Financial

From the Chairman's Report 2008-2009

Introduction

We are pleased to report that in terms of turnover R&M have once again enjoyed growth and expansion over the past financial year. One of the key measurements of the groups performance is its continual growth. Sales increased by 9.3% whilst our gross profit margin remained stable.

New Operating System

Continued growth dictated the need to upgrade our systems and following major investment we are pleased to report that our new operating system (SXE) went live across the group during 2008. The implementation of this system has consumed much time and energy but will give us better controls and reporting as our business develops. We believe the system will help improve overall profitability through improved sales reporting and inventory management.

UK Branches

Our UK branch network grew substantially during 2007 with new branches being launched in Newbury and Pembroke and a new subsidiary company opening in Oxford. Despite tough economic conditions these branches made positive strides forward during their first year of trading and are achieving sales growth ahead of our projected budgets. We feel confident that they will make a positive contribution to the group's profitability over the coming year. Our Cable and Fixings companies continue to expand beyond our expectations. The diversity and specialisation that these businesses provide has been instrumental in bringing many new sales opportunities to the group outside of our traditional scope of supply. Our fixings division in particular have secured a number of long term supply agreements with blue chip companies that will provide a good platform by which to continue to grow their business.

Another positive aspect of the business being that branches that have not previously performed as profitably as we had hoped appear to have turned the corner and are now beginning to make a positive contribution to the group.

International Expansion

Internationally the group has again performed well, our project and export division has been restructured to allow us to service our ever expanding customer base . The oil and gas sectors are still very buoyant with major projects being implemented throughout the world. With the price of oil remaining high, operators are making major investments in new and existing oil and gas fields and the demand for our products and services continues to grow. We have strengthened our ties with our partner company in the United States, this has resulted in joint contract awards for projects in Peru, Chile and Algeria. This development allows us to globally target projects that have historically been out of our reach. We anticipate that through our existing and global activities that this area of our business will grow substantially over the next 5 years.

Overseas we remain strongly committed to the Caspian region and in addition to our established business in Azerbaijan opened in 1998 we now have an established sales office in Kazakhstan.

Our investment in a new business in Dubai, R&M Wholesale Electric, has proved to be very successful. First year sales were exceeded our budget and the company generated a net profit in its first year of trading. The company has a strong management team which will be increased during the year. The customer base continues to grow and we are confident this company will make a very healthy profit by the end of its second year of trading. We are very optimistic that this business will strengthen and further enhance our international sales activities.

Financial Control

The group continues to manage its cash and borrowing requirements centrally to minimise interest expenses whilst ensuring that the Group has sufficient liquid resources to meet the operational needs of the business.

The group controls its exposure to credit risks by regularly reviewing customers' accounts and limits and only granting terms to those whom are credit worthy. Credit insurance is also used to insure domestic debts.

The group's foreign currency exposure arises from the export of goods. Group policy allows for these exposures to be hedged naturally by buying and selling in the same currencies where possible. When this is not possible then forward option contracts are used.

The market is very competitive and the group is committed to maintaining its competitive pricing position and also keeping the very high standards of customer service. The group also continues to build upon its strong relationships with its suppliers.

Due to the tough economic conditions being experienced globally R&M have taken measures to ensure that our operational costs remain at a sustainable level whilst not affecting our ability to service our customers. During the year a thorough review of our overheads and personnel has been undertaken and we have reviewed every aspect of our management structure. We believe that by taking these measures we are in a lean position to be able to react to any changes in the marketplace.

Conclusion

In summary we are confident that the coming financial year will see us continue to establish our new businesses in the UK and overseas, our efforts will be centred around consolidating and improving on our existing sales activities and we have no additional plans to invest in any new ventures over the coming year. The implementation of our new operating systems will allow us to control and manage the group in a more detailed and disciplined manner.

Once again we expect to enjoy an increase in the Groups turnover whilst the implementation of the new business system and management improvements should help us to retain or improve our profitability.