Final Results
RM announces results for the year to 30 September 2009
RM, the international provider of education solutions, announces results for the year to 30 September 2009.
Financial headlines
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Revenue up 20%: £346.9m (2008: £289.5m)
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Adjusted profit from operations* up 21%: £17.7m (2008: £14.6m)
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Adjusted profit before tax* up 9%: £17.9m (2008: £16.4m)
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Profit before tax up 6%: £16.3m (2008: £15.4m)
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Adjusted earnings per share* up 17%: 15.3p (2008: 13.1p)
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Dividend per share (paid and proposed) up 6%: 6.17p (2008: 5.81p)
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Net cash: £5.0m (2008: £17.3m)
*Before amortisation of acquisition related intangible assets and acquisition integration costs
Operational headlines
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BSF moving to successful delivery
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RM USA driving international expansion
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Education Resources growing rapidly
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Record committed revenues: £445m (2008: £410m)
Commenting on the results, Terry Sweeney, Chief Executive of RM, said:
"2009 has been a very good year for RM, with strong financial results and significant strategic progress.
"The Group is very different from five years ago. We have moved from a largely domestically-focused IT business, to a broadly-based international education group. In the UK, each of our three divisions targets different strands of the overall education budget. Outside the UK, we are a relatively small and agile supplier, with highly relevant experience and world-class solutions. We believe the diverse nature of our business provides both opportunities for future growth and a high level of resilience.
"Education remains an important priority around the globe. RM is one of the world's leading education solution businesses and we see growth opportunities ahead for all of our activities."
For further information, please contact:
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Terry Sweeney, Chief Executive Officer |
RM plc |
08450 700300 |
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Mike Greig, Chief Financial Officer |
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Phil Hemmings, Director of Corporate Affairs |
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Andrew Fenwick |
Brunswick |
020 7404 5959 |
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Chris Blundell |
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Franziska Boehnke |
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A briefing to analysts will take place at 09:30 on Monday 23 November 2009 at Brunswick, 16 Lincoln's Inn Fields, London, WC2A 3ED. A live audio feed will be available to those analysts and shareholders unable to attend this meeting in person. To access this facility, call +44 (0) 1452 568 060 and quote RM Plc.
A copy of the presentation will be available at www.rm.com from 08:30 on 23 November 2009.
Business Review Operations
FY-2009 has been a very good year for RM, marking a further major step in the Group's transformation from a domestic ICT business to an international education solutions group. We have delivered strong financial results, whilst at the same time making strategic progress. With three distinct business divisions, and an increasing international presence, we are well positioned for further growth.
A growing business
RM's results for FY-2009 show significant growth on the previous year and were ahead both of our original plan and of expectations.
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Financial highlights |
FY-2009 |
FY-2008 |
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Revenue |
£346.9m |
£289.5m |
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Adjusted* profit from operations |
£17.7m |
£14.6m |
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Adjusted* profit before tax |
£17.9m |
£16.4m |
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Profit before tax |
£16.3m |
£15.4m |
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Adjusted* earnings per share |
15.3p |
13.1p |
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Earnings per share |
14.0p |
12.3p |
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Dividend per share - proposed and paid |
6.17p |
5.81p |
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Cash |
£13.3m |
£18.3m |
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Net cash |
£5.0m |
£17.3m |
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Committed revenues |
£445m |
£410m |
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*Adjusted profit is before amortisation of acquisition related intangible assets and acquisition integration costs |
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Group revenue increased by 20% to £346.9m (2008: £289.5m), with particularly strong contributions from new school build programmes and our general education resources business, as well as the inclusion of Computrac, our US subsidiary, for the first time. Revenue from outside the UK increased by 150% to £41.5m (2008: £16.5m), representing 12% of Group sales and reflecting the Group's success in increasing the international reach of its business.
Committed revenue (order book, deferred revenue and projects at preferred/selected bidder stage) is £445m (2008: £410m). Of this, £216m falls in the current financial year and £153m is beyond two years, providing both a strong base for growth in FY-2010 and good visibility for the future.
Adjusted profit from operations increased 21% to £17.7m (2008: £14.6m). Adjusted profit before tax increased 9% to £17.9m (2008: £16.4m). After deducting amortisation of acquisition related intangible assets and acquisition integration costs, the statutory measure of profit before tax increased by 6% to £16.3m (2008: £15.4m). These increases in profit were achieved after charging restructuring costs £1m above historic run-rate and a reduction in net investment income of £1.6m.
The effective adjusted tax rate was 21.3% (2008: 26.4%). RM's tax charge benefits from enhanced tax deductions on qualifying research and development activities. In addition in FY-2009, the tax charge reflects a one-off settlement of claims for additional research and development tax credits in relation to prior years.
Adjusted earnings per share increased by 17% to 15.3p per share (2008: 13.1p per share).
At 30 September 2009 cash and cash equivalents stood at £13.3m (2008:£18.3m). Net cash stood at £5.0m (2008: £17.3m), reflecting acquisitions made in the year funded by long-term borrowings.
Dividend
The Board is recommending a 6% increase in the full-year dividend (paid and proposed) to 6.17p (2008: 5.81p), reflecting the Group's continued confidence in its future growth prospects. RM's dividend has increased or been maintained at the same level every year since the Group floated in 1994.
A broadly-based group
RM is a growing group of education businesses, operating in the UK and internationally.
We believe that RM will continue to benefit from the priority placed on education by governments across the world. The funding landscape in which the Group operates comprises a range of different purchasers, in different geographies, with independent budgets. As a consequence, we are not wholly dependent on any single budget stream, set of customers, product line, or education policy.
The majority of revenue in our UK education resources and individual schools learning technologies businesses is derived from individual schools' frontline education budgets. In England, these budgets are fixed for the government year ending April 2010 and showed real-terms growth on the previous year. Government data shows that many schools hold budget surpluses. The March 2009 Budget planned further growth in education spending for the government year ending April 2011; individual school budget allocations for this year will be set before March 2010. Beyond this, indications are that frontline school budgets will be given priority.
Growth in our BSF business is underpinned by the 14 contracts we have already won. Looking further ahead, our BSF bid pipeline is larger than it has ever been.
In our international markets, the most significant of which is the US, RM is a relatively small player and well-positioned for gaining market share. In the US, the Obama administration has prioritised education as part of the ARRA (American Reinvestment and Recovery Act) and has specifically identified technology as an area for investment. The UK is significantly ahead of the US in the deployment of interactive classroom technology and our expertise is highly valued by our US customers.
RM Learning Technologies
RM Learning Technologies provides ICT software, systems and infrastructure for education establishments. RM is the leading provider of these products and services to schools in the UK. RM USA, which now includes Computrac, has a strong regional presence in the South Eastern United States and is expanding into other areas.
Revenue in this division increased by 22% to £263.7m (2008: £216.5m), principally as a result of BSF contracts in delivery and the first-time inclusion of Computrac. BSF revenue in the year was £34.0m (2008: £9.0m); Computrac, which we acquired in November 2008, contributed £21.6m. Business from individual schools in the UK was broadly flat year-on-year.
RM's range of classroom ICT infrastructure products remains unrivalled. We are also maintaining a very high standard of delivery. Two of our managed ICT service contracts - in Dudley and South Lanarkshire - were extended during the year; subsequent to year-end, the Scottish Government renewed our contract to provide Glow, a national learning platform, for a further two years. These contract extensions demonstrate the high level of service we offer our customers.
In the US, the acquisition of Computrac has provided us with significantly increased scale. Revenue from Computrac in the eleven months it contributed in FY-2009 was £21.6m (year to July 2008: £18.0m). We anticipate further revenue growth in FY-2010 as a result of increased demand for interactive classroom technology. We are also beginning to see interest in the Group's Kaleidos learning platform in a number of US school districts.
Our very strong BSF position is a major asset to the Group, providing excellent earnings visibility and a substantial opportunity to supply further products and services to the schools we are working with. RM is the clear ICT market leader in BSF and, across the life of the programme, we aim to increase our share of the English secondary school market. We have been selected as ICT supplier for 14 of the 37 projects that have been awarded and, so far, we have delivered 41 of the 134 schools in these projects. The balance will be delivered over the next five years. Multi-year managed service delivery commences after initial delivery.
RM Education Resources
RM Education Resources provides a very wide range of products used by teachers to help them deliver good lessons. The product range includes general non-ICT resources, special educational needs resources and curriculum software. We choose to focus on products that provide a high level of educational value and a large proportion of what we provide is unique to the RM Group.
Revenue in this division increased by 19% to £63.9m (2008: £53.6m). This performance masks a very strong performance from general resources, offset by a further decrease in UK curriculum software. General resources revenue increased by 31%, with organic growth of 25%, reflecting both market share gain and the acquisitions of Isis Concepts and Pisces Art during the year. Conversely, UK curriculum software, which has been a difficult market for a number of years, contributed £9.4m (2008: £13.1m). We have significantly reduced operating costs in Lightbox, our UK curriculum software business.
RM Education Resources' revenues primarily come from frontline education budgets. Since we established our education resources business in 2004, growth has been driven by a combination of acquisition and market share gain. We will continue with this strategy, further broadening our product range and providing an increasing number of superior solutions which teachers value.
RM Assessment and Data Services
RM Assessment and Data provides outsourced "back-office" services to qualification providers and government departments & agencies. RM has pioneered the development of on-screen marking and on-screen testing solutions, and also has extensive expertise and experience in providing management information to policy makers and school leaders.
Revenue in this division was flat at £19.3m, reflecting the end of a large contract in FY-2008 offset by growing business with our key strategic customers.
FY-2009 was a successful period for customer acquisition. In April 2009, we signed a memorandum of understanding with the International Baccalaureate Organisation (IB), a rapidly growing international provider of end-of-school qualifications. In June 2009 we signed a £9m contract with ACCA (the Association of Chartered Certified Accountants), under which we will provide on-screen marking services. This relationship demonstrates the ability of our innovative assessment systems to reach customers outside of the school-age education market.
Committed revenue for this division exceeds total revenue for FY-2009, demonstrating the long-term visibility in this business area.
Cost management
We have continued to focus on ensuring that our cost base is appropriate for the market conditions we anticipate.
Restructuring costs in RM Learning Technologies and RM Education Resources in the year were £1m more than the historic run-rate. Since year-end, we have undertaken further restructuring. We are also rationalising our property portfolio, bringing together Group companies into a smaller number of buildings.
We are also focusing more of our development, support and Group services activities in India. Headcount in India is now 270 and we have opened a second office to allow for further expansion.
Prospects
RM remains a seasonal business, with the majority of revenues and an even greater proportion of profit occurring in the second half of the year. As always, at this time of year, it is difficult to give a meaningful view of the outlook for FY-2010.
Our investment in the BSF programme is now beginning to mature. FY-2010 will see further significant growth in BSF revenue, as we deliver 70% more schools than the 28 we delivered in FY-2009, and we anticipate that BSF will make a net contribution to profit in the year. Our international business has gained scale through the acquisition and successful integration of Computrac. Our education resource business is well-positioned for further market share gain.
The characteristics of the Group are very different from five years ago. We have moved from a largely domestically-focused IT business, to a broadly-based international education group. In the UK, each of our three divisions targets different strands of the overall education budget. Outside the UK, we are a relatively small and agile supplier, with highly relevant experience and world-class solutions. We believe the diverse nature of our business provides both opportunities for future growth and a high level of resilience.
Education remains an important priority for education policy makers across the globe. RM is one of the world's leading education solution businesses and we see growth opportunities ahead for all of our activities.
Business Review Finance
Revenue and profits
Group revenue increased by £57.4m (20%) to £346.9m (2008: £289.5m). Organic growth contributed £30.8m, and acquisitions (in the year and the full-year impact of previous year's acquisitions) contributed £26.6m.
Revenue growth in FY-2009 came from the Group's RM Learning Technologies and RM Education Resources divisions.
International revenues increased by 150% to £41.5m (2008: £16.5m) and now represent 12% of total Group revenue. RM Learning Technologies international revenue is £30.7m (largely from US and Australasia); RM Education Resources international revenue is £10.8m (largely from Europe).
Our preferred measure of profit is adjusted to exclude both amortisation of acquisition related intangible assets (as in prior years) and, for FY-2009, acquisition integration costs of £89,000 relating to the closure of one of Pisces Art's distribution centres.
Adjusted profit from operations increased by 21% to £17.7m (2008: £14.6m), after charging restructuring costs £1m above historic run rate in the year. Net investment income was £0.2m (2008: £1.8m). This reduction of £1.6m is as a result of a £1.0m reduction in pension finance income and a £0.6m increase in interest expense reflecting interest on acquisition borrowings. Adjusted profit before tax increased to £17.9m (2008: £16.4m).
The statutory measure of profit before tax increased to £16.3m (2008: £15.4m).
The Operations Review provides information about performance in each of the Group's three operating divisions. The charts below provide a revenue and divisional profit breakdown for these three divisions for FY-2009 and FY-2008.
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FY-2009 £m |
RM Learning Technologies (inc. US) |
RM Education Resources (inc. UK curriculum software) |
RM Assessment and Data Services |
Total |
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Revenue |
263.7 |
63.9 |
19.3 |
346.9 |
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Divisional profit before BSF net expenditure |
12.8 |
6.3 |
2.1 |
21.2 |
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BSF net expenditure |
(2.6) |
- |
- |
(2.6) |
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Divisional profit |
10.2 |
6.3 |
2.1 |
18.6 |
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Net interest expense |
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(0.7) |
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Adjusted profit before tax |
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17.9 |
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FY-2008 £m |
RM Learning Technologies (inc. US) |
RM Education Resources (inc. UK curriculum software) |
RM Assessment and Data Services |
Total |
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Revenue |
216.5 |
53.6 |
19.4 |
289.5 |
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Divisional profit before BSF net expenditure |
11.3 |
6.4 |
2.1 |
19.8 |
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BSF net expenditure |
(4.4) |
- |
- |
(4.4) |
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Divisional profit |
6.9 |
6.4 |
2.1 |
15.4 |
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Net interest income |
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1.0 |
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Adjusted profit before tax |
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16.4 |
We have restated 2008 to reflect the inclusion our US operation in RM Learning Technologies, the inclusion of pension finance income in net interest income and to present a BSF net expenditure figure which is net of the contribution from projects in delivery.
RM Learning Technologies revenue increased by £47.2m (22%) to £263.7m (2008: £216.5m). Revenue from BSF contracts in delivery was up £25m to £34m (2008: £9m). Revenue from the Group's US operations increased by £22.3m to £25.3m (2008: £3.0m), reflecting the acquisition of Computrac, its successful integration and the success of the Group's combined US operation.
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BSF £m |
FY-2009 |
FY-2008 |
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Revenue |
34.0 |
9.0 |
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Operating profit from projects in delivery |
1.3 |
0.3 |
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Operating margin |
3.8% |
3.7% |
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Bid costs expensed |
(3.9) |
(4.7) |
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BSF net expenditure |
(2.6) |
(4.4) |
The net expenditure on BSF was £2.6m in 2009, a £1.8m reduction in comparison to £4.4m a year earlier. There was a £1.3m contribution from BSF contracts in delivery in 2009 compared to £0.3m in 2008. These low initial margins reflect a prudent approach to early profit recognition on long term contracts. We continue to expense all bid costs prior to selected bidder. The more selective approach towards bidding for BSF projects that we adopted in the year and increased contributions from construction partners led to expensed bid costs of £3.9m compared to £4.7m a year ago.
RM Learning Technologies divisional profit before net BSF expenditure increased to £12.8m (2008: £11.3m); profit after net BSF expenditure increased to £10.2m (2008: £6.9m). We anticipate that profit recognised on BSF contracts in delivery will exceed expenditure during the year from FY-2010.
RM Education Resources revenue increased by £10.3m (19%) to £63.9m (2008: £53.6m). There was a very strong performance in general curriculum resources, where revenues increased by £14m (34%). This was offset by a further decline in UK curriculum software of £3.7m. Divisional profit decreased slightly to £6.3m (2008: £6.4m). The increase from general education resources balanced the significant decrease in the contribution from high margin UK curriculum software and restructuring costs in this area.
Restructuring charges
Restructuring charges, relating to reductions in headcount in Lightbox (the Group's UK curriculum software business) and in RM Learning Technologies, and property rationalisation, were at least £1m more than historic run-rate. All restructuring costs have been expensed through adjusted profit.
This restructuring will result in annualised cost savings of over £2.5m and was necessary both to align the cost base in these divisions with available revenues, and to ensure that RM is well-positioned for future conditions. Further restructuring has taken place since year end.
Profit margin
Adjusted operating profit margin as a percentage of total revenue increased to 5.1% from 5.0% and divisional profit margin increased by a similar amount to 5.4% from 5.3%.
Working capital
The year-on-year increase in net current assets, excluding cash and deferred acquisition consideration, was £16.8m. £2.9m of this was a result of acquisitions in the year. The balance of the increase reflects the 20% growth in revenue in the year, with particular increases in BSF and Education Resources.
BSF contracts in delivery accounted for £6.5m of the working capital increase; total working capital invested in BSF contracts was £17.6m at the year end. There is a build up of long term contract balances in each BSF project prior to delivery, with a significant peak around each school opening. Typical invoicing terms for new BSF schools are 70% on issue of acceptance certificate, 25% two months later, and 5% on completion of a group of schools, with payment 30 days later. RM opened 16 BSF schools in summer 2009 and significant balances relating to these schools which were outstanding at the year end have now been collected.
RM Education Resources has a greater working capital requirement than the Group's ICT businesses because of lower inventory turnovers, and the absence of the deferred income balances that benefit the UK learning technologies businesses and which arise from invoicing for contracted services in advance. We have invested in additional inventory in TTS in particular to ensure that we continue to offer good customer service as the business grows.
Balance sheet
The net cost of acquisitions during the year was £10.0m.
Net capital expenditure decreased to £8.2m (2008: £10.5m). Expenditure on refreshing computer equipment in the Group's PFI projects was £3.1m.
Cash
Cash and cash equivalents at 30 September stood at £13.3m (2008: £18.3m). After deducting borrowings under the acquisition facility of £8.3m (2008: £1.0m), net cash was £5.0m (2008: £17.3m). Net funds less deferred consideration at year end were £(0.7)m (2008: £12.4m).
The movement of cash and net funds, less deferred consideration across the year is analysed in the table below.
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Cash and net funds £m |
30 Sep 2008 |
Acquisitions |
BSF working capital |
Other |
30 Sep 2009 |
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Cash & cash equivalents |
18.3 |
(0.5) |
(6.5) |
2.0 |
13.3 |
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Long-term borrowings |
(1.0) |
(7.4) |
- |
0.1 |
(8.3) |
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Net cash |
17.3 |
(7.9) |
(6.5) |
2.1 |
5.0 |
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Issued loan notes |
(4.5) |
- |
- |
0.9 |
(3.6) |
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Net funds |
12.8 |
(7.9) |
(6.5) |
3.0 |
1.4 |
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Deferred cash consideration |
(0.4) |
(2.1) |
- |
0.4 |
(2.1) |
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Net funds less deferred consideration |
12.4 |
(10.0) |
(6.5) |
3.4 |
(0.7) |
The seasonal nature of the Group's business, with high demand for products and services during the summer months, results in a peak in working capital during the summer. The average cash balance, before acquisition related borrowings, during the year was £4.6m (2008: £7.0m); peak borrowing in early September was £19.3m.
Bank facilities
The Group has in place facilities to manage its cash requirements.
A £25m facility with HSBC, committed to 2013, provides flexibility and finance for acquisitions. At year end £8.3m (2008: £1.0m) was drawn on this facility, following the acquisitions of Computrac and Isis Concepts. The covenants on this facility require the net debt to be less than 2.5xEBITDA and the net facility interest to be less than EBITDA/4.
The Group's annual facilities to fund seasonal working capital requirements have been increased to £38m and are agreed for FY-2010.
Tax
The Group's tax charge, measured as a percentage of adjusted profit, was 21.3% (2008: 26.4%). RM's tax rate has been below the standard UK corporation tax rate for a number of years due the benefit the Group gains from enhanced tax deductions on qualifying research & development activities. In addition, in FY-2009, the tax charge benefited from a one-off settlement of claims for additional research and development tax credits in relation to prior years; without this, the tax rate would have been approximately 25%.
In total, RM paid and collected tax on behalf of HMRC amounting to £51.3m (2008: £50.4m). This includes corporation tax of £2.9m (2008: £3.1m), employment taxes of £27.4m (2008: £25.9m) and VAT of £21.0m (2008: £21.4m).
Treasury
The Board approves significant treasury transactions and reviews treasury policy on a regular basis. The treasury activities are controlled and monitored by the Group Finance Director and are carried out in accordance with the approved policies. Surplus cash, which is predominantly held in Sterling, is invested for appropriate periods with institutions that have a high credit rating and have been approved by the Board. The objectives of the Treasury function are largely:
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To provide protection from the effects of foreign currency volatility. The Group has exposures arising from buying products and components in US Dollars and Euros, and paying salaries in US Dollars and Indian Rupees. These exposures are effectively hedged through the use of forward foreign exchange contracts. The Group has operations in Australia, India and North America; these remain small relative to Group as a whole, so the foreign exchange risk arising on translation is also small.
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To provide the Group with cost effective and appropriate liquidity. The Group's cash funds vary throughout the year due to the seasonality of the business and its aim is to maximise returns from surplus cash through very low risk investments with defined institutions. Treasury also works with banks to ensure that cost effective committed borrowing facilities are available to meet any forecast funding requirements that arise from our seasonal trading pattern.
Pensions
The Group has a defined benefit pension scheme which has been closed to new entrants since January 2003. The IAS19 deficit on this scheme at September 2009 increased to £12.8m (September 2008: £0.6m). This increase can all be attributed to market related movements which totalled £13.5m. The liabilities of the scheme increased by £18.0m as a result of a change in assumptions, principally a decrease in the market derived discount rate used to value them to 5.6% (2008: 6.7%); this was partially offset by asset returns which were £4.5m more than expected.
|
DB pension £m |
30 Sep 2009 |
30 Sep 2008 |
|
Assets |
89.9 |
76.2 |
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Liabilities |
(102.7) |
(76.8) |
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Deficit |
(12.8) |
(0.6) |
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Deferred tax asset |
3.6 |
0.2 |
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Deficit post-tax |
(9.2) |
(0.4) |
The continuation of funding payments agreed after the last triennial valuation resulted in the Group making a cash contribution in excess of service charge in the year of £2.8m. Employee contributions to the scheme, made by salary sacrifice, were increased by a further 1% in FY-2009.
Defined benefit pension scheme valuations are volatile. The table below provides an analysis of the sensitivity of the Group's scheme to changes in certain key assumptions.
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Sensitivity analysis |
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Current assumption |
Change in assumption |
Increase/(decrease) in deficit |
|
5.6% |
0.1% increase in discount rate |
£(2.5)m |
|
3.0% |
0.1% increase in inflation |
£1.9m |
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PA92 Medium Cohort |
1 year increase in life expectancy |
£1.5m |
Acquisitions
On 3 November 2008, the Group acquired Computrac LLC for a net cost of up to $8.1m (c.£5.0m). Computrac provides interactive whole-class teaching technology solutions to schools in the South Eastern United States.
On 14 May 2009, the Group acquired Pars Commercial Holdings Ltd, the holding company which owned ISIS Concepts, for a total net cost of up to £2.6m. ISIS Concepts provides design-led learning spaces and furniture for educational establishments.
Shareholder return
RM's adjusted EPS has increased from 3.8p in 2002 to 15.3p, and the Group's dividend has increased or remained at the same level every year since the Group floated.
Total dividend for 2009 (paid and proposed) will increase by 6% to 6.17p (2008: 5.81p); this comprises the already paid interim dividend per share of 1.32p, and a proposed final dividend per share of 4.85p payable on 5 February 2010. The estimated total cost of dividends paid and proposed for 2009 is £5.7m; dividend yield for the year is 3.9%, based on the share price at the end of the year.
The dividend payments in relation to the last five years total 27.5p per share, with a total cash cost of £25.3m.
The Group's share price at close of business on 30 September 2009 was 157.5p (28 September 2008: 168.0p); market capitalisation at the same date was £146.7m.
Statement of risks
The most significant risks the Group is exposed to are set out below. In the interests of transparency, the statement of risks given here contains a high level of detail in order to give a thorough analysis of the principal risks the Group is exposed to and to describe the approach it takes to mitigate them.
Public policy
The majority of RM's business is ultimately funded from UK government sources. A change in political administration - or a change in the policy priorities of the current administration - might result in a reduction in education spending or reduced commitment to ICT within education spending. Global economic conditions might result in a reduction in budgets available for public spending generally and education spending specifically. The Government is seeking to improve efficiency in public purchasing and the delivery of public services - this might result in changes to the kinds of products education customers purchase or the procurement methods they adopt (for example, aggregated or centralised purchasing may become more common).
The Group seeks to understand the education policy environment through regular monitoring of the policy positions of the major political parties and through building relationships with education policy makers. The Group has also developed a broad and diverse product portfolio, which provides access to more of the education budget; and is seeking to exploit its products and intellectual property in territories other than the UK.
Market
RM operates in a highly competitive market. Increased market competition - from major multinational ICT suppliers or smaller education specialists - might reduce the margin potential of the market or erode RM's market share. Against a background of difficult global economic conditions, companies not currently active in the education market might move their focus into this area.
The commodity hardware market is subject to intense global competition. RM has to react to continual average selling price reductions and margin pressures, as well as to US Dollar rate fluctuations, which might result in part of the Group's operations becoming unprofitable.
Educational practices may change and, as a result, RM's products and services might no longer meet customer requirements.
The Group seeks to mitigate these general market risks by maintaining a broad and diverse product and service range, by seeking new markets in territories other than the UK, and by investing to enhance the educational value of its products and services.
Technology
The ICT market is subject to rapid, and often unpredictable, change. As a result of inappropriate technology choices, the Group's products and services might become unattractive to its chosen customer base.
The Group provides sophisticated products and services, which require a high level of technical expertise to develop and support, and on which its customers place a high level of reliance. A product failure, or a product which requires a disproportionate amount of support, might result in significant damage to the Group's reputation or high remedial costs.
The Group closely monitors technology developments, invests continually in keeping its products up to date, undertakes extensive testing for new products and services, and maintains strong relationships with key technology providers.
BSF
The BSF initiative might result in a fundamental shift in the way secondary schools procure products and services. The Group has invested significantly in preparing bids for BSF and continues to do so. If funding for this programme were to slow down or stop, then some of this investment might be wasted. The Group closely monitors the activities of education policy makers and regular reviews its BSF strategy in the light of policy changes.
A substantial proportion of BSF bids are likely to require RM to work as part of a wider consortium. This means that the Group might invest in preparing and bidding for the ICT element of a BSF contract, but not be successful despite having the best ICT solution. The Group has in put in place stringent criteria for identifying consortium partners and, where possible, seeks to contribute to the effectiveness of the overall bid as well as to the ICT elements.
Some of the contract terms for BSF projects set high standards of performance and high limits of liability. The Group's success in winning these contracts means that cumulatively the potential financial liability is significant. This position is mitigated by the Group's substantial experience of delivering large and complex ICT projects in education environments, and by ensuring that reasonable acceptance tests are in place so that we have a high degree of confidence in delivery.
Execution risk
RM's business is more complex than that of most companies of a similar size - this adds to execution risk (though also offers some strategic advantage). Failing to achieve acceptable levels of customer satisfaction, which includes ensuring that its trading ethics are of the highest standards, might significantly damage the Group's reputation, reducing the likelihood of existing customers continuing to buy from the Group.
The Group has in place a customer satisfaction programme, which provides an externally reviewed customer satisfaction score, and management processes designed to address any causes of customer dissatisfaction.
Education projects
RM bids for high value, multi-year education projects, typically involving the development and integration of complex ICT systems. These projects always carry risk and ultimately one may not go according to plan - this might result in RM being committed to a project that does not achieve acceptable financial returns or that exposes the Group to contract termination or financial penalties.
The Group has a well-developed approach to bidding for large projects and no project is entered into without approval by the Board's Transactions Committee. Strong internal management control processes are in place to govern the delivery of education projects, including regular reviews by the Executive Committee and detailed progress reporting to the Board.
People
RM's business depends on highly skilled employees; the Group might not be able to recruit the employees required to achieve its development plans. The Group seeks to be an excellent employer and has been identified as one of the UK's Top Employers and as the UK's Top IT Employers.
Education resources - physical resources
RM is increasingly involved in the supply of physical education resources that will be to be used by children of all ages and abilities. In particular, the rapid growth in our Education Resources division, including recent acquisitions has dramatically increased the number of physical products we are shipping.
Data
RM is engaged in storing and processing sensitive educational data (for example, exam papers and scripts, and school and pupil records), where accuracy, privacy and security are very important. The Group's IS function has invested in developing secure Data Centres, and has been successfully certified to ISO/IEC 27001:2005 for the provision of systems, information and hosting services to RM Education plc.
Acquisitions
RM has made and may make further acquisitions. These acquisitions reduce RM's exposure to any single product or market area; however, it is possible that one of them might not make its expected financial contribution to the Group.
The Group carries out a rigorous analysis of all potential acquisitions. Subsequent to acquisition, the business performance of new subsidiary companies is reviewed quarterly by the Executive Committee, and the Group's internal audit function carries out regular reviews to ensure that appropriate controls and management structures are in place.
Financial
RM has introduced procedures to ensure that it is not exposed to bad debt and that its cash reserves are with safe and secure banks. The Group has an exceptionally good record in relation to bad debts because of the good credit standing of most of its customers. Where the Group deals with customers who are not public bodies and those customers constitute significant business, appropriate credit checks are performed and limits are put in place.
In accordance with the recommendations of the Board, no more than one-third of the Group's cash may be held with any one bank.
The Group enters into US Dollar-denominated hedging contracts with approved banking organisations that mitigate transactional dollar exposure. Asset investments in foreign subsidiaries are regularly reviewed, with surplus cash being repatriated to the UK.
Business Recovery
The Group would be significantly impacted if, as a result of a natural disaster, act of God, act of terrorism or other similar event, its buildings, systems and infrastructure could not function for a long period. An RM Group Information Security Committee has been established to oversee the security aspects of the Group's information systems. This covers data integrity and protection, defence against external threats and disaster recovery. The Group has made significant investments in protecting itself against the consequences of a disaster and has piloted its plans for dealing with a disaster.
The Group has comprehensive property insurance covering all of its properties.
Pension
RM operates a defined benefits pension scheme that is closed to new entrants. The deficit calculation is very sensitive to the assumptions used in calculating the present value of future liabilities and returns, owing to the long duration of liabilities.
The financial position of the scheme is reviewed at least bi-annually, when management meet with the scheme actuary. Management actively keep up to date with market practice and developments and provide frequent updates to the Board. The Group appoints two representatives to serve as Trustees of the scheme.
Statement of Directors' responsibilities
The responsibility statement below has been prepared in connection with the Company's full Annual Report for the year to 30 September 2009. Certain parts thereof are not included within this announcement.
We confirm to the best of our knowledge:
-
The financial statements, prepared in accordance with IFRS as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and income of the Company and the undertakings included in the consolidation taken as a whole.
-
The management report, which is incorporated into the Directors' report, includes a fair review of the development and performance of the business and the position of the Company and undertakings included in the consolidation as a whole, together with a description of the principal risks and uncertainties they face.
The responsibility statement was approved by the Board of Directors on 23 November 2009 and is signed on its behalf by:
T. Sweeney M.D. Greig
Chief Executive Group Finance Director
Consolidated income statement
for the year ended 30 September 2009
|
|
|
|
|
|
|
|
|
|
|
Notes |
Adjusted £'000 |
Adjustments £'000 |
2009 Total £000 |
Adjusted £000 |
Adjustments £000 |
2008 Total £000 |
|
Revenue |
|
346,917 |
- |
346,917 |
289,473 |
- |
289,473 |
|
Cost of sales |
|
(255,680) |
- |
(255,680) |
(211,713) |
- |
(211,713) |
|
Gross profit |
|
91,237 |
- |
91,237 |
77,760 |
- |
77,760 |
|
Selling and distribution costs |
|
(39,839) |
- |
(39,839) |
(35,131) |
- |
(35,131) |
|
Research and development expenses |
|
(13,731) |
- |
(13,731) |
(13,180) |
- |
(13,180) |
|
Administrative expenses |
|
(20,024) |
(1,483) |
(21,507) |
(14,813) |
(1,026) |
(15,839) |
|
- Acquisition integration costs |
|
- |
(89) |
(89) |
- |
- |
- |
|
Share of results of associates |
|
22 |
(19) |
3 |
(36) |
(14) |
(50) |
|
|
|
(73,572) |
(1,591) |
(75,163) |
(63,160) |
(1,040) |
(64,200) |
|
Profit from operations |
|
17,665 |
(1,591) |
16,074 |
14,600 |
(1,040) |
13,560 |
|
Investment income |
3 |
1,192 |
- |
1,192 |
1,994 |
- |
1,994 |
|
Finance costs |
4 |
(947) |
- |
(947) |
(167) |
- |
(167) |
|
Profit before tax |
|
17,910 |
(1,591) |
16,319 |
16,427 |
(1,040) |
15,387 |
|
Tax |
5 |
(3,809) |
448 |
(3,361) |
(4,331) |
270 |
(4,061) |
|
Profit for the year attributable to equity holders of the parent |
|
14,101 |
(1,143) |
12,958 |
12,096 |
(770) |
11,326 |
|
|
|
|
|
|
|
|
|
|
Earnings per ordinary share: |
6 |
|
|
|
|
|
|
|
Basic |
|
15.3p |
(1.3)p |
14.0p |
13.1p |
(0.8)p |
12.3p |
|
Diluted |
|
15.2p |
(1.2)p |
14.0p |
13.0p |
(0.8)p |
12.2p |
|
|
|
|
|
|
|
|
|
|
Paid and proposed dividends per share: |
7 |
|
|
|
|
|
|
|
Interim |
|
|
|
1.32p |
|
|
1.26p |
|
Final |
|
|
|
4.85p |
|
|
4.55p |
|
|
|
|
|
|
|
|
|
Adjustments relate to amortisation of acquisition related intangible assets and for 2009 acquisition integration costs of £89,000.
Consolidated statement of recognised income and expense
for the year ended 30 September 2009
|
|
Notes |
2009 £000 |
2008 £000 |
|
Exchange gains/(losses) on translation of foreign operations |
|
957 |
(23) |
|
Actuarial losses on defined benefit pension scheme |
|
(14,582) |
(1,532) |
|
Fair value loss on interest rate swap |
|
(61) |
- |
|
Current tax on items taken directly to equity |
|
31 |
147 |
|
Deferred tax on items taken directly to equity |
|
3,893 |
398 |
|
Net loss recognised directly in equity |
|
(9,762) |
(1,010) |
|
Profit for the year |
|
12,958 |
11,326 |
|
Total recognised income and expense for the year attributable to equity holders of the parent |
|
3,196 |
10,316 |
Total tax credited to equity was £3,924,000 (2008: credit of £545,000).
Consolidated balance sheet
as at 30 September 2009
|
|
Notes |
2009 £000 |
2008 £000 |
|
Non-current assets |
|
|
|
|
Goodwill |
|
33,818 |
29,662 |
|
Acquisition related intangible assets |
|
4,981 |
4,941 |
|
Other intangible assets |
|
2,654 |
2,242 |
|
Property, plant and equipment |
|
21,321 |
19,882 |
|
Interest in associates |
|
967 |
964 |
|
Deferred tax assets |
|
5,227 |
1,532 |
|
|
|
68,968 |
59,223 |
|
Current assets |
|
|
|
|
Inventories |
|
19,905 |
18,254 |
|
Trade and other receivables |
8 |
86,164 |
70,303 |
|
Cash and cash equivalents |
|
13,297 |
18,291 |
|
|
|
119,366 |
106,848 |
|
|
|
|
|
|
Non-current assets held for sale |
|
- |
2,580 |
|
Total assets |
|
188,334 |
168,651 |
|
|
|
|
|
|
Current liabilities |
|
|
|
|
Trade and other payables |
9 |
(96,829) |
(93,200) |
|
Tax liabilities |
9 |
(1,320) |
(920) |
|
|
|
(98,149) |
(94,120) |
|
|
|
|
|
|
Net current assets |
|
21,217 |
12,728 |
|
|
|
|
|
|
Non-current liabilities |
|
|
|
|
Retirement benefit obligation |
|
(12,786) |
(561) |
|
Bank loans |
|
(8,281) |
(1,000) |
|
Deferred tax liabilities |
|
(51) |
(83) |
|
Other payables |
|
(7,654) |
(9,112) |
|
Provisions |
|
(589) |
(488) |
|
|
|
(29,361) |
(11,244) |
|
|
|
|
|
|
Total liabilities |
|
(127,510) |
(105,364) |
|
|
|
|
|
|
Net assets |
|
60,824 |
63,287 |
|
|
|
|
|
|
Equity attributable to equity holders of the parent |
|
|
|
|
Share capital |
|
1,863 |
1,863 |
|
Share premium account |
|
26,725 |
26,578 |
|
Own shares |
|
(1,246) |
(1,323) |
|
Capital redemption reserve |
|
94 |
94 |
|
Hedging reserve |
|
(61) |
- |
|
Translation reserve |
|
1,124 |
167 |
|
Retained earnings |
|
32,325 |
35,908 |
|
Total equity |
10 |
60,824 |
63,287 |
Consolidated cash flow statement
for the year ended 30 September 2009
|
|
Notes |
2009 £000 |
2008 £000 |
|
Profit from operations |
|
16,074 |
13,560 |
|
Adjustments for: |
|
|
|
|
Gain on foreign exchange derivatives |
|
(160) |
(653) |
|
Amortisation of acquisition related intangible assets |
|
1,511 |
1,040 |
|
Amortisation of other intangible assets |
|
914 |
912 |
|
Depreciation of property, plant and equipment |
|
8,331 |
8,869 |
|
Gain on disposal of property, plant and equipment |
|
(499) |
(300) |
|
Loss on disposal of other intangible assets |
|
123 |
- |
|
Increase in provisions |
|
61 |
- |
|
Share-based payment charge |
|
1,021 |
600 |
|
Operating cash flows before movements in working capital |
|
27,376 |
24,028 |
|
Decrease/(increase) in inventories |
|
1,129 |
(3,813) |
|
Increase in receivables |
|
(12,814) |
(9,736) |
|
(Decrease)/increase in payables |
|
(798) |
4,965 |
|
Cash generated by operations |
|
14,893 |
15,444 |
|
Defined benefit pension contribution in excess of current service cost |
|
(2,773) |
(3,627) |
|
Tax paid |
|
(3,272) |
(3,103) |
|
Income on sale of finance lease debt |
|
622 |
651 |
|
Interest paid: |
|
|
|
|
- bank overdrafts and loans |
|
(464) |
(155) |
|
- other |
|
(67) |
(12) |
|
Net cash inflow from operating activities |
|
8,939 |
9,198 |
|
|
|
|
|
|
Investing activities |
|
|
|
|
Interest received |
|
226 |
521 |
|
Proceeds on disposal of property, plant and equipment |
|
949 |
663 |
|
Purchases of property, plant and equipment |
|
(7,737) |
(10,458) |
|
Purchases of other intangible assets |
|
(1,398) |
(691) |
|
Acquisition of investment in associate |
|
- |
(1,014) |
|
Acquisition of subsidiaries and business combinations, net of cash acquired |
|
(3,418) |
(3,999) |
|
Net cash used in investing activities |
|
(11,378) |
(14,978) |
|
|
|
|
|
|
Financing activities |
|
|
|
|
Dividends paid |
|
(5,425) |
(5,126) |
|
Proceeds from share capital issue, net of share issue costs |
|
91 |
460 |
|
Repayment of borrowings assumed in acquisitions |
|
(2,477) |
(554) |
|
Increase in borrowings |
|
7,419 |
1,000 |
|
Purchase of own shares |
|
(1,347) |
(874) |
|
Repayment of loan notes and deferred consideration |
|
(1,059) |
(246) |
|
Net cash used in financing activities |
|
(2,798) |
(5,340) |
|
|
|
|
|
|
Net decrease in cash and cash equivalents |
|
(5,237) |
(11,120) |
|
|
|
|
|
|
Cash and cash equivalents at the beginning of year |
|
18,291 |
29,321 |
|
Effect of foreign exchange rate changes |
|
243 |
90 |
|
Cash and cash equivalents at the end of year |
|
13,297 |
18,291 |
Group net funds
for the year ended 30 September 2009
|
|
2008 £000 |
Cash flow £000 |
Non-cash movements |
2009 £000 |
|
|
|
Foreign exchange £000 |
Other £000 |
|||
|
Cash and cash equivalents |
18,291 |
(5,237) |
243 |
- |
13,297 |
|
Borrowings |
(1,000) |
(7,419) |
138 |
- |
(8,281) |
|
Net cash |
17,291 |
(12,656) |
381 |
- |
5,016 |
|
Loan notes |
(4,464) |
681 |
- |
177 |
(3,606) |
|
Net funds |
12,827 |
(11,975) |
381 |
177 |
1,410 |
|
Deferred consideration |
(440) |
378 |
44 |
(2,102) |
(2,120) |
|
|
12,387 |
(11,597) |
425 |
(1,925) |
(710) |
Notes to the report and accounts
1. Preliminary announcement
The preliminary results for the year to 30 September 2009 have been prepared in accordance with the accounting principles of International Financial Reporting Standards (IFRS) as adopted by the European Union and applied in accordance with the Companies Act 2006. However, this announcement does not contain sufficient information to comply with IFRS. The Group expects to publish full financial statements which will be delivered before the Company's Annual General Meeting in January 2010. These full financial statements will be published on the Group's web-site at www.rm.com/investors
The financial information set out in the preliminary announcement does not constitute the Group's statutory accounts for the years ended 30 September 2009 or 2008. Statutory accounts for 2008 have been delivered to the Registrar of Companies and those for 2009 will be delivered following the Company's Annual General Meeting. The auditor's reports on both the 2009 and 2008 accounts were unqualified, did not draw attention any matters by way of emphasis and did not contain statements under s498(2) or (3) of the Companies Act 2006 or equivalent preceding legislation.
This Preliminary Announcement was approved by the Board of Directors on 23 November 2009.
Income statement presentation
The income statement for the year ended 30 September 2009 has been presented in three columns. This presentation is intended to give a better guide to business performance by separately identifying the amortisation charge relating to acquisition related intangible assets and for 2009, acquisition integration costs. The columns extend down the income statement to allow the tax and earnings per share impacts of these transactions to be understood.
Adoption of new and revised International Financial Reporting Standards
The Group has adopted no new standards in the current financial year, following the prior year early adoption of IFRS 8 Operating Segments.
Basis of preparation
The financial statements have been prepared on the historical cost basis except for certain financial instruments, share-based payments and pension assets and liabilities which are measured at fair value. The preparation of financial statements, in conformity with generally accepted accounting principles, requires the use of 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 revenues and expenses during the reporting period. Although these estimates are based on the directors' best knowledge of current events and actions, actual results ultimately may differ from those estimates.
The Directors have assessed forecast future cash flows over the coming year and are satisfied that the Group's agreed working capital facilities are sufficient to meet these cash flows. Given the Group's continued seasonality and Building Schools for the Future contractual commitments, cash flows are forecast to be at their highest outflow between July and September.
Considering the above, the Directors believe that the Group is well placed to manage its business risks successfully despite the current uncertain economic outlook and have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the annual financial statements.
2. Operating segments
The Group's business is supplying products and services to education. The Group's operating divisions are Learning Technologies which includes Education Management Systems and US operations; Education Resources; and Assessment and Data Services. These divisions are the basis on which the group reports its primary segment information. Results of international operations are included below on the basis of the nature of the products and services provided. IFRS 8 was early adopted in the year ended 30 September 2008.
The following disclosure shows the result and total assets of these divisions, with the result being shown before Building Schools for the Future (BSF) net expenditure:
Divisional result
|
|
Learning Technologies (inc US) £000 |
Education Resources (and UK Curriculum software) £000 |
Assessment and Data Services £000 |
Total £000 |
|
2009 Revenue |
263,699 |
63,881 |
19,337 |
346,917 |
|
Divisional profit before BSF net expenditure |
12,751 |
6,280 |
2,166 |
21,197 |
|
BSF net expenditure |
(2,567) |
- |
- |
(2,567) |
|
Divisional profit |
10,184 |
6,280 |
2,166 |
18,630 |
|
Net bank, loan note and pension scheme finance costs |
|
|
|
(720) |
|
Profit before tax* |
|
|
|
17,910 |
|
Amortisation of acquisition related intangible assets |
|
|
|
(1,502) |
|
Acquisition integration costs |
|
|
|
(89) |
|
Profit before tax |
|
|
|
16,319 |
|
|
|
|
|
|
|
Group profit before tax |
|
|
|
16,316 |
|
Share of associate result |
|
|
|
3 |
|
|
|
|
|
16,319 |
|
|
Learning Technologies (inc US) (Restated) £000 |
Education Resources (and UK Curriculum software) (Restated) £000 |
Assessment and Data Services £000 |
Total (Restated) £000 |
|
2008 Revenue |
216,562 |
53,564 |
19,347 |
289,473 |
|
Divisional profit before BSF net expenditure |
11,329 |
6,443 |
2,108 |
19,880 |
|
BSF net expenditure |
(4,420) |
- |
- |
(4,420) |
|
Divisional profit |
6,909 |
6,443 |
2,108 |
15,460 |
|
Net bank, loan note and pension scheme finance income |
|
|
|
967 |
|
Profit before tax* |
|
|
|
16,427 |
|
Amortisation of acquisition related intangible assets |
|
|
|
(1,040) |
|
Profit before tax |
|
|
|
15,387 |
|
|
|
|
|
|
|
Group profit before tax |
|
|
|
15,437 |
|
Share of associate result |
|
|
|
(50) |
|
|
|
|
|
15,387 |
*before amortisation of acquisition related intangible assets and 2009 acquisition integration costs.
Reflecting continuing evolution of our business, we have restated 2008 to reflect three changes: the inclusion of our US operation in RM Learning Technologies- it had previously been disclosed within Education Resources; the presentation of BSF on a net expenditure basis, net of the contribution from projects in delivery; and the inclusion of the pension scheme finance charge within net interest. These changes to divisional profit and assets are considered to better reflect the divisions' operating performance.
Divisional assets
Divisional assets include all assets except for tax balances and cash and cash equivalents which are shown as non-divisional balances:
|
|
Learning Technologies (inc US) (Restated) £000 |
Education Resources (and UK Curriculum software) (Restated) £000 |
Assessment and Data Services £000 |
Total £000 |
|
2009 Total assets - Divisional |
103,532 |
60,088 |
6,190 |
169,810 |
|
- Other |
|
|
|
18,524 |
|
|
|
|
|
188,334 |
|
2008 Total assets - Divisional |
99,212 |
42,568 |
7,048 |
148,828 |
|
- Other |
|
|
|
19,823 |
|
|
|
|
|
168,651 |
|
|
|
|
|
|
The Group's operations are predominately located in the United Kingdom, with operations also in the United States of America, India and Australia. The Group sells to the markets of these countries and also the European, North American, Asian and Australasian continents. Revenues of £41.5 million (2008:£16.5 million) were earned on non-UK sales and include RM Learning Technologies sales of £30.7 million (2008: £7.8 million) largely in the United States of America and £10.8 million (2008: £8.7 million) of RM Education Resources sales largely in Europe.
3. Investment income
|
|
2009 £000 |
2008 £000 |
|
Bank interest |
226 |
521 |
|
Income from sale of finance lease debt |
622 |
651 |
|
Net finance income on defined benefit pension scheme |
- |
613 |
|
Other finance income |
344 |
209 |
|
|
1,192 |
1,994 |
Net bank and loan note interest payable is £304,000, being £226,000 bank interest less finance costs of £531,000 (2008: £354,000 income, being £521,000 bank interest less £167,000 finance costs). After deducting pension scheme finance costs of £416,000 (2008: £613,000 income), net interest payable is £720,000 (2008: £967,000 income).
4. Finance costs
|
|
|
|
|
|
2009 £000 |
2008 £000 |
|
Interest on bank overdrafts and loan |
464 |
155 |
|
Interest on loan notes |
67 |
12 |
|
Net finance costs on defined benefit pension scheme |
416 |
- |
|
|
947 |
167 |
5. Tax
a) Income statement
Analysis of tax charged in income statement:
|
|
2009 £000 |
2008 £000 |
|
|
|
|
|
Current taxation |
|
|
|
UK corporation tax at 28% (2008: 29%) based on the profit for the year |
3,558 |
3,078 |
|
Adjustment in respect of prior years |
(995) |
(232) |
|
Overseas tax - current year |
1,111 |
171 |
|
Total current tax |
3,674 |
3,017 |
|
|
|
|
|
Deferred taxation |
|
|
|
Temporary differences |
(311) |
907 |
|
Adjustment in respect of prior years |
(2) |
137 |
|
Total deferred tax |
(313) |
1,044 |
|
|
|
|
|
Total income statement tax charge |
3,361 |
4,061 |
In addition to the amount charged to the income statement, £3,924,000 of tax has been credited to equity through the statement of recognised income and expense (2008: credit of £545,000). The credit comprises a tax charge on the equity component of share-based payments of £28,000 (2008: £74,000), a tax charge on a net investment hedge of £131,000 (2008: £nil) and a tax credit on actuarial gains and losses of £4,083,000 (2008: credit of £471,000).
Further analysis of the Group's deferred tax assets and liabilities is shown below.
b) Reconciliation to standard UK tax rate
The difference between the total tax shown above and the amount calculated by applying the standard rate of UK corporation tax to the profit on ordinary activities before tax is as follows:
|
|
2009 £000 |
2008 £000 |
|
Profit on ordinary activities before tax |
16,319 |
15,387 |
|
|
|
|
|
Tax at 28% (2008: 29%) thereon: |
4,569 |
4,462 |
|
|
|
|
|
Effects of: |
|
|
|
- other expenses not deductible for tax purposes |
296 |
37 |
|
- other temporary timing differences |
144 |
233 |
|
- research and development tax credit - current year |
(680) |
(495) |
|
- research and development tax credit - prior period adjustment |
(672) |
- |
|
- effect of overseas profits |
30 |
(81) |
|
- prior period adjustments - other |
(326) |
(95) |
|
Tax |
3,361 |
4,061 |
c) Effective tax rate
The Group's effective tax rate of 21.3% (2008: 26.4%) has been calculated excluding the impact of acquisition related intangible amortisation and the 2009 acquisition integration costs from profit before tax:
|
|
Before amortisation of acquisition related intangible assets and acquisition integration costs £000 |
Amortisation of acquisition related intangible assets and acquisition integration costs £000 |
2009 Total £000 |
Before amortisation of acquisition related intangible £000 |
Amortisation of acquisition related intangible assets £000 |
2008 Total £000 |
|
Profit before tax |
17,910 |
(1,591) |
16,319 |
16,427 |
(1,040) |
15,387 |
|
Tax charge/(credit) |
3,809 |
(448) |
3,361 |
4,331 |
(270) |
4,061 |
|
Effective rate |
21.3% |
28.2% |
20.6% |
26.4% |
26.0% |
26.4% |
The tax rate on adjusted profit for 2009 benefitted by 3.7% from finalising prior year Research and Development tax credits.
The tax credit on the amortisation of acquisition related intangible assets of £448,000 (2008: credit of £270,000) comprises a deferred tax credit of £371,000 and current tax credit of £77,000 (2008: deferred tax credit of £231,000 and current tax credit of £39,000). Deferred tax has been recognised on acquisition related intangibles at the rate applicable in the jurisdiction in which they arise. The acquisition of Computrac in the US during the year created acquisition related intangible assets on which deferred tax has been recognised at 38%. This results in the tax rate on the amortisation being higher than the standard UK rate of corporation tax of 28%.
d) Deferred tax
The following are the major deferred tax assets and liabilities recognised by the Group and movements thereon during the current and prior reporting period.
|
|
Accelerated tax depreciation £000 |
Retirement benefit obligations £000 |
Share-based payment £000 |
Short-term timing differences £000 |
Tax losses US operations £000 |
Acquisition related intangible assets £000 |
Total £000 |
|
|
|
|
|
|
|
|
|
|
At 1 October 2007 |
945 |
915 |
909 |
669 |
83 |
(917) |
2,604 |
|
(Charge)/credit to income |
184 |
(1,229) |
3 |
(150) |
(83) |
231 |
(1,044) |
|
(Charge)/credit to equity |
- |
471 |
(73) |
- |
- |
- |
398 |
|
Acquisition of subsidiaries in the year |
- |
- |
- |
93 |
- |
(811) |
718 |
|
Adjustments to provisional fair values on acquisition of subsidiaries |
- |
- |
- |
- |
- |
209 |
209 |
|
At 1 October 2008 |
1,129 |
157 |
839 |
612 |
- |
(1,288) |
1,449 |
|
(Charge)/credit to income |
142 |
(660) |
(4) |
455 |
- |
380 |
313 |
|
(Charge)/credit to equity |
- |
4,083 |
(190) |
- |
- |
- |
3,893 |
|
Acquisition of subsidiaries in the year |
- |
- |
- |
5 |
- |
(484) |
(479) |
|
At 30 September 2009 |
1,271 |
3,580 |
645 |
1,072 |
- |
(1,392) |
5,176 |
In addition to the £190,000 (2008: £73,000) deferred tax charge to equity on share based payments there is a current tax credit to equity of £31,000 (2008: £147,000) for the current tax deduction available upon the exercise of equity settled remuneration. Therefore the total charge to equity on share based payment charges included within the Statement of Recognised Income and Expense is £159,000 (2008: credit £74,000).
Certain deferred tax assets and liabilities have been offset above. The following analysis shows the deferred tax balances before offset, as shown in the balance sheet:
|
|
2009 £000 |
2008 £000 |
|
|
|
|
|
Deferred tax assets |
5,227 |
1,532 |
|
Deferred tax liabilities |
(51) |
(83) |
|
|
5,176 |
1,449 |
6. Earnings per ordinary share
The calculation of basic and diluted earnings per ordinary share is shown below: As explained in note 1, earnings per share have also been presented which remove the impact of the amortisation of acquisition related intangible assets and acquisition integration costs.
Basic earnings per ordinary share:
|
|
Profit after tax £'000 |
2009 Weighted average number of shares '000 |
Pence per share |
Profit after tax £'000 |
2008 Weighted average number of shares '000 |
Pence per share |
|
Basic earnings per ordinary share |
12,958 |
92,408 |
14.0 |
11,326 |
92,297 |
12.3 |
|
Effect of amortisation of acquisition related intangible assets and 2009 acquisition integration costs |
1,143 |
- |
1.3 |
770 |
- |
0.8 |
|
Basic earnings per ordinary share adjusted for amortisation of acquisition related intangible assets and 2009 acquisition integration costs |
14,101 |
92,408 |
15.3 |
12,096 |
92,297 |
13.1 |
Diluted earnings per ordinary share:
|
|
Profit after tax £'000 |
2009 Weighted average number of shares '000 |
Pence per share |
Profit after tax £'000 |
2008 Weighted average number of shares '000 |
Pence per share |
|
Basic earnings per ordinary share |
12,958 |
92,408 |
14.0 |
11,326 |
92,297 |
12.3 |
|
Effect of dilutive potential ordinary shares: share options |
- |
240 |
- |
- |
409 |
(0.1) |
|
Diluted earnings per ordinary share |
12,958 |
92,648 |
14.0 |
11,326 |
92,706 |
12.2 |
|
Effect of amortisation of acquisition related intangible assets and 2009 acquisition integration costs |
1,143 |
- |
1.2 |
770 |
- |
0.8 |
|
Diluted earnings per ordinary share adjusted for amortisation of acquisition related intangible assets and 2009 acquisition integration costs |
14,101 |
92,648 |
15.2 |
12,096 |
92,706 |
13.0 |
During 2009 the Group benefited from finalising claims in respect of prior year UK Research and Development tax credits. The following basic earnings per share working shows this impact:
|
|
Profit after tax £'000 |
2009 Weighted average number of shares '000 |
Pence per share |
Profit after tax £'000 |
2008 Weighted average number of shares '000 |
Pence per share |
|
Basic earnings per ordinary share |
12,958 |
92,408 |
14.0 |
11,326 |
92,297 |
12.3 |
|
Effect of prior year Research and Development tax credit benefits |
(672) |
- |
(0.7) |
- |
- |
- |
|
Basic earnings per ordinary share adjusted for effect of prior year Research and Development tax credit benefits |
12,286 |
92,408 |
13.3 |
11,326 |
92,297 |
12.3 |
|
Effect of amortisation of acquisition related intangible assets and 2009 acquisition integration costs |
1,143 |
- |
1.2 |
770 |
- |
0.8 |
|
Basic earnings per ordinary share adjusted for effect of prior year Research and Development tax credit benefits amortisation of acquisition related intangible assets and 2009 acquisition integration costs |
13,429 |
92,408 |
14.5 |
12,096 |
92,297 |
13.1 |
7. Dividends
Amounts recognised as distributions to equity holders in the year:
|
|
2009 £000 |
2008 £000 |
|
|
|
|
|
Final dividend for the year ended 30 September 2008 of 4.55p (2007: 4.30p) per share |
4,206 |
3,964 |
|
Interim dividend for the year ended 30 September 2009 of 1.32p (2008: 1.26p) per share |
1,219 |
1,162 |
|
|
5,425 |
5,126 |
The proposed final dividend of 4.85p per share was approved by the Board on 20 November 2009. The dividend is subject to approval by shareholders at the Annual General Meeting and the expected cost of £4.5 million has not been included as a liability as at 30 September 2009.
8. Trade and other receivables
|
|
|
|
|
|
2009 £000 |
2008 £000 |
|
Current |
|
|
|
Trade receivables |
64,826 |
54,423 |
|
Long-term contract balances |
13,222 |
8,036 |
|
Other receivables |
1,462 |
208 |
|
Prepayments |
5,481 |
7,200 |
|
Accrued income |
1,173 |
436 |
|
|
86,164 |
70,303 |
|
|
|
|
9. Trade and other payables
|
|
|
|
|
|
2009 £000 |
2008 £000 |
|
Current |
|
|
|
Trade payables |
27,239 |
30,173 |
|
Other taxation and social security |
10,202 |
10,408 |
|
Other payables - other |
3,158 |
692 |
|
Accruals |
29,217 |
29,054 |
|
Deferred income |
23,258 |
22,192 |
|
Loan notes |
2,220 |
681 |
|
Deferred consideration |
1,535 |
- |
|
|
96,829 |
93,200 |
|
|
|
|
|
Tax liabilities |
1,320 |
920 |
|
|
|
|
|
Non-current |
|
|
|
Deferred income: |
|
|
|
- due after one year but within two years |
3,840 |
3,392 |
|
- due after two years but within five years |
1,843 |
1,450 |
|
- due after five years |
- |
47 |
|
|
5,683 |
4,889 |
|
Other payables - deferred consideration |
585 |
440 |
|
Loan notes |
1,386 |
3,783 |
|
|
7,654 |
9,112 |
10. Reconciliation of shareholder's equity and reserves
|
|
Share capital £000 |
Share premium account £000 |
Own shares £000 |
Capital redemption reserve £000 |
Hedging Reserve £000 |
Translation reserve £000 |
Retained earnings £000 |
Total equity £000 |
|
Group |
|
|
|
|
|
|
|
|
|
At 1 October 2007 |
1,854 |
25,727 |
(998) |
94 |
- |
190 |
31,045 |
57,912 |
|
Profit for the year |
- |
- |
- |
- |
- |
- |
11,326 |
11,326 |
|
Exchange differences on translation of foreign operations |
- |
- |
- |
- |
- |
(23) |
- |
(23) |
|
Actuarial gains and losses on defined benefit scheme |
- |
- |
- |
- |
- |
- |
(1,532) |
(1,532) |
|
Tax charge on items taken directly to equity |
- |
- |
- |
- |
- |
- |
545 |
545 |
|
Purchase of shares |
- |
- |
(734) |
- |
- |
- |
- |
(734) |
|
Transfer in respect of issue of shares to employee trusts |
- |
400 |
- |
- |
- |
- |
(400) |
- |
|
Share-based payment awards exercised in year |
- |
- |
409 |
- |
- |
- |
(550) |
(141) |
|
Share-based payment fair value charges |
- |
- |
- |
- |
- |
- |
600 |
600 |
|
Dividends paid |
- |
- |
- |
- |
- |
- |
(5,126) |
(5,126) |
|
Share issues |
9 |
451 |
- |
- |
- |
- |
- |
460 |
|
At 1 October 2008 |
1,863 |
26,578 |
(1,323) |
94 |
- |
167 |
35,908 |
63,287 |
|
Profit for the year |
- |
- |
- |
- |
- |
- |
12,958 |
12,958 |
|
Exchange differences on translation of foreign operations |
- |
- |
- |
- |
- |
957 |
- |
957 |
|
Actuarial gains and losses on defined benefit scheme |
- |
- |
- |
- |
- |
- |
(14,582) |
(14,582) |
|
Fair value loss on interest rate swap |
- |
- |
- |
- |
(61) |
- |
- |
(61) |
|
Tax charge on items taken directly to equity |
- |
- |
- |
- |
- |
- |
3,924 |
3,924 |
|
Purchase of shares |
- |
- |
(1,207) |
- |
- |
- |
- |
(1,207) |
|
Transfer in respect of issue of shares to employee trusts |
- |
56 |
- |
- |
- |
- |
(56) |
- |
|
Share-based payment awards exercised in year |
- |
- |
1,284 |
- |
- |
- |
(1,423) |
(139) |
|
Share-based payment fair value charges |
- |
- |
- |
- |
- |
- |
1,021 |
1,021 |
|
Dividends paid |
- |
- |
- |
- |
- |
- |
(5,425) |
(5,425) |
|
Share issues |
- |
91 |
- |
- |
- |
- |
- |
91 |
|
At 30 September 2009 |
1,863 |
26,725 |
(1,246) |
94 |
(61) |
1,124 |
32,325 |
60,824 |
11. Acquisition of subsidiaries
Computrac
On 3 November 2008, the Group acquired 100 per cent of the membership interest in Computrac LLC, a company registered in the United States of America, for an estimated total cost of £5.0m ($8.1m). The estimated total cost comprises: initial cash consideration of £1.9m ($3.0m), deferred consideration estimated at £0.4m ($0.7m), acquisition costs of £0.2m ($0.4m) and repayment of £2.5m ($4.0m) borrowings. Computrac is a leading provider of interactive classroom technology solutions to schools in the Southeastern United States. This transaction has been accounted for by the purchase method of accounting.
|
|
Book value £000 |
Provisional fair value adjustments £000 |
Provisional fair value £000 |
|
|
|
||||
|
Net assets acquired: |
|
|
|
|
|
Acquisition related intangible assets |
- |
927 |
927 |
|
|
Property, plant and equipment |
473 |
- |
473 |
|
|
Inventory |
2,156 |
- |
2,156 |
|
|
Trade and other receivables |
1,315 |
- |
1,315 |
|
|
Trade and other payables |
(1,759) |
- |
(1,759) |
|
|
Bank loans and overdrafts |
(1,398) |
- |
(1,398) |
|
|
Finance leases |
(421) |
- |
(421) |
|
|
Deferred tax liability |
- |
(353) |
(353) |
|
|
|
366 |
574 |
940 |
|
|
Goodwill |
|
|
1,588 |
|
|
Total consideration |
|
|
2,528 |
|
|
|
|
|
|
|
|
Satisfied by: |
|
|
|
|
|
Initial cash consideration |
|
|
1,861 |
|
|
Deferred consideration |
|
|
434 |
|
|
Directly attributable costs |
|
|
233 |
|
|
|
|
|
2,528 |
|
|
Net cash outflow arising on acquisition: |
|
|||
|
|
£'000 |
|||
|
Initial cash consideration |
1,861 |
|||
|
Acquisition costs |
233 |
|||
|
Repayment of borrowings and finance obligations |
2,477 |
|||
|
|
4,571 |
|||
The goodwill arising is attributable to the acquired workforce, anticipated future profit from expansion opportunities in the United States and operating the business with the Group's existing US operations. Fair value adjustments have been recognised for acquisition related intangible assets and related deferred tax. Acquisition related intangibles assets relate to the valuation of customer relationships, the Computrac brand and intellectual property purchased and are being amortised over five to seven years.
At acquisition the Group repaid and extinguished Computrac borrowings of £2.5 million. In addition to drawing-down £4.5 million from the HSBC acquisition facility to fund the initial cash outflow, an additional £1.9 million was drawn-down to fund Comptrac's seasonal working capital requirements.
The values disclosed above are as per those included in the Group's interim results as at 31 March 2009 except for an adjustment of £94,000 increasing the provisional fair value of the deferred tax liability recognised on acquisition related intangible assets and a £35,000 reduction in the book value of other payables. There has been a corresponding adjustment of £59,000 to goodwill.
Following acquisition, the operations of Computrac were integrated with the Group's existing US business RM Educational Software Inc. This included establishment of a single leadership team, a combined sales force and operational integration. The combined US operations contributed £25.3 million (2008: RM Educational Software Inc £3.0 million) to the Group's revenue and £1.7 million (2008: RM Educational Software Inc £0.4 million) to the Group's profit before tax for the period between the date of acquisition and the balance sheet date. There would be no material changes to Group revenue or profit if Computrac had been acquired at the period start date of 1 October 2008.
Isis
On 14 May 2009, the Group acquired 100 per cent of the share capital of PARS Commercial Holdings Ltd, the 100 per cent holding company of Isis Concepts Ltd and PARS Office Systems Ltd. The consideration paid comprised an initial cash consideration of £1.0 million and deferred consideration estimated at £1.5 million. Isis is a leading supplier of flexible learning spaces built around its innovative purpose-designed furniture. The transaction has been accounted for by the purchase method of accounting.
|
|
Book value £000 |
Provisional fair value adjustments £000 |
Provisional fair value £000 |
|
|
|
||||
|
Net assets acquired: |
|
|
|
|
|
Acquisition related intangible assets |
- |
469 |
469 |
|
|
Property, plant and equipment |
78 |
- |
78 |
|
|
Inventory |
341 |
(35) |
306 |
|
|
Trade and other receivables |
473 |
(63) |
410 |
|
|
Cash at bank and in hand |
45 |
- |
45 |
|
|
Trade and other payables |
(732) |
6 |
(726) |
|
|
Finance leases |
(29) |
- |
(29) |
|
|
Corporation Tax |
(134) |
(24) |
(158) |
|
|
Deferred tax asset/(liability) |
5 |
(131) |
(126) |
|
|
|
47 |
222 |
269 |
|
|
Goodwill |
|
|
2,306 |
|
|
Total consideration |
|
|
2,575 |
|
|
|
|
|
|
|
|
Satisfied by: |
|
|
|
|
|
Initial cash consideration |
|
|
990 |
|
|
Deferred consideration |
|
|
1,549 |
|
|
Directly attributable costs |
|
|
36 |
|
|
|
|
|
2,575 |
|
|
Net cash outflow arising on acquisition: |
|
|||
|
|
|
|||
|
Initial cash consideration |
990 |
|||
|
Acquisition costs |
36 |
|||
|
|
1,026 |
|||
The goodwill arising is attributable to the acquired workforce and anticipated future profit from expansion opportunities, including the benefits of enhancing the Group's BSF proposition. Fair value adjustments have been recognised for acquisition related intangible assets and related deferred tax and in alignment of accounting policies. Acquisition related intangibles assets relate to the valuation of customer relationships, the Isis brand and intellectual property purchased and are being amortised over five to seven years.
Subsequent to acquisition, the trade and operating assets of PARS Commercial Holdings Ltd and PARS Office Systems Ltd have been transferred to Isis Concepts Ltd.
Isis contributed £2.3 million revenue for the period between the date of acquisition and the balance sheet date and £0.3 million to the Group's profit before tax. If the acquisition of Isis had been completed on the first day of the financial year, Group revenues would have been £3.9 million higher and Group profit attributable to equity holders of the parent would have been £0.2 million higher.
Other acquisitions
On 1 April 2009 the Group acquired the trade and certain assets of Transfile Ltd (t/a Pisces Art) for a consideration of up to £0.4 million. Fair values have not been disclosed on the grounds of materiality.
12. Defined benefit scheme
The Group operates one defined benefit pension scheme, the Research Machines plc 1988 Pension Scheme. The scheme provides benefit to qualifying employees and former employees of RM Education plc, 3T Productions Ltd and Softease Ltd, but was closed to new members with effect from 1 January 2003. Following the formation of RM Education's trading division: Lightbox Education, 3T Productions Ltd and Softease Ltd ceased to have any qualifying employees in the scheme, with staff moving to the employment of RM Education plc. Under the scheme employees are entitled to retirement benefits of 1/60th of final salary for each qualifying year on attainment of retirement age of 60 or 65 years and additional benefits based on the value of individual accounts. No other post-retirement benefits are provided. The scheme is a funded scheme.
The assets of the scheme are held separately from those of the Group in a trustee-administered fund.
The most recent actuarial valuation of plan assets and the present value of the defined benefit obligation were carried out for statutory funding purposes at 31 May 2006 by a qualified independent actuary. A statutory funding valuation as at 31 May 2009 is currently in progress and IAS 19 Employee Benefits liabilities have been rolled forward based on this valuation's base data. Plan assets are measured at bid-price at 30 September 2009. The present value of the defined benefit obligation and the related current service cost was measured using the projected unit credit method.
As at 31 May 2006 the triennial valuation for statutory funding purposes showed a deficit of £12.7 million (31 May 2003: £12.3 million). The cost of future provision, as a percentage of pensionable salary, from the most recent roll-forward of this valuation is 20.9% for Normal Retirement Age 60 (2006: 21.4%. 2003: 20.4%) and 15.1% for Normal Retirement Age 65 (2006: 15.3%, 2003: 13.1%). The post 2006 costs take into account the benefit of the implementation of a 5% per annum pensionable salary cap.
IAS 19 valuation
Defined benefit pension scheme charges/(credits) recognised in income are as follows:
|
|
2009 £000 |
2008 £000 |
|
Current service cost, recognised within operating profit |
2,579 |
3,190 |
|
Interest cost |
5,200 |
4,879 |
|
Expected return on scheme assets |
(4,784) |
(5,492) |
|
Expense/(income) recognised within finance cost/(income) |
416 |
(613) |
|
|
2,995 |
2,577 |
Of the £2.6 million operating profit charge, £1.6 million is included in cost of sales and £1.0 million in operating expenses.
The amount included within the balance sheet arising from the Group's obligations in respect of its defined benefit scheme, and the expected rate of return on scheme assets are as follows:
|
|
2009 |
2008 |
||
|
|
% |
£000 |
% |
£000 |
|
Equities |
7.20% |
46,585 |
6.80% |
36,924 |
|
Bonds |
4.00% |
43,295 |
5.45% |
39,320 |
|
Total fair value of scheme assets |
|
89,880 |
|
76,244 |
|
Present value of defined benefit obligations |
|
(102,666) |
|
(76,805) |
|
Deficit in scheme and liability recognised in balance sheet |
|
(12,786) |
|
(561) |
|
Related deferred tax asset |
|
3,580 |
|
157 |
|
Net pension deficit |
|
(9,206) |
|
(404) |
The actual return on scheme assets was a gain of £9.3 million (2008: loss of £9.7 million). The expected return on scheme equity assets is based upon the expected out-performance of equities over government bonds over the long term and includes an allowance for future expenses. The bond rate is based on the addition of a risk loading to the long term risk free rate of return and also includes an allowance for future expenses.
Amounts recognised directly in equity in respect of the defined benefit pension scheme are as follows:
|
|
2009 £000 |
2008 £000 |
|
Actuarial gains and (losses) |
(13,482) |
(1,532) |
|
Experience gains and (losses) |
(1,100) |
- |
|
|
(14,582) |
(1,532) |
Cumulative actuarial gains and losses recognised in the statement of recognised income and expense since 1 October 2004 are losses of £14.8m (2008: losses of £0.2m).
Key assumptions used:
|
|
2009 |
2008 |
|
Rate of increase in salaries |
3.50% |
3.90% |
|
Rate of increase of pensions in payment |
3.00% |
3.60% |
|
Rate of increase of pensions in deferment |
3.00% |
3.60% |
|
Discount rate |
5.60% |
6.70% |
|
Inflation assumption |
3.00% |
3.60% |
Mortality assumptions continue to be based on the PA92 medium cohort tables which give average life expectancies as follows:
|
|
2009 |
2008 |
||
|
|
Male |
Female |
Male |
Female |
|
Pensioner member age 65 (current life expectancy) |
21.8 |
24.7 |
21.8 |
24.7 |
|
Non-pensioner member age 45 (life expectancy at 65) |
23.0 |
25.8 |
23.0 |
25.8 |
Movements in fair value of scheme assets were as follows:
|
|
2009 £000 |
2008 £000 |
|
At 1 October |
76,244 |
79,672 |
|
Expected return on scheme assets |
4,784 |
5,492 |
|
Actuarial gains and (losses) - actual return less expected return |
4,540 |
(15,189) |
|
Contributions from sponsoring companies: |
|
|
|
In respect of current service cost |
2,579 |
3,190 |
|
In excess of current service cost |
2,773 |
3,627 |
|
|
5,352 |
6,817 |
|
|
|
|
|
Contributions from scheme members |
24 |
23 |
|
Benefits paid |
(1,064) |
(571) |
|
At 30 September |
89,880 |
76,244 |
Movements in fair value of defined benefit obligations were as follows:
|
|
2009 £000 |
2008 £000 |
|
At 1 October |
76,805 |
82,941 |
|
Current service costs |
2,579 |
3,190 |
|
Interest cost |
5,200 |
4,879 |
|
Contributions from scheme members |
24 |
23 |
|
Actuarial (gains) and losses |
19,122 |
(13,657) |
|
Benefits paid |
(1,064) |
(571) |
|
At 30 September |
102,666 |
76,805 |
The history of experience adjustments is as follows:
|
|
2009 £000 |
2008 £000 |
2007 £000 |
2006 £000 |
2005 £000 |
|
Difference between expected and actual return on scheme assets: |
|
|
|
|
|
|
- amount (£'000) |
4,540 |
(15,189) |
1,102 |
2,025 |
5,900 |
|
- as a percentage of scheme assets |
5% |
(20)% |
1% |
3% |
10% |
|
Experience gains and (losses) on scheme liabilities: |
|
|
|
|
|
|
- amount (£'000) |
(1,100) |
- |
- |
1,813 |
- |
|
- as a percentage of scheme liabilities |
(1)% |
- |
- |
2% |
- |
The amounts of contributions expected to be paid to the scheme during the financial year ending 30 September 2010 are approximately £3.2 million in respect of current service. In addition, the current triennial valuation as at 31 May 2006 commits the Group to paying £1.7 million per annum of deficit catch up payments, compared to the service cost calculated for statutory funding purposes, until September 2010. As noted above, there is a valuation in progress as at 31 May 2009, an output of which will be agreement between Group company RM Education plc and the scheme's Trustees of an amount and duration of future payments.
Defined benefit pension parameters
The defined benefit pension scheme accounting entries require a number of estimates to be made including the discount rate applied to liabilities, the current and past service costs and appropriate mortality assumptions. The financial position and performance of the scheme are sensitive to these parameters owing to the long duration of the liabilities.
Sensitivity to these assumptions are shown in the table below:
|
|
Current assumption |
Increase/(decrease) in pre-tax deficit £000 |
|
Discount rate increase of 0.1% |
5.6% |
(2,500) |
|
Inflation increase of 0.1% |
3.0% |
1,900 |
|
1 year additional life expectancy |
PA92 Medium cohort |
1,500 |
13. Related party transactions
The remuneration of the key management personnel of the Group, recognised in the income statement, is set out below in aggregate. Key management are defined as the executive and non-executive directors of the RM plc and other persons classified as "persons discharging management responsibility under the rules of the Financial Services Authority".
|
|
2009 £000 |
2008 £000 |
|
Short-term employee benefits |
2,692 |
2,761 |
|
Post-employment benefits |
214 |
196 |
|
Other long-term benefits |
296 |
256 |
|
Share-based payment |
115 |
63 |
|
|
3,317 |
3,276 |
There were no other significant related party transactions which have not been eliminated on consolidation.
Ends
This information is provided by RNS
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