Carter & Carter Group plc
Annual Report and Accounts
for the year ended 31 July 2005
Carter & Carter Group plc
United Kingdom Office
Carter & Carter Group plc
Greenhill House
Thorpe Wood
Peterborough
PE3 6RU
Tel: +44 (0)1733 262656
Fax: +44 (0)1733 267545
Carter & Carter Group plc  Annual Report and Accounts 2005  contents 	 	 Carter and Carter GrOUp plC  AnnUAl REPoRT 2005
Contents
Highlights 01
Business o verview 02
Chairman’s Statement 04
Company History 05
Chief Executive’s Review 06
Divisional Review – o utsource Services Division 08
Divisional Review – Vocational l earning Division 11
Acquisition Profile – Adult l earning 14
Financial Review 16
o ur People 18
Board of Directors 20
Directors’ Report 22
Directors’ Remuneration Report 24
Statement of Corporate Governance 29
Audit Committee 33
n omination Committee 35
Corporate Social Responsibility 36
Statement of Directors’ Responsibilities 37
Independent Auditors’ Report 38
Group Profit and l oss Account 39 
Group Statement of Total Recognised 
 Gains and l osses 39
Balance Sheets 40
Group Statement of Cash Flows 41
Reconciliation of n et Cash Flow  
 to Movement in n et Debt 41
n otes to the Financial Statements 42
Supplementary Director’s Information 67
Shareholder Information 68 Carter & Carter Group plc is a major provider 
of learning solutions and outsource support 
services to large corporate organisations.
 
Working for and on behalf of our clients, 
we provide solutions that deliver measurable 
improvements in business performance by 
utilising both client and Government funding. 
Financial Highlights Key Achievements
+
33
%
Turnover increased  
by 33% to £51.0m
+
47
%
*
+
44
%
Operating profit  
increased by 44% to £7.3m
+
319
%
Earning per share  
of 8.8p up 319%
Underlying operating profit 
increased by 47% to £10.3m
01    highlights
Highlights
	•	 	Acquisition	 and	 integration	 of	 AA	 	 technical	 training	 services	 business
	•	 Acquisition 	 of	 Ass A	 post	 year	 end
	•	 Average 	 students	 in	 learning	 up	 by	 27%
	•	 Average 	 fee-earning	 heads	 up	 by	 30%
	•	 Revenue 	 per	 student	 up	 21%
	•	 Final 	 dividend	 at	 3.2p	 per	 share
	 •	 	Major	 contract	 wins	 including	 a	 branded	 manufacturer	 apprenticeship	 programme	 	 for	 Daimler	 Chrysler	 (Mercedes	 Benz,	 	 Chrysler	 Jeep	 and	 Mercedes	 Trucks)
	•	 successful	 IPO	 in	 February	 2005
* Excludes goodwill amortisation and exceptional costs
  Carter & Carter g roup pl C  a nnual r eport 2005    
at a glance After the recent acquisition of ASSA, the 
Group operates through two divisions, 
Vocational Learning and Outsource 
Services. The Vocational Learning 
division will encompass Apprenticeship 
Learning and Adult Learning.
Division
Vocational learning Overview Key results
02    business overview
at   a   glance Carter & Carter g roup pl C  a nnual r eport 2005
Business Overview
Vocational l earning offers  
a range of development  
programmes to large corporate 
organisations for 14-year-olds  
and upwards, funded by a 
combination of the g overnment 
and our clients. t his division was 
previously called “apprenticeship 
l earning” prior to the acquisition 
of assa post year end, which 
broadened the activity of the 
division. Financial performance  
in this report refers to the 
apprenticeship learning  
activity only.
the division enables clients to outsource their people 
development activity from 14–16 pre-employment  
apprenticeships to adult qualifications and learndirect.  
in the apprenticeship learning sector, the division enables 
clients to outsource the operation of their apprenticeship 
programmes. Many students are working on 36-month 
programmes. t he apprenticeship l earning division was  
formed after the acquisition of the eMte C g roup in June 
2003. t he business holds a dominant position in the vehicle 
manufacturer branded apprenticeship market operating 21  
of the manufacturer programmes in the u K. in the adult  
learning sector the division offers a range of services to 
corporate clients to enhance the skills productivity of their 
workforce. t he development is delivered through adult  
nv Q programmes and learndirect in addition to the current 
n ational employer t raining programme. t his activity in 
vocational learning was secured with the acquisition of assa .
t he  Outsource  Services  division provides dedicated 
teams of people who work 
within the vehicle manufacturers’ 
organisations delivering  
business improvements.
 
these services include assisting the vehicle manufacturers 
to improve sales of cars and parts to their business 
customers and improve customer service and network 
profitability through training and field-based experts. the 
vast majority of the division’s teams operate under the 
vehicle manufacturers’ respective brands and earn fees 
and commission under contract to them. t his division has 
benefited from the acquisition of the aa technical training 
services business in February 2005, which was integrated 
effectively. business improvement solutions are provided by  
this division under the Carter & Carter and eMte C brands.  
t his branding approach maximises the credentials and 
reputation each organisation has in its respective fields.  
35% of the division’s activity is in learning solutions.
outsource ser Vices +
50
%
t urnover  2005:  
£26.7m (2004: £17.8m) which 
excludes results from assa 
as the acquisition was 
completed post year end.
+
19
%
t urnover  2005:    £24.3m (2004: £20.5m)
s
s 
s
s   
03     04     05
0 1000 2000 3000 4000 5000
3
4446
3493
2666
03     04     05
0 50 100 150 200 250 300 350 400
5
360
276
252
   
Bentley Audi l exus dA imler Chrysler e le Ctrolux Bm W JAgu Ar 
lA nd r over BAr Bour t oyot A v olvo r en Ault Alf A r omeo gm 
v Auxh All v olks WAgen k P foods Aston mA rtin Akzo n o Bel JCB  
r en Ault t ru Cks f A Premier l e Ague f indus Peugeot Citroën s kod A 
f ord Johnson Controls n estle s u BAru f i At t hryssen se At mA zd A 
k ru PP s uzuki v olks WAgen Commer Ci Al v ehi Cles Allied B Akeries Market growth Market drivers
Our clients encompass  
the majority of the world’s 
automotive brands and, 
following the acquisition  
of ASSA, a number of  
blue-chip non-automotive 
organisations.
03    business overview
at   a   glance Carter & Carter g roup pl C  a nnual r eport 2005
Business drivers
+
50
%
t urnover  2005:  
£26.7m (2004: £17.8m) which 
excludes results from assa 
as the acquisition was 
completed post year end.
+
19
%
t urnover  2005:    £24.3m (2004: £20.5m)
t he o utsource services  
division is estimated to have an 
addressable market opportunity  
of approximately £386m in just  
the product areas in which it 
currently operates. 
•  n eed of manufacturers to  
control fixed costs in a 
competitive market.
•  n eed of manufacturers to 
develop new solutions to  
attract and secure customers.
•  n eed to maximise revenue  
from each vehicle in the  
overall parc.
average  students  in  learning
average  fee-earning  headcount
t he division is excellently placed  
to meet the increasing demand  
for vocational apprenticeship 
programmes for 16- to  
24-year-olds from both corporate 
organisations and the g overnment. 
t his year the g overnment  
targeted and achieved 175,000 
new apprenticeship starts.  
t he g overnment is also driving  
a productivity improvement  
agenda that is to be fulfilled  
by the growth of nv Q level 2  
for adults. t he ls C funding has 
grown 23% to £1.3bn over the  
last three years.
•  increasing engineering 
complexity.
•  increasing shortage of skilled  
technicians.
•  g overnment commitment  
to increasing apprenticeship 
intake.
•  increasing vocational learning  
for 16-year-olds and over. Chairman’ s Statement
04    Chair Man’s state Ment
a   year  O f   gr Owth Carter & Carter g roup pl C  a nnual r eport 2005
a year of growth The past 12 months have been another 
exciting year of growth and change in the 
Carter & Carter Group. The listing of the 
Group on the London Stock Exchange, 
the acquisition of the AA technical training 
services business and, post our year 
end, the acquisition of ASSA have made 
this perhaps the most significant year  
in our history.
 Rodney Westhead
	 Chairman
leadership of the board through a period of 
high growth, our entry into the Apprenticeship 
Learning market, and a successful flotation 
process. We look forward to his continued 
contribution on the board and its committees. 
We have also appointed John Green as Group 
Finance Director and would like to thank Julie 
Pomeroy for her contribution over the last two 
years. Nigel Blythe Tinker has been appointed 
as Group Company Secretary and Head of 
Legal to support and advise the Board and 
finally Peter Marples has been appointed as 
Group Business Development Director having 
previously led the ASSA business. 
The Carter & Carter Group plc business is 
built on a strong foundation and an absolute 
focus on delivering measurable value for 
clients by providing motivated, talented and 
knowledgeable people. These building blocks 
are at the very core of the way the business 
operates, and it is as a direct result of the 
activity of our team members that we continue 
to grow. I would like to thank all of them for 
their hard work and great results, not just this 
year, but during the last 13 years since the 
business was established.
We believe that the prospects for growth 
and success remain strong. We have a clear 
strategy that will focus on providing more 
solutions to our existing client base alongside 
the development of new services and markets 
that arose from our acquisition of ASSA. Our 
business model seeks to deliver high quality, 
value based solutions that drive our clients’ 
businesses forward, and this approach will 
remain at the heart of how the Group operates. 
We see great potential for making selective 
acquisitions, particularly in the fragmented 
learning market. There will be competitive and 
market challenges along the way, but I am 
confident that the business will continue to 
make substantial progress in the coming year.
Rodney Westhead
Chairman	 12	 October	 2005
Welcome to our first annual report as a  
listed company.
The response we received from institutional 
investors at flotation was, we believe, a 
measure of the strength of our strategy, 
business model and market position. We will 
continue to work to deliver strong growth and 
returns for our shareholders. The Initial Public 
Offering (IPO) success was also a reflection of 
the outstanding work carried out by Phil Carter 
and his team, and I would like to take this 
opportunity to thank everyone involved for their 
enthusiasm, professionalism and contributions. 
I am pleased to report that the Group has 
continued to deliver strong growth. Turnover 
grew by 33% to £51.0m and operating profit by 
44% to £7.3m. Operating profit before goodwill 
amortisation and exceptional items grew by 
47% to £10.3m. Both the Outsource Services 
and Vocational Learning divisions achieved  
profit growth. The business continues to 
generate cash. Cashflow from operations was 
£7.9m and, excluding exceptional IPO costs, 
cashflow was £8.8m. Net debt at 31 July 
2005 was £29.1m (2004: £31.5m). A detailed 
review of trading and results is provided in the 
operating reviews for each division. 
Basic earnings per share increased by 319% 
to 8.8p (2004: 2.1p). Excluding goodwill 
amortisation and IPO related exceptional costs, 
earnings per share increased by 72% to 17.4p 
(2004: 10.1p). The Board is recommending a 
final dividend of 3.2p per share. The Group will 
adopt a progressive dividend policy, reflecting the 
cash generative nature of the Group’ s operating 
businesses, the long-term earnings potential 
of the Group and the Group’ s opportunities 
to invest for growth organically and through 
selective acquisitions.
As outlined in the flotation communications, 
the Group added two new non-executive 
directors to the board. David Galloway and 
I joined Adrian Smith and we will all use our 
experience and knowledge to support the 
business and its executive management going 
forward. After three years as non-executive 
chairman, Adrian recently stepped down from 
that role, and I would like to thank him for his 
+
33
%
Turnover growth
3.2
p
Dividend per share 1998
Carter & Carter Group plc
to August
1998
Carter & Carter Group plc
to August
1998
Carter & Carter Group plc
to August
2005
Carter & Carter Group plc
1997
Carter & Carter Group plc
from August
05    Co Mpany history
company history 2001
Bridgepoint Capital 
acquires 45% of the  
equity share capital  
of the business
Bridgepoint Capital invested in the business 
as part of the next stage of development for 
the Group. The relationship provided excellent 
support and challenge and allowed the Group 
to build on its success. This deal provided 
the opportunity for management and staff to 
secure equity in the business.
 
2003
The Group acquires the 
EMTEC Group  
of Companies
The EMTEC business was the leading  
provider of vehicle manufacturer branded 
apprenticeship programmes and adult 
technical training in the UK. The acquisition 
provided the Group with the ability to  
address all people development requirements 
of a vehicle manufacturer from apprentice 
technician to managing director.
The business has grown rapidly since the 
acquisition and taken advantage of the  
cross selling opportunities the Group offers.
Feb 2005
Initial public offering on the 
London Stock Exchange
The IPO of the business in 2005 was the 
next pivotal stage in the development of the 
Group. The flotation created the appropriate 
capital structure for the business to enable 
future growth, created an even more 
challenging and rewarding environment for 
our staff and allowed Bridegpoint Capital 
to realise their investment. The shares were 
heavily oversubscribed at an offer price of 
£2.35 per share at the top of the pricing 
range and the first day’ s trading saw a 
25% increase in price.
 
Feb 2005
The Group acquires the AA 
technical training services 
business
The acquisition of the AA technical training 
services business built on the technical 
competence of the Group provided by 
EMTEC. This generated a broader client base, 
new products and services, and strategically 
removed a competitor from the market.
The business was fully integrated within 
the first few months of ownership and is 
performing ahead of expectations.
 
Sept 2005
The Group 
acquires ASSA
The Group acquired the ASSA business  
as part of its strategy to further develop its 
share of the Government funded Vocational 
Learning market. The ASSA acquisition 
broadens the depth of the Government 
funding available to major clients and provides 
access to markets outside automotive such 
as food manufacturing and engineering.
1992
The Carter & Carter 
business is  
formed by  
Phillip Carter
The business was established as a specialist 
outsource and support service provider in  
one area of the automotive sector. The niche 
market of accident repair was identified as  
an opportunity and was used to establish 
relationships with vehicle manufacturers.  
Over the coming years, the quality of service 
delivered by the business allowed it to  
provide services across all areas of the  
vehicle manufacturers’ retail business.
 
1997
The Group enters the 
training and learning sector
The Group won the Audi Academy contract 
in the UK and established its first training and 
learning contract.
  Carter & Carter g roup pl C  a nnual r eport 2005 Strategically   pOSiti Oned Carter & Carter g roup pl C  a nnual r eport 2005
Chief Executive’ s Review
06    Ch ieF eXeCutive ’s rev iew
The Group has performed well in the last 12 months 
and has established a platform for achieving exciting 
growth in the coming years. The acquisition of ASSA  
is a clear sign of our intention to increase our presence 
in the Government-funded learning market.
strategically positioned highlights  of  the  year
I am delighted to report that the Group has 
delivered substantial growth in operating profit 
before goodwill amortisation and exceptional 
costs of 47% and turnover growth of 33%. In 
addition, we have firmly established a platform 
for further growth in the Government funded 
Vocational Learning market with the post year 
end completion of the ASSA acquisition.
Both the divisions, Vocational Learning and 
Outsource Services enjoyed strong growth in 
underlying operating profit before exceptional 
costs of 43% and 56% respectively, and have 
a core base of 4,495 students and 438 fee 
earners going into the new financial year.
During 2005 the Group acquired and 
successfully integrated the AA technical training 
services business, which has performed 
beyond expectations in the five months under 
Carter & Carter ownership.
The Group also listed on the London Stock 
Exchange in February 2005 at an initial offer 
price of £2.35 and, shortly after the year end, 
raised £8.5m via a placing at £3.55 per share 
to part fund the acquisition of ASSA.
The ASSA acquisition broadens the depth of the 
Government funding available to major clients and 
provides access to markets outside automotive 
such as food manufacturing and engineering. 
The Vocation Learning division now has a 
leading position in the sector.
t he  vocational  learning  market
The Group has a target of being number 
one in the Vocational Learning market with 
20% market share in the medium term. 
Carter & Carter will use this position to 
help its customers deliver performance 
improvements with optimal Government 
funding and will enhance the partnership 
between the employer and Government in 
skills development.
The Government led trend to increase 
vocational learning and apprenticeships 
provides excellent market conditions in which 
Carter & Carter can operate. In apprenticeship 
learning the Government has announced its 
aspiration to substantially grow the intake each 
year. It has achieved a new intake of 175,000 
this year and while this is a very sizable growth 
over previous years, it still only represents 28% 
of young people versus a target of 35% over 
the coming five years. 
 Phillip J Carter
	 Group	 Chief	 Executive
£
7.3
m
Operating profit (2004: £5.1m) 
+
319
%
Earning per share growth
£
10.3
m
*
Underlying operating profit
(2004: £7.0m)
* Excluding goodwill and exceptional items 02     03     04
0 2000000 4000000 6000000 8000000 10000000
15
8.6
7.4
5.1
02     03     04
0 200000 400000 600000 80000010000001200000
3
1.1
1.0
0.8
Strategically   pOSiti Oned Carter & Carter g roup pl C  a nnual r eport 2005
T otal LSC funding £bn
07    Ch ieF eXeCutive ’s rev iew
In the adult sector, learndirect continues to be 
a core element of the skills strategy and has 
benefited from steady growth in public funding. 
The Government National Employer Training 
Programme is forecast to grow by around 65% 
to over £120m in the coming three years. This 
sector can now be actively pursued following 
the acquisition of ASSA. 
There is considerable evidence of a drive  
by the Government towards having fewer, 
higher quality learning providers. The 
importance of achieving good results in Adult 
Learning Inspectorate (ALI) inspections and 
delivering high achievement rates is growing. 
The Government White Paper in 2005 also 
mentions the Government’ s desire for increased 
contestability for current further education 
contracts where delivery is poor. The ASSA 
business has already achieved excellent ALI 
results and considerable resource is being 
allocated within the Group to progress the 
current rating to the same level as ASSA. This 
drive to even better quality delivery will be a 
strong foundation for further growth in our 
Government relationship. 
t he  automotive  outsourcing  market
The automotive sector continues to experience 
challenging market conditions with vehicle 
manufacturers looking to find new ways to 
differentiate their offerings and secure existing 
and new customers. We continue to see 
contract opportunities for the division and as 
the Groups’ scale has grown, we have begun 
to see evidence of being invited to even larger 
tenders. Clearly our growth in Government 
funding expertise will also enhance our product 
proposition in the sector and provide new 
solutions for our vehicle manufacturer clients. 
Our  strategy  for  growth
We plan to focus on building the Vocational 
Learning business through a combination 
of organic growth and acquisitions. 
The organic growth will continue to focus on 
areas of expertise and knowledge and will grow 
carefully through customer acquisition and 
growth in Government contract value. This in 
turn will be achieved by delivering excellence 
in quality in ALI inspections and administration 
of the contracts. Acquisitions will be targeted 
at quality providers where substantial sector 
expertise is added to the organisation.
We will continue to grow the Outsource 
Services division through cross-selling our 
increasing range of products and solutions 
into our broad automotive client base.
We will ensure quality-of-service provision 
by continued attention to our core strategic 
building blocks of knowledge, Measurable 
Business Improvement (MBI) and people. 
Expert knowledge remains fundamental to 
the delivery of value to our clients and hence 
our growth. The importance of knowledge 
is reinforced in our acquisition strategy by 
focusing on the best providers in each industry 
or sector. Our knowledge management strategy 
is established and we will continue to increase 
our focus and activity in this area.
MBI is at the very core of our business 
philosophy, it pervades each contract and every 
team member. The delivery of MBI supports our 
competitive positioning and is driven through in 
our existing areas of operation, and also each 
acquisition we make. MBI is now in place in 
the recently acquired AA business and will be 
integrated into ASSA by January 2006.
As a people business we recognise that the 
expertise, commitment and motivation of our 
team members is a core driver of our growth. 
We have invested in our people in recent years, 
and the continued improvement in employee 
satisfaction illustrates the benefits of this activity. 
Implementing the people strategy and delivering 
on our commitments for our staff will continue 
to be non-negotiable in our current and 
acquired businesses.
We continue to strive to provide equal 
opportunities for all and ensure that our 
recruitment, development and support avoid 
discrimination on the grounds of gender, sexual 
orientation, race, religion, age or disability.
The last 12 months have been the most 
exciting and challenging of my career with 
outstanding growth and achievements. I am 
looking forward to the coming year with great 
optimism. We are well positioned to grow the 
Group and I am particularly excited about the 
opportunity that exists to take a leading position 
in the Government funded learning market.
Phillip J Carter
Group	 Chief	 Executive	 	 12	 October	 2005
 Phillip J Carter
	 Group	 Chief	 Executive
“ Carter & Carter has a target of being 
number one in the Vocational Learning 
market with 20% market share in the 
medium term.”
Vocational learning funding £bn Divisional Review
08    divisional review
outsource  
ser Vices diVision Outsource Services
division
The Outsource Services division now 
operates in three main segments of the 
automotive sector and an overview of each 
is provided below.
Vehicle  Sales  The Vehicle Sales unit provides vehicle 
manufacturers with dedicated, branded sales 
teams, that:
•  operate as the in-house corporate sales 
function, selling new vehicles to the corporate 
and fleet sectors;
•  train and advise dealership personnel on 
improving their used car sales; and
•  advise dealership personnel on the marketing 
and selling of finance and lease packages.
parts  Sales  The Parts Sales unit focuses on the sale of  
genuine manufacturer branded spare parts  
to independent service and repair workshops.
The division provides brand dedicated  
teams that:
•  perform the function of an in-house sales  
and telemarketing operation, selling on behalf  
of the vehicle manufacturer; and
•  provide training and advice to dealership 
personnel to improve parts sales.
Orders for parts sales are referred to the 
manufacturer’ s dealership network.
network  Services  Network Services encompasses our work 
with the franchised dealer network and covers 
Service and Process, Accident Repair, People 
Development and T echnical Services, each of 
which is outlined opposite.
The Outsource Services division  
provides dedicated teams of people that  
work within the vehicle manufacturers’ 
organisations, supplying a range of  
outsource services. These teams seek  
to improve the sales of vehicles and  
parts on behalf of vehicle manufacturers  
and improve customer service and  
dealer profitability.
 David Carter
	 Group	 Managing	 Director
Out SOurce  S er Vice S  di ViSiOn Carter & Carter g roup pl C  a nnual r eport 2005 03     04     05
0 50 100 150 200 250 300 350 400
5
360
276
252
C&C
Services
£
386
m
“ At Volkswagen UK, we recognised  
in 2001 that parts, and in particular 
parts sold to the Independent Motor 
Trade, was an area of the business 
that needed more of our attention  
to ensure that everyone who drives  
one of our cars could have the 
opportunity and peace of mind of 
having Volkswagen Original parts 
fitted to their vehicles, wherever the 
repair is carried out – though, of 
course, we prefer them to use our 
retailer network.  
 
Realising that we did not necessarily 
have the required field experience 
to fully meet the requirements of the 
Independent Motor trade, we looked  
at suppliers that could help us. We 
chose Carter & Carter because we 
have worked with them before and 
they always exhibit competence and 
try to deliver on their promises. 
 
Over the period, our parts sales to the 
Independent Motor Trade has grown 
at a rate above our initial estimations, 
even though the market place has 
become tougher, while the Carter & 
Carter parts sales team has been an 
asset to Volkswagen UK and our  
Trade Centre retailer network.”
Out SOurce  S er Vice S  di ViSiOn Carter & Carter g roup pl C  a nnual r eport 2005
09    divisional review
Service  and p rocess  This unit provides brand dedicated teams to 
train and advise dealerships, under commercial 
arrangements from the vehicle manufacturers. 
These services help the Group’ s clients to:
•  meet customer service standards;
•  carry out routine servicing and fix faults 
effectively on the first visit; and
•  maximise workshop capacity.
accident r epair
The Accident Repair unit provides vehicle 
manufacturers with brand dedicated teams, 
focusing on:
•  training and advising vehicle manufacturer 
approved bodyshops to improve performance 
standards and processes; and
•  providing a post-accident customer 
assistance service on behalf of a vehicle 
manufacturer’ s brand. We provide this 
through the unit’ s call centre situated in 
Peterborough. The unit’ s staff refer customer 
repairs to the manufacturer’ s bodyshop 
network, arrange for the provision of loan 
vehicles and help with insurance claims.
people d evelopment  The People Development unit runs brand 
dedicated programmes providing recruitment, 
training, coaching and administration 
support under contract on behalf of vehicle 
manufacturers. The aim of the unit’ s services is 
to improve the effectiveness and competence  
of dealership employees and to maximise the 
sales impact of new vehicle launches.
technical  Services  The T echnical Services unit, originally  
acquired as part of the EMTEC acquisition  
and supplemented by the AA technical training 
services acquisition, provides brand dedicated 
teams to vehicle manufacturers who provide:
•  the vehicle manufacturer’ s in-house technical 
training function, designing and delivering 
programmes to improve the skills of  
technicians in the dealership network;
•  the in-house technical support function,  
providing specialist technical expertise to  
dealer networks; and
•  warranty support functions.
The 
Outsource  
Services division  
operates in three 
segments of the 
automotive sector
The Outsource Services division is 
estimated to have an addressable 
market of approximately £386m 
(Sewells)
Average fee-earning headcount
Outsource Services division
  Mark l ewis     Volkswagen 3.0
1.9
1.8*
03     04     05
%
0.0 0.5 1.0 1.5 2.0 2.5 3.0
8
03     04     05
0 5 10 15 20 25
4
24.3
20.4
18.5*
Divisional Review
Outsource Services division continued
10    divisional review
Out SOurce  S er Vice S  di ViSiOn Carter & Carter g roup pl C  a nnual r eport 2005
Outsource Services underlying  
operating profit** £m
Outsource Services turnover £m
* 2003 is the full year result for this division although the part of the business 
was not acquired until June 2003
** Excluding goodwill amortisation and exceptional costs
divisional  performance  and  highlights
The Outsource Services division performed 
strongly in the last 12 months with turnover 
having grown 19% to £24.3m (2004: £20.5m) 
and operating profit before exceptional costs 
and amortisation by 56% to £3.0m (2004: 
£1.9m). Fee-earning headcount grew 30% 
over the previous year. Operating margins 
(before exceptional costs and amortisation) 
increased to 12.3% from 9.4% due to indirect 
costs increasing at a slower rate than turnover. 
The vast majority of the divisions commercial 
relationships continued and new relationships 
were secured. Additionally in the year, the AA 
technical training services was acquired and 
added £0.3m operating profit to this division.  
The integration has been successful and these 
teams are performing ahead of our expectations.
Market  environment
The market for outsource services in the 
automotive sector is currently estimated, from 
a study by Sewells, to have a market of circa 
£386m per year. This opportunity is purely in 
the services and solutions that the division 
currently offers and does not include new 
products or new segments.
Outsourcing continues to grow in the auto-
motive sector as highly competitive market 
conditions demand that vehicle manufacturers 
seek new ways to create competitive 
differentiation, manage costs and improve 
dealer performance. Given these market 
dynamics, vehicle manufacturers turn to 
outsourcing to secure expertise and solutions 
without adding to fixed cost headcount. 
While vehicle sales remain under pressure 
and stagnate or fall in many markets, the total 
car parc that needs to be serviced continues 
to grow. It is this overall parc that drives the 
demand for our services along with the need to 
secure vehicle sales and other revenue streams 
in difficult trading conditions. Fluctuations 
in new vehicle sales have not to this point 
impacted upon the growth of the division and it 
is our view that this will continue.
t he  key  drivers  of  our  growth
The Outsource Services division is driven by the 
number of fee-earning team members 
contracted to clients. This metric is increased 
by adding team members to existing contracts 
or by winning new contracts. Gross margins 
remain stable in this division, and so the 
growth in fee-earning headcount has driven 
operating profit as indirect costs have fallen  
as a percentage of turnover.
delivering  value  for  our  clients
Long-term success for our business is 
founded on a simple philosophy, doing what 
we say we are going to do and delivering 
value for our clients. We call this Measurable 
Business Improvement. It is the definition  
and delivery of a measurable business 
improvement for every contract and client that 
allows us to grow existing contracts, win new 
contracts and deliver a premium service that 
delivers a tangible return for our clients. This 
philosophy is at the core of how the division 
operates and behaves.
Our  strategy  for  growth
This division benefits from a broad client base 
encompassing most of the worlds’ automotive 
brands. As such, the primary focus for growth 
in the Outsource Services division is cross-
selling existing services to existing clients. When 
analysing a matrix of segments and clients, 
there are many more opportunities available. 
New products and solutions can also be 
developed to meet the growing needs of our 
clients and this will add breadth to the existing 
offer or drive us into new segments. Finally, an 
opportunity exists in this fragmented market 
to make selective bolt-on acquisitions that 
secure further fee-earning team members, new 
products or new segments. 
l ooking  forward  to  2006
The outlook for the Outsource Services division 
remains very positive. The opportunity to cross-
sell existing products to existing clients is a 
sizeable opportunity and this is supplemented 
by the potential for delivering new products and 
entering new segments. Additionally market 
conditions continue to create the demand for 
new solutions delivered by partners with a 
track record for delivering value. These factors 
provide a strong basis for my belief that this 
division will continue to flourish in 2006. Divisional Review
Strategically   pOSiti Oned Carter & Carter g roup pl C  a nnual r eport 2005 VOcati Onal  l earning   di ViSiOn
11    divisional review
Vocational Learning 
division
Vocational Learning offers a range of branded 
apprenticeship programmes on behalf 
of clients, predominantly funded by the 
Government. The division enables clients to 
outsource the operation of their apprenticeship 
programmes from recruiting students and their 
training to assessment and qualification. 
The range of services provided includes:
•  securing positions for apprentices at 
dealerships;
•  recruitment of apprentices; 
•  matching and placing of successful 
applicants; 
•  design and delivery of training  
programmes; and
•  assessment and certification. 
divisional  performance  and  highlights
Apprenticeship Learning has performed 
strongly in the last 12 months with turnover 
having grown 50% to £26.7m (2004: £17.8m) 
and operating profit before exceptional costs 
and goodwill amortisation by 43% to £7.3m 
(2004: £5.1m). Average students in learning 
grew to 4,446, 27% over the previous year. 
New contracts were also won with Mercedes 
Benz, Chrysler Jeep and Mercedes Trucks in 
addition to agreements with dealer groups who 
direct students to existing vehicle manufacturer 
programmes operated by EMTEC. This year 
also saw the official opening of our Basingstoke 
and Newport centres as part of the investment 
in a national network of quality training facilities. 
The division currently provides the branded 
apprenticeship programme for 21 vehicle 
manufacturer brands in the UK.
Market  environment  –  government  funding  As part of it’ s on going commitment to 
Vocational Learning, the Government continues 
to fund a range of apprenticeship programmes 
for people aged between 14 and 24. The key 
area of focus is 16- to 19- year-olds where 
Vocational learning diVision The Vocational Learning division 
provides a range of learning services and 
solutions to support the varied development 
needs of individuals in employment 
The division seeks to balance Government 
funding and employer contributions to 
provide learning that impacts on workplace 
productivity across a range of industries.  
This is delivered through Apprenticeship 
Learning under the EMTEC brand and  
Adult Learning under the ASSA brand  
after the recent acquisition of ASSA.
 David Carter
	 Group	 Managing	 Director 03     04     05
0 1000 2000 3000 4000 5000
3
4446
3493
2666
7.3
5.1
2.3*
03     04     05
%
0 1 2 3 4 5 6 7 8
7
VOcati Onal  l earning   di ViSiOn Carter & Carter g roup pl C  a nnual r eport 2005
Divisional Review
Vocational Learning division continued
funding for learning is guaranteed if the person 
is in employment. In England, the division’ s 
primary funding for its programmes is provided 
under contract with the Learning and Skills 
Council (LSC), a Government body responsible 
for funding and planning education and training 
for over 16-year-olds not in university education. 
The secretary of state for education allocates 
resources to the LSC annually. For the fiscal 
year 2004, £8.6bn was allocated to the LSC. 
This represented an increase of approximately 
16% in real terms over the 2003 allocation.
The Government White Paper on 14-19 
Education and Skills in February 2005 
re-affirmed the Government’ s commitment 
to vocational learning on an equal footing 
with academic learning. It laid out plans for 
vocational specialist diplomas and stated its 
intent to grow apprenticeship programmes as 
the vehicle for work based vocational learning. 
The recent task force set up to implement the 
White Paper also confirmed that this year the 
target of 175,000 new apprentice starts would 
be achieved but that this represented only 28% 
of young people versus the 35% they would 
target within five years.
automotive  skills  shortages
Analysis in April 2003 by Burlington, an 
independent market research house, indicated 
that there are around 16,000 automotive 
apprentices working in franchised dealers 
in the UK. Currently we train around 5,000 
apprentices with the remaining being trained 
through local colleges. There was also an 
estimated shortfall of approximately 1,800 
qualified automotive technicians in the UK, 
and this shortfall is projected to widen to 
approximately 7,000 by 2012. When coupled 
with the current market dynamics of increasing 
vehicle complexity and an aging technician 
population, we conclude that there will be 
an increasing demand for apprentices and 
technicians. 
Traditionally, automotive apprentices have 
been trained at local technology colleges on 
unbranded programmes. However, vehicle 
manufacturers have increasingly recognised the 
benefits of branded training courses because 
they:
•  are tailored to each manufacturer’ s 
requirements while satisfying NVQ standards;
•  provide apprentices with access to the latest 
vehicles and equipment, including new 
vehicle models to help to ensure that training 
is up to date and relevant;
•  are typically undertaken in dedicated and 
modern facilities; and
•  promote brand association among the 
apprentices who are trained solely on one 
brand of vehicle. 
This benefits the manufacturers as it helps 
to increase apprentice loyalty and reduces 
defection to a rival branded dealership network 
once the apprentice has qualified.
80
%
80%  of  revenues are provided by 
Government funding through the 
LSC budgets
Vocational Learning underlying  
operating profit**
Average students in learning
12    divisional review
 Phillip J Carter
	 Group	 Chief	 Executive
* 2003 is the full year result for this division although part of the business was 
not acquired until June 2003
** Excluding goodwill amortisation and exceptional costs
“ The Government led trend to increase 
vocational learning and apprenticeships 
provides an excellent market condition 
in which Carter & Carter can operate.” VOcati Onal  l earning   di ViSiOn Carter & Carter g roup pl C  a nnual r eport 2005
t he  key  drivers  of  our  growth
The key drivers of growth in Apprenticeship 
Learning are the average number of students 
in learning combined with the average level 
of revenue generated by each learner. The 
average number of students in learning reflects 
the annual intake of new learners, the rate 
of learner retention and the average duration 
through to successful achievement. By 
increasing achievement rates and accelerating 
the period to completion, we are able to drive 
up average funding per learner each year. 
Completion rates are also a key measure used 
by the Government funding bodies. We also 
seek to optimise the use of facilities and training 
resources to leverage our infrastructure.
delivering  value  for  our  clients
The EMTEC proposition has been built on 
delivering branded programmes that provide 
vehicle manufacturers and their networks 
with the most brand aligned and technically 
competent apprentices. The business utilises 
a series of performance measures for every 
programme to ensure that operational 
deliverables are met.
The philosophy of Measurable Business 
Improvement has been ingrained in the  
EMTEC business since its acquisition by  
the Group.
investment  in  facilities
Since acquiring EMTEC a further substantial 
investment has been made in the high quality, 
branded training facilities. We have opened the 
dedicated Renault facility in Nottingham, our 
new premises in Newport and Basingstoke, 
acquired a facility with the AA technical training 
services business and started work on the 
dedicated Volkswagen Group Academy 
building. In this last year, we have invested 
some £4.2m in premises and facilities. This 
investment is a core element of our competitive 
differentiation of our offer compared to that of 
local colleges and is paramount to our clients.
Our  strategy  for  growth
Our growth strategy in Apprenticeship Learning 
has three key elements.
In automotive:
•  transfer franchise dealers’ students from local 
colleges to the EMTEC-run manufacturer 
programmes. There are estimated to be 
some 16,000 apprentices in franchised 
dealers, EMTEC currently train around 5,000 
of these; and
•  convince dealers already participating 
in manufacturer programmes to take 
apprentices in addition to those they already 
employ. The substantial skills shortage in 
the sector supports the case for increased 
apprentice numbers.
In other sectors:
•  Utilise the Groups’ expertise in apprenticeship 
learning delivery to secure programmes and 
learners in other markets.
l ooking  forward  to  2006
The prospects for Apprenticeship Learning 
remain positive. The Government continues 
to be committed to vocational learning and, 
more specifically, apprenticeship programmes 
while the automotive sector continues to suffer 
severe skills shortages that can be helped by 
adding apprentices. EMTEC has a dominant 
position in the manufacturer branded sector 
and offers a brand specific proposition that has 
clear differentiation from local colleges. In 2006, 
we will further drive home this competitive 
position to the advantage of the Group and  
our clients.
13    divisional review
“ EMTEC start by providing high  
quality candidates and delivering  
a flexible training programme 
underpinned by superb training 
facilities and individual on-site 
support. The focus on personal 
development is refreshing. EMTEC 
encourage behaviours that make  
the difference: a sense of pride, 
teamwork and the right way  
to approach customers. 
 
We are extremely proud of one of  
our apprentices who won a high 
profile UK Skills award and competed 
in the International Skills Olympics. 
The direct output of our investment is 
a well-rounded, effective technician. 
Perhaps more difficult to measure,  
but equally important, is the strong 
loyalty to the dealer generated by  
the programme.”
  Malcolm  Keene     Service  Manager  (Volvo) adult   learning Carter & Carter g roup pl C  a nnual r eport 2005
Acquisition Profile
Adult Learning
Overview  of  the a SSa  acquisition
In September of this year, Carter & Carter 
Group completed the purchase of the 
ASSA business for £24.2m. ASSA employs 
over 200 staff and generated a turnover of 
£26.4m in the year ended 31 July 2005.
ASSA is a major provider of Government-
funded Vocational Learning in a variety of 
industries. The business provides solutions 
that encompass apprenticeship learning and 
NVQ qualification programmes, and it operates 
sector hubs for the delivery of learndirect 
training courses. These services are provided 
within a number of industries including 
automotive retail, automotive manufacturing, 
general manufacturing, food manufacturing 
and leisure. The business has also been 
heavily involved in the Government pilot for the 
National Employer Training Programme, a new 
initiative to develop core skills in the workplace. 
ASSA received excellent grades in its most 
recent Adult Learning Inspectorate (ALI) 
inspection, a key measure of quality delivery 
and a benchmark used by funding bodies to 
determine the quality of providers.
The business was a potentially increasing 
competitor to EMTEC, however, it now provides 
additional solutions to the Vocational Learning 
offer of the Group.
Market  environment  –    government  funding
The market for Vocational Learning in the UK 
is around £1.3bn and represents a significant 
proportion of the LSC budget of some £9bn 
for England. Within this funding allocation, the 
LSC supports apprenticeship programmes, 
The National Employer Training Programme 
and learndirect. The Government has restated 
its ongoing commitment to Vocational Learning 
and continues to provide substantial funding, 
albeit they wish to secure increasing employer 
contributions. This trend for focusing on 
employer demand led development and of 
combining Government and private funding 
is central to ASSA’ s approach. A great deal 
of ASSA’ s activity is contained within the 
engineering and manufacturing sector, which 
is an area that receives substantial funding 
with an estimated £256m in 2003/04 invested 
against a substantial skills shortage. 
The Government is seeking to maximise results, 
against the funding provided, by directing 
funding to organisations who have a track 
record of delivery. This shift to fewer, larger, 
more professional providers is a trend that will 
provide opportunity to the Group. Achievement 
rates and results of ALI inspections will 
be paramount in securing these broader 
relationships. The prospect of commercial 
organisations being invited to tender for further 
education contracts is another opportunity 
that will demand closer partnerships with key 
providers. The alignment of ASSA’ s activity to 
Government strategy was a major contributor 
to the decision to acquire the business.
Securing  synergy
The Group has carried out acquisitions to 
secure new products, clients and markets 
to drive our growth. There will, however, be 
clear areas of synergy and efficiency that can 
be secured, which will create cost savings in 
addition to increased growth.
As a provider of apprenticeship learning, 
ASSA has some overlap with EMTEC, 
indeed some of these programmes are in the 
automotive sector. Given the proven track 
record within EMTEC for apprenticeship 
learning, the current programmes of ASSA will 
be transferred to centralise this type of activity in 
the Apprenticeship Learning Division. ASSA will 
then provide the adult learning solutions that are 
Government supported Vocational Learning.
£
1.3
bn
The allocation of LSC budget 
directed to vocational learning  
this year.
14    aCQuisition pro File
adult learning Phillip J Carter
	 Group	 Chief	 Executive
“ There is considerable evidence of  
a drive by the Government towards 
having fewer, higher quality learning 
providers. The importance of achieving 
good results in Adult Learning 
Inspectorate (ALI) inspections and 
delivering high achievement rates  
is growing.” 03     04     05
0 1000 2000 3000 4000 5000 6000 7000 8000
12
7071
3347
1429
70711
34316
28736
03     04     05
0 1000020000300004000050000600007000080000
13
adult   learning Carter & Carter g roup pl C  a nnual r eport 2005
There are areas of obvious synergy in addition 
to centralising apprenticeship programmes. 
Internal quality processes and systems can be 
managed across all Vocational Learning that 
receives Government support. This will allow us 
to share best practice and create a dedicated 
unit that will drive us to the highest levels of 
ALI inspection results. The enlarged division 
will share dedicated business development 
resource that will focus on building our 
relationship with Government funding bodies. 
This will be led by Peter Marples, previously 
CEO with ASSA and a recognised influencer in 
the Government learning area.
t he  future
The acquisition of ASSA clearly demonstrates 
our focus on multi-industry Government funded 
and supported Vocational Learning. This 
is a highly fragmented market within which 
the enlarged division is a major player. The 
combination of EMTEC and ASSA provides 
the Group with learning solutions across the 
spectrum of the Government’ s agenda and 
allows activity in a range of sectors outside 
of the automotive market. We will drive 
forward our adult learning capability through 
learndirect and the National Employer Training 
programmes and seek to deliver a product 
that maximises the Government’ s investment 
and employers’ business improvement. This 
alignment to the Group’ s Measurable Business 
Improvement culture was evident throughout 
the acquisition. 
We will integrate the ASSA business through 
alignment to our strategic building blocks. 
This will be carried out with absolute focus on 
the need to deliver our plan, deliver for clients, 
and ensure the engagement and motivation of 
ASSA team members. The coming year will be 
an exciting one for the adult learning business 
and provide a platform for further growth.
aSSa  performance  Management information supplied by the 
business has shown an increase of 41% 
in turnover in the year to 31 July 2005 to 
£26.4m. Underlying operating profits, before 
goodwill amortisation, have increased by  
16% to £2.9m.
NVQ courses delivered
15    aCQuisition pro File
learndirect courses delivered
“ The LSC continues to invest in 
vocational education and training to 
increase the productive skills of the 
workforce of England. This is a key 
priority, and a significant proportion of 
the LSC’s budget will continue to be 
directed to this purpose. As set out  
in our Annual Statement of Priorities, 
we are seeking to contract with  
those who can deliver the skills the 
nation needs and thereby contribute  
to the LSC’s targets. Funding will 
therefore be increasingly directed  
to those who deliver our targets.  
For apprenticeships, this will mean 
contracting with providers who can 
help us deliver a step-change in 
improving quality and ensuring that 
apprentices achieve their full 
framework of training.  
 
Where organisations with proven 
strong performance, such as EMTEC 
and ASSA, come together, there is  
the opportunity for each to contribute 
their existing good practices and 
hence to improve the performance  
of the new organisation.”
  Stephen g ardener     l earning  and  Skill c ouncil Financial Review
Meeting   expectati On S Carter & Carter g roup pl C  a nnual r eport 2005
16    Finan Cial rev iew
meeting 
expectations t urnover
Group turnover has increased by 33% to 
£51.0m (2004: £38.2m). 
Vocational Learning showed an increase in 
turnover of 50% to £26.7m (2004: £17.8m). 
The key drivers of revenue growth are the 
average number of students in learning, which 
increased by 27% to 4,446 (2004: 3,493) and 
the average revenue generated per learner 
which increased by 21% to £5,587 (2004: 
£4,624). While the number of students in 
learning remains a core driver, as we seek to 
reduce the time required to qualify apprentices, 
revenue per student becomes increasingly 
important.
Outsource Services turnover increased by 19% 
to £24.3m (2004: £20.5m). The key driver 
in this business is the number of fee-earning 
heads which saw an increase of 30% to 360 
(2004: 276). Excluding growth due to the 
acquisition of the AA technical training services 
business, fee-earning head count grew by 9%. 
Operating  profit
Group operating profit before amortisation of 
goodwill and exceptional items increased by 
47% to £10.3m (2004: £7.0m). Operating 
margins before goodwill amortisation and 
exceptional costs increased to 20% from 18%.
Vocational Learning operating profit before 
goodwill amortisation and exceptional costs 
increased by 43% to £7.3m (2004: £5.1m) 
with an operating margin of 27% down from 
29% in 2004. This decline in margin is due to 
investment in the business infrastructure.
Outsource Services showed an increase in 
operating profit before goodwill amortisation 
and exceptional costs of 56% to £3.0m 
(2004: £1.9m). Operating margins increased 
to 12% from 9% in 2004 due to indirect costs 
increasing at a slower rate than turnover.
goodwill  amortisation
Goodwill amortisation has increased marginally 
to £2.0m (2004: £1.9m) mainly due to the 
acquisition of the AA technical training services 
business. The Group’ s policy is to write off 
goodwill over the useful economic life of the 
acquisition up to a maximum of 20 years.
exceptional  administration  costs
Exceptional costs of £1.0m relate to the  
IPO expenses.
interest  costs
Interest costs have increased to £3.1m  
(2004: £2.7m). The interest charge includes an 
exceptional accelerated deferred finance charge 
of £0.3m related to the refinancing of bank and 
other debt as part of the IPO. Interest costs 
also include the unwinding of discount in 
respect of the EMTEC deferred consideration  
of £0.1m (2004: £0.3m).
taxation
The Group’ s effective rate of tax for the 
year was 37%, compared to 67% in 2004. 
Excluding amortisation of goodwill the tax rate 
falls to 25% (2004: 37%). This low effective 
rate arises as a result of an exceptional tax 
credit from the exercise of share options at IPO 
offset by the exceptional administration costs, 
the majority of which are not tax deductable. 
For 2006, we expect the tax rate, excluding 
goodwill, to be approximately 32%.
Shareholder  returns  and  dividends
Basic earnings per share increased by 319% 
to 8.8p (2004: 2.1p). Excluding goodwill 
amortisation and IPO related exceptional costs, 
earnings per share have increased by 72% to 
17.4p (2004: 10.1p). 
The Board has proposed a final dividend  
of 3.2p per share. This will be payable  
on 6 December 2005 to shareholders  
on the register at close of business on  
21 October 2005. 
 John Green
	 Group	 Finance	 Director
 I am pleased to present our first set of results as  
a listed Company. Both operating divisions  
continue to deliver strong growth in revenues 
significantly improving operational gearing. The 
capital restructuring and refinancing on IPO and 
more recently with the acquisition of ASSA provides  
a strong balance sheet for future growth.
£
51.0
m
Group turnover
(2004: £38.2m)
8.8
p
Earnings per share 
(2004: £2.1p) Meeting   expectati On S Carter & Carter g roup pl C  a nnual r eport 2005
17    Finan Cial rev iew
t reasury  and  risk  management
The Group’ s treasury function is run as part 
of the finance function and seeks to reduce 
or eliminate exposure to foreign exchange, 
interest rate and other financial risks and to 
ensure sufficient liquidity is available to meet 
foreseeable needs. It does not operate as a 
profit centre and transacts only in relation to 
underlying business requirements.
c urrency  risk  management
Overseas companies account for less than 
6% of the Group’ s turnover and therefore 
Group results are not significantly impacted by 
currency movements. The directors regularly 
review the need to put specific currency 
hedging arrangements in place. 
interest  rate  risk  management
During the year the Group entered into interest 
rate hedge agreements, which capped the 
interest payable on approximately £8m of the 
outstanding senior debt. An interest rate floor is 
also included in these arrangements. Under the 
new bank facilities agreed as part of the ASSA 
acquisition, the Group has put in place similar 
interest rate hedging arrangements in respect 
of 55% of its outstanding senior debt.
acquisitions
Acquisitions amounted to £1.1m. This included 
£0.6m payable in respect of the acquisition 
of the AA technical training services business, 
of which £0.2m is deferred dependent on a 
major contract renewal due in November 2005. 
In addition, £0.5m is payable in respect of the 
acquisition of the DCUK apprenticeship learning 
contract.
pensions
The Group operates two defined contribution 
pension schemes. There are no unfunded 
benefits.
accounting  policies  and  standards
The principal accounting policies used by the 
Group are shown in note 1 to the financial 
statements on pages 42 to 44. No new 
Financial Reporting Standards have been 
adopted in this financial year.
international  financial  reporting  standards
The move to IFRS will not change how the 
Group is managed and will have no impact on 
cash flow. It could, however, lead to increased 
volatility in the profit and loss account and 
balance sheet, with the presentation of the 
financial statements also affected. 
The Group is preparing for the adoption of 
IFRS. The greatest impact on net assets 
and profit will come from changes to the 
accounting treatment of goodwill amortisation 
and impairment, other intangibles, share-based 
remuneration, tax and deferred tax. 
The financial statements for the year to 
31 July 2006 will be reported under IFRS, 
as will the interim results for the six months 
to 31 January 2006. 
post  balance  sheet  events
On 12 August 2005, the Group announced 
that it had agreed to acquire ASSA Training and 
Learning Limited for £24.2m payable in cash, 
shares and loan notes. The purchase price 
includes an element of deferred consideration 
totalling £2.5m that will be satisfied by the issue 
of shares. The acquisition was completed on 
1 September 2005.
John Green
Group	 Finance	 Director	 12	 October	 2005
Shareholders’  funds
T otal shareholders’ funds have increased 
to £15.7m (2004: £4.1m). During the year, 
preference shares totalling £6.3m were bought 
back by the Company in two tranches, one of 
which required the transfer of £4.5m from the 
profit and loss account to a capital redemption 
reserve. As part of the flotation of the Company 
in February 2005, approximately 8.4m new 
shares were issued at a premium of £2.31  
per share.
c ash  flow  and  net  debt
The Group’ s operating cash flow before capital 
expenditure, IPO costs, acquisitions, interest, 
tax and dividends, was £8.8m (2004: £6.6m). 
Cash conversion (operating cash flow as a 
percentage of EBITDA) was 79% (2004: 86%). 
This being less than 100% was mainly due 
to working capital increasing as turnover has 
grown and as a result of the move to VAT 
monthly payments on account in the Outsource 
Services division. 
The net amount incurred on capital expenditure 
was £4.7m, of which £4.0m was paid in the 
year (2004: incurred £1.1m, cash paid £1.3m). 
This reflects expenditure on our new Newport 
premises and work on the Volkswagen Group 
Academy building, which will be completed 
early in the new financial year. 
During the period, the Group redeemed  
£6.3m of preference shares and paid deferred 
consideration in respect of the EMTEC 
acquisition totalling £4.8m. The AA technical 
training services business was acquired for 
£0.4m cash (plus £0.2m deferred consideration). 
In addition, £19.7m was raised, before fees,  
as part of the Company’ s listing in February. 
The flotation and the financial reorganisation 
prior to the flotation resulted in the payment  
of rolled up interest and preference dividends 
totalling £2.2m.
Net debt at 31 July 2005 decreased to £29.1m  
(2004: £31.5m).
8.8
2.1
-6.7
03     04     05
%
-8 -6 -4 -2 0 2 4 6 8 10
9
EPS-basic pence per share
-1 0 1 2 3 4 5 6 7 8
7.9
6.6
0.7
03     04     05
-1 0 1 2 3 4 5 6 7 8
10
Operating cash flow
10.3
7
1.5
03     04     05
0 2 4 6 8 10 12
6
Group operating profit*
* Before exceptionals and goodwill
4.0
1.3
1.2
03     04     05
%
0 1 2 3 4 5
11
Capital expenditure*
* Cash expenditure Our People
18    our people
expert S  in   their   field   Carter & Carter g roup pl C  a nnual r eport 2005
“ Our innovative e-learning 
environment already provides 
a massive on-line resource for 
over 5,000 apprentices across 
27 different programmes. 
Looking forward, it gives us 
the opportunity to capture the 
in-depth expertise we have 
throughout the Company  
and share this knowledge 
across the Group.”
	 Phil 	 Whitehouse
	 EMTEC
	 E-learning 	 Development	 Manager
experts in their field Each year the Group invests its resources  
to deliver on a people strategy that seeks to 
attract, develop, motivate and retain the best 
people. Sounds like motherhood and apple  
pie? It may, but the elements of our people 
strategy driven through in our business, are 
non-negotiable and are managed closely  
In any area of the Group’s activity, people are 
central to our success. It is their knowledge 
and expertise that forms the basis of 
delivering solutions and value to our clients. 
They are the key element of our solutions 
and our most prized asset. This is a people 
business in the truest sense. 
“Our focus on delivering value 
and our people strategy were 
the key differentiators that 
enabled us to win the new 
Skoda contract. We already 
had a reputation for delivering 
results and superb working 
relationships with our current 
customers in the VW Group.” 
	 Angela 	 Carroll
	 Carter 	 &	 Carter
	 Programme 	 Manager
	 Volkswagen 	s upport	 Teams
Our	 people,	 	 knowledgeable, 	 motivated,	 		 valued,	 critical 19    our people
expert S  in   their   field Carter & Carter g roup pl C  a nnual r eport 2005
“ When Jaguar/Landrover 
wanted to improve the 
profitability of its accident 
and repair network and 
increase the sales of its 
branded parts, we knew we 
could provide the expertise 
and the people needed. 
Clients use us simply 
because we do what we  
say we’re going to do.”
Gerald	 Porter
Carter	 &	 Carter
Regional	 Commercial	 Development	 Manager
Jaguar/Landrover	 Body	 and	 Paint	 programme
“ Using Measurable Business Improvement 
has transformed the way we deliver the 
apprenticeship programme for Vauxhall. 
We’re focused on the key drivers that 
improve the standards, consistency and 
effectiveness of our training to produce the 
high quality apprentices our customers 
demand.”
	 Paul 	 Rowlett
	 EMTEC
	 Apprentice 	 Programme	 Manager	 	 Vauxhall 	 Contract
“ When we set up the new contract with 
Daimler Chrysler, we wanted to set high 
levels of service from the start. It was a 
very busy period but I had a clear set of 
objectives and specific training on the 
tools I needed to do the job. I knew  
I could deliver the things that were  
really important to the customer.”
	 Eleri 	 Dunstan
	 EMTEC
	 senior	 Administrator	 	 Daimler	 Chrysler	 apprentice	 programme
by the senior management of the Group. We 
don’t always get it right, but we make every 
possible effort to. Each year we select a ‘Star 
Performers’ Group, people who are outstanding 
in their current roles and who epitomise the 
values of our business. We thought you may  
be interested to hear their views.
Our	 people,	 	 knowledgeable, 	 motivated,	 		 valued,	 critical 20    board o F dire Ctors
  Carter & Carter g roup pl C  a nnual r eport 2005
board of directors The Board brings together a wealth of 
experience across differing sectors and 
businesses on an international basis.  
Most importantly they share a passion  
for the business and the outstanding 
opportunities ahead.
01 p hillip c arter  Chief Executive 
Phillip Carter, aged 43, founded Carter & Carter 
Limited in 1992, since which time he has driven 
the Group’ s substantial growth, both in the UK 
and overseas, and has overseen the acquisition 
and successful integration of the EMTEC 
business. Prior to establishing Carter & Carter 
Limited, he worked in a number of sales  
and marketing roles at ICI before becoming 
European Business Development Manager  
of the Paints Division of ICI.
02 d avid c arter
Group Managing Director 
David Carter, aged 62, (no relation to Phillip 
Carter) is Group Managing Director. He joined 
the Group in 2001 and has almost 40 years  
of UK and international experience within the 
automotive industry, having worked as Director 
of Group Service with Volkswagen Group UK 
Ltd, Logistics Director with Volkswagen Group 
(UK) Limited, Parts & Service Director with VAG 
(UK) Limited, Director and General Manager 
with Lucas World Service Europe, Parts Sales 
Director with Ford Motor Company and Service 
Marketing Manager with Ford of Europe.  
Prior to these roles, he held several other 
management roles within Ford of Europe  
in Germany and Ford in Britain.
01
02
05   Carter & Carter g roup pl C  a nnual r eport 2005
21    board o F dire Ctors
07 p eter  Marples
Group Business Development Director 
Peter Marples, aged 41, joined the Group 
with the acquisition of ASSA, where he was 
a managing director and led the team in 
the growth of the business following their 
management buy out in 2003. Prior to 
joining ASSA, Peter was a partner at KPMG 
LLP , where he had national responsibility 
for the education practice, delivering audit 
and consultancy services to Government, 
universities, colleges, funders and other 
stakeholders. An accountant by profession, 
Peter trained in the public sector with 
Derbyshire County Council and also worked  
for the Audit Commission.
nOte
See page 67 for a full list of Directorships held.
05 a drian  Smith
Non-executive Director  
Adrian Smith, aged 61, studied law before 
spending 13 years at Procter & Gamble. Adrian 
was then appointed Vice President, Europe, 
for Ecolab Inc. In 1981, he relocated with 
them to the USA and subsequently supervised 
subsidiary operations in Asia and the Americas 
besides Europe. From December 1991 Adrian 
held a senior position at Arthur Andersen before 
becoming CEO of Grant Thornton LLP . He has 
recently retired from Deloitte where he was the 
global managing partner for marketing and 
communication. He is also on the board of  
the Harbour Branch Oceanographic Institution 
in Florida.
06 d avid g alloway
Non-executive Director 
David Galloway, aged 59, is a chartered 
accountant and has extensive experience of the 
support services and automotive sectors. He 
was a main board director of RAC plc and was 
also Managing Director of Lex Vehicle Leasing 
Ltd, Chairman of Hyundai Car (UK) Ltd and 
Managing Director of Lex Retail Group Ltd. He 
is currently a non-executive director of Speedy 
Hire PLC, May Gurney Integrated Services PLC, 
Accident Exchange plc and Williams Motor 
Company. He chairs the Audit Committee.
03  John g reen
Group Finance Director  
John Green, aged 38, joined ASSA as Finance 
Director in 2003 and, following the acquisition 
by the Group, was appointed Group Finance 
Director in October 2005. Prior to joining 
ASSA, John spent two years with a specialist 
corporate finance advisory practice and, before 
this, was Finance Director of Wagon plc’ s 
UK automotive division. John is a chartered 
accountant and spent seven years with 
PricewaterhouseCoopers LLP .
04 r odney w esthead  Non-executive Chairman 
Rodney Westhead, aged 61, joined Ricardo 
Plc, the largest automotive engineering 
consultancy company in Europe, in 1992  
as Finance Director and was appointed  
Chief Executive Officer in 1996. Before  
joining Ricardo Plc, he was a partner of Grant 
Thornton for 14 years, holding a number of 
positions including managing partner of their 
London office. He is also a non-executive 
director of Mouchel Parkman Group plc and 
AEA T echnology plc.
04
03
06
07 22
Directors’ Report
for the year ended 31 July 2005
The directors present their annual report on the activities of the Group, together with the financial statements and auditor’s report for the year 
ended 31 July 2005.
Principal activities and business review
The principal activities of the Group during the period continue to be the operation of Outsource Services and Vocational Learning. The 
subsidiary and associated undertakings principally affecting the profits or net assets of the Group are listed in note 14 to the financial 
statements. The Group operates from a number of facilities in the United Kingdom and has a number of overseas operations, including  
in the United States, Germany, Japan and Australia.
A review of the Group’s activities and a report on its business, strategy and likely future developments are included in the Chief Executive’s 
Review, Divisional Review and Financial Review on pages 6 to 17 .
Post balance sheet events
Details of significant events since the balance sheet date are contained in note 34 to the financial statements.
Results and dividends
The Group’s profit on ordinary activities after taxation was £2.7m for the year ended 31st July 2005 (2004: £0.8m). The directors recommend 
a final dividend of 3.2 pence per share to be paid on 6 December 2005 to ordinary shareholders on the Register of Members on 21 October 
2005, subject to approval by shareholders of the final dividend per share for the year ended 31st July 2005 (2004: nil pence per share). 
Accrued preference dividend of £114,000 was declared in the year ended 31 July 2005 (2004: £264,000).
Directors
The directors who served during the period up to 31 July 2005 comprise:
Adrian Smith  Non-Executive Chairman
Phillip Carter Group Chief Executive
Julie Pomeroy  Group Finance Director
David Carter  Group Managing Director
Rodney Westhead* Independent Non-Executive Director
David Galloway* Senior Independent Non-Executive Director
* Appointed at flotation in February 2005
Rodney Westhead succeeded Adrian Smith as Non-Executive Chairman with effect from 1 October 2005.
Julie Pomeroy resigned as Group Finance Director with effect from 3 October 2005 to pursue other business interests and has been 
succeeded by John Green, effective from the same date.
Peter Marples has been appointed Business Development Director with effect from 3 October 2005.
The appointment of each of John Green and Peter Marples will be considered by shareholders for approval at the forthcoming Annual 
General Meeting.
Details of committee membership is set out on pages 24 to 28, 33 to 34 and 35.
Details of the directors’ interests are set out in the Directors' Remuneration Report.
Please refer to pages 20 to 21 for directors’ biographies.
The Board are of the view that notwithstanding the three non-executive directors holding shares in the Company, they are nonetheless 
independent, based on their wide ranging individual experience of other businesses in different sectors.
Supplier payment policy
It is the Group’s policy to comply with terms of payment negotiated with suppliers. Where payment terms are not negotiated, the Group 
endeavours to adhere to the suppliers’ standard terms.
The Company does not trade and consequently cannot disclose an average creditors’ payment period. Trade creditors of the Group at  
31 July 2005 were equivalent to 45 days’ purchases (31 July 2004: 42 days’ purchases), based on the average daily amount invoiced by 
suppliers during the period.
Charitable contributions
During the period the Group made charitable donations of £9,000 (2004: £7 ,500), of which £7 ,500 was donated to the Carter & Carter Group 
Charity (2004: £7 ,500) and £1,000 to the BeN Charity (2004: £nil).
DIRECTORS’ REPORT Carter & Carter Group p l C a nnual r eport 2005 23
Substantial shareholdings
On 12 October 2005, the Company had been notified, in accordance with sections 198 to 202 of the Companies Act 1985, of the interests in 
the ordinary share capital of the Company set out in the table below:
      Number  Percentage
Name of holder      of shares  shareholding
Fidelity International      1,702,530 5.10
HSBC Global Custody      1,387 ,800 4.15
Chase Nominees      1,118,500 3.35
Legal & General      1,008,255 3.02
Note: The information above is as extracted from relevant notifications under Section 198 to 202 of the Companies Act 1985.
Authority to make purchases of own shares
The Board recognises that under certain circumstances, it may be in the best interests of the Company to make purchases of its own shares. 
Hence the Board received shareholder approval effective at flotation on 7 February 2005 to make market purchases of its own shares up to a 
maximum of 1,669,148 shares (being 5% of the Company’s ordinary share capital at the date of passing the resolution) within a specified price 
range. This authority expires at the conclusion of the next Annual General Meeting.
Shareholders will be asked to approve a special resolution at this year’s Annual General Meeting to extend the existing authority until the end  
of the Annual General Meeting to be held in 2006. This authority will relate to a maximum of 1,788,551 shares (being 5% of the Company’s 
ordinary share capital at 12 October 2005) and will be subject to price restrictions as specified in the Notice of the next Annual General Meeting.
Disabled employees
Applications for employment by disabled persons are always fully considered, bearing in mind the aptitude and abilities of the applicant 
concerned. In the event of members of staff becoming disabled every effort is made to ensure that their employment within the Group 
continues and that appropriate training is arranged. It continues to be the policy of the Group that the training, career development and 
promotion of disabled persons should as far as is feasible be identical to that of other employees.
Employee involvement
The Group places considerable value on the involvement of its employees and has continued to keep them informed on matters affecting 
them as employees and on the various factors affecting the performance of the Group. Employees are consulted and are encouraged 
generally to be involved in the Group’s overall performance.
This is achieved through formal and informal meetings, and Your Company News, the Group magazine.
The Company proposes, subject to shareholder approval, at the next Annual General Meeting, to introduce a Long Term Incentive Plan (‘the 
LTIP’), the purpose of which will be to incentivise those employees who are invited to participate in the LTIP . Further details on the LTIP are 
contained within the Directors’ Remuneration Report and in the notes to the Notice of Annual General Meeting.
Auditors
So far as each director is aware, there is no relevant audit information of which the Company’s auditors are unaware and each director has 
taken all the steps that he ought to have taken as a director in order to make himself aware of any relevant audit information and to establish 
that the Company’s auditors are aware of that information. 
A resolution to re-appoint PricewaterhouseCoopers LLP as the Company’s auditors will be proposed at the forthcoming Annual General 
Meeting.
By order of the Board
Nigel Blythe-Tinker LLB, FCIS
Group Company Secretary
12 October 2005
Registered Office:
Greenhill House, Thorpe Wood, Peterborough PE3 6RU
DIRECTORS’ REPORT Carter & Carter Group p l C a nnual r eport 2005 24
Directors’ Remuneration Report
for the year ended 31 July 2005
Introduction
This report has been prepared in accordance with Schedule 7A to the Companies Act 1985 (as amended by the Directors’ Remuneration 
Regulations 2002 (the ‘Regulations’)), relevant provisions of the Listing Rules and the Combined Code, and the guidance issued by the 
National Association of Pension Funds and the ABI.
The Regulations require the auditors to report to the Company’s shareholders on the ‘auditable part’ of the Directors’ Remuneration Report 
and to state whether in their opinion that part of the report has been properly prepared in accordance with the Companies Act 1985 (as 
amended by the Regulations). The report has therefore been divided into separate sections for audited and unaudited information.
As required by the Regulations, a resolution to approve the report will be proposed at the forthcoming Annual General Meeting.
Unaudited information
The performance graph below illustrates the total shareholder return delivered by the Group since its admission to the London Stock 
Exchange on 7 February 2005, in comparison with the FTSE Small Cap Index. The directors believe that this index is the most suitable 
benchmark for comparison purposes.
160
Feb 05
Carter & Carter
Mar 05 Apr 05 May 05 Jun 05 Jul 05 Aug 05 Sep 05
140
120
100
80
60
40
20
0
FTSE Small Cap Index
Source: Thomson Datastream
Remuneration committee
The Company established a Remuneration Committee (the ‘Committee’), in February 2005 on flotation of the Company. The Committee is 
composed of independent non-executive directors. The Committee determines and agrees with the Board the Group’s policy and 
framework for the remuneration of executive directors and senior management. Details of the membership of the Remuneration Committee, 
together with the year in which membership commenced are detailed below. The Committee met five times during the period with all 
members attending each meeting. The Chairman of the Committee, Rodney Westhead, was also appointed Chairman of the Board on  
1 October 2005.
Director     Year of appointment  Appointment
Rodney Westhead, Chairman      2005  7 February 2005
David Galloway      2005  7 February 2005
In determining the directors’ and senior management’s remuneration, the Committee consulted Phillip Carter (Group Chief Executive) and 
Rod Castle (Director of Group Strategy and Planning) about its proposals relating to individuals other than themselves. No member of the 
Committee has any personal financial interest (other than as a shareholder), or conflicts of interests arising from cross-directorship or day-to-
day involvement in running the business. No director plays a part in any discussion concerning their own remuneration.
In addition, the Committee appointed and advice has been taken from DLA Piper Rudnick Gray Cary UK LLP and Monks Partnership  
in connection with establishing a Long Term Incentive Plan.
DIRECTORS’ REMUNERATION REPORT Carter & Carter Group p l C a nnual r eport 2005 25
Remuneration policy
The remuneration policy has been designed to ensure that the Group has the ability to attract and retain directors and senior managers of a high 
calibre so as to align the interest of the senior management with that of the shareholders and be compliant with best practice. The policy also 
reflects for benchmarking purposes relevant senior management positions in the support services sector and FTSE small cap companies.
This report details the Company’s policy on directors’ and senior management remuneration for 2005 and, so far as practical, for subsequent 
years. This policy will continue unless changed by the Committee, and any changes in policy for years after 2005 will be described in future 
Directors’ Remuneration Reports, which will continue to be subject to shareholder approval.
The Committee is of the view that a successful remuneration policy requires to be sufficiently flexible to take account of future changes in the 
Group’s business environment and remuneration practice.
There are currently two main elements of the remuneration package for directors:
basic annual salary and benefits; and
bonus payments.
The performance measurement of directors and senior management and the determination of their annual remuneration packages are 
undertaken by the Committee. The Group’s policy is to position the basic salaries of directors and senior management at the median of the 
relevant competitive market, with a substantial proportion of their remuneration being performance related. The directors may earn annual 
incentive payments as a percentage of their basic salary, as defined and agreed by the Committee. The remuneration of the non-executive 
directors is determined by the Board within limits detailed in the Articles of Association.
In addition, it is also proposed, subject to shareholder approval, to establish a Long Term Incentive Plan (LTIP) as an integral part of the 
remuneration package of the directors. Further details on the proposed LTIP are contained in this report and in the notes to the Notice of the 
Annual General Meeting.
Executive directors are required to obtain the Board’s prior written consent to accept external appointments, and with the exception  
of Phillip Carter, they hold no such positions. Phillip Carter is currently a director of PJC Peterborough Limited, Statusinput Limited and  
Anchor Properties Inc. He is also a partner of the Carter & Carter Partnership.
Executive directors’ remuneration and service contracts
It is the Company’s policy that executive directors should have contracts with a rolling term providing for a maximum of one year’s notice. 
Consequently no executive has a contractual notice period in excess of 12 months. In the event of early termination the policy on executive 
directors’ contracts provides for compensation up to a maximum of 12 months’ basic salary, benefits of a fully expensed car and/or car 
allowance, private health cover, permanent health insurance and pro-rated bonus. The Committee will also consider mitigation to reduce 
compensation to a departing director where appropriate to do so.
 
The salaries of the directors are reviewed annually on 1 August each year. Individual pay levels are determined by reference to competitive 
market conditions, performance, experience and potential. The Group benchmarks compensation by reference to comparator groups and 
crosschecks this information against a sample of companies of comparable size.
Messrs Phillip Carter and David Carter are, and Julie Pomeroy was, during the year ended 31 July 2005 and until her resignation on  
3 October 2005, employed under service contracts with the Company dated 24 January 2001, 1 March 2001 and 2 December 2002 
respectively. Each of these contracts provide(d) an entitlement to a basic annual salary, a discretionary bonus, a company car (or cash 
allowance in lieu), permanent health insurance cover and each contract is terminable by 12 months’ notice given by either party.
The basic annual salaries of Phillip Carter and David Carter were increased by 11.4% and 25.0% to £250,000 and £150,000, respectively, 
effective 1 August 2005. David Carter’s increase reflects his increased responsibilities on his appointment on 1 August, 2005 as Group 
Managing Director. Julie Pomeroy’s basic annual salary of £119,000 remained unchanged during the period. On the appointment of John 
Green, who succeeded Julie Pomeroy as Group Finance Director on 3 October 2005, his basic annual salary was increased to £120,000 
together with a fully expensed car and allowances, private health cover, permanent health insurance and a Company pension contribution 
equivalent to 10% of basic salary. Peter Marples was appointed Group Business Development Director on 3 October 2005 at a basic annual 
salary of £205,000 together with a fully expensed car and allowances, private health cover, permanent health insurance and a Company 
pension contribution equivalent to 10% of basic salary. The basic salaries of other directors were reviewed and increased as appropriate, 
dependent on personal performance and comparator benchmarking. In setting salary levels the Committee is sensitive to pay and conditions 
in other comparator companies.
In addition to basic salary, certain members of senior management receive other competitive benefits, being a fully expensed car or car 
allowance, private health cover and permanent health insurance. It is intended to continue to provide these benefits but retain the flexibility 
to provide a cash alternative for any or all of these according to individual circumstances.
•
•
DIRECTORS’ REMUNERATION REPORT Carter & Carter Group p l C a nnual r eport 2005 26
Bonus payments
Executives are eligible for annual bonus payments, at the discretion of the Remuneration Committee, upon the recommendation of the chief 
executive. The bonuses are based on achievement of Group and Divisional operating profits and personal objectives. The Remuneration 
Committee sets targets at the start of the year and at the end of the year reviews performance against those targets to determine bonus 
levels. In the year ended 31 July 2005, the executive directors’ maximum bonus opportunity was as follows: Phillip Carter – 100%; David 
Carter – 100%; Julie Pomeroy – 25%; Rod Castle – 50%. All bonuses are paid in cash.
For the year ending 31 July 2006 the executive directors’ maximum bonus opportunity will vary from 25% of salary to 100% of salary.
Long-term incentives
Long-term incentives are provided to drive performance, aid retention and align the interests of executives with those of shareholders. As 
indicated above, the Group proposes, subject to shareholder consent at the forthcoming Annual General Meeting on 29 November 2005,  
to introduce an LTIP whose purpose will primarily be to incentivise directors, senior and middle management and ‘star performers’.
The LTIP will be administered by the Committee and provides for conditional awards of shares, dependent on Company performance. 
Release of the shares will be dependent upon the Company’s performance measured by reference to an earnings per share (EPS) measure 
over a three-year period by reference to the support services sector or size of comparator support services companies. Shares vest in 
proportion to the Company’s EPS performance. No shares will vest if the Company’s performance is below RPI plus 5%. At RPI plus 5%, 
20% of the Company’s shares will vest, with a ‘straight line’ vesting to RPI plus 10%, at which 100% vesting will occur. The LTIP is structured 
so that the awards are nil-cost options. It is proposed for the first awards to be made in 2005, following shareholder approval of the LTIP ,  
and subsequently on an annual basis, subject to objective conditions, provided this is justified by corporate and individual performance.  
The Committee believes that a three-year performance period is appropriate and in line with market practice and that the level of award  
is competitive. The Committee considers EPS to be the most appropriate metric for long-term incentives as it rewards management’s 
performance in both growing the business as reflected in the share price and returning value to shareholders via the payment of dividends.
Pension arrangements
The Company participates in two defined contribution arrangements, a Group personal pension scheme and a stakeholder pension 
scheme, both of which are arranged through Standard Life. These pension schemes are not open to directors.
Non-executive directors’ letter of appointment
All non-executive directors have specific letters of appointment and their remuneration is determined by the Board within the limits set by the 
Articles of Association and based on independent surveys of fees paid to non-executive directors of similar companies. Remuneration is set 
taking account of the commitment and responsibilities of the relevant role. The non-executive directors do not have service contracts.
Messrs Smith, Westhead and Galloway each entered into letters of appointment as non-executive directors with the Company dated  
18 January 2005, which provide for:
(i) an initial fixed term of three years from 18 January 2005, terminable upon three months’ written notice by either party;
(ii) a fee of £30,000 reviewed annually by the Committee; and
(iii) reimbursement of all reasonable out-of-pocket expenses which he properly incurs  
in the course of performing his duties as a non-executive director of the Company.
Mr. Smith was appointed non-executive Chairman on 24 September 2002. On 30 September 2005, Mr Smith relinquished the role of  
non-executive Chairman but remains on the Board as an independent non-executive director. He has been succeeded by Mr. Westhead, 
who was appointed non-executive Chairman with effect from 1 October 2005. Mr. Smith is chairman of the Nomination Committee.  
Mr. Westhead is the chairman of the Remuneration Committee and a member of the Audit and Nomination Committees. In accordance  
with the PERK Sharholder Voting Guidelines 2005, it is proposed, following Mr Westheads appointment as Chairman of the Company on  
1 October 2005, that he be replaced by Mr Smith as a member of the Audit Committee. Mr. Galloway is chairman of the Audit Committee  
and a member of the Remuneration and Nomination Committees. Mr Galloway is also the Senior Independent Non-Executive Director.  
Each of their fees are in respect of all the services each of them provides to the Company.
Non-executive directors are appointed for an initial term of three years and, in normal circumstances, and subject to performance and  
re-election at Annual General Meetings, they would be expected to serve for a second three-year term. Non-executive directors may be 
requested to serve for a further three-year term subject to rigorous review at the relevant time and agreement with the relevant director. Upon 
termination or resignation, non-executive directors are not entitled to compensation and no fee is payable in respect of the unexpired portion 
of the term of appointment. Non-executive directors cannot participate in any Company incentive scheme.
DIRECTORS’ REMUNERATION REPORT Carter & Carter Group p l C a nnual r eport 2005 27
Directors’ interests in shares
Directors’ interests in the share capital of the Company at 31 July 2004 is shown in the table below:
       Ordinary shares of £1 each
     A B C
P J Carter     394,000 15,000 35,000
D J Carter      10,000 
J P Pomeroy      5,000 
A J R Smith      2,500 
In addition, at 31 July 2004, P J Carter had an interest in 100% of the 4.2% irredeemable cumulative preference shares with a value of 
£6,285,000. These shares were redeemed at the time of the flotation.
As part of the flotation of the Company, the various classes of £1 ordinary shares were converted into one new class of ordinary shares of  
4 pence each. The directors’ interests in the share capital of the Company at 31 July 2005 is shown below:
       Ordinary shares 
       of 4 pence each
P J Carter (note 1)       8,873,405
D J Carter       222,688
J P Pomeroy       183,770
A J R Smith       67 ,562
R J Westhead (note 2)       3,500
D A Galloway (note 3)       10,000
There have been no changes in the shareholdings of the directors shown above between 31 July 2005 and 12 October 2005.
Notes
1 Of which, 8,864 are held by Judith Carter, Phillip Carter’s wife.
2 These are held by Judith Westhead, Rodney Westhead’s wife. These shares were aquired on 20 April 2005.
3 These are held by Janet Galloway, David Galloway’s wife. These shares were aquired on 20 April 2005.
Peter Marples and John Green were appointed to the Board after the year end. Their shareholdings at 12 October 2005 are shown below:
       Ordinary shares 
       of 4 pence each
P Marples       145,180
J C Green       21,777
DIRECTORS’ REMUNERATION REPORT Carter & Carter Group p l C a nnual r eport 2005 28
Audited information
Aggregate directors’ remunteration:
      2005 2004
      £’000 £’000
Emoluments      942 776
Gains on exercise of share options      188 –
Directors’ remuneration (audited)
The emoluments of the directors for the years ended 31 July are detailed below:
   Salary   Annual   2005  2004
   and fees Benefits bonus   total  total
Name of director    £’000  £’000 £’000   £’000  £’000
Executive directors
P J Carter    220 52 220  492 352
D J Carter   120 16 90  226 163
J P Pomeroy   112 7 30  149 155
R Castle (until 30/1/04)   – – – – 50
Non-executive directors
D A Galloway   16 – –  16 –
R J Westhead   16 – –  16 –
A J R Smith   31 – –  31 34
M Davy (until 31/1/05)   12 – –  12 22
Aggregate emoluments   527 75 340  942 776
Directors’ share options (audited)
Details of the share options exercised during the period are as follows:
        Gains on  
Name of director    Number of Exercise  Share price on  exercise 2005  Gains on
   options price date of exercise £ exercise 2004
Julie Pomeroy    81,075  3.7p  235p  187 ,526  —
Details of share options for directors who served during the period are as follows:
   Share   Options  Options
  Number of  held at  granted  exercised   Share price Options
  options at  split and  Restated  during  during  Exercise  on date  held at
Name of Director  1 August 2004  bonus issue  options  the year  the year  price  of exercise  31 July 2005
Julie Pomeroy   3,000  78,075  81,075  –  81,075  3.7p  235p  nil
Approval
This report was approved by the Board of directors on 12 October 2005 and signed on its behalf by:
Rodney Westhead
Chairman of the Remuneration Committee
12 October 2005
DIRECTORS’ REMUNERATION REPORT Carter & Carter Group p l C a nnual r eport 2005 29
Statement of Corporate Governance
for the year ended 31 July 2005
The Revised Combined Code on Corporate Governance (‘the Code’) applies to financial years commencing on or after 1 November 2003. 
The Company is reporting on compliance with the Code for the first time as a fully listed company.
The Code comprises a set of main principles that cover the general themes of the Board, directors’ remuneration, financial reporting, internal 
control and communication with shareholders. Each main principle is further expanded by a set of supporting principles as detailed 
provisions.
Listed companies are required to include a statement in their Annual Report to say how the main and supporting principles have been applied 
and whether or not they have complied with the Code’s provisions during the year. Where a company is not compliant with any of the 
provisions, an explanation for such non-compliance is required.
Compliance with the Code’s provisions.
Since flotation, save as otherwise provided in this statement, the Company has complied with the provisions of the Code.
(i) Since flotation, a process of formal and rigorous annual evaluation of the Board, its committees and directors has yet to be established. It 
is proposed, however, to establish such an evaluation process during the remainder of 2005, so as to be fully compliant with the Code.
(ii) The Company has formulated a ‘whistleblowing’ policy that it proposes to implement in the near future.
(iii) The Company currently does not have a supplier payment policy and endeavours in the absence of payment terms to adhere to suppliers’ 
standard terms.
(iv) A full formal and tailored induction programme for new directors is being developed.
The Board
The Chairman, Chief Executive, Senior Independent Director and those directors whom the Board considers to be independent are listed on 
pages 20 to 21. Details of Board and Committee attendance are detailed on page 30. No directors have resigned during the year. Appropriate 
directors and officers insurance cover is in place in respect of legal action against directors and officers.
The Board has met eight times since the flotation of the Company on 7 February 2005 and operates within a formal schedule of matters 
reserved to it, including strategy, the approval of financial statements and shareholder circulars, treasury policy, major capital investments, 
risk management strategy and acquisitions and disposals. Other powers are delegated to the Remuneration Committee, Audit Committee, 
Nomination Committee and senior management. Details of the roles and responsibilities of these Board Committees are set out on pages 24 
to 28, 33 to 34 and 35. Papers for board and committee meetings are circulated in advance of the relevant meeting and where a director is 
unable to attend he is provided with a full copy of the papers and has the opportunity to comment on the matters to be discussed. Julie 
Pomeroy resigned on 3 October 2005 as Group Finance Director to pursue other business interests and was succeeded on that date by 
John Green, previously Finance Director of ASSA, prior to its acquisition in August 2005.
The Board considers that its primary role is to provide leadership to the Group, to set the Group’s long-term strategic objectives and to 
develop robust corporate governance and risk management practices. The schedule of matters reserved to the Board and delegated 
authorities are reviewed and approved by the Board annually.
The authority delegated to senior management provides a practical framework for executive management, which seeks to achieve the 
objectives of maintaining effective financial and operational controls whilst providing sufficient flexibility to manage the business.
 
The Board comprises individuals with wide business experience of various sectors of industry and they have access to all information relating 
to the Group.
During the period, the chairman met with the non-executive directors without the executive directors being present and, as part of the 
process to appraise the chairman’s performance, the two other independent non-executive directors met.
STATEMENT OF CORPORATE GOVERNANCE Carter & Carter Group p l C a nnual r eport 2005 30
Chairman and Group Chief Executive
There is a clear division of responsibilities between the Chairman and the Group Chief Executive whereby the Chairman is responsible for the 
running of the Board, and the Group Chief Executive has executive responsibility for the running of the business. At the time of the flotation the 
Board reviewed and approved the division of responsibilities for the Chairman and Group Chief Executive. No one individual has unfettered 
powers of decision.
A Smith satisfied the independence criteria detailed in provision A.3.1 of the Code as Chairman during the period and details of his other 
significant commitments are detailed on page 67 .
As indicated at the time of the Interim Results announcement Rodney Westhead succeeded Adrian Smith as chairman with effect from  
1 October 2005.
R Westhead satisfies the independence criteria detailed in provision A.3.1 of the Code on his appointment as Chairman and details  
of his other significant commitments are set out on page 67 .
Board balance, independence and appointments
On flotation, the composition of the Board and its various committees was reviewed and evaluated so as to reflect the Board’s and the 
Committees’ balance of skills, expected time commitment, knowledge and experience.
The directors’ aim is to ensure that the balance of the Board reflects the changing needs of the Group’s business. The Nomination Committee 
and the Board will continue to monitor the Board’s balance and skills at least annually.
Since flotation, the Board has comprised three independent non-executive directors out of a total of six directors, it now comprises four 
executive directors and three independent non-executive directors.
The Senior Independent Non-Executive Director, David Galloway, is available to shareholders if they have concerns that have not, or cannot, 
be addressed through the Chairman, Group Chief Executive or Group Finance Director.
Appointments to the Board are the responsibility of the full Board, on the recommendation of the Nomination Committee. On joining the 
Board, directors receive a formal appointment letter, which identifies the time commitment expected of them. A potential director candidate is 
required to disclose all significant outside commitments prior to appointment. The terms and conditions of appointment of non-executive 
directors are available to shareholders for inspection at the Group’s registered office during normal business hours and at the Annual General 
Meeting (for 15 minutes prior to the meeting and during the meeting). The non-executive directors have undertaken that they have sufficient 
time to meet commitments.
2005 Board and Committee meetings (since flotation)
     Audit  Nomination  Remuneration
Number of meetings held     Board Committee Committee  Committee
Meetings attended    
A J R Smith    8 3* 1 4*
R J Westhead    8 3 1 5
D A Galloway    8 3 1 5
P J Carter    8 3* 1* 5*
J P Pomeroy    8 3* 0 1*
D J Carter    6 0 0 0
*Attendance by invitation
Information and professional development
The Board receives detailed reports from executive management on the performance of the Group at monthly board meetings and other 
information as necessary and senior management regularly make presentations to the Board on their areas of responsibility. Regular updates 
are provided on relevant legal, corporate governance status reports and financial reporting developments and directors are encouraged to 
attend external seminars on areas of relevance to their role.
A full formal and tailored induction programme is being developed for new appointments to the Board, the Audit, Nomination and the 
Remuneration Committee. Major shareholders are to be offered the opportunity to meet new non-executive directors.
All directors have access to the advice and services of the Group Company Secretary, who is responsible to the Board for ensuring that 
Board procedures are complied with. The appointment of the Group Company Secretary is a matter reserved for Board approval and the 
Board appointed the new Group Company Secretary in May 2005. The Board also obtains advice from professional advisers.
STATEMENT OF CORPORATE GOVERNANCE Carter & Carter Group p l C a nnual r eport 2005 31
A review of the status of the Group’s general compliance with the Code’s provisions has recently been undertaken and reported to the Board. 
This review will be further updated later in 2005 to confirm to the Board progress made in the interim period.
Performance Evaluation
A process of formal and rigorous annual evaluation of performance of the Board, its committees and directors is planned in due course. It is 
proposed this evaluation will, subject to Board approval, be structured as follows:
the Remuneration Committee, Audit Committee and Nomination Committee will conduct a review of their terms of reference and consider 
a detailed questionnaire to assess committee performance;
one-to-one meetings between the Chairman and each director will take place to assess individual director performance and to allow any 
other issues to be raised; and
the performance evaluation will be concluded with an assessment by the Board of its own performance, feedback to the Board from the 
chairman of each committee and the Board, and approval of action to address issues raised.
David Galloway is the Senior Independent Non-Executive Director and he will lead the process for the evaluation of the Chairman’s 
performance involving discussions with each other director and feedback to the Chairman.
Re-election
The Company’s Articles of Association state that a director appointed in accordance with the Articles of Association shall hold office until the 
dissolution of the next Annual General Meeting, unless re-elected during that meeting. Each director shall retire at the Annual General Meeting 
held in the third calendar year following the year in which he was elected or last re-elected, but he shall be eligible for re-election. A director 
shall also retire at the Annual General Meeting if he has agreed to do so (whether in accordance with the terms of appointment or otherwise) 
and, unless the director has agreed otherwise, he shall not be eligible for re-election. As indicated above, it is proposed those directors who 
hold office during the relevant period will be subject to formal performance evaluation in order to confirm they continue to be effective and to 
demonstrate commitment to their relevant role. 
The Board explains the reasons why it believes each director retiring should be elected in the Notice of Meeting for the next Annual  
General Meeting. As indicated above, it is proposed that those directors who hold office during the relevant period will be subject to  
formal performance evaluation in order to confirm they continue to be effective and to demonstrate commitment to their relevant role.  
Their election is consistent with the Board’s evaluation of the size, structure and composition of the Board.
Remuneration
The Directors’ Remuneration Report is set out on pages 24 to 28.
Relations with Shareholders
The Board remains committed to maintaining good relationships with both institutional and private shareholders. Following the Company’s 
flotation a regular dialogue has been established with institutional shareholders, although care is exercised to ensure that any price-sensitive 
information is released at the same time to all shareholders in accordance with the requirements of the UK Listing Authority. Slide 
presentations provided to institutional shareholders and analysts following the publication of the Group’s preliminary and future interim results 
will be made available on the Group’s investor relations website, www.carter-and-carter.com.
The Chairman is available to discuss strategy and governance issues with shareholders and is available to shareholders if they have concerns 
that have not, or cannot, be addressed through the Group Chief Executive or Group Finance Director. During the period since flotation, the 
Group’s largest shareholders have been offered meetings with the Chairman. The Senior Independent Non-Executive Director, David 
Galloway, is available to shareholders if they have concerns that have not, or cannot, be addressed through the Chairman, Group Chief 
Executive or Group Finance Director.
The Group obtains feedback from its broker, Hoare Govett, on the views of institutional investors on a non-attributed basis and the Group 
Chief Executive and Group Finance Director communicate the issues and concerns of major shareholders to the Board. As a matter of 
routine, the Board receives a quarterly report from Hoare Govett on issues relating to share price, trading activity and institutional investor 
sentiment. The Board also receives copies of relevant analysts’ reports on a regular basis.
The Board regards the Annual General Meeting as an important opportunity to communicate directly with all shareholders and to encourage 
their participation. All Board members, including the chairmen of the Remuneration, Nomination and Audit Committees intend to attend  
the forthcoming meeting and will be available to answer questions. Details of proxy votes will be announced at the Annual General Meeting 
and are expected to be made available on the Group’s website following the meeting. The website will also contain a copy of the Notice of 
Meeting and explanatory notes. A seperate resolution will be proposed on each substantially separate issue. The Notice of the Annual 
General Meeting and related papers are posted to shareholders with the Annual Report and Accounts twenty working days prior to the  
date of the meeting.
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STATEMENT OF CORPORATE GOVERNANCE Carter & Carter Group p l C a nnual r eport 2005 32
Board committees
The Remuneration Committee, the Nomination Committee and the Audit Committees are standing committees of the Board.
The terms of reference of the Committees, including their objectives and the authority delegated to them by the Board, are available upon 
request or via the Group’s investor relations website (www.carter-and-carter.com) and will be reviewed at least annually by the relevant 
Committee and the Board. All Committees have access to independent professional advice and are provided with sufficient resources  
to undertake their duties. Appointments to Committees are for three-year terms extendable by no more than two additional three-year terms.
Audit Committee
The composition, role and operation of the Audit Committee is detailed in its report on pages 33 to 34.
Nomination Committee
The composition, role and operation of the Nomination Committee is detailed in its report on page 35.
Remuneration Committee
The composition, role and operation of the Remuneration Committee is detailed in the Directors’ Remuneration Report on pages 24 to 28.
Internal control
The Board has overall responsibility for the Group’s internal control systems and for monitoring their effectiveness in order to safeguard 
shareholders’ investments and the Group’s assets. Executive directors and senior management are responsible for the implementation  
and maintenance of the internal control systems, which are subject to periodic, and at least annual, review by the Board.
The Board monitors the ongoing process by which critical risks to the business are identified, evaluated and managed. This process is 
consistent with the Turnbull Guidance on Internal Control and has been in operation for the period under review and up to the date of approval 
of the Annual Report and Accounts.
The Board assesses the effectiveness of the Group’s system of internal controls, including financial, organisational and compliance controls 
and risk management systems.
The Group’s internal control systems are designed to manage, rather than eliminate, the risk of failure to achieve the Group’s objectives, and 
can only provide reasonable, and not absolute, assurance against material mis-statement or loss. The Board considers, in assessing what 
constitutes reasonable accuracy, the materiality of financial and non-financial risks and the relationship between the cost of, and benefit from, 
internal control systems.
The Board regularly reviews the actual and forecast performance of the Group compared with the business plan, as well as other key 
performance indicators.
Lines of responsibility and delegated authorities are areas which continue to be defined. The Group’s policies and procedures continue to be 
refined and updated for distribution throughout the Group. The Audit Committee receives reports on a regular basis on compliance with the 
Group’s policies and procedures.
Assessment of risk
The Group has developed a corporate risk matrix for annual approval by the Audit Committee. The purpose of the matrix is to record the key 
risks facing the business, the assessment of the likelihood of the risks crystallising and their potential materiality and the Group’s response to 
each risk. Responsibility for management of the risks is attributed typically to senior management.
The Board uses the control and risk management matrix to identify and manage any significant risks arising from social, environmental and 
ethical issues.
Internal audit
The Group does not currently have an internal audit function. The need for an internal audit function has been and is regularly reviewed by the 
audit committee in light of the growth of the business. An assessment is currently underway.
Going concern
The Board has reviewed the Group’s budget for the financial year ending 31 July 2006 and projections for future years. After taking account  
of the cash flow projections, including proposed capital expenditure and considering the availability of borrowing facilities, the Board has 
concluded that it is appropriate to prepare the accounts of both the Group and the Company on the going concern basis.
STATEMENT OF CORPORATE GOVERNANCE Carter & Carter Group p l C a nnual r eport 2005 33
Audit Committee
Since flotation, the Audit Committee comprised David Galloway (Chairman) and Rodney Westhead who were appointed on 7 February 2005. 
The Committee has met three times with the Chairman, Group Chief Executive, Group Finance Director and external auditors in attendance. 
David Galloway and Rodney Westhead are Chartered Accountants and have experience as chairmen or members of other audit 
committees.
The Committee’s principal responsibilities are to:
monitor the integrity of the financial statements and formal announcements relating to the Group’s performance;
monitor and review the effectiveness of the Group’s internal controls in the context of the Group’s overall risk management systems 
including, as and when established, approving the appointment and removal of the head of the internal audit function, reviewing and 
assessing the internal audit plan, reports, and responses;
review the effectiveness of the Company’s internal controls and risk management systems;
oversee the relationship with the external auditors including approving fees and assessing their independence;
review audit findings with the external auditors; and
monitor the ‘whistleblowing’ process.
During the last eight months the Committee reviewed:
the Group’s interim and final accounts together with the external auditors’ detailed reports;
the appropriateness of the Group’s accounting policies;
the policy for tendering of non-audit advice;
the independence of the external auditors; and
the process by which the Board reviews and monitors risk.
During the period the Company did not have an internal audit function and a ‘whistleblowing’ process has yet to be put in place. The listing 
documentation for the acquisition of ASSA Training and Learning Limited was reviewed and approved by the full Board of Directors.
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•
•
•
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•
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•
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AUDIT COMMITTEE Carter & Carter Group p l C a nnual r eport 2005 34
Internal control
The directors are responsible for the Group’s system of internal control and for reviewing its effectiveness. Internal control is defined in the 
Tumbull Guidance on internal control as all controls, including financial, operational, compliance, and risk management. The directors’ 
procedures for reviewing the effectiveness of the system of internal control have been in place throughout the year and to the date of approval 
of the financial statements.
These procedures included a series of meetings with senior management in each of the operational, commercial, accounting, IT and 
business-development functions aimed at identifying business risks, their likelihood of occurrence, potential impact and control measures in 
place to address those risks. The findings of these meetings were communicated to the Board via a written report that was reviewed and 
discussed.
Any such system of internal control is designed to manage rather than eliminate the risk of failure to achieve business objectives and can only 
provide reasonable and not absolute assurance against material misstatement or loss. The directors have reviewed the effectiveness of the 
system of internal control in place during the year.
The key features of the Group’s system of internal control:
identification and evaluation using a risk matrix of the key risks applicable to each area of business so as to ensure it is monitored and 
assessed on a continuous basis at executive committee and Board level, which is supplemented by the annual process of preparing 
business plans, detailed budget setting and the half-year budget review process;
the production of accurate and timely detailed financial management information reported against budget to the Board;
the control of key financial risks through clearly laid down authorisation levels and proper segregation of accounting duties;
regular executive committee meetings of the Group’s most senior managers and executive directors;
the integrity and competence of personnel is ensured through high recruitment standards and subsequent training courses (high-quality 
personnel are seen as an essential part of the control environment);
capital expenditure is restricted to amounts approved in the annual budget and half-year budget review process (any significant  
over-spend requires prior approval by the Board); and
detailed written proposals are submitted to the Board before any decision is made to authorise investment in acquisitions. Due diligence 
reviews are always performed by the Group’s own staff along with a combination of external advisers. The Committee has reviewed and 
approved the statements on internal control at page 32 with respect to the Company’s Statement of Corporate Governance. 
Independence of auditors
PricewaterhouseCoopers LLP is the Group’s auditor. Both the Audit Committee and the auditors themselves have safeguards in place to 
ensure that the objectivity and independence of the auditors is maintained, including the periodic rotation of the audit partner. In addition  
to the annual appointment of the auditors by the shareholders, the Audit Committee regularly reviews their independence taking into 
consideration relevant UK professional and regulatory requirements. The Committee also reviews their performance and fees charged  
to ensure that the Group continues to receive value for money.
Non-audit work such as taxation and due diligence services are carried out by the auditors as the Board believes that it is in the Group’s best 
interests to make use of the auditors’ extensive knowledge of the business. The Board continuously monitors the quality and volume of this 
work and will, where appropriate, use other accounting firms (or other appropriately qualified organisations).
Details of fees paid to the auditors for both audit and non-audit work are given in note 5 to the financial statements.
David Galloway
Chairman of the Audit Committee  
12 October 2005
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AUDIT COMMITTEE Carter & Carter Group p l C a nnual r eport 2005 35
The Nomination Committee comprises Rodney Westhead, David Galloway and is chaired by Adrian Smith, all appointed 7 February 2005. 
The Committee met once during the period with all three members attending the meeting. The Nomination Committee continues to evaluate 
the balance of skills, knowledge and experience on the Board and, following any such evaluation, will prepare a description of the role and 
capabilities required for a particular appointment.
The Committee makes recommendations to the Board on the appointment of directors and the management of Board succession. The 
Committee’s terms of reference include consideration of the size and structure of the Board; the appointment and duties of executive 
directors and their continuation (or not) in service; the appointment and re-appointment of non-executive directors’ and whether any director 
retiring in accordance with the Articles of Association should be put forward for election or re-election.
The Nomination Committee continuously reviews the composition of the Board to ensure that it contains the necessary skills, knowledge and 
experience to properly discharge its duties.
The Committee has prepared a job specification for the Chairman of the Board, which includes an assessment of the expected time 
commitment, recognising the need for availability in the event of crises. The Chairman’s other significant commitments have been disclosed  
to the Board prior to appointment and these are referred to on page 67 of the Annual Report.
The Committee where appropriate engages external search consultancies with respect to executive and non-executive Board appointments.
Adrian Smith
Chairman of the Nomination Committee  
12 October 2005
Nomination Committee
NOMINATION COMMITTEE Carter & Carter Group p l C a nnual r eport 2005 36
The Board recognises its environmental, health and safety and employment responsibilities and devotes appropriate resources towards 
monitoring compliance with and improving existing standards. The Group Chief Executive has responsibility for these areas at Board level, 
ensuring that the Group’s policies are upheld and providing the necessary resources.
Environmental
The Group remains committed to operating in an environmentally responsible manner. The Group has yet to formulate a formal environmental 
policy, but it is proposed to develop this during the course of this year.
Health and safety
The Group is committed to providing for the health, safety and welfare of all its employees. Every effort is made to ensure that the 
requirements of the Health and Safety at Work Act 1974 and all other relevant regulations and codes of practice are complied with.
The Group operates a number of health-and-safety management and risk control systems throughout its subsidiary companies. The Group 
Chief Executive has recently undergone a health and safety course in order to maintain a comprehensive understanding of the latest 
developments in this area.
The Group Company Secretary is responsible for the Company’s health and safety compliance and is currently undertaking a 
comprehensive review of health and safety systems and procedures in the Company’s existing and newly acquired business.
Employees
The Group is also committed to achieving equal opportunities and to complying with anti-discrimination legislation. In addition, employees 
are encouraged to train and develop their careers. It is established Group policy to offer employees and job applicants the opportunity to 
benefit from fair employment, without regard to their sex, sexual orientation, marital status, race, religion or belief, age or disability.
The Group is also committed to ensuring that any allegations of malpractice within the organisation are taken very seriously and have 
developed a procedure whereby employees can bring any such allegations to the attention of management or, if necessary, make a public 
disclosure in confidence and without fear of repercussions.
The Community
The Group is committed to providing support to the community and society through a number of charitable activities. The Group established 
a charity fund in 2003 which raises money through Company donations, a give as you earn scheme and fundraising events. These funds are 
managed by a charity committee who each year determine the recipients of the funds. This year donations have been given to Cancer Relief, 
BEN (the motor industry benevolent fund) and the Peterborough Paediatric Nurses. 
 
In 2005 the Group also became a charter member for the Duke of Edinburgh Award Scheme. Charter members provide donations that help 
support the 250,000 participants currently involved in the awards regardless of gender, background or ability. In addition the Group is 
currently establishing itself as an ‘Operating Authority’ for the award, enabling students to pursue an award while on training.
Corporate Social Responsibility
CORPORATE SOCIAL RESPONSIBILITY Carter & Carter Group p l C a nnual r eport 2005 37
Company law requires the directors to prepare financial statements for each financial year which give a true and fair view of the state of affairs 
of the Company and the Group and of the profit or loss of the Group for that period. In preparing those financial statements, the directors are 
required to:
select suitable accounting policies and then apply them consistently;
make judgements and estimates that are reasonable and prudent;
state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the 
financial statements; and
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group will continue in business.
The directors confirm that they have complied with the above requirements in preparing the financial statements.
The directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial 
position of the Company and Group and to enable them to ensure that the financial statements comply with the Companies Act 1985. They 
are also responsible for safeguarding the assets of the Company and Group and hence for taking reasonable steps for the prevention and 
detection of fraud and other irregularities.
The directors are also responsible for the maintenance and integrity of the Group’s website. Legislation in the UK concerning the preparation 
and dissemination of financial statements may differ from legislation in other jurisdictions.
By order of the Board
Nigel Blythe – Tinker LLB, FCIS
Group Company Secretary 
12 October 2005
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Statement of Directors’ Responsibilities
for the year ended 31 July 2005
STATEMENT OF DIRECTORS’ RESPONSIBILITIES Carter & Carter Group p l C a nnual r eport 2005 FINANCIAL SECTION Carter & Carter Group p l C a nnual r eport 2005
38
Independent Auditors’ Report to the Members of Carter & Carter Group plc 
We have audited the financial statements that comprise the Group profit and loss account, the balance sheets, the Group cash flow 
statement, the Group statement of total recognised gains and losses and the related notes. We have also audited the disclosures required by 
Part 3 of Schedule 7A to the Companies Act 1985 contained in the directors’ Remuneration Report (‘the auditable part’).
Respective responsibilities of directors and auditors
The directors’ responsibilities for preparing the annual report and the financial statements in accordance with applicable United Kingdom law 
and accounting standards are set out in the statement of directors’ responsibilities. 
Our responsibility is to audit the financial statements and the auditable part of the directors’ Remuneration Report in accordance with relevant 
legal and regulatory requirements and United Kingdom Auditing Standards issued by the Auditing Practices Board. This report, including the 
opinion, has been prepared for and only for the Company’s members as a body in accordance with Section 235 of the Companies Act 1985 
and for no other purpose. We do not, in giving this opinion, accept or assume responsibility for any other purpose or to any other person to 
whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
We report to you our opinion as to whether the financial statements give a true and fair view and whether the financial statements and the 
auditable part of the director’s Remuneration Report have been properly prepared in accordance with the Companies Act 1985. We also 
report to you if, in our opinion, the directors’ report is not consistent with the financial statements, if the Company has not kept proper 
accounting records, if we have not received all the information and explanations we require for our audit, or if information specified by law 
regarding directors’ remuneration and transactions is not disclosed.
We read the other information contained in the annual report and consider the implications for our report if we become aware of any apparent 
misstatements or material inconsistencies with the financial statements. The other information comprises only the Financial Highlights, 
Business Overview, Chairman’s Statement, Company History, Chief Executives’s Review, Divisional Review’s, Acquisition Profile, Financial 
Review, Our People, Board of Directors, Directors’ Report, the audited part of the Directors’ Remuneration Report, Statement of Corporate 
Governance, Audit Committee, Nomination Committee and Corporate Social Responsibility statements.
We review whether the corporate governance statement reflects the Company’s compliance with the nine provisions of the 2003 FRC 
Combined Code specified for our review by the Listing Rules of the Financial Services Authority, and we report if it does not. We are not 
required to consider whether the Board’s statements on internal control cover all risks and controls, or to form an opinion on the effectiveness 
of the Group’s corporate governance procedures or its risk and control procedures.
Basis of audit opinion
We conducted our audit in accordance with Auditing Standards issued by the Auditing Practices Board. An audit includes examination,  
on a test basis, of evidence relevant to the amounts and disclosures in the financial statements and the auditable part of the directors’ 
remuneration report. It also includes an assessment of the significant estimates and judgements made by the directors in the preparation of 
the financial statements, and of whether the accounting policies are appropriate to the Company’s circumstances, consistently applied and 
adequately disclosed.
We planned and performed our audit so as to obtain all the information and explanations that we considered necessary in order to provide us 
with sufficient evidence to give reasonable assurance that the financial statements and the auditable part of the directors’ remuneration 
report 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.
Opinion
In our opinion, the financial statements give a true and fair view of the state of affairs of the Company and the Group at 31 July 2005 and of the 
profit and cash flows of the Group for the year then ended and have been properly prepared in accordance with the Companies Act 1985, 
and those parts of the directors’ remuneration report required by Part 3 of Schedule 7A to the Companies Act 1985 have been properly 
prepared in accordance with the Companies Act 1985.
PricewaterhouseCoopers LLP
Chartered Accountants and Registered Auditors 
East Midlands
12 October 2005 39
FINANCIAL SECTION	 Carter 	 &	 Carter 	 Group 	p l C	 a nnual 	r eport 	 2005
	 	 	 	 Continuing 	 	 Acquisitions
	 	 	 	 operations	 (note 	 31)	 Total	 Total
	 	 	 	 2005	 2005	 2005	 2004
	 	 	 Note	 £’000	 £’000	 £’000	 £’000
Turnover	 	 	 2	 47 ,981	 2,996	 50,977	 38,231
Cost	 of	 sales	 	 	 	 (32,030)	 (2,053)	 (34,083)	 (24,822)
Gross profit	 	 	 	 15,951	 943	 16,894	 13,409
Administration	 expenses	 	 	 	 (8,978)	 (626)	 (9,604)	 (8,371)
Other	 operating	 income	 	 	 	 25	 –	 25	 41
	 Operating	 profit	 before	 goodwill	 amortisation	 and	 	 	 	 exceptional	 administration	 expenses	 	 	 	 9,943	 339	 10,282	 7 ,011
	 Goodwill	 amortisation	 	 	 	 12	 (1,951)	 (22)	 (1,973)	 (1,932)
	 Exceptional	 administration	 expenses	 	 	 3	 (994)	 –	 (994)	 –
Operating profit	 	 	 4	 6,998	 317	 7,315	 5,079
Interest	 receivable	 	 	 	 	 	 54	 17
Interest	 payable	 and	 similar	 charges	 	 	 8/3	 	 	 (3,109)	 (2,748)
Profit on ordinary activities before taxation 	 	 	 	 	 4,260	 2,348
Tax	 on	 profit	 on	 ordinary	 activities	 	 	 9/3	 	 	 (1,563)	 (1,570)
Profit for the financial year	 	 	 	 	 	 2,697	 778
Dividends	 (including	 non-equity)	 	 	 10	 	 	 (1,182)	 (264)
Retained profit transferred to reserves	 	 	 24	 	 	 1,515	 514
Earnings per share – basic
After	 amortisation	 of	 goodwill	 and	 exceptional	 items	 	 11	 	 	 8.8p	 2.1p
Before	 amortisation	 of	 goodwill	 and	 exceptional	 items	 	 11	 	 	 17.4p	 10.1p
Earnings per share – diluted
After	 amortisation	 of	 goodwill	 and	 exceptional	 items	 	 11	 	 	 8.7p	 2.1p
Before	 amortisation	 of	 goodwill	 and	 exceptional	 items	 	 11	 	 	 17.2p	 9.9p
There	 is	 no	 difference	 between	 the	 results	 shown	 above	 and	 their	 historical	 cost	 equivalents.
Group	 Statement	 of	 Total	 Recognised	 Gains	 and	 Losses
for	 the	 year	 ended	 31	 July	 2005
	 	 	 	 	 	 2005	 2004
	 	 	 	 	 	 £’000	 £’000
Profit	 for	 the	 financial	 year	 	 	 	 	 	 2,697	 778
Currency	 translation	 differences	 	 	 	 	 	 (35)	 14
Total gains recognised since last annual report     2,662	 792
Group	 Profit	 and	 Loss	 Account
for	 the	 year	 ended	 31	 July	 2005 FINANCIAL SECTION Carter 	 &	 Carter 	 Group 	p l C	 a nnual 	r eport 	 2005
40
	 	 	 	 Group	 Company
	 	 	 	 2005	 2004	 2005	 2004	 	 	 	 Note	 £’000	 £’000	 £’000	 £’000
Fixed assets
Intangible	 assets	 	 	 12	 33,614	 34,187	 –	 –
Tangible	 assets	 	 	 13	 11,430	 7 ,404	 –	 –
Investments	 	 	 14	 –	 –	 42,339	 42,339
	 	 	 	 45,044	 41,591	 42,339	 42,339
Current assets
Debtors	 	 	 15	 14,180	 9,032	 18,188	 6,761
Cash	 at	 bank	 and	 in	 hand	 	 	 398	 892	 11	 13
	 	 	 	 14,578	 9,924	 18,199	 6,774
Creditors:	 amounts	 falling	 due	 within	 one	 year	 	 16	 (21,486)	 (16,845) (13,235)	 (8,304)
Net current (liabilities)/assets	 	 	 	 (6,908)	 (6,921)	 4,964	 (1,530)
Total assets less current liabilities	 	 	 	 38,136	 34,670	 47,303	 40,809
Creditors:	 amounts	 falling	 due	 after	 more	 than	 one	 year	 	 17 (21,100)	 (28,968)	 (20,804)	 (28,631)
Provisions for liabilities and charges	 	 	 20	 (1,309)	 (1,571)	 –	 –
Net assets	 	 	 15,727	 4,131	 26,499	 12,178
Capital and reserves
Called	 up	 share	 capital	 	 	 21	 1,335	 7 ,254	 1,335	 7 ,254
Share	 premium	 account	 	 	 22	 16,086	 –	 16,086	 –
Capital	 redemption	 reserve	 	 	 23	 4,425	 –	 4,425	 –
Profit	 and	 loss	 account	 	 	 24	 (6,119)	 (3,123)	 4,653	 4,924
Total shareholders’ funds	 	 	 25/26	 15,727	 4,131	 26,499 12,178
The	 financial	 statements	 on	 pages	 39	 to	 66	 were	 approved	 by	 the	 board	 of	 directors	 on	 12	 October	 2005	 and	 signed	 on	 its	 behalf	 by:
P J Carter J Green
Director	 Director
Balance	 Sheets	 as	 at	 31	 July	 2005 41
FINANCIAL SECTION	 Carter 	 &	 Carter 	 Group 	p l C	 a nnual 	r eport 	 2005
	 	 	 	 Excluding 
	 	 	 	 	 exceptional 
	 	 	 	 	 IPO cash flows	 2005	 2004
	 	 	 	 Note	 £’000	 £’000	 £’000
Net cash inflow from operating activities	 	 	 	 27(a)	 8,776 7,885	 6,561
Returns on investments and servicing of finance	 	 	 27(b)	 (1,871) (4,645)	 (1,764)
Taxation	 	 	 	 27(b)	 (1,773) (1,773)	 (1,276)
Capital expenditure and financial investment	 	 	 27(b)	 (3,984) (3,984)	 (1,286)
Acquisitions	 	 	 	 27(b)	 (5,239) (5,239)	 (499)
Cash (outflow)/inflow before financing	 	 	 	 	 (4,091) (7,756)	 1,736
Financing	 	 	 	 27(b)	 1,631 6,200	 (1,551)
(Decrease)/increase in cash	 	 	 	 	 (2,460) (1,556)	 185
Reconciliation	 of	 Net	 Cash	 Flow	 to	 Movement	 in	 Net	 Debt
	 	 	 	 	 	 2005	 2004
	 	 	 	 	 Note	 £’000	 £’000
(Decrease)/increase	 in	 cash	 	 	 	 	 	 (1,556)	 185
Cash	 outflow	 from	 decrease	 in	 debt	 	 	 	 	 	 4,452	 1,551
Change	 in	 net	 debt	 from	 cash	 flows	 	 	 	 	 	 2,896	 1,736
Non-cash	 increase	 in	 debt	 	 	 	 	 	 (445)	 (260)
Movement	 in	 net	 debt	 in	 the	 year	 	 	 	 	 	 2,451	 1,476
Net	 debt	 at	 1	 August	 	 	 	 	 	 	 (31,518)	 (32,994)
Net debt at 31 July	 	 	 	 	 27(c)	 (29,067)	 (31,518)
Group	 Statement	 of	 Cash	 Flows
for	 the	 year	 ended	 31	 July	 2005 FINANCIAL SECTION Carter 	 &	 Carter 	 Group 	p l C	 a nnual 	r eport 	 2005
42
1 Accounting policies
Accounting convention
The	 financial	 statements	 have	 been	 prepared	 under	 the	 historical	 cost	 convention	 in	 accordance	 with	 the	 Companies	 Act	 1985	 and	 applicable	 accounting	 standards.
A	 summary	 of	 the	 more	 important	 accounting	 policies,	 which	 have	 been	 consistently	 applied,	 is	 set	 out	 below.
Basis of consolidation
The	 financial	 information	 consolidates	 the	 financial	 statements	 of	 Carter	 &	 Carter	 Group	 plc	 and	 all	 of	 its	 subsidiary	 undertakings	 drawn	 up	 to	 31	 July	 2005.	 No	 profit	 and	 loss	 account	 is	 presented	 for	 Carter	 &	 Carter	 Group	 plc	 as	 permitted	 by	 section	 230	 of	 the	 Companies	 Act	 1985.
Intra-group	 sales	 and	 unrealised	 profits	 are	 eliminated	 on	 consolidation.
Acquisitions	 are	 consolidated	 under	 the	 acquisition	 accounting	 methodology	 and	 the	 results	 of	 subsidiaries	 are	 included	 from	 their	 date	 of	 acquisition.	 The	 purchase	 consideration	 of	 acquisitions	 is	 allocated	 to	 assets	 and	 liabilities	 on	 the	 basis	 of	 their	 fair	 values	 at	 the	 date	 of	 acquisition.
Estimates and assumptions
The	 preparation	 of	 financial	 statements	 requires	 management	 to	 make	 estimates	 and	 assumptions	 that	 affect	 the	 reported	 amounts	 of	 assets	 and	 liabilities	 and	 disclosure	 of	 contingent	 assets	 and	 liabilities	 at	 the	 date	 of	 the	 financial	 statements	 and	 the	 reported	 amounts	 of	 income	 and	 expenditure	 during	 the	 reported	 period.	 In	 the	 preparation	 of	 these	 consolidated	 financial	 statements,	 estimates	 and	 assumptions	 have	 been	 made	 by	 management	 concerning	 the	 selection	 of	 useful	 lives	 of	 fixed	 assets,	 provisions	 necessary	 for	 certain	 liabilities,	 the	 carrying	 value	 of	 investments	 and	 other	 similar	 evaluations.	 Actual	 amounts	 could	 differ	 from	 those	 estimates.
Revenue recognition
Turnover	 which	 is	 stated	 net	 of	 value	 added	 tax,	 represents	 fees	 earned	 in	 respect	 of	 services	 provided	 during	 the	 period.	 Where	 amounts	 have	 been	 earned	 but	 not	 invoiced	 during	 the	 period,	 the	 amount	 included	 in	 turnover	 is	 the	 proportion	 of	 the	 anticipated	 net	 sales	 value	 earned	 to	 date.	 A	 corresponding	 balance	 is	 recognised	 in	 debtors	 as	 amounts	 recoverable	 on	 contracts.	 To	 the	 extent	 that	 fees	 invoiced	 exceed	 the	 value	 of	 work	 performed,	 they	 are	 included	 in	 creditors	 as	 payments	 on	 account.	 Turnover	 includes	 expenses	 recharged	 at	 cost.
Where	 revenue	 is	 determined	 by	 reference	 to	 performance	 criteria	 which	 are	 achieved	 over	 a	 period	 of	 time,	 it	 is	 only	 recognised	 once	 it	 is	 probable	 that	 the	 performance	 criteria	 will	 be	 met	 for	 the	 entire	 period	 and	 thereafter	 such	 revenue	 is	 recognised	 as	 it	 is	 earned.
Where	 revenue	 is	 directly	 linked	 to	 specific	 achievements,	 such	 as	 the	 payments	 payable	 in	 respect	 of	 student	 qualifications,	 this	 revenue	 is	 only	 recognised	 when	 the	 specific	 achievement	 is	 met.
Goodwill and other intangibles
Goodwill	 arising	 on	 acquisitions,	 representing	 the	 excess	 of	 consideration	 paid	 over	 the	 fair	 value	 of	 individual	 assets	 and	 liabilities,	 is	 capitalised,	 classified	 as	 an	 asset	 on	 the	 balance	 sheet	 and	 amortised	 on	 a	 straight	 line	 basis	 over	 its	 useful	 economic	 life	 up	 to	 a	 maximum	 of	 20	 years.	 It	 is	 reviewed	 for	 impairment	 at	 the	 end	 of	 the	 first	 full	 financial	 year	 following	 the	 acquisition	 and	 in	 other	 periods	 if	 events	 or	 changes	 in	 circumstances	 indicate	 that	 the	 carrying	 value	 may	 not	 be	 recoverable.
Other	 intangibles	 are	 carried	 at	 historical	 cost	 less	 accumulated	 amortisation	 and	 any	 impairment	 losses.	 Amortisation	 is	 provided	 under	 the	 straight	 line	 method	 over	 the	 estimated	 useful	 life	 of	 the	 asset.
Tangible fixed assets
Tangible	 fixed	 assets	 are	 stated	 at	 purchased	 historical	 cost	 less	 accumulated	 depreciation	 and/or	 any	 provisions	 for	 impairment.
Notes	 to	 the	 Financial	 Statements
for	 the	 year	 ended	 31	 July	 2005	 43
FINANCIAL SECTION	 Carter 	 &	 Carter 	 Group 	p l C	 a nnual 	r eport 	 2005
1 Accounting policies continued
Depreciation
Depreciation	 is	 provided	 on	 all	 tangible	 fixed	 assets,	 at	 rates	 calculated	 to	 write	 off	 the	 cost	 less	 estimated	 residual	 value,	 based	 on	 prices	 prevailing	 at	 the	 date	 of	 acquisition,	 of	 each	 asset	 evenly	 over	 its	 expected	 useful	 life.	 The	 annual	 rates	 of	 depreciation	 used	 vary	 according	 	 to	 the	 type	 of	 asset	 and	 are	 as	 follows:
Freehold	 land	 Not	 depreciated
Freehold	 buildings	 2.5%	 straight	 line	 on	 cost
Leasehold	 property	 Lower	 of	 40	 years	 or	 term	 of	 lease
Plant	 and	 machinery	 20%	 reducing	 balance
Computer	 equipment	 33%	 straight	 line	 on	 cost
Fixtures	 and	 fittings	 25%	 straight	 line	 on	 cost
Motor	 vehicles	 25%	 straight	 line	 to	 residual	 value
The	 carrying	 values	 of	 tangible	 fixed	 assets	 are	 reviewed	 for	 impairment	 in	 the	 period	 if	 events	 or	 changes	 in	 circumstances	 indicate	 the	 carrying	 value	 may	 not	 be	 recoverable.	 Any	 impairment	 in	 the	 carrying	 value	 of	 tangible	 fixed	 assets	 is	 charged	 to	 the	 profit	 and	 loss	 account	 as	 it	 arises.
The	 Group	 has	 arrangements	 with	 certain	 motor	 vehicle	 manufacturers	 whereby	 vehicles	 are	 purchased	 direct	 from	 the	 motor	 vehicle	 manufacturer	 for	 certain	 employees.	 Under	 these	 arrangements,	 the	 Group	 has	 the	 right	 to	 dispose	 of	 such	 vehicles	 at	 their	 original	 purchase	 cost,	 and	 does	 so.	 The	 directors	 therefore	 consider	 that	 the	 residual	 value	 of	 these	 vehicles	 is	 the	 same	 as	 their	 purchase	 cost,	 and	 that	 in	 applying	 the	 depreciation	 policies	 above	 no	 depreciation	 charge	 is	 required.	 Impairment of fixed assets and goodwill
Impairment	 provisions	 are	 calculated	 by	 comparing	 the	 net	 book	 value	 of	 fixed	 assets	 or	 goodwill	 with	 the	 higher	 of	 the	 post-tax	 net	 realisable	 value	 and	 the	 value	 in	 use	 of	 those	 assets.	 The	 value	 in	 use	 is	 calculated	 using	 forecast	 discounted	 cash	 flows	 over	 the	 economic	 life	 of	 the	 related	 fixed	 asset	 or	 goodwill.
Fixed asset investments
Investments	 held	 as	 fixed	 assets	 are	 stated	 at	 cost	 less	 any	 provision	 for	 impairment.
Taxation
Current	 tax,	 including	 corporation	 tax	 and	 foreign	 tax,	 is	 provided	 at	 amounts	 expected	 to	 be	 paid	 (or	 recovered)	 using	 the	 tax	 rates	 and	 laws	 that	 have	 been	 enacted	 at	 the	 balance	 sheet	 date.
Deferred taxation
Deferred	 tax	 is	 recognised	 in	 respect	 of	 all	 timing	 differences	 that	 have	 originated	 but	 not	 reversed	 at	 the	 balance	 sheet	 date	 where	 transactions	 or	 events	 have	 occurred	 at	 that	 date	 that	 will	 result	 in	 an	 obligation	 to	 pay	 more,	 or	 a	 right	 to	 pay	 less	 tax,	 with	 the	 following	 exceptions:
provision	 is	 made	 for	 tax	 on	 gains	 arising	 from	 the	 revaluation,	 (and	 similar	 fair	 value	 adjustments)	 of	 fixed	 assets,	 and	 gains	 on	 disposal	 of	 fixed	 assets	 that	 have	 been	 rolled	 over	 into	 replacement	 assets,	 only	 to	 the	 extent	 that,	 at	 the	 balance	 sheet	 date,	 there	 is	 a	 binding	 agreement	 to	 dispose	 of	 the	 assets	 concerned.	 However,	 no	 provision	 is	 made	 where,	 on	 the	 basis	 of	 all	 available	 evidence	 at	 the	 balance	 sheet	 date,	 it	 is	 more	 likely	 than	 not	 that	 the	 taxable	 gain	 will	 be	 rolled	 over	 into	 replacement	 assets	 and	 charged	 to	 tax	 only	 where	 the	 replacement	 assets	 are	 sold;
provision	 is	 made	 for	 deferred	 tax	 that	 would	 arise	 on	 remittance	 of	 the	 retained	 earnings	 of	 overseas	 subsidiaries,	 associates	 and	 joint	 ventures	 only	 to	 the	 extent	 that,	 at	 the	 balance	 sheet	 date,	 dividends	 have	 been	 accrued	 as	 receivable;	 and
deferred	 tax	 assets	 are	 recognised	 only	 to	 the	 extent	 that	 the	 directors	 consider	 that	 it	 is	 more	 likely	 than	 not	 that	 there	 will	 be	 suitable	 taxable	 profits	 from	 which	 the	 future	 reversal	 of	 the	 underlying	 timing	 differences	 can	 be	 deducted.
Deferred	 tax	 is	 measured	 on	 an	 undiscounted	 basis	 at	 the	 tax	 rates	 that	 are	 expected	 to	 apply	 in	 the	 periods	 in	 which	 timing	 differences	 reverse,	 based	 on	 tax	 rates	 and	 laws	 enacted	 or	 substantively	 enacted	 at	 the	 balance	 sheet	 date.
•
•
• FINANCIAL SECTION Carter 	 &	 Carter 	 Group 	p l C	 a nnual 	r eport 	 2005
44
1 Accounting policies continued
Foreign currencies
Transactions	 in	 foreign	 currencies	 are	 recorded	 at	 the	 rate	 ruling	 at	 the	 date	 of	 transaction	 or	 at	 the	 contracted	 rate	 if	 the	 transaction	 is	 covered	 by	 a	 forward	 exchange	 contract.	 Monetary	 assets	 and	 liabilities	 denominated	 in	 foreign	 currencies	 are	 retranslated	 at	 the	 rate	 of	 exchange	 ruling	 at	 the	 balance	 sheet	 date	 or	 if	 appropriate	 at	 the	 forward	 contract	 rate.	 All	 translation	 differences	 are	 taken	 to	 the	 profit	 and	 loss	 account.
The	 trading	 results	 of	 overseas	 subsidiaries	 are	 translated	 at	 the	 average	 exchange	 rate	 in	 the	 year,	 with	 an	 adjustment	 between	 average	 rates	 and	 year	 end	 rates	 being	 taken	 to	 reserves.	 The	 exchange	 difference	 arising	 on	 the	 retranslation	 of	 opening	 net	 assets,	 together	 with	 any	 matching	 foreign	 currency	 loans,	 are	 taken	 directly	 to	 reserves.	 All	 other	 translation	 differences	 are	 taken	 to	 the	 profit	 and	 loss	 account.	 Leasing and hire purchase commitments
Assets	 held	 under	 finance	 leases,	 which	 are	 leases	 where	 substantially	 all	 the	 risks	 and	 rewards	 of	 ownership	 of	 the	 asset	 have	 passed	 to	 the	 Group,	 and	 hire	 purchase	 contracts	 are	 capitalised	 as	 tangible	 fixed	 assets	 on	 the	 balance	 sheet	 and	 are	 depreciated	 over	 the	 shorter	 of	 their	 primary	 lease	 period	 and	 their	 useful	 lives.	 The	 capital	 element	 of	 future	 obligations	 under	 leases	 and	 hire	 purchase	 contracts	 are	 included	 as	 liabilities	 in	 the	 balance	 sheet.	 The	 interest	 elements	 of	 the	 rental	 obligations	 are	 charged	 in	 the	 profit	 and	 loss	 account	 over	 the	 periods	 of	 the	 leases	 and	 hire	 purchase	 contracts	 and	 represent	 a	 constant	 proportion	 of	 the	 balance	 of	 capital	 repayments	 outstanding.
Rentals	 payable	 under	 operating	 leases	 are	 charged	 in	 the	 profit	 and	 loss	 account	 on	 a	 straight	 line	 basis	 over	 the	 lease	 term.	 Capital instruments
Debt	 is	 recognised	 on	 the	 balance	 sheet	 as	 the	 cash	 proceeds	 retained	 less	 costs	 incurred	 directly	 in	 connection	 with	 the	 issue	 of	 the	 instrument.	 Finance	 costs	 in	 respect	 of	 the	 instruments,	 including	 discounts	 on	 issue,	 are	 charged	 to	 the	 profit	 and	 loss	 account	 over	 the	 term	 of	 the	 instruments.
Financial instruments
The	 principal	 derivative	 financial	 instruments	 used	 by	 the	 Group	 to	 manage	 its	 interest	 rate	 risk	 are	 interest	 rate	 swaps	 and	 swap	 options.	 These	 instruments	 are	 used	 for	 hedging	 purposes	 only	 and	 no	 trading	 of	 financial	 instruments	 is	 undertaken.	 Interest	 payments	 or	 receipts	 arising	 from	 derivative	 instruments	 are	 recognised	 within	 net	 interest	 payable	 over	 the	 period	 of	 the	 contract.	 Any	 premium	 or	 discounts	 arising	 are	 amortised	 over	 the	 life	 of	 the	 instruments.	 Termination	 payments	 made	 or	 received	 in	 respect	 of	 derivatives	 are	 spread	 over	 the	 life	 of	 the	 underlying	 exposure.
Holiday pay
Holiday	 pay	 accrues	 over	 a	 holiday	 year.	 A	 holiday	 pay	 accrual	 is	 recognised	 where	 accrued	 holiday	 pay	 exceeds	 holidays	 taken.	 A	 holiday	 pay	 prepayment	 is	 recognised	 where	 holidays	 taken	 exceed	 accrued	 holiday	 pay.
Pensions
The	 Group	 operates	 two	 defined	 contribution	 pension	 schemes.	 Contributions	 are	 charged	 in	 the	 profit	 and	 loss	 account	 as	 they	 become	 payable	 in	 accordance	 with	 the	 rules	 of	 the	 scheme.
Expenditure under contracts
In	 the	 Vocational	 Learning	 division,	 certain	 customer	 contracts	 require	 amounts	 to	 be	 set	 aside	 for	 the	 benefit	 of	 the	 learning	 programmes	 to	 which	 they	 relate.
In	 these	 cases,	 provisions	 are	 recognised	 for	 contractual	 liabilities	 accrued	 but	 not	 yet	 settled.	 The	 provisions	 are	 charged	 in	 accordance	 with	 contractual	 terms	 and	 utilised	 in	 agreement	 with	 the	 customer.	 Any	 differences	 between	 the	 provision	 utilised	 and	 the	 actual	 expenditure	 incurred	 are	 charged	 or	 credited	 to	 the	 profit	 and	 loss	 account	 as	 appropriate.
Employee benefit trust
The	 shares	 in	 the	 Company	 held	 by	 the	 Employee	 Benefit	 Trust	 are	 recorded	 in	 the	 balance	 sheet	 and	 are	 deducted	 from	 shareholders’	 funds.
	 Notes	 to	 the	 Financial	 Statements	 continued
for	 the	 year	 ended	 31	 July	 2005	 45
FINANCIAL SECTION	 Carter 	 &	 Carter 	 Group 	p l C	 a nnual 	r eport 	 2005
2 Segmental analysis
Analysis of turnover by segment 
	 	 	 	 	 	 2005	 	 2004
	 	 	 	 	 	 £’000	 £’000
Vocational	 Learning	 	 	 	 	 	 	 26,682	 17 ,776
Outsource	 Services
(1)
	 	 	 	 	 	 24,295	 20,455
	 	 	 	 	 	 50,977	 38,231
(1)
	 Acquisitions 	 in	 the	 year	 contributed	 £2,996,000	 to	 turnover	 and	 £317,000	 to	 operating	 profit.
Turnover	 includes	 expenses	 that	 have	 been	 recharged	 at	 nil	 margin.	 Recharged	 expenses	 included	 within	 turnover	 for	 Vocational	 Learning	 are	 £1,840,000	 (2004:	 £1,629,000).	 Recharged	 expenses	 included	 within	 turnover	 for	 Outsource	 Services	 are	 £1,736,000	 (2004:	 £1,475,000).
Analysis of turnover by geographical destination 
	 	 	 	 	 	 2005	 	 2004
	 	 	 	 	 	 £’000	 £’000
United	 Kingdom	 	 	 	 	 	 48,216	 35,237
North	 America	 	 	 	 	 	 1,434	 1,597
Australia	 	 	 	 	 	 351	 244
Japan	 	 	 	 	 	 790	 691
Other	 European	 countries	 	 	 	 	 	 186	 462
	 	 	 	 	 	 50,977	 38,231
There	 is	 no	 material	 difference	 between	 turnover	 by	 destination	 and	 turnover	 by	 origin.
Analysis of operating profits by segment
	 	 	 	 	 	 2005	 	 2004
	 	 	 	 	 	 £’000	 £’000
Vocational	 Learning	 	 	 	 	 	 7,289	 5,094
Outsource	 Services
(1)
	 	 	 	 	 	 2,993	 1,917
Operating	 profit	 before	 exceptional	 costs	 and	 amortisation	 	 	 	 	 10,282	 7 ,011
Vocational	 Learning	 	 	 	 	 	 6,343	 4,167
Outsource	 Services
(1)
	 	 	 	 	 	 1,966	 912
Operating	 profit	 after	 amortisation	 before	 exceptional	 costs	 	 	 	 	 8,309	 5,079
Exceptional	 costs
(2)
	 	 	 	 	 	 (994)	 –
Operating	 profit	 	 	 	 	 	 7,315	 5,079
(1)
	 Acquisitions 	 in	 the	 year	 contributed	 £2,996,000	 to	 turnover	 and	 £317,000	 to	 operating	 profit	 (see	 note	 31).
(2)
	 Exceptional 	 costs	 relate	 to	 the	 IPO	 during	 the	 year	 and	 are	 not	 therefore	 directly	 associated	 with	 either	 segment	 (note	 3).	 The	 majority	 of	 operating	 profit	 is	 generated	 in	 the	 UK,	 accordingly	 operating	 profit	 by	 geographical	 segment	 is	 not	 presented. FINANCIAL SECTION Carter 	 &	 Carter 	 Group 	p l C	 a nnual 	r eport 	 2005
46
2 Segmental analysis	 continued
Analysis of net assets by segment 
	 	 	 	 	 	 2005	 	 2004
	 	 	 	 	 	 £’000	 £’000
Vocational	 Learning	 	 	 	 	 	 27,222	 25,623
Outsource	 Services	 	 	 	 	 	 20,174	 17 ,352
Operational	 assets	 	 	 	 	 	 47,396	 42,975
Less	 bank	 borrowings	 (note	 18)	 	 	 	 	 	 (25,477)	 (29,395)
Less	 central	 net	 liabilities	 	 	 	 	 	 (6,192)	 (9,449)
Net	 assets	 at	 31	 July	 	 	 	 	 	 15,727	 4,131
Central	 net	 liabilities	 comprise	 assets,	 offset	 by	 liabilities,	 that	 cannot	 practicably	 be	 allocated	 between	 the	 segments.	 These	 liabilities	 include	 accrued	 dividends,	 accrued	 tax,	 deferred	 consideration	 payable	 and	 bank	 overdraft.
The	 majority	 of	 net	 assets	 are	 held	 in	 the	 UK,	 accordingly	 net	 assets	 by	 geographical	 segment	 is	 not	 presented.
3 Exceptional costs
Included	 within	 the	 statutory	 headings	 are	 exceptional	 IPO	 costs	 as	 follows:
	 	 	 	 	 	 2005	 	 2004
	 	 	 	 	 	 £’000	 £’000
Administration	 expenses	 	 	 	 	 994	 –
Interest	 payable	 and	 similar	 charges	 (note	 8)	 	 	 	 	 	 331	 –
	 	 	 	 	 	 1,325	 –
Tax	 impact	 of	 exceptional	 items	 above	 	 	 	 	 	 (160)	 –
Tax	 on	 profit	 on	 ordinary	 activities	 (note	 9)	 	 	 	 	 	 (638)	 –
	 	 	 	 	 	 527	 –
The	 exceptional	 administration	 cost	 represents	 fees	 and	 other	 costs	 arising	 as	 a	 direct	 result	 of	 the	 IPO	 which	 have	 not	 been	 treated	 as	 deductions	 against	 the	 share	 premium	 account.	 The	 exceptional	 interest	 payable	 represents	 a	 charge	 in	 respect	 of	 previous	 finance	 costs	 that	 were	 written	 off	 as	 the	 existing	 banking	 loans	 were	 repaid	 and	 replaced	 by	 new	 loan	 facilities	 prior	 to	 the	 IPO.	 The	 exceptional	 tax	 credit	 represents	 a	 one	 off	 tax	 deduction	 arising	 on	 the	 exercise	 of	 share	 options	 on	 flotation	 or	 shortly	 thereafter.
The	 exceptional	 cash	 flows	 arising	 as	 a	 result	 of	 the	 IPO	 are	 shown	 in	 note	 27 .	 Of	 the	 costs	 identified	 above,	 £891,000	 of	 the	 administration	 costs	 have	 resulted	 in	 cash	 outflows	 from	 the	 business	 with	 a	 further	 £103,000	 remaining	 to	 be	 paid.	 The	 interest	 charge	 is	 non-cash.	 4 Operating profit
	 	 	 	 	 	 2005	 	 2004
	 	 	 	 	 	 £’000	 £’000
Operating profit is stated after charging:
Depreciation	 of	 tangible	 fixed	 assets	 (note	 13)
–	 Owned	 assets	 	 	 	 	 	 665	 536
–	 Leased	 assets	 	 	 	 	 	 130	 100
Amortisation	 of	 goodwill	 (note	 12)	 	 	 	 	 	 1,973	 1,932
Loss	 on	 disposal	 of	 fixed	 assets	 	 	 	 	 	 3	 4
Operating	 lease	 rentals
–	 Plant	 and	 machinery	 	 	 	 	 	 103	 295
–	 Other	 	 	 	 	 	 1,534	 922
Auditors’	 remuneration	 (note	 5)	 	 	 	 	 	 197	 66
Notes	 to	 the	 Financial	 Statements	 continued
for	 the	 year	 ended	 31	 July	 2005	 47
FINANCIAL SECTION	 Carter 	 &	 Carter 	 Group 	p l C	 a nnual 	r eport 	 2005
5 Fees paid to auditors
	 	 	 	 	 	 2005	 	 2004
	 	 	 	 	 	 £’000	 £’000
Audit services
Statutory	 audit
(1)
	 	 	 	 	 	 85	 46
Taxation services
Compliance	 	 	 	 	 	 16	 20
Advisory	 	 	 	 	 	 14	 –
Other services
IPO	 reporting	 accountant	 (charged	 against	 share	 premium	 account)	 	 	 	 752	 –
Acquisition	 due	 diligence	 (charged	 against	 cost	 of	 investment	 and	 goodwill)	 	 	 	 7	 –
Interim	 review	 	 	 	 	 	 25	 –
Other
(2)
	 	 	 	 	 	 57	 –
Total	 	 	 	 	 	 956	 66
(1)
	 Auditors’ 	 remuneration	 as	 auditors	 to	 the	 Company	 during	 the	 year	 amounted	 to	 £26,000	 (2004:	 borne	 by	 other	 group	 companies).
(2)
	 Other 	 services	 includes	 general	 advisory	 and	 fees	 relating	 to	 the	 refinancing	 of	 bank	 facilities	 in	 the	 year.
6 Staff costs
Employee	 costs	 (including	 directors)	 during	 the	 year	 amounted	 to:
	 	 	 	 	 	 2005	 	 2004
	 	 	 	 	 	 £’000	 £’000
Wages	 and	 salaries	 	 	 	 	 	 20,418	 16,146
Social	 security	 costs	 	 	 	 	 	 2,182	 1,716
Other	 pension	 costs	 	 	 	 	 	 410	 286
	 	 	 	 	 	 23,010	 18,148
	 	 	 	 	 	 Number	 Number
Monthly	 average	 number	 of	 employees:	 	 	 	 	 	 696	 552
7 Directors’ emoluments
Details	 of	 directors’	 emoluments	 and	 interest	 in	 shares	 are	 included	 in	 the	 Remuneration	 Report	 on	 pages	 24	 to	 28.		 As	 a	 result	 of	 the	 IPO	 during	 the	 year	 J	 P	 Pomeroy	 exercised	 81,075	 share	 options	 resulting	 in	 a	 gain	 on	 exercise	 of	 £187 ,526.
8 Interest payable and similar charges
	 	 	 	 	 	 2005	 	 2004
	 	 	 	 	 	 £’000	 £’000
Bank	 loans	 and	 overdrafts	 	 	 	 	 	 2,064	 1,491
Other	 loans	 	 	 	 	 	 312	 744
Finance	 lease	 and	 hire	 purchase	 contracts	 	 	 	 	 	 170	 139
Amortisation	 of	 deferred	 issue	 costs	 	 	 	 	 	 416	 91
Discounting	 of	 deferred	 consideration	 	 	 	 	 	 147	 283
	 	 	 	 	 	 3,109	 2,748
Amortisation	 of	 deferred	 issue	 costs	 includes	 £331,000	 in	 respect	 of	 previous	 finance	 costs	 written	 off	 as	 the	 existing	 banking	 loans	 were	 repaid	 and	 replaced	 by	 new	 facilities	 prior	 to	 the	 IPO	 (note	 3).
	 FINANCIAL SECTION Carter 	 &	 Carter 	 Group 	p l C	 a nnual 	r eport 	 2005
48
9 Tax on profit on ordinary activities
	 	 	 	 	 	 2005	 	 2004
	 	 	 	 	 	 £’000	 £’000
Current tax
UK	 corporation	 tax	 on	 profits	 for	 the	 year	 	 	 	 	 	 1,545	 1,495
Adjustments	 in	 respect	 of	 previous	 periods	 	 	 	 	 	 (49)	 15
Foreign	 tax	 	 	 	 	 	 62	 –
Total	 current	 tax	 	 	 	 	 1,558	 1,510
Deferred tax
Origination	 and	 reversal	 of	 timing	 differences	 	 	 	 	 	 5	 60
Total	 deferred	 tax	 (note	 20)	 	 	 	 	 	 5	 60
Tax	 on	 profit	 on	 ordinary	 activities	 	 	 	 	 	 1,563	 1,570
The	 tax	 assessed	 on	 the	 profit	 on	 ordinary	 activities	 for	 each	 period	 is	 higher	 than	 the	 standard	 rate	 of	 corporation	 tax	 in	 the	 UK	 (30%).	 The	 differences	 are	 explained	 below:
	 	 	 	 	 	 2005	 	 2004
	 	 	 	 	 	 £’000	 £’000
Profit	 on	 ordinary	 activities	 before	 tax	 	 	 	 	 	 4,260	 2,348
Profit	 on	 ordinary	 activities	 multiplied	 by	 standard	 rate	 of	 corporation	 tax	 in	 the	 UK	 of	 30%	 (2004:	 30%)	 	 1,278	 704
Effects of:
Expenses	 not	 deductible	 for	 tax	 purposes	 (including	 goodwill	 amortisation)	 	 	 	 922	 719
Other	 timing	 differences	 	 	 	 	 	 (2)	 50
Accelerated	 capital	 allowances	 	 	 	 	 	 (41)	 (53)
Share	 scheme	 deductions	 (note	 3)	 	 	 	 	 	 (638)	 –
Difference	 in	 tax	 rates	 on	 overseas	 earnings	 	 	 	 	 	 15	 (16)
Tax	 at	 marginal	 rates	 	 	 	 	 	 –	 (4)
Adjustments	 in	 respect	 of	 previous	 periods	 	 	 	 	 	 (49)	 15
Overseas	 tax	 losses	 not	 recognised	 	 	 	 	 	 73	 95
	 	 	 	 	 	 1,558	 1,510
All	 deferred	 tax	 balances	 have	 arisen	 in	 the	 United	 Kingdom.
The	 share	 scheme	 deduction	 represents	 a	 one	 off	 tax	 deduction	 arising	 on	 the	 exercise	 of	 share	 options	 on	 flotation.
10 Dividends 
	 	 	 	 	 	 2005	 	 2004
	 	 	 	 	 	 £’000	 £’000
Equity – ordinary
Final	 proposed:	 3.2p	 per	 share	 	 	 	 	 	 1,068	 –
Non-equity – preference
Paid:	 4.2%	 irredeemable	 cumulative	 preference	 shares	 	 	 	 	 114	 264
	 	 	 	 	 	 1,182	 264
The	 proposed	 final	 dividend	 of	 £1,068,000	 is	 calculated	 on	 shares	 in	 issue	 at	 31	 July	 2005.	 The	 dividend	 will	 also	 be	 payable	 on	 the	 new	 shares	 issued	 since	 the	 year	 end	 in	 connection	 with	 the	 acquisition	 of	 ASSA	 Training	 and	 Learning	 Limited	 (note	 34).
Notes	 to	 the	 Financial	 Statements	 continued
for	 the	 year	 ended	 31	 July	 2005	 49
FINANCIAL SECTION	 Carter 	 &	 Carter 	 Group 	p l C	 a nnual 	r eport 	 2005
11 Earnings per share
	 	 	 	 	 	 2005	 2004
	 	 	 	 	 	 Number	 Number
	 	 	 	 	 	 ’000	 ’000
Basic	 weighted	 average	 number	 of	 shares	 	 	 	 	 	 29,232	 24,285
Dilutive	 potential	 ordinary	 shares	 from	 share	 options	 	 	 	 	 403	 329
Total	 	 	 	 	 	 29,635	 24,614
There	 are	 no	 share	 options	 outstanding	 at	 31	 July	 2005.
	 	 	 	 	 	 £’000	 £’000
Earnings
Profit	 for	 the	 financial	 year	 	 	 	 	 	 2,697	 778
Preference	 dividends	 	 	 	 	 	 (114)	 (264)
Profit	 after	 tax	 and	 appropriations	 	 	 	 	 	 2,583	 514
Goodwill	 amortisation	 	 	 	 	 	 1,973	 1,932
Exceptional	 IPO	 costs	 (note	 3)	 	 	 	 	 	 527	 –
Underlying	 earnings	 	 	 	 	 	 5,083	 2,446
Earnings per share
Basic	 	 	 	 	 	 8.8p	 2.1p
Diluted	 	 	 	 	 	 8.7p	 2.1p
Basic	 –	 underlying	 earnings	 	 	 	 	 	 17.4p	 10.1p
Diluted	 –	 underlying	 earnings	 	 	 	 	 	 17.2p	 9.9p
The	 calculation	 of	 the	 basic	 earnings	 per	 share	 has	 been	 based	 on	 the	 earnings	 attributable	 to	 ordinary	 shareholders	 and	 on	 29,232,045	 ordinary	 shares	 (2004:	 24,285,000	 ordinary	 shares)	 being	 the	 weighted	 average	 number	 of	 ordinary	 shares	 after	 taking	 account	 of	 the	 restructuring	 of	 the	 existing	 share	 capital	 that	 occurred	 on	 Admission.	 The	 weighted	 average	 number	 of	 shares	 has	 been	 adjusted	 to	 exclude	 those	 shares	 held	 by	 the	 employee	 benefit	 trust.
The	 underlying	 earnings	 per	 share	 is	 based	 on	 profit	 adjusted	 for	 goodwill	 amortisation	 and	 exceptional	 IPO	 costs	 and	 on	 the	 same	 weighted	 average	 number	 of	 shares	 used	 in	 the	 basic	 earnings	 per	 share	 calculation	 above.	 The	 directors	 consider	 that	 this	 measure	 provides	 an	 additional	 indicator	 of	 underlying	 performance	 of	 the	 Group.
12 Intangible fixed assets
	 	 	 	 	 Goodwill	 Other	 Total
Group 	 	 	 	 	 £’000	 £’000	 £’000
Cost
At	 1	 August	 2004	 	 	 	 	 38,484	 –	 38,484
Additions	 (note	 31)	 	 	 	 	 938	 462	 1,400
At 31 July 2005     39,422 462 39,884
Amortisation
At	 1	 August	 2004	 	 	 	 	 4,297	 –	 4,297
Charge	 for	 the	 year	 	 	 	 	 1,954	 19	 1,973
At 31 July 2005     6,251 19 6,270
Net book value
At 31 July 2005     33,171 443 33,614
At	 31	 July	 2004	 	 	 	 	 34,187	 –	 34,187
Goodwill	 is	 being	 amortised	 on	 a	 straight	 line	 basis	 over	 20	 years	 being	 the	 period	 over	 which	 the	 directors	 estimate	 that	 the	 values	 of	 the	 underlying	 businesses	 acquired	 are	 expected	 to	 exceed	 the	 value	 of	 the	 underlying	 assets.	 Other	 intangibles	 represent	 a	 payment	 made	 to	 acquire	 the	 contract	 for	 the	 provision	 of	 Vocational	 Learning	 programmes	 for	 Daimler	 Chrysler	 Group	 and	 is	 being	 amortised	 over	 eight	 years	 being	 the	 minimum	 contract	 period	 expected	 to	 generate	 benefits	 to	 the	 Group. FINANCIAL SECTION Carter 	 &	 Carter 	 Group 	p l C	 a nnual 	r eport 	 2005
50
13 Tangible fixed assets
	 Land and 
 buildings 
 freehold  Short Plant  Fixtures
 and long leasehold and Computer and Motor
 leasehold  premises machinery Equipment fittings vehicles Total
Group £’000 £’000 £’000 £’000 £’000 £’000 £’000
Cost
At	 1	 August	 2004	 4,887	 55	 360	 1,175	 360	 1,712	 8,549
Exchange	 movement	 on	 retranslation	 –	 –	 –	 –	 (15)	 –	 (15)
Acquisition	 (note	 31)	 –	 –	 40	 5	 37	 –	 82
Additions	 2,586	 1,222	 159	 586	 263	 4,489	 9,305
Disposals	 –	 –	 –	 –	 –	 (4,604)	 (4,604)
Transfers	 (19)	 19	 –	 –	 –	 –	 –
At 31 July 2005 7,454 1,296 559 1,766 645 1,597 13,317
Depreciation
At	 1	 August	 2004	 130	 15	 104	 674	 194	 28	 1,145
Exchange	 movement	 on	 retranslation	 –	 –	 –	 –	 (9)	 –	 (9)
Charge	 for	 year	 130	 62	 70	 403	 91	 39	 795
Disposals	 –	 –	 –	 –	 –	 (44)	 (44)
Transfers	 (7)	 7	 –	 –	 –	 –	 –
At 31 July 2005 253 84 174 1,077 276 23 1,887
Net book amount
At 31 July 2005 7,201 1,212 385 689 369 1,574 11,430
At	 31	 July	 2004	 4,757	 40	 256	 501	 166	 1,684	 7 ,404
Included	 within	 fixed	 assets	 are	 assets	 with	 a	 net	 book	 value	 of	 £1,499,000	 (2004:	 £1,718,000)	 held	 under	 finance	 leases	 and	 hire	 purchase	 agreements.
Included	 within	 Land	 and	 buildings	 freehold	 and	 long	 leasehold	 is	 freehold	 land	 with	 a	 net	 book	 value	 of	 £426,000	 (2004:	 £nil)	 and	 freehold	 buildings	 with	 a	 net	 book	 value	 of	 £2,515,000	 (2004:	 £nil).	 Notes	 to	 the	 Financial	 Statements	 continued
for	 the	 year	 ended	 31	 July	 2005	 51
FINANCIAL SECTION	 Carter 	 &	 Carter 	 Group 	p l C	 a nnual 	r eport 	 2005
14 Investments
	 	 	 	 	 	 	 Subsidiary 
       undertakings
Company       £’000
Cost and net book amount
At 1 August 2004 and 31 July 2005       42,339
Details	 of	 the	 investments	 in	 which	 the	 Company	 holds	 20%	 or	 more	 of	 the	 nominal	 value	 of	 any	 class	 of	 share	 capital	 are	 as	 follows:
  Proportion of
Subsidiary undertakings all held   voting rights and
by the Company unless indicated Country of incorporation ordinary shares held Nature of business
Carter	 &	 Carter	 Limited	 United	 Kingdom	 100%	 Business	 and	 management	 consultancy
Inhoco	 Corporation	 Inc	 USA	 100%	 Holding	 company
Emtec	 Holdings	 Limited	 United	 Kingdom	 100%	 Holding	 company
Emtec	 Colleges	 Limited*	 United	 Kingdom	 100%	 Training	 provider
Emtec	 (Leicestershire)	 Limited*	 United	 Kingdom	 100%	 Dormant
Emtec	 (Derbyshire)	 Limited*	 United	 Kingdom	 100%	 Dormant
Emtec	 (Specialised	 Services)	 Limited*	 United 	 Kingdom	 100%	 Business	 and	 management	 consultancy
Motor	 Systems	 Limited*	 United	 Kingdom	 100%	 Dormant
Carter	 &	 Carter	 Gmbh	 Germany	 100%	 Business	 and	 management	 consultancy
Carter	 &	 Carter	 International	 Inc.*	 USA	 100%	 Business	 and	 management	 consultancy
Carter	 &	 Carter	 Australia	 Pty	 Limited	 Australia	 100%	 Business	 and	 management	 consultancy
Carter	 &	 Carter	 International	 (S)PTE	 Limited	 Singapore	 100%	 Dormant
Carter	 &	 Carter	 KK*	 	 Japan	 100%	 Business	 and	 management	 consultancy
*	 Held	 by	 a	 subsidiary	 undertaking.
All	 of	 the	 above	 subsidiaries	 are	 included	 in	 the	 Group’s	 consolidated	 financial	 statements.
	 15 Debtors
	 	 	 	 Group Company
	 	 	 	 2005	 2004	 2005	 2004	 	 	 	 	 £’000	 £’000	 £’000	 £’000
Trade	 debtors	 	 	 	 7,970	 5,179	 –	 –
Amounts	 recoverable	 on	 contracts	 	 	 	 1,020	 793	 –	 –
Amounts	 owed	 by	 group	 undertakings	 	 	 	 –	 –	 17,278	 6,757
Deferred	 tax	 (note	 20)	 	 	 	 –	 –	 3	 –
Other	 debtors	 	 	 	 320	 373	 –	 4
Prepayments	 and	 accrued	 income	 	 	 	 4,870	 2,687	 907	 –
	 	 	 	 14,180	 9,032	 18,188	 6,761
Amounts	 recoverable	 on	 contracts	 represents	 accrued	 revenue	 on	 normal	 trading	 contracts	 with	 customers. FINANCIAL SECTION Carter 	 &	 Carter 	 Group 	p l C	 a nnual 	r eport 	 2005
52
16 Creditors: amounts falling due within one year
    Group Company
	 	 	 	 2005	 2004	 2005	 2004	 	 	 	 	 £’000	 £’000	 £’000	 £’000
Bank	 overdrafts	 	 	 	 	 2,104	 1,042	 3,468	 898
Bank	 loans	 (note	 18)	 	 	 	 4,673	 2,450	 4,673	 2,450
Trade	 creditors	 	 	 	 4,171	 1,422	 211	 –
Amounts	 owed	 to	 group	 undertakings	 	 	 	 –	 –	 2,053	 –
Finance	 leases	 and	 hire	 purchase	 contracts	 (note	 18)	 	 	 1,872	 1,881	 –	 –
Corporation	 tax	 	 	 	 525	 740	 –	 –
Taxation	 and	 social	 security	 	 	 	 1,328	 1,318	 12	 –
Other	 creditors	 	 	 	 383	 4,918	 –	 4,838
Accruals	 and	 deferred	 income	 	 	 	 5,362	 3,018	 1,750	 62
Accrued	 dividend	 	 	 	 1,068	 56	 1,068	 56
	 	 	 	 21,486	 16,845	 13,235	 8,304
The	 bank	 overdraft	 and	 loan	 is	 secured	 by	 a	 fixed	 and	 floating	 charge	 over	 the	 assets	 of	 the	 Company	 and	 all	 subsidiary	 undertakings.
	 17 Creditors: amounts falling due after more than one year
    Group Company
	 	 	 	 2005	 2004	 2005	 2004	 	 	 	 	 £’000	 £’000	 £’000	 £’000
Bank	 loans	 (note	 18)	 	 	 	 20,804	 15,674	 20,804	 15,674
Other	 loans	 (note	 18)	 	 	 	 –	 11,271	 –	 11,271
Finance	 leases	 and	 hire	 purchases	 contracts	 (note	 18)	 	 	 12	 92	 –	 –
Other	 creditors	 	 	 	 284	 1,322	 –	 1,077
Preference	 dividend	 	 	 	 –	 609	 –	 609
	 	 	 	 21,100	 28,968	 20,804	 28,631
The	 bank	 overdraft	 and	 loan	 is	 secured	 by	 a	 fixed	 and	 floating	 charge	 over	 the	 assets	 of	 the	 Company	 and	 all	 subsidiary	 undertakings.
Preference	 dividends	 were	 payable	 half	 yearly.	 Under	 the	 terms	 of	 an	 investor	 agreement	 entered	 into	 in	 January	 2001,	 half	 of	 the	 dividends	 were	 paid	 and	 half	 rolled	 up.	 The	 preference	 shares	 and	 rolled	 up	 dividends	 were	 all	 repaid	 as	 part	 of	 the	 IPO	 and	 the	 refinancing	 prior	 to	 	 the	 IPO.
Notes	 to	 the	 Financial	 Statements	 continued
for	 the	 year	 ended	 31	 July	 2005	 53
FINANCIAL SECTION	 Carter 	 &	 Carter 	 Group 	p l C	 a nnual 	r eport 	 2005
18 Loans and other borrowings
Bank and other borrowings
An	 analysis	 of	 the	 maturity	 of	 loans	 is	 as	 follows:
	 	 	 	 	 	 2005	 2004
	 	 	 	 	 	 £’000	 £’000
Bank	 and	 other	 loans
In	 one	 year	 or	 less	 	 	 	 	 	 4,750	 2,450
In	 more	 than	 one	 year,	 but	 not	 more	 than	 two	 years	 	 	 	 	 2,250	 2,000
In	 more	 than	 two	 years,	 but	 not	 more	 than	 five	 years	 	 	 	 	 12,750	 25,323
In	 more	 than	 five	 years	 	 	 	 	 	 6,250	 –
	 	 	 	 	 	 26,000	 29,773
Less:	 prepaid	 issue	 costs	 	 	 	 	 	 (523)	 (378)
	 	 	 	 	 	 25,477	 29,395
Bank	 loans	 of	 £26,000,000	 (2004:	 £18,450,000)	 comprise	 term	 and	 revolving	 loans.	 The	 loans	 are	 secured	 by	 a	 fixed	 and	 floating	 charge	 over	 the	 assets	 of	 the	 Company	 and	 all	 subsidiary	 undertakings.	 The	 annual	 interest	 rate	 varies	 from	 LIBOR	 +1.06%	 to	 LIBOR	 +3.00%.
Other	 loans	 at	 31	 July	 2004	 comprised	 £6,662,000	 of	 6%	 and	 £4,500,000	 of	 7%	 unsecured	 loan	 notes	 which	 were	 redeemable	 at	 par	 on	 31	 December	 2008.	 Part	 of	 the	 interest	 was	 deferred	 until	 an	 event	 or	 on	 redemption.	 Also	 included	 in	 other	 loans	 were	 unsecured	 subordinated	 loan	 notes	 amounting	 to	 £161,500	 which,	 were	 redeemable	 at	 par	 on	 31	 December	 2008	 and	 did	 not	 carry	 any	 right	 to	 interest.	 These	 loans	 were	 repaid	 during	 the	 year	 as	 part	 of	 the	 IPO	 and	 refinancing	 prior	 to	 the	 IPO.
Refinancing
On	 23	 December	 2004	 the	 Company	 entered	 into	 a	 temporary	 bridging	 loan	 of	 £15,000,000	 which	 was	 used	 to	 repay	 the	 £6,662,000	 of	 	 6%	 and	 £4,500,000	 of	 7%	 unsecured	 loan	 notes	 including	 rolled	 up	 interest	 and	 to	 repurchase	 £4,500,000	 of	 preference	 shares	 including	 accrued	 dividend.	 The	 bridging	 loan	 was	 repayable	 in	 part	 from	 the	 proceeds	 of	 the	 IPO	 and	 in	 part	 from	 a	 draw	 down	 under	 the	 senior	 term	 loan	 as	 part	 of	 the	 IPO.
Finance leases and hire purchase contracts
Obligations	 under	 finance	 leases	 and	 hire	 purchase	 contracts	 are	 repayable	 as	 follows:
	 	 	 	 	 	 2005	 2004
	 	 	 	 	 	 £’000	 £’000
In	 one	 year	 or	 less	 	 	 	 	 	 1,872	 1,881
In	 more	 than	 one	 year,	 but	 not	 more	 than	 two	 years	 	 	 	 	 12	 92
	 	 	 	 	 	 1,884	 1,973
Hire	 purchase	 agreements	 are	 secured	 on	 the	 assets	 to	 which	 the	 agreements	 relate. FINANCIAL SECTION Carter 	 &	 Carter 	 Group 	p l C	 a nnual 	r eport 	 2005
54
19 Financial instruments
Short-term debtors and creditors
Short-term	 debtors	 and	 creditors	 (other	 than	 bank,	 other	 borrowings	 and	 deferred	 consideration	 payable)	 have	 been	 excluded	 from	 all	 the	 following	 disclosures,	 other	 than	 the	 currency	 risk	 disclosure.
Interest rate risk profile of financial liabilities
The	 interest	 rate	 risk	 profile	 of	 the	 Group’s	 financial	 liabilities	 for	 the	 year	 ended	 31	 July	 2005:
Financial liabilities – sterling 
	 	 	 	 	 	 2005	 2004
	 	 	 	 	 	 £’000	 £’000
Floating	 rate	 financial	 liabilities	 	 	 	 	 29,988	 19,465
Fixed-rate	 financial	 liabilities	 	 	 	 	 	 –	 19,447
Financial	 liabilities	 on	 which	 no	 interest	 paid	 	 	 	 	 	 200	 4,911
Total	 financial	 liabilities	 	 	 	 	 30,188	 43,823
Details of interest applied to each form of borrowing
All	 the	 Group’s	 creditors	 falling	 due	 within	 one	 year	 (other	 than	 bank,	 other	 borrowings	 and	 deferred	 consideration	 payable)	 are	 excluded	 from	 the	 above	 tables	 either	 due	 to	 the	 exclusion	 of	 short-term	 items	 or	 because	 they	 do	 not	 meet	 the	 definition	 of	 a	 financial	 liability,	 such	 as	 tax	 balances.
All	 of	 the	 Group’s	 provisions	 are	 excluded	 from	 the	 above	 tables	 as	 it	 is	 not	 practical	 to	 determine	 the	 amount	 that	 will	 be	 settled	 in	 cash	 and	 any	 cash	 settlement	 is	 likely	 to	 be	 immaterial.
The	 Group	 has	 £8,156,250	 notional	 principal	 of	 UK	 interest	 rate	 collars	 as	 at	 31	 July	 2005,	 which	 mature	 on	 30	 September	 2005.	 These	 collars	 have	 a	 floor	 of	 3.85%	 and	 a	 cap	 of	 5.50%.
Financial liabilities – sterling 
	 	 	 	 	 	 2005	 2004
Fixed-rate financial liabilities
Weighted	 average	 interest	 rate	 (	 %)	 	 	 	 	 	 –	 6.8
Weighted	 average	 period	 for	 which	 rate	 is	 fixed	 (years)	 	 	 	 	 –	 0.3
Financial liabilities on which no interest is paid
Weighted	 average	 period	 until	 maturity	 (years)		 	 	 	 	 0.5	 0.3
Floating	 rate	 financial	 liabilities	 bear	 interest	 at	 rates,	 based	 on	 relevant	 national	 LIBOR	 equivalents,	 which	 are	 fixed	 in	 advance	 for	 periods	 of	 between	 one	 and	 six	 months.
Notes	 to	 the	 Financial	 Statements	 continued
for	 the	 year	 ended	 31	 July	 2005	 55
FINANCIAL SECTION	 Carter 	 &	 Carter 	 Group 	p l C	 a nnual 	r eport 	 2005
19 Financial instruments	 continued
Interest rate risk of financial assets
The	 interest	 rate	 risk	 profile	 of	 the	 Group’s	 financial	 assets	 for	 the	 period	 are:
	 	 	 	 	 	 2005	 2004
	 	 	 	 	 	 £’000	 £’000
Cash at bank and in hand
Sterling	 	 	 	 	 	 11	 501
US	 dollars	 	 	 	 	 	 133	 315
Euro	 	 	 	 	 	 55	 63
Other	 currencies	 	 	 	 	 	 199	 13
At 31 July	 	 	 	 	 	 398	 892
Floating	 rate	 	 	 	 	 	 398	 892
Fixed-rate	 	 	 	 	 	 –	 –
At 31 July	 	 	 	 	 	 398	 892
Floating	 rate	 cash	 earns	 interest	 based	 on	 relevant	 national	 bank	 base	 rates.
Maturity of financial liabilities
The	 maturity	 profile	 of	 the	 carrying	 amount	 of	 the	 Group’s	 financial	 liabilities,	 other	 than	 short-term	 trade	 creditors	 and	 accruals	 during	 the	 period	 was	 as	 follows:
	 	 	 	 2005	 	 	 2004
	 	 Debt Other Total	 Debt	 Other	 Total
	 	 £’000 £’000 £’000	 £’000	 £’000	 £’000
Within	 one	 year,	 or	 on	 demand	 	 4,750 4,176 8,926	 13,773	 13,958	 27 ,731
Between	 one	 and	 two	 years	 	 2,250 12 2,262	 2,000	 92	 2,092
Between	 two	 and	 five	 years	 	 12,750 – 12,750	 14,000	 –	 14,000
Over	 five	 years	 	 6,250 – 6,250	 –	 –	 –
	 	 26,000 4,188 30,188	 29,773	 14,050	 43,823
Borrowing facilities
The	 Group	 has	 the	 following	 undrawn	 committed	 borrowing	 facilities	 at	 31	 July	 2005	 in	 respect	 of	 which	 all	 conditions	 precedent	 had	 been	 met	 at	 that	 date:
	 	 	 2005	 	 	 2004
	 	 Floating Fixed Total	 Floating	 Fixed	 Total
	 	 £’000 £’000 £’000	 £’000	 £’000	 £’000
Expiring	 within	 one	 year	 	 – – – 2,900	 –	 2,900
Expiring	 between	 one	 and	 two	 years	 	 896 – 896	 –	 –	 –
Expiring	 in	 more	 than	 two	 years	 	 4,000 – 4,000	 –	 –	 –
	 	 4,896 – 4,896	 2,900	 –	 2,900
The	 facilities	 expiring	 within	 one	 year	 were	 annual	 facilities	 subject	 to	 review	 at	 various	 dates. FINANCIAL SECTION Carter 	 &	 Carter 	 Group 	p l C	 a nnual 	r eport 	 2005
56
19 Financial instruments	 continued
Fair values of financial assets and financial liabilities
	 	 	 	 2005	 2004
	 	 	 	 Book value Fair value	 Book 	 value	 Fair 	 value
	 	 	 	 £’000 £’000	 £’000	 £’000
Short-term	 borrowings	 	 	 	 8,726 8,726	 16,696	 17 ,318
Long-term	 borrowings	 	 	 	 22,162 22,162	 16,000	 17 ,144
Preference	 shares	 	 	 	 – –	 6,285	 7 ,013
Other	 financial	 liabilities	 	 	 	 200 200	 4,842	 4,842
Cash	 at	 bank	 and	 in	 hand	 	 	 	 398 398	 892	 892
Summary of methods and assumptions
The	 fair	 value	 of	 short-term	 deposits,	 loans	 and	 overdrafts	 approximates	 to	 the	 carrying	 amount	 because	 of	 the	 short	 maturity	 of	 these	 instruments.
The	 fair	 value	 of	 the	 Group’s	 long-term	 borrowings	 in	 the	 current	 year	 approximates	 to	 book	 value	 as	 all	 debt	 is	 at	 floating	 rate.	 In	 the	 prior	 year,	 the	 fair	 value	 of	 the	 long-term	 borrowings	 are	 estimated	 by	 discounting	 expected	 cash	 flows	 at	 prevailing	 interest	 rates.
Currency exposures
The	 table	 below	 shows	 the	 extent	 to	 which	 companies	 have	 monetary	 assets	 and	 liabilities	 in	 currencies	 other	 than	 their	 local	 currency.	 	 	 	 	 	 	 2005	 2004
	 	 	 	 	 	 £’000	 £’000
Net	 foreign	 currency	 monetary	 assets/(liabilities)
US	 dollars	 	 	 	 	 824 784
Euro	 	 	 	 	 424 327
Other	 currencies	 	 	 	 	 226	 277
Total	 	 	 	 	 	 1,474	 1,388
There	 are	 no	 foreign	 currency	 monetary	 assets	 or	 liabilities	 in	 any	 of	 the	 group	 companies	 whose	 functional	 currency	 is	 not	 sterling.
•
•
Notes	 to	 the	 Financial	 Statements	 continued
for	 the	 year	 ended	 31	 July	 2005	 57
FINANCIAL SECTION	 Carter 	 &	 Carter 	 Group 	p l C	 a nnual 	r eport 	 2005
20 Provisions for liabilities and charges
    Expenditure 
    under   Deferred
    contracts Dilapidations  taxation Total
Group     £’000 £’000 £’000 £’000
At	 1	 August	 2004	 	 	 	 1,351	 180	 40	 1,571
Charge	 for	 the	 year	 	 	 	 946	 –	 5	 951
Satisfied	 in	 the	 year	 	 	 	 (721)	 (7)	 –	 (728)
Utilised	 during	 year	 	 	 	 (485)	 –	 –	 (485)
At 31 July 2005    1,091 173 45 1,309
Company
The	 Company	 had	 a	 deferred	 tax	 asset	 of	 £3,000	 at	 31	 July	 2005	 (2004:	 £nil),	 which	 is	 included	 within	 debtors	 (note	 15).
Expenditure under contracts
In	 the	 Vocational	 Learning	 division,	 certain	 contracts	 require	 amounts	 to	 be	 set	 aside	 for	 the	 benefit	 of	 the	 learning	 programmes	 to	 which	 they	 relate.	 The	 utilisation	 of	 the	 provision	 is	 generally	 within	 one	 to	 three	 years.
Dilapidations
The	 dilapidations	 provision	 reflects	 the	 work	 that	 will	 be	 required	 to	 maintain	 or	 reinstate	 leasehold	 properties	 in	 accordance	 with	 the	 contractual	 terms	 of	 the	 leases.	 The	 remaining	 term	 of	 the	 leases	 range	 from	 one	 to	 15	 years.
Deferred tax
Deferred	 taxation	 provided	 in	 the	 financial	 statements	 is	 as	 follows:
	 	 	 	 	 	 2005	 2004
	 	 	 	 	 	 £’000	 £’000
Capital	 allowances	 in	 advance	 of	 depreciation		 	 	 	 	 59	 49
Other	 timing	 differences	 	 	 	 	 	 (14)	 (9)
	 	 	 	 	 	 45	 40
The	 Company	 has	 unrecognised	 deferred	 tax	 assets	 relating	 to	 non-trading	 losses		 amounting	 to	 £242,000	 (2004:	 £242,000).	 Further	 unrecognised	 tax	 assets	 relating	 to	 trading	 losses	 in	 overseas	 operations	 exist	 but	 remain	 unquanitified.	 These	 amounts	 have	 not	 been	 recognised	 as	 the	 directors	 do	 not	 expect	 them	 to	 be	 utilised	 in	 the	 foreseeable	 future. FINANCIAL SECTION Carter 	 &	 Carter 	 Group 	p l C	 a nnual 	r eport 	 2005
58
21 Share capital
	 	 	 	 	 	 2005	 2004
	 	 	 	 	 	 £’000	 £’000
Authorised:
850,000	 ‘A’	 Ordinary	 shares	 of	 £1	 each	 	 	 	 	 	 –	 850
100,000	 ‘B’	 Ordinary	 shares	 of	 £1	 each	 	 	 	 	 	 –	 100
50,000	 ‘C’	 Ordinary	 shares	 of	 £1	 each	 	 	 	 	 	 –	 50
6,285,000	 4.2%	 irredeemable	 cumulative	 preference	 shares	 of	 £1	 each	 	 	 	 –	 6,285
150,000	 Deferred	 shares	 of	 £1	 each	 	 	 	 	 	 –	 150
250,000,000	 ordinary	 shares	 of	 4p	 each	 	 	 	 	 	 10,000	 –
	 	 	 	 	 	 10,000	 7 ,435
	 	 	 	 	 	 2005	 2004
	 	 	 	 	 	 £’000	 £’000
Allotted and called up:
850,000	 ‘A’	 Ordinary	 shares	 of	 £1	 each	 	 	 	 	 	 –	 850
84,000	 ‘B’	 Ordinary	 shares	 of	 £1	 each	 	 	 	 	 	 –	 84
35,000	 ‘C’	 Ordinary	 shares	 of	 £1	 each	 	 	 	 	 	 –	 35
6,285,000	 4.2%	 irredeemable	 cumulative	 preference	 shares	 of	 £1	 each	 	 	 	 –	 6,285
33,382,978	 ordinary	 shares	 of	 4p	 each	 	 	 	 	 	 1,335	 –
	 	 	 	 	 	 1,335	 7 ,254
Initial Public Offering (‘IPO’)
On	 11	 January	 2005	 the	 Company	 issued	 2,430	 ‘B’	 ordinary	 shares	 for	 £1	 each.	 This	 issue	 was	 made	 to	 the	 Employee	 Benefit	 Trust	 to	 ensure	 sufficient	 shares	 were	 held	 by	 the	 trust	 to	 allow	 full	 exercise	 of	 share	 options	 on	 the	 flotation	 of	 the	 Company.
On	 1	 February	 2005	 and	 conditional	 upon	 admission	 to	 the	 London	 Stock	 Exchange,	 Carter	 &	 Carter	 Group	 plc	 passed	 resolutions	 to	 convert	 46,361	 ‘A’	 ordinary	 shares	 of	 £1	 each	 into	 deferred	 shares	 of	 £1	 each	 and	 redeemed	 such	 deferred	 shares	 for	 a	 sum	 of	 £1	 each,	 to	 convert	 existing	 ‘A’	 ordinary	 shares,	 ‘B’	 ordinary	 shares	 and	 ‘C’	 ordinary	 shares	 to	 ordinary	 shares	 of	 £1	 each,	 to	 subdivide	 each	 ordinary	 share	 of	 £1	 each	 into	 25	 ordinary	 shares	 of	 4	 pence	 each	 and	 allot	 1,873,275	 ordinary	 shares	 credited	 as	 fully	 paid	 to	 the	 holders	 of	 ordinary	 shares	 in	 proportion	 to	 their	 existing	 holdings.
On	 7	 February	 2005,	 Carter	 &	 Carter	 Group	 plc	 issued	 an	 additional	 8,382,978	 ordinary	 shares	 at	 a	 price	 of	 £2.35	 per	 share.	 The	 net	 proceeds	 of	 the	 offer	 were	 £15,427 ,000	 after	 deducting	 fees	 of	 £994,000	 charged	 to	 profit	 and	 loss	 account	 and	 £3,279,000	 charged	 against	 the	 share	 premium	 account.	 The	 net	 proceeds	 were	 applied	 in	 redeeming	 existing	 preference	 shares	 and	 debt.
	 Notes	 to	 the	 Financial	 Statements	 continued
for	 the	 year	 ended	 31	 July	 2005	 59
FINANCIAL SECTION	 Carter 	 &	 Carter 	 Group 	p l C	 a nnual 	r eport 	 2005
21 Share capital	 continued
Pre-IPO shares
‘A’,’B’	 and	 ‘C’	 ordinary	 shares	 carried	 one	 vote	 and	 neither	 had	 any	 rights	 to	 dividends	 other	 than	 those	 that	 may	 be	 recommended	 by	 the	 directors.	 The	 amounts	 receivable	 on	 each	 class	 of	 shares	 upon	 an	 ‘event’	 varied	 in	 favour	 of	 certain	 ‘A’	 ordinary	 shareholders	 and	 the	 whole	 of	 the	 ‘B’	 ordinary	 shareholders	 if	 the	 realisation	 value	 exceeded	 a	 certain	 amount.	 This	 amount	 known	 as	 the	 ‘required	 realisation	 value’	 is	 defined	 in	 the	 Articles	 of	 Association.	 If	 the	 ‘required	 realisation	 value’	 was	 not	 achieved	 the	 ‘A’,	 ‘B’	 and	 ‘C’	 ordinary	 shareholders	 received	 equal	 amounts	 per	 share.
The	 irredeemable	 preference	 shares	 carried	 no	 voting	 rights	 and	 upon	 a	 winding	 up	 of	 the	 Company	 were	 repayable	 at	 par	 first	 from	 the	 net	 assets	 available	 for	 distribution	 to	 members.	 The	 shares	 had	 a	 right	 to	 a	 fixed	 4.2%	 per	 annum	 dividend,	 although	 the	 dividend	 accruing	 from	 issue	 to	 28	 February	 2002	 and	 half	 of	 all	 accrued	 dividends	 thereafter	 were	 not	 payable	 until	 an	 ‘event’	 occurred.	 The	 ‘event’	 was	 defined	 as	 a	 winding	 up,	 listing,	 disposal	 or	 sale.
The	 deferred	 shares	 carried	 no	 right	 to	 participate	 in	 the	 profits	 of	 the	 Company	 and	 the	 shares	 carried	 no	 voting	 rights.	 The	 shares	 become	 redeemable	 at	 par	 upon	 the	 admission	 of	 any	 equity	 shares	 to	 the	 official	 list	 of	 the	 UK	 Listing	 Authority.	 On	 a	 winding	 up	 the	 deferred	 shares	 ranked	 after	 the	 payment	 of	 preference	 shares	 (together	 with	 arrears	 of	 preference	 dividend)	 and	 the	 amounts	 credited	 as	 paid	 up	 on	 the	 ordinary	 ‘A’,	 ‘B’	 and	 ‘C’	 shares.
Share options
Prior	 to	 the	 IPO	 the	 Group	 operated	 an	 Enterprise	 Management	 Incentive	 share	 option	 scheme	 whereby	 certain	 senior	 executives	 and	 staff	 held	 options	 to	 subscribe	 for	 ‘B’	 ordinary	 shares	 in	 the	 Company.	 The	 listing	 of	 the	 Company	 in	 February	 2005	 resulted	 in	 the	 exercise	 of	 all	 options.	 The	 number	 of	 options	 at	 that	 date,	 restated	 for	 the	 change	 in	 capital	 structure	 was	 as	 follows:
     Exercise   Share
     Price Exercise options
Year of Grant     pence Date Number
2001	 	 	 	 	 100.00	 2011	 7 ,160
2004	 	 	 	 	 100.00	 2014	 22,250
Options	 at	 31	 July	 2004	 	 	 	 	 	 	 	 29,410
Lapsed	 	 	 	 	 	 	 (1,390)
Options	 prior	 to	 restructure	 	 	 	 	 	 28,020
Share	 split	 25:1	 	 	 	 	 4.00  700,500
Bonus	 issue	 	 	 	 	 (0.30)  56,708
Options at flotation     3.70  757,208
Exercised	 	 	 	 	 	 	 	 (757,208)
Options at 31 July 2005       –
The	 directors	 have	 considered	 the	 requirements	 of	 UITF	 17	 (‘Employee	 Share	 Schemes’)	 regarding	 the	 share	 options	 that	 were	 issued	 in	 2001	 and	 2004	 and	 consider	 that	 no	 charge	 is	 required. FINANCIAL SECTION Carter 	 &	 Carter 	 Group 	p l C	 a nnual 	r eport 	 2005
60
22 Share premium account
	 	 	 	 	 	 Group Company
      £’000 £’000
At	 1	 August	 2004	 	 	 	 	 	 –	 –
Premium	 on	 shares	 issued	 at	 flotation	 	 	 	 	 	 19,365	 19,365
Expenses	 of	 share	 issue	 	 	 	 	 	 (3,279)	 (3,279)
At 31 July 2005      16,086 16,086
23 Capital redemption reserve
	 	 	 	 	 	 Group Company
      £’000 £’000
At	 1	 August	 2004	 	 	 	 	 	 –	 –
Transfer	 from	 profit	 and	 loss	 reserve	 (note	 24)	 	 	 	 	 	 4,500	 4,500
Bonus	 issue	 of	 shares	 	 	 	 	 	 (75)	 (75)
At 31 July 2005      4,425 4,425
On	 22	 December	 2004,	 the	 Company	 redeemed	 £4,500,000	 of	 4.2%	 cumulative	 preference	 shares	 resulting	 in	 the	 corresponding	 transfer	 from	 the	 profit	 and	 loss	 account	 (note	 24).	 This	 was	 reduced	 by	 the	 bonus	 issue	 of	 shares	 on	 1	 February	 2005.
	 24 Profit and loss account
	 	 	 	 	 	 Group Company
      £’000 £’000
At	 1	 August	 2004	 	 	 	 	 	 (3,123)	 4,924
Profit	 for	 the	 year	 	 	 	 	 	 1,515	 4,205
Transfer	 to	 capital	 redemption	 reserve	 (note	 23)	 	 	 	 	 (4,500)	 (4,500)
Currency	 translation	 differences	 	 	 	 	 	 (35)	 –
Movement	 in	 respect	 of	 Employee	 Benefit	 Trust	 	 	 	 	 24	 24
At 31 July 2005      (6,119) 4,653
At	 31	 July	 2005	 the	 Employee	 Benefit	 Trust	 holds	 24,645	 ordinary	 4	 pence	 shares	 with	 a	 cost	 of	 £1,000	 (2004:	 26,500	 ordinary	 £1	 shares	 with	 a	 cost	 of	 £25,000).	 Share	 options	 are	 granted	 to	 employees	 at	 the	 discretion	 of	 the	 directors	 and	 shares	 are	 awarded	 by	 the	 trust	 in	 accordance	 with	 the	 wishes	 of	 the	 Group.
Notes	 to	 the	 Financial	 Statements	 continued
for	 the	 year	 ended	 31	 July	 2005	 61
FINANCIAL SECTION	 Carter 	 &	 Carter 	 Group 	p l C	 a nnual 	r eport 	 2005
25 Reconciliation of movement in shareholders’ funds
    Group Company
	 	 	 	 2005	 2004	 2005	 2004	 	 	 	 	 £’000	 £’000	 £’000	 £’000
Profit	 for	 the	 year	 	 	 	 2,697	 778	 5,387	 4,619
Dividends	 	 	 	 (1,182)	 (264) (1,182)	 (264)
Shares	 issued	 in	 period	 	 	 19,702	 –	 19,702	 –
Expenses	 of	 share	 issue	 	 	 	 	 (3,279)	 –	 (3,279)	 –
Purchase	 of	 deferred	 shares	 	 	 	 (46)	 –	 (46)	 –
Purchase	 of	 preference	 shares	 	 	 	 (6,285)	 –	 (6,285)	 –
Currency	 translation	 differences	 	 	 	 (35)	 14	 –	 –
Movement	 in	 respect	 of	 Employee	 Benefit	 Trust	 	 	 24	 (25)	 24	 (25)
	 	 	 	 11,596	 503	 14,321	 4,330
Opening	 shareholders’	 funds	 	 	 	 4,131	 3,628 12,178	 7 ,848
Closing	 shareholders’	 funds	 	 	 	 15,727	 4,131	 26,499	 12,178
Currency	 translation	 differences	 relate	 to	 retranslation	 of	 net	 assets	 of	 subsidiary	 undertakings	 of	 £45,000	 (2004:	 £49,000)	 offset	 by	 the	 retranslation	 of	 a	 loan	 to	 overseas	 subsidiary	 of	 £10,000	 (2004:	 £35,000).
26 Shareholders’ funds
    Group Company
	 	 	 	 2005	 2004	 2005	 2004	 	 	 	 	 £’000	 £’000	 £’000	 £’000
Equity	 	 	 	 15,727	 (2,154)	 26,499	 5,893
Non-equity	 	 	 	 –	 6,285	 –	 6,285
At 31 July 	 	 	 	 15,727	 4,131	 26,499	 12,178 FINANCIAL SECTION Carter 	 &	 Carter 	 Group 	p l C	 a nnual 	r eport 	 2005
62
27 Note to the cash flow statement
(a) Reconciliation of operating profit to net cash inflow from operating activities:
	 	 	 	 	 	 2005	 2004
	 	 	 	 	 	 £’000	 £’000
Operating	 profit	 	 	 	 	 	 7,315	 5,079
Depreciation	 	 	 	 	 	 795	 636
Amortisation	 of	 goodwill	 	 	 	 	 	 1,973	 1,932
Loss	 on	 disposal	 of	 fixed	 assets	 	 	 	 	 	 3	 4
Increase	 in	 debtors	 	 	 	 	 	 (5,056)	 (1,842)
Increase	 in	 creditors	 	 	 	 	 	 3,122	 536
(Decrease)/increase	 in	 provisions	 	 	 	 	 	 (267)	 216
Net	 cash	 inflow	 from	 operating	 activities	 	 	 	 	 	 7,885	 6,561
Exceptional	 IPO	 operating	 costs	 (note	 3)	 	 	 	 	 	 994	 –
IPO	 cost	 accruals	 (note	 3)	 	 	 	 	 	 (103) –
Net	 cash	 inflow	 from	 operating	 activities	 (excluding	 exceptional	 IPO	 cash	 flows)	 	 	 8,776	 6,561
(b) Analysis of cash flows for headings netted in the statement of cash flows:
	 	 	 	 	 	 2005	 2004	 	 	 	 	 	 	 £’000	 £’000
Returns on investments and servicing of finance
Interest	 received	 	 	 	 	 	 54	 17
Interest	 paid	 (excluding	 exceptional	 IPO	 cash	 flows)	 	 	 	 	 (1,623)	 (1,510)
Interest	 element	 of	 finance	 leases	 	 	 	 	 	 (170)	 (139)
Preference	 dividend	 (excluding	 exceptional	 IPO	 cash	 flows)	 	 	 	 	 (132)	 (132)
	 	 	 	 	 (1,871)	 (1,764)
Accrued	 interest	 payable	 on	 IPO	 	 	 	 	 	 (1,565)	 –
Accrued	 preference	 dividend	 payable	 on	 IPO	 	 	 	 	 	 (648)	 –
Issue	 costs	 on	 new	 borrowings	 	 	 	 	 	 (561)	 –
	 	 	 	 	 (4,645)	 (1,764)
Prior	 to	 the	 IPO	 the	 Group	 had	 a	 number	 of	 debt	 instruments	 where	 all	 or	 part	 of	 the	 interest	 was	 accrued	 and	 only	 became	 payable	 on	 redemption	 or	 on	 an	 ‘event’.	 In	 addition	 under	 the	 terms	 of	 an	 investor	 agreement	 entered	 into	 in	 January	 2001,	 half	 of	 the	 preference	 dividends	 are	 paid	 and	 half	 rolled	 up	 to	 be	 payable	 on	 redemption	 or	 an	 event.	 The	 IPO	 and	 refinancing	 during	 the	 year	 resulted	 in	 the	 redemption	 of	 all	 loans	 and	 preference	 shares	 including	 rolled	 up	 balances.	 Issue	 costs	 of	 £561,000	 were	 incurred	 in	 setting	 up	 new	 loans	 and	 facilities	 with	 the	 bank	 as	 part	 of	 the	 refinancing.
	 	 	 	 	 	 2005	 2004	 	 	 	 	 	 	 £’000	 £’000
Taxation
Corporation	 tax	 payments	 	 	 	 	 	 (1,781)	 (1,355)
Corporation	 tax	 receipts	 	 	 	 	 	 8	 79
	 	 	 	 	 	 (1,773)	 (1,276)
Notes	 to	 the	 Financial	 Statements	 continued
for	 the	 year	 ended	 31	 July	 2005	 63
FINANCIAL SECTION	 Carter 	 &	 Carter 	 Group 	p l C	 a nnual 	r eport 	 2005
27 Note to the cash flow statement continued
	 	 	 	 	 	 2005	 2004	 	 	 	 	 	 	 £’000	 £’000
Capital expenditure and financial investment
Purchase	 of	 tangible	 fixed	 assets	 	 	 	 	 	 (8,541)	 (5,131)
Proceeds	 on	 disposal	 of	 tangible	 fixed	 assets	 	 	 	 	 	 4,557	 3,845
	 	 	 	 	 	 (3,984)	 (1,286)
	 	 	 	 	 	 2005	 2004	 	 	 	 	 	 	 £’000	 £’000
Acquisitions
Purchase	 of	 subsidiary	 undertakings	 	 	 	 	 	 (5,150)	 –
Costs	 of	 acquisition	 	 	 	 	 	 (89)	 (499)
	 	 	 	 	 	 (5,239)	 (499)
The	 purchase	 of	 subsidiary	 undertakings	 comprises	 deferred	 consideration	 of	 £4,750,000	 paid	 in	 respect	 of	 the	 acquisition	 of	 EMTEC	 Holdings	 Limited	 and	 initial	 consideration	 of	 £400,000	 for	 the	 acquisition	 of	 the	 technical	 services	 business	 of	 Automobile	 Association	 Developments	 Limited.
	 	 	 	 	 	 2005	 2004	 	 	 	 	 	 	 £’000	 £’000
Financing
Capital	 element	 of	 finance	 lease	 rental	 payments	 	 	 	 	 (4,544)	 (3,730)
Drawdown	 of	 monies	 from	 finance	 companies	 	 	 	 	 	 4,425	 3,688
New	 secured	 loans	 	 	 	 	 	 1,750	 –
Loan	 repayments	 	 	 	 	 	 –	 (1,550)
New	 unsecured	 subordinated	 loan	 notes	 	 	 	 	 	 –	 41
Financing	 (excluding	 IPO	 cash	 flows)	 	 	 	 	 	 1,631	 (1,551)
Issue	 of	 ordinary	 share	 capital	 	 	 	 	 	 19,702	 –
Expenses	 in	 connection	 with	 share	 issue	 	 	 	 	 	 (3,279)	 –
Repayment	 of	 preference	 and	 deferred	 shares	 	 	 	 	 	 (6,331)	 –
New	 secured	 loan	 	 	 	 	 	 22,500	 –
Loan	 repayments	 	 	 	 	 	 (28,023)	 –
Financing (including IPO cash flows)	 	 	 	 	 6,200	 (1,551)
(c) Analysis of net debt
	 	 	 	 At	 	 	 At
	 	 	 	 1 	 August	 	 Non-cash	 31 July
	 	 	 	 2004	 Cash 	 flow	 changes	 2005
	 	 	 	 £’000	 £’000	 £’000	 £’000
Cash	 at	 bank	 	 	 	 892	 (494)	 –	 398
Bank	 overdraft	 	 	 	 (1,042)	 (1,062)	 –	 (2,104)
	 	 	 	 (150)	 (1,556)	 –	 (1,706)
Debt	 due	 within	 one	 year	 	 	 	 (4,331)	 (2,147)	 (67)	 (6,545)
Debt	 due	 after	 more	 than	 one	 year	 	 	 	 (27 ,037)	 6,599	 (378)	 (20,816)
	 	 	 	 (31,518)	 2,896	 (445)	 (29,067)
Non-cash	 changes	 comprise	 amortisation	 of	 issue	 costs	 relating	 to	 debt	 issue	 of	 £416,000	 and	 new	 finance	 leases	 taken	 out	 £29,000.
Included	 within	 the	 movement	 in	 cash	 at	 bank	 are	 currency	 translation	 gains	 of	 £17 ,000. FINANCIAL SECTION Carter 	 &	 Carter 	 Group 	p l C	 a nnual 	r eport 	 2005
64
28 Commitments under operating leases
At	 31	 July	 2005,	 there	 were	 annual	 commitments	 under	 non-cancellable	 operating	 leases	 as	 set	 out	 below:
	 	 	 	 2005	 2004
	 	 	 	 Land and	 	 Land 	 and
	 	 	 	 buildings Other	 buildings	 Other
	 	 	 	 £’000 £’000	 £’000	 £’000
Operating	 leases	 which	 expire:
Within	 one	 year	 	 	 	 50 137	 –	 138
In	 two	 to	 five	 years	 	 	 	 45 917	 42	 518
In	 over	 five	 years	 	 	 	 745 –	 480	 –
	 	 	 	 840 1,054	 522	 656
29 Contingent liabilities
On	 the	 acquisition	 of	 EMTEC	 Holdings	 Limited	 and	 its	 subsidaries	 (‘the	 EMTEC	 Group’)	 in	 June	 2003,	 the	 directors	 were	 advised	 to	 obtain	 specific	 tax	 indemnities	 relating	 to	 a	 payment	 made	 by	 the	 EMTEC	 Group	 to	 its	 Employee	 Benefit	 Trust	 during	 the	 previous	 year.	 The	 directors	 have	 been	 advised	 that	 recent	 court	 rulings	 have	 increased	 the	 likelihood	 of	 a	 liability	 arising	 in	 the	 EMTEC	 Group	 and	 discussions	 have	 commenced	 with	 HM	 Revenue	 &	 Customs	 to	 quantify	 any	 liability	 that	 may	 exist.	 An	 agreement	 was	 reached	 with	 the	 former	 owner	 that	 an	 amount	 of	 £900,000	 would	 be	 paid	 into	 escrow	 out	 of	 the	 £4,750,000	 deferred	 consideration	 due	 to	 him.	 The	 directors	 consider	 that	 this	 amount	 is	 sufficient	 to	 cover	 any	 potential	 liability	 that	 may	 arise	 in	 the	 future.
30 Capital commitments
	 	 	 	 	 	 2005	 2004
	 	 	 	 	 	 £’000	 £’000
Capital	 expenditure	 that	 has	 been	 contracted	 for	 by	 the	 Group	 	 	 but	 has	 not	 yet	 been	 provided	 for	 in	 the	 financial	 statements	 at	 31	 July	 2005	 	 	 	 1,187	 –
The	 Company	 has	 no	 capital	 commitments	 at	 31	 July	 2005	 (2004:	 £nil).
Notes	 to	 the	 Financial	 Statements	 continued
for	 the	 year	 ended	 31	 July	 2005	 65
FINANCIAL SECTION	 Carter 	 &	 Carter 	 Group 	p l C	 a nnual 	r eport 	 2005
31 Acquisitions
On	 18	 February	 2005,	 the	 Group	 acquired	 the	 technical	 training	 services	 business	 of	 Automobile	 Association	 Developments	 Limited.	 This	 acquisition	 has	 been	 accounted	 for	 as	 an	 acquisition	 in	 accordance	 with	 FRS	 7 .	 The	 total	 adjustments	 required	 to	 the	 book	 values	 of	 assets	 and	 liabilities	 acquired	 are	 shown	 below:
	 	 	 	 	 	 	 	 Provisional	 	 	 	 	 	 Book 	 value	 Revaluation	 fair value 
	 	 	 	 	 £’000	 £’000	 £’000
Fixed	 assets	 	 	 	 	 82	 –	 82
Creditors	 due	 within	 one	 year	 	 	 	 	 (33)	 (26)	 (59)
Creditors	 due	 after	 more	 than	 one	 year	 	 	 	 	 –	 (284)	 (284)
Net	 assets	 	 	 	 	 49	 (310)	 (261)
Goodwill	 on	 acquisition	 (note	 11)	 	 	 	 	 	 	 938
	 	 	 	 	 	 	 677
Satisfied by:
Purchase	 consideration	 	 	 	 	 	 	 400
Deferred	 consideration	 	 	 	 	 	 	 188
Acquisition	 costs	 	 	 	 	 	 	 89
	 	 	 	 	 	 	 677
The	 deferred	 consideration	 will	 be	 satisfied	 in	 cash	 when	 certain	 contracts	 are	 renewed.	 The	 directors	 believe	 that	 the	 contracts	 will	 be	 renewed	 on	 the	 respective	 due	 dates	 and	 accordingly	 have	 included	 the	 deferred	 consideration	 at	 the	 maximum	 value	 after	 discounting	 at	 a	 rate	 of	 6.4%	 as	 required	 by	 FRS	 7 .
The	 revaluation	 adjustment	 arises	 from	 an	 open	 market	 valuation	 of	 the	 leasehold	 land	 and	 buildings.	 The	 lease	 is	 considered	 to	 be	 onerous	 and	 the	 revaluation	 reflects	 the	 difference	 in	 cost	 of	 ownership	 between	 the	 lease	 acquired	 and	 current	 market	 rates.	 In	 the	 period	 since	 18	 February	 2005	 the	 acquisition	 has	 contributed	 £2,996,000	 to	 turnover	 and	 £317 ,000	 to	 operating	 profit.	 	 Pre-acquisition	 trading	 results	 were	 not	 made	 available	 to	 the	 Group.
32 Pensions
The	 Group	 operates	 two	 defined	 contribution	 pension	 schemes.	 The	 assets	 of	 the	 schemes	 are	 held	 separately	 from	 those	 of	 the	 Company	 in	 an	 independently	 administered	 funds.	 The	 pension	 cost	 charge	 of	 £410,000	 for	 the	 year	 ended	 31	 July	 2005	 (2004:	 £286,000)	 represents	 contributions	 payable	 by	 the	 Company	 to	 the	 fund.	 There	 were	 no	 amounts	 outstanding	 at	 the	 balance	 sheet	 date. FINANCIAL SECTION Carter 	 &	 Carter 	 Group 	p l C	 a nnual 	r eport 	 2005
66
33 Related party transactions
The	 Company	 is	 exempt	 under	 the	 terms	 of	 FRS	 8,	 ‘Related	 party	 disclosures’	 from	 disclosing	 related	 party	 transactions	 with	 entities	 that	 are	 part	 of	 the	 Group.
During	 the	 year	 ended	 31	 July	 2005,	 the	 Group	 purchased	 services	 from	 Complete	 IT	 Limited	 totalling	 £699,000	 (2004:	 £250,000),	 a	 company	 in	 which	 Mr	 PJ	 Carter	 owns	 28.8%	 of	 the	 issued	 share	 capital.	 During	 the	 year	 rent	 and	 management	 fees	 of	 £8,000	 (2004:	 £13,700),	 was	 charged	 to	 Complete	 IT	 Limited.	 At	 31	 July	 2005	 there	 were	 amounts	 owing	 to	 Complete	 IT	 Limited	 of	 £30,000	 (2004:	 £26,800)	 and	 amounts	 receivable	 of	 £nil	 (2004:	 £520).
During	 the	 year	 ended	 31	 July	 2005,	 rent	 was	 paid	 to	 Anchor	 House,	 a	 property	 business	 owned	 by	 Mr	 PJ	 Carter	 through	 a	 partnership	 with	 his	 wife,	 totalling	 £73,000	 (2004:	 £61,600).	 At	 31	 July	 2005	 there	 were	 amounts	 owing	 to	 Anchor	 House	 of	 £17 ,000	 (2004:	 £1,420).
The	 Group	 purchased	 services	 amounting	 to	 £257 ,000	 in	 the	 year	 ended	 31	 July	 2005	 (2004:	 £94,100)	 from	 the	 Haycock	 Hotel,	 which	 is	 owned	 by	 Status	 Input	 Limited,	 a	 company	 in	 which	 Mr	 PJ	 Carter	 was	 also	 a	 director.	 At	 31	 July	 2005	 there	 were	 amounts	 owing	 to	 the	 Haycock	 Hotel	 of	 £3,000	 (2004:	 £3,500).
The	 Group	 had	 the	 following	 loans	 outstanding	 from	 directors	 and	 related	 parties:
	 	 	 	 	 	 2005	 2004
	 	 	 	 	 	 £’000	 £’000
P	 J	 Carter	 –	 4.2%	 irredeemable	 preference	 shares	 	 	 	 	 –	 6,285
P	 J	 Carter	 –	 7%	 unsecured	 loan	 notes	 	 	 	 	 	 –	 2,250
D	 J	 Carter	 –	 unsecured	 subordinated	 loan	 notes	 	 	 	 	 –	 38
J	 P	 Pomeroy	 –	 unsecured	 subordinated	 loan	 notes	 	 	 	 	 –	 19
A	 J	 R	 Smith	 –	 unsecured	 subordinated	 loan	 notes	 	 	 	 	 –	 9
Bridgepoint	 –	 6%	 unsecured	 loan	 notes	 	 	 	 	 	 –	 6,662
Bridgepoint	 –	 7%	 unsecured	 loan	 notes	 	 	 	 	 	 –	 2,250
All	 of	 the	 loans	 were	 repaid	 from	 the	 proceeds	 of	 the	 IPO	 and	 refinancing.
Dividends	 and	 interest	 accrued	 to	 shareholders	 and	 directors	 	 	 	 	 	 	 2005	 2004
	 	 	 	 	 	 £’000	 £’000
P	 J	 Carter
	 Interest	 	 	 	 	 	 –	 26
	 Preference	 share	 dividends	 (incl.	 interest)	 	 	 	 	 	 –	 728	 Bridgepoint
	 Loan	 interest	 	 	 	 	 	 –	 397
All	 amounts	 owing	 were	 repaid	 from	 the	 proceeds	 of	 the	 IPO	 and	 refinancing.
34 Post balance sheet events
On	 12	 August	 2005,	 the	 Group	 announced	 that	 it	 had	 conditionally	 agreed	 to	 acquire	 100%	 of	 ASSA	 Training	 and	 Learning	 Limited	 for	 a	 consideration	 of	 approximately	 £24.2	 million,	 of	 which	 £21.7	 million	 was	 satisfied	 on	 1	 September	 2005	 and	 £2.5	 million	 will	 be	 deferred	 until	 shortly	 after	 the	 announcement	 of	 the	 Group’s	 preliminary	 results	 for	 the	 year	 ending	 31	 July	 2006.
As	 part	 of	 the	 funding	 of	 the	 acquisition,	 the	 Company	 placed	 2,388,060	 ordinary	 shares	 with	 institutional	 investors	 at	 a	 price	 of	 355	 pence	 per	 share	 to	 raise	 gross	 proceeds	 of	 approximately	 £8.5	 million.
Notes	 to	 the	 Financial	 Statements	 continued
for	 the	 year	 ended	 31	 July	 2005	 67
FINANCIAL SECTION	 Carter 	 &	 Carter 	 Group 	p l C	 a nnual 	r eport 	 2005
Supplementary	 Directors’	 Information
Name	 Age	 Directorships	 	 Former	 Directorships
Phillip	 Carter	 43	 	 PJC	 Peterborough	 Ltd	 Complete	 IT	 Ltd
	 	 Statusinput	 Ltd	 Rayfield	 Ltd
	 	 Anchor	 Properties	 Inc	 DW	 Norris	 Ltd
	 	 Carter	 &	 Carter	 Group	 plc	 Enterstand	 Ltd
	 	 Partnership	 	 	 	 Carter	 &	 Carter	 Partnership
David	 Carter	 62	 	 Carter	 &	 Carter	 Group	 plc	 Volkswagen	 Group	 Ltd
	 	 	 	 Kingdom	 Ltd
Adrian	 Smith	 61	 	 Carter	 &	 Carter	 Group	 plc	 	 	 Harbour	 Branch	 	 	 Oceanographic	 Institution	 Inc	 	 	 Tutogen	 Medical	 Inc	 	 	 Education	 Foundation	 of	 	 	 	 	 Indian	 River	 County	 	 Rodney	 Westhead	 61	 Carter	 &	 Carter	 Group	 plc	 The	 Society	 of	 Motor	 Manufacturers
	 	 Forgehour	 Ltd	 	 and	 Traders	 Ltd
	 	 Ricardo	 Plc	 	 Schenck	 Test	 Automatic	 Ltd
	 	 Ricardo	 Group	 Plc	 Sussex	 Chamber	 of	 Commerce
	 	 Ricardo	 MTC	 Ltd	 and	 Enterprise
	 	 SAC	 International	 Plc	 Sussex	 Enterprise	 Services	 Ltd
	 	 Plazabay	 Ltd	 	 SRH	 Systems	 Ltd
	 	 Bilton	 Grange	 Trust	 Ltd	 The	 Quoted	 Companies	 Alliance
	 	 AEA	 Technology	 Plc	 Parkman	 Group	 Plc
	 	 MouchelParkman	 Plc
David	 Galloway	 59	 Carter	 &	 Carter	 Group	 plc	 Eight	 Sevennine	 Ltd
	 	 Williams	 Motor	 Co	 (Holdings)	 Ltd
	 	 Speedy	 Hire	 Plc
	 	 May	 Gurney	 Integrated	 Services	 	 	 	 Public	 Ltd	 Company
	 	 Defence	 Aviation	 Repair	 Agency
	 	 Accident	 Exchange	 Plc
Peter	 Marples	 41	 	 Carter	 &	 Carter	 Group	 plc
	 	 Partnership
	 	 PJM	 Helicopters	 LLP	 John	 Green	 38	 	 Carter	 &	 Carter	 Group	 plc FINANCIAL SECTION Carter 	 &	 Carter 	 Group 	p l C	 a nnual 	r eport 	 2005
68
Shareholder	 Information
directors,	 Group	 company	 secretary,	 registered	 office	 and	 advisors
Directors
Rodney Westhead
Non-Executive	 Chairman
Phillip J Carter
Chief	 Executive
David Carter
Managing	 Director
John Green
Group	 Finance	 Director
Peter Marples
Business	 Development	 Director
David Galloway
Senior	 Independent	 Non-Executive	 Director
Adrian Smith
Independent	 Non-Executive	 Director
Group Company Secretary
Nigel Blythe-Tinker LLB, FCIS
Registered and Head Office
Carter & Carter Group Plc
Greenhill	 House
Thorpe	 Wood
Peterborough
Cambridgeshire
PE3	 6RU
Stockbroker
Hoare Govett Limited
250	 Bishopsgate
London
EC2M	 4AA
Solicitors
DLA Piper Rudnick Gray Cary UK LLP
3	 Noble	 Street
London
EC2V	 7EE
Registered Auditors
PricewaterhouseCoopers LLP
Donington	 Court
Pegasus	 Business	 Park
East	 Midlands
DE74	 2UZ
Registrars
Lloyds TSB Registrars
The	 Causeway
Worthing
West	 Sussex
BN99	 6DA
Financial Calendar and Website
AGM	 29	 November	 2005
Dividend	 payment	 dates:
Final	 9 	 December,	 2005
Interim	 	 April, 	 2006	 (provisional)
Website	 www.carter-and-carter.com contents 	 	 Carter and Carter GrOUp plC  AnnUAl REPoRT 2005
Contents
Highlights 01
Business o verview 02
Chairman’s Statement 04
Company History 05
Chief Executive’s Review 06
Divisional Review – o utsource Services Division 08
Divisional Review – Vocational l earning Division 11
Acquisition Profile – Adult l earning 14
Financial Review 16
o ur People 18
Board of Directors 20
Directors’ Report 22
Directors’ Remuneration Report 24
Statement of Corporate Governance 29
Audit Committee 33
n omination Committee 35
Corporate Social Responsibility 36
Statement of Directors’ Responsibilities 37
Independent Auditors’ Report 38
Group Profit and l oss Account 39 
Group Statement of Total Recognised 
 Gains and l osses 39
Balance Sheets 40
Group Statement of Cash Flows 41
Reconciliation of n et Cash Flow  
 to Movement in n et Debt 41
n otes to the Financial Statements 42
Supplementary Director’s Information 67
Shareholder Information 68 Carter & Carter Group plc
Annual Report and Accounts
for the year ended 31 July 2005
Carter & Carter Group plc
United Kingdom Office
Carter & Carter Group plc
Greenhill House
Thorpe Wood
Peterborough
PE3 6RU
Tel: +44 (0)1733 262656
Fax: +44 (0)1733 267545
Carter & Carter Group plc  Annual Report and Accounts 2005