Final Results

Ricardo PLC 19 September 2005 19 September 2005 Ricardo plc Preliminary results for the year ended 30 June 2005 Ricardo plc is the leading UK independent automotive consultancy, employing over 1,700 people. The company has technical centres in the UK, USA, Germany and offices in Tokyo and Shanghai, the client list includes the world's major automotive OEMs. HIGHLIGHTS • Recovery driven by growth in Strategic Consulting, electronics and increased business from Asia • Profit before tax and goodwill £8.4m (2004: £1.8m). Profit before tax and after goodwill and exceptional costs £7.4m (2004: loss of £2.8m) • Steady recovery in order book up 21% to £70m (2004: £58m) with increased visibility • Earnings per share before goodwill up to 16.2p (2004: 4.3p). Earnings per share after goodwill and exceptional costs 14.2p (2004: loss of 2.6p) • Dividend held at 6.3p, giving a full dividend for the year of 9.0p • Growth in business from Asian companies accelerating • Dave Shemmans to become CEO with effect from AGM on 4 November 2005 Commenting on the results, Rodney Westhead, Chief Executive said: 'I am pleased with these results and the significant improvement in performance over the year. Strategic Consulting and Ricardo UK have done especially well, driven by demand for our technology and strategic advice. 'The new year has begun well, and our order prospects continue to strengthen with a much better geographic balance with growth from Asia. Although the global automotive market remains challenging, we are confident of further steady progress for the coming year.' Further enquiries: Ricardo plc Rodney Westhead, Chief Executive (today) Tel: 020 7554 1400 Dave Shemmans CEO Designate Andrew Goodburn, Finance Director (thereafter) Tel: 01273 455611 Website: www.ricardo.com Gavin Anderson & Company Charlotte Stone /Robert Speed Tel: 020 7554 1400 REVIEW OF THE YEAR 2005 has been a much better year with a marked improvement in performance by the UK and a steady growth in the order book which closed at the end of June at the highest level for a number of years. Profitability improved generally as the impact of earlier restructuring took effect but has not yet recovered to acceptable levels in some of our businesses, nor for the group as a whole. Nonetheless our second half trading has laid the foundation for further improvement. ANNUAL RESULTS & DIVIDEND Profit before tax, goodwill amortisation and exceptional costs rose to £8.4m from £1.8m last year. Net borrowings at the year end were £11.3m compared with £10.3m last year, reflecting the growth in working capital as activity levels increased. The preliminary results of the triennial valuation of the Pension Fund indicate an increase in the deficit to £22m which is likely to result in an increase in the Company's cash contribution of £1.6m per annum. The dividend has been held this year at 9.0p per share. STRATEGY Good progress has been made, particularly in two areas. Our focus on China has led to a number of important new contracts with new Chinese clients and the award of our contract with SAIC is testimony to the reputation we are rapidly building in the territory. The other noteworthy success is in Strategic Consulting which is now profitable and growing steadily. The importance of Strategic Consulting is not only in its own growth potential but the opportunities that it can also open up for our technology consulting. BUSINESS OVERVIEW All areas of the business have seen improved results in the last year with all operating businesses profitable. Strategic Consulting and Ricardo UK performed particularly well, and our order book at £70m (2004: £58m) has significantly improved during the year with major gains in Asia. The developments of electronics and strategic consulting continue to widen Ricardo's appeal and enhance our added value offering to our customers. Our recovery in the year proceeded well, with better than anticipated growth in both our order book and in Asian markets. We still have a long way to go to achieve historic growth rates and levels of profitability, however good progress has been made and the UK, USA and Strategic Consulting are all well ahead of last year. The confidence in the business going forward is good. UK The UK performance improvement has been supported by the continuing growth in electronics and the Chinese automotive expansion. This has reversed a previous decline in the world-wide engine and the mechanical development markets and as a consequence our engine division performed particularly well. The opening of an additional office in the Midlands to support our contract with SAIC underpins all of our UK activity. Transmission and vehicle engineering have both improved their order books after a tough trading year and start the new financial year in much better shape. In particular, the military vehicle market continues to provide useful additional business to the traditional passenger car market. Transmissions now has a secure, low volume manufacturing base and is also beginning to benefit from a pick up in the development market. We continue to grow our Prague office as a low cost support base for the UK operations and will now be adding electronics engineers to the existing team of computer aided designers and software developers there. USA The USA had a satisfactory year. Profits increased over 50 percent and the order book up nearly 40 percent. This result was generated from our traditional market place together with increasingly active commercial vehicle and military markets. These performance improvements are particularly pleasing given the difficult market conditions that the traditional US car manufacturers face. Germany In Germany, all companies who service the automotive market face challenges from the weak domestic market, including Ricardo. Two of the major German car companies in particular are facing difficulties, so we are pleased that our business has achieved a near 50% increase in profits and only a very slight reduction in the order book, although the outlook for the New Year clearly remains testing. Asia During the year, order intake in Japan tripled to 13% of all orders and similarly orders from China have grown from virtually zero to over 15%. There is a dramatic shift in emphasis for the automotive world from historically dominant markets of North America/Europe to Asia. The opening of our new offices in Tokyo and Shanghai, which we report as a cost, is most timely and will ensure we continue to capitalise on opportunities as they arise. As well as China and Japan, we are also seeing growth from India, Korea and other markets with aspirations to create their own automotive development capability. These markets will bring their own commercial challenges but make a most welcome addition to the traditional markets of Europe and the USA with their overcapacity and high cost problems. Strategic Consulting Strategic Consulting is now well established and has had an excellent year turning a significant start-up loss into a very good profit and has also delivered a five-fold increase in the order book. This has been achieved by teams in Europe, USA and Asia against competition from the major international consultancies. The combination of our traditional technology capability, coupled with our newer strategic advisory service with deep industry knowledge and a focus on delivering tangible results, is a very successful formula with our client base and one with considerable potential for further development. We envisage this growth will also have an influence on our traditional business which is likely to adopt some of the strategic methodologies, particularly in business development and approach to clients. RESEARCH & DEVELOPMENT Internal research investment remains a key part of the Ricardo business strategy, creating tangible in-house solutions to industry challenges and differentiates Ricardo from lower added value routine engineering resource providers. Future needs are currently dominated by the demand for cost effective reductions in carbon and exhaust emissions, together with improvements in vehicle safety. Also customers are keen to reduce the time and cost of product research and development as a key requirement for new models, which drives an increased need for us to deliver more robust tools and processes in product development, including control and safety critical software. In line with the drive towards more cost effective research processes, Ricardo has focused on creating more collaborative research programme. Most internally funded research now attracts collaborative support from a range of automotive customers, often with added government funding in the US, Europe and the UK. 2S/4Sight Lower Fuel Consumption Programme ------------------------------------------ A good example of a collaborative research programme with UK Government support has been the 2S/4Sight research programme. The 2S/4Sight concept uses a combination of downsizing and boosting to reduce internal friction, resulting in lower fuel consumption and therefore carbon emissions. Uniquely this concept has addressed the low speed torque deficiency historically exhibited by small, high performance engines. 2S/4Sight operates predominantly as a four stroke engine for good exhaust emissions control but is configured to switch to two stroke operation to deliver higher torque when demanded at low engine speeds. Work to develop the combustion system has been successfully completed, based on a patented Ricardo configuration, and the focus is now on developing transient switching strategies to provide seamless changes between two and four stroke operation. Current estimates predict fuel economy benefits for this concept of around 25% compared with a conventional gasoline engine, with overall costs similar to that of a diesel engine. R&D of this nature is fundamental to the development of products for our customers in tomorrow's market place. Advancing Control & Electronics ------------------------------- Advances in control and electronics capabilities are at the centre of many internally funded research programmes, as they are often the key to operation of engines and transmissions in more efficient operating regimes. Ricardo has produced a very flexible and powerful prototype engine and vehicle management system for investigating new control approaches. These flexible units are now in use on five major internal research programmes and many more have been purchased by our customers for their own research. Improving Road Safety --------------------- A third key R&D area for Ricardo is to help clients meet ambitious global targets to cut road deaths. This has driven an increased requirement for active safety technology, using advanced sensors, actuators and control and electronics to prevent vehicle accidents. Ricardo has identified interactions between safety-critical vehicle subsystems and software as a key area for research. Validation of safety-critical software using traditional analysis is creating major challenges due to the vast quantity of code now required for vehicle systems and susceptibility to human error in any manual process. To address the need for more automated, less error prone analysis, Ricardo has initiated a programme to create tools and processes for automated reliability and multiple failure mode analysis. Our approach and work to date offers major benefits compared to traditional analysis and has attracted significant customer interest. ENVIRONMENTAL DRIVERS FOR OUR BUSINESS The product of our R&D and client programmes have a direct impact on the environment because much of our work is aimed at reducing both emissions and fossil fuel consumption and in the future will be increasingly focused on helping to reduce road deaths and accidents, likely to be the world's third biggest killer by 2020. Legislation continues to be a key driver for our growth in these areas, as automotive manufacturers work to make new models meet future targets, and reflects the importance of our R&D programme in meeting the future challenges for our clients. Legislated limits for key exhaust emissions are already a tenth of what they were in 1990, and in some cases are likely to drop to a quarter of today's levels in the next decade. Vehicles must achieve this environmental performance while meeting increasing customer expectations for performance, safety, comfort and value. The development of technologies, tools and processes to deliver vehicles with improved exhaust emissions has been a mainstay of Ricardo's R&D investment for many years. This investment has already delivered: • A diesel passenger car demonstrating emissions performance compatible with the likely requirements of 'Euro 5' legislation, as a result of collaborative research with the former Fiat-GM Powertrain (FGP) and VROM, the Dutch ministry of Housing, Spatial Planning and the Environment. • An advanced Combustion Research programme, in collaboration with several UK and foreign Universities, which has built scientific understanding of the mechanisms by which exhaust emissions form in the engine. Ricardo is also engaged in an increasing number of production programmes to develop lower emission products for the second half of this decade. Looking further to the future, Ricardo is investing in low emission technology for truck engines; solutions for passenger car diesels that are compatible with the very demanding US legislation; advanced control technology for ultra-clean combustion; and further development of the engineering tools that will support this new generation of technology. These programmes include the development of Hybrid vehicles and 'Low Carbon' powertrain technologies for market introduction in the second half of this decade, including: • I-MoGen, a cost-effective diesel Mild Hybrid demonstrator car demonstrated in 2002, which continues to showcase Ricardo's expertise in Hybrid systems integration, Advanced Control, and efficient engine technology. • Dual Clutch Transmission technology, which offers the smooth driving experience of an Automatic gearbox with the fuel efficiency of a Manual. Ricardo technology has recently been showcased on the Chrysler ME4-12 and Bugatti Veyron supercars, and will filter down to mainstream vehicles in the coming years where we have a steady flow of customer interest. • The Lean Boost system, a technology which enables the gasoline (Petrol) engine to compete with diesel in terms of carbon emissions. • The HyTrans micro-hybrid demonstrator, which showcases how low-risk technologies can have a big impact in the growing delivery van sector. This project was a result of collaborative research with Ford and suppliers Valeo and Gates, with support from the UK's Energy Savings Trust. For the longer term, Ricardo is investing in further efficient powertrain technologies through the collaborative programmes 'Efficient-C' (A very efficient Hybrid people-carrier co-developed with PSA Peugeot-Citroen and Qinetiq, sponsored by the UK Energy Savings Trust as part of their Ultra Low Carbon Car Challenge) and '2/4Sight'. A Fuel Cell research programme focussed on computer modelling and integration of systems, and supported by collaboration with two key North American players in this field. IMPACT OF IFRS Our project team has been working hard on the transition from UK GAAP to International Financial Reporting Standards. The 2005 interims will be the first time we report under these new standards. The impact to the P&L is expected to be relatively small, but the net assets and distributable reserves will be significantly reduced due mainly to taking the pensions deficit onto the balance sheet. PENSIONS Under FRS17 the net deficit in our defined benefit pension scheme increased from £19.1m to £24.2m due mainly to the falling bond yield which is used as the basis for the discount rate which was assumed to be 5% compared with 5.8% a year earlier. At the time of writing this review, our actuary was well advanced in carrying out the triennial valuation of the pension scheme. Preliminary results of the actuarial valuation suggest that on an ongoing basis the deficit will have increased from £9m to around £22m. The main reasons for this increase are more prudent assumptions being used coupled with the falling bond yield and a poor equity investment return over the three year period. As a consequence it is expected that the Group will be required to significantly increase its additional contribution to the fund from £1.6m to approximately £3.2m per annum. Although the fund is now closed, this represents a significant impact on the company's future cash outflow. This increase will not affect the pensions charge to the profit and loss account under IFRS. PEOPLE On 18 February 2005 we announced the appointment of Dave Shemmans as CEO designate to take over from Rodney Westhead when he retires on 8 November 2005. Dave will make a great leader for Ricardo and we look forward to working with him over the coming years. The Board would like to take this opportunity of paying tribute to the considerable success with which Rodney has led the company over these last 9 years, and to wish him a long and very happy retirement. Peter Ward resigned from the Board on 31 March 2005 to take up the Chairmanship of another company. We thank him for his support and guidance to the company over the last six years and wish him every success in his new role. Dr Clive Hickman resigned from the Board on 31 August 2005 to pursue his career elsewhere. We thank him for his contribution to the company and wish him success for the future. OUTLOOK Ricardo is now the world's major independent automotive consultancy and well placed to continue growing. We have withstood some very difficult years and emerged better equipped than ever to exploit the future. Despite the continuing difficult automotive market in both Europe and the USA, our broadening customer and geographic base enables the Board to be confident of further steady progress in the years ahead. Our long term outlook is excellent and our immediate future prospects continue to improve most satisfactorily as we steadily restore previous levels of growth and profitability. This is not a one year task but one which we continue to tackle with increasing confidence as Ricardo's breadth of capability and market place steadily improve. CONSOLIDATED PROFIT & LOSS ACCOUNT For the year ending 30 June 2005 Before goodwill Goodwill amortisation amortisation and and Before 2005 exceptional exceptional 2004 goodwill Goodwill £'000 redundancy redundancy £'000 Notes amortisation amortisation Total costs costs Total -------------------------------------------------------------------------------------------------------------------- Turnover 2 159,920 - 159,920 146,242 - 146,242 -------------------------------------------------------------------------------------------------------------------- Operating profit/(loss) 3 9,147 (1,004) 8,143 2,600 (4,558) (1,958) -------------------------------------------------------------------------------------------------------------------- Profit/(loss) on ordinary activities before interest 9,147 (1,004) 8,143 2,600 (4,558) (1,958) Net interest (796) - (796) (800) - (800) -------------------------------------------------------------------------------------------------------------------- Profit/(loss) on ordinary activities before taxation 8,351 (1,004) 7,347 1,800 (4,558) (2,758) Tax on profit/ (loss) on (186) - (186) 515 1,114 1,629 ordinary activities -------------------------------------------------------------------------------------------------------------------- Profit/(loss) on ordinary activities after taxation 8,165 (1,004) 7,161 2,315 (3,444) (1,129) Minority interest (82) (148) -------------------------------------------------------------------------------------------------------------------- Profit/(loss) for the financial year 7,079 (1,277) Non - equity preference (6) (6) dividends -------------------------------------------------------------------------------------------------------------------- Profit/(loss) attributable to ordinary shareholders 7,073 (1,283) Equity ordinary dividends 4 (4,505) (4,478) -------------------------------------------------------------------------------------------------------------------- Retained profit/(loss) transferred to/(from)reserves 2,568 (5,761) ==================================================================================================================== Earnings per ordinary share -basic 14.2p (2.6)p -diluted 14.1p (2.6)p Earnings per ordinary share before goodwill amortisation (2004: and exceptional redundancy costs) -basic 16.2p 4.3p -diluted 16.1p 4.3p -------------------------------------------------------------------------------------------------------------------- There is no material difference between the profit on ordinary activities before taxation and the profit/(loss) for the financial years stated above, and their historical cost equivalents. All the above activities are continuing. CONSOLIDATED AND COMPANY BALANCE SHEETS As at 30 June 2005 Group Company 2005 2004 2005 2004 £'000 £'000 £'000 £'000 ------------------------------------------------------------------------------------------------------ Fixed assets Intangible assets 14,643 16,161 - - Tangible assets 47,872 50,944 10,093 10,463 Investments - - 26,062 20,333 ------------------------------------------------------------------------------------------------------ 62,515 67,105 36,155 30,796 ====================================================================================================== Current assets Stocks 6,918 6,285 - - Debtors 46,589 36,525 42,576 164,726 Cash at bank and in hand 8,807 11,119 22,354 13,227 ------------------------------------------------------------------------------------------------------ 62,314 53,929 64,930 177,953 Creditors - amounts falling due within one year (45,066) (56,247) (20,372) (23,255) ------------------------------------------------------------------------------------------------------ Net current assets/(liabilities) 17,248 (2,318) 44,558 154,698 ------------------------------------------------------------------------------------------------------ Total assets less current liabilities 79,763 64,787 80,713 185,494 Creditors - amounts falling due after more than one year (18,655) (4,788) (15,534) - Provisions for liabilities and charges (1,815) (3,843) (162) (392) ------------------------------------------------------------------------------------------------------ Net assets 59,293 56,156 65,017 185,102 ====================================================================================================== Capital and reserves Called up share capital 12,504 12,474 12,504 12,474 Share premium account 12,201 12,076 12,201 12,076 Capital redemption reserve 40 40 40 40 Merger reserve 967 967 - - Long term incentive plan reserve 143 - 143 - Profit and loss account 32,944 30,106 40,129 160,512 ------------------------------------------------------------------------------------------------------ Shareholders' funds 58,799 55,663 65,017 185,102 ------------------------------------------------------------------------------------------------------ Equity and non equity minority interests 494 493 - - ------------------------------------------------------------------------------------------------------ Capital employed 59,293 56,156 65,017 185,102 ------------------------------------------------------------------------------------------------------ CONSOLIDATED CASH FLOW STATEMENT For the year ended 30 June 2005 2005 2004 Notes £'000 £'000 £'000 £'000 ----------------------------------------------------------------------------------------------------------- Net cash inflow from operating activities 6 10,183 12,037 Returns on investments and servicing of finance Interest received 774 919 Interest paid (1,649) (1,662) Dividend paid to minority shareholder (85) (207) ----------------------------------------------------------------------------------------------------------- Net cash outflow from returns on investment and servicing of finance (960) (950) Taxation 271 (3,531) Capital expenditure and financial investment Purchase of tangible fixed assets (6,264) (11,091) Sale of tangible fixed assets 158 75 ----------------------------------------------------------------------------------------------------------- (6,106) (11,016) Equity and non equity dividends paid (4,499) (4,482) ----------------------------------------------------------------------------------------------------------- Management of liquid resources Loan note repaid - (340) ----------------------------------------------------------------------------------------------------------- (340) ----------------------------------------------------------------------------------------------------------- Cashflow before financing (1,111) (8,282) Financing Issue of ordinary share capital 155 27 Loans taken out /(repaid) 13,855 (585) Amounts received in respect of ESOP shares 99 - ----------------------------------------------------------------------------------------------------------- Increase/(decrease) in cash 14,109 (558) ----------------------------------------------------------------------------------------------------------- 12,998 (8,840) =========================================================================================================== NOTES TO THE ACCOUNTS 1. Accounting Policies This preliminary announcement has been prepared on the basis of the accounting policies as set out in the annual financial statements for the year ended 30 June 2005. 2. Segmental reporting The directors consider that the Group operates in two business segments, the provision of engineering and technology services and strategic consulting to industry, commerce and other agencies. Turnover by destination 2005 2004 £'000 £'000 Europe 91,307 94,284 North America 42,160 40,830 Pacific Basin 16,266 5,529 Rest of the World 10,187 5,599 ------------------------------------------------------------------------------------------- 159,920 146,242 ------------------------------------------------------------------------------------------- Turnover by origin, operating profit and net operating assets For engineering and technology services, the Group operates from 3 main geographical areas. In addition, the Group's strategic consulting business operates on a global basis. Segmental analysis for the year ended 30 June 2005 Engineering and technology services Strategic North Rest of Sub - Consulting UK America Germany World total Total £'000 £'000 £'000 £'000 £'000 £'000 £'000 Turnover by origin 88,629 32,441 29,660 249 150,979 8,941 159,920 ----------------------------------------------------------------------------------------------------------- Operating profit/(loss) before goodwill amortisation 4,735 1,599 1,626 (343) 7,617 1,530 9,147 Operating profit/(loss) after goodwill amortisation 4,431 1,589 936 (343) 6,613 1,530 8,143 ----------------------------------------------------------------------------------------------------------- Net operating assets/ 40,904 12,503 21,178 (703) 73,882 (1,514) 72,368 (liabilities) Net Group borrowings (11,260) Provisions for liabilities and (1,815) charges ----------------------------------------------------------------------------------------------------------- Net assets 59,293 ----------------------------------------------------------------------------------------------------------- Segmental analysis for the year ended 30 June 2004 Engineering and technology services Strategic North Rest of Sub - Consulting UK America Germany World total Total £'000 £'000 £'000 £'000 £'000 £'000 £'000 Turnover by origin 84,677 36,365 23,390 32 144,464 1,778 146,242 ----------------------------------------------------------------------------------------------------------- Operating profit/(loss) before 1,869 1,026 1,181 (185) 3,891 (1,291) 2,600 goodwill amortisation and exceptional costs Operating profit/(loss) after 1,554 1,015 522 (185) 2,906 (1,291) 1,615 goodwill amortisation and before exceptional costs ----------------------------------------------------------------------------------------------------------- Net operating assets/ 42,775 9,564 17,557 (239) 69,657 599 70,256 (liabilities) Net Group borrowings (10,257) Provisions for liabilities and (3,843) charges ----------------------------------------------------------------------------------------------------------- Net assets 56,156 ----------------------------------------------------------------------------------------------------------- 3. Operating profit/(loss) on ordinary activities before taxation Profit on ordinary activities before taxation is after charging research and development of £3,862,000 (2004: £4,421,000) goodwill of £1,004,000 (2004: £985,000) and depreciation of £9,298,000 (2004: £9,518,000). 4. Dividends The final dividend is 6.3p (2004: 6.3p). This is payable on 18 November 2005 ordinary shareholders on the register on 21 October 2005. 5. Earnings per share Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of shares in issue during the year, excluding those held by the LTIP Trustee which are treated as cancelled for the purposes of the calculation. For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares. The Group has two classes of dilutive potential ordinary shares: those options granted to employees where the exercise price is less than the market price of the Company's ordinary shares during the year and the contingently issuable shares under the Group's LTIP. At 30 June 2005, the performance criteria for the vesting of awards under the plans maturing on 30 June 2005 and 30 June 2006 had not been met and consequently the shares in question are excluded from the diluted earnings per share computation. The contingently issuable shares under the Group's LTIP maturing on 30 June 2007 are included as the performance criteria for the vesting of awards will be met based on the current status of the conditions. Reconciliations of the earnings and the weighted average number of shares used in the calculations are set out below. 2005 2004 Per Per Number Share Number share Earnings of shares amount Earnings of shares amount £'000 '000 Pence £'000 '000 Pence Basic EPS Profit/(loss) attributable to ordinary shareholders 7,073 49,938 14.2 (1,283) 49,770 (2.6) Effect of dilutive securities: LTIP 203 - Options - 61 - * -------------------------------------------------------------------------------------------------------- Diluted EPS 7,073 50,202 14.1 (1,283) 49,770 (2.6) -------------------------------------------------------------------------------------------------------- Supplementary earnings per share to exclude goodwill amortisation (2004: goodwill and exceptional redundancy costs) Basic EPS 7,073 49,938 14.2 (1,283) 49,770 (2.6) Effect of goodwill 1,004 - 3,444 - -------------------------------------------------------------------------------------------------------- Basic EPS excluding goodwill amortisation 8,077 49,938 16.2 2,161 49,770 4.3 -------------------------------------------------------------------------------------------------------- Diluted EPS 7,073 49,938 14.2 (1,283) 49,770 (2.6) Effect of goodwill 1,004 - 3,444 - Effect of dilutive securities: LTIP 203 - Options - 61 - 271 -------------------------------------------------------------------------------------------------------- Diluted EPS excluding goodwill amortisation 8,077 50,202 16.1 2,161 50,041 4.3 -------------------------------------------------------------------------------------------------------- * No dilution due to loss in the year. The weighted average number of shares in issue may be reconciled to the number used in the earnings per share calculation as follows: 2005 2004 Weighted average number: '000 '000 Ordinary shares in issue 49,943 49,889 Shares held by Employee Share Ownership Trust - (67) Shares held by Long Term Incentive Plan Trustee (5) (52) ------------------------------------------------------------------------------------------ 49,938 49,770 ------------------------------------------------------------------------------------------ 6. Net cash inflow from operating activites 2005 2004 £'000 £'000 Operating profit/(loss) 8,143 (1,958) Depreciation Charges 9,298 9,518 Goodwill amortisation 1,004 985 Loss/ (profit) on sale of tangible fixed assets 5 (7) Long term incentive plan charge/(credit) 143 (204) Reduction in potential deferred consideration (600) - Increase in stock (604) (1,632) (Increase)/decrease in debtors (10,781) 15,642 Increase/(decrease) in creditors 3,575 (10,307) ------------------------------------------------------------------------------------------ Net cash inflow from operating activities 10,183 12,037 ------------------------------------------------------------------------------------------ 7. Reconciliation of net cash flow to movement in net debt 2005 2004 £'000 £'000 Increase/(decrease) in cash 12,998 (8,840) Movement in debt (13,855) 691 ---------------------------------------------------------------------------------------- Change in net debt from cash flows (857) (8,149) Translation difference (146) (916) ----------------------------------------------------------------------------------------- Movement in net funds in year (1,003) (9,065) Net debt at 1 July (10,257) (1,192) ----------------------------------------------------------------------------------------- Net debt at 30 June (11,260) (10,257) ----------------------------------------------------------------------------------------- 8. Analysis of net debt At 1 July Cash Exchange At 30 June 2004 flow movement 2005 £'000 £'000 £'000 £'000 Cash in hand 11,119 (2,355) 43 8,807 Overdrafts (16,588) 15,353 (301) (1,536) --------------------------------------------------------------------------------------- Sub total (5,469) 12,998 (258) 7,271 Debt due after 1 year (4,788) (13,855) 112 (18,531) --------------------------------------------------------------------------------------- Total (10,257) (857) (146) (11,260) --------------------------------------------------------------------------------------- This information is provided by RNS The company news service from the London Stock Exchange

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