yorkshire report final

7/30/2019 Yorkshire Report Final

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THE YORKSHIRE REPORT 2012HOW DID YORKSHIRE DO?Aggregated accounts for the regions top 150 companies


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Highlights

NOT BAD AT ALL...BUT THERE ARECHALLENGES AHEAD

The Yorkshire Report 2012

PROFITAFTER TAX

REVENUE

CURRENT

PRIOR

OPERATINGPROFIT

DIVIDEND INVESTMENTIN PROPERTYPLANT AND

EQUIPMENT

NO OFEMPLOYEES

83.8BN

79.7BN

2.25BN

4.5BN

1BN

3.1BN

469,0

00

1.25BN

3.5BN

0.94BN

2.4BN

460,0

00


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CONTENTS

02 Chairmans View

04 Finance Directors Review

06 Funding & Gearing

08 M&A10 Business Restructuring

12 Fraud & Forensics

14 Tax

16 Outlook

18 2012 Hot Topic: Sustainability

20 Company Profile

22 Financial Information

38 Basis of Preparation

40 The Team

41 The 150 Group Companies

This is the sixth edition of our regional annual report, compiling the latest published accounts ofYorkshires top 150 companies and aggregating the figures to create a barometer of economic healthfor our region. We identified the top 150 companies by revenue (as outlined on page 22). Prior-yearfigures are based on the top 150 in our previous Yorkshire Reports. As the composition of the top 150has changed, year-on-year comparisons may not be like-for-like. We refer collectively to the top 150

companies in either year as the Group throughout the report.

WELCOME

INTRODUCING THE YORKSHIRE REPORT 2012 PREPARED BY BDOTAKING THE REGIONS TEMPERATURE, EXAMINING ITS HEALTH AND DIAGNOSINGTHE BEST COURSE OF TREATMENT.

The Yorkshire Report 2012 1

16mTHE CONSTRUCTION SECTOR LOST 16M IN THE PERIOD BUT THIS REPRESENTS A RECOVERY COMPARED TO 84M LOSS

IN YR 2011 AND THE CARNAGE OF 533M LOSS OF THE PREVIOUSPERIOD


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Chairmans view

BOUNCING BACKWITH PROFITS AND REVENUE UP, THE GROUP APPEARS TO

BE FIRMLY BACK ON ITS FEET. NOW ITS TIME TO TAKE THENEXT STEP.

YORKSHIRES ABILITY TO DELIVER A SECOND CONSECUTIVEYEAR OF STRONG PROFIT GROWTH IS CAUSE FORCELEBRATION. INDEED, THE REGION ADDED ANOTHER TROPHYTO ITS CABINET THIS YEAR. IN WHAT HAS PROVED A TOUGHCLIMATE FOR GROWTH, YORKSHIRE PLC INCREASED REVENUESFOR THE FIRST TIME SINCE 2009.

2 The Yorkshire Report 2012

PAUL FULLERTONEmail: [email protected]

Paul retired in early 2012 as the Bank of England Agent for Yorkshire andThe Humber, although remains as a part time consultant. His role includedinterviewing companies and reporting business conditions directly toSir Mervyn King and the Monetary Policy Committee. He has also heldseveral senior management positions at Yorkshire Bank, including Head ofRetail Banking and Head of Marketing. He has a first class honours degreein economics and is a Fellow of the Chartered Institute of Bankers.


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With profit after tax doubling to 2.25bn andrevenue up 5% to 83.8bn, the Group hascontinued its post-recession revival, barelypausing to lick the wounds it suffered duringprevious years.

Challenges, however, remain. A lack of exposure

to, and investment in, growing markets andsectors could hinder future growth. Unless theGroup seizes new opportunities there is a dangerthat, having got back on our feet, we couldstand still.

SECTORS

Yorkshire stalwarts Morrisons and Asda/Walmart,who account for over 40% of Group revenue, putin another sterling shift, but they were not themajor drivers of profit growth. In fact, althoughfood retailers continued to eke out growth, foodproducers actually saw a fall in both revenues

and profit.Instead there appear to be multiple factors atwork. Firstly a bounce back in some of thesectors hit hardest during the recession and itsimmediate aftermath. One example is consumerfinancials, where a strong performance fromYorkshire Building Society saw it acqu ire ChelseaBuilding Society en route to posting strongrevenue growth and an impressive return toprofit. Other smaller sectors made a positivecontribution and showed welcome evidenceof Yorkshires technological edge. Theseincluded Software & Programming and

Biotechnology & Drugs.

At the same time, a more traditional sectorclearly demonstrated the truth of the Yorkshireexpression Where theres muck, theres brass.Waste Management saw revenues up nearly40% and profits rise by 50% as environmentalconcerns increased demand for clean solutions.Manufacturing, at one time somewhat written offamid the smoke and mirrors of virtual productsand easy money, continued to progress this year.Recession-friendly businesses also thrived, fromvalue-end retailers to metal dealers.

MARKETS

The good news needs, however, to be put in thecontext of the hard economic environmentYorkshire faced during the reporting period, andlooks set to endure for some time. A whole hostof setbacks for consumers from high inflation tounemployment, low wage rises and Governmentcutbacks meant retailers had to work harder

to gain their custom. Businesses, with therecession still clear in their memories, struggledto build the confidence needed for furtherinvestment.

While the domestic market struggled, troubles inthe eurozone did little to accelerate overseasdemand. Given these circumstances, the regionappeared to perform well, with the value of goodsexported to the EU rising by over a third to4.4bn. America, too, proved a growing market forYorkshire goods, although there was no evidenceof increasing exports to Asia. We must not getcarried away, however, as exports represent only

11% of total revenues. Although this is up slightlysince the previous reporting period, there stillappears to be little success in seeking outsignificant export growth.

DEBT

As might be expected, Yorkshires business leaderstook the opportunity to bank profits and paydown debt during the reporting period. As a result,Group gearing (excluding financial institutions)fell from 62% to 55%. This cautious approach,

however, had a less welcome side effect. At theend of the reporting period, the Group had seen areduction in business spending, with investmentin property, plant and machinery falling by over20% to 2.4bn. Although such parsimony maybe no bad thing in the short term, to remaincompetitive it is likely that future spending onnon-current assets will need to increase.

DIVIDENDS

The Board of Yorkshire Plc is pleased to announcenotional earnings of 21.7p per share and a totaldividend of over 1bn. This is not only more

generous than last year but more stronglycovered.

OUTLOOK

With UK GDP growth of just 0.9% in 2011, andmany forecasters predicting little or no increase in2012, we should be in no doubt that there arestill tough times ahead. Yorkshires majorexposure to domestic food retailers may provegood insulation from recession and any eurozonecrises even in tough times people have to eat.But at the same time its vital that Yorkshire,having faced the dark depths of recession and

emerged in reasonable shape, looks beyond itstraditional base to find and invest in newopportunities and markets. Having got firmlyback on our feet, the challenge now is to createa springboard for growth.

44mTHE MOST PROFITABLESECTOR IS RETAIL, 44MPER COMPANY WHILSTAVERAGE CHEMICAL &BIOTECHNOLOGY COMPANIESPROFITS HAVE ROCKETEDFROM 5M TO 40M



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Finance Directors review

FACING THE HEADWINDDESPITE TOUGH MARKET CONDITIONS, YORKSHIRE

BUSINESSES GAINED GROUND.

ANOTHER YEAR, ANOTHER SOLID FINANCIAL PERFORMANCEFROM OUR REGION.


LIZ RICHARDSGroup Finance Director, Callcredit GroupTel: +44 (0) 113 826 6204

Email: [email protected]

Liz Richards is the Group Finance Director of Callcredit Information Group. A languagesgraduate, Liz began her career in banking with Lloyds TSB, then qualified as a CharteredAccountant with Ernst & Young. She worked across a variety of sectors including FinancialServices and Manufacturing and in several senior financial roles before joining Skipton BuildingSociety in 1998. Liz has been involved with Callcredit since its inception and was appointedGroup Finance Director in 2002. She was part of the team which led the buy-out of theGroup to private equity house Vitruvian in 2009.


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THE NUMBER OF FEMALE

DIRECTORS IN POSITION ATTHE END OF THE PERIOD WASONLY 9.3% WITH NOSIGNIFICANT MOVEMENTFROM LAST YEAR

9.3%

REVENUE

Group revenue increased by 5% to 83.8bn.On a like-for-like basis, ignoring the effect ofchanges in composition of the Group, revenueincreased by 6%. This is a substantialimprovement on the two previous years,

in which we reported declining revenues.

Food retailers Morrisons and Asda/Walmart,which account for 44% of Group revenue, sawrevenue rise by nearly 7% and 4% respectivelybut more significantly perhaps over 68% ofcompanies saw an increase in revenue in the year,compared with just 44% in the prior year. Somecompanies in sectors hit hard over the last fewyears seem to be showing signs of bouncing back,in particular in Property and Construction relatedindustries. However, most sectors still have theirstruggling companies and there is no immediatesign of a full return to pre-recession levels of

revenue growth.

PROFIT

Gross margin improved slightly to 21.8% from21%, but operating costs increased by 4.6%.Although a 4% rise in staff costs would appear tobe a major contributor, it is worth noting thatthese were driven largely by an increase in staffnumbers, up 2% to 468,750. Wage inflation, infact, remained relatively low, with average pay peremployee increasing by just 2% to 23,270, wellbelow the rate of inflation.

Operating profit rose by 27% to 4.5bn, which

was a strong performance but not as dramatic asthe prior year rise of 54%. Revenue growth is themain reason for the improvement.

Pre-tax Group profit increased by 1.4bn to3.3bn (75%) benefitting from the improvedoperating profit but also reduced finance costs asdiscussed below. Of that increase, 0.3bn is

attributable to net changes in the Groupcomposition: like-for-like increase in pre-tax profitis 62%. Surprisingly, perhaps, it was not Morrisonsand Asda/Walmart that accounted for this, asthey saw little overall change in aggregate profits.The rest of the Group saw a substantial shift infortunes from the prior year with 67% ofcompanies improving profits compared to 50% inthe prior year. Kelda (see below), Croda andYorkshire Building Society saw some of the largestimprovements.

UK V OVERSEAS GROWTH

Group revenue is still generated predominantly inthe UK with overseas revenue generation slightlyup at 11% of total revenue. Revenue has grown inboth Europe (42%) and North America (67%) butthese numbers remain small in the context ofoverall revenue. More worryingly, revenue in Asiahas fallen and it seems that the Group is making

little headway in this key emerging market.

FINANCE AND TAX COSTS

The Groups net finance cost decreased from1.7bn to 1.3bn, a fall of 23%. This is a functionof the fall in the Groups gearing, discussed below,but also a 400m (nearly 100%) reduction in thecharge for fair value movements on substantialswap instruments held by Kelda. The Groupseffective tax rate fell further this year from 40%to 32%, helped by a reduction in the corporatetax rate. The combination of the increase in pre-tax profit and the benefit of a lower tax charge

resulted in profit after tax increasing by 100%,from 1.1bn to 2.2bn.

CASH GENERATION AND FINANCING

Despite the improvement in profits, cashgenerated from operating activities fellsubstantially, from 6.8bn to 3.0bn. This is due

mainly to working capital movements in financialinstitutions.

Net cash flow on investing activities changeddramatically, from a 3.5bn outflow to a 0.7bninflow. The main reasons were a net cash inflowon the Yorkshire Building Societys acquisition of

the Chelsea Building Society and increased salesof debt securities by financial institutions.

Excluding these, cash paid for businesses andinvestments was static at 0.4bn. Investment inproperty, plant and equipment reduced to 2.4bnfrom the prior year level of 3.1bn.

The Groups gearing (excluding financialinstitutions), has fallen to 55% from 62% in the

prior year as cash generation reduced net debt.If we also exclude highly geared utility businesses,gearing stands at 33% (prior year 36%).

Current debt exposure for financial institutionshas increased from 32.2bn to 36.1bn but forother businesses, it is 1.8bn, down from 2.4bnin the prior year.

DIVIDEND AND PENSIONS

Dividends increased very slightly in the year to1,067m from 949m and are now covered2.10 times by profit compared with 1.19 in theprior year. The Groups net defined benefitpension scheme liabilities decreased from 1.7bnto 1.3bn, despite the impact of historically lowbond yields.

PROSPECTS

A solid year of financial progress for the Groupmeans that we can face 2012 with a strongerbalance sheet. But there is no room forcomplacency. We expect the environment toremain tough, meaning that costs must continueto be tightly controlled and that future growth islikely to prove more challenging.



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Funding & Gearing

POSITIONED FOR GROWTH?STATIC BUSINESSES CONTINUE TO RECEIVE BANK

SUPPORT AND PAY DOWN DEBT, BUT FUNDING FORNEW VENTURES REMAINS ELUSIVE.

IN MANY WAYS 2011 WAS A BENIGN YEAR FOR YORKSHIREBUSINESSES WITH MOST, UNLESS IN SERIOUS DISTRESS,HAVING LITTLE PROBLEM REFINANCING EXISTING LOANS.AND AS PROFITS AND REVENUE ROSE FOR THE GROUP, MANYOF ITS CONSTITUENT BUSINESSES TOOK THE OPPORTUNITYTO PAY DOWN DEBT. AS A RESULT, GEARING (EXCLUDINGFINANCIAL INSTITUTIONS AND UTILITIES) FELL FROM36% TO 33% IN THE REPORTING PERIOD. BUT DOES THISRELATIVELY ROSY PICTURE HIDE A GROWING PROBLEM:YORKSHIRES ZOMBIE COMPANIES?



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HOW TO SPOT A ZOMBIE

Classic signs are static profits, flat markets andhigh levels of debt. Zombie companies have theability to pay back interest but lack the ea rningsto clear their debts. Lenders were generally happyto keep them alive in 2011, rolling debt over

rather than realising a loss. But as companies tryto recover from their zombie state, they willprobably find any cash they generate earmarkedby the banks to pay down debt and any attemptsto access new funds blocked.

AS A RESULT MANY COMPANIESSPENT 2011 LOCKED IN ASTALEMATE WITH THEIRINCUMBENT LENDER. THIS LOOKSSET TO CONTINUE UNTIL THINGSGET SIGNIFICANTLY BETTER OR WORSE.

OLD MONEY

This willingness of banks to refinance staticcompanies rather than crystallise losses is onereason that the wall of debt we predicted lastyear proved relatively easy to scale. Thedisproportionately large quantity of debt due thisyear or next is simply being shunted into the longgrass of 2014 and beyond, by which time thehope is that the recovery will have injected more

life into flat markets. In the meantime banks cangenerate useful income from charges, whilecompanies, as long as rates stay low, are findinginterest payments manageable.

NEW MONEY

If you were looking for new money in 2011 youwere likely to find conditions less benign. Theeurozone debt crisis had a negative impact onliquidity and continued to make banks cautious.For those with business-to-consumer

propositions, finding funding was particularlytough, as banks remained understandably wary offurther exposure to the UKs fragile Retail sector.B2B propositions fared little better unless theyprovided strong UK platforms with access tooverseas growth markets. Relatively few of themajor banks had much appetite for fundingmid-market proposals with the exception provingto be the rule.

Given the continuing pressure on banks, bothregulatory and macroeconomic, it is hard to seethis situation reversing in 2012. Basel III looks setto make capital even scarcer and more tightly

controlled, while the possibility of sovereign debtdefault in the eurozone will encourage banks toact even more cautiously. The only bright spot forborrowers may be the pressure, particularly onGovernment-controlled banks such as RBS andLloyds, to increase lending to businesses.

With the economy recovering, Group profits risingand businesses looking to grow, we might expectany funding gap to be filled by alternativefinancing sources. However, except for those largecorporates able to launch bonds or find otherways to issue and sell on debt, we have seen littleevidence of this. For mid-market companies wehave seen some increased activity by asset-basedlenders (ABLs). Interestingly, this was a year whennearly all the major ABLs operating in the areabecame American owned. Burdale was taken overby Wells Fargo & Company in early 2012, whilePNC earlier entered the UK market following itsacquisition of KBC Business Capital, and GECapital is a major US global player.

OUTLOOK

Despite the low growth environment, andprovided there is no disorderly eurozone default,we expect benign conditions to continue. As aresult financing should be straightforward forexisting borrowers, although sourcing new moneyis likely to remain a problem. The obvious danger,

therefore, is that as we head into a vital period ofpost-recession rebuilding and reinvention, capitalmay not be allocated efficiently. If too muchfunding goes to keeping zombies on their feet andtoo little to helping fresh blood to thrive, thenthere will clearly be risks to the future health ofthe region.


LLOYDS TSB IS THE LEADINGBANK, NAMED IN 26FINANCIAL STATEMENTS,AND EVERSHEDS ARE THETOP LEGAL ADVISERS, NAMEDIN 13


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M&A

BEATING A PATH TO OUR DOOROVERSEAS BUYERS WERE THE MAIN MOVERS IN

M&A DURING 2011, WITH PRIVATE EQUITY TAKINGA BACK SEAT.

NEARLY ONE-THIRD OF THE GROUPS 150 CONSTITUENTBUSINESSES ARE OWNED BY OVERSEAS COMPANIES.AND JUDGING BY CURRENT TRENDS IN THE M&AMARKET, THAT FIGURE IS ONLY GOING TO RISE.



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While four years ago three-quarters of M&Aactivity in our region was private equity driven,this has now reversed. The majority of sales arenow trade deals driven by overseas buyers.

For example, calendar year 2011 saw Indiantycoon Ranjiit Boparan take over Northern Foods

in a 342m deal, US group Hain Celestial buyCovent Garden soup maker S Daniels for 165m,and Singapores Olam International acquire ex-Group company Brittania Food Ingredients for34m. Ireland also added to its stake in Yorkshireplc through DCC Groups purchase of AdventData for 25m.

Whats driving this? Firstly, many large overseascorporates, having cut costs during the recession,now have cash surpluses to invest. Also, as themacroeconomic climate remains tough,valuations are relatively low. And for non-EUbuyers, the UK is a preferred hunting ground

because it is seen as a safe staging post forEurope, without many of the dangers inherent inthe eurozone. Finally, the relatively low poundmakes prices more appetising for foreign buyers.This inward investment is likely to be good newsfor the Group as it can offer much-needed accessto new funds and markets.

PRIVATE EQUITY

Faced with such strong competition fromoverseas buyers, UK Private Equity firms wereforced to take a back seat on existing companysales in 2011, while new to market deals were

relatively thin on the ground. Private equityplayers were also impeded by the lack of liquidity(discussed in our Funding and Gearing section).As a result, since Cinven completed its takeover ofSpice in late 2010, major deals have been elusive.Key PE players like LDC , however, continued tosupport local activity such as Driver Hiressecondary buy-out from Spirit Capital andlearndirects 40m buy-out.

BOLT ONS

In general the market has turned its attention tobolt on acquisitions. These are when a corporatebuys a competitor or related company to add totheir existing business. The benefits come fromtaking out a competitor, growing market share,

increasing overall profits and gaining economiesof scale.

RATHER THAN BEINGTRANSFORMATIVE, BOLT ONDEALS ARE MORE ABOUTCONSOLIDATION, PROVIDINGA VALUABLE ROUTE TO GROWTHIN FLAT MARKETS.

Examples during the 2011 calendar year fromthe Groups 150 include: Morrisons acquisitionof Kiddicare.com for 70m and Asda/Walmartspurchase of the former Netto stores for 28m;serial acquirer Fenner bought Australian-basedBelle Banne and US-based MRI Manufacturingand Research; and Pace flexed its muscles with

the acquisition of US business 2Wire Inc for313m and Irish company Latens Systemsfor 27m.

TURNAROUND FUNDS

While some traditional PE groups struggled toraise funds during 2011, there seemed to be nosuch problem for turnaround firms. Leeds-basedrestructuring fund, Endless, had no trouble raising220m for their new fund and were active in themarket. Restructuring deals during 2011 includeda 28m re-finance to support new factorycapacity and international expansion for Allam

Marine, and a 30m capital restructuring forglobal consultancy WYG.

GROUP ACQUISITION SUMMARY

The number of Group transactions in the periodof this report fell from 30 to 19, but the total costof these (including shares and loan write offs)rose from 500m to 801m. The largesttransaction in the period was the 340m transferof Chelsea Bu ilding Society to Yorkshire BuildingSociety. Apart from financ ial institutions, thelargest transaction was the 313m acquisition of2Wire Inc by Pace.

OUTLOOK

With many corporates holding relatively highlevels of cash on their balance sheets and PrivateEquity continuing to have an overhang of funds,we foresee good support for deal volumes in2012. And we expect that the themes of overseasbuyers and consolidation through bolt ons willcontinue to play out in the year ahead.


LOOKING UPBDO M&A SURVEY 2011

Despite economic turmoil, corporate UKmaintains a strong desire for M&A.

80% ANTICIPATE MAKING

ACQUISITIONS TO MEET GROWTHTARGETS

80% PLAN TO INCREASE MARKETSHARE THROUGH ACQUISITION

65% PLAN TO GROW INTO NEWGEOGRAPHIES THROUGH ACQUISITION

55% SEE VENDOR PRICE EXPECTATIONSAS THE BIGGEST CHALLENGE TO M&AACTIVITY

38% SEE THE ABILITY TO RAISE BANKDEBT EXPECTATIONS AS THE BIGGESTCHALLENGE TO M&A ACTIVITY

80% HAVE SEEN ACQUISITIONS MEETOR EXCEED THEIR EXPECTATIONS.

BDO Corporate M&A Survey 2011The survey questioned acquisitivecompanies of all shapes and sizes including quoted plcs, private equity-backed companies and owner-managedbusinesses.

IS THE SKY THE LIMIT FOR M&A?Corporate M&ASurvey2011

4848 OF THE 150 COMPANIESARE OWNED OVERSEASAND 31 OF THE 150 ARECONTROLLED BY DIRECTORSAND INDIVIDUALS


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Business restructuring

MIND THE GAPA CLEAR DIVISION WILL EMERGE THIS YEAR BETWEEN

UK BUSINESSES ABLE TO TAKE ADVANTAGE OFGROWTH OPPORTUNITIES AND THOSE LEFT BEHINDTO FIGHT IT OUT IN DIFFICULT MARKETS.

BUSINESS FAILURE PREDICTIONS REFLECT THIS TURBULENTTWO-SPEED OUTLOOK. FOLLOWING A 6% INCREASE IN THETOTAL NUMBER OF INSOLVENCIES DURING 2011, WE AREPREDICTING ANOTHER MARGINAL INCREASE IN 2012;HOWEVER, THESE ARE EXPECTED TO OCCUR LARGELY IN THESME MARKET. GOOD QUALITY BUSINESSES CAN AND DOFIND MARKET OPPORTUNITIES IN DIFFICULT TRADINGCONDITIONS. THE WINNERS WILL BE THOSE WHO ACCEPTTHE ECONOMY IS NOT GOING TO BOUNCE BACK IN THESHORT TERM AND TAKE APPROPRIATE ACTION TO MEET THEMARKET CHALLENGE.



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Businesses in Yorkshire showed a lot of tenacity.Faced on the one hand by a major squeeze ondomestic consumer spending as inflation rose atroughly twice the rate of earnings growth, and onthe other by reduced public spending and slowingeurozone demand, most Yorkshire businesses cuttheir cloth accordingly and navigated 2011

relatively successfully.

NOW THAT COSTS HAVE BEENREALIGNED AND EFFICIENCIESIMPLEMENTED, THERE AREQUESTION MARKS OVER HOWMUCH MORE CAN BE SQUEEZEDFROM THE CORE BUSINESS.

SECTORS

Businesses that rely on discretionary spendremain the hardest hit with continuing pressureon Retail, Leisure and Housing-related sectors.Further, mounting pressure in the ProfessionalServices sector points to a continuation of theconsolidation, restructuring and failuresexperienced throughout 2011.

On the positive side, high-tech growth could begood news for Telecoms, Media and Technology.Manufacturing should be comparatively wellplaced too, benefitting from lower commodityprices and new export opportunities driven byglobal growth.

We do not predict the economy to bounce backin the short term, therefore business performancewill not depend entirely on sector in stead thosebusinesses that decide to take action rather thanwait it out have greater potential for growth. The

key to success in current markets appears to bearound consumer value, client service, innovationand adaptability.

THE TRADING ENVIRONMENT

UK growth prospects look uncertain throughout

2012. It is expected that the OBR will revisedown its GDP forecast, currently at 0.7% growth,bringing it closer to CEBRs prediction of a0.4% contraction. The potential for risingunemployment, stagnant wage growth andreduced spending power may knock businessconfidence in particular those close to theconsumer pound. Add this to some fairly majorrisks including uncertainty around the eurozonedebt crisis and Middle East tension and theimmediate future appears challenging.

THE RISE AND FALL OF THE RESTRUCTURINGADVISER

The traditional role of the insolvency practitionerhas evolved in recent years with managementand lenders demanding new skills from arestructuring professional. The restructuringadviser is now a multi-skilled, cross-disciplineanimal with the ability to deliver diverse solutionswhich integrate seamlessly with private equity,venture capital and other financial stakeholders.

Exhausted management teams have increasinglyturned to these advisers to assist them inboth operational and financial restructuringimprovements. This move has been welcomed

by lenders who have long viewed the proactiveengagement of specialists to augmentmanagements core skill set as a progressivemove.

THE ROAD AHEAD

Business failures have not hit expec ted levelsdue, in part, to the supportive approach takenby the banks and HMRC and the ongoing lowinterest rates. With the first signs that lendersmay increase interest rates in 2012 and thenoticeable hardening attitude of HMRC towardTime To Pay agreements, the environment maybe about to change.

Further, the co-operative attitude of suppliersthat underpinned a number of businesses abilityto manage scarce cash resource last year (as thesupply chain avoided aggressive debt collection

strategies to prevent crystallising losses), mayunravel if banks begin to price cash availabilitymore aggressively.

AS BASEL III IMPLEMENTATIONGETS NEARER, OLD-FASHIONEDMODELS AND MARKETS MAYFIND IT HARDER TO ACCESSCAPITAL BUT WELL THOUGHT-OUT, INNOVATIVE PROPOSALSARE MORE LIKELY TO FINDINVESTMENT PARTNERS.

Its not all doom and gloom though. As we discussin the Outlook section, there are opportunities

that have the ability to transform businesses,particularly around technology and export-ledmanufacturing. For other sectors, Yorkshiresability to cut costs and show great resilience willcontinue to carry many through the ongoingtough times.


PREDICTED CHANGE IN BUSINESS FAILURES BY SECTOR: 2012 COMPARED WITH 2011

-6% -4% -2% 0% 2% 4% 6% 8% 10% 12% 14% 16%

n Business Services n Property and Construction n Retail and Wholesale nManufacturing n Personal Services

nTelcoms, Media and Technology n Leisure nTransport


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Fraud & Forensics

WORST FEARS COME TRUEAS PREDICTED, REPORTED FRAUD ROSE SHARPLY

IN 2011 AND OUR REGION BECAME ITS BIGGESTVICTIM OUTSIDE LONDON.

THE VALUE OF REPORTED FRAUD ROSE TO MORE THAN2BN IN THE UK LAST YEAR, THE HIGHEST FIGURE EVERRECORDED BY OUR BDO FRAUDTRACK REPORT. THISREPRESENTS A 50% INCREASE ON LAST YEARS FIGUREOF 1.4BN.



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OUR REGION FARED EVENWORSE. REPORTED FRAUDACROSS YORKSHIRE AND THENORTH EAST ROCKETEDSIX-FOLD TO 330M IN 2011,

GIVING IT THE HIGHEST FIGURESOUTSIDE OF LONDON.

Yorkshire cases included a Ponzi investmentscheme that targeted British expatriates living inMallorca, worth 6m in losses, and a Doncaster-based car fraud valued at 2.5m. A Bradford planthire scheme featured on the list with 2massociated losses, as did a 1.9m tax fraud by aregional financial adviser.

SECTORS

Finance and Insurance, which contributed overhalf of all UK reported fraud in 2010, wasresponsible for only a quarter in 2011. This isalmost certainly due to their heavy investment insystems and technologies to prevent and trackfraud. But with over 500m of fraud reported in2011, the sector has plenty more work to do.

It was a different story in the Retail sector, whichaccounted for 12% of all fraud in 2011, comparedwith just 2% in 2010. Given the tough economicclimate and the fact that 30% of all fraud iscommitted by suppliers and customers this riseis perhaps not surprising. But tackling fraud more

seriously could help retailers rebuild profitmargins in tough times.

While Constructions 1% share of reported fraudin 2011 looks good on paper, it is likely to be thetip of the iceberg. Fraud and corruption have beena commercial reality in Construction for a longtime, so the fact that so little is reported suggeststhe sector needs to bring its business practices upto date, especially in the wake of the Bribery Act.

TYPES OF FRAUD

Tax fraud accounted for the highest percentage(36%), closely followed by fraud committed bysuppliers and customers (30%). Next cameemployee fraud and last, but not least, corruption.Although representing just 4% of reported fraudin 2011, corruption has been steadily risingsince 2009.

WHAT TO DO IN 2012

Put simply, question everything and assumenothing. Dont just focus on your suppliers,customers or other external contacts: fraud, likecharity, can begin at home. Reacting quickly whenanomalies occur is good, but its not enough. You

need to be preventative and that means havingthe right systems and procedures in place fromthe start. Even then, you will not be able to designall fraud risk out of your business but you willat least have the tripwires in place to catchfraudsters out in 2012.


RULES FOR FRAUD DETECTION

Follow these rules to keep fraud downin 2012

n Know who you are doing business with

n Invest in background checks during therecruitment stage

n Ensure you have in place adequateprocedures and process to detect fraudand prevent fraud

n Make it easy for your staff toreport fraud

n Understand your responsibilities underthe Bribery Act and set a no-toleranceprogramme for your organisation.


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Tax

STAYING AHEAD OF THE GAMEAS LEGISLATION CHANGES AND TOUGH ECONOMIC

CONDITIONS CONTINUE, COMPANIES NEED TOADAPT TO NEW REALITIES.

FIRST, THE GOOD NEWS. THE GOVERNMENT IS FOLLOWINGTHROUGH ON ITS COMMITMENT TO MAKE THE UK A MORECOMPETITIVE AND STRAIGHTFORWARD PLACE TO DOBUSINESS. THE CORPORATE TAX RATE REMAINS ON ADOWNWARD TRAJECTORY TOWARDS 22% BY 2014,WHICH HAS CONTRIBUTED TO A REDUCTION IN THEGROUPS EFFECTIVE TAX RATE FROM 40% TO 32% DURINGTHE REPORTING PERIOD. LOOKING AHEAD, THE REFORM OFTHE CONTROLLED FOREIGN COMPANIES (CFC) REGIMELOOKS SET TO DELIVER A BUSINESS-FRIENDLY OUTCOME.


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IN THE TAX WORLD, HOWEVER, ITS RARELYTHAT STRAIGHTFORWARD.

The price businesses paid for the lower corporatetax rate was the loss of a number of taxallowances for example those relating toindustrial buildings. While it would be wrong to

blame these developments for Yorkshires fall inbusiness investment (property, plant andequipment investment down 23% to 2.4bn),it is fair to assume they did not help. So, althoughsimplification of the tax regime is welcome, itdoes provide rather a blunt instrument forencouraging growth. Reversing Yorkshiresdeclining business investment may ultimatelyrequire the targeting of specific areas or sectorsthrough the introduction of further meaningfulinvestment incentives but at present theseappear to be off the agenda.

THE YEAR IN REVIEW

HMRC appears to be seeking to engage withlarge business, and provided sufficient resourcescontinue to be available in order to support thisapproach, it should help companies obtain clarityaround their tax affairs. The progress made on thereform of the taxation of foreign profits is a clearexample of a legislative response to calls to makethe UK an attractive place to do business, and willbe welcomed by many large groups. In particular,HMRC will hope these reforms are well receivedby those types of groups which have flexibilityover where to locate their holding companies.

A hurdle facing Yorkshire businesses in 2011 wasthe introduction of tax filing in the iXBRL format.Although this, to some extent, placed theresponsibility for making HMRCs job easier ontocompanies, it was implemented in typical nononsense Yorkshire manner, with the minimumof fuss.

HMRCs attitude to Time To Pay (TTP), havingswung from lenient to harsh over the previoustwo years, settled to a more moderate andconstant state. As advisers, we found it easier toget clarity on what HMRC would agree, allowingcompanies to gain more certainty.

WHERE DO WE GO FROM HERE?

One of our key themes for companies is the needto adapt their tax strategies, which may havebeen put in place a few years back, to currentrealities. When the recession first hit there wereperhaps grounds for thinking strategy requiredtemporary, rather than permanent adjustment. Asit now seems clear that economic conditions aregoing to remain tough for the foreseeable future,it will be necessary for many businesses to takeaction in reassessing their approach to taxation.

TO TAKE JUST ONE EXAMPLE:WHEN THE 50% INCOME TAXRATE WAS FIRST INTRODUCEDIN APRIL 2010, MANAGEMENTTEAMS, THINKING IT WOULDBE TEMPORARY, REACTED BYADVANCING OR DELAYINGBONUSES. TWO YEARS LATER,THE HIGHEST TAX RATE IS STILLHERE (ALBEIT AT 45% FROM2013) AND BUSINESSES NEEDTO TAKE A MORE MEASUREDLONG-TERM OUTLOOK AT HOWTHEY REWARD STAFF. ASIDEFROM CONSIDERATIONS OF TAXEFFICIENCY, EMPLOYERS MUST

CONSIDER HOW A LIMITED POOLOF DISTRIBUTABLE CASH CANBE SHARED OUT IN A WAY THATBEST INCENTIVISES KEYEMPLOYEES.

Similarly, larger companies may seek to reassesshow they are structured. The most efficient andtax-friendly way to operate a number of yearsago may not necessarily represent the bestapproach in 2012 and beyond.


ONE TO WATCH IN 2012

Changes to the Controlled ForeignCompanies (CFC) regime

These changes, due to be implemented in2012, are seen as a key part of theGovernments strategy to make the UK

more tax competitive. In essence, theymove the UK towards a more territorialsystem, such that only foreign profitsartificially diverted from the UK should besubject to a CFC charge.

What will the changes mean?

n Foreign subsidiary profits will only besubject to the CFC regime if theyderive from UK activities that relateto the assets or risk of the foreignsubsidiary.

n Without current CFC constraints

companies have the potential to buildmore efficient financing arrangements,international supply chains of goods,services and licensing arrangements.

n It may be possible to license andexploit non-UK connected IP moreefficiently intra-group.

For international companies, their UKsubsidiaries and suppliers, the changescould have a major impact.

54%54% OF THE GROUP AREBASED IN WEST YORKSHIRE.LEEDS IS THE MOSTREPRESENTED CITY WITH 32AND DONCASTER THE TOPTOWN WITH 7


18/44


Outlook

TIME TO MOVE ONYORKSHIRE BUSINESSES HAVE DONE A GREAT JOB

OF CUTTING COSTS AND PAYING DOWN DEBT.NOW ITS TIME TO LOOK UP OR GET LEFT BEHIND.

AS YORKSHIRE BUSINESSES FACE YET ANOTHER YEAR OFUNCERTAINTY ITS EASY TO FEEL A SENSE OF DJ VU.BUT SIMPLY RELIVING OUR VERY OWN GROUNDHOGDAY OF SQUEEZED DEMAND AND MACROECONOMICBLUES IS UNLIKELY TO BE THE BEST ROUTE TO SUCCESS.


19/44

Costs have been cut, balance sheets strengthenedand profits increased. But its questionable howmuch further this process can usefully go.The next round of cost-cutting is likely to notonly be harder and less profitable, but possiblyrelationship changing. It may require businessesto go beyond their usual practices to seek out

newer, hungrier suppliers and to outsource morenon-core functions.

SO PERHAPS THE REALCHALLENGE FOR 2012 IS NOTCOSTS, BUT GROWTH. FIRSTLY,FINDING IT, THEN HAVING THECONFIDENCE TO GRAB IT.

Not least because there is evidence of a gapopening up, between those businesses who can

adapt to new markets and opportunities andthose that risk being stuck in a chase to thebottom as they fight over static revenues andfalling margins. Being in the first group is likely tobe increasingly important in 2012, as customersand banks become tougher nuts to crack.

Growth might be found in a number of ways.Firstly overseas and preferably beyond theweakening eurozone. With Chinese GDP predictedto rise by 7.6% this year and India s by 6%,these are vital markets, particularly for theManufacturing sector, helped by the weak pound.Secondly, technology appears to have a strong

role to play. Indeed, in a recent survey by theFederation of Small Businesses, ComputerServices was the most optimistic sector. Itsimportant to understand that this isnt just anopportunity for hi-tech companies: technologycontinues to transform all sec tors. In Retail, forexample, while overall UK sales value rose 4.9% in

2011, internet sales were up 22%. Finally,strong branding, outstanding service (again, oftendriven by new technology that recognisescustomer preferences) and the ability to generateand exploit intellectual property are all driversfor growth.

But, as ever in todays environment, its not quitethat simple. Turning new opportunities into solidresults needs more than good ideas and hardwork it requires finance. Traditionally, anentrepreneur seeks to share risk. But in todaysclimate, only the very best business cases will getthe funding they need from their banks. Instead,Yorkshire companies may have to makeconnections across their industry and acrossregions to see how they can gain partners to helpaccess new markets, develop new products andattract finance. As advisers who can bring aninternational network to Yorkshire businesses, thisis a trend we are already seeing and facilitating.

SO, HAVING DONE A GREATJOB OF PLOUGHING THERECESSIONARY FURROW, 2012MAY BE THE TIME FOR YORKSHIREBUSINESSES TO LOOK UP ANDTHINK LATERALLY.


2012 HOT TOPIC: GOVERNMENT AND INFRASTRUCTURE

TAKING THE POSITIVESDESPITE MAJOR CHALLENGES FOR PUBLIC SECTORORGANISATIONS AND THEIR SUPPLIERS, OPPORTUNITIES REMAIN

NEGATIVES

*Local Enterprise Partnerships

POSITIVES

Public sector organisations need to find new ways to deliver services and generate income giving the private sector an opportunity to sell outsourcing and innovation.

New rules will give local authorities more incentive to invest in their region and generategrowth (for example, being able to retain business rates).

Local authorities will have fewer restrictions, allowing them to deliver in the most efficient way.

The Priority School Building Programme is going ahead and will offer opportunities in 2012and beyond.

Since the war there have never been more than two consecutive years of public spending cuts.Yorkshire is currently facing seven.

Although press focus tends to be on cuts in services, reductions in capital expenditure will affectmany more Yorkshire businesses, particularly those involved in Construction.

A Government review of the Private Finance Initiative may further delay opportunities forcapital investment.

The National Infrastructure Plan will have only limited impact in the region.

Yorkshire Forward has gone, and its replacement, LEPs*, are constrained by funding.


20/44

2012 HOT TOPIC: SUSTAINABILITY

IF YOU DONT GETSUSTAINABILITY, IT JUST MIGHTGET YOU FIRST.IF, LIKE MANY YORKSHIRE BUSINESSES, YOU THINKSUSTAINABILITY IS A NICE TO HAVE RATHER THANBUSINESS CRITICAL, THEN 2012 MAY BE THE TIMETO THINK AGAIN.


Last year saw a local supplier delisted, overnight,for failing to meet its customers sustainabilitycharter stark evidence that large organisationsare now using sustainability audits as amechanism for rationalising their supply chainsand proactively managing their brand. Largeinvestor groups and banks are at the same time

increasingly concerned with the medium-termeffects of climate change and moving itsimportance into their core investment portfoliodecision-making criteria. In the media consumersare bombarded on a daily basis, with issuesfrom carbon footprints to air miles and fromto waste to child labour creating uncertaintyand confusion.

Add to this the exciting possibility that the regionmay soon find itself at the heart of a new supercluster for the offshore wind industry and itbecomes clear that sustainability and cleantechnologies will be a hot topic for Yorkshire

businesses in 2012.

YET, ACCORDING TO OURSURVEY, RELATIVELY FEW GROUPCOMPANIES ARE REPORTING ONSUSTAINABILITY, PERHAPSINDICATING THAT THEY ARE NOTGIVING IT SUFFICIENT FOCUS.

There are certainly plenty of reasons why itshould figure higher on the corporate agenda.

These vary from improving competitivepositioning to ensuring compliance with new andexisting legislation and reducing long-term energyand raw material costs. In addition, a well alignedstrategy for sustainability can help driveinnovation and be a route to open new markets.

HITTING YOUR BOTTOM LINE

The key to successfully unlocking the potentialoffered by sustainability lies in understandingwhich part of the broad agenda is relevant toyour business, then addressing and implementingit efficiently and cost-effectively. Whether its

creating the appropriate focus, auditing androbust measurement of KPIs, or even maximisingtax advantages and applying sustainability toincrease shareholder value the objective shouldbe to deliver the right solution for each individualbusiness. Sustainability invariably has no one sizefits all solution.

2012 SEIZING THE GOLDEN OPPORTUNITY

There is a glittering prize within the regions grasp and not just for Yorkshire athletes at London2012. Even though Leeds narrowly missed out onbeing the chosen location for the Green

Investment Bank, it remains at the centre of avibrant green economy with the potential tobecome a hub for clean technology innovation.With the Humber Estuary already acknowledgedas a super cluster for offshore wind technologies,our region is strongly positioned, with Leeds at itsfinancial centre. However, the challenge will be tograsp these opportunities locally, making surethat Yorkshires strong manufacturing base canadapt and deliver to this rapidly evolving market.


21/44

BDOS NATIONALSUSTAINABILITY PRACTICE,BASED IN LEEDS, HAS THEEXPERIENCE AND SKILLS TOHELP BUSINESSES ACROSS

THE REGION. OURSPECIALIST PRACTICEWORKS ALONGSIDE BDOSESTABLISHED SERVICEAREAS USING A STRONGNO-NONSENSECOMMERCIAL FOCUS TOUNDERSTAND YOURORGANISATION ANDDELIVER THE RIGHT

SOLUTION.

Our services help our clients to:

n Build and protect brand value andreputation

n Be operationally efficient

n Improve competitiveness and retainexisting clients

n Manage risks and comply withregulation

n Drive innovation

n Recruit and retain the best talent.


BEHAVING RESPONSIBLY?WE STUDIED HOW SERIOUSLY YORKSHIRESTOP 150 COMPANIES ARE TAKING SUSTAINABILITY.

Yes 25%

75%

100%

No

NON-LISTED COMPANIES WITH ENVIRONMENTAL POLICYPARAGRAPHS IN DIRECTORS REPORT

Yes 8%

92%

100%

No

COMPANIES WITH SPECIFIC ENVIRONMENTAL KPIS OR TARGETS

Yes 14%

86%

100%

No

COMPANIES WITH SUSTAINABILITY DATA

Carbon Emissions 13

12

6

6

8

45

Waste Management

Recycling/Packaging

Energy Consumption/Water

Own Business Practices and other

CATEGORIES OF ENVIRONMENTAL DATA PRESENTED (NUMBER)

189mENERGY AND UTILITY COMPANY PRE TAXPROFITS ROSE TO 189M FROM 52M LAST YEAR

EVEN THOUGH REVENUE FELL BY 4.7%


22/44

COMPANY PROFILE


Retail 1,1482644,275

Construction (16)157,655

Manufacturing 263235,219

Energy and Utilities 18974,812

Business Services 62265,529

Food and Drink 98175,639

Financial Services 32794,151

Transport and Motor Services 61142,872

Other (5)5969

Public Sector/Healthcare/Educational (40)4987

Chemicals and Biotechnology 15941,707

2,24615083,815

SECTOR SUMMARY 2012REVENUE NUMBER PROFIT

M AFTERTAX M

OWNERSHIP

n Overseas Companies 48

n UK Companies 15

n Directors and Individuals 31

n Private Equity listed 26

n Investors 9

n Other 21

REGION

n East Yorkshire 17

n North Yorkshire 21

n West Yorkshire 81

n South Yorkshire 31

CITY/TOWNn Leeds 32

n Sheffield 18

n Bradford 16

n Hull 13

n Doncaster 7

n York 7

n Other 57


23/44

45ONLY 45 OF THE GROUPSCOMPANIES PREPAREDACCOUNTS UNDER IFRS,WITH THE REMAINDER STILLUSING UK GAAP

91COMPANY DIRECTORS OFTHE GROUP ARE A DIVERSE

BUNCH WITH THE OLDESTBEING A 91 YEAR OLD SWISSRESIDENT AND THEYOUNGEST A 27 YEAR OLDFEMALE FINNISH LAWYER



24/44

CONSOLIDATED INCOME STATEMENT

Note Current periodm Prior periodm

Revenue

Cost of sales

1 83,815(65,515)

79,657

(62,923)

Gross profit

Other operating incomeDistribution costsAdministrative expenses

18,300

762(2,506)

(12,071)

16,734

776(1,817)

(12,162)

Operating profit

Share of joint venture operating loss

Non-operating items

2 4,485(1)

78

3,531

(1)

5

Profit before net finance costs

Finance costsFinance income

55

4,562

(1,426)162

3,535

(1,905)250

Profit before taxation

Tax expense 63,298

(1,052)1,880

(755)

Profit for the year 2,246 1,125

Attributable to:Equity holders of the parentNon-controlling interest

2,2424

1,1214

2,246 1,125

Earnings per shareBasic (pence)Diluted (pence)

721.7021.47

2.562.39


FINANCIAL INFORMATION


25/44

STATEMENT OF COMPREHENSIVE INCOME

Current periodm Prior periodm

Profit for the yearOther comprehensive incomeForeign exchange gains / (losses) on retranslation of overseas operationsActuarial gains / (losses) on pension schemesOther items reflected directly in equityTax effect of items recognised directly in equity

2,246

171654119

1,125

(52)(1,258)

599180

Total other comprehensive income / (expense) 242 (531)

Total comprehensive income 2,488 594



26/44

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

Note Current periodm Prior periodm

Assets

Non-current assets

Property plant and equipment

Intangible assets

Financial institution assets

Investments

Deferred tax assets

Employee benefits / pensions

Other non-current assets

9

10

31,068

9,547

38,263

773

646

92

982

31,144

9,935

38,950

755

538

30

710

81,371 82,062

Current assets

Inventories

Financial institution assets

Trade and other receivables

Other financial assets

Cash and cash equivalents

Assets held for sale

11

7,342

11,064

10,240

590

6,426

81

6,914

5,266

8,503

1,142

7,004

28

Total current assets 35,743 28,857

Total assets 117,114 110,919



27/44

CONSOLIDATED STATEMENT OF FINANCIAL POSITION (continued)

Note Current period

m

Prior period

m

Liabilities

Current liabilities

Financial institution liabilities

Bank and other loans

Trade and other payables

Current tax liabilities

Current element of provisions

12

13

16

36,074

1,835

15,343

906

244

32,186

2,425

15,224

803

163

Total current liabilities 54,402 50,801

Non-current liabilities

Financial institution liabilities

Bank and other loans

Trade and other payables

Employee benefits / pensions

Provisions

Deferred tax liability

14

15

16

13,837

14,073

4,321

1,341

1,047

2,108

12,755

14,323

4,125

1,720

1,156

2,269

Total non-current liabilities 36,727 36,348

Total liabilities 91,129 87,149

TOTAL NET ASSETS 25,985 23,770

Capital and reserves attributable to equity shareholders

Called up share capital

Share premium

Merger reserve

Other reservesRetained earnings

17 10,177

4,112

2,692

1,8157,168

9,452

4,087

3,153

2,1154,940

Shareholders funds

Non-controlling interest

18 25,964

21

23,747

23

TOTAL EQUITY 25,985 23,770



28/44


ILLUSTRATIVE CONSOLIDATED STATEMENT OF CASH FLOWS


Operating activitiesProfit for the year 2,246 1,125

Adjustments forDepreciation, amortisation and impairmentInterest paidIncome tax expenseOther adjustments

2,5821,4261,052(245)

2,5781,905

75519

Operating profit before changes in working capital and provisionsChanges in working capital and provisions

7,061(3,133)

6,3821,107

Cash generated from operationsTax paid

3,928(965)

7,489(694)

Cash flows from operating activities 2,963 6,795

Investing activitiesPurchase of subsidiaries and investmentsDisposal of subsidiaries and investmentsNet investment in debt securities by financial institutionsPurchases of property, plant and equipmentDevelopment costs capitalisedSale of property, plant and equipmentOther

84769

2,187(2,398)

(41)247

(227)

(420)119(74)

(3,115)(52)184(98)

684 (3,456)


29/44


ILLUSTRATIVE CONSOLIDATED STATEMENT OF CASH FLOWS (continued)


Financing activitiesIssue of ordinary sharesPurchase of own sharesNet movement on debt and other financingInterest paidDividends paid

162(11)

(2,467)(1,019)(1,067)

862(9)

856(1,175)

(949)

(4,402) (415)

(Decrease) / increase in cash and cash equivalentsCash and cash equivalents brought forward

Opening adjustments

(755)6,862

153

2,9243,946

(8)

Cash and cash equivalents carried forward 6,260 6,862

Comprises:Cash in balance sheetDeductable overdrafts

6,426(166)

7,004(142)

6,260 6,862


30/44


NOTES FORMING PART OF THE FINANCIAL STATEMENTS FOR THE PERIOD

1 Revenue by destination Current periodm Prior periodm

United Kingdom

Europe

North America

Asia

Africa

Unspecified

74,418

4,399

1,992

177

37

2,792

72,368

3,255

1,193

244

72

2,525

83,815 79,657

2 Operating profit Current period

m

Prior period

m

This is arrived at after charging:

Depreciation and impairment of property, plant and equipment

Amortisation and impairment of intangible assets

Operating lease expense:

- Plant and machinery

- Property

Auditors remuneration - audit

Auditors remuneration - other services

1,880

702

222

616

20

15

1,850

729

221

553

19

15


31/44


NOTES FORMING PART OF THE FINANCIAL STATEMENTS FOR THE PERIOD (continued)

3 Staff costs Current periodm

Prior periodm

Wages and salariesOther staff costsPension costsShare-based payment expenseEmployers NI and similar taxes

9,54318

39494

859

9,31214

28458

829

10,908 10,497

Average number of employees (incl directors)Average pay per employee (000)

468,75023

460,28423

4 Directors remuneration Current periodm

Prior periodm

Salaries and fees

BenefitsBonusesCompensation for loss of officePension contributions

145

21458

127

214

38

174 154

Number of executive directorsNumber of non-executive directorsAverage remuneration per director (000)Average remuneration per highest paid director (000)Total remuneration of highest paid directors (m)

742196185480

70

74818316640457

Average age of executive directorsAge range of executive directorsAverage age of non-executive directorsAge range of non-executive directorsMale / female analysis executiveMale / female analysis non-executive

5227-9159

36-75683/59177/19

5031-7955

33-74684/64168/15


32/44



5 Net finance costs Current periodm

Prior periodm

Finance costs:Interest payableOther finance expense

455971

4991,406

1,426 1,905

Finance income:Interest receivable 162 250

Net finance costs 1,264 1,655

6 Tax expense Current periodm Prior periodm

Current tax expense:UK corporation tax and income tax of overseas operations on profit for the yearAdjustment for over-provision in prior periods

1,213(63)

902(44)

1,150 858

Deferred taxCurrent periodAdjustment for under-provision in prior periods

(101)4

(128)26

(97) (102)

Share of associates and joint ventures tax (1) (1)

Total tax expense 1,052 755


33/44



6 Tax expense continued Current periodm

Prior periodm

The reasons for the difference between the actual tax expense for the period and the standard rate of corporation tax in the UK applied toprofits for the period are as follows:

Profit before tax 3,298 1,880

Expected tax charge at the UK standard corporation tax rate of 28% 923 529

Effects of:Expenses not deductible for taxGoodwill / non-qualifying depreciationEffect of change in tax rate on deferred tax

Tax exempt incomeLosses not utilisedPrior period adjustmentsOther

153169(87)

(65)5(60)14

157162

(1)

(159)28(37)76

Total tax expense 1,052 755

7 Earnings per share Current period

m

Prior period

m

BasicDiluted

21.7021.47

2.562.39

The above illustrative earnings per share figures have been calculated by taking the average earnings per share of those companies publishingearnings per share figures on a like-for-like basis over both current and prior periods

8 Dividends Current period

m

Prior period

m

Dividends paid in the period 1,067 949


34/44



9 Property, plant and equipment

Land and

buildings

m

Plant,machinery,

and motor

vehicles

m

Fixtures and

fittings

m

Total

m

Cost or valuationAt start of periodOpening adjustmentsAdditionsAcquired through business combinationsDisposalsTransfers

RevaluationsExchange differences

22,569(88)84760

(289)88

1203

22,305(528)

1,65425

(1,192)(423)

-5

1,031166103

2(64)

2

--

45,905(450)

2,60487

(1,545)(333)

1208

At end of period 23,310 21,846 1,240 46,396

DepreciationAt start of periodOpening adjustmentsAcquired through business combinationsDisposalsTransfersCharge for the periodRevaluation

Impairment chargesExchange difference

3,03555

1(70)(13)430(52)

15(2)

11,020(207)

2(1,012)

(72)1,310

-

14(2)

706118

-(57)(2)

109-

2-

14,761(34)

3(1,139)

(87)1,849

(52)

31(4)

At end of period 3,399 11,053 876 15,328

Net book valueAt end of period 19,911 10,793 364 31,068

At beginning of period 19,534 11,285 325 31,144


35/44



10 Intangible assets Goodwill

m

Developmentcosts

m

Other

m

Total

m

Cost or valuationAt start of periodOpening adjustmentsAdditionsAcquired through business combinationsDisposalsOther adjustments

13,097(427)19134

(26)3

10976

137-

(14)-

1,2965

111199(51)

5

14,502(346)439233(91)

8

At end of period 12,872 308 1,565 14,745

AmortisationAt start of periodOpening adjustmentsDisposalsCharge for periodImpairment chargesOther adjustments

3,949(49)(17)38897(2)

614

(14)441-

55755

(50)14033

1

4,56710

(81)572131

(1)

4,366 96 736 5,198

Net book valueAt end of period 8,506 212 829 9,547

At beginning of period 9,148 48 739 9,935


36/44



11 Trade and other receivables Current periodm Prior periodm

Trade debtors

Other debtors

Amounts owed by Group undertakings

Accrued income

Prepayments

6,505

754

2,085

215

681

4,488

1,003

2,134

171

707

10,240 8,503

12 Bank and other loans - current Current period

m

Prior period

m

Bank loans and overdraftsFinance lease creditor

Other loans

1,29974

462

1,45857

910

1,835 2,425

13 Trade and other payables - current Current period

m

Prior period

m

Trade creditors

Other taxes and social security

Other creditors

Amounts owed to group undertakings

Accruals and deferred income

7,517

712

2,069

1,698

3,347

7,125

620

1,965

2,367

3,147

15,343 15,224


37/44



14 Bank and other loans - non-current Current periodm Prior periodm

Bank loansFinance lease creditorOther loans

4,135493

9,445

5,923464

7,936

14,073 14,323

15 Trade and other payables - non-current Current period

m

Prior period

m

Trade creditorsOther creditors

Amounts owed to Group undertakingsAccruals and deferred income

8306

3,556451

12325

3,430358

4,321 4,125

16 Provisions

m

At start of periodOpening adjustmentCharged to income statementOn acquisitionsUtilised during the yearOther movements

1,319(62)25238

(247)(9)

At end of period 1,291

Current 244

Non-current 1,047


38/44



17 Share capital Current periodm Prior periodm

Equity share capital 10,177 9,452

18 Reconciliation of changes in total equity m

Total equity at start of periodOpening adjustmentsTotal comprehensive income for the yearPrior year adjustmentsIssue of equity sharesRedemption or cancellation of equity sharesEquity dividends paid

Other movements

23,770(138)

2,488(86)649(17)

(1,067)

386

Total equity at end of period 25,985


39/44


Five year summary

2012m 2011m 2010m 2009m 2008m

RevenueGrowth %

83,8155.2%

79,657-0.9%

80,352-0.6%

80,8572.6%

78,8335.5%

Gross profitGross profit %

18,30021.8%

16,73421.0%

15,69619.5%

16,87620.9%

15,87520.1%

Profit before tax 3,298 1,880 1,007 4,554 4,205

Tax chargeEffective tax rate

(1,052)31.9%

(755)40.2%

(685)68.0%

(1,122)24.6%

(1,336)31.8%

Profit for the year 2,246 1,125 322 3,432 2,869

Gearing (excl financial institutions) 55.4% 61.7% 66.5% 46.3% 49.7%

Gearing (excl financial institutions and uti lity companies) 33.0% 35.9% 37.1% 32.3% 31.9%

Net assets 25,985 23,770 22,282 25,370 24,066

Dividend 1,067 949 928 1,468 1,416

Dividend cover 2.10 1.19 - 2.33 2.03

People employed 468,750 460,284 468,617 467,829 449,752

Average director pay (000) 185 166 175 198 182

Revenue per employee (000) 179 173 171 173 175

Gross margin per employee (000) 39 36 33 36 35


40/44

Basis of preparation

HOW WE COMPILED THIS REPORT



41/44

SOURCES OF INFORMATION

The companies included in the Yorkshire Report2012 were selected by conducting an initialCompanies House search using specialistsoftware. First we selected companies:

n located in North, South or West Yorkshire or

North Humbersiden with revenue of more than 70m.

This produced over 300 companies. We theneliminated companies whose effective registeredoffice recorded in the financia l statements wasoutside the region. We also deleted subsidiariesof parent companies where both were included,to eliminate duplication. This produced the finalpopulation of 150 companies.

YEAR ENDS AND COMPARATIVES

For the current period financial information in

the Yorkshire Report 2012 we used the mostrecent accounts filed at Companies House at thetime. These had year ends ranging from 30 April2010 to 31 March 2011. The prior-yearcomparative figures are those shown in theYorkshire Report 2011.

AGGREGATION

To produce the financial information in this reportwe simply aggregated the 150 accounts identifiedabove. We made no consolidation adjustments,and no adjustments to reflect the non-matchingyear ends or any trading between the 150

companies. As the population in this report differsfrom that in last years report, adjustments wererequired to cash flow, reserves and non-currentassets to reconcile the opening positions in thecurrent period to the closing positions in lastyears report.

Some of the analysis and commentary,particularly in relation to investment, funding andgearing, excludes utility companies and financialinstitutions. This is because their funding woulddistort the picture for the majority of the regionstrading companies.

IFRS AND UK GAAPAs the Groups listed entities report under IFRS,we continue to present the financial informationin a format more consistent with IFRS than withUK GAAP. We have not tried to adjust UK GAAPnumbers to comply with IFRS: we have merelyrepresented the UK GAAP numbers in a formatsimilar to IFRS. This involved a number ofallocation judgements that could affect thecomparability of the financial information.

DISCONTINUED OPERATIONS/NON-OPERATING ITEMS

We made no distinction between continuing anddiscontinued operations because companies hadused a variety of judgements and presentationalapproaches. Where it has been possible to identifysuch items, we aggregated all exceptional orsimilar items reflected outside operating profit:we labelled them as non-operating items anddid not analyse them further.

CASH FLOW STATEMENT

Most of the individual line items on the cash flowstatement have been obtained by aggregatingcash flows. The remaining cash flow statement

has been largely derived from the simplisticapproach of reconciling the movements betweenthe balance sheets. This ensured that the changesin cash and cash equivalents in the cash flowstatement reconciled with the balance sheets.

Aggregating cash flows did not achieve thisbecause of the differences in starting points,definitions of cash and cash equivalents and thetreatment of debt.

FINANCIAL INSTITUTIONS

A number of financial institutions (banks andbuilding societies) are included in the aggregation.In combining their results with the widerpopulation we made four main assumptions:

n Interest income has been included in revenue,with interest expense in cost of sales to reflectthe interest margin as gross profit.

n Other fees and commissions are included inother operating income.

n Cash and cash equivalents in the balance sheetfor financial institutions have been made toequal cash and cash equivalents as defined inthe cash flow statements, which will include

certain short-term deposits.

n Balances specific to financial institutions(eg customer accounts, share accounts anddeposits, with either individuals or creditinstitutions) have where possible beenanalysed by maturity and presented incurrent/non-current categories separatelyidentified as amounts relating to financialinstitutions. No attempt has been made todetermine whether amounts owed to creditinstitutions should be classified as borrowings.

DISCLAIMER

The financial information in this report has beencompiled exclusively from publicly availableinformation under the key assumptions andlimitations outlined in this section. It has beendesigned solely to illustrate trends in the financialperformance of a representative sample ofcompanies in the region.

BDO has not carried out any verification workon the financial information in this report andgives no opinion on the financial information.BDO makes no claims, promises or guaranteesabout the accuracy, completeness or adequacyof the contents of this report. No reliance shouldbe placed on the information contained in thisreport and, to the fullest extent permittedby law, BDO does not accept or assume anyresponsibility to anyone for the informationcontained in this report. BDO has made a numberof judgements in aggregating the information

into a consistent format. BDO does not, andcannot, warrant the completeness or accuracy ofthe adjustments made during the aggregation.



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The team

THIS REPORT HAS BEEN PRODUCED BY THE BDO TEAM IN LEEDS

THEIR GRATEFUL THANKS GO TO THEIR COLLEAGUES EDWARD HURWITZ, GAYNOR APPLEYARD AND CARLY JONES.


IAN BEAUMONTOffice Managing Partner0113 204 [email protected]

JASON WHITWORTHPartner, Corporate Finance0113 204 1237

[email protected]

MATT COPLEYPartner, Corporate Finance0113 204 [email protected]

PAUL BATESPartner, Business Restructuring0113 204 [email protected]

PAUL DAVIESPartner, Audit0113 290 [email protected]

TOM VALLANCEPartner, Tax0113 204 [email protected]

SIMON P BEVANPartner, Forensic Accountingand National Head of Fraud

0113 204 [email protected]

TIM CLARKEPartner, Corporate Finance0113 204 [email protected]

TERRY JONESPartner, Tax0113 204 [email protected]

GILES WHARTONPartner, Audit0113 204 [email protected]

MICHAEL PRATTDirector, Accounting andReporting Advisory


GRAHAM NEWTONPartner, Business Recovery0113 204 [email protected]

ANDY MAHONPartner, Government andInfrastructure


SIMON PRINGLEHead of Sustainability andClimate Change



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AarhusKarlshamn UK Ltd

ABS Industrial Resources Ltd

ACICS Ltd

Acorn Mobility Services Ltd

Advent Data Ltd

AES Engineering Ltd

Allam Marine Ltd

Allied Glass Containers Ltd

Andrew Page Ltd

Arco Ltd

Ardagh Glass Ltd

Arla Foods Ltd

Arnold Laver Holdings Ltd

Arran Isle Ltd

Arrow Enterprise Computing Solutions Ltd

ASD Ltd

Asda Group Ltd (Broadstreet Great Wilson Europe Ltd)

ATH Resources Plc

Austin Reed Group Ltd (Gajan Holdings Ltd)

Barrett Steel Ltd

Bayford and Co Ltd

Bentley Holdings Ltd

Bettys & Taylors Group Ltd

Birse Civils Ltd

Borgwarner Holdings Ltd

Brenntag UK Ltd

Bupa Care Homes (CFG) Plc

C F Booth Ltd

Car Care Plan (Holdings) Ltd

Carclo Plc

Clipper Group Holdings LtdComet Group Plc

Communisis Plc

Co-operative Group Motors Ltd

Costcutter Supermarkets Holdings Ltd

Country Style Foods Ltd

CPP Group Plc

Cranswick Plc

Croda International Plc

Cummins Turbo Technologies Ltd

Damartex UK Ltd

Danoptra Ltd

Dart Group Plc

DePuy International Ltd

DFS Furniture Company Ltd

Dovecote Park Ltd

Dr. Oetker (UK) Ltd

Drax Group Plc

Dunhills (Pontefract) Plc

Ebuyer Holdings Ltd

Eggborough Power Ltd

ELG Haniel Metals Ltd

F Smales & Son (Fish Merchants) Ltd

Fenner Plc

FMG Support Group Ltd

Forza AW Ltd

Fullers Foods International Plc

GDF SUEZ Energy UK Ltd

GHD Group Holdings Ltd

Gilder Group Ltd

Go Outdoors Ltd

Grattan Plc

GRI Group Ltd

Group Auto Union UK and Ireland Ltd

Hallmark Cards (Holdings) Ltd

Henry Boot Plc

Heron Food Group Ltd

Hocomm Ltd

Hoyer UK LtdIdeal Standard (UK) Ltd

Insight Direct (UK) Ltd

Interface Europe Ltd

International Personal Finance Plc

Irwin Mitchell LLP

J.R. Rix & Sons Ltd

JCT600 Ltd

Jeld-Wen UK Ltd

KCOM Group Plc

Kelda Holdco Ltd

LA fitness (MOP Acquisitions (LAF) Ltd)

Lakeside 1 Ltd

Leeds Building Society

London & Scandinavian Metallurgical Co Ltd

London Security Plc

Lorien Ltd

LuK (UK) Ltd

Manheim Europe Ltd

Maple Leaf Bakery UK Ltd

Maplin Electronics Group (Holdings) Ltd

Marshalls Plc

McCain Foods (GB) Ltd

McLean & Appleton (Holdings) Ltd

MKM Building Supplies (Holdings) Ltd

Netto Foodstores Ltd

NG Bailey Ltd

Northern Foods Ltd

Northern Gas Networks Holdings Ltd

Nufarm UK Ltd

Outokumpu Stainless Ltd

Oval Ltd

Pace Plc

Pegler Yorkshire Group Ltd

Persimmon Plc

Polypipe Ltd (Hamsard 3054 Ltd)

Poundworld Retail Ltd

PPG Architectural Coatings UK Ltd

Premier Farnell PlcProvident Financial Plc

R&R Ice Cream Plc

Redhall Group Plc

Renew Holdings Plc

S Daniels Plc

Scaid Investments Ltd

Serviced Dispense Equipment (Holdings) Ltd

Severfield-Rowen Plc

Sheffield Forgemasters International Ltd

Shepherd Building Group Ltd

Siddall Group Ltd

Siemens VAI Metals Technologies Ltd

SIG Plc

Skipton Building Society

Sportswift Ltd

Style Group Holdings Ltd

Sulzer Pumps (UK) Ltd

Superbreak Mini-Holidays Ltd

Swift Holdings (UK) Ltd

Symphony Holdings Ltd

Tenet Group Ltd

Teva UK Ltd

The Big Green Parcel Holding Company Ltd

The Car People Ltd

The Fuelcard Company UK Ltd

The Harratts Group Ltd

TMD Friction UK Ltd

Trustmarque Group Ltd

Tunstall Healthcare Group Ltd

Turner & Townsend Plc

UFI Charitable Trust

UFP (UK) Ltd

UK COAL Plc

UPM Raflatac Ltd

Vasanta Group Holdings Ltd

VP Plc

Wakefield and District Housing Ltd

Wavin LtdWilliam Jackson and Son Ltd

Wm Morrison Supermarkets Plc

Wortlea Estates (Leeds) Ltd

WYG Plc

Yorkshire Building Society

THE 150 GROUP COMPANIES



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