IFRS Statement
Northgate PLC
21 December 2005
NORTHGATE PLC
ADOPTION OF INTERNATIONAL
FINANCIAL REPORTING
STANDARDS ('IFRS')
Preliminary restatement of financial information
as at 1 May 2004, for the year ended 30 April 2005
and for the six months ended 31 October 2004
1. Introduction and background to the adoption of IFRS
Background to the adoption of IFRS
The financial year ending 30 April 2006 will be the first year of mandatory
reporting under International Financial Reporting Standards ('IFRS') for
Northgate plc ('the Group' or 'the Company'). The Group will therefore be
required to prepare its consolidated financial statements for that period under
IFRS and will also present one year of comparative financial information for the
year ended 30 April 2005.
The date of transition to IFRS for the Group was 1 May 2004, being the first day
of the comparative period ('the transition date') and the Group is required to
prepare a balance sheet as at the transition date ('the transition balance
sheet') under IFRS.
This document sets out the preliminary restatement of financial information that
will constitute the comparative financial information, under IFRS, for the year
ended 30 April 2006, for the six months ended 31 October 2005 ('the IFRS
comparatives') and also for the transition balance sheet as at 1 May 2004.
Section 2 of this document sets out the restated financial information for the
Group under IFRS for the year ended 30 April 2005, including:
•Consolidated income statement for the year ended 30 April 2005;
•Consolidated statement of recognised income and expense for the year
ended 30 April 2005;
•Consolidated balance sheets as at 1 May 2004 and 30 April 2005;
•Consolidated cash flow statement for the year ended 30 April 2005;
•Reconciliation of UK GAAP consolidated income statement and balance
sheets to IFRS; and
•Details of the IFRS adjustments required.
Section 3 of this document sets out the restated financial information for the
Group under IFRS for the six months ended 31 October 2004, including:
•Consolidated income statement for the six months ended 31 October 2004;
•Consolidated statement of recognised income and expense for the six
months ended 31 October 2004;
•Consolidated balance sheet as at 31 October 2004;
•Consolidated cash flow statement for the six months ended 31 October
2004;
•Reconciliation of UK GAAP consolidated income statement and balance
sheets to IFRS; and
•Details of the IFRS adjustments required.
Section 4 of this document sets out the principal accounting policies of the
Group, as restated for IFRS, which are expected to be applied to the Group's
first set of financial statements required to be prepared under IFRS.
Basis of preparation
For the year ended 30 April 2006, the Company will prepare consolidated
financial statements under 'International Accounting Standards' as adopted by
the European Commission. These will be those International Accounting Standards
('IAS'), International Financial Reporting Standards ('IFRS') and related
Interpretations (SIC-IFRIC interpretations), subsequent amendments to those
standards and related interpretations, future standards and related
interpretations issued or adopted by the International Accounting Standards
Board ('IASB') that have been endorsed by the European Commission. This process
of transition to reporting under IFRS is ongoing and the Commission has yet to
endorse certain standards issued by the IASB. In particular the Commission:
•endorsed a version of IAS 39 Financial Instruments - Recognition and
Measurement that differed from that issued by the IASB in two respects (the
so-called 'carve-out'):
•The endorsed version of IAS 39 removes the option in the IASB version
to fair value certain financial liabilities; and
•The endorsed version of IAS 39 widens the range of circumstances in
which hedge accounting may be applied;
•has not given a final approval to IAS 39 amendments relating to the Fair
Value Option, however the Accounting Regulatory Committee (ARC) has
recommended endorsement.
The Directors have prepared the transition balance sheet and the IFRS
comparatives and accompanying reconciliations between UK GAAP and IFRS using
their best knowledge of the expected standards and interpretations of the IASB,
facts and circumstances, and accounting policies that will be applied when the
Company prepares its first complete set of IFRS financial statements as at 30
April 2006. Therefore, until such time, the possibility cannot be excluded that
the accompanying transition balance sheet and IFRS comparatives may require
adjustment before constituting the final opening balance sheet and IFRS
comparatives. Moreover, under IFRS, only a complete set of financial statements
comprising a balance sheet, income statement, statement of recognised income and
expense, statement of changes in equity, cash flow statement and principal
accounting policies, together with comparative financial information and
explanatory notes, can provide a fair presentation of the Company's financial
position, results of operations and cash flow.
Statement of Directors' responsibilities
The following statement, which should be read in conjunction with the auditors'
statement of auditors' responsibilities set out in their reports in Sections 2
and 3, is made with a view to distinguishing for shareholders the respective
responsibilities of the Directors and of the auditors in relation to the
preliminary restatement of financial information.
In preparing the preliminary restated financial information on the basis set out
above, the Directors have:
•selected appropriate accounting policies which are consistently applied;
•made judgements and estimates that are reasonable and prudent;
•made assumptions about the standards and interpretations expected to be
effective, and the accounting policies expected to be adopted, when they
prepare the Group's first set of IFRS financial statements for the year
ended 30 April 2006 and that all accounting standards they consider to be
applicable have been followed.
The Directors are responsible for ensuring that the Company keeps adequate
accounting records and for safeguarding the assets of the Group and hence for
taking reasonable steps for the prevention and detection of fraud and other
irregularities.
The preliminary restated financial information has been prepared on a going
concern basis as the Directors have a reasonable expectation that the Group has
adequate resources to continue in operational existence for the foreseeable
future.
Differences between UK GAAP and IFRS
All relevant accounting standards have been applied to the restated financial
information and the following accounting standards are those that have the most
significant impact on the Group.
IFRS 2 (Share-based Payment): An income statement charge is recognised in
respect of the cost of share options granted under the Group's various share
schemes. This cost is deemed to be the fair value of the options granted and is
charged over the vesting period. An amount equivalent to the charge is credited
directly to equity, resulting in no net impact on net assets. This accounting
treatment is the same as UK GAAP except that the fair values used under IFRS 2
differ from those under UK GAAP.
IFRS 3 (Business Combinations): Separate intangible assets are recognised at
fair value on the acquisition of businesses after the date of transition to
IFRS, which previously formed part of goodwill under UK GAAP. These include
non-contractual customer relationships, brand names and non-compete agreements,
all of which are amortised over their respective estimated useful lives. The
residual goodwill balance under IFRS is therefore lower in value than under UK
GAAP but it is no longer amortised and is, instead, tested annually for
impairment.
IFRS 5 (Non-current Assets Held for Sale and Discontinued Operations): Vehicles
held for resale are reclassified from inventories into non-current assets held
for sale under IFRS.
IAS 10 (Events After the Balance Sheet Date): Under IFRS, dividends are not
appropriated within the accounts until they are either paid or formally
approved.
IAS 12 (Income Taxes): Deferred taxation changes arise under IFRS as a result of
differences between the accounting treatment and taxation treatment in respect
of share options (IFRS 2), intangible assets (IFRS 3) and holiday pay accruals
(IAS 19). Under IAS 12, deferred tax liabilities are also recognised on all
capitalised buildings, regardless of whether a contractual commitment to sell
exists.
IAS 16 (Property, Plant and Equipment): Under IAS 16, the Group is required to
review its depreciation rates and estimated useful lives on an annual basis to
ensure that the net book value of disposals of tangible fixed assets are broadly
equivalent to their market value. Depreciation charges are adjusted for any
differences that arise between net book values and open market values of used
vehicles upon transfer into non-current assets held for sale, taking into
account the further direct costs to sell the vehicles.
IAS 18 (Revenue): Under IFRS, income from the sale of used vehicles is not
recognised within revenue and the net book value of vehicles sold is removed
from cost of sales.
IAS 19 (Employee Benefits): An accrual is recognised for employee annual leave
accrued, but not taken, at each balance sheet date. Where this applies to
business combinations, the accrual required at the date of acquisition is deemed
to reduce the fair value of the net assets acquired with a corresponding
adjustment to goodwill.
IAS 21 (The Effects of Changes in Foreign Exchange Rates): Certain exchange
differences, previously recognised directly within the profit and loss account
reserve under UK GAAP, are reclassified into a separate translation reserve,
directly within equity, under IFRS.
IAS 32 (Financial Instruments: Disclosure and Presentation): The Company's
cumulative preference shares are deemed to be debt rather than equity under
IFRS. They are reclassified from share capital to borrowings in the balance
sheet and preference dividends are reclassified from dividends to finance costs
in the income statement.
IAS 38 (Intangible Assets): Certain software assets are reclassified from
tangible to intangible assets under IFRS. Amounts previously charged to the
profit and loss account as depreciation under UK GAAP relating to these fixed
assets are reclassified as amortisation within the IFRS income statement.
Separate intangible assets are also recognised within business combinations (see
IFRS 3, above). These assets are amortised to the income statement over their
estimated useful lives.
IAS 39 (Financial Instruments: Recognition and Measurement): Interest rate
derivatives, to which the Group is party, are recognised on the balance sheet at
their fair value. Subsequent changes in the fair value are recognised either
within the income statement, as a finance cost, or directly in equity to the
extent that the Group elects to hedge account, within the provisions of IFRS. As
explained under IFRS 1 options below, this will impact on the Group from 1 May
2005 only.
IFRS 1 (First-time Adoption of IFRS) will be applied to the financial statements
for the year ended 30 April 2006 and the relevant comparative financial
information. The first-time adoption choices are as follows:
IFRS options Basis of election
Share based payments
There are two first-time adoption
exemptions for accounting for share
based payments:
• Share based payments granted on • Share options granted on or
or before 7 November 2002 and vested before 7 November 2002 and vested
before 1 May 2005 may be restated before 1 May 2005, have not been
but restatement is not mandatory; restated in accordance with IFRS
2.
• Share based payments granted on • IFRS has been applied to all
or before 7 November 2002 and not share options granted on or after 7
vested before 1 May 2005 may be November 2002 which had not vested
restated but restatement is not by 1 May 2005.
mandatory.
Business combinations and goodwill
The standard is mandatory for all The standard has been applied only to
acquisitions after the Company's business combinations taking place
transition date, 1 May 2004. after the Group's transition date of 1
May 2004.
However, the standard allows a Goodwill relating to acquisitions prior
first-time adopter to apply the standard to the transition date will be held at
to all business combinations that net book value on 1 May 2004, no longer
occurred before this date. amortised and subject to annual
impairment review (IAS 36)
Financial instruments
The standard is applicable from the The Group will not account
Company's transition date, 1 May 2004. retrospectively for financial
instruments, including derivatives.
However, the standard grants a first The restated results for the year to 30
year exemption from its application to April 2005 do not reflect the impact of
the comparative period but also allows IAS 32 and IAS 39 and the related
first-time adopters to retrospectively applicable financial instruments have
account for financial instruments in been accounted for under UK GAAP, with
line with the standard. the exception of preference shares.
Foreign exchange differences
IFRS requires certain translation The Group will deem cumulative exchange
differences to be recognised as a differences to be zero as at 1 May 2004
separate component of equity, rather and will not consider any cumulative
than within retained earnings, and to be exchange differences arising prior to 1
considered as part of the profit or loss May 2004 if the relevant foreign
on disposal of foreign operations in operations are disposed in the
future. future.
However, the standard allows first-time
adopters to deem the cumulative
translation differences to be zero at
the date of transition.
2. Restated financial information for the year ended 30 April 2005
Independent Auditors' Report to the Board of Directors of Northgate plc on the
non-statutory preliminary comparative IFRS financial information
We have audited the non-statutory preliminary comparative IFRS financial
information of Northgate plc for the year ended 30 April 2005 which comprises
the consolidated balance sheets as at 30 April 2005 and 1 May 2004, the
consolidated income statement, the consolidated statement of recognised income
and expense, the consolidated cash flow statement, the Notes to the consolidated
cash flow statement and the related Notes 1 to 14 within Section 2 of this
document.
This report is made solely to the Board of Directors, in accordance with our
engagement letter dated 5 December 2005 and solely for the purpose of assisting
with the transition to IFRS. Our audit work was undertaken so that we might
state to the Company's Board of Directors those matters we are required to state
to them in an auditors' report and for no other purpose. To the fullest extent
permitted by law, we will not accept or assume responsibility to anyone other
than the Company for our audit work, for our report, or for the opinions we have
formed.
Respective responsibilities of Directors and auditors
The Company's Directors are responsible for ensuring that the Company and the
Group maintains proper accounting records and for the preparation of the
preliminary comparative IFRS financial information on the basis set out in
Section 1 of this document, which describes how IFRS will be applied under IFRS
1, including the assumptions the Directors have made about the standards and
interpretations expected to be effective, and the policies expected to be
adopted, when the Company prepares its first complete set of IFRS financial
statements as at 30 April 2006. Our responsibility is to audit the preliminary
comparative financial information in accordance with relevant United Kingdom
legal and regulatory requirements and auditing standards and report to you our
opinion as to whether the preliminary comparative IFRS financial information is
prepared, in all material respects, on the basis set out in Section 1 of this
document.
Basis of audit opinion
We conducted our audit in accordance with United Kingdom 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 preliminary
comparative IFRS financial information. It also includes an assessment of the
significant estimates and judgements made by the Directors in the preparation of
the preliminary comparative IFRS financial information and of whether the
accounting policies are appropriate to the circumstances of the Group,
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 preliminary
comparative IFRS financial information is 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
preliminary comparative IFRS financial information.
Without qualifying our opinion, we draw attention to the fact that the basis of
preparation note in Section 1 of this document explains why there is a
possibility that the accompanying preliminary comparative IFRS financial
information may require adjustment before constituting the final comparative
IFRS financial information. Moreover, we draw attention to the fact that, under
IFRS, only a complete set of financial statements comprising a balance sheet,
income statement, statement of changes in equity, cash flow statement, together
with comparative financial information and explanatory notes, can provide a fair
presentation of the Company's financial position, results of operations and cash
flows in accordance with IFRS.
Opinion
In our opinion the preliminary comparative IFRS financial information is
prepared, in all material respects, on the basis set out in Section 1 of this
document which describes how IFRS will be applied under IFRS 1, including the
assumptions the Directors have made about the standards and interpretations
expected to be effective, and the policies expected to be adopted, when the
Company prepares its first complete set of IFRS financial statements as at 30
April 2006.
Deloitte & Touche LLP
Chartered Accountants and Registered Auditors
Leeds
20 December 2005
Consolidated Income Statement
for the year ended 30 April 2005
Restated for IFRS
£'000
Revenue 339,382
Cost of sales (215,097)
--------
Gross profit 124,285
Administrative expenses (47,193)
Amortisation (855)
--------
Profit from operations 76,237
Investment income 1,814
Finance costs (23,063)
--------
Profit before taxation 54,988
Taxation (15,757)
--------
Profit attributable to equity holders 39,231
Dividends (11,916)
--------
Retained profit 27,315
========
Consolidated Statement of Recognised Income and Expense
for the year ended 30 April 2005
Restated for IFRS
£'000
Gains on revaluation of land and properties 1,031
Foreign exchange differences on long term borrowings 1,635
Exchange differences on translation of foreign operations (153)
Net deferred tax credit recognised directly in equity 1,084
Adjustment for share options granted 88
--------
Net income recognised directly in equity 3,685
Profit attributable to equity holders 39,231
--------
Total recognised income and expense for the year 42,916
========
Consolidated Balance Sheets
Restated for IFRS
30 April 2005 1 May 2004
£'000 £'000
Goodwill 12,448 1,981
Other intangible assets 4,866 232
Property, plant and equipment 569,694 402,456
Interest in joint venture - 14,467
-------- --------
Total non-current assets 587,008 419,136
-------- --------
Inventories 6,696 5,614
Trade and other receivables 92,841 56,382
Cash and cash equivalents 41,375 46,160
-------- --------
Total current assets 140,912 108,156
-------- --------
--------
Non-current assets held for sale 11,464 9,671
-------- --------
TOTAL ASSETS 739,384 536,963
======== ========
Trade and other payables 44,728 32,535
Tax liabilities 7,231 7,143
Obligations under finance leases
and hire purchase 36,491 84,422
Bank overdrafts, loans and other
debt 11,919 3,485
Proposed dividends 41 -
-------- --------
Total current liabilities 100,410 127,585
-------- --------
Borrowings 403,819 208,579
Deferred tax liabilities 10,124 6,349
-------- --------
Total non-current liabilities 413,943 214,928
-------- --------
TOTAL LIABILITIES 514,353 342,513
======== ========
-------- --------
NET ASSETS 225,031 194,450
======== ========
Share capital 3,209 3,202
Share premium account 62,544 61,829
Revaluation reserve 1,054 23
Own shares held (2,471) (1,330)
Merger reserve 4,721 4,721
Currency translation reserve 1,482 -
Retained earnings 154,492 126,005
-------- --------
TOTAL EQUITY 225,031 194,450
======== ========
Consolidated Cash Flow Statement
for the year ended 30 April 2005
Restated for IFRS
Note £'000
Net cash from operating activities (a) 150,457
-------
Investing activities
Interest received 1,957
Proceeds of disposal of vehicles for hire 116,895
Purchases of vehicles for hire (274,517)
Proceeds of disposal of other property, plant and equipment 378
Purchases of other property, plant and equipment (7,613)
Purchases of intangible assets (19)
Acquisitions of subsidiaries (19,353)
-------
Net cash used in investing activities (182,272)
-------
Financing activities
Dividends paid (11,874)
Repayments of obligations under finance leases (279,243)
New finance lease agreements entered into 93,663
Increase in bank loans and other borrowings 221,166
Proceeds from issue of share capital 722
Payments to acquire own shares (1,141)
-------
Net cash from financing activities 23,293
-------
Net decrease in cash and cash equivalents (8,522)
Cash and cash equivalents at the beginning of the period 42,675
Effect of foreign exchange movements (96)
-------
Cash and cash equivalents at the end of the period (b) 34,057
=======
Notes to the Consolidated Cash Flow Statement
for the year ended 30 April 2005
Restated for IFRS
(a) Net cash from operating activities
£'000
Profit from operations 76,237
Adjustments for:
Depreciation of property, plant and equipment 120,831
Amortisation of intangible assets 855
Loss on disposal of property, plant and equipment 39
IFRS 2 share options fair value charge credited to equity 88
-------
Operating cash flows before movements in working capital 198,050
Decrease in inventories 1,665
Increase in receivables (7,735)
Decrease in payables (3,634)
-------
Cash generated by operations 188,346
Income taxes paid (15,241)
Interest paid (22,648)
-------
Net cash from operating activities 150,457
=======
(b) Cash and cash equivalents
Cash and cash equivalents consist of cash in hand and at bank, investments in
money market instruments and bank overdrafts. Bank overdrafts are included
within cash equivalents on the grounds that they are repayable on demand and
form an integral part of the Group's cash management.
Cash and cash equivalents, as described above, included in the cash flow
statement comprise the following balance sheet amounts:
£'000
Cash in hand and at bank 39,601
Short term investments 1,774
-------
Gross cash and cash equivalents as reported 41,375
Bank overdrafts (7,318)
-------
Net cash and cash equivalents 34,057
=======
Notes to the Consolidated Cash Flow Statement
for the year ended 30 April 2005 (continued)
(c) Explanation of differences between cash flow statements under IFRS and UK
GAAP
The significant differences between the Group cash flow statements under IFRS,
as compared to UK GAAP, are as follows:
Movements in non-current assets held for sale and movements in trade debtors
relating specifically to these non-current assets, between the previous and
current balance sheet dates, are both classified within 'proceeds of disposal of
vehicles for hire' and form part of cash flows from investing activities under
IFRS. Under UK GAAP, the non-current assets were classified within 'stock' and
their movement formed part of '(increase) decrease in stock' and the changes in
debtors formed part of the '(increase) decrease in debtors', both of which were
classified within net cash flows from operating activities.
Preference dividends form part of finance costs under IFRS and payments of
preference dividends are classified as 'interest paid' within net cash from
operating activities. Under UK GAAP, these amounts were separately classified
within 'returns on investments and servicing of finance'.
All UK GAAP to IFRS adjustments that impact on profit from operations have no
net impact on net cash flows from operating activities under IFRS.
Consolidated Income Statement - UK GAAP to IFRS reconciliation
for the year ended 30 April 2005
UK GAAP to IFRS adjustments
£'000 Note UK IFRS2 IFRS3 IAS10 IAS12 IAS16 IAS18 IAS19 IAS32 IAS38 IAS38 IFRS
GAAP in Share Goodwill Divi- Taxa- Fixed Vehicle Holiday Prefe- Intang- Software
IFRS Options Amortis- dends tion Assets Sales Pay rence ible Assets
format ation Divi- Amorti-
dends sation
Revenue 1 458,267 (118,885) 339,382
Cost of 2 (333,913) 7,160 111,725 (69) (215,097)
sales ----- ------ ------- ------ ----- ----- ------ ----- ------ ------- ------ ------
Gross profit 124,354 7,160 (7,160) (69) 124,285
Administrative
expenses 3 (47,557) 103 (1) 262 (47,193)
Amortisation 4 (1,116) 1,116 (593) (262) (855)
----- ------ ------- ------ ----- ----- ------ ----- ------ ------- ------ ------
Profit from
operations 75,681 103 1,116 7,160 (7,160) (70) (593) 76,237
Investment
income 1,814 1,814
Finance 5 (23,038) (25) (23,063)
costs ----- ------ ------- ------ ----- ----- ------ ----- ------ ------- ------ ------
Profit before
taxation 54,457 103 1,116 7,160 (7,160) (70) (25) (593) 54,988
Taxation 6 (15,963) 206 (15,757)
----- ------ ------- ------ ----- ----- ------ ----- ------ ------- ------ ------
Profit
attributable
to equity
holders 38,494 103 1,116 206 7,160 (7,160) (70) (25) (593) 39,231
Preference
dividends 5 (25) 25
Ordinary
dividends 7 (12,812) 896 (11,916)
----- ------ ------- ------ ----- ----- ------ ----- ------ ------- ------ ------
Retained
profit 25,657 103 1,116 896 206 7,160 (7,160) (70) (593) 27,315
----- ------ ------- ------ ----- ----- ------ ----- ------ ------- ------ ------
Consolidated Balance Sheet - UK GAAP to IFRS reconciliation - 30 April 2005
UK GAAP to IFRS adjustments
£'000 Note UK GAAP Date of IFRS3 IFRS3 IFRS5 IAS10 IAS10 IAS12 IAS19 IAS21 IAS32 IAS38 IAS38 IFRS
in IFRS Trans- Intan- Good- Vehic- Prop- Divi- Tax Hol- Exch- Pref- Intan- Soft-
format ition gible will les osed dend iday ange erence gible ware
adjus- assets amorti- for divi- pay- pay diffe- shares amort- ass-
tments sation sale dends ment rences isation ets
Goodwill 8 14,110 (5,363) 1,116 2,462 123 12,448
Other
intangible
assets 9 5,363 (593) 96 4,866
Property,
plant and
equipment 569,790 (96) 569,694
------ ----- ----- ------ ----- ----- ----- ----- ---- ----- ----- ---- --- ------
Total
non-current
assets 583,900 1,116 2,462 123 (593) 587,008
------ ----- ----- ------ ----- ----- ----- ----- ---- ----- ----- ---- --- ------
Inventories 10 18,160 (11,464) 6,696
Trade and
other
receivables 92,841 92,841
Cash and cash
equivalents 41,375 41,375
------ ----- ----- ------ ----- ----- ----- ----- ---- ----- ----- ---- --- ------
Total current
assets 152,376 (11,464) 140,912
------ ----- ----- ------ ----- ----- ----- ----- ---- ----- ----- ---- --- ------
Non-current
assets held
for sale 10 11,464 11,464
------ ----- ----- ------ ----- ----- ----- ----- ---- ----- ----- ---- --- ------
TOTAL ASSETS 736,276 1,116 2,462 123 (593) 739,384
------ ----- ----- ------ ----- ----- ----- ----- ---- ----- ----- ---- --- ------
Trade and
other payables 11 43,925 609 193 1 44,728
Tax
liabilities 7,231 7,231
Obligations
under finance
leases/hire
purchase 36,491 36,491
Bank
overdrafts,
loans and
other debt 11,919 11,919
Proposed
dividends 7 7,718 (7,676) (1) 41
------ ----- ----- ------ ----- ----- ----- ----- ---- ----- ----- ---- --- ------
Total current
liabilities 107,284 609 (7,676) 193 100,410
------ ----- ----- ------ ----- ----- ----- ----- ---- ----- ----- ---- --- ------
Borrowings 12 403,319 500 403,819
Deferred tax
liabilities 13 9,424 (472) 1,172 10,124
------ ----- ----- ------ ----- ----- ----- ----- ---- ----- ----- ---- --- ------
Total
non-current
liabilities 412,743 (472) 1,172 500 413,943
------ ----- ----- ------ ----- ----- ----- ----- ---- ----- ----- ---- --- ------
TOTAL
LIABILITIES 520,027 137 (7,676) 1,172 193 500 514,353
------ ----- ----- ------ ----- ----- ----- ----- ---- ----- ----- ---- --- ------
NET ASSETS 216,249 (137) 1,116 7,676 1,290 (70) (500) (593) 225,031
------ ----- ----- ------ ----- ----- ----- ----- ---- ----- ----- ---- --- ------
Share 3,709 (500) 3,209
capital
Share premium
account 62,544 62,544
Revaluation
reserve 1,054 1,054
Own shares (2,471) (2,471)
Merger reserve 4,721 4,721
Currency
translation
reserve 14 1,482 1,482
Retained
earnings 146,692 6,643 1,116 7,676 (6,780) 1,290 (70) (1,482) (593) 154,492
------ ----- ----- ------ ----- ----- ----- ----- ---- ----- ----- ---- --- ------
TOTAL EQUITY 216,249 6,643 1,116 7,676 (6,780) 1,290 (70) (500) (593) 225,031
------ ----- ----- ------ ----- ----- ----- ----- ---- ----- ----- ---- --- ------
Consolidated Balance Sheet - UK GAAP to IFRS reconciliation - 1 May 2004
UK GAAP to IFRS adjustments
£'000 Note UK GAAP IFRS5 IAS10 IAS12 IAS19 IAS32 IAS38 IFRS
in IFRS Vehicles Divi- Tax- Holiday Pre- Soft-
format for sale dends ation pay ference ware
shares assets
Goodwill 8 1,981 1,981
Other
intangible
assets 9 232 232
Property,
plant and
equipment 402,688 (232) 402,456
Interest in
joint venture 14,467 14,467
------- ------- ------- ------- ------ ------ ------- --------
Total
non-current
assets 419,136 419,136
------- ------- ------- ------- ------ ------ ------- --------
Inventories 10 15,285 (9,671) 5,614
Trade and
other
receivables 56,382 56,382
Cash and cash
equivalents 46,160 46,160
------- ------- ------- ------- ------ ------ ------- --------
Total current
assets 117,827 (9,671) 108,156
------- ------- ------- ------- ------ ------ ------- --------
Non-current
assets held
for sale 10 9,671 9,671
------- ------- ------- ------- ------ ------ ------- --------
TOTAL ASSETS 536,963 536,963
------- ------- ------- ------- ------ ------ ------- --------
Trade and
other payables 11 31,926 609 32,535
Tax liabilities 7,143 7,143
Obligations
under finance
leases/hire
purchase 84,422 84,422
Bank
overdrafts and
loans 3,485 3,485
Proposed
dividends 7 6,780 (6,780)
------- ------- ------- ------- ------ ------ ------- --------
Total current
liabilities 133,756 (6,780) 609 127,585
------- ------- ------- ------- ------ ------ ------- --------
Borrowings 12 208,079 500 208,579
Deferred tax
liabilities 13 6,821 (472) 6,349
------- ------- ------- ------- ------ ------ ------- --------
Total
non-current
liabilities 214,900 (472) 500 214,928
------- ------- ------- ------- ------ ------ ------- --------
TOTAL
LIABILITIES 348,656 (6,780) (472) 609 500 342,513
------- ------- ------- ------- ------ ------ ------- --------
NET ASSETS 188,307 6,780 472 (609) (500) 194,450
------- ------- ------- ------- ------ ------ ------- --------
Share capital 3,702 (500) 3,202
Share premium
account 61,829 61,829
Revaluation
reserve 23 23
Own shares (1,330) (1,330)
Merger reserve 4,721 4,721
Retained earnings 119,362 6,780 472 (609) 126,005
------- ------- ------- ------- ------ ------ ------- --------
TOTAL EQUITY 188,307 6,780 472 (609) (500) 194,450
------- ------- ------- ------- ------ ------ ------- --------
Notes to the Consolidated Income Statement
for the year ended 30 April 2005
1 Revenue £'000
UK GAAP 458,267
Removal of used vehicle sales proceeds from revenue in
accordance with IAS18 (118,885)
-------
IFRS 339,382
=======
2 Cost of sales
UK GAAP 333,913
Removal of cost of used vehicles sold from cost of sales
to correspond with (111,725)
revenue adjustment (Note 1)
Adjustment to depreciation on updated estimate of
residual values of (7,160)
vehicles sold
Additional holiday pay accrual 69
-------
IFRS 215,097
=======
3 Administrative expenses
UK GAAP 47,557
Adjustment to fair value of share options granted (103)
Holiday pay accrual adjustment 1
Reclassification of depreciation of software assets as
amortisation (262)
-------
IFRS 47,193
=======
4 Amortisation
UK GAAP 1,116
Reversal of goodwill amortisation (1,116)
Amortisation of intangible assets 593
Reclassification of depreciation of software assets as
amortisation 262
-------
IFRS 855
=======
5 Finance costs and preference dividends
UK GAAP 23,038
Preference dividends reclassified from dividends to
finance costs 25
to match reclassification of preference shares from equity to debt
(Note 12) -------
IFRS 23,063
=======
6 Taxation
UK GAAP 15,963
Deferred tax credit on intangible assets (202)
Deferred tax credit on buildings (13)
Deferred tax charge on share options 31
Deferred tax credit on holiday pay (22)
-------
IFRS 15,757
=======
7 Ordinary dividends
UK GAAP 12,812
Reversal of 2005 final dividend not formally approved at 30 April
2005 (7,676)
2004 final dividend formally approved in the year ended 30 April 2005 6,780
-------
IFRS 11,916
=======
Notes to the Consolidated Balance Sheets
as at 30 April 2005 and 1 May 2004
30 April 2005 1 May 2004
£'000 £'000
8 Goodwill
UK GAAP 14,110 1,981
Amounts reclassified into other intangible assets (Note 9) (5,363) -
Reversal of goodwill amortisation, not charged under IFRS 3 1,116 -
Deferred tax adjustments in respect of intangible assets 1,839 -
Deferred tax adjustments in respect of assets and liabilities 623 -
acquired with Fualsa and Foley
Reduction in Fualsa net assets acquired due to recognition 123 -
of holiday pay accrual
-------- -------
IFRS 12,448 1,981
======== =======
9 Other intangible assets
UK GAAP - -
Reclassification of software assets at net book value 96 232
Brand names recognised* 3,953 -
Non-contractual customer relationships recognised* 1,273 -
Non-compete agreements recognised* 137 -
Amortisation of recognised intangible assets (593) -
-------- -------
IFRS 4,866 232
======== =======
* Previously classified within goodwill under UK GAAP
10 Inventories
UK GAAP 18,160 15,285
Net book value of used vehicles held for resale
reclassified from inventories (11,464) (9,671)
to non-current assets held for sale in accordance with
IFRS5 -------- -------
IFRS 6,696 5,614
======== =======
11 Trade and other payables
UK GAAP 43,925 31,926
Annual leave accrued by employees but not taken as at the
balance sheet date under IAS 19 802 609
Unpaid preference dividends reclassified under IAS 32 1 -
-------- -------
44,728 32,535
======== =======
12 Borrowings
UK GAAP 403,319 208,079
Book and fair value of preference shares reclassified from
equity to debt under IAS32 500 500
-------- -------
IFRS 403,819 208,579
======== =======
13 Deferred tax liabilities
UK GAAP 9,424 6,821
Date of transition adjustments (472) -
Deferred tax provision on intangible assets 1,637 -
Deferred tax provision on buildings 652 300
Deferred tax asset on share options (869) (589)
Deferred tax asset on holiday pay accrual (248) (183)
-------- -------
IFRS 10,124 6,349
======== =======
14 Currency translation reserve
UK GAAP - -
Cumulative exchange differences from 1 May 2004 to
30 April 2005 1,482 -
reclassified from retained earnings into separate equity
component -------- -------
IFRS 1,482 -
======== =======
3. Restated financial information for the six months ended 31 October 2004
Independent Review Report to the Board of Directors of Northgate plc on the
preliminary non-statutory comparative financial information for the six months
ended 31 October 2004
We have reviewed the accompanying preliminary non-statutory International
Financial Reporting Standards (IFRS) consolidated financial information of
Northgate plc ('the Company') and its subsidiaries (together 'the Group') for
the six months ended 31 October 2004, which comprises the consolidated income
statement, the consolidated balance sheet, the consolidated statement of
recognised income and expense, the consolidated cash flow statement, the Notes
to the consolidated cash flow statement and related Notes 1 to 14 within Section
3 of this document (hereinafter referred to as 'preliminary financial
information').
This preliminary financial information is the responsibility of the Company's
directors. It has been prepared as part of the Company's conversion to IFRS in
accordance with the basis set out in Section 1 of this document which describes
how IFRS will be applied under IFRS 1, including the assumptions the Directors
have made about the standards and interpretations expected to be effective, and
the policies expected to be adopted, when the Company prepares its first
complete set of IFRS financial statements as at 30 April 2006. Our
responsibility is to express an opinion on this preliminary IFRS comparative
financial information based on our review.
Our review report is made solely to the Company in accordance with Bulletin 1999
/4 issued by the Auditing Practices Board. Our work has been undertaken so that
we might state to the Company those matters we are required to state to them in
an independent review 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, for our review work, for this report, or for the conclusions we
have formed.
Review work performed
We conducted our review in accordance with Bulletin 1999/4 issued by the
Auditing Practices Board. A review consists principally of making enquiries of
management and applying analytical procedures to the preliminary financial
information and underlying financial data and assessing whether the accounting
policies and presentation have been consistently applied unless otherwise
disclosed. A review excludes audit procedures such as tests of control and
verification of assets, liabilities and transactions. It is substantially less
in scope than an audit performed in accordance with United Kingdom auditing
standards and therefore provides a lower level of assurance than an audit.
Accordingly, we do not express an audit opinion on the preliminary financial
information.
Without modifying our review conclusion, we draw attention to the fact that the
basis of preparation noted in Section 1 of this document explains why there is a
possibility that the accompanying preliminary financial information may require
adjustment before constituting the final IFRS comparative information for the
six months ended 31 October 2005. Moreover, we draw attention to the fact that,
under IFRS, only a complete set of financial statements comprising an income
statement, balance sheet, statement of changes in equity, cash flow statement,
together with comparative financial information and explanatory notes, can
provide a fair presentation of the Group's financial position, results of
operations and cash flows in accordance with IFRS.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the preliminary financial information for the six months ended
31 October 2004 which has been prepared in accordance with the basis set out in
Section 1 of this document.
Deloitte & Touche LLP
Chartered Accountants
Leeds
20 December 2005
Consolidated Income Statement
for the six months ended 31 October 2004
Restated for IFRS
£'000
Revenue 167,082
Cost of sales (102,499)
--------
Gross profit 64,583
Administrative expenses (26,490)
Amortisation (409)
--------
Profit from operations 37,684
Investment income 871
Finance costs (10,916)
--------
Profit before taxation 27,639
Taxation (8,449)
--------
Profit attributable to equity holders 19,190
Dividends (6,780)
--------
Retained profit 12,410
========
Consolidated Statement of Recognised Income and Expense
for the six months ended 31 October 2004
Restated for IFRS
£'000
Gains on revaluation of land and properties 579
Exchange differences on translation of foreign operations 944
Net deferred tax credit recognised directly in equity 1,508
Adjustment for share options granted (19)
--------
Net income recognised directly in equity 3,012
Profit attributable to equity holders 19,190
--------
Total recognised income and expense for the period 22,202
========
Consolidated Balance Sheet
Restated for IFRS
31 October 2004
£'000
Goodwill 13,427
Other intangible assets 5,302
Property, plant and equipment 550,114
---------
Total non-current assets 568,843
---------
Inventories 6,121
Trade and other receivables 87,257
Cash and cash equivalents 22,570
---------
Total current assets 115,948
---------
Non-current assets held for sale 12,652
---------
TOTAL ASSETS 697,443
=========
Total current liabilities 196,386
Long term liabilities 281,249
Deferred tax liabilities 9,745
---------
Total non-current liabilities 290,994
---------
TOTAL LIABILITIES 487,380
=========
NET ASSETS 210,063
=========
Share capital 3,206
Share premium account 62,201
Revaluation reserve 602
Own shares (1,515)
Merger reserve 4,721
Currency translation reserve 944
Retained earnings 139,904
---------
TOTAL EQUITY 210,063
=========
Consolidated Cash Flow Statement
for the six months ended 31 October 2004
Restated for IFRS
Note £'000
Net cash from operating activities (a) 73,766
--------
Investing activities
Interest received 265
Proceeds of disposal of vehicles for hire 50,039
Purchases of vehicles for hire (134,107)
Proceeds of disposal of other property, plant and
equipment 221
Purchases of other property, plant and equipment (2,350)
Purchases of intangible assets (11)
Acquisitions of subsidiaries (19,360)
--------
Net cash used in investing activities (105,303)
--------
Financing activities
Dividends paid (6,764)
Repayments of obligations under finance leases (124,030)
New finance lease agreements entered into 78,680
Increase in bank loans and other borrowings 47,136
Proceeds from issue of share capital 376
--------
Net cash used in financing activities (4,602)
--------
Net decrease in cash and cash equivalents (36,139)
Cash and cash equivalents at the beginning of the period 42,675
Effect of foreign exchange movements 58
--------
Cash and cash equivalents at the end of the period (b) 6,594
--------
Notes to the Consolidated Cash Flow Statement
for the six months ended 31 October 2004
Restated for IFRS
(a) Net cash from operating activities
£'000
Profit from operations 37,684
Adjustments for:
Depreciation of property, plant and equipment 59,149
Amortisation of intangible assets 409
Loss on disposal of property, plant and equipment 19
IFRS 2 share options fair value credit charged to
equity (19)
-------
Operating cash flows before movements in working
capital 97,242
Decrease in inventories 2,313
Increase in receivables (703)
Decrease in payables (7,689)
-------
Cash generated by operations 91,163
Income taxes paid (7,775)
Interest paid (9,622)
-------
Net cash from operating activities 73,766
-------
(b) Cash and cash equivalents
Cash and cash equivalents consist of cash in hand and at bank, investments in
money market instruments and bank overdrafts. Bank overdrafts are included
within cash equivalents on the grounds that they are repayable on demand and
form an integral part of the Group's cash management.
Cash and cash equivalents, as described above, included in the cash flow
statement comprise the following balance sheet amounts:
£'000
Cash in hand and at bank 20,817
Short term investments 1,753
-------
Gross cash and cash equivalents as reported 22,570
Bank overdrafts (15,976)
-------
Net cash and cash equivalents 6,594
-------
(c) Explanation of differences between cash flow statements under IFRS compared
to UK GAAP
The significant differences between the Group cash flow statements under IFRS,
as compared to UK GAAP, are as follows:
Movements in non-current assets held for sale and movements in trade debtors
relating specifically to these non-current assets, between the previous and
current balance sheet dates, are both classified within 'proceeds of disposal of
vehicles for hire' and form part of cash flows from investing activities under
IFRS. Under UK GAAP, the non-current assets were classified within 'stock' and
their movement formed part of '(increase) decrease in stock' and the changes in
debtors formed part of the '(increase) decrease in debtors', both of which were
classified within net cash flows from operating activities.
Preference dividends form part of finance costs under IFRS and payments of
preference dividends are classified as 'interest paid' within net cash from
operating activities. Under UK GAAP, these amounts were separately classified
within 'returns on investments and servicing of finance'.
All UK GAAP to IFRS adjustments that impact on profit from operations have no
net impact on net cash flows from operating activities under IFRS.
Consolidated Income Statement - UK GAAP to IFRS reconciliation
for the six months ended 31 October 2004
UK GAAP to IFRS adjustments
IAS38
IFRS3 IAS32 Intang-
UK Good- IAS16 Pref- ible
GAAP in IFRS2 will IAS10 IAS18 IAS19 erence amort- IAS38
IFRS Share amort- Divi- IAS12 Fixed Vehicle Holiday divid- isat- Software
£'000 Note format options isation dends Tax assets sales pay ends tion assets IFRS
Revenue 1 222,592 (55,510) 167,082
Cost of 2 (157,987) 3,962 51,548 (22) (102,499)
sales
------ ----- ------ ----- ----- ----- ----- ----- ----- ----- ------ ------
Gross profit 64,605 3,962 (3,962) (22) 64,583
Administrative
expenses 3 (26,799) 19 158 132 (26,490)
Amortisation 4 (514) 514 (277) (132) (409)
------ ----- ------- ------ ----- ----- ----- ----- ------ ------ ------ ------
Profit from
operations 37,292 19 514 3,962 (3,962) 136 (277) 37,684
Investment
income 871 871
Finance 5 (10,903) (13) (10,916)
costs
------ ----- ------- ------ ----- ----- ----- ----- ------ ------ ------ ------
Profit before
taxation 27,260 19 514 3,962 (3,962) 136 (13) (277) 27,639
Taxation 6 (8,500) 51 (8,449)
------ ----- ------- ------ ----- ----- ----- ----- ------ ------ ------ ------
Profit
attributable
to equity
holders 18,760 19 514 51 3,962 (3,962) 136 (13) (277) 19,190
Preference
dividends 5 (13) 13
Ordinary
dividends 7 (5,136) (1,644) (6,780)
------ ----- ------- ------ ----- ---- ----- ----- ------ ------ ------ ------
Retained
profit 13,611 19 514 (1,644) 51 3,962 (3,962) 136 (277) 12,410
------ ----- ------- ------ ----- ---- ----- ----- ------ ------ ------ ------
Consolidated Balance Sheet - UK GAAP to IFRS reconciliation
as at 31 October 2004
UK GAAP to IFRS adjustments IAS38
Date IFRS3 IFRS In
of Good- 5 IAS10 IAS21 tang-
UK Tran- IFRS3 will Vehic- Divi- IAS19 Ex- IAS32 gible IAS38
GAAP in sition Intan- amort- les IAS10 dend IAS12 Holi- change Pref- amort- Soft-
IFRS adjust- gible isa- for Divi- pay- day differ- erence isa- ware
£'000 Note format ments assets tion sale dends ment Tax pay ences shares tion assets IFRS
Goodwill 8 15,679 (5,363) 514 2,474 123 13,427
Other
intangible
assets 9 5,363 (277) 216 5,302
Property,
plant and
equipment 550,330 (216) 550,114
------ ------ ------ ------ ----- ----- ----- ----- ----- ------ ----- ----- ----- -----
Total
non-current
assets 566,009 514 2,474 123 (277) 568,843
------ ------ ------ ------ ----- ----- ----- ----- ----- ------ ----- ----- ----- -----
Inventories 10 18,773 (12,652) 6,121
Trade and
other
receivables 87,257 87,257
Cash and cash
equivalents 22,570 22,570
------ ------ ------ ------ ----- ----- ----- ----- ----- ------ ----- ----- ----- -----
Total current
assets 128,600 (12,652) 115,948
------ ------ ------ ------ ----- ----- ----- ----- ----- ------ ----- ----- ----- -----
Non-current
assets held
for sale 10 12,652 12,652
------ ------ ------ ------ ----- ----- ----- ----- ----- ------ ----- ----- ----- -----
TOTAL ASSETS 694,609 514 2,474 123 (277) 697,443
------ ------ ------ ------ ----- ----- ----- ----- ----- ------ ----- ----- ----- -----
Total current
liabilities 11 200,926 609 (5,136) (13) 196,386
Long term
liabilities 12 280,749 500 281,249
Deferred tax
liabilities 13 9,302 (472) 915 9,745
------ ------ ------ ------ ----- ----- ----- ----- ----- ------ ----- ----- ----- -----
Total
non-current
liabilities 290,051 (472) 915 500 290,994
------ ------ ------ ------ ----- ----- ----- ----- ----- ------ ----- ----- ----- -----
TOTAL
LIABILITIES 490,977 137 (5,136) 915 (13) 500 487,380
------ ------ ------ ------ ----- ----- ----- ----- ----- ------ ----- ----- ----- -----
NET ASSETS 203,632 (137) 514 5,136 1,559 136 (500) (277) 210,063
------ ------ ------ ------ ----- ----- ----- ----- ----- ------ ----- ----- ----- -----
Share capital 3,706 (500) 3,206
Share premium
account 62,201 62,201
Revaluation
reserve 602 602
Own shares (1,515) (1,515)
Merger reserve 4,721 4,721
Currency
translation
reserve 14 944 944
Retained
earnings 133,917 6,643 514 5,136 (6,780) 1,559 136 (944) (277) 139,904
------ ------ ------ ------ ----- ----- ----- ----- ----- ------ ----- ----- ----- -----
TOTAL EQUITY 203,632 6,643 514 5,136 (6,780) 1,559 136 (500) (277) 210,063
------ ------ ------ ------ ----- ----- ----- ----- ----- ------ ----- ----- ----- -----
Notes to the Consolidated Income Statement
for the six months ended 31 October 2004
1 Revenue £'000
UK GAAP 222,592
Removal of used vehicle sales proceeds from revenue in
accordance with IAS18 (55,510)
-------
IFRS 167,082
=======
2 Cost of sales
UK GAAP 157,987
Removal of cost of used vehicles sold from cost of sales
to correspond with revenue adjustment (Note 1) (51,548)
Adjustment to depreciation on updated estimate of
residual values of vehicles sold (3,962)
Additional holiday pay accrual 22
-------
IFRS 102,499
=======
3 Administrative expenses
UK GAAP 26,799
Adjustment to fair value of share options granted (19)
Holiday pay accrual adjustment (158)
Reclassification of depreciation of software assets as
amortisation (132)
-------
IFRS 26,490
=======
4 Amortisation
UK GAAP 514
Reversal of goodwill amortisation (514)
Amortisation of intangible assets 277
Reclassification of depreciation of software assets as
amortisation 132
-------
IFRS 409
=======
5 Finance costs and preference dividends
UK GAAP 10,903
Preference dividends reclassified from dividends to
finance costs to match reclassification 13
of preference shares from equity to debt (Note 12)
-------
IFRS 10,916
=======
6 Taxation
UK GAAP 8,500
Deferred tax credit on intangible assets (95)
Deferred tax credit on buildings (7)
Deferred tax charge on share options 6
Deferred tax charge on holiday pay 45
-------
IFRS 8,449
=======
7 Ordinary dividends
UK GAAP 5,136
Reversal of 2004 interim dividend not paid at 31 October 2004 (5,136)
2004 final dividend formally approved in the six months ended 31
October 2004 6,780
-------
IFRS 6,780
=======
Notes to the Consolidated Balance Sheet
as at 31 October 2004
8 Goodwill £'000
UK GAAP 15,679
Amounts reclassified into other intangible assets (Note 9) (5,363)
Reversal of goodwill amortisation, not charged under IFRS 3 514
Deferred tax adjustments in respect of intangible assets 1,839
Deferred tax adjustments in respect of assets and liabilities 635
acquired with Fualsa
Reduction in Fualsa net assets acquired due to recognition 123
of holiday pay accrual
-------
IFRS 13,427
=======
9 Intangible assets
UK GAAP -
Reclassification of software assets at net book value 216
Brand names recognised* 3,953
Non-contractual customer relationships recognised* 1,273
Non-compete agreements recognised* 137
Amortisation of recognised intangibles (277)
-------
IFRS 5,302
=======
* Previously classified within goodwill under UK GAAP
10 Inventories
UK GAAP 18,773
Net book value of used vehicles held for resale reclassified from
inventories (12,652)
to non-current assets held for sale in accordance with IFRS5
-------
IFRS 6,121
=======
11 Current liabilities
UK GAAP 200,926
Annual leave accrued by employees but not taken as at the balance
sheet date 596
under IAS 19
Derecognition of 2004 interim dividend, not paid until after the (5,136)
balance sheet date, under IAS 10
-------
IFRS 196,386
=======
12 Long term liabilities
UK GAAP 280,749
Book and fair value of preference shares reclassified from equity to
debt under IAS32 500
-------
IFRS 281,249
=======
13 Deferred tax liabilities
UK GAAP 9,302
Date of transition adjustments (472)
Deferred tax provision on intangible assets 1,743
Deferred tax provision on buildings 673
Deferred tax asset on share options (1,319)
Deferred tax asset on holiday pay accrual (182)
-------
IFRS 9,745
=======
14 Currency translation reserve
UK GAAP -
Cumulative exchange differences from 1 May 2004 to 31 October
2004 944
reclassified from retained earnings into separate equity
component -------
IFRS 944
=======
4. Principal Accounting Policies
Statement of compliance and first time adoption choices
The consolidated financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRS) and their interpretations
adopted by the International Accounting Standards Board (IASB). These are the
Group's first consolidated financial statements prepared under IFRS and IFRS1
has been applied.
Basis of preparation
The financial information has been prepared on the historical cost basis, except
for the revaluation of certain land and buildings and the treatment of certain
financial instruments. The accounting policies set out below have been prepared
by management using its best knowledge of the expected standards and
interpretations of the International Accounting Standards Board, facts and
circumstances, and accounting policies that will be applied when the Company
prepares its first complete set of IFRS financial statements as at 30 April
2006. Therefore, until such time, the possibility cannot be excluded that the
accompanying preliminary opening balance sheet at 1 May 2004 and the restated
financial information for the year ended 30 April 2005 may require adjustment
before constituting the final opening balance sheet and IFRS comparatives.
Basis of consolidation
Subsidiaries are entities controlled by the Company. Control exists when the
Company has the power, directly or indirectly, to govern the financial and
operating policies of the entity so as to obtain benefits from its activities.
The consolidated financial statements include the financial statements of the
Company and its undertakings made up to 1 May 2004, 31 October 2004 and 30 April
2005. The results of new subsidiary undertakings are included from the dates of
acquisition. Where an entity has ceased to be a subsidiary undertaking during
the year, its results are included to the date of cessation.
On acquisition, the assets, liabilities and contingent liabilities of a
subsidiary are measured at their fair values at the date of acquisition. Any
excess of the cost of acquisition over the fair values of the identifiable net
assets acquired is recognised as goodwill. Any deficiency of the cost of
acquisition below the fair values of the identifiable net assets acquired (i.e.
discount on acquisition) is credited to the income statement in the period of
acquisition. The interest of minority shareholders is stated at the minority's
proportion of the fair values of the assets and liabilities recognised.
Subsequently any losses applicable to the minority interest in excess of the
minority interest are allocated against the interests of the parent.
Where necessary, adjustments are made to the financial statements of
subsidiaries to bring the accounting policies used into line with those used by
the Group. All intra-group transactions, balances, income and expenses are
eliminated on consolidation.
Revenue recognition
Group revenue is measured at the fair value of the consideration received or
receivable in respect of the hire of vehicles and the supply of related goods
and services in the normal course of business, net of value added tax and
discounts.
Revenue from vehicle rentals is recognised evenly over the rental period and
revenue from sales of other related goods and services is recognised at the
point of sale.
Goodwill
All business combinations are accounted for by applying the purchase method.
Goodwill represents amounts arising on acquisition of subsidiary undertakings
and interests in associates and is the difference between the cost of the
acquisition and the fair value of the net identifiable assets and liabilities
acquired.
Goodwill is stated at cost less any accumulated impairment losses identified
through an annual test for impairment.
Goodwill arising on acquisitions before the date of transition to IFRS has been
retained at the previous UK GAAP amounts subject to being tested for impairment
at that date. Goodwill written off to reserves under UK GAAP prior to 1998 has
not been reinstated and is not included in determining any subsequent profit or
loss on disposal.
Intangible assets - arising on business combinations
Amortisation of intangible assets is charged to the income statement on a
straight-line basis over the estimated useful lives of each intangible asset.
Intangible assets are amortised from the date they are available for use. The
estimated useful lives are as follows:
Customer relationships 5 to 9 years
Brand names 5 to 10 years
Non-compete agreements 2 to 4 years
Intangible assets - other
Other intangible assets that are acquired by the Group are stated at cost less
accumulated amortisation and impairment losses.
Software assets are amortised over their estimated useful lives, which do not
exceed three years.
Property, plant and equipment
Property, plant and equipment is stated at historical cost less accumulated
depreciation and any provision for impairment. Depreciation is provided so as to
write off the cost of assets to residual values on a straight-line basis over
the assets' useful estimated lives as follows:
Freehold buildings 50 years
Leasehold buildings Over 50 years or over the period of lease
whichever is shorter
Plant, equipment and fittings Over 8 to 10 years
Vehicles for hire 3 to 6 years
Motor vehicles 3 to 6 years
Vehicles for hire are depreciated on a straight-line basis using depreciation
rates that reflect economic lives of between three and six years. These
depreciation rates have been determined with the anticipation that the net book
values at the point the vehicles are transferred into non-current assets held
for sale is in line with the open market values for those vehicles. Depreciation
charges are adjusted for any differences that arise between net book values and
open market values of used vehicles upon transfer into non-current assets held
for sale, taking into account the further direct costs to sell the vehicles.
Property under construction is not depreciated. Depreciation commences when
these assets are ready for their intended use.
Freehold land is not depreciated.
Depreciation on revalued buildings is charged to the income statement. On the
subsequent sale or retirement of a revalued property, the attributable
revaluation surplus remaining in the revaluation reserve is transferred directly
to retained earnings.
The residual value, if not insignificant, is reassessed annually.
Non-current assets held for resale
Non-current assets classified as held for resale are valued at the lower of
carrying amount or fair value less estimated costs to sell. Non-current assets
are classified as held for sale if their carrying amount will be recovered
through a sales transaction.
Fixed asset investments
Fixed asset investments are shown at cost less any provision for impairment.
Impairment
At each balance sheet date, the Group reviews the carrying amounts of its
tangible and intangible assets to determine whether there is any indication that
those assets have suffered an impairment loss. If any such indication exists,
the recoverable amount of the asset is estimated in order to determine the
extent of the impairment loss (if any).
The recoverable amount is the higher of fair value less selling costs and value
in use. In assessing value in use, the estimated future cash flows are
discounted to their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and the risks specific to
the asset for which the estimates of future cash flows have not been adjusted.
An impairment loss is recognised whenever the carrying amount of an asset
exceeds its recoverable amount. Impairment losses are recognised in the income
statement. Impairment losses recognised in respect of cash-generating units are
allocated first to reduce the carrying amount of any goodwill allocated to cash
generating units and then to reduce the carrying amount of other assets in the
unit on a pro rata basis.
Inventories
Inventories comprise goods for resale and finished goods and are valued at the
lower of cost or net realisable value. Net realisable value represents the
estimated selling price less all estimated costs of completion and costs to be
incurred in marketing, selling and distribution.
Taxation
The tax expense represents the sum of the tax currently payable and deferred
tax.
The tax currently payable is based on taxable profit for the period. The Group's
liability for current tax is calculated using tax rates that have been enacted
or substantively enacted by the balance sheet date. Taxable profit differs from
net profit as reported in the income statement because it excludes items of
income or expense that are taxable or deductible in other years and it further
excludes items that are never taxable or deductible.
Deferred tax is the tax expected to be payable or recoverable on differences
between the carrying amounts of assets and liabilities in the financial
statements and the corresponding tax bases used in the computation of taxable
profit, and is accounted for using the balance sheet liability method. Deferred
tax liabilities are generally recognised for all taxable temporary differences
and deferred tax assets are recognised to the extent that it is probable that
taxable profits will be available against which deductible temporary differences
can be utilised. Such assets and liabilities are not recognised if the temporary
difference arises from goodwill or from the initial recognition (other than in a
business combination) of other assets and liabilities in a transaction that
affects neither the tax profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each balance sheet
date and reduced to the extent that it is no longer probable that sufficient
taxable profits will be available to allow all or part of the asset to be
recovered.
Deferred tax liabilities are recognised for taxable temporary differences
arising on investments in subsidiaries and associates, and interests in joint
ventures, except where the Group is able to control the reversal of the
temporary difference and it is probable that the temporary difference will not
reverse in the foreseeable future.
Deferred tax is calculated at the tax rates that are expected to apply in the
period when the liability is settled or the asset is realised. Deferred tax is
charged or credited in the income statement, except when it relates to items
charged or credited directly to equity, in which case the deferred tax is also
dealt with in equity.
Financial instruments and hedge accounting
Financial assets and liabilities are recognised in the Group's balance sheet
when the Group becomes a party to the contractual provision of the instrument.
Trade receivables are non-interest bearing and are stated at their nominal value
less the amount of any appropriate provision for irrecoverable amounts. Trade
payables are non-interest bearing and are stated at their nominal value.
The Group uses derivative financial instruments to hedge its exposure to foreign
exchange and interest rate risks arising from operational, financing and
investment activities. In accordance with its treasury policy, the Group does
not hold or issue derivative financial instruments for trading purposes.
Derivative financial instruments are stated at fair value. Any gain or loss on
remeasurement to fair value is recognised immediately in the income statement.
However, where derivatives qualify for hedge accounting, recognition of
resultant gain or loss depends on the nature of the items being hedged.
The fair value of the interest swaps is the estimated amount that the Group
would receive or pay to terminate the swap at the balance sheet date, taking
into account current interest rates and the current creditworthiness of the swap
counterparties.
Changes in the fair value of derivative financial instruments that are
designated and effective as hedges of future cash flows are recognised directly
in equity, and the ineffective portion is recognised immediately in the income
statement. If the cash flow hedge of a firm commitment or forecasted transaction
results in the recognition of an asset or liability, then, at the time the asset
or liability is recognised, the associated gains or losses on the derivative
that had previously been recognised in equity are included in the initial
measurement of the asset or liability. For hedges that do not result in
recognition of an asset or a liability, amounts deferred in equity are
recognised in the income statement in the same period in which the hedged item
affects net profit or loss.
Changes in the fair value of derivative financial instruments that do not
qualify for hedge accounting are recognised in the income statement as they
arise.
Hedge accounting for cash flow hedges is discontinued when the hedging
instrument expires or is sold, terminated, or exercised, or no longer qualifies
for hedge accounting. At that time, any cumulative gain or loss on the hedging
instrument recognised in equity is retained in equity until the forecasted
transaction occurs. If a hedged transaction is no longer expected to occur, the
net cumulative gain or loss recognised in equity is transferred to net profit or
loss for the period.
Bank loans and issue costs
Bank loans are stated at the amount of proceeds after deduction of issue costs,
which are amortised over the period of the loan. Finance charges, including
premiums payable on settlement or redemption and direct issue costs, are
accounted for in the income statement on an accrual basis and are added to the
carrying amount of the instrument to the extent that they are not settled in the
period in which they arise.
Foreign currencies
Transactions in foreign currencies other than UK Sterling are recorded at the
rate prevailing at the date of the transaction or at the contracted rate if the
transaction is covered by a forward exchange contract. At each balance sheet
date, monetary assets and liabilities denominated in foreign currencies are
retranslated at the rate of exchange prevailing at the balance sheet date or, if
appropriate, at the forward contract rate and any variances are reflected in the
income statement.
The accounts of overseas subsidiary undertakings are translated into UK Sterling
at the rate of exchange ruling at the balance sheet date. The exchange
difference arising on the retranslation of opening net assets is recognised
directly in equity. All other translation differences are taken to the income
statement with the exception of differences in equity on foreign currency
borrowings to the extent that they are used to finance or provide a hedge
against Group equity investments in foreign enterprises, which are recognised
directly in equity, together with the exchange difference on the net investment
in these enterprises.
The results of overseas subsidiary undertakings and joint ventures are
translated into UK Sterling using average exchange rates for the financial
period and variances compared with the exchange rate at the balance sheet date
are recognised directly in equity.
The Company maintains certain borrowings in the same currency as the functional
currency of its overseas subsidiary undertaking, as a hedge against the net
assets of the subsidiary. These borrowings are translated into UK Sterling using
the exchange rate prevailing at the balance sheet date. Any variances are
recognised directly in equity.
Goodwill and fair value adjustments, arising on acquisition of a foreign entity,
are treated as assets and liabilities of the foreign entity. They are
denominated in the functional currency of the foreign entity and translated at
the exchange rate prevailing at the balance sheet date, with any variances
reflected directly in equity.
All foreign exchange differences reflected directly in equity are shown in the
currency translation reserve component of equity.
Leasing and hire purchase commitments
As Lessee:
Assets held under finance leases and hire purchase contracts are capitalised in
the balance sheet at their fair value or, if lower, the present value of the
future minimum lease payments, and are depreciated over their useful economic
lives using Group policies. The capital elements of future obligations under
finance leases and hire purchase contracts are included as liabilities in the
balance sheet. The interest elements of the rental obligations are charged to
the income statement over the periods of the leases and hire purchase contracts
so as to produce a constant rate of return on the outstanding balance.
Rentals payable under operating leases are charged to the income statement on a
straight-line basis over the lease term.
As Lessor:
Motor vehicles and equipment leased to certain customers under operating leases
are included within property, plant and equipment. Income from such leases is
taken to the income statement evenly over the period of the operating lease
agreement.
Retirement benefit costs
The Group operates defined contribution type arrangements. Contributions in
respect of these arrangements are charged to the income statement in the period
they fall due. Pension contributions in respect of one of these arrangements are
held in trustee administered funds, independently of the Group's finances. The
other arrangements are group personal pension plans.
Employee share schemes and share based payments
The Group has applied the requirements of IFRS 2 (Share-based Payment). In
accordance with the transitional provisions, IFRS 2 has been applied to all
grants of equity instruments after 7 November 2002 that were unvested as of 30
April 2005.
The Group issues equity-settled and cash-settled share-based payments to certain
employees.
Equity-settled employee schemes, including employee share options and deferred
annual bonuses, provide employees with the option to acquire shares of the
Company. Employee share options and deferred annual bonuses are generally
subject to performance or service conditions.
The fair value of equity-settled share-based payments is measured at the date of
grant and charged to the income statement over the period during which
performance or service conditions are required to be met, or immediately where
no performance or service criteria exist. The fair value of equity-settled
share-based payments granted is measured using the Black-Scholes model. The
amount recognised as an expense is adjusted to reflect the actual number of
employee share options that vest, except where forfeiture is only due to market
based performance criteria not being met.
For cash-settled share-based payments a liability equal to the portion of the
goods or services received is recognised at the current fair value determined at
each balance sheet date.
The Group also operates a Share Incentive Plan (SIP) under which employees each
have the option to purchase up to £1,500 of shares annually and receive an
equivalent number of free shares. The Group recognises the free shares as an
expense evenly throughout the period over which the employees must remain in the
employ of the Group in order to receive the free shares.
Dividends
Dividends on ordinary shares are recognised as a liability in the period in
which they are either paid or formally approved, whichever is earlier.
Provisions
A provision is recognised in the balance sheet when the Group has a present
legal or constructive obligation as a result of a past event, and it is probable
that an outflow of economic benefits will be required to settle the obligation.
If the effect is material, provisions are determined by discounting the expected
future cash flows at a pre-tax rate that reflects current market assessments of
the time value of money and, where appropriate, the risks specific to the
liability.
For further information, please contact:
Northgate plc 01325 467558
Steve Smith, Chief Executive
Gerard Murray, Finance Director
Hogarth Partnership Limited 020 7357 9477
Andrew Jaques
Barnaby Fry
This information is provided by RNS
The company news service from the London Stock Exchange
Latest directors dealings
- 7 minutes ago Intermediate Capital Group
- 12 minutes ago Intermediate Capital Group
- 29 minutes ago Edinburgh Inv Trust
- 52 minutes ago Sainsbury (J)
- 56 minutes ago Senior