Company Number: 5982873
Inhoco 3363 Limited Annual Report and Accounts 2008 Contents
Directors’ Report 3
Independent Auditors’ Report 8 to the Members of Enterprise Group Holdings Limited
Group Income Statement 10
Group Balance Sheet 11
Group Statement of 12 Recognised Income and Expense
Group Cash Flow Statement 13
Notes to the Financial Statements 14
Company Balance Sheet 50
Notes to the Company 51 Financial Statements
Company Directory 55
2 Inhoco 3363 Limited | Annual Report and Accounts 2008 Directors’ Report
The directors submit their report together with the audited financial statements of the Company and of the Group for the period from 1 January 2008 to 31 December 2008.
Principal activities Inhoco 3363 Limited is an intermediate holding company within the Enterprise Group Holdings Limited group of companies (‘Enterprise Group’). The Group is engaged principally in the provision of support services to utility companies and the public sector in the UK.
Acquisitions A subsidiary company, Kirk Newco plc, made two acquisitions in the prior period. On 11 May 2007, the acquisition of the entire issued share capital of Enterprise plc was completed. On 20 September 2007, the acquisition of the entire issued share capital of Accord plc was completed. Details of these acquisitions are detailed in note 31 to the financial statements. During 2008, the Group finalised the fair value of the assets and liabilities acquired in 2007 to reflect conditions which existed at the acquisition date. This resulted in adjustments of £53m. In addition, management have reviewed the valuation methodology, and in particular the assumptions in respect of discount rates, growth rate and assumed margins used to calculate the value of intangibles acquired with the Enterprise and Accord businesses and as a consequence have adjusted the value of these relevant issues acquired by £145m net of deferred tax.
Business Review The Group’s results are shown in the Group income statement. The group made a loss after tax for the year to 31 December 2008 of £46.9m (period from incorporation to 31 December 2007 – loss of £29.4m). No dividends can be paid (2007 – same).
The balance sheet of the group and company are shown on pages 11 and 50 respectively.
The performance of the Group is discussed further in the Enterprise Group’s Annual Report which does not form part of this report. Principal risks and uncertainties affecting the business are set out below.
Key performance indicators To assist the Board’s management of the business and to provide evidence of achieving the Group strategy the Board monitors a number of financial and non-financial Key Performance Indicators (KPIs). To the extent that these are applicable the KPIs are used to determine bonus and other reward mechanisms in the Group.
The KPIs which the Board examines on a monthly basis are as follows
2008 £m Group Operating cash flow 41.4 Total shareholder interests 197.4 Adjusted operating profit * 71.4
Health and Safety Notifiable accidents 116.0 Incidents per £m revenue 0.1
*operating profit before amortisation of intangible fixed assets and share of tax of jointly controlled entities
The non-financial KPIs shown here demonstrate the importance to the Group of health and safety. The Board has re-launched its successful “TargetZero” safety awareness campaign, which was first launched in 2003, to encourage and support employees to avoid the unsafe acts and unsafe conditions that give rise ultimately to accidents and incidents. Achieving the lowest possible rate of accidents is our goal and staff and management are incentivised to achieve year on year improvements in health and safety.
Enterprise | maintaining the infrastructure of the UK 3 Directors’ Report continued
Health and Safety, Quality and Environment The Group undertakes work at the centre of people’s lives, in and around their homes and neighbourhoods, either with utility supplies or public services. This makes the health and safety of employees and the general public of paramount importance and this is why it is one of the Group’s driving principles. The implementation of the Group’s health and safety management systems, policies and the adoption of the TargetZero initiative have assisted the Group to minimise accidents and incidents within the workplace. This achievement has again been recognised by RoSPA (Royal Society for the Prevention of Accidents) which awarded the Company its Gold Medal Award for 2008, the Group’s third consecutive award within this category having held the RoSPA Gold Award for the previous five consecutive years.
Health, safety and the environment are also two key areas of the Group’s corporate responsibility report which can be seen in the recently published report.
Principal Risks and Uncertainties
Financial Risks As part of its ordinary activities, the Group is exposed to a number of financial risks, including liquidity, credit, interest rate and currency risks. The Group has adequate policies and procedures in place to monitor and manage these risks.
Liquidity risk relates to the Group’s ability to meet the cash flow requirements of the operations, while avoiding excessive levels of debt and/or breach of its debt covenants. The Group’s borrowings are principally medium term loans which were drawn down fully to fund the MBO and Accord acquisitions. In addition, the Group has a revolving credit facility.
Credit risk relates principally to invoiced trade receivables from customers. We assess all customers before trading commences and have detailed policies and procedures to monitor each situation. The nature of our customer base is such that we have limited exposure to bad debts.
Interest rate risk is a key factor monitored by management. To mitigate this risk 90% of the Groups cash pay debt, has been hedged by way of swap and cap agreements. These instruments enable management to improve forecasting the cash outflow in respect of interest over the medium term.
Currency risk is limited in its impact due to the relatively low level of transactions which we undertake outside of the UK.
Commercial Relationships The Group has significant commercial relationships with a number of Utility services companies and Government Authorities. The loss of a contractual commercial relationship could have an adverse impact on the Group’s future profitability and cash flows. The size and scale of the group is such that whilst the loss of a single contract exposes the organisation financially it should not expose the company to an adverse movement in profits and cashflow. The risk is managed through regular reviews and contact with the senior management of these customers in order that we respond to their needs and deliver the expected service, thereby maximising our chances of retaining those contracts. We ensure that we have sufficient alternative contract opportunities so that we can replace swiftly and loss of work. All of our main contracts are with organisations that face a lower risk of bankruptcy or the inability to pay us for agreed essential services.
The Group also has strong commercial relationships with a number of suppliers and Direct Service Providers. We have policies in place to ensure that these relationships are sustained and, wherever possible, ensure that the failure of one or more supplier does not jeopardise our service delivery to customers. The financial health of all suppliers is monitored closely and alternative sources of supply are available at all times.
Competitor Risk There are a number of other companies that provide services that are similar to those of the Group. They compete with us in our chosen markets and could succeed in displacing us on contracts resulting in loss of revenue and/or pressure on operating margins. This is the normal competitive environment in which most companies operate. We undertake a regular review of all our markets and the activities of competitors are closely monitored. The development of innovative products and services and building close relationships with our customers are seen as key activities to maintain our competitive advantage. Through the integration of services, the re-engineering of operations and at least cost we believe that we are maintaining a competitive edge.
4 Inhoco 3363 Limited | Annual Report and Accounts 2008 Directors
The Directors of the company during the year ended 31 December 2008 and to the date of this report were:
Owen McLaughlin Chief Executive
Neil Kirkby Group Managing Director
Corporate Governance The company is not obliged to follow the 2006 FRC Combined Code (“the 2006 code”). The Board’s policy however is to embrace the Principles of Good Governance as set out in the 2006 code where appropriate and practical.
Full details of the Enterprise Group’s corporate governance policies and procedures are included in the director’s report of the ultimate parent company, Enterprise Group Holdings Limited.
Employment It is the Enterprise Group’s policy to provide employees with relevant information on a regular basis and to seek their views on matters that concern them. The Enterprise Group’s aims, objectives and financial performance are communicated through management briefings and other less formal communications.
The Enterprise Group’s policy is to provide, whenever possible, employment opportunities for disabled people to encourage and assist their recruitment, training, career development and promotion, and to retain employees who become disabled. The group also operates an equal opportunities policy.
Environment The Enterprise Group recognises the importance of its environmental responsibilities, monitors its impact on the environment, and designs and implements policies to reduce the damage that might be caused by the Enterprise Group’s activities. The company operates within the group’s policies, which are described in the Enterprise Group’s Annual Report and do not form part of this report. Incentives designed to minimise the company’s impact on the environment include recycling and reducing energy consumption.
Going Concern The Group’s business activities, together with the factors likely to affect its future development, performance and position are set out in the Chairman, Chief Executives and Finance Directors reviews in the Annual Report of Enterprise Group Holdings Limited as well as in this Directors report.
The Group has considerable secured financial resources through to March 2015 together with contracts of a long term nature with a significant number of its customers who are principally blue chip utility companies or government authorities. The services which the Group delivers are primarily essential maintenance in nature. As a consequence the directors believe that the Group is well placed to manage its business risks successfully despite the current uncertain economic outlook and the potential impact on the Group’s customers.
The Directors, in the light of FRC guidelines on going concern, have reviewed the Group’s future cash flow forecasts and profit projections and based on those believe that it is appropriate to prepare the financial statements of the Group on the going concern basis.
The Directors are of the opinion that the Group’s forecasts and projections show that the Group should be able to operate within its available facilities and comply with its banking covenants. The Group has committed facilities through to March 2015 and there is no repayment of debt until that time.
Auditors On 1 December 2008 Deloitte & Touche LLP changed their name to Deloitte LLP. Deloitte LLP have expressed their willingness to continue in office as auditors of the Company.
Enterprise | maintaining the infrastructure of the UK 5 Directors’ Report continued
Statement of Directors’ Responsibilities
The directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the group financial statements under IFRSs (IFRSs) as adopted by the European Union and the parent company financial statements under United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). The financial statements are also required by law to be properly prepared in accordance with the Companies Act 1985.
International Accounting Standard 1 requires that IFRS financial statements present fairly for each financial year the company’s financial position, financial performance and cash flows. This requires the faithful representation of the effects of transactions, other events and conditions in accordance with the definitions and recognition criteria for assets, liabilities, income and expenses set out in the International Accounting Standards Board’s ‘Framework for the preparation and presentation of financial statements’. In virtually all circumstances, a fair presentation will be achieved by compliance with all applicable IFRSs. However, directors are also required to:
• properly select and apply accounting policies; • present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information; • provide additional disclosures when compliance with the specific requirements in IFRSs are insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity’s financial position and financial performance; and • make an assessment of the company’s ability to continue as a going concern.
The parent company financial statements are required by law to give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period. In preparing these financial statements, the directors are required to:
• select suitable accounting policies and then apply them consistently; • make judgments and estimates that are reasonable and prudent; • state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; • prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.
The directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the parent company financial statements comply with the Companies Act 1985. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of 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 United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
6 Inhoco 3363 Limited | Annual Report and Accounts 2008 Audit information In the case of each of the persons who are directors of the company at the date when this report is approved:
• so far as each of the directors is aware, there is no relevant audit information (as defined in the Companies Act 1985) of which the company’s auditors are unaware; and • each of the directors has taken all the steps that they ought to have taken as a director to make themselves aware of any relevant audit information (as defined) and to establish that the company’s auditors are aware of that information.
The confirmation is given and should be interpreted in accordance with the provisions of s234 ZA of the Companies Act 1985.
By order of the Board
Company Secretary 1 May 2009
Enterprise | maintaining the infrastructure of the UK 7 Independent Auditors’ Report to the Members of Inhoco 3363 Limited
We have audited the Group and parent company financial statements (the ‘’financial statements’’) of Inhoco 3363 Limited for the year ended 31 December 2008 which comprise the Group Income Statement, the Group Balance Sheet, the Group Cash Flow Statement, the Group Statement of Recognised Income and Expense and the related notes 1 to 34 and the Company Balance Sheet and related company notes 1 to 9. These financial statements have been prepared under the accounting policies set out therein.
This report is made solely to the company’s members, as a body, in accordance with section 235 of the Companies Act 1985. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditors’ report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Respective Responsibilities of Directors and Auditors The directors’ responsibilities for preparing the Annual Report and the group financial statements in accordance with applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union, and for preparing the parent company financial statements in accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice) are set out in the Statement of Directors’ Responsibilities.
Our responsibility is to audit the financial statements in accordance with relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland).
We report to you our opinion as to whether the financial statements give a true and fair view and are properly prepared in accordance with the Companies Act 1985. We also report to you whether in our opinion the information given in the Directors’ Report is consistent with the financial statements.
In addition we report to you if, in our opinion, the company has not kept proper accounting records, if we have not received all the information and explanations we require for our audit, or if information specified by law regarding directors’ remuneration and other transactions is not disclosed.
We read the other information contained in the Annual Report as described in the contents section, and consider whether it is consistent with the audited financial statements. We consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the financial statements. Our responsibilities do not extend to any further information outside the Annual Report.
Basis of Audit Opinion We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgments made by the directors in the preparation of the financial statements, and of whether the accounting policies are appropriate to the group’s and company’s circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements.
8 Inhoco 3363 Limited | Annual Report and Accounts 2008 Opinion In our opinion: • the group financial statements give a true and fair view, in accordance with IFRSs as adopted by the European Union, of the state of the group’s affairs as at 31 December 2008 and of its loss for the year then ended; • the parent company financial statements give a true and fair view, in accordance with United Kingdom Generally Accepted Accounting Practice, of the state of the parent company’s affairs as at 31 December 2008; • the group and parent company financial statements have been properly prepared in accordance with the Companies Act 1985; and • the information given in the Directors’ Report is consistent with the financial statements.
Deloitte LLP Chartered Accountants and Registered Auditors Manchester, United Kingdom 1 May 2009
Enterprise | maintaining the infrastructure of the UK 9 Group Income Statement
Year ended 31 December 2008 Period from incorporation to 31 December 2007
Amortisation Exceptional Amortisation of Total of intangible items intangible Restated fixed assets Total (see note 4) fixed assets (see note 2) 2008 2008 2008 2007 2007 2007 2007 Note £m £m £m £m £m £m £m
Revenue Group continuing operations and share of jointly controlled entities 1,090.2 - 1,090.2 580.0 - - 580.0 Less share of jointly controlled entities 15 (188.7) - (188.7) (94.1) - - (94.1)
Group revenue - continuing operations 3 901.5 - 901.5 485.9 - - 485.9
Operating profit Continuing operations 3 65.2 (30.4) 34.8 38.5 (7.0) (17.6) 13.9 Share of operating profits of jointly controlled entities 9.2 - 9.2 2.8 - - 2.8 Share of tax of jointly controlled entities (2.6) - (2.6) (0.9) - - (0.9) Share of results of jointly controlled entities 15 6.6 - 6.6 1.9 - - 1.9 Total operating profit - continuing operations 5 71.8 (30.4) 41.4 40.4 (7.0) (17.6) 15.8 Interest income 7 6.5 - 6.5 5.2 - - 5.2 Finance costs - payable in cash 9 (48.5) - (48.5) (24.9) - - (24.9) Profit/(loss) after net cash pay interest 29.8 (30.4) (0.6) 20.7 (7.0) (17.6) (3.9) Other non cash gains and losses 8 (7.3) - (7.3) (3.3) 0.1 - (3.2) Finance costs - deferred interest and amortisation 9 (52.6) - (52.6) (29.6) - - (29.6)
Loss before tax (30.1) (30.4) (60.5) (12.2) (6.9) (17.6) (36.7) Tax 10 5.1 8.5 13.6 2.3 - 5.0 7.3
Loss for the year/ period from continuing operations 30 (25.0) (21.9) (46.9) (9.9) (6.9) (12.6) (29.4)
Attributable to: Equity shareholders of the parent (46.9) (29.4)
10 Inhoco 3363 Limited | Annual Report and Accounts 2008 Group Balance Sheet
Restated (see note 2) 2008 2007 As at 31 December 2008 Note £m £m
Non-current assets Goodwill 11 580.3 580.3 Other intangible assets 12 225.4 253.7 Property, plant and equipment 13 22.6 19.7 Interest in jointly controlled entities 15 4.5 1.7 Deferred tax asset 17 5.1 2.7 Other investments 18 - - 837.9 858.1 Current assets Inventories 19 5.6 6.1 Trade and other receivables 21 189.4 186.7 Cash and cash equivalents 21 68.7 80.8 Other financial assets 21 5.7 130.8 Derivative financial instruments 23 0.3 0.9 269.7 405.3 Creditors: amounts falling due within one year Borrowings 22 1.4 8.1 Bank guaranteed loan notes 22 1.5 126.3 Derivative financial instruments 23 9.3 2.9 Obligations under finance leases 27 3.3 2.9 Tax liabilities 2.3 4.3 Provisions 26 19.5 12.2 Trade and other payables 25 160.0 169.0 197.3 325.7 Net current assets 72.4 79.6 Total assets less current liabilities 910.3 937.7
Creditors: amounts falling due after more than one year Borrowings 22 631.2 617.4 Retirement benefit obligation 24 0.7 3.6 Trade and other payables 25 9.5 3.6 Obligations under finance leases 27 5.7 5.2 Deferred tax liabilities 17 63.9 72.0 Provisions 26 1.9 22.4 712.9 724.2 Total shareholders interests 197.4 213.5
Shareholders interests Shareholder financing 28 265.8 231.6 265.8 231.6
Share capital 29 11.1 11.1 Retained earnings 30 (79.5) (29.2) Capital and reserves (68.4) (18.1)
Total shareholders interests 197.4 213.5
These financial statements were approved by the Board of Directors, authorised for issue and were signed on its behalf by Peter Ahye, Group Finance Director 1 May 2009.
Enterprise | maintaining the infrastructure of the UK 11 Group Statement of Recognised Income and Expense
Period ended 31 December Year ended Restated 31 December (see note 2) 2008 2007 £m £m
Exchange difference on retranslation of foreign branches 0.4 - Actuarial losses on defined benefit pension schemes (net of tax) (2.1) (0.6) Share of actuarial (losses)/gains in jointly controlled entities (net of tax) (1.7) 0.8
Net (expense)/income recognised directly in reserves (3.4) 0.2 Loss for the year/period (46.9) (29.4)
Total recognised income and expense for the year/period (50.3) (29.2)
Attributable to: Equity holders of the parent (50.3) (29.2)
12 Inhoco 3363 Limited | Annual Report and Accounts 2008 Group Cash Flow Statement
Period ended 31 December Year ended Restated 31 December (see note 2) 2008 2007 Note £m £m
Reconciliation of operating profit to cash generated from operations Cash flow from operating activities Operating profit 41.4 15.8
Adjustments for: Depreciation of property, plant and equipment 7.8 4.0 Amortisation of intangible assets 30.4 17.6 Exceptional items - 7.0 Profit on disposal of property, plant and equipment (0.6) - Share of results in jointly controlled entities (6.6) (1.9) Operating charge for defined benefit pension scheme (1.4) (0.3) Movement in provisions (10.6) (6.9) (Increase)/decrease in receivables (0.5) 18.4 Decrease in inventories 0.5 0.3 Decrease in payables (6.4) (16.7) Cash flows from operating activities before exceptional cash flows 54.0 37.3 Cash flow in respect of exceptional pension contributions 24 (4.4) - Cash outflow in respect of exceptional items (2.6) (2.8) Net cash generated by operations 47.0 34.5 Tax received 0.4 0.3
Net cash from operating activities 47.4 34.8 Investing activities Acquisitions of subsidiaries net of cash acquired 31 - (523.3) Cash transferred from/(to) restricted account 21 124.8 (126.3) Purchase of property, plant and equipment (6.5) (1.9) Proceeds on disposal of property, plant and equipment 0.7 0.3 Proceeds on sale of subsidiary 32 0.9 0.4 Proceeds on sale of associate - 0.2 Investment in intangible fixed assets (2.4) - Acquisition of share in jointly controlled entities (1.3) - Dividends received from jointly controlled entities 3.4 3.2
Net cash generated/(used) in investing activities 119.6 (647.4) Financing activities Finance costs paid (51.5) (26.6) Interest received 7.7 1.9 Proceeds on issue of ordinary shares - 11.1 New bank loans raised - 808.2 Bank loans repaid - (107.5) Other loans repaid (125.1) - Principal payments under finance leases (3.3) (1.5) (Decrease)/increase in bank overdrafts (6.9) 7.7
Net cash (paid)/from financing activities (179.1) 693.3
Net (decrease)/increase in cash and cash equivalents (12.1) 80.8 Cash and cash equivalents at start of the period 80.8 - Cash and cash equivalents at end of the period 68.7 80.8
Enterprise | maintaining the infrastructure of the UK 13 Notes to the Financial Statements
1. General Information Inhoco 3363 Limited is a limited liability company incorporated in England and Wales under the Companies Act 1985. The address of the registered office is given on page 55. The nature of the group’s operations and its principal activities are set out in the Directors’ Report on pages 3 to 7.
In the current year, one Interpretation issued by the International Financial Reporting Interpretations Committee was effective. This is IFRIC 11 – IFRS2 – Group and Treasury Share Transactions. The adoption of this Interpretation has not led to any changes in the Group’s accounting policies.
At the date of authorisation of these financial statements, the following Standards and Interpretations which have not been applied in these financial statements were in issue but not effective (and in some cases had not yet been adopted by the EU).
IFRS1 (amended)/ IAS27 (amended) Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate IFRS2 (amended) Share Based Payment – Vesting Condition and Cancellations IFRS 3 (revised 2008) Business Combinations IFRS 8 Operating Segments IAS 1 (revised 2007) Presentation of Financial Statements IAS 23 (revised 2007) Borrowing Costs IAS 27 (revised 2008) Consolidated and Separate Financial Statements IAS 32 (amended)/IAS 1 (amended) Puttable Financial Instruments and Obligations Arising on Liquidation IFRIC 12 Service Concession Arrangements IFRIC 14 IAS 19 - The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction IFRIC 15 Agreements for the Construction of Real Estate IFRIC 16 Hedges of a Net Investment in a Foreign Operation Improvements to IFRSs (May 2008)
The directors currently anticipate that the adoption of these Standards and Interpretations in future periods will have no material impact on the financial statements of the Group.
2. Significant accounting policies
Basis of accounting The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS). The financial statements have also been prepared in accordance with IFRSs adopted for use in the European Union.
The financial statements have been prepared on the historical cost basis except for the valuation of certain financial instruments. The principal accounting policies adopted (including critical accounting judgements and key sources of estimation uncertainty) are set out below.
Basis of consolidation The Group financial statements consolidate the financial statements of Inhoco 3363 Limited, its subsidiary undertakings and incorporate the results of jointly controlled entities and associates made up to 31 December each year. The financial statements of subsidiaries are prepared for the same reporting period as the parent company using consistent accounting policies.
Subsidiaries are entities over which the Group has control, being the power to govern the financial and operating policies of the acquired entity so as to obtain benefits from its activities. The results of subsidiaries acquired or sold in the year are consolidated from the effective date of acquisition or to the effective date of disposal, as appropriate. All intra-group transactions, balances, income and expenses are eliminated on consolidation.
14 Inhoco 3363 Limited | Annual Report and Accounts 2008 2. Significant accounting policies (continued)
Restatement of Comparatives Completion of the fair value exercise As required by IFRS3 – ‘ Business Combinations’, any adjustments in the hindsight period to the provisional fair value of the assets and liabilities acquired with a business should be adjusted as if the amendments had occurred on the acquisition date. As a consequence, following the completion of the fair value exercise in relation to the acquisitions of Enterprise plc and Accord plc in 2007, the group income statement, group balance sheet and group cashflow statement for the year ended 31 December 2007 have been restated to reflect the adjustments made. The impact of these adjustments is as follows:
Adjustments As previously arising from reported fair values As restated £m £m £m
Balance sheet
Goodwill 382.5 197.8 580.3 Intangible fixed assets 450.3 (196.6) 253.7 Other non current assets 25.6 (1.5) 24.1 Current assets 414.3 (9.0) 405.3 Creditors: amounts falling due within one year (307.8) (17.9) (325.7) Creditors: amounts falling due after more than one year (759.0) 34.8 (724.2) Share capital and reserves 25.7 (7.6) 18.1 Shareholder interests (231.6) - (231.6)
- - -
Income statement
Operating profit 6.8 9.0 15.8
Loss before tax (45.7) 9.0 (36.7)
Tax 8.7 (1.4) 7.3
Loss after tax (37.0) 7.6 (29.4)
As a consequence of the changes to the income statement above, the group cashflow statement has been restated in respect of operating profit and the amortisation of intangible fixed assets. There is no impact on net cash generated by operations.
Presentation of the balance sheet The Board has reviewed the presentation of the balance sheet as at 31 December 2007. As a consequence, certain tranches of the Group’s debt totalling £231.6m have been renamed shareholder interests as the Board believe this presentation more accurately reflects the capital structure of the Group and the nature of these items, being owed to the shareholders of the company, not repayable until 2018 and accruing interest/dividends throughout their lives rather than being paid in cash.
The change in presentation has had no impact on the income statement.
Basis of preparation – going concern basis The group’s business activities, together with the factors likely to affect its future development, performance and position are set out in the Chairmans, Chief Executives and Finance Directors Reviews of the ultimate parent company, Enterprise Group Holdings Limited (“EGHL”). The financial position of EGHL, its cash flows, liquidity position and borrowing facilities are described in the Finance Directors Review on pages 25 to 28 of that company’s financial statements.
In addition, note 23, of the financial statements includes the group’s objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and hedging activities; and its exposure to credit risk and liquidity risk.
Enterprise | maintaining the infrastructure of the UK 15 Notes to the Financial Statements continued
2. Significant accounting policies (continued) Basis of preparation – going concern basis (continued) EGHL has considerable secured financial resources through to March 2015 together with contracts of a long term nature with a significant number of its customers who are principally blue chip utility companies or government authorities. The services which the EGHL delivers are primarily essential maintenance in nature. As a consequence the Directors believe that EGHL is well placed to manage its business risks successfully despite the current uncertain economic outlook and the potential impact on the Group’s customers.
The Directors, in their consideration of going concern, have reviewed EGHL’s future cash forecasts, profit projections and covenant compliance and based on these forecasts and projections believe that it is appropriate to prepare the financial statements of the Group on the going concern basis.
Management is of the opinion that the EGHL’s forecasts and projections show that the EGHL should be able to operate within its available facilities (see note 22) and comply with its banking covenants. EGHL has committed facilities through to March 2015 and there is no repayment of debt until that time.
Business combinations The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquired entity, plus any costs directly attributable to the business combination. On acquisition, the assets (including intangible fixed assets), liabilities and contingent liabilities of a subsidiary are measured at their provisional fair values at the date of acquisition. Any excess of the fair value of the cost of acquisition over the fair values of the identifiable net assets acquired is recognised as goodwill. A review of the provisional fair value of assets and liabilities is made in the hindsight period and any adjustments required are recognised in goodwill. Any deficiency of the cost of acquisition below the fair values of identifiable net assets acquired is credited to the income statement in the period of acquisition.
Goodwill and other intangibles Goodwill arising on the acquisition of subsidiary undertakings, associates, jointly controlled entities and businesses represents any excess of the cost of acquisition over the fair value of the identifiable assets and liabilities acquired. Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill on the acquisitions of associates and jointly controlled entities is included in investments in associates and jointly controlled entities.
Goodwill is initially recognised at cost and is subsequently measured at cost less any accumulated impairment losses. Goodwill which is recognised as an asset is reviewed for impairment at least annually. Any impairment is recognised immediately in the income statement.
For the purpose of impairment testing, goodwill is allocated to groups of cash-generating units expected to benefit from the synergies of the combination. Cash-generating units to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than the carrying value of the unit, the impairment loss is allocated first to reduce the carrying value of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period.
On disposal of a subsidiary, associate or jointly controlled entity, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.
Other intangible assets are stated at cost less accumulated amortisation and any impairment losses. Amortisation is based on the useful economic lives of the assets concerned, which are principally as follows:
Computer software and licences Straight line over 5 years Customer contracts and relationships Consumption of economic benefits up to 20 years
16 Inhoco 3363 Limited | Annual Report and Accounts 2008 2. Significant accounting policies (continued) Impairment Assets which have an indefinite useful life are not subject to amortisation and are tested for impairment at each balance sheet date (see goodwill above). Assets subject to depreciation and amortisation are reviewed for impairment whenever events or circumstances indicate that the carrying value may not be recoverable. Any impairment loss is recognised in the income statement based on the amount by which the carrying amount exceeds the recoverable amount. The recoverable amount is the higher of the fair value less costs to sell and value in use.
Investments in jointly controlled entities Jointly controlled entities are those entities over which the Group exercises joint control through a contractual arrangement. The results, assets and liabilities of associates and jointly controlled entities are incorporated in the financial statements using the equity method of accounting. Investments in jointly controlled entities are initially carried in the balance sheet at cost and adjusted by post acquisition changes in the Group’s share of net assets of the entity, less any impairment in the value of individual investments. The consolidated income statement includes the Group’s share of these undertakings’ contribution after interest and tax.
Property, plant and equipment Property, plant and equipment are stated at cost less accumulated depreciation and any accumulated impairment losses. Depreciation is charged so as to write off the cost of assets over their estimated useful lives on a straight-line basis as follows:
Freehold land and buildings - 50 years Computer, office equipment, leasehold improvements and motor vehicles - 10% to 33% per annum
Revenue Recognition Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and that these benefits can be measured reliably. It is measured at the fair value of the consideration received or receivable for goods and services provided, net of discounts, value added tax and excludes intra-group transactions.
Revenue from contracts is recognised in accordance with the Group accounting policy on contracts (see below).
Contracts The activities of the Group are largely undertaken through long-term framework contracts under which profit is recognised in line with each separate supply. Where losses are foreseeable in respect of future supplies committed under these framework contracts, provision is made immediately. In addition, a provision is maintained for future remedial works that may be required in respect of supplies already made.
For contracts which are not framework contracts, and where the outcome of the contract can be estimated reliably, revenue and cost are recognised by reference to the stage of completion of the contract activity at the balance sheet date principally measured in relation to contract costs incurred to date. Where it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately. Variations and claims are included where there is reasonable certainty that the amount will be settled and in accordance with the provisions of IAS11.
Inventories Inventories are stated at the lower of cost and net realisable value. In determining the cost of raw materials and consumables, the first-in first-out method is used after making allowances for any obsolete or slow moving items. Net realisable value represents the estimated selling price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution.
Provisions Provisions are recognised when the Group has a present obligation as a result of a past event, and it is probable that the Group will be required to settle the obligation. Provisions are measured at the Directors’ best estimate of the expenditure required to settle the obligation at the balance sheet date, and are discounted to present value where the effect is material.
Enterprise | maintaining the infrastructure of the UK 17 Notes to the Financial Statements continued
2. Significant accounting policies (continued) Taxation The tax credit or expense represents the sum of the corporation tax currently payable and deferred tax. The corporation tax currently payable is based on taxable profit for the year. Taxable profit differs from profit before tax as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the tax nor the accounting profit.
Deferred tax is calculated at the average tax rates that are expected to apply in the periods in which the timing differences are expected to reverse based on tax rates and laws that have been enacted by the balance sheet date.
Retirement benefit costs Contributions to defined contribution pension schemes are charged to the income statement of the accounting year to which the contributions relate.
The Group participates in several defined benefit schemes run by Government bodies. These primarily arise where employees have transferred to the Group under TUPE transfer arrangements from the relevant councils. The Group is not liable for a number of the key assumptions for these schemes which means an accurate valuation cannot be made. The pension costs in respect of the schemes are treated as if they were defined contribution schemes as are those relating to Local Government Schemes where any surplus/deficit is passed through to the client and there is no risk to the company. The pension costs are therefore charge to the income statement of the accounting year to which the contributions relate.
The pension cost relating to the Group’s defined benefit schemes are assessed in accordance with the advice of independent qualified actuaries using the projected unit method.
For defined benefit schemes, the cost of providing benefits is determined using the Projected Unit Credit Method, with actuarial valuations being carried out at each balance sheet date. Actuarial gains and losses are recognised in full in the period in which they occur. They are recognised outside the income statement and presented in the statement of recognised income and expense.
The retirement benefit obligation recognised in the balance sheet represents the present value of the defined benefit obligation as adjusted for unrecognised past service cost, and as reduced by the fair value of the scheme assets. Any asset resulting from this calculation is limited to past service cost, plus the present value of available refunds and reductions in future contributions to the scheme.
Foreign Currencies For the purposes of preparing consolidated financial statements, the assets and liabilities of the group’s overseas branches are translated at exchange rates prevailing at the balance sheet date. Income and expense items are translated at the average exchange rates for the period. Exchange differences arising, if any, are classified as equity and recognised in the Group’s retained earnings.
18 Inhoco 3363 Limited | Annual Report and Accounts 2008 2. Significant accounting policies (continued) Financial instruments Financial assets and financial liabilities are recognised on the Group’s balance sheet when the Group becomes a party to the contractual provisions of the instrument.
Financial assets Financial assets are classified into the following specified categories: financial assets at ‘fair value through profit or loss’ (FVTPL) and loans and receivables. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.
Financial assets at FVTPL Financial assets are classified as at FVTPL where the financial asset is either held for trading or it is designated as at FVTPL.
Financial assets at FVTPL are stated at fair value, with any resultant gain or loss recognised in the income statement. Fair value is determined in the manner described in note 23.
Trade receivables Trade receivables do not carry any interest and are stated at their nominal value as reduced by appropriate allowances for estimated irrecoverable amounts.
Cash and cash equivalents Cash and cash equivalents comprise cash on hand and demand deposits and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.
Impairment of financial assets Financial assets, other than those at FVTPL, are assessed for indicators of impairment at each balance sheet date. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the asset have been impacted. For financial assets such as trade receivables, objective evidence of impairment includes a review of the Group’s past experience of collecting payments and the ageing of the balances.
The carrying value of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables where the carrying amount is reduced through the use of an allowance account. When a trade receivable is considered irrecoverable it is written off against the allowance account. Changes in the carrying amount of the allowance account are recognised in the income statement.
De-recognition of financial assets The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire or if it transfers substantially all of the risks and rewards of ownership.
Financial liabilities and equity Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into.
Equity instruments An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all its liabilities. Equity instruments issued by the Group are recorded at the proceeds received, net of direct issue costs.
Financial liabilities Financial liabilities are classified as either financial liabilities at FVTPL or other financial liabilities.
Enterprise | maintaining the infrastructure of the UK 19 Notes to the Financial Statements continued
2. Significant accounting policies (continued)
Financial liabilities at FVTPL Financial liabilities are classified as at FVTPL where the financial liability is either held for trading or it is designated as at FVTPL.
Financial liabilities at FVTPL are stated at fair value with any resultant gain or loss recognised in the income statement. Fair value is determined in the manner described in note 23.
Other financial liabilities Other financial liabilities, including borrowings and trade payables, are initially measured at fair value, net of transaction costs. Other financial liabilities are subsequently measured at amortised cost, using the effective interest method.
Derivative financial instruments The Group enters into derivative financial instruments to manage its exposure to interest rate risk including interest rate swaps and caps. Further details of the derivative financial instruments are disclosed in note 23 to the financial statements.
Derivatives are initially recognised at fair value at the date the derivative contract is entered into and are subsequently re-measured at their fair value at each balance sheet date. The resulting gain or loss is recognised in the income statement immediately unless the derivative is designated and effective as a hedging instrument.
A derivative is presented as a non current asset or a non current liability if the remaining maturity of the instrument is more than 12 months and it is not expected to be realised or settled within 12 months.
Leases Assets obtained under hire purchase contracts and finance leases, which transfer to the Group substantially all the risks and rewards incidental to ownership, are capitalised in the balance sheet at the present value of the minimum lease payments and depreciated over the shorter of their estimated useful lives or lease term.
The interest element of the repayments is charged to the income statement over the period of the contract and represents a constant proportion of the balance to the capital element outstanding.
Rentals paid under operating leases are charged to the income statement as incurred.
Operating profit Operating profit includes the results from operating activities of the group and it’s share of results of jointly controlled entities.
Exceptional items and amortisation of intangible fixed assets Exceptional items are those that need to be disclosed by virtue of their size or incidence and are charged in arriving at operating profit in the financial statements.
Material business combination intangible assets were acquired as a result of the group’s acquisitions during the prior year. The amortisation of these intangible assets is significant and the Directors consider that it should be disclosed separately to enable a full understanding of the group’s results.
20 Inhoco 3363 Limited | Annual Report and Accounts 2008 3. Business and geographical segments
The Group is currently organised by the following two divisions: Utility Services and Public Sector Services. These divisions are the basis on which the Group reports its primary segment information.
The segmental results for the year ended 31 December 2008 (period from incorporation to 31 December 2007) were as follows:
Operating Operating Profit Restated Revenue Revenue Profit (see note 2) 2008 2007 2008 2007 £m £m £m £m
Continuing operations pre exceptional items and amortisation of intangibles
Public sector services 540.9 253.2 35.9 16.2 Utility services 360.6 232.7 29.3 22.3
Total continuing operations 901.5 485.9 65.2 38.5
Exceptional items (see note 4) Public sector services - (6.7) Utility services - (0.3)
- (7.0)
Amortisation of intangible fixed assets (30.4) (17.6)
Continuing operations post exceptional items and amortisation of intangible fixed assets
Public sector services 35.9 9.5 Utility services 29.3 22.0 Amortisation of intangible fixed assets (30.4) (17.6)
34.8 13.9
Share of results of jointly controlled entities (before tax) 9.2 2.8 Tax of jointly controlled entities (2.6) (0.9) Share of results of jointly controlled entities (after tax) 6.6 1.9
Total operating profit 41.4 15.8
Interest income 6.5 5.2 Finance costs - payable in cash (48.5) (24.9)
Loss after net cash pay interest (0.6) (3.9)
Other gains and losses (7.3) (3.2) Finance costs - deferred interest and amortisation (52.6) (29.6)
Loss before tax (60.5) (36.7)
Tax 13.6 7.3
Loss for the year/period from continuing operations (46.9) (29.4)
Enterprise | maintaining the infrastructure of the UK 21 Notes to the Financial Statements continued
3. Business and geographical segments (continued)
2008 2007 £m £m
Segmental assets and liabilities The analysis of the segmental assets and liabilities of the Group are set out below:
Assets
Public sector services 527.4 438.9 Utility services 376.8 374.5 904.2 813.4
Unallocated assets 621.1 784.0 Intercompany eliminations (422.2) (335.7) Interest in jointly controlled entities 4.5 1.7
Consolidated total assets 1,107.6 1,263.4
Liabilities
Public sector services 196.0 163.7 Utility services 115.1 149.2 311.1 312.9
Unallocated liabilities 1,021.3 1,072.7 Intercompany eliminations (422.2) (335.7)
Consolidated total liabilities 910.2 1,049.9
Net assets 197.4 213.5
Capital Capital Additions Additions Depreciation Depreciation 2008 2007 2008 2007 £m £m £m £m
Other segmental disclosures Public sector services 10.2 2.5 6.7 2.6 Utility services 0.5 0.8 1.1 1.4
10.7 3.3 7.8 4.0
Geographical segments Revenue arising on activities outside the United Kingdom is immaterial to the Group.
Other income statement information Revenue from construction contracts is disclosed in note 20. All other revenue relates to the provision of services.
Cost of sales in the year were £792.1m (period ended 31 December 2007 - £426.7m) leaving a gross profit of £109.4m (period ended 31 December 2007 - £59.2m).
Administration expenses which relate to continuing activities were £35m (period ended 31 December 2007- £23m) (before exceptional items and the amortisation of intangibles assets).
22 Inhoco 3363 Limited | Annual Report and Accounts 2008 4. Exceptional items
Year ended 31 December 2008 There were no exceptional items in the year.
Period ended 31 December 2007 Following the acquisition of Accord plc in September 2007, the Group undertook a significant restructuring exercise which involved redundancies, write down of assets and a review of the Group’s property. As a consequence, £6.9m of exceptional costs were incurred in the period ended 31 December 2007.
2008 2007 These were analysed as follows £m £m
Impairment of assets - 0.3 Onerous lease provisions 1.4 Restructuring costs (including redundancies) - 5.3
Exceptional costs included in administrative costs - 7.0
Gain on sale of associate (see note 8) - (0.1)
Total exceptional items - (6.9)
Enterprise | maintaining the infrastructure of the UK 23 Notes to the Financial Statements continued
5. Operating profit for the year/period
Operating profit for the year/period has been arrived at after charging: Year ended Period ended 31 December 31 December 2008 2007 £m £m
Depreciation of property, plant and equipment 7.8 4.0 Impairment of fixed assets - 0.3 Amortisation of intangible assets 30.4 17.6
Total depreciation and amortisation expense 38.2 21.9
Staff costs (see note 6) 266.6 131.8 Auditors’ remuneration for audit services 0.4 0.5 Auditors’ remuneration for non audit services 0.2 0.1 Impairment loss recognised on trade receivables 1.0 0.4
Year ended Period ended 31 December 31 December 2008 2007 The analysis of auditors’ remuneration is as follows: £m £m Fees payable to the company’s auditiors for the audit of the company’s financial statements - 0.1 Fees payable to the auditors for the audit of the company’s subsidiaries 0.4 0.4
Total audit fees 0.4 0.5
Tax services 0.1 0.1 Corporate finance services 0.1 1.9
Total non audit fees 0.2 2.0
Total fees 0.6 2.5
The corporate finance fees in 2007 were capitalised as part of the cost of investment in subsidiaries in the period.
24 Inhoco 3363 Limited | Annual Report and Accounts 2008 6. Staff costs
Year ended Period ended 31 December 31 December 2008 2007 £m £m
Aggregate remuneration comprised: Wages and salaries 241.8 117.0 Social security costs 20.9 11.2 Other pension costs (see note 24) 3.9 3.6
266.6 131.8
The average monthly number of employees (including executive directors) during the year was 8,431 (in period from the acquisition of Enterprise plc in May 2007 to 31 December 2007 - 6,965). Of these 4,687 were engaged in direct labour (2007 - 3,367).
Disclosures in respect of Directors are included in note 34.
The company has no employees.
7. Investment revenue
Year ended Period ended 31 December 31 December 2008 2007 £m £m
Interest receivable on bank deposits 1.8 1.9 Other interest receivable 1.3 0.4 Interest receivable on intergroup balances 1.3 0.8 Interest receivable on restricted cash accounts 2.1 2.1
6.5 5.2
8. Other gains and losses
Year ended Period ended 31 December 31 December 2008 2007 £m £m
Loss on fair value of derivative financial instruments during the period 7.0 3.3 Gain on sale of associate (see note 16) - (0.1) Loss on disposal of businesses (see note 32) 0.3 -
7.3 3.2
The derivative financial instruments associated with the above movement are described in note 23.
No gains or losses have been recognised on financial liabilities measured at amortised cost.
Enterprise | maintaining the infrastructure of the UK 25 Notes to the Financial Statements continued
9. Finance costs
Year ended Period ended 31 December 31 December 2008 2007 £m £m
Interest on bank overdrafts and loans 48.1 24.8 Interest on obligations under finance leases 0.4 0.1
Finance costs - payable in cash 48.5 24.9
Interest on other borrowings (financial liabilities held at amortised cost) 12.8 6.9 Interest on shareholding financing (financial liabilities held at amortised cost) 28.9 15.3 Interest on intercompany loans 9.1 6.5 Amortisation of arrangement fees (financial liabilities held at amortised cost) 1.8 0.9
Finance costs - deferred interest and amortisation 52.6 29.6
Total finance costs 101.1 54.5
10. Tax
Period ended Year ended 31 December 31 December Restated (see 2008 note 2) 2007 £m £m
Current tax (3.9) (1.8) Deferred tax (note 17) (9.7) (5.5)
(13.6) (7.3)
Corporation tax is calculated at 28.5% for the year reflecting the change in rate from 30% in 2007 to 28% on 6 April 2008.
The credit for the period can be reconciled to the loss per the income statement as follows:
Loss before tax (60.5) (36.7)
Tax at the UK corporation tax rate of 28.5% (2007 - 30%) (17.2) (11.0) Tax effect of share of results of jointly controlled entities (1.9) (0.6) Tax effect of expenses that are not deductible in determining taxable profit 4.7 3.8 Movement in short term timing differences (1.5) - Effect of deferred tax rate change - 0.5 Prior year adjustments (3.7) - Tax losses 6.1 -
Tax credit for the year/period (13.6) (7.3)
In addition to the above £0.8m (2007 - £0.2m) has been credited directly to the Statement of Recognised Income and Expense in relation to deferred tax on the actuarial gains and losses of the Group’s defined benefit pension schemes.
26 Inhoco 3363 Limited | Annual Report and Accounts 2008 11. Goodwill
£m
Cost and carrying value At incorporation - Goodwill arising on acquisitions in the period (see note 31) 382.5
At 31 December 2007 as previously reported 382.5
Adjustments to goodwill in respect of acquisitions in 2007 (see note 31) 197.8
At 31 December 2007 as restated and at 31 December 2008 580.3
Cash generating units information Goodwill acquired in a business combination is allocated, at acquisition, to the cash generating units (CGUs) that are expected to benefit from that business combination. The carrying amount of goodwill has been allocated to the Group’s primary business segments as a result of synergies which impact on the whole of the segment and the fact that management assess the performance of the business based on these segments rather than individual businesses. The carrying amount of goodwill has been allocated as follows:
Restated 2008 2007 £m £m
Public sector services 356.2 356.2 Utility services 224.1 224.1
Total goodwill 580.3 580.3
The Group tests annually for impairment, or more frequently if there are indications that goodwill might be impaired.
The recoverable amounts of the CGUs are determined from value in use calculations. The key assumptions for the value in use calculations are those regarding the discount rates and growth rates during the period. Management estimates discount rates using pre-tax rates that reflect current market assessments of the time value of money and the risks specific to the Group.
The Group prepares cash flow forecasts derived from the most recent financial forecasts approved by management for three years ended 31 December 2011 and have extrapolated cash flows for the following years in perpetuity based on a growth rate of nil percent (2007 - same).
Discount rates have been applied to each segment with the rate used to discount the forecast cash flows being 11 percent (2007 - same).
Enterprise | maintaining the infrastructure of the UK 27 Notes to the Financial Statements continued
12. Other intangible assets
Customer contracts and Computer relationships software Total £m £m £m
Cost
At incorporation - - - Acquired on acquisition of subsidiaries (see note 31) 459.3 13.4 472.7
At 31 December 2007 as previously reported 459.3 13.4 472.7
Adjustments in respect of acquisitions in 2007 (see note 31) (201.4) - (201.4)
At 31 December 2007 as restated 257.9 13.4 271.3
Additions - 2.4 2.4 On disposal of subsidiary - (0.3) (0.3)
At 31 December 2008 257.9 15.5 273.4
Amortisation
At incorporation - - - Charge for the period 20.8 1.6 22.4
At 31 December 2007 as previously reported 20.8 1.6 22.4
Adjustment in respect of acquisitions in 2007 (4.8) - (4.8) At 31 December 2007 as restated 16.0 1.6 17.6
Charge for the year 27.7 2.7 30.4
At 31 December 2008 43.7 4.3 48.0
Carrying amount
At 31 December 2008 214.2 11.2 225.4
At 31 December 2007 as restated 241.9 11.8 253.7
Customer contracts and relationships of £258m arose on the acquisition of Enterprise plc and Accord plc during the period ended 31 December 2007 (as disclosed in note 31). The contracts and customer relationships identified on the acquisition of Enterprise plc and Accord plc relate principally to the present value of future income streams expected to arise from secured and unsecured contracts with existing customers. The computer software principally relates to the bespoke computer software acquired with the Enterprise plc business.
Included in computer software is an amount of £2.4m representing internally generated intangible assets arising from the further development of the Group’s bespoke computer software.
28 Inhoco 3363 Limited | Annual Report and Accounts 2008 13. Property, plant and equipment
Freehold Computer land and and office Motor buildings equipment vehicles Total £m £m £m £m
Cost
At incorporation - - - - On acquisition of subsidiaries 0.7 6.7 13.6 21.0 Additions - 1.0 2.3 3.3 Disposals - - (0.3) (0.3)
At 31 December 2007 0.7 7.7 15.6 24.0
On disposal of subsidiaries - - - - Additions - 1.0 9.7 10.7 Disposals - (0.1) (0.9) (1.0)
At 31 December 2008 0.7 8.6 24.4 33.7
Depreciation
At incorporation - - - - Provided in the period 0.1 2.6 1.3 4.0 Impairment in the period - 0.3 - 0.3 Disposals - - - -
At 31 December 2007 0.1 2.9 1.3 4.3
Provided in the year - 2.4 5.4 7.8 Disposals - (0.2) (0.8) (1.0)
At 31 December 2008 0.1 5.1 5.9 11.1
Carrying amount
At 31 December 2008 0.6 3.5 18.5 22.6
At 31 December 2007 0.6 4.8 14.3 19.7
The net book value of assets under finance leases at the year end was £9.3m (2007 - £7.8m).
Capital commitments Capital commitments at 31 December 2008 were £0.8m (2007 - £3.7m).
Enterprise | maintaining the infrastructure of the UK 29 Notes to the Financial Statements continued
14. Subsidiaries
A list of the significant investments in subsidiaries, including the name, country of incorporation, proportion of ownership interest is shown below.
Place of Proportion Proportion registration of ownership of voting Name of subsidiary and operation interest power held
Holding companies
Inhoco 3366 Limited England and Wales 100% * 100% Kirk Newco Plc England and Wales 100% * 100% Enterprise Limited (formerly Enterprise plc) England and Wales 100% * 100% Accord Limited (formerly Accord plc) England and Wales 100% * 100%
Utility services
Enterprise Managed Services Limited England and Wales 100% * 100% Enterprise Utility Services (TBC) Limited England and Wales 100% * 100% Enterprise Utility Services (DCE) Limited England and Wales 100% * 100% Enterprise Power Services Limited England and Wales 100% * 100%
Public sector services
MRS Environmental Services Limited England and Wales 100% 100% Brophy Grounds Maintenance Limited England and Wales 100% * 100% Enterprise Lighting Services Limited England and Wales 100% * 100% Enterprise Maintenance Services Limited England and Wales 100% * 100% Enterprise Public Services Limited England and Wales 100% * 100% Enterprise-Liverpool Limited England and Wales 80% ** 80% CRW Maintenance Limited England and Wales 100% * 100% Durley Group Holdings Limited England and Wales 100% * 100% Heating and Building Maintenance Company Limited England and Wales 100% * 100% JJ McGinley Limited England and Wales 100% * 100% Beha Williams Norman Limited England and Wales 100% * 100% Enterprise Recruitment Services Limited England and Wales 100% * 100% Enterprise (AOL) Limited England and Wales 100% * 100% Slough Enterprise Limited England and Wales 100% * 100% Haringey Enterprise Limited England and Wales 100% * 100% Enterprise Islington Limited England and Wales 100% * 100% Enterprise Manchester Partnership Limited England and Wales 80% * 80%
* Interests held by a subsidiary. ** Interest held by a subsidiary. Whilst the Group has 80% of the shareholding, it is entitled to 76% of the profits of the company.
A full list of subsidiary companies will be filed with the next Annual Return.
30 Inhoco 3363 Limited | Annual Report and Accounts 2008 15. Interests in jointly controlled entities
Proportion Country of of ownership At 31 December 2008, the Group held interests in four jointly controlled entities. These are: incorporation interest
Careers Enterprise Limited England and Wales 50% Modern Housing Solutions (Prime) Limited England and Wales 33% CarillionEnterprise Limited England and Wales 50% EnterpriseMouchel Limited England and Wales 50%
The interests held in the above jointly controlled entities are either equal to or lower than those of the other shareholders. As a result, the Board do not consider that they exert control over any of these entities.
The movements in respect of jointly controlled entities are as follows: £m
Cost At incorporation - Acquired on acquisition of subsidiaries 3.7 Share of retained profits and losses 1.9 Dividends received (3.2) Share of actuarial gains net of tax 0.8
At 31 December 2007 3.2
Adjustment in respect of subsidiaries acquired in 2007 (1.5)
At 31 December 2007 as restated 1.7
Acquisition in the year 1.3 Share of retained profits and losses 6.6 Dividends received (3.4) Share of actuarial losses net of tax (1.7)
At 31 December 2008 4.5
Enterprise | maintaining the infrastructure of the UK 31 Notes to the Financial Statements continued
15. Interests in jointly controlled entities (continued)
Acquisition in the period During the year the Group acquired a further 8% stake in Modern Housing Solutions (Prime) Limited for consideration of £1.3 million.
Other disclosures in relation to jointly controlled entities
The following amounts are included in the Group’s financial statements at 2008 2007 31 December 2008 as a result of equity accounting for these entities: £m £m
Share of assets 54.0 37.0 Share of liabilities (49.5) (35.3) Total share of net assets 4.5 1.7
The amounts included in the Group income statement for the year ended 2008 2007 31 December 2008 in relation to the jointly controlled entities is as follows: £m £m
Revenue 188.7 94.1 Profit before tax 9.2 2.8 Tax (2.6) (0.9)
Profit after tax 6.6 1.9
Amounts due to members of the Group from jointly controlled entities and Revenue Receivables Payables transactions with jointly controlled entities in the year/period were as follows: £m £m £m
2008 Transactions with/balances with jointly controlled entities 44.3 3.9 8.7
2007 Transactions with/balances with jointly controlled entities 25.0 10.1 -
All transactions are at arms length and on the Group’s normal terms. The amounts outstanding are unsecured and there is no requirement for any provision for doubtful debts in respect of amount owed by jointly controlled entities.
32 Inhoco 3363 Limited | Annual Report and Accounts 2008 16. Interests in associate
During the prior period, the Group sold its 21% stake in Enterprise Ventures Group Limited for consideration of £0.2m, generating a profit on disposal of £0.1m.
17. Deferred tax
Accelerated Other short Retirement Tax tax term timing benefit allowable Financial Intangible depreciation differences obligations goodwill instruments assets Total £m £m £m £m £m £m £m
At incorporation ------
Acquired on acquisition of subsidiaries 0.3 0.4 0.9 (0.9) - (132.2) (131.5) (Charge)/credit for the period - 0.1 (0.1) (0.3) 0.9 6.3 6.9 Credited to reserves - - 0.2 - - - 0.2
At 31 December 2007 0.3 0.5 1.0 (1.2) 0.9 (125.9) (124.4)
Adjustment in respect of acquisition of subsidiaries in 2007 - - - - - 55.1 55.1
At 31 December 2007 as restated 0.3 0.5 1.0 (1.2) 0.9 (70.8) (69.3)
Credit/(charge) for the year 2.6 1.5 (1.6) (0.4) (0.9) 8.5 9.7 Credited to reserves - - 0.8 - - - 0.8
At 31 December 2008 2.9 2.0 0.2 (1.6) - (62.3) (58.8)
Year ended Period ended 31 December 31 December 2008 2007 Deferred tax is disclosed in the financial statements as follows: £m £m
Deferred tax assets 5.1 2.7 Deferred tax liabilities (63.9) (72.0)
Total (58.8) (69.3)
Temporary differences arising in connection with interests in jointly controlled entities are insignificant. At 31 December 2008, the Group had an unprovided deferred tax asset of £24m in relation to non trade loan relationship deficits (At 31 December 2007 - £10m). The asset has not been recognised due to the uncertainty regarding future surpluses in the parent companies concerned.
Enterprise | maintaining the infrastructure of the UK 33 Notes to the Financial Statements continued
18. Other investments
The investments (held to maturity investments) represent loans, capital investments and the accumulated share of revenue gains/ (losses) in several partnerships held by Enterprise (Venture Partner) Limited, a wholly owned subsidiary of Enterprise Limited. At 31 December 2008 these amounted to £18,000 (At 31 December 2007 - £40,000).
19. Inventories
Year ended Period ended 31 December 31 December 2008 2007 £m £m
Raw materials and consumables 5.6 6.1
20. Construction contracts
Year ended Period ended 31 December 31 December 2008 2007 £m £m
Contracts in progress at balance sheet date: Amounts due from contract customers included in trade and other receivables 7.1 4.2
The amount of revenue in the year from construction contracts was £56m (period ended 31 December 2007 - £26m).
At 31 December 2008 retentions held by customers for contract work amounted to £2.8m (2007 - £1.9m). Advances received from customers for contract work amounted to £0.1m (2007 - £0.4m).
At 31 December 2008, there were no amounts included in trade and other receivables arising from construction contracts which were due for settlement after more than 12 months (2007 - nil).
34 Inhoco 3363 Limited | Annual Report and Accounts 2008 21.Other financial assets
Restated (see note 2) 2008 2007 £m £m
Trade and other receivables Amounts receivable from the provision of services 134.4 139.6 Contract revenue less progress billings to date (see note 20) 7.1 4.2 Amounts receivable from group companies 14.1 9.7 Prepayments and other receivables 33.8 33.2
189.4 186.7
The average credit period taken on sales of services is 27 days (2007 - 32 days). No interest is charged on the receivables. The Group provides against receivables on a specific basis which is primarily determined by reference to past default experience.
The directors consider that the carrying amount of trade and other receivables approximates their fair value.
Before accepting any new customer, the Group uses an external credit scoring system to assess the potential customer’s credit quality and defines credit limits for all customers. Limits and scoring are monitored throughout the period. Due to the nature of the Group’s customer base, principally government authorities or blue chip utility companies, the Directors consider a concentration of credit risk of 15% with any one customer to be acceptable. At 31 December 2008 there were no customer balances greater than this level (2007 - same).
Included in the Group’s trade receivables balance are invoiced sales with a carrying amount of £6.2m (2007 - £7.7m) which are past due at the reporting date. Allowances of £2.7m (2007 - £5.5m) have been made against these balances. No allowance has been made against the remainder as there has been no significant change in the credit quality of the customers and the amounts are considered to be recoverable. The Group does not hold any collateral against any trade receivables.
Restated 2008 2007 Movements in the allowance for doubtful debts: £m £m
At start of year/incorporation 5.5 - Acquired on acquisition of subsidiaries - 5.1 Impairment losses recognised in the period 1.0 0.4 Utilised in period (3.9) -
Balance at the end of the period 2.7 5.5
Cash and cash equivalents Cash and cash equivalents 68.7 80.8
Cash and cash equivalents comprise cash held by the Group and short term bank deposits with an original maturity of three months or less. The carrying amount of these approximates their fair value
2008 2007 £m £m
Other financial assets Cash held in restricted accounts 5.7 130.8
Included in note 31 are details regarding the acquisition of Accord plc in September 2007. Of the total consideration for the acquisition, £126.3m was issued as loans with an initial maturity date of April 2008. At the time of their issue an equal and opposite amount was lodged with the Group’s bankers as security against these loan notes. As these monies were not free to be used by the Group they have been separated from the Group’s main cash and cash equivalent balances. The cash balance earns interest at LIBOR less 7.5bps. During 2008, £124.8m of the loans have been redeemed using cash held in the restricted accounts. This leaves £1.5m of cash at 31 December 2008.
The remaining £4.2m of other financial assets is described in detail in note 22.
Enterprise | maintaining the infrastructure of the UK 35 Notes to the Financial Statements continued
22. Borrowings
2008 2007 £m £m
Unsecured borrowings at amortised cost PIK notes 93.2 80.1 2018 Fixed rate unsecured Inhoco 3363 Loan notes 6.7 6.7
99.9 86.8
Secured borrowings at amortised cost Bank overdrafts 0.8 7.7 Senior term bank loans 529.8 528.3 Other bank loans 2.1 2.7 2008 bank guaranteed loan notes 1.5 126.3
534.2 665.0
Total borrowings Amount due for settlement within 12 months 2.9 134.4 Amount due for settlement after 12 months 631.2 610.7
634.1 745.1
The whole of the Group’s borrowings are denominated in Sterling.
The other principal features of the Group’s borrowings are as follows:
1) The Group has two principal bank loans:
a) a loan of £465m which was taken out in two tranches In May and September 2007. The loan is repayable in March 2015 and is secured by a debenture over the assets of the Group. The loan carries an interest rate at 2.5% above LIBOR which is payable on a monthly basis.
b) a loan of £75m which was taken out in two tranches in May and September 2007. It is due for repayment in full in March 2016. The loan carries an interest rate of 5.0% above LIBOR which is payable on a monthly basis.
The Group hedges the cashflow impact of the interest on the majority of the above loans via an interest rate swap and an interest rate cap exchanging variable rate interest for fixed rate interest.
2) PIK notes were issued in May 2007 as part of the financing for the acquisition of Enterprise plc. They are repayable in full at their principal amount plus deferred interest in March 2017. Interest is accruing on the PIK notes at 9.25% above LIBOR.
3) The 2008 bank guaranteed loan notes were issued by Kirk Cayman Limited as part of the acquisition of Accord in September 2007. They are fully secured by a bank deposit account of an equal amount. The loan notes carry an interest rate of LIBOR which is payable on redemption. The earliest redemption date was 15 April 2008.
4) The fixed rate unsecured loan notes were issued to the ultimate holding company as part of the acquisition of Enterprise plc in May 2007. They are repayable in May 2018 at their principal amount plus accrued interest and carry an interest rate of 14.875%.
5) Other bank loans of £2.1m (2007 -£2.7m) represent the balance outstanding of a loan from the Bank of Ireland. This loan is repayable in monthly instalments of £50,000 (including interest) until June 2013. Interest is currently payable at 8.2% per annum. The loan was intended to fund the refurbishment of a depot to be used by the Group in the servicing of a contract with the London Borough of Islington. However, due to developments in the area, the refurbishment is no longer taking place. Under the terms of the contract, the loan will remain in place for the duration of the Group’s contract and will be repaid solely from the proceeds generated from the service contract with the Council. The related cash balance at 31 December 2008 was £4.2m (2007 - £4.5m). As this balance is not available for general use by the Group, it has been included within other financial assets in note 21 to the financial statements.
36 Inhoco 3363 Limited | Annual Report and Accounts 2008 22. Borrowings (continued)
Undrawn borrowing facilities At 31 December 2008, the group had available £80m of undrawn committed revolving credit facility (2007 - £90m). The total facility at 31 December 2008 is £110m (2007 - same). Amounts drawn on the facility at 31 December 2008 are amounts set aside to cover performance bonds and guarantees issued by subsidiaries within the Group.
Uncommitted borrowing facilities In addition to the committed facilities noted above, the Group has uncommitted facilities of £150 million.
23. Derivative financial instruments
Capital risk management The Group manages its capital to ensure that entities in the Group will be able to continue as going concerns. The capital structure of the Group consists of debt, which includes the borrowings disclosed in note 22, the 3i and management investments shown in note 28, cash and cash equivalents and equity attributable to the equity holders of the parent, comprising issued share capital and retained earnings disclosed in notes 29 and 30. During the year, the Group has complied with all its banking covenants.
Significant accounting policies Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenditure are recognised in respect of each class of financial asset, financial liability and equity instrument are disclosed in note 2 to the financial statements.
Financial risk management objectives The Group Board and treasury function, monitor and manage the financial risks relating to the operations. These risks include credit risk, liquidity risk, cashflow interest risk and currency risk. The Group, where appropriate, seeks to minimise the effects of these risks by entering into derivative financial instruments to hedge these exposures. The use of derivative instruments is governed by the Group’s policies which are approved by the board of directors. The Group does not enter into any speculative trading in financial instruments. The Group’s activities primarily expose it to risks of changes in interest rates and to a limited extent changes in foreign currency rates. The principal risks are detailed below together with details of how these are mitigated.
Interest rate risk management The Group is exposed to interest rate risk as entities in the Group borrow funds at both fixed and floating interest rates. The risk is managed by the Group maintaining an appropriate mix between fixed and floating rate borrowings and by the use of interest rate swap and cap contracts. Although the Group has derivative financial instruments in place to “hedge” the interest rate risk, they do not meet the definition of a hedge within the meaning of IAS39 and are therefore accounted for as FVTPL.
Under interest rate swap contracts, the Group has agreed to exchange the difference between fixed and floating interest amounts on agreed notional principal amounts. In addition, the Group has put in place a cap agreement ensuring that interest on an agreed notional principal amount will not exceed a certain interest rate. Such contracts enable the Group to mitigate the risk of changing interest rates on the cashflow exposures on the issued variable rate debt held. The fair value of the interest rate swap and cap at the reporting date is determined by discounting the future cash flows using the interest yield curves at the reporting date and is disclosed below. The following table details the notional principal amounts and remaining terms of the interest rate swap and cap contracts outstanding at the reporting date:
Enterprise | maintaining the infrastructure of the UK 37 Notes to the Financial Statements continued
23. Derivative financial instruments (continued)
Outstanding derivative instruments are as follows:
Notional Fair value Fair value amount 2008 2007 Interest rate £m Maturity £m £m
Interest rate swap 5.80% 245.0 31 December 2009 (9.3) (2.9)
Interest rate cap 5.80% 245.0 31 December 2010 0.3 0.9
The interest rate swap and cap settle on a quarterly basis. The floating rate on the contracts is based on 3 month LIBOR. The Group settles the difference between the fixed and floating rates on a net basis. All interest rate swap and cap contracts are designated as FVTPL. As a result, the loss in 2008 of £7m (2007 - £3.3m) is included in other gains and losses in the income statement (see note 8).
Interest rate sensitivity analysis Over 90% of the Group’s cash pay debt is hedged using the derivative instruments set out above. The Group’s exposure to interest rate movements on the unhedged element of the debt is relatively small. A 0.5% movement in LIBOR would increase or decrease the interest on this unhedged element by £0.25m per annum.
Credit risk management Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. The Group conducts credit checks on all potential customers and suppliers before entering into any contracts using independent rating agencies and other publicly available information. The Group’s exposure is regularly monitored and forms part of the monthly reporting to the operations board.
Trade receivables consist of a large number of customers across the Group’s two segments. The majority of customers by value are blue chip companies within the utility sector or local authorities in the public sector. The Group has minimal exposure to individuals. The Group does not have any significant credit risk exposure to any one customer.
The Group’s exposure to credit risk is set out in note 21.
Liquidity risk management The Group manages liquidity risk management by maintaining adequate reserves and banking facilities and through regular monitoring of forecast and actual cashflows. The available undrawn committed facilities of the Group at 31 December 2008 are set out in note 22.
Foreign exchange risk management The Group undertakes certain transactions denominated in foreign currencies, hence exposures to exchange rate fluctuations arise. At 31 December 2008, the net carrying amounts of the Group’s foreign currency denominated assets (all in Euros) were €1.2m (2007 - €1.9 million).
These amounts are not material to the Group’s overall balance sheet and therefore management have not entered into any foreign exchange contracts to mitigate any foreign exchange exposure on receipts and payments. The position is regularly monitored by management based on the amount of business conducted in foreign currencies. Total revenue in the period in amounts other than sterling (all in Euros) was €44m (2007 -€42 million).
As the above amounts are not material to the Group’s overall trade a sensitivity analysis has not been produced.
38 Inhoco 3363 Limited | Annual Report and Accounts 2008 24. Retirement benefits
Defined contribution schemes The Group operates several defined contribution pension schemes. The assets of the Schemes are held separately from those of the Group in funds under the control of trustees. At 31 December 2008 all contributions due had been paid over to the Schemes (2007 - same).
In addition, the Group participates in several defined benefit schemes run by Government bodies. These primarily arise where employees have transferred to the Group under TUPE transfer arrangements from the relevant councils. The Group is not liable for a number of the key assumptions including the rate of return on investments. This means an accurate valuation cannot be made. The pension costs in respect of the schemes are treated as if they were defined contribution schemes as are those relating to Local Government Schemes where any surplus/deficit is passed through to the client and there is no risk to the company.
The total cost charged to the income statement in respect of schemes treated as defined contribution schemes in the year was £3.2m (2007 - £3.0m).
Defined benefit schemes The Group operates two defined benefit schemes - one in respect of certain of the Brophy Grounds Maintenance Limited’s employees (the BALI scheme) and the other is the Accord Final Salary Scheme (“AFSS”). The last full actuarial valuation of the BALI scheme was carried out as at 6 April 2006, using the projected unit method, by an independent qualified actuary. This showed assets of £8.8m and a funding level of 86%. To fund the past service deficit the company has agreed to make additional contributions of £0.36m per annum from 6 April 2007.
The last full actuarial review of the Accord Final Salary Scheme was carried out as at 1 April 2007. This was performed by a qualified actuary using the projected unit method. The market value of the assets at the time was £34.3m which gives a funding level of 72%. Deficit payments were agreed at the time of the Accord acquisition to bridge this funding gap and contributions of £4.0m were paid in 2008 (2007 - nil).
The present value of the defined benefit obligations and the related current service cost were measured using the projected unit credit method.
BALI AFSS BALI AFSS 2008 2008 2007 2007 The principal assumptions used by the actuary were: % % % %
Rate of increase in salaries 3.1 3.1 3.1 3.1 Rate of increase in pensions in payment 2.9 2.9 2.9 2.9 Discount rate 6.4 6.4 5.8 5.8 Inflation assumption 2.9 2.9 2.9 2.9
The mortality assumptions used by the actuaries are as follows:
Pre retirement mortality PCA00C2007mc PA92C2007mc PA92C2007mc PA92C2007mc Post retirement mortality for non pensioner members PCA00C2007mc PA92C2020mc PA92C2020mc PA92C2020mc Post retirement mortality for pensioner members PCA00C2007mc PA92C2020mc PA92C2020mc PA92C2020mc
BALI AFSS Total BALI AFSS Total Amounts recognised in income in respect of the 2008 2008 2008 2007 2007 2007 defined benefit schemes are as follows: £m £m £m £m £m £m
Current service cost (0.2) (1.6) (1.8) (0.2) (0.5) (0.7) Gains/losses on settlements/curtailments - 0.5 0.5 - - - Interest on obligation (0.6) (2.3) (2.9) (0.3) (0.7) (1.0) Expected return on plan assets 0.6 2.9 3.5 0.4 0.8 1.2
(0.2) (0.5) (0.7) (0.1) (0.4) (0.5)
The charge for the period of £0.7m (2007 - £0.5m) has been included in administrative costs. Actuarial gains and losses have been reported in the statement of recognised income and expense. The actual negative return on scheme assets in the period was £5.8m (2007 - positive return £0.2m).
Enterprise | maintaining the infrastructure of the UK 39 Notes to the Financial Statements continued
24. Retirement benefits (continued)
The amount recognised in the balance sheet in BALI AFSS Total BALI AFSS Total respect of the Group’s defined benefit retirement 2008 2008 2008 2007 2007 2007 schemes is as follows: £m £m £m £m £m £m
Present value of funded obligations (9.5) (35.9) (45.4) (10.6) (39.3) (49.9) Fair value of scheme assets 8.0 36.7 44.7 9.4 36.9 46.3
Deficit in the scheme recognised in the balance sheet (1.5) 0.8 (0.7) (1.2) (2.4) (3.6)
Changes in the present value of the defined benefit obligation are as follows: £m £m £m £m £m £m
Opening defined benefit obligation - at date of acquisition of subsidiary (10.6) (39.3) (49.9) (10.5) (39.3) (49.8) Service cost (0.2) (1.6) (1.8) (0.2) (0.5) (0.7) Settlements - 0.5 0.5 - - - Interest cost (0.6) (2.3) (2.9) (0.3) (0.7) (1.0) Contributions - (0.4) (0.4) - (0.2) (0.2) Benefits paid 0.4 2.3 2.7 0.2 1.3 1.5 Actuarial gains and losses 1.5 4.9 6.4 0.2 0.1 0.3
Closing defined benefit obligation (9.5) (35.9) (45.4) (10.6) (39.3) (49.9)
BALI AFSS Total BALI AFSS Total Changes in the fair value of the 2008 2008 2008 2007 2007 2007 schemes assets are as follows: £m £m £m £m £m £m
Opening fair value of plan assets - at date of acquisition of subsidiary 9.4 36.9 46.3 9.0 37.6 46.6 Expected return on scheme assets 0.6 2.9 3.5 0.4 0.8 1.2 Actuarial gains and losses (2.0) (7.3) (9.3) (0.2) (0.8) (1.0) Benefits paid (0.4) (2.3) (2.7) (0.2) (1.3) (1.5) Contributions 0.4 6.5 6.9 0.4 0.6 1.0
Closing fair value of plan assets 8.0 36.7 44.7 9.4 36.9 46.3
BALI AFSS Total BALI AFSS Total The fair value of the plan assets at 2008 2008 2008 2007 2007 2007 the balance sheet date is analysed as follows: £m £m £m £m £m £m
Equities 4.1 11.7 15.8 4.8 19.4 24.2 Property 0.7 3.1 3.8 1.2 5.2 6.4 Bonds 2.4 18.7 21.1 2.3 9.1 11.4 Cash 0.8 3.2 4.0 1.1 3.2 4.3
8.0 36.7 44.7 9.4 36.9 46.3
The cumulative actuarial gains and losses in relation to the Group's defined benefit pension schemes are £2.7m net of tax (2007 - £0.6m net of tax). These are recognised in the statement of recognised income and expenditure.
Having considered market information (including input from the Group's actuaries), the long term rate 2008 2008 2007 2007 of expected return on the plan assets are estimated BALI AFSS BALI AFSS as follows: £m £m £m £m
Equities 8.00 8.00 8.00 8.00 Property 6.75 6.75 6.75 6.75 Bonds 6.40 6.40 5.00 5.00 Cash 1.50 1.50 5.50 5.50
40 Inhoco 3363 Limited | Annual Report and Accounts 2008 24. Retirement benefits (continued)
The history of experience gains and losses has been: £m £m £m £m £m £m
Present value of defined benefit obligations (9.5) (35.9) (45.4) (10.6) (39.3) (49.9)
Fair value of scheme assets 8.0 36.7 44.7 9.4 36.9 46.3
Deficit in the scheme (1.5) 0.8 (0.7) (1.2) (2.4) (3.6)
BALI AFSS £m BALI AFSS £m
Experience adjustments on scheme assets Amount (£m) (2.0) (7.3) (0.2) (0.8) Percentage of scheme assets -25.0% -20.0% -1.6% -2.2%
Experience gains and losses on scheme liabilities Amount (£m) 1.5 4.9 0.2 0.1 Percentage of scheme liabilities -15.2% -13.6% -1.7% -0.3%
BALI AFSS £m BALI AFSS £m
The estimated amount of contributions expected to be paid to the Schemes during the 2009 is 0.4 2.1 2.5 0.5 2.3 2.8
Sensitivity analysis The sensitivities regarding the principal assumptions used to measure the scheme liabilities are set out below:
Impact on Impact on Change in scheme Change in scheme assumption liabilities assumption liabilities Assumption 2008 2008 2007 2007
Discount rate +/- 0.5% +/-9.3% +/- 0.5% +/-10.5% Rate of inflation +/- 0.5% +/- 6.3% +/- 0.5% +/- 2% Rate of salary growth +/- 0.5% +/- 2.4% +/- 0.5% +/- 3.2% Rate of mortality +/- 1 year +/- 2.7% +/- 1 year +/- 2.3%
Enterprise | maintaining the infrastructure of the UK 41 Notes to the Financial Statements continued
25. Other financial liabilities
Restated (see note 2) 2008 2007 £m £m
Trade and other payables Trade payables 58.6 70.5 Value added and payroll taxes and social security 25.1 27.2 Other payables - 2.5 Accruals 76.3 68.8
160.0 169.0
Non current liabilities Trade payables 5.3 3.6 Amounts due to Group companies 4.2 -
9.5 3.6
Trade payables and accruals principally comprise amounts outstanding for trade purchases and ongoing costs. The average credit period taken for trade purchases is 37 days (2007 - 40 days). The current financial liabilities shown above arise from the normal trading activities of the Group and are payable in line with normal terms of trade which range from 14 days to 3 months (2007 - 14 days to 3 months). Trade payables included in non current liabilities are payable between 12 and 24 months (2007 - same).
The Directors consider that the carrying amount of trade payables approximates to their fair value.
42 Inhoco 3363 Limited | Annual Report and Accounts 2008 26. Provisions
Onerous Future loss Restructuring leases provisions provision Total £m £m £m £m
At incorporation - - - - Acquired on acquisition of subsidiaries 0.7 4.6 2.3 7.6 Provided in the period 1.4 - 5.0 6.4 Utilisation of provision in the period (0.3) (0.6) (4.3) (5.2)
At 31 December 2007 1.8 4.0 3.0 8.8
Adjustments arising in respect of acquisition of subsidiaries in 2007 1.8 23.9 0.1 25.8
As restated at 31 December 2007 3.6 27.9 3.1 34.6
Provided in the period - - 0.3 0.3 Transfer from creditors - - - - Released in the period (0.9) (1.4) (0.1) (2.4) Utilisation of provision in the period (1.0) (7.2) (2.9) (11.1)
At 31 December 2008 1.7 19.3 0.4 21.4
2008 Included in current liabilities 1.0 18.1 0.4 19.5 Included in non-current liabilities 0.7 1.2 - 1.9
1.7 19.3 0.4 21.4
2007 Included in current liabilities 1.3 7.8 3.1 12.2 Included in non-current liabilities 2.3 20.1 - 22.4
3.6 27.9 3.1 34.6
The future loss and other provision principally relates to loss making contracts in respect of work now exited within Enterprise, several onerous contracts acquired with the Accord plc in September 2007 and a contingent liability of £10m in relation to a business activity which is considered non core. As permitted by IAS37, further information regarding the contingent liability is not disclosed as the Board believe that doing so could seriously prejudice their negotiations regarding the outcome of the liability. The future loss provisions represent management’s best estimate of the likely losses to be incurred on these contracts through to their completion (up-to 2012) and represents the lower of the cost of exiting the contract and the forecast losses from continued trading.
The restructuring provision principally related to redundancy costs and integration costs following the acquisition of Accord in September 2007. The majority of the provision was utilised in 2008 with the remainder expected to be utilised during 2009.
The provision for onerous leases represents managements best estimate of the future cost of vacant leased properties. In most cases the provision covers the period to the next break clause in the lease agreement. It is anticipated that the provision will be utilised by the end of 2010.
Enterprise | maintaining the infrastructure of the UK 43 Notes to the Financial Statements continued
27. Obligations under finance leases
Present value Present value Minimum of minimum Minimum of minimum lease lease lease lease payments payments payments payments 2008 2008 2007 2007 £m £m £m £m
Amounts payable under finance leases:
Within one year 3.5 3.3 3.1 2.9 In the second to fifth years inclusive 6.2 4.8 5.6 5.2 After five years 1.4 0.9 - -
11.1 9.0 8.7 8.1
Less: future finance charges (2.1) (0.6)
Present value of lease obligations 9.0 9.0 8.1 8.1
Less: Amount due for settlement within 12 months (shown under current liabilities) (3.3) (2.9)
Amount due for settlement after 12 months 5.7 5.2
It is the Group’s policy to lease certain of its commercial vehicles and equipment under finance leases. The average lease term is seven years. For the year ended 31 December 2008, the average borrowing rate was 8% (2007 - 6%). Interest rates are fixed at the contract date, and thus expose the Group to fair value interest rate risk. All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments.
All lease obligations are denominated in sterling.
The fair value of the Group’s lease obligations approximates their carrying amount.
The Group’s obligations under finance leases are secured by the lessors’ title to the leased assets.
28. Shareholder interests
2008 2007 £m £m
Unsecured borrowings at amortised cost
2018 Shareholder loan notes (including accrued interest) 216.6 187.8 Loans from parent company 49.2 43.8
Total shareholder interests 265.8 231.6
The above amounts are denominated in Sterling.
The 2018 shareholder loan notes were issued in two tranches in May and September 2007 as part of the funding for the acquisition of Enterprise plc and Accord plc. They carry an interest rate of 14.88%. The principal plus the accrued interest is repayable in full in 2018.
The loan from the parent company bears interest at 14.875% and is repayable in 2018.
44 Inhoco 3363 Limited | Annual Report and Accounts 2008 29. Share capital
2008 2007 Shares of 10p each Shares of 10p each
Nominal Value Nominal Value Number £ Number £
Authorised
Ordinary shares 111,166,534 11,116,653 111,166,534 11,116,653
Allotted, called up, and fully paid
Ordinary shares 111,166,534 11,116,653 111,166,534 11,116,653
The shares carry no right to fixed income. Each share carries one vote. On a return of assets, the ordinary shareholders will receive any surplus remaining after the repayment of the company debt.
30. Retained earnings
Retained earnings £m
Group
At incorporation - Retained loss for the period (29.4) Actuarial gain on defined benefit pension scheme (net of tax) (0.6) Actuarial gain on defined benefit pension scheme of jointly controlled entities (net of tax) 0.8
At 31 December 2007 (29.2)
Retained loss for the year (46.9) Exchange difference on retranslation of foreign branches 0.4 Actuarial loss on defined benefit pension scheme (net of tax) (2.1) Actuarial loss on defined benefit pension scheme of jointly controlled entities (net of tax) (1.7)
At 31 December 2008 (79.5)
Enterprise | maintaining the infrastructure of the UK 45 Notes to the Financial Statements continued
31. Acquisition of subsidiaries
Year ended 31 December 2008 There were no acquisitions in the year ended 31 December 2008.
Period ended 31 December 2007 On 11 May 2007, the Group acquired 100% of the issued share capital of Enterprise plc. Enterprise plc was quoted on the London Stock Exchange and the acquisition became unconditional on this date following the requisite number of acceptances from the shareholders. Enterprise plc is the holding company for a group of companies engaged in the maintenance of the infrastructure for utility companies and maintenance activities including streetscene services and social housing maintenance in the public sector. The transaction was accounted for by the purchase method of accounting.
Adjustments Fair value to fair values Book value adjustments in 2008 Fair value The book and fair value of the assets and liabilities acquired are set out below. £m £m £m £m
Net assets acquired Goodwill 162.3 (162.3) - - Intangible fixed assets 0.5 391.0 (189.6) 201.9 Property plant and equipment 7.8 - - 7.8 Deferred tax 0.4 (109.5) 53.1 (56.0) Investments 0.2 - - 0.2 Interests in jointly controlled entities 4.0 - - 4.0 Inventories 4.4 - - 4.4 Trade and other receivables 150.9 - (7.0) 143.9 Non current assets held for resale 0.8 - - 0.8 Cash and cash equivalents 23.9 - - 23.9 Trade and other payables (111.9) - (29.5) (141.4) Current tax liabilities (2.8) - - (2.8) Liabilities associated with assets held for resale (0.4) - - (0.4) Bank loans (100.0) - - (100.0) Retirement benefit obligations (1.0) - - (1.0) Finance lease liabilities (2.7) - - (2.7)
136.4 119.2 (173.0) 82.6
Goodwill 435.9
Total consideration 518.5
Satisfied by: Cash 501.6 Directly attributable costs 16.9
518.5
Net cash outflow arising on acquisition: Cash consideration 518.5 Cash and cash equivalents acquired (23.9)
494.6
The goodwill arising on the acquisition is attributable to the anticipated profitability of the Group’s services in new and existing markets.
The provisional fair value adjustments made at acquisition relate to:
- The recognition of an intangible asset in relation to customer contracts and customer relationships acquired
- The recognition of an intangible asset in relation to computer software acquired
- The recognition of a deferred tax liability on the future amortisation of the intangible assets acquired
- The elimination of the consolidated goodwill on the Group balance sheet of Enterprise plc at the date of acquisition
46 Inhoco 3363 Limited | Annual Report and Accounts 2008 31. Acquisition of subsidiaries (continued)
In accordance with IFRS 3 “Business Combinations”, during 2008, the fair value review exercise which started in 2007 was completed and final adjustments were made to the fair value of the assets and liabilities acquired to reflect conditions which existed at the acquisition date. These are set out above and the significant balances relate to onerous contract provisions in respect of work now exited and a contingent liability relating to a business activity considered non core. In addition, management have reviewed the valuation methodology, and in particular the assumptions in respect of discount rates, growth rate and assumed margins, used to calculate the value of intangibles acquired with the Enterprise business and as a consequence have adjusted the value of the relevant assets acquired.
During the period ended 31 December 2007, Enterprise plc contributed £416m to revenue and £32.7m to the Group’s operating profit in the period from the date of acquisition to the balance sheet date.
Accord Limited (formerly Accord plc) On 20 September 2007, the Group acquired 100% of the issued share capital of Accord plc. Accord plc was the holding company for a group of companies engaged in highway maintenance, waste collection, social housing maintenance and other maintenance activities in the public sector. The transaction has been accounted for by the purchase method of accounting.
Adjustments Fair value to fair values Book value adjustments in 2008 Fair value The book and fair value of the assets and liabilities acquired are set out below. £m £m £m £m
Net assets acquired Goodwill 27.7 (27.7) - - Intangible fixed assets 1.5 79.7 (11.8) 69.4 Property plant and equipment 18.0 (4.9) - 13.1 Deferred tax assets - 0.4 - 0.4 Interests in jointly controlled entities (0.3) - (1.5) (1.8) Inventories 1.9 - - 1.9 Trade and other receivables 54.4 (4.2) (2.5) 47.7 Cash and cash equivalents (1.9) - - (1.9) Other financial assets 4.5 - - 4.5 Trade and other payables (67.3) (5.9) (10.9) (84.1) Current tax liabilities 0.9 (1.8) (0.3) (1.2) Bank loans (10.7) - - (10.7) Retirement benefit obligations (2.2) 0.9 - (1.3) Finance lease liabilities (6.9) - - (6.9) Deferred tax liabilities (0.1) (22.6) 2.2 (20.5)
19.5 13.9 (24.8) 8.6
Goodwill 144.4
Total consideration 153.0
Satisfied by:
Cash 24.8 Issue of bank guaranteed loan notes 126.3 Directly attributable costs 1.9
153.0
Net cash outflow arising on acquisition:
Cash consideration 26.7 Bank overdrafts acquired 1.9
28.6
Enterprise | maintaining the infrastructure of the UK 47 Notes to the Financial Statements continued
31. Acquisition of subsidiaries (continued)
The goodwill arising on the acquisition is attributable to the strengthening of the Group’s presence in the public sector markets and the anticipated future operating synergies from the combination with Enterprise.
The provisional fair value adjustments made at acquisition related to:
• The recognition of an intangible asset in relation to customer contracts acquired • The recognition of a deferred tax liability on the future amortisation of the intangible assets acquired • The elimination of the consolidated goodwill on the Group balance sheet of Accord plc at the date of acquisition • Provision for certain loss making contracts acquired • Write down of fixed assets acquired to their recoverable amount
During 2008, the fair value review was completed and final adjustments were made to the fair value of the assets and liabilities acquired which existed at the acquisition date. These are set out above and primarily related to adjustments in respect of onerous contracts and revisiting the methodology and assumptions used (see Enterprise above) in valuing customer relationships within the Accord business, and as a consequence have advised the value of the relevant assets acquired.
Accord contributed £70 million to revenue and an operating profit of £3.5m (pre exceptional items and amortisation of intangibles) in the period from the date of acquisition to 31 December 2007.
32. Sale of businesses
2008
On 17 March 2008 the Group sold the entire issued share capital of Dbi Consulting Limited for net proceeds of £0.1m. This generated a loss on disposal of £0.2m.
On 21 April 2008 the Group sold the entire issued share capital of Strategem Limited and Structural Change Consultants Limited for net proceeds of £0.2m. This generated a loss on disposal of £0.4m.
On 28 March 2008 the Group sold the business and assets of its specialist water systems operation for net proceeds of £0.65m. This generated a profit on disposal of £0.3m.
As the results of the businesses were immaterial to the Group’s overall revenue and losses for the year, the businesses have not been classed as discontinued in these financial statements.
2007
On 26 May 2007, the Group sold one of its subsidiaries, Enterprise MPC Limited.
The business is shown as held for resale on the acquisition balance sheet of Enterprise plc (see note 31) at its recoverable amount. Net proceeds of £0.4m were received in the period. As the assets and liabilities were disclosed as “held for resale” on the acquisition balance sheet at their recoverable amount, there is no gain or loss on disposal recognised in the income statement for the period.
As the results of the business were wholly immaterial to the Group’s overall revenue and profits for the period, the company has not been classed as discontinued in these financial statements.
48 Inhoco 3363 Limited | Annual Report and Accounts 2008 33. Operating lease arrangements
2008 2007 £m £m
The Group as a lessee Minimum lease payments under operating leases recognised in the income statement for the period 9.0 4.9
At the balance sheet date, the Group had outstanding commitments for future minimum lease payments under non cancellable operating leases, which fall due as follows:
2008 2007 £m £m
Within one year 8.7 9.6 Within two to five years 16.4 21.1 After five years 2.7 5.8
27.8 36.5
Operating leases primarily relate to land and buildings, vehicles and computer equipment.
34. Related party transactions
Transactions between the company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note. Transactions between the Company and its subsidiaries are disclosed in the Company’s separate financial statements.
A) Key management compensation
The remuneration of the Directors, who are the key management personnel of the Group, is set out below in aggregate for each of the categories specified in IAS 24 Related Party Disclosures.
2008 2007 £m £m
Short-term employee benefits 0.5 0.3 Post-employement benefits - -
0.5 0.3
The highest paid Director’s total emoluments in the period were £0.3m (period ended 31 December 2007 - £0.2m).
B) Related party transcations
Transactions and balances with jointly controlled entities are disclosed in note 15.
The Group had no material related party transactions which might reasonably be expected to influence decisions made by the users of these financial statements.
C) Controlling party
3i plc, through various managed funds, is considered by the Directors to be the ultimate controlling party.
Enterprise | maintaining the infrastructure of the UK 49 Company Balance Sheet
Restated (see note 1) 2008 2007 As at 31 December 2008 Note £m £m
Fixed assets Investments 3 21.2 146.0
21.2 146.0
Current assets Debtors 4 216.3 188.4
216.3 188.4
Creditors: amounts falling due within one year 5 (9.5) (132.2) Net current assets 206.8 56.2 Total assets less current liabilities 228.0 202.2
Restated (see note 1) 2008 2007 Equity shareholders’ funds and long term liabilities Note £m £m
Creditors: amounts falling due after more than one year 6 223.4 194.5
Capital and reserves Called up share capital 7 11.1 11.1 Profit and loss account 8 (6.5) (3.4)
Equity shareholders’ funds 4.6 7.7
Long term liabilities and Equity shareholders’ funds 228.0 202.2
These financial statements were approved by the Board of Directors on 2009
Signed on behalf of the Board of Directors
50 Inhoco 3363 Limited | Annual Report and Accounts 2008 Notes to the Company Financial Statements
1. Accounting policies The separate financial statements of the company are presented as required by the Companies Act 1985. They have been prepared under the historical cost convention and in accordance with applicable law and United Kingdom accounting standards. The principal accounting policies are summarised below. They have all been applied consistently throughout the current year and prior period.
Investments Investments are included at cost. Provision is made for any impairment in the value of investments.
Taxation Corporation tax is payable on taxable profits at the current rate.
Deferred tax is recognised in respect of all timing differences that have originated but not reversed by the balance sheet date where transactions or events that result in an obligation to pay more tax in the future or a right to pay less tax in the future have occurred at the balance sheet date.
Timing differences are differences between the Company’s taxable profits and its results as stated in the financial statements that arise from the inclusion of gains and losses in tax assessments in years different from those in which they are recognised in the financial statements.
A net deferred tax asset is regarded as recoverable and therefore recognised only when, on basis of all available evidence, it can be regarded as more likely than not there will be suitable taxable profits from which the future reversal of the underlying timing differences can be deducted.
Deferred tax is not recognised when fixed assets are revalued unless by the balance sheet date there is a binding agreement to sell the revalued assets and the gain or loss expected to arise on the sale has been recognised in the financial statements. Neither is deferred tax recognised when fixed assets are sold and it is more likely than not that the taxable gain will be rolled over, being charged to tax only if and when the replacement assets are sold.
Deferred tax is measured at the average tax rates that are expected to apply in the periods in which the timing differences are expected to reverse based on tax rates and laws that have been enacted or substantively enacted by the balance sheet date. Deferred tax assets and liabilities have not been discounted.
Related party transactions There were no transactions with related parties which would require disclosure under FRS 8 – Related Party Disclosures.
Presentation of the balance sheet The balance sheet at 31 December 2007 has been re-presentedto to show long term liabilities with shareholders equity. Given the nature of the long term liabilities ie, long term loans or finance instruments due to shareholders the directors believe this more accurately reflects the capital structure of the company. There is no impact on the overall net assets of the comaony nor its profits.
2. Loss for the period As permitted by Section 230 of the Companies Act 1985, the company has elected not to present its own profit and loss account for the period. The company reported a loss of £3.1m for the financial period.
Enterprise | maintaining the infrastructure of the UK 51 Notes to the Company Financial Statements continued
3. Investments
Shares in subsidiary undertakings Loan notes Total As at 31 December 2008 £m £m £m
Cost and net book value
At 1 January 2008 13.0 133.0 146.0 Redeemed in the period - (124.8) (124.8)
At 31 December 2008 13.0 8.2 21.2
On 11 May 2007, the company acquired the entire issued ordinary share capital of Inhoco 3366 Limited for consideration of £10m. Inhoco 3366 Limited is a holding company incorporated in the United Kingdom. On 20 September 2007, the company subscribed for a further 3 million £1 ordinary shares in Inhoco 3366 Limited. At 31 December 2007, the company therefore owns the whole of the issued share capital of Inhoco 3366 Limited.
On 11 May 2007, the company subscribed for 6,726,445 loan notes issued by Inhoco 3366 Limited. On 20 September 2007, Inhoco 3366 Limited issued bank guaranteed loan notes with a value of £126.27m as part of the acquisition by the Group of Accord plc. These were purchased by Inhoco 3363 Limited at par. During 2008, £124.8m of these loan notes were redeemed.
4. Debtors
2008 2007 £m £m
Amounts owed by fellow group undertakings 216.3 188.4
5. Creditors: amounts falling due within one year
2008 2007 £m £m
Taxation - 3.8 Amounts due to Group undertakings 8.0 2.1 2008 Bank guaranteed load notes 1.5 126.3
9.5 132.2
52 Inhoco 3363 Limited | Annual Report and Accounts 2008 6. Creditors: amounts falling due after more than one year
2008 2007 £m £m
2018 Fixed rate unsecured Shareholder Loan notes 216.7 187.8 2018 Fixed rate unsecured Inhoco 3363 Loan notes 6.7 6.7
223.4 194.5
The 2018 shareholder loan notes were issued in two tranches in May and September 2007 as part of the funding for the acquisition of Enterprise plc and Accord plc. They carry an interest rate of 14.875%. The principal plus the accrued interest is repayable in full in 2018.
The fixed rate unsecured loan notes were issued to the ultimate holding company as part of the acquisition of Enterprise plc in May 2007. They are repayable in May 2018 at their principal amount plus accrued interest and carry an interest rate of 14.875%.
7. Share capital
Shares of 10p each*
Nominal Value Number £
Authorised
Ordinary shares 111,166,534 11,116,653
Total 111,166,534 11,116,653
Allotted, called up, and fully paid
Ordinary shares 111,166,534 11,116,653
Total 111,166,534 11,116,653
The company issued 1 ordinary share on its incorporation of £1 which was subsequently converted to 10 shares of 10p each. On 11 May 2007, the company issued 81,166,524 ordinary 10p shares to its immediate parent company, Enterprise Group Holdings Limited at par. On 20 September 2007, the company issued a further 30,000,000 ordinary shares of 10p each at par to its new parent company, Kirk Cayman Limited.
The shares carry no right to fixed income. Each share carries one vote. On a return of assets, the ordinary share holders will receive any surplus remaing after the settlement of other assets and liabilities.
Enterprise | maintaining the infrastructure of the UK 53 Notes to the Company Financial Statements continued
8. Reserves
Profit and loss account £m
At 1 January 2008 (3.4) Loss for the financial period (3.1)
At 31 December 2008 (6.5)
9. Reconciliation of movement in shareholders’ funds
2007 £m
Loss for the period (3.1)
Increase in shareholders’ funds in the period (3.1) Shareholders’ funds at 1 January 2007 (3.4)
Shareholders’ funds at the end of the period (6.5)
54 Inhoco 3363 Limited | Annual Report and Accounts 2008 Company Directory
Registered Office Lancaster House Centurion Way Leyland Lancashire PR26 6TX
Registered Number 5982873
Website www.enterprise.plc.uk
Auditors Deloitte LLP Manchester
Financial & Corporate Close Brothers Ltd
Bankers Lloyds Banking Group Citigroup N.A.
Financial Relations Weber Shandwick Square Mile
Enterprise | maintaining the infrastructure of the UK 55 Address Enterprise Lancaster House Centurion Way Leyland Lancashire PR26 6TX
Tel 01772 819 000
E-mail [email protected]
Website www.enterprise.plc.uk