Final Results

RM PLC 24 November 2003 24th November 2003 RM announces Preliminary Results for the year to 30th September 2003 RM plc, the leading supplier of information and communications technology (ICT) and other services to education announces results for the year ended 30th September 2003. Highlights • Turnover up 6.6% to £215.5 million (2002: £202.2 million) • Turnover (exc Learning Schools Programme*) up 17% to £214.3 million (2002: £182.9 million) • Profit before tax and goodwill up 72% to £8.6 million (2002: £5.0 million**) • Net funds at year end up £5.7 million to £38.4 million (2002: £32.7 million) • Diluted EPS (exc goodwill and at a normalised tax charge of 28%) 6.9p • Total dividend per share up 5% to 4.35p (2002: 4.15p) • Growth in educational ICT business • Good progress in strategic projects and education services *RM's response to a one-off government lottery funded teacher training project which has now finished **before last year's exceptional administration charge of £9.0m Commenting today, Tim Pearson, Chief Executive of RM said: 'We're on the way to establishing RM as a broadly-based education services business. There's still much left that we want to achieve, but we've seen growth in educational ICT, established our education services business and won £110 million of strategic project business. 'We are providing an update on progress today and our success continues. We have been shortlisted for a further three PFI projects; and our Forvus subsidiary has been awarded a contract to provide a national pupil database in Wales. 'As always at the time of our Preliminary Results announcement, it is too early in the financial year to give an indication of the outcome for 2004. However, the Board believes that RM is well positioned to make further progress.' - Ends - For further information, please contact: Tim Pearson, Chief Executive RM plc 08709 200200 Mike Greig, 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 9.30 am on Monday 24th 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 9.30am. Financial Summary Profit before tax (before goodwill amortisation) was £8.6 million (2002: £5.0 million profit before exceptional administration charge). Profit after tax was £4.7 million (2002: £4.8 million loss). Diluted earnings per share (before goodwill amortisation and assuming a normalised long-term tax rate of 28%, which takes into account anticipated research and development tax credits) were up 82% to 6.9p (2002: 3.8p excluding exceptional charges). The Group's turnover for the year was up 6.6% at £215.5 million (2002: £202.2 million). Turnover, excluding the Learning Schools Programme (which reached its planned conclusion during the year) was up 17% to a new Group record of £214.3 million (2002: £182.9 million). Of this increase £11 million was derived from the four strategic project contracts won during the year. Order intake for the year was in excess of £300 million, which is another Group record and reflects the strong strategic projects performance during the year. Gross profit percentage for the year was 24.7% compared to 25.3% last year. Excluding the strategic projects on which no gross profit has yet been recognised, the margin was 26.1%. Margins on hardware declined reflecting the increased competitiveness of the Group's offer and an increased proportion of lower margin mobile PCs. Total operating expenses for the year, excluding goodwill amortisation, were £45.7 million (£48.1 million less goodwill amortisation of £2.4 million)compared to £47.2 million a year earlier. This reflects the full year benefit of the cost reduction actions taken half way through the previous year. Research & Development expenditure reduced from £13.8 million to £11.7 million, reflecting a decrease in investment in education software and the completion of the Community Connect 3 development. The Group continues to be strongly cash generative, with cash inflow from operating activities for the year of £18.6 million. Net funds at year end, after the payment of £4.7 million in initial consideration for the acquisition of Forvus, were up £5.7 million to £38.4 million. The Board proposes an increased final dividend of 3.4p (2002: 3.2p), making the total dividend for the year 4.35p (2002: 4.15p) an increase of 5%. The final dividend will be paid on the 6th February 2004 to shareholders on the register on the 9th January 2004. Operational Review Turnover growth during the year has been driven by both an improved performance from our educational ICT business and by good progress in our targeted areas of growth. Turnover from our educational schools ICT business grew by 11%, which, we believe, is ahead of the market as a whole. RM remains the clear leader in this market, and this lead was extended during the year with the launch of highly innovative new products such as Tablet PC, Kaleidos and ICT Alive. Our strategic projects activity made significant progress during the year, with four major project wins. As well as reinforcing our educational ICT business, these projects have allowed us to develop further our presence in the broader education services market. The combination of these projects and a number of smaller contracts has resulted in an annualised turnover run rate at year end in our education services business of approximately £15 million. We are also continuing our strategy of making carefully targeted acquisitions of successful companies with expertise, intellectual property and established businesses that can add value in our target markets. Education funding We reported at the time of our Interim Results announcement in May that, following the start of the government year 2003/04, some schools were facing budget difficulties. This had less impact on RM than some feared. In fact, revenues from our individual schools ICT business saw a year-on-year increase in the second half, with head teachers continuing to prioritise investment in ICT. Looking ahead, the education funding situation for government year 2004/05 is somewhat clearer. Much of the uncertainty in the 2003/04 settlement was due to head teachers' expectations of growth not being matched by the reality of their budgets. For 2004/05 the Department for Education and Skills (DfES) has provided head teachers with budget indications much earlier than usual. The DfES has committed to a guaranteed minimum 4% budget increase per pupil for all schools, against an 'unavoidable cost pressure' of 3.4%. There are also plans for a significant increase in capital expenditure on school buildings over the next ten years. Educational ICT Our customers value our ability to provide them with complete integrated solutions that address all of their ICT requirements. These solutions typically include personal computer hardware as well as software and support. Providing such a wide range of products and services is a strength for the Group as it enables us to take the role of an educational establishment's ICT partner. This year both the value and volume of our hardware products increased significantly. We are a highly efficient PC supplier, and we continue to differentiate our PC range through the addition of education specific products such as Intellidesk (an integrated school desk / PC combination) and the All-in-One PC (a space saving PC design). We have also made good progress in the provision of interactive white boards - a priority area for ICT in schools - with unit volumes growing by approximately 70% during the year. Education software RM's education software business has shown growth during the year as a result of the Electronic Learning Credit (eLC) scheme, which provides dedicated funding for schools to purchase digital learning resources. The eLC scheme was put in place by the DfES as part of their Curriculum Online strategy, recognising the impact of the BBC's intention to provide free educational content. The scheme is worth £100 million per year in each of the government years 2003/04, 2004/05 and 2005/06. Schools, as expected, are substituting eLC funds for money they would otherwise have spent from their core budgets on this kind of product. Nonetheless, the scheme has brought much needed stability to this market. RM is pleased to be able to report a generally positive conclusion to our campaign in response to the BBC's Digital Curriculum plans. The BBC's proposed new service was given approval by the Department of Culture, Media and Sport in January, but with significant constraints designed to minimise the market impact of the service. Recently, that approval has been reviewed by the European Commission and further important ground has been gained. The conditions of the approval have been strengthened, with the BBC having to provide a fixed, detailed five-year plan of the areas they will - and won't - be active in. The European Commission has also made it clear that the UK government must ensure that funding is in place to 'alleviate' the BBC's market impact. We now view this episode as effectively closed. We believe our actions have resulted in constraints on the BBC that will result in a more healthy competitive market for digital learning resources, which will benefit schools, pupils and suppliers alike. The existence of a more secure market means that potential further development investment may now be justified. Kaleidos, which is built on the experience of our ground-breaking Maths Alive product, positions RM as a significant provider of managed learning environments (MLEs). MLEs offer educational establishments a framework for structuring and delivering digital learning resources. We have established partnerships with a number of important educational publishers who will be making their content available to work with Kaleidos. Strategic projects Strategic projects are important to RM both because increasing numbers of our educational ICT customers are aggregating their business into large, multi-year projects, and because education services will usually take the form of large contracts. However, they do require a substantially different model for customer engagement and product and service delivery. We established a dedicated strategic projects team at the beginning of the year, as previously announced it has been successful in achieving £110 million of long-term business. Our success in winning strategic project contracts results from a number of key characteristics. We have good project management skills, wide ranging experience (including technical and educational understanding), a strong balance sheet and a growing ability to work in complex multi-disciplinary partnerships. With our bidding successes during 2003 we are also building up a significant track record. Our attention has now turned to successfully replenishing our bid pipeline, and to executing well the contracts we have already won. Education services Our goal is to extend our position as the UK's leading provider of educational ICT products and services, and become a leading provider of broadly-based education services. Our priority is to identify professional services that contribute to improving teaching and learning in schools, and which build on the Group's substantial educational and technology expertise. Two of our strategic project wins - the South Yorkshire eLearning Programme and the Qualifications and Curriculum Agency (QCA) assessment project - will see the Group providing services that are fundamentally different from our traditional business. In South Yorkshire, RM is taking responsibility for providing workforce skills training as well as for providing products that support eLearning. For the QCA we are providing a pioneering eAssessment service, which will be used to deliver the first national, high stakes test to be offered online to schools in England. We have also developed a market-leading understanding of the delivery of online professional development through our Indigo Visions service. Indigo Visions was commissioned by the DfES and has been developed by 3T Production, our interactive and web design company. Customer satisfaction Following the introduction of our continuous customer satisfaction programme, we now have a clear and current view of how our customers feel about the service they receive from RM. We have received 11,000 customer responses and 5,600 individual improvement suggestions. Our survey data shows that customer satisfaction levels have improved during the year, but there is scope for improving them even further. For the first year a substantial proportion of RM's staff have had an element of their remuneration conditional on the Group achieving a customer satisfaction target. This, together with clearer management priority, has had a noticeable effect on the culture and work patterns of the business. RM Education Solutions India It is increasingly clear that software and computer services companies must have a strategy for benefiting from the cost savings offered by off-shore development facilities. For some years RM has used Indian subcontractors. However, whilst this offered some cost savings, it did not provide either continuity of staff or the development of RM-specific knowledge and experience. During the year we established RM Education Solutions India, our wholly-owned Indian subsidiary. Under the leadership of Connell Viegas, RM ESI now employs 50 people (average age 28) nearly half of whom have a post-graduate qualification. We anticipate that RM will employ 100 - 150 people in India by the end of 2004. It is not our intention that our Indian staff directly replace any of our current permanent UK staff. However, it is part of our plans that the lower costs available in India will be an important factor in improving the value we offer to our customers. People The knowledge, skills and experience of our employees are major assets to RM. A high proportion of RM's staff have had degree level education, and we are also fortunate to have attracted a substantial number of people who have previously worked in the education profession. Financial Review Balance Sheet Intangible fixed assets increased by £3.6 million during the year to £10.8 million. Goodwill of £6.3 million arose on the acquisition of Forvus and there was an amortisation charge of £2.7 million. The net book value of tangible fixed assets declined by £3.1 million as the depreciation charge of £7.8 million significantly exceeded net capital expenditure of £4.4 million. Capital expenditure was tightly controlled. An employee share trust has been established, funded by the Group, to purchase RM plc shares on the open market in order to hedge against obligations in respect of shares awarded under the RM plc Co-Investment Plan. Under current accounting standards these shares are included within fixed assets at cost. Stocks were £3.8 million higher than a year earlier as a result of purchases made for specific customer orders. Closing cash and short term deposits increased by £1.5 million reaching £40.6 million and after deducting loan notes, closing net funds were £5.7 million higher at £38.4 million. Minimum net funds balances during the year were £18.6 million. Average net funds for the year were £31.5 million Deferred income representing customer payments in advance for annually contracted and other services was £25.7 million (2002: £20.3 million) and is included in creditors. Tax The tax charge for the year was £1.5 million representing an effective rate of 18% of profit before amortisation of goodwill compared to 28% last year and the UK standard rate of 30%. Under Financial Reporting Standard 19 (FRS 19) the Group has recognised a deferred tax asset of £1.1 million. The Group benefited from a one off tax credit of £0.9 million relating to the release of prior year's tax provisions following the settlement of certain matters with the Inland Revenue. The Group has also benefited from the full year effect of the enhanced deduction for qualifying research and development expenditure that was introduced from 1st April 2002. It is expected that the tax rate next year will be approximately 28% as a result of the continuing benefit of the research and development tax credit. An additional earnings per share figure has been provided on the basis of this normalised tax rate. Acquisitions The Group acquired Sir (UK) Limited (trading as Forvus Computer Services) in July for an initial consideration of £4.7 million satisfied in cash with a further £2.5 million payable in December 2006 against which the vendors have provided a warranty should certain performance targets not be met. Following the year end Peakschoolhaus Limited was purchased for a maximum consideration of £2.9 million satisfied by an initial cash payment of £1.5 million plus loan notes payable in three years time up to a maximum of £1.4 million conditional upon the performance of the business over the three year period. Both of these were targeted acquisitions that represent significant milestones in the development of the Group's education services business. Prospects We enter 2004 a much healthier company, addressing broader market opportunities. However we still have much to do to reduce our dependency on commodity ICT products and to increase the educational value of the products and services we offer to our customers. The school funding position is clearer than it was when we reported our Interim results in May 2003. With the DfES committing to a minimum per-pupil funding increase for government year 2004/05 intended to fund 'unavoidable cost pressures', head teachers will face less uncertainty in setting their budgets for 2004/05 than they did in 2003/04. Nonetheless, budget pressures remain, particularly for those schools that set deficit budgets for 2003/04. 2004 will include a full year's contribution from our two recent acquisitions. There will also be an increased contribution from the strategic projects we won during 2003, with the Classroom 2000 project in Northern Ireland in particular contributing significant hardware revenues during the year. We are not expecting the educational ICT market to show any significant growth in the next government year. The opportunity for RM - as it was in 2003 - is to generate growth by increasing our share of educational ICT spend and by expanding into broader education services markets. As always at the time of our Preliminary Results announcement, it is too early in the financial year to give an indication of the outcome for 2004. However the Board believes that RM is well positioned to make further progress. CONSOLIDATED PROFIT AND LOSS ACCOUNT For the year ended 30th September 2003 2003 2002 £000 £000 Turnover Existing operations 214,929 202,158 Acquisitions 565 - -------------------------- -------- -------- Total turnover 215,494 202,158 Cost of (162,209) (150,914) sales ---------- -------- -------- Gross profit 53,285 51,244 -------------------------- -------- -------- Operating expenses: Selling & distribution (26,968) (26,457) Research & development (11,729) (13,836) Administrative expenses (9,451) (17,848) -------------------------- -------- -------- (48,148) (58,141) -------- -------- Operating profit/(loss) 5,137 (6,897) -------- -------- Operating profit/(loss) analysed between: Existing operations before exceptional items and goodwill 7,575 4,059 Exceptional administrative expenses - (8,968) Amortisation of goodwill - existing operations (2,112) (1,988) -------- -------- Operating profit/(loss) for existing operations 5,463 (6,897) Acquisitions before goodwill (8) - Amortisation of goodwill - acquisitions (318) - -------- -------- Operating loss for acquisitions (326) - -------- -------- Total operating profit/(loss) 5,137 (6,897) -------------------------- -------- -------- Net interest receivable 1,082 983 -------------------------- -------- -------- Profit/(Loss) on ordinary activities before taxation 6,219 (5,914) -------- -------- Profit/(Loss) on ordinary activities before taxation analysed between: Profit on ordinary activities before taxation, amortisation of goodwill and exceptional administrative expenses 8,649 5,042 Exceptional administrative expenses - (8,968) Amortisation of goodwill (2,430) (1,988) -------- -------- 6,219 (5,914) -------- -------- Tax (charge)/credit on profit/(loss) on ordinary activities (1,544) 1,095 -------------------------- -------- -------- Profit/(Loss) on ordinary activities after taxation 4,675 (4,819) Dividends paid and proposed (3,875) (3,767) -------- -------- Retained profit/(loss) for the year 800 (8,586) -------------------------- -------- -------- Earnings/(Loss) per ordinary share Basic and diluted 5.2p (5.1p) Diluted - before amortisation of goodwill 7.9p (3.0p) Diluted - before amortisation of goodwill and exceptional items 7.9p 3.8p Diluted - before amortisation of goodwill and exceptional items at normalised tax rate 6.9p 3.8p CONSOLIDATED BALANCE SHEET As at 30th September 2003 2003 2002 £000 £000 Fixed assets Intangible fixed 10,777 7,141 assets Tangible fixed 17,091 20,199 assets Investment in own 664 - shares --------------------------- ------- ------- 28,532 27,340 Current assets Stocks 13,759 9,954 Debtors 44,317 43,041 Investments - short term cash 13,125 20,157 deposits Cash at bank and in hand 27,500 18,968 --------------------------- ------- ------- 98,701 92,120 Creditors Amounts falling due within (76,028) (70,327) one year ---------------------------- ------- ------- Net current assets 22,673 21,793 ------------------- ------- ------- Total assets less current liabilities 51,205 49,133 Creditors Amounts falling due after (8,081) (5,943) more than one year Provision for liabilities and charges (1,245) (2,131) --------------------------- ------- ------ Net assets 41,879 41,059 --------------------------- ------- ------ Capital and reserves Called-up share capital 1,794 1,794 Share premium account 20,349 20,349 Capital redemption reserve 94 94 Profit and loss account 19,642 18,822 --------------------------- ------- ------ Equity shareholders' funds 41,879 41,059 --------------------------- ------- ------ CONSOLIDATED CASH FLOW STATEMENT For the year ended 30th September 2003 2003 2002 £000 £000 Net cash inflow from operating activities 18,612 25,019 Returns on investments and servicing of 1,082 983 finance Taxation (1,889) (4,209) Capital expenditure and (5,092) (3,506) financial investment Acquisitions (3,263) (499) Equity dividends paid (3,716) (3,916) --------------------------- ------- ------- Net cash inflow before use of liquid resources and financing 5,734 13,872 Management of liquid resources 7,032 (12,062) Financing (4,254) (3,903) --------------------------- ------- ------- Increase/(Decrease) in cash in the year 8,512 (2,093) --------------------------- ------- ------- RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS For the year ended 30th September 2003 2003 2002 £000 £000 Increase/(Decrease) in cash in the year 8,512 (2,093) Capital element of finance lease 20 11 payments Cash (outflow)/inflow from change in liquid (7,032) 12,062 resources Settlement of loan notes 4,234 522 --------------------------- -------- ------- Change in net cash resulting from cash 5,734 10,502 flows Issue of loan notes - (4,898) Exchange translation 20 (9) --------------------------- -------- ------- Movement in net funds in the year 5,754 5,595 Net funds brought forward 32,663 27,068 --------------------------- -------- ------- Net funds carried forward 38,417 32,663 --------------------------- -------- ------- PRELIMINARY ANNOUNCEMENT 1. Report and Accounts 2003 & AGM 2004 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 2002. The financial information set out in this announcement does not constitute the Company's statutory accounts for the years ended 30th September 2003 or 30th September 2002 but is derived from those accounts. Statutory accounts for the year ended 30th September 2002 contained an unqualified audit report, did not contain statements under section 237 (2) or (3) of the Companies Act 1985 and have been delivered to the Registrar of Companies. The Company will hold its Annual General Meeting on 28th January 2004, following which the statutory accounts for the year ended 30th September 2003 will be posted and delivered to 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 18% of profit before amortisation of goodwill (2002: credit at 28%). The tax rate for the year benefited from the full year effect of the enhanced deduction for qualifying research and development expenditure together with an £860,000 one off benefit of a prior year adjustment following the acceptance of the treatment of certain items by the Inland Revenue. It is expected that the tax rate next year will be approximately 28% as a result of the continuing benefit of the research and development tax credit. The tax charge of £1,544,000 (2002: credit £1,095,000) comprises current tax £1,711,000 (2002: £865,000) and deferred tax credit £167,000 (2002: credit £1,960,000). 3. Dividends per share The Directors have recommended the payment of a final dividend of 3.4p per share (2002: 3.2p) bringing the total dividend for the year to 4.35p per share (2002: 4.15p). The final dividend is payable on 6th February 2004 to shareholders on the register on 7th January 2004. 4. Earnings/(Loss) per share Basic earnings per ordinary share for the year ended 30th September 2003 is based on 89,400,658 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 2003 takes account of share options in issue and is based on a weighted average number of 89,619,022 ordinary shares issued and issuable. A reconciliation of the basic earnings/(loss) per share with diluted earnings per share is as follows: Year ended 30th September Year ended 30th 2003 September 2002 ------ ------ ------- ------- ------- ------ Profit Number Pence (Loss)/ Number Pence after of per Profit of per tax shares share after shares share tax £000 '000 £000 '000 ------ ------ ------- ------- ------- ------ Basic earnings/(loss) per share 4,675 89,401 5.2 (4,819) 93,765 (5.1) Impact of share options - 218 - - 10 - ------ ------ ------- ------- ------- ------ Diluted earnings/(loss) per share 4,675 89,619 5.2 (4,819) 93,775 (5.1) ------ ------ ------- ------- ------- ------ Supplementary earnings/(loss) per share before amortisation of goodwill and exceptional items: Diluted earnings/(loss) per share 4,675 89,619 5.2 (4,819) 93,775 (5.1) Effect of amortisation of goodwill 2,430 - 2.7 1,988 - 2.1 ------ ------ ------- ------- ------- ------ Diluted earnings/(loss) per share before amortisation of goodwill 7,105 89,619 7.9 (2,831) 93,775 (3.0) Effect of exceptional items - - - 6,360 - 6.8 ------ ------ ------- ------- ------- ------ Diluted earnings per share before amortisation of goodwill and exceptional items 7,105 89,619 7.9 3,529 93,775 3.8 Effect of normalising tax rate (878) - (1.0) - - - ------ ------ ------- ------- ------- ------ Diluted earnings per share before amortisation of goodwill and exceptional items at a normalised (28%) tax rate 6,227 89,619 6.9 3,529 93,775 3.8 ------ ------ ------- ------- ------- ------ Included in the current year within tax is a one off benefit of an adjustment relating to prior years (see note 2). A new earnings per share measure at normalised tax rates of 28% excludes the effect of this adjustment. 5. Prior year exceptional administrative expenses During the previous year to 30th September 2002 exceptional costs relating to restructuring and redundancy activities, rationalisation of facilities and an impairment charge relating to a licence held as an intangible fixed asset were included within exceptional administrative expenses. 6. Acquisitions Sir (UK) Limited which trades as Forvus was acquired for a maximum consideration of £7,080,000 on 14th July 2003. The initial cash consideration was £4,630,000 with a further maximum of £2,450,000 payable before December 2006, conditional upon certain financial targets being met. Goodwill arising on this acquisition of £6,292,000 is being amortised to the profit and loss account on a straight-line basis over 5 years. Following the close of the year, Peakschoolhaus Limited was acquired for a maximum consideration of £2,900,000 satisfied by the initial payment of £1,500,000 in cash with a further maximum deferred consideration of £1,400,000 in loan notes payable over a 3 year period, conditional upon certain financial targets being met. 7. Investment in own shares Following shareholder approval, a long term incentive plan for senior executives in the Group has been implemented. Subject to performance conditions, matching shares will be awarded at the end of the performance period pro rata to shares acquired by the participants. The Group has purchased shares in order to provide matching shares. These shares are held by an Employee Share Trust and are shown within fixed assets as investment in own shares and comprise 650,000 ordinary shares of 2p each. 8. Reconciliation of movements in shareholders' funds ------ ------ ------- ------- ------- ------ Share Share Capital Profit 2003 2002 Capital Premium Redemption And Total Total Loss £000 Account Reserve Account £000 £000 £000 £000 £000 ------ ------ ------- ------- ------- ------ Beginning of the year 1,794 20,349 94 18,822 41,059 53,024 Retained profit/(loss) for the year - - - 800 800 (8,586) Share issues - - - - - 10 Share repurchase - - - - - (3,380) Other movements - - - 20 20 (9) ------ ------ ------- ------- ------- ------ End of year 1,794 20,349 94 19,642 41,879 41,059 ------ ------ ------- ------- ------- ------ 9. Net cash flow from operating activities 2003 2002 £000 £000 Operating profit/(loss) 5,137 (6,897) Depreciation charge 7,836 8,805 Exceptional amortisation of intangible fixed - 5,000 assets Normal amortisation of intangible fixed 2,656 2,619 assets Profit on sale of fixed assets (277) (130) (Increase)/Decrease in stocks (3,805) 1,029 (Increase)/Decrease in debtors (715) 11,660 Increase in creditors 7,780 2,933 ------- ------- Net cash inflow from operating activities 18,612 25,019 10. Pension scheme Following the further 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 whilst disclosing additional FRS 17. The FRS 17 valuation of the now closed defined benefit scheme as at 30th September 2003 identified a deficit of £16.7 million (£11.7 million after tax), compared to a deficit of £16.9 million (£11.9 million after tax) a year earlier. Whilst there was a better than expected return on scheme assets, this was offset by an increase in liabilities as a result of changes in the inflation and discount rate assumptions. In addition there was a £4.2 million increase in liabilities as a result of the adoption of the more prudent mortality tables (PMA92-3 & PFA92-3 compared to PMA92 & PFA92). During the year employee contributions to the scheme were increased by 0.25% and various changes to benefits were introduced. The profit and loss account charge for the year was £3.2 million under SSAP24 and it is expected that a broadly similar charge for next year, as a percentage of salary costs, will lead to the recovery of the deficit over 15 years. Copies of the Annual Report and Accounts may be obtained after the posting date of 19th December 2003 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: http://www.rm.com and a copy of the Annual Report and Accounts will be available at the same site from 19th December 2003. This information is provided by RNS The company news service from the London Stock Exchange

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