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					NIAL Holdings PLC
Annual report
for the year ended 31 December 2005


Registered Number: 04184967
NIAL Holdings PLC
Annual report
for the year ended 31 December 2005


Contents

Directors and advisers...........................................................................................................................................1
Directors’ report for the year ended 31 December 2005.......................................................................................2
Independent auditors’ report to the members of NIAL Holdings PLC.................................................................7
Group Income statement for the year ended 31 December 2005..........................................................................9
Group Statement of recognised income and expense for the year ended 31 December 2005.............................10
Group and Parent company Balance sheets at 31 December 2005 .....................................................................11
Group and Company Cash flow statements for the year ended 31 December 2005...........................................13
Accounting policies ............................................................................................................................................14
Financial risk management .................................................................................................................................20
Notes to the financial statements ........................................................................................................................21
NIAL Holdings PLC

Directors and advisers

Executive directors
L N Friis
J Parkin

Non-Executive directors
R A Radcliffe (chair)
I Malcolm
N D P Ross
K Binger
N Boserup
W Brooks (alternating director)
R Symonds (alternating director)

Secretary and registered office
L N Friis
Newcastle International Airport Limited
Woolsington
Newcastle upon Tyne
NE13 8BZ

Domicile, legal form and country of incorporation
The group is domiciled in the UK, and is a public limited company.
All companies within the group are incorporated, registered and operate within the UK.

Bankers
HSBC Bank plc
110 Grey Street
Newcastle upon Tyne
NE1 6JT

Independent auditors
PricewaterhouseCoopers LLP
89 Sandyford Road
Newcastle Upon Tyne
NE1 8HW

Legal advisors
Eversheds LLP
Central Square South
Orchard Street
Newcastle upon Tyne




                                                                                         1
NIAL Holdings PLC

Directors’ report for the year ended 31 December 2005

The directors present their report and the audited financial statements of the group for the year ended 31
December 2005.

Principal activities
The principal activities of the group are the operation and management of Newcastle International Airport
(NIAL).

Review of business
In 2002 the Company carried out a Strategic Review setting the agenda for a major transformation of the
business over a three year period. The key components of the strategy were:

     •   Changing the cost base to compare to the best performing airports in the UK and Europe.

     •   Introduction of low cost airlines ensuring a balanced airline and passenger mix.

     •   Optimising the commercial offer and customer service delivery to our passengers.

In spite of changing market conditions and structural changes in the airline industry, significant and
satisfactory progress has been made in 2005 in all areas of the business delivering not only the expectations for
2005 in isolation but also for the three year period as a whole . During the last three years, we have succeeded
in building up an extensive range of new destinations and services together with significantly improved
facilities for our passengers offering a level of quality comparable to the best of our competitors.

Traffic
The traffic business is organised in the business unit of Aviation Development and Operations comprising the
acquisition of new routes and optimisation of existing routes together with the functions and facilities which
are made available so that the airlines can operate their flights.

Revenue from this business unit comes from landing and navigation and passenger and parking charges paid
by the airlines for using the facilities made available by the airport.

Passenger numbers in the year totalled 5.2m an increase of 10.2% compared with the previous year, the highest
ever in the history of Newcastle International Airport.

New services to Milan – Bergamo and Oslo – Torp with Ryanair, to Murcia and Cork with Jet2 and to Faro
with easyJet commenced during 2005 taking the total of scheduled routes up to 37 from 32 the previous year.

Commercial
NIAL’s commercial business unit comprises the facilities and services provided to passengers and other users
of the airport, including shops, restaurants, lounges and parking facilities. The majority of the operations have
been concessioned to private operators and NIAL are not directly involved in day-to-day operations of these
activities. Furthermore the business unit is responsible for renting out of premises and land to third parties.

Passengers are the basis for the revenue generation in the commercial business unit, so revenues from the
commercial activities are dependent on the development in traffic and the passenger mix. Revenue comes from
concession fees and rent paid by third party operators for using the facilities made available by the airport.




                                                                                                                    2
NIAL Holdings PLC

The terminal’s common lounge for all passengers (domestic & international) has continued to have a positive
impact on commercial performance during the year. 2005 saw the addition of Tucci, a clothing retailer in the
terminal and the finalisation of tender processes for new advertising and vending concessions.

An acquisition of off-airport car park operator Newcastle Park & Fly Limited took place on the 21 January
2005. We expect this acquisition to deliver increased commercial income and synergies with the on-airport car
park operation.

Future developments
New routes are expected to be delivered in 2006 serving more European destinations direct from Newcastle.
The UK charter market is expected to trade below last year’s levels with the market in Newcastle expected to
outperform the UK average. On this basis the passenger numbers are expected to increase above the average
UK market.

A range of improvements to existing food and beverage offers and introduction of new retail and food and
beverage offers is expected in 2006 which will improve the services delivered to our customers. Car park
revenue continues to be of huge importance and the facilities will be optimised in 2006 with the intention to
deliver a better product to our customers.

Based on the current level of business, the growth prospects in passenger numbers, the improved commercial
offers and the year-end financial position the directors consider that the strategy adopted in September 2002 is
well on track and that the group’s activities will continue to be successful in 2006.

Financial result for 2005
Total revenue in the year was £52m compared with £45m in 2004, an increase of 15.3%. The increase in
revenue was primarily delivered by the increase in passenger numbers but has also benefited from a number of
one off income streams in relation to contract renegotiations and new developments.

The profit after tax for the year amounts to £7.6m compared to £4.5m in 2004.

The financial statements show capital expenditure of £5.5m, which includes new apron facilities £1.2m, the
start up of the building of a new Air Traffic Control Tower £0.8m, a new fire vehicle £0.4m, improved
directional signage in the terminal £0.2m and IT systems £0.2m.

The directors have proposed a dividend of 10.88p per ordinary share (2004: 8.51p per ordinary share). This
will be financed by the receipt of a dividend from Newcastle International Airport Limited.

Post balance sheet events
There are no post balance sheet events to be reported.




                                                                                                                   3
NIAL Holdings PLC

Directors and their interests
The directors of the company during the year ended 31 December 2005, all of whom have been directors for
the whole of the year ended on that date unless stated otherwise were as follows:

R A Radcliffe (chair) (appointed 1 January 2005)
N D P Ross
I Malcolm
W Brooks (alternating director)
R Symonds (alternating director)
K Binger
N Boserup
LN Friis
J Parkin

No director who held office had any interest in the shares or debentures of the company at any time during the
year or to the date of this report.

Board meetings
There were five board meetings in 2005. The number of board meetings attended by the directors was as
follows:

R A Radcliffe (chair)   5
N D P Ross              5
I Malcolm               3
W Brooks                1(alternating director)
R Symonds               0 (alternating director)
K Binger                4
N Boserup               5
LN Friis                5
J Parkin                5

Employees
The Staff Forum, a consultative body with nominated representatives from all areas of the group, provides the
opportunity to discuss areas of common interest. The group continues to consult and work in partnership with
the recognised trade unions through their representatives and formally through the Joint Shop Stewards
Committee.

The directors regularly present all staff with information on group performance and strategic objectives. All
department managers communicate departmental objectives to their staff through the Team Briefing process.
The group continues to encourage staff participation by involvement in special projects.

The group continues to monitor its employment practices against its Equal Opportunity Policy and encourages
the fair and equal treatment of those employees who may become disabled during their employment.




                                                                                                                 4
NIAL Holdings PLC

Applications for employment by disabled persons are always fully considered, bearing in mind the respective
aptitudes and abilities of the applicant concerned. In the event of members of staff becoming disabled every
effort is made to ensure that their employment with the company continues and appropriate training is
arranged. It is the policy of the company that the training, career development and promotion of a disabled
person should as far as possible be identical to that of a person who does not suffer from a disability.

Health and safety at work
Work has continued to be undertaken to implement formal safety management arrangements to improve
business efficiency and meet challenges set out in the UK Government Revitalising Health and Safety
document. This has included a series of management training programmes on key health and safety policies
and procedures and introduction of an audit programme to determine the adequacy and effectiveness of health
and safety management in departments. Initiatives to enhance management ownership of health and safety
such as health and safety objectives at group and departmental level have been introduced.

Staff involvement in health and safety has continued through the group and departmental safety committees.
Training initiatives have taken place for staff and their representatives on health and safety issues.


Charitable donations
The contributions made by the Group during the year for charitable purposes were £Nil (2004: £Nil). The
Group has made no political donations during the current and prior year.

Significant shareholdings
At the year end and 16 February 2006 the following parties owned more than 3% of the nominal value of the
ordinary share capital in the company:

Newcastle Airport Local Authority Holding Company Limited: 33,395,000 A Ordinary shares (51%)
CPH Newcastle Limited: 32,085,000 B Ordinary shares (49%). CPH Newcastle Limited is a subsidiary of
Copenhagen Airports A/S.

Contracts of significance
Under a contract for management services, management fees charged in the year by Copenhagen Airport
Development International A/S, a subsidiary of Copenhagen Airports A/S, totalled £2,198,149 (2004:
£1,408,800) of which £188,000 (2004: £176,000) was outstanding at the year end. Copenhagen Airports A/S
has a 49% interest in the share capital of NIAL Holdings PLC.

Details of transactions and contracts of significance with Copenhagen Airport Development International A/S,
a fellow subsidiary of CPH Newcastle Limited, are given in note 28 to the accounts.




                                                                                                               5
NIAL Holdings PLC

Statement of directors’ responsibilities
United Kingdom company law requires the directors to prepare financial statements for each financial year that
give a true and fair view of the state of affairs of the company and the group and of the profit or loss of the
group 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 that the financial statements comply with IFRS.
   •    Prepare the financial statements on the going concern basis, unless it is inappropriate to presume that
        the group will continue in business

The directors confirm that they have complied with the above requirements in preparing the financial
statements.

The directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at
any time the financial position of the company and the group and to enable them to ensure that the financial
statements comply with the Companies Act 1985. They are also responsible for safeguarding the assets of the
company and the group and hence for taking reasonable steps for the prevention and detection of fraud and
other irregularities.

Going concern
The directors confirm that, after having made appropriate enquiries, they have a reasonable expectation that the
group and the company have adequate resources to continue operating for the foreseeable future. Accordingly
the directors continue to adopt the going concern basis in the preparation of the accounts.

Policy regarding payment of suppliers
The group’s policy regarding the payment of suppliers is to agree terms of payment at the start of business with
each supplier to ensure that the supplier is made aware of the payment terms, and to pay in accordance with its
contractual or other legal obligations. At 31 December 2005 the group’s trade creditors outstanding
represented approximately 30 (2004: none) days’ purchases. It is not meaningful to disclose a statistic for the
company as it does not trade in its own right.

Auditors
The auditors, PricewaterhouseCoopers LLP have indicated their willingness to continue in office, and a
resolution to tender for the audit and related services will be proposed at the annual general meeting.

By order of the Board




John Parkin
Director                                                                                   16 February 2006




                                                                                                                  6
NIAL Holdings PLC

Independent auditors’ report to the members of
NIAL Holdings PLC

We have audited the group and company financial statements (the ‘‘financial statements’’) of NIAL Holdings
PLC for the year ended 31 December 2005 which comprise the Group Income Statement, the Group and
Company Balance Sheets, the Group and Company Cash Flow Statements, the Group Statement of Recognised
Income and Expense and the related notes. These financial statements have been prepared under the accounting
policies set out therein.

Respective responsibilities of directors and auditors
The directors’ responsibilities for preparing the Annual Report and the financial statements in accordance with
applicable United Kingdom law and International Financial Reporting Standards (IFRSs) as adopted by the
European Union are set out in the Statement of Directors’ Responsibilities.

Our responsibility is to audit the financial statements in accordance with relevant legal and regulatory
requirements and International Standards on Auditing (UK and Ireland). This report, including the opinion, has
been prepared for and only for the company’s members as a body in accordance with Section 235 of the
Companies Act 1985 and for no other purpose. We do not, in giving this opinion, accept or assume
responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it
may come save where expressly agreed by our prior consent in writing.

We report to you our opinion as to whether the financial statements give a true and fair view and have been
properly prepared in accordance with the Companies Act 1985 and Article 4 of the IAS Regulation. 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 other
transactions is not disclosed.

We read other information contained in the Annual Report, and consider whether it is consistent with the
audited financial statements. This other information comprises only the Directors’ Report. We consider the
implications for our report if we become aware of any apparent misstatements or material inconsistencies
within the financial statements. Our responsibilities do not extend to any other information.

Basis of audit opinion
We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) 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. It also includes an assessment of the significant estimates and
judgments made by the directors in the preparation of the financial statements, and of whether the accounting
policies are appropriate to the group’s and company’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 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.




                                                                                                                  7
NIAL Holdings PLC

Opinion
In our opinion:

    •   the group financial statements give a true and fair view, in accordance with IFRSs as adopted by the
        European Union, of the state of affairs of the group and company as at 31 December 2005 and of the
        group profit and the group and company cash flows for the year then ended;

    •   The group financial statements have been properly prepared in accordance with the Companies Act
        1985 and article 4 of the IAS Regulation.




PricewaterhouseCoopers LLP
Chartered Accountants and Registered Auditors
Newcastle upon Tyne                                                                    16 February 2006




                                                                                                               8
NIAL Holdings PLC

Group Income statement for the year ended 31 December 2005

                                                                       2005       2004
                                                               Note   £’000       £’000

 Revenue
 Traffic revenue                                                       27,700     27,837
 Concession revenue                                                    17,293     13,556
 Contractual settlement                                         3       1,950        -

 Rent and other revenue                                                 5,120      3,741

 Total revenue                                                  1      52,063     45,134
 Administrative expenses                                              (13,467)   (10,855)
 Employee benefits costs                                       24      (9,794)    (9,664)
 Depreciation and amortisation                                         (9,337)   (10,268)

 Operating profit                                               3      19,465     14,347
 Finance costs                                                  2      (8,732)    (8,688)
 Finance income                                                 2        61        107

 Profit before tax                                                     10,794      5,766
 Tax on profit for the year                                     4      (3,158)    (1,291)

 Profit for the year                                                    7,636      4,475

 Profit Attributable to equity shareholders                             7,636      4,475



All of the above activities relate to continuing operations.




                                                                                          9
NIAL Holdings PLC

Group Statement of recognised income and expense
for the year ended 31 December 2005

                                                          2005      2004
                                                   Note   £’000     £’000

Profit for the financial year                      20     7,636      4,475


Actuarial losses on defined benefit plans          25     (7,236)   (1,540)

Tax on actuarial losses on defined benefit plans   18      2,171      463

Net losses not recognised in income statement             (5,065)   (1,077)

Total recognised income for the year               21      2,571     3,398




                                                                         10
NIAL Holdings PLC

Group and Parent Company Balance sheets at 31 December 2005

                                                    Group                   Company

                                          2005        2004        2005         2004
                                 Note    £’000       £’000       £’000         £’000

Assets

Non-current assets
Goodwill                          6      100,345      97,208          -            -
Intangible assets                 7        894         1,089          -            -
Property, plant and equipment     8      247,174     247,813          -            -
Investment in subsidiaries        9           -           -      229,809      229,809

                                         348,413     346,110    229,809       229,809
Current assets
Inventories                       10       155         177            -            -
Trade and other receivables       11       8,276       6,158         14            -
Cash and cash equivalents         12       3,326       621            -            -

                                          11,757       6,956         14            -
Liabilities
Current liabilities
Financial liabilities
 Borrowings                       15      (3,226)     (2,500)     (2,854)      (3,722)
 Trade and other payables         13      (8,380)     (6,975)      (663)        (618)
 Current tax liabilities          14      (2,155)     (1,107)         -            -

                                         (13,761)    (10,582)     (3,517)      (4,340)
Net current liabilities                   (2,004)     (3,626)     (3,503)      (4,340)
Non-current liabilities
Financial liabilities
 Borrowings                       15    (105,774)   (103,955)   (101,510)    (103,955)
 Deferred tax liabilities         18     (38,547)    (40,527)         -            -
 Other non-current liabilities    16      (1,729)     (1,606)         -            -
 Retirement benefit liability     25     (29,483)    (22,519)         -            -

                                        (175,533)   (168,607)   (101,510)    (103,955)
Net assets                               170,876     173,877     124,796      121,514




                                                                                   11
NIAL Holdings PLC

Group and Parent Company Balance sheets at 31 December 2005
(continued)

                                                                           Group                   Company

                                                                2005         2004         2005        2004
                                                    Note       £’000        £’000        £’000        £’000

 Shareholders’ equity
 Ordinary shares                                     19         65,480       65,480       65,480      65,480
 Share premium                                       20         62,860       62,860       62,860      62,860
 Other reserves                                      20         66,895       66,895        1,469        1,469
 Retained earnings                                   20        (24,359)     (21,358)     (5,013)      (8,295)

 Total equity                                        21        170,876      173,877      124,796     121,514


The financial statements on pages 9 to 52 were approved by the board of directors on 16 February 2006 and
were signed on its behalf by:
Directors




Rosemary A Radcliffe (Chair)




John Parkin




                                                                                                            12
NIAL Holdings PLC

Group and Company cash flow statements
for the year ended 31 December 2005

                                                                Group                Company

                                                      2005       2004      2005         2004
                                              Note   £’000       £’000     £’000        £’000

Cash flows from operating activities
Cash generated from operations                22      27,792     23,719     (28)         (38)

Interest received                                       61        107        15           77
Interest paid                                         (8,732)    (8,688)   (7,908)      (8,309)
Tax paid                                              (2,748)    (2,252)       -            -

Net cash from operating activities                    16,373     12,886    (7,921)      (8,270)

Cash flows from investing activities
Purchase of acquired intangible assets                (194)          -         -            -
Proceeds from sale of tangible assets                    -         33          -            -
Purchase of property, plant and equipment             (5,488)   (13,034)       -            -
Acquisition of subsidiaries                   23      (4,973)        -         -            -
Dividend received                                        -           -     16,806       11,555

Net cash used in investing activities                (10,655)   (13,001)   16,806       11,555

Cash flows from financing activities
Repayment of borrowings including overdraft           (2,191)    (2,500)   (3,313)      (1,170)
Proceeds from bank loan                                4,750         -         -
Dividends paid to shareholders                        (5,572)    (3,258)   (5,572)      (3,258)

Net cash used in financing activities                 (3,013)    (5,758)   (8,885)      (4,428)

Net Increase/(decrease) in cash equivalents            2,705     (5,873)       -        (1,143)

Cash and cash equivalents at 1 January                 621        6,494        -         1,143

Cash and cash equivalents at 31 December               3,326      621          -            -




                                                                                                13
NIAL Holdings PLC

Accounting policies

The principal accounting policies adopted in the preparation of these financial statements are set out below.
These policies have been consistently applied to all the years presented, unless otherwise stated.

Basis of preparation
These financial statements of NIAL Holdings PLC have been prepared in accordance with International
Financial Reporting Standards (IFRS) and IFRIC interpretations issued by the International Accounting
Standards Board and with those parts of the Companies Act, 1985 applicable to companies reporting under
IFRS. Under IFRS 1 the group have taken the exemption where a subsidiary company adopts IFRS later than
its holding company the subsidiary can value its assets and liabilities at the same value in the holding company
at the time the holding company adopted IFRS. In the subsidiary company Newcastle International Airport
Limited, fixed assets were valued at fair value, being the same basis as the consolidated value. The financial
statements have been prepared under the historical cost convention as modified by the revaluation of land and
buildings. A summary of the more important group accounting policies is set out below.

The preparation of financial statements in conformity with generally accepted accounting principles requires
the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during the reporting period. Although
these estimates are based on management’s best knowledge of the amount, events or actions, actual results
ultimately may differ from those estimates.

Basis of consolidation
The consolidated financial statements incorporate the financial statements of the company and entities
controlled by the group (its subsidiaries) made up to 31 December each year. Control is achieved where the
group has the power to govern the financial and operating policies of an entity so as to obtain benefits from its
activities. The existence and effect of potential voting rights that are currently exercisable or convertible are
considered when assessing whether the group controls another entity.

On acquisition, the assets and 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 capitalised as goodwill. Goodwill is not amortised; instead impairment tests are made
regularly, and any impairment is charged to the income statement. 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 results of subsidiaries acquired or disposed of during the year are included in the group income statement
from the effective date of acquisition or up to the effective date of disposal, as appropriate. 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.




                                                                                                                    14
NIAL Holdings PLC

Revenue recognition
Revenue comprises traffic revenue, rent, concession revenue and sales of services, net of value added tax and
price reductions directly related to sales. Traffic revenue comprises passenger, take-off and aircraft parking
charges and is recognised when the related services are provided. Concession revenue comprises sales-related
revenue from Newcastle International Airport’s shopping outlets, parking facilities and other facilities and is
recognised in line with the revenue generated by the concessionaires. Rent comprises rent for buildings and
land and is recognised over the terms of the contracts. Revenue from sales of services comprises revenue from
the activities of an operating nature, which are recognised when delivery of the services takes place.

As permitted by Section 230(1) of the Companies Act 1985 the parent company has not presented its own
profit and loss account. The profit after tax dealt with in the accounts of the parent company is £8,854,000
(2004 profit £3,260,000).

Segmental reporting
The segment information is based on the management structure and reflects the differences in the risk profiles
of the segments. The group’s segments are described below:

Traffic business
The operations and functions which Newcastle International Airport make available so that airlines can operate
their flights, including facilities required for passengers’ traffic through the airport.

Commercial business
The facilities and services provided at the airport to passengers and others, including parking facilities, shops,
restaurants, resting areas, lounges and hotel facilities.

The vast majority of the operations have been dispensed to private concessionaires.

Segmental assets comprise fixed assets used directly in the operating activities of each segment and current
assets directly attributable to the operating activities of each segment, including trade and other receivables,
and deferred income.

Segment liabilities comprise liabilities that have arisen out of the segment operations, including trade and other
payables.

Financial instruments
Financial instruments comprise borrowings and cash. The main purpose of these financial instruments is to
manage the group’s operations. No trading in financial instruments is undertaken.

Short term debtors and creditors are held at book value.

Loans such as term loans and loans from financial institutions are recognised when obtained at the proceeds
received less transaction costs incurred. In subsequent periods, the loans are measured at amortised cost so that
the effective interest charges are recognised in the income statement over the term of the loan.

Leases
Costs in respect of operating leases are charged to the income statement on a straight-line basis over the lease
term.

Capitalisation of borrowing costs and interest
Issue costs incurred in the raising of debt are capitalised and amortised over the term of the relevant financing
at a constant rate on the carrying amount.

                                                                                                                   15
NIAL Holdings PLC

Property plant and equipment
Property, plant and equipment are measured at cost less accumulated depreciation.

Cost comprises the cost of acquisition and costs directly related to the acquisition up until the time when the
asset is ready for use. In the case of assets of own construction, cost comprises direct and indirect costs
attributable to the construction work, including salaries and wages, materials, components, and work
performed by subcontractors. Loan costs are not included in cost.

The depreciation base is determined as cost less any residual value. Depreciation is charged on a straight-line
basis over the estimated useful lives of the assets and begins when the assets are brought into use. The useful
economic lives and residual values are reviewed annually by management.

The estimated useful lives of the major asset categories are as follows:

Land and buildings:
  Land is not depreciated
  Freehold buildings                  25 - 50 years
  Terminal buildings                  40 - 50 years
  Runway, aprons, taxiways            10 - 50 years
  Metro link contribution             10 years
Vehicles, plant and machinery         5 - 20 years
Fixtures and fittings                 5 - 10 years

Gains and losses on the sale of fixed assets are recognised under administrative expenses.

Investment properties
Investment properties are included in the balance sheet at their historical or deemed cost as per the valuation of
2001 (per note 8). All investment properties are revalued annually by the directors and by external valuers at
least every five years. Any surplus or deficit is transferred to the revaluation reserve except that deficit below
original cost, which is expected to be permanent, is charged to the income statement.

Intangibles
Major projects in which computer software is the principal element are recognised as assets if there is
sufficient certainty that the capital value of future earnings can cover the related costs.

Computer software primarily comprises operating expenses and other directly and indirectly attributable costs.

Amortisation is charged on a straight-line basis commencing upon completion of the project. The amortisation
period is 3 years.

Impairment of fixed tangible assets and goodwill/intangible assets
The carrying amount of intangible assets and property, plant and equipment as well as investments is assessed
periodically to determine whether there are indications of any impairment of the value beyond what is
expressed in the amortisation or depreciation charges. If that is the case, an impairment charge is taken against
the recoverable amount of the assets, if that is lower than the carrying amount.

The recoverable amount of the asset is determined as the higher of the net selling price and the value in use. If
it is not possible to determine a recoverable amount for the individual assets, the assets are assessed together in
the smallest group of assets for which a reliable recoverable amount can be determined in an overall
assessment. The discount factor used in 2005 was 8.25%, being the company discount rate.



                                                                                                                  16
NIAL Holdings PLC

Government grants
Capital based grants are treated as accruals and deferred income in the balance sheet and are amortised on a
straight-line basis over the estimated useful lives of the assets to which they relate. Revenue based grants are
credited to the income statement in the period to which they relate.

Employee benefit costs
Staff costs comprise salaries, wages and pensions of the group.

Regular pension contributions under defined contribution schemes are recognised in the income statement in
the period in which they arise.

In respect of defined benefit plans, obligations are measured at discounted present value whilst plan assets are
recorded at fair value. The operating and financing costs of such plans are recognised separately in the income
statement; service costs are spread systematically over the estimated useful service lives of employees and
financing costs are recognised in the periods in which they arise. Actuarial gains and losses are recognised
immediately in the statement of recognised income and expense.

Share capital and share premium
There are 100,000,000 ordinary shares of £1 each authorised which are split into “A” ordinary shares and “B”
ordinary shares at a ratio of 51:49 respectively.

The “A” ordinary shares and “B” ordinary shares rank pari passu in all respects except that on an issue of
shares “A” ordinary shares are first offered to “A” ordinary shareholders and “B” ordinary shares are first
offered to “B” ordinary shareholders.

Where shares are issued at a premium, a sum equal to the aggregate amount or value of the premium is
transferred to the share premium account.

Inventories
Inventories are stated at cost which is determined on an average cost basis. Where necessary, provision is
made for obsolete, slow moving and defective stocks calculated on a cost basis for specific items.




                                                                                                                   17
NIAL Holdings PLC

Taxation including deferred tax
The tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as
reported in the group 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. The group’s
liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the
balance sheet date.

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.

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries,
except where the group is able to control the reversal of the temporary difference and it is probable that the
temporary difference will not reverse in the foreseeable future.

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 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 reserves, in which case the deferred tax is also dealt with in
reserves.

Cash and cash equivalents
Cash and cash equivalents includes cash and balances in accounts with no or short notice.

Foreign currency translation
Transactions denominated in foreign currencies are translated at the exchange rate ruling at the transaction
date. Gains and losses arising as a result of differences between the exchange rate at the transaction date and
the exchange rate at the date of payment are recognised in the income statement as financial income or
financial expenses.

Receivables, payables and other monetary items denominated in foreign currencies that have not been settled
by the balance sheet date are translated at the exchange rates ruling at the balance sheet date. Differences
between the exchange rate ruling at the balance sheet date and at the transaction date are recognised in the
income statement as financial income or financial expenses.

Finance costs
Financial income and expenses include interest, realised and unrealised exchange differences, amortisation of
mortgage loans and other loans, supplements and value adjustments of securities and similar items.

Receivables
Receivables are recognised in the balance sheet at net realisable value. Provisions are determined on the basis
of an individual assessment of each receivable.


                                                                                                                  18
NIAL Holdings PLC


Dividends
Dividends are recognised as a liability at the time of agreement by the shareholders at the annual general
meeting.

Other liabilities
Other liabilities primarily comprise holiday pay liabilities, income taxes, other taxes and interest payable,
which are measured at book value. Other liabilities also comprise the fair value of derivative financial
instruments.

Investments
Investments in subsidiaries are carried at cost less any provision for diminution in value.



All areas where management have made significant judgements in applying the policies, key assumptions and
estimates have been documented in the above accounting policies.




                                                                                                                19
NIAL Holdings PLC

Financial risk management

The group’s activities expose it primarily to the financial risks of changes in interest rates and liquidity risk.
The board reviews and agrees policies for managing each of these risks, and others and they are summarised
below.

Interest rate risk
The group finances its operations through a mixture of retained profits made by Newcastle International
Airport Limited, long term debt and bank borrowings and borrows at both fixed and floating rates of interest.
The group’s borrowings excluding overdrafts and other loans are all at fixed rates of interest in order to
manage the group’s exposure to interest rate fluctuations.

Liquidity risk
As regards liquidity, the policy of the group has throughout the year been to maintain a mix of short and long
term borrowings with short term flexibility achieved through overdraft facilities.

Credit risk
The group has no significant concentrations of credit risk. The group has implemented policies that require
appropriate credit checks on potential customers before sales commence.

The group has no derivatives or hedging transactions.




                                                                                                                     20
NIAL Holdings PLC

Notes to the financial statements

1      Segmental reporting

Primary reporting format – business segments

 Year ended 31 December 2005                       Traffic        Commercial                 Total
                                                     £’000               £’000               £’000

 Continuing operations
 Revenue                                               27,700               22,413              50,113
 Contractual settlement                                 -                     1,950              1,950

 Total revenue                                         27,700               24,363              52,063
 Segment result                                         6,008               13,457              19,465
 Interest expense                                       -                     -                 (8,732)
 Interest income                                        -                     -                 61

 Profit before tax                                      -                     -                 10,794
 Income taxes                                           -                     -                 (3,158)

 Profit for the year from continuing
 operations                                             -                     -                  7,636



 Segment assets                                       183,474              176,696            360,170

 Total assets                                         183,474              176,696            360,170

 Segment liabilities                                    5,583                 4,952             10,535
 Non allocated Liabilities                              -                     -               178,759

 Total liabilities                                      5,583                 4,952           189,294

 Other segment items
 Capital expenditure                                    4,940              548                   5,488
 Depreciation (net of grants)                           5,607                 3,224              8,831
 Amortisation of intangible assets                    206                  183                389



Costs are allocated between the segments firstly on specific costs identifiable to the segment and all other
remaining costs are allocated on a revenue basis.




                                                                                                          21
NIAL Holdings PLC

1      Segmental reporting (continued)

 Year ended 31 December 2004                          Traffic         Commercial                 Total
                                                        £’000                 £’000              £’000

 Continuing operations
 Revenue                                                  27,837                17,297                 45,134
 Contractual settlement                                     -                     -                     -

 Total revenue                                            27,837                17,297                 45,134
 Segment result                                             5,546                 8,801                14,347
 Interest expense                                           -                     -                    (8,688)

 Interest income                                            -                     -                107

 Profit before tax                                          -                     -                     5,766
 Income taxes                                               -                     -                    (1,291)

 Profit for the year from continuing
 operations                                                 -                     -                     4,475



 Segment assets                                          200,555               152,511             353,066

 Total assets                                            200,555               152,511             353,066

 Segment liabilities                                        4,283                 3,799                 8,082
 Non allocated Liabilities                                                                         171,107

 Total liabilities                                          4,283                 3,799            179,189

 Other segment items
 Capital expenditure                                        7,138                 7,142                14,280
 Depreciation (net of grants)                               6,542                 3,534                10,076
 Amortisation of intangible assets                        38                    34                     72



There are immaterial sales between the business segments. Segment assets include property, plant and
equipment, goodwill, stocks, debtors, and operating cash. Segment liabilities comprise operating liabilities.
Capital expenditure comprises additions to property, plant and equipment, including additions resulting from
acquisitions through business combinations.

Secondary reporting format – geographical segments
All of the group’s turnover is derived in the United Kingdom therefore it is considered to operate in a single
segment.

Company
The company’s business is to invest in subsidiaries and, therefore, it operates in a single segment.




                                                                                                                 22
NIAL Holdings PLC

2     Finance costs - net

                                                             Group                Company

                                                   2005       2004      2005         2004
                                                   £’000     £’000      £’000        £’000
Interest expense

Interest payable on bank borrowings                (8,162)    (8,074)   (7,908)      (8,309)

Net interest payable relating to defined benefit    (516)     (542)         -            -
pension scheme (note 25)
Amortisation of issue costs of bond                  (54)      (54)         -            -
Other finance costs                                    -       (18)         -            -

Total interest expense                             (8,732)    (8,688)   (7,908)      (8,309)

Interest income
Bank interest receivable                             61         92        15            77
Other interest receivable                              -        15          -            -

Total interest income                                61        107        15            77

Finance cost - net                                 (8,671)    (8,581)   (7,893)      (8,232)




                                                                                             23
NIAL Holdings PLC

3        Profit before taxation

                                                                            Group                       Company

                                                                2005          2004           2005          2004
                                                               £’000          £’000         £’000          £’000
 The following charges/(credits) have been included in
 arriving at operating profit:

 Staff costs (note 24)                                           9,794          9,664               -          -
 Depreciation of property, plant and equipment
 Owned assets                                                    8,948         10,196               -          -
 Amortisation of intangibles                                      389            72                 -          -

 Profit on disposal of fixed assets                                    -        (44)                -          -
 Operating lease- other                                             19           19                 -          -
 Operating lease- plant and machinery                                  -        310                 -          -

 Repairs and maintenance expenditure - property                   722           700                 -          -
 Repairs and maintenance expenditure - plant                      957           903                 -          -
 equipment
 Trade receivables impairment                                     353           155
 Contractual settlement                                        (1,950)             -                -          -
 Amortisation of government grants                               (117)         (120)                -          -



The contractual settlement relates to a renegotiation of existing contract terms with a supplier.

Services provided by the group’s auditor
During the year the group obtained the following services from the group’s auditor at costs as detailed below:

                                                                            Group                       Company

                                                                2005          2004           2005          2004
                                                               £’000         £’000          £’000          £’000
 Audit services
 Statutory audit                                                  62             50                 7         7

 Tax services compliance                                          12             12                 -          -
 Other services not covered above                                 72             60                 -          -

 Total                                                           146            122                 7         7




                                                                                                               24
NIAL Holdings PLC

4        Taxation

                                                                                                     Group

                                                                                         2005          2004
                                                                                        £’000         £’000
 Current tax
 Current year                                                                             3,977         2,752
 Prior year                                                                               (182)         (490)

 Total current tax                                                                        3,795         2,262

 Deferred tax

 Current year                                                                             (788)         (914)

 Prior year                                                                               151            (57)

 Total deferred tax                                                                       (637)         (971)

 Taxation                                                                                 3,158         1,291


Tax on items credited to equity
                                                                                                     Group

                                                                                         2005          2004
                                                                                        £’000         £’000
 Tax on actuarial losses on defined benefit plans                                         2,171         463



The tax for the period is lower than the standard rate of corporation tax in the UK (30%). The differences are
explained below:

                                                                                                     Group

                                                                                         2005          2004
                                                                                        £’000         £’000
 Profit on ordinary activities before taxation                                           10,794        5,766
 Profit on ordinary activities multiplied by the                                          3,238        1,730
 standard rate of corporation tax in the UK of 30%

 Effects of:

 Expenses not deductible for tax purposes                                                  47           252
 Other                                                                                     (96)        (144)
 Adjustments in respect of prior periods                                                   (31)        (547)

 Tax charge for the year                                                                  3,158        1,291




                                                                                                            25
NIAL Holdings PLC

5       Dividends
                                                                                     2005           2004
                                                                                    £’000          £’000

 Dividends on equity shares:
 Ordinary – 8.51p (2004:4.98p)                                                         5,572         3,258

Under IFRS the 2005 dividend has not been accrued for in the financial statements for the year ended 31
December 2005 as it was proposed post year end. Dividends proposed for the year amount to £7,123,000.


6       Goodwill
Group
                                                                                                   £’000

 Cost
 At 1 January 2005                                                                                  97,208
 Additions (see note 23)                                                                             3,137

 At 31 December 2005                                                                               100,345

 Aggregate impairment

 At 1 January 2005 and 31 December 2005                                                                 -

 Net book amount at 31 December 2005                                                               100,345

 Net book amount at 31 December 2004                                                                97,208



Goodwill of £97,208,000 arose on the acquisition of Newcastle International Airport Limited in 2001 and was
tested for impairment in accordance with IAS 36

During the year, the acquired goodwill was tested for impairment in accordance with IAS 36.

The allocation of goodwill to cash-generating units has been completed during the year based upon revenue
recognised in each division. The carrying amounts of goodwill by division are as follows:

The key assumption behind the allocation of goodwill is the revenue generated by each segment of the
business. The viewpoint of management is that this is the most appropriate method of allocating goodwill.




                                                                      Traffic    Commercial         Total

                                                                       £’000          £’000         £’000

 UK                                                                     51,720         48,625     100,345


All of the recoverable amounts were measured on value in use basis.


                                                                                                         26
NIAL Holdings PLC

7       Intangibles

Group
Acquired intangible assets

                                                                                                   Computer
                                                                                                    software
                                                                                                       £’000

 Cost
 At 1 January 2005                                                                                        1,161

 Additions                                                                                              194

 At 31 December 2005                                                                                      1,355

 Accumulated amortisation
 At 1 January 2005                                                                                       72
 Charge for the year                                                                                    389

 At 31 December 2005                                                                                    461

 Net book amount

 At 31 December 2005                                                                                    894

 At 31 December 2004                                                                                      1,089



The computer software capitalised principally relates to the recent acquisition of SAP software.




                                                                                                               27
NIAL Holdings PLC

8       Property, plant and equipment

Group
                                                                         Other
                                                                      fixtures,      Property,
                                                 Vehicles       fittings, tools      plant and
                               Land and               and                  and    equipment in
                               buildings        machinery          equipment          progress            Total
                                   £’000            £’000               £’000           £’000            £’000

 Cost
 At 1 January 2005                 240,066            37,058             3,113           5,027       285,264

 On Acquisitions                      2,796            24                    1               -            2,821
 Additions                           147               1,712                15           3,614            5,488
 Transfers                            46               4,256                  -        (4,302)                -

 At 31 December 2005               243,055            43,050             3,129           4,339       293,573

 Accumulated
 depreciation
 At 1 January 2005                   20,740           14,456             2,255               -           37,451
 Charge for the year                  4,992            3,683              273                -            8,948

 At 31 December 2005                 25,732           18,139             2,528               -           46,399

 Net book amount

 At 31 December 2005               217,323            24,911              601            4,339       247,174

 At 31 December 2004               219,326            22,602              858            5,027       247,813



The company holds no tangible fixed assets, as such the note above relates to the group only position.

Freehold land and buildings includes investment properties amounting to £10,234,000 represented by
properties at a fair valuation of £10,150,000 and properties at a cost of £84,000. The value of the properties
carried at a fair valuation was assessed by Drivers Jonas, a firm of independent chartered surveyors, on 4 May
2001 in accordance with the Royal Institution of Chartered Surveyors Appraisal and Valuation Manual on an
Open Market basis. In the opinion of the directors there has been no material change in the value of the
investment properties during the year. There is no depreciation on investment properties.

The freehold land and buildings acquired in Prestwick Properties Limited were brought in to the group at fair
value.




                                                                                                                28
NIAL Holdings PLC

9        Investments

 Shares in group undertaking                                                                          Company
                                                                                                         £’000

 At 31 December 2004 & 31 December 2005                                                                  229,809



Investments in group undertaking are stated at cost. The company’s subsidiary undertaking is Newcastle
International Airport Limited, a company incorporated and operating in England. NIAL Holdings PLC owns
100% of the ordinary share capital of this company whose business is the operation and management of
Newcastle International Airport (note 29).


10       Inventories

                                                                                      Group              Group

                                                                                         2005             2004
                                                                                         £’000           £’000

 Spares for plant, vehicles and machinery together with materials for
 premises maintenance                                                                     155              177




11       Trade and other receivables

                                                                           Group                      Company

 Amounts falling due within one year:                          2005          2004           2005          2004
                                                              £’000         £’000          £’000         £’000
 Trade debtors                                                  6,173            3,868            -           -
 Less: provisions for impairment of receivables                (353)          (152)               -           -

 Trade receivables - net                                        5,820            3,716            -           -
 Other debtors                                                   49            293               14           -
 Prepayments and accrued income                                 2,407            2,149            -           -

 Total                                                          8,276            6,158           14           -



Concentrations of credit risk with respect to trade receivables are limited due to the group’s customer base
being large and unrelated. Due to this, management believe there is no further credit risk provision required in
excess of normal provisions for doubtful receivables.




                                                                                                               29
NIAL Holdings PLC

12      Cash and cash equivalents

                                                              Group             Company

                                                     2005      2004     2005       2004
                                                     £’000    £’000     £’000      £’000
Cash at bank and in hand                              3,326     621         -          -



13      Trade and other payables - current

                                                              Group             Company

                                                     2005      2004     2005       2004
                                                     £’000    £’000     £’000      £’000
Trade payables                                        703        19         -          -

Amounts owed to group undertakings                       -        -      213        183

Amounts owed to related parties (trading balances)    188       176         -          -
balances)
Other tax and social security payable                 217       203         -          -
Other creditors                                       466         -         -          -
Accruals                                              6,302     6,577    450        435
Deferred income                                       504         -         -          -

Total                                                 8,380     6,975    663        618



14      Current tax liabilities

                                                              Group             Company

                                                     2005      2004     2005       2004
                                                     £’000    £’000     £’000      £’000
Current tax liabilities                               2,155     1,107       -          -




                                                                                       30
NIAL Holdings PLC

15       Financial liabilities - borrowings

Current
                                                                         Group                     Company

                                                             2005          2004          2005            2004
                                                            £’000         £’000         £’000          £’000
 Bank loans and overdrafts due within one year or
 on demand:
 Secured                                                      (372)            -             -               -
 Unsecured                                                   (2,854)       (2,500)       (2,854)         (3,722)

 Total                                                       (3,226)       (2,500)       (2,854)         (3,722)




Non-current
                                                                         Group                     Company

                                                             2005          2004          2005            2004
                                                            £’000         £’000         £’000          £’000
 Bank loans

 Secured                                                      (4,264)          -             -               -

 Debenture loans
 7.25% UK £84.896m bonds due 2021                            (84,010)     (83,955)      (84,010)      (83,955)
 Other unsecured loan notes                                  (17,500)     (20,000)      (17,500)      (20,000)

 Total                                                      (105,774)   (103,955)     (101,510)      (103,955)

Unsecured loan notes
The Unsecured long term loan notes are unsecured and carry interest at a fixed rate of 8.25% and are repayable
at £2,500,000 per annum over 10 years commencing 31 March 2004. These loans are held with the
shareholders of the ultimate parent company, Newcastle Airport Local Authority Holding Company Limited.

Bonds
The bonds were issued on 4 April 2002 and are stated net of unamortised issue costs of £886,000 (2004:
£940,000). The bonds carry fixed interest at 7.25% and are repayable in full on 7 June 2021. They are
guaranteed by Newcastle International Airport Limited and are listed on the London Stock Exchange.

Overdraft
The company has a bank overdraft facility that is unsecured and carries an interest rate of 1% over LIBOR.
There is a right of set-off and unlimited cross guarantee between NIAL Holdings PLC and Newcastle
International Airport Limited in relation to the overdraft.




                                                                                                              31
NIAL Holdings PLC

15     Financial liabilities – borrowings (continued)
Bank loan
The company has a loan which was taken out during 2005 for £4,750,000 to acquire the shares in Park & Fly
Limited and Prestwick Properties Limited and carries an interest rate of 1.125% over the bank’s base rate and
is repayable over 20 years. It is secured on the assets of Prestwick Properties Limited.

The effective interest rates at the balance sheet dates were as follows


                                                                                      2005              2004
                                                                                         %                 %

 Bank overdraft                                                                        5.75               5.5

 Bank borrowings                                                                       5.75                 -

 Other unsecured loans                                                                 8.25             8.25

 UK£ bonds                                                                             7.25              7.25



16     Other non-current liabilities

                                                                          Group                   Company

 Government grants                                              2005       2004          2005           2004
                                                               £’000       £’000         £’000         £’000
 1 January                                                       1,606       1,726            -             -
 Released to income statement                                   (117)       (120)             -             -
 Grants received                                                 240            -             -             -

 31 December                                                     1,729       1,606            -             -




                                                                                                                32
NIAL Holdings PLC

17     Financial instruments

Numerical financial instruments disclosures are set out below. Additional disclosures are set out in the
accounting policies relating to risk management.

There are no hedging activities undertaken by the group.

In accordance with IAS 39, 'Financial instruments: Recognition and measurement', NIAL Holdings PLC has
reviewed all contracts for embedded derivatives that are required to be separately accounted for if they do not
meet certain requirements set out in the standard. No such embedded derivatives were found

Fair values of non-current borrowings

Set out below is a comparison by category of book values and fair values of the company’s financial assets and
liabilities at 31 December 2005:


                                                                       Group                               Group
                                                                         2005                               2004
                                                  Book value         Fair value     Book value         Fair value
                                                        £’000            £’000            £’000             £’000

 Cash at bank                                               3,326           3,326           621               621
 Secured Loan                                              (4,635)        (4,635)              -                  -

 Overdraft                                                 (354)           (354)               -                  -

 Unsecured loan notes                                   (20,000)         (20,000)         (22,500)         (22,500)

 Bonds                                                  (85,000)       (102,085)          (85,000)         (98,141)




                                                                     Company                           Company
                                                                          2005                              2004
                                                  Book value         Fair value     Book value         Fair value
                                                        £’000            £’000            £’000             £’000

 Overdraft                                                 (354)           (354)               -                  -
                                                       (20,000)         (20,000)        (22,500)           (22,500)
 Unsecured loan notes
                                                       (85,000)         (102,085)         (85,000)         (98,141)
 Bonds


The fair value of the financial liabilities shown above have been calculated by reference to market values. The
bank and other loans repayable after more than one year are gross of capitalised costs £886,000.




                                                                                                               33
NIAL Holdings PLC

17     Financial instruments (continued)
Maturity of financial liabilities and undrawn commitments
The maturity profile of the carrying amount of the group’s non-current liabilities, at 31 December was as
follows:


                                                                       Group                          Group
                                                                         2005                           2004
                                                       Debt              Total            Debt         Total

                                                      £’000              £’000           £’000         £’000

 In more than one year but not more than two            2,872            2,872           2,500              2,500
 years
 In more than two years but not more than               8,616            8,616           7,500              7,500
 five years

 In more than five years                               95,172           95,172          94,896          94,896

 Total borrowings                                     106,660         106,660          104,896         104,896
 Unamortised finance cost                              (886)             (886)           (941)          (941)

 Total borrowings net of finance costs                105,774         105,774          103,955         103,955



                                                                    Company                          Company
                                                                         2005                               2004

                                                         Debt            Total          Debt                Total

                                                        £’000           £’000            £’000              £’000

 In more than one year but not more than two            2,500            2,500           2,500              2,500
 years
 In more than two years but not more than five          7,500            7,500           7,500              7,500
 years

 In more than five years                               92,396          92,396           94,896          94,896

 Total borrowings                                     102,396         102,396         104,896         104,896
 Unamortised finance cost                               (886)            (886)           (941)              (941)

 Total borrowings net of finance costs                101,510         101,510         103,955         103,955
 nancial cost




                                                                                                               34
NIAL Holdings PLC

18     Deferred tax

Deferred tax is calculated in full on temporary differences under the liability method using a tax rate of 30%
(2004: 30%).

The movement on the deferred tax account is as shown below:

                                                                              Group                     Company

                                                                 2005           2004           2005           2004
                                                                £’000          £’000          £’000          £’000
 At 1 January                                                    40,527       41.961                -              -

 Income and expense credit                                        (637)          (971)              -              -
 On acquisition of subsidiary                                      828               -              -              -

 Amount credited to statement of total recognised
 income and expense                                              (2,171)         (463)              -              -

 At 31 December                                                  38,547         40,527              -              -



The movements in deferred tax assets and liabilities (prior to the offsetting of balances within the same
jurisdiction as permitted by IAS12) during the period are shown below.

Deferred tax assets and liabilities are only offset where there is a legally enforceable right of offset and there is
an intention to settle the balances net.


 Deferred tax liabilities                                                           Accelerated tax depreciation
                                                                                                              £’000

 At 1 January 2005                                                                                            47,282

 Income and expense credit                                                                                     (637)
 Acquisition of subsidiary                                                                                      828
 At 31 December 2005                                                                                          47,473




                                                                                                                   35
NIAL Holdings PLC

18     Deferred tax (continued)

 Deferred tax assets                                                 Pension          Other                Total
                                                                        £’000          £’000                £’000

 At 1 January 2005                                                        6,755             -                6,755

 Income and expense charge/(credit)                                       (82)            82                     -
 Recognised in SoRIE                                                     2171               -                2,171
 At 31 December 2005                                                      8,844           82                 8,926



All of the deferred tax assets were available for offset against deferred tax liabilities and hence the net deferred
tax provision at 31 December 2005 was £38,547,000 (2004: £40,527,000)


19     Called up equity share capital

Group and company


                                                                                       2005                 2004
                                                                                       £’000                £’000
 Authorised:

 100,000,000 ordinary shares of £1 each                         A                     51,000                51,000
                                                                B                     49,000                49,000

                                                                                     100,000               100,000

 Allotted, issued, called-up and fully paid:

 65,480,392 ordinary shares of £1 each                          A                     33,395                33,395

                                                                B                     32,085                32,085

                                                                                      65,480                65,480



The “A” Ordinary shares and “B” Ordinary shares rank pari passu in all respects except that on an issue of
shares “A” Ordinary shares are first offered to “A” Ordinary shareholders and “B” Ordinary shares are first
offered to “B” Ordinary shareholders.




                                                                                                                 36
NIAL Holdings PLC

20     Reserves

 Group                                                   Share                               Capital          Profit
                                                      premium               Merger      contribution        and loss
                                                       account              reserve          reserve        account
                                                          £’000              £’000              £’000             £’000

 At 1 January 2005                                          62,860            65,426             1,469        (21,358)
 Profit for the year                                           -                  -                -               7,636
 Actuarial loss recognised in the pension                      -                  -                -              (7,236)
 scheme
 Dividend paid                                                 -                  -                -              (5,572)

 Movement on deferred tax relating to pension                  -                  -                -               2,171
 liability

 At 31 December 2005                                        62,860            65,426             1,469        (24,359)



The merger reserve arose on the acquisition of Newcastle International Airport Limited which was effected
through a share for share exchange. On adoption of IFRS the accounting for prior acquisitions remains
unchanged as it has not been revisited.


 Company                                                         Share              Capital              Profit
                                                              premium          contribution            and loss
                                                               account              reserve            account
                                                                   £’000               £’000             £’000

 At 1 January 2005                                                   62,860             1,469            (8,295)
 Profit for the financial year                                          -                 -                8,854
 Dividend paid                                                          -                 -              (5,572)

 At 31 December 2005                                                 62,860             1,469            (5,013)




                                                                                                              37
NIAL Holdings PLC

21     Shareholders’ funds and statement of changes in shareholders’ equity

 Group                                      Share                                      Profit
                               Share     premium         Merger           Capital    and loss        Total
                              capital     account        reserve     contribution    account        equity
                               £’000         £’000         £’000           £’000       £’000         £’000

 At 1 January 2004              65,480        62,860       65,426            1,469    (21,498)      173,737
 Net recognised income              -               -          -                -        3,398        3,398
 Dividends paid                     -               -          -                -      (3,258)       (3,258)

 At 31 December 2004            65,480        62,860       65,426            1,469    (21,358)      173,877
 Net recognised income              -               -          -                -        2,571        2,571
 Dividends paid                     -               -          -                -      (5,572)       (5,572)

 At 31 December 2005            65,480        62,860       65,426            1,469    (24,359)      170,876




 Company                                                   Share                       Profit
                                           Share        premium           Capital    and loss        Total
                                          capital        account     contribution    account        equity
                                          £’000            £’000            £’000       £’000        £’000

 At 1 January 2004                           65,480         62,860           1,469      (8,297)     121,512
 Net recognised income                        -                -                -        3,260         3,260
 Dividends paid                               -                -                -       (3,258)      (3,258)

 At 31 December 2004                         65,480         62,860           1,469      (8,295)     121,514
 Net recognised income                        -                -                -        8,854         8,854
 Dividends paid                               -                -                -       (5,572)      (5,572)

 At 31 December 2005                         65,480         62,860           1,469      (5,013)     124,796



The statement of changes in shareholders’ funds and the statement of changes in shareholders’ equity are the
same and therefore have been presented in the same table.




                                                                                                          38
NIAL Holdings PLC

22     Cash flow from operating activities

Reconciliation of operating profit/(loss) before tax to net cash inflow from operating activities:

                                                                            Group                        Company

 Continuing operations                                          2005          2004           2005           2004
                                                               £’000          £’000         £’000           £’000
 Profit /(loss) before tax                                      10,794          5,766        (7,967)        (8,426)
 Adjustments for:
 Depreciation                                                    8,948         10,196                -          -
 Loss on disposal of property, plant and equipment                  -            35                  -          -
 Amortisation of intangibles                                     389             72                  -          -
 Release deferred income                                        (117)          (120)                 -          -
 Interest income                                                  (61)         (107)                 -          -
 Interest expense                                                8,732          8,688          7,908         8,309

 Changes in working capital (excluding effects of
 acquisitions of subsidiaries)

 Decrease/(increase) in inventories                               22            (81)                 -          -
 Increase in trade and other receivables                       (2,118)         (680)           (14)             -
 Increase/(decrease) in payables                                 1,352         (279)            45            79
 Decrease in pension payments                                   (272)          (922)                 -          -
 Increase in other non-current liabilities                       123               -                 -          -
 Increase in provisions                                             -           1,151                -          -

 Cash generated from continuing operations                      27,792         23,719          (28)           (38)




                                                                                                                39
NIAL Holdings PLC

23      Acquisitions

The group purchased Prestwick Properties limited during the year for a total consideration of £5,075,000 and
acquired 100% of the voting shares. From the date of acquisition to 31 December 2005 the acquisition
contributed £702,773 to turnover, £396,536 to profit after interest, £287,179 to the group’s net operating cash
flows, £116,000 in respect of taxation and utilised £20,312 for capital expenditure.

The residual excess over the net assets acquired is recognised as goodwill in the financial statements.

Prestwick Properties Limited (including Newcastle Park and Fly Limited)


                                                                         Carrying value
                                                                         pre acquisition
                                                                                                  Fair value
                                                                                    £’000
                                                                                                          £’000
 Property, plant and equipment                                                        216                    2,821
 Receivables                                                                             3                    3
 Payables                                                                             (67)                  (67)
 Provisions                                                                              9                    9
 Taxation
 - Current                                                                            (62)                  (62)
 - Deferred                                                                             (1)                (828)
 Cash and cash equivalents                                                            102                  102
 Loans                                                                                (40)                  (40)

 Net assets acquired                                                                  160                    1,938
 Goodwill                                                                               4,915                3,137

 Consideration                                                                          5,075                5,075

 Consideration satisfied by:
 Cash                                                                                   5,075                5,075



The fair value adjustments made relate to the revaluation of the freehold land owned by Prestwick Properties
Limited and the subsequent deferred tax provision on the revalued land.




                                                                                                                   40
NIAL Holdings PLC

23        Acquisitions (continued)

The outflow of cash and cash equivalents on the acquisition of Prestwick Properties Limited is calculated as
follows:

                                                                                                      £’000



 Cash consideration                                                                                     (5,075)
 Cash acquired                                                                                          102

                                                                                                         4,973



The results of operations for the whole year were as follows:


 Group                                                                                                 2005
                                                                                                      £’000
 Revenue                                                                                                716
 Profit                                                                                                 394

The above numbers have not been included on the face of the income statement, as they are not considered to
be material.


24        Employees and directors

                                                                                     2005              2004
                                                                                    £’000             £’000

 Staff costs for the group during the year
 Wages and salaries                                                                     8,286             8,192
 Social security costs                                                                678               690
 Other pension costs (note 25)                                                        830               782

                                                                                        9,794             9,664




                                                                                                               41
NIAL Holdings PLC

24       Employees and directors (continued)

Average monthly number of people (including executive directors) employed:


 By business group                                                                  2005              2004
                                                                                Number             Number

 Traffic                                                                             220               220
 Commercial                                                                            61               61
 Administration                                                                        52               51
 Total                                                                               333               332




Directors
                                                                                    2005              2004
                                                                                   £’000             £’000
 Aggregate emoluments                                                                826               648



Retirement benefits are accruing to one (2004: one) executive director under a defined benefit pension scheme.
Included in the above is £250,000 payable by Copenhagen Airports A/S.

Highest paid director
                                                                                    2005              2004
                                                                                   £’000             £’000

 Aggregate emoluments:

 Salary (including annual incentive payments and benefits in kind)                   519               267

 Defined benefit pension scheme:
 Accrued pension at end of year                                                         5                 3
 Accrued lump sum at end of year                                                       14               10




                                                                                                              42
NIAL Holdings PLC

25     Pension commitments

The Company’s subsidiary undertaking, Newcastle International Airport Limited, is an admitted body to the
Tyne and Wear County Superannuation Fund. The scheme is of the defined benefit type.

The pension cost is assessed in accordance with the advice of an independent qualified actuary using the
projected unit method.

With effect from 31 December 2002 the Fund was closed to new entrants. Accordingly, under the projected
unit method of actuarial valuation the current service cost will increase as members of the Fund approach
retirement.

The Group also runs a defined contribution scheme for the benefit of new employees. Contributions in the year
amounted to £26,000 (2004: £17,000).

The valuation used for the disclosures has been based on the most recent actuarial valuation as at 31 December
2005. The amounts set out below are derived from the group’s allocation of the Tyne and Wear County
Superannuation Fund. Scheme assets are stated at their market value at 31 December 2005.

Defined benefit plans
The principal actuarial assumptions used were as follows:


                                                                                    2005              2004
                                                                                       %                   %

 Rate of increase in pensionable salaries                                            3.50              3.50
 Rate of increase in pensions in payment and deferred pensions                       2.70              2.70
 Discount rate                                                                       4.80              5.40
 Inflation assumption                                                                2.75              2.75
 Expected return on equities/property                                                7.75              8.00
 Expected return on bonds                                                            4.45              4.60

 Expected return on cash                                                             4.50              4.75




                                                                                                               43
NIAL Holdings PLC

25      Pension commitments (continued)

Assumptions regarding future mortality experience are set based on advice from published statistics and
experience in each territory. The average life expectancy in years of a pensioner retiring at the age of 65 is as
follows.




                                                                                        2005              2004

 Male                                                                                      19                18
 Female                                                                                 21.5                 22



 Reconciliation of defined benefit obligation                                           2005              2004
                                                                                       £’000              £’000

 Defined benefit obligation at 1 January                                                63,738             59,662
 Current service cost                                                                    804                765
 Past service cost                                                                          -                  -
 Interest cost                                                                            3,417             3,270
 Employee contributions                                                                  341                352
 Actuarial losses                                                                       12,749              1,369

 Benefits and expenses paid                                                             (2,097)            (1,680)

 Defined benefit obligation at 31 December                                              78,952             63,738



 Reconciliation of assets over the year                                                 2005              2004
                                                                                       £’000              £’000

 Plan assets at 1 January                                                               41,219             38,285
 Employer contributions                                                                   1,592             1,705
 Member contributions                                                                    341                352
 Benefits and expenses paid                                                             (2,097)            (1,680)
 Expected return on assets                                                                2,901             2,728

 Actuarial gain/(loss) on plan assets                                                     5,513            (171)

 Plan assets at 31 December                                                             49,469             41,219
 Actual return on assets                                                                  8,414             2,557




                                                                                                                    44
NIAL Holdings PLC

25       Pension commitments (continued)

The amounts recognised in the balance sheet are determined as follows:


                                                                                  2005       2004
                                                                                  £’000     £’000

 Present value of funded obligations                                             (78,952)   (63,738)
 Fair value of plan assets                                                         49,469    41,219

 Net liability recognised in the balance sheet                                   (29,483)   (22,519)



The amounts recognised in the income statement are as follows:


                                                                                   2005      2004
                                                                                  £’000     £’000

 Current service cost                                                               804       765
 Interest cost                                                                    3,417       3,270
 Expected return on plan assets                                                  (2,901)     (2,728)

 Total                                                                            1,320       1,307



The total charge has been allocated between staff costs and net finance costs.


Analysis of the movement in the balance sheet asset


                                                                                   2005      2004
                                                                                  £’000     £’000

 1 January                                                                       22,519      21,377
 Total expense as above                                                           1,320       1,307
 Actuarial losses charge recognised in SORIE                                      7,236       1,540
 Contributions paid                                                              (1,592)     (1,705)

 31 December                                                                     29,483      22,519

The actual return on plan assets was£ 8,414,000 (2004: £2,557,000).




                                                                                                    45
NIAL Holdings PLC

26     Contingent liabilities

At 31 December 2005 and 31December 2004 there are no contingent liabilities


27     Capital and other financial commitments

                                                                         Group                    Company

                                                             2005          2004          2005          2004
                                                            £’000         £’000         £’000         £’000
 Contracts placed for future capital expenditure not
 provided in the financial statements                         3,500           99             -                -




28     Ultimate parent undertaking and related party transactions

Newcastle Airport Local Authority Holding Company Limited, incorporated in Great Britain, is the ultimate
controlling party and the parent undertaking of the smallest and largest group to consolidate these financial
statements. Copies may be obtained from the company secretary.

Under a contract for management services, management fees charged in the year by Copenhagen Airport
Development International A/S, a subsidiary of Copenhagen Airports A/S, totalled £2,198,149 (2004:
£1,408,800) of which £188,000 (2004: £176,000) was outstanding at the year end. Copenhagen Airports A/S
has a 49% interest in the share capital of NIAL Holdings PLC, via its shareholding in CPH Newcastle Limited.

Fees and rental costs incurred by Newcastle International Airport Limited and recharged to Copenhagen
Airports A/S, amounted to £nil (2004: £37,062) in the year of which £nil (2004: £19,344) was outstanding at
the year end.

In addition to the above an amount of £nil (2004: £479,000) has been invoiced from Copenhagen Airports A/S
and capitalised within fixed assets. This amount relates to the implementation and customisation of the new IT
system




                                                                                                              46
NIAL Holdings PLC

29 Principal subsidiaries

Particulars of subsidiary undertakings


    (a)    The company’s subsidiary undertakings are Newcastle International Airport Limited, Newcastle
           Park & Fly Limited, Prestwick Properties Limited.

    (b)    NIAL Holdings PLC owns 100% of the share capital of Newcastle International Airport Limited
           who in turn own 100% of the share capital of Prestwick Properties Limited who own 100% of the
           share capital of Newcastle Park & Fly Limited.

    (c)    The results of all subsidiaries are incorporated within the consolidation. The results of subsidiaries
           acquired during the year are included in the group income statement from the effective date of
           acquisition.

    (d)    NIAL Holdings PLC holds 100% of the voting rights in all three companies.

    (e)    Newcastle International Airport Limited operates and manages Newcastle International Airport,
           Prestwick Properties Limited is the holding company for Newcastle Park & Fly Limited.

    (f)    Newcastle Park & Fly Limited operates an off site car parking facility.




                                                                                                                47
NIAL Holdings PLC

30      Reconciliation of net assets and profit under UK GAAP to IFRS

NIAL Holdings PLC reported under UK GAAP in its previously published financial statements for the year
ended 31 December 2004. The analysis below shows a reconciliation of net assets and profit as reported under
UK GAAP as at 31 December 2004 to the revised net assets and profit under IFRS as reported in these
financial statements. In addition there is a reconciliation of the net assets under UK GAAP to IFRS at the
transition date for this company being 1 January 2004.

Reconciliation of equity at 1 January 2004 (date of transition to IFRS)
Group                                                                                 Effect of
                                                                      Previous       transition
                                                                        GAAP           to IFRS       IFRS
                                                                          £’000          £’000       £’000
 Property, plant and equipment                                            245,015             -      245,015
 Goodwill                                                                  45,510         51,698      97,208

 Total non-current assets                                                 290,525         51,698     342,223

 Inventories                                                                 96               -          96
 Trade and other receivables                                                5,478             -         5,478

 Cash and cash equivalents                                                  6,494             -         6,494

 Total current assets                                                      12,068             -       12,068

 Total assets                                                             302,593         51,698     354,291

 Interest-bearing loans                                                (106,455)              -    (106,455)
 Trade and other payables                                                  (5,488)            -       (5,488)
 Current tax liabilities                                                   (1,096)            -       (1,096)

 Other liabilities                                                        (26,698)      (40,817)     (67,515)

 Total liabilities                                                     (139,737)        (40,817)   (180,554)

 Total assets less total liabilities                                      162,856         10,881     173,737

 Share capital and share premium                                          128,340             -      128,340
 Merger reserve                                                            65,426             -       65,426
 Capital contribution                                                       1,469             -         1,469

 Retained earnings                                                        (32,379)        10,881     (21,498)

 Total shareholders’ equity                                               162,856         10,881     173,737



The adjustments relate to adoption of goodwill at the same value in the accounts of Copenhagen Airports A/S
when they acquired a shareholding in NIAL Holdings PLC and the deferred tax on the revalued assets.




                                                                                                           48
NIAL Holdings PLC

30 Reconciliation of net assets and profit under UK GAAP to IFRS
(continued)


Reconciliation of equity at 31 December 2004
Group                                                                                    Effect of
                                                                          Previous      transition
                                                                            GAAP          to IFRS          IFRS
                                                                             £’000          £’000          £’000
 Property, plant and equipment                                               248,902         (1,089)      247,813
 Goodwill                                                                     42,882         54,326         97,208
 Intangible assets                                                                -           1,089          1,089

 Total non-current assets                                                    291,784         54,326       346,110

 Inventories                                                                   177               -           177
 Trade and other receivables                                                   6,158             -           6,158
 Cash and cash equivalents                                                     621               -           621

 Total current assets                                                          6,956             -           6,956

 Total assets                                                                298,740         54,326       353,066

 Interest-bearing loans                                                    (106,455)             -       (106,455)
 Trade and other payables                                                     (6,762)        (213)         (6,975)
 Current tax liabilities                                                      (1,107)            -         (1,107)
 Other liabilities                                                          (28,000)       (36,652)       (64,652)

 Total liabilities                                                         (142,324)       (36,865)      (179,189)

 Total assets less total liabilities                                         156,416         17,461       173,877
 Share capital and share premium                                             128,340             -        128,340
 Merger reserve                                                               65,426             -          65,426
 Capital Contribution                                                          1,469             -           1,469
 Retained earnings                                                          (38,819)         17,461       (21,358)

 Total shareholders’ equity                                                  156,416         17,461       173,877



The adjustments relate to adoption of goodwill at the same value in the accounts of Copenhagen Airports A/S
when they acquired a shareholding in NIAL Holdings PLC and the deferred tax on the revalued assets.
Intangible asset relate to the reclassification of computer software, liabilities now include accrued holiday pay.




                                                                                                                49
NIAL Holdings PLC

30 Reconciliation of net assets and profit under UK GAAP to IFRS
(continued)

Reconciliation of equity at 1 January 2004 (Date of transition to IFRS)

Company
                                                                                       Effect of
                                                                        Previous      transition
                                                                          GAAP          to IFRS       IFRS
                                                                            £’000         £’000       £’000
 Investments                                                               229,809              -     229,809
 Total non-current assets                                                  229,809              -     229,809

 Trade and other receivables                                                 11,555      (11,555)          -
 Cash and cash equivalents                                                    1,143             -       1,143

 Total current assets                                                        12,698      (11,555)       1,143

 Total assets                                                              242,507       (11,555)     230,952

 Interest-bearing loans                                                   (108,901)             -    (108,901)
 Trade and other payables                                                   (3,797)         3,258      (539)

 Total liabilities                                                        (112,698)         3,258    (109,440)

 Total assets less total liabilities                                       129,809         (8,297)    121,512
 Share capital and share premium                                           128,340              -     128,340
 Capital contribution                                                         1,469             -       1,469
 Retained earnings                                                               -         (8,297)     (8,297)

 Total shareholders’ equity                                                129,809         (8,297)    121,512



The adjustments relate to the reclassification of dividends payable and dividends receivable.




                                                                                                           50
NIAL Holdings PLC

30 Reconciliation of net assets and profit under UK GAAP to IFRS
(continued)

Reconciliation of equity at 31 December 2004

Company
                                                                                       Effect of
                                                                        Previous      transition
                                                                          GAAP          to IFRS       IFRS
                                                                            £’000         £’000       £’000
 Investments                                                               229,809              -     229,809
 Total non-current assets                                                  229,809              -     229,809

 Trade and other receivables                                                 16,806      (16,806)          -
 Cash and cash equivalents                                                       -              -          -

 Total current assets                                                        16,806      (16,806)          -

 Total assets                                                              246,615       (16,806)     229,809

 Interest-bearing loans                                                   (106,455)        (1,222)   (107,677)
 Trade and other payables                                                   (7,412)         6,794      (618)

 Total liabilities                                                        (113,867)         5,572    (108,295)

 Total assets less total liabilities                                       132,748       (11,234)     121,514
 Share capital and share premium                                           128,340              -     128,340
 Capital contribution                                                         1,469             -       1,469
 Retained earnings                                                            2,939      (11,234)      (8,295)

 Total shareholders’ equity                                                132,748       (11,234)     121,514



The adjustments relate to the reclassification of dividends payable and dividends receivable.




                                                                                                           51
NIAL Holdings PLC

30 Reconciliation of net assets and profit under UK GAAP to IFRS
(continued)

Reconciliation of group profit for the year ended 31 December 2004
                                                                                     Effect of
                                                                      Previous      transition
                                                                        GAAP          to IFRS         IFRS
                                                                          £’000         £’000         £’000
 Revenue                                                                   44,081         1,053        45,134
 Administration costs                                                    (32,154)         1,367      (30,787)
 Operating profit                                                          11,927         2,420        14,347

 Finance costs – net                                                      (8,581)            -        (8,581)
 Taxation                                                                 (3,137)         1,846       (1,291)

 Net profit                                                                 209           4,266         4,475

The revenue adjustment relates to a contract in which the company acted as an agent so must recognise the
total revenue and costs within its group income statement. The taxation adjustment relates to goodwill no
longer being amortised.




                                                                                                            52

				
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