Northgate Information Solutions Limited

Transcription

Contents
2
Welcome
3
CEO Letter
5
NGA Business Overview
7
NPS Business Overview
9
Financial Director’s Review
10
NGA Insights
14
NPS Insights
17
Financial Highlights
18
Corporate Social Responsibility
20
Directors’ Report
23
Strategic Report
25
Financial Section
All trademarks are owned by their respective owners. The Solvay registered trademark is owned by Solvay Group, Belgium.
1
Summary Annual Report 2013/2014
Welcome
Our Advantage at Work
Organisations of all kinds are surrounded by an increasingly rapid pace of change. The Northgate companies — NGA
Human Resources and Northgate Public Services — are in the business of helping our clients not just to manage change,
but to lead in driving and capitalising on change. We apply our market expertise, technical know-how and global service
capabilities to help organisations manage their business-critical issues — and deliver people-critical results.
This is our perspective on three critical drivers of change today, and what we can expect in the future.
Read how NGA Human Resources (NGA) and Northgate Public Services (NPS) have applied their insight to deliver leading
solutions in their respective industries.
EXPERTISE: How are today’s best practices evolving and what will they enable in the future?
TECHNOLOGY: How will technology help us meet the changing needs of our clients and their constituents?
SERVICES: How are evolving customer expectations driving change in managed services?
Company Descriptors:
Northgate Information Solutions provides technology solutions and services for human resources management through
our NGA Human Resources division, while Northgate Public Services provides solutions and services to public sector
organisations.
NGA Human Resources
NGA Human Resources is a global leader in helping organisations transform their business-critical HR operations to deliver
more effective and efficient people-critical services.
We help our clients become better employers through smarter, more streamlined business processes — to save money,
manage employee life cycles and support globally connected, agile organisations. This is how NGA makes HR work.
What sets us apart is The NGA Advantage. It’s a combination of deep HR expertise and insight, advanced technology
platforms and applications, and a global portfolio of flexible service delivery options.
Northgate Public Services
Northgate Public Services plays a unique role in the delivery of efficient and effective public services. We have built an
understanding of, and been committed to, the complex, changing and often challenging business of delivering services in
local and central government, safety and healthcare. We help public service providers reduce costs and deliver peoplecritical services.
The strength of these foundations is The Northgate Advantage, a combination of deep public sector expertise and insight,
our advanced technology platforms and applications, and a portfolio of flexible service delivery options.
Our commitment to understand our customers’ needs and the needs of their customer, the citizen, is what allows us to
deliver business-critical capabilities which positively impact upon the lives of millions of people.
2
CEO Letter
Accelerating Transformation
To our stakeholders:
Over the last few years we’ve transformed our business into a people-critical partner for our clients, leveraging the Northgate
Advantage — our unique combination of deep market experience and insight, advanced technology platforms and
applications, and unparalleled, flexible service delivery.
As we accelerate the transformation of our businesses, results for FY14 have been mixed. Despite disappointing overall
financial results for the group, we worked on key fundamentals to build our foundation for growth. Our NPS business had
a terrific year, growing both top line and bottom line, achieving 10 consecutive quarters of growth, whereas our NGA HR
business had a challenging year, working through transformation on multiple fronts. So, as we continue to transform for
growth and profitability, we are addressing those aspects of our business that are holding us back.
Overall performance on a group level was down. Group revenue declined 3.8%1 year-on-year and adjusted EBITDA declined
by 13.8%1. The decline was driven by NGA, with revenue down 6.6%1, while our Public Services business demonstrated
solid revenue growth of 7%.
Northgate Public Services (NPS)
Northgate Public Services (NPS) has closed FY14 with strong momentum. Revenue and EBITDA both grew 7%, to £181m
and £42m, respectively. NPS delivered its 10th consecutive quarter of growth in both the top line and bottom line. This is a
significant achievement and a testimony to the successful transformation of the business.
Order book grew 12% to reach £327m and the company secured in excess of £100m in Software as a Service (SaaS)based contracts, reflecting the shift in its business to collaborative platforms that combine IP with innovative operational
models. Growth was driven by innovation delivered through core technology platforms and applications to support new
projects in local government as well as expansion in international markets.
The Public Services space remains a challenging environment with public organisations facing pressure and continued
transformation. NPS’s response has been to innovate and build flexible services and solutions that deliver outstanding
customer value. NPS’s solutions help clients respond to their challenges by integrating our software solutions, Software as
a Service (SaaS) platforms with full Business Process as a Service (BPaaS) support. We expect momentum to continue in
FY15 for the NPS business.
NGA Human Resources
NGA Human Resources had a challenging year financially. EBITDA declined by 15.7% and revenue declined by 6.6%1. In the
second half of the year we’ve seen business performance stabilise, confirming our transformation efforts and the resilience
of our business model. NGA also continued to drive strong contract signings. The total contract value (TCV) of new business
won in the year reached £647m, which is up 4% year-on-year and represents in excess of $1bn at year end exchange rates.
NGA continued the transformation of the HR consulting business, transitioning our capabilities to cloud computing, as well
as moving away from smaller engagements and focusing our efforts on top 100 clients and operating as an integrated
global consulting practice. Anticipated revenue attrition in legacy contracts acquired from Convergys HRM came through.
As the cloud becomes the delivery model of choice, we help clients transform legacy contracts to modern, more focused
and standardised BPaaS (Business Process as a Service) contracts, integrating NGA solutions with industry leading HRIS
platforms.
The above had a direct impact on NGA’s performance in FY14. We saw the business stabilise in the second half of the year
and our software and Application Management Services (AMS) business lines supported a return to growth. As we go into
FY15 we expect NGA to continue its return to growth driven by its mid-market and SME businesses, both of which performed
well in FY14.
1 Figures
are for continuing operations calculated using constant currency rates. For figures at actual currency rates please refer to the NGA Business
Overview, NPS Business Overview and Financial Directors’ Review on pages 5 to 9.
3
CEO Letter continued
NGA Human Resources (continued)
As markets transform under the influence of new technologies, changing delivery models and client buying behaviour, we’re
also accelerating the transformation of our offerings. In FY14 NGA delivered a new global payroll integration platform —
Payroll Exchange — and new, innovative releases of our euHReka, ResourceLink and Preceda platforms, including powerful
mobile user interfaces, automation capabilities and rich reporting features.
Over the course of FY14, NGA has performed a strategic review of the markets in which it operates. As a result, we have
introduced a market segment-focused approach through which we will go to market following three strategic segments:
SMB (small & medium-sized business), Mid-Market, and Enterprise. These segments will play an increasingly important
role in our growth strategy and in our overall go-to-market. A market segment-based structure will allow us to combine a
deep focus on local and regional customer requirements with an integrated sales and delivery organisation, for each market
around the world.
This refinement in our go-to-market also affects how we invest our money and shift our R&D investments to focus more
on innovation, new technologies and new service lines that are relevant to the market segments we serve. NGA Human
Resources continues to evolve, and my management team and I are confident we are on the right track to get back to
growth by the end of FY15.
FY15 Outlook
For the year ahead we want to build on the foundation which was laid in the last three years with a single objective:
profitable growth. Customer satisfaction, delivery quality, and innovation will continue to drive our investment focus and our
value proposition to the markets in which we operate.
On a macro-economic level, we see many global economies returning to growth and we’re confident we’re well established
to make the most of this opportunity. Growth will be our key focus area for the years to come fuelled by market demand for
modern Human Resources solutions and services, and we are well prepared to capitalise on these opportunities.
I would like to thank our customers, our staff and our shareholders — for helping us to deliver on The Northgate Advantage.
Northgate offers a safe pair of hands for our customers, an exciting career environment for our employees and a sound
financial and operational opportunity for our owners.
Adel Al-Saleh
28 August 2014
4
NGA Business Overview
Positioning for Growth
NGA Human Resources (NGA)
Turnover
Divisional operating profit before depreciation and amortisation
(adjusted EBITDA)
Divisional operating margins
Order book
2014
2013
% Change
£485.1m
£523.0m
(7.2%)
£88.0m
18.1%
£1,068m
£104.4m
20.0%
£1,056m2
(15.7%)
(9.5%)
1.1%
NGA signed £647m in
Total Contract Value in FY14 —
a record-breaking achievement.
For NGA FY14 was a challenging year financially, with both revenue and EBITDA declining. NGA closed the year with
revenue of £485.1m (-7.2%) and EBITDA of £88.0m (-15.7%). Trading stabilised in the second half of the year, with the
Software and Application Management Services (AMS) business lines returning to growth. As we go into FY15, we have
addressed the root causes of our FY14 performance and we expect NGA to return to growth by end of FY15.
Anticipated revenue attrition from legacy contracts we inherited from Convergys HRM came through as clients are shifting
technology to more innovative, focused cloud solutions and delivery models to modern, third-generation HR outsourcing
(HRO) contracts. These shifts were expected and in line with our strategy to provide clients with focused HRO solutions, but
resulted in revenue attrition across the portfolio of former Convergys HRM clients.
Our sales performance in terms of contract value and order book has been strong. Despite adverse in-year performance,
NGA recorded Total Contract Value of £647m, up 4% year-over-year. Our win rate for enterprise deals reached 70%.
Significant contract activity contributing to our TCV achievement included new contracts with Abbvie, Bristol-Myers Squibb
and the renewal of the HR BPO contract with General Motors Europe — now as a prime contractor.
Over the course of FY14 we have continued to transform our HR consulting businesses from a country-based model to a
global practice. We transitioned our skills from legacy ERP platforms to cloud solutions, and we sharpened our focus on our
top 100 clients while moving away from non-strategic engagements.
Less visible but certainly as important are the changes we implemented to our operating model. Over the course of the
year we have driven additional efficiencies in finance, procurement, real estate and IT. As an example, our internal IT delivery
systems “went Google” in order to drive efficiencies and at the same time take advantage of the collaborative features
provided by cloud-based systems. Also, we have reduced our real estate footprint by 23% over the last three years. Finally,
we established a global finance shared services centre in Kochi, India. This has allowed us to move transactional finance
activities to a low-cost location, while leaving critical finance business skills close to our customer-facing teams.
2 At
5
constant currency rates
NGA Business Overview continued
Customer satisfaction
We have made great strides in automating our delivery engine. On an infrastructure and application level we have
automated many of the interfaces we maintain between platforms. In our centres we have pioneered Robotics Process
Automation, reducing manual and paper-based processes. Over the next few years, we will continue to build on the
foundations we established.
Customer satisfaction has been a focus area in FY14. Service Level Agreement (SLA) performance hit the highest level in
four years and we have witnessed a company-wide delivery improvement, both in terms of quality and efficiency. Improving
the customer experience has been a constant focus throughout the year, through process automation, training and
development, employee engagement, and lean methodologies.
“Service Level Agreement
performance hit the highest
level in four years.”
Driving innovation
In product development we have made a significant shift in our investment patterns. Over the course of FY14 we have
tripled our innovation investment, moving from 17% of our total R&D budget in FY14 to 55% in FY15. Whereas in previous
years a large portion of our R&D budgets went into customer-specific development and customisation of platforms, we
have now shifted our investments to focus on platforms that benefit our entire client community.
Further, we have continued investing in evolving our delivery capability, extending our coverage for payroll to 145 countries
— more than any other provider — enabling interconnectivity with even more platforms through our Payroll Exchange
solution, and facilitating automation and standardisation in our processes. Our key platforms — ResourceLink, Preceda &
euHReka — all saw multiple major releases, introducing rich reporting features, mobile HR applications, and an improved
user experience. These investments have contributed to lower margin performance in FY14, but position us well for FY15.
Key market segments
Based on a strategic market analysis we performed, we have defined key growth segments in the mid-market (in the UK
and ANZ) and small and medium business segments (in the UK), in addition to our enterprise segment focus. For each
segment, we have put detailed growth plans and integrated sales and delivery organisation structures in place. These
segments will allow us to further grow our ResourceLink (UK) and Preceda (ANZ) businesses and maintain leading positions
in their respective markets.
Even under challenging circumstances NGA has been able to grow contract signings and customer satisfaction. Our
strategy is clear and underpinned by in-depth analysis of the markets in which we operate. We fully understand the areas
we need to improve and we have detailed, focused plans in place to do so. We also know where our growth opportunities
lie. We feel confident about our future growth strategy, built on a solid delivery footprint and a market segment-focused
view on the HR services marketplace.
Our financial structure was further strengthened by our owners in the past year and we have restructured our debt to
support our growth agenda. This is important to our clients who seek partners with the stability, longevity and strength to
execute multi-year contracts.
6
NPS Business Overview
Northgate Public Services (NPS)
Turnover
Divisional operating profit before depreciation and amortisation
(adjusted EBITDA)
Divisional operating margins
Order book
2014
2013
% Change
£181.0m
£168.9m
7.2%
£42.0m
23.2%
£327m
£39.3m
23.3%
£292m
6.9%
(0.4%)
12.0%
Leveraging technology for people-critical services
Around the world, organisations that deliver public services are facing extraordinary challenges. The local environment may
differ but change is inevitable.
Public service providers must take a flexible approach to delivery, and consider how they themselves may need to adapt and
maintain a dialogue with citizens so that changes stay aligned to their needs and preferences. With growing demand but
smaller budgets, doing the same for less is no longer enough; organisations must do things better and do better things.
Northgate Public Services (NPS) has responded by innovating and building flexible services and solutions that deliver
outstanding value. In areas like Eligibility, Collaboration, Preventative Care and Housing, we have delivered world-leading
“Software as a Service” (SaaS) platforms with full “Business Process as a Service” (BPaaS) support.
This approach has helped deliver strong performance over the past 12 months, achieving growth of 7.2% in revenue and
6.9% in EBITDA, at £181.0m and £42.0m respectively. We have secured in excess of £100m in SaaS-based contracts,
reflecting the shift in our business to collaborative platforms that combine our IPR with new commercial and operational
models. We have also seen an increase in the order book of 12.0% to £327m with order intake up 18% in the year, rapidly
expanding our recurring revenue base. Our cash generation was very strong, reflecting the strength of our relationships with
our clients.
At the core of our success is the fact that NPS is an integrated software and outsourcing business, with deep experience in
the public sector.
We help organisations around the world to deliver more efficient and effective public services, working with local and central
governments, health providers and public safety bodies. We support our clients to respond to new challenges, keep costs
down and transform the services they provide to citizens.
Every day, the work we do means that individuals get the services they need faster, employees spend less time on
administration and organisations can improve outcomes, even when resources are increasingly limited.
Better citizen services
As a technology company that focuses on people-critical services, we understand the needs of the organisations that
provide public services as well as the citizens that use them.
Over the past year we have secured significant strategic contracts in our chosen markets and have continued our expansion
abroad, most significantly in Canada, the US and Australia.
Our housing business performed strongly, with new contracts and clients in the UK and internationally. In local government,
our revenues and benefits performance also remained strong and saw the successful conversion of our IPR into new
commercial SaaS, BPO and BPaaS platforms.
In health, our screening and registries work continues to expand and provides an increasing proportion of our revenues and
profits in this market.
In public safety we have a broad portfolio of products which continue to drive growth and will form a core part of our Athena
ecosystem, the first collaborative SaaS platform in UK policing.
7
NPS Business Overview continued
Looking ahead
In the coming year we expect to see further growth in our international business, building on the success of our work in
Housing and Health.
In the UK and elsewhere, public finances will remain constrained but this is a unique chance for us to help our clients to
innovate and to deliver their services in new and better ways.
Our continued success would not be possible without the NPS team. Our people share the same values of embracing
innovation, improving customer service and enhancing quality and I would like to extend my thanks to them for their
continued contribution and hard work.
8
Financial Director’s Review
Operating Results
Group revenue from continuing operations declined overall by 3.7% to £666.1m (2013: £691.9m) in challenging markets. The NPS
division revenue grew organically by 7.2% to £181.0m (2013: £168.9m) and has made excellent progress focusing on growth
areas of its markets to continue strong growth. NGA revenues declined by 7.2% to £485.1m (2013: £523.0m) as the division
focused on key clients and continued its strategic restructure to enhance the product delivery in selected growth markets.
Group operating profit from continuing operations before one-off items, depreciation and amortisation of intangibles (EBITDA)
of £123.4m declined by 12.1%, as the NGA business focused on key clients and continued its strategic restructure offset by
growth in Northgate Public Services (2013: £140.4m).
The operating results of the Northgate Managed Services business are disclosed as discontinued operations in the prior year
and are included in the 2012/13 results for the 10 months prior to disposal with the business being sold on 13 February 2013.
After one-off restructuring and property costs of £49.9m (2013: £55.4m), amortisation of acquired intangibles of £49.8m (2013:
£52.9m) and loss on disposal of the Northgate Managed Services business of £37.5m recognised in the prior year, the Group
recorded an operating loss of £13.9m (2013: £38.4m). Net financing costs increased to £85.7m (2013: £82.8m). Loss on
ordinary activities before tax was £99.6m (2013: £121.2m).
One-off Items
During the year the Group recorded net one-off costs of £49.9m (2013: £55.4m) as the Group continued its cost reduction
programme, including the offshoring of operational and back-office functions and the impact of the strategic restructuring in NGA.
Cash and Financing
During the year the Group generated £55.8m (2013: £74.1m) of net cash from operating activities after one-off items. In the prior
year £23.1m was generated from the sale of non-core assets and the Group continued to invest (£45.9m) in the product portfolio
and infrastructure fixed assets (2013: £55.1m) to support further growth. The Group had net debt of £847.9m at 30 April 2014
(2013: £854.7m) and unused facilities of £99.0m under its banking facilities (2013: £101.6m).
Taxation
The Group continues to benefit from significant trading and non-trading losses. Tax paid in the year was £2.1m (2013: £3.7m).
Goodwill
The Group performs an annual impairment test of its goodwill. As a result of performing these impairment tests, the Directors
believe that currently no reasonably possible change in income would reduce the headroom in the NGA Human Resources
and Northgate Public Services CGUs to zero.
Pensions
During the year the Group made deficit payments of £6.6m (2013: £6.5m) toward the Group’s pension scheme liabilities. The
Group pension schemes showed an IAS19 (adjusted for IFRIC14) deficit of £37.4m at the balance sheet date (2013: £46.2m).
Going Concern
At the start of this financial year the Group secured additional funding from its funders including shareholders and an agreement
for capital maturity dates to extend beyond 2017. This secures the Group’s funding requirements for a number of years with
only minimal amounts of debt being repayable before September 2017. The Directors have prepared detailed cash flow
projections for the period to 31 October 2015, including sensitivity analysis on key assumptions. The Group’s forecasts and
projections, taking account of reasonably possible changes in trading performance and the timing of key strategic events, show
the Group will be able to operate within the level and conditions of this funding. The Directors have a reasonable expectation
that the Group has adequate resources to continue in operational existence for the foreseeable future. To the extent that there
is a material change in performance compared to management’s expectations, then the Directors have no reason to believe the
Group will not continue to receive the support of its shareholders. Accordingly, the Group continues to adopt the going concern
basis in preparing its consolidated financial statements.
Total Equity
Total equity at 30 April 2014 was £25.8m (2013: £65.6m).
John R. Stier
Group Finance Director
28 August 2014
9
NGA Insights
Globalisation, Datafication and Personalisation of HR
There’s never been a more interesting time to be in Human Resources than today. Technology shifts, globalisation,
abundance of data, and a mobile, multi-generational workforce have put HR at the pinnacle of innovation. We’d like to review
three areas through which HR leaders can tap into today’s opportunity and deliver strategic value to their organisation:
Global Payroll
How are today’s best practices evolving and what will they enable in the future?
In HR, there’s no better place to look than the function of global payroll to understand the importance of applying best
practices, simplifying processes and enabling business effectiveness.
Payroll is perhaps the least glamorous of all HR functions; however, it has
remained abuzz with activity, including a growing interest in multi-country
payroll strategy. The demand for outsourced payroll administration has
remained steady even during recent years plagued by a global economy
in crisis.
In recent years outsourcing payroll on a multi-national basis — often
referred to as “global payroll” — has grown into a rapidly growing
segment in which NGA is recognised as a global leader. Gartner’s 2013
Magic Quadrant for Payroll BPO ranked NGA in the top quadrant both for
“completeness of vision” and “ability to execute.”
Managing payroll complexity
NGA’s 2013 Payroll Complexity research provides deep insight on how
complex it is to run and manage payroll across a range of geographies.
NGA’s Payroll Complexity research ranked countries based on the various
factors contributing to the complexity of payroll calculation. The research
confirms that the complexity associated with workforce administration,
compliance requirements and payroll regulation remains an impediment
to the globalisation plans of organisations.
http://my.ngahr.com/payrollinsideout/
An ever-evolving landscape
Payroll complexity is only one reason for companies to outsource payroll. The global payroll landscape has continued
to change dramatically over the last 10 years. New providers, technologies, vendor service delivery models and global
capabilities have made payroll administration possible across complex multi-national organisations.
Where a company has large numbers of employees in key locations but has many other employees in other geographies
around the world it is essential that the global payroll provision is flexible and able to accommodate several different service
delivery mechanisms — from traditional gross-to-net processing services to fully managed payroll services that include data
management, timekeeping and related HR outsourcing services. Broad payroll scope becomes particularly attractive where
there is sufficient scale to warrant replacing the client’s in-house administrative effort and driving cost efficiencies.
The rapid adoption of global, unified, cloud-based Human Capital Management (HCM) systems adds to an already complex
landscape, but also accelerates the adoption of payroll BPO. As HR leaders start feeling comfortable with managing HR data
“in the cloud,” managing service level agreements and navigating privacy requirements, they also open up to contracting
with specialist providers to run entire HR processes, such as payroll, on a global basis.
10
NGA Insights continued
Payroll Exchange
As a response to rapid technology changes, adoption of cloud technologies, and continued globalisation of HR processes,
we have developed NGA Global Payroll — an end-to-end solution leveraging NGA’s global delivery capabilities and
technology expertise to integrate very diverse global payroll solutions.
At the heart of NGA’s Global Payroll capability is Payroll Exchange — a unique platform that reduces the complexity of global
payroll by seamlessly connecting cloud-based HR Management Systems (HRMS) such as Workday and SuccessFactors
with NGA’s network of payroll engines in 145 countries. Payroll Exchange addresses the ongoing complexity of connecting
multiple payroll engines, the lack of standardisation in HCM environments, and the rapid pace of new software releases in
the cloud.
Payroll Exchange delivers on the promise of global payroll by centralising interfaces, managing touch points and
consolidating reporting, which in turn helps global businesses simplify, automate, and ensure appropriate oversight of their
HR and payroll operations. Payroll Exchange features certified packaged integration both with Workday & SuccessFactors’
Employee Central.
Australian Unity
Sometimes, success is a result of bringing together elements of different platforms to provide the client with exactly what
they need.
In June 2014, NGA announced a five-year contract for the provision of a Human Resources Information System and
ongoing HR and payroll BPO support services for Australian Unity’s employees across Australia. Australian Unity is a national
healthcare, financial services and retirement living organisation providing services to more than half a million Australians.
The HR & payroll solution uses NGA’s own flagship payroll system, Preceda, integrated with SuccessFactors’ industryleading Employee Central (Core HR), Talent Management and Workforce Analytics solutions, all delivered through NGA’s
BPO partnership with SAP SuccessFactors.
http://www.ngahr.com/nga-human-resources-and-australian-unity-work-together-enable-growth
Ferrovial
In January 2014, NGA was selected by Ferrovial, one of the leading global construction, services and infrastructure groups,
to deliver SaaS payroll services on a single platform. By deploying euHReka Payroll, Ferrovial now has an innovative and
preconfigured solution to manage the personnel administration and payroll data of its entire workforce in Spain on a single
platform. In addition, Ferrovial can tap into NGA’s network of payroll experts at all times to manage process changes and
regulatory updates.
http://www.ngahr.com/ferrovial-selects-nga-run-saas-payroll
Bristol-Myers Squibb
In June 2014, NGA was selected by global biopharmaceutical company Bristol-Myers Squibb to provide payroll and related
Workforce Administration Services for its employees in the US, Canada, and Puerto Rico. NGA will execute and deliver
Bristol-Myers Squibb’s payroll via comprehensive BPO (Business Process Outsourcing) services on a single platform,
seamlessly integrating with Bristol-Myers Squibb’s existing HR systems. This will be made possible by implementing
NGA’s Global Payroll Solution, featuring NGA’s Payroll Exchange platform. The Payroll Exchange platform addresses all the
complexities associated with connecting networks, data formats, security protocols, and routing options. The end result is a
seamlessly connected service, between HRIS system and various local payroll engines.
http://www.ngahr.com/bristol-myers-squibb-selects-nga-human-resources-provide-payroll-and-workforce-administration
Additional insights on Global Payroll: http://www.ngahr.com/insights/global-payroll
11
Datafication of HR
How will technology help us meet the changing needs of our clients and their constituents?
Faster implementation times; enabling actionable insights through analytics and big data; and robotic process automation
are three faces of a broader trend towards the increased “datafication” of HR. At NGA, we’re expecting data to become
a driving force in HR, enabling data-driven workforce decisions, empowering better management insights, and ultimately
strengthening the HR function as a whole.
Ramping up roll-outs
Many organisations have gone through the process of rolling out HR systems, dealing with issues such as data modeling,
project control and change management. The adoption of cloud-based HR systems and the underlying trend towards unified
data models has driven the requirement to get to value faster. This is particularly true in HR, where the expectation now is
that HR solutions should be live in weeks or months, not years.
In the past year we have been working on shortening implementation cycles for our technology platforms. One example in
the UK mid-market is the deployment of Implementation and Configuration Transport Tools for ResourceLink. A new and
improved system deployment tool accelerates implementation times by 30% using preconfiguration tools and an enhanced
implementation approach.
As a result, ResourceLink customers can get to value faster, start using the application within weeks, and spend more time
on innovating HR best practices.
Analytics & reporting
There is also an increasing requirement for Payroll and HR-related data to be available at the global level for companies to
make key business decisions. Increasingly this data is subject to complex analysis and requires the ability to easily call on
data from different business areas and systems.
Enabling employees to access personal data, managers to visualise and enter departmental data, and executives to report
on workforce and organisational performance has been widely welcomed as a critical way to unlock value in the enterprise.
In order to help enable better data-driven HR decisions for clients in the UK mid-market, NGA has expanded the functionality
of ResourceLink to include an integrated reporting tool — ResourceLink Reporting. Individual KPI reports and graphs can
be deployed to employee and manager self-service dashboards, providing real-time data analysis for them and their teams.
The new Reporting Services and MyView dashboards enable customers to support complex decision-making, facilitate
actionable insights, and track trends over time and contribute to more strategic HR.
Accelerating automation
It’s true, many HR processes still rely on manual processing, paper-based approval and other forms of human intervention.
But increasingly, software is capable of replacing all underlying sub-processes, providing end-to-end automation. RPA —
Robotic Process Automation — builds on the “datafication” and automation of business processes. In the past year, NGA
started leveraging opportunities for Robotic Process Automation (RPA).
Recent research reports have identified that with new advancements in robotic automation there is an opportunity for
organisations to build a Virtual Back Offices and process manual, rules-based HR transactions at a new speed which makes
automation viable while supporting operational agility.
Our early stage efforts were rewarded with a Top Five spot in HfS Research’s “Premier League” table for Robotic Process
Automation — a first ranking of which BPO providers are reaping the benefits offered by RPA.
• Press release Selex: http://www.ngahr.com/content/northgatearinso-signs-7-year-contract-selex-es-agustawestland-andfinmeccanica
• Reading: http://www.horsesforsources.com/robotic-premier-league_042014
• Wired: http://insights.wired.com/profiles/blogs/the-back-office-renaissance#axzz36A89xtuf
12
Employee Experience
How are evolving customer expectations driving change in managed services?
The last three years have probably seen more change in HR technology and services than the preceding 30. In recent years,
we’ve seen over 15 billion dollars in M&A activity related to HR, across 15 major deals, with every software or services giant
involved in one way or another. However, in the midst of this technology tsunami, we’ve started picking up concerns from
Chief Human Resource Officers. Although they benefit from improved access to data, easy-to-use self-service systems, and
powerful HR analytics, many also wonder how their customer — the employee — feels about this.
All too often, HR projects have been IT led, rather than HR or business led. Technology has changed that, but it hasn’t
fundamentally answered key questions: How do employees feel about this? Does automation truly reduce administrative
workload? Or does it create more — electronic — transactions? Do managers get more insight, or only more data? Do we
take better decisions, or do we only change course faster?
At NGA, we believe that technology is an enabler and not a solution in itself. It’s HR’s role to create the environment that
delivers the desired employee experience. This helps to attract top talent and create a great workplace where people feel
engaged, inspired, challenged, proud and respected. To achieve that, we need to focus our HR clients on one key mission:
developing an exceptional employee experience that is also aligned with business needs.
• HfS white paper: http://resources.ngahr.com/reorienting-hr-create-employee-experience
• NGA white paper featuring Gartner research: http://resources.ngahr.com/technology-taking-human-touch-out-humanresources
13
NPS Insights
The Insight to Transform Public Sector Services
Local and central governments around the world share a fundamental responsibility to take care of their citizens and to
provide a range of services that protect them and enable a better quality of life.
But with this overarching responsibility come great challenges.
The services provided by most governments — such as public safety, health, social care and housing — continue to face
shrinking budgets, changing political priorities and greater demand.
The requirement to demonstrate good value for money and to deliver improved outcomes against this background pressure
is often overwhelming for decision makers in the public sector.
How are today’s best practices evolving and what will they enable in the future?
At the outset, it’s important to note that best practice in the public sector differs from best practice in the commercial sector.
The requirements of citizens are very different from the requirements of industry. At the heart of the public sector are people’s
lives and livelihoods and they are deeply affected by the ability to access the services they need.
A great example of this is in healthcare. Growing and ageing populations around the world will create increased demand for
better and more tailored healthcare. Over time, a large proportion of older people will suffer from osteoporosis or arthritis,
and a large proportion of them will therefore need a joint replaced.
Today, hip, knee, ankle, elbow and shoulder joint replacements have become common and highly successful operations that
bring many patients improved mobility and relief from pain. In the UK alone, over 200,000 joint replacement operations were
undertaken in 2012/13 — an increase of 7.5% per year — using a wide range of implants.
The importance of monitoring the performance of these implants and the effectiveness of different types of surgery is
paramount to help improve clinical standards, which, in turn benefits patients, clinicians and the orthopaedic industry.
Working in partnership with the Healthcare Quality Improvement Partnership (HQIP), Northgate deliver the National Joint
Registry (NJR) in England, Wales and Northern Ireland to detect poorly performing implants used in joint replacement
procedures. Established in 2003 and containing information on over 1.7m procedures to date, it is the most extensive and
complete healthcare register in the UK and the largest of its kind in the world.
The collection and analysis of high-quality data about joint replacement surgery enables health bodies and the industry to
assess device performance, monitor surgical performance and provide early warning of any patient safety issues. The NJR
therefore helps improve the quality and cost effectiveness of all joint replacement surgery by providing clinical controls,
supporting innovation and giving patients confidence in the procedures.
The value of the registry lies in improving patient outcomes while reducing cost, providing surgeons, hospitals and device
manufacturers with the information they need to make better decisions and deliver better patient outcomes.
The best practice developed by the NJR is now supporting initiatives like “Beyond Compliance,” established to support the
safe introduction of new medical devices into the UK market by collecting and reporting comprehensive in-market data to
an independent panel. Such initiatives are made possible through the successful establishment of the NJR, which is able to
provide immediate notification of revision or re-operation events, and is able to provide reference outcome measures against
which a device can be assessed.
• White papers: http://www.northgate-ispublicservices.com/Literature/Files/NJR-White-Paper-June-2014.pdf
• NPS Health Registries webpage: http://www.northgate-ispublicservices.com/what-we-do/health-registries
• NJR Case Study: http://www.northgate-ispublicservices.com/Literature/Files/Northgate Public Services Case Study National Joint Registry.pdf
• NPS PR — International Registries: http://www.northgate-ispublicservices.com/Resource-centre.aspx?View=Pressreleases&nid=413
• NJR website: http://www.njrcentre.org.uk/njrcentre/default.aspx
14
NPS Insights continued
Today, Big Data is everywhere. But data needs to be analysed and made actionable if it is to be useful. For citizens,
technological benefits come through the amalgamation of data into a single unified database which enables the government
to extend and personalise customer service and keep up-to-date records of service requests. However, it doesn’t stop there.
By introducing intelligent mobile solutions and automated workflow processes housing organisations can transform their
working practices and become more efficient as they are able to remove manual and paper-based processes and data re-entry.
Northgate has been serving the Canadian social housing market for more than 14 years, working for organisations such
as the Canadian Forces Housing Agency, Newfoundland & Labrador Housing Corporation, City Housing Hamilton, Good
Shepherd Not for Profit and Ottawa Community Housing.
The housing market is the most complex urban system people experience on a daily basis. In Canada, for example, as
house prices rise, homeowners’ household wealth increases. The challenge facing those who cannot afford to buy housing
is that the stock of rental housing is declining in Canada. Typically more than 90% of new housing is built for ownership.
Across Canada, about 14% of households are classified as being in “core need,” defined as living in poor-quality properties
and/or spending more than 30% of their income on housing. Only a few people remain in core need permanently; others
experience temporary need when they move or their family circumstances change. The most serious need is found in
metropolitan areas, where many renters spend more than half their income on housing.
Already, more than 41,000 properties of Canada’s housing stock are managed using Northgate’s systems, supporting
allocation and repairs while facilitating mobile working so that people can access the right information, at the right place, at
the right time.
The objectives of Canadian housing policies are to ensure that dwellings of a decent standard are available to all Canadians
at prices they can afford, and our work provides a foundation to transform the way Canada will provide social housing in the
future.
• Housing Overview on NPS website: http://www.northgate-ispublicservices.com/Literature/Files/Northgate-Housing---aglobal-flexible-solution---Canada.pdf
• PR on NPS website: http://www.northgate-ispublicservices.com/Resource-centre.aspx?View=Press-releases&nid=421
• Paper on NPS website: http://www.northgate-ispublicservices.com/Literature/Files/Tracking-the-US-and-UK-PublicHousing-history-how-different-are-we-really.pdf
• Housing opinion NPS In the know: http://www.intheknow.northgate-ispublicservices.com/posts/the-housing-and-healthsectors-are-undergoing-the-biggest-shake-up-for-a-generation
15
NPS Insights continued
How are evolving customer expectations driving change in managed services?
Delivering large-scale public services which meet the needs of both the client and the public accessing those services is
complex and challenging. Governments are always looking for ways to partner with providers who can deliver these services
with little or no risk and in a way that provides simple access for all users.
For example, the need for connected, sustainable transport solutions is shared around the world — ranging from tough
action against emissions in California to urban congestion charging in London and long-distance road charging across
Europe. Effective transport systems are key to businesses looking to compete in the world economy.
Joined-up thinking and new solutions are required to reduce cost, improve productivity and reduce the impact on the
environment in relation to the movement of goods, data, people and services. Addressing these issues needs a multidisciplinary and holistic approach across boundaries and borders to ensure that transport can support economic, social and
environmental improvements across the world.
The UK government agenda to try to rebalance the economy from services to manufacturing continues to be good news
for the freight industry. In a globalised economy these companies can compete better if they have access to efficient supply
chains, high connectivity and a range of transport modes and services.
However, with the UK’s transport infrastructure increasingly under strain from the travel demands both of individuals and
freight, the Department for Transport (DfT) decided to introduce a system of taxation that would see UK and foreignregistered heavy goods vehicles (HGVs) contribute to the cost of maintaining UK roads.
The HGV Levy was launched on 1 April 2014, creating a new, time-based charge that must be paid by all UK and foreignregistered HGVs of 12 tonnes or more when using UK roads. Northgate has responsibility for the design and operation of the
payment system and associated database that operators and drivers of non-UK registered HGVs will use to purchase the
Levy before the vehicle enters the UK.
Introducing the Levy required the integration of strategy, process, technology and people and the DfT chose to partner with
Northgate to deliver this major programme, which included provision of a multi-lingual call centre and significant activity to
raise awareness of the new Levy.
At the end of the first week alone, 96% of levies were purchased online, with 72,700 vehicles registered and 6,700 accounts
created, and Northgate’s contribution was praised by government ministers as essential to the successful launch of the
scheme.
• Other reference sources: PR in external media: http://www.handyshippingguide.com/shipping-news/road-haulage-andfreight-interests-welcome-inception-of-new-hgv-levy_5429
• PR in external media: http://www.fleet.ie/breaking-news/hgv-road-user-levy-provides-northgate-public-services/
• PR in external media: http://transportoperator.co.uk/2014/04/09/foreign-truck-tax-now-in-effect/
• PR on NPS website: http://www.northgate-ispublicservices.com/Resource-centre.aspx?View=Press-releases&nid=414
• PR on GOV.UK website: https://www.gov.uk/government/news/fairer-deal-for-uk-hauliers-in-hgv-road-user-levy-act
• PR on GOV.UK website: https://www.gov.uk/government/collections/hgv-road-user-levy
• HGV webpage: http://www.northgate-ispublicservices.com/uk-hgv-levy.aspx
16
Financial Highlights
To clarify for the reader of the accounts, we have adjusted the continuing operating profit and EBITDA* for years ending
30 April 2013 and 30 April 2014, to account for one-off items, property provisions and amortisation of acquired intangibles.
2014
2013
Continuing
Continuing
operations
operations
Revenue
Adjusted operating profit before significant restructuring, one-off
items, property provisions, amortisation of intangibles,
depreciation and impairment of fixed assets (EBITDA)*
Continuing
operations
change
(% yty)
£666.1m
£691.9m
(4)%
£123.4m
£140.4m
(12)%
£85.8m
£107.5m
(20)%
£(49.9m)
£(53.6)m
7%
Impairment of intangible fixed assets
—
£(7.3)m
100%
Impairment of tangible fixed assets
—
£(1.2)m
100%
Amortisation of acquired intangibles
£(49.8)m
£(52.6)m
5%
Group operating loss
£(13.9)m
£(7.2)m
93%
Adjusted operating profit before significant restructuring,
one-off items, property provisions, amortisation of acquired
intangibles and impairment of fixed assets
Significant restructuring, one-off items and property provisions
17
Corporate Social Responsibility
As a global business operating in 35 countries, the Northgate Information Solutions Group is committed to sustainable
growth which promotes social, economic and environmental improvement.
Our aim is to conduct our business in a socially responsible way, contributing to the communities in which we operate,
minimising our impact on the environment and respecting the needs of employees, clients and other stakeholders.
Governance
Both of our businesses, Northgate Public Services (NPS) and NGA Human Resources (NGA) have distinct characteristics
which are reflected in the corporate responsibility agenda that they pursue within the overall framework set by the Corporate
Responsibility Group (CRG), which has representation from both businesses. The CRG sets our Corporate Responsibility
policy and strategy and is responsible for best practice across the Group.
Adel Al-Saleh, our Group Chief Executive, is Executive Sponsor of the CRG. Each business manages its corporate
responsibility programme to ensure that corporate responsibility is embedded into day-to-day practice.
Sustainable Services
Our services have an impact on people all over the world.
In NGA we work to make organisations more efficient and effective, saving money and reducing environmental impact.
Improving organisational performance is at the core of what we do — at work, at home, in school and within the community.
Globally, we understand the business of HR and the role it plays within an organisation.
We help our clients become better employers through smarter, more streamlined business processes — to save money,
manage employee life cycles, and support globally connected, agile organisations.
The combination of deep HR experience and insight, advanced technology platforms and applications and a global portfolio
of flexible service delivery options is how NGA’s experience and insight make a measurable difference for our clients’
outsourcing services.
In NPS we work with our clients to help them deliver services that are more effective and more efficient, giving better
outcomes for service users. Our services ensure that benefits are paid to those in need, vulnerable adults and children are
protected, social housing is provided to those that are eligible and disabled people receive mobility badges to assist their
movement. Our screening solutions enable early diagnosis and early intervention, improving outcomes for patients and their
families. Our work in policing is delivering joined-up information that is strengthening the safety of local communities by
helping to reduce crime, improve citizen engagement and protect vulnerable people. We work with our clients to introduce
remote and flexible working, reducing environmental impacts and improving quality of life for employees. We continue to
extend our Software as a Service delivery model, reducing environmental impact and making services more readily available
for our clients and the citizens that they serve.
Combating climate change remains integral to developing sustainable services for Northgate’s clients in all sectors. Our
businesses continue to place a strong focus on improving our clients’ environmental performance by enabling them to
access modern “on demand” technologies which enable working practices that reduce environmental footprint and generate
considerable savings.
Environmental sustainability is fully embedded into service delivery methodology. We focus both on reducing the number
of assets required as well as favouring energy-efficient energy consumption models. Assets are reused wherever possible
and, where they are beyond economical repair, they are recycled in accordance with the Waste Electrical and Electronic
Equipment Directive (WEEE).
Further reductions are gained by equipping our employees with the tools and technology to enable flexible and mobile
working.
18
Corporate Social Responsibility continued
Sustainable Procurement
Northgate is committed to ensuring that the products and services that we buy are sustainable. As such, we have integrated
corporate social responsibility criteria into our group-wide procurement activities. Sustainability considerations are integrated
across our entire procurement process — in the identification of needs, evaluation of options, evaluation of tenders, and
post-contract management. This approach is applied globally to all new and existing major suppliers.
In order to formalise our global CSR practices, NGA signed the United Nations Global Compact (http://www.
unglobalcompact.org/), a strategic policy initiative for businesses that are committed to aligning their operations and
strategies with 10 universally accepted principles in the areas of human rights, labour, environment and anti-corruption.
Together with our Legal, Finance and Compliance departments, our Procurement department has developed standards to
ensure we meet NGA’s commitment to the UN Global Compact principles and work to ensure that all suppliers who wish to
do business with Northgate sign up to those same standards we hold ourselves up to. This approach helps propagate the
benefits and global best practices onto the workforces across our supply chain. We are continuously evaluating suppliers
who might not meet those principles with the objective of bringing our entire supplier base to the same global standard.
Our People
Northgate continues to enhance skills and increase employability in our communities through Apprenticeships, Graduate
Trainee Schemes, Careers Visits, Work Experience and partnership with companies.
In the UK, the company has continued to support the Young Apprentice scheme. Within the last year, the company
welcomed Young Apprentices working across a range of services and clients, while gaining accreditations in ICT, Customer
Service or Business Administration. Several of these young adults have gone on to become permanent employees of the
company and several others have used the skills and experience they have gained to obtain permanent jobs with other
organisations.
By enhancing employability through these schemes, Northgate is addressing shortages of skilled staff, gender issues and
supply chain issues, creating a skilled future workforce which will benefit the growth of the IT sector.
Employee Well-being
Through Northgate’s ActNow programme every employee is encouraged to do something, however small, to help deliver
value and build sustainable and healthy communities. The programme’s initiatives embrace sustainability, community
involvement and engagement.
The company has sponsored numerous charities throughout the last year, encouraging employees to get involved in fun
activities in support of many good causes. Charities included Macmillan cancer care, Comic Relief, Children’s Toy Foundation
(CTF), India National Association for the Blind (NAB), United Way and the Red Cross.
19
Directors’ Report
The Directors present their report and financial statements for the year ended 30 April 2014.
Directors
The Board of Directors consists of the following members who possess the necessary range of backgrounds, qualities and
experience to lead and maintain effective control over Northgate’s activities.
Adel Al-Saleh (Executive) was appointed Group Chief Executive Officer and Director of Northgate Information Solutions
Limited on 1 December 2011. He was formerly with IMS Health, where he held several senior positions, including President
of EMEA, senior Vice President (VP) Global Pharma Solutions, and President of US Operations. Prior to this, Adel spent 19
years at IBM in several senior positions, including General Manager of Sales and Industries in the Group’s European region,
General Manager Global Wireless Business Unit and General Manager Telco, Utilities and Media and Entertainment Industries
Americas region.
Brian Carroll (Non-Executive Chairman and Member of Audit Committee) is a Member of Kohlberg Kravis Roberts
& Co. L.P. (KKR). He joined the firm in 1995 and currently heads the Consumer and Retail teams in Europe. He is also a
member of the European Investment Committee. He has played a significant role in many investments, including Laureate
Education, Sealy Corporation, Borden, Merit Behavioral Care, Randall’s Food Markets, Rockwood/Dynamit Nobel, Harman
International, Wild Flavors, Wincor Nixdorf, Pets at Home, SMCP Group and Cognita Schools. He is currently a member of
the board of directors of Laureate Education, Pets at Home, SMCP Group and Cognita Schools, in addition to Northgate
Information Solutions. Prior to joining KKR, Mr. Carroll was with Donaldson, Lufkin & Jenrette, where he worked on a
broad range of high-yield financing, corporate finance and merchant banking transactions. He has a BS and BAS from the
University of Pennsylvania, and an MBA from Stanford University Graduate School of Business.
William L. Cornog (Non-Executive) joined KKR Capstone in 2002. He currently serves as Head of KKR Capstone
globally and is a member of KKR’s Portfolio Management Committee. Mr. Cornog was appointed to the Board of Northgate
Information Solutions Limited on 5 April 2011.
John R. Stier (Executive) was promoted to Group Finance Director of Northgate Information Solutions plc (now Northgate
Information Solutions Holdings Limited) on 15 May 2003 and subsequently to Northgate Information Solutions Limited
upon the acquisition by KKR. He is a Fellow of the Institute of Chartered Accountants in England and Wales. Mr. Stier was
appointed to the Board of Northgate Information Solutions Limited on 1 July 2008.
Edouard Pillot (Non-Executive and Chairman of Audit Committee) joined KKR in 2006 and is part of KKR’s Private
Equity platform, where he heads Business Services within the Services industry team. He has also been involved in the
investments in SMCP, Maxeda and KION. Mr. Pillot was appointed to the Board of Northgate Information Solutions on 21
November 2012.
In addition to the Directors, Sir Roger Carr was appointed as a Special Adviser to the Board from the beginning of
February 2011.
Sir Roger Carr is Chairman of BAE Systems plc. He is also a member of the Prime Minister’s Business Advisory Group,
a senior advisor to KKR and a Visiting Fellow of Saïd Business School, University of Oxford and a Commissioner on the
Commission for Ownership. He has previously held a number of senior appointments, including chairman of Centrica
plc (2004–2013), Deputy Chairman & Senior Independent Director of the Court of the Bank of England, President of the
Confederation of British Industry, chairman of Cadbury plc, chairman of Chubb plc, chairman of Mitchells & Butlers plc,
chairman of Thames Water plc and Chief Executive of Williams plc.
The Board discharges its responsibilities by providing leadership of the Northgate Group within a framework of prudent
and effective controls, which enables risk to be assessed and managed. It sets Northgate’s strategic aims, ensures that
the necessary financial and human resources are in place for the Group to meet its objectives and reviews management
performance.
20
Directors’ Report continued
Risk Assessment
The Board has overall responsibility for the Group’s approach to assessing risk and the systems of internal control, and
for monitoring their effectiveness in providing its ultimate stakeholders, certain funds advised by KKR, with a return that
is consistent with a responsible assessment and mitigation of risks. This includes reviewing financial, operational and
compliance controls and risk management procedures, which themselves include the security and controls around customer
and internal data. The Board has established ongoing processes for identifying, evaluating and managing the significant
risks faced by the Group which accord with the Internal Control Guidance for Directors in the Combined Code (which only
applies to UK-listed companies but is used for best practice). Further independent assurance is provided by an internal audit
function, operating across the Group, and the Group’s auditors. All employees are accountable for operating within these
policies.
Internal Control
Whilst the Board maintains full control and direction over appropriate strategic, financial, organisational and compliance
issues, it has delegated to executive management the implementation of the systems of internal control within an established
framework.
The Board has put in place an organisational structure which formally defines lines of responsibility and delegation of
authority. There are also established procedures for planning, capital expenditure, information and reporting systems and for
monitoring the Group’s businesses and their performances.
Assurance
On behalf of the Board, the Audit Committee examines the effectiveness of the Group’s:
• assessment of risk by reviewing evidence of risk assessment activity and a report from internal audit on the risk
assessment process; and
• systems of internal control primarily through agreeing the scope of the internal audit programme and reviewing its findings,
reviews of the annual financial statements and a review of the nature and scope of the external audit.
Any significant findings or identified risks are closely examined so that appropriate action can be taken. The work of
the internal audit department is focused on areas of priority as identified by the risk analysis and in accordance with the
annual audit plan approved by the Audit Committee and the Board. External auditors are engaged to express an opinion
on the financial statements. They review and test the systems of internal financial control and the data contained in the
financial statements to the extent necessary to express their audit opinion. They discuss with management the reporting of
operational results and the financial position of the Group and present their findings to the Audit Committee.
Audit Committee
The Committee assists the Board in fulfilling its overview responsibilities, primarily reviewing the reporting of financial and
non-financial information, the systems of internal control and risk management, and the audit process. It comprises Edouard
Pillot (Chairman) and Brian Carroll. The Committee intends to meet at least three times a year and the Group Chief Executive
Officer, the Group Finance Director, the Group Internal Audit Director and our Auditors, currently KPMG LLP, will attend the
meetings by invitation.
Auditors
KPMG LLP was appointed by the Board as auditors of the Group during the period. KPMG LLP has confirmed its willingness
to continue in office as auditors of Northgate, and in accordance with Section 485 of the Companies Act 2006, a resolution
to re-appoint it will be proposed at a future meeting of the Board.
Dividend Policy
The Board reviews the dividend policy in conjunction with a policy of retaining significant funds for future growth. No
dividends were declared during the year under review.
Employees
We actively promote an internal recruitment process encouraging internal succession planning and career development. All
UK employees have the opportunity to elect members to an Employee Consultation Group (ECG). The ECG meets formally
with Northgate’s management on a quarterly basis to discuss issues of importance. The Group also has a number of works
councils and employee groups in place across the globe to ensure effective communication takes place with all employees.
21
Directors’ Report continued
Equal Opportunities and Diversity
Northgate aims to be an employer of choice for people from different backgrounds and through our policy and mandatory
diversity training (completed annually) we promote respect for the individual and equality of opportunity for employment,
development and promotion. Opportunities also exist for employees of the Group who become disabled to continue their
employment or to be trained for other positions in the Group. An Equality Survey is conducted regularly.
Health and Safety
Northgate has an established health and safety policy that focuses on the ability to measure performance and to pursue
continuous improvement in managing health and safety. The policy is reviewed regularly by the Health and Safety Manager.
Financial
Northgate has access to sources of capital that are sufficient to develop the business. Its funds are provided by a syndicate
of leading banks and under the current agreements Northgate can call on up to £99.0m of unused facilities at 30 April 2014
(30 April 2013: £101.6m). During the year, the Company received capital contributions from its parent company of £54.8m
for funding of the Group’s operations. These arrangements and the recurring nature of much of Northgate’s businesses give
confidence over Northgate’s financial strength, and provide the basis on which future investment decisions can be taken. The
Board continually reviews the performance of its divisions and regularly reviews its divestment versus investment strategy in
each case.
Donations
During the period the Group made no charitable or political donations.
Relationships with key stakeholders
Northgate manages its relationships with its key stakeholder groups as follows:
• Customers
Northgate appoints one or more individuals through which all customer contact with each customer is managed. Larger
customers have dedicated account managers, or teams that focus directly on customer needs. A number of active user
groups are in place where customers can provide feedback on product performance, future requirements and issues of
strategic significance.
• Suppliers and partners
Northgate performs reviews of its key suppliers and partners on a regular basis to ensure that maximum performance and
value are being obtained, and that risk and reward are equitably shared. Northgate negotiates agreements within which the
Group and its suppliers operate.
Significant events since the period end
Except for any matters referred to elsewhere in this Report and Accounts, there have been no significant events affecting
Northgate or any of its subsidiary undertakings since the end of the financial period.
Disclosure of information to auditors
The Directors who held office at the date of approval of this Directors’ Report confirm that, so far as they are each aware,
there is no relevant audit information of which the Group’s auditors are unaware; and each Director has taken all the steps he
ought to have taken as a Director to make himself aware of any relevant audit information and to establish that the Group’s
auditors are aware of that information.
This Directors’ Report was approved by the Board and signed on its behalf by:
Daniel William Schenck
Group Company Secretary
Registered Number: 6442582
22
Strategic Report
Principal Activities
The principal activity of the company is to provide technology solutions and services for human resources management through
our NGA Human Resources (NGA) division. What sets us apart is The NGA Advantage, which is a combination of deep HR
expertise and insight, advanced technology platforms and applications and a global portfolio of flexible service delivery options.
Our Northgate Public Services (NPS) division provides technology solutions to public sector organisations. We help
organisations around the world to deliver more efficient and effective public services, working with local and central
governments, health providers and public safety bodies. The strength of these foundations is The Northgate Advantage,
a combination of deep public sector expertise and insight, our advanced technology platforms and applications, and a
portfolio of flexible service delivery options.
Business Performance
As we accelerate the transformation of our businesses, results for FY14 have been mixed. Our NPS business had a terrific
year, whereas our NGA HR business had a more challenging year. Group revenue from continuing operations declined overall
by 3.7% to £666.1m (2013: £691.9m) in challenging markets.
The NPS revenue and EBITDA both grew 7%, to £181.0m and £42.0m, respectively (2013: £168.9m) and has made
excellent progress focusing on growth areas of its markets to continue strong growth. Order book grew 12% to reach
£327m and the company secured in excess of £100m in SaaS-based contracts. Growth was driven by innovation delivered
through core technology platforms and applications to support new projects in local government as well as expansion in
international markets. Our cash generation was very strong, reflecting strength to our relationships with our clients.
The NGA revenue and EBITDA both declined. NGA closed the year with revenue of £485.1m (-7.2%) and EBITDA of £88.0m
(-15.7%). Our financial structure was further strengthened by our owners in the past year and we have restructured our debt
to support growth. This is important to our clients who seek partners with the stability, longevity and strength to execute
multi-year contracts.
NGA also continued to drive strong contract signings by recording a total contract value of £647m GBP, which is up 4%
year-on-year and continued order book growth to £1,068m, up 1.1% year over year.
Group operating profit from continuing operations before one-off items, depreciation and amortisation of intangibles (EBITDA)
of £123.4m declined by 12.1% due to the contraction of NGA (2013: £140.4m).
After one-off restructuring and property costs of £49.9m (2013: £55.4m) and amortisation of acquired intangibles of £49.8m
(2013: £52.9m) the Group recorded an operating loss of £13.9m (2013: £38.4m). In 2013 a £37.5m loss was recorded
on the sale of the managed services business. Net financing costs increased to £85.7m (2013: £82.8m). Loss on ordinary
activities before tax was £99.6m (2013: £121.2m).
The business continues to focus on certain key performance indicators, namely divisional turnover, earnings before interest,
tax, depreciation and amortisation (EBITDA), margin % and order book total contract value.
Business Model and Strategy
Over the course of FY14, NGA HR has performed a strategic review of the most important markets in which it operates. As a
result, we have introduced a market segment-focused approach through which we will go to market following three strategic
segments: small & medium-sized business, mid-market and enterprise. These segments will play an increasingly important
role in our growth strategy and in our overall go-to-market approach.
A market segment-based structure will allow us to combine a deep focus on local and regional customer requirements with
an integrated sales and delivery organisation, for each market around the world. For each segment we have put detailed
growth plans and integrated sales and delivery organisation structures in place. We feel confident about our future growth
strategy, built on a solid delivery footprint and a market segment-focused view on the HR services marketplace.
Based on a strategic market analysis we performed, and in addition to our enterprise activities, we have defined key growth
segments in the mid-market (in the UK and ANZ) and small and medium business segments (in the UK). For each segment,
we have put detailed growth plans and integrated sales and delivery organisation structures in place. This change in go-tomarket also affects how we invest our money and shift our R&D investments to focus more on innovation, new technologies
and new service lines — such as application management.
23
Strategic Report continued
Business Model and Strategy (continued)
Customer satisfaction has been also a focus area in FY14. Service Level Agreement (SLA) performance hit the highest level
in four years and we have witnessed a company-wide delivery improvement, both in terms of quality and efficiency.
For the year ahead we want to build on the foundation which was laid in the last three years with a single objective: growth.
Customer satisfaction, delivery quality and innovation will continue to drive our investment focus and our value proposition to
the markets in which we operate.
In the NPS sector growth was driven by innovation delivered through core technology platforms and applications to support
new projects in local government as well as expansion in international markets. Public service providers must take a flexible
approach to delivery, and consider how they themselves may need to adapt and maintain a dialogue with citizens so that
changes stay aligned to their needs and preferences.
Over the past year we have secured significant strategic contracts in our chosen markets and have continued our expansion
abroad, most significantly in Canada, the US and Australia. We expect to see further growth in our international business,
building on the success of our work in Housing and Health. Over the course of the year we have driven additional efficiencies
in procurement, real estate and IT to support the business’ financial performance.
Business Risks
Risks to the business centre remain around government spending patterns, the buoyancy of the world economy and levels of
employment around the globe impacting income in our HR outsourcing business. In addition, despite all the security systems
and disaster recovery, business continuity and crisis management plans and procedures in place to protect our infrastructure
and business, a cyber attack or other unforeseen events such as natural disasters may cause an interruption to our services
and operations. As regards the risk from loss of key personnel, the company has succession plans in place and continually
monitors the situation. Price pressures in the market are mitigated by improving the operational efficiency of our services. The
Board are very conscious of these matters and ensure we continually flex costs in the Group to meet client demand.
Employees
Northgate continues to enhance employability in our communities through Apprenticeships, Graduate Trainee Schemes,
Careers Visits, Work Experience and partnership with companies. By doing this, Northgate is addressing shortages of skilled
staff, gender issues and supply chain issues, creating a skilled future workforce which will benefit IT sector growth.
Northgate promotes respect for the individual and equality of opportunity for employment through our policy and mandatory
diversity training, and actively encourages succession planning and career development. Northgate also provides employees
with a Flexible Benefits scheme, which enables them to choose benefits that best support their lifestyle. Opportunities also
exist for employees of the Group who become disabled to continue their employment or to be trained for other positions in
the Group. An Equality Survey is conducted regularly.
The Directors recognise the importance of good communications with Northgate’s employees and of informing and
consulting with them on a regular basis. This is mainly achieved through regular meetings, personal appraisals, e-mail
communications and the Your Say survey.
Health and Safety
Northgate has an established health and safety policy that focuses on the ability to measure performance and to pursue
continuous improvement in managing health and safety. The policy is reviewed regularly by the Health and Safety Manager.
Environmental Performance
Combating climate change remains integral to developing sustainable services for Northgate’s clients in all sectors. Our businesses
continue to place a strong focus on improving our clients’ environmental performance by enabling them to access modern “on
demand” technologies which enable working practices that reduce environmental footprint and generate considerable savings.
Environmental sustainability is fully embedded into service delivery methodology. We focus both on reducing the number
of assets required as well as favouring energy-efficient energy consumption models. Assets are reused wherever possible
and, where they are beyond economical repair, they are recycled in accordance with the Waste Electrical and Electronic
Equipment Directive (WEEE). Further reductions are gained by equipping our employees with the tools and technology to
enable flexible and mobile working.
Daniel William Schenck
Group Company Secretary
24
Financial Section
Statement of Directors’ Responsibilities In Respect of the Strategic Report,
the Directors’ Report and the Financial Statements
The directors are responsible for preparing the Strategic Report, the Directors’ Report and the group and parent company
financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare group and parent company financial statements for each financial year.
Under that law they have elected to prepare the group financial statements in accordance with IFRSs as adopted by the EU
and applicable law and have elected to prepare the parent company financial statements in accordance with UK Accounting
Standards and applicable law (UK Generally Accepted Accounting Practice).
Under company law, the directors must not approve the financial statements unless they are satisfied that they give a true
and fair view of the state of affairs of the group and parent company and of their profit or loss for that period. In preparing
each of the group and parent company financial statements, the directors are required to:
• select suitable accounting policies and then apply them consistently; • make judgements and estimates that are reasonable and prudent; • for the group financial statements, state whether they have been prepared in accordance with IFRSs as adopted by
the EU;
• for the parent company financial statements, state whether applicable UK Accounting Standards have been followed,
subject to any material departures disclosed and explained in the financial statements; and
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the group and the
parent company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent
company’s transactions and disclose with reasonable accuracy at any time the financial position of the parent company and
enable them to ensure that its financial statements comply with the Companies Act 2006. They have general responsibility
for taking such steps as are reasonably open to them to safeguard the assets of the group and to prevent and detect fraud
and other irregularities.
The directors are responsible for the maintenance and integrity of the corporate and financial information included on the
company’s website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from
legislation in other jurisdictions.
25
Independent Auditor’s Statement to the Members of Northgate Information
Solutions Limited
We have examined the summary financial statement for the year ended 30 April 2014 which comprises the Summary
consolidated income statement, Summary statement of financial position, Summary consolidated statement of changes in
equity, Statement of recognised income and expense, Summary consolidated cash flow statement and related notes set out
on pages 27 to 45.
This statement is made solely to the company’s members, as a body, in accordance with section 427 of the Companies
Act 2006. Our work has been undertaken so that we might state to the company’s members those matters we are required
to state to them in such a statement 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 work, for this
statement, or for the opinions we have formed.
Respective responsibilities of directors and auditors
The directors are responsible for preparing the summarised annual report in accordance with applicable United Kingdom law.
Our responsibility is to report to you our opinion on the consistency of the summary financial statement within the
summarised annual report with the full annual financial statements, the Directors’ Report and its compliance with the relevant
requirements of section 427 of the Companies Act 2006 and the regulations made thereunder.
We also read the other information contained in the summarised annual report and consider the implications for our report if
we become aware of any apparent misstatements or material inconsistencies with the summary financial statement.
Basis of opinion
We conducted our work in accordance with Bulletin 2008/3 “The auditor’s statement on the summary financial statement
in the United Kingdom issued by the Auditing Practices Board.” Our report on the group’s full annual financial statements
describes the basis of our audit opinions on those financial statements and the Directors’ Report.
Opinion
In our opinion the summary financial statement is consistent with the full annual financial statements and the Directors’
Report of Northgate Information Solutions Limited for the year ended 30 April 2014 and complies with the applicable
requirements of section 427 of the Companies Act 2006 and the regulations made thereunder.
We have not considered the effects of any events between the date on which we signed our report on the full annual
financial statements 28 August 2014 and the date of this statement.
Paul Gresham (Senior Statutory Auditor)
For and on behalf of
KPMG LLP (Statutory Auditor)
Chartered Accountants
15 Canada Square
London
E14 5GL
28 August 2014
26
Financial Section continued
Group income statement for the year ended 30 April 2014
2014
2013
2013
Continuing Continuing Discontinued
Operations Operations
Operations
(note 1)
£m
£m
£m
Notes
Revenue
Operating costs 2
666.1
(680.0)
691.9
(699.1)
2013
Total
£m
110.1
(141.3)
802.0
(840.4)
(13.9)
(7.2)
(31.2)
Operating profit before significant restructuring, one-off
items, property provisions, amortisation of intangibles,
depreciation and impairment of fixed assets
123.4
140.4
14.0
(38.4)
154.4
Amortisation of other intangible fixed assets
(25.0)
(15.5)
(0.4)
(15.9)
Depreciation of tangible fixed assets
(12.6)
(17.4)
(5.2)
(22.6)
Operating profit before significant restructuring, one-off
items, property provisions, amortisation of acquired
intangibles and impairment of fixed assets 85.8
107.5
8.4
115.9
Significant restructuring, one-off items and property
provisions 2
(49.9)
(53.6)
(1.8)
-
(7.3)
-
-
(1.2)
-
Loss on disposal of managed services business
1
-
-
(37.5)
(49.8)
(52.6)
(0.3)
(13.9)
(7.2)
Financial income
6.3
5.4
Financial expenses
(92.0)
(86.8)
(55.4)
(7.3)
(1.2)
(37.5)
(52.9)
(31.2)
(38.4)
-
(1.4)
5.4
(88.2)
Net financing costs
(85.7)
(81.4)
(1.4)
(82.8)
Loss before tax
(99.6)
(88.6)
(32.6)
(121.2)
Tax income/(expense)
4.0
9.1
(7.3)
1.8
Loss for the year from continuing/ discontinuing operations
(95.6)
(79.5)
(39.9)
(119.4)
Loss for the year from discontinued operations
-
(39.9)
Attributable to:
Equity holders of the parent
(95.6)
(119.4)
The notes on pages 32 to 45 are an integral part of these consolidated financial statements.
27
Group statement of comprehensive income for the year ended 30 April 2014
Notes
Year ended 30 April 2014
£m
Year ended
30 April 2013
£m
Loss for the year
(95.6)
(119.4)
Items that will never be reclassified to profit or loss
6
4.3
(20.7)
Deferred tax on remeasurements of defined benefit pension schemes
(2.0)
4.7
2.3
(16.0)
Remeasurements of defined benefit pension schemes
Items that are or may be reclassified to profit or loss
Foreign exchange translation differences
(1.3)
11.6
(1.3)
11.6
Total recognised income and expense for the year
(94.6)
(123.8)
Attributable to:
Equity holders of the parent
(94.6)
(123.8)
28
Group statement of financial position as at 30 April 2014
2014
£m
Notes
2013
£m
Non-current assets
Goodwill
762.7
Acquired and other intangible assets
284.3
771.3
329.2
Total intangible assets
Property, plant and equipment
Other receivables
1,047.0
33.8
5.7
1,100.5
36.9
9.0
Total non-current assets
1,086.5
1,146.4
Current assets
Inventories – goods for resale
0.6
Trade and other receivables
200.4
Cash and cash equivalents
68.0
0.3
204.5
93.7
Total current assets
269.0
298.5
Total assets
1,355.5
1,444.9
Non-current liabilities
Interest-bearing loans and borrowings
5
879.8
Employee benefits
6
37.4
Provisions
7
4.7
Deferred tax liabilities
29.2
Other financial liabilities
9(f)
10.1
911.5
46.2
3.6
34.0
12.4
Total non-current liabilities
961.2
1,007.7
Current liabilities
Interest-bearing loans and borrowings
5
25.1
Provisions
7
10.2
Taxation
7.8
Trade and other payables
319.2
9(f)
6.2
28.6
6.5
9.5
320.6
6.4
Total current liabilities
368.5
371.6
Total liabilities
1,329.7
1,379.3
Net assets
Issued share capital
Share premium account
Capital contribution
Retained earnings
25.8
65.6
108.2
0.6
497.2
(580.2)
108.2
0.6
442.4
(485.6)
Shareholders’ funds
25.8
65.6
Approved by the Board of Directors on 28 August 2014 and signed on its behalf by:
John R Stier
Group Finance Director
28 August 2014
29
Group statement of changes in equity as at 30 April 2014
Share
Share
Capital Retained
capital
premium contribution
earnings
£m
£m
£m
£m
Equity
shareholders’
funds
£m
Balance at 30 April 2012
108.2
0.6
442.4
(361.8)
Loss for the period -
-
-
(119.4)
189.4
Other comprehensive income for the year:
-
-
-
(20.7)
Deferred tax on remeasurements of defined benefit
pension schemes
-
-
-
4.7
-
-
-
11.6
108.2
0.6
442.4
(119.4)
(20.7)
4.7
11.6
(485.6)
65.6
Loss for the period -
-
-
(95.6)
-
-
54.8
-
(95.6)
54.8
Other comprehensive income for the year:
-
-
-
4.3
Deferred tax on remeasurements of defined benefit
pension schemes
-
-
-
(2.0)
-
-
-
(1.3)
(2.0)
(1.3)
25.8
108.2
0.6
497.2
(580.2)
4.3
30
Group statement of cash flows for the year ended 30 April 2014
Notes
Year ended
30 April 2014
£m
Cash flows from operating activities
Loss for the period
(94.0)
Adjustments for:
49.8
Amortisation of other intangibles
25.0
Impairment of other intangibles
-
Depreciation
12.6
Impairment of property, plant and equipment
-
Loss on disposal of business 1
-
Net financing costs
85.7
Tax credit
(5.6)
Year ended
30 April 2013
£m
(119.4)
52.9
15.9
7.3
22.6
1.2
37.5
82.8
(1.8)
Net cash from operating activities before changes in
working capital and provisions
73.5
99.0
Foreign exchange movements
Change in trade and other receivables
Change in inventories
Change in trade and other payables
Change in provisions and employee benefits Additional pension deficit contributions
(10.6)
7.6
(0.3)
(13.1)
5.3
(6.6)
5.2
1.6
0.5
(11.7)
(14.0)
(6.5)
Net cash from operating activities before taxes paid
55.8
74.1
Cash flows from investing activities
Proceeds for sale of managed services business
1
-
Acquisition of intangible assets
(28.3)
Acquisition of property, plant and equipment
(14.6)
23.1
(24.9)
(30.2)
Net cash used in investing activities
(42.9)
(32.0)
Net cash from operations after investing activities
12.9
42.1
Taxes paid
(2.1)
(3.7)
Net cash from operations after investing activities and before
financing activities
10.8
38.4
Cash flows from financing activities
Interest received
1.0
Interest paid (45.8)
Cash flows treated as finance costs – loan arrangement fees
(9.6)
54.8
Movement in borrowings
(28.4)
Repayment of borrowings
(5.3)
Increase in finance lease liabilities
16.4
Payment of finance lease liabilities
(19.6)
1.2
(48.5)
(0.5)
69.0
(20.0)
40.2
(20.9)
Net cash from financing activities
(36.5)
20.5
Cash and cash equivalents at 1 May
Net (decrease)/increase in cash and cash equivalents excluding effect of
foreign exchange rate movements on cash held
Effect of foreign exchange rate movements on cash held
93.7
34.8
(25.4)
(0.3)
58.6
0.3
Net (decrease)/increase in cash and cash equivalents
(25.7)
58.9
Cash and cash equivalents at 30 April
68.0
93.7
31
Notes to the consolidated accounts for the year ended 30 April 2014
1. ACQUISITION AND DISPOSAL OF SUBSIDIARIES
There were no significant disposals or acquisitions during the year. Movements in goodwill which are not related to
acquisitions through business combinations comprise change in the value of the net investment hedge and revaluation of
foreign denominated goodwill.
Disposal of Northgate Managed Services Limited – Discontinued Operations
On 13 February 2013, the Group disposed of its investment in Northgate Managed Services Limited for a cash consideration
of £23.1m and a loss on disposal of £37.5m.
Enterprise value
£m
Consideration
23.1
Finance lease liabilities
24.0
Defined benefit pension liabilities – estimated actuarial valuation
23.0
70.1
Total enterprise value* *Enterprise value is defined as the underlying value of the MS division’s trade before adjustments for the pension scheme
and finance lease liabilities. Based on an annual EBIT of £7.0m the sale generated a multiple of 10 times EBIT.
Goodwill of £62.5m and acquired intangibles of £1.6m were disposed of on the sale. As part of the disposal, hire purchase
liabilities of £24.0m and defined benefit pension scheme liabilities (estimated actuarial valuation) of £23.0m were also
disposed of.
Loss on disposal
£m
Consideration
23.1
Fees
(0.8)
Disposal of goodwill
(62.5)
Disposal of acquired intangibles
(1.6)
Disposal of net assets 4.3
(37.5)
Loss on disposal
The loss for the year from discontinuing operations is shown on the Group Income Statement on page 27.
32
Notes to the consolidated accounts for the year ended 30 April 2014 (continued)
2. OPERATING COSTS
Year ended
30 April 2014 £m
Year ended
30 April 2013
£m
Change in inventories of goods for resale, excluding impact of disposals
Purchase of goods for resale, raw materials and consumables
Other external operating charges
Staff costs
- wages and salaries
- social security costs
- other pension costs defined contribution
- other pension costs defined benefit – current year service cost
Depreciation of owned assets
Depreciation of assets held under finance leases
Amortisation of development costs and purchased software
Loss on sale of managed services business (note 1)
(0.3)
59.5
62.0
0.5
107.3
84.4
347.4
62.4
9.8
1.9
10.2
2.4
-
25.0
-
49.8
-
378.3
66.8
7.8
2.5
17.4
5.2
1.2
15.9
7.3
52.9
37.5
Severance and restructuring
Business integration, development and business transformation
Contract termination costs
Property provisions
Non recurring efficiency and productivity projects and other
630.1
15.8
7.1
3.6
13.4
10.0
785.0
18.8
7.6
9.8
2.7
16.5
Significant restructuring and property provisions
49.9
55.4
Total operating costs 680.0
840.4
These one off costs principally relate to the business’s on-going cost reduction programme, including offshoring of
operational and back office functions and the impact of product strategy review and include:
• £15.8m of severance costs in Group restructuring programmes;
• £7.1m of project resource costs. These are made up of business integration costs, restructuring programme resources,
costs of moving contract fulfilment locations, migration from legacy systems and one off productivity improvement plans;
• £3.6m of contract termination and internal contract closure costs;
• £13.4m of property exceptional costs made up of vacant space provisions and dilapidation costs;
• £10.0m of other costs include non recurring professional fees, pension liability management and non recurring efficiency
and productivity projects and fees related to the sale of the managed services business.
3. DIRECTORS’ EMOLUMENTS
Year ended
30 April 2014
£m
Directors’ emoluments
1.4
Company contributions to money purchase pension plans
0.1
Year ended
30 April 2013
£m
1.5
2.5
2.4
0.1
The aggregate emoluments of the highest paid director were £879,000 (2013: £1,768,000) including £45,000 (2013: £45,000)
paid into a money purchase pension plan. At 30 April 2014 and at 30 April 2013, one director had benefits accruing under a
defined benefit pension scheme and one director had benefits accruing under a money purchase pension plan.
33
4. STAFF NUMBERS
The average number of persons employed by the Group, including Executive Directors, during the year was as follows:
Year ended
30 April 2014
Number
Sales
463
Business Transformation
167
Operations
5,946
Product Support
1,540
HR Consulting
612
Support Functions
1,043
Year ended
30 April 2013
Number
9,771
10,183
2014
£m
2013
£m
867.0
12.8
894.7
16.8
Current liabilities
Secured bank loans
879.8
911.5
15.4
9.7
16.9
11.7
25.1
28.6
510
461
5,713
1,334
1,351
814
5. INTEREST-BEARING LOANS AND BORROWINGS
Non-current liabilities
Secured bank loans
The Group’s net bank loans are secured by a cross guarantee and a fixed and floating charge over the assets of the
Company and its material subsidiaries. Interest on the loans is paid as cash interest plus a payment in kind (PIK) Margin.
The cash interest rate applicable to the Sterling denominated bank loans is LIBOR plus a margin which varies between
1.75% and 4.5%, depending on the tranche and the business ratio of debt to EBITDA. The cash interest rate applicable to
the Euro denominated bank loans is EURIBOR plus a margin which varies between 1.75% and 4.5%, depending on the
tranche and the business ratio of debt to EBITDA. The PIK Margin, depending on the tranche, varies between 0.5% and
10.5%. All bank loans at the period end are due in Sterling, Euros or Australian dollars. Details of the repayment profile are
shown in note 9(d). The Group’s loan notes are secured by a bank guarantee.
Group bank loans are stated net of unamortised issue costs of £14.7m (2013: £10.2m). Issue costs, together with the
interest expenses, are allocated to the income statement at a constant rate on the carrying amount. Group bank loans are
subject to the following covenant restrictions:
• Ratio of consolidated net borrowings to consolidated EBITDA
• Ratio of cash flow to consolidated debt service (interest plus mandated repayments)
• Ratio of consolidated EBITA to consolidated net interest
• Value of Capital Expenditure in each Financial Year
All covenants are based on International Financial Reporting Standards (“IFRS”). Failure to meet the covenant restrictions
results in all amounts outstanding, becoming immediately due and payable. There have been no breaches in covenants in
the year or since the inception of the loans.
34
5. INTEREST-BEARING LOANS AND BORROWINGS (continued)
Finance lease liabilities are payable:
Minimum
Minimum
lease
lease
payments
Interest
Principal
payments Interest
2014
2014
2014
2013 2013
£m
£m
£m
£m
£m
Less than one year
11.6
1.9
9.7
15.0
3.3
Between one and five years
14.2
1.4
12.8
20.2
3.4
25.8
3.3
22.5
35.2
6.7
Principal
2013
£m
11.7
16.8
28.5
Under the terms of the lease arrangements, no contingent rents are payable.
6. EMPLOYEE BENEFITS
IAS 19, ‘Employee benefits’ was revised in June 2011. The revised employee benefit standard introduces changes to
the recognition, measurement, presentation and disclosure of post-employment benefits. The standard also requires net
interest expense / income to be calculated as the product of the net defined benefit liability / asset and the discount rate
as determined at the beginning of the year. The effect of this is to remove the previous concept of recognising an expected
return on plan assets. The changes to the group’s accounting policies has been as follows: to immediately recognise all past
service costs; and to replace interest cost and expected return on plan assets with a net interest amount that is calculated
by applying the discount rate to the net defined benefit liability (asset). Expenses such as record-keeping costs or actuarial
valuation fees are recognised in profit or loss when the services are received.
2013
£m
2012
£m
Total employee benefit liabilities – net defined benefit liability
37.4
46.2
For details on the related employee benefit expenses see note 2.
The Group contributes to the following post-employment defined benefit plans: The Northgate Public Services Pension
Scheme and the Northgate HR Pension Scheme (‘the Northgate Schemes’) and the Rebus Group Pension Scheme (‘the
Rebus Scheme’). The schemes are closed to new employees, who are instead eligible to join another defined contribution
scheme.
Benefits are related to salary close to retirement or leaving service (if earlier) and also to years of pensionable service. Assets
are held in separate, trustee administered funds. Employer contributions to the schemes are determined on the basis of
regular valuations undertaken by independent, qualified actuaries. As the schemes are closed to new entrants for pension
accrual, under the method used to calculate pension costs in accordance with IAS19, the cost as a percentage of covered
pensionable payroll will tend to increase as the average age of the membership increases.
These defined benefit plans expose the Group to actuarial risks, such as longevity risk, currency risk, interest rate risk and
market (investment) risk.
During the prior year the group sold Northgate Managed Services Limited and the group ceased to operate the Northgate
Managed Services Pension Scheme at that time, resulting in a curtailment gain.
35
6. EMPLOYEE BENEFITS (continued)
Funding
All three plans are funded by the Group’s subsidiaries. Over the next year, the Group will pay estimated contributions of
£6.9m (2013: £6.7m) to the defined benefit schemes. The funding requirements are based on the pension fund’s actuarial
measurement framework set out in the funding policies of the plan. This includes the additional contributions aimed at
removing the deficit of the Schemes. Contributions to the defined contribution schemes are in addition to the contributions to
the UK defined benefit schemes.
Movements in the net defined benefit liability
The following table shows a reconciliation from the opening balances to the closing balances for the net defined benefit and
its components.
Defined benefit
Fair value of
Impact of
Net defined
obligation
plan assets
asset ceiling
benefit liability
2014
2013
2014
2013
2014
2013
2014
2013
£m
£m
£m
£m
£m
£m
£m
£m
Restated Restated Restated
Balance at 1 May before impact of
asset ceiling
286.0
341.7 (239.8)
(302.8)
46.2
38.9
Impact of asset ceiling
-
-
-
-
-
4.4
-
4.4
Balance at 1 May
286.0
341.7 (239.8)
(302.8)
-
4.4
46.2
Included in income statement Current service cost
1.9
2.5
-
-
-
-
1.9
Past service cost and gains on
curtailment
(0.2)
(108.7)
-
97.2
-
-
(0.2)
Interest cost
12.4
16.2
(10.6)
(14.5)
-
-
1.8
14.1
(90.0)
(10.6)
82.7
-
-
3.5
Included in statement of
comprehensive income
Remeasurement loss (gain):
Actuarial loss (gain) arising from:
Financial assumptions
(6.7)
41.0
0.7
0.7
-
-
(6.0)
Experience Adjustment
(1.4)
-
-
-
-
-
(1.4)
Return on plan assets excluding
interest income
-
-
3.1
(16.6)
-
-
3.1
Impact of asset ceiling
-
-
-
-
-
(4.4)
-
(8.1)
41.0
3.8
(15.9)
-
(4.4)
(4.3)
Other Contributions paid by the employer
-
-
(8.0)
(10.5)
-
-
(8.0)
Benefits paid (6.5)
(6.7)
6.5
6.7
-
-
-
43.3
2.5
(11.5)
1.7
(7.3)
41.7
(16.6)
(4.4)
20.7
(10.5)
-
(6.5)
(6.7)
(1.5)
(3.8)
-
-
(8.0)
(10.5)
At 30 April
285.5
286.0
(248.1)
(239.8)
-
-
37.4
46.2
36
Fair value of plan assets
The plan assets are all in investment funds which do not have quoted prices, although the majority of assets held within
those funds will have quoted prices. The assets with the funds are split as follows:
2014
£m
2013
£m
Equities
Bonds
LDI Funds
Multi-asset credit
Property Emerging market multi asset
Secured loans
Diversified growth funds
Cash
54.3
-
40.3
19.3
24.5
23.7
-
83.5
2.5
49.3
89.8
20.9
77.3
2.5
At 30 April
248.1
239.8
The expected rate of return on pension plan assets is determined as the Company’s best estimate of the long term return of
the major asset classes - equities, bonds, LDI, and diversified growth funds - weighted by the current strategic allocation at
the measurement date less expenses.
Defined benefit obligation
Actuarial assumptions
The principal actuarial assumptions at the balance sheet date were:
2014
%
Discount rate 4.5%
Future salary increases
1.0%
Retail price inflation
3.3%
Consumer price inflation (CPI)
2.2%
Future pension increases (2.5% LPI) 1.8%-2.2%
Future pension increases (5.0% LPI) 2.2%-3.2%
2013
%
4.4%
1.0%
3.3%-3.4%
2.2%-2.3%
1.9%-2.2%
2.3%-3.2%
The weighted average durations of the expected benefit payments is between 19-22 years across the schemes. The current
longevities underlying the values in the defined benefit obligation at the reporting date were as follows:
Longevity at age 65 for current pensioners Males
Females
Longevity at age 65 for current members aged 45
Males
Females
37
2014
Years
2013
Years
22.8
24.2
22.6
24.1
25.8
26.1
25.6
26.0
Defined benefit obligation
Sensitivity Analysis
Reasonable possible changes at the reporting date to one of the relevant actuarial assumptions, holding the other
assumptions constant, would have affected the defined benefit obligation by the amounts shown below:
30 April 2014
Discount rate (0.1% movement)
Future pension growth (0.1% movement)
Inflation and related future pension growth (0.1% movement)
CPI (deferred revaluation increases)
Life expectancy (1 year movement)
2014
£m
Increase
2014
£m
Decrease
(5.4)
1.6
2.5
1.1
7.7
5.5
(1.6)
(2.4)
(1.1)
(7.7)
Although the analysis does not take account of the full distribution of cash flows expected under the plans, it does provide
an approximation of the sensitivity of the assumptions shown.
Defined contribution arrangements
The Group also operates various defined contribution arrangements for its UK and overseas employees. The contributions
paid to defined contribution schemes amounted to £9.8m (2013: £8.0m). The amount recognised as an expense was £9.8m
(2013: £7.8m). The amount paid into pension schemes for overseas employees was £4.3m (2013: £5.3m). Amounts payable
in respect of defined contribution arrangements at 30 April 2014 were £0.4m (2013: £0.1m).
7. PROVISIONS
Property Restructuring
provisions
and other
provisions
£m
£m
At 1 May 2013
4.4
5.7
Foreign exchange differences
-
(0.2)
Recognised in the income statement
9.5
4.2
Utilised in the period
(4.2)
(4.5)
Total
At 30 April 2014
9.7
5.2
14.9
Current
Non-current
8.2
1.5
2.0
3.2
10.2
4.7
At 30 April 2014
9.7
5.2
14.9
Current
Non-current
2.9
1.5
3.6
2.1
6.5
3.6
At 30 April 2013
4.4
5.7
10.1
£m
10.1
(0.2)
13.7
(8.7)
38
7. PROVISIONS (continued)
Property provisions
The provision relates to Group properties that have either been sublet or are vacant. It consists of the discounted value of the
differential between future liabilities on the property less any expected future sublet receipts extrapolated to the earliest break
point in the contract. In addition there is a dilapidations provision to make the property good at the end of the lease. This is
made for all leased properties expiring within the next three years.
Restructuring and other provisions
The Group has provided in full for the anticipated costs of restructuring certain divisions and is management’s best estimate
of this cost. The provisions are expected to be used within the next 1 to 2 years.
8. NET DEBT
Net debt includes cash and cash equivalents, secured bank loans and loan notes and finance lease liabilities.
Notes
Cash and cash equivalents Secured bank loans and loan notes– current
5
– non-current 5
Finance lease liabilities – current 5
– non-current
5
Other financial liabilities– current
9(f)
– non-current
9(f)
2014
£m
2013
£m
68.0
(15.4)
(867.0)
(9.7)
(12.8)
(6.2)
(4.8)
93.7
(16.9)
(894.7)
(11.7)
(16.8)
(4.0)
(4.3)
(847.9)
(854.7)
Set out below is a reconciliation in cash and cash equivalents to the increase in net borrowings at 30 April 2014.
Net decrease/(increase) in cash and cash equivalents Effect of foreign exchange rate movements on cash held
Cash and cash equivalents net inflow from increase in debt and debt financing 2014
£m
2013
£m
25.4
0.3
(36.9)
(58.6)
(0.3)
43.8
Movement in net borrowings resulting from cash flows
Amortisation of loan arrangement fees
Capitalised finance costs
Non cash mezzanine bank loan interest – added to loan
Currency translation differences
(11.2)
5.1
(9.6)
20.1
(11.2)
(15.1)
6.7
(0.5)
8.3
11.0
Movement in net debt in the year
Net debt at 1 May
(6.8)
854.7
10.4
844.3
Net debt at 30 April
847.9
854.7
39
9. FINANCIAL INSTRUMENTS
The Group’s financial assets and liabilities mainly comprise bank borrowings, cash, liquid resources and various items, such
as trade and other receivables and trade and other payables that arise directly from operations.
The main financial market risks arising from the Group’s operations are credit risk, interest rate risk, foreign exchange risk and
liquidity risk. The Board reviews and agrees policies for managing each of these risks and they are summarised below.
he main purpose of the financial instruments is to provide a hedge against the interest rate risk for the Group’s financial
T
liabilities.
(a) Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its
contractual obligations and arises principally from the Group’s trade and other receivables from customers.
Management has a credit policy in place and the exposure to credit risk is monitored on an on-going basis. Credit
evaluations are performed on all customers requiring credit over a certain amount. The Group does not require collateral in
respect of financial assets.
At the balance sheet date, there were no significant concentrations of credit risk. The maximum exposure to credit risk is
represented by the carrying amount of each financial asset in the balance sheet, principally trade and other receivables. The
Group provides credit to customers in the normal course of business and the amount that appears in the balance sheet is
net of a provision for impairment of £1.9m (2013: £2.8m). The provision for impairment is calculated in accordance with the
Group’s policy based on the age of the financial asset at each period end and specific doubtful debts. Past history suggests
that no provision for impairment is required for trade and other receivables not past due.
The ageing of trade receivables at the year-end was:
2014
Gross
£m
Not past due
59.9
Past due 0-30 days
18.7
Past due 31-60 days 6.6
Past due 61-90 days 1.7
Past due 90 days and above
4.3
2013
Gross
£m
Restated
91.2
55.9
18.0
5.7
2.4
5.4
87.4
In addition to the above at 30 April 2014 there were also other receivables (long term debtors) of £5.7m (2013: £9.0m). An
allowance for impairment of £1.9m (30 April 2013: £2.8m) has been added back to debtors past due 90 days and above in
arriving at these figures.
The movement in the allowance for impairment in respect of trade and other receivables during the period was as follows:
At 1 May
Additional bad debt provision
Utilised in the period
2014
£m
2013
£m
2.8
0.5
(1.4)
2.3
1.0
(0.5)
1.9
2.8
40
9. FINANCIAL INSTRUMENTS (continued)
(b) Interest rate risk
Interest rate risk is the risk of increased net financing costs due to increases in market interest rates. The Group finances its
operations and acquisitions through a mixture of retained profits, bank borrowings and equity; the Group’s main interest rate
risk therefore comes from its bank borrowings, which the Group borrows principally in Sterling and Euros.
The Group policy is to undertake interest rate hedging to protect itself against adverse movements in interest rates (see
note 9(g)). Any surplus cash is invested in short-term bank deposits at the prevailing rates of interest in order to achieve the
market rate of return.
At 30 April 2014, the Group had interest rate hedges in place to reduce its exposure to changes in interest rates. Hedging
contracts are in place fixing approximately two thirds of the Group’s interest rate exposure for the next 3 financial years. The
need for further interest rate hedges is reviewed by the Board of Directors annually. This is set out in detail in note 9(g).
At the period end the interest rate profile of the Group’s interest-bearing financial instruments was:
2014
£m
Variable rate instruments
2013
£m
882.4
911.6
Secured bank loans
As noted above, interest rate hedges are in place to manage the risk from changing interest rates affecting the cost of these
bank loans.
2014
£m
Fixed rate instruments
2012
£m
22.5
28.5
(c) Foreign exchange risk
The Group operates internationally and is exposed to foreign currency risk on transactions denominated in a currency other
than the functional currency and on the translation of the balance sheet and income statement of foreign operations into
sterling. The currencies giving rise to this risk are primarily US dollars and Euros. The Group has both cash inflows and
outflows in these currencies that create a natural hedge.
In managing currency risks the Group aims to reduce the impact of short-term fluctuations on the Group’s cash inflows and
outflows in a foreign currency. The Group also hedges any material foreign currency transaction exposure. The Group has
treated €360m of the long term funding of a subsidiary as a net investment hedge. At 30 April 2013 exchange rates the long
term funding was £295.3m (2013: £304.4m) and the net investment shown in goodwill was £295.3m (2013: £304.4m).
Over the longer term permanent changes in foreign exchange could have an impact on consolidation of foreign subsidiaries
earnings. It is estimated that a general increase of one percentage point in the value of sterling against other currencies
would have reduced the Group’s loss before tax by approximately £0.3m (2012: (reduced) £0.2m).
41
(d) Liquidity Risk
Liquidity risk is the risk that the Group will not be able to meet its financial commitments as they fall due.
The Group‘s objective is to ensure that adequate facilities are available through use of bank loans and finance leases. The
Group manages liquidity risk through regular cash flow forecasting and monitoring of cash flows, management review and
regular review of working capital and costs.
The Group regularly monitors its available headroom under its borrowing facilities. At 30 April 2014, £99.0m (2013: £101.6m)
of undrawn facilities were available (see note 9(e)).
In respect of the Group’s financial liabilities including estimated interest where applicable, the table below includes details (at
the balance sheet date) of the periods in which they mature.
Future cash Less than
Book value
flows
1 year 1-2 years 2-3 years 3-4 years 4-5 years
30 April 2014
Notes
£m
£m
£m
£m
£m
£m
Secured bank loans
5
(882.4) (1,125.0)
(67.3)
(69.9)
(53.2)
(588.9)
Finance lease liabilities *
5
(22.5)
(22.5)
(9.7)
(6.4)
(4.4)
(1.6)
(47.8)
(47.8)
(47.8)
-
-
-
Interest rate collars/SWAPS
9(f)
(5.3)
(5.3)
-
(3.4)
-
(1.9)
9(f)
(11.0)
(11.0)
(6.2)
(2.9)
(1.4)
(0.5)
(969.0)
(1,211.6)
(131.0)
(82.6)
(59.0)
(592.9)
£m
(345.7)
(0.4)
(346.1)
Future cash Less than
Book value
flows
1 year 1-2 years 2-3 years 3-4 years 4-5 years
30 April 2013
Notes
£m
£m
£m
£m
£m
£m
Secured bank loans
5
(911.6) (1,212.3)
(67.3)
(87.8)
(295.2)
(295.2)
Finance lease liabilities *
5
(28.5)
(28.5)
(11.7)
(9.4)
(4.8)
(2.6)
(36.0)
(36.0)
(36.0)
-
-
-
Interest rate collars/SWAPS
9(f)
(10.5)
(10.5)
(2.4)
(2.4)
(5.7)
-
9(f)
(8.3)
(8.3)
(4.0)
(2.7)
(1.3)
(0.3)
(994.9)
(1,295.6)
(121.4)
(102.3)
(307.0)
(298.1)
£m
(466.8)
(466.8)
*These liabilities bear interest at a fixed rate
42
(e) Borrowing facilities
The Group has syndicated Senior and Subordinated facility agreements with a number of banks and investment companies
providing £660 million and €360 million of available funding. These facilities were amended and extended in July 2013. Of
these facilities, the Group has the following available committed floating rate borrowing facilities and cash at 30 April 2014 in
respect of which all conditions precedent had been met at that date:
2014
£m
2013
£m
Expiring between 2 and 10 years
99.0
101.6
In addition the Group has a facility secured on UK and US trade receivables, providing up to £27.5m of additional liquidity. In
July 2013 the Group completed an amendment to the Senior and Subordinated Facilities. This extended the debt maturity
profile of majority of the Group’s loans, with only 5% of bank facilities due to be repaid before 2017.
(f) Fair values of financial assets and financial liabilities
The fair values, together with the carrying amounts shown in the balance sheet, are as follows:
Carrying amount
Notes
2014
2013
2014
£m
£m
£m
Trade and other receivables
89.3
84.6
89.3
Other receivables (long-term trade debtors)
5.7
9.0
5.7
Cash and cash equivalents
68.0
93.7
68.0
Secured bank loans 5
(882.4)
(911.6)
(882.4)
5
(22.5)
(28.5)
(22.5)
Other financial liabilities – current
Interest rate collars/SWAPs - Liabilities
-
(2.4)
-
(6.2)
(4.0)
(6.2)
2013
£m
84.6
9.0
93.7
(911.6)
(28.5)
(2.4)
(4.0)
(6.2)
(6.4)
Other financial liabilities – non-current
Other financial liabilities (4.8)
(4.3)
(4.8)
Interest rate collars/SWAPs – Liabilities
(5.3)
(8.1)
(5.3)
(4.3)
(8.1)
(6.2)
Fair value
(6.4)
(10.1)
(12.4)
(10.1)
(12.4)
(758.2)
(771.6)
(758.2)
(771.6)
Included in other financial liabilities are assets of £11.0m secured by other financial liabilities of £4.8m due under a year
and £6.2m due over a year (2013: £8.3m secured by other financial liabilities of £4.0m due under a year and £4.3m due over
a year).
Estimation of fair values
The fair values of financial instruments reflect the market value at the balance sheet date. The market value of interest rate
collars is determined from valuations provided by the issuing financial institution adjusted for credit risk. All other financial
instruments are stated at their carrying values which are not materially different to the market value.
43
(g) Hedging
In respect of our overall borrowings this covers approximately 66% of our interest exposure in 2015/16 and 2016/17. The
average rate of interest fixed over the period is in the range 1.02% to 2.01% for Sterling and 0.87% to 2.01% for Euros plus
margin. The effect of the arrangement is to limit any detrimental interest rate moves over the period to the amount of debt
not covered by these instruments. These positions are reviewed annually by the Board.
The Group also hedges any material foreign currency transaction exposure. Transaction exposures are reviewed periodically
and hedged.
The Group undertakes interest rate hedging to protect itself against adverse movements in interest rates. Hedging is put in
place when significant amounts of borrowing are incurred. A summary of the Group’s interest rate hedging position (including
interest rate hedges taken on as part of the “acquired group”) is given in note 9(d). The figures quoted represent total interest
costs including funding margin.
Note 9(d) gives details of the carrying value and expected future cash flows associated with the interest rate hedges. The
Group has not applied hedge accounting to the interest rate hedges. The fair value of the interest rate hedges is determined
by valuations provided by the issuing financial institution of those instruments and is taken through the income statement.
(h) Capital Management
The Group’s objectives when managing capital (retained profits and bank borrowings) are to safeguard the Group’s ability to
continue as a going concern support the growth of the business and to maintain an optimal capital structure to reduce the
cost of borrowing. The Group finances its operations through a combination of retained profits, equity and bank borrowings
(see note 5).
10. ACCOUNTING ESTIMATES AND JUDGEMENTS
The following sets out the key assumptions concerning the future and key sources of estimation and uncertainty at the
balance sheet date that may cause material adjustment to the carrying amounts of assets or liabilities within the next
financial year.
Revenue recognition
The revenue and profit of fixed price contracts is recognised on a percentage completion basis when the outcome of a
contract can be estimated reliably. Management exercises judgement in determining whether a contract’s outcome can be
estimated reliably. Management also make some estimates in the calculation of future contract costs, which are used in
determining the value of amounts recoverable on contracts. Estimates are continually revised based on changes in the facts
relating to each contract.
Pensions
Details of the principal actuarial assumptions used in calculating the recognised liability for the defined benefit plans are
given in note 6. Changes to the discount rate, mortality rates and actual return on plan assets may necessitate material
adjustments to this liability in the future.
Provisions
Provisions are recognised in the period when it becomes probable that there will be a future outflow of funds resulting
from past operations or events which can be reasonably estimated. The timing of recognition requires the application of
judgement to existing facts and circumstances, which can be subject to change. Note 7 to the accounts contain information
about the assumptions made concerning the Group’s provisions.
44
10. ACCOUNTING ESTIMATES AND JUDGEMENTS (continued)
Fair value measurement on a business combination
The measurement of fair values on a business combination requires the recognition and measurement of the identifiable
assets, liabilities and contingent liabilities. The key judgements involved are the identification and valuation of intangible
assets which require the estimation of future cash flows and the selection of a suitable discount rate.
Impairment of intangible assets, including goodwill
Following the acquisition of Northgate Information Solutions plc in 2007/08, the Group has significant carrying values of
goodwill and intangible assets, such as customer relationships, technology based assets and trade names and other
marketing related assets. Goodwill and other intangible assets are tested annually for impairment. The impairment tests
involve estimation of future cash flows and the selection of a suitable discount rate. These require an estimation of the valuein-use of the cash generating units to which the intangible assets are allocated.
Recognition of internally generated intangible assets from development
Under IFRS, internally generated intangible assets from the development phase are recognised if certain conditions are met.
These conditions include the technical feasibility, intention to complete, the ability to use or sell the asset under development
and the demonstration how the asset will generate probable future economic benefits. The cost of a recognised internally
generated intangible asset comprises all directly attributable cost necessary to make the asset capable of being used as
intended by management. In contrast, all expenditures arising from the research phase are expensed as incurred.
We believe that the determination whether internally generated intangible assets from development are to be recognised as
intangible assets requires significant judgement, particularly in the following areas:
• The determination whether activities should be considered research activities or development activities;
• The determination whether the conditions for recognising an intangible asset are met requires assumptions about future
market conditions, customer demand and other developments;
• The term ‘technical feasibility’ is not defined in IFRS, and therefore the determination whether completing an asset is
technically feasible requires a company-specific and necessary judgemental approach;
• The determination of the future ability to use or sell the intangible asset arising from the development and the determination
of probability of future benefits from sale or use, and
• The determination whether a cost is directly or indirectly attributable to an intangible asset and whether a cost is necessary
for completing a development.
Development Costs
During the prior year the Group changed the rate of amortisation of development costs from 3 to 5 years resulting in a
decrease in amortisation charge for 2012/13 of £7.3m following a reassessment of the estimated useful lives of these assets.
Taxation
The Group is subject to corporate taxes in numerous jurisdictions. Management is required to exercise significant judgement
in determining the worldwide provision for corporate taxes. Certain transactions require the use of estimates and judgements
to determine the financial effect where the ultimate tax determination is uncertain. When the final outcome of such matters is
different, from previous estimates, such differences will impact on the corporate tax in the period in which the determination
is made.
45
Directors and Advisers
Directors
Adel Al-Saleh Group Chief Executive
Brian Carroll Chairman
William L. Cornog Non-Executive Director
John R. Stier Group Finance Director
Edouard Pillot Non-Executive Director
Special Adviser to the Board
Sir Roger Carr
Chairman of Centrica
Registered Office
Peoplebuilding 2
Peoplebuilding Estate
Maylands Avenue
Hemel Hempstead
HP2 4NW
United Kingdom
Registered Number
6442582
Auditors
KPMG LLP
15 Canada Square
London E14 5GL
Bankers
Barclays Bank Plc
28 George Street
Luton LU1 2AE
46
Northgate Information
Solutions Limited
Peoplebuilding 2
Peoplebuilding Estate
Maylands Avenue
Hemel Hempstead
HP2 4NW
United Kingdom
+44 (0) 1442 232424
www.northgate-is.com

Northgate Information Solutions Limited

Transcription

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