Final Results
RM PLC
23 November 2004
RM announces Preliminary Results for the year to 30th September 2004
RM plc, the leading supplier of information and communications technology (ICT)
and other services to education announces results for the year ended 30th
September 2004.
Financial highlights
• Turnover up 22% to £263.3 million (2003: £215.5 million)
• Operating profit margin before goodwill amortisation* up to 4.0%
(2003: 3.5%)
• Profit before tax and goodwill amortisation* up 35% to £11.6 million
(2003: £8.6 million)
• Profit before tax up 13% to £7.1 million (2003: £6.2 million)
• Diluted EPS (excluding goodwill amortisation)* up 36% to 9.4p
(2003: 6.9p**)
• Dividend per share up 6% to 4.6p (2003: 4.35p)
• Operating cashflow up 20% to £22.4 million (2003: £18.6 million)
*goodwill amortisation of £4.5 million (2003: £2.4 million)
**at normalised tax rate
Operational highlights
• Growth in all areas of the business
• Improvement in customer satisfaction score
• Product innovation
• Now delivering seven long-term education projects
• Acquisition of TTS Group, Sentinel Products and Peakschoolhaus
Commenting, Tim Pearson, CEO of RM, said:
'With increased customer satisfaction levels, renewed innovation, good
performance from our recently acquired subsidiaries and significant organic
growth, 2004 has been a successful year for RM.
'Our focus is now on delivering ever improving levels of performance - for all
of our stakeholders - from the enlarged Group. For financial year 2005 as a
whole, we do not anticipate the same growth rate as in 2004 as a result of the
absence of last year's non-recurring factors. However, organic growth, combined
with the full-year contribution from our recent acquisitions, is likely to
result in a further increase in turnover. We believe there are exciting
prospects for the Group and look forward to 2005 as a year of further progress.'
- Ends -
For further information, please contact:
Tim Pearson, Chief Executive RM plc 08709 200200
Mike Greig, Group Finance Director
Phil Hemmings, Director of Corporate Affairs
Andrew Fenwick Brunswick 020 7404 5959
Fiona Laffan
Mark Antelme
A briefing to analysts will take place at 10.30 am on Tuesday 23rd November at
Brunswick, 16 Lincoln's Inn Fields, London WC2A 3ED.
A live audio feed will be available to analysts and shareholders who are unable
to attend this meeting in person. Please dial telephone number: +44 (0) 1452 561
263 to access this facility. A copy of the presentation will be available on
www.rm.com at 10.30 am.
Financial summary
Results for the year to 30th September 2004 are considerably ahead of
last year, reflecting both underlying improvements in the business and the
benefit of the non-recurring factors that were reported at the interim stage.
Turnover for 2004 was up 22% to £263.3 million (2003: £215.5 million), a new
record for the RM Group.
Operating profit (before goodwill amortisation) increased by 39% to £10.5
million (2003: £7.6 million). Operating profit margin (on the same basis)
increased to 4.0% from 3.5%.
Profit before tax (before goodwill amortisation) increased by 35% to £11.6
million (2003: £8.6 million). This increase is after continued investment in new
business development, as well as the planned increase in research and
development expenditure. After goodwill amortisation of £4.5 million (2003: £2.4
million), profit before tax was £7.1 million (2003: £6.2 million). Diluted
earnings per share (before goodwill amortisation) were up 36% to 9.4p (2003:
6.9p - at a normalised 28% tax rate).
The Group's operations continue to be strongly cash generative, with cash inflow
from operating activities of £22.4 million (2003: £18.6 million). Net funds at
the 30th September were £25.8 million (2003: £38.4 million), after acquisitions
of £18.6 million and capital expenditure related to PFI projects of £5.4
million.
The Board is proposing an increased final dividend per share of 3.6p (2003:
3.4p), making the total dividend per share for the year 4.6p (2003: 4.35p).
Subject to approval at the AGM, the final dividend will be paid on the 4th
February 2005 to shareholders on the register on the 7th January 2005.
Individual schools ICT
RM is the leading provider of information and communications technology (ICT) to
UK schools and our business with individual schools grew ahead of the market
during the year. Much of this growth came from existing customers choosing to
spend more with the Group, which is a strong indication that these schools are
achieving success with our products and services.
Community Connect, our network infrastructure system, had a particularly
successful year and remains the most widely used system of its type in UK
schools. For many of our existing customers, the summer of 2004 was a good point
to upgrade their ICT infrastructure by moving to Community Connect 3 from
earlier versions of RM's network product; this led to strong sales of network
servers.
Interactive whiteboard and education software sales benefited from targeted
government initiatives. Intense competition for interactive whiteboard hardware
sales has reduced the margins available for these products. However, the focus
on whiteboards has allowed us to invest in establishing a strong market position
for our Easiteach whole-class teaching software, where there is a real
opportunity to target customers who would not normally buy from RM.
Education projects
The Group signed education projects with Warwickshire LEA (£16 million over
eight years) and Newham LEA (£20 million over eight years); these two projects
bring the total number of long-term projects we are delivering to seven. The
Warwickshire and Newham projects are part of a series of four DfES pathfinder
PFI projects intended to pilot the use of advanced ICT solutions, designed to
transform teaching and learning, across local education authorities.
The delivery of the Warwickshire and Newham projects has now commenced and the
Warwickshire project in particular is allowing us to further develop our
Learning Platform architecture. Learning Platform integrates all of the ICT
systems used in educational environments - management and administration,
together with curriculum delivery - into a single, open architecture. We believe
that high-quality information systems of this kind have an increasingly
important role to play in improving the quality of teaching.
This year has seen the mid-term refresh of the infrastructure of the Dudley Grid
for Learning. The refresh is a major milestone in the delivery of the project
and is progressing well. Dudley is widely regarded as one of the real successes
of PFI in the education marketplace.
As we reported at half-year, the Group has benefited from one-off hardware
shipments related to education projects. Most of this benefit has come from the
Classroom 2000 project. Unlike long-term elements of education projects (where
we recognise profit only when we have a high degree of certainty of successful
delivery), separable elements such as hardware shipments are recognised at the
point of delivery.
The pioneering key stage 3 ICT online assessment project, which we are
delivering on behalf of the QCA (Qualifications and Curriculum Authority),
positions RM at the forefront of technology-based assessment. Over the summer a
critical pilot, involving 2% of English secondary schools, was completed
successfully and the project is on track to deliver tests in a much larger
number of schools next year.
Acquisitions
We made three acquisitions during the year - TTS, Sentinel and Peakschoolhaus.
Each of these companies increases the Group's educational focus and capability
and helps us provide a richer range of products and services to the education
community.
TTS was acquired for a total consideration of up to £11.0 million in September
2004. TTS is a well-respected and highly profitable distributor of specialist
education resources and provides the Group with a wide range of innovative and
educationally valuable products. TTS had reached a stage where additional
investment and management expertise was required for it to realise its
potential. We have already begun to work with the management of TTS on future
development and we are confident that, as part of the RM Group, they will
achieve further growth.
Sentinel, which we acquired for a total consideration of up to £6.1 million in
February, is a developer and distributor of network management software.
Sentinel brings a highly regarded education brand into the Group and an indirect
(dealer) sales channel, which provides new routes to market for RM products. We
will continue to develop Sentinel's Ranger product range, which is complementary
to RM Community Connect and allows the Group to address the needs of an
increased proportion of the educational ICT market.
Peakschoolhaus, a provider of Ofsted inspection and training services, performed
well during the year. However, its future contribution to the Group is dependent
on the outcome of a major government procurement exercise which is currently
under way. Ofsted, the government agency that manages school inspections, is
letting a number of multi-year, regional inspection contracts. Competition for
these regional contracts is strong. If RM and Peakschoolhaus are successful with
our bid, it will provide a larger revenue stream than is currently the case.
Customer satisfaction
Customer satisfaction remains RM's most important non-financial performance
indicator; our education customers are part of a close community and reputation
is enormously important. Our continuous customer satisfaction measurement
programme, through which our customers score the service we provide them with
and suggest an area for improvement, provides a clear and current view of how
the Group is performing. We regard customer success as so important that a
significant proportion of performance-related pay for managerial staff is
conditional on the Group achieving its customer satisfaction target. We achieved
the improvement target we set for 2004 and have set another challenging
improvement target for 2005.
A survey undertaken at our national seminars for technical staff in schools
shows that current customers have an extremely positive view of RM, which is
pleasing. However, research with non-customers has identified a need to improve
our reputation amongst educationalists who have not had recent experience of
dealing with RM. A clear focus in 2005 is to improve the perception that
non-customers have of the Group, whilst continuing to improve satisfaction
amongst existing customers.
Innovation
Innovation is crucial for the RM Group: innovative, exciting and educationally
valuable products that genuinely help teachers to teach and learners to learn
are the best way to delight our existing customers and to attract new ones. The
recent DTI 'R&D Scoreboard', which shows that RM is the seventh largest research
and development spender of all UK-quoted software and computer service
companies, is evidence of our commitment to innovation.
Significant innovations in 2004 include:
•Easiteach, which is a software product that helps teachers exploit the
potential of interactive whiteboards and one of the most exciting products
RM has ever developed. The Easiteach family has been significantly enhanced
with the development of a number of curriculum-specific add-on packs and now
addresses a wide range of ages and subjects. It is in use in over 8,100
schools in the UK and we believe it has the potential to appeal to the
global market.
•The RM One, which is a development of the 'all-in-one' PC concept we
introduced in 2003. RM One has been designed with the help of
educationalists solely for classrooms. Education-relevant features,
including anti-graffiti paint, hardened screen covering and an integral desk
bolting facility, demonstrates that there is differentiation available to
the specialist education PC supplier. Early demand has been encouraging and
the product has been well-received by the press with the Times Educational
Supplement commenting, 'RM's new all-in-one PC is stylish, robust, secure
and powerful; just about everything you need in the classroom'.
•Learning Platform, which, as described above, is the defining
architecture for several of our large education projects, is an important
framework for our future developments. Learning Platform brings together a
set of open standards. Standards - particularly those that allow many
different software products to share pupil data - are essential for the
development of educational ICT. We see a future where educationalists can
choose curriculum software and management systems from a range of different
suppliers with the confidence that they will work together.
•Community Connect, our market-leading network infrastructure system,
where we have delivered significant performance improvements that make the
product more effective in a classroom environment.
Strategy
The recovery strategy RM put in place in February 2002 has helped guide us
through the last two and a half years. We have stabilised the business, improved
efficiency and effectiveness and identified a number of areas of growth.
Over the last six months the Executive Committee, along with a small core of
senior managers, has been working on our forward strategy. Our view is that
strategy is best developed by identifying and understanding the Group's sources
of competitive advantage.
At the highest level, we have identified three key sources of competitive
advantage:
•our education focus;
•our relative scale amongst educational ICT companies;
•our technical capability.
The combination of these three factors differentiates RM from its competition
and positions us to create and deliver innovative and compelling products and
services that deliver genuine educational value.
Processes and systems
Fundamental to our strategy is that RM will continue to provide a broad range of
products and services, often as part of sophisticated, integrated systems. This
results in a relatively complex environment and it is essential that RM
maintains and develops the management expertise and the systems and processes
required to manage this complexity. RM has made good progress with systems and
processes over the last two years; we're probably one of the best companies in
our sector at this. We are not yet, however, as good as we need to be and in the
year ahead we intend to make further improvements.
An example of the benefit of good systems - both in terms of customer success
and business efficiency - is our credit control activity. Through the
introduction of new information systems that bring together customer data
previously held in separate systems, we have transformed the efficiency of our
credit control team. Equally importantly, we have improved the experience for
customers, who now get more accurate information and, as a result, pay more
quickly. We have decreased debtor days, improved customer satisfaction and
reduced the size of the credit control team by 50%.
Direction
Easiteach has the opportunity to become a world product. The UK continues to
have a world-class reputation for educational software, and UK schools lead the
world in the deployment of interactive whiteboards. The USA is a particular
opportunity, with increasing interest in installing interactive whiteboards. We
are already in discussions with most of the leading US suppliers about enhancing
their product offers by providing Easiteach.
Examinations and assessment in the UK are undergoing radical development, with
the QCA encouraging examination boards to make more effective use of ICT. RM,
with its unrivalled education and ICT knowledge, is well-placed to work with
these boards, providing ICT-based processes and systems. We have entered into a
framework agreement with UCLES (a leading examination board) under which RM will
become their strategic partner for the development and delivery of eMarking
services.
Our competitive strengths make us an ideal partner for and participant in the
government's BSF initiative, a major capital programme designed to rebuild or
refurbish every secondary school in the UK. Initial indications from the DfES
suggest the initiative is worth about £30 billion, with capital allocations of
£2.2 billion per year by government year 2005/06. ICT is central to the DfES'
thinking for secondary schools, with BSF promising world-class technology in
every school. Whilst it is not yet clear what impact BSF will have on RM, the
Group is uniquely well positioned to provide ICT that will deliver the
educational improvements the initiative is aiming for. We will invest during
2005 in establishing our position as a leading ICT supplier to the BSF
initiative and in developing our capacity to bid for, partner in and deliver
these projects.
Delivery
Our focus is now on delivering ever improving levels of performance - for all of
our stakeholders - from the enlarged Group. The trade-off between profitability
and investment for the future is key. In 2004, we have provided an acceptable
balance between short-term returns and investment that will secure the future
prosperity of the Group. 2005 will see further investments in business
development, research and development, and processes and systems, which we
believe will contribute to further improvements in profitability.
As always, there are challenges as well as opportunities: our commodity ICT
products remain subject to price and margin pressure; and, as a Group focused on
a single sector, we need to constantly respond to policy developments.
Nonetheless, our commitment to delivering genuinely valuable education products
and services means RM is well-positioned in a market that has enormous
potential. We look forward to the future with confidence.
Financial review
Balance sheet
Total fixed assets increased by £17.1 million. Intangible fixed assets increased
by £14.0 million to £24.7 million reflecting the goodwill arising on the three
acquisitions; £1.6 million on Peakschoolhaus, £6.2 million on Sentinel and £10.7
million on TTS. This goodwill, like goodwill on other acquisitions, is being
written off on a straight line basis over a 5 year period.
Stocks increased by £2.7 million to £16.5 million, primarily as a result of a
£1.4 million increase in long term contract balances to £2.0 million. Debtors
increased by £7.2 million, reflecting the higher turnover and the impact of the
acquisitions. Closing cash and short term deposits decreased by £13.1 million to
£27.5 million and, after deducting issued loan notes, closing net funds were
£25.8 million (2003: £38.4 million). The Group's core business is seasonal and
average net funds during the year were £27.2 million (2003: £31.5 million) with
a minimum for the year of £7.1million (2003: £18.6 million). The lower average
net funds reflected the acquisitions, the investment in assets for long-term PFI
contracts and, to a lesser extent, the buying of own shares as a cash flow hedge
against the requirements of the Co-Investment Plan. Further deferred
consideration of £3.7 million is expected to be payable on acquisitions, £2.5
million is included within creditors and £1.2 million in provisions.
Tax
Because the charge for amortisation of goodwill is not a tax deductible expense,
it is sensible to focus on the tax rate as a percentage of profit before
goodwill amortisation. In 2004 this was 27.3% compared to a normalised rate of
28% in 2003. In 2003 the actual rate was 17.9% as a result of a one-off tax
credit arising from an agreement with the Inland Revenue on the tax treatment of
prior year transactions. The Group underlying tax rate continues to be below the
standard UK corporation tax rate of 30% because of the benefit of the Group
undertaking research and development projects that attract an enhanced tax
deduction.
Pensions
The Group has continued to account for its closed defined benefit pension scheme
using SSAP 24 'Accounting for pension costs'. The latest triennial actuarial
valuation was carried out at 31st May 2003. Under FRS 17 'Retirement benefits'
at 30th September 2004 the scheme's assets were £42.6 million and its
liabilities were £57.5 million, a deficit of £14.9 million (2003: £16.7
million), equivalent to a £10.4 million deficit after tax (2003: £11.7 million).
The Group adopted more prudent mortality tables, PMA92(-3) and PFA92(-3), in
2003 and has continued to use these tables.
The Group continues to monitor closely the position of the pension scheme taking
appropriate and prudent action when it deems necessary. Current funding levels
were set in 2003 and planned to recover the scheme deficit over fifteen years.
With effect from November 2004 employee contributions to the scheme for those
aged over 25 were increased by 0.75% of pensionable salaries to 7.5%.
International Accounting Standards
In common with all listed companies within the European Union, RM will soon be
required to prepare its consolidated accounts in accordance with International
Financial Reporting Standards. The reports for the forthcoming year ending 30th
September 2005 will be the last prepared under UK GAAP. The interim results for
the six months ending 31st March 2006 will be the first under IFRS.
The changeover to IFRS has potentially far reaching implications. In order to
ensure that the Group is ready, a project is underway with steering being
provided by the Board and the Audit Committee.
Prospects
We believe that education presents a growing and profitable market opportunity
and our focus remains on creating products and services that help teachers to
teach and learners to learn. Over the last two years the RM Group has developed
significantly, whilst staying clearly focused on the education market. Our
current focus is on delivering the highest levels of performance from the
businesses that we have.
We have identified three key priority investment areas for 2005: the DfES
Building Schools for the Future (BSF) initiative; education software, with an
increased focus on international opportunities; and education services, in
particular examinations and assessment.
As usual, the seasonal nature of RM's business means that it is too early to
comment on the outcome for 2005. In 2004, the first half of the year benefited
from a number of non-recurring, one-off factors - in particular, hardware
shipments related to education projects - which will not be repeated this year.
The first half of the year is never a good indicator of full-year performance,
though this year, as in 2003, it is likely that there will be a small first half
loss.
For financial year 2005 as a whole, we do not anticipate the same growth rate as
in 2004 as a result of the absence of last year's non-recurring factors.
However, organic growth, combined with the full-year contribution from our
recent acquisitions, is likely to result in a further increase in turnover. We
believe there are exciting prospects for the Group and look forward to 2005 as a
year of further progress.
2004 2003
£000 £000
Turnover
Existing operations 257,763 215,494
Acquisitions 5,501 -
--------------------------------------------------------------------------------
Total turnover 263,264 215,494
-------------------------------------------------------------------------------
Cost of sales (194,757) (162,209)
--------------------------------------------------------------------------------
Gross profit 68,507 53,285
--------------------------------------------------------------------------------
Operating
expenses:
Selling & distribution (32,746) (26,968)
Research & development (14,546) (11,729)
Administrative expenses (15,232) (9,451)
--------------------------------------------------------------------------------
(62,524) (48,148)
--------------------------------------------------------------------------------
Operating profit 5,983 5,137
Operating profit analysed between:
Existing operations before goodwill 9,772 7,567
Amortisation of goodwill - existing
operations (3,383) (2,430)
-------------------
Operating profit for existing operations 6,389 5,137
Acquisitions before goodwill 730 -
Amortisation of goodwill - acquisitions (1,136) -
--------------------
Operating loss for acquisitions (406) -
-------------------
Total operating profit 5,983 5,137
--------------------------------------------------------------------------------
Net interest receivable 1,071 1,082
------------------------------------------------------------------------------
Profit on ordinary activities before
taxation 7,054 6,219
Profit on ordinary activities before taxation
analysed between:
Profit on ordinary activities before taxation
and amortisation of goodwill 11,573 8,649
Amortisation of goodwill (4,519) (2,430)
-------------------
7,054 6,219
Tax charge on profit on ordinary activities (3,162) (1,544)
--------------------------------------------------------------------------------
Profit on ordinary activities after taxation 3,892 4,675
Dividends paid and proposed (4,075) (3,875)
--------------------------------------------------------------------------------
Retained (loss)/profit for the year (183) 800
--------------------------------------------------------------------------------
Earnings per ordinary share
Basic 4.4p 5.2p
Diluted 4.3p 5.2p
Diluted - before amortisation of goodwill
(2004 at actual tax rate, 2003 at 28%
normalised tax rate, see note 4) 9.4p 6.9p
All activities relate to continuing operations
Consolidated Balance Sheet
As at 30th September 2004
2004 2003
£000 £000
(Restated)
Fixed assets
Intangible fixed assets 24,737 10,777
Tangible fixed assets 20,202 17,091
--------------------------------------------------------------------------------
44,939 27,868
Current assets
Stocks 16,492 13,759
Debtors 51,538 44,317
Investments - short term 5,000 13,125
cash deposits
Cash at bank and in hand 22,480 27,500
--------------------------------------------------------------------------------
95,510 98,701
Creditors
Amounts falling due within one year (86,442) (76,028)
--------------------------------------------------------------------------------
Net current assets 9,068 22,673
--------------------------------------------------------------------------------
Total assets less current liabilities 54,007 50,541
Creditors
Amounts falling due after more than one year (11,086) (8,081)
Provision for liabilities and charges (2,320) (1,245)
--------------------------------------------------------------------------------
Net assets 40,601 41,215
--------------------------------------------------------------------------------
Capital and reserves
Called-up share capital 1,794 1,794
Share premium account 20,349 20,349
Capital redemption reserve 94 94
ESOP shareholding (1,010) (664)
Profit and loss account 19,374 19,642
--------------------------------------------------------------------------------
Equity shareholders' funds 40,601 41,215
--------------------------------------------------------------------------------
Consolidated Cash Flow Statement
For the year ended 30th September 2004
2004 2003
£000 £000
(Restated)
Net cash inflow from operating activities 22,399 18,612
Returns on investments and servicing of
finance 1,071 1,082
Taxation (3,532) (1,889)
Capital expenditure and (9,691) (4,428)
financial investment
Acquisitions (16,873) (3,263)
Equity dividends paid (3,909) (3,716)
--------------------------------------------------------------------------------
Net cash (outflow)/inflow before use of
liquid resources and financing (10,535) 6,398
Management of liquid resources 8,125 7,032
Financing (2,607) (4,918)
--------------------------------------------------------------------------------
(Decrease)/Increase in cash in the year (5,017) 8,512
--------------------------------------------------------------------------------
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS
For the year ended 30th September 2004
2004 2003
£000 £000
(Decrease)/Increase in cash in the year (5,017) 8,512
Capital element of finance lease payments - 20
Cash outflow from change in liquid (8,125) (7,032)
resources
Settlement of loan notes 2,208 4,234
--------------------------------------------------------------------------------
Change in net cash resulting from cash flows (10,934) 5,734
Issue of loan notes (1,699) -
Exchange translation (3) 20
--------------------------------------------------------------------------------
Movement in net funds in the year (12,636) 5,754
Net funds brought forward 38,417 32,663
--------------------------------------------------------------------------------
Net funds carried forward 25,781 38,417
--------------------------------------------------------------------------------
1. Report and Accounts 2004 & AGM 2005
The financial information set out in this preliminary results announcement has
been prepared on a basis that is consistent with the statutory accounts for the
year ended 30th September 2003 with the exception that Urgent Issues Task Force
Abstract 38 (UITF 38) 'Accounting for ESOP trusts' has been adopted from 1st
October 2003 as described below.
This Abstract requires that shares in the reporting company that are held
through an ESOP trust be deducted in arriving at shareholders' funds. Previously
such shares were required to be recognised as fixed assets in accordance with
UITF Abstract 13 'Employee Share Schemes'. The RM plc Employee Share Trust has
been established and funded by the Group in order to hedge future obligations in
respect of shares awarded under the RM plc Co-Investment Plan. The caption
'Investment in own shares' that was shown on the face of the balance sheet in
fixed assets is now described as 'ESOP shareholding' and is shown in the capital
and reserves section. The comparative balance sheets and cash flow statements
have been restated to reflect this change. The cost of the Co-Investment Plan
continues to be charged to the profit and loss account over the performance
period during which the Company derives the benefit from the services of the
participants in the scheme.
The financial information set out in this announcement does not constitute the
Company's statutory accounts for the years ended 30th September 2004 or 30th
September 2003 but is derived from those accounts. Statutory accounts for the
year ended 30th September 2003 contained an unqualified audit report, did not
contain statements under section 237 (2) or (3) of the Companies Act 1985 and
have been filed with the Registrar of Companies.
The Company will hold its Annual General Meeting on 24th January 2005, following
which the statutory accounts for the year ended 30th September 2004 will be
filed with the Registrar of Companies. The Auditors have reported on these
accounts and their report was unqualified and did not contain statements under
section 237 (2) or (3) of the Companies Act 1985.
2. Taxation
The tax charge for the year represents a rate of 27% of profit before
amortisation of goodwill (2003: 18%), lower than the standard 30% rate
reflecting the benefit of an enhanced deduction for qualifying expenditure under
the Group's research and development programme. Included in 2003 within tax is a
one-off non recurring benefit of an adjustment relating to earlier years.
The tax charge of £3,162,000 (2003: £1,544,000) comprises current tax £3,371,000
(2003: £1,711,000) and deferred tax credit £209,000 (2003: credit £167,000).
3. Dividends per share
The Directors have recommended the payment of a final dividend of 3.6p per share
(2003: 3.4p) bringing the total dividend for the year to 4.6p per share (2003:
4.35p). The final dividend is payable on 4th February 2005 to shareholders on
the register on 7th January 2005.
4. Earnings per share
Basic earnings per ordinary share for the year ended 30th September 2004 is
based on 88,894,220 ordinary shares, being the weighted average number of
ordinary shares in issue during the year. The diluted earnings per ordinary
share for the year ended 30th September 2004 takes account of share options in
issue and is based on a weighted average number of 89,673,294 ordinary shares
issued and issuable.
A reconciliation of the basic earnings per share with diluted earnings per share
is as follows:
Year ended 30th September 2004 Year ended 30th September 2003
-------------------------------------------------------------------------
Profit after Number of Pence per share Profit after Number of Pence per share
tax shares tax shares
£000 '000 £000 '000
-------------------------------------------------------------------------
Basic earnings
per share 3,892 88,894 4.4 4,675 89,401 5.2
Impact of
share options - 779 (0.1) - 218 -
-------------------------------------------------------------------------
Diluted earnings
per share 3,892 89,673 4.3 4,675 89,619 5.2
-------------------------------------------------------------------------
Supplementary earnings per share before amortisation of goodwill:
Diluted earnings
per share 3,892 89,673 4.3 4,675 89,619 5.2
Effect of
amortisation
of goodwill 4,519 - 5.1 2,430 - 2.7
-------------------------------------------------------------------------
Diluted earnings
per share before
amortisation
of goodwill 8,411 89,673 9.4 7,105 89,619 7.9
Effect of
normalising
tax rate - - - (878) - (1.0)
-------------------------------------------------------------------------
Diluted
earnings per
share before
amortisation
of goodwill
(2003 at a
28% normalised
tax rate) 8,411 89,673 9.4 6,227 89,619 6.9
-------------------------------------------------------------------------
Included in the previous year within tax is a one-off non recurring benefit of
an adjustment relating to prior years. The earnings per share measure at
normalised tax rates excludes the effect of this adjustment.
5. Acquisitions
Peakschoolhaus Limited was acquired on 1st October 2003 for an initial payment
of £1.6 million in cash. Following renegotiation of the share purchase
agreement, deferred cash consideration of up to a maximum of £0.3 million is
payable over a three year period conditional upon the performance of the
business.
Sentinel Products Limited and a connected company, Hyperion Security Software
Limited, were acquired for a maximum consideration of £6.1 million on 26th
February 2004 satisfied by the initial payment of £4.3 million in cash, with a
further maximum deferred consideration of £1.8 million, payable through the
issue of loan notes over two years, conditional upon the achievement of product
development and sales targets over the two year period.
TTS Group Limited was acquired on 9th September 2004 for a maximum consideration
of £11.0 million (with RM assuming net debt of £0.8 million). The acquisition
price was satisfied by the initial payment of £9.9 million in cash with a
further consideration of up to £1.1 million payable over two years in loan notes
conditional upon the Directors of TTS transferring their knowledge of the
business to RM by continuing to work for the Group over that period.
6. Reconciliation of movements in shareholders' funds
-------------------------------------------------------------------------
Called-up Share Capital ESOP Profit 2004 2003
share premium redemption s'holding and loss Total Total
capital account reserve £000 account £000 £000
£000 £000 £000 £000 (Restated)
-------------------------------------------------------------------------
Beginning of
the year as
previously
reported 1,794 20,349 94 - 19,642 41,879 41,059
UITF 38
restatement - - - (664) - (664) -
-------------------------------------------------------------------------
As 1,794 20,349 94 (664) 19,642 41,215 41,059
restated
Retained
(loss)/
profit - - - - (183) (183) 800
for the year
Purchase of
shares - - - (399) - (399) (664)
ESOP
shareholding
transfer - - - 53 (53) - -
Other
movements - - - - (32) (32) 20
-------------------------------------------------------------------------
End of year 1,794 20,349 94 (1,010) 19,374 40,601 41,215
-------------------------------------------------------------------------
7. Net cash flow from operating activities
2004 2003
£000 £000
Operating profit 5,983 5,137
Depreciation charge 7,805 7,836
Amortisation of intangible fixed assets 4,519 2,656
Profit on sale of fixed assets (205) (277)
Increase in stocks (1,952) (3,805)
Increase in debtors (5,168) (715)
Increase in creditors 11,417 7,780
--------------------
Net cash inflow from operating activities 22,399 18,612
--------------------
8. Pension scheme
Following the extension of the transitional arrangements for the implementation
of FRS 17 'Retirement Benefits', the Group has continued to account for its
defined pension scheme using SSAP 24 'Accounting for Pension Costs' whilst
disclosing additional FRS 17 information in the notes to the accounts.
The FRS 17 valuation of the closed defined benefit scheme as at 30th September
2004 identified a deficit of £14.9 million (£10.4 million after tax), compared
to a deficit of £16.7 million (£11.7 million after tax) a year earlier. The
Group has continued to use the more prudent mortality tables, PMA92(-3) and
PFA92(-3) adopted last year.
Current funding levels were set in 2003 and planned to recover the scheme
deficit over fifteen years. With effect from 1st November 2004 employee
contributions to the scheme for those aged over 25 were increased by 0.75% to
7.5% of pensionable salaries.
Copies of the Annual Report and Accounts may be obtained after the posting date
of 17th December 2004 from the registered office of the Company at: New Mill
House, 183 Milton Park, Abingdon, Oxfordshire OX14 4SE.
A copy of this announcement is available at RM's internet site www.rm.com and a
copy of the Annual Report and Accounts will be available at the same site from
17th December 2004.
This information is provided by RNS
The company news service from the London Stock Exchange
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