Rm Regulatory News (RM.)

14 Dec 2005 07:00

RM PLC14 December 2005 RM plc: IFRS transition information for the year ended 30 September 2005 RM plc, the leading supplier of information and communications technology (ICT)and other services to education, is providing International Financial ReportingStandards (IFRS) transition information for the year ended 30 September 2005. RMwill report interim results for the six months to 31 March 2006 under IFRS inMay 2006, when additional transitional information will be provided. Key Financials - Transition of FY2005 from UK GAAP to IFRS • Underlying business performance and cash flow unchanged • Revenue unchanged at £262.7 million • Profit before tax and goodwill charges increases from £12.8 million to £14.0 million (+9%) - Pension cost falls by £1.3 million - Application of IFRS 2 (Share-based Payment) increasesprofit - No R&D capitalised • Profit before tax increases from £5.5 million to £11.5 million (+109%) - Goodwill amortisation ceases • Diluted EPS before goodwill charges increases from 10.5p to 11.6p (+10%) • Net assets £38.2 million compared to £38.5 million This press release and the accompanying presentation have been prepared on thebasis of current understanding of IFRS as it will apply on 30 September 2006.These standards are subject to review and endorsement by the European Commissionand may change. Further industry-specific practice about the application of IFRSmay also emerge. All restatements are unaudited. A conference call for investment analysts will take place at 10:00am onWednesday 14 December 2005. To access this facility dial +44 (0) 1452 561 263. Acopy of the accompanying presentation will be available at 8:30am at www.rm.com/investors - Ends -For further information, please contact: Mike Greig, Group Finance Director RM plc 08709 200200Phil Hemmings, Director of Corporate AffairsAndrew Fenwick Brunswick 020 7404 5959Fiona LaffanMark Antelme Adoption choices Share-based payments: IFRS 2 applied to equity instruments granted post 7November 2002. Employee benefits: Adoption of 16 December 2004 amendment to IAS 19 allowingactuarial gains and losses to be presented in statement of recognised income andexpenditure rather than using a corridor approach. Business combinations: Combinations already recognised at 1 October 2004 havenot had IFRS 3 retrospectively applied. Financial instruments: IAS 32 and 39 not applied to periods prior to 1 October2005. Consolidated income statement £'000 2005UK GAAP profit before tax 5,459Add back goodwill amortisation 6,294Add back goodwill impairment 1,092UK GAAP profit before tax and goodwill charges 12,845Share-based payment 14Pensions 1,260Holiday pay accrual (122)IFRS profit before tax and goodwill charges 13,997Goodwill impairment (2,469)IFRS profit before tax 11,528 Earnings per share IFRS UK GAAPBasic 8.9p 2.3pDiluted 8.9p 2.2pDiluted - before goodwill charges 11.6p 10.5p Consolidated net assets £'000 2005 2004UK GAAP net assets 38,515 40,601Dividends 3,399 3,195Pensions (net of tax) (11,123) (10,395)Goodwill 4,917 -Tax 1,236 821Share-based payment 2,331 1,328Holiday pay liability (1,027) (906)IFRS net assets 38,248 34,644 Goodwill FY2005 impact: • Amortisation charge of £6.3 million reduces to nil, resulting in increase in intangible assets (goodwill) • peakschoolhaus impairment charge increases from £1.1 million to £1.2 million, reflecting impairment of the balance at transition • Sentinel goodwill written down to £4.2 million by an impairment charge of £1.2 million (UK GAAP amortisation charge £1.2 million) Future impact: • Historic goodwill not amortised and subject to annual impairment review • Future acquisitions will involve the identification and evaluation of separate intangible assets in addition to goodwill Current policy: • Goodwill is shown at cost less amortisation • Amortisation provided to write off cost over 5 years. • Provision is made for impairment where appropriate IFRS policy: • Goodwill is carried at transition value • Annual impairment review of carrying value, no goodwill amortisation Share based payments FY2005 impact: • 0% of profit before tax • Income statement charge £1.13 million - £14k less than UK GAAP charge £0.27 million charge for share options (new) £0.77 million charge for co-investment plan (£0.2 million reduction from UK GAAP) £0.09 million charge for other schemes (£0.1 million reduction from UK GAAP) • Since 2003, RM has used a co-investment scheme rather than share options for senior management Future impact: • Dependent upon share price at grant, performance conditions, quantity of shares/options granted, historic share price volatility, leavers and exercise experience Current policy: • Share options not expensed, as exercise price is set at market value at grant • Co-investment scheme shares expensed IFRS policy: • Income statement charge at fair value for equity instruments granted to employees, including share options; co-investment plan; staff share scheme; and deferred bonus Pensions FY2005 impact: • Increase in liabilities of £11.1 million: £15.9 million pension liability net of £4.8 million deferred tax asset, previously disclosed under UK GAAP • Reduced income statement charge at £2.1 million (a reduction of £1.3 million from SSAP 24 charge) • Income statement charge of £2.1 million comprises £1.7 million operating charge and £0.4 million other finance charge Future impact: • Balance sheet bears net of pension scheme assets and liabilities, with expected movements reflected in income statement and variations reflected in equity Current policy: • Regular pension cost charged to the profit and loss at a substantially level % of current and future pensionable payrolls • Variations over regular pension cost allocated to the profit and loss over average remaining lives of the current members • Balance sheet shows the difference between the profit and loss charge and amounts paid to the pension fund IFRS policy: • Assets and liabilities of the defined benefit pension scheme on balance sheet • Movements reflected in income statement and statement of recognised income and expenditure R&D FY2005 impact: • Nil - no project expenditure meeting recognition criteria (technical feasibility, future economic benefit, intention to use/sell, technical/ financial resource to complete, ability to use/sell, ability to measure expenditure reliably) Future impact: • Project expenditure will continue to be reviewed against capitalisation criteria. Expenditure meeting the criteria will be capitalised and amortised over its expected useful life. Assets will then be subject to an annual impairment review Current policy: • Expenditure is written off to the profit and loss account in the year in which incurred IFRS policy: • Expenditure, including software development, meeting certain recognition criteria must be capitalised, amortised over its useful economic life and subject to impairment reviews • Industry practice on treatment has not yet emerged - RM view: technical feasibility is achieved when product enters validation Hedge accounting and inventory valuation FY2005 impact: • Nil - IAS 39 Financial instruments not adopted until 1 October 2005 Future impact: • Foreign exchange forward contracts will be reviewed for effectiveness in meeting hedge accounting requirements • Inventory purchases will no longer be accounted for at contracted exchange rates • Potential for short-term income statement volatility Current policy: • Gains and losses arising on foreign exchange forward contracts are deferred until the hedged transaction is recognised • Inventory is recorded at rates in matched forward contracts IFRS policy: • Hedging instruments are recorded at fair value. Movements on effective hedges deferred in reserves until inventory is received and taken to income statement thereafter. Movements on ineffective hedges taken to income statement immediately • Gains/losses deferred in reserves are recycled to the income statement when inventory is sold • Inventory receipts recorded at average exchange rates Other impact areas Holiday pay accrual • at 1 October 2004 and 1 October 2005 employees had on average 5 days of holiday accrued. IFRS requires a liability to be recorded for this entitlement. A liability of £0.9 million is recognised at 1 October 2004 which increases by £0.1 million to £1.0 million at 1 October 2005, reflecting the increased payroll over this time Dividends • the final dividend is not accrued until approved, therefore not included within year end numbers. Distributions to shareholders are not recorded in the income statement. The FY2005 impact is a reduction in creditors of £3.4 million • RM plc distributable reserves £31.8 million (UK GAAP £30.3 million) Taxation • in addition to the deferred tax on the pension scheme liability, IFRS requires that deferred tax is provided on temporary differences which are expected to be recovered. £1.2 million deferred tax asset recognised on share based payment and holiday pay accrual balances Segmental reporting Primary reported segments unchanged: • Infrastructure software and services; • Education software and services; and • Hardware This information is provided by RNS The company news service from the London Stock Exchange