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KEEPING BUSINESS MOVING
Northgate plc
Annual Report and Accounts
for the year ended 30 April 2016
24608.04 7 July 2016 10:36 AM Proof 6
About us
Northgate plc is the leading light commercial vehicle hire
business in the UK, Ireland and Spain by fleet size and has
been operating in the sector since 1981. Our core business
is the hire of light commercial vehicles to businesses on a
flexible basis, giving customers the ability to manage their
vehicle fleet requirements without a long term commitment.
The Northgate Difference
No capital or contractual commitment
Ease of flexing number and type of vehicles
24/7 support
E . F
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Celebrating
Success
Our Values
The approach of our colleagues is underpinned by our core values of professionalism, teamwork
and can-do attitude. This outlook enables us to deliver upon our core customer values:
hassle free, flexible and trusted. Our Celebrating Success awards enable us to identify and
recognise colleagues who have gone the extra mile to achieve this.
24608.04 7 July 2016 10:36 AM Proof 6
01IFC
Highlights
For a full glossary of terms used
throughout this report see page 129
Underlying financial
PBT
(£m)
85.0
82.9
Net debt
(£m)
371.3
362.7
59.7
60.3
49.5
346.1
337.8
309.9
2015
2014
2013
2012
Operational
UK Vehicles on Hire
(’000)
2016
2012
2013
2014
2015
2016
Spain Vehicles on Hire
(’000)
48.6
46.4
47.6
45.7
35.6
35.7
43.1
34.0
34.7
32.1
2012
2013
2014
2015
2016
2012
2013
2014
2015
2016
About our non-GAAP measures and why we use them
Throughout this report we refer to underlying results and measures. The underlying
measures allow management and other stakeholders to better compare the
performance of the Group between the current and prior period without the
effects of one-off or non-operational items.
Underlying measures exclude certain one-off items such as those arising due to
restructuring activities and recurring non-operational items, namely intangible
amortisation.
Exceptional items are explained on page 116 and Reconciliations of GAAP to non-
GAAP measures are included on page 31.
In discussion with the Chief Executive
Contents
Review
01 Highlights
02 Chairman’s statement
04
05 Why invest
StRategiC RepoRt
07 Group at a glance
12 Marketplace
14 Our strategy
16 Our business model
18 Chief Executive’s operational review
22 Financial review
32 The depreciation rate challenge
36 Key Performance Indicators
38 Managing risk
44 Corporate social responsibility
goveRnanCe
52 Board of Directors
54 Chairman’s introduction to governance
55
58 Corporate governance
61 Report of the Audit and Risk Committee
64 Remuneration report
75 Report of the Directors
78 Directors’ responsibilities
79
Introduction to governance
Independent auditor’s report to the
members of Northgate plc
FinanCialS
86 Consolidated income statement
87 Statements of comprehensive income
88 Balance sheets
89 Cash flow statements
90 Notes to the cash flow statements
91 Statements of changes in equity
92 Notes to the accounts
125 Notice of Annual General Meeting
129 Glossary
130 Shareholder information
Navigating the Report
For further information within this
document and relevant page numbers
Additional information online
24608.04 7 July 2016 10:36 AM Proof 6
REVIEWREVIEW Chairman’s statement
Our core objective is to grow
shareholder value and we will do
this by developing a business capable
of delivering long term, sustainable
and growing cash flows, achieved
through a disciplined approach to
deployment of capital and a rigorous
focus on execution
I became Northgate’s Chairman nine
months ago and therefore this is my first
Report to our shareholders.
Performance
During the year we have made good
progress in a number of key areas and,
on an underlying basis, the Group’s
profit before tax was £82.9m. After
further adjusting for accounting changes
to depreciation and the impact of
exchange rates this represented an
increase of £3.3m compared to the
prior year.
Cash generation has continued to be
strong with free cash flow of £62.9m
and this provides good scope to further
expand our business and also to return
cash to our shareholders in the form of
increased dividends.
andrew page I Chairman
bob mackenzie I Chairman
The Group’s Spanish business performed
well during the year and ended the
period with a modest increase in
vehicles on hire. In contrast, the UK
business was more challenged with
a lower level of demand than the
prior year, particularly from customers
operating in the renewable energy
sector as well as a result of our reduced
focus on short term rentals to domestic,
non-business customers and vehicles on
hire at the end of the year was 2,900
below the prior year.
Dividend
The Group remains in a strong financial
position, with healthy cash generation
and a robust balance sheet. This
underpins our progressive dividend
policy and the Board’s continued
confidence in the outlook for the Group
means we are proposing a full year
dividend of 16.0p, an increase of 10%
compared to the 2015 full year dividend
of 14.5p. This means a final dividend of
10.9p (2015 – 10.2p).
This gives a 3.1× cover on underlying
earnings, in line with our intention
to keep cover in the range of 3.75×
to 2.5×.
24608.04 7 July 2016 10:36 AM Proof 6
10%
DIVIDEND
INCREASE TO
16.0p
Northgateplc.com stock code: NTG 0203
The way forward
Our core objective is to grow
shareholder value and we will do this
by developing a business capable of
delivering long term, sustainable and
growing cash flows, achieved through
a disciplined approach to deployment
of capital and a rigorous focus on
execution. Our touchstones will be cash
flow and returns on investment.
During the year we have been assessing
the opportunities for Northgate and
how best to position the business
to capture and maximise these. This
has involved reviewing the potential
addressable market, determining how
we can effectively widen Northgate’s
offering and brand so as to appeal to
a broader customer base and building
a senior management team which
possesses the skill and ambition to drive
our business forward.
The Group’s strategy
focuses on three key areas:
| To optimise our core
business;
| To expand our addressable
markets; and
| To maximise end
of life value.
During the past six months we have
recruited a new UK senior management
team and structured it in a similar way
to our highly successful Spanish team.
A Group Executive Committee has
also been formed which includes the
senior management from both the UK
and Spain. This will benefit the Group
in several ways, including alignment
of objectives, clarity of focus, sharing
of best practices and securing further
operational efficiencies.
As such, we have renewed the Group’s
strategic focus on three key areas:
| To optimise our core business;
| To expand our addressable markets;
and
| To maximise end of life value.
This sharper focus on the quality of
business, a customer proposition
with wider appeal, improving brand
recognition, clear lines of responsibility
and more efficient and consistent
execution I believe will generate
improved performance.
Board changes
Since last year we have welcomed
several new Board members. In
November 2015, Claire Miles joined as
a non-executive Director, in February
2016, Paddy Gallagher was appointed
as Group Finance Director and, since
the year end, Bill Spencer has been
appointed as a non-executive Director. I
am sure that each will make a significant
contribution to the future development
of Northgate.
Our people
I would like to record the Board’s thanks
to all of our 2,900 team members
throughout Northgate. They are the
people who, day in and day out, make
sure that our customers receive a superb
service and we are most grateful to
them.
We now have experienced senior teams
in both the UK and Spain and they are
eager to demonstrate what can be
achieved. There is much to do and I am
confident that our team will be looking
to drive the business forward to secure
profitable progress.
Andrew Page
Chairman
27 June 2016
24608.04 7 July 2016 10:36 AM Proof 6
HeadingREVIEWREVIEW
In discussion
with the Chief
Executive
Bob Contreras
Why has Northgate not
grown by as much this year
compared to last year?
BC Our focus remains on targeting
growth where the appropriate level of
return exists. For this reason we have
seen decreases with some of our less
profitable National customers in the
UK and Spain. We have also made a
decision to reduce short term retail
business in the UK that was stretching
operations and taking away the focus
from our core business customers. We
have experienced some reductions with
customers trading in the renewable
energy sector. Excluding this impact,
vehicles on hire and customer numbers
within our targeted SME customer
segment have increased.
How do you plan to grow the
business going forward?
BC The rental market accounts for only
5% of the seven million light commercial
vehicles driven on the roads in the UK,
Ireland and Spain. We therefore plan to
capitalise upon this significant market
opportunity through expanding our
product offering so that it appeals to
customers who have not traditionally
rented. Within our existing markets
we will clarify our sales proposition to
ensure that the benefits of our products
are clearly communicated. We will focus
marketing effort on increasing brand
awareness, particularly targeting sectors
where there is the greatest need for our
solution. Our routes to market will also
be enhanced through deployment of our
digital strategy and a new sales structure
in the UK will enable us to reach
customers in the most efficient way.
Why is the SME sector so
important to Northgate; are
National customers no longer
a focus for the business?
BC Our National customers remain a
key part of the Northgate business and
are a central part of the strategy going
forward. We have seen reductions in
some National customers who have
moved a larger proportion of their
business in house or to a contract hire
model. Our flexible rental model is most
suited to SMEs who benefit from the
whole life costs of using a flexible rental
model. The market potential in this
segment is also very large.
What are Northgate doing in
the area of corporate social
responsibility?
BC In January 2016 our UK business
launched a wellbeing section of its
employee benefits portal, aiming to
provide a wealth of information to all
employees with the aim of helping
them live healthier, happy lives. In Spain
we are pleased with the partnerships
we have developed with educational
institutions.
Read more in our Corporate social
responsibility report on page 44
Given the importance of
protecting the customer
base, what measures have
been put in place to improve
customer service and monitor
performance?
BC We continue to look at ways through
which to enhance our service levels and
provide customers with a flexible rental
solution which will aid their business in
the most effective way possible. NPS
is a key way to track and measure our
customer base perceptions, and to
uphold the high standards we maintain.
Our NPS performance has increased by
3% across the Group in the year.
Why do you keep changing
vehicle depreciation rates,
which makes it difficult to
understand the underlying
performance of the Group
year-on-year?
BC This is a key area of judgement in
our accounts and we acknowledge that
changing depreciation rates makes it
difficult to understand our underlying
performance year-on-year.
In order to address this concern we have
explained the issues surrounding this
matter further on pages 32 to 35.
24608.04 7 July 2016 10:36 AM Proof 6
Northgateplc.com stock code: NTG 0405
Why invest
As a new investor why should I invest in Northgate?
The Northgate
investment story
We believe that
Northgate is a sound
investment proposal
that will return value
to shareholders. Over
recent years the Group
has delivered a strong
combination of earnings
growth, cash generation
and balance sheet
management.
5yr EPS history chart (p)
5yr Gearing history (%)
51.0
49.0
109
102
31.5
29.2
35.1
91
81
67
2012
2013
2014
2015
2016
2012
2013
2014
2015
2016
5yr Net tangible asset
value per share (p)
348
314
287
265
267
5yr Dividend history (p)
16.0
14.5
10.0
7.3
3.0
2012
2013
2014
2015
2016
2012
2013
2014
2015
2016
Risk management
We take a conservative view with
respect to risk management. Our
robust approach to risk management
enables us to continually identify
and assess risks to the business.
Our business model enables us to
respond to changes in demand and
conserve cash through reducing vehicle
purchases, disposing of liquid vehicle
assets or ageing out our existing fleet.
Read more in our Managing risk section
on page 38
Financial profile
| Our business is highly cash
generative. We buy all of our vehicles
upfront, which means that we use
up cash more in periods of growth or
generate cash when fleet is reduced.
Taking this into account the Group
generated £48m of underlying free
cash flow in the year.
| We have a progressive dividend
policy, with dividend growth of 10%
in the year and cover of 3.75x to 2.5x
in the medium term.
| We have a strong balance sheet at
67% geared and c.£220m of spare
facility to facilitate future growth.
| Cost control and tight financial
management is important to
the Group with underlying PBT
improving over the last five years
from £59.7m in 2012 to £82.9m.
Market position
| Northgate is the market leading
provider of light commercial
vehicle flexible rental in the
UK and Spain and has been
operating in this sector since 1981.
Read more in our Marketplace section
on page 12
| The potential for growth is
vast with seven million light
commercial vehicles driving on
the roads in the UK and Spain.
Read more in our Marketplace section
on page 12
| Our strategy is focused on delivering
high levels of customer service to
business customers in the SME
sector. Our measure of customer
satisfaction (NPS) has improved from
13% to 43% over the last 3 years.
Read more in our Strategy section
on page 14
24608.04 7 July 2016 10:36 AM Proof 6
REVIEWREVIEWNorthgate plc Annual Report and Accounts for the year ended 30 April 2016 This section outlines our strategic objectives. The Chief Executive
and Group Finance Director provide commentary on the Group’s
operational and financial performance in the year. We explain how
we are performing against our Key Performance Indicators and set
out the principal risks to the business as part of an overall review
of our risk management procedures. Finally, we outline how the
Group is managing its responsibilities to all of its stakeholders.
24608.04 7 July 2016 10:36 AM Proof 6
Northgateplc.com stock code: NTG 06
7 Group at a glance
12 Marketplace
14 Our strategy
16 Our business model
18 Chief Executive’s operational review
22 Financial review
32 The depreciation rate challenge
36 Key Performance Indicators
38 Managing risk
44 Corporate social responsibility
24608.04 7 July 2016 10:36 AM Proof 6
REVIEWNorthgate plc Annual Report and Accounts for the year ended 30 April 2016 Northgateplc.com stock code: NTG
Find out more about our UK business at:
www.northgatevehiclehire.co.uk
24608.04 7 July 2016 10:36 AM Proof 6
Northgate plc Annual Report and Accounts for the year ended 30 April 2016
Review
Review
0708
Group at a glance
UK
We continue to increase the proportion of vehicles
on hire with SME customers. Asset management
performance reflects our ability to manage the
fleet effectively as customer demand changes.
Fleet mix
2016
2015
50.4
48.7
47.2
44.9
45.3
2012
2013
2014
2015
2016
3.3%
deCReaSe
in average
vehicles on hire
Medium Vans 44%
Small Vans 33%
Large Commercial 13%
Cars 6%
Buses, 4x4 and other 4%
Medium Vans 42%
Small Vans 34%
Large Commercial 13%
Cars 7%
Buses, 4x4 and other 4%
Vehicle sales (000’s) Vehicle purchases (000’s)
20.3
17.6
14.0
19.8
17.0
15.8
Fleet by customer size
2016
2015
Corporate fleets (>100) 31%
Small and medium sized (50–100) 10%
Micro fleets (<50) 59%
Corporate fleets (>100) 33%
Small and medium sized (50–100) 11%
Micro fleets (<50) 56%
2014
2015
2016
2014
2015
2016
Operating margin
19.0%
Closing employees
1,865
Closing fleet
52,300
24608.04 7 July 2016 10:36 AM Proof 6
Review
Northgateplc.com stock code: NTG
SPAIN
Our strategy of increasing the proportion of
business with SMEs continues. Despite growing
the fleet size we maintained utilisation.
Fleet mix
2016
2015
Small Vans 41%
Cars 40%
Large Vans 13%
4x4 2%
Large Commercial and other 3%
Small Vans 42%
Cars 40%
Large Vans 12%
4x4 3%
Large Commercial and other 3%
Fleet by customer size
2016
2015
Corporate fleets (>100) 25%
Small and medium sized (50–100) 11%
Micro fleets (<50) 64%
Corporate fleets (>100) 30%
Small and medium sized (50–100) 11%
Micro fleets (<50) 59%
37.5
35.6
35.6
33.1
33.0
0.3%
inCReaSe
in average
vehicles on hire
2012
2013
2014
2015
2016
Vehicle sales (000’s) Vehicle purchases (000’s)
10.3
10.0
10.7
10.6
12.4
8.3
2014
2015
2016
2014
2015
2016
Operating margin
29.3%
Closing employees
994
Closing fleet
39,800
24608.04 7 July 2016 10:36 AM Proof 6
Review
Review
0910
Find out more about our Spanish business at:
www.northgateplc.es
24608.04 7 July 2016 10:36 AM Proof 6
Marketplace
Overview
The Group operates
predominantly in the
LCV sector in the UK
(including the Republic
of Ireland) and Spain.
LCVs are defined as vehicles for a
commercial carrier with a gross vehicle
weight of not more than 3.5 tonnes.
The total market size as defined by the
number of LCVs on the road (the LCV
parc) is estimated at 4.8m vehicles in the
UK and 2.2m in Spain.
Vehicle registrations
A key indicator of activity within the
LCV sector is the number of new vehicle
registrations in each calendar year,
which have progressed as follows:
UK
338,000
372,000
322,000
289,000
260,000
271,000
223,000
240,000
186,000
2007
2008
2009
2010
2011
2012
2013
2014
2015
SPAIN
276,000
166,000
155,000
116,000
114,000
107,000
104,000
85,000
77,000
2007
2008
2009
2010
2011
2012
2013
2014
2015
Market characteristics
The LCV market in the UK (excluding the Republic of Ireland) is segmented as follows:
LCV Parc
3.7m
Non-purchased*
0.4m
Rental
0.2m
12%
24%
Purchase 90%
Rental 5%
Contract Hire 5%
Northgate Market Share
* Non-purchased comprises contract hire and rental
SOURCE: Management estimates
The LCV markets in Spain and Ireland are structurally similar to the UK.
The choice of acquisition method by customers will depend upon the operational flexibility required and the availability of capital.
The main characteristics of each segment are outlined in the table on page 13.
24608.04 7 July 2016 10:36 AM Proof 6
Northgateplc.com stock code: NTG 1213
Acquisition
(new)
Characteristics
Long term commitment requiring availability of up front capital.
Operators bear the full risk of operating the vehicle and funding
running costs.
The purchaser takes the risk of the residual value of the vehicle.
Can be the cheapest headline cost, but overall holding cost can be
higher if vehicles are not utilised or vehicle failure leads to a
significant cost of business interruption.
Typical competitors
Franchised dealers.
Contract hire
Long term contractual commitment (typically a minimum of 36 months).
Penalties for early return of vehicles and excess mileage usage.
Varying levels of operational support offered at additional cost.
Large companies often backed
by financial institutions.
Flexible rental
No contractual or capital commitment coupled with operational
flexibility and fleet management support.
Vehicles are usually supplied fully inclusive of maintenance and
without penalty for excess mileage.
Some national companies but
predominantly small regional
operators.
Daily rental
Flexible, satisfying short term requirements at short notice, but
expensive as a result.
Acquisition
(secondary
market)
Typically sold directly to owner managed businesses who may have
capital constraints.
A combination of large
multinationals down to small
local operators.
Franchised dealers and some
national retailers down to small
local operators and individuals
trading via the Internet.
Auction houses selling directly
to the trade.
24608.04 7 July 2016 10:36 AM Proof 6
STRATEGIC REPORT Our strategy
Our vision
Our vision is for customers to recognise Northgate as their partner for LCV
solutions who can meet all their needs and provide superior value. We
want to be a great place where colleagues are proud to work and provide
excellent returns for our shareholders.
StRategy
O P TIMISE
E X PAND
M A X IMISIN
G
S S
C
ORE BU S I N E
1
Sales and marketing: Improving
the clarity of our proposition so that
customers understand the whole-
life financial and operating benefits
of our offering and will select clear
routes to market through our sales
and marketing deployment
Technology: Leveraging technology
to connect with customers and
enable efficient and effective
business operations
Operational: Achieving efficiency
gains in our workshops and depots
Employees: Engaging with our
people and demonstrating the
Northgate culture and behaviours
S
K ET
R
A
D
D
R
E
SSABLE M A
2
We have the opportunity to expand
our LCV offering into markets
currently not touched.
| Developing a product that
will appeal to operators that
currently purchase or contract
hire
| Expanding our product portfolio
beyond flexible rental
| Expanding our vehicle product
range
| Filling remaining regional gaps
in each territory in which we
operate
meaSuReS
oF SuCCeSS
U E
E
N
D OF LIF E V A L
3
We will continue to make progress
in maximising the value created
through our end of rental life
disposals strategy.
| Improving the proportion of
vehicles sold through our Van
Monster retail network
| Developing our route to market
through marketing and digital
technologies
| Widening the product range and
ancillary services provided to
customers
Successful achievement of our strategic objectives will be measured
by progress towards the following targets:
Customers: Achieving a net promoter score of 50% or higher
People: An employee engagement score of 80% or higher
Shareholders: Achieving superior TSR relative to the FTSE 250 index
24608.04 7 July 2016 10:36 AM Proof 6
Northgateplc.com stock code: NTG
Northgate plc Annual Report and Accounts for the year ended 30 April 2016
StRategiC
RepoRt
1415
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Celebrating
Success
tim walker
Tim, a Customer Support Agent at our Darlington branch,
was nominated for an award for his can-do attitude by his
colleagues at his depot.
Find out more about the Group at: www.northgateplc.com
24608.04 7 July 2016 10:36 AM Proof 6
OUR
BUSINESS
MODEl
We have identified a clear market
need, and our model ensures we
offer the best solution
BUY
M A NAG
E
| Knowledge of our customers enables us
| Network of branches across
to offer the vehicles they need
the UK and Spain
| We benefit from our size to negotiate
pricing directly with manufacturers
| Purchases are balanced against sales to
optimise the age, condition and utilisation
of vehicles
| Delivering flexible, hassle free and trusted
service to our customers
| Ensuring vehicle availability meets demand
| Maintaining vehicles to a high standard
through our national networks of
maintenance facilities
24608.04 7 July 2016 10:36 AM Proof 6
Northgateplc.com stock code: NTG 1617
Flexible rental
Operating a fleet of vehicles is both a crucial but potentially
costly part of many businesses. Flexible rental allows customers
to rent the type of vehicle they require for the length of time
they need it. There are a number of reasons why flexible rental
may be the best option for our customers’ fleet needs.
How we operate
In order to provide the best possible service to customers,
as well as maximising returns, our business model focuses
on the process of sustaining our fleet of vehicles through its
rental life cycle.
S ELL
Learn more about our Business model at
www.northgateplc.com
| Proven process for assessing when a
vehicle should be sold
| We offer the widest range of vehicles
available in the market
| Use of optimal disposal routes –
retail, trade or auction
| Established and growing Van Monster
retail operation
Renting Flexible
24608.04 7 July 2016 10:36 AM Proof 6
Northgate plc Annual Report and Accounts for the year ended 30 April 2016STRATEGIC REPORT Chief Executive’s operational review
We continue to believe that flexible
rental offers the best method for
many businesses to manage their
fleet requirements
GROUP
We have taken a number of steps
during the year to review the way in
which we operate and how we address
our markets in order to strengthen the
business for future profitable growth.
As such, our strategic focus is in three
core areas:
Optimising our core business
We continue to believe that flexible
rental offers the best opportunity for
many businesses to manage their fleet
requirements. In particular, the Group
has continued to pursue its strategy of
increasing the proportion of our vehicles
on hire with SME customers where the
flexibility we offer is of greatest value.
Our aim is to increase awareness of
the whole life benefits that flexible
rental offers through the clarity of our
proposition and by providing clear
routes to market through our sales and
marketing deployment and the use of
technology.
Internally we will continue to target
operational excellence through our
branch and workshop network and
ensure that all of our people understand
their role in shaping the culture of the
Group.
bob Contreras I Chief Executive
bob mackenzie I Chairman
Expanding our
addressable markets
With approximately seven million LCVs
on the road in the UK, Spain and Ireland,
significant opportunities exist to grow
the business beyond its current position
as the largest flexible rental provider
in each territory. The rental market
currently accounts for an estimated 5%
of LCV usage and we therefore have a
significant opportunity to position and
widen our product offering to customers
not currently renting.
We have completed a full market usage
and attitude study and have insight to
support growing the Northgate brand
within the current LCV rental market as
well as an opportunity to partner with
customers not currently renting.
Maximising end of life value
The price received when we sell our ex-
rental vehicles has a significant impact
upon returns. Traditionally, our ex-rental
vehicles would have been sold through
trade and auction channels but in recent
years an increasing number are being
sold through our Van Monster retail
channel.
We will focus on maximising the value
created through Van Monster and will
continue to increase the proportion
and value of vehicles sold through
this channel as the awareness and
reputation of the brand increases.
24608.04 7 July 2016 10:36 AM Proof 6
Northgateplc.com stock code: NTG 1819
Regional
National
Consumer
(non-
business)
30 April
2016
30 April
2015
32,600
13,000
33,000
15,000
Change
(400)
(2,000)
100
45,700
600
48,600
(500)
(2,900)
The Regional business was affected by
reductions from customers linked to
the struggling renewable energy sector.
Excluding this segment, the closing
vehicles on hire in Regional increased
by 400 vehicles. The total number of
customers has increased by 200 to
6,900.
We have seen reductions in our
lower margin National business.
Customers have moved a larger
proportion of their business in-
house or to a contract hire model
as uncertainty in their own
business has reduced.
UK
Our people and customers
The UK market provides an opportunity
for significant profitable growth. We
have replicated the successful Spanish
management structure, strengthening
the UK senior management team
with the appointment of a dedicated
Managing Director, separate Sales
and Marketing Directors and a new
Operations Director. This highly
experienced team with a clearer
strategic focus and ambition for flawless
execution will capitalise upon these
opportunities for growth.
Customer numbers increased by 2%
during the year, reflecting our strategy
of growth within the SME sector. NPS,
a key indicator of customer satisfaction,
grew to 48% across all customers (2015
– 45%) with our target being to further
improve beyond 50%.
Vehicles on hire and hire rates
The average number of vehicles on hire
was 47,200, a 3% decrease compared
to the previous year.
Closing vehicles on hire at 30 April 2016
were 45,700, a reduction of 2,900 since
April 2015. This was split by business
type as follows:
During the year we made the decision to
reduce the number of vehicles rented to
non-business users in order to improve
returns and focus on delivering high
levels of customer service to our core
business customers.
We are currently refreshing our
customer proposition and product
offering in order to bridge the perceived
gap between headline price and overall
in-life vehicle costs for customers who
are comparing our offering to other
acquisition methods such as contract
hire.
48%
NPS IN UK
(2015 – 45%)
24608.04 7 July 2016 10:36 AM Proof 6
STRATEGIC REPORT Chief Executive’s operational review
CONTINUED
Average hire revenue per vehicle
increased by 2% when compared to the
previous year.
Asset management
During the year the fleet size reduced
from 56,100 at 30 April 2015 to 53,300
at 30 April 2016. Average utilisation was
87% in the year (2015 – 88%). Average
utilisation was affected by the reduction
in vehicles on hire in the year. However,
the overall good asset management
performance reflects our ability to
manage the fleet size effectively as
customer demand changes. Going
forward we are targeting utilisation in
excess of 90% whilst ensuring that each
branch has the right range of vehicles
available to meet our customers’ needs.
Purchases for the year totalled 15,800
vehicles (2015 – 19,800) and the average
fleet age was 20.9 months (2015 – 21.1
months).
A total of 20,300 vehicles were sold
during the year (2015 – 17,600) with
the increase being in response to the
reduction in vehicles on hire.
We continue to make progress in selling
a higher proportion of vehicles through
our Van Monster retail network. During
the year 33% (2015 – 31%) were sold
via this route. The absolute number
of vehicles sold through this channel
increased by 1,300 or 24% compared to
the prior year.
We have previously commented on how
the supply of used vehicles within our
target disposal age range (3 to 4 years)
had been constrained as a result of a
low number of registrations in the post-
recessionary period. We have seen that
this supply constraint has now eased
and inevitably put downward pressure
on market pricing. This, coupled with
the impact of historical depreciation rate
changes, has resulted in an adjustment
to the depreciation charge of £20.5m
compared to £27.8m in the previous
year. This equates to a PPU (profit per
unit) of £1,014 compared to £1,583 in
the prior year.
Network
Since our network expansion
programme commenced in 2013, we
have opened 16 new sites in total,
including one opened in the year. These
new sites contributed 5,100 to the
closing vehicles on hire.
37%
NPS IN SPAIN
(2015 – 34%)
24608.04 7 July 2016 10:36 AM Proof 6
We have made the decision to pause
new site openings in order to allow the
new management team to focus sales
and marketing efforts on optimising
demand generation across the entire
network.
Spain
Our people and customers
During the year we appointed a
new Operations Director, tasked
with increasing the efficiency and
effectiveness of our workshops and
good progress is being made in this
important area.
Customer numbers increased by 16%
during the year. We continue to monitor
NPS as a key indicator of customer
satisfaction and this measure improved
to 37% in 2016 compared to 34% in the
previous year. We will continue to seek
improvement in this area as it is key to
the future success of the business.
Vehicles on hire and hire rates
Closing vehicles on hire at 30 April 2016
was 35,700, an increase of 100 from
35,600 at 30 April 2015, with a growth
in Regional customers of 2,000 being
offset by a 1,900 reduction in larger
National accounts as follows:
Regional
National
30 April
2016
30 April
2015
21,900
13,800
35,700
19,900
15,700
35,600
Change
2,000
(1,900)
100
The decrease in National business
reflects the planned run-off of a number
of lower margin contracts.
The average number of vehicles on hire
was maintained at 35,600 vehicles.
Average hire revenue per vehicle
increased by 1% compared to the
previous year.
Asset management
During the year the fleet size increased
from 39,400 at 30 April 2015 to 39,800
at 30 April 2016. Utilisation levels were
maintained at 91% during the year.
Northgateplc.com stock code: NTG
2021
range of operational and commercial
initiatives which will improve both the
quality of the business and our financial
performance over the medium term.
Therefore we expect that the current
financial year will be more heavily
weighted towards strength in the
second half.
Bob Contreras
Chief Executive
27 June 2016
Purchases for the year totalled 10,600
vehicles (2015 – 12,400) and the average
fleet age closed at 23.3 months (2015 –
23.7 months).
A total of 10,200 vehicles were sold
during the year (2015 – 10,300). The
proportion of sales made through our
own more profitable retail network was
17%. This represents an increase of 100
vehicles, a 6% increase compared to the
prior year.
The increase in the resale values of used
vehicles led to a reduction of €21.4m
in the depreciation charge compared
to €16.0m in the previous year. This
equates to a PPU (profit per unit) of
€2,102 compared to €1,554 in the
prior year.
Network
We operate from 24 rental locations
in Spain, with one additional branch
having opened during the year. We will
continue to consider any opportunities
to fill in remaining geographical gaps in
our network and expect to open up to
three more sites over the next three to
five years.
Group current trading
and outlook
We began the new financial year with
a lower level of vehicles on hire than
expected, albeit we have seen stable
conditions over the last few months. We
expect to grow vehicles on hire over the
course of the year, subject, of course, to
uncertainty arising from the UK’s recent
decision to leave the EU.
We have confidence in the steps
we have taken to strengthen our
management team in the UK and
whilst it will take some time to translate
into results, we have put in place a
24608.04 7 July 2016 10:36 AM Proof 6
STRATEGIC REPORT Financial review
During the year the Group successfully
refinanced its borrowing facilities,
extending maturities, improving
existing terms and diversifying the
lending base
paddy gallagher I Group Finance Director
bob mackenzie I Chairman
Group
Summary
A summary of the Group’s financial performance for 2016, with a comparison to
2015, is shown below:
Revenue
Underlying operating profit
Underlying profit before tax
Underlying EPS
Dividend per share
Underlying free cash flow
2016
£m
618.3
94.3
82.9
49.0p
16.0p
48.4
2015
£m
614.3
97.8
85.0
51.0p
14.5p
32.8
Change
£m
Change
%
4.0
(3.5)
(2.1)
(2.0)p
1.5p
15.6
0.7
(3.5)
(2.4)
(3.9)
10.3
47.6
Group revenue increased by 1% to
£618.3m or 2% at constant exchange
rates.
Excluding both of the above impacts,
underlying profit before tax was £3.3m
higher than the prior year.
The weakened Euro across the year
reduced profit before tax by £1.7m
compared to the prior year.
The impact of previous changes to
depreciation rates decreased profit
before tax by £3.7m compared to the
prior year.
The accounting requirements to adjust
depreciation rates due to changes in
expectations of residual values of used
vehicles make it more difficult to identify
the underlying profit trends in our
business. The issues surrounding this
matter have therefore been explained
further on pages 32 to 35.
The impact on operating profit since
changes were made in the year ended
30 April 2012, including the estimated
impact on future periods is as follows:
£
62.9
m
FREE CASH FlOW
GENERATED IN THE YEAR
Cumulative
impact
Group
£m
15.7
12.0
6.3
2.1
–
Year:
30 April 2015
30 April 2016
30 April 2017*
30 April 2018*
30 April 2019*
* Management estimate
Year-on-year impact
Group
£m
11.4
(3.7)
(5.7)
(4.2)
(2.1)
UK
£m
8.4
(5.9)
(4.1)
(2.7)
–
Spain
£m
3.0
2.2
(1.6)
(1.5)
(2.1)
24608.04 7 July 2016 10:36 AM Proof 6
Northgateplc.com stock code: NTG 2223
Free cash flow of the Group was £62.9m
(2015 – outflow of £7.8m) after net
capital expenditure of £155.5m (2015
– £218.4m). If the impact of increasing
or reducing the fleet size in the year is
removed from net capital expenditure
in each year, underlying free cash flow
of the Group was £48.4m (2015 –
£32.8m).
Net cash generation was £42.8m (2015
– outflow of £22.4m). After an adverse
exchange rate impact of £16.1m (2015 –
£28.8m favourable impact), closing net
debt was £309.9m (2015 – £337.8m)
and gearing was 67% (2015 – 81%).
On a statutory basis, operating profit
was £90.6m (2015 – £95.8m) and profit
before tax was £77.6m (2015 – £83.0m).
Basic earnings per share were 46.1p
(2015 – 50.1p). Net cash generated
from operations, including net capital
expenditure on vehicles for hire, was
£73.7m (2015 – £8.5m).
UK
The composition of the UK revenue and operating profit is set out below:
Revenue
Vehicle hire
Vehicle sales
Operating profit
Operating margin
2016
£m
2015
£m
Change
£m
Change
%
306.4
127.0
433.4
58.2
19.0%
311.3
115.0
426.3
69.0
22.2%
(4.9)
12.0
7.1
(10.8)
(1.6)
10.4
1.7
(15.8)
A decrease in hire revenue of 1.6%
was primarily driven by a decrease in
the average number of vehicles on hire
of 3.2%. This was partially offset by a
1.6% increase in revenue per vehicle.
The impact of previous changes to
depreciation rates decreased operating
profit by £5.9m compared to the prior
year.
The increased volume of vehicles sold
was offset by lower residual values and
a higher net book value per vehicle sold
as a result of previous depreciation rate
changes. Residual values of vehicles
sold also reduced. The total impact was
a £7.3m decrease in operating profit
compared to the prior year.
24608.04 7 July 2016 10:36 AM Proof 6
STRATEGIC REPORT
Financial review
CONTINUED
Spain
The revenue and operating profit generated in Spain is shown below:
Revenue
Vehicle hire
Vehicle sales
Operating profit
Operating margin
2016
£m
2015
£m
Change
£m
Change
%
140.8
44.1
184.9
41.3
29.3%
145.5
42.4
187.9
33.3
22.9%
(4.7)
1.7
(3.0)
8.0
(3.3)
4.1
(1.6)
24.0
The decrease in hire revenue of 3.3% was impacted by the weaker Euro across the
year. At constant exchange rates hire revenue grew by 1.0%. Average vehicles on
hire were constant compared to the previous year and average revenue per vehicle
increased by 1.0%.
The weaker Euro across the year adversely impacted operating profit by £1.8m.
The impact of previous changes to depreciation rates increased operating profit by
£2.2m compared to the prior year.
Stronger residual values of vehicles sold increased operating profit by £3.5m
compared to the prior year.
Corporate
Underlying corporate costs were £5.1m
(2015 – £4.5m).
Interest
Net underlying finance charges for the
year were £11.4m (2015 – £12.8m).
The net cash interest charge for the year
was £10.1m (2015 – £12.4m) benefiting
by £1.0m from lower levels of net
borrowings, £1.1m due to lower pricing
and £0.2m from movements in foreign
exchange rates.
Non-cash interest increased by £0.9m
to £1.3m (2015 – £0.4m) following a
refinancing of the Group’s borrowing
facilities in the year.
24608.04 7 July 2016 10:36 AM Proof 6
Northgateplc.com stock code: NTG
Northgate plc Annual Report and Accounts for the year ended 30 April 2016
2425
E . F
L
E
E
X
I
B
L
E
.
E F R
L
S
S
A
H
RUSTED.
T
Celebrating
Success
marissa dempsey
Marissa is a Workshop Administrator at our Cannock depot
and was nominated for an award for her professionalism by
her line manager.
Find out more about the Group at: www.northgateplc.com
24608.04 7 July 2016 10:36 AM Proof 6
STRATEGIC REPORT
24608.04 7 July 2016 10:36 AM Proof 6
Northgateplc.com stock code: NTG 2627
Financial review
CONTINUED
Taxation
The Group’s underlying effective tax rate
was 21% (2015 – 20%).
The underlying tax charge excludes the
tax on exceptional items, brand royalty
charges and intangible amortisation.
Including these items the Group’s
statutory effective tax rate was 21%
(2015 – 19%).
Earnings per share
Underlying EPS was 49.0p compared to
51.0p in the previous year.
Underlying earnings for the purpose of
calculating EPS were £65.4m (2015 –
£67.9m). The weighted average number
of shares for the purposes of calculating
EPS was 133.2m, in line with the
previous year.
Exceptional items
During the year £3.34m of exceptional
costs were incurred (2015 – £Nil), of
which £1.78m related to restructuring
costs and £1.56m related to finance
costs following the refinancing of the
Group’s borrowing facilities in the year.
Dividend
Subject to approval, the final dividend
proposed of 10.9p per share (2015 –
10.2p) will be paid on 23 September
2016 to shareholders on the register as
at close of business on 19 August 2016.
Including the interim dividend paid of
5.1p (2015 – 4.3p), the total dividend
relating to the year would be 16.0p
(2015 – 14.5p). The dividend is covered
3.1x by underlying earnings.
Cash flow
A summary of the Group’s cash flows is shown below:
Underlying operational cash generation
Net capital expenditure
Net taxation and interest payments
Share purchases and refinancing costs
Free cash flow
Dividends
Net cash generated (outflow)
A total of £296.2m was invested in
new vehicles compared to £350.1m in
the prior year. The Group’s new vehicle
capital expenditure was partially funded
by £145.9m generated from the sale of
used vehicles (2015 – £135.9m). Other
net capital expenditure amounted to
£5.2m (2015 – £4.2m).
All vehicles required for the Group’s
operations are paid for in cash up-front.
The cash flow generation of the Group
2016
£m
242.8
(155.5)
(18.8)
(5.6)
62.9
(20.1)
42.8
2015
£m
251.6
(218.4)
(28.8)
(12.2)
(7.8)
(14.6)
(22.4)
in any year is therefore influenced by
the capital expenditure to grow the
business or cash generated by adjusting
the fleet size downwards if vehicles on
hire reduce. If the impact of increasing
or reducing the fleet size in the year is
removed from net capital expenditure,
the underlying free cash generation of
the Group was as follows:
Free cash flow
Add back: Adjustment to net capital expenditure for
(contraction) growth in fleet size
Underlying free cash flow
Net debt reconciles as follows:
Opening net debt
Net cash (generated) outflow
Other non-cash items
Exchange differences
Closing net debt
2016
£m
62.9
(14.5)
48.4
2016
£m
337.8
(42.8)
(1.2)
16.1
309.9
2015
£m
(7.8)
40.6
32.8
2015
£m
346.1
22.4
(1.9)
(28.8)
337.8
Excluding the £16.1m impact of foreign exchange net debt reduced by £44.0m.
24608.04 7 July 2016 10:36 AM Proof 6
Northgate plc Annual Report and Accounts for the year ended 30 April 2016STRATEGIC REPORT Financial review
CONTINUED
Borrowing facilities
During the year the Group successfully
refinanced its borrowing facilities,
extending the maturity of its existing
multi-bank facility by two years,
improving existing terms and replacing
part of this facility with €100m of seven
year private placement loan notes. As
at 30 April 2016 the Group had £313m
drawn against total committed facilities
of £532m, giving headroom of £219m,
as detailed below:
UK bank facility
Loan notes
Other loans
Facility
£m
Drawn
£m
Headroom
£m
438
78
16
532
224
78
11
313
214
–
5
219
Maturity
Jun-20
Aug-22
Nov-16
Borrowing
cost
2.12%
2.38%
0.94%
2.14%
Maturity of facilities
(£m)
16
1
1
1
1
1
1
1
Loan notes
Bank facilities
Other loans
438
438
438
438
438
438
78
78
78
78
78
78
78
78
FY16
FY17
FY18
FY19
FY20
FY21
FY22
FY23
The overall cost of borrowings at 30
April 2016 is 2.14% (2015 – 2.78%).
There are three financial covenants under the Group’s facilities which remain
unchanged and are as follows:
The margin charged on bank debt
is dependent upon the Group’s net
debt to EBITDA ratio, ranging from a
minimum of 1.50% to a maximum of
2.25%. The net debt to EBITDA ratio at
30 April 2016 corresponds to a margin
of 1.75%.
Interest rate swap contracts have been
taken out which fix a proportion of bank
debt at 2.23% (2015 – 3.00%) giving
an overall cost of bank borrowings at
30 April 2016 of 2.12% (2015 – 2.85%).
The other loans consist of £10.0m of
local borrowings in Spain and £0.5m of
preference shares.
The split of borrowings (gross of cash
balances) by currency is as follows:
Euro
Sterling
Borrowings before
unamortised
arrangement fees
Unamortised
arrangement fees
2016
£m
257
75
2015
£m
232
117
332
349
(3)
329
(2)
347
Threshold
April 2016
Headroom
April 2015
Interest cover
Loan to value
Debt leverage
3.00×
70%
2.00×
Balance sheet
Net tangible assets at 30 April 2016
were £463.4m (2015 – £418.4m),
equivalent to a net tangible asset value
of 348p per share (2015 – 314p per
share).
Gearing at 30 April 2016 was 67%
(2015 – 81%), which reflects the £27.9m
reduction in net debt.
Return on capital employed was 12.2%
(2015 – 13.0%).
9.13×
£62m (EBIT)
39% £251m (Net debt)
£79m (EBITDA)
1.33×
7.75×
44%
1.41×
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 our policy
to avoid using more complex financial
instruments.
24608.04 7 July 2016 10:36 AM Proof 6
Northgateplc.com stock code: NTG
2829
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 outlined 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 subsidiaries are financed by
a combination of retained earnings and
borrowings.
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.
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
91% at 30 April 2016 (2015 – 73%).
24608.04 7 July 2016 10:36 AM Proof 6
STRATEGIC REPORT Financial review
CONTINUED
Foreign exchange risk
The Group’s reporting currency is,
and the majority of its revenue (67%)
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
2016
£:€
1.35
1.28
2015
£:€
1.29
1.38
The Group manages its exposure to
currency fluctuations on retranslation of
the balance sheets of those subsidiaries
whose functional currency is in Euro
by maintaining a proportion of its
borrowings in the same currency. The
exchange differences arising on these
borrowings have been recognised
directly within equity along with the
exchange differences on retranslation of
the net assets of the Euro subsidiaries.
At 30 April 2016 78% of Euro net assets
were hedged against Euro borrowings
(2015 – 77%).
Going concern
Having considered the Group’s current
trading, cash flow generation and debt
maturity including severe but plausible
stress testing scenarios, the Directors
have concluded that it is appropriate to
prepare the Group financial statements
on a going concern basis.
Paddy Gallagher
Group Finance Director
27 June 2016
24608.04 7 July 2016 10:36 AM Proof 6
Northgateplc.com stock code: NTG 3031
Group
2016
£000
77,632
1,777
1,979
1,561
82,949
61,479
1,777
1,979
1,561
Group
2015
£000
82,963
–
2,010
–
84,973
66,802
–
2,010
–
(1,446)
65,350
(868)
67,944
133,232,518 133,232,518
49.0p
5,586
51.0p
(8,036)
(70,410)
107,653
42,829
20,114
62,943
(14,545)
48,398
Corporate
2016
£000
166
–
(5,282)
17
(5,099)
(5,099)
–
–
Corporate
2015
£000
772
(5,323)
31
(4,520)
(4,520)
–
–
(14,317)
–
(22,353)
14,607
(7,746)
40,556
32,810
Group
2016
£000
90,563
1,777
–
1,979
94,319
94,319
447,134
21.1%
Group
2015
£000
95,762
–
2,010
97,772
97,772
456,818
21.4%
GAAP reconciliation
Throughout this report we refer to
underlying results and measures. The
underlying measures allow management
and other stakeholders to better
compare the performance of the Group
between the current and prior period
without the effects of one-off or
non-operational items.
Underlying measures exclude certain
one-off items such as those arising
from restructuring activities and
recurring non-operational items, namely
intangible amortisation.
A reconciliation of GAAP to non-GAAP
underlying measures is as follows:
Profit before tax
Add back:
Restructuring costs
Intangible amortisation
Exceptional finance costs
Underlying profit before tax
Profit for the year
Add back:
Restructuring costs
Intangible amortisation
Exceptional finance costs
Tax on exceptional items, brand royalty charges and
intangible amortisation
Underlying profit for the year
Weighted average number of Ordinary shares
Underlying EPS
Net increase (decrease) in cash and cash equivalents
Add back:
Receipt of bank loans and other borrowings
Repayments of bank loans and other borrowings
Net cash generated (outflow)
Add back: Dividends paid
Free cash flow
Add back: Adjustment to net capital expenditure for
(contraction) growth in fleet size
Underlying free cash flow
Operating profit
Add back:
Restructuring costs
Brand royalty charges
Intangible amortisation
Underlying operating profit (loss)
Underlying operating profit (loss)
Divided by: Revenue: hire of vehicles
Underlying operating margin
Operating profit
Add back:
Brand royalty charges
Intangible amortisation
Underlying operating profit (loss)
Underlying operating profit (loss)
Divided by: Revenue: hire of vehicles
Underlying operating margin
UK
2016
£000
53,917
1,777
559
1,898
58,151
58,151
306,353
Spain
2016
£000
36,480
–
4,723
64
41,267
41,267
140,781
19.0%
29.3%
UK
2015
£000
66,662
442
1,928
69,032
69,032
311,282
Spain
2015
£000
28,328
4,881
51
33,260
33,260
145,536
22.2%
22.9%
24608.04 7 July 2016 10:36 AM Proof 6
Northgate plc Annual Report and Accounts for the year ended 30 April 2016STRATEGIC REPORT The depreciation rate challenge
Over recent reporting periods Northgate has made revisions to depreciation
rates applied to vehicles for hire in order to comply with IFRS requirements.
This has distorted the year-on-year comparison of the income statement and
therefore made the underlying results less transparent.
This section aims to explain the reasons
why Northgate is required to continually
assess and make adjustments to
depreciation rates, and also demonstrate
the impact that this has had on our
reported results.
Choosing appropriate
depreciation rates
Northgate has a fixed asset base of
vehicles for hire with a net book value
of £684m. These vehicles are typically
held for a rental life of between 36 and
48 months.
When a vehicle is acquired it is
recognised as a fixed asset at its cost net
of any discount or rebate receivable. The
cost is then depreciated evenly over its
rental life, matching its pattern of usage.
Accounting standard IAS 16 (Property,
Plant and Equipment) requires that
the depreciation rates selected must
be based on the anticipation that the
net book value at the point of sale will
equate to its open market value (less
any costs required to sell the vehicle) as
demonstrated in example 1.
1 Example 1: Vehicle
disposal scenario
£
0
10
20
30
40
50
Vehicle age (months)
Net book value
Market value
Acquisition date
Anticipated residual value
Acceptable range of outcomes
In example 1, the ‘perfect’ depreciation
rate would mean that the net book
value on disposal of a vehicle equates to
its market value.
However, the matching of future market
values to net book value on the disposal
date requires significant judgement for
the following key reasons:
1. Used vehicle prices are subject to
short term volatility which makes
it challenging to estimate future
residual values;
2. The exact disposal age is not known
at the point at which rates are set
and therefore the book value at
disposal date is not certain; and
3. Mileage and condition are the key
factors in influencing the market
value of a vehicle. This can vary
significantly through a vehicle’s life
depending upon how the vehicle is
used.
Inevitably, a difference arises between
the net book value of a vehicle and its
market value at the date of disposal. If
these differences are within a materially
acceptable range (as suggested in
example 1) then no adjustments
are made to depreciation rates and
these differences will be reflected as
adjustments to the depreciation charge
in the period of disposal. The result in
the current year has been as follows:
£m
UK
Spain Group
Residual value
of disposals*
Net book value
of disposals
before
adjustment to
depreciation
Adjustment to
depreciation in
the year
PPU (£)
110.8
37.9 148.7
(90.3)
(22.0) (112.3)
20.5
15.9
1,014 1,555
36.4
* Net of selling costs
24608.04 7 July 2016 10:36 AM Proof 6
Northgateplc.com stock code: NTG 3233
In example 2, the expected residual
value at the point of reassessment
has fallen outside of the acceptable
(material) range of outcomes and
therefore a change is made to
depreciation rates prospectively. The
residual value is now expected to fall
within the revised acceptable range.
The impact of changing
depreciation rates
Management regularly assess
depreciation rates and estimated useful
lives to ensure that the net book value of
disposals are broadly equivalent to their
market values.
Changes to depreciation rates must
be applied across the entire fleet
prospectively. The impact of these
changes can make it difficult to compare
our underlying results year-on-year.
Using Spain to illustrate this, the impact
that a 1% change to depreciation rates
would have on profit is outlined in
example 3.
IAS 16 requires the Group to reassess
depreciation rates each year to ensure
that they are appropriate in light of
available market data and recent
performance.
This can be seen in example 2.
2 Example 2: Vehicle disposal
scenario: changing
depreciation rates
If this assessment concludes that
differences between the expected
book values and market values are
anticipated to be material (falling outside
of the acceptable range), then IAS
16 requires adjustments to be made
to depreciation rates which are then
applied prospectively.
£
Re-assessment of
residual values
0
10
20
30
40
50
Vehicle age (months)
Net book value (original assessment)
Originally anticipated residual value
Original range of acceptable values
Revised anticipated residual value
Revised net book value following
depreciation rate change
Revised range of acceptable values
24608.04 7 July 2016 10:36 AM Proof 6
STRATEGIC REPORT The depreciation rate challenge
CONTINUED
3 Example 3: Impact of 1% change to Spain depreciation rates
£m
Impact on fleet depreciation charge
Impact on adjustment for vehicles sold
Net impact on income statement vs. Yr0 (prior to
change)
Year-on-year impact
Cumulative impact
Yr1
3.6
(0.6)
3.0
3.0
3.0
Yr2
3.6
(1.8)
1.8
(1.2)
1.8
Yr3
3.6
(3.0)
0.6
(1.2)
0.6
Yr4
3.6
(3.6)
0.0
(0.6)
–
Key assumptions
| Based on April 2016 closing fleet cost
of £361m
| Constant fleet size
| Constant disposal cycle of 36 months
| No change to cost of vehicles
acquired or residual value of vehicles
sold
As can be seen from example 3, a
reduction in depreciation rates will
reduce the depreciation charge in year
1 as it is applied across the entire fleet.
This reduction will reverse in the income
statement throughout the remaining
holding period of those vehicles due
to lower adjustments or PPU when the
vehicles are sold.
In other words, the net book value of
vehicles sold will increase going forward,
until vehicles sold have been depreciated
at the new lower rate throughout
their rental life. This is demonstrated in
example 4.
24608.04 7 July 2016 10:36 AM Proof 6
Northgateplc.com stock code: NTG 3435
4 Example 4: Net book value
impact of depreciation rate
changes
£
30
20
10
40
0
10
10
20
20
30
30
40
40
Months since depreciation rate change
Proceeds per vehicle sold
NBV per vehicle sold
Adjustment to depreciation
on sale of vehicle
Months depreciated at old rate
Months depreciated at new rate
Assuming 40 month disposal cycle and
no change to residual values
Example 4 demonstrates how the
adjustment to depreciation for vehicles
sold (PPU) reduces to £Nil as the
depreciation change unwinds through
the existing fleet.
Cumulative impact of previous depreciation rate changes
Examples 3 and 4 consider a single change made to depreciation rates. However,
in order to understand the underlying performance of the Group we must consider
the cumulative impact of changes to depreciation rates which have taken effect as
follows:
Taking effect from:
From 1 May 2012
From 1 May 2014
From 1 May 2015
UK
Reduction of 1%
Reduction of 2%
–
Spain
–
Reduction of 1%
Reduction of 1%
The cumulative impact of changes made to depreciation rates since the year ended
30 April 2012 has had the following impact on the reported results when compared
to the previous year:
£m
Underlying as reported:
Operating profit (a)
Profit before taxation
EPS
2016
2015
UK
Spain
Head
office
Group
Group
58.1
41.3
(5.1)
94.3
82.9
49.0p
97.8
85.0
51.0p
Cumulative impact of
depreciation rate changes (b)
Impact of depreciation rate
changes year-on-year
6.8
(5.9)
5.2
2.2
–
–
12.0
15.7
(3.7)
11.4
Results adjusted for
depreciation rate changes:
Operating profit (a-b)
82.1
Profit before taxation
69.3
EPS
41.6p
Impact of previous depreciation rate changes on future results
As the above rate changes have not fully unwound in the income statement, there
will be a continuing impact upon reported results in future periods.
82.3
70.9
41.9p
36.1
51.3
(5.1)
The cumulative impact on operating profit of £12.0m up to the year ended 30 April
2016 is estimated to reverse in the income statement over future periods as follows:
Cumulative Impact
Year-on-year Impact
£m
Year ending 30 April 2017
Year ending 30 April 2018
Year ending 30 April 2019
UK
2.7
–
–
Spain
Group
UK
Spain
Group
3.6
2.1
–
6.3
2.1
–
(4.1)
(2.7)
–
(6.8)
(1.6)
(1.5)
(2.1)
(5.2)
(5.7)
(4.2)
(2.1)
(12.0)
24608.04 7 July 2016 10:36 AM Proof 6
Northgate plc Annual Report and Accounts for the year ended 30 April 2016STRATEGIC REPORT Key Performance Indicators
Description
Performance
Target
Risk Factor link
Business Model link
Buy
Manage
Sell
Financial
Earnings per share (EPS)
Underlying EPS performance is a key measure of our current
profitability.
| Underlying EPS was 49.0p
compared to 51.0p in the previous
year.
| EPS will be affected by the depreciation
rate unwind in the short term and is then
targeted to increase.
Return on Capital Employed (ROCE)
In a capital intensive business ROCE is an important measure of
performance.
| ROCE has reduced from 13.0%
to 12.2%.
Operational
Asset management
Utilisation needs to be optimised in order to be operationally
efficient but must also be balanced against the need to have
fleet available to meet customer demand.
The holding cost of vehicles is the biggest cost to the business
and therefore needs to be minimised in order to increase
profitability and returns.
| Utilisation across the Group was
89% compared to 89% in the
previous year. This was affected
by the number of vehicles off-
hired in the UK this year.
| Channelling more disposals
through our retail network
increases residual values and
therefore reduces holding cost.
Retail penetration increased to
27% across the Group (2015 –
26%).
Pricing
The revenue per vehicle achieved is a key contributor to ROCE.
The hire rates we charge our customers need to reflect the levels
of service and flexibility that our customers enjoy.
| On a constant currency basis,
revenue per rented vehicle
was constant across the Group
compared to the prior year.
Customer service
The average number of vehicles on hire during the year is one of
the primary drivers of our revenue.
In order to grow the business we must deliver the highest levels
of customer service to set us apart from our competitors. NPS is
used as a key measure to monitor customer satisfaction.
| The average number of vehicles
on hire across the Group was
82,800 (2015 – 84,200). The
reduction arose in the UK.
| NPS for the Group was 43%
(2015 – 40%).
Staff retention
Attracting, retaining and developing the right people is key to the
successful delivery of our strategy. Staff turnover is a key measure
for monitoring performance in this area.
| Group staff turnover was 23%
compared to 22% in the previous
year.
24608.04 7 July 2016 10:36 AM Proof 6
| In the short term, as the business expands
and the impact of previous depreciation
rate changes continue to impact results,
ROCE will be adversely impacted. Over the
longer term ROCE is targeted to exceed
levels previously achieved.
| We continue to target utilisation levels
| The Group is targeting retail disposals in
above 90%.
excess of 40%.
| We will continue to maintain minimum hire
rate thresholds, seeking to increase prices
balanced against the full life return of our
vehicles.
| Growth in vehicles on hire is a primary
objective of the Group. However, this is
only sought where appropriate returns
exist.
| Our target is to achieve an NPS in excess of
50% across the Group.
| We aim to manage staff turnover below
industry standards.
1
4
1
4
3
6
3
6
1
2
3
4
6
1
2
2
5
2
5
2
4
Northgateplc.com stock code: NTG
Financial
Earnings per share (EPS)
Underlying EPS performance is a key measure of our current
compared to 51.0p in the previous
Performance
| Underlying EPS was 49.0p
year.
Return on Capital Employed (ROCE)
| ROCE has reduced from 13.0%
In a capital intensive business ROCE is an important measure of
to 12.2%.
Description
profitability.
performance.
Operational
Asset management
Utilisation needs to be optimised in order to be operationally
efficient but must also be balanced against the need to have
fleet available to meet customer demand.
The holding cost of vehicles is the biggest cost to the business
and therefore needs to be minimised in order to increase
profitability and returns.
| Utilisation across the Group was
89% compared to 89% in the
previous year. This was affected
by the number of vehicles off-
hired in the UK this year.
| Channelling more disposals
through our retail network
increases residual values and
therefore reduces holding cost.
Retail penetration increased to
27% across the Group (2015 –
26%).
Pricing
| On a constant currency basis,
The revenue per vehicle achieved is a key contributor to ROCE.
revenue per rented vehicle
The hire rates we charge our customers need to reflect the levels
was constant across the Group
of service and flexibility that our customers enjoy.
compared to the prior year.
Customer service
The average number of vehicles on hire during the year is one of
the primary drivers of our revenue.
In order to grow the business we must deliver the highest levels
| The average number of vehicles
on hire across the Group was
82,800 (2015 – 84,200). The
reduction arose in the UK.
of customer service to set us apart from our competitors. NPS is
| NPS for the Group was 43%
used as a key measure to monitor customer satisfaction.
(2015 – 40%).
Staff retention
| Group staff turnover was 23%
Attracting, retaining and developing the right people is key to the
compared to 22% in the previous
successful delivery of our strategy. Staff turnover is a key measure
year.
for monitoring performance in this area.
3637
Target
Risk Factor link
Business Model link
Buy
Manage
Sell
| EPS will be affected by the depreciation
rate unwind in the short term and is then
targeted to increase.
| In the short term, as the business expands
and the impact of previous depreciation
rate changes continue to impact results,
ROCE will be adversely impacted. Over the
longer term ROCE is targeted to exceed
levels previously achieved.
| We continue to target utilisation levels
above 90%.
| The Group is targeting retail disposals in
excess of 40%.
| We will continue to maintain minimum hire
rate thresholds, seeking to increase prices
balanced against the full life return of our
vehicles.
| Growth in vehicles on hire is a primary
objective of the Group. However, this is
only sought where appropriate returns
exist.
| Our target is to achieve an NPS in excess of
50% across the Group.
| We aim to manage staff turnover below
industry standards.
1
4
1
4
2
5
2
5
3
6
3
6
1
2
3
4
6
1
2
2
4
See our Principal risks and
uncertainties on pages 40 and 41
24608.04 7 July 2016 10:36 AM Proof 6
Northgate plc Annual Report and Accounts for the year ended 30 April 2016STRATEGIC REPORT
Managing risk
Our internal and external risk environments require a dynamic, proactive
approach to risk. The Group’s risk appetite is approved by the Board and
this culture is disseminated throughout the organisation. The Group takes
a conservative view on risk overall. There is an ongoing process of risk
identification, analysis and mitigation by the Board and throughout the
Group with reporting back upwards.
Risk governance
There is a formal governance
structure underpinning our approach
to risk management. Key roles and
responsibilities within the structure are
as follows:
Board
The Board has overall responsibility for
risk management and internal control
and instilling the culture towards risk
management throughout the Group.
The Board manages this through the
Audit and Risk Committee, who report
to the Board.
Audit and Risk Committee
The Audit and Risk Committee review
the Group’s risk appetite statement on
a quarterly basis. The Committee set
the objectives, monitor and review the
activities of Group Internal Audit and
oversee the Group’s whistleblowing
arrangements. The Committee monitor
the Group’s risk management processes
focusing on the effectiveness of internal
controls and business continuity
procedures, including cyber risk.
Executive Committee
The Executive Committee is chaired by
the Chief Executive. More details on the
Executive Committee can be seen in the
Introduction to governance on page 55.
The Executive Committee receive risk
reporting from regional management
which feeds into the strategic
conversations held in this forum.
BOTTOM UP
BOARD
AUDIT AND RISK
COMMITTEE
TOP DOWN
EXECUTIVE
COMMITTEE
GROUP
INTERNAL AUDIT
REGIONAL EXECUTIVE TEAMS
Regional Executive Teams
Regional Executive Teams are
responsible for implementing risk
management within the Group’s
operations. Regional management
identify, analyse, manage and report on
the risks that the businesses face as part
of a continuous dialogue with Group
Internal Audit.
Group Internal Audit
Group Internal Audit are responsible
for the monitoring of the Group’s risk
management approach and provide
a link between regional management
and the Audit and Risk Committee. The
Group Head of Internal Audit reports
formally to and attends the meetings
of the Audit and Risk Committee and
has direct access to the Chairman of the
Board and to all members of the Audit
and Risk Committee.
In addition to risk based standardised
site audits, Group Internal Audit
facilitate the risk management process
by meeting with risk owners to monitor
risk, discuss new risks arising and
to ensure that risks monitored and
reported on are consistent across the
Group.
24608.04 7 July 2016 10:36 AM Proof 6
Northgateplc.com stock code: NTG 3839
t
r
o
Re p
Id
e
n
t
i
f
y
Risk
management
process
M
a
n
a
g
e
alyse
A n
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 can therefore 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 this annual report and
accords with the Turnbull guidance and
therefore the Board has performed a
robust assessment of the principal risks
facing the Group.
Review of risk management
and internal control systems
In addition to the ongoing monitoring
and review of the Group’s risk
management and internal control
systems during the year the Board
engaged a third party to perform a
review of the Group’s processes and
procedures to supplement and bring
an alternative perspective from that of
the Board. The findings of this review
complemented the assessment made by
the Board and identified no significant
failings and weaknesses in the Group’s
risk management system but contained
a number of recommendations which
the Group has already begun work on.
Risk appetite
Risk is always high on the Board’s
agenda and the focus on effective
risk management cascades all the way
through the organisation. The culture
of the organisation ensures that all
activities from day-to-day operations
to high level strategic decisions are
performed in line with this approach.
Management’s assessment of our
principal risks is based on impact,
likelihood, change from the prior year
and appetite.
The governance of risk is undertaken
in the context of the Group’s overall
risk appetite. The Group considers risk
appetite to ensure adequate resources
are allocated to the correct risks. During
the year the Audit and Risk Committee
reviewed and approved a formal risk
appetite statement, which subdivided
the Group’s six principal risks into
fourteen specific risks. Of these, the
Audit and Risk Committee had very
low appetite for three risks, a low level
of appetite for eight of the risks and a
medium level of appetite for three risks.
This demonstrates that the Group takes
a conservative view towards risk and
attempts to minimise its exposure to
undue risk.
24608.04 7 July 2016 10:36 AM Proof 6
STRATEGIC REPORT Managing risk
CONTINUED
Principal risks and uncertainties
Risk
Impact before mitigation
Mitigation
Evaluation
1
2
3
4
5
6
Economic environment
The demand for our products and services could be affected by
a downturn in economic activity in the countries in which the
Group operates.
The recent referendum decision for the UK to leave the EU could
potentially cause a downturn in the economies in which we
operate.
Competition and hire rates
The markets in which the Group operates are fragmented and
competitive, with competitors often pursuing aggressive pricing
strategies to increase their market share. This leads to a risk of
the Group being forced to reduce hire rates to retain current
business or attract new customers.
There is a risk that a lack of understanding of the Group’s
product offering and low brand awareness could lead to the
Group not taking full advantage of the opportunities open to it.
Vehicle holding costs
The profitability of the Group is dependent upon minimising
vehicle holding costs, which are affected by the pricing levels of
new vehicles purchased and the disposal value of vehicles sold.
The high level of operational gearing in our business model
means that changes in demand can lead to higher levels of
variability in profits.
An adverse change in macroeconomic conditions could also
increase the risk of customer failure and therefore incidences of
bad debts.
In the short term, foreign exchange volatility, credit risk and
availability of capital may be affected by the decision to leave
the EU. In the longer term, demand for our products and the
cost of our supplies may be impacted.
As our business is highly operationally geared any decrease in
hire rates will impact profit and shareholder returns to a greater
extent.
An increase in holding costs, if not recovered through hire
rate increases, would adversely affect profitability, shareholder
returns and cash generation.
Employees and the working environment
Failure to attract, develop and retain individuals with the
appropriate skills will inhibit the successful delivery of our
strategy.
Inadequate maintenance of our vehicles and a working
environment where individuals do not receive appropriate
training and support could place employees and customers’
employees at risk from failures in health and safety.
Failure to invest in our workforce and high levels of staff turnover
will impact upon customer service and delivery of the Group’s
strategic objectives.
Failures in health and safety would put the reputation of the
business at risk, both in terms of attracting and retaining talent
and maintaining customer relationships.
Our recruitment processes seek to attract individuals who will
exemplify our core values of professionalism, teamwork and
can-do attitude. Each new joiner receives an introduction to the
Group’s culture as well as our processes.
IT systems
The Group’s business involves a high number of operational and
financial transactions across numerous sites which rely on the
continuous operation of our IT systems.
Should IT systems fail, whether the cause is accidental or
malicious, this could have an adverse impact on both the
ongoing operations of the Group and the recording and
processing of financial information.
Should there be a significant economic downturn the flexible nature of the Group’s business model allows
any vehicles returned to be placed with different customers. Alternatively, utilisation can be maintained
through purchasing fewer vehicles, increasing disposals or a combination of the two. Although this may
affect short term profitability it generates cash and reduces debt.
No individual customer contributes more than 5% of total revenue generated, and ongoing credit analysis is
performed on new and existing customers to assess credit risk.
With regards to the EU referendum the Group’s current hedging arrangements protect it from material
foreign exchange risks and the Group has in place sufficient borrowing facilities to fund its activities with
maturities up to seven years. Any impact on demand or the cost of supplies is not yet known.
All hire rates offered to customers must exceed certain hurdle rates to ensure that appropriate levels of
return on capital are achieved.
Our current pricing strategy is focused on ensuring that we charge an appropriate price for the product and
ancillary services provided, which reflects the benefits provided to our customers. Although flexible rental is
not necessarily the cheapest option, it will attract customers for whom it is the best option and protect the
Group from solely price led competition.
The Board is currently reviewing the Group’s route to market, which will include a review of our marketing
strategy and reinforcing the benefits of our product offering through training of commercial teams.
Pricing is negotiated with manufacturers on an annual basis in advance of purchases being made. Variable
supply terms allow us flexibility to make purchases as required throughout the year.
Whilst the Group is exposed to fluctuations in the used vehicle market, we have sought to increase the level
of sales made through our more profitable retail channel. Should the market experience a short term decline
in residual values, we can age our existing fleet until such time as the market improves.
Personal development plans and tailored training are conducted for all employees. Salaries are benchmarked
against the market and a range of incentives are provided to attract and retain staff. Succession plans are in
place for executive positions.
Regular communication and engagement with everyone across the business is vital to our success.
The Group Health and Safety and Group Internal Audit functions are responsible for delivering health and
safety best practice and reporting any non-compliance to the Board.
Our scheduling and compliance department is overseen by Group Internal Audit and ensures that vehicles
are maintained to the required standards.
The Group has an appropriate business continuity plan in the event of disruption arising from an IT systems
failure.
Before any material system changes are implemented a project plan is approved by the Board. A member of
the executive team will then lead the project and an ongoing implementation review will be performed by
either Group Internal Audit or external consultants where appropriate. The objective is always to minimise
the risk of business disruption that could result from changes.
Access to capital
The Group requires capital to replace vehicles at the end of their rental
life and for any growth in the fleet.
The Group therefore requires continued access to adequate credit
facilities to remain in compliance with its financial covenants.
Failure to maintain or extend access to credit facilities could
impact on the Group’s abilities to continue as a going concern.
The Group’s main facilities mature in 2020 and 2022 and the Group believes that these facilities provide
adequate resources for present requirements.
The Group reviews its compliance with covenants on a monthly basis in conjunction with cash flow forecasts to
ensure ongoing compliance.
viability statement on page 42.
The impact of access to capital on the wider risk of going concern is considered on page 30 and within the
24608.04 7 July 2016 10:36 AM Proof 6
Northgateplc.com stock code: NTG Evaluation is defined as Management’s assessment of whether the risk factor has:
Increased
Decreased
Stayed the same since the prior year.
4041
Risk
Impact before mitigation
Mitigation
Evaluation
1
Economic environment
The high level of operational gearing in our business model
means that changes in demand can lead to higher levels of
The demand for our products and services could be affected by
a downturn in economic activity in the countries in which the
variability in profits.
Group operates.
operate.
The recent referendum decision for the UK to leave the EU could
potentially cause a downturn in the economies in which we
bad debts.
An adverse change in macroeconomic conditions could also
increase the risk of customer failure and therefore incidences of
In the short term, foreign exchange volatility, credit risk and
availability of capital may be affected by the decision to leave
the EU. In the longer term, demand for our products and the
cost of our supplies may be impacted.
As our business is highly operationally geared any decrease in
hire rates will impact profit and shareholder returns to a greater
extent.
2
Competition and hire rates
The markets in which the Group operates are fragmented and
competitive, with competitors often pursuing aggressive pricing
strategies to increase their market share. This leads to a risk of
the Group being forced to reduce hire rates to retain current
business or attract new customers.
There is a risk that a lack of understanding of the Group’s
product offering and low brand awareness could lead to the
Group not taking full advantage of the opportunities open to it.
Vehicle holding costs
The profitability of the Group is dependent upon minimising
vehicle holding costs, which are affected by the pricing levels of
new vehicles purchased and the disposal value of vehicles sold.
An increase in holding costs, if not recovered through hire
rate increases, would adversely affect profitability, shareholder
returns and cash generation.
Employees and the working environment
Failure to attract, develop and retain individuals with the
appropriate skills will inhibit the successful delivery of our
strategy.
Inadequate maintenance of our vehicles and a working
environment where individuals do not receive appropriate
training and support could place employees and customers’
employees at risk from failures in health and safety.
Failure to invest in our workforce and high levels of staff turnover
will impact upon customer service and delivery of the Group’s
strategic objectives.
Failures in health and safety would put the reputation of the
business at risk, both in terms of attracting and retaining talent
and maintaining customer relationships.
Our recruitment processes seek to attract individuals who will
exemplify our core values of professionalism, teamwork and
can-do attitude. Each new joiner receives an introduction to the
Group’s culture as well as our processes.
5
IT systems
The Group’s business involves a high number of operational and
financial transactions across numerous sites which rely on the
continuous operation of our IT systems.
Should IT systems fail, whether the cause is accidental or
malicious, this could have an adverse impact on both the
ongoing operations of the Group and the recording and
processing of financial information.
3
4
Should there be a significant economic downturn the flexible nature of the Group’s business model allows
any vehicles returned to be placed with different customers. Alternatively, utilisation can be maintained
through purchasing fewer vehicles, increasing disposals or a combination of the two. Although this may
affect short term profitability it generates cash and reduces debt.
No individual customer contributes more than 5% of total revenue generated, and ongoing credit analysis is
performed on new and existing customers to assess credit risk.
With regards to the EU referendum the Group’s current hedging arrangements protect it from material
foreign exchange risks and the Group has in place sufficient borrowing facilities to fund its activities with
maturities up to seven years. Any impact on demand or the cost of supplies is not yet known.
All hire rates offered to customers must exceed certain hurdle rates to ensure that appropriate levels of
return on capital are achieved.
Our current pricing strategy is focused on ensuring that we charge an appropriate price for the product and
ancillary services provided, which reflects the benefits provided to our customers. Although flexible rental is
not necessarily the cheapest option, it will attract customers for whom it is the best option and protect the
Group from solely price led competition.
The Board is currently reviewing the Group’s route to market, which will include a review of our marketing
strategy and reinforcing the benefits of our product offering through training of commercial teams.
Pricing is negotiated with manufacturers on an annual basis in advance of purchases being made. Variable
supply terms allow us flexibility to make purchases as required throughout the year.
Whilst the Group is exposed to fluctuations in the used vehicle market, we have sought to increase the level
of sales made through our more profitable retail channel. Should the market experience a short term decline
in residual values, we can age our existing fleet until such time as the market improves.
Personal development plans and tailored training are conducted for all employees. Salaries are benchmarked
against the market and a range of incentives are provided to attract and retain staff. Succession plans are in
place for executive positions.
Regular communication and engagement with everyone across the business is vital to our success.
The Group Health and Safety and Group Internal Audit functions are responsible for delivering health and
safety best practice and reporting any non-compliance to the Board.
Our scheduling and compliance department is overseen by Group Internal Audit and ensures that vehicles
are maintained to the required standards.
The Group has an appropriate business continuity plan in the event of disruption arising from an IT systems
failure.
Before any material system changes are implemented a project plan is approved by the Board. A member of
the executive team will then lead the project and an ongoing implementation review will be performed by
either Group Internal Audit or external consultants where appropriate. The objective is always to minimise
the risk of business disruption that could result from changes.
6
Access to capital
The Group requires capital to replace vehicles at the end of their rental
life and for any growth in the fleet.
The Group therefore requires continued access to adequate credit
facilities to remain in compliance with its financial covenants.
Failure to maintain or extend access to credit facilities could
impact on the Group’s abilities to continue as a going concern.
The Group’s main facilities mature in 2020 and 2022 and the Group believes that these facilities provide
adequate resources for present requirements.
The Group reviews its compliance with covenants on a monthly basis in conjunction with cash flow forecasts to
ensure ongoing compliance.
The impact of access to capital on the wider risk of going concern is considered on page 30 and within the
viability statement on page 42.
24608.04 7 July 2016 10:36 AM Proof 6
Northgate plc Annual Report and Accounts for the year ended 30 April 2016STRATEGIC REPORT Managing risk
CONTINUED
As explained in the Strategic Report,
our business model provides customers
with vehicles on a non-contract basis
which allows them to flex their vehicle
requirements as their business needs
change. This is core to the proposition
we offer, however, it does mean that
there is less certainty over the future
revenue streams of the Group over a
longer period of time. The Directors
have therefore made assumptions on
future revenue generation in the context
of current market conditions and
prospects of the Group.
In making this statement, the Directors
have considered the resilience of the
Group, taking into account its current
position and the principal risks facing
the business. The Plan was stress tested
for severe but reasonable scenarios
and the effectiveness of any mitigating
actions that would reasonably be taken.
The Plan was specifically stress tested
for downturns in vehicles on hire, hire
rates, vehicle acquisition costs and
residual values of vehicles. The outcome
of this testing satisfied the Directors
with respect to the ongoing liquidity and
solvency of the Group over the period
under review. In particular, should there
be a significant downturn in demand for
the Group’s business, vehicle utilisation
can be maintained through purchasing
fewer vehicles, increasing disposals or a
combination of the two, which would
generate cash and reduce debt.
Viability statement
The Directors have assessed the viability
of the Group over a three year period
to 30 April 2019, taking into account
the Group’s current position and the
potential impact of the principal risks
documented in the Strategic Report.
Based upon this assessment the
Directors have a reasonable expectation
that the Company will be able to
continue in operation and meet its
liabilities as they fall due over the period
to 30 April 2019.
The three year period was selected
as this represents the normal holding
period of our core vehicle assets and
therefore represents the Company’s
normal investment cycle. This period
is aligned to how our business model
runs through its cycle, how capital is
employed in the business and therefore
how returns on investment are
reviewed.
The strategy and associated principal
risks underpin the Group’s three year
strategic planning process (the Plan),
which is updated annually. This process
takes into account the current and
prospective macroeconomic conditions
in the countries in which we operate
and the competitive tension that exists
within the markets that we trade in.
The Plan also encompasses the projected
cash flows, dividend cover, and
headroom against financial covenants
under the Group’s existing facilities.
The Plan makes certain assumptions
about the normal level of capital
recycling likely to occur and therefore
considers whether additional financing
will be required. Headroom against the
Group’s existing facilities at 30 April
2016 was £219m as detailed on page
28. The facilities have maturity dates
between November 2016 and August
2022, which exceeds the period under
review and provides sufficient headroom
to fund the capital expenditure and
working capital requirements during the
planned period.
24608.04 7 July 2016 10:36 AM Proof 6
Northgateplc.com stock code: NTG 4243
24608.04 7 July 2016 10:36 AM Proof 6
Northgate plc Annual Report and Accounts for the year ended 30 April 2016STRATEGIC REPORT Corporate social responsibility
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
We understand that we have an
obligation to run our business in a
responsible and sustainable way for
all 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
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. Risks, 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.
The Group is committed to all of its
employees acting ethically at all times
and has a Code of Business Conduct
which communicates expected
behaviour on a range of subjects.
We recognise that employees are the
key resource required to deliver the high
levels of customer service that maintains
our competitive advantage and we
remain committed to equality.
As a business we seek to limit our
impact on the environment and aim to
be a good neighbour and member of
our local community.
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’
programme creates 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
Safety & Environment (S&E) department.
During the year the Group’s S&E
department carried out formal audit
reviews to measure performance of
our S&E management system at all
locations and where necessary identified
improvements and subsequently
monitored compliance. The main
objective of the S&E department is to
ensure continuous improvement across
the Group whilst providing 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.
Health & safety performance across
the business is measured using an
Accident Frequency Rate (AFR). The AFR
is calculated as the number of lost time
incidents, multiplied by 100,000, divided
by the number of man hours worked.
The AFR’s reported are as follows:
UK
Spain
Group
2016
1.0
2.2
1.4
2015
1.1
2.2
1.5
24608.04 7 July 2016 10:36 AM Proof 6
Northgateplc.com stock code: NTG Northgate plc Annual Report and Accounts for the year ended 30 April 2016
4445
E . F
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E
E
X
I
B
L
E
.
E F R
L
S
S
A
H
RUSTED.
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Celebrating
Success
adam Cheal
Adam is a Warranty Administrator in Barking and received his
award for outstanding teamwork after being nominated by a
manager from a branch he had been assisting.
Find out more about the Group at: www.northgateplc.com
24608.04 7 July 2016 10:36 AM Proof 6
STRATEGIC REPORT
Corporate social responsibility
CONTINUED
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 bribery, competition,
conflicts of interest, inside 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
2016 we had 2,859 (2015 – 2,971)
employees across the Group, 1,865 in
the UK (2015 – 2,057) and 994 in Spain
(2015 – 914).
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.
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 or political
bias.
As at 30 April 2016, the gender
breakdown of the workforce across the
Group was:
Directors
Senior
Managers
All
Employees
Male
4
20
Female
2
3
1,996
863
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. In
addition, Northgate offers colleagues
a suite of ongoing bespoke training
in various disciplines throughout their
career.
Regular and consistent communication
and engagement with everyone across
the business is vital to our success,
ensuring we all share in our values,
vision, and goals. A number of new
initiatives are currently under way across
the business to achieve this and our
revised communication strategy will
better utilise our new communication
channels and further enhance our
employee engagement across the
business.
Our current emphasis is placed on
monthly briefings, face to face meetings,
conferencing, conference calls, and
discussions between managers and their
teams. These methods will continue
to be supported by the business as we
look towards the transformation of our
communication channels.
We understand that communication and
engagement are critical business tools
and we are striving to promote a sense
of community at Northgate and ensure
that our people work towards the vision
of our desired future.
UK
The Northgate Sales Academy was
launched in September 2015 to help
new colleagues in the sales team to
settle in quickly through learning
partners who ensure an effective
induction programme, including
coaching in the field. In addition, face
to face training and support is delivered
to existing sales staff. During the year
42 new colleagues joined the Sales
Academy.
Our management assessment
programme continued throughout the
year, with 12 managers achieving the
Institute of Leadership and Management
level five. 301 colleagues have begun
studying for the level two NVQ in
customer service, with the first 50
having now passed.
September 2015 saw another 24
technical apprentices join the business.
Half will spend time with Ford and half
with Mercedes Benz as part of their
training. 12 apprentices from a previous
intake achieved the prestigious Technical
certificate and enjoyed a Mercedes
Benz driving experience at Goodwood
as a reward, showing our commitment
to supporting colleagues within the
business.
Spain
In the calendar year ending December
2015 18 people with disabilities
were employed, an 80% increase
on the previous year. This shows our
commitment to hiring on merit and not
discriminating on social factors.
During the year Northgate Campus was
launched. This is a bespoke e-learning
platform customised for the needs of
individuals in order to allow them to
access timely, relevant training material
tailored to their role within the business.
Northgate Campus is available to all
employees.
24608.04 7 July 2016 10:36 AM Proof 6
Northgateplc.com stock code: NTG 4647
Human rights
Information on equality is contained
above and our corporate responsibility
policy information, which includes
human rights, can be found on the
Group’s corporate website. A statement
on the Group’s compliance with the
Modern Slavery Act will be published
on the website within six months of the
year end.
Environment
As at 30 April 2016, the UK business
operated from a total of 89 locations,
including 77 rental sites. The Spanish
business operates from a total of 38
locations, including 24 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.
For all environmental matters our
policy is to promote and operate
processes and procedures, which, so
far as is reasonably practicable, avoid or
minimise the contamination of water,
air and the ground. We manage the
waste streams which are generated
through our activities responsibly and
we aim to dispose of waste properly
in ways which minimise the likelihood
of harming the environment. Waste is
separated at source and stored until
specialist contractors can dispose of it
in the most appropriate and effective
manner. This includes recycling and
reducing the amount of waste being
sent to landfill across our locations. The
Group continues to work closely with its
waste management partners to improve
performance and continually monitors
these aspects and the impacts our
operations have on the environment.
UK
During the year we participated in
ESOS for the first time. We are currently
working through the recommendations
provided as part of this process.
We maintained the internationally
recognised ISO 14001 Environmental
Standard during the year, showing our
commitment to effective environmental
management systems. This was
complemented with our OHSAS 18001
accreditation, confirming that we have
suitable and effective health & safety
management practices in place.
We are currently trialling internal and
external LED lights in a number of
branches, projections suggest these
could save at least 70% on electricity
consumption compared to the legacy
bulbs. 16 branches now have energy
management controls fitted, allowing
heating to be better controlled according
to the conditions. We intend to monitor
the effectiveness of the trial closely.
We were able to continue to recycle
or recover 100% of all waste streams
generated and collected from our
vehicle repair workshops in the UK.
Due to adopting sound environmental
practices across the estate we were also
able to recycle 70% of all dry waste
streams collected from our sites in the
UK. In all 90% of dry waste streams
collected from our sites were diverted
from landfill in the UK.
24608.04 7 July 2016 10:36 AM Proof 6
STRATEGIC REPORT Corporate social responsibility
CONTINUED
Spain
We have maintained our ISO 14001
accreditation in Spain. Positive measures
taken to improve environmental
performance include installing an
electric vehicle charging point at our
head office as well as decreasing both
electricity and paper consumption.
This has been coupled with other
environmental campaigns including
temperature adjustments in facilities,
recycling and reiterating the importance
that every employee plays in
environmental matters.
Each depot is audited by a Northgate
team at least twice a year with
opportunities for improvement
identified and monitored and the results
are reported to the Group Safety and
Environment Manager.
During the year we also increased the
number and range of electric vehicles
on the fleet. This gives our customers
the ability to drive on restricted roads
in certain cities and charging is free in
several places, as well as being kinder
to the environment than traditional
vehicles.
We were able to recycle or recover
72% of all waste streams generated
and collected from our vehicle repair
workshops in Spain.
Greenhouse gas emissions
This section incorporates the mandatory reporting of greenhouse gas emissions required by the Companies Act 2006
(Strategic Report and Directors’ Report) Regulations 2013 (the Regulations).
Reporting and baseline year
The information presented covers the period from 1 May 2015 to 30 April 2016 with a comparison to the prior year.
The base year for calculations is the year ended 30 April 2014.
Consolidation approach and organisational boundary
The emissions data presented has been derived using the operational control approach, required under the Regulations.
Each facility under operational control has been included within the figures. Northgate has used the principles of the GHG
Protocol Corporate Accounting and Reporting Standard (revised edition), ISO 14064-1.
Methodology
Defra’s current conversion factors have been used in arriving at the information supplied below. All six greenhouse gases are
reported where appropriate.
Greenhouse gas emissions figures
Greenhouse gas emissions source
Scope 1 – Combustion of fuel and operation of facilities
Scope 2 – Electricity, heat, steam and cooling
Intensity ratio: Tonnes of CO2e per £m of revenue
Tonnes of CO2e
2016
Tonnes of CO2e
2015
6,201
4,766
24.5
5,865
4,343
22.3
The above data has been verified by an independent, UKAS accredited, third party assessor.
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.
As at 30 April 2016 the UK fleet of
53,300 vehicles had an average age of
20.9 months. The total fleet in Spain
was 39,800 vehicles with an average
age of 23.3 months. All vehicles
purchased in the year ended 30 April
2016 met Euro 5 standards.
Our community
We must be 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 member of the British
Safety Council and the Royal Society for
the Prevention of Accidents (RoSPA),
which supports our commitment to
corporate social responsibility. During
2015 we received a Silver Occupational
Health and Safety award.
The Group encourages employees to
partake in activities in aid of charities:
UK
During the year colleagues have
supported various charities including
Birmingham Children’s Hospital charity,
Breast Cancer Now, the victims of
flooding in Sowerby Bridge through the
loan of a vehicle, School of Hard Knocks
through donation of a vehicle and
collection of Christmas presents for a
children’s charity in a Northgate van.
Spain
The Spanish business has been involved
in helping out at a food bank in
Sevilla, collaborating in a charity bike
ride supporting a children’s cancer
charity and supporting Gavi, a vaccine
alliance aimed at widening access to
immunisation for children in the world’s
poorest countries.
24608.04 7 July 2016 10:36 AM Proof 6
Northgateplc.com stock code: NTG 4849
School and
university partnerships
Seeking to prepare individuals for the workplace has
been a significant focus for our Spanish business over
the past four years. Since 2012 we have:
EDUCATIONAL
INSTITUTION
TRAINEE
Worked with 78 schools
to provide 300 individuals
with internships across all of our
geographical locations
From these internships we have
employed over 30 trainees
These tripartite agreements
benefit all parties
As well as the wider social benefits,
Northgate benefit from having a pool
of talent where the highest performers
can join the business with no or little
recruitment cost.
The educational institutions we
partner with have fulfilled their duties
to equip their students for the post
educational world of work.
Trainees get the benefit of exposure to
real life work experience, support with
employability skills and for some the
opportunity of a job at the end of the
programme.
Work with social guarantee scholars is
an area we are particularly pleased with.
Guarantee scholars are those who come
from low income families or families
with social difficulties. This programme
involves the students spending three
months learning about every aspect of
the work of a motor vehicle technician.
This covers both technical aspects and
areas such as Health & Safety.
The students also benefit from
sessions on employability and
workplace behaviour. From each
group two or three would typically
be employed.
Our continued commitment to
developing these relationships shows
our commitment to being a responsible
corporate citizen and enhancing the
communities we do business in.
24608.04 7 July 2016 10:36 AM Proof 6
STRATEGIC REPORT
24608.04 7 July 2016 10:36 AM Proof 6
Northgateplc.com stock code: NTG 5051
This section explains our approach to governance
from Board level down, including governance
structures, activities of the various Board
committees and the key skills of those charged
with governance.
52 Board of Directors
54 Chairman’s introduction to governance
55 Introduction to governance
58 Corporate governance
61 Report of the Audit and Risk Committee
64 Remuneration report
75 Report of the Directors
78 Directors’ responsibilities
79 Independent auditor’s report to the
members of Northgate plc
24608.04 7 July 2016 10:36 AM Proof 6
Northgate plc Annual Report and Accounts for the year ended 30 April 2016GOVERNANCE Board of Directors
Andrew Page
Chairman
Bob Contreras ACA
Chief Executive
Paddy Gallagher
Group Finance Director
Andrew Allner
Jill Caseberry
Claire Miles
Bill Spencer
Senior Independent Director
Non-executive Director
Non-executive Director
Non-executive Director
Joined Board
December 2014
June 2008
February 2016
September 2007
December 2012
November 2015
June 2016
Committee
membership
Key skills and
experience
Remuneration, Nominations (C)
| Previously CEO of a FTSE 250 business
| International business
| Major capital investment decisions
| Chartered Accountant
| Wide cross-sector experience
| International business
| Chartered Accountant
| Significant cross-sector experience
| International business
| Chartered Accountant
Current
positions
Former
positions
Carpetright –
Senior Independent Director
Schroder UK Mid Cap Fund plc – non-
executive Director
JP Morgan Emerging Markets
Investment Trust plc –
non-executive Director
Speedy Hire –
non-executive Director
Restaurant Group plc –
Chief Executive Officer
Arena Leisure plc –
Senior Independent Director
Mölnlycke Healthcare Group –
Divisional Managing Director
Demovo Group SA – Chief Executive
Azlan Group plc – Group CFO
Spirit Pub Company plc – CFO
The Rank Group plc – CFO
Dell Inc
Audit & Risk (C), Remuneration,
Audit & Risk, Remuneration (C),
Audit & Risk, Remuneration,
Audit & Risk, Remuneration,
Nominations
Nominations
Nominations
Nominations
| Significant Board experience
| Sales
(see below)
| Marketing
| UK and multinational experience
| General management
operations
| Chartered Accountant
| Commercial strategy
| Multi-channel customer
| Large scale transformation
| International business
| Former CFO of a FTSE
100 company
| Wide multi-industry
experience
Marshalls plc – Chairman
Enhance Drinks Limited –
HomeCare, British Gas –
Exova Group –
Chief Executive
Managing Director
Go Ahead Group plc – Chairman
Fox Marble Holdings plc – Chairman
Senior Independent Director
and Chairman of Audit
Committee
UK Mail Group –
Chair of Audit Committee
RHM plc – Finance Director
Enodis Plc – Chief Executive
Mars –
Santander Cards –
Intertek Group – CFO
Various Sales and Marketing roles
Managing Director,
AZ Electronic Materials SA – Senior
Independent Director and Chair of
Audit Committee
CSR plc – Chair of Audit Committee
PepsiCo –
Commercial Director
Premier Foods –
General Manager
Retail Distribution
GE Money –
Commercial Director
HFC Bank – Head of Cards
Moss Bros Group plc –
Chair of Audit Committee
PriceWaterhouse – Partner
24608.04 7 July 2016 10:36 AM Proof 6
HeadingNorthgateplc.com stock code: NTG 5253
Andrew Page
Chairman
Bob Contreras ACA
Chief Executive
Paddy Gallagher
Group Finance Director
Andrew Allner
Senior Independent Director
Jill Caseberry
Non-executive Director
Claire Miles
Non-executive Director
Bill Spencer
Non-executive Director
Joined Board
December 2014
June 2008
February 2016
September 2007
December 2012
November 2015
June 2016
Committee
membership
Remuneration, Nominations (C)
Audit & Risk (C), Remuneration,
Nominations
Audit & Risk, Remuneration (C),
Nominations
Audit & Risk, Remuneration,
Nominations
Audit & Risk, Remuneration,
Nominations
Key skills and
| Previously CEO of a FTSE 250 business
| Wide cross-sector experience
| Significant cross-sector experience
experience
| International business
| International business
| Major capital investment decisions
| Chartered Accountant
| International business
| Chartered Accountant
| Chartered Accountant
| Significant Board experience
(see below)
| UK and multinational experience
| Chartered Accountant
| Sales
| Marketing
| General management
| Commercial strategy
| Multi-channel customer
operations
| Large scale transformation
Current
positions
Carpetright –
Senior Independent Director
Speedy Hire –
non-executive Director
Schroder UK Mid Cap Fund plc – non-
executive Director
JP Morgan Emerging Markets
Investment Trust plc –
non-executive Director
Former
positions
Restaurant Group plc –
Chief Executive Officer
Arena Leisure plc –
Senior Independent Director
Mölnlycke Healthcare Group –
Divisional Managing Director
Spirit Pub Company plc – CFO
The Rank Group plc – CFO
Demovo Group SA – Chief Executive
Dell Inc
Azlan Group plc – Group CFO
Marshalls plc – Chairman
Go Ahead Group plc – Chairman
Fox Marble Holdings plc – Chairman
Enhance Drinks Limited –
Chief Executive
HomeCare, British Gas –
Managing Director
RHM plc – Finance Director
Enodis Plc – Chief Executive
AZ Electronic Materials SA – Senior
Independent Director and Chair of
Audit Committee
CSR plc – Chair of Audit Committee
Moss Bros Group plc –
Chair of Audit Committee
PriceWaterhouse – Partner
Mars –
Various Sales and Marketing roles
PepsiCo –
Commercial Director
Premier Foods –
General Manager
Santander Cards –
Managing Director,
Retail Distribution
GE Money –
Commercial Director
HFC Bank – Head of Cards
24608.04 7 July 2016 10:36 AM Proof 6
| International business
| Former CFO of a FTSE
100 company
| Wide multi-industry
experience
Exova Group –
Senior Independent Director
and Chairman of Audit
Committee
UK Mail Group –
Chair of Audit Committee
Intertek Group – CFO
(C) denotes Chairman
HeadingNorthgate plc Annual Report and Accounts for the year ended 30 April 2016GOVERNANCE Chairman’s introduction to governance
Significant changes made to the Code
in 2014 have applied to the Group
for the first time this year. This has
facilitated a comprehensive review of
how we approach risk management.
andrew page I Chairman
bob mackenzie I Chairman
Dear Shareholder,
At Northgate we recognise the vital role that governance plays
in delivering the best outcomes for all stakeholders in the
business. Our system of risk management and internal control
is underpinned by our core values of professionalism, team
work and can-do attitude which are espoused by our 2,900
staff.
Significant changes made to the Code in 2014 have applied
to the Group for the first time this year. This has facilitated a
comprehensive review of how we approach risk management.
We have overseen Directorate changes as well as undertaking
a formal evaluation of the Board’s own performance. We have
also transitioned to a new external auditor.
UK Corporate Governance Code
The 2014 update to the Code became effective in the
current year. This has facilitated a review of our approach
and disclosure of risk management. We have provided an
overview of our risk governance processes in the Managing
risk report on pages 38 to 42. This report explains the Board’s
risk appetite. The risk appetite statement was approved by
the Board during the year and is reviewed by the Audit and
Risk Committee. Further details of the work performed by this
committed is outlined on pages 61 to 63.
The Board considers that it has complied with the provisions of
the Code throughout the year, with the exception of provision
C.3.1 which requires the Audit Committee to consist of at
least three members. The membership of this committee was
increased from two to three following the appointment of
Claire Miles in November 2015, therefore the Group was fully
compliant with the Code as at the date of this report.
Board changes
I am delighted to welcome Claire Miles and Bill Spencer to the
Board as new non-executive Directors. They collectively bring
with them a wealth of commercial and Board experience and
continue to broaden the skills base of the Board.
I am also pleased to welcome Paddy Gallagher to the Board as
Group Finance Director. Paddy brings with him significant cross
-sector public company experience and he has already made a
valuable contribution towards the development of the Group.
Board evaluation
During the year an external evaluation of Board effectiveness
was undertaken. I am pleased to report that this review
concluded that Board governance is in good repair. A number of
areas were identified where we can improve further. These have
been discussed and prioritised by the Board and will be a key
area of focus going forward.
Change in auditor
The shareholders approved the appointment of PwC as
statutory auditor during the AGM in September. The transition
has been managed smoothly and their audit report can be
seen on page 79.
Good governance is a cornerstone of our business and the
disciplines and practices that contribute to this are well
understood by the Northgate team.
Andrew Page
Chairman
27 June 2016
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Northgateplc.com stock code: NTG 5455
Introduction to governance
Governance structure
BOARD
Executive
Directors
Audit and Risk
Committee
Remuneration
Committee
Nominations
Committee
Executive
Committee
Internal
Audit
Responsibilities
Board
The Board has overall responsibility for:
| Determining the strategy and values of the Group and ensuring long
term success for the benefit of all stakeholders;
2016 key activities:
| Redefinition of the Group’s strategy
| Conducted a review of the Group’s risk
management processes
| Ensuring that adequate resources are available so that strategic
| Overseeing the appointment of two new
objectives may be achieved through the annual planning process and
ongoing monitoring;
non-executive Directors
| Appointment of a new Group Finance
| Ensuring that the Company’s internal control systems (both financial and
Director
operational) are fit for purpose and operating as they should be;
| Reporting to and relationships with shareholders;
| Compliance with laws and regulations and good corporate governance;
| Dividend policy;
| Treasury policy;
| Insurance policy;
| Major capital expenditure;
| Acquisitions and disposals;
| Board structure; and
| Remuneration policy.
2017 key focus:
| Overseeing the strategic development of the
Group
| Acting upon recommendations of the
external Board effectiveness review
| Embedding the recommendations of the
external risk management review into the
Group
| Ensuring that the Group follows
recommendations made following the
external review of cyber risk
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Northgate plc Annual Report and Accounts for the year ended 30 April 2016GOVERNANCE Introduction to governance
CONTINUED
New UK executive team
Facilitating the restructuring of the UK executive
management team, including the appointment
of a UK Managing Director.
Sharing best practice
The Committee was formed during the year,
replacing direct reporting of operating segment
management to the executive Directors. The
Committee meets once a month and facilitates
best practice across the Group.
The Committee comprises the executive
Directors and senior management from each
territory.
New auditors
After a formal tender process PwC were
appointed as our external auditor at our AGM in
September 2015.
Risk review
The Committee commissioned external
reviews of the Group’s approach to risk
management and cyber security during the
year and will oversee the implementation of the
recommendations made.
Executive Directors
Executive Directors are responsible for:
| Ensuring the Group strategy is executed effectively via the Executive
Committee;
| Monitoring Group performance;
| Managing the Group’s financial affairs; and
| Implementation and review of the system of internal control.
Executive Committee
The Executive Committee is responsible for:
| Executing Group strategy and policies;
| Considering operational business issues;
| Reviewing risk reporting and taking necessary actions; and
| Managing business performance.
Audit and Risk Committee
The Audit and Risk Committee is responsible for:
| Monitoring the integrity of financial reporting and reviewing the
Group’s risk management systems on behalf of the Board, including
reviewing the work of Group Internal Audit;
| Overseeing the statutory audit process;
— Recommending appointments to the Board;
— Monitoring independence and objectivity, including monitoring
auditor rotation and developing policy on non-audit services
provided;
— Approving auditor remuneration and terms of engagement; and
— Overseeing the audit tender process, if applicable; and
| All aspects of Group risk.
Further information on the work of the Audit and Risk
Committee is detailed in the Report of the Audit and Risk
Committee on pages 61 to 63.
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Northgateplc.com stock code: NTG
5657
New Director remuneration
During the year the Committee determined
the remuneration to be awarded to the newly
appointed Group Finance Director.
Remuneration Committee
The Remuneration Committee is responsible for:
| Determining and agreeing with the Board the remuneration policy
for the Board and other executives, excluding non-executive Director
remuneration. Non-executive Director remuneration is decided by the
Chairman and the executive Directors;
| Determining and annually reviewing the remuneration policy and
employee benefits structure for all employees throughout the Group;
| Reviewing the design and outcome of any share incentive plans put in
place; and
| Determining the scope of Group pension arrangements.
The Remuneration Report can be found on pages 64 to 74.
Nominations Committee
The Nominations Committee is responsible for:
| Reviewing the structure, size, skills and experience of the Board and
making recommendations regarding any changes;
| Considering succession planning for Directors and other senior
executives; and
| Making recommendations to the Board for candidates to fill Board
vacancies when they arise, normally using the services of professional
consultants in the search.
Three new appointments
During the year the Nominations Committee
approved the appointment of two new non-
executive Directors and a new Group Finance
Director.
It also oversaw new appointments in the roles
of Chairman and Senior Independent Director.
The full terms of reference of the Audit and Risk, Remuneration and Nominations Committees can be found on the Group’s
corporate website.
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GOVERNANCE Corporate governance
We recognise the vital role that good governance plays
in delivering the best outcomes for all stakeholders in the
business. Furthermore, UK Listed Companies are required by
the FCA (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 Code. The provisions of the Code
applicable to listed companies are divided into five parts,
as set out below:
1. leadership
The business is managed by the Board of Directors currently
comprising two executive and five non-executive Directors,
details of whom are shown on pages 52 and 53.
The offices of the Chairman and Chief Executive are separate.
An overview of the leadership of the Group, including the
responsibilities and activities of each component is outlined in
the Introduction to Governance on pages 55 to 57.
2. Effectiveness
Information supplied
The Chairman ensures that all Directors are appropriately
briefed to enable them to discharge their duties. Management
accounts are prepared and submitted to the Board on a
monthly basis. Before each Board meeting appropriate
documentation on all items to be discussed is circulated.
Attendance
Directors’ attendance at Board and Committee meetings
during the year is detailed as follows:
1
2
Leadership
Effectiveness
5
Relations with
Shareholders
3
Accountability
4
Remuneration
Director appointments
The Nominations Committee is responsible for the composition
of the Board including the selection and appointment of
new Directors. A summary of the work of this Committee is
outlined on page 57.
There is a formal induction process for new Directors
facilitated by the Company Secretary. Before appointment
non-executive Directors are required to assure the Board that
they can give the time commitment necessary to properly
fulfil their duties, both in terms of meeting attendance and
preparation time.
No. of meetings
AJ Allner
JG Astrand1
G Caseberry
RL Contreras
P Gallagher2
RD Mackenzie3
C Miles4
CJR Muir5
A Page
Board
9
Audit and Risk
Remuneration
Nominations
4
7
2
(Max 3)
(Max 2)
(Max 3)
(Max 5)
(Max 6)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1 Resigned from the Board on 17 September 2015
2 Appointed to the Board on 22 February 2016
3 Resigned from the Board on 17 September 2015
4 Appointed to the Board on 27 November 2015
5 Resigned from the Board on 22 February 2016
All Directors in office at that time were present at the AGM
held in September 2015.
The external auditor and the Head of Group Internal Audit
attended all Audit and Risk Committee meetings.
Andrew Allner will have completed nine years’ service as a
non-executive director of the Company in September 2016,
at which time he will no longer be regarded as independent
in terms of the Code or by the ABI. As recently announced,
it is the Board’s intention that Bill Spencer, appointed to the
Board as a non-executive director on 1 June 2016, will assume
the roles of Senior Independent Director and Chairman of the
Audit and Risk Committee on 1 October 2016.
24608.04 7 July 2016 10:36 AM Proof 6
Northgateplc.com stock code: NTG
5859
Board review
The Board undertook a formal evaluation of its own
performance, and that of its Committees and individual
Directors during the year. The Code requires that the Company
conduct an externally facilitated evaluation every three
years but, following the appointment of a new Chairman, it
was decided to bring forward the date of the next external
evaluation, and that it should again be facilitated by Duncan
Reed of Condign Board Consulting Ltd, as it was in 2014. This
was to provide continuity of perspective, and to allow changes
to be assessed and placed in their proper context. Condign is
a firm which specialises in board effectiveness work. Neither
Mr Reed nor Condign have any other connection with the
Company.
The evaluation process consisted of a structured interview with
the Chairman, each Director, the Company Secretary and the
Managing Directors of the Spanish and UK businesses, with an
outline of the agreed topics to be covered in the interview sent
to each in advance. The evaluation also included the review
of relevant Board papers, and Mr Reed attended the January
Board meeting prior to the Strategy Day. The outcome of the
review was discussed with the Chairman, the full report then
shared with all of the Directors, and then Mr Reed presented
it in person, and facilitated a discussion about it, before the
April Board meeting, where he was also available for questions
pertaining to it.
The review concluded that Board governance was still in good
repair, and that the Board itself – though much changed
due to director rotation and retirement – remained ‘notably
commercial’ and ‘business-focused’. Robust discussions of a
constructive nature continue to be had, against the backdrop
of a changed boardroom environment and challenging market
expectations.
The engagement by the new Board with strategy development
at a Group level was again highlighted and now accepted
as an urgent priority. It was agreed that personnel change
at executive and non-executive level had had an impact on
progress in this area over the last two years.
To assist this, and to drive performance and best practice in
a number of areas, a new Group structure was put in place
in January 2016, with a separate UK Managing Director (a
role previously undertaken by the Group CEO), the hiring of
UK Sales and Marketing Directors, and the appointment of
a new Operations Director. This team now forms part of the
Group Executive Committee involving the Spanish and Irish
management, which meets monthly.
Recommendations which will be implemented following the
2016 Board performance evaluation were made and then
agreed under the headings of vision and strategy, people and
succession, and communications.
They include making time available for the Board to discuss
a more strategic forward agenda planner, to ensure that
the right topics are being covered at the right times, to
flag opportunities for further input from the Directors, and
to ensure that strategic objectives are being pursued and
monitored. The Board will also receive more regular reporting
on HR matters such as employee engagement, cultural change
and personnel development, as well as succession planning
for key roles. The Board will also see more of the key line
managers in the business through the year, in parallel with
arrangements for the Group Executive Committee to meet
monthly, and for the CEO to have fortnightly calls with his
direct reports.
The non-executive Directors, led by the Senior Independent
Director, will shortly evaluate the early performance of the
Chairman in his role, using input from the externally facilitated
evaluation. The Chairman will do the same in relation to
each of the Directors. The Board continues to believe that
the Directors have strongly relevant experience to the Group
and its businesses, and contribute multiple perspectives and,
importantly, ongoing independent judgement.
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GOVERNANCE Corporate governance
CONTINUED
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.
prior year, with review by management of variance from
targeted performance levels.
These commentaries are consolidated into the pack submitted
to the Board. Year to date actuals are used to guide forecasts,
which are updated regularly and communicated to the Board.
The Board recognises the benefits of diversity at
all levels of the business and in order to reinforce
the Board’s commitment to equality, the Board has
endorsed an Equal Opportunities Policy, which may be
found on our website www.northgateplc.com
Planning
Each reporting segment prepares a three year Business Plan
on an annual basis. This is presented to and approved by
the Board. Performance against these plans is reviewed on a
monthly basis.
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 does not believe it is appropriate to set targets,
however aspirational, at the present time.
At 30 April 2016 33% of Board members were female. In
the senior management team 13% are female and for all
employees this figure is 30%.
Conflicts of interest
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.
3. Accountability
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.
Internal control
Confirmation that the Board has performed an assessment
of the risk management and internal control systems of the
Group, as required by the Code provision C.2.3, is contained in
the Managing risk report on pages 38 to 42.
Whistleblowing hotline
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 and Internal Audit as
appropriate.
Information and communication
Each reporting segment prepares monthly management
accounts with a comparison against their business plan and
Assurance
An account of the work of the Audit and Risk Committee is
included within the Report of the Audit and Risk Committee
on pages 60 to 63. Both the external auditor and Head of
Internal Audit report directly to the Committee.
4. Remuneration
Details of the Company’s remuneration policy and the
remuneration of each Director are given in the Remuneration
Report on pages 64 to 74.
5. 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 AGM, of which more than the recommended
minimum 20 working days’ notice is given.
Details of proxies lodged in respect of the AGM will be
published on the Company’s website immediately following
the meeting.
Significant interests in shares are detailed on page 75.
Compliance with the Code
The Board considers that the Company complied with the
provisions on the Code throughout the year, with the exception
of provision C.3.1. Up until the appointment of Claire Miles in
November 2015 the Audit and Risk Committee comprised two
independent non-executive Directors, rather than three. Upon
appointment to the Board Claire was appointed to the Audit
and Risk Committee and therefore since November 2015 and up
until the date of this report C.3.1 has been complied with.
D Henderson
Secretary
27 June 2016
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Northgateplc.com stock code: NTG Report of the Audit and Risk Committee
Chairman’s introduction
6061
The Audit and Risk Committee has
an important role in ensuring the
integrity of the Group’s financial
reporting and in reviewing the
effectiveness of the Group’s internal
control systems and risk management.
andrew allner I Chairman
bob mackenzie I Chairman
Dear Shareholder,
The Audit and Risk Committee (the Committee) has an
important role in ensuring the integrity of the Group’s financial
reporting and in reviewing the effectiveness of the Group’s
internal control systems and risk management.
The report which follows sets out details on the workings of
the Committee, the work done during the year and the key
issues considered in the preparation of the financial statements
and the related information, judgements and assurance
received.
As reported last year we conducted a formal tender process
for the external audit and I am pleased to report that PwC
were appointed as external auditors at the AGM in September
2015 replacing Deloitte as the outgoing firm. The transition
has progressed smoothly due to the combined efforts of
the Committee, PwC and executive management. We look
forward to continuing to work with PwC for the rest of their
tenure.
The key accounting issue considered during the year
continued to be determining appropriate depreciation rates
for our vehicles. This is an area where the accounting rules
do not facilitate an easy understanding of the accounts and
underlying trends in the business. In order to address this
challenge we have included a separate report on pages 32
to 35, which deals with this issue alone and we hope that it
enhances the understanding of our financial results.
The other area I would like to highlight and where I believe we
have continued to make good progress is risk management.
The Board’s risk appetite and approach towards risk is outlined
in the Managing risk report on pages 38 to 42. This year we
commissioned an external review of our risk management
approach. Whilst this showed that our risk management
processes were comparable to our peers it highlighted areas
where we can improve further and this will be a focus of the
Committee in the forthcoming year.
We also engaged in a review of cyber security risk during
the year. Again, our risk rating was considered appropriate
for an organisation of our nature and we are acting upon
recommendations made in order to reduce our level of cyber
risk further.
I hope you find this report useful and I would welcome any
comments.
This will be my final report to you as Chairman of the
Committee. I would like to thank management and our
advisers for their support over the last nine years and wish my
successor, Bill Spencer, every success in the years ahead.
Andrew Allner
Chairman of Audit and Risk Committee
27 June 2016
24608.04 7 July 2016 10:36 AM Proof 6
Northgate plc Annual Report and Accounts for the year ended 30 April 2016GOVERNANCE
Report of the Audit and Risk Committee
Role
The role of the Audit and Risk Committee is set out in the
Introduction to Governance report on page 56.
Membership
The members of the Committee, who are all non-executive
Directors of the Company, are:
AJ Allner FCA (Chairman)
G Caseberry
C Miles
B Spencer
Date of appointment
26 September 2007
10 December 2012
27 November 2015
1 June 2016
The Code requires that at least one member of the Committee
should have recent and relevant financial experience: currently,
the Chairman of the Committee and Bill Spencer fulfil this
requirement. All members of the Committee are expected to
be financially literate.
Meetings
The Committee is required to meet at least three times a year.
Details of attendance at meetings held in the year ended
30 April 2016 are given on page 58.
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 Group Head of Internal Audit and the external
auditor, are normally invited to attend all meetings.
Activity
Since May 2015, the Committee has:
| reviewed the financial statements for the years ended
30 April 2015 and 2016 and the half yearly report issued
in December 2015. As part of this review process, the
Committee received reports from Deloitte on the 2015
full year results and PwC on the half year and 2016
full year results. For the full year results this included
making a recommendation to the Board as to whether
the Annual Report and Accounts were fair, balanced and
understandable;
| overseen the transition in external auditor from Deloitte
to PwC;
| reviewed and agreed the scope of the audit work to be
undertaken by PwC 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 whistleblowing procedures;
| reviewed the Group’s depreciation policy;
| reviewed the Group’s corporate taxation arrangements;
| reviewed the output of the risk management framework
review;
| reviewed the external report on cyber security;
| reviewed the viability statement made on page 42;
| reviewed a management paper on the Group’s investor
relations activities, principally focused on communication
through the annual report;
24608.04 7 July 2016 10:36 AM Proof 6
Northgateplc.com stock code: NTG 6263
| monitored and reviewed the activities of the Group’s
Internal Audit department;
| monitored and assessed the Group’s going concern status;
| considered the risk implications of the UK referendum
result to leave the EU and the political uncertainty in Spain;
| reviewed the Group’s Code of Business Conduct, including
the requirements of the Bribery Act 2010, and the effective
monitoring of the giving and receiving of gifts and
hospitality; and
| reviewed its own effectiveness and terms of reference.
Significant issues considered in relation to the
financial statements
During the year the Committee considered, discussed with the
external auditor and concluded on what the significant risks
and issues were in relation to the financial statements and
how these would be addressed:
| Determining appropriate depreciation rates for
vehicles available for hire – in addition to a monthly
review of adjustments to depreciation when vehicles are
sold, the Committee reviewed formal papers prepared
by management at each reporting date which included a
qualitative assessment of the current and forecast trends in
the used vehicle market. After due challenge and debate,
the Committee were content with the assumptions and
judgements made;
| The recoverability of aged trade receivables –
throughout the period, KPIs are provided. The Committee
ensured that management dedicated sufficient resources to
mitigate bad debt risk across the Group;
| Provisions for uncertain tax positions – the Committee
reviewed formal papers prepared by management at each
reporting date which outlined the Group’s tax positions.
The Committee challenged areas where significant
judgement was taken in order to determine the level of
provisions held in the balance sheet and was satisfied with
the judgements made;
| Presumed risk of fraud in revenue recognition and
management override of controls – the Committee
considered the presumed risks of fraud as defined by
auditing standards and was content that there were no
issues arising; and
| Financial statements – the Committee considered the
presentation of the Annual Report and Accounts, and in
particular, the analysis between underlying and statutory
disclosures. We were satisfied with management’s
presentation.
External auditor
The Committee reviews and makes recommendations with
regard to the appointment of the external auditor. In making
this recommendation, the Committee considers auditor
effectiveness and independence, partner rotation and any
other factors which may impact upon the external auditor’s
reappointment.
The Board’s policy on non-audit services provided by the
external auditor, developed and recommended by the
Committee, is:
| Certain audit related work such as the review of the half
year announcement, being 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 compliance, 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. The external
auditor is not invited to compete for this type of work. For
this reason PwC were replaced as the Group’s tax adviser in
the year following their appointment as external auditor.
Fees paid and payable to PwC in respect of the year under
review are as shown in Note 5 on page 100.
PwC were appointed at the AGM in September 2015 as a
result of the proposal put forward being passed.
The Committee reviewed the effectiveness and
independence of the external auditor, taking into account
input from management, consideration of responses to
questions from the Committee and the audit findings
reported to the Committee, including conducting one-to-
one meetings with the audit partner. Based on all of this
information, the Committee concluded that the audit process
was operating effectively. As a result of this the Committee
has recommended to the Board the reappointment of PwC
at the AGM.
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; and
| conducted a one-to-one meeting with the Head of
Internal Audit, approved the internal audit programme and
reviewed quarterly reports by the Head of Internal Audit.
The Chairman of the Committee will be available at the AGM
to answer any questions about the work of the Committee.
Andrew Allner
Chairman of Audit and Risk Committee
27 June 2016
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Northgate plc Annual Report and Accounts for the year ended 30 April 2016GOVERNANCE Remuneration report
Chairman’s introduction
The role of the Remuneration
Committee is to design a
remuneration strategy that drives
performance aligned to the Group’s
strategic priorities
Jill Caseberry I Chairman
Dear Shareholder,
On behalf of the Board, I am pleased to present the Directors’
remuneration report for the year ended 30 April 2016.
This encouraging performance is reflected in the annual bonus
payment and long term incentive vesting levels referred to
below.
Purpose
The role of the Remuneration Committee (the Committee) is
to design a remuneration strategy that drives performance
aligned to the strategic priorities of the business, as well
as enabling it to attract, retain and motivate high-calibre
executives.
Overall reward structure
The Committee believes that the total reward available to its
executives should be competitive for a company of Northgate’s
size, complexity and geography. In order to ensure strong
alignment to the interests of shareholders, the policy provides
a greater weighting to the variable elements of remuneration
and for a significant proportion of the remuneration package
to be paid in equity.
Performance of the Group
The following are the key financial highlights for the year:
| Underlying PBT of £82.9m; a £3.3m increase after further
adjusting for depreciation and the impact of a weaker Euro;
| Underlying EPS of 49.0p (2015 - 51.0p);
| Cash generation remains strong with free cash flow
generation of £62.9m; and
| 10% increase in proposed full year dividend of 16.0p per
share compared to 14.5p in 2015.
In addition, there has been good progress made on our
key strategic priorities including strengthening of the UK
management team, reviewing our potential addressable
market, developing a segmented customer proposition and
delivering excellent net promoter customer service scores.
Executive change
In March 2016, Chris Muir left the business and Paddy
Gallagher was appointed as Group Finance Director.
Paddy brings with him a wealth of cross-sector experience and
a proven track record. His base salary of £325,000 reflects his
skills and experience and was set taking into account market
data for comparable companies in the same industry as
Northgate at the time of appointment. Paddy’s benefits and
variable remuneration opportunities are at the same level as
our former CFO and no ‘buy-out’ payments were made.
In accordance with Chris Muir’s Service Agreement, he is
entitled to a payment in lieu of 12 months’ notice, subject to
mitigation. Chris has secured alternative employment and the
total payment in lieu of notice is therefore £20,198. In line with
our Remuneration Policy and good leaver status Chris may
exercise his deferred bonus shares within six months of leaving
the business. His Executive Performance Share Plan awards will
remain subject to performance and vest pro rata and on the
original dates.
Chris and Paddy’s annual bonus payments for the year to
30 April 2016 are pro-rated for the period of time they served
as CFO.
Base salary
In line with the general UK workforce no salary increases
have been awarded to the CEO or CFO for the year to
30 April 2017.
24608.04 7 July 2016 10:36 AM Proof 6
Northgateplc.com stock code: NTG 6465
Other items
For the fifth consecutive year, the Committee agreed an award
of Free Shares under the All Employee Share Scheme. All staff
with the qualifying 12 months’ service will receive shares to
the value of £500 after the Preliminary Results announcement.
As previously reported, our depreciation rates were reduced
on 1 May 2012 and 1 May 2014 in the UK and 1 May 2014
and 1 May 2015 in Spain. Where appropriate when setting
performance targets in future the Committee will take this into
account. With regard to outstanding unvested EPSP awards
the Committee has agreed that it will review the position at
the end of the performance period for each award when the
exact impact is known and make any adjustment it considers
appropriate. Any adjustment will be fully explained in the
Annual Report on Remuneration for the relevant year.
Shareholder feedback
Given our continued strategy for growth, our remuneration
arrangements remain unchanged for the coming year and
we will not be asking shareholders to vote on a new policy.
We will, however, seek your support in the form of an
advisory vote for the Annual Report on Remuneration and this
statement at the AGM on 21 September 2016.
Northgate is committed to a transparent and open dialogue
with shareholders. The objective of this report is to
communicate clearly the strong link between executive pay
and performance. As always, I welcome your feedback.
Jill Caseberry
Chairman of the Remuneration Committee
27 June 2016
Annual bonus
Annual bonuses for the year ended 30 April 2016 were based
on profit before tax (75% of maximum opportunity) and key
strategic targets (25% of maximum opportunity) with a ROCE
underpin. Bonuses of 34.1% of maximum have been awarded
to the CEO, 44.6% of maximum to CFO Chris Muir and 4.9%
of maximum to CFO Paddy Gallagher. Full details of the bonus
criteria and calculations can be found on page 68.
The maximum annual bonus opportunity and performance
metrics for the coming year are the same as for the year just
ended. Performance targets will be disclosed retrospectively in
next year’s report.
Executive Performance Share Plan (EPSP)
Vesting of the EPSP award granted on 9 July 2013 was based
on performance over the three years ended 30 April 2016.
This award was subject to EPS performance for 50% of
the award and ROCE for the other 50%. The performance
achieved has resulted in 79.15% vesting for the CEO and CFO
(Chris Muir). Further detail regarding this award can be found
on page 69.
For the coming year, EPSP award levels for the CEO and CFO
remain unchanged from this year and EPS and TSR continue
to be the target metrics. The balance between these metrics
remains 60% on EPS and 40% on TSR compared to the
FTSE 250 (excluding Investment Trusts). The EPS target is set
at a level to encourage progressive and sustainable growth
of earnings for shareholders. Since 2013 there has been a
threshold of CPI + 3% p.a. and a stretch of CPI + 11% p.a. and
these remain the targets for the coming year’s awards.
Committee changes
There have been three Committee changes in the last year.
Bob Mackenzie ceased to be a member of the Remuneration
Committee on his retirement from the Board. I would like
to thank Bob for his commitment and valuable counsel to
the Committee. Claire Miles and Bill Spencer have joined the
Remuneration Committee on their respective appointments to
the Board. I am sure that their extensive experience will be an
asset going forward.
24608.04 7 July 2016 10:36 AM Proof 6
Northgate plc Annual Report and Accounts for the year ended 30 April 2016GOVERNANCE Remuneration report
Annual Report on Remuneration
This part of the report has been prepared in accordance with
Part 3 of the revised Schedule 8 set out in The Large and
Medium-sized Companies and Groups (Accounts and Reports)
(Amendment) Regulations 2013 (the Regulations), and 9.8.6R
of the Listing Rules. The Annual Report on Remuneration and
the Chairman’s Annual Statement will be put to an advisory
shareholder vote at the 2016 AGM. The information on pages
67 to 68 has been audited, along with other indicated selected
information within this report.
The Committee is advised by NBS, who were first appointed
by the Committee in 2003. NBS advises the Committee on
executive remuneration matters including topical remuneration
issues which are of particular relevance to the Company, on
incentive arrangements for the Directors and senior staff, on
all-employee share plans and on remuneration reporting and
compliance matters. NBS liaises with the Committee Chairman
and considers how best it can work with the Company to
meet the Committee’s needs.
The Remuneration Committee
The members of the Committee are listed below. All are
independent non-executive Directors, as defined in the UK
Corporate Governance Code, with the exception of the Group
Chairmen, RD Mackenzie and A Page, who were independent
on appointment.
The members of the Committee during the last financial year
and their attendance at the meetings of the Committee were:
G Caseberry (Chairman)
AJ Allner
A Page
RD Mackenzie
(until 17 September 2015)
C Miles
(From 27 November 2015)
Number of meetings
attended out of
potential maximum
7 out of 7
7 out of 7
7 out of 7
3 out of 3
4 out of 4
The CEO and UK HR Director attend meetings by invitation
and assist the Committee in its deliberations, except when
issues relating to their own remuneration are discussed. No
Directors are involved in deciding their own remuneration. The
Company Secretary acts as Secretary to the Committee.
The total fees paid to NBS in respect of its services to the
Committee during the year were £29,947 (2015 – £9,770). The
fees are predominantly charged on a ‘time spent’ basis.
NBS is a signatory to the Remuneration Consultants’ Code of
Conduct. Neither NBS nor Aon plc overall provide any other
services to the Company and the Committee is satisfied that
the advice that it receives is objective and independent.
The Committee’s terms of reference are available on
the Company’s website. www.northgateplc.com
The Committee is responsible for making recommendations
to the Board on the remuneration packages and terms and
conditions of employment of the Chairman and the executive
Directors of the Company as well as the Company Secretary.
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 their rewards are competitive with
the market and that they are appropriate relative to the
Board and employees generally. The Committee also reviews
remuneration policy generally throughout the Group.
24608.04 7 July 2016 10:36 AM Proof 6
Northgateplc.com stock code: NTG 6667
Remuneration for the year ended 30 April 2016
The table below sets out the remuneration received by the Directors in relation to performance in the year ended 30 April 2016
(or for performance periods ending in the year ended 30 April 2016 in respect of long term incentives) and in the year ended
30 April 2015.
£’000
Executive Directors
RL Contreras
PJ Gallagher(1)
CJR Muir(2)
Chairman
A Page(3)
RD Mackenzie(4)
Non-executive Directors
AJ Allner
JG Astrand(5)
G Caseberry
C Miles(6)
Salary
& Fees
Taxable
Benefits(7)
Annual
Bonus(8)
Long Term
incentive(9)
Pension(10)
Other(11)
Total
2016
2015
2016
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
408
400
62
234
250
138
49
68
160
71
65
23
55
65
63
28
16
18
5
20
18
–
–
–
–
–
–
–
–
–
–
–
208
542
16
104
250
–
–
–
–
–
–
–
–
–
–
–
505
686
–
295
365
–
–
–
–
–
–
–
–
–
–
–
73
72
10
42
45
–
–
–
–
–
–
–
–
–
–
–
4
5
–
3
5
–
–
–
–
–
–
–
–
–
–
–
1,214
1,723
93
698
933
138
49
68
160
71
65
23
55
65
63
28
1 Paddy Gallagher was appointed to the Board on 22 February 2016.
8 This relates to the payment of the annual bonus for the year.
2 Chris Muir retired from the Board on 22 February 2016.
3 Andrew Page was appointed Chairman on 17 September 2015.
4 Bob Mackenzie retired from the Board on 17 September 2015.
5 Jan Astrand retired from the Board on 17 September 2015.
6 Claire Miles was appointed to the Board on 27 November 2015.
7 Taxable Benefits:
PJ Gallagher
£000
RL Contreras
£000
CJR Muir
£000
Car
Medical insurance
5
–
15
1
19
1
The bonus is paid part in cash and part in shares. Details of the
performance targets are on page 68.
9 This relates to the 2013 EPSP award, details of which are given
on page 69. The value of the options vesting in respect of
FY2015 shown in last year’s accounts of £802,000 and £427,000
respectively were valued at the average closing share price over
the last three months of that financial year of 622.76p per share.
They have been restated using the actual share price on the date of
vesting (17 August 2015) of 532p. The options vesting in respect of
FY2016 are valued at the average closing price over the last three
months of FY2016 of 385.18p.
10 The executive Directors are eligible for membership of a Group
personal pension plan under which they are entitled to a
contribution from the Company of 18% of basic salary. In view of
the Annual Allowance cap, part or all of their entitlements were paid
to them in cash.
11 This represents the value of Matching shares awarded under the SIP
which have fully vested in the year (i.e. they are no longer subject to
forfeiture), valued at the market price on the date of vesting.
24608.04 7 July 2016 10:36 AM Proof 6
Northgate plc Annual Report and Accounts for the year ended 30 April 2016GOVERNANCE
Remuneration report
Annual Report on Remuneration CONTINUED
In accordance with Chris Muir’s Service Agreement and his agreement with the Company relating to the termination of his
employment, following the Termination Date (31 March 2016) Chris is entitled to receive a payment in lieu of his 12 month notice
period. This payment is to be made in equal monthly instalments with any remuneration received during the 12 months following
the Termination Date being offset against the monthly amount being paid to him by the Company. Chris has found alternative
employment, which commenced on 4 April 2016. His salary and benefits at Northgate as at the Termination Date equated to
£324,875 per annum. His new salary and benefits equate to £307,346 per annum. The difference of £17,529 per annum will be
paid to Chris in equal monthly instalments of £1,460.75 over the next 12 months. Chris was also paid an additional amount of
£2,669.88 in respect of the first three days of April 2016 before he started his alternative employment. The total amount paid in
this financial year after he ceased to be a Director was therefore £4,130.63.
Paddy Gallagher was appointed to the Board on 22 February 2016 at a basic salary of £325,000 per annum. His maximum
annual bonus potential is 100% of basic salary and his maximum annual award level under the EPSP is 150% of salary. There was
no buyout of incentive arrangements from his previous employer.
Annual bonus for the year ended 30 April 2016
Deferred annual bonus plan
The bonus for the executive Directors in respect of the year under review was based as to 75% on Group PBT and 25% on
strategic objectives, with a ROCE underpin of 11.97% (being 95% of budget), below which no bonus would be payable. ROCE
on the above basis was 12.2% for the year ended 30 April 2016.
The maximum potential bonus for the CEO was 150% of basic salary but with a stretch performance target to achieve that level
of bonus. The maximum potential bonus for the CFO was 100% of basic salary.
For the CEO, the bonus is paid 50% in cash and 50% in shares up to 100% of salary. Any bonus earned in excess of this is paid
wholly in shares. For the CFO the bonus is paid 50% in cash and 50% in shares. The shares are deferred for three years, subject
to continued employment. Both the cash and share elements are subject to clawback, further details of which are given on
page 73.
The matrix of target PBT levels and the percentage of the maximum available for this element was as follows:
Target PBT - £m
CEO
CFO
Group PBT for the year was £82.9m.
Lower
82.7
25%
25%
Plan
87.1
62.5%
50%
Upper
91.0
125%
100%
CEO stretch
92.8
150%
–
The Committee set the CEO objectives on management restructuring, development of customer proposition and improvement to
NPS, new site performance and a future European Strategy. On assessment by the Committee against these objectives it was felt
that, whilst good progress had been made in relation to embedding a new senior management team in the UK, improvements to
NPS and setting a European strategy, the performance of new sites was not yet at a satisfactory level. As a result, the Committee
determined that 56.25% out of the 25% available for this part of the bonus had been achieved. The CFO’s objectives were
centred on debt restructuring, cyber risk mitigation, IT strategy project review and improvements to year end processes. The
Committee assessed his performance and felt that the CFO had fully achieved all his objectives.
The resulting bonuses for 2016 were as follows:
RL Contreras
CJR Muir
PJ Gallagher
PBT
20.0%
19.6%
26.1%
Strategic
objectives
14.1%
25.0%
–(1)
Total
34.1%
44.6%
26.1%
Maximum
£000
612
234(2)
61(2)
Achievement
£000
209
104
16
Cash
£000
104.5
52
8
Shares
£000
104.5
52
8
1 Given his start date, it was not felt appropriate to set strategic objectives for Paddy Gallagher, so his bonus was based purely on the
PBT measure.
2 The bonuses payable to Chris Muir and Paddy Gallagher were pro-rated for time to reflect their periods of service with the Company –
Chris Muir from 1 May 2015 to 31 March 2016 and Paddy Gallagher from 22 February 2016 to 30 April 2016.
24608.04 7 July 2016 10:36 AM Proof 6
Northgateplc.com stock code: NTG 6869
Vesting of EPSP awards
The EPSP award granted on 9 July 2013 was based on performance over the three years ended 30 April 2016. As disclosed in
previous annual reports, the performance condition for this award was as follows:
Performance
Condition
EPS
(50% of award)
ROCE
(50% of award)
Threshold target
(25% Vesting)*
Stretch target
(100% Vesting)*
End measurement
point
26.3p+
(CPI +3% p.a.)
= 29.2p
10.8%
26.3p+
(CPI +11% p.a.)
= 36.6p
11.7%
Final year of the
performance
period
Average of the
3 years of the
performance
period
Actual
49.2p
Adjusted* % Vesting
41.9p
100.0
11.7%
11.2%
58.3
* As indicated in last year’s report, the ROCE and EPS outturns have been adjusted to reflect the changes in vehicle depreciation rates which were
not envisaged when the targets were originally set.
The resulting vesting position will therefore be:
RL Contreras
CJR Muir
Original award
(shares)
Total vesting
%
Pro rating
%
165,684
99,410
79.15
79.15
–
97.2(1)
Total shares
vesting
131,138
76,479
Note 1: The number of shares vesting to Chris Muir has been pro-rated for time to reflect his period of service with the Company relative to the
performance period – 35 out of 36 months.
EPSP awards made during the year (audited)
On 20 July 2015, the following EPSP awards were granted to executive Directors:
RL Contreras
CJR Muir
Type of award
Nil cost
option
Nil cost
option
Basis of
award
granted
150% of
salary of
£408,000
150% of
salary of
£255,000
Share price
at 30 June
2015(1)
575p
Number of
shares over
which award
was granted
106,424
Face
value of
award (£)
612,000
% of face
value that
would vest
at threshold
performance
Vesting
determined by
performance
over
25% Three financial
years to
30 April 2018(2)
575p
66,521
382,500
25%
As above
1 The closing price on the date of the Preliminary Announcement of the results for FY2015.
2 The number of shares vesting to Chris Muir will be pro-rated for time to reflect his period of service with the Company relative to the
performance period – 11 out of 36 months.
This award is subject to EPS and TSR targets as follows:
Performance condition
EPS (60% of award)
TSR (40% of award)
Threshold target
(25% vesting)
Stretch target
(100% vesting)
48.9p+ (CPI+3% p.a.)
Median
48.9p+ (CPI+11%p.a.)
Upper quartile
End measurement point
Final year of the performance
period relative to FTSE250 (excl.
investment trusts) over the
performance period.
24608.04 7 July 2016 10:36 AM Proof 6
Northgate plc Annual Report and Accounts for the year ended 30 April 2016GOVERNANCE Remuneration report
Annual Report on Remuneration CONTINUED
Percentage change in remuneration levels
CEO (£000)
– salary
– benefits
– bonus
Average per UK employee (£)
– salary
– benefits
– bonus
2015
2016
% change
400
18
542
23,739
1,501
1,928
408
16
209
24,640
1,691
383
2.0
(11.1)
(61.4)
3.8
12.68
(80.13)
This shows the movement in the salary, benefits and annual bonus for the CEO between the year under review and the previous
financial year compared to that for the average UK employee. The Committee has chosen this comparator as it feels that it
provides a more appropriate reflection of the earnings of the average worker than the movement in the Group’s total wage bill,
which is distorted by movements in the number of employees and variations in wage practices in Spain.
Performance graph
As required by the Regulations, 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 seven years. As the Company
has been a constituent of the FTSE 250 index for the majority of that time, 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 2016 was
403p (30 April 2015 – 645p). The range during the year was 323p to 645p.
The chart below shows the Company’s TSR performance against the performance of the FTSE 250 index from 30 April 2009 to
30 April 2016.
Total shareholder return
Source: Thomson Reuters
)
£
(
e
u
a
V
l
300
250
200
150
100
50
0
30-Apr-09
30-Apr-10
30-Apr-11
30-Apr-12
30-Apr-13
30-Apr-14
30-Apr-15
30-Apr-16
This graph shows the value, by 30 April 2016, of £100 invested in Northgate plc on 30 April 2009 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
Northgate plc
FTSE 250 (Excl. Inv. Trusts) Index
24608.04 7 July 2016 10:36 AM Proof 6
Northgateplc.com stock code: NTG
7071
2012
2013
2014
2015
2016
1,115
100%
100% 331/3%
1,723
628
859
0% 43.59% 90.33%
0%
1,214
34.1%
47.9% 79.15%
Total remuneration for CEO
Year ended 30 April
Total Remuneration (£000)
Annual bonus (% of maximum)
Long term incentive vesting (% of maximum)
2010
831
70%
0%
2011
821
100%
0%
This shows the total remuneration figure for the CEO during each of those financial years. The total remuneration figure includes
the annual bonus and EPSP awards which vested based on performance periods ending in those years. The annual bonus and
EPSP percentages show the payout for each year as a percentage of the maximum. In years when there was a change of CEO,
the figures shown are the aggregate for the office holders during that year.
Relative importance of spend on pay
Staff costs
Dividends
The table above shows the movement in spend on staff costs versus that in dividends.
Outstanding share awards
The tables below set out details of executive Directors’ outstanding share awards.
2015
£000
93,332
14,632
2016
£000
89,368
20,139
% increase
(decrease)
(4.25)
37.64
Rl Contreras (audited)
Scheme
Grant
date
Exercise
price (p)
EPSP
EPSP
EPSP
EPSP
EPSP
EPSP
DABP
DABP
DABP
DABP
DABP
DABP
DABP
12.10.09
11.08.10
17.08.12
09.07.13
27.06.14
20.07.15
11.08.10
30.08.11
30.08.11
30.08.11
20.07.12
11.07.14
20.07.15
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
327.9
Nil
Nil
Nil
Nil
Number
of shares
at 1 May
2015
130,952
100,864
269,138
165,684
117,647
–
29,719(1)
9,149(2)
9,149(3)
44,220(1)
78,947(1)
16,025(1)
–
Granted
during
year
Vested
during
year
Exercised
during
year
lapsed
during
year
Number of
shares at
30 April
2016
End of
performance
period
–
–
–
–
–
106,434
–
–
–
–
–
–
59,478(1)
–
–
128,917
–
–
–
–
–
–
–
78,947
–
–
130,952
100,864
–
–
–
–
29,719
–
–
–
–
–
–
–
–
140,221
–
–
–
–
–
–
–
–
–
–
–
–
128,917
165,684
117,647
106,434
–
9,149
9,149
44,220
78,947
16,025
59,478
30.04.12
30.04.13
30.04.15
30.04.16
30.04.17
30.04.18
–
–
–
–
–
–
–
Vesting
date
12.10.12
11.08.13
17.08.15
09.07.16
27.06.17
20.07.18
11.08.13
30.08.14
30.08.14
30.08.14
20.07.15
11.07.17
20.07.18
Exercise period
12.10.12 – 12.10.19
11.08.13 – 11.08.20
17.08.15 – 17.08.22
09.07.16 – 09.07.23
27.06.17 – 27.06.24
20.07.18 – 20.07.25
11.08.13 – 11.08.15
30.08.14 – 30.08.21
30.08.14 – 30.08.21
30.08.14 – 30.08.21
20.07.15 – 20.07.22
11.07.17 – 11.07.24
20.07.18 – 20.07.25
24608.04 7 July 2016 10:36 AM Proof 6
Northgate plc Annual Report and Accounts for the year ended 30 April 2016GOVERNANCE Remuneration report
Annual Report on Remuneration CONTINUED
CJR Muir (audited)
Scheme
Grant
date
Exercise
price (p)
EPSP
EPSP
EPSP
EPSP
DABP
DABP
DABP
DABP
DABP
DABP
DABP
17.08.12
09.07.13
27.06.14
20.07.15
30.08.11
30.08.11
20.07.12
20.07.12
20.07.12
11.07.14
20.07.15
Nil
Nil
Nil
Nil
Nil
327.9
Nil
209
Nil
Nil
Nil
Number
of shares
at 1 May
2015
143,450
99,410
73,529
–
7,295(4)
7,295(3)
2,908(5)
2,908(3)
33,934(1)
9,615(1)
–
Granted
during
year
Vested
during
year
Exercised
during
year
lapsed
during
year
Number of
shares at
30 April
2016
End of
performance
period
–
–
–
66,521
–
–
–
–
–
–
21,739(1)
–
–
–
–
–
–
2,908
2,908
33,934
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
143,450
99,410
73,529
66,521
7,295
7,295
2,908
2,908
33,934
9,615
21,739(1)
30.04.15
30.04.16
27.06.17
30.04.18
–
–
–
–
–
–
–
Vesting
date
17.08.15
09.07.16
27.06.17
20.07.18
30.08.14
30.08.14
20.07.15
20.07.15
20.07.15
11.07.17
20.07.18
Exercise period
17.08.15 – 17.08.22
09.07.16 – 09.07.23
27.06.17 – 27.06.24
20.07.18 – 20.07.25
30.08.14 – 30.08.21
30.08.14 – 30.08.21
20.07.15 – 20.07.22
20.07.15 – 20.07.22
20.07.15 – 20.07.22
11.07.17 – 11.07.24
20.07.18 – 20.07.25
1 Deferred Award.
2 Linked Deferred Award with a capped value of £30,000.
3 Approved Option.
4 Linked Deferred Award with a capped value of £23,920.
5 Linked Deferred Award with a capped value of £6,078.
The share price at 30 April 2016 was 403p.
PJ Gallagher held no share awards at 30 April 2016 or at any
time since his appointment on 22 February 2016.
DABP: Awards can 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 an HMRC Approved
Option (an ’Approved Option’). The face value of Approved
Options held at any one time may not exceed £30,000. The
value of a Linked Deferred Award is capped at the original face
value. Related Linked Deferred Awards and Approved Options
must be exercised at the same time unless the Approved
Option is ‘underwater’ and therefore lapses.
As an eligible leaver, Chris Muir will be permitted to exercise
all outstanding vested and unvested DABP awards for up to six
months from his termination date, 31 March 2016. Similarly,
he will be permitted to exercise all vested but unexercised EPSP
awards over the same period. Unvested EPSP awards will be
considered for release, subject to the applicable performance
conditions and pro-rated for time, on the scheduled vesting
dates.
SIP
The SIP, which is approved by HMRC under Schedule 8 Finance
Act 2000, was introduced in 2000 to provide employees at all
levels with the opportunity to acquire shares in the Company
on preferential terms. The Board believes that encouraging
wider share ownership by all staff will have longer term
benefits for the Company and for shareholders. The SIP
operates under a trust deed, the Trustees being Capita IRG
Trustees Limited (the Capita Trust).
To participate in the SIP, 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 Group will therefore receive the most
benefit.
The fifteenth annual cycle ended in December 2015 and
resulted in 509 employees acquiring 115,264 Partnership
shares at 393.5p each and being allocated the same number
of Matching shares. As at 30 April 2016 the Capita Trust held
1,354,433 50p Ordinary shares that have been allocated to
employees from the first 15 cycles.
The sixteenth annual cycle started in January 2016 and
currently some 600 employees are making contributions to the
scheme at an annualised rate of £547,000.
During the year, an award of 75 Free shares was made to all
eligible employees with one year’s service. The total number of
shares awarded was 113,400.
The executive Directors are entitled to participate in this
scheme and to receive both Matching and Free shares.
24608.04 7 July 2016 10:36 AM Proof 6
Northgateplc.com stock code: NTG 7273
Sourcing of shares
Shares to satisfy the requirements of the Group’s existing
share schemes are currently sourced as follows:
At 30 April 2016 the Capita Trust held 17,186 (2015 – 35,552)
Ordinary shares which had been forfeited as a result of early
withdrawals post January 2016.
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
600,000 (2015 – 2,150,000) Ordinary shares were purchased
by the Guernsey Trust and 345,967 (2015 – 169,600) were
used to satisfy the exercise of awards under the DABP and
MPSP. At 30 April 2016 the Guernsey Trust held 1,899,747
(2015 – 1,910,135) Ordinary shares as a hedge against the
Group’s obligations under these schemes.
The rules of both these schemes also allow new issue and
treasury shares to be used to satisfy the vesting and exercise of
awards, but to date the Board has 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. To date, all exercises have been satisfied by open
market purchase.
SIP
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
2016 was 230,528 (2015 – 149,602) of which 150,096 were
transferred from the Guernsey Trust, with the balance of
80,432 (2015 – 74,670) being shares already held by the
Capita Trust from forfeiture during the year. The 113,400
free shares referred to above were also sourced from the
Guernsey Trust.
Share Interests (audited)
Overall plan limits and clawback
All the above schemes operate within the following limits: in
any ten 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 2016 was 1.25% under the
EPSP, MPSP and DABP and 1.72% under all schemes.
In line with current best practice guidelines, the Committee
has introduced recovery provisions into the rules of all
discretionary schemes, which can be invoked in the event of
financial misstatement, gross misconduct or fraud and which
apply to all awards made from 2010 onwards.
Directors’ shareholding and share interests
The executive Directors are required to build up a shareholding
equivalent to 150% of salary, to be achieved primarily through
the retention, after tax, of share options exercised under the
long term incentive share plans, until such time as their share
ownership target has been met. Directors are not required to
go into the market to purchase shares, although any shares
so acquired would count towards meeting the guidelines.
The Chairman and non-executive Directors are not subject
to a formal shareholding guideline. Details of the Directors’
interests in shares are shown in the table below:
Beneficially
owned at
30 April
2016
248,776
–
10,000
13,090
5,000
–
Outstanding EPSP awards
Outstanding DABP awards
Vested but not
exercised
Not vested
Vested but not
exercised
Not vested
128,917
–
–
–
–
–
389,765
–
–
–
–
–
132,316
–
–
–
–
–
75,503
–
–
–
–
–
%
shareholding
guideline
achieved at
30 April
2016
Interests in
SIP subject to
forfeiture
1,603
–
–
–
–
–
245.7
0
N/A
N/A
N/A
N/A
RL Contreras
PJ Gallagher
A Page
AJ Allner
G Caseberry
C Miles
No changes in the above interests have occurred between 30 April 2016 and the date of this report.
24608.04 7 July 2016 10:36 AM Proof 6
Northgate plc Annual Report and Accounts for the year ended 30 April 2016GOVERNANCE Remuneration report
Annual Report on Remuneration CONTINUED
Remuneration for FY2016
Salaries as at 1 May 2016 are as follows:
Salary as at
1 May 2015
Salary as at
1 May 2016
£408,000
£325,000(1)
£408,000
£325,000
Increase
0%
0%
RL Contreras
PJ Gallagher
1 On appointment.
In line with UK staff generally, no increases were made to the
executive Directors’ salaries at 1 May 2016.
Fees for the Chairman and non-executive
Directors
As detailed in the Remuneration Policy, the Company’s
approach to setting non-executive Directors’ remuneration
is with reference to market levels in comparably sized FTSE
companies, levels of responsibility and time commitments. A
summary of current fees is as follows:
Salary as at
1 May 2015
Salary as at
1 May 2016
Increase
Chairman
Base fee
Senior Independent
Director
Audit Committee
Chairman
Remuneration
Committee Chairman
£163,200
£55,000
£163,200
£55,000
£10,000
£10,000
£10,000
£10,000
£10,000
£10,000
Fees were last reviewed at 1 May 2016.
0%
0%
0%
0%
0%
Performance targets for the annual bonus and EPSP awards to be granted in 2016
For 2016, the annual bonus will be based on PBT as to 75% and a range of strategic and operational objectives for the remaining
25%, with a ROCE underpin.
The Committee has chosen not to disclose, in advance, the performance targets for the annual bonus for the forthcoming year
as these include items which the Committee considers commercially sensitive. Full retrospective disclosure of the targets and
performance against them will be seen in next year’s Annual Report on Remuneration.
The EPSP awards to be granted in 2016 will be subject to two separate performance conditions, with EPS accounting for 60%
of the award and TSR compared to the FTSE 250 (Excluding Investment Trusts) Index of Companies for the remaining 40%. The
performance conditions are as follows with intermediate vesting between the threshold and stretch targets:
Performance condition
EPS (60% of award)
TSR (40% of award)
Threshold target
(25% vesting)
CPI +3% p.a.
Stretch target
(100% vesting)
CPI +11% p.a.
Median
Upper quartile
End measurement
point
Final year of the
performance period
End of the three year
performance period
In addition, no awards will vest unless the Committee is satisfied that the underlying financial and operational performance of
the business has been satisfactory.
Award levels for 2016 will be 150% of salary for the EPSP for both the CEO and CFO. Annual bonus opportunity will be 150% of
salary for the CEO and 100% of salary for the CFO.
Statement of shareholder voting and shareholder feedback
At last year’s AGM, voting on the Annual Report on Remuneration was 95.256% in favour, 4.742% against and 0.002%
withheld.
Approval
This Remuneration Report has been approved by the Board of Directors.
Signed on behalf of the Board of Directors.
Jill Caseberry
Chairman of the Remuneration Committee
27 June 2016
24608.04 7 July 2016 10:36 AM Proof 6
Northgateplc.com stock code: NTG Report of the Directors
7475
The Directors present their report and the audited
consolidated accounts for the year ended 30 April 2016.
No person has any special rights of control over the Company’s
share capital and all issued shares are fully paid.
Results
Profit for the year after taxation was £61,479,000 (2015 –
£66,802,000).
The Directors recommend the payment of a final dividend
of 10.9p per share on the Ordinary shares. This dividend, if
approved, will be paid on 23 September 2016 to shareholders
on the register at close of business on 19 August 2016.
An interim dividend of 5.1p per share was paid on the Ordinary
shares on 11 January 2016.
Principal activities
The Company is an investment holding company.
A list of subsidiary companies is shown in Note 16 to the
accounts.
Close company status
So far as the Directors are aware the close company provisions
of the Income and Corporation Taxes Act 1988 do not apply to
the Company.
Capital structure
Details of the issued share capital, together with details of
any movements during the year, are shown in Note 23. 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.
With regards to the appointment and replacement of
Directors, the Company is governed by the Articles, the UK
Corporate Governance Code, the Companies Act and related
legislation. The Articles themselves may be amended by special
resolution of the shareholders. The powers of directors are set
out in the Articles.
The Directors are not aware of any agreements between the
Company and its Directors or employees that provide for
compensation for loss of office or employment that occurs
because of a change of control.
Interests in shares
The following interests in the issued Ordinary share capital
of the Company have been notified to the Company in
accordance with the provisions of Chapter 5 of the Disclosure
and Transparency Rules:
Aviva Plc
Schroders plc
Aberforth Partners
BlackRock Inc.
Artemis Investment
Management Ltd
Norges Bank
Old Mutual Plc
30 April
2016
7,783,670
(5.84%)
7,454,107
(5.60%)
6,773,063
(5.08%)
*
6,536,818
(4.90%)
5,728,257
(4.30%)
5,735,049
(4.30%)
5,307,060
(3.98%)
7 June
2016
7,665,644
(5.75%)
7,454,107
(5.60%)
6,773,063
(5.08%)
6,686,835
(5.01%)
6,536,818
(4.90%)
5,728,257
(4.30%)
5,735,049
(4.30%)
5,307,060
(3.98%)
The percentage of the issued nominal value of the Ordinary
shares is 99.255% of the total issued nominal value of all share
capital.
Legal & General
Group Plc
There are no specific restrictions on the size of a holding nor
on the transfer of shares, which are both governed by the
general provisions of the Articles of Association (the Articles)
and prevailing legislation. The Directors are not aware of any
agreements between holders of the Company’s shares that
may result in restrictions on the transfer of securities or on
voting rights.
Details of employee share schemes are set out in the
Remuneration Report. Shares held by the Capita Trust are
voted on the instructions of the employees on whose behalf
they are held. Shares in the Guernsey Trust are voted at the
discretion of the Trustees.
* No disclosable holding
Directors
Details of the present Directors are listed on pages 52 and 53.
All have served throughout the year except Claire Miles who
was appointed on 27 November 2015, Paddy Gallagher who
was appointed on 22 February 2016 and Bill Spencer who was
appointed on 1 June 2016. Bob Mackenzie and Jan Astrand
retired from the Board on 17 September 2015 and Chris Muir
retired from the Board on 22 February 2016.
24608.04 7 July 2016 10:36 AM Proof 6
Northgate plc Annual Report and Accounts for the year ended 30 April 2016GOVERNANCE Report of the Directors
CONTINUED
Resolutions to reappoint each of the Directors in office at the
date of this report will be proposed at the AGM.
The termination provisions in respect of executive
Directors’ contracts are set out in the Remuneration
Policy which is available on the Company’s website:
www.northgateplc.com.
Directors’ indemnities
As permitted by the Company’s Articles of Association,
qualifying third party indemnities for each Director of the
Company were in place throughout their periods of office
during the year and, for those currently in office, 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: www.northgateplc.com
Employee consultation
Employees are kept informed on matters affecting them as
employees and on various issues affecting the performance
of the Group through Chief Executive briefing updates,
announcements on the Group’s intranet, 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: www.northgateplc.com
Political donations
No political donations were made by any Group company in
the year.
Greenhouse gas emissions
The disclosures concerning greenhouse gas emissions required
by the Large and Medium-sized Companies and Groups
(Accounts and Reports) Regulations are included in the CSR
section of the Strategic Report on pages 44 to 49.
Remuneration report
The Directors’ Remuneration Report contains:
| a statement by Jill Caseberry, Chairman of the Company’s
Remuneration Committee, on pages 64 and 65; and
| the Annual report on remuneration, which sets out
payments made in the financial year ended 30 April 2016
on pages 66 to 74.
These will be put to an advisory shareholder vote by ordinary
resolution. The Directors’ Remuneration Policy, which sets
out the Company’s forward looking policy on Directors’
remuneration (including the approach to exit payments to
Directors) and which was approved by shareholders in 2014, is
available on the Company’s website: www.northgateplc.com.
This policy is subject to a binding shareholder vote by ordinary
resolution at least every three years and will next be put to
such vote in 2017.
If the Company wishes to change the Directors’ Remuneration
Policy, it will need to put the revised policy to a further vote
before it can be implemented. No such changes are proposed
this year.
Power to allot shares
The present authority of the Directors to allot shares was
granted at the AGM held in September 2015 and expires at
the forthcoming AGM. A resolution to renew that authority
for a period expiring at the conclusion of the AGM to be held
in 2017 will be proposed at the AGM. The authority will permit
the Directors to allot up to an aggregate nominal amount of
£22m of share capital which represents approximately 33%
of the present issued Ordinary share capital and is within
the limits approved by the Investment Association 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 a 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 in accordance
with the best practice guidance set out in the Statement of
Principles issued by The Pre-Emption Group and which has
been endorsed by the Investment Association. This authority
will be limited to:
| firstly, an aggregate nominal amount of £3,330,000,
representing approximately 5% of the current issued
Ordinary share capital (Resolution 14b); and
| secondly, a further 5% of the Company’s share capital,
provided that this additional power is only used in
connection with acquisitions and specified capital
investments which are announced contemporaneously
with the issue or which have taken place in the
preceding six month period and are disclosed in the
announcement of the issue (Resolution 15).
24608.04 7 July 2016 10:36 AM Proof 6
Northgateplc.com stock code: NTG 7677
The 2015 Statement of Principles defines a ‘specified capital
investment’ as “one or more specific capital investment related
uses for the proceeds of an issuance of equity securities, in
respect of which sufficient information regarding the effect
of the transaction on the listed company, the assets the
subject of the transaction and (where appropriate) the profits
attributable to them is made available to shareholders to
enable them to reach an assessment of the potential return”.
Items that are regarded as operating expenditure rather than
capital expenditure will not typically be regarded as falling
within the term ‘specified capital investment’.
The Directors have no present intention of exercising this
authority and confirm their intention to follow the provisions
of The Pre-Emption Group’s Statement of Principles regarding
cumulative use of such authorities within a rolling three year
period. The Principles provide that companies should not
issue shares for cash representing more than 7.5% of the
Company’s issued share capital in any rolling three year period,
other than to existing shareholders, without prior consultation
with shareholders. This limit excludes any Ordinary shares
issued pursuant to a general disapplication of pre-emption
rights in connection with an acquisition or specified capital
investment.
Disclosure of information under listing Rule
9.8.4
Dividend waiver arrangements are in place for the employee
trusts as shown on page 73.
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 AGM on page 127 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 AGM. 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 renew 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 AGM.
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 22 to 31 and in Notes 21 and
29 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 appointment of PwC as auditor of the
Company will be proposed at the forthcoming Annual General
Meeting. This proposal is supported by the Audit and Risk
Committee.
The Directors’ Report, comprising the Strategic Report, the
Corporate Governance Report and the Reports of the Audit
and Remuneration Committees, has been approved by the
Board and signed on its behalf.
By order of the Board
David Henderson
Secretary
27 June 2016
24608.04 7 July 2016 10:36 AM Proof 6
Northgate plc Annual Report and Accounts for the year ended 30 April 2016GOVERNANCE Directors’ responsibilities
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 Strategic 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.
The Directors are responsible for preparing the annual report
in accordance with applicable law and regulations. Having
taken advice from the Audit and Risk Committee, the Board
considers the report and accounts, taken as a whole, to
be fair, balanced and understandable and that it provides
the information necessary for shareholders to assess the
Company’s performance, business model and strategy.
By order of the Board
Bob Contreras
Chief Executive
27 June 2016
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
(EU) 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.
24608.04 7 July 2016 10:36 AM Proof 6
Northgateplc.com stock code: NTG 7879
Independent auditor’s report
to the members of Northgate plc
Report on the financial statements1
Our opinion on the financial statements
In our opinion:
| Northgate plc’s (‘Northgate’) Group financial statements
and Parent Company financial statements (the “financial
statements”) give a true and fair view of the state of the
Group’s and Parent Company’s affairs as at 30 April 2016
and of the Group’s profit and the Group’s and Parent
Company’s cash flows for the year then ended;
| the Group financial statements have been properly
prepared in accordance with International Financial
Reporting Standards (“IFRSs”) as adopted by the European
Union;
| the Parent Company financial statements have been
properly prepared in accordance with IFRSs 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.
Performing the audit
On behalf of PricewaterhouseCoopers LLP (‘PwC’) it is my
responsibility to form these opinions. This was the first year
that you have appointed PwC as Northgate’s auditors, and
I have therefore provided more information on how PwC
prepared for the audit together with an explanation of the
audit approach applied and details of the accounting issues
we focused on, which I have discussed with the Audit and Risk
Committee.
Preparing to change auditors
Following the decision to appoint PwC as auditors in March
2015 I and members of my team met with Northgate’s
management teams in the UK and Spain to understand the
issues faced by the business and to gather information which
would assist us in the planning of our audit.
During the 30 April 2015 year-end process we met the former
auditors in order to understand the complex or significant
audit judgements which they made, observing the Audit
and Risk Committee and reviewing the Annual Report and
Accounts.
In August 2015 we held a workshop with UK management
which helped us build a more detailed understanding of
Northgate’s business, assisted in our determination of the
significant audit risks and provided an opportunity for the
wider audit team to get to know Northgate management.
We also reviewed the working papers of the former auditors,
to help familiarise ourselves with the testing approach they
applied for the purposes of issuing their opinion, and to
understand the evidence they obtained over key judgements.
How the audit approach was structured
Northgate has two principal trading components in the UK
and Spain, a smaller trading component in Ireland and a non-
trading component in Malta, overseen by a Group function in
the UK. I planned the audit approach to reflect Northgate’s
structure, which incorporated two important aspects.
i. Audit work executed on subsidiary businesses
I performed the audit partner role on Northgate’s UK
business and received an audit opinion from the PwC
member firm in Spain on Northgate Spain. I was in
active dialogue throughout the year with the partner
responsible for the audit of Northgate Spain; this included
consideration of how she planned and performed her
work and visiting the business once during the year
and attending the audit closing meeting which was
also attended by the Northgate Spain Finance Director.
Although not significant to the Group audit, my UK audit
team also performed a full scope audit in Ireland.
ii. Audit procedures undertaken at a Group level and on the
Parent Company
I ensured that appropriate further audit work was
undertaken for Northgate plc as the Parent Company.
This included audit work on, for example, centrally held
tax provisions, accounting for financial instruments, the
consolidation of the Group’s results, the preparation
of the financial statements, assessing the appropriate
classification of exceptional items and work on certain
disclosures within the Directors’ Remuneration report.
In aggregate these two areas provided me with the evidence
required to form an opinion on the financial statements.
Collectively the scope of our work covered 100% of revenue,
99% of total assets and 91% of profit before tax.
1 Northgate plc’s financial statements comprise the Group and Parent Company balance sheet as at 30 April 2016, the consolidated income
statement and Group and Parent Company statements of comprehensive income for the year then ended, the Group and Parent Company
cash flow statements for the year then ended, the Group and Parent Company statements of changes in equity for the year then ended; and
the notes to the financial statements, which include a summary of significant accounting policies and other explanatory information. The
financial reporting framework that has been applied in the preparation of the financial statements is applicable law and IFRSs 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.
24608.04 7 July 2016 10:36 AM Proof 6
Northgate plc Annual Report and Accounts for the year ended 30 April 2016GOVERNANCE
Independent auditor’s report
to the members of Northgate plc
CONTINUED
The purpose and scope of my audit
An audit has an important role in providing confidence in the
financial statements that are provided by companies to their
members. The audit opinion does not provide assurance over
any particular number or disclosure, but over the financial
statements taken as a whole. It is the Directors’ responsibility
to prepare the financial statements and to be satisfied that
they give a true and fair view. These responsibilities have been
recognised on behalf of the Board of Directors on page 78.
My responsibility is to undertake my work and express
my opinion in accordance with applicable law and the
International Standards on Auditing (UK and Ireland) as
issued by the Financial Reporting Council (‘FRC’) of the United
Kingdom. These standards also require me to comply with the
APB’s Ethical Standards for auditors.
What an audit of financial statements involves
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.
We primarily focus our work in these areas by assessing the
Directors’ judgements against available evidence, forming
our own judgements, and evaluating the disclosures in the
financial statements.
We test and examine information, using sampling and other
auditing techniques, to the extent we consider necessary to
provide a reasonable basis for us to draw conclusions. We
obtain audit evidence through testing the effectiveness of
controls, substantive procedures or a combination of both.
In addition, we read all the financial and non-financial
information in the Annual Report and Accounts (the “Annual
Report”) to identify material inconsistencies with the audited
financial statements and to identify any information that
is apparently materially incorrect based on, or materially
inconsistent with, the knowledge acquired by us in the course
of performing the audit. If we become aware of any apparent
material misstatements or inconsistencies we consider the
implications for our report.
Materiality
In order for me to perform my work I had regard to the concept of materiality. I determined materiality as follows:
Overall group materiality
How I determined it
Why I believe this is appropriate
£3.9m
5% of profit before tax
I believe a standard benchmark of 5% of profit before tax is
an appropriate quantitative indicator of materiality, although
of course an item could also be material for qualitative
reasons. I selected profit before tax because management
believes it best reflects the performance of Northgate.
When planning the audit I considered if multiple errors may
exist which, when aggregated, could exceed £3.9m. In order
to reduce the risk of multiple errors which could aggregate
to this amount I used a lower level of materiality, known as
performance materiality, of £3.0m to identify the individual
balances, classes of transactions and disclosures that were
subject to audit. Furthermore, each subsidiary of the Group
and the Parent Company was audited to an assigned
materiality level reflecting the size of the operation. These
ranged from £120,000 (Ireland) to £3.5m (Northgate UK).
Where the audit identified items that were not reflected
appropriately in the audited financial statements, I considered
these items carefully to assess if they were individually or in
aggregate material. I reported any such items which exceeded
£200,000 to the Audit Committee, who were responsible for
deciding whether adjustments should be made to the financial
statements in respect of those items. The Directors have
concluded that all items which remained unadjusted were not
material to the financial statements, either individually or in
aggregate. I agree with their conclusion.
24608.04 7 July 2016 10:36 AM Proof 6
Northgateplc.com stock code: NTG 8081
Our areas of audit focus
Having determined materiality we assessed the risks of
material misstatement in the financial statements. In
particular, we looked at where the Directors made subjective
judgements, for example in respect of significant accounting
estimates that involved making assumptions and considering
future events that are inherently uncertain. As in all of our
audits we also addressed the risk of management override
of internal controls, including evaluating whether there was
evidence of bias by the Directors that represented a risk of
material misstatement due to fraud.
The risks of material misstatement that had the greatest effect
on our audit, including the allocation of our resources and
effort, are identified as “areas of focus” in the table below.
We have also set out how we tailored our audit to address
these specific areas in order to provide an opinion on the
financial statements as a whole, and any comments we make
on the results of our procedures should be read in this context.
This is not a complete list of all risks identified by our audit.
Area of focus
How our audit addressed the area of focus
Determining appropriate depreciation rates for vehicles
available for hire
The net book value of vehicle assets for hire at 30 April 2016 is
£684.5m (2015: £660.2m) with a depreciation charge for the
year of £137.7m (2015: £138.0m). IAS 16 ‘Property, Plant and
Equipment’ requires that depreciation rates and estimated useful
lives are reviewed regularly to ensure that the net book value of
tangible fixed assets when they are sold is broadly equivalent to
their market value.
This requires management to make an estimate of the sale
proceeds at the time of disposal. Determining likely sales
proceeds for future vehicle disposals is judgemental and requires
a number of key estimates to be made, including the age,
condition and mileage of each vehicle, the method of selling a
vehicle and expected future market conditions, such as forecast
levels of supply and demand.
Further explanation is included in the Group’s critical
accounting judgements and key sources of estimation
uncertainty in Note 3, the Audit and Risk Committee report on
pages 61 to 63 and Note 14.
The recoverability of aged trade receivables
Trade receivables are stated in the balance sheet at their fair
value less any provision for irrecoverable amounts. At 30 April
2016 net trade receivables were £58.1m (2015: £61.4m) after
provisions of £12.9m (2015: £12.6m).
Determining an appropriate provision for potentially
irrecoverable trade receivables requires judgement across the
Group’s large and diverse customer base of the likely levels of
recovery of these receivables, along with the consideration of
the overall economic environments in the UK, Ireland and Spain.
Further details are included in the Group’s critical accounting
judgements and key sources of estimation uncertainty in Note
3, the Audit and Risk Committee report on pages 61 to 63 and
Note 18.
We examined management’s assumptions of expected
future market values of hire vehicles used in the calculation
by comparison to external third party industry data for
expected future market prices.
We considered the historical accuracy of expected future
market values by comparison to actual values achieved.
We tested the assumption of the level of vehicle
registrations to third party, publically available data and
recalculated the impact of a reduction in fleet age on
disposal profits.
We performed detailed testing of the calculations
supporting these judgements, including comparison to
recent actual market prices achieved on disposal of similar
vehicles.
From the work we performed we did not identify any
material misstatements.
We recalculated provisions to test whether they were
calculated in accordance with Group policy.
We examined the levels of post year end cash collections
against year-end trade receivables and investigated
individual overdue balances greater than £100,000,
by reference to recent history of recoveries and
correspondence with customers.
To assess the reasonableness of provisions we tested the
age profile of the trade receivables balance back to a
sample of invoices raised. We considered the collectability
of individual balances raised more than 90 days prior to
year-end greater than £100,000, by reference to recent
history of recoveries and correspondence with customers.
We also performed look back testing to consider
management’s historical accuracy of provisioning for trade
receivables.
From the work we performed we did not identify any
material misstatements.
24608.04 7 July 2016 10:36 AM Proof 6
Northgate plc Annual Report and Accounts for the year ended 30 April 2016GOVERNANCE Independent auditor’s report
to the members of Northgate plc
CONTINUED
Area of focus
How our audit addressed the area of focus
Provisions for uncertain tax positions
We focused on this area due to the judgement required in
assessing the need for provisions, to cover the risk of challenge
of certain of the Group’s tax positions, which have been taken as
current tax deductions in the current and previous years.
We evaluated and challenged management’s rationale for
the level of provisions held. We considered the status of
recent and current tax audits and enquiries, the outturn of
previous claims and the tax environment in each territory.
We also considered any penalty regimes that could apply
should any of the Group’s tax positions be challenged
successfully.
From the work we performed we did not identify any
material misstatements.
Going concern
The Directors have made a statement on page 30 regarding going concern. This statement is based on their belief that the Group
and Parent Company intend to, and have sufficient resources to, remain in business for 12 months from the date of this report. I
am required to review this statement, and in doing so have considered Northgate’s budgets and forecast cash flows and financial
covenants and sensitivity analysis thereon. I have nothing to report as a result of my review and have nothing material to add or
draw attention to in relation to the Directors’ statement.
Other reporting
The Annual Report also contains a considerable amount of other required information and in respect of this information my
responsibilities and my reporting are set out in the table below:
Area of the Annual Report
My responsibility
My reporting
Remuneration report on pages 64
to 74
Those parts of which are clearly marked
as audited.
Consider whether the information is
properly prepared.
Other remuneration report disclosures.
Consider whether certain other
disclosures specified by the Companies
Act have been made.
Other areas
In my opinion, this information has
been properly prepared in accordance
with the Companies Act 2006.
The other required disclosures have
been made.
Strategic Report and the Directors’
Report
Consider whether they are consistent
with the audited financial statements.
In my opinion, the information in these
reports is consistent with the audited
financial statements.
Viability statement on page 42 which
considers the longer term sustainability
of the Group’s business model.
Directors’ confirmation of their robust
assessment of principal risks and
disclosures, describing those risks and
how they are managed or mitigated on
pages 39 to 41.
Review the statement in the light of the
knowledge gathered during the audit.
I have nothing material to draw
attention to or to add to the statement.
Review the confirmation and description
in the light of the knowledge gathered
during the audit.
I have nothing material to draw
attention to or to add to the
confirmation or description.
24608.04 7 July 2016 10:36 AM Proof 6
Northgateplc.com stock code: NTG 8283
Area of the Annual Report
My responsibility
My reporting
Audit Committee report on page 61.
Directors’ statement (on page 78)
that they consider the Annual Report,
taken as a whole, to be fair, balanced
and understandable and provides the
information necessary for you to assess
Northgate’s performance, business
model and strategy.
Corporate Governance report (on pages
58 to 60)
All other information in the Annual
Report aside from the audited financial
statements.
Consider whether it deals appropriately
with those matters that I reported to
the Audit Committee.
Consider whether any information
found during the course of the audit
would cause me to disagree.
No exceptions to report.
No disagreements to report.
Nothing to report following our
review.
No exceptions to report
Review the remaining 10 provisions of
the UK Corporate Governance Code
specified for our review by the UK
Listing Rules.
Consider whether it is materially
inconsistent or materially incorrect
based on the knowledge gained in the
audit, or otherwise misleading.
Consider whether it is materially
inconsistent with the audited financial
statements.
In addition, I am required to report to you if, in my opinion:
| I have not received all the information and explanations required for my audit; or
| 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.
I have no exceptions to report arising from this responsibility.
Use of this report
This report, including the opinions, has been prepared for and only for the Parent Company’s members as a body in accordance
with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept
or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may
come save where expressly agreed by our prior consent in writing.
Steve Denison (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Leeds
27 June 2016
24608.04 7 July 2016 10:36 AM Proof 6
Northgate plc Annual Report and Accounts for the year ended 30 April 2016GOVERNANCE In the financials you can find the financial
statements for both the Group and the Parent
Company, along with the accompanying notes.
24608.04 7 July 2016 10:36 AM Proof 6
Northgateplc.com stock code: NTG Northgate plc Annual Report and Accounts for the year ended 30 April 2016
8485
86 Consolidated income statement
87 Statements of comprehensive income
88 Balance sheets
89 Cash flow statements
90 Notes to the cash flow statements
91 Statements of changes in equity
92 Notes to the accounts
125 Notice of Annual General Meeting
129 Glossary
130 Shareholder information
24608.04 7 July 2016 10:36 AM Proof 6
FINANCIALS Consolidated income statement
For the year ended 30 April 2016
Revenue: hire of vehicles
Revenue: sale of vehicles
Total revenue
Cost of sales
Gross profit
Administrative expenses (excluding exceptional items
and intangible amortisation)
Exceptional administrative expenses
Intangible amortisation
Total administrative expenses
Operating profit
Interest income
Finance costs (excluding exceptional items)
Exceptional finance costs
Profit before taxation
Taxation
Profit for the year
Notes
4
4
4
26
13
4,5
7
7, 26
8
Underlying
2016
£000
447,134
171,154
618,288
(459,286)
159,002
(64,683)
–
–
(64,683)
94,319
3
(11,373)
–
82,949
(17,599)
65,350
Statutory
2016
£000
447,134
171,154
618,288
(459,286)
159,002
(64,683)
(1,777)
(1,979)
(68,439)
90,563
3
(11,373)
(1,561)
77,632
(16,153)
61,479
Underlying
2015
£000
456,818
157,442
614,260
(445,221)
169,039
(71,267)
–
–
(71,267)
97,772
9
(12,808)
–
84,973
(17,029)
67,944
Statutory
2015
£000
456,818
157,442
614,260
(445,221)
169,039
(71,267)
–
(2,010)
(73,277)
95,762
9
(12,808)
–
82,963
(16,161)
66,802
Profit for the year is wholly attributable to owners of the Parent Company. All results arise from continuing operations.
Underlying profit excludes exceptional items as set out in Note 26, as well as brand royalty charges, 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
10
10
49.0p
48.3p
46.1p
45.5p
51.0p
50.0p
50.1p
49.2p
24608.04 7 July 2016 10:36 AM Proof 6
Northgateplc.com stock code: NTG
8687
Statements of comprehensive income
For the year ended 30 April 2016
Amounts attributable to the owners of the Parent
Company
Profit (loss) attributable to the owners
Other comprehensive income (expense)
Foreign exchange differences on retranslation of net assets
of subsidiary undertakings
Net foreign exchange differences on long term borrowings
and derivatives held as hedges
Foreign exchange difference on revaluation reserve
Recycling of hedging reserve items
Net fair value losses on cash flow hedges
Deferred tax credit recognised directly in equity
relating to cash flow hedges
Total other comprehensive income (expense)
Total comprehensive income (expense) for the year
GROUP
2016
£000
2015
£000
COMPANY
2016
£000
2015
£000
Notes
61,479
66,802
37,624
(2,933)
25
22,775
(28,526)
–
–
(18,347)
70
649
(1,428)
285
4,004
65,483
21,885
(126)
–
(1,772)
355
(8,184)
58,618
–
–
–
(1,428)
285
(1,143)
36,481
–
–
–
(1,772)
355
(1,417)
(4,350)
All items will subsequently be reclassified to the consolidated income statement.
24608.04 7 July 2016 10:36 AM Proof 6
Northgate plc Annual Report and Accounts for the year ended 30 April 2016FINANCIALS Balance sheets
As at 30 April 2016
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
Cash and bank balances
Total current assets
Total assets
Current liabilities
Trade and other payables
Current tax liabilities
Short term borrowings
Total current liabilities
Net current assets
Non-current liabilities
Derivative financial instrument liabilities
Long term borrowings
Deferred tax liabilities
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
12
13
14
15
21
22
16
17
18
19
20
21
20
22
23
24
25
25
25
25
25
25
GROUP
COMPANY
2016
£000
3,589
4,054
684,499
65,765
750,264
–
15,256
–
773,163
23,109
63,499
18,748
105,356
878,519
53,183
19,350
10,015
82,548
22,808
3,152
318,610
3,184
324,946
407,494
471,025
66,616
113,508
1,026
(8,157)
67,463
(2,522)
(9,400)
40
242,451
471,025
2015
£000
3,589
4,341
660,160
66,248
726,408
57
14,784
–
749,179
21,673
71,817
9,676
103,166
852,345
62,273
9,956
12,081
84,310
18,856
1,780
335,375
4,524
341,679
425,989
426,356
66,616
113,508
956
(8,812)
67,463
(2,028)
(13,828)
40
202,441
426,356
2016
£000
–
–
–
2,398
2,398
–
1,688
120,893
124,979
–
825,275
–
825,275
950,254
328,233
–
34,347
362,580
462,695
3,152
318,610
–
321,762
684,342
265,912
66,616
113,508
1,371
–
63,159
(2,522)
–
40
23,740
265,912
2015
£000
–
16
–
2,459
2,459
57
1,058
120,893
124,483
–
774,631
–
774,631
899,114
285,442
–
28,638
314,080
460,551
1,780
335,375
–
337,155
651,235
247,879
66,616
113,508
1,371
–
63,159
(1,379)
–
40
4,564
247,879
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 27 June 2016.
They were signed on its behalf by:
A Page
Director
PJ Gallagher
Director
24608.04 7 July 2016 10:36 AM Proof 6
Northgateplc.com stock code: NTG 8889
Cash flow statements
For the year ended 30 April 2016
Net cash generated from (used in) operations
Investing activities
Interest received
Dividends received from subsidiary undertakings
Loans to subsidiary undertakings
Proceeds from disposals of other property, plant and
equipment
Purchases of other property, plant and equipment
Purchases of intangible assets
Net cash (used in) generated from investing activities
Financing activities
Dividends paid
Receipt of bank loans and other borrowings
Repayments of bank loans and other borrowings
Debt issue costs paid
Settlement of financial instruments with subsidiary
undertaking
Net payments to acquire own shares for share schemes
Termination of financial instruments
Net cash used in financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at 1 May
Effect of foreign exchange movements
Cash and cash equivalents at 30 April
GROUP
COMPANY
Notes
(a)
2016
£000
73,726
2015
£000
8,532
2016
£000
2015
£000
(10,867)
(20,076)
3
–
–
1,001
(4,503)
(1,682)
(5,181)
(20,114)
70,410
(107,653)
(1,675)
–
(2,366)
(1,561)
(62,959)
5,586
9,676
3,486
18,748
9
–
–
2,371
(5,659)
(889)
(4,168)
(14,607)
14,317
–
(2,042)
–
(10,068)
–
(12,400)
(8,036)
19,056
(1,344)
9,676
3
44,788
20,411
–
–
–
65,202
(20,114)
70,410
(103,280)
(1,675)
1
30,000
6,878
–
–
–
36,879
(14,607)
7,920
–
(2,042)
–
(7,665)
(2,366) (10,068)
–
(1,561)
(26,462)
(58,586)
(9,659)
(4,251)
(20,283)
(28,638)
1,304
(1,458)
(28,638)
(34,347)
(b)
24608.04 7 July 2016 10:36 AM Proof 6
Northgate plc Annual Report and Accounts for the year ended 30 April 2016FINANCIALS Notes to the cash flow statements
For the year ended 30 April 2016
(a) Net cash generated from (used in) operations
Operating profit (loss)
Adjustments for:
Depreciation of 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 in non-vehicle inventories
Decrease in receivables
(Decrease) increase in payables
Cash generated from (used in) operations
Income taxes paid, net
Interest paid
Net cash generated from (used in) operations
Purchases of vehicles
Proceeds from disposals of vehicles
Net cash generated from (used in) operations
(b) Cash and cash equivalents
Cash and cash equivalents comprise:
Cash and bank balances
Bank overdrafts
Cash and cash equivalents
GROUP
2016
£000
2015
£000
COMPANY
2016
£000
90,563
95,762
(2,104)
144,272
–
1,979
122
1,666
238,602
866
10,157
(6,825)
242,800
(8,259)
(10,527)
224,014
(296,165)
145,877
73,726
144,455
–
2,010
50
1,680
243,957
105
2,833
4,672
251,567
(16,524)
(12,302)
222,741
(350,085)
135,876
8,532
61
–
16
–
1,666
(361)
–
2,353
315
2,307
–
(13,174)
(10,867)
–
–
(10,867)
2015
£000
684
61
(7,665)
31
–
1,680
(5,209)
–
25
272
(4,912)
–
(15,164)
(20,076)
–
–
(20,076)
GROUP
2016
£000
18,748
–
18,748
2015
£000
9,676
–
9,676
COMPANY
2016
£000
2015
£000
–
(34,347)
(34,347)
–
(28,638)
(28,638)
24608.04 7 July 2016 10:36 AM Proof 6
Northgateplc.com stock code: NTG Statements of changes in equity
For the year ended 30 April 2016
9091
Own shares
reserve
£000
Hedging
reserve
£000
Translation
reserve
£000
Share
capital
and share
premium
£000
180,124
–
–
(653)
–
–
–
–
–
–
–
(10,068)
–
–
180,124
–
–
–
–
–
–
1,909
–
(8,812)
–
–
–
–
(2,366)
3,021
(611)
–
–
–
–
–
–
(1,417)
(2,028)
–
–
–
–
–
–
(7,187)
–
–
–
–
–
–
(6,641)
(13,828)
–
–
–
–
–
–
Other
reserves
£000
68,585
–
–
–
–
–
–
(126)
68,459
–
–
–
–
–
–
Retained
earnings
£000
150,475
1,680
(1,909)
66,802
(14,607)
–
–
–
202,441
1,666
(3,021)
61,479
(20,114)
–
Total
£000
390,733
1,680
(1,909)
66,802
(14,607)
(10,068)
1,909
(8,184)
426,356
1,666
(3,021)
61,479
(20,114)
(2,366)
–
3,021
Group
Total equity at 1 May 2014
Share options fair value charge
Share options exercised
Profit attributable to owners of the
Parent Company
Dividends paid
Net purchase of own shares
Transfer of shares on vesting of
share options
Other comprehensive expense
Total equity at 1 May 2015
Share options fair value charge
Share options exercised
Profit attributable to owners of the
Parent Company
Dividends paid
Net purchase of own shares
Transfer of shares on vesting of
share options
Other comprehensive (expense)
income
Total equity at 30 April 2016
–
180,124
–
(8,157)
(494)
(2,522)
4,428
(9,400)
70
68,529
–
242,451
4,004
471,025
Other reserves comprise the capital redemption reserve, revaluation reserve and merger reserve.
Company
Total equity at 1 May 2014
Share options fair value charge
Loss attributable to owners of the
Parent Company
Dividends paid
Other comprehensive expense
Total equity at 1 May 2015
Share options fair value charge
Profit attributable to owners of the
Parent Company
Dividends paid
Other comprehensive expense
Total equity at 30 April 2016
Share
capital
and share
premium
£000
180,124
–
–
–
–
180,124
–
–
–
–
180,124
Revaluation
reserve
£000
Hedging
reserve
£000
1,371
–
–
–
–
1,371
–
–
–
–
1,371
38
–
–
–
(1,417)
(1,379)
–
–
–
(1,143)
(2,522)
Merger
reserve
£000
63,159
–
–
–
–
63,159
–
–
–
–
63,159
Capital
redemption
reserve
£000
40
–
–
–
–
40
–
–
–
–
40
Retained
earnings
£000
20,424
1,680
(2,933)
(14,607)
–
4,564
1,666
37,624
(20,114)
–
23,740
Total
£000
265,156
1,680
(2,933)
(14,607)
(1,417)
247,879
1,666
37,624
(20,114)
(1,143)
265,912
24608.04 7 July 2016 10:36 AM Proof 6
Northgate plc Annual Report and Accounts for the year ended 30 April 2016FINANCIALS 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 130. The nature of the Group’s operations and its principal activities are set out in the strategic report on
pages 7 to 49.
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 IFRS, adopted by the 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. The accounts have been prepared in accordance with International Financial Reporting Standards Interpretations
Committee (IFRS-IC) interpretations and the Companies Act 2006 applicable to companies reporting under IFRS.
Going concern
Having assessed the principal risks and the other matters discussed in connection with the viability statement on page 42, the
Directors considered it appropriate to adopt the going concern basis of accounting in preparing the financial statements.
Changes in accounting policy
Annual improvements 2012, Annual improvements 2013 and IAS 19 (Employee benefits) became effective or were amended
during the year but had no impact on the financial statements. Various new accounting standards and amendments were
endorsed during the year, none of which have had or are expected to have any significant impact on the Group.
Basis of consolidation
Subsidiary undertakings are entities controlled by the Company. Control exists when the Company is exposed, or has rights, to
variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the
subsidiary. The consolidated accounts include the accounts of the Company and its subsidiary undertakings made up to 30 April
2015 and 30 April 2016.
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.
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. Revenue from sales of other related goods and services is
recognised at the point at which the goods or services are provided.
Revenue from the sale of used vehicles is recognised at the point of sale, which is usually represented by the point at which
the customer takes possession of the vehicle. Where cash is received in advance of customers collecting or taking delivery of
vehicles, revenue is recognised subject to the bill and hold criteria of IAS 18 (Revenue) being met.
24608.04 7 July 2016 10:36 AM Proof 6
Northgateplc.com stock code: NTG
9293
2 Principal accounting policies continued
Goodwill
All business combinations are accounted for by applying the acquisition method. Goodwill represents amounts arising on
acquisition of subsidiary undertakings 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
5 to 13 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 12 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 12 years, averaging around six years. These depreciation rates have been determined with the anticipation that the net
book values at the point the vehicles are transferred into inventories is in line with the open market values for those vehicles.
Depreciation charges reflect adjustments made as a result of differences between expected and actual residual values of used
vehicles, taking into account the further directly attributable costs to sell the vehicles.
Property under construction is not depreciated. Depreciation commences when these assets are ready for their intended use.
Freehold land is not depreciated.
On the subsequent sale or retirement of properties revalued prior to the adoption of IFRS, the attributable revaluation surplus
remaining in the revaluation reserve is transferred directly to retained earnings. The residual value, if not insignificant, is
reassessed annually.
Investments in subsidiaries
Investments in subsidiaries are shown at cost less any provision for impairment.
24608.04 7 July 2016 10:36 AM Proof 6
Northgate plc Annual Report and Accounts for the year ended 30 April 2016FINANCIALS Notes to the accounts CONTINUED
2 Principal accounting policies continued
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 has decreased or 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 and any amounts outstanding in relation to previous years.
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 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.
24608.04 7 July 2016 10:36 AM Proof 6
Northgateplc.com stock code: NTG
9495
2 Principal accounting policies continued
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 initially stated at their fair value and subsequently at amortised cost less any
appropriate provision for irrecoverable amounts. Trade payables are non-interest bearing and are stated initially at their fair value
and subsequently at amortised cost.
The Group uses derivative financial instruments to hedge its exposure to 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 interest rate derivatives is the estimated amount that the Group would receive or pay to terminate the
derivative at the balance sheet date, taking into account current interest rates and the current creditworthiness of the derivative
counterparties.
Changes in the fair value of derivative financial instruments that are designated and effective as hedges of future cash flows
are recognised in other comprehensive income 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.
No derivative assets and liabilities are offset. Certain customer rebates, which will be settled in cash, are offset against the trade
receivables balance until such time as these are settled.
Cash and cash equivalents
Cash and cash equivalents consist of cash at bank and in hand and bank overdrafts.
Bank loans, other loans, loan notes and issue costs
Bank loans, other loans and loan notes are stated initially at fair value – the amount of proceeds after deduction of issue costs –
and then subsequently at amortised cost. Finance charges, including premiums payable on settlement or redemption and direct
issue costs, are accounted for in the income statement on an accruals basis.
24608.04 7 July 2016 10:36 AM Proof 6
Northgate plc Annual Report and Accounts for the year ended 30 April 2016FINANCIALS Notes to the accounts CONTINUED
2 Principal accounting policies continued
Foreign currencies
Transactions in foreign currencies other than UK Sterling are recorded at the rate prevailing at the date of the transaction. 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 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 that
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:
If the lease transfers substantially all the risks and rewards incident to ownership of the asset then it is classified as a finance
lease. All other leases are classified as operating leases.
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 operates defined contribution pension schemes. 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.
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 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.
24608.04 7 July 2016 10:36 AM Proof 6
Northgateplc.com stock code: NTG 9697
2 Principal accounting policies continued
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 or 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 judgements and key sources of estimation uncertainty
In the process of applying the Group’s accounting policies, which are described in Note 2, the Directors have made the following
judgments that have the most significant effect on the amounts recognised in the accounts.
Depreciation
Vehicles for hire are depreciated on a straight line basis using depreciation rates that reflect economic lives of between three and
12 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, after taking account of costs required to
sell the 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 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.
24608.04 7 July 2016 10:36 AM Proof 6
Northgate plc Annual Report and Accounts for the year ended 30 April 2016FINANCIALS Notes to the accounts CONTINUED
3 Critical accounting judgements and key sources of estimation uncertainty continued
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, judgement is required in estimating the likely levels
of recovery. In exercising this judgement, 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. See note 29 for further
information.
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 probable that taxable profit will be
available against which the deductible temporary difference can be utilised.
4 Segmental reporting
Management has determined the operating segments based upon the information provided to the 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, the UK and Spain. The UK division includes operations in the Republic of Ireland as it forms part of
the UK reporting segment and the aggregation criteria of IFRS 8 have been met. The principal activities of these divisions are set
out in the strategic report.
Revenue: hire of vehicles
Revenue: sale of vehicles
Total revenue
Underlying operating profit (loss)*
Restructuring costs
Brand royalty charges
Intangible amortisation
Operating profit
Interest income
Finance costs
Exceptional finance costs
Profit before taxation
Other information
Capital expenditure
Depreciation
Reportable segment assets
Income tax assets
Total assets
Reportable segment liabilities
Derivative financial instrument liabilities
Income tax liabilities
Total liabilities
UK
2016
£000
306,353
127,044
433,397
58,151
(1,777)
(559)
(1,898)
53,917
Spain
2016
£000
Corporate
2016
£000
140,781
44,110
184,891
41,267
–
(4,723)
(64)
36,480
–
–
–
(5,099)
–
5,282
(17)
166
203,930
98,384
95,847
45,827
579,671
283,592
262,335
119,473
–
61
–
–
Total
2016
£000
447,134
171,154
618,288
94,319
(1,777)
–
(1,979)
90,563
3
(11,373)
(1,561)
77,632
299,777
144,272
863,263
15,256
878,519
381,808
3,152
22,534
407,494
24608.04 7 July 2016 10:36 AM Proof 6
Northgateplc.com stock code: NTG
9899
UK
2015
£000
311,282
115,058
426,340
69,032
(442)
(1,928)
66,662
Spain
2015
£000
145,536
42,384
187,920
33,260
(4,881)
(51)
28,328
Corporate
2015
£000
–
–
–
(4,520)
5,323
(31)
772
247,901
88,420
109,389
55,974
575,716
261,788
275,433
134,296
–
61
–
–
Total
2015
£000
456,818
157,442
614,260
97,772
–
(2,010)
95,762
9
(12,808)
82,963
357,290
144,455
837,504
57
14,784
852,345
409,729
1,780
14,480
425,989
4 Segmental reporting continued
Revenue: hire of vehicles
Revenue: sale of vehicles
Total revenue
Underlying operating profit (loss)*
Brand royalty charges
Intangible amortisation
Operating profit
Interest income
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
* Underlying operating profit (loss) stated before intangible amortisation, intra-Group brand royalty charges and exceptional items is the measure
used by the Board of Directors to assess segment performance.
There is no significant intersegment trading other than the above mentioned intra-Group brand royalty charge.
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 considered immaterial to the Group as a whole.
United Kingdom and Republic of Ireland
Spain
Revenue
2016
£000
433,397
184,891
618,288
Non-current
assets
2016
£000
494,861
263,046
757,907
Revenue
2015
£000
426,340
187,920
614,260
Non-current
assets
2015
£000
500,892
233,446
734,338
There are no external customers from whom the Group derives more than 10% 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.
24608.04 7 July 2016 10:36 AM Proof 6
Northgate plc Annual Report and Accounts for the year ended 30 April 2016FINANCIALS Notes to the accounts CONTINUED
5 Operating profit
Operating profit is stated after charging:
Depreciation of property, plant and equipment (Notes 14 and 15)
Staff costs (Note 6)
Cost of inventories recognised as an expense
Net impairment of trade receivables (Note 29)
Auditors’ remuneration for audit services (below)
Auditors’ remuneration for non-audit services (below)
2016
£000
2015
£000
144,272
89,368
206,849
3,468
324
122
144,455
93,332
193,845
3,051
352
156
The above cost of inventories recognised as an expense includes movements in stock provisions which are considered immaterial.
Fees payable to the Company’s auditors for the audit of the Company’s annual accounts
Fees payable to the Company’s auditors 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
2016
£000
205
119
324
26
28
68
122
2015
£000
231
121
352
21
135
–
156
Fees payable to PwC and their associates for non-audit services to the Company are not required to be disclosed because the
consolidated financial statements are required to disclose such fees on a consolidated basis.
A description of the work of the Audit and Risk Committee is set out on pages 61 to 63 and includes an explanation of how
auditor objectivity and independence is safeguarded when non-audit services are provided by the auditors.
6 Staff costs
The average number of persons employed by the Group:
United Kingdom and Republic of Ireland:
Direct operations
Administration
Spain:
Direct operations
Administration
2016
Number
2015
Number
1,492
476
1,968
806
147
953
2,921
1,536
487
2,023
751
138
889
2,912
24608.04 7 July 2016 10:36 AM Proof 6
Northgateplc.com stock code: NTG
6 Staff costs continued
The aggregate remuneration of Group employees comprised:
Wages and salaries
Social security costs
Other pension costs – defined contribution plans
100101
2016
£000
77,569
9,806
1,993
89,368
2015
£000
81,454
10,030
1,848
93,332
Wages and salaries include £2,391,000 (2015 – £885,000) in respect of redundancies and loss of office.
Details of Directors’ remuneration, pension contributions and share options are provided in the Remuneration Report on pages
64 to 74.
7 Finance costs
Interest on bank overdrafts and loans
Recycling of hedging reserve items
Amortisation of arrangement fees
Preference share dividends
Finance costs (excluding exceptional items)
Termination of interest rate swaps (note 26)
Exceptional finance costs
8 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
Rate adjustments in UK and Spain
2016
£000
10,096
649
603
25
11,373
1,561
1,561
12,934
2015
£000
12,338
–
445
25
12,808
–
–
12,808
2016
£000
2015
£000
10,823
854
5,023
16,700
1,168
(1,818)
103
(547)
16,153
10,111
(1,789)
9,188
17,510
(4,097)
898
1,850
(1,349)
16,161
UK corporation tax is calculated at 20.00% (2015 – 20.92%) of the estimated assessable profit for the year. Taxation for other
jurisdictions is calculated at the rates prevailing in those respective jurisdictions.
24608.04 7 July 2016 10:36 AM Proof 6
Northgate plc Annual Report and Accounts for the year ended 30 April 2016FINANCIALS Notes to the accounts CONTINUED
8 Taxation continued
The net charge for the year can be reconciled to the profit before taxation as stated in the income statement as follows:
Profit before taxation
Tax at the UK corporation tax rate of 20.00% (2015 – 20.92%)
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
Reduction in tax rate
Adjustment to tax charge in respect of prior years
Tax charge and effective tax rate for the year
2016
£000
77,632
15,526
1,502
(960)
946
103
(964)
16,153
%
20.0
1.9
(1.2)
1.2
0.1
(1.2)
20.8
2015
£000
82,963
17,356
682
(2,699)
(357)
1,850
(671)
16,161
%
20.9
0.8
(3.2)
(0.4)
2.2
(0.8)
19.5
In addition to the amount charged to the income statement, a net deferred tax amount of £285,000 has been credited (2015 –
£355,000) directly to equity (Note 22).
The underlying tax charge of £17,599,000 (2015 – £17,029,000) excludes exceptional tax credits of £668,000 (2015 – £Nil) as set
out in Note 26, and tax credits on brand royalty charges and intangible amortisation of £778,000 (2015 – £868,000). There has
been no recognition of deferred tax assets previously derecognised.
In July 2015 an announcement was made meaning that the applicable tax rate in the UK will reduce from 20% to 19% for the
fiscal year starting 1 April 2017 and thereafter. In March 2016 it was announced that for the fiscal year starting 1 April 2020 the
rate would reduce to 17%. Neither of these changes have been substantively enacted at the balance sheet date and deferred tax
balances have therefore not been revalued. The Spanish corporation tax rate reduced to 25% on 1 January 2016. Based on the
expected timing of the reversal of temporary differences, the tax disclosures reflect deferred tax measured at 20% in the UK and
25% in Spain.
9 Dividends
An interim dividend of 5.1p per Ordinary share was paid in January 2016 (2015 – 4.3p). The Directors propose a final dividend
for the year ended 30 April 2016 of 10.9p per Ordinary share (2015 – 10.2p) which is subject to approval at the Annual General
Meeting and has not been included as a liability as at 30 April 2016. No dividends have been paid between 30 April 2016 and
the date of signing the Accounts.
10 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 for the year attributable to the owners of the
Parent Company
Underlying
2016
£000
Statutory
2016
£000
Underlying
2015
£000
Statutory
2015
£000
65,350
61,479
67,944
66,802
24608.04 7 July 2016 10:36 AM Proof 6
Northgateplc.com stock code: NTG
102103
2016
Number
2016
Number
2015
Number
2015
Number
133,232,518 133,232,518 133,232,518 133,232,518
1,990,249
1,990,249
2,649,060
2,649,060
135,222,767 135,222,767 135,881,578 135,881,578
50.1p
49.2p
46.1p
45.5p
49.0p
48.3p
51.0p
50.0p
10 Earnings per share continued
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
11 Result of the Parent Company
A profit of £37,624,000 (2015 – loss of £2,933,000) 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.
12 Goodwill
Carrying value:
At 1 May 2014, 1 May 2015 and 30 April 2016
£000
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 goodwill balance all relates to the UK. 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 of other non-current assets 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 three year business plan approved
by the Directors in May 2016 using growth rates of 1% over a 10 year period, including terminal values, using a discount rate
of 8.9% for the UK CGU and 8.9% for the Spain 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 of other non-current assets
previously charged for both the UK CGU and Spain CGU.
24608.04 7 July 2016 10:36 AM Proof 6
Northgate plc Annual Report and Accounts for the year ended 30 April 2016FINANCIALS Notes to the accounts CONTINUED
12 Goodwill continued
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 May 2015 using growth rates of 1% over a 10 year period, including terminal values, using
a discount rate of 9.7% for the UK CGU and 9.5% for the Spain 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 Spain CGU.
The value in use 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 Spain CGU. Based on this sensitivity analysis, no reasonably
possible changes to the assumptions used for either the UK CGU or Spain CGU resulted in an additional impairment charge being
required.
13 Other intangible assets
Cost:
At 1 May 2014
Additions
Exchange differences
At 1 May 2015
Additions
Exchange differences
At 30 April 2016
Amortisation:
At 1 May 2014
Charge for the year
Exchange differences
At 1 May 2015
Charge for the year
Exchange differences
At 30 April 2016
Carrying amount:
At 30 April 2016
At 30 April 2015
Customer
relationships
£000
GROUP
Other
software
£000
14,988
–
(504)
14,484
–
280
14,764
11,327
755
(508)
11,574
775
279
12,628
2,136
2,910
13,356
889
(149)
14,096
1,682
91
15,869
11,550
1,255
(140)
12,665
1,204
82
13,951
1,918
1,431
COMPANY
Other
software
£000
90
–
–
90
–
–
90
43
31
–
74
16
–
90
–
16
Total
£000
28,344
889
(653)
28,580
1,682
371
30,633
22,877
2,010
(648)
24,239
1,979
361
26,579
4,054
4,341
24608.04 7 July 2016 10:36 AM Proof 6
Northgateplc.com stock code: NTG 14 Property, plant and equipment: vehicles for hire
Group
Cost:
At 1 May 2014
Additions
Exchange differences
Transfer to motor vehicles
Transfer to inventories
At 1 May 2015
Additions
Exchange differences
Transfer to motor vehicles
Transfer to inventories
At 30 April 2016
Depreciation:
At 1 May 2014
Charge for the year
Exchange differences
Transfer to motor vehicles
Transfer to inventories
At 1 May 2015
Charge for the year
Exchange differences
Transfer to motor vehicles
Transfer to inventories
At 30 April 2016
Carrying amount:
At 30 April 2016
At 30 April 2015
104105
£000
971,859
350,742
(47,039)
(328)
(288,107)
987,127
293,592
27,464
(663)
(310,394)
997,126
356,932
137,955
(18,425)
(116)
(149,379)
326,967
137,678
9,850
(170)
(161,698)
312,627
684,499
660,160
At 30 April 2016, the Group had entered into contractual commitments for the acquisition of vehicles for hire amounting to
£20,599,000 (2015 – £25,920,000).
24608.04 7 July 2016 10:36 AM Proof 6
Northgate plc Annual Report and Accounts for the year ended 30 April 2016FINANCIALS Notes to the accounts CONTINUED
15 Other property, plant and equipment
Group
Cost:
At 1 May 2014
Additions
Exchange differences
Transfer from vehicles for hire
Transfer to land & buildings
Disposals
At 1 May 2015
Additions
Exchange differences
Transfer from vehicles for hire
Disposals
At 30 April 2016
Depreciation:
At 1 May 2014
Charge for the year
Exchange differences
Transfer from vehicles for hire
Transfer to land & buildings
Disposals
At 1 May 2015
Charge for the year
Exchange differences
Transfer from vehicles for hire
Disposals
At 30 April 2016
Carrying amount:
At 30 April 2016
At 30 April 2015
land and buildings by category:
Freehold and long leasehold
Short leasehold
land &
buildings
£000
Plant,
equipment
& fittings
£000
Motor
vehicles
£000
82,444
1,521
(4,922)
–
554
(2,798)
76,799
726
2,580
–
(1,474)
78,631
20,115
2,516
(1,108)
–
238
(950)
20,811
2,577
600
–
(1,209)
22,779
55,852
55,988
21,325
2,940
(1,207)
–
(554)
(2,706)
19,798
2,504
755
–
(1,164)
21,893
11,986
3,372
(744)
–
(238)
(2,548)
11,828
3,318
497
–
(1,026)
14,617
7,276
7,970
2,812
1,198
–
328
–
(984)
3,354
1,273
–
663
(1,489)
3,801
905
612
–
116
–
(569)
1,064
699
–
170
(769)
1,164
2,637
2,290
2016
£000
49,909
5,943
55,852
Total
£000
106,581
5,659
(6,129)
328
–
(6,488)
99,951
4,503
3,335
663
(4,127)
104,325
33,006
6,500
(1,852)
116
–
(4,067)
33,703
6,594
1,097
170
(3,004)
38,560
65,765
66,248
2015
£000
49,299
6,689
55,988
At 30 April 2016, the Group had entered into contractual commitments for the acquisition of property, plant and equipment
amounting to £48,000 (2015 – £377,000).
24608.04 7 July 2016 10:36 AM Proof 6
Northgateplc.com stock code: NTG 106107
land &
buildings
£000
3,239
719
61
780
61
841
2,398
2,459
Total
£000
Shares in
subsidiary
undertakings
£000
loans to
subsidiary
undertakings
£000
76,328
47,000
123,328
2,435
–
2,435
73,893
47,000
120,893
15 Other property, plant and equipment continued
Company
Cost:
At 1 May 2014, 1 May 2015 and 30 April 2016
Depreciation:
At 1 May 2014
Charge for the year
At 1 May 2015
Charge for the year
At 30 April 2016
Carrying amount:
At 30 April 2016
At 30 April 2015
16 Investments
Company
Cost:
At 1 May 2014, 1 May 2015 and 30 April 2016
Accumulated provisions:
At 1 May 2014, 1 May 2015 and 30 April 2016
Carrying amount:
At 1 May 2015 and 30 April 2016
At 30 April 2016, a full list of subsidiaries of the Group, all of which are wholly owned and are registered in England and Wales
unless otherwise stated, were as follows:
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
NGMalta Finance Limited* (incorporated in the Republic of Ireland)
Northgate Vehicle Sales Limited*
Goode Durrant Administration Limited*
Fleet Technique Limited*
Northgate (AVR) Limited
Willhire Group Limited*
Willhire Vehicle Rentals Limited*
* Interest held indirectly by the Company.
24608.04 7 July 2016 10:36 AM Proof 6
Northgate plc Annual Report and Accounts for the year ended 30 April 2016FINANCIALS Notes to the accounts CONTINUED
17 Inventories
Group
Vehicles held for resale
Spare parts and consumables
18 Trade and other receivables
Trade receivables
Amounts due from subsidiary undertakings
Other taxes
Other receivables and prepayments
The average credit period given on trade sales is
2016
£000
17,758
5,351
23,109
2015
£000
15,544
6,129
21,673
GROUP
COMPANY
2016
£000
58,131
–
–
5,368
63,499
2015
£000
61,373
–
–
10,444
71,817
UK
Spain
2016
£000
–
825,090
56
129
825,275
2016
36 days
38 days
2015
£000
–
774,459
31
141
774,631
2015
39 days
44 days
Allowances for estimated irrecoverable amounts and the Group’s credit risk are considered in Note 29.
The Directors consider that the carrying amount of trade and other receivables approximates to their fair value due to their short
term nature.
19 Trade and other payables
Trade payables
Amounts due to subsidiary undertakings
Social security and other taxes
Accruals and deferred income
The average credit period taken on trade purchases is
GROUP
COMPANY
2016
£000
23,158
–
7,054
22,971
53,183
2015
£000
26,736
–
5,348
30,189
62,273
UK
Spain
2016
£000
125
325,226
239
2,643
328,233
2016
32 days
61 days
2015
£000
54
282,340
109
2,939
285,442
2015
31 days
60 days
The Directors consider that the carrying amount of trade and other payables approximates to their fair value due to their short
term nature.
24608.04 7 July 2016 10:36 AM Proof 6
Northgateplc.com stock code: NTG 108109
20 Borrowings
The Directors consider that the carrying amounts of the Group’s borrowings approximate to their fair value.
Bank loans and overdrafts
Loan notes
Cumulative Preference shares
Confirming facilities
The borrowings are repayable as follows:
On demand or within one year (shown within current
liabilities)
Bank loans and overdrafts
Confirming facilities
In the second year
Bank loans
In the third to fifth years
Bank loans
Due after more than five years
Loan notes
Cumulative Preference shares
Unamortised finance fees relating to the bank loans and loan notes
Total borrowings
Less: Amounts due for settlement within one year (shown within
current liabilities)
Amounts due for settlement after more than one year
GROUP
COMPANY
2016
£000
249,742
77,930
500
453
328,625
2015
£000
346,415
–
500
541
347,456
2016
£000
274,527
77,930
500
–
352,957
2015
£000
363,513
–
500
–
364,013
GROUP
2016
£000
2015
£000
COMPANY
2016
£000
2015
£000
9,562
453
10,015
–
–
11,540
541
12,081
7,609
7,609
34,347
–
34,347
–
–
28,638
–
28,638
7,609
7,609
242,754
242,754
328,863
328,863
242,754
242,754
328,863
328,863
78,025
500
78,525
(2,669)
328,625
10,015
318,610
–
500
500
(1,597)
347,456
12,081
335,375
78,025
500
78,525
(2,669)
352,957
34,347
318,610
–
500
500
(1,597)
364,013
28,638
335,375
The UK syndicated bank loans, totalling £242,754,000 (gross of unamortised fees) at 30 April 2016, would become repayable in
full in the event of a change in control of the Group. The holders of the loan notes, totalling £78,025,000 (gross of unamortised
fees) at 30 April 2016, would have to be offered full repayment in the event of a change in control of the Group.
Bank loans and overdrafts
Bank loans and overdrafts are unsecured and bear interest at rates of 0.70% to 2.25% (2015 – secured and bear interest rates
of 2.30% to 2.80%) above the relevant interest rate index, being LIBOR for Sterling denominated debt and EURIBOR for Euro
denominated debt.
24608.04 7 July 2016 10:36 AM Proof 6
Northgate plc Annual Report and Accounts for the year ended 30 April 2016FINANCIALS Notes to the accounts CONTINUED
20 Borrowings continued
loan notes
During the year the Company issued €100,000,000, 2.38% seven year private placement loan notes. These are unsecured and
mature in August 2022.
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 (2015 – 1,300,000), of which 1,000,000
(2015 – 1,000,000) were allotted and fully paid at the balance sheet date.
Confirming facilities
Spanish confirming facilities of £453,000 (2015 – £541,000) are unsecured and all fall due within one year. 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
2016
£000
5,200
195,494
200,694
2015
£000
5,723
169,571
175,294
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
Cumulative Preference shares
Confirming facilities
Consolidated net debt
At 1 May
2015
£000
(9,676)
346,415
–
500
541
337,780
Cash
flow
£000
(5,586)
(107,653)
70,410
–
–
(42,829)
Other
non-cash
changes
£000
Foreign
exchange
movements
£000
–
(977)
(95)
–
(88)
(1,160)
(3,486)
11,957
7,615
–
–
16,086
At 30 April
2016
£000
(18,748)
249,742
77,930
500
453
309,877
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 and bank balances. At 30 April 2016, the
gearing of the Group amounted to 66.9% (2015 – 80.7%) where net borrowings are £309,877,000 (2015 – £337,780,000) and
shareholders’ funds less goodwill and the net book value of intangible assets are £463,382,000 (2015 – £418,426,000).
24608.04 7 July 2016 10:36 AM Proof 6
Northgateplc.com stock code: NTG 110111
20 Borrowings continued
Financial instruments (see also Note 29)
Financial assets
The Group’s principal financial assets are cash and bank balances, 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 Group has credit insurance policies in place to partially 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 21.
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 and medium term bank
loans and loan notes.
Cash at bank, and on deposit, yields interest based principally on interest rate indices applicable to periods of less than three
months, those indices being LIBOR for Sterling denominated cash and EURIBOR for Euro denominated cash. The Group’s
exposure to interest rate fluctuations on its borrowings is managed through the use of interest rate derivatives as detailed in
Note 21. 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 2016 96.7% (2015 – 75.5%) of net borrowings
were at fixed rates of interest comprising interest rate swaps of £75,000,000 and €190,000,000, loan notes of €100,000,000,
£500,000 of Preference shares and £453,000 of confirming facilities (30 April 2015 – interest rate swaps of £105,000,000 and
€206,500,000, £500,000 of Preference shares and £541,000 of confirming facilities).
24608.04 7 July 2016 10:36 AM Proof 6
Northgate plc Annual Report and Accounts for the year ended 30 April 2016FINANCIALS Notes to the accounts CONTINUED
20 Borrowings continued
Foreign currency exchange risk
The Group maintains borrowings in the same currency as its cash requirements, with the exception of borrowings maintained in
Euros as net investment hedges against its Euro denominated investments (Note 21).
An analysis of the Group’s borrowings by currency is given below:
Group
At 30 April 2016
Bank loans
Cumulative Preference shares
Confirming facilities
Loan notes
Group
At 30 April 2015
Bank loans
Cumulative Preference shares
Confirming facilities
Sterling
£000
Euro
£000
Total
£000
74,376
500
–
–
74,876
Sterling
£000
114,903
500
–
115,403
175,366
–
453
77,930
253,749
249,742
500
453
77,930
328,625
Euro
£000
Total
£000
231,512
–
541
232,053
346,415
500
541
347,456
21 Derivative financial instruments
The Group’s derivative financial instruments at the balance sheet date comprise interest rate swaps. Their net estimated fair
values are as follows:
Interest rate derivatives
They are represented in the balance sheet as follows:
Non-current derivative financial instrument assets
Non-current derivative financial instrument liabilities
GROUP
2016
£000
2015
£000
COMPANY
2016
£000
2015
£000
(3,152)
(1,723)
(3,152)
(1,723)
–
(3,152)
(3,152)
57
(1,780)
(1,723)
–
(3,152)
(3,152)
57
(1,780)
(1,723)
24608.04 7 July 2016 10:36 AM Proof 6
Northgateplc.com stock code: NTG
112113
21 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 a substantial
element of the interest cost on outstanding debt. The interest rate derivatives to which the Group was party as at 30 April 2016
are summarised below:
At 30 April 2016
Sterling interest rate swaps
Euro interest rate swaps
At 30 April 2015
Sterling interest rate swaps
Euro interest rate swaps
Total
nominal
values
Weighted
average fixed
contract net
pay rates
Weighted
average
remaining
life
£75,000,000
€190,000,000
£105,000,000
€206,500,000
1.17%
0.06%
1.02%
0.48%
4.2 years
4.2 years
1.9 years
1.6 years
In October 2015 the existing interest rate swaps totalling £105,000,000 and €206,500,000 were cancelled and interest rate
swaps totalling £75,000,000 and €190,000,000 commenced. These had weighted average pay rates of 1.17% and 0.06%
respectively and all had weighted average lives of 4.7 years.
All the Group’s interest rate swaps are 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, has been deferred in equity. There was no hedge ineffectiveness
during the year (2015 – £Nil).
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 Euros by maintaining a proportion of its borrowings in the same currency. The hedging objective
is to reduce the risk of spot retranslation of the Euro subsidiaries from Euros 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.
24608.04 7 July 2016 10:36 AM Proof 6
Northgate plc Annual Report and Accounts for the year ended 30 April 2016FINANCIALS
Notes to the accounts CONTINUED
22 Deferred tax
The following are the major deferred tax liabilities and (assets) recognised by the Group and movements thereon during the
current and prior year:
Accelerated
capital
allowances
£000
Revaluation
of buildings
£000
Share
based
payment
£000
Intangible
assets
£000
Group
At 1 May 2014
(Credit) charge to income
Credit to equity
Exchange differences
Adjustment to tax rate charged
(credited) to income
Adjustment to tax rate charged to
equity
Adjustments in respect of prior
years charged (credited) to income
Transferred to current tax
At 1 May 2015
(Credit) charge to income
Credit to equity
Exchange differences
Adjustment to tax rate charged
(credited) to income
Adjustments in respect of prior
years credited to income
At 30 April 2016
7,171
(6,068)
–
(475)
373
–
1,488
–
2,489
(1,908)
–
(268)
2,095
(21)
–
(39)
(43)
–
(836)
–
1,156
(28)
–
21
96
–
(1,804)
(1,395)
–
1,149
(854)
(178)
–
–
34
–
311
–
(687)
(186)
–
–
–
–
(873)
(29)
1,334
Other
temporary
differences
£000
(3,317)
(1,254)
(372)
319
losses
£000
(12,579)
3,582
–
1,371
181
17
155
–
(4,271)
1,110
(285)
(155)
–
–
(3,217)
(9,509)
2,335
–
(577)
Total
£000
(6,518)
(4,097)
(372)
1,179
1,850
17
898
(3,217)
(10,260)
1,168
(285)
(980)
(56)
63
103
–
(7,807)
(14)
(3,552)
(1,818)
(12,072)
966
(158)
–
3
–
(220)
–
562
(155)
–
(1)
–
–
406
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 2016
Deferred tax assets
Deferred tax liabilities
Net deferred tax assets
At 30 April 2015
Deferred tax assets
Deferred tax liabilities
Net deferred tax assets
Total
£000
(15,256)
3,184
(12,072)
(14,784)
4,524
(10,260)
In the current year, the net credit to equity of £285,000 (2015 – £355,000) in respect of other temporary differences relates to
derivative financial instruments which has been reflected in the hedging reserve (Note 25).
There are no deferred tax assets which are not recognised in the balance sheet.
24608.04 7 July 2016 10:36 AM Proof 6
Northgateplc.com stock code: NTG
114115
22 Deferred tax continued
Net deferred tax assets of £3,552,000 (2015 – £4,271,000) classified as other temporary differences relate to movements on fair
values of foreign currency derivatives, other temporary differences in relation to tax payable in various tax jurisdictions in which
the Group operates and other temporary differences within the UK.
The following are the major deferred tax assets recognised by the Company and movements thereon during the current and
prior year:
Company
At 1 May 2014
Charge to income
Credit to equity
Change in UK tax rate charged to income
At 1 May 2015
Credit to income
Credit to equity
At 30 April 2016
23 Share capital
Group and Company
Allotted and fully paid:
133,232,518 (2015 – 133,232,518) Ordinary shares of 50p each
24 Share premium account
Group and Company
At 1 May 2014, 1 May 2015 and 30 April 2016
25 Other reserves
Group
At 1 May 2014
Foreign exchange differences
At 1 May 2015
Foreign exchange differences
At 30 April 2016
Company
At 1 May 2014, 1 May 2015 and 30 April 2016
Share based
payments
£000
Other
temporary
differences
£000
(854)
133
–
34
(687)
(186)
–
(873)
(72)
37
(355)
19
(371)
(159)
(285)
(815)
Total
£000
(926)
170
(355)
53
(1,058)
(345)
(285)
(1,688)
2016
£000
2015
£000
66,616
66,616
£000
113,508
Merger
reserve
£000
67,463
–
67,463
–
67,463
Merger
reserve
£000
63,159
Capital
redemption
reserve
£000
Revaluation
reserve
£000
40
–
40
–
40
1,082
(126)
956
70
1,026
Capital
redemption
reserve
£000
Revaluation
reserve
£000
40
1,371
The above shows the movements on the reserves classified as ‘Other reserves’ on the Group’s statement of changes in equity.
Movements on the Own shares reserve, Hedging reserve and Translation reserve are shown in the Statement of changes in
equity, which can be seen on page 91.
24608.04 7 July 2016 10:36 AM Proof 6
Northgate plc Annual Report and Accounts for the year ended 30 April 2016FINANCIALS Notes to the accounts CONTINUED
25 Other reserves continued
Further information on certain of these reserves is given below:
Own shares
The own shares reserve represents shares held by employee trusts in order to meet commitments under the Group’s various
share schemes (Note 28). At 30 April 2016 the Guernsey Trust held 1,899,747 (2015 – 1,910,135) 50p Ordinary shares and
the Capita Trust held 17,186 (2015 – 35,552) 50p Ordinary shares. The total number of shares held by these employee trusts
represents 1.4% of the allotted and fully paid share capital of the Group.
The results of the trusts are consolidated into the results of the Group in accordance with IFRS 10 (Consolidated Financial
Statements).
Hedging reserve
The hedging reserve represents the cumulative amounts of changes in fair values of hedged interest rate derivatives that are
deferred in equity, as explained in Note 2 and Note 21, less amounts transferred to the income statement and other components
of equity.
Translation reserve
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 21.
26 Exceptional items
Restructuring costs
Exceptional administrative expenses
Costs associated with July 2015 refinancing
Exceptional finance costs
Total pre-tax exceptional items
Tax credits relating to exceptional items
2016
£000
1,777
1,777
1,561
1,561
3,338
(668)
2015
£000
–
–
–
–
–
–
Details of exceptional items recognised in the income statement are as follows:
Restructuring costs
The Group incurred total exceptional restructuring costs of £1,777,000 (2015 – £Nil), all of which arose in the United Kingdom.
Costs associated with July 2015 refinancing
The Group incurred £1,561,000 (2015 – £Nil) of exceptional finance costs relating to the cancellation of previous interest rate
swaps which no longer qualified for hedge accounting as the hedged items were deemed to no longer exist.
24608.04 7 July 2016 10:36 AM Proof 6
Northgateplc.com stock code: NTG 116117
27 Operating lease arrangements
As lessee
Group
Lease payments under operating leases recognised in the income statement for the year
2016
£000
6,422
2015
£000
5,819
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
2016
£000
6,020
17,011
20,863
43,894
2015
£000
5,451
15,927
21,491
42,869
Operating lease payments represent rentals payable by the Group for certain of its operating sites as well as rentals for certain
equipment.
Leases are negotiated for an average term of 11 years (2015 – 11 years) and rentals are fixed for an average term of 10 years
(2015 – 10 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.
28 Share based payments
The Group’s and Company’s various share incentive plans are explained in the Remuneration Report on pages 64 to 74.
The Group and Company recognised total expenses of £1,666,000 (2015 – £1,680,000) related to equity-settled share based
payment transactions in the year.
All options granted under the MPSP and EPSP are nil cost options. Options granted under the DABP have exercise prices ranging
from £Nil to £5.75.
The All Employee Share Scheme (AESS) 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.
The Board may make discretionary awards of free shares to eligible employees. Employees must remain in the employ of the
Group during the vesting period of three years in order to receive the free shares.
24608.04 7 July 2016 10:36 AM Proof 6
Northgate plc Annual Report and Accounts for the year ended 30 April 2016FINANCIALS Notes to the accounts CONTINUED
28 Share based payments continued
Details regarding the plans in the year ended 30 April 2016 are outlined below:
At 1 May 2015
Granted/allocated during the year
Exercised/vested during the year
Forfeited/lapsed during the year
At 30 April 2016
Exercisable at the end of the year
Weighted average remaining contractual life at the
end of the year
Weighted average share price at the date of exercise
of options in the year
Date options granted/allocated in the year
Aggregate estimated fair value of options at the date
of grant
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
DABP
Number of
share options
2016
MPSP
Number of
share options
2016
EPSP
Number of
share options
2016
398,355
253,812
(56,646)
–
595,521
237,632
587,046
–
(51,970)
(350,902)
184,174
184,174
1,142,683
186,525
(231,816)
(214,959)
882,433
197,599
AESS
Number of
matching
shares
2016
254,360
115,264
(115,497)
(20,083)
234,044
–
Free Shares
Number of
free shares
2016
457,400
113,400
(238,600)
(43,450)
288,750
–
DABP
2016
MPSP
2016
EPSP
2016
AESS
2016
Free Shares
2016
7.7 years
6.0 years
7.7 years
1.9 years
1.2 years
£4.83
July 2015
£4.83
–
£4.83
£4.62
July 2015 January 2016 August 2015
£3.36
£617,000
–
£658,000
£378,000
£440,000
£5.65
£2.31
46.7%
3 years
1.53%
2.9%
–
–
–
–
–
–
£5.65
£Nil
46.7%
3 years
1.53%
2.9%
£5.31
£Nil
45.7%
3 years
1.03%
3.0%
£5.69
£Nil
46.2%
3 years
1.38%
2.9%
Expected volatility was determined by calculating the historical volatility of the Group’s share price over the previous three years.
Details regarding the plans in the year ended 30 April 2015 are outlined below:
At 1 May 2014
Granted/allocated during the year
Exercised/vested during the year
Forfeited/lapsed during the year
At 30 April 2015
Exercisable at the end of the year
DABP Number
of share
options
2015
MPSP Number
of share
options
2015
EPSP
Number of
share options
2015
388,050
113,876
(94,988)
(8,583)
398,355
123,516
782,359
–
(34,530)
(160,783)
587,046
76,074
1,188,107
206,176
–
(251,600)
1,142,683
231,816
AESS
Number of
matching
shares
2015
311,898
74,801
(109,865)
(22,474)
254,360
–
Free Shares
Number of
free shares
2015
401,400
125,100
(17,450)
(51,650)
457,400
–
24608.04 7 July 2016 10:36 AM Proof 6
Northgateplc.com stock code: NTG 118119
28 Share based payments continued
Weighted average remaining contractual life at the
end of the year
Weighted average share price at the date of exercise
of options in the year
Date options granted/allocated in the year
Aggregate estimated fair value of options at the date
of grant
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
DABP
2015
MPSP
2015
EPSP
2015
AESS
2015
Free Shares
2015
7.0 years
7.1 years
7.4 years
1.6 years
1.1 years
£5.35
July 2014
£441,000
£4.83
£Nil
57.5%
3 years
1.95%
2.5%
£5.35
–
–
£6.21
June 2014 January 2015
£5.44
July 2014
–
–
–
–
–
–
–
£692,000
£832,000
£460,000
£4.76
£Nil
57.8%
3 years
1.96%
2.6%
£5.25
£Nil
52.9%
3 years
1.06%
2.6%
£4.91
£Nil
57.5%
3 years
1.98%
2.7%
29 Financial instruments
The following disclosures and analysis relate to the Group’s financial instruments.
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 20, 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 23 to 25.
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 20 and 21.
Foreign currency sensitivity analysis
During the year, the Group has been exposed to movements in the exchange rate between Euro and Sterling, where Sterling is
the functional currency of the Group.
The following tables detail the Group’s sensitivity to a €0.15 (2015 – €0.10) increase and decrease in the Euro/Sterling
exchange rate.
A €0.15 (2015 – €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 €0.15 (2015 – €0.10) change in foreign currency rates.
2016
Profit before taxation
Total equity
As stated in
annual report
£000
As would be
stated if
€0.15
increase
£000
As would be
stated if
€0.15
decrease
£000
77,632
471,025
75,047
462,602
80,629
481,687
24608.04 7 July 2016 10:36 AM Proof 6
Northgate plc Annual Report and Accounts for the year ended 30 April 2016FINANCIALS Notes to the accounts CONTINUED
29 Financial instruments continued
2015
Profit before taxation
Total equity
As stated in
annual report
£000
82,963
426,356
As would be
stated if
€0.10
increase
£000
80,876
423,164
As would be
stated if
€0.10
decrease
£000
85,400
430,055
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 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.
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 the 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% (2015 – 1.0%) increase or decrease has been used in the analyses and represents management’s best estimate of a
reasonably possible change in interest rates in the near term.
2016
Profit before taxation
Total equity
2015
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
77,632
471,025
77,200
470,680
78,062
471,370
As stated in
annual report
£000
82,963
426,356
As would be
stated if
1.0%
increase
£000
81,859
425,483
As would be
stated if
1.0%
decrease
£000
84,068
427,230
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.
24608.04 7 July 2016 10:36 AM Proof 6
Northgateplc.com stock code: NTG 120121
29 Financial instruments continued
The following table details the notional principal amounts and remaining terms of interest rate swap contracts outstanding at the
reporting date:
Average contract
fixed interest rate
Outstanding receive floating pay
fixed contracts
Sterling
In the second to fifth years inclusive
Euro
In the second to fifth years inclusive
2016
%
1.17
0.06
Notional principal amount
Fair value
2015
%
2016
000
2015
000
2016
£000
2015
£000
1.02
£75,000
£105,000
(1,001)
(524)
0.48
€190,000
€206,500
(2,151)
(1,199)
liquidity risk management
Ultimate responsibility for liquidity risk management rests with the Board of Directors, who have 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
financial liabilities. Included in Note 20 is a description of additional undrawn facilities that the Group has at its disposal to
further reduce liquidity risk.
liquidity and interest risk tables
The following tables detail the Group’s remaining contractual maturity for its non-derivative financial liabilities. The tables have
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 tables include 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.
2016
Non-interest bearing
Fixed interest rate instruments
Variable interest rate instruments
Weighted average
effective interest rate
0.00%
2.40%
1.64%
2015
Non-interest bearing
Fixed interest rate instruments
Variable interest rate instruments
Weighted average
effective interest rate
0.00%
5.00%
2.43%
<1 year
£000
23,611
1,882
13,723
39,216
<1 year
£000
27,277
25
20,090
47,392
2nd year
£000
3–5 years
£000
–
1,882
4,053
5,935
2nd year
£000
–
25
15,898
15,923
–
5,646
251,543
257,189
3–5 years
£000
–
75
338,144
338,219
>5 years
£000
–
80,851
–
80,851
>5 years
£000
–
500
–
500
Total
£000
23,611
90,261
269,319
383,191
Total
£000
27,277
625
374,132
402,034
The following tables detail the Group’s liquidity analysis for its derivative financial instruments. It includes both liabilities and
assets to illustrate how the cash flows are matched in each period.
2016
Liabilities
Net settled:
Interest rate swaps
<1 year
£000
2nd year
£000
3–5 years
£000
Total
£000
1,091
1,091
2,226
4,408
24608.04 7 July 2016 10:36 AM Proof 6
Northgate plc Annual Report and Accounts for the year ended 30 April 2016FINANCIALS Notes to the accounts CONTINUED
29 Financial instruments continued
2015
Liabilities
Net settled:
Interest rate swaps
<1 year
£000
2nd year
£000
3–5 years
£000
Total
£000
1,198
858
69
2,125
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.
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, are held at fair value.
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 receivables 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
2016
£000
2015
£000
71,004
(12,873)
58,131
52,088
4,552
221
1,270
58,131
73,988
(12,615)
61,373
55,804
5,219
64
286
61,373
24608.04 7 July 2016 10:36 AM Proof 6
Northgateplc.com stock code: NTG 122123
29 Financial instruments continued
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 £802,000 (2015 – £893,000) is due from the Group’s largest
customer. There are no customers who represent more than 5% 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 £6,062,000 (2015 – £5,569,000) which
are past due at the reporting date for which the Group has not provided as there has not been a significant change in credit
quality and the amounts are still considered recoverable.
Movement in the allowance for doubtful receivables
At 1 May
Impairment losses recognised
Amounts written off as uncollectible
Impaired losses reversed
Exchange differences
At 30 April
2016
£000
2015
£000
12,615
4,837
(3,846)
(1,369)
636
12,873
14,470
5,014
(3,621)
(1,963)
(1,285)
12,615
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 with customers which have been placed under liquidation
of £159,000 (2015 – £168,000).
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
2016
£000
138
1,856
2,434
250
8,195
12,873
2015
£000
279
1,695
2,012
316
8,313
12,615
The Directors consider that the carrying amount of trade and other receivables approximates their fair value. The Company has
no trade receivables and no intercompany receivables past due date.
24608.04 7 July 2016 10:36 AM Proof 6
Northgate plc Annual Report and Accounts for the year ended 30 April 2016FINANCIALS Notes to the accounts CONTINUED
30 Related party transactions
Transactions with subsidiary undertakings
Transactions between the Company and its subsidiary undertakings, which are related parties, are £3,447,000 (2015 –
£3,927,000) interest payable and £5,282,000 (2015 – £5,323,000) royalty charges receivable.
Balances with subsidiary undertakings at the balance sheet date are shown in Notes 18 and 19.
Remuneration of key management personnel
In the current and prior year, the Directors of Northgate plc are determined to be the key management personnel of the
Group. There are other senior executives in the Group who are able to influence the Company in the achievement of its goals.
However, in the opinion of the Directors, only the Directors of the Company have significant authority for planning, directing and
controlling the activities of the Group.
In respect of the compensation of key management personnel, the short term employee benefits, post-employment (pension)
benefits, termination benefits and details of share options granted are set out in the Remuneration Report on pages 64 to 74.
The fair value charged to the income statement in respect of equity-settled share based payment transactions with the Directors
is £660,000 (2015 – £521,000). There are no other long term benefits accruing to key management personnel, other than as set
out in the Remuneration Report.
24608.04 7 July 2016 10:36 AM Proof 6
Northgateplc.com stock code: NTG Notice of Annual General Meeting
124125
Notice is hereby given that the one hundred and eighteenth Annual General Meeting of Northgate plc (the Company) will be
held at 10 Paternoster Square, London EC4 at 11.30 a.m. on 21 September 2016 for the purpose of considering and, if thought
fit, passing the following resolutions, of which resolutions 1 to 13 will be proposed as ordinary resolutions and resolutions 14 to
17 will be proposed as special resolutions:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
To receive the Directors’ Report and audited accounts of the Company for the year ended 30 April 2016.
To declare a final dividend of 10.9p per Ordinary share.
To approve the Directors’ Remuneration Report in the form set out on pages 64 to 74 of the 2016 Annual Report and
Accounts.
To appoint PricewaterhouseCoopers LLP as auditor of the Company to hold office until the conclusion of the next Annual
General Meeting.
To authorise the Audit and Risk Committee to determine the remuneration of the auditor.
To re-elect Mr A Page as a director.
To re-elect Mr AJ Allner as a director.
To re-elect Miss G Caseberry as a director.
To re-elect Mr RL Contreras as a director.
To elect Mrs C Miles as a director.
To elect Mr P Gallagher as a director.
To elect Mr W Spencer as a director.
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 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.
14.
That subject to the passing of Resolution 13 the Board be authorised to allot equity securities (as defined in the Companies
Act 2006) for cash under the authority given by that resolution and/or to sell ordinary shares held by the Company as
treasury shares for cash as if section 561 of the Companies Act 2006 did not apply to any such allotment or sale, such
authority to be limited:
a.
b.
to the allotment of equity securities 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 of equity securities or sale of treasury shares (otherwise than under paragraph (a) above) up to a
nominal amount of £3,330,000,
such authority to expire at the end of the next Annual General Meeting of the Company (or, if earlier, at the close of
business on 21 December 2017) but, in each case, prior to its expiry the Company may make offers, and enter into
agreements, which would, or might, require equity securities to be allotted (and treasury shares to be sold) after the
authority expires and the Board may allot equity securities (and sell treasury shares) under any such offer or agreement as if
the authority had not expired.
24608.04 7 July 2016 10:36 AM Proof 6
Northgate plc Annual Report and Accounts for the year ended 30 April 2016FINANCIALS Notice of Annual General Meeting
CONTINUED
15.
That subject to the passing of Resolution 13, the Board be authorised in addition to any authority granted under Resolution
14 to allot equity securities (as defined in the Companies Act 2006) for cash under the authority given by that resolution
and/or to sell ordinary shares held by the Company as treasury shares for cash as if section 561 of the Companies Act 2006
did not apply to any such allotment or sale, such authority to be:
a.
b.
limited to the allotment of equity securities or sale of treasury shares up to a nominal amount of £3,330,000; and
used only for the purposes of financing (or refinancing, if the authority is to be used within six months after the
original transaction) a transaction which the Board of the Company determines to be an acquisition or other capital
investment of a kind contemplated by the Statement of Principles on Disapplying Pre-Emption Rights most recently
published by the Pre-Emption Group prior to the date of this notice,
such authority to expire at the end of the next Annual General Meeting of the Company (or, if earlier, at the close of
business on 21 December 2017) but, in each case, prior to its expiry the Company may make offers, and enter into
agreements, which would, or might, require equity securities to be allotted (and treasury shares to be sold) after the
authority expires and the Board may allot equity securities (and sell treasury shares) under any such offer or agreement as if
the authority had not expired.
16.
17.
That a general meeting, other than an Annual General Meeting, may be called on not less than 14 clear days’ notice.
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 27 June 2016;
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.
By Order of the Board
David Henderson
Secretary
27 June 2016
Registered office:
Norflex House
Allington Way
Darlington
DL1 4DY
24608.04 7 July 2016 10:36 AM Proof 6
Northgateplc.com stock code: NTG 126127
Notes
1.
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.
2.
3.
4.
5.
6.
7.
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 at 6 pm on Monday 19 September 2016 or, in the case of an adjourned meeting, at
6 pm on the day which is two days before the meeting (excluding days which are not working days). 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 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.
24608.04 7 July 2016 10:36 AM Proof 6
Northgate plc Annual Report and Accounts for the year ended 30 April 2016FINANCIALS Notice of Annual General Meeting
CONTINUED
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 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 27 June 2016 (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 (i) have the
right to require the Company 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 8 August 2016, being the date six 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.
24608.04 7 July 2016 10:36 AM Proof 6
Northgateplc.com stock code: NTG 128129
Definition
Light commercial vehicle: the official term
used within the European Union for a
commercial carrier vehicle with a gross vehicle
weight of not more than 3.5 tonnes
listing Rules
The Listing Rules of the Financial Conduct
Authority
MPSP
NBS
Management Performance Share Plan (closed
to new awards from 2013)
New Bridge Street, a trading name of Aon plc
Net tangible
assets
Net assets less goodwill and other intangible
assets
NPS
NVQ
OHSAS
PBT
PPU
PwC
RIDDOR
ROCE
SIP
Net promoter score: a standardised measure
of customer satisfaction
National Vocational Qualification
Occupational Health & Safety Management
Systems - requirements
Underlying profit before tax
Profit per unit/loss per unit – this is a
non-GAAP measure used to describe the
adjustment in the depreciation charge made
in the year for vehicles sold at an amount
different to their net book value at the date of
sale (net of attributable selling costs), divided
by the number of vehicles sold
PricewaterhouseCoopers LLP
Reporting of Injuries, Diseases and Dangerous
Occurrences Regulations 1995
Underlying return on capital employed:
calculated as underlying operating profit (see
non-GAAP reconciliation) divided by average
capital employed
The Company’s HMRC approved share
incentive plan, also known as the All
Employee Share Scheme
SMEs
The Code
Small and medium sized enterprises
The UK Corporate Governance Code
The Company
Northgate plc
The Group
The Company and its subsidiaries
TSR
UKAS
Utilisation
Total Shareholder Return
The United Kingdom Accreditation Service
Calculated as the average number of vehicles
on hire divided by average rentable fleet in
any period
Glossary
Term
ABI
AGM
Definition
Association of British Insurers
Annual General Meeting
Term
lCV
Annual Report on
Remuneration
That section of the Remuneration Report
which is subject to an advisory shareholder
vote
CEO
CFO
CPI
CSR
DABP
DEFRA
Deloitte
EBIT
EBITDA
EPS
EPSP
ESG
ESOS
EU
Euro 5
Chief Executive Officer/Chief Executive
Chief Financial Officer/Group Finance Director
Consumer Price Index
Corporate Social Responsibility
Deferred Annual Bonus Plan
The Department for Environment,
Food and Rural Affairs
Deloitte LLP
Earnings before interest and taxation
(equivalent to operating profit)
Earnings before interest, taxation,
depreciation and amortisation
Basic earnings per share
Executive Performance Share Plan
Environment, social and governance
Energy Savings Opportunity Scheme
European Union
European Emissions Standard 5, for Light
Duty Vehicle standards
Facility headroom Calculated as facilities of £532.0m less net
borrowings of £312.6m. Net borrowings
represent net debt of £309.9m less
unamortised arrangement fees of £2.7m and
stated after the deduction of £18.7m of cash
balances which are available to offset against
borrowings.
FCA
Financial Conduct Authority
Free cash flow
Net cash generated before the payment of
dividends
FY2015
FY2016
GAAP
Gearing
GHG
HMRC
IFRS
ISO
KPIs
The year ended 30 April 2015
The year ended 30 April 2016
Generally Accepted Accounting Practice:
meaning compliance with International
Financial Reporting Standards
Calculated as net debt divided by net tangible
assets (as defined below)
Greenhouse Gas
Her Majesty’s Revenue & Customs
International Financial Reporting Standards
International Organisation for Standardisation
Key Performance Indicators
24608.04 7 July 2016 10:36 AM Proof 6
Northgate plc Annual Report and Accounts for the year ended 30 April 2016FINANCIALS Shareholder information
Classification
Information concerning day to day movements in the price
of the Company’s Ordinary shares can be found on the
Company’s website at:
www.northgateplc.com
The Company’s listing symbol on the London Stock Exchange
is NTG.
The Company’s joint corporate brokers are Barclays Bank plc
and Numis Securities Limited and the Company’s Ordinary
shares are traded on SETSmm.
Registrars
Capita Registrars
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU
Tel: 0871 664 0300
(calls cost 10p per minute plus network extras)
Overseas: (+44) 208 639 3399
Financial calendar
December
Publication of Half Yearly Report
January
Payment of interim dividend
June
Announcement of year end results
July
Report and accounts posted to shareholders
September
Annual General Meeting
Payment of final dividend
Secretary and registered office
D Henderson FCIS
Norflex House
Allington Way
Darlington
DL1 4DY
Tel: 01325 467558
24608.04 7 July 2016 10:36 AM Proof 6
Northgateplc.com stock code: NTG
keeping
buSineSS
moving
Find out more about the Group at:
www.northgateplc.com
24608.04 7 July 2016 10:36 AM Proof 6
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Northgate plc
Norflex House, Allington Way
Darlington, DL1 4DY
Tel
01325 467558
Fax
01325 523640
Web
northgateplc.com
24608.04 7 July 2016 10:36 AM Proof 6