21st Nov 2005 07:01
RM PLC21 November 2005 21 November 2005 RM announces Preliminary Results for the year to 30 September 2005 RM plc, the leading supplier of information and communications technology (ICT)and other services to education announces results for the year to 30 September2005. Strong performance • 11% growth in profit before goodwill charges* • Order growth: up 15% on last year • Successful education project delivery • Customer satisfaction continues to increase Financial highlights • Turnover unchanged: £263 million • Profit before tax (before goodwill charges*): up 11% to £12.8 million (2004: £11.6 million) • Profit before tax (after goodwill charges*): £5.5 million (2004: £7.1 million) • Diluted EPS (before goodwill charges*): up 12% to 10.5p (2004: 9.4p) • Net funds: £21.8 million (2004: £25.8 million) - after £10.4 million of PFI capex during the year • Dividend per share up 5% to 4.85p (2004: 4.6p) *Goodwill amortisation and impairment of £7.4 million (2004: £4.5 million);under UK GAAP RM amortises goodwill arising from acquisitions over five years,under IFRS goodwill amortisation will cease and be replaced by annual impairmenttests Commenting, Tim Pearson, CEO of RM, said: "RM has delivered a strong performance in 2005 - particularly so against abackground of tough market conditions. Underlying growth in the business hasreplaced the 'one-off' turnover which was a feature of last year and we haveboth increased profit before tax and goodwill charges and funded an additional£1.8 million investment in BSF business development. "The start of the new financial year has been mixed for RM. We have beenappointed preferred bidder for a £6.4 million BSF ICT contract - the first to beannounced. However, the budget pressures evident in our individual schoolsmarket since the start of the new academic year have continued. As previouslyindicated, we are choosing to increase investment in the BSF programme thisyear; we believe this is in the long-term interests of shareholders, withreturns expected to start in the 2007 financial year. "Looking ahead, the educational ICT landscape is evolving more rapidly than ithas for many years: new and innovative uses for educational ICT are emergingand, through our education project activity, RM is leading the world in many ofthese areas. The education market provides opportunities for further growth,which RM is uniquely well positioned to address." - Ends- For further information, please contact: Tim Pearson, CEO RM plc 08709 200200Mike Greig, Group Finance DirectorPhil Hemmings, Director of Corporate Affairs Andrew Fenwick Brunswick 020 7404 5959Fiona LaffanMark Antelme A briefing to analysts will take place at 9.30 am on Monday 21 November 2005 atBrunswick, 16 Lincoln's Inn Fields, London WC2A 3ED. A live audio feed will beavailable to those analysts and shareholders who are unable to attend thismeeting in person. To access this facility: +44 (0) 1452 561 263. A copy of thepresentation will be available at 8:30am here: www.rm.com Operating review RM has delivered a strong performance in 2005 - particularly so against abackground of budget pressures in schools and falling selling prices in the PChardware market. Financial results for the year show good progress compared withlast year and customer satisfaction levels continue to improve. Looking ahead, the educational landscape is evolving more rapidly than it hasfor many years: new and innovative uses for educational technology are emergingand RM, through our education project activity, is leading the world in many ofthese areas. The education market continues to provide opportunities for furthergrowth, which RM is uniquely well positioned to address. Results Profit before tax (before goodwill charges) increased by 11% to £12.8 million(2004: £11.6 million). This increase is after £1.8 million ofbusiness-development expenditure related to the Building Schools for the Future(BSF) programme. Operating profit margin (before goodwill charges) showedfurther progress, increasing to 4.4% (2004: 4.0%). Group turnover was unchanged at £263 million, however this masks underlyinggrowth in the Group's business: the 'one-off' turnover which we reported lastyear (£15 million, arising largely from hardware sales related to a specificeducation project) has been replaced by a combination of long-term projectturnover and full-year contributions from the businesses which we acquiredduring 2004. Group order intake was 15% higher than in 2004 and significantly exceededshipments in the year. Cash management during the year was excellent: at 30 September 2005 net fundsstood at £21.8 million (2004: £25.8 million). This is after PFI project capitalexpenditure in the year of £10.4 million (which is now completed). After goodwill charges of £7.4 million, profit before tax was £5.5 million(2004: £7.1 million). The Board is proposing an increased final dividend pershare of 3.8p (2004: 3.6p), making the total dividend per share for the year4.85p (2004: 4.6p). Subject to approval at the AGM, the final dividend will bepaid on 3 February 2006 to shareholders on the register on 6 January 2006. Individual schools Individual schools customers continued to contribute the majority of RM'sturnover during 2005. The average annual amount spent by RM's primary andsecondary school customers increased during the year and more schools arechoosing to use our flagship Community Connect 3 infrastructure product.Although a strong year overall, the individual schools market is not withoutchallenges, with the last month of our 2005 financial year (which is also thefirst month of the academic year) being below our expectations. Head teachers inEngland are experiencing budget pressures, linked to both the workforceremodelling programme and the introduction of teaching and learningresponsibility payments for teachers. The education software market waschallenging, with evidence that some of the dedicated funding provided by theDepartment for Education and Skills is 'leaking' out of the market. Education project delivery We entered 2005 having won several major education projects. These projectsrepresent significant educational transformation for our customers; each of themis providing a high-quality service and all of them serve as reference sites forfuture bids. Delivery highlights include: • QCA: 47,000 pupils taking examinations online, compared with 1,200 in 2004 • Cambridge Assessment: 225,000 exam scripts processed electronically • Warwickshire LEA: 1,500 teachers using Tablet-PC based teacher toolkits • Newham LEA: 4,200 laptop computers available for pupils to take home • Lambeth LEA: Full managed service supporting over 6,000 users • South Lanarkshire Council: 9,000 computers over 200 sites • South Yorkshire eLearning Programme: 10,500 new ICT qualifications achieved so far • Dudley Grid for Learning: 8,000 computers updated in over 100 schools Education projects made an increased contribution to turnover during the year.Also important is the reputation we are developing for delivering successfuloutcomes for our customers, which increasingly differentiates us from ourcompetition. During the year we won two further education projects (Scottish Schools DigitalNetwork and Lambeth PFI) worth, in total, £54.5 million, as well as securing therenewal of our contract with the South West Grid for Learning, which is expectedto be worth £10 million per year for up to five years. Scottish Schools Digital Network In September 2005 we were awarded a £37.5 million contract to deliver theScottish Schools Digital Network National Intranet (SSDN). This was a fiercelycontested contract and we won it in competition against some of the world'slargest technology companies. RM was successful because we were able todemonstrate an unrivalled combination of technical delivery capability andeducational focus. When the first stage of SSDN is complete, more than 800,000 learners, teachersand educational managers in Scotland will have secure, personalised access to asingle intranet. Over time this intranet will be extended to embrace parents aswell. The SSDN project will drive whole new ways of using technology in education,which will both save time for teachers and improve facilities for learners.Functions available will include curriculum-planning and delivery for teachers,innovative educational content for learners and sophisticated managementinformation systems for education managers; as well as collaboration andcommunication tools (including email, video conferencing and chat) for allusers. A reputation for innovation We see technical capability as one of our key competitive advantages and, during2005, we have continued to build our reputation for innovation. The education projects which we are delivering require technical innovation;they also play a key role in developing the Group's intellectual property. Eachof these education projects individually has built the knowledge, skills andexperience the Group has access to, together they provide us with a rich anddeep understanding of designing and delivering technology that makes a genuinecontribution to educational outcomes. Several of our products and services have been recognised for their innovationduring 2005. We won four awards at BETT 2005 (the annual educational ICT tradeshow), two Education Resources Awards at the annual Education Show, and awardsat the Nursery World show. These awards cover all aspects of our product rangeincluding PC hardware, educational software and general educational resources(produced by the recently acquired TTS subsidiary). Hardware and distribution Our innovative, educationally differentiated PC, the RM ONE, has been extremelywell received by schools. Schools value the RM ONE's educational features androbust, space-saving design, demonstrating the benefit of customer-driveninnovation - even in commodity product areas. The RM ONE range has now beenextended with the RM Mobile ONE, which brings educational benefits to the laptopcomputer. The commodity PC hardware market has continued to be extremely competitive andthis year has seen a significant decline in average selling prices. This effecthas been most evident in our universities business; however, we believe we haveretained our market share here, despite reducing the level of sales andmarketing resource deployed. TTS, the general education resources supplier which we acquired during 2004, hasmade an excellent first-year contribution to the Group. Working in partnershipwith RM's hardware division, TTS has begun to develop a highly innovative rangeof technology products. The first of these - Bee-Bot - has been a sales successand further products will be introduced at BETT 2006. Online assessment More than 50 million exam scripts circulate around the UK examination systemeach year, typically in the form of physical pieces of paper. There is a clearopportunity for ICT to improve the effectiveness and efficiency of theseprocesses and it's an area in which we have made good progress. Our project with the Qualifications and Curriculum Authority to deliver anonline Key Stage 3 (13-14 year olds) examination for the curriculum subject ofICT is progressing well. The examination went through volume-testing this summerand will be used next year by a high proportion of all English Key Stage 3pupils. As well as providing an innovative new way of testing ICT, this projecthas also created a national ICT infrastructure for delivering, administering andmarking tests for other subjects as well. We are also working with Cambridge Assessment (formerly UCLES) to streamline theprocess of managing traditional, paper-based exams. DOMS, our Digital OnlineMarking Software, improves the efficiency and increases the accuracy of marking.Through a sophisticated workflow engine, completed exam scripts are scanned atthe earliest possible point, with the distribution, marking and reporting thenmanaged electronically. These two projects both have wider relevance and we are exploring a range offurther business opportunities. Building Schools for the Future BSF is a 15-year programme which is intended to rebuild or substantiallyrefurbish every secondary school in England. Partnerships for Schools (P4S), theagency tasked with driving the programme forward, has indicated that over thelife of the programme capital investment could reach £45 billion. Technology will be a fundamental part of the 'school of the future' - indeed,educational ICT is being seen as one the key drivers of educationaltransformation. With as much as £5 billion of the investment being focused oneducational technology, the BSF programme is an unprecedented opportunity forRM. The potential benefits go beyond an increase in market size. P4S has providedstrong guidance that BSF projects should procure ICT in the form of multi-year,managed services. This would allow us to build even deeper partnerships with ourcustomers, as well as providing greater long-term visibility of revenues. Aswith any major market change, there are, of course, risks associated with theBSF programme. In particular, the requirement to bid for projects as part of aconsortium means that decisions will not be made entirely on the quality of anICT proposition. The track record of education-project delivery, which we have built up in recentyears, is directly relevant to the kind of business which is likely to beavailable under BSF. We have made some early progress, being appointed aspreferred bidder for a £6.4 million ICT contract with Solihull Local EducationAuthority. We have chosen to increase our expenditure on business development related tothe BSF programme from the £1.8 million that was spent in 2005 to approximately£4 million in 2006, with the target of securing the position of leading ICTpartner to the programme. We view this expenditure as a strategic investmentwhich will yield shareholder benefits over the next three to five years as anincreasing number of BSF contracts is awarded. International The UK leads the world in the deployment of interactive whiteboards inclassrooms and RM has responded to the growing use of this kind of technologywith the further development of the Easiteach product range. Easiteach - a suiteof interactive whole-class teaching software - is equally as useful ininternational markets as it is in the UK and, during 2005, we have made progressin establishing a customer base for the product range in the USA. By working in partnership with four of the leading interactive whiteboardsuppliers in America, we have established a presence for Easiteach in Americanschools. Our partners bundle Easiteach Studio - the core of the product range -with the whiteboards which they sell to the US education market. We areestablishing a distribution channel to sell 'add-on' modules to those schoolswhich experience the bundled product. Customer satisfaction A key part of our strategy is to focus on continual improvement of customersatisfaction levels. In 2006 every permanent staff member in our principaloperating subsidiary will have some element of their remuneration linked tocustomer satisfaction. We view our externally audited customer satisfaction score as our most importantnon-financial measure. In 2005 this score increased again, exceeding our targetand reaching 7.21 on a scale of 0 to 10 (2004: 7.0), with more than 58% ofcustomers giving us a score of 8, 9 or 10. The customer satisfaction target has been set higher again for 2006. If weachieve our 2006 target, we will have seen year-on-year increases each yearsince we first started measuring customer satisfaction in 2003. Independentanalysis (by the American Customer Satisfaction Index) of US companies whichmeasure customer satisfaction suggests that very few companies increase theirscore in two consecutive years. The quality of service which we deliver for our customers has received externalvalidation during 2005. Support Online, our Web support service, was identifiedby the Association of Support Professionals as one of the World's Ten Best WebSupport Sites for the second consecutive year in 2005. Our telephone supportteam was a finalist in the Helpdesk Institute's Helpdesk Support Team ExcellenceAwards. We are now extending our focus to include customer success as well as customersatisfaction. By this we mean achieving a position where our customers not onlyview us as an exemplary supplier, but also consider that the products andservices which we supply are an essential tool to improve teaching and learning. Our people RM has a growing international presence and we now employ 185 people outside theUnited Kingdom. In North America and Australia we have regional sales officesand our software development facility in Trivandrum, India is making anincreasing contribution to product development. Employee satisfaction, based on our internal staff survey, increased during theyear, with 80% of staff responding that they thought RM was a good organisationto work for (comparable companies: 58%). There are, as ever, areas forimprovement, the most obvious this year being staff training. For 2006 we haveincreased our focus on staff development. Financial review Turnover and profits At the Group level, turnover for the year was unchanged at £262.7 million (2004:£263.3 million); however, this position masks significant developments in theGroup's underlying business. In 2004 we reported 'one-off' turnover ofapproximately £15 million arising from the Classroom 2000 project in NorthernIreland. In 2005, this has been replaced, principally by a full year'scontribution from TTS and Sentinel (the acquisitions made in 2004) and by anincrease in the turnover recognised on long term education projects. 2005 alsosaw a decline in the proportion of turnover arising from PC hardware sales,which now accounts for less than one-third of the Group's revenues. This declinewas driven by a reduction in average unit selling prices for PCs, an effect thatwas particularly noticeable in the university sector. The gross profit percentage increased to 28.1% (2004: 26.0%). This increase isprimarily a result of the increasing breadth of activities inside the Group andtheir differing business models. This year gross profit percentage has beenparticularly impacted by the acquisition of TTS, which has higher than Groupaverage gross margins, and by an increase in the contribution made by long termcontracts. Total operating expenses (excluding goodwill charges) were up £4.2 million at£62.2 million (2004: £58.0 million), with the full year impact of last year'sacquisitions accounting for £3.3 million of this increase. Investment inresearch and development increased by £2.3 million to £16.8 million (2004: £14.5million) reflecting increased project supported developments. Selling anddistribution costs increased by £1.4 million to £34.2 million, mainly as aresult of increased business development expenditure relating to the BuildingSchools for the Future (BSF) contracts (£1.8 million in 2005, compared to £0.1million last year). Operating profit (excluding goodwill charges) increased by 10% to £11.5 million.Operating profit margin (before goodwill charges) made further progressincreasing to 4.4% (2004: 4.0%). Net interest receivable increased by 24% to£1.3 million. This includes £0.7 million of income arising from leasingactivities (2004: £nil). The provision of lease finance options to customers hadpreviously been outsourced but was brought in-house in 2005 in order to providegreater control and flexibility over our offer to customers. This change hasresulted in a change in the way in which income related to leasing is includedin the accounts. There was lower interest receivable on the lower average cashbalances during the year. Profit before tax, excluding goodwill chargesincreased by 11% to £12.8 million. Goodwill charges increased from £4.5 millionto £7.4 million, reflecting additional amortisation of £1.8 million onacquisitions made in 2004 and an impairment charge of £1.1 million made inrelation to the closure of peakschoolhaus. Under UK GAAP, RM writes off goodwillarising from acquisitions over five years. Profit on ordinary activities beforetaxation was £5.5 million (2004: £7.1 million), primarily as a result of thisincrease in goodwill charges. Cash flow Cash generation continues to be strong with £17.2 million of operating cash flowgenerated in the year (2004: £22.4 million). Net capital expenditure was £14.5million (2004: £9.7 million), comprising additions of £15.7 million, lessproceeds from sales of £0.7 million. £10.4 million was invested in the year inthe PFI contract asset bases for the mid-contract refresh of the existing Dudleycontract and in the new Warwickshire, Newham and Lambeth PFI contracts. Net funds of £21.8 million comprise cash and investments of £22.9 million, lessissued loan notes of £1.1 million. In addition, there is deferred considerationof £3.6 million comprising loan notes of £1.2 million that are issuable in 2007and included in provisions, and deferred cash consideration of £2.4 million thatis payable in December 2006 and included in creditors falling due after morethan one year. The Group's core business is seasonal and average net funds during the year were£8.0 million (2004: £27.2 million), with a minimum for the year of (£1.2)million (2004: £7.1 million). The reduction in average net funds reflects thetiming of the 2004 acquisitions, the investment in fixed assets for long-termPFI contracts and an increase long term work in progress. Balance sheet Tangible fixed assets increased by £6.2 million to £26.4 million, arising fromadditions at a cost of £15.7 million, net disposals of £0.8 million anddepreciation charged of £8.7 million. Intangible fixed assets represent the netbook value of goodwill arising on acquisitions and amounts to £17.3 million.Stocks increased by £1.2 million to £17.7 million, as a result of an increase inlong-term contract balances of £3.8 million. Debtors decreased by £2.1 millionto £49.5 million, mainly due to reductions in trade debtors and prepayments.Creditors decreased by £3.2 million to £83.3 million mainly due to reductions intrade creditors and accruals, offset by an increase in payments on accountrelated to a long term contract. International Accounting StandardsThis report for the year ending 30 September 2005 is the last prepared under UKGAAP. In common with all listed companies within the European Union, the nextconsolidated report and accounts RM will prepare will be in accordance withInternational Financial Reporting Standards. The Group intends to make atransition announcement on the impact of moving to IFRS in December 2005 with apresentation being made available on our website (www.rm.com/investors). Prospects The recent education white paper, Higher Standards, Better Schools for All,identifies a central role for ICT in education; this follows on from thepublication of the DfES' eLearning Strategy early this year and the appointmentof the first ever Director of Technology to the DfES Board. RM remains a seasonal business, with more than half of our revenues - and aneven greater proportion of profits - occurring in the second half of the year(reflecting the peak in schools demand in preparation for the start of theacademic year in September). While we have improved the visibility of ourrevenues, we still have almost two-thirds of the year's business to win anddeliver. As always at this time of our financial year, it is too early in the year tomake any meaningful comment on RM's performance in 2006. However, with Englishhead teachers facing budget pressures as a result of the workforce remodellingprogramme and the introduction of teaching and learning responsibility paymentsfor teachers, the weakness in the market that was evident at the start of thenew academic year has continued into the current financial year. As previously mentioned, we are choosing to increase our investment inbusiness-development expenditure to prepare for the opportunities presented byBSF. We believe that this is in the long-term interests of shareholders;however, it will hold back profit growth in 2006. In the longer term, RM is very well positioned to deliver innovative ICTproducts and services that will help teachers to teach and learners to learn. CONSOLIDATED PROFIT AND LOSS ACCOUNTFor the year ended 30 September 2005 2005 2004 £000 £000 Turnover 262,707 263,264Cost of sales (188,999) (194,757)----------------------------------------------- -------- -------- Gross profit 73,708 68,507----------------------------------------------- -------- -------- Operating expenses:Selling and distribution (34,224) (32,746)Research and development (16,812) (14,546)Administrative expenses (18,536) (15,232)----------------------------------------------- -------- -------- (69,572) (62,524)----------------------------------------------- -------- -------- Operating profit 4,136 5,983----------------------------------------------- -------- -------- Operating profit analysed:- before goodwill charges 11,522 10,502- goodwill charges (7,386) (4,519)----------------------------------------------- -------- -------- Total operating profit 4,136 5,983----------------------------------------------- -------- -------- Net interest receivable 1,323 1,071----------------------------------------------- -------- -------- Profit on ordinary activities before taxation 5,459 7,054----------------------------------------------- -------- -------- Profit on ordinary activities before taxation analysed between:- profit on ordinary activities beforetaxation and goodwill charges 12,845 11,573- goodwill charges (7,386) (4,519)----------------------------------------------- -------- -------- 5,459 7,054----------------------------------------------- -------- -------- Tax charge on profit on ordinary activities (3,455) (3,162)----------------------------------------------- -------- -------- Profit on ordinary activities after taxation 2,004 3,892----------------------------------------------- -------- -------- Dividends paid and proposed (4,331) (4,075)----------------------------------------------- -------- -------- Retained loss for the year (2,327) (183)----------------------------------------------- -------- -------- Earnings per ordinary shareBasic 2.3p 4.4pDiluted 2.2p 4.3pDiluted - before goodwill charges 10.5p 9.4p All material activities relate to continuing operations. CONSOLIDATED BALANCE SHEET As at 30 September 2005 2005 2004 £000 £000 Fixed assetsIntangible fixed assets 17,304 24,737Tangible fixed assets 26,357 20,202--------------------------------------------- --------- --------- 43,661 44,939Current assetsStocks 17,658 16,492Debtors 49,456 51,538Investments - short term cash deposits 500 5,000 Cash at bank and in hand 22,442 22,480--------------------------------------------- --------- --------- 90,056 95,510 CreditorsAmounts falling due within one year (83,273) (86,442)------------------------------------ --------- ---------Net current assets 6,783 9,068--------------------------------------------- --------- ---------Total assets less current liabilities 50,444 54,007 Creditors Amounts falling due after more than one year (9,759) (11,086) Provisions for liabilities and charges (2,170) (2,320)--------------------------------------------- --------- ---------Net assets 38,515 40,601--------------------------------------------- --------- ---------Capital and reservesCalled-up share capital 1,815 1,794Share premium account 22,151 20,349Capital redemption reserve 94 94ESOP shareholding (1,386) (1,010)Profit and loss account 15,841 19,374--------------------------------------------- --------- ---------Equity shareholders' funds 38,515 40,601--------------------------------------------- --------- --------- CONSOLIDATED CASH FLOW STATEMENT For the year ended 30 September 2005 2005 2004 £000 £000 Net cash inflow from operating activities 17,204 22,399 Returns on investments and servicing of finance 1,032 1,071Taxation (3,743) (3,532)Capital expenditure and financial investment (14,506) (9,691)Acquisitions - (16,873)Equity dividends paid (4,127) (3,909)--------------------------------------------------- ------- --------Net cash outflow before use of liquid resources and financing (4,140) (10,535) Management of liquid resources 4,500 8,125 Financing (403) (2,607)--------------------------------------------------- ------- --------Decrease in cash in the year (43) (5,017)--------------------------------------------------- ------- -------- RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS For the year ended 30 September 2005 2005 2004 £000 £000 Decrease in cash in the year (43) (5,017) Cash outflow from change in liquid resources (4,500) (8,125)Settlement of loan notes 600 2,208--------------------------------------------------- ------- --------Change in net cash resulting from cash flows (3,943) (10,934)Issue of loan notes - (1,699)Exchange translation 5 (3)--------------------------------------------------- ------- --------Movement in net funds in the year (3,938) (12,636) Net funds brought forward 25,781 38,417--------------------------------------------------- ------- --------Net funds carried forward 21,843 25,781--------------------------------------------------- ------- -------- PRELIMINARY ANNOUNCEMENT 1. Report and Accounts 2005 and AGM 2006 The financial information set out in this preliminary results announcement hasbeen prepared on a basis that is consistent with the statutory accounts for theyear ended 30 September 2005. The financial information set out in this announcement does not constitute theCompany's statutory accounts for the years ended 30 September 2005 or 30September 2004 but is derived from those accounts. Statutory accounts for theyear ended 30 September 2004 contained an unqualified audit report, did notcontain statements under section 237 (2) or (3) of the Companies Act 1985 andhave been filed with the Registrar of Companies. The Company will hold its Annual General Meeting on 23 January 2006, followingwhich the statutory accounts for the year ended 30 September 2005, will be filedwith the Registrar of Companies. The Auditors have reported on these accountsand their report was unqualified and did not contain statements under section237 (2) or (3) of the Companies Act 1985. 2. Taxation The tax charge for the year represents a rate of 27% of profit before goodwillcharges (2004: 27%), lower than the standard 30% rate mainly reflecting thebenefit of an enhanced deduction for qualifying expenditure under the Group'sresearch and development programme. The tax charge of £3.5 million (2004: £3.2 million) comprises current tax £3.3million (2004: £3.4 million) and deferred tax charge £0.2 million (2004: credit£0.2 million). 3. Dividends per share The Directors have recommended the payment of a final dividend of 3.8p per share(2004: 3.6p) bringing the total dividend for the year to 4.85p per share (2004:4.6p). The final dividend is payable on 3 February 2006 to shareholders on theregister on 6 January 2006. 4. Earnings per share A reconciliation of the basic earnings per share with diluted earnings per shareis as follows: 2005 2005 2005 2004 2004 2004 Profit No. of Pence Profit No. of Pence after tax shares per after tax shares per £000 ('000) share £000 ('000) share Basic earnings per share 2,004 88,924 2.3 3,892 88,894 4.4Impact of share options - 434 (0.1) - 779 (0.1)--------------------- ------- ------- ------- ------- ------- -------Diluted earnings pershare 2,004 89,358 2.2 3,892 89,673 4.3--------------------- ------- ------- ------- ------- ------- -------Supplementary earningsper share before goodwill chargesDiluted earnings pershare 2,004 89,358 2.2 3,892 89,673 4.3Effect of goodwillcharges 7,386 - 8.3 4,519 - 5.1--------------------- ------- ------- ------- ------- ------- -------Diluted earnings pershare beforegoodwill charges 9,390 89,358 10.5 8,411 89,673 9.4--------------------- ------- ------- ------- ------- ------- ------- 5. Reconciliation of movements in shareholders' funds Share Share Capital Profit capital premium redemption ESOP and loss 2005 2004 account reserve s'holding account Total Total £000 £000 £000 £000 £000 £000 £000 Beginning ofthe year 1,794 20,349 94 (1,010) 19,374 40,601 41,215Retained lossfor the year - - - - (2,327) (2,327) (183)Share issues 21 745 - - - 766 -Transfer inrespect ofissue ofshares toemployeetrusts - 1,057 - - (1,057) - -Purchase ofshares - - - (569) - (569) (399)ESOPshareholdingtransfer - - - 193 (193) - -Currencytranslationdifferences - - - - 44 44 (32)--------------- ------ ------- ------- ------ ------ ------ ------End of theyear 1,815 22,151 94 (1,386) 15,841 38,515 40,601--------------- ------ ------- ------- ------ ------ ------ ------ 6. Net cash flow from operating activities 2005 2004 £000 £000 Operating profit 4,136 5,983Depreciation charge 8,682 7,805Goodwill charges 7,386 4,519Profit on sale of fixed assets (260) (205)Increase in stocks (1,166) (1,952)Decrease/(Increase) in debtors 1,992 (5,168)(Decrease)/Increase in creditors (3,566) 11,417------------------------------------------- -------- --------Net cash inflow from operating activities 17,204 22,399------------------------------------------- -------- -------- 7. Pension scheme The Group has continued to account for its defined benefit pension scheme usingSSAP 24 "Accounting for pension costs". The latest triennial actuarialvaluation was carried out at 31 May 2003, with another due in May 2006. At 30September 2005, under FRS 17 "Retirement benefits", the scheme's assets were£56.5 million and its liabilities were £72.4 million; this is a deficit beforetax of £15.9 million (2004: £14.9 million), or £11.1 million deficit after tax(2004: £10.4 million). In 2005, the Group has adopted more prudent mortalityassumptions - PMA92(-4) and PFA92(-4) - which in summary added an extra year'slife expectancy and increased liabilities by £1.4 million. Over the year theyield on "AA" rated corporate bonds, which is used to discount the scheme'sliabilities, has fallen by 0.55% to 5.05% and the assumption for future salaryincreases has been reduced by 0.4% to 3.8%. The impact of these changes inassumptions is an increase in liabilities of £8.2 million and this more thanoffset the investment return on the scheme assets during the year. The recent introduction of the Pension Protection Fund and the, as yet unclear,mechanisms for calculating future years payments (which will include thesolvency of participating Group companies and the scheme's PPF deficit) mightmean significant unplanned costs for the Group. The charge made for 2005, on adifferent basis from that going forward, was £0.02 million. The Group continues to closely monitor the position of the pension scheme,taking appropriate and prudent action when it deems necessary.Copies of the Annual Report and Accounts may be obtained after the posting dateof 16 December 2005 from the registered office of the Company at: New MillHouse, 183 Milton Park, Abingdon, Oxfordshire OX14 4SE. A copy of this announcement is available at RM's internet site www.rm.com and acopy of the Annual Report and Accounts will be available at the same site from16 December 2005. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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