ANNUAL REPORT AND ACCOUNTS for the 15 months to 30 June 2006 helphire is leading the way ahead >>> chairman’s statement I am delighted to introduce this excellent set of results for the 15-month ﬁnancial period to 30 June 2006. The Company has continued to grow strongly throughout this period and the core market place in which we operate is developing at a rapid pace. Managing expansion at the rate we are experiencing is a major challenge for all of the management and staff and I would like to express my thanks to them for the hard work which has made this possible. The new ﬁnancial period has started well and we look forward with optimism to the rest of the year. Rodney Baker-Bates Chairman 8 September 2006 mission and highlights 3 chief executive’s statement 4 ﬁnance director’s review 6 the board 8 introduction to the managing directors 10 advisors 13 directors’ report 14 corporate governance 16 directors’ remuneration report 19 corporate social responsibility 26 directors’ responsibilities 28 independent auditors’ report 29 consolidated income statement 30 consolidated statement of changes in equity 31 consolidated balance sheet 32 consolidated cash ﬂow statement 33 notes to the consolidated ﬁnancial statements 34 company income statement 51 company balance sheet 52 company cash ﬂow statement 53 notes to the consolidated ﬁnancial statements 54 3 mission and highlights mission The strategic objective of the Group is to position itself as the leading provider of services to non-fault accident victims in co-operation with the insurance industry and to generate additional revenue streams from the development of insurance related products. highlights * Growth in revenue of 95% (annualised 65%) * Gross proﬁt grew by 79% (annualised 50%) * Growth in adjusted* operating proﬁt 107% (annualised 76%) Growth in statutory operating proﬁt 64% (annualised 40%) * Growth in adjusted* diluted EPS 62% Growth in statutory diluted EPS 19% * Dividend for the ﬁnancial year increased from 6.0p to 10.0p * Hire volumes increased by 86% (annualised 55%) * Credit Repair cases up by 99% (annualised 66%) * Personal Injury cases up 107% (annualised 69%) The highlights compare the 15-month period to 30 June 2006 to the 12-month period ended 31 March 2005. Annualised percentages are for the 12-month period to 30 June 2006 compared to the 12-month period to 31 March 2005. *Adjusted ﬁnancial information in the current period excludes the impact of amortisation of intangible assets and charges relating to share options and Albany claims. The comparative ﬁgure for the 12 months to 31 March 2005 also excludes a proﬁt on the sale and leaseback of the Group’s head ofﬁce and impairment charge relating to goodwill and intangible assets.These items are shown separately in the consolidated income statement. “Justiﬁably proud of our high levels of customer satisfaction” 4 chief executive’s statement overview The vehicle ﬂeet continues to grow and now comprises over 10,500 The last 15 months has seen a signiﬁcant continuation of growth in vehicles and 27 depots with plans to open more in the next 12 months in all of the Group’s activities with both an acquisition, Swift Rent-A-Car order to further enhance the geographical footprint of the business and Limited the prestige car credit hire business, and several large new continue to increase operational efﬁciency. key accounts being won. Total Accident Management, the ﬂeet claims fulﬁlment arm of the These statements reﬂect the trading and ﬁnancial activity for the Group Group, continues to grow and has moved to new premises in Bristol. for the 15-month period ended 30 June 2006. Due to the impact on our results of increased business volumes during the winter months, the swift acquisition Group’s ﬁnancial year end has been changed to 30 June to enable easier On 2 September 2005 the acquisition of Swift Rent-A-Car Limited comparison of the two halves of each year. was announced. Swift Rent-A-Car Limited specialises in the supply of prestige vehicles on credit hire to drivers involved in non-fault trading results accidents. It is a leader in the prestige segment of the credit hire Turnover has grown to £231.4m (12 months to 31 March 2005 – £118.4 m), market. Swift derives the vast majority of its business from referrals an annualised increase of 65%, and includes a £10.9m contribution from by prestige dealerships and dealership groups with whom it Swift which was acquired in September 2005. Hire volumes increased has close relationships. Swift aims to provide customers with the by 55% (annualised) to 133,170 (12 months to 31 March 2005 – 71,433), same make of vehicle as a replacement – described as ‘marque for credit repair cases by 66% (annualised) to 49,236 and Personal Injury marque’ replacement – which is attractive to both the customer cases by 69% (annualised) to 32,933. Proﬁt before tax increased 65% and the dealership. from £17.2m to £28.4m. However, adjusted* proﬁt before tax increased by 118% from £14.9m to £32.5m. Annualised percentages are for the Swift has been successfully integrated within the Group. In particular 12-month period to 30 June 2006 compared to the 12-month period it has beneﬁted from access to the Group’s larger ﬂeet infrastructure to 31 March 2005. and the increased choice of vehicles this brings. Swift is moving to larger premises in Northwich in October of this year. operations The Group continues to focus on the supply of hire cars to non-fault infrastructure victims of motor accidents and the generation of additional revenue The Pinesgate call centre facility in Bath of over 60,000 square feet is streams from the development of related services. Levels of interest now fully occupied, housing over 900 staff. from insurers continue to increase with most major motor underwriters now beginning to use services such as those we provide or actively The Albany call centre in Peterlee, County Durham has space for investigating the possibility of doing so. further expansion of the Albany business. Currently it houses just over 200 staff with a capacity for 400. The policyholder base at Angel Assistance, our legal expenses business, has continued to grow, increasing to over 800,000 A call centre facility was established in Bristol in June 2006, which policyholders by the end of this ﬁnancial period. Hires provided will allow for further room for expansion as the strong organic to these policyholders grew in proportion. growth continues. Customer satisfaction continues to be a major focus of the Group The major business process re-engineering programme, which and is monitored closely on a monthly basis. It has been maintained commenced in 2003, continues to progress. The ﬁrst new suites throughout the year at 98% ‘satisﬁed’ or ‘very satisﬁed’ with the of software commenced us in a ‘model ofﬁce’ environment in service provision. For those involved in an accident, the quality of mid-August 2006. service they receive is extremely important and, we believe, a major driver of new business. “Shorter claims cycle times creating cost savings” 5 dividends A second interim dividend payment of 3.0p was announced in June 2006, giving a total dividend of 6.0p for the period to 31 March 2006. I am pleased to announce a ﬁnal dividend for the period of 4.0p (12 months to 31 March 2005 – 3.7p), an increase of 8%. This gives a total dividend for the period of 10.0p, an increase of 67%. The ﬁnal dividend will be paid on 23 November 2006 to shareholders on the register at 27 October 2006. outlook The new ﬁnancial year has started well. Organic growth is strong and any opportunities for growth by acquisition continue to be fully evaluated. On 2 December 2005 we were pleased to welcome as our new Non-Executive Chairman, Rodney Baker-Bates, who has now established himself in that role. We are today once again announcing record trading proﬁts compared to the previous ﬁnancial period. Growth in the business continues to be very strong and our market continues to expand as credit hire services are utilised more widely. Whilst this inevitably leads to increased competition, it also leads to increased awareness and opportunity and the Board’s conﬁdence in the future is high. *Adjusted ﬁnancial information in the current period excludes the impact of amortisation of intangible assets and charges relating to share options and Albany claims. The comparative ﬁgure for the 12 months to 31 March 2005 also excludes a proﬁt on the sale and leaseback of the Group’s head ofﬁce and impairment charge relating to goodwill and intangible assets. These items are shown separately in the consolidated income statement. MAR K J A C K S O N Chief Executive / 8 September 2006 “We offer the full service to make the customer’s life easier” 6 ﬁnance director’s review change in year e n d margin from 46% to 42%. It is the Board’s view that the margin can be The Group has changed its ﬁnancial year-end from 31 March to 30 June maintained at this level during the current ﬁnancial year. to remove the effect of seasonality on the two halves of the ﬁnancial year. Road accident activity is at its highest during the winter months. operating margin By changing the year-end, this period is split equally between the two Operating margin decreased from 17% to 14%. In June 2005 I reported halves of the year and results in a more meaningful representation that the adjusted* operating margin for the 12 months to 31 March of the Group’s performance. 2005 had increased considerably to 15% as compared with the 11% generated in 2004. I anticipated further expansion in the adjusted* In accordance with statutory obligations I refer to the ﬁnancial data for operating margin in 2006 and am delighted to report that this has the 15-month period to 30 June 2006 as compared with the 12 months been achieved with the adjusted* operating margin having increased to 31 March 2005. In order to facilitate comparisons, I have detailed the to 16% in the15-month period to 30 June 2006. Further expansion is Group’s unaudited key ﬁnancial and performance data for the 12 months expected during the next accounting period as the Company utilises to 30 June 2006 and the audited 12 months to 31 March 2005 at the end its ﬁxed asset base more efﬁciently and we derive further economies of my report. from our increasing scale. turnover financial performance Turnover has grown by 95% to £231.4m (12 months to 31 March 2005 – Proﬁt before tax increased by 65% to £28.4m (12 months to 31 March £118.4m) and includes a £10.9m contribution from Swift which was acquired 2005 – £17.2m). Adjusted* proﬁt before tax increased by 118% to in September 2005. Hire volumes increased by 86% to 133,170 (12 months £32.5m (12 months to 31 March 2005 – £14.9m). to 31 March 2005 – 71,433), credit repair cases increased by 99% to 49,236 (12 months to 31 March 2005 – 24,728) and PI cases increased by 107% The Group is now paying tax following the utilisation of losses brought to 32,933 (12 months to 31 March 2005 – 15,941). The changing mix in our forward and consequently the tax charge has affected the growth in business has contributed to an increase in the average turnover per hire earnings per share as has the 15% increase in the number of shares in case by 5% to £1,738 (12 months to 31 March 2005 – £1,651). issue which were used to fund the acquisition of Swift, the repayment of debt and to satisfy the exercise of share options. As noted in my report last year, Helphire has beneﬁted from an increase in the proportion of cases being referred by key accounts which include debtors, working capital and cash flow nationwide insurance brokerages and insurance companies. The Outstanding claims at 30 June 2006 stood at £111.9m (2005 – £71.5m) acquisition of Swift, which sources business primarily from prestige reﬂecting the growth in the core business and the acquisition of Swift. dealerships throughout the United Kingdom, has given the Group a stronger foothold in the prestige sector of the credit hire market. We have recently Processing claims for the Group’s services in order to achieve the consolidated the Group’s entire automotive dealer-referred work into one optimum settlement in terms of value and time is key to Helphire’s division in order to increase our focus on this area of the referrer market. proﬁtability and its working capital management. Settlement of claims quickly without undue margin sacriﬁce requires skilled personnel and gross margins investment in processing systems, including information systems. Cash Gross proﬁt grew by 79% to £97.5m (12 months to 31 March 2005 – £54.4m). collection has improved signiﬁcantly in recent years and debtor days As a percentage, the gross margin is inﬂuenced by the unit sale value, the have fallen from 221 days in the year to 31 March 2005 to 206 days in direct cost and the mix of hire, repair and personal injury income. During the 15-month period to 30 June 2006. Achieving further reductions in the 15-month period to 30 June 2006 the average value of a claim has the average age of claims outstanding continues to be a key objective increased due to an increased contribution from credit repair and personal and initiatives in this area include the recent appointment of a injury. As far as direct costs are concerned, ﬂeet cost as a percentage of Collections Managing Director who sits on the Group Operating Board hire turnover has fallen whilst referral commissions have increased. and investment in additional claims handling resource as well as the The net effect arising from these factors has been a reduction in the gross pursuit of early settlement protocols with insurers. “Vehicles delivered to and collected from customer’s chosen location” 7 interest rate risk share capital The Group ﬁnances its operations from a mixture of equity, bank During the year the Group’s capital reserves were increased by £43.1m borrowings and lease ﬁnancing. The Group borrows in sterling as a result of the issue of shares relating to the acquisition of Swift and at ﬂoating rates of interest with a margin of between 0.95% and the exercise of options. 2.00% above LIBOR. No interest rate caps or swaps are used to manage exposure to interest rate ﬂuctuations, although it is international financial reporting standards (IFRS) expected that a hedging strategy will be implemented during the The Group has undergone an IFRS review and has published its accounts current ﬁnancial year. in accordance with IFRS as required. liquidity risk pro forma information (un audited) I am pleased to announce that during the year, RBS has joined 12 months to 12 months to HBOS in the Company’s banking syndicate. The syndicate provides 30 June 2006 31 March 2005 combined facilities of £80m, which mature after more than 12 months. (Unaudited) £ million Change** At 30 June 2006 £54m of these facilities had been utilised of which Turnover 195.4 118.4 65% £30m relate to the acquisitions of Swift and Albany. Gross profit 81.4 54.4 50% Gross margin (%) 42% 46% Adjusted* operating profit 31.9 18.2 76% critical judgemen t s Adjusted* operating margin (%) 16% 15% As detailed in the accounts, the Directors have made critical Operating profit 28.6 20.4 40% judgements in relation to expected future adjustments on settlements Amortisation (2.3) (3.5) of claims against motor insurers and in relation to depreciation of Costs/income adjusted* (1.0) 5.8 Profit before tax 24.7 17.2 44% the vehicle hire ﬂeet. By their very nature, these areas are inherently Profit after tax 19.2 17.3 11% judgemental. Adjusted* EPS diluted applying tax charge of 19% in both years (p) 17.01 10.13 68% capital expenditu r e Hire volumes (no.) 110,725 71,433 55% Repair volumes (no.) 41,506 24,728 68% Capital expenditure during the year amounted to £60.4m with £56.4m PI volumes (no.) 26,870 15,941 69% used to fund the acquisition of vehicles; £3.3m to fund IT and telecom equipment and services and £0.7m to fund ﬁxtures and ﬁttings. **12 months to June 2006 vs 12 months to March 2005. The unaudited results for the 12 months ended 30 June 2006 are actual results extracted from the management tax accounts. During the past ﬁve years the Group has beneﬁted from tax losses * Adjusted financial information in the current period excludes the impact of brought forward which has resulted in a zero tax charge. During the amortisation of intangible assets and charges relating to share options and Albany 15-month period to 30 June 2006 the losses available to the Group claims. The comparative figure for the 12 months to 31 March 2005 also excludes diminished resulting in an effective tax rate of 19%. It is expected that a profit on the sale and leaseback of the Group’s head office and impairment charge relating to goodwill and intangible assets. These items are shown separately in the the effective tax rate will increase to 30% for the year to 30 June 2007. consolidated income statement. earnings per sha r e The diluted basic earnings per share increased by 19% to 17.27p (12 months to 31 March 2005 – 14.49p). These ﬁgures were distorted by certain items as adjusted* below and an effective tax rate of 19% compared with zero in the 12 months to 31 March 2005. On an adjusted* basis and in addition applying a 19% tax charge in the 12 months to 31 March 2005, diluted earnings per share was 20.42p D AV I D E L I N D S AY (12 months to 31 March 2005 – 10.13p), an increase of 102%. Group Finance Director / 8 September 2006 “Nationwide branch network with access to 40,000 vehicles” 8 the board Rodney Baker-Ba t e s Mark B Jackson David E Lindsay ACA D a v i d A R o b e rtson Company Chairman Chief Executive Group Finance Director Group Operations Director Rodney was previously Mark qualiﬁed in medicine from David began his career in 1986 Prior to joining Helphire Chief Executive of Prudential Oxford University in 1980, and with ANZ Merchant Bank. He in August 1997, David’s Financial Services from subsequently pursued a career subsequently trained from career encompassed senior 1998 to 2001 and prior in general medical practice with 1991 to 1994 as a chartered management positions in the to that he was the Finance a period spent completing a accountant with Coopers & service sector before moving and Information Technology doctorate in epidemiology. Lybrand. From 1995 to 1996 he into management consulting. Director for the British was ﬁnancial accountant at As a consultant, he advised Broadcasting Corporation He co-founded Helphire in 1992 Telewest plc. He joined Helphire some of the largest companies between 1993 and 1998. and became a full time Executive in October 1996. in Europe, both with Coopers & Director and Deputy Chief Lybrand and latterly as a director He is currently the Chairman Executive in 1998. He became of his own consulting business. of the Executive Managing Chief Executive in 2001. Partners and Consultant to the Board of C. Hoare & Since November 2003 he Co and holds a number of has been Non-Executive other Chairmanships, which Chairman of the Medical include The Westbury Property Property Investment Fund Ltd. Fund Limited and First Assist Group Limited. “We offer a full range of replacement vehicles, from commercials to scooters” 9 Peter F Holding R o g e r J Ta y l o r Alistair H Mathers FCA R i c h a r d C M Burrell Group Legal Director Deputy Chairman Non-Executive Director Non-Executive Director Formerly a partner in Shoosmiths Roger Taylor was appointed Alistair qualiﬁed as a chartered Richard Burrell was appointed and Harrison Solictors, Peter as a Non-Executive Director of accountant in 1969 and since as a Non-Executive Director joined Helphire as Group Legal Helphire in February 2000. Roger that date has held a number of Helphire in January 2002. Director in December 1997. He is is currently Chairman of Amlin of ﬁnance positions in major Richard is Chief Executive of the a member of the Association of plc, prior to which, from 1986 to international companies, Medical Property Investment Personal Injury Lawyers. 1998, he was a director of Royal including African Oxygen Fund Limited (“MPIF”). He is also & Sun Alliance, where he also Limited, a subsidiary of B.O.C. the Chairman of the Investment served as Deputy Chairman plc, and Avon Cosmetics Limited. Committee of the Westbury of the Group and Chairman of Property Fund Limited. Prior to the Management board. From From 1981 to 1995 he was this, Richard was the majority 1997 to 1998 he was Chairman the ﬁnance director of the shareholder and Chief Executive of the Association of British pharmaceutical division of of Berrington Fund Management Insurers (ABI). Fisons plc. He joined the board Limited which was acquired of Helphire in February 1997. by MPIF in May 2006. Prior to He is currently a director of He currently runs his own forming Berrington, he was a Yura International Holding management consultancy in Senior Managing Director at ING B.V. and the White EnSign Nottingham. Barings in Corporate Finance Association Ltd. and a member of the bank’s Global Operating Committee. From 1988 to 1998 he was an Executive Director in Corporate Finance at UBS Warburg. “Personal injury claims are a key area of our business” 10 introduction to the managing directors Rodney Baker-Bates Company Chairman Mark Jackson Chief Executive David Lindsay Peter Holding David Robertson Group Finance Director Group Legal Director Group Operations Director Nick Tilley Company Secretary / Solicitor Rupert Rod Tim Peter Jason Chris Alan Martin Richard Llewellyn Jenkins Williams Gomes Tripp Chatterton Gilbert Ward Edwards MD of Group MD of Human MD of MD of MD of MD of Helphire MD of MD of Fleet Financial Resources Collections Business Helphire and Automotive Albany IT Services Controller & Training Change Angel Division Assistance Limited 11 Rupert Llewellyn Group plc as Managing Director of Human name companies in the leisure and travel, Managing Director of Fleet Services Resources & Training in September 2005. fashion retail and building materials sectors, specialising in successfully delivering major Rupert joined Helphire in May 2004, having change programmes and improving the spent all of his working life within the Peter Gomes value delivered by the use of information automotive ﬂeet and logistics industry. Managing Director of Collections and technology. Richard joined Helphire He brings with him a broad knowledge of in January 2005. all aspects of ﬂeet including the disciplines Peter is an honours graduate in Pure of purchase, disposal, maintenance and Mathematics from the University of rental operations. Sheffield. On leaving university he joined Nick Tilley Arthur Andersen in Manchester where he Company Secretary / Solicitor Prior to joining Helphire, Rupert was Divisional qualified as a Chartered Accountant. He Managing Director and Head of European gained considerable experience in audit and Nick was a Solicitor in private practice from Operations for Autocare Ltd – a company corporate finance, rising to partner with the 1982 until 1998 when he joined Helphire and owned by the Wallenius Wilhelmsen shipping firm before entering industry in 1996. Since has been Company Secretary since 2002. organisation, who specialise in automotive then, Peter has held the roles of Finance shipping and logistics. Extensive ﬂeet and Director at Flying Colours Holidays and rental operations experience came from latterly at Swift Prestige Hire. Following the Alan Gilbert time spent with Hertz UK, Europe and Budget acquisition of Swift by Helphire Group plc, MD of Helphire Automotive Division Rent A Car International. Peter was appointed Managing Director, Collections in August 2006. After graduate and post-graduate study in life sciences Alan spent a number of years Rod Jenkins FCMA in B2B Marketing, Market Research and Group Financial Controller Jason Tripp Business Development before joining HSBC Managing Director of Business Change in 1988 becoming NW Regional Manager of Rod is a graduate of the London School of the Current Asset Finance Division. In 1995 Economics and a Fellow of the Chartered Prior to joining Helphire in August 2000 he was appointed Sales and Marketing Institute of Management Accountants and Jason held several senior operational Director of Misys plc subsidiary Countrywide joined Helphire in 2001. He began his career management roles in a number of Insurance Marketing the largest wholesale with Rank Hovis McDougall, before moving credit hire, claims handling and personal Insurance Intermediary in the UK. He joined on to the sports and leisurewear multinational injury management organisations the board of Swift Rent-A-Car Limited as Pentland Group, where he concentrated specialising in the development of new Sales and Marketing Director in 1999; became primarily on acquisitions. He has over 15 products and services. Managing Director in January 2002 and saw years experience in senior financial roles in a the business through to its acquisition by variety of industries including car components Helphire in October 2005. He is now MD with French manufacturer, Valeo, electronics Chris Chatterton of the Helphire Automotive Division with with Rank Xerox and also has experience in Managing Director of Helphire and Angel responsibility for all of the Group’s business supply chain management and printing. derived from that sector. Prior to joining Helphire in August 2002 Chris worked for over 12 years in the Tim Williams automotive and financial services sectors, Martin Ward Managing Director of in various senior sales and marketing roles, Managing Director of Human Resources & Training securing a number of major business Albany Assistance Limited to business outsource contracts. Tim has a degree in biochemistry from Martin has 12 years of experience in Birmingham University. He started his career the insurance industry and was the in Cadbury Schweppes on the production Richard Edwards founding director and major shareholder graduate training scheme and after a number Managing Director of IT of the Rarrigini & Rosso Group which of years of production management he took specialises in motor fleet insurance and a career step into HR. Since then he has Richard has a Physics degree from the risk management services. During this time built a successful career in HR across a University of Manchester. Richard worked Martin was commercial and operations number of sectors including FMCG, finance for several years as a senior consultant director and led the raising of over and banking, pharmaceuticals manufacturing with Coopers & Lybrand advising banks, £10 million in VC backed development and cosmetics with Cadburys, HSBC pharmaceutical companies and central capital. The business was acquired by Group, First Direct, Cardinal Health Inc. government on IT strategy, project THB Group plc in 2003. Martin has an MBA latterly as European HR Director for Revlon management and security. Richard went from Durham Business School and joined International Corporation. Tim joined Helphire on to lead IT Departments for household Helphire in August 2005. 12 ﬁnancial contents advisors 13 directors’ report 14 corporate governance 16 directors’ remuneration report 19 corporate social responsibility 26 directors’ responsibilities 28 independent auditors’ report 29 consolidated income statement 30 consolidated statement of changes in equity 31 consolidated balance sheet 32 consolidated cash ﬂow statement 33 notes to the consolidated ﬁnancial statements 34 company income statement 51 company balance sheet 52 company cash ﬂow statement 53 notes to the consolidated ﬁnancial statements 54 13 advisors C O M PANY SECRETARY REGISTRA R S N P Tilley Capita IRG p l c The Registry R E G I STERED OFFICE 34 Beckenham Road White Hart House Beckenham High Street Kent BR3 4TU Limpsfield Surrey RH8 0DT BANKERS Royal Ban k o f S c o t l a n d A U D I TORS 4th Floor D e l o itte & Touche LLP Castlegate House 3 Rivergate Tower Hill Temple Quay Bristol BS2 0JA Bristol BS1 6GD HSBC S O L I CITORS 45 Milsom Street Ta y l or Wessing Bath BA1 1OU Carmelite 50 Victoria Embankment Bank of S c o t l a n d Blackfriars 4th Floor London EC4Y 0DX New Uberior House 11 Earl Grey Steet S T O C KBROKERS Edinburgh EH3 9BN C e n k os Securities Limited 6.7.8 Tokenhouse Yard FINANCIA L A D V I S O R S London EC2R 7AS UBS Inves t m e n t B a n k L i m i t e d 2 Finsbury Avenue, L e h m an Brothers London EC2M 2PP 25 Bank Street London E14 5LE Cenkos Se c u r i t i e s L i m i t e d 6.7.8 Tokenhouse Yard London EC2R 7AS COMPANY N U M B E R 3120010 14 directors’ report The Directors present their annual report on the affairs of the Group, together with the accounts and independent auditors’ report, for the 15-month financial period ended 30 June 2006. P R I N CIPAL ACTIVITIES The principal activities of the Group are the provision of non-fault accident management assistance and related services, the main income being derived from replacement vehicle hire and the financing of vehicle repairs arising from insurance claims. B U S I NESS REVIEW The Group continues to invest in the development of new products and services. The Directors expect the level of core business activity to increase in line with historic trading patterns. Further details of the Group’s performance during the period and ongoing strategy are contained in the Chairman’s Statement, Chief Executive’s Statement and Finance Director’s Review. R E S U LTS AND DIVIDENDS The audited accounts for the 15-month period ended 30 June 2006 are set out on pages 28 to 58. The Group’s profit for the year after taxation was £22.9m (year ended 31 March 2005 – £17.3m). Interim dividends totalling 6.0p (year ended 31 March 2005 – 2.3p) per ordinary share were approved during the period. The Directors recommend a final dividend of 4.0p (year ended 31 March 2005 – 3.7p) per ordinary share to be paid after approval at the AGM. D I R E CTORS The Directors who served during the 15-month period were as follows: M J Symons (Executive Chairman – until 10/6/05) R Baker-Bates (Non-Executive Chairman – appointed 2/12/05) R J Taylor (Senior Independent Director) M B Jackson R C M Burrell (Non-Executive Chairman – 1/7/05–1/12/05) P F Holding D E Lindsay A H Mathers D A Robertson Michael O’Leary did not serve as a Director during the period under review but is due to be appointed as Non-Executive Director before the end of the year and will be standing for election at this year’s AGM. D I R E CTORS’ INTERES TS The interests of the Directors in the shares of Helphire Group plc are shown in the table below. Ordinary 5p Shares 30 June 2006 31 March 2005 Rodney Baker-Bates – – R J Taylor 45,217 40,000 M B Jackson 1,002,864 995,705 R C M Burrell 33,630 29,750 P F Holding 12,811 5,000 D E Lindsay 103,606 78,218 A H Mathers 132,094 125,171 D A Robertson 76,011 70,224 Helphire Directors’ Pension Fund 67,230 73,070 B I O G RAPHIES OF NON-EXECUTIVE DIRECTORS Biographies of Non-Executive Directors are provided on pages 8 and 9. 15 directors’ report continued B I O G RAPHIES OF DIRECTORS FOR (RE)ELECTION Biographies for David A Robertson and Rodney Baker-Bates are provided on page 8. Mike O’Leary, aged 53, is due to be appointed a Non-Executive Director of the Group before the end of the year. He served on the Main Board of Misys plc for 14 years between 1986 and 2000, held responsibility for its Insurance Division for almost a decade and subsequently its Healthcare Division in the US for three years between 1998 and 2000. He was appointed CEO of the Huon Corporation in September 2000 and more recently served as CEO of Marlborough Stirling plc between 2004 and 2005 until completion of its sale to United Utilities plc. He is currently a Non-Executive Director of Headlam Group plc. S U P PLIER PAYMENT POLICY The Company’s policy, which is also applied by the Group, is to settle terms of payment with suppliers when agreeing the terms of each transaction, to ensure that suppliers are made aware of the terms of payment and to abide by those terms. At 30 June 2006, the Group’s trade creditors, expressed as a number of days, was 17 days (2005 – 23 days). C H A RITABLE AND POLITICAL CONTRIBUTIONS During the year the Group made charitable donations of £16,000 (2005 – £13,000). There were no political donations (2005 – £nil). S U B STANTIAL SHAREHOLDINGS As at 8 September 2006, the Company had been informed that the following persons are interested directly or indirectly in three per cent or more of the issued share capital of the Company: Number of Percentage of ordinary issued share shares capital Amvescap PLC 14,855,559 11.00% HSBC 12,914,513 9.50% Goldman Sachs 6,886,316 5.06% Morley Fund Management 4,496,584 3.31% D I S A BLED EMPLOYEES Applications for employment by disabled persons are always fully considered, bearing in mind the aptitudes of the applicant concerned. In the event of members of staff becoming disabled every effort is made to ensure that their employment with the Group continues and that appropriate training is arranged. It is the policy of the Group that the training, career development and promotion of disabled persons should, as far as possible, be identical with that of other employees. E M P LOYEE CONSULTATION The Group places considerable value on the involvement of its employees and has continued to keep them informed on matters affecting them as employees and on the various factors affecting the performance of the Group. This is achieved through presentations, informal meetings and Company notice boards. The Group also consults with its Staff Association made up of elected representatives from the whole business. Employee representatives are consulted regularly on a wide range of matters affecting their current and future interests. The employee share scheme has been running successfully since its inception in 1997. It is open to all employees after completion of one year of service and has enabled a large number of employees to participate in the significant growth in share price since flotation. In 2002 the Group commenced a share save scheme. There have been two grants under this scheme, which was widely supported by all levels of staff. A U D I TORS Each of the persons who is a Director at the date of approval of this report confirms that: • so far as the Director is aware, there is no relevant audit information of which the Company’s auditors are unaware; and • the Director has taken all the steps that they ought to have taken as a Director in order to make themselves aware of any relevant audit information and to establish that the Company’s auditors are aware of that information. A resolution will be put forward at the Annual General Meeting to re-appoint Deloitte & Touche LLP as auditors for the year ending 30 June 2007. This confirmation is given and should be interpreted in accordance with the provisions of S234ZA of the Companies Act 1985. By Order of the Board N P Tilley Secretary White Hart House, Limpsfield, Surrey RH8 0DT 8 September 2006 16 corporate governance S TAT EMENT OF COM PLIANCE WITH THE COMBINED C O D E O N C O R P O R AT E G O V E R N A N C E ( “ C O D E ” ) A N D THE APPLICATION OF ITS PRINCIPLES The Company has, throughout the 15-month financial period ended 30 June 2006, complied with the provisions of Section 1 of the 2003 FRC Combined Code except in two respects, set out below. 1. Since joining the FTSE 250 during the latter part of 2005 the Company has not had an equal number of independent Non-Executive and Executive Directors. Prior to entering the FTSE 250 the Company did not need to meet this requirement. However the Board recognised the importance of this provision and intends to appoint Michael O’Leary as an independent Non-Executive Director before the end of the year. 2. By June 2006 Alistair Mathers had served as a Non-Executive Director for more than nine years. The Company had decided that he should remain in his post as Chairman of the Audit Committee whilst the Company was effecting a change in its financial year end but is currently seeking a replacement. The Company has applied both the main and supporting principles of Section 1 of the Code and an explanation of how these principles have been applied is set out both below and in the Directors’ remuneration report and the corporate social responsibility report. THE BOARD The Board held seven scheduled meetings during the 15-month period under review. There was full attendance at all those meetings save that Peter Holding missed one meeting due to illness. Board decisions are generally on matters of strategy, policy, people and budgets. Decisions on the day to day management of the Company are delegated to an Operating Board comprising Executive Directors and senior mangers. Each Director receives detailed information on matters to be discussed well in advance of each meeting to ensure that there is a full debate at Board level and, in particular so that the Non-Executive Directors can contribute fully, as required by the Code. The Board has formally reserved specific matters to itself for determination and has approved terms of reference for all other Board committees; these are available on request and are published on the Company’s web site at www.helphire.co.uk/investor_relations.htm. The Non-Executive Directors’ terms and conditions of appointment are available for inspection as required by the Code. There is a formal policy in place to ensure that all directors have access to independent professional advice, if they have the need to seek it. C H A I RMAN, CHIEF EXECUTIVE AND SENIOR INDEPE N D E N T D I R E C T O R The roles of Chairman and Chief Executive are separated. The division of responsibilities is clearly defined in writing and has been approved by the Board. Whilst Mark Jackson has been Chief Executive throughout the period under review, Rodney Baker-Bates was appointed Non-Executive Chairman on 2 December 2005 as a consequence of Michael Symons’ retirement on 10 June 2005. This appointment followed an interim arrangement during which time the Chairman role was undertaken by Richard Burrell. Rodney Baker-Bates is also currently a Consultant to the Board of C. Hoare & Co and holds a number of other Chairmanships, which include Westbury Property Fund Limited, Solutions plc and First Assist Group. He has recently been appointed as Non-Executive Director to the Britannia Building Society. The Non-Executive Directors, led by Roger Taylor, the Senior Independent Director, meet regularly in the absence of Executive Directors. B O A RD BALANCE Following Michael Symons’ retirement in June 2005 and Rodney Baker-Bates’ appointment, during the period under review, the Board comprised a Non-Executive Chairman, four full-time Executive Directors and three Non-Executive Directors. All three Non-Executive Directors, R J Taylor, A H Mathers and RC M Burrell were viewed as independent of management and free from any business or other relationship, which could materially interfere with the exercise of their independent judgement. Richard Burrell was Chief Executive of Berrington Fund Management Limited (“Berrington”) which, as reported last year, was the appointed investment manager to the Medical Property Investment Fund Limited (“MPIF”) and the Westbury Property Fund Limited. In May 2006, MPIF acquired Berrington and Richard Burrell became chief executive of MPIF. Mark Jackson is the Non-Executive Chairman of MPIF. Notwithstanding this, the Board, having reviewed the position, remains of the opinion that Richard Burrell continues to exercise independent judgement. After the Company entered the FTSE 250 it was required by Code provision A.3.2 to have an equal number of Executive and independent Non-Executive Directors. The Company decided to complete the appointment of a new Chairman before recruiting an additional Non-Executive. After the appointment of the Chairman, other factors militated against making immediately another, Non-Executive appointment. This will be resolved by appointment of Michael O’Leary referred to above. A P P OINTMENTS TO THE BOARD Board appointments and succession planning is the responsibility of the Nominations Committee which currently comprises the Chairman (who chairs this Committee), the three Non-Executive Directors, R J Taylor, A H Mathers and R C M Burrell and the Chief Executive. During the period under review the Committee met on four occasions and there was full attendance at each meeting. Michael Symons chaired the Committee until his resignation on 10 June 2005. The Chairman was appointed to the Committe in December 2005. The Committee, with the assistance of external recruitment consultants, led the recruitment process for the current Chairman, as well as the appointment of an additional Non-Executive. It is currently seeking a replacement for Alistair Mathers who will be retiring as a Non-Executive Director during 2007. 17 corporate governance continued P E R F ORMANCE EVALUATION A Board evaluation is currently being conducted by an external consultant and is due to be completed by the end of 2006. The Board intends that a regular performance evaluation will be undertaken. R E - E LECTION All Directors must submit themselves for re-election at least every three years. The Nomination Committee has recommended to the Board that David Robertson, should be nominated for re-election and that Rodney Baker-Bates, who was appointed to the Board during the period under review and Michael O’Leary who will be appointed to the Board on 1 October 2006 should be nominated for election. The biographies of the Directors submitted for re-election are on page 8. R E M UNERATION COMMITTEE The Remuneration Committee comprising exclusively Non-Executive Directors, R J Taylor (Committee Chairman), A H Mathers and R C M Burrell met on ten occasions during the 15-month period under review. Richard Burrell was unable to attend two of the meetings, otherwise there was full attendance. The Committee’s role is to determine remuneration packages for Executive Directors to enable the Group to attract, retain and motivate Executives of the necessary calibre without paying more than is necessary for this purpose. Further information is given in the Directors’ Remuneration Report and other parts of this Annual Report & Statement. A public statement regarding the use of remuneration consultants is available on the Company’s web site at www.helphire.co.uk/investor_relations.htm. The remuneration of the Non-Executive Directors is a matter reserved for the whole Board. The Chairman’s remuneration is determined by the Remuneration Committee. R E L ATIONS WITH SHAREHOLDERS The Company is committed to maintaining good relations with all its shareholders through the provision of regular Interim and Annual Reports, other trading statements and the Annual General Meeting. The Company also arranges individual and Group meetings with its institutional shareholders. The views of analysts, brokers and major shareholders are relayed to the Board through the Chairman, Chief Executive and Finance Director. C O N STRUCTIVE USE OF THE ANNUAL GENERAL MEE T I N G The Company holds its Annual General Meeting once a year in Bath providing an opportunity for all shareholders and particularly private investors to ask questions of the Board. F I N A NCIAL REPORTING The Board has ultimate responsibility for both the preparation of Accounts and the monitoring of systems of internal financial control. The Board seeks to present a balanced and understandable assessment of the Company’s position and its prospects and present price sensitive information in an appropriate way. The Company publishes interim reports (two this year due to the 15-month period covered) so the Company’s financial position can be monitored regularly by shareholders. I N T E RNAL CONTROL The Board is responsible for the Group’s system of internal control and has during the period covered by this report applied principle C2 of the Combined Code by maintaining a continuous process for identifying, evaluating, reporting and managing the significant risks faced by the Group, which has been in place for the period of the review and to the date of signing the annual report and accounts. The Company complies with the provisions of the Turnbull Report. In accordance with provision C2.1 of the Combined Code, the Board confirms that it has reviewed the effectiveness of the Group’s system of internal controls. These controls include the financial, operational, compliance and risk management systems that have been in operation during this financial period. The Board confirms that the risk management processes in operation are in accordance with the guidance Internal Control: Guidance for Directors on the Combined Code, which links the regular reviewing of reports on internal control to the management of strategic and operational risks that are significant and relevant to the achievement of business objectives. The Board, in seeking to achieve the Group’s business objectives, cannot offer an absolute guarantee that the application of a risk management system will overcome, eliminate or mitigate all significant risks. However, by linking an established risk-management system, which seeks in quantitative terms to identify the potential impact a risk may have on the Group to relevant business objectives, the Board is able to provide a reasonable assurance against material misstatement or loss. During the financial year under review the primary responsibility for assessing, monitoring and managing operational risks related to internal processes, systems and staff lies with the Group’s senior managers immediately below Board level. These managers submit monthly risk management reports to the Operating Board, which is comprised of those senior managers and the Executive Directors. Minutes of Operating Board meetings and copies of all risk reports are sent to the Chairman of the Audit Committee . The management and monitoring of strategic risks remains the sole responsibility of the Board. Through its oversight role the Group’s Risk Committee has continued to have a positive and contributory role in the management of risk. The Board has performed a specific evaluation of the Group’s system of internal controls for the purpose of this report. This evaluation considers all significant aspects of internal control arising during the period covered by this report. The Audit Committee and Risk Committee have again assisted the Board in discharging its review responsibilities. 18 corporate governance continued I N T E RNAL CONTROL CONTINUED In the period under review, the Group has not had any significant problems that required specific disclosure in the annual report and accounts so has not had to apply any specific processes to deal with material internal control issues that might arise from such disclosure. AUDIT COMMITTEE AND AUDITORS The Audit Committee comprising A H Mathers (chartered accountant and committee chairman), R J Taylor and R C M Burrell met five times in the year under review and save one meeting which Roger Taylor was unable to attend, there was full attendance on each occasion. The Committee Chairman is the required, financially qualified member of this committee. Further details about, and the qualifications of, the Committee Chairman and the other committee members can be found in their biographies elsewhere in this Annual Report. The Board has, through the Audit Committee, established formal and transparent arrangements for financial reporting, the review of formal announcements relating to the Company’s financial performance, internal control and external auditing. As required by its terms of reference the Committee has during the period under review, considered the Group’s Risk Management activities as a whole and the monitoring of the internal audit function in addition to the financial aspects of internal control. It has reviewed the scope and results of the audit and non-audit services, the cost-effectiveness, independence and objectivity of the auditors and has approved their fees. The Committee has also reviewed the Company’s arrangements to enable employees to raise confidentially, concerns about possible improprieties. It has reviewed the interim and final results published in respect of the period under review and has considered its own effectiveness. The Committee has reviewed the Internal Auditor’s work for the period under review and approved its current programme of work. The Committee receives reports (written and in person) from Executive Directors, senior managers and representatives of the Risk Committee to discharge its responsibilities. It also receives reports from and meets (in the absence of management) external and internal auditors. It sets and reviews the programme of work to be undertaken by the Internal Auditor. During the period under review the Company recruited from BMW (UK) a full-time internal Auditor, replacing the external consultant who previously undertook this role. The Company has a formal policy regarding the use of Auditors for non-audit work. By Order of the Board A l i s t air Mathers Chairman Audit Committee 8 September 2006 19 directors’ remuneration report I N T R ODUCTION This report has been prepared so as to meet the requirements of the Directors’ Remuneration Report Regulations 2002 (the “Regulations”) as well as the Listing Rules of the Financial Services Authority. It deals with the remuneration of both executive and non-executive directors. The report has been divided into separate sections for audited and un-audited information. A resolution to approve the report will be proposed at the Annual General Meeting of the Company at which the financial statements will be approved. U N A UDITED INFORMATION R e m uneration Committee The Remuneration Committee operates under written terms of reference approved by the Board, meets as and when required (but at least twice a year) and was, throughout the period under review, comprised exclusively of Non-Executive Directors whom the Company considers are independent, being; R J Taylor (committee chairman), A H Mathers and R C M Burrell. No Committee member has any personal financial interest (save in respect of interests in shares), conflicts of interest arising from cross directorships (see note in Corporate Governance section on Board Balance re R C M Burrell) or any day-to-day involvement in the running of the business. The Committee makes recommendations to the Board. No Director plays a part in any discussion about his remuneration. In determining the directors’ remuneration for the year, the Committee consulted Mark Jackson (Chief Executive) about its proposals. The Committee also took advice from New Bridge Street Consultants LLP (who have been appointed by the Committee) on the structure of the directors’ remuneration packages. New Bridge Street Consultants also advise the Company in relation to the operation of the Company’s share incentive schemes generally. R e m uneration Policy Executive remuneration packages are designed to attract, motivate and retain the high calibre directors (from what is a small pool of candidates with relevant experience at this level) needed to maintain the Company’s position as a leading non-fault accident service provider and to reward them for enhancing value to shareholders. The performance evaluation of the Executive Directors and the determination of their annual remuneration packages is undertaken by the Committee. The remuneration of the Non-Executive Directors (except the Chairman) is set by the Board. When setting the remuneration of the Executive Directors the Committee takes account of pay practices elsewhere in the Group. As announced last year, with effect from April 2006, the Committee has been responsible for reviewing the remuneration of the layer of management immediately below Board level. The Committee is in the process of reviewing senior executive long-term incentive provision. When this review process is completed, the Group will seek the necessary shareholder approvals so as to allow any new long-term incentive policy to be established. The main elements of the Executive Directors’ remuneration packages for the period under review (which are set out in more detail below) were: 1. basic salary and benefits; 2. annual bonus payments not to exceed 95% of basic salary; and 3. pension arrangements. The Committee currently intends that the same will be true of the 2006/7 financial year save that long-term incentive provisions (if approved by shareholders) may be operational, with the maximum bonus being 100% of base salary. The Company’s policy is, and therefore will continue to be, that a significant element of an Executive Director’s remuneration is to be performance related. Whilst the Committee has, as required, stated its remuneration policy for future years it is conscious that any remuneration policy needs to be flexible. Any changes to this policy will be disclosed in subsequent reports. Executive Directors are entitled to accept appointments outside the Company so long as the Company’s permission is sought. Any fees payable are shared with the Company. M B Jackson holds an outside appointment; he retains £55,000 being half of the fees paid. B a s i c Salary Executive Directors’ salaries are generally determined by the Committee prior to the start of each financial year, although they may be reviewed during the relevant financial year (for example if an individual changes position or responsibility). Before setting these basic salaries the Committee considers pay conditions in the Group as a whole, individual performance and relies on objective, independent advice and research which gives up to date information on remuneration policies adopted by like companies. The most recent increases in the basic salary of all Executive Directors were made after considering advice from New Bridge Street Consultants with regard to the levels of salaries in comparator businesses, the Company’s continued success and the Executive Directors’ specialist, industry knowledge. Due to the change of financial year end the most recent salary review took place in June 2006 but (as with all employees) was backdated for this year only to 1 April 2006. In future years the pay reviews will be effective from 1 July each year. As a consequence the new salaries (CEO £380,000, other Executive Directors £266,000) were applied to the last three months of the period under review. Executive Directors’ contracts of service (which include details of their remuneration) will be available for inspection at the AGM. In addition to their basic salary, Executive Directors receive certain benefits, comprising a car (or cash allowance in lieu), fuel card, private medical, life, loss of income and permanent health insurances and pension contributions (or cash in lieu of such contributions). 20 directors’ remuneration report continued U N A UDITED INFORMATION CONTINUED A n n u al Bonus Payments The four Executive Directors (Michael Symons did not participate in view of his retirement) are entitled to participate in the annual bonus scheme which for the period under review provided for a bonus of up to a maximum of 95% of basic salary to be paid upon achieving earnings targets which were set by the Committee. When setting the earnings target for the year under review, the Committee took account of the fact that annual bonus opportunity was increased from 75% which had applied in the previous year, believing that any incentive payments awarded should be tied to the meeting of challenging and stretching performance targets. Due to the Company’s excellent performance during the year under review, the annual bonus targets were met in full, resulting in the payment of maximum bonuses. The Committee has set appropriately challenging bonus targets to be applied in the forthcoming financial year, taking account of the increased annual bonus opportunity of 100% of salary that is to apply going forward. S h a r e-Based Incentives The Company’s current share-based incentive arrangements comprise the Executive Share Option Scheme 2002 (“2002 Scheme”), the Equity Partnership Plan 2002 (“EPP”) and the SAYE Scheme. The Committee has responsibility for supervising the 2002 Scheme and the grant of options under its terms. The 2002 Scheme permits the annual grant to any individual of options over shares worth up to 200% of their basic salary. However, during the year under review no options were granted under its terms due to the Company being in a close period for a substantial portion of the year. No awards were made under the EPP in the period under review, again due to the Company being in a close period for a substantial portion of that period (nor have any prior awards been made under the EPP). During the period under review the Company made grants under its SAYE Scheme in which the Executive Directors participated and under which options were granted at a discount of 20% to the market value of the Company’s shares at the time when the options were granted. The Company does not currently operate any long-term incentive schemes other than those described above. However, as stated above, the Committee is currently reviewing long-term incentive provision. As part of its responsibilities in respect of the Company’s share-based incentive arrangements, the Committee will assess the extent to which the relevant performance conditions that apply to awards are met, seeking advice from third parties where necessary. Details of share options granted in the past to Executive Directors appear in the audited section of this report. P e n s ion Arrangements All Executive Directors (save the Chief Executive and Michael Symons who were permitted to take the same contributions as salary supplements in lieu of a contribution to a pension scheme) received a contribution of 20% of basic salary to be used for personal money purchase schemes. The Committee will continue to keep the Executive Directors’ pension provision under review. D i r e ctors’ Contracts In accordance with general practice it is the Company’s policy that all Executive Directors should have contracts with an indefinite term providing for a maximum one year notice period. All Executive Directors, including David Robertson who is proposed for re-election at the next AGM, have contracts which are subject to one year’s notice. Details of the Executive Directors’ contracts are summarised below: Name Contract date Notice period M J Symons 23 January 2002 N/A – retired M B Jackson 28 February 1997 One Year D E Lindsay 28 February 1997 One Year D A Robertson 10 February 1998 One Year P F Holding 28 January 1998 One Year The Executive Directors’ contracts have no express provision for the payment of compensation in the event of early termination. In the event of termination of an Executive Director’s service contract, when determining the compensation payable to the Executive Director, it is the policy of the Committee to take account of the principles of mitigation of loss. 21 directors’ remuneration report continued U N A UDITED INFORMATION CONTINUED All Non-Executive Directors have specific terms of engagement and are appointed for periods of three years. Their fees are disclosed in the audited section of this report and are set by the Board as a whole after taking account of independent surveys of fees paid to Non-Executive Directors of similar companies and of the time commitment of the Non-Executive Directors. Non-Executive Directors cannot participate in any of the Company’s incentive schemes. Dates of the Non-Executive Directors’ original letters of appointment and the current unexpired period of their appointments are set out below: Name Date of letter Unexpired term R P Baker-Bates 2 December 2005 Two years (subject to election at 2006 AGM) R J Taylor 11 September 2002 One year A H Mathers 11 September 2002 One year R C M Burrell 11 September 2002 Two years M O’Leary N/A Three years (subject to election at 2006 AGM) P e r f ormance Graph The Regulations require this report to contain a graph showing the performance of the Company and a “broad equity market index” over the past five years. As the Company was a constituent of the FTSE SmallCap Index for the substantial part of the last five years, this index is at present considered an appropriate form of “broad equity market index” against which the Company’s performance should be compared (although this approach will be kept under review). Performance, as required by the Regulations, is measured by Total Shareholder Return (share price growth plus dividends reinvested). This graph shows the value by the end of June 2006, of £100 invested in Helphire on 1 July 2001 compared with the value of £100 invested in the FTSE SmallCap Index. Helphire’s Total Shareholder Return against The FTSE SmallCap (Normalised) 500 450 400 Helphire Total 350 Shareholder Return 300 Assuming Dividends Reinvested 250 200 FTSE SmallCap 150 100 50 0 Jul 01 Jan 02 Jul 02 Jan 03 Jul 03 Jan 04 Jul 04 Jan 05 Jul 05 Jan 06 Jul 06 A U D I TED INFORMATION A g g r egate Directors’ Remuneration The total amounts for Directors’ remuneration and other benefits were as follows: Note: the 2006 figures are for 15 months to 30 June 2006. 2006 2005 £’000 £’000 Emoluments 3,089 2,357 Gains on exercise of options 737 2,087 Money purchase pension contributions 180 126 Total remuneration 4,006 4,570 22 directors’ remuneration report continued D i r e ctors’ Emoluments Fees/Basic Taxable 2006 2005 salary Bonus benefits Total Total Name of Director £’000 £’000 £’000 £’000 £’000 Executive: M J Symons (to 10/6/05 only) 60 nil 7 67 443 M B Jackson 517 404 16 937 612 D E Lindsay 318 283 8 609 385 D A Robertson 319 283 8 610 387 P F Holding 321 283 3 607 384 Non-Executive: R Baker-Bates (from 2/12/05) 64 – – 64 – A H Mathers 56 – – 56 41 R J Taylor 92 – – 92 69 R C M Burrell 47 – – 47 36 Total emoluments 1,794 1,253 42 3,089 2,357 D i r e ctors’ Bonuses In the 15-month period ended 30 June 2006 annual bonuses were awarded at the maximum rate of 95% of basic salary (which for the last three months of the period was at the increased rate) following the achievement of the required profit target. D i r e ctors’ Share Options The aggregate emoluments disclosed do not include any amounts for the value of options to acquire ordinary shares in the Company granted to or held by Directors. The Directors no longer hold any Inland Revenue approved options. D e t a ils of Gains Gains on Gains on Market price exercise exercise Number of Exercise at exercise 2006 2005 Name Scheme options price date £’000 £’000 M J Symons Unapproved 493,000 £0.76 £2.00 – 611 Unapproved 343,000 £1.06 £3.10 700 1 Unapproved 68,000 £2.56 £3.10 37 – M B Jackson Unapproved 394,000 £0.76 £2.00 – 489 Unapproved 300,000 £1.00 £2.00 – 300 Unapproved 44,000 £0.98 £2.00 – 45 D E Lindsay Unapproved 256,500 £0.76 £2.00 – 318 Unapproved 195,000 £1.00 £2.00 – 195 Unapproved 28,000 £0.98 £2.00 – 29 P F Holding Unapproved 100,000 £1.00 £2.00 – 100 Total gains on exercise 737 2,088 Note: Michael Symons was permitted to retain his options, as allowed under the rules of the relevant schemes. 23 directors’ remuneration report continued Details of the Directors’ options under the Unapproved part of the 2002 Scheme and the Company’s previous Executive Share Option Scheme are as follows: Options Options Options Options Options held at granted exercised lapsed held at 1 April in the in the in the 30 June 2006 Date from 2005 year year year (or cessation of Exercise which Name ’000 ’000 ’000 ’000 employment) price exercisable Expiry date M J Symons *68 – 68 – – £2.255 20/5/02 20/5/09 343 – 343 – – £1.06 19/7/05 19/7/12 191 – – – 191 £2.09 8/7/06 8/7/13 Total 602 – 411 – 191 M B Jackson *56 – – – 56 £2.255 20/5/02 20/5/09 491 – – – 491 £1.06 19/7/05 19/7/12 272 – – – 272 £2.09 8/7/06 8/7/13 280 – – – 280 £2.145 13/12/07 13/12/14 Total 1,099 – – – 1,099 D E Lindsay *36 – – – 36 £2.255 20/5/02 20/5/09 292 – – – 292 £1.06 19/7/05 19/7/12 167 – – – 167 £2.09 8/7/06 8/7/13 196 – – – 196 £2.145 13/12/07 13/12/14 Total 691 – – – 691 D A Robertson *28 – – – 28 £0.9813 14/8/01 14/8/08 *36 – – – 36 £2.255 20/5/02 20/5/09 195 – – – 195 £1.00 17/5/03 17/5/10 257 – – – 257 £0.76 29/6/04 29/6/11 292 – – – 292 £1.06 19/7/05 19/7/12 162 – – – 162 £2.09 8/7/06 8/7/13 196 – – – 196 £2.145 13/12/07 13/12/14 Total 1,166 – – – 1,166 P F Holding *36 – – – 36 £2.255 20/5/02 20/5/09 50 – – – 50 £1.00 17/5/03 17/5/10 257 – – – 257 £0.76 29/6/04 29/6/11 292 – – – 292 £1.06 19/7/05 19/7/12 162 – – – 162 £2.09 8/7/06 8/7/13 196 – – – 196 £2.145 13/12/07 13/12/14 Total 993 – – – 993 Entries marked with an * were grants under the pre-2002 Scheme; all other entries were grants made under the 2002 Scheme. The exercise of the options granted under the Company’s previous Executive Share Option Scheme is subject to an average growth rate of 7.5% plus inflation in the Company’s earnings per share in the three years prior to the date of exercise. The exercise of the options granted under the 2002 Scheme (which are exercisable between 19 July 2005 and 13 December 2012) was dependent on the achievement of a sliding scale of absolute EPS targets which were met in full. 24 directors’ remuneration report continued The exercise of the options granted under the 2002 Scheme which are exercisable between 8 July 2006 and 8 July 2013 is dependent on the achievement of a sliding scale of absolute EPS targets as follows: EPS for financial year ending 31 March 2006* Proportion of option exercisable Less than 6p 0 6p One third 9p Two thirds 14p All *N.B. Although there was no financial year ending on 31 March 2006, the target was set before any change in the year end was known and as EPS was measured to this date and on the most diluted calculation exceeded the highest target, the Committee has assessed these targets as having been met in full. EPS for the last financial year of the Company ending before the third anniversary of the grant date* Proportion of option exercisable Less than 15.5p 0 15.5p One third 17.0p Two thirds 18.7p All *This wording, in respect of grants made in December 2004, reflects the then proposed change of financial period end date in the 2005/6 financial period. The targets in respect of the grants made in December 2004 are not capable of re-testing so to the extent that these targets are not met the options will lapse. The exercise price of options granted under the 2002 Scheme is equal to the market value of the Company’s shares at the time when the options were granted. 25 directors’ remuneration report continued Details of the Directors’ options under the Company’s SAYE Scheme are as follows: Options Options granted in the Options Options Options held at first 15 months exercised lapsed held at Date from 1 April to 30 June 2006 in the in the 30 June Exercise which Name 2005 (“year”) year year 2006 price exercisable Expiry date M J Symons 7,159 – – 7,159 – £1.32 1/2/06 1/8/06 Total 7,159 – – 7,159 – M B Jackson 7,159 – 7,159 – – £1.32 1/2/06 1/8/06 – 3,035 – – 3,035 £3.08 1/6/09 1/6/16 Total 7,159 3,035 7,159 – 3,035 D E Lindsay 7,159 – 7,159 – – £1.32 1/2/06 1/8/06 – 3,035 – – 3,035 £3.08 1/6/09 1/6/16 Total 7,159 3,035 7,159 – 3,035 D A Robertson 5,727 – 5,727 – – £1.32 1/2/06 1/8/06 – 3,035 – – 3,035 £3.08 1/6/09 1/6/16 Total 5,727 3,035 5,727 – 3,035 P F Holding 7,159 – 7,159 – – £1.32 1/2/06 1/8/06 – 3,035 – – 3,035 £3.08 1/6/09 1/6/16 Total 7,159 3,035 7,159 – 3,035 Nothing has been paid by any Director for the award of any share options. All share options are in respect of ordinary shares. The market price of the ordinary shares at 30 June 2006 was 384p and the range during the 15-month period was 195.6p to 446.25p. There have been no variations to the terms and conditions or performance conditions for share options during the financial period. D i r e ctors’ Pension Entitlements All Executive Directors are members of personal money purchase schemes. Contributions paid by the Group in respect of such Directors were as follows: 2006 2005 Name of Director £’000 £’000 D E Lindsay 60 42 D A Robertson 60 42 P F Holding 60 42 Total 180 126 Pension entitlements of Messrs Symons and Jackson are dealt with by way of salary supplement as described above. By Order of the Board R J Taylor Chairman, Remuneration Committee 8 September 2006 26 corporate social responsibility Helphire is committed to being a good corporate citizen and has put in place supporting procedures to ensure best practice is followed. O U R COMPANY AND THE ENVIRONMENT Helphire Group plc is committed to following the best environmental practices in the day-to-day conduct of its business and the management of resources and facilities. The stance adopted by the Group provides for the promotion of, and understanding of, environmental considerations across the Group. The Group’s Board retains ultimate responsibility for setting and monitoring policy on environmental matters. The aims of the Group’s environmental position include: • taking all practical steps to ensure the Group’s business activities have the minimum negative impact on the environment; • achieving the most economic and careful use of sources of fuel and energy; • minimising the production of waste and managing the disposal of necessary waste in a safe manner; and • making the maximum practical use of recycling. Specialist advisors are appointed, as required, to ensure best practice is followed and to ensure potential opportunities to improve performance and compliance with statutory requirements are met. B U I L DINGS AND OUR WORKING ENVIRONMENT We strive to provide a comfortable working environment for our employees in conjunction with our aim of following the best environmental practices. Our head office site in Bath boasts state-of-the-art work stations, climate control heating and cooling systems, and sensor activated lighting which compensates for ambient light changes. We have a 95% efficient heating/cooling plant, parts of which run on 12V supply for efficiency, and our lighting systems are PIR controlled for occupation detection ensuring minimum energy wastage. Two of our key sites, Bath and Peterlee recycle all waste paper, cans, plastic drinking cups, ink and toner cartridges and we are looking to extend this to other sites. O U R FLEET Being a vehicle provider, with a fleet in excess of 10,500 vehicles, our policy is to provide our customers with the safest, most fuel efficient replacement transport. To achieve this, the average age of our vehicles is now 11 months as newer cars are more efficient and comply with the very latest in safety and emissions legislation. Wherever possible, new vehicles are selected with ENCAP crash test performance results in mind, supporting our suppliers in their quest to build safer cars. As diesel vehicles and dual fuel have become more environmentally friendly or ‘greener’, new Euro compliant and bi-fuel vehicles have been added to the fleet, currently representing about 25% of our vehicles. Our existing operations policy of using transporters to deliver vehicles to our customers has been reviewed in light of fuel consumption and effect on the environment. Consequently we have reduced the transporter fleet by 75%. Increasing our branch network will ensure delivery distances to customers are reduced, thus the effect on the environment of our business operations will be lessened. O U R PEOPLE We recognise the contribution of our employees to Helphire’s performance and profitability and have core values, supported by policies, to maintain and develop good staff relationships. We are committed to the principle and practice of equal opportunity in employment. We do not tolerate discrimination, bullying or harassment. We apply common terms and conditions to both temporary and permanent staff and have policies which are in line with ACAS guidelines and which comply with relevant UK and European Human Rights and employment legislation. We ensure effective communication with our employees through staff association meetings, monthly publications, twice yearly Director briefings, one-to-one staff/manager updates and staff suggestions schemes. All staff have twice yearly performance appraisals in which objective setting, training and development are integral parts. We run management development programmes to assist our managers in their roles. Our sites at Peterlee and Northwich have Investors in People accreditation. By benchmarking salaries annually using third party data and offering a range of benefits including pension, save as you earn share options for all employees, childcare vouchers, subsidised café and discounts on sporting facilities goods/services, the Group seeks to provide a competitive reward package. 27 corporate social responsibility continued C O M MUNITY SUPPORT We believe our business can and should make a positive contribution to the local community. In addition to our activities to support the environment, we make a number of charitable donations and sponsorships as a Group. C h a r itable donations We aim to support local, national and international charity appeals, especially if a staff member is actively involved in fundraising. In 2005/6 Helphire’s ‘dress down’ Friday charity collections, and one-off appeal collections, raised in excess of £10,000. Staff contributions, regularly matched by the Company were made to 25 charities, including: Breast Cancer Care Charitable Trusts of the United Bristol Hospitals Juvenile Diabetic Trust Red Nose Day RSPCA WaterAid Albany employees based at our Peterlee site have, over the year, supported a number of nominated charities through similar dress down days. In addition monthly theme/fun days help to raise even more funds for these causes, including World Poetry Day in aid of Butterwick Childrens’ Hospice, St George’s Day celebrations for the Tyne and Wear Autistic Society and Sport Relief/Albany Obstacle Course and Pool Competition in support of Sport Relief. As corporate sponsors of CLIC, our Swift operation in Northwich also run a number of activities during the year including ‘Win a day off work’ and selling CLIC ‘Awareness Bears’ to help raise funds. In 2005/6, Helphire committed to a discretionary charity fund of £5,000 per Executive Board Member, which has over the past year supported a number of staff-driven fundraising activities, including a triathlon challenge in Support of CLIC Sargent and the Paris to London Endurance Charity Bike Ride, in aid of Great Ormond Street Childrens’ Hospital. The Helphire annual five-a-side football tournament has also been enabled through this fund. Held in memory of Andrea Gray, a Helphire colleague who sadly passed away from cancer, the tournament raises funds for Cancer Research UK. B a t h Rugby Community Foundation Helphire and Bath Rugby have teamed up to help steer disadvantaged children away from becoming a risk to society. The Foundation, which was set up to expand Bath Rugby’s community work, is intended to get more children involved in the sport of Rugby. Helphire has committed to a three-year involvement with the Foundation, which is currently helping children in over 60 local schools. S p o n sorships Our sponsorship strategy is to provide support to local initiatives which create a positive local profile in our key areas of operation. 2005/6 also saw Helphire announce its upgraded commitment to Bath Rugby in becoming main sponsors of the Club. A new shirt design featuring Helphire branding on the front of Bath Rugby’s playing and replica shirts, along with programme advertising as well as the creation of the Helphire Stand (formerly East Stand), forms part of the awareness-building campaign. H E A LTH AND SAFETY We recognise that the health and safety of our employees and users of our services are of paramount importance. We have an established Health and Safety Policy implemented across the business and a Health and Safety committee chaired by the Chief Executive Officer. Health and Safety within the Group has an equal status with all other business objectives and we see the promotion of health and safety as a joint objective between the Group and its employees. The Health and Safety Policy is based on the belief that accidents can be prevented and it is the Group’s objective to provide and maintain a healthy, safe and secure work setting for its employees and visitors. W O R KING WITH SUP PLIERS Currently dealing with over 2,500 suppliers, we operate a supplier selection policy that considers the quality, delivery and warranty elements of proposals as well as cost. We set service level agreements with our key suppliers, managing performance against agreed standards to ensure we get good service for our customers and operating divisions. We operate within the spirit of our supplier contracts and strive to conduct our business in a way that promotes long-term relationships. We will reject any attempt at improper business practice, and our staff will not use their authority for personal gain. Staff may accept token business gifts only and will not accept hospitality that could lead to them being perceived to favour any supplier. 28 directors’ responsibilities S TAT EMENT OF DIRE CTORS’ RESPONSIBILITIES The Directors are responsible for preparing the Annual Report and the financial statements. The Directors are required to prepare the financial statements for the Group in accordance with International Financial Reporting Standards (“IFRS”) and have also elected to prepare financial statements for the Company in accordance with IFRS. Company law requires the Directors to prepare such financial statements in accordance with IFRS, the Companies Act 1985 and Article 4 of the IAS Regulation. International Accounting Standard 1 requires that financial statements present fairly for each financial period the Company’s financial position, financial performance and cash flows. This requires the faithful representation of the effects of transactions, other events and conditions in accordance with the definitions and recognition criteria or assets, liabilities, income and expenses set out in the International Accounting Standards Board’s “Framework for the preparation and presentation of financial statements”. In virtually all circumstances, a fair presentation will be achieved by compliance with all applicable International Financial Reporting Standards. Directors are also required to: • properly select and apply accounting policies; • present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information; and • provide additional disclosures when compliance with the specific requirements in IFRS is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity’s financial position and financial performance. The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Company, for safeguarding the assets, for taking reasonable steps for the prevention and detection of fraud and other irregularities and for the preparation of a Directors’ report and a Directors’ remuneration report which comply with the requirements of the Companies Act 1985. The Directors are responsible for the maintenance and integrity of the Company website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. G O I N G CONCERN After making enquiries the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the financial statements. 29 independent auditors’ report T O T HE MEMBERS OF HELPHIRE GROUP PLC We have audited the Group and individual Company financial statements (“the financial statements”) of Helphire Group plc for the 15-month period ended 30 June 2006 which comprise the consolidated income statement, the consolidated statement of changes in equity, the consolidated balance sheet, the consolidated cash flow statement, the Company income statement, the Company balance sheet, the Company cash flow statement and the related notes 1 to 44. These financial statements have been prepared under the accounting policies set out therein. We have also audited the information in the part of the directors’ remuneration report that is described as having been audited. This report is made solely to the Company’s members, as a body, in accordance with section 235 of the Companies Act 1985. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditors’ report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed. R E S P ECTIVE RESPONSIBILITIES OF DIRECTORS AND A U D I T O R S The directors’ responsibilities for preparing the annual report, the directors’ remuneration report and the financial statements in accordance with applicable law and International Financial Reporting Standards (“IFRS”) as adopted for use in the European Union are set out in the statement of directors’ responsibilities. Our responsibility is to audit the financial statement and part of the directors’ remuneration report described as having been audited in accordance with relevant United Kingdom legal and regulatory requirements and International Standards on Auditing (UK and Ireland). We report to you our opinion as to whether the financial statements give a true and fair view, in accordance with the relevant financial reporting framework, and whether the financial statements and the part of the directors’ remuneration report described as having been audited have been properly prepared in accordance with the Companies Act 1985 and Article 4 of the IAS Regulation. We report to you whether in our opinion the information given in the directors’ report is consistent with the financial statements. The information given in the directors’ report includes that specific information presented in the Chief Executive’s statement and Finance Director’s review that is cross referred from the Business Review section of the directors’ report. We also report to you if, in our opinion, 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 also report to you if, in our opinion, the Company has not complied wth any of the four directors’ remuneration disclosure requirements specified for our review by the Listing Rules of the Financial Services Authority. These comprise the amount of each element in the remuneration package and information on share options, details of long-term incentive schemes, and money purchase and defined benefit schemes. We give a statement, to the extent possible, of details of any non-compliance. We review whether the corporate governance statement reflects the Company's compliance with the nine provisions of the July 2003 FRC Combined Code specified for our review by the Listing Rules of the Financial Services Authority, and we report if it does not. We are not required to consider whether the Board's statements on internal control cover all risks and controls, or form an opinion on the effectiveness of the Group's corporate governance procedures or its risk and control procedures. We read the directors’ report and other information contained in the annual report, including the unaudited part of the directors’ remuneration report, and we consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the financial statements. B A S I S OF AUDIT OPI NION 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 and the part of the directors’ remuneration report described as having been audited. It also includes an assessment of the significant estimates and judgements made by the directors in the preparation of the financial statements and of whether the accounting policies are appropriate to the 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 and the part of the directors’ remuneration report described as having been audited are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion, we also evaluated the overall adequacy of the presentation of information in the financial statements and the part of the directors’ remuneration report described as having been audited. O P I N ION In our opinion • the financial statements give a true and fair view, in accordance with the International Financial Reporting Standards as adopted for use in the European Union, of the state of the Group’s and the individual Company’s affairs as at 30 June 2006 and of the Group’s and the individual Company’s profit for the 15-month period then ended; • the financial statements and part of the directors’ remuneration report described as having been audited have been properly prepared in accordance with the Companies Act 1985 and Article 4 of the IAS Regulation; and • the information given in the directors’ report is consistent with the financial statements. S E PARATE OPINION IN RELATION TO IFRS As explained in note 1 to the financial statements, the Group, in addition to complying with its legal obligation to comply with IFRSs adopted for use in the European Union, has also complied with IFRSs issued by the International Accounting Standards Board. Accordingly, in our opinion the financial statements give a true and fair view, in accordance with IFRSs, of the state of the Group’s affairs as at 30 June 2006 and of its profit for the15-month period then ended. D e l o itte & Touche LLP Chartered Accountants and Registered Auditors Bristol, United Kingdom 8 September 2006 30 consolidated income statement for the 15 months ended 30 June 2006 15 months to Year ended 30 June 2006 31 March 2005 Continuing operations Note £’000 £’000 Revenue Existing operations 220,472 118,442 Acquisitions 10,915 – Total revenue 3 231,387 118,442 Cost of sales (133,903) (64,056) Gross profit 97,484 54,386 Administrative expenses Goodwill impairment charge 12 – (1,453) Intangible asset impairment charge 13 – (1,000) Amortisation of intangible assets 13 (2,870) (1,048) Profit on sale of tangible fixed assets 4 – 6,175 IFRS 2 share-based payment charge 27 (722) (412) Albany claims 29 (578) – Other (63,351) (38,150) (67,521) (35,888) Other operating income 5 3,452 1,915 Operating profit analysed between: Existing operations excluding profit on sale of tangible fixed assets 32,283 14,238 Profit on sale of tangible fixed assets – 6,175 Existing operations 32,283 20,413 Acquisitions 1,132 – Total operating profit 6 33,415 20,413 Finance costs 8 (5,048) (3,255) Profit before tax 28,367 17,158 Tax on profit on ordinary activities 9 (5,484) 102 Profit for the period 22,883 17,260 Earnings per share Basic 11 17.67p 14.80p Diluted 11 17.27p 14.49p Adjusted basic 11 20.89p 12.86p Adjusted diluted 11 20.42p 12.59p 31 consolidated statement of changes in equity for the 15 months ended 30 June 2006 Share Share premium Equity Retained capital account reserve earnings Total £’000 £’000 £’000 £’000 £’000 Balance at 1 April 2004 5,800 22,186 1,335 11,335 40,656 Profit for the period – – – 17,260 17,260 Issue of new ordinary shares 107 1,750 – – 1,857 Share based incentive plans – – 412 – 412 Deferred tax – share based incentive plan – – (162) – (162) Dividend – – – (5,613) (5,613) Balance at 31 March 2005 5,907 23,936 1,585 22,982 54,410 Profit for the period – – – 22,883 22,883 Issue of new ordinary shares 892 42,170 – – 43,062 Share based incentive plans – – 722 – 722 Deferred tax – share based incentive plan – – 2,276 – 2,276 Dividend – – – (12,520) (12,520) Balance at 30 June 2006 6,799 66,106 4,583 33,345 110,833 32 consolidated balance sheet as at 30 June 2006 30 June 2006 31 March 2005 Note £’000 £’000 Non-current assets Goodwill 12 67,052 42,644 Intangible assets 13 6,259 6,254 Property, plant and equipment 14 50,702 14,442 Investments 15 300 300 Deferred tax asset 20 6,733 3,973 131,046 67,613 Current assets Trade and other receivables 16 125,938 81,558 Cash and cash equivalents 8,758 3,568 134,696 85,126 Total assets 265,742 152,739 Current liabilities Trade and other payables 17 (37,928) (22,776) Tax liabilities (3,076) – Obligations under finance leases 18 (37,230) (11,583) Short-term borrowings and overdrafts 19 (48,966) (39,883) (127,200) (74,242) Net current assets 7,496 10,884 Non-current liabilities Bank loans 19 (15,487) (20,111) Deferred tax liability 20 (2,467) (1,739) Obligations under finance leases 18 (9,755) (2,237) (27,709) (24,087) Total liabilities (154,909) (98,329) Net assets 110,833 54,410 Equity Share capital 21 6,799 5,907 Share premium account 22 66,106 23,936 Equity reserve 23 4,583 1,585 Retained earnings 24 33,345 22,982 Total equity 110,833 54,410 The financial statements were approved by the Board and authorised for issue on 8 September 2006. They were signed on its behalf by: D E L indsay Director 33 consolidated cash ﬂow statement for the 15 months ended 30 June 2006 15 months to Year ended 30 June 2006 31 March 2005 £’000 £’000 £’000 £’000 Cash flows from operating activities Operating profit 33,415 20,413 Depreciation, amortisation and impairment charges 14,486 7,502 Losses/(gains) on sale of tangible fixed assets 4 (6,141) Share based payment charge 722 412 Increase in debtors (39,361) (25,216) Increase in creditors 5,581 7,193 Cash generated from operators 15,117 4,163 Bank and loan interest paid (4,511) (2,710) Interest element of finance lease rentals (537) (545) (5,048) (3,255) Taxation paid (2,322) (222) Net cash flow from operating activities 7,747 686 Cash flows used in investing activities Purchase of property, plant and equipment (6,071) (404) Purchase of other intangible assets (2,585) – Purchase of unlisted investments – (300) Proceeds from sale of plant and equipment 14,716 862 Proceeds from sale of freehold property – 17,779 Acquisitions (17,574) (19,660) Cash and cash equivalents acquired 395 (10,281) Net cash flow used in investing activities (11,119) (12,004) Cash flows (used in)/from financing activities Net proceeds from issue of ordinary share capital 39,837 1,857 Net proceeds from issue of new loans – 33,447 Repayment of borrowings (19,372) (13,765) Capital element of other loan repayments – (556) Finance lease principal repayments (23,270) (5,019) Dividends paid to shareholders (8,441) (5,613) Net cash flow (used in)/from financing activities (11,246) 10,351 Decrease in cash and cash equivalents (14,618) (967) Cash and cash equivalents at beginning of period 195 1,162 Cash and cash equivalents at end of period (14,423) 195 Cash and cash equivalents consists of: Cash at bank and in hand 4,736 3,568 Cash held in restricted deposit 4,022 – Bank overdraft (23,181) (3,373) (14,423) 195 No material adjustments were required to the consolidated cash flow statement for the year ended 31 March 2005 in order to comply with the requirements of IFRS. The cash held in restricted deposit is held in relation to additional consideration for the acquisition of a subsidiary. 34 notes to the consolidated ﬁnancial statements 1 STATEMENT OF ACCOUNTING POLICIES Basis of accounting The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) for the first time. The disclosures required by IFRS 1 concerning the transition from UK GAAP to IFRS are given in note 30. The financial statements have also been prepared in accordance with IFRSs adopted for use in the European Union and therefore comply with Article 4 of the EU IAS Regulation. The financial statements have been prepared under the historical cost basis. The principal accounting policies adopted are set out below. Basis of consolidation The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company made up to 30 June 2006 each financial year (31 March in previous accounting periods). Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The results of entities acquired or disposed of during the period are included in the consolidated 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 controlled entities 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. Business combinations The acquisition of subsidiaries is accounted for using the purchase method. The cost of the acquisition is measured at the aggregate fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree, plus any costs directly attributable to the business combination. The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 are recognised at their fair value at the acquisition date, except for non-current assets (or disposal groups) that are classified as held for resale in accordance with IFRS 5 Non Current Assets Held for Sale and Discontinued Operations, which are recognised and measured at fair value less costs to sell. Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the business combination over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. If, after reassessment, the Group’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, the excess is recognised immediately in profit or loss. Investments Non-current investments in unlisted companies are included in non-current assets and stated at cost less any provision for impairment. Goodwill Goodwill arising on consolidation represents the excess of the cost of the acquisition over the Group’s interest in the fair value of the identifiable assets and liabilities of a controlled entity at the date of acquisition. Goodwill is initially recognised as an asset at cost and is subsequently measured at cost less any accumulated impairment losses. Goodwill which is recognised as an asset is reviewed for impairment at least annually. Any impairment is recognised immediately in the income statement and is not subsequently reversed. For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash generating units expected to benefit from the synergies of the combination. Cash-generating units to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognised for goodwill cannot be reversed in a subsequent period. Goodwill arising on acquisitions before the date of transition to IFRS has been retained at the previous UK GAAP amounts subject to being tested for impairment. Revenue recognition Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for services provided in the normal course of business, net of discounts and VAT. Credit hire and repair income and income derived from other accident management activities is recognised on transactions which have been completed during the period, together with an appropriate proportion of income in respect of hires and work in progress at the period-end. Income derived from legal expenses insurance policy sales and deferred premiums is recognised on accruals basis, whilst other policy sales are recognised on a receipt basis or on an accruals basis where an element of the income is considered to be certain. Leases Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. Assets held under finance leases are recognised as assets of the Group at their fair value or, if lower, at the present value of the minimum lease payments, each determined at the inception of the lease. The corresponding liability to the lessor is included in the balance sheet as a finance lease obligation. Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly to the income statement. Finance charges relating to the vehicle hire fleet are charged to cost of sales. Rentals under operating leases are charged to income on a straight-line basis over the term of the relevant lease. Benefits received and receivable as an incentive to enter into an operating lease are also spread on a straight-line basis over the lease term. 35 notes to the consolidated ﬁnancial statements 1 STATEMENT OF ACCOUNTING POLICIES CONTIN U E D Borrowing costs Borrowing costs are recognised in the income statement in the period in which they are incurred. Retirement benefit costs The Group contributes to the personal pension plans of employees at a fixed percentage of basic earnings. The cost is charged to the income statement as the contributions fall due. Taxation The tax expense represents the sum of the tax currently payable and deferred tax. The tax currently payable is based on taxable profit for the period. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other periods 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 the initial recognition of 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 equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis. Intangible assets Intangible assets are recognised when a non-monetary asset is separable, or arises from contractual or other legal rights, and where it is probable that future economic benefits attributable to the asset will flow to the Group and the asset cost can be measured reliably. Intangible assets are amortised over their estimated useful economic life on a straight-line basis. Property, plant and equipment Property, plant and equipment is stated at cost, less accumulated depreciation and any recognised impairment loss. Depreciation is charged so as to write off the cost of assets, other than land, over their estimated useful lives, using the straight-line method, on the following bases: Hire fleet 20% to 25% Freehold buildings 2% Leasehold improvements over the term of the lease Furniture, fixtures and equipment 15% to 31.33% Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets or, where shorter, over the term of the relevant lease. 36 notes to the consolidated ﬁnancial statements 1 STATEMENT OF ACCOUNTING POLICIES CONTIN U E D Impairment of tangible and intangible assets At each balance sheet date the Group reviews the carrying amount of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash generating unit to which the asset belongs. An intangible asset with an indefinite useful life is tested for impairment annually and whenever there is an indication that the asset may be impaired. Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risk specific to the assets for which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset (cash generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash generating unit) is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash generating unit) in prior years. A reversal of an impairment loss is recognised as income immediately, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is taken to reserves. Financial assets Financial assets and liabilities are recognised on the Group’s balance sheet when the Group becomes a party to the contractual provisions of the instrument. Equity instruments Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs. Trade receivables Trade receivables are stated at their nominal value as reduced by appropriate allowances for estimated adjustments arising in settlement. Financial liability and equity Financial liabilities are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all its liabilities. Bank borrowings Interest bearing bank loans and overdrafts are recorded at the proceeds received net of direct issue costs. Finance charges, including direct issue costs, are accounted for on an accruals basis in profit or loss using the effective interest rate method and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise. Trade payables Trade payables are not interest bearing and are stated at their nominal value. Share-based payments The Group has applied the requirements of IFRS 2, share-based payments. In accordance with the transitional provisions, IFRS 2 has been applied to all grants of equity instruments after 7 November 2002 that had not vested at 1 April 2005. The Group issues equity-settled share-based payments to certain directors and employees. These payments are measured at fair value (excluding the effects of non market-based vesting conditions) at the date of grant. The fair value determined at the date of grant is expensed on a straight-line basis over the vesting period, based on the Group’s estimate of shares that will eventually vest and adjusted for the effect of non market-based vesting conditions. Fair value is measured by use of the Black-Scholes option pricing model. The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations. Operating profit Operating profit is stated after charging restructuring costs but before investment income and finance costs. 37 notes to the consolidated ﬁnancial statements 2 SEGMENTAL INFORMATION The financial statements are in respect of the Group’s sole business segment of non-fault accident service provisions, conducted wholly in the United Kingdom. 3 REVENUE An analysis of the Group’s revenues is as follows: 15 months to Year ended 30 June 2006 31 March 2005 £’000 £’000 Accident management assistance and related services, primary vehicle hire 166,434 83,755 Vehicle repairs 64,953 34,687 231,387 118,442 4 PROFIT ON SALE OF PROPERTY, PLANT AND EQ U I P M E N T The profit on sale of property, plant and equipment in the year ended 31 March 2005 related to the sale and leaseback of the Group’s corporate headquarters in Bath. The associated tax charge on this profit was £179,000. 5 OTHER OPERATING INCOME Other income includes fees, commissions and premiums generated from non-core accident management services. 6 OPERATING PROFIT Operating profit has been arrived at after charging (crediting): 15 months to Year ended 30 June 2006 31 March 2005 £’000 £’000 Depreciation of property, plant and equipment 11,616 4,001 Amortisation of intangible assets – from business combinations 2,870 1,048 Impairment of goodwill – 1,453 Impairment of intangible assets – internally generated – 1,000 Auditors’ remuneration for audit services 250 135 Loss/ (profit) on sale of property, plant and equipment 4 (6,175) Operating lease rentals – vehicles 16,105 11,095 – property 3,673 1,121 – office equipment 3 13 Staff costs (note 7) 45,061 24,332 A more detailed analysis of auditors’ remuneration is provided below: 15 months to Year ended 30 June 2006 31 March 2005 £’000 % £’000 % Audit services – statutory audit 170 26 120 15 – audit related regulatory reporting 80 12 15 2 250 38 135 17 Further assurance services – acquisition services 127 20 379 49 – IT services 269 42 266 34 646 100 780 100 The amounts in relation to acquisitions and IT services have been capitalised in accordance with their nature. 38 notes to the consolidated ﬁnancial statements 7 STAFF COSTS The average number of employees (including Executive Directors) was: 15 months to Year ended 30 June 2006 31 March 2005 Number Number Operational 1,410 843 Office administration 251 203 Management 119 60 1,780 1,106 Their aggregate remuneration comprised: 15 months to Year ended 30 June 2006 31 March 2005 £’000 £’000 Wages and salaries 39,999 21,652 Social security costs 4,323 2,183 Other pension costs 739 497 45,061 24,332 8 FINANCE COSTS 15 months to Year ended 30 June 2006 31 March 2005 £’000 £’000 Interest on bank overdrafts and loans 3,092 2,209 Interest on loan notes 1,419 501 Interest on obligations under finance leases 537 545 5,048 3,255 Interest on obligations under finance leases in relation to the vehicle hire fleet of £2,050,000 (year ended 31 March 2005 – £nil) has been charged to cost of sales. 9 TAX ON PROFIT ON ORDINARY ACTIVITIES 15 months to Year ended 30 June 2006 31 March 2005 £’000 £’000 Current tax UK corporation tax on profits for the period 4,073 193 Adjustments in respect of prior periods 400 8 Total current tax 4,473 201 Deferred tax Origination and reversal of timing differences 1,011 (303) Tax on profit on ordinary activities 5,484 (102) 15 months to Year ended 30 June 2006 31 March 2005 £’000 £’000 Reconciliation of tax charge Profit before tax 28,367 17,158 Tax at the UK corporation tax rate of 30% 8,510 5,147 Capital allowances and other timing differences not previously recognised (386) (1,630) Deduction in respect of share schemes (415) (1,004) Amortisation of intangible assets (862) (314) Tax effect of expenses that are not deductible in determining taxable profit 1,730 571 Tax effect of utilisation of tax losses not previously recognised (905) (922) Recognition of tax losses (2,188) (1,950) Tax expense/(credit) for the period 5,484 (102) 39 notes to the consolidated ﬁnancial statements 10 DIVIDENDS Amounts recognised as distributions to equity holders in the period: 15 months to Year ended 30 June 2006 31 March 2005 £’000 £’000 Final dividend for the period ended 31 March 2005 of 3.7p (2005 – 2.5p for the year ended 31 March 2004) 4,372 2,900 Interim dividends for the period ended 30 June 2006 of 6.0p (2005 – 2.3p for the year ended 31 March 2005) 8,148 2,713 12,520 5,613 Proposed final dividend for period ended 30 June 2006 of 4.0p (year ended 31 March 2005 – 3.7p) per share 5,439 4,372 The proposed dividend is subject to approval by shareholders at the Annual General Meeting and has not been included as a liability in these financial statements. 11 EARNINGS PER SHARE The calculation of the basic and diluted earnings per share is based on the following data: 15 months to Year ended 30 June 2006 31 March 2005 Earnings £’000 £’000 Earnings for the purposes of basic and diluted earnings per share being net profit attributable to equity holders 22,883 17,260 Number of shares Number Number Weighted average number of ordinary shares for the purposes of basic earnings per share 129,523,905 116,612,903 Effective of dilutive potential ordinary shares – share options 2,987,986 2,477,818 Weighted average number of ordinary shares for the purposes of diluted earnings per share 132,511,891 119,090,721 Adjusted earnings per share Adjusted earnings per share is based on the weighted average number of shares as for the unadjusted earnings per share and the profit for the period adjusted for the following expenses/(income). 15 months to Year ended 30 June 2006 31 March 2005 £’000 £’000 Amortisation of intangible assets 2,870 1,048 Albany claims costs 578 – Share-based payment charge 722 412 Goodwill/impairment – 1,453 Tangible asset impairment – 1,000 Profit on sale and lease back of head office – (6,175) 4,170 (2,262) 40 notes to the consolidated ﬁnancial statements 12 GOODWILL £’000 Cost At 1 April 2004 1,453 Recognised on acquisition of subsidiary 42,644 At 1 April 2005 44,097 Recognised on acquisition of subsidiary 23,647 Other changes 761 At 30 June 2006 68,505 Accumulated impairment losses At 1 April 2004 – Impairment loss (1,453) At 1 April 2005 (1,453) Impairment loss – At 30 June 2006 (1,453) Carrying amount At 30 June 2006 67,052 At 1 April 2005 42,644 Goodwill acquired in a business combination is allocated, at acquisition, to the cash generating units (CGUs) that are expected to benefit from that business acquisition. Before recognition of impairment losses, the carrying amount of goodwill has been allocated as follows: 2006 2005 £’000 £’000 Albany CGU 43,405 42,644 Swift CGU 23,647 – Previous Acquisitions segment (comprising several CGUs) 1,453 1,453 68,505 44,097 The other changes in goodwill of £761,000 related to subsequent amendments to the fair values of the net assets acquired in the acquisition of the Albany CGU in 2005. This related principally to the re-assessment of taxation liabilities at the date of acquisition. The Group tests goodwill annually for impairment, or more frequently if there are indications that the goodwill might be impaired. The recoverable amounts of the CGUs are determined from value in use calculations. The key assumptions for the value in use calculations are those regarding the discount rates, growth rates and expected changes to selling prices and direct costs during the period. Management estimates discount rates using pre-tax rates that reflect current market assessments of the time value of money and the risks specific to the CGUs. The growth rates are based on industry growth forecasts. Changes in selling prices and direct costs are based on past practices and expectations of future changes in the market. The Group prepares cash flow forecasts derived from the most recent financial budget approved by management for the next five years and extrapolates cash flows for the remaining period based on estimated growth rate. For reasons of prudence the growth rate used for extrapolation was 0%, with 5% per annum decline in the final five years. The total finite useful economic life at the Albany and Swift CGUs for purpose of the impairment review was assumed to be 20 years. The rate used to discount the forecast cash flows for all CGUs is 6.3%. At 30 June 2006, before impairment testing, goodwill of £1,453,000 was allocated to the Previous Acquisitions segment. Due to reduced business performance and refocusing of these businesses the Group revised its cash flow forecasts for this CGU and an impairment loss of £1,453,000 was recognised in the year ended 31 March 2005. 41 notes to the consolidated ﬁnancial statements 13 OTHER INTANGIBLE ASSETS Customer Software contracts development Total £’000 £’000 £’000 Cost At 1 April 2004 – 1,150 1,150 Additions – 307 307 Recognised on acquisition of subsidiary 6,845 – 6,845 At 1 April 2005 6,845 1,457 8,302 Additions – 2,585 2,585 Recognised on acquisition of subsidiary 290 – 290 At 30 June 2006 7,135 4,042 11,177 Accumulated amortisation and impairment losses At 1 April 2004 – – – Amortisation charge (1,048) – (1,048) Impairment loss – (1,000) (1,000) At 1 April 2005 (1,048) (1,000) (2,048) Amortisation charge (2,870) – (2,870) At 30 June 2006 (3,918) (1,000) (4,918) Carrying amount At 30 June 2006 3,217 3,042 6,259 At 1 April 2005 5,797 457 6,254 Customer contracts acquired as part of business acquisitions are amortised over the expected useful life of each contract, which range from 23 to 48 months. Software development costs are not yet being amortised because their useful life has not yet commenced. 42 notes to the consolidated ﬁnancial statements 14 PROPERTY, PLANT AND EQUIPMENT Group Freehold land Leasehold Vehicle Fixtures & & buildings improvements hire fleet equipment Total £’000 £’000 £’000 £’000 £’000 Cost At 1 April 2004 10,761 1,496 5,195 10,549 28,001 Additions 2,429 463 8,634 990 12,516 Acquisition of subsidiary undertaking – – – 157 157 Transfer between category (1,115) – – 1,115 – Disposals (12,075) (928) (1,385) (2,974) (17,362) At 1 April 2005 – 1,031 12,444 9,837 23,312 Additions – 690 56,404 3,354 60,448 Acquisition of subsidiary undertaking – 42 2,062 45 2,149 Disposals – – (19,077) (62) (19,139) At 30 June 2006 – 1,763 51,833 13,174 66,770 Accumulated depreciation and impairment At 1 April 2004 (231) (1,250) (2,641) (5,609) (9,731) Charge for the period (220) (158) (1,272) (2,351) (4,001) Disposals 451 928 519 2,964 4,862 At 1 April 2005 – (480) (3,394) (4,996) (8,870) Charge for the period – (197) (8,666) (2,753) (11,616) Disposals – – 4,358 60 4,418 At 30 June 2006 – (677) (7,702) (7,689) (16,068) Carrying amount At 30 June 2006 – 1,086 44,131 5,485 50,702 At 1 April 2005 – 551 9,050 4,841 14,442 Leased assets included above: Carrying amount At 30 June 2006 – – 35,014 1,587 36,601 At 1 April 2005 – 25 8,890 4,789 13,704 In accordance with IFRS 1, “First time adoption of International Financial Reporting Standards” and IAS17 “Leases”, the Group has reviewed the classification of all leases at the opening balance sheet date of 1 April 2004. All leases of land and buildings are deemed to be operating leases. The depreciation charge on the vehicle hire fleet represents a critical judgement made by the Directors. The Group operates a large fleet of hire vehicles. Depreciation on these vehicles is intended to reduce the carrying value of the vehicles to their expected residual value on disposal. However, the residual value attributable is dependent on conditions present in the future and is subject to movements in the market for nearly-new vehicles. As such, this area is inherently judgemental and is a key source of estimation uncertainty. 15 INVESTMENTS The investment in the consolidated balance sheet represents an investment in an unlisted entity. A list of the significant investments in subsidiaries, including the name, country of incorporation and proportion of ownership interest is given in note 36 to the Company’s separate financial statements. 43 notes to the consolidated ﬁnancial statements 16 TRADE AND OTHER RECEIVABLES 30 June 2006 31 March 2005 £’000 £’000 Trade receivables 127,302 83,178 Expected adjustments arising on settlement (15,392) (11,715) Trade receivables – net 111,910 71,463 Other debtors 9,675 6,504 Prepayments and accrued income 3,936 3,338 VAT recoverable 417 253 125,938 81,558 Trade receivables represents amounts receivable for the provision of services to customers. The expected adjustments arising on settlement is estimated by the Group’s management based on prior experience. Credit risk is spread across major motor insurers in proportion to their respective share of the market. The average credit period taken by customers is 206 days. The expected adjustments arising on settlement of receivables represents a critical judgement made by the Directors. By their very nature, claims against motor insurance policies can be subject to dispute with a consequent requirement to reach a settlement with the counterparty. The Directors have reduced trade receivables to reflect the expected future adjustments on settlement on the basis of the level of adjustments arising historically. However, this area is inherently judgemental and is a key source of estimation uncertainty. 17 TRADE AND OTHER PAYABLES 30 June 2006 31 March 2005 £’000 £’000 Trade payables 6,379 4,082 Other taxation and social security 1,920 5,685 Accruals and deferred income 24,923 11,326 Other creditors 627 1,683 Dividends payable 4,079 – 37,928 22,776 Trade payables represent amounts payable for goods and services. The average credit period taken for trade purchases is 17 days. 18 OBLIGATIONS UNDER FINANCE LEASES 30 June 2006 31 March 2005 £’000 £’000 Amounts payable under finance leases within one year 37,230 11,583 Amount due for settlement within 12 months 37,230 11,583 Amounts payable under finance leases in the second to fifth years inclusive 9,755 2,237 Amount due for settlement after 12 months 9,755 2,237 It is the Group’s policy to lease certain of its fixtures and equipment and motor vehicles under finance leases. The average lease term is 1.76 years. For the period ended 30 June 2006 the average effective borrowing rate was 6.89% (2005 – 8.23%). Interest rates are fixed at the contract date. All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments. All lease obligations are denominated in sterling. The fair value of the Group’s finance lease obligations approximates to their carrying value. The Group’s obligations under finance leases are secured by the lessors’ charges over the leased assets. 44 notes to the consolidated ﬁnancial statements 19 BORROWINGS AND OVERDRAFTS 30 June 2006 31 March 2005 £’000 £’000 Bank overdrafts 23,181 3,373 Bank loans 20,080 39,451 Loan notes 21,192 17,170 64,453 59,994 The borrowings are repayable as follows: On demand or within one year – Bank overdrafts 23,181 3,373 – Bank loans 4,593 19,340 – Loan notes 21,192 17,170 Amount due for settlement within 12 months 48,966 39,883 In the second year – Bank loans 3,518 3,739 In the third to fifth years inclusive – Bank loans 1,220 5,515 After five years – Bank loans 10,749 10,857 Amount due for settlement after 12 months 15,487 20,111 The weighted average interest rates paid were as follows: % % Bank loans and overdrafts 5.97 6.32 Facilities of £23.5m in the form of a revolving facility and a term loan are provided by Bank of Scotland. These facilities expire after two years and attract an interest rate of 1.5% above LIBOR. Security is provided by a fixed and floating charge over the Group’s assets which encompasses cross guarantees between subsidiaries. A further facility of £34.5m in the form of two term loans, (a) and (b), and guaranteed loan notes were provided by Bank of Scotland in 2005. Term loan (a), amounting to £6.3m, is repayable from 30 September 2006 and must be repaid in full by October 2011. Term loan (b), amounting to £11m, is repayable in full by October 2011. Term loan (a) attracts an interest rate of 1.5% above LIBOR. Term loan (b) attracts an interest rate of 2% above LIBOR. The loan notes were issued to fund the acquisition of Albany and are guaranteed by the Bank of Scotland, the Group’s bankers. The loan notes are redeemable in full upon receipt of 30 days written notice. Interest is charged using the base rate published by the Bank of Scotland. Upon redemption the loan notes are to be converted into term loan (a) and will be subject to the same repayment terms as above. Further loan notes totalling £4,022,000 were issued on the same terms during the period to fund the acquisition of Swift Rent-A-Car Limited. The directors consider that the fair values of the Group’s borrowings was equal to their book value. Subsequent to the period-end, on 25 July 2006, the Group secured a new three year revolving credit facility of £25m with Royal Bank of Scotland. The new facility is repayable in full on 25 July 2009 and is subject to interest at 0.95% above LIBOR, rising to 1.05% or 1.40% above LIBOR if the ratio of Net Debt to EBITDA exceeds certain levels. The new facility is secured by a fixed and floating charge over the assets of the Group. 45 notes to the consolidated ﬁnancial statements 20 DEFERRED TAX Deferred tax is calculated in full on temporary differences under the liability method using a tax rate of 30% (2005 – 30%). The deferred tax liabilities and assets, and movements thereon, recognised by the Group are set out below: (Liability) (Liability) Asset Intangible Accelerated tax Liability Asset Share-based Asset assets depreciation total tax losses payments total £’000 £’000 £’000 £’000 £’000 £’000 At 1 April 2004 – – – 3,061 1,085 4,146 Acquisition of subsidiary (2,053) – (2,053) – – – (Charge) credit to income 314 – 314 (11) – (11) (Charge) credit to equity – – – – (162) (162) At 1 April 2005 (1,739) – (1,739) 3,050 923 3,973 Acquisition of subsidiary (86) (170) (256) 1,024 – 1,024 (Charge) credit to income 860 (1,332) (472) (486) (54) (540) (Charge) credit to equity – – – – 2,276 2,276 At 30 June 2006 (965) (1,502) (2,467) 3,588 3,145 6,733 At the balance sheet date the Group has unused trading losses of £15m (2005 – £22.7m) available for offset against future trading profits. A deferred tax asset has been recognised in respect of £12m (2005 – £10.2m) of this amount. No deferred tax asset has been recognised in respect of the remaining £3m (2005 – £12.5m) due to the unpredictability of future profit streams. 21 SHARE CAPITAL 30 June 2006 31 March 2005 £’000 £’000 Authorised 160,000,000 ordinary shares of 5p each 8,000 8,000 Issued and fully paid 135,975,540 (2005 – 118,141,802) ordinary shares of 5p each 6,799 5,907 The movement in issued share capital during the period was as follows: Shares ’000s At start of period 118,142 Placing and open offer 15,424 Issued to vendors of acquisition 1,240 Exercise of share options 885 Sharesave scheme 284 At end of period 135,975 The placing and open offer for cash on 17 September 2005 was to fund the acquisition of Swift Rent-A-Car Limited. 22 SHARE PREMIUM ACCOUNT £’000 At 1 April 2004 22,186 Shares issued 1,750 At 1 April 2005 23,936 Shares issued 42,170 At 30 June 2006 66,106 23 EQUITY RESERVE £’000 At 1 April 2004 1,335 Share-based payment charged to income 412 Deferred tax asset on share options (162) At 1 April 2005 1,585 Share-based payment charged to income 722 Deferred tax asset on share options 2,276 At 30 June 2006 4,583 46 notes to the consolidated ﬁnancial statements 24 RETAINED EARNINGS £’000 At 1 April 2004 11,355 Profit for the period 17,260 Dividends (5,613) At 1 April 2005 22,982 Profit for the period 22,883 Dividends (12,520) At 30 June 2006 33,345 25 ACQUISITION OF SUBSIDIARY On 2 September 2005 the Group acquired 100% of the issued share capital of Swift Rent-A-Car Limited for consideration of £26.9m. Swift Rent-A-Car Limited is involved in the provision of credit hire services. This transaction has been accounted for by the purchase method of accounting. Book Fair value Fair value adjustments value £’000 £’000 £’000 Net assets acquired Property, plant and equipment 2,149 – 2,149 Intangible asset – customer contract – 290 290 Trade and other receivables 5,019 – 5,019 Cash and cash equivalents 395 – 395 Trade and other payables (1,223) (1,521) (2,744) Tax liability (820) 268 (552) Obligations under finance leases (2,058) – (2,058) Deferred tax (liabilities)/asset (169) 937 768 3,293 (26) 3,267 Goodwill 23,647 Total consideration 26,914 Satisfied by: Cash 17,128 Deferred consideration 2,093 Shares issued 3,225 Directly attributable costs 446 Loan notes 4,022 26,914 Net cash outflow arising on acquisition Cash consideration 17,128 Directly attributable costs paid 446 Cash and cash equivalents acquired (395) 17,179 The fair value adjustments were to recognise an intangible asset in respect of a customer contract in accordance with IAS 38, to recognise current and deferred tax debtors and to accrue for outstanding liabilities. 47 notes to the consolidated ﬁnancial statements 26 OPERATING LEASE ARRANGEMENTS 30 June 31 March 2006 2005 £’000 £’000 Minimum lease payments under operating leases recognised in income for the period 19,781 12,229 At the balance sheet date the Group had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows: 2006 2005 £’000 £’000 Within one year 4,998 2,978 In the second to fifth years inclusive 1,898 1,175 After five years 1,172 1,706 8,066 5,859 Operating lease payments represent rentals payable by the Group for certain of its motor vehicles, plant and equipment and properties. Leases are negotiated for an average term of 2.97 years and rentals are fixed for an average of 2.34 years. 27 SHARE-BASED PAYMENTS Equity settled share option plan The Group grants options to certain directors and employees. Options are exercisable at a price equal to the average quoted market price of the Company’s shares on the date of grant. The vesting period is generally three years. If the options remain unexercised after a period of seven years from the date of grant the options expire. Furthermore, options are forfeited if the employee leaves the Group before the options vest. Details of the options outstanding during the period are as follows: 15 months to Year ended June 2006 31 March 2005 Weighted Weighted Number of average Number of average options exercise price options exercise price 000s £ £’000 £ Outstanding at beginning of period 6,303 1.50 7,231 1.20 Granted during the period 103 2.97 1,272 2.14 Exercised during the period (885) 1.20 (2,131) 0.87 Forfeited during the period (55) 1.88 (69) 1.65 Outstanding at end of period 5,466 1.57 6,303 1.50 Exercisable at the end of the period 1,601 1.08 1,451 1.12 The weighted average share price at the date of exercise for share options exercised during the period was 310.97p. The options outstanding at 30 June 2006 had a weighted average exercise price of £1.57 and a weighted average remaining contractual life of 6.5 years. In the year ended 31 March 2005, options were granted on 13 December 2004 and 29 March 2005. The aggregate of the estimated fair values of the options granted on those dates was £688,000. In the 15-month period ended 30 June 2006, options were granted on 2 September 2005 and 29 March 2006. The aggregate of the estimated fair values of the options granted on those dates was £80,000. The inputs to the Blacks-Scholes model are as follows: 15 months to Year ended June 2006 31 March 2005 Weighted average share price £2.98 £2.09 Weighted average exercise price £2.97 £2.14 Expected volatility 31.9% 32.9% Expected life 4 years 4 years Risk free rate 4.13% 4.45% Dividend yield 2.06% 2.30% Expected volatility was determined by calculating the historical volatility of the Group’s share price over the previous four years. The expected useful life in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations. The Group recognised total expenses of £0.7m and £0.4m related to equity-settled share-based payment transactions in the 15-month period ended 30 June 2006 and the year ended 31 March 2005 respectively. 48 notes to the consolidated ﬁnancial statements 28 RELATED PARTY TRANSACTIONS Transactions between the Company and its subsidaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note. Transactions between the Company and its subsidiaries are disclosed in the Company’s separate financial statements. Remuneration of the directors, who are the key management personnel of the Group, is provided in the audited section of the Directors’ Remuneration Report on pages 19 to 25. 29 CONTINGENT ASSETS AND LIABILITIES Subsequent to the acquisition of Albany in October 2004 and Swift in September 2005, certain liabilities have arisen in the acquired businesses relating to matters arising prior to acquisition by Helphire Group plc. These liabilities were not foreseen at the date of acquisition. The Directors have estimated the likely impact of these matters and recognised associated liabilities in the consolidated balance sheet. £1.6m of the liabilities were identified within one year of the relevant acquisition and have been recorded as adjustments to the fair values of the acquired liabilities. £0.6m arose after one year of the relevant acquisition and have therefore been treated as an expense in the current period. Whilst the nature of the items concerned is such that it is not possible at the current time to precisely determine the amount of the liability, the Directors consider that suitably reliable estimations can be made and have recorded liabilities on this basis. The Directors anticipate making warranty claims against the former owners of both Albany and Swift in respect of the above liabilities. However, such claims are at an early stage and it is not possible to assess their success, or otherwise, with sufficient certainty. As such, warranty claims are considered contingent and no asset has been recorded in the accounts. 30 EXPLANATION OF TRANSITION TO IFRS This is the first financial period that the Group has presented its financial statements under IFRS. The following disclosures are required in the year of transition. The last financial statements under UK GAAP were for the year ended 31 March 2005 and the date of transition to IFRS was therefore 1 April 2004. Reconciliation of equity at 1 April 2004 (date of transition to IFRS) UK GAAP Effect of transition to IFRS IAS10 IFRS 2 IAS38 IAS27 IFRS Post Balance Share-based Intangible Consolidated Sheet Events Payments Assets and separate Dividends financial statements (Note 1) (Note 2) (Note 3) (Note 4) £’000 £’000 £’000 £’000 £’000 £’000 Goodwill 1,453 – – – – 1,453 Intangible assets – – – 1,150 – 1,150 Property, plant and equipment 19,420 – – (1,150) – 18,270 Deferred tax asset 3,061 – 1,085 – – 4,146 Total non-current assets 23,934 – 1,085 – – 25,019 Trade and other receivables 49,482 – – – 250 49,732 Cash and cash equivalents 4,976 – – – 264 5,240 Total current assets 54,458 – – – 514 54,972 Total assets 78,392 – 1,085 – 514 79,991 Trade and other payables (11,331) 2,900 – – (641) (9,072) Obligations under finance leases (6,420) – – – – (6,420) Borrowings and overdraft (23,843) – – – – (23,843) Total creditors (41,594) 2,900 – – (641) (39,335) Net assets 36,798 2,900 1,085 – (127) 40,656 Share capital 5,800 – – – – 5,800 Share premium account 22,186 – – – – 22,186 Equity reserve – – 1,335 – – 1,335 Retained earnings 8,812 2,900 (250) – (127) 11,335 36,798 2,900 1,085 – (127) 40,656 49 notes to the consolidated ﬁnancial statements 30 EXPLANATION OF TRANSITION TO IFRS CONTIN U E D Reconciliation of equity at 31 March 2005 (date of last UK GAAP financial statements) UK GAAP Effect of transition to IFRS IAS10 IFRS 2 IAS38 IAS27 IFRS 3 IFRS Post Balance Share-based Intangible Consolidated Business Sheet Events Payments Assets and separate combinations Dividends financial statements (Note 1) (Note 2) (Note 3) (Note 4) (Note 5) £’000 £’000 £’000 £’000 £’000 £’000 £’000 Goodwill 46,402 – – (4,793) – 1,035 42,644 Intangible assets – – – 6,254 – – 6,254 Property, plant and equipment 14,894 – – (456) 4 – 14,442 Investment 300 – – – – – 300 Deferred tax asset 3,050 – 923 – – – 3,973 Total non-current assets 64,646 – 923 1,005 4 1,035 67,613 Trade and other receivables 81,506 – – – 52 – 81,558 Cash and cash equivalents 3,353 – – – 215 – 3,568 Total current assets 84,859 – – – 267 – 85,126 Total assets 149,505 – 923 1,005 271 1,035 152,739 Trade and other payables (26,880) 4,372 – – (268) – (22,776) Obligations under finance leases (13,820) – – – – – (13,820) Borrowings and overdraft (59,994) – – – – – (59,994) Deferred tax liability – – – (1,739) – – (1,739) Total creditors (100,694) 4,372 – (1,739) (268) – (98,329) Net assets 48,811 4,372 923 (734) 3 1,035 54,410 Share capital 5,907 – – – – – 5,907 Share premium account 23,936 – – – – – 23,936 Equity reserve – – 1,585 – – – 1,585 Retained earnings 18,968 4,372 (662) (734) 3 1,035 22,982 48,811 4,372 923 (734) 3 1,035 54,410 50 notes to the consolidated ﬁnancial statements 30 EXPLANATION OF TRANSITION TO IFRS CONTIN U E D Reconciliation of income for year ended 31 March 2005 (date of last UK GAAP financial statements) UK GAAP Effect of transition to IFRS IFRS 2 IAS38 IAS27 IFRS 3 IFRS Share-based Intangible Consolidated Business Payments Assets and separate Combinations financial statements (Note 2) (Note 3) (Note 4) (Note 5) £’000 £’000 £’000 £’000 £’000 £’000 Revenue 118,010 – – 432 – 118,442 Cost of sales (64,056) – – – – (64,056) Gross profit 53,954 – – 432 – 54,386 Administrative expenses Goodwill impairment charge (1,453) – – – – (1,453) Intangible asset impairment charge (1,000) – – – – (1,000) Profit on sale of tangible fixed assets 6,175 – – – – 6,175 Other (39,022) (412) (1,048) (163) 1,035 (39,610) (35,300) (412) (1,048) (163) 1,035 (35,888) Other operating income 1,915 – – – – 1,915 Finance costs (3,116) – – (139) – (3,255) Profit before tax 17,453 (412) (1,048) 130 1,035 17,158 Tax on profit on ordinary activities (212) – 314 – – 102 Net profit (loss) 17,241 (412) (734) 130 1,035 17,260 Notes to reconciliations between UK GAAP and IFRS 1 Post Balance Sheet Events Under UK GAAP dividends are provided for in the accounts when they are proposed. IAS10 requires dividends to be recognised as a liability only when they are approved. For a final dividend this is when they are approved by the shareholders in general meeting. For an interim dividend this is when they are approved by the Board. 2 Share-based Payments Under UK GAAP no profit and loss account charge was required in respect of remuneration paid to directors and employees by means of granting share options. IFRS 2 requires that share-based payments are recognised as an expense in the income statement at fair value. The expense is based on the fair value of the share award at the date of grant. The fair value is calculated using the Blacks-Scholes model and is applied to options granted after 7 November 2002 and not vested at 1 April 2005. 3 Intangible Assets IAS 38 requires the recognition of certain intangible assets acquired in business combinations, where this was not required under UK GAAP. This includes ongoing contractual rights to supply, where the fair value of the relationship can be measured. The directors have identified several customer contracts that on this basis should be treated as intangible assets. These are amortised over two to four years. The directors have also identified certain software licence and development expenditure classified as tangible fixed assets under UK GAAP which they believe more closely meet the definition of intangible assets under IAS38. Accordingly these costs, which did not arise from business combinations, have been reclassified as intangible assets under IFRS. 4 Consolidated and Separate Financial Statements Fishers Solicitors Practice Limited (“Fishers”) is a member of Helphire’s panel of solicitors. The directors have considered the nature of the relationship with Fishers against the requirements of IAS 27 and have concluded that it satisfies the definition of a subsidiary, whereas this was not previously the case under UK GAAP. As such, the results of Fishers have been consolidated into these financial statements. 5 Business Combinations In accordance with IFRS 3, goodwill is carried at cost subject to impairment review. The previous UK GAAP treatment was for goodwill to be amortised over its useful life. Under the transitional arrangements of IFRS 1 the Group exercised its option of applying IFRS 3 prospectively from the date of transition to IFRS. Accordingly, goodwill arising from acquisitions prior to 1 April 2004 is frozen at its written down value as at that date. 6 Impairment of Assets Impairment tests are carried out whenever events or changes in circumstances indicate that the carrying value of assets may not be recoverable, and also annually in the case of goodwill, which has an indefinite useful life and is not subject to amortisation and intangible assets not yet available for use. An impairment loss is recognised in respect of the amount by which the asset’s carrying amount exceeds its recoverable amount, defined as the higher of the asset’s fair value and its value in use. For the purposes of the assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units). 51 company income statement for the 15 months ended 30 June 2006 15 months to Year ended 30 June 2006 31 March 2005 Continuing operations Note £’000 £’000 Operating income Management charges 22,811 15,010 Other income 64 413 Dividends from subsidiaries 10,000 8,300 Administrative expenses (19,100) (13,561) Operating profit 32 13,775 (10,162) Finance costs 33 (4,753) (2,960) Profit before tax 9,022 7,202 Tax on profit on ordinary activities 34 (392) – Profit for the period 8,630 7,202 A Company only income statement has not previously been presented. 52 company balance sheet as at 30 June 2006 30 June 2006 31 March 2005 Note £’000 £’000 Non-current assets Property, plant and equipment 35 822 267 Investments in subsidiaries 36 67,938 40,888 Other investments 36 300 300 Deferred tax asset 40 2,611 767 71,671 42,222 Current assets Trade and other receivables 37 78,300 56,305 Cash and cash equivalents 4,022 – 82,322 56,305 Total assets 153,993 98,527 Current liabilities Trade and other payables 38 (13,938) (5,503) Borrowings and overdrafts 39 (46,770) (36,905) (60,708) (42,408) Non-current liabilities Borrowings and overdrafts 39 (15,487) (20,111) Deferred tax liabilities 40 (7) – (15,494) (20,111) Total liabilities (76,202) (62,519) Net assets 77,791 36,008 Equity Share capital 41 6,799 5,907 Share premium account 41 66,086 23,916 Equity reserve 43 3,997 1,386 Retained earnings 42 909 4,799 77,791 36,008 The financial statements were approved by the Board of Directors and authorised for issue on 8 September 2006. They were signed on its behalf by: D E L indsay Director 53 company cash ﬂow statement for the 15 months ended 30 June 2006 15 months to Year ended 30 June 2006 31 March 2005 £’000 £’000 £’000 £’000 Cash flows (used in)/from operating activities Operating profit 13,775 10,162 Depreciation charge 27 1 Investment impairment charge – 3,000 Increase in debtors (22,335) (5,675) Increase in creditors 2,264 781 Share-based payment charge (net of recharge to subsidiaries) 586 348 Cash (used in)/from operations (5,683) 8,617 Bank and loan interest paid (4,753) (2,960) Taxation paid – – Net cash flow (used in) from operating activities (10,436) 5,657 Cash flows from investing activities Purchase of unlisted investments – (300) (Repayment)/issue of borrowings (582) (268) Acquisitions (17,574) (19,660) Net cash used in investing activities (18,156) (20,228) Cash flows from financing activities Net proceeds from issue of ordinary share capital 39,837 1,857 Net proceeds from (repayment) loans (19,767) 17,931 Dividends paid to shareholders (8,441) (5,613) Net cash flow from financing activities 11,629 14,175 Net decrease in cash and cash equivalents (16,963) (396) Cash and cash equivalents at beginning of period – 396 Cash and cash equivalents at end of period (16,963) – Cash and cash equivalents consists of: Cash at bank and in hand 4,022 – Cash held in restricted deposit – – Bank overdraft (20,985) – (16,963) – 54 notes to the consolidated ﬁnancial statements 31 SIGNIFICANT ACCOUNTING POLICIES The separate financial statements of the Company are presented as required by the Companies Act 1985. As permitted by that Act, the separate financial statements have been presented in accordance with International Financial Reporting Standards. The financial statements have been prepared on a historical cost basis. The principal accounting policies adopted are the same as those set out in note 1 to the consolidated financial statements except as noted below. Investments in subsidiaries are stated at cost less, where appropriate, provisions for impairment. 32 OPERATING PROFIT The auditors’ remuneration for audit services to the Company was £76,000 (2005 – £50,000). 33 FINANCE COSTS 15 months to Year ended 30 June 2006 31 March 2005 £’000 £’000 Interest on bank overdrafts and loans 1,662 2,960 Interest on loan notes 3,091 – 4,753 2,960 34 TAX 15 months to Year ended 30 June 2006 31 March 2005 £’000 £’000 Current tax UK corporation tax on profits for the period 10 – Adjustments in respect of prior periods 330 – Total current tax 340 – Deferred tax Origination and reversal of timing differences 52 – Tax on profit on ordinary activities 392 – Reconciliation of tax charge Profit before tax 9,022 7,202 Tax at the UK corporation tax rate of 30% 2,707 2,161 Non taxable income (3,000) (2,490) Group relief surrendered 273 – Deductible costs not in income statement (310) (673) Non deductible costs 722 1,003 Tax expense for the period 392 – 55 notes to the consolidated ﬁnancial statements 35 PROPERTY, PLANT AND EQUIPMENT Leasehold improvements £’000 Cost At 1 April 2004 – Additions 268 At 1 April 2005 268 Additions 582 At 30 June 2006 850 Accumulated depreciation and impairment At 1 April 2005 – Charge for the period (1) At 1 April 2005 (1) Charge for the period (27) At 30 June 2006 (28) Carrying amount At 30 June 2006 822 At 1 April 2005 267 56 notes to the consolidated ﬁnancial statements 36 INVESTMENTS Details of the Company and Group’s subsidiaries at 30 June 2006 are as follows: Shares held Place of Ownership by Company incorporation interest Subsidiary undertaking or Group and operation % Helphire (UK) Limited Company England and Wales 100 Helphire Finance Limited Company England and Wales 100 Angel Assistance Limited Company England and Wales 100 Fleet Services Limited Company England and Wales 100 Helphire Legal Services Limited Company England and Wales 100 Countrywide Assistance Limited Company England and Wales 100 1st Automotive Limited Company England and Wales 100 Rescue Car Rentals Limited Group England and Wales 100 Helphire EBT (Trustees) Limited Group England and Wales 100 e Register Limited Company England and Wales 100 Jewellers On-line Limited Group England and Wales 100 Total Accident Management Limited Company England and Wales 100 InsureAssist Limited Company England and Wales 100 Compensation Team Limited Company England and Wales 100 City and County Hire Limited Group England and Wales 100 Car and Commercial Assessors Limited Group England and Wales 100 Specialist Witness Limited Group England and Wales 100 Theftsure Limited Group England and Wales 100 Helphire (Pinesgate) Limited Company England and Wales 100 Helphire (Pinesgate Reversion) Limited Company England and Wales 100 Helphire (Pinesgate Nominee No 1) Limited Company England and Wales 100 Helphire (Pinesgate Nominee No 2) Limited Company England and Wales 100 Albany RTA Limited Company England and Wales 100 Albany Group Holdings Limited Group England and Wales 100 Marketstir Limited Group England and Wales 100 Albany Assistance Limited Group England and Wales 100 Albany Vehicle Rentals Limited Group England and Wales 100 Albany Medical Rentals Limited Group England and Wales 100 Swift Rent-A-Car Limited Company England and Wales 100 Swift Prestige Hire Limited Group England and Wales 100 Swift Finance (GB) Limited Group England and Wales 100 Whilst Helphire owns no shares in Fishers Solicitors Limited the directors consider it to be a subsidiary against the requirements of IAS 27 because of its contractual arrangements with the Group. The movement in investments in subsidiaries during the period was as follows: Cost £’000 At 1 April 2004 5,473 Additions 40,677 At 31 March 2005 46,150 Additions 27,050 At 30 June 2006 73,200 Impairment At 1 April 2004 (2,262) Charge for the period (3,000) At 31 March 2005 (5,262) Charge for the period – At 30 June 2006 (5,262) Carrying amount At 30 June 2006 67,938 At 31 March 2005 40,888 The other investment of £300,000 (2005 – £300,000) in an investment in a corporate vehicle created for the sale and lease back of the Group’s headquarters in 2005. 57 notes to the consolidated ﬁnancial statements 37 TRADE AND OTHER RECEIVABLES 30 June 2006 31 March 2005 £’000 £’000 Amounts owed by subsidiary undertakings 72,197 53,077 Other debtors 3,373 1,628 Prepayments and accrued income 2,395 1,385 VAT 335 215 78,300 56,305 Included within other debtors is an amount of £871,000 (2005 – £1,266,000) receivable after more than one year. 38 TRADE AND OTHER PAYABLES 30 June 2006 31 March 2005 £’000 £’000 Trade payables 1,020 798 Other taxation and social security 211 158 Accruals and deferred income 5,360 1,560 Other creditors – 7 Dividends payable 4,079 – Amounts owed to subsidiary undertakings 3,268 2,980 13,938 5,503 Trade payables represent amounts payable for goods and services. The average credit period taken for trade purchases is 30 days. 39 BORROWINGS AND OVERDRAFTS 30 June 2006 31 March 2005 £’000 £’000 Bank overdrafts 20,985 – Bank loans 20,080 39,846 Loan notes 21,192 17,170 62,257 57,016 The borrowings are repayable as follows: On demand or within one year – Bank overdrafts 20,985 – – Bank loans 4,593 19,735 – Loan notes 21,192 17,170 Amount due for settlement within 12 months 46,770 36,905 In the second year – Bank loans 3,518 3,739 In the third to fifth years inclusive – Bank loans 1,220 5,515 After five years – Bank loans 10,749 10,857 Amount due for settlement after 12 months 15,487 20,111 Further details relating to borrowings and overdrafts and the applicable interest rates are given in note 19 to the consolidated financial statements. The Directors consider that the fair values of the Group’s borrowings was equal to their book value. 58 notes to the consolidated ﬁnancial statements 40 DEFERRED TAX (Liability) Asset Accelerated tax Share-based depreciation payments £’000 £’000 At 1 April 2004 – 901 (Charge) credit to income – – (Charge) credit to equity – (134) At 1 April 2005 – 767 Charge to income (7) (45) Credit to equity – 1,889 At 30 June 2006 (7) 2,611 41 SHARE CAPITAL AND SHARE PREMIUM ACCOU N T The movements on these items are disclosed in notes 21 and 22 to the consolidated financial statements. 42 RETAINED EARN INGS £’000 At 1 April 2004 3,210 Profit for the period 7,202 Dividends (5,613) At 1 April 2005 4,799 Profit for the period 8,630 Dividends (12,520) At 30 June 2006 909 43 EQUITY RESERV E £’000 At 1 April 2004 1,108 Share-based payment charge 412 Deferred tax asset on share options (134) At 1 April 2005 1,386 Share-based payment charge 722 Deferred tax asset on share options 1,889 At 30 June 2006 3,997 44 STATEMENT OF CHANGES IN EQUITY 15 months to Year ended 30 June 2006 31 March 2005 £’000 £’000 Profit for the period 8,630 7,202 Share-based payment charge (before recharge to subsidiaries) 722 412 Deferred tax on share-based payment charge 1,889 (134) Net proceeds from issue of ordinary share capital 43,062 1,857 Ordinary dividend paid on equity shares (12,520) (5,613) 41,783 3,724 As at start of period 36,008 32,284 As at end of period 77,791 36,008 notes notes Pinesgate, Lower Bristol Road, Bath BA2 3DP Te l : 0 1 2 2 5 3 2 1 0 0 0 Design by Design Group International Te l : 0 1 2 2 5 4 4 6 7 4 4 Printed by Apple Litho (Bristol) Ltd. who are accredited with the ISO 14001 Environmental Management System. 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