Financial

From the Chairman's Report 2012

Group Financial Performance

We are pleased to report that despite continued extremely tough economic conditions the group has had a very successful year . The operating profits (group and joint venture) increased to £2,091,010 (2011 - £826,640).

Sales increased by 30.4% to £65,863,358 (2011- £50,519,290) with gross profit margin dropping only 1.83% to 17.67% (2011 – 19.50%). Total Gross profit increased to £11,638,608 (2011 - £9,854,083).

The group’s improved operational systems have continued to be successful. Better controls through improved financial reporting procedures and key performance indicators and inventory management.

Domestic Operations

Our focus during 2011/2012 has again been one of continued improvement on the profitable and growth areas within the group. Following the closure or amalgamation of underperforming branches during the previous two years we are pleased to report that all our operational branches and divisions have generated and returned profit back into the Group during the past financial year. Our core UK distribution branches have all performed well and we are particularly pleased that our Oxford Branch has been able to return a profit for the first time since it was formed. Other notable successes have been the continued sales growth of our flagship Southampton branch and our Neyland and Swansea branches have also had a successful year.

Our specialist divisions also continue to perform very well. 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 further strengthened their position in the marketplace and are adding additional services to their offering with the development of pre-fabricated material supply and modular design services. Fixings continue to operate on a nationwide basis. Also of note is the continued success of our Assembly division, we have extended the services that we can offer our customers and have taken on additional third party assembly agreements with internationally recognised manufacturers which has led to increased sales and opportunities along with the development on own-branded niche products and associated manufacturing and fabrication opportunities. Further expansion and possible relocation of our Assembly division is planned during 2012/2013.

International Operations

Internationally the group has again performed well. We have seen excellent growth within our export division and are proud to have exported to well over 75 countries worldwide since our formation in 1996, our client list continues to grow year on year and we will be focusing on many new emerging markets during 2012/2013.

In terms of our Project Division we continue to supply major on-going contracts in the North Sea, Azerbaijan, Kazakhstan and remote locations such as Papua New Guinea . The longevity of the contracts secured will ensure that we will remain busy during the new financial year and allows us to focus on the new trench of oil and gas projects earmarked for sanction in the next year.

Our Joint Venture Activity has increased further which has led to new awards in geographical areas that historically have been out of reach. We anticipate that through our expanding global presence that this specialist area of our business will continue to grow substantially over the next 5 years.

Overseas we remain strongly committed to the Caspian region and have successfully completed the second year of a long term MRO contract covering the supply of capital equipment, operational spares and maintenance equipment to the expanding operator investments in the Caspian Sea region. In addition to our established business in Azerbaijan, we have also had continued success in Kazakhstan with restructuring and increased sales presence planned for 2012/13. These enhancements will leave us in a very strong position to both maintain our historical clients and develop new in this fast developing oil and gas rich region.

Our J/V Company in Dubai, R&M Wholesale Electric, had a profitable year following a complete re-structuring due to the major downturn in construction that was experienced throughout the Middle East during 2010. During the last 12 months we switched our focus from construction to the continually buoyant oil and gas sectors and are now becoming well established in this more specialist arena. The international projects division has grown significantly with great successes both in the UAE and International markets. Additional investment made in both the operational and sales functions.

Financial Controls

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 references agencies are used and Credit insurance is 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.

R&M have continued to ensure that our operational costs remain at a sustainable level whilst not affecting our ability to service our customers. We believe that by taking these measures we are in a lean position to be able to react to any additional changes in the marketplace.

Conclusion

In summary despite the continued gloomy economic outlook the group has performed exceptionally well. Our efforts will again be centred on improving on our existing sales operations with the focus on increasing sales and profitability; although we have no immediate plans to expand our operations