annualreportandaccounts2003 www.vpplc.com Vp plc comprises five businesses: Hire Station Rental and sale of tools, small equipment and allied services to industry, construction and homeowners plus three specialist offerings: - Safeforce - hire and sale of safety and survey products, asset management and training services. - Lifting Point - materials handling and lifting gear hire. - One Call - national call centre for tool hire. Torrent Trackside Hire of portable track repair and renewals equipment, trackside lighting and related support services to rail infrastructure maintenance companies. UK Forks Hire of rough terrain material handling equipment and accessories to the house building and construction industry. Unique in the transaction of the business through a national call centre and dedicated services outlets. Groundforce Rental, sale and design of shoring systems and allied services to the water, civil engineering and construction industries. Airpac Oilfield Services Servicing the international oil and gas exploration and development markets with specialist air compressors and associated equipment. 0 1 contents Financial Highlights Directors and Advisors Chairman’s Statement Business Review Financial Review Directors’ Report Remuneration Report Statement of Directors’ Responsibilities Auditors’ Report Consolidated Profit and Loss Account Consolidated Balance Sheet Parent Company Balance Sheet Consolidated Cash Flow Statement Notes Five Year Summary Notice of Meeting Form of Proxy 0 2 3 4 5 7 10 12 15 17 18 19 20 21 22 23 39 40 41 financial highlights Turnover £m 59.8 75.5 66.8 2001 2002 2003 Profit Before Tax £m 7.5 6.2 Turnover £75.5m £66.8m 2003 2002 Profit on ordinary activities before taxation £7.5m £6.2m Earnings per share 12.36p 10.23p Dividend per share 4.50p 4.20p Return on capital employed 14.4% 12.1% Net assets per share 108p 101p Net debt £6.1m £10.6m *3.1 Net debt / shareholders' funds 12.2% 22.8% *After £2.2m loss on terminated operations Expenditure on rental equipment £14.1m £12.0m 2001 2002 2003 Earnings Per Share 12.36 10.23 5.03 2001 2002 2003 0 3 directors and advisors Honorary President Margaret A Pilkington Executive Directors Jeremy F G Pilkington, B.A. (Chairman and Chief Executive) Neil A Stothard, M.A., F.C.A. Non-Executive Directors Barrie Cottingham, F.C.A., A.T.I.I. (Senior Non Executive Director) Peter W Parkin Secretary Neil A Stothard, M.A., F.C.A. Registered Office Central House, Beckwith Knowle, Otley Road, Harrogate, North Yorkshire, HG3 1UD Registered in England: No 481833 Telephone: 01423 533400 Auditors KPMG Audit Plc, 1 The Embankment, Neville Street, Leeds, West Yorkshire, LS1 4DW Solicitors Hammonds, 2 Park Lane, Leeds, West Yorkshire, LS3 1ES Registrars and Transfer Office Capita Registrars, The Registry, 34 Beckenham Road, Beckenham, Kent, BR3 4TU Bankers National Westminster Bank Plc Merchant Bankers N M Rothschild & Sons Limited Stockbrokers Brewin Dolphin Securities Limited 0 4 chairman’s statement I am pleased to be able to report another very satisfactory year for the Group in which we have again achieved significant improvements against our key measures of profit growth, earnings per share and return on capital employed. Profits before tax rose 21% to £7.5m (2002: £6.2m) on turnover ahead by 13% at £75.5m (2002: £66.8m). Earnings per share improved 21% to 12.36p per share and return on capital employed improved to 14.4%, an increase of 19%. The Board is recommending a 7% increase in the final dividend to 3.0p per share, making a total dividend for the year of 4.5p (2002: 4.2p). The dividend is payable on 1 October 2003 to shareholders registered as of 5 September 2003. Our strong cash flow has enabled us to reduce borrowings to £6.1m (2002: £10.6m) at the year end, representing gearing of 12%, whilst at the same time investing £14.1m (2002: £12.0m) in expanding and renewing our rental fleets. S E R V I C E S plan. The first full year contribution from the Mechplant shoring business following its acquisition in October 2001 further supported this excellent profit result. In terms of year on year comparisons, it should be remembered that the prior year contained the foot and mouth epidemic which severely disrupted the timing of projects in many rural areas. Following the transfer into Hire Station of the safety rental activity of Safeforce, the remaining two elements of Safeforce, which are Stopper Specialists and Laser & Survey, will in future be managed by Groundforce. This will give Groundforce customers access to three additional services allied to the mainstream shoring systems business; the rental of specialist pile driving and pile breaking equipment through Piletec; the rental of pipe testing and water flow management systems through Stopper Specialists and the rental and sale of construction and civil engineering laser levelling and aligning equipment through Laser & Survey. Investment in rental fleet totalled £1.4m (2002: £1.5m). Services is made up of four specialist businesses, Groundforce, UK Forks, Airpac Oilfield Services and Safeforce, each focused on its own target market. UK Forks Operating profit rose 77% to £4.6m (2002: £2.6m) on turnover 15% ahead at £29.4m. Groundforce Rental, sale and design of shoring systems and allied services to the water, civil engineering and construction industries. An excellent result with operating profits up 109% at £2.3m (2002: £1.1m), driven by turnover growth of 31% at £11.3m (2002: £8.6m). Hire of rough terrain, material handling equipment and accessories to the house building and construction industry. UK Forks had a relatively flat, but nevertheless satisfactory, year. Turnover rose marginally to £10.6m (2002: £10.1m) generating operating profits of £1.3m (2002: £1.3m). We believe considerable further scope exists to develop long term supply relationships, particularly with our house building customers, although we recognise that these arrangements may take some time to yield results. Healthy demand from the general market was augmented by improved activity from the water industry’s AMP3 five year asset management Investment in rental fleet totalled £2.9m (2002: £2.3m). 0 5 chairman’s statement Safeforce Specialists in the hire, sale and servicing of safety and related equipment. Despite these disappointing results, we remain confident that Hire Station is capable of delivering competitive margins although this will only be achieved progressively. Safeforce had a very successful year, aided in part by maiden contributions from the acquisitions in October 2002 of Stopper Specialists and Laser & Survey. Operating profits rose 67% to £0.5m (2002: £0.3m) on turnover ahead by 60% at £2.4m (2002: £1.5m). As referred to elsewhere, with effect from April 2003 Safeforce has been split into its three constituent parts. Its safety business has transferred into Hire Station and the stopper and laser rental businesses will come under the management of Groundforce where there is a close and natural fit with a shared civil engineering customer base. There are also a number of exciting developments within Hire Station. These include the extension of the One Call Warehouse concept into Birmingham and a second location in London, and the launch of a new Safeforce @ Hire Station business. The safety equipment rental activities previously conducted within Services will be consolidated into Hire Station Safeforce in the current financial year. We believe additional market penetration can be achieved utilising the resources and locations of the Hire Station infrastructure to bring service delivery closer to the customer. Safeforce now operates out of six locations and we plan to expand Safeforce further during the current year. Lifting Point, our specialist materials handling and lifting gear hire business, grew its network to eleven outlets and will in future operate as a distinct business. Investment in rental fleet totalled £0.3m (2002: £0.2m). Investment in rental fleet totalled £5.9m (2002: £5.1m). Airpac Oilfield Services Servicing the international oil and gas exploration and development markets with specialist air compressors and associated equipment. This has proven to be a very significant year for Airpac with the disposal of its non-core, onshore activity for £1.8m during the second half of the financial year. The rationalisation and exit costs associated with this divestment are reflected in these results. Airpac, renamed Airpac Oilfield Services, is now a pure oil and gas exploration and development support business and will be better able to expand its scope of operation beyond its established North Sea market. Turnover fell to £5.1m (2002: £5.4m) as we progressively reduced fleet in anticipation of a complete exit from onshore activity. Operating profits improved to £0.4m from a loss of £0.1m in the previous year reflecting the costs taken out of the onshore business and the growing contribution from the retained oil and gas services business. TORRENT TRACKSIDE Hire of portable track repair and renewals equipment, trackside lighting and related support services to rail infrastructure maintenance companies. Torrent had an excellent year with a 72% increase in operating profit to £3.1m (2002: £1.8m) on revenues ahead by 38% at £11.3m (2002: £8.2m). This exceptional performance was partially due to demand from several major projects, including the Channel Tunnel Rail Link, but was for the most part a result of Torrent’s long term policy of investing in skills, systems and rental assets in anticipation of future rail infrastructure investment. From its seven locations, Torrent provides true 24 hour x 365 day service and national coverage to meet the very particular and demanding working patterns of the rail industry. During the year we established an operational support base in Singapore to improve the service to our customers in the South East Asian market which is now representing an increasing proportion of our activity. We anticipate that the current financial year will be once again successful for Torrent but would not expect a repetition of the exceptional levels of year on year growth that we have seen this year. Investment in rental fleet totalled £0.9m (2002: £1.1m). Investment in rental fleet totalled £2.7m (2002: £1.8m). HIRE STATION Rental and sale of tools, small equipment and allied services to industry, construction and homeowners, plus three specialist offerings : Safeforce - hire and sale of safety and survey products, asset management and training services; Lifting Point - materials handling and lifting gear hire; One Call - national call centre for tool hire. During the year, the new management team at Hire Station has implemented significant restructuring of the business designed to improve sales volume and margin, including the reorganisation of the business into three geographical regions from four together with the elimination of a regional head office. The full benefit of these measures will only be felt in full during the course of the current financial year. In addition, weak trading, particularly in the Greater London and South West regions, was exacerbated by the start-up costs of new branch openings and product launches. Turnover rose to £34.8m (2002: £33.0m) but operating profit fell to £0.6m (2002: £2.8m). 0 6 OUTLOOK The current economic outlook contains a number of uncertainties, but the breadth of business sectors within which we operate, some with strong safety and regulatory elements, gives us a degree of resilience to individual economic cycles. In addition, the Group’s low gearing gives us defensive strength in the event of a downturn, but equally the capability to exploit growth opportunities as they are identified. These strengths, together with the Group’s improved financial performance, give us reason to view the new financial year with cautious optimism. Jeremy Pilkington Chairman & Chief Executive 9 June 2003 business review SERVICES UK Forks Services comprises four separate businesses with an aggregate turnover of £29.4m (2002: £25.6m) and profit before goodwill amortisation, interest and tax of £4.6m (2002: £2.6m) Hire of rough terrain, material handling equipment and accessories to the housebuilding and construction industry. Each of the businesses is a specialist rental provider with market leadership within their defined target market as one of their key management objectives. Groundforce Rental, sale and design of shoring systems and allied services to the water, civil engineering and construction industries. Turnover PBIT Investment in rental fleet £11.3m £2.3m £1.4m (2002: £8.6m) (2002: £1.1m) (2002: £1.5m) Groundforce provides designs and equipment to solve a wide variety of excavation support problems, primarily within the civil engineering and water services market. These applications range from routine street utilities work, to the clear bracing of excavations as large as 20 metres square. This year more active implementation of the water industry five-year asset management plan (AMP3) has helped Groundforce to deliver an excellent trading performance. All geographical regions except Scotland have benefited from the release of projects, particularly in the second half of the year. As the market leader with the widest product offering, we have been well placed to respond to this increased demand from our customers working to tight completion deadlines. During the year we continued to invest in new product development with the launch of a new 250T hydraulic telescopic strut, the largest in the industry. This product has proven to be very successful and we have secured several high profile contracts through its availability. In its second year of operation, our piling business delivered good revenue growth and margins and we extended the product range further with the introduction of a range of heavy sheet piles. Prospects for the new financial year are encouraging. 0 7 Turnover PBIT Investment in rental fleet £10.6m £1.3m £2.9m (2002: £10.1m) (2002: £1.3m) (2002: £2.3m) UK Forks is now three years old and operates a fleet of over a thousand rough terrain telehandlers, primarily supplying the house building and general construction markets. The division is unique in it's market in transacting business through a national call centre. This structure delivers uniformly high standards of customer service with high levels of equipment utilisation from a low operational cost base. This remains our fundarmental business strategy for the future. This year changes in customer demand, working practices, technology and legislation have presented the business with challenges and opportunities to which we have responded both positively and quickly. This flexibility and focus has consolidated our position as the brand of choice within the house building and construction market. We have continued to invest strongly in the rental fleet to meet the changing demands of the customer base. Ongoing rationalisation of the fleet has ensured that the age profile of the fleet has improved again this year. The results for the year have proved to be satisfactory and a strong order book towards the end of the year gives us confidence for the new financial year. Safeforce Specialists in the hire, sale and servicing of safety and related equipment. Turnover PBIT Investment in rental fleet £2.4m £0.5m £0.3m (2002: £1.5m) (2002: £0.3m) (2002: £0.2m) This small but innovative business had another successful year, achieving growth both organically and through acquisition. business review The core safety equipment hire business continued to make gains with increased income from retail sales, servicing and asset management, training and on-site services. Product diversification continued with the introduction of new survey products and specialist equipment such as water leakage correlator kits. Our ability to attract preferred and sole-supply deals was substantially aided by our ability to offer this comprehensive range of products and services to contractors wishing to concentrate on their core activity. Meanwhile, we sought to increase our geographical penetration through satellite operations in the Groundforce depots. In October 2002, we purchased two businesses to expand our services to companies engaged in the laying or refurbishing of pipelines. Laser and Survey is a small business engaged in the hire and sale of laser alignment equipment and its acquisition has enabled us to target further asset management contracts comprising safety and survey products. October also saw the acquisition of Lymington based Stopper Specialists for £1.3m. Stopper Specialists are the leading rental providers of pipe stoppers and pipeline pressure testing equipment in the UK with the most comprehensive range and the longest established service offering. The business complements our own stopper fleet, which we have grown significantly over the past two years. Both acquisitions have performed ahead of expectations and offer good prospects moving forward. Airpac Oilfield Services Servicing the international oil and gas exploration and development markets with specialist air compressors and associated equipment and labour. Turnover PBIT Investment in rental fleet £5.1m £0.4m £0.9m (2002: £5.4m) (2002: loss of £0.1m) (2002: £1.1m) This year saw the end of our involvement in the onshore compressor rental market after almost 30 years with the disposal of our rental fleet assets for £1.8m. Following this disposal, our Offshore compressor business was renamed Airpac Oilfield Services to better reflect the focus of the retained business on the global oil and gas services market. This business serves diverse oil and gas industry segments including well testing, pipeline de-watering and drying, platform and rig structural fabric maintenance and under balanced drilling (UBD) both in the North Sea and worldwide. In August we established a base in Singapore to act as a mobilisation location for equipment servicing the Asia Pacific market. Here we were successful in securing five major projects and we are now established as a leading supplier to UBD and pipeline contracts. Our skilled air, steam and nitrogen operators compliment our offering and generated useful revenue contribution. The first six months trading in Singapore has been very encouraging and we are confident that we will be able to exploit the sizeable market potential that exists in this region. Growth in this region will help to 0 8 offset the interruption of business that we experienced in the North Sea due to harsh weather conditions during the winter months. We have invested in new steam boilers, high-pressure compressors and gas boosters to meet increased demand and our modern fleet is proving to be well accepted by the targeted customers. A new, purpose- built facility is nearing completion at the Head Office in Aberdeen. John Singleton Managing Director - Services Division HIRE STATION Rental and sale of tools, small equipment and allied services to industry, construction and homeowners, plus three specialist offerings : Safeforce - hire and sale of safety and survey products, asset management and training services; Lifting Point - materials handling and lifting gear hire; One Call - national call centre for tool hire. Turnover PBIT Investment in rental fleet £34.8m £0.6m £5.9m (2002: £33.0m) (2002: £2.8m) (2002: £5.1m) The year ended 31 March 2003 saw significant changes in Hire Station aimed at establishing a platform on which to grow the business into the future. Implementing these changes has had an adverse profit impact in the short term that obscured some positive performances achieved elsewhere. Firstly, we reduced the operating regions from four to three with the resultant closure of the regional head office in Shrewsbury. This was completed in October. Secondly, the senior management team was strengthened by the addition of a Procurement/Technical Director and a Marketing Director. These appointments were made in the second half and will enable a more professional approach to be taken in these key functional areas. In addition, two substantial new initiatives were started in the year. The Hire Station One Call offering was expanded with the opening of a number of dedicated warehouses stocking tools for use by our fast track customer base. The first three of these warehouses were opened in Docklands, Heathrow and Birmingham. The Express delivery service offered by these facilities has proved very popular with our travelling customers who require fast and efficient service in the major conurbations. Additional openings are anticipated. In January we opened the first of our safety equipment hire branches in East London followed by openings in Heathrow, Birmingham, Manchester and Glasgow. These initial five openings are trading ahead of expectations and it is planned to increase our coverage rapidly to a fully national service. Further organic expansion of the branch network took place with new tool hire openings in Glasgow, Edinburgh, Middlesborough and Burton on Trent, and new Lifting Points in Preston and Glasgow. There was also a single branch acquisition completed in Plymouth. business review Finally and most importantly, a substantial investment was made in staff training covering the entire spectrum of activities from use of computer systems and branch administration procedures to technical and health and safety training of all branch staff. This programme is ongoing and will be further extended in the coming year. Andrew Makepeace Managing Director - Hire Station TORRENT TRACKSIDE Hire of portable track repair and renewals equipment, trackside lighting and related support services to rail infrastructure maintenance companies. Turnover PBIT Investment in rental fleet £11.3m £3.1m £2.7m (2002: £8.2m) (2002: £1.8m) (2002: £1.8m) Torrent’s performance has seen a significant improvement during this financial year, with a greater emphasis on developing stronger links with all the major rail maintenance and renewals contractors. This has seen us agreeing long term partnering agreements and offering a wider range of services to these blue chip customers. During the period capital expenditure increased by 50% to £2.7m from £1.8m, including significant first time investment in a rigid safety barrier system. This product has proven very successful and Torrent is now regarded as the premier hirer of this product, holding the largest fleet in the UK. As an ISO9000 (Quality Standard) and ISO14001 (Environmental Standard) registered company, we are the supplier of choice for the majority of rail contractors. These accreditations, together with our ability to comply with Railway Safety’s risk minimisation protocol (RIMINI) and our rail specific Link-up qualifications give clients the confidence to develop stronger ties with Torrent. Our status has been strengthened further with the addition of a Compliance Manager to our senior management team. We have strict maintenance regimes, regularly audited procedures and support all our activities with a true "24x7" service. We have a good geographic spread of depots providing full national coverage and all locations have performed well. Significant projects included the Channel Tunnel Rail Link and the West Coast Route Modernisation. We are now expanding our range of services to include the asset management and maintenance of our customers specialist rail portable plant. Additionally we are increasing the range of courses available through our training division where we are working towards City and Guilds approved courses and a programme of NVQ based training modules. Looking ahead, new markets and revenue streams have been identified and we are currently evaluating the potential to provide a wider range of specialist safety products. Richard Donald Managing Director - Torrent Trackside 0 9 financial review Summary of Results Group turnover of £75.5m represented a 13% increase on the prior year (2002: £66.8m). This growth came primarily from Torrent Trackside, and from Groundforce, which benefited from a full year contribution from an acquisition made in the prior year. Operating profits increased by 17% to £8.1m (2002: £6.9m), with further improvement in operating margins to 10.7% (2002: 10.3%). The individual business units within the group have now reached a stage of development where we believe it is appropriate to present full segmental analysis for the first time, as reported in note 2 to the financial statements. Shareholders’ Return The key financial measures for the Board are the return on the capital employed in the business and the earnings generated per share. The group reported further progress on both measures in the year. Return on capital employed is defined as profit before interest expressed as a percentage of the total of net assets and net debt. Return on capital employed for the year was 14.4% (2002: 12.1%) Earnings per share increased from 10.23 pence to 12.36 pence based on the weighted average number of shares in issue in the year of 43,600,602. Earnings per share pre – goodwill amortisation increased from 10.87 pence to 13.08 pence. The Board is recommending a final dividend of 3.0 pence per share making a total for the year of 4.50 pence (2002: 4.20 pence). The dividend distribution of £2.0m is covered 2.7 times by profits. assets was a significant cash contributor at £9.0m (2002: £8.3m), which included the disposal proceeds from the sale of the onshore Airpac assets. The net cash outflow on capital expenditure was £6.3m (2002: £5.2m). The net cost of acquisitions during the year was £1.5m (2002: £3.4m). Acquisitions and Disposals The Group acquired three businesses during the year. Safeforce acquired the entire issued share capital of Stopper Specialists Ltd and the business and assets of Laser & Survey. Hire Station made a small bolt-on acquisition of the business and assets of Plymouth Tool Hire. Airpac Oilfield Services disposed of the assets of its non-core, onshore business for £1.8m. Net Debt and Interest In spite of significant investment in capital equipment in the year, net debt reduced further to £6.1m (2002: £10.6m), with gearing , the ratio of net debt to net assets, reduced to 12% (2002: 23%). The reduced interest charge of £0.6m (2002 :£0.7m) reflected the fall in net debt in the year. The funding requirement to support the capital investment and acquisitions in the period was entirely provided from the organic cash flow of the Group. Bank debt funding decreased from £7.3m to £4.9m during the year. Bank debt consists of a £8.0m medium term floating rate loan, a £0.3m medium term loan repayable over 5 years, less cash at bank. In addition, the Group has an overdraft facility on a floating rate basis. Net debt also includes loan notes totalling £0.8m issued in relation to £0.1m of the loan notes are guaranteed and the acquisitions. remainder are unguaranteed. The net asset value per share at 31 March 2003 is 108 pence compared with 101 pence in the prior year. The balance of the net debt of £0.4m (2002: £1.3m) related to fixed rate finance lease and hire purchase agreements. Cash Flow The Group continued to generate strong net cash inflows from operating activities totalling £16.6m (2002: £15.1m). Gross capital expenditure in the period was £15.3m (2002: £13.5m). Disposal of fixed In October 2001 the Company entered into an interest rate swap agreement which fixes the interest rate on £4.0m of the floating rate debt for a period of five years, with a bank only break option after three years. 1 0 financial review Treasury The Group’s financial instruments comprise bank borrowings, liquid cash resources and various items such as trade debtors, trade creditors, etc, that have arisen directly from its operations. The main purpose of these financial instruments is to raise finance for the Group’s operations. The main risks arising from the Group’s financial instruments relate to interest rates and liquidity. The Board regularly reviews the interest rate and liquidity position of the Group. The Group finances its operations by a mixture of retained profits, bank borrowings, finance lease and hire purchase. The Group has no foreign currency borrowings and no material foreign currency deposits . At the year end 71% of Group debt was at fixed interest rates (finance lease, hire purchase and bank loan) and 29% on floating interest rates (overdraft, bank loans and loan notes). The fixed interest rate element of the bank loans relates to the interest rate swap noted above. The Group had short term cash deposits at 31 March 2003. It is the Board’s policy to continually review the interest rate risk position and the Group will continue to underpin a significant element of its debt going forward by way of fixed interest rate instruments. Further liquidity is achieved from the finance lease and hire purchase facilities, which have terms of up to 5 years. Short term flexibility for running the Group is achieved via the overdraft facilities. The Group net interest charge was £0.6m (2002: £0.7m) after interest on finance leases of £0.1m (2002: £0.2m). Interest cover increased to 13.92 (2002: 9.49) at the year end. The numeric disclosures required by FRS13 are set out in notes 16 and 17. As permitted by FRS13 short-term debtors and creditors have been excluded from such disclosure. Shareholders’ Funds Group shareholders’ funds at the year end totalled £49.9m (2002: £46.5m). Shareholders’ funds include capitalised goodwill totalling £5.8m (2002: £5.4m), which is being amortised over its estimated useful life of 20 years. The goodwill relating to acquisitions made during the year totalled £0.7m. Accounting Policies There have been no changes to accounting policies in the year. The enhanced transitional disclosures on pension schemes as required by FRS17 are reported in note 26 to the financial statements. Taxation The Group taxation charge of £2.1m (2002: £1.7m) represents an effective tax rate of 28% (2002: 27%) on the profit before tax for the year. The low effective rate has arisen primarily due to the impact of writing back over provisions for the corporation tax in prior years and a detailed reconciliation of the factors affecting the tax charge is shown in note 7 to the financial statements. Neil Stothard Group Finance Director 1 1 directors’ report The Directors of Vp plc present their annual report and the audited financial statements for the year ended 31 March 2003. Principal activities and business review The principal activity of the Group is equipment rental and associated services conducted mainly in the United Kingdom. company and had previously been Chairman and Chief Executive of Raine plc. He is Chairman of the Remuneration Committee and a member of the Audit Committee. A review of the development of the business and the current trading position is provided in the Chairman’s Statement, the Business Review and the Financial Review. Dividend The Directors propose a final dividend of 3.0 pence (2002: 2.80 pence) per share. Subject to approval at the Annual General Meeting, shareholders will receive a total dividend for the year of 4.50 pence (2002: 4.20 pence) per share, a total charge of £1,964,000 (2002: £1,837,000) net of waived dividends. The final dividend will be paid to shareholders on the register of members of the Company on 5 September 2003 and it is proposed that dividend warrants be posted on 1 October 2003. Directors The Directors who held office during the year were as follows: Jeremy F G Pilkington (52) has been Chairman and Chief Executive since 1981. He was a member of the Audit and Remuneration Committees in 2002/2003 but with effect from the new financial year stood down from these committees, in line with recommended best practice. Neil A Stothard (45) joined the Group as Group Finance Director in 1997. He was previously Group Finance Director of Gray Dawes Group Limited, a business travel management company and prior to that, Divisional Finance Director of TDG plc. Barrie Cottingham (69) was appointed a non-executive Director in 1996. Until his retirement in 1995 he was a senior partner at Coopers & Lybrand. Currently, he is non-executive Chairman of SIG plc and Cattles plc, and a non-executive Director of Dew Pitchmastic plc. He is Chairman of the Audit Committee and a member of the Remuneration Committee. Peter W Parkin (57) was appointed a non-executive Director in 2000. He is Chairman of Wheeldon Brothers Limited, a private house building 1 2 Barrie Cottingham retires by rotation and being eligible, offers himself for re-election. He does not have a service contract with the Company. Directors’ interests The interest of each Director in the shares of Group companies are shown in the Remuneration Report on pages 15 and 16. Share schemes The Group operates a SAYE share option scheme, an Approved Share Option Scheme, an Unapproved Share Option Scheme and a Long Term Incentive Plan, all of which have been approved at an Annual General Meeting. Under the terms of the SAYE scheme invitations are made to all eligible employees and options are granted at up to 20% less than the mid market price just before invitation. At 31 March 2003 214 employees were participating in the scheme. The approved and unapproved share option schemes are available to executive Directors and employees of the Group. Options are granted under the scheme by the Remuneration Committee and entitle the holders to acquire shares at a pre-determined price, which cannot be less than the higher of the mid market price at the dealing day immediately before the date of the award and the nominal value of the shares. The awards are conditional upon the achievement of targets relating to earnings per share growth and return on capital employed. There is no consideration for the award of these options. Awards under the Long Term Incentive Plan are made to certain executives in accordance with conditions set out by the Remuneration Committee. The Long Term Incentive Plan provides reward for performance measured over a three year period commencing on the first day of the financial year in which the awards are granted. The awards are exercisable after three years if the Group achieves certain performance criteria set by the Remuneration Committee. The awards are conditional upon the achievement of targets relating to earnings per share growth, return on capital employed and share price performance. directors’ report Substantial shareholders As at 9 June 2003 the following had notified the Company of an interest of 3% or more in the Company’s issued ordinary share capital. Number of Ordinary Shares Percentage of Issued Ordinary Shares % Ackers P Investment Company JP Morgan Fleming Asset Management (UK) Limited Acorn Income Fund Limited Vibroplant Employee Trust Britel Fund Trustees Limited 23,684,876 6,249,567 3,497,296 2,489,962 1,878,336 51.28 13.53 7.57 5.39 4.07 A resolution is also proposed to enable the Directors to continue to use their existing powers to purchase the company’s own shares, subject to certain specific limits. Any purchase of the Company’s own shares will be in line with the current guidelines issued by the Investment Committees of the Association of British Insurers and the National Association of Pension Funds. The Board does not have any present intention of exercising such powers. The maximum and minimum prices that may be paid for an Ordinary Share in exercise of such powers are set out at Resolution 8(b) and 8(c) of the notice of meeting on page 40. The Board undertakes to shareholders that it will not exercise the ability to purchase its own shares unless to do so would result in an increase in earnings per share and is in the best interest of shareholders generally. In addition, your Board is also proposing a resolution that the Company adopts a new share scheme. Included with this Report and Financial Statements is a circular setting out the reasons why your Board is proposing such a resolution and a summary of the proposed scheme. Mr. Pilkington is a Director of Ackers P Investment Company which is the holding company of Vp plc. CORPORATE GOVERNANCE Employees The Directors are committed to maintaining effective communication with employees on matters which affect their occupations and future prospects while at the same time increasing their awareness of the Group’s overall activities and performance. The Combined Code The Board supports the need for the highest standards of corporate governance. Throughout the year the Group has complied with the provisions set out in Section 1 of the Combined Code (the “Code”) with the following exceptions: It is the policy of the Group to employ and train disabled people whenever their skills and qualifications allow and suitable vacancies are available. If existing employees become disabled, every effort is made to find them appropriate work and training is provided if necessary. Political and charitable contributions The Group made no political contributions during the year. Donations to charities amounted to £22,096. Supplier payment policy It is the Company’s policy to make payment to suppliers on our standard supplier terms unless alternative terms are agreed. The Company seeks to abide by these payment terms whenever it is satisfied that the supplier has provided the goods or services in accordance with the agreed terms and conditions. The number of days purchases outstanding at 31 March 2003 was 67 days (2002: 66 days). This figure fluctuates dependent on the creditor position for capital purchases at the year end. Annual General Meeting Resolutions will be proposed as special business to enable the Directors to continue to use their existing powers to allot unissued shares and (subject to the limits therein contained) to allot shares for cash other than to existing shareholders in proportion to their shareholding. The resolution enabling Directors to continue to allot unissued shares will be limited to the allotment of shares up to a maximum nominal amount of £690,750 which represents 29.9% of the total ordinary share capital in issue at 9 June 2003. The Board does not have any present intention of exercising such authority. The authority will expire on the date of the next Annual General Meeting after the passing of the proprosed resolution. The resolution enabling the Directors to allot shares for cash other than to existing shareholders in proportion to their shareholdings will be limited to the allotment of shares up to a maximum nominal amount of £115,000 which represents 5% of the total ordinary share capital in issue at 9 June 2003. These resolutions seek to renew the authorities approved at last year’s Annual General Meeting and comply with the current guidelines issued by the Investment Committees of the Association of British Insurers and the National Association of Pension Funds. 1 3 ■ The roles of Chairman and Chief Executive are combined (Code provision A.2.1) ■ Under the Articles of Association Mr Pilkington is not required to stand for re-election (Code provision A.6.2). ■ During the year ended 31 March 2003 both the remuneration and audit committees included an executive Director. However, with effect from 1 April 2003 the executive Director stood down from those committees (Code provision B.2.2 and D.3.1) ■ Director’s remuneration does not comply with certain aspects of Schedule A. These are detailed in the Remuneration Report (Code provision B.1.6). The reasons for these exceptions and how the Group has applied the principles in Section 1 of the Code are set out below under the four main headings of the Code. Directors The Board consists of two executive and two independent non-executive Directors. The non-executive Directors have wide ranging experience from other publicly quoted companies and bring an authoritative objectivity to the Board. Mr Pilkington serves as Chairman and Chief Executive. It is considered that the relatively small size of the Group makes it unnecessary and unduly expensive to split these roles. Under the Company’s Articles of Association Mr Pilkington is not required to stand for re-election. The Board has considered this long standing article and does not consider it necessary to amend it. The senior non-executive Director is Barrie Cottingham. The non- executive Directors have letters of engagements with the Company which, subject to re-election, have a fixed initial term of one or two years and are renewable for two further periods of two or three years, or more if regarded in the best interest of the Company. The Board meets at least six times a year and has adopted a schedule of matters reserved for its approval to ensure that it has full and effective control over appropriate financial, strategic and compliance matters. The Board is provided with all appropriate papers for each Board meeting, including the latest available management accounts. All Directors have access to the advice and services of the Company Secretary and can seek independent legal advice as appropriate. directors’ report There are also two committees of the Board: the Remuneration and Audit Committees. Each committee has specific terms of reference set by the Board. The members of these committees during the year ended 31 March 2003 were as follows : Remuneration Committee P W Parkin - Chairman of the Committee B Cottingham J F G Pilkington Audit Committee B Cottingham - Chairman of the Committee P W Parkin J F G Pilkington Both committees had a majority of non-executive Directors, the inclusion of Mr Pilkington, an executive Director, was considered appropriate due to the small size of the Group and of the Board. However, with effect from 1 April 2003 Mr Pilkington stood down from these committees. In addition the Company does not have a Nomination Committee due to the small size of the Group. The Remuneration Committee meets formally once a year and the Audit Committee twice a year. Both Committees meet additionally as required. Directors’ Remuneration Details of the remuneration of each Director are provided in the Remuneration Report on pages 15 and 16. The Remuneration Report also provides full details of the Group’s remuneration policy. Relations with Shareholders The Board has always sought to maintain good relationships with its shareholders. It therefore understands the importance of giving both private and institutional shareholders the opportunity to raise concerns and discuss matters with the Directors. To this end meetings are held, as appropriate, with institutional investors and, at the Annual General Meeting, which all Directors attend, Shareholders are given the opportunity to ask the Board any questions they wish regarding the Group. Accountability and Audit The Board recognises the importance of strong internal controls and through the group internal audit function,group reporting procedures and subsidiary board meetings maintains a constant review of the operation of these controls. As noted above, the Company has an Audit Committee which liaises directly with the external auditors. The members of the committee meet independently with the external auditors as required. The Code introduced a requirement that Directors’ should review the effectiveness of the Group’s internal controls and report to shareholders that they have done so. The review should cover all controls including financial, operational and compliance controls and risk management. In this regard the Board has considered the guidance of the Turnbull Committee, “Internal Control: Guidance to Directors on the Combined Code”, and considers that there is in place an ongoing process to identify, evaluate and manage the Group’s key risks in accordance with this guidance.This process has been in place for the year ended 31 March 2003 and up to the date of approval of these accounts. Further details are provided below in the section on Internal Control. 1 4 Internal Control The Board is responsible for the Group’s system of internal controls. The system of internal control is designed to facilitate effective and efficient operation of the business by ensuring it responds to any significant business, operational, financial, compliance and other risks it faces in achieving its objective. It is also designed to provide reasonable assurance that the financial information within the business and for publication is timely, relevant and reliable. However, any system of internal control is designed to manage rather than eliminate the risk of failure to achieve business objectives and can only provide reasonable and not absolute assurance against material misstatement or loss. During the year the Board, in conjunction with its Audit Committee, reviewed the operation of the system of internal control. This review includes an annual assessment of the control environment of the Group as a whole, the identification of key business and financial risks and the evaluation of the effectiveness of the control procedures in place. This annual assessment is undertaken by the Group Internal Audit function in association with the operating companies and a report is presented to the Board which highlights the key risks identified in the process. As part of the ongoing process regular reports are then presented to the Board on the key risks, including any new risks identified since the previous report. These reports update the Board with the changes to the level of risk in these key areas. In addition, through the Audit Committee and Group Internal Audit, the Board monitors the ongoing compliance with control systems as well as their improvement or modification as appropriate. Key elements of the control and review procedures employed by the Board are the annual strategic planning and budget preparation process which includes consideration of business, operational and other risks, together with approval of all material capital expenditure and contracts. Monthly financial and management accounts are reported against budget and prior year, and variances are investigated. In addition business, operational and other risks are regular agenda items at all Board meetings throughout the Group. During the year the Group made three acquisitions. All were subject to a detailed due diligence review. Furthermore, once a new business is acquired, the Group takes appropriate steps to extend its internal controls to that company’s operations. Going Concern As at 31 March 2003 the Group has net debt including finance leases of £6.1m. Further details of the net debt and the Group’s finance facilities are provided in the Financial Review on pages 10 and 11. After making enquiries, the Directors have reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason the going concern basis has been adopted in the preparation of the accounts. Auditors A resolution is to be proposed at the Annual General Meeting for the re- appointment of KPMG Audit Plc as auditors of the Company. By Order of the Board. Neil Stothard Secretary 9 June 2003 remuneration report This report has been prepared and approved by the Board of Vp plc and complies with the UK Directors’Remuneration Report Regulations 2002.The sections on Directors’ remuneration, pensions, share options and the long term incentive plan have been audited. Benefits in kind For each executive Director these comprise a contribution to a pension scheme, a car allowance, private health insurance and permanent health insurance. REMUNERATION POLICY Overview In framing its remuneration policy, the Board has complied with Section 1 of the Combined Code. The primary role of the Remuneration Committee is to determine, on behalf of the Board, the remuneration of the executive Directors. In this regard the Committee takes into consideration the interests of the Group and its shareholders as a whole. The membership of this committee is set out in the Directors’ Report on page 14. The policy currently applied and to be applied in future years in setting remuneration is described below. The Group seeks to recruit, retain and motivate executives of the highest calibre, taking into account levels of remuneration in companies of comparable size and industry orientation. The remuneration package consists of a number of elements: basic salary, annual performance related bonus, share options, long term incentive plan, contributions to a pension scheme and benefits in kind. In determining the performance related incentive plans the Committee is mindful of the balance between performance and non performance related remuneration. The remuneration of the non-executive Directors is set by the full board with each Director abstaining from voting in relation to his own remuneration. In relation to service contracts it is the Committee's policy that no executive Director should have a contract with a notice period of greater than twelve months. Annual performance related bonus The executive Directors are entitled to an annual bonus based primarily on achievement of profit targets relating to the Group’s performance. The maximum bonus payable is capped at 50% of the executive Director’s basic salary for both executive Directors. The actual bonuses accrued for 2002/3 are set out in the table below. Long term incentive plan and share options The executive Directors also benefit from participation in various share option schemes and a Long Term Incentive Plan. The Approved Share Option scheme and the Long Term Incentive Plan are subject to three year performance targets as set out under Directors' interests on page 16. Options held under the SAYE scheme, which is available to all employees, are not subject to any performance targets. Details of the share options held and entitlements under the Long Term Incentive Plan at the year end are set out in the tables on page 16. 1 5 TOTAL SHAREHOLDER RETURN The following graph charts the total cumulative shareholder return of the Group for the 5 years to the 31 March 2003 as compared to the Small Cap index, which is regarded as an appropriate benchmark for the Group’s shareholders. 180.0 160.0 140.0 120.0 100.0 80.0 60.0 40.0 20.0 0.0 Vp plc Small Cap Mar 98 Mar 99 Mar 00 Mar 01 Mar 02 Mar 03 SERVICE CONTRACTS Mr Pilkington and Mr Stothard have service contracts terminable on twelve months notice, both are dated 10 June 2002. Non-executive Directors do not have service contracts, however they do have letters of engagement terminable on 3 months notice, based on an initial period of one to two years renewable for a maximum of two further periods of either two or three years. The dates of these letters are 1 March 1996 for Mr Cottingham and 18 November 1999 for Mr Parkin. DIRECTORS’ REMUNERATION The following table breaks down the remuneration of Directors for the year ended 31 March 2003. J F G Pilkington N A Stothard B Cottingham P W Parkin Salary/Fees £000 195 120 22 22 Bonus Benefits £000 £000 21 39 14 24 - - - - 359 63 35 Total £000 255 158 22 22 457 2002 £000 237 147 22 22 428 remuneration report PENSIONS Mr Pilkington is a member of the Vp Pension Scheme. Under the scheme, a Directors’ category, which is non-contributory, permits individualised arrangements to be incorporated. These arrangements currently provide for an annual pension entitlement accrual of one thirtieth of final pensionable salary, up to a maximum of two thirds, which includes annual bonuses but not long-term incentive plans. Annual bonuses are included within pensionable salary in accordance with the Scheme rules. The Remuneration Committee is mindful of Schedule A of Part 2 of Section 1 of the Combined Code relating to pension contributions. Whilst current arrangements form part of existing employment contracts, this is an area that will be kept under careful review. The provisions of the Code will, subject to legal obligations, be reflected in any future arrangements. The details of his benefits are as follows: Accrued benefit at 31 March 2003 Increase in accrued benefit £ £ Increase in accrued benefits allowing for inflation £ Transfer value of increase in accrued benefit £ Transfer value of accrued benefits at 1 April 2002 £ Transfer value of accrued benefits at 31 March 2003 £ Increase in transfer value £ 99,006 J F G Pilkington In addition, Mr Pilkington benefits from a long-standing contractual entitlement to retire at any time after the age of 50 without actuarial reduction of pension. The present value cost to the Group of augmenting the fund to facilitate this entitlement is estimated at £993,000. However, Mr Pilkington has indicated to the Group in writing that he has no present intention of retiring before the age of 55 at the earliest. The present value cost of augmentation on the latter basis is estimated at approximately £833,000. This sum is being provided for over the relevant period. 807,000 915,000 121,000 108,000 14,503 13,066 During the year the Company made contributions of £12,000 (2002: £10,500) to Mr Stothard’s personal pension plan. DIRECTORS’ INTERESTS Shareholdings The beneficial interests of Directors serving at the end of the year and their families, in the ordinary share capital of the Company are set out below: J F G Pilkington B Cottingham P W Parkin N A Stothard 31 March 2003 8,122 35,000 67,500 39,272 1 April 2002 8,122 35,000 67,500 31,028 During the year Mr Pilkington was interested in 23,684,876 shares registered in the name of Ackers P Investment Company, a company controlled by him together with Trusts which are connected persons for the purposes of Section 346 of the Companies Act 1985. Share Options One Director, Mr Stothard, has share options and these are set out below: 1 April 2002 8,244 4,211 - Granted in year Exercised in year Lapsed in year - - 5,205 (8,244) - - - - - 31 March 2003 - 4,211 5,205 Exercise price Earliest exercise date Expiry date 47p 46p 73p 01/02/2003 01/09/2003 01/09/2005 01/08/2003 01/03/2004 01/03/2006 Scheme 1999 SAYE Scheme 2000 SAYE Scheme 2002 SAYE Scheme Approved Share Option Scheme 22/12/2009 During the year Mr Stothard exercised options over 8,244 shares (2002: 7,500 shares) under the SAYE Scheme. On the date of the exercise the market price of Vp plc shares was 93p. 23/12/2003 - (14,575) 35,425 50,000 57p - The options which lapsed during the year resulted from applying the performance criteria for the Approved Share Option Scheme awards granted on 23 December 1999. The performance criteria were based on achievement of a minimum 10% compounded growth in earnings per share over a three year period, and achievement of a return on capital employed of between 10% and 15% by the end of that period. Long-term Incentive Plan Ordinary shares outstanding under the terms of the Long-term Incentive Plan were: J F G Pilkington N A Stothard At 1 April 2002 125,000 265,000 Granted in year 100,000 100,000 Lapsed in year (54,150) (54,150) At 31 March 2003* 170,850* 310,850* * The shares outstanding in respect of Mr Pilkington are notional shares which would be satisfied by a cash payment. Awards relating to 70,850 shares in respect of each of the above Directors vested in the period, but have not been exercised. The entitlements which lapsed during the year resulted from applying the performance criteria for the provisional Long Term Incentive Plan awards made on 23 December 1999. The performance criteria for all Long Term Incentive Plan awards are based on achievement of a minimum 10% compounded growth in earnings per share over a three period, and achievement of a return on capital employed of between 10% and 16% plus a targetted share price of a minimum value equal to nett assets per share at the end of the period. The vesting of the outstanding awards at 31March 2003 is subject to the achievement of performance criteria over relevant three year periods up to the year ended 31 March 2006. Details of the market value of shares at the year end and the highest and lowest market values in the financial year are provided in note 21. The share price on the date of the awards made in the year was 96p. There were no changes in the interests of the Directors between 31 March 2003 and 9 June 2003. On behalf of the Board Neil Stothard Secretary 1 6 9 June 2003 statement of directors’ responsibilities The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Company and to enable them to ensure that the financial statements comply with the Companies Act 1985. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities. Company law requires the Directors to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the Company and Group and of the profit or loss for that period. In preparing those financial statements, the Directors are required to: select suitable accounting policies and then apply them consistently; ■ make judgements and estimates that are reasonable and prudent; state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; ■ prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company and the Group will continue in business. 1 7 ■ ■ auditors’ report Independent auditors’ report to the members of Vp plc We have audited the financial statements on pages 19 to 38. We have also audited the information in the directors’ remuneration report that is described as having been audited. This report is made solely to the company’s members, as a body, in accordance with section 235 of the Companies Act 1985. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of directors and auditors The directors are responsible for preparing the Annual Report and the directors’ remuneration report. As described on page 17 this includes responsibility for preparing the financial statements in accordance with applicable United Kingdom law and accounting standards. Our responsibilities, as independent auditors, are established in the United Kingdom by statute, the Auditing Practices Board, the Listing Rules of the Financial Services Authority, and by our profession’s ethical guidance. We report to you our opinion as to whether the financial statements give a true and fair view and whether the financial statements and the part of the directors’ remuneration report to be audited have been properly prepared in accordance with the Companies Act 1985. We also report to you if, in our opinion, the directors’ report is not consistent with the financial statements, if the company has not kept proper accounting records, if we have not received all the information and explanations we require for our audit, or if information specified by law regarding directors’ remuneration and transactions with the group is not disclosed. We review whether the statement on pages 13 and 14 reflects the company’s compliance with the seven provisions of the Combined Code specified for our review by the Listing Rules, and we report if it does not. We are not required to consider whether the board’s statements on internal control cover all risks and controls, or form an opinion on the effectiveness of the group’s corporate governance procedures or its risk and control procedures. 1 8 We read the other information contained in the Annual Report, including the corporate governance statement and the unaudited part of the directors’ remuneration report, and consider whether it is consistent with the audited financial statements. We consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the financial statements. Basis of audit opinion We conducted our audit in accordance with Auditing Standards issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements and the part of the directors’ remuneration report to be audited. It also includes an assessment of the significant estimates and judgements made by the directors in the preparation of the financial statements, and of whether the accounting policies are appropriate to the group’s circumstances, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements and the part of the directors’remuneration report to be audited are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements and the part of the directors’ remuneration report to be audited. Opinion In our opinion: the financial statements give a true and fair view of the state of affairs of the company and the group as at 31 March 2003 and of the profit of the group for the year then ended; and the financial statements and the part of the directors’ remuneration report to be audited have been properly prepared in accordance with the Companies Act 1985. KPMG Audit Plc Chartered Accountants Registered Auditor Leeds 9 June 2003 ■ ■ consolidated profit and loss account for the year ended 31 March 2003 Turnover Cost of sales Gross profit Administrative expenses Operating profit before goodwill amortisation Goodwill amortisation Operating profit Net interest payable Profit on ordinary activities before taxation Taxation on profit on ordinary activities Profit for the financial year Dividends paid and proposed Retained profit for the financial year Earnings per 5p ordinary share Diluted earnings per 5p ordinary share Earnings per 5p ordinary share before goodwill amortisation Diluted earnings per 5p ordinary share before goodwill amortisation Dividend per 5p ordinary share Note 2 3 6 7 8 22 9 9 9 9 8 2003) £000) 75,546) (51,586) 23,960) (15,873) 8,405) (318) 8,087) (581) 7,506) (2,119) 5,387) (1,964) 3,423) 12.36p 12.13p 13.08p 12.85p 4.50p 2002) £000) ) 66,847) (43,898) 22,949) (16,050) 7,179) (280) 6,899) (727) 6,172) (1,664) 4,508) (1,837) 2,671) 10.23p 10.12p 10.87p 10.75p 4.20p The profit and loss account reflects all recognised gains and losses for current and prior year. All operations are continuing activities as defined by FRS 3. As a result of the integration of acquisitions into the existing businesses, including the transfer of assets between depots, it is not possible to disclose separately the effect of acquired businesses on the Group results for the year. A reconciliation of the movement in consolidated shareholders’ funds is provided in note 23. note of consolidated historical cost profits and losses Reported profit on ordinary activities before taxation Realisation of property revaluation gains from previous years Difference between historical cost depreciation charge and the actual depreciation charge for the year calculated on the revalued amount Historical cost profit on ordinary activities before taxation Historical cost profit for the year retained after taxation, minority interest and dividends 2003) £000) 7,506) 391) 7) 7,904) 3,821) 2002) £000) ) 6,172) 281) 9) 6,462) 2,961) 1 9 consolidated balance sheet at 31 March 2003 Note £000) £000) £000) £000) 2003 2002 Fixed assets Intangible assets - goodwill Tangible assets Investments - own shares Current assets Stocks Debtors Cash at bank and in hand 10 11 12 13 14 5,814) 49,689) 1,532) 2,180) 18,764) 3,330) 24,274) Creditors: amounts falling due within one year 15 (18,619) Net current assets Total assets less current liabilities Creditors: amounts falling due after more than one year Provisions for liabilities and charges Net assets Equity capital and reserves Called up share capital Share premium account Revaluation reserve Profit and loss account Equity shareholders' funds Equity minority interests 16 18 20 22 22 22 24 These financial statements were approved by the Board of Directors on 9 June 2003 and were signed on its behalf by: 5,388) 51,024) 1,521) 57,035) 57,933) 2,293) 16,792) 1,050) 20,135) (18,569) 5,655) 62,690) (8,365) (4,377) 49,948) 2,309) 16,192) 832) 30,588) 49,921) 27) 49,948) 1,566) 59,499) (8,704) (4,270) 46,525) 2,309) 16,192) 1,230) 26,767) 46,498) 27) 46,525) J F G Pilkington Chairman N A Stothard Director 2 0 parent company balance sheet at 31 March 2003 Note £000) £000) £000) £000) 2003 2002 Fixed assets Intangible assets – goodwill Tangible assets Investments Current assets Stocks Debtors Cash at bank and in hand 10 11 12 13 14 676) 30,057) 11,985) 669) 23,799) 1,657) 26,125) Creditors: amounts falling due within one year 15 (18,607) Net current assets/(liabilities) Total assets less current liabilities Creditors: amounts falling due after more than one year Provisions for liabilities and charges Net assets Equity capital and reserves Called up share capital Share premium account Revaluation reserve Profit and loss account Equity shareholders' funds 16 18 20 22 22 22 These financial statements were approved by the Board of Directors on 9 June 2003 and were signed on its behalf by: 661) 33,046) 15,826) 42,718) 49,533) 488) 18,080) 9) 18,577) (19,042) 7,518) 50,236) (8,221) (3,809) 38,206) 2,309) 16,192) 832) 18,873) 38,206) (465) 49,068) (8,287) (3,691) 37,090) 2,309) 16,192) 1,230) 17,359) 37,090) J F G Pilkington Chairman N A Stothard Director 2 1 consolidated cash flow statement for the year ended 31 March 2003 Net cash inflow from operating activities 30 16,644) 15,087) Note £000) £000) £000) £000) 2003 2002 Return on investments and servicing of finance Interest paid Interest received Interest element of finance lease rental payments Net cash outflow from returns on investments and servicing of finance Taxation UK corporation tax paid Capital expenditure and financial investment Purchase of tangible fixed assets Purchase and sale of investments Sale of tangible fixed assets Net cash outflow from capital expenditure and financial investment Acquisitions and disposals Purchase of subsidiaries and businesses (net of cash and overdraft purchased) 27 Equity dividends paid Cash inflow before financing Financing Medium-term loans Loan notes Capital element of finance lease rental payments Net cash outflow from financing Increase/(decrease) in cash in the year (564) 21) (73) (15,285) (25) 8,997) (133) (1,039) (893) (354) 22) (321) (13,460) (474) 8,273) 1,874) (1,112) (3,468) (616) (2,035) (6,313) (1,460) (1,875) 4,345) (2,065) 2,280) (653) (1,062) (5,661) (3,440) (1,785) 2,486) (2,706) (220) A reconciliation of the net cash flow to the movement in net debt is provided in note 28 and analysis of net debt in note 29. 2 2 notes (forming part of the financial statements) 1. ACCOUNTING POLICIES The following accounting policies have been applied consistently in dealing with items which are considered material in relation to the Group’s financial statements. Basis of preparation The financial statements have been prepared in accordance with applicable accounting standards under the historical cost accounting rules, modified to include the revaluation of certain freehold and long leasehold land and buildings. Details of a departure from the requirements of the Companies Act are set out below in the accounting policy on investments. Basis of consolidation The Group financial statements consolidate the financial statements of Vp plc and all its subsidiary undertakings. All subsidiary financial statements have year ends which are coterminous with those of the parent company. The results of subsidiary undertakings acquired or disposed of in the year are included in the consolidated profit and loss account from the date of acquisition or up to the date of disposal. In accordance with Section 230 (4) of the Companies Act 1985 Vp plc is exempt from the requirement to present its own profit and loss account. The amount of the profit for the financial year dealt with in the financial statements of Vp plc is disclosed in note 22 to these financial statements. Investment in own shares Investment in own shares is disclosed at cost less a provision for the charge, spread over time, to the Group of awarding the shares under the share option schemes, as defined in the Director’s Report, at a discount to purchase price. Investments In the Company’s financial statements, investments in subsidiary undertakings are stated at cost or net recoverable value. Dividends received and receivable are credited to the Company’s profit and loss account to the extent that they represent a realised profit for the Company. 2 3 During the year, as part of the reorganisation of the Hire Station operations, the trade and net assets of a number of subsidiary undertakings were transferred to another subsidiary company, Hire Station Limited, at their book value which was less than their fair value. The cost of the Company’s investment in those subsidiary undertakings reflected the underlying fair value of its assets and goodwill at the time of acquisition. As a result of this transfer, the value of the Company’s investment in those subsidiary undertakings fell below the amount at which they were stated in the Company’s accounting records. Schedule 4 to the Companies Act 1985 requires that the investments be written down accordingly and that the amount be charged as a loss in the Company’s profit and loss account. However, the directors consider that, as there has been no overall loss to the Company, it would fail to give a true and fair view to charge that diminution to the Company’s profit and loss account for the year and it should instead be re-allocated to the cost of investment in Hire Station Limited so as to recognise in the Company’s individual balance sheet the effective cost to the Company of all its subsidiary undertakings. The effect of this departure is to increase the holding Company’s profit for the financial year by £3,519,000 and to increase the value of investments in the holding Company’s balance sheet.The group accounts are not affected by this transfer. Goodwill Goodwill represents the excess of the fair value of the consideration given in respect of investments in subsidiary undertakings or businesses over the fair value of the separable net assets acquired. Goodwill relating to businesses acquired is capitalised as an intangible asset and amortised over its useful economic life of 20 years. Prior to 1 April 1998, goodwill arising on consolidation was written off to reserves in the year it arose. In accordance with the transitional provisions of FRS10 such goodwill remains eliminated against reserves. In the event that a subsidiary undertaking or business which gave rise to such goodwill is disposed of, the attributable goodwill will be charged to the profit and loss account as a component of the profit or loss on disposal. Tangible fixed assets The cost of fixed assets is their purchase cost together with any incidental costs of acquisition. In accordance with FRS 15, the Group has not adopted a policy of revaluation of Land and Buildings. However, it retains the current book values for properties which have previously been revalued. Land and buildings for own use are therefore included in the financial statements at historical cost, or at Directors’ valuation as at 31 March 1996. notes Depreciation Depreciation is provided by the Group to write off the cost or valuation of tangible assets using the following annual rates: Freehold buildings Leasehold land and buildings Rental equipment Motor vehicles Computers Fixtures, Fittings and other equipment 2% straight line Term of lease 10% - 50% straight line depending on asset type 25% straight line 33% straight line 10% - 20% straight line No depreciation is provided on freehold land. Foreign currencies Transactions in foreign currencies are recorded using the rate of exchange ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated using the rate of exchange ruling at the balance sheet date and the gains or losses on translation are included in the profit and loss account. Leases Where the Group enters into a lease which entails taking substantially all the risks and rewards of ownership of an asset, the lease is treated as a ‘finance lease’. The asset is recorded in the balance sheet as a tangible fixed asset and is depreciated over its estimated useful life or the term of the lease, whichever is shorter. Future instalments under such leases, net of finance charges, are included within creditors. Rentals payable are apportioned between the finance element, which is charged to the profit and loss account, and the capital element which reduces the outstanding obligation for future instalments. All other leases are accounted for as ‘operating leases’ and the rental is charged to the profit and loss account on a straight line basis over the life of the lease. Pensions The Group operates defined contribution and defined benefit pension schemes. The cost of pensions in respect of the defined contribution schemes is fixed in relation to the emoluments of the membership and is charged to the profit and loss account as incurred. The pension contributions to the defined benefit scheme are assessed by a qualified actuary and charged to the profit and loss account so as to spread the cost of pensions over the service lives of employees participating in the scheme. Stocks Stocks are stated at the lower of cost and net realisable value. Taxation Taxation is based on the profit or loss for the year and takes into account taxation deferred because of timing differences between the treatment of certain items for taxation and accounting purposes. Except where otherwise required by Financial Reporting Standards, full provision is to be made, without discounting for all timing differences which have arisen but not reversed at the balance sheet date. Turnover Turnover represents the amounts (excluding Value Added Tax) derived from the provision of goods and services to third party customers during the year. 2. SEGMENTAL INFORMATION Turnover Profit before Tax Net Assets 2003) £000) 10,629) 11,251) 2,396) 5,107) 34,849) 11,314) -) 75,546) -) 75,546) 2002) £000) 10,149) 8,598) 1,483) 5,400) 33,027) 8,190) -) 66,847) -) 66,847) 2003) £000) 1,331) 2,337) 543) 436) 622) 3,136) (318) 8,087) (581) 7,506) 2002) £000) 1,332) 1,100) 276) (99) 2,813) 1,757) (280) 6,899) (727) 6,172) 2003) £000) 11,296) 7,169) 821) 2,252) 18,232) 4,101) 12,224) 56,095) (6,147) 49,948) 2002) £000) 11,809) 6,798) 362) 5,151) 17,451) 2,711) 12,805) 57,087) (10,562) 46,525) UKForks Groundforce Safeforce Airpac Oilfield Services Hire Station Torrent Trackside Goodwill/ Group assets Interest/ net debt Total Group assets reflect unallocated Group properties. Vp shares held for share options and goodwill. The costs relate to the amortisation of goodwill. Turnover is mainly within the United Kingdom, but in the year did include £787,000 (2002: £118,000) of turnover in South East Asia by destination. Turnover by source outside the United Kingdom is not material. 2 4 notes 3. OPERATING PROFIT Operating profit is stated after charging : Auditors' remuneration (see analysis below) Depreciation and other amounts written off tangible fixed assets: Owned Leased Amortisation of goodwill Rent of land and buildings Hire of other assets After crediting : Profit on sale of tangible assets Analysis of auditors’ remuneration Audit - Group auditors - Other auditors Tax services (paid to Group auditors and their associates) 2003 £000 119 9,423 859 318 1,616 7,318 2002 £000 111 9,131 1,275 280 1,563 6,436 1,738 2,163 77 - 77 42 119 68 7 75 36 111 In addition £18,000 (2002: £38,000) was paid to the Group auditors and their associates which is included in the goodwill capitalised. The audit fee of the Company was £46,000 (2002 : £43,000). 4. STAFF NUMBERS AND COSTS The average number of persons employed by the Group (including Directors) during the year, analysed by category, was as follows: Number of employees Services Hire Station Torrent Trackside The aggregate payroll costs of these persons were as follows: Wages and salaries Social security costs Other pension costs (see note 26) 2003 326 571 116 1,013 2003 £000 20,183 1,778 634 22,595 2002 305 545 96 946 2002 £000 18,009 1,544 429 19,982 2 5 notes 5. REMUNERATION OF DIRECTORS Directors’ emoluments comprise the following: Fees Salaries and other emoluments Money purchase pension contributions 2003) £000) 22) 435) 457) 12) 469) 2002) £000) 22) 406) 428) 11) 439) The emoluments, including the estimated monetary value of benefits in kind, but excluding pension contributions, of the Chairman who was also the highest paid Director, were £255,402 (2002: £237,462). Details of Directors’ remuneration are given in the Remuneration Report on pages 15 and 16. During the year the Company disposed of a property to Wheeldon Brothers Limited. Peter Parkin is chairman and a shareholder of Wheeldon Brothers Limited. The transaction took place at an arms length valuation. There were no other material related party transactions. 6. NET INTEREST PAYABLE Interest payable: On bank loans and overdrafts Finance charges payable in respect of finance lease and hire purchase contracts Other Interest receivable: Bank and other interest receivable 7. TAXATION UK Corporation tax charge at 30% (2002: 30%) Adjustments relating to earlier years Total current taxation Deferred taxation Factors affecting the current tax charge for the year Profit on ordinary activities before tax Profit on ordinary activities multiplied by standard rate of corporation tax of 30% (2002: 30%) Effects of: Expenses not deductible for tax purposes Non-qualifying depreciation and amortisation of goodwill Profit on sale of non-qualifying assets Gains covered by exemption / losses Timing differences Adjustments to tax charge in respect of previous years Current tax charge for year 2 6 2003) £000) (495) (73) (34) (602) 21) (581) 2003) £000) 2,305) (285) 2,020) 99) 2,119) 2003) £000) 7,506) 2,252) 244) 190) (164) (168) (49) (285) 2,020) 2002) £000) (444) (182) (123) (749) 22) (727) 2002) £000) 2,079) (286) 1,793) (129) 1,664) 2002) £000) 6,172) 1,852) 136) 167) (131) -) 55) (286) 1,793) notes 8. DIVIDENDS Ordinary shares: Interim paid Final proposed 1.50p (2002: 1.40p) per share 3.00p (2002: 2.80p) per share 2003) £000) 654) 1,310) 1,964) 2002) £000) 615) 1,222) 1,837) This year’s dividend charge is after dividends were waived to the value of £114,000 (2002: £103,000) in relation to shares held by Vibroplant Employee Trust. These dividends will continue to be waived in the future. 9. EARNINGS PER SHARE The calculation of earnings and diluted earnings per 5 pence ordinary share is based on a profit of £5,387,000 (2002 : £4,508,000) and on 43,600,602 (2002 : 44,057,076) shares, being the weighted average number of shares in issue during the year. The diluted earnings per share is based on 44,400,067 (2002: 44,556,626) shares, the difference being due to the impact of share options on the calculation. The earnings per share before goodwill amortisation is based on a profit of £5,705,000 (2002 : £4,788,000) calculated as follows: Profit after tax Goodwill amortisation 10. INTANGIBLE FIXED ASSETS - GOODWILL 2003 2002 £000 5,387 318 5,705 Earnings per share 12.36p 0.72p 13.08p £000 4,508 280 4,788 Cost At beginning of year Acquisitions - see note 27 At end of year Amortisation At beginning of year Charge At end of year Net book value At 31 March 2003 At 31 March 2002 Group £000 6,008 744 6,752 620 318 938 5,814 5,388 Earnings per share 10.23p 0.64p 10.87p Company £000 673 43 716 12 28 40 676 661 In accordance with the accounting policy for goodwill set out on page 23 goodwill arising after 1 April 1998 has been capitalised and is being amortised over its estimated useful economic life of 20 years. Goodwill arising on consolidation prior to 1 April 1998 remains eliminated against reserves 2 7 notes 11. TANGIBLE FIXED ASSETS GROUP Cost or valuation At beginning of year Additions On acquisition Disposals At end of year Depreciation At beginning of year Charge for year On disposals At end of year Net book value At 31 March 2003 At 31 March 2002 COMPANY Cost or valuation At beginning of year Additions On acquisition Disposals At end of year Depreciation At beginning of year Charge for year On disposals At end of year Net book value At 31 March 2003 At 31 March 2002 Land and) Buildings) £000) Rental) Equipment) £000) Motor) Vehicles) £000) Other) Assets) £000) Total) £000) 10,305) 599) 43) (1,233) 9,714) 1,904) 423) (193) 2,134) 68,936) 14,064) 487) (15,390) 68,097) 29,511) 8,756) (9,493) 28,774) 2,828) 98) 41) (808) 2,159) 1,469) 512) (523) 1,458) 5,460) 848) 26) (332) 6,002) 3,621) 591) (295) 3,917) 87,529) 15,609) 597) (17,763) 85,972) 36,505) 10,282) (10,504) 36,283) 7,580) 39,323) 701) 2,085) 49,689) 8,401) 39,425) 1,359) 1,839) 51,024) Land and) Buildings) £000) Rental) Equipment) £000) Motor) Vehicles) £000) Other) Assets) £000) Total) £000) 627) 73) 22) (227) 495) 337) 74) (74) 337) 158) 290) 3,041) 200) 10) (1) 3,250) 2,272) 238) (1) 2,509) 55,011) 5,933) 402) (10,989) 50,357) 21,965) 4,305) (5,970) 20,300) 741) 30,057) 769) 33,046) 8,433) 158) 43) (1,071) 7,563) 1,564) 107) (124) 1,547) 42,910) 5,502) 327) (9,690) 39,049) 17,792) 3,886) (5,771) 15,907) 6,016) 23,142) 6,869) 25,118) 2 8 notes The net book value of land and buildings is analysed as follows: Freehold Long leasehold Short leasehold Group Company 2003 £000 5,695 202 1,683 7,580 2002) £000) 6,665) 204) 1,532) 8,401) 2003 £000 5,543 129 344 6,016 2002) £000) 6,406) 130) 333) 6,869) In accordance with Financial Reporting Standard 15, the Group has not adopted a policy of revaluation of Land and Buildings, however as permitted by the transitional arrangements in the Standard it retains the current book values for properties which have previously been revalued. Land and Buildings are therefore included in the Financial Statements at historical cost or Directors’ valuations from 31 March 1996 which were last reviewed at 31 March 1999. If the properties had not been included in these financial statements based on valuation they would have been stated at the following amounts: Historical cost of land and buildings Aggregate depreciation based on historical cost Historical cost net book value Group Company 2003) £000) 8,775) (2,027) 6,748) 2002) £000) 8,951) (1,780) 7,171) 2003) £000) 6,624) (1,440) 5,184) 2002) £000) 7,079) (1,440) 5,639) The cost or valuation of land and buildings for both the Group and the Company includes £5,364,000 (2002: £6,421,000) at valuation. Other tangible fixed assets are included at cost. The cost or valuation of land and buildings for the Group and the Company includes £2,474,000 (2002: £3,249,000) of freehold land not subject to depreciation. Included in the total net book value of fixed assets of the Group is £2,118,000 (2002: £4,087,000) in respect of assets held under finance leases and similar hire purchase contracts, Company £887,000 (2002: £2,537,000). Depreciation for the year on these Group assets was £859,000 (2002: £1,275,000) and £402,000 (2002: £708,000) for the Company. 2 9 notes 12. FIXED ASSET INVESTMENTS Fixed asset investments are as follows : Group Cost At beginning of year Purchases Disposals At end of year Provision At beginning of year Charge At end of year Net book value At 31 March 2003 At 31 March 2002 Company Cost At beginning of year Purchases Return of investment Disposals At end of year Provision At beginning of year Charge At end of year Net book value At 31 March 2003 At 31 March 2002 Own Shares) £000) 1,690) 185) (160) 1,715) 169) 14) 183) 1,532) 1,521) Total) £000) 17,682) 1,506) (3,087) (2,246) 13,855) 1,856) 14) 1,870) 11,985) 15,826) Subsidiaries) £000) 15,992) 1,321) (3,087) (2,086) 12,140) 1,687) -) 1,687) 10,453) 14,305) Own) Shares) £000) 1,690) 185) -) (160) 1,715) 169) 14) 183) 1,532) 1,521) The investment in own shares, in both the Group and Company, relates to the shares held for the SAYE scheme, Approved Share Option Scheme, Unapproved Share Option Scheme and the Long Term Incentive Plan. A further 210,000 shares were acquired during the year at prices between 81.5 pence and 90 pence. The total holding at 31 March 2003 was 2,522,010 shares at a market value of £2,143,709. The maximum number of shares held in the financial year was 2,622,774 and between the year end and 9 June 2003 a total of 32,048 shares were sold. The charge represents the cost, spread over the terms of the share schemes, as defined in the Directors’ Report, to the Group of awarding shares at a discount to purchase price. The Company’s principal subsidiary undertakings are: Country of Registration Or Incorporation Principal Activity Country of Principal Operation Class and Percentage of Shares held Torrent Trackside Limited England Tool Hire Hire Station Limited England Tool Hire UK UK Ordinary shares 100% Ordinary shares 100% Further subsidiaries have not been shown because they are either not material or are dormant. Their particulars will be included in the next annual return. The provision against subsidiaries is in relation to two dormant companies. 3 0 notes 13. STOCKS Raw materials and consumables Finished goods and goods for resale 14. DEBTORS Amounts falling due within one year Trade debtors Amounts owed by subsidiary undertakings Corporation tax recoverable Advance corporation tax recoverable Other debtors Prepayments and accrued income 15. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR Bank overdrafts (see note 17) Medium term bank loans (see note 17) Obligations under finance leases and hire purchase contracts (see note 16) Loan notes Trade creditors Amounts owed to subsidiary undertakings Corporation tax Other taxes and social security Other creditors Accruals and deferred income Deferred consideration Dividend proposed 2003 £000 665 1,515 2,180 2003 £000 17,092 - 239 16 204 1,213 18,764 2003 £000 - 150 348 835 9,629 - 1,392 2,026 84 2,794 50 1,311 18,619 Group Company 2002 £000 883 1,410 2,293 2003 £000 391 278 669 Group Company 2002 £000 15,675 - - 16 161 940 16,792 2003 £000 6,613 16,836 - 16 - 334 23,799 Group Company 2002 £000 - 150 1,101 1,779 9,290 - 1,099 1,313 95 2,520 - 1,222 18,569 2003 £000 - - 154 835 4,044 10,367 554 768 - 524 50 1,311 18,607 2002 £000 488 - 488 2002 £000 6,306 11,511 - 16 - 247 18,080 2002 £000 951 - 428 1,779 3,995 9,697 74 326 - 570 - 1,222 19,042 3 1 notes 16. CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR Medium term bank loans (see note 17) Loan notes Obligations under finance leases and hire purchase contracts (see below) Accruals and deferred income Group Company 2003 £000 8,104 - 40 221 8,365 2002 £000 8,237 165 180 122 8,704 2003 £000 8,000 - - 221 8,221 The maturity of obligations under finance leases and hire purchase contracts is as follows: Within one year In the second to fifth years Group Company 2003 £000 348 40 388 2002 £000 1,101 180 1,281 2003 £000 154 - 154 The Group’s finance lease and hire purchase liabilities are fixed rate instruments with interest rates ranging from 5% to 9%. There is no material difference between the book value and fair value of the Group’s finance lease and hire purchase liabilities. 17. BANK LOANS AND OVERDRAFTS Payable within one year or on demand Payable within 1-2 years Payable within 2-5 years Group Company 2003 £000 150 8,104 - 8,254 2002 £000 150 150 8,087 8,387 2003 £000 - 8,000 - 8,000 2002 £000 8,000 165 - 122 8,287 2002 £000 428 - 428 2002 £000 951 - 8,000 8,951 The Group’s bank accounts are subject to set off arrangements covered by cross guarantees and are presented accordingly. The bank loans and overdraft are secured by a fixed and floating charge over the assets of the Group and are at variable interest rates linked to current bank base rate and LIBOR. The unutilised bank facility available to the Group is £7,500,000. There is no material difference between the book value and fair value of the Group’s bank borrowings. Further details relating to the Group’s funding strategy are provided in the Financial Review on pages 10 and 11. In October 2001 the Group entered into an interest rate swap agreement which fixed the interest rate on £4,000,000 of the bank debt for a period of 5 years with a bank only break option after 3 years. 18. PROVISIONS FOR LIABILITIES AND CHARGES Deferred taxation Group At beginning of year Deferred tax included in purchase of subsidiary Charge for the year in the profit and loss account At end of year Company At beginning of year Deferred tax included in purchase of subsidiary Charge for the year in the profit and loss account At end of year 3 2 £000 4,270 8 99 4,377 3,691 8 110 3,809 notes 19. DEFERRED TAXATION The liability for deferred tax is analysed as follows: Accelerated capital allowances Short term timing differences 20. CALLED UP SHARE CAPITAL Authorised 60,000,000 Ordinary shares of 5 pence each Allotted, called up and fully paid 46,185,000 Ordinary shares of 5 pence each (2002: 46,185,000) 21. SHARE OPTION SCHEMES Group Company 2003) £000) 4,515) (138) 4,377) 2002) £000) 4,437) (167) 4,270) 2003) £000) 3,904) (95) 3,809) 2003 £000 3,000 2,309 2002) £000) 3,776) (85) 3,691) 2002) £000) 3,000) 2,309) SAYE Scheme During the year options over a further 558,448 shares were granted under the SAYE scheme at a price of 73 pence. The outstanding options at the year end were: Date of Grant December 1999 July 2000 August 2001 August 2002 Price per share 47p 46p 52p 73p Number of shares) 19,784) 194,305) 324,471) 488,188) 1,026,748) All the options are exercisable after 3 years. At 31 March 2003 there were 214 employees saving on average £75 per month in respect of options under the SAYE scheme. Approved Share Option Scheme Options over a further 430,000 shares were granted during the year at a price of 93 pence. The options outstanding at the year end were: Date of Grant December 1999 July 2000 July 2001 June 2002 Price per Share 57.0p 56.5p 65.0p 93.0p Number of shares) 148,785) 165,000) 300,000) 380,000) 993,785) These options are exercisable between the third and tenth anniversary of the grant. The awards are subject to achievement of performance measures over a three year period as shown in the Directors’ Report on page 12. Unapproved Share Option Scheme Options over 85,000 shares were granted during the year at a price of 93p. The options outstanding at the year end were:- Date of Grant August 2001 June 2002 Price per Share 71.5p 93.0p Number of shares) 20,000) 65,000) 85,000) These options are exercisable between the third and tenth anniversary of the grant. The awards are subject to achievement of performance measures over a three year period as shown in the Directors’ Report on page 12. 3 3 notes Long Term Incentive Plan Awards were made during the year in relation to a further 200,000 shares. Shares outstanding at the year end were: Date of Grant December 1999 July 2000 July 2001 June 2002 Number of shares 141,700 90,000 50,000 200,000 481,700 The vesting of the awards is subject to the achievement of performance measures over a three year period as shown in the Directors’ Report on page 12. All the awards under the above schemes will be made utilising shares owned by Vibroplant Employee Trust. The market value of the ordinary shares at 31 March 2003 was 85 pence (2002: 92 pence), the highest market value in the year to 31 March 2003 was 104.5 pence and the lowest 79.0 pence. 22. SHARE PREMIUM AND RESERVES Group At beginning of year Retained profit for year Realised on sale of revalued assets Depreciation of revalued assets At end of year Company At beginning of year Retained profit for year Realised on sale of revalued assets Depreciation on revalued assets At end of year Share Premium Account £000 16,192 - - - 16,192 16,192 - - - 16,192 Revaluation) Reserve) £000) 1,230) -) (391) (7) 832) 1,230) -) (391) (7) 832) Profit and Loss Account £000 26,767 3,423 391 7 30,588 17,359 1,116 391 7 18,873 The cumulative amount of goodwill resulting from acquisitions prior to 1 April 1998 which has been written off directly to reserves is £7,403,000 (2002: £7,403,000). This amount excludes goodwill attributable to subsidiary undertakings or businesses disposed of prior to the balance sheet date. The amount of the profit for the financial year dealt with in the accounts of the Company was £3,080,000 (2002 : £1,727,000). 23. RECONCILIATION OF MOVEMENT IN CONSOLIDATED SHAREHOLDERS’ FUNDS Profit for the financial year Dividends Goodwill written off Net increase in shareholders’ funds Opening shareholders’ funds Closing shareholders’ funds 24. EQUITY MINORITY INTERESTS At beginning and end of year 3 4 2003) £000) 5,387) (1,964) 3,423) -)) 3,423) 46,498) 49,921) 2003) £000) 27) 2002) £000) 4,508) (1,837) 2,671) (6) 2,665) 43,833) 46,498) 2002) £000) 27) Group notes 25. COMMITMENTS (i) Capital commitments at the end of the financial year for which no provision has been made are as follows: Contracted (ii) Annual commitments under non-cancellable operating leases are as follows: Group Operating leases which expire: Within one year In the second to fifth years inclusive Over five years Company Operating leases which expire: Within one year In the second to fifth years inclusive Over five years 26. PENSION SCHEMES Group Company 2003 £000 74 2002 £000 1,424 2003 £000 4 2003 2002 Land and buildings £000 Other £000 Land and buildings £000 107 713 954 1,774 24 - 240 264 313 3,349 - 3,662 69 2,479 - 2,548 12 417 1,089 1,518 - 41 287 328 2002 £000 1,303 Other £000 237 2,423 - 2,660 116 1,937 - 2,053 The Group and Company continues to account for pension costs in accordance with Statement of Standard Accounting Practice 24 ‘Accounting for Pension costs’. The Group operates defined contribution schemes and a defined benefit scheme providing benefits based on final pensionable earnings. The defined benefit scheme contains both defined benefit and defined contribution categories. The defined benefit scheme was closed to new entrants in 1996 and only has a limited number of participants. The assets of the schemes are held in separate trustee administered funds. Contributions to the defined benefit scheme are charged to the profit and loss account so as to spread the cost of the pensions over the employee’s working lives with the Company. The contributions are determined by a qualified actuary on the basis of triennial valuations. The latest actuarial assessment of the defined benefit scheme was made as at 6 April 2002 using the attained age method. The main assumptions adopted for pension cost purposes were that the long term investment return would be 6.5% per annum, that pensionable earnings would increase by 4% per annum and that post 6 April 1997 pensions in payment would increase by 3% per annum. At 6 April 2002 the market value of the assets of the Scheme was £5,704,000 which was sufficient to cover 90% of the benefits that had accrued to members, after allowing for expected future increases in earnings. The pensions charge for the year was £634,000 (2002: £429,000). This includes a £60,000 charge (2002: £67,000 credit) in respect of the amortisation of deficits of the defined benefit scheme that are recognised over 10 years, the average expected remaining service lifetime of employees. A provision of £221,000 (2002: £122,000) is included in creditors, this being the excess of accumulated pension costs over the amount funded. FRS 17 Transitional Disclosure Under FRS 17 ‘Retirement benefits’ the following transitional disclosures are required for the defined benefit category of the defined benefit scheme: The valuation was updated by the actuary on an FRS 17 basis as at 31 March 2003 and 31 March 2002. The major assumptions used by the actuary in this valuation were: Rate of increase in salaries Rate of increase in deferred pensions and pensions in payment which are subject to limited price indexation Discount rate applied to scheme liabilities Inflation assumption 2003 3.75% 2.75% 5.75% 2.75% 2002 4.00% 3.00% 6.00% 3.00% The assumptions used by the actuary are the best estimates chosen from a range of possible actuarial assumptions which, due to the timescale covered, may not necessarily be borne out in practice. 3 5 notes Scheme assets The fair value of the scheme’s assets, which are not intended to be realised in the short term and may be subject to significant change before they are realised, and the present value of the scheme’s liabilities, which are derived from cash flow projections over long periods and thus inherently uncertain, were: Long term rate% Long term rate% of return% Value at) 2003) £000) 2003% £000% of return% Value at) 2002) £000) 2002% £000% Equities Bonds Other – Property Present value of scheme liabilities Deficit in the scheme – Pension liability Related deferred tax asset Net pension liability 6.25% 5.00% 5.00% 7.00% 5.25% 5.25% 3,397) 784) 174) 4,355) (7,514) (3,159) 948) (2,211) The amount of this net pension liability would have a consequential effect on reserves. Movement in the deficit during the year Deficit in scheme at beginning of year Current service cost Contributions paid Other finance cost Actuarial loss Deficit in the scheme at end of year If FRS 17 had been fully adopted in these financial statements the pension costs for defined benefit schemes would have been: Analysis of other pension costs charged in arriving at operating profit Current service cost Analysis of amounts included in other finance costs Expected return on pension scheme assets Interest on pension scheme liabilities Analysis of amount recognised in statement of total recognised gains and losses Actual return less expected return on scheme assets Percentage of year end scheme assets Experience gains and losses arising on scheme liabilities Percentage of present value of year end scheme liabilities Changes in assumptions underlying the present value of scheme liabilities Percentage of present value of year end scheme liabilities Actuarial loss recognised in statement of total recognised gains and losses Percentage of present value of year end scheme liabilities 2003) £000) (1,636) 279 ) (1,169) (2,526) 3 6 4,397) 958) 282) 5,637) (6,165) (528) 158) (370) 2003) £000) (528) (76) 41) (70) (2,526) (3,159) 2003) £000) (76) (76) 2003) £000) 339) (409) (70) 2003 % (37.6) 3.7 (15.6) (33.6) notes 27. PURCHASE OF SUBSIDIARIES The Group acquired three businesses during the year. The details are as follows: Name of acquisition Plymouth Tool Hire Laser and Survey Stoppers Specialists Limited Date of acquisition 7 June 2002 9 October 2002 25 October 2002 Type of acquisition Business and Assets Business and Assets Company Acquired by Hire Station Limited Vp plc Vp plc None of these acquisitions was individually material in Group terms and therefore the details are provided in aggregate below: Fixed assets Stock Debtors Cash Creditors Deferred Tax Book and fair value of assets acquired Goodwill capitalised Cost of acquisitions Satisfied by Consideration paid in cash Acquisition costs Deferred consideration Reduction in loan notes relating to prior year acquisition Analysis of cash flow for acquisitions Consideration paid in cash Acquisition costs capitalised Cash included in acquisitions £000) 597) 20) 260) 250) (173) (8) 946) 744) 1,690) 1,640) 70) 50) (70) 1,690) 1,640) 70) (250) 1,460) As a result of the integration of the acquisitions into the business, including the transfer of assets between depots, it is not possible to disclose separately the trading performance of the acquisitions in the profit and loss account. 28. RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT Increase /(decrease) in cash in the year Cash outflow from movement in debt and lease finance Change in net debt resulting from cash flows New finance leases Loan notes cancelled Movement in net debt in the year Net debt at the start of the year Net debt at the end of the year 2003) £000) 2,280) 2,065) 4,345) -)) 70) 4,415) (10,562) (6,147) 2002) £000) (220) 2,706) 2,486) (273) 57) 2,270) (12,832) (10,562) 3 7 notes 29. ANALYSIS OF NET DEBT Cash at bank and in hand Medium term loans Loan notes Finance leases and hire purchase contracts As at) 1 April 2002) Cash Flow Other non-cash As at) changes 31 March 2003) £000) 1,050) (8,387) (1,944) (1,281) (10,562) £000 2,280 133 1,039 893 4,345 £000 - - 70 - 70 £000) 3,330) (8,254) (835) (388) (6,147) 2002) £000) 6,899) 10,406) 280) (2,163) 65) (1,889) 1,489) 15,087) 30. RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATING ACTIVITIES Operating profit Depreciation Amortisation of goodwill Profit on sale of tangible fixed assets Decrease in stocks Increase in debtors Increase in creditors Net cash inflow from operating activities 31. ULTIMATE PARENT COMPANY 2003 £000 8,087 10,282 318 (1,738) 133 (1,473) 1,035 16,644 The Company is a subsidiary undertaking of Ackers P Investment Company which is the ultimate parent Company registered in England. Consolidated accounts are not prepared for this Company. 3 8 five year summary Turnover 52,510) 55,002) 59,822) 66,847) 75,546) 1999) £000) 2000) £000) 2001) £000) 2002) £000) 2003) £000) Profit on ordinary activities before taxation Taxation 3,304) (690) 3,429) (1,503) 3,059) (827) 6,172) (1,664) 7,506) (2,119) Profit on ordinary activities after taxation 2,614) 1,926) 2,232) 4,508) 5,387) Dividends Share capital Reserves (1,859) (1,797) (1,768) (1,837) (1,964) 2,309) 40,642) 2,309) 40,760) 2,309) 41,524) 2,309) 44,189) 2,309) 47,612) Equity shareholders' funds 42,951) 43,069) 43,833) 46,498) 49,921) Share Statistics Asset value Earnings Dividend Times covered 93p 93p 95p 101p 108p 5.71p 4.26p 5.03p 10.23p 12.36p 4.05p 4.05p 4.05p 4.20p 4.50p 1.41) 1.05p 1.24p 2.44p 2.75) 3 9 notice of meeting Notice is hereby given that the thirty first Annual General Meeting of the Company will be held at Rudding House, Rudding Park, Follifoot, Harrogate on Tuesday 9 September 2003 at 10am for the following purposes: As ordinary business 1. To receive and adopt the Directors’ Report and Financial Statements for the year ended 31 March 2003 and the Auditors’ report contained therein. 2. To declare a Final Dividend. 3. To re-elect B Cottingham as a Director 4. To re-appoint KPMG Audit Plc as Auditors of the Company to hold office from the conclusion of this meeting until the conclusion of the next Annual General Meeting, at which the accounts are laid before the Company and to authorise the Directors to agree their remuneration. 5. To approve the Directors Remuneration Report comprised within the Directors Report and Accounts for the year ended 31 March 2003. As special business To consider and, if thought fit, pass the following resolutions of which Resolutions 6 and 7 will be proposed as Ordinary Resolutions and Resolutions 8 and 9 will be proposed as Special Resolutions: 6. That the Vp Share Matching Scheme (the "Scheme"), in the form of the rules of the Scheme tabled at the meeting and initialled by the Chairman for the purpose of identification, be and is approved and the Directors be and are authorised to adopt and carry the same into effect. 7. That for the purposes of Section 80 of the Companies Act 1985 (and so that expressions defined in that Section shall bear the same meanings as in this Resolution) the Directors be, and they are, generally authorised to allot relevant securities up to a maximum nominal amount of £690,750 to such persons at such times and on such terms as they think proper during the period expiring on the date of the next Annual General Meeting after the passing of this Resolution (or any adjournment thereof) save that the Company may before such expiry make an offer or agreement which would or might require relevant securities to be allotted after such expiry and the Board may allot relevant securities in pursuance of such offer or agreement as if the authority conferred hereby had not expired. b) to the allotment of equity securities pursuant to the terms of any share schemes for Directors and employees of the Company or any of its subsidiaries approved by the Company in General Meeting; and c) to the allotment otherwise than pursuant to subparagraphs (a) and (b) above of equity securities not exceeding in aggregate the nominal amount of £115,000. Provided further that the authority hereby granted shall expire at the conclusion of the next Annual General Meeting after the passing of this Resolution (or any adjournment thereof) save that the Directors shall be entitled to make at any time before the expiry of the power hereby conferred any offer or agreement which might require equity securities to be allotted after the expiry of such power. 9. That the Company is hereby generally and unconditionally authorised to make market purchases (within the meaning of Section 163 of the Act) of Ordinary shares of 5 pence each in the capital of the Company (“Ordinary shares”) provided that: a) the maximum number of Ordinary shares to be purchased is 4,618,500 being 10% of the issued share capital of the Company; b) the minimum price which can be paid for Ordinary shares is 5 pence per Ordinary share exclusive of expenses; c) the maximum price which may be paid for an ordinary share is the amount equal to 5% above the average of the middle market quotations derived from the Stock Exchange Daily Official List for the 5 business days immediately proceding the day of purchase, exclusive of expenses; d) the authority hereby conferred shall expire at the conclusion of the next Annual General Meeting of the Company unless such authority is renewed prior to such time; and e) the Company may make a contract to purchase Ordinary shares under the authority which will or may be executed wholly or partly after the expiry of such authority, and may make a purchase of Ordinary shares in pursuance of any such contract. 8. That the Directors be and they are hereby generally authorised to allot for cash or otherwise equity securities (as defined in Section 94 of the Companies Act 1985“the Act”) of the Company pursuant to the authority conferred by Resolution 6 above as if Section 89 of the Act did not apply to such allotment provided that this power shall be limited: By Order of the Board. N A Stothard Secretary 8 July 2003 a) to the allotment of equity securities in connection with a rights issue, open offer or otherwise in favour of Ordinary Shareholders where the equity securities respectively attributable to the interests of all such shareholders are proportionate (as nearly as may be practicable) to the respective numbers of Ordinary Shares held by them on the record date for such allotment but subject to such exclusions or other arrangements as the Directors may deem necessary or expedient in relation to fractional entitlements or legal or practical problems under the laws of, or the requirements of any recognised regulatory body or any Stock Exchanges in any territory; 4 0 Notes A member entitled to attend and vote is entitled to appoint a proxy to attend and on a poll, vote instead of him and that proxy need not also be a member. A form of proxy is enclosed for this purpose. It must be deposited at the offices of the Company’s registrars not less than 48 hours before the time fixed for the meeting. In accordance with Regulation 41 of the Uncertificated Securities Regulations 2001, only those members entered on the register of members of the Company as at the close of business 7 September 2003 shall be entitled to attend or vote at the meeting in respect of the number of shares registered in their name at that time. Changes to the register of members after close of business on 7 September 2003 shall be disregarded in determining the rights of any person to attend or vote at the meeting. annual general meeting form of proxy I/We (BLOCK LETTERS) of being a registered holder (s) of * Ordinary Shares in the capital of Vp plc hereby appoint the Chairman of the Meeting, or (note 2) as my/our Proxy to attend and on a poll (and in the case of a Corporation on show of hands and a poll) vote for me/us on my/our behalf at the Annual General Meeting of the Company to be held on Tuesday 9 September 2003 and at any adjournment thereof. I/we request the Proxy to vote on the following resolutions as indicated. Resolution For Against 1. 2. 3. 4. 5. 6. 7. 8. 9. To receive and adopt the Director’ Report and Financial Statements for the year ended 31 March 2003 and the Auditors’ Report contained therein To declare a final dividend To re-elect B Cottingham as a Director To re-appoint KPMG Audit plc as Auditors and to authorise the Directors to agree their remuneration To approve the Remuneration Report To approve and adopt the New Share Scheme To approve the authority to allot shares To approve the authority to disapply pre-emption rights To approve the authority to purchase own shares Signature Date Notes 1. 2. 3. 4. 5. * Please indicate how you wish your vote to be cast. If you do not indicate how you wish your proxy to use your vote on any particular matter the proxy will exercise his discretion both as to how he votes and as to whether or not he abstains from voting. If you prefer to appoint some other person or persons as your proxy, strike out the words “the Chairman of the Meeting”, and insert in the blank space the name or names preferred and initial the alternation. A proxy need not be a member of the Company. In the case of joint holders only one need sign as the vote of the senior holder who tenders a vote will alone be counted. If the member is a Corporation this form must be executed either under its common seal or under the hand of an officer or attorney duly authorised in writing. To be effective this Proxy must be completed, signed and must be lodged (together with any power of attorney or duly certified copy thereof under which this proxy is signed) at the offices of the Company’s Registrars at Capita Registrars, The Registry, Bourne House, 34 Beckenham Road Beckenham, Kent, BR3 4TU not less than 48 hours before the time appointed for the meeting. Insert the number of Ordinary Shares in respect of which the form of Proxy is given. If the number is not inserted, the form of Proxy will be taken to have been given in respect of all Ordinary Shares held. 4 1 THIRD FOLD AND TUCK IN BUSINESS REPLY SERVICE Licence No. MB 122 22 D L O F T S R I F Capita Registrars Proxy Department P.O. Box 25 Beckenham Kent BR3 4BR SECOND FOLD