REG - RM PLC - Interim Results <Origin Href="QuoteRef">RM.L</Origin> - Part 1
06/09/2014 02:36
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RNS Number : 5546L
RM PLC
07 July 2014
7 July 2014
RM plc announces interim results for the 6 months ended 31 May 2014
RM plc, the educational ICT and resources group, announces its interim results for the 6 months ended 31 May 2014.
Highlights
· Total revenue of £92.1m (2013: £118.8m)
o Education Technology reduction of 36.2% with the planned move away from the sale of personal computing devices
o Education Resources growth of 11.3%
o Assessment and Data Services growth of 3.0%
· Adjusted* operating profit margin increased to 8.0% (2013: 4.1%)
· Adjusted* operating profit increased by 49% to £7.3m (2013: £4.9m). Adjusted* profit before tax of £7.0m (2013:
£4.4m)
· Adjusted* diluted EPS: 6.2p (2013: 3.6p)
· Cash generated by operations of £6.1m (2013: £19.6m)
· Net cash and short-term deposits of £40.3m (2013: £51.8m at 31 May, £63.2m at 30 November) after payment of
£14.7m special dividend and £8.0m for pension risk reduction
· Pension deficit decreased to £8.8m (2013: £25.3m at 31 May; £15.8m at 30 November). Deficit net of deferred tax
was £5.4m
· Interim dividend per share increased by 14.3% to 0.96p (2013: 0.84p).
David Brooks, RM's CEO, said:
"We are pleased to report a solid set of results for the first half. We are particularly encouraged by the double digit
top-line growth in Education Resources for both UK and exports, while maintaining good margins in this business.
The reshaping of the largest division, Education Technology, continues with the discontinuing of hardware device
manufacturing and the end of the stand-alone sale of personal computer devices progressing well. As headlined previously,
refocusing this business on software and services will take time with the trend towards devolved procurement at a school
level and the expiry of BSF contracts.
Assessment and Data Services continues to grow organically and maintain strong margins.
Trading performance in the second half is expected to be similar to that in the first half."
* Adjusted profit and adjusted EPS are before amortisation of acquisition related intangible assets; share-based payment
charges; restructuring costs; impairment of goodwill, acquisition related intangible assets and investments; the gain on
sale of operations; credit on settlement; and the change in provisions for dilapidations on leased properties and onerous
lease contracts.
The Group early adopted the IAS19 Employee Benefits (Revised) accounting standard changes for the defined benefit pension
scheme in the year ended 30 November 2013. The prior period interim financials have been revised for comparability.
For further information contact: RM plcDavid Brooks, Chief Executive OfficerIain McIntosh, Chief Financial Officer 08450 700300 FTI Consulting Sophie McMillan 020 3727 1000
RM plcDavid Brooks, Chief Executive OfficerIain McIntosh, Chief Financial Officer 08450 700300
FTI Consulting Sophie McMillan 020 3727 1000
Results
6 months toMay 2014 6 months toMay 2013 12 months toNovember 2013
Revenue £92.1m £118.8m £261.8m
Adjusted* operating profit £7.3m £4.9m £17.2m
Adjusted* profit before tax £7.0m £4.4m £16.4m
Profit before tax £6.7m £4.6m £9.4m
Adjusted* diluted Earnings Per Share 6.2p 3.6p 12.4p
Diluted Earnings Per Share 5.9p 3.6p 6.6p
Ordinary dividend per share 0.96p 0.84p 3.30p
Special dividend per share - - 16.00p
Cash and Short term deposits £40.3m £51.8m £63.2m
*Throughout this statement, adjusted profit and adjusted EPS are before amortisation of acquisition related intangible
assets; share-based payment charges; restructuring costs; impairment of goodwill, acquisition related intangible assets and
investments; the gain on sale of operations; credit on settlement; and the change in provisions for dilapidations on leased
properties and onerous lease contracts.
The Group early adopted the IAS19 Employee Benefits (Revised) accounting standard changes for the defined benefit pension
scheme in the year ended 30 November 2013. The prior period interim financials have been revised for comparability.
Revenue declined 22.5% to £92.1m compared with £118.8m for the same period last year, with growth in the ADS and Education
Resources divisions being more than offset by the expected decline in the Education Technology division following the
decision to discontinue the sale of personal computing devices announced in 2013.
Adjusted* profit before tax was £7.0m (2013: £4.4m). Adjusted* operating profit was £7.3m (2013: £4.9m). Profit before tax
was £6.7m (2013: £4.6m).
Group headcount reduced to 1,885 at 31 May 2014 compared with 2,201 at 31 May 2013.
Operating capital efficiency remained strong. Cash generated by operations was £6.1m (2013: £19.6m), net cash and
short-term deposits at 31 May 2014 was £40.3m (2013: £51.8m at 31 May, £63.2m at 30 November). This balance is after
payment of a £14.7m special dividend and the £8.0m pension escrow account payment.
Adjusted* diluted earnings per share were 6.2p (2013: 3.6p). Diluted earnings per share were 5.9p (2013: 3.6p).
Pension
The IAS 19 deficit relating to RM's defined benefit pension scheme has decreased since 30 November 2013 to £8.8m (2013:
£25.3m at 31 May and £15.8m at 30 November), which is primarily due to scheduled deficit recovery payments made into the
scheme plus £8.0m paid into an escrow account established to pursue risk mitigation exercises; offset by increased
liabilities due to a reduction in market interest rates. The deficit net of deferred tax was £5.4m (2013: £19.5m at 31 May
and £12.7m at 30 November). Quotations have been received from a number of third parties to provide a pensioner buy-in
whereby longevity and investment risk to the scheme with respect to pensions currently in payment is largely eliminated.
Such a buy-in is expected to be progressed in the second half of the year. Further risk mitigation activities are being
considered.
Dividend
Given the continued strong rate of cash generation, the interim dividend per share has been increased by 14.3% to 0.96p
(2013: 0.84p). The dividend will be payable on 12 September 2014 to shareholders on the register on 15 August 2014.
Assessment and Data Services
Branded as 'RM Results', the Assessment and Data Services ('ADS') division provides products and services that include
secure, innovative systems for creating high-stakes exams and tests, onscreen testing, onscreen marking and the management
and analysis of educational data.
6 months toMay 2014 6 months toMay 2013 12 months toNovember 2013
Assessment and Data Services revenue £10.1m £9.8m £26.5m
Assessment and Data Services adjusted* operating profit £2.0m £0.8m £4.1m
Revenue in this division increased by 3.0% to £10.1m (2013: £9.8m). Adjusted* operating profit increased from £0.8m for the
first half of 2013 to £2.0m for the first half of 2014.
E-marking pilot projects continue with AQA, a major UK examination awarding body, and internationally a contract was won
with the Caribbean Examinations Council.
Margins remain strong though performance in the half was flattered by the cumulative impact of an improvement in the
forecast lifetime profitability on an established long term contract.
Education Resources
The Education Resources ('ER') division comprises two operating businesses: TTS and SpaceKraft. TTS, which represents over
90% of divisional revenue, is a value-added distribution business offering a wide range of curriculum products and
materials to schools for both general and departmental use. SpaceKraft supplies products and installation services for the
Special Educational Needs market.
6 months toMay 2014 6 months toMay 2013 12 months toNovember 2013
Education Resources revenue £29.3m £26.4m £54.0m
Education Resources adjusted* operating profit £3.8m £3.0m £7.2m
ER reported revenue growth of 11.3% to £29.3m (2013: £26.4m). TTS UK direct catalogue and online revenue rose 12.4%;
International revenue grew 53.6% and represented 12.4% of TTS revenues in the period. TTS sales to UK trade and CSR
partners were more subdued with revenue falling 24.2%. SpaceKraft's revenues were marginally ahead of last year and the
business is no longer loss making.
Adjusted operating margins increased to 13.1% (2013: 11.3%) in part due to the elimination of losses from SpaceKraft
combined with operating efficiencies in TTS following investment in systems in 2013.
Education Technology
The Education Technology ('ET') division supplies IT Services, Internet Services, Infrastructure Solutions and Digital
Platforms and Content to UK schools and colleges.
6 months toMay 2014 6 months toMay 2013 12 months toNovember 2013
Education Technology revenue £52.7m £82.6m £181.2m
Education Technology adjusted* operating profit £3.0m £2.5m £8.6m
The repositioning of the division to discontinue the sale of personal computing devices continues. Manufacturing of
hardware devices ceased in June 2014. Third party partners Misco and Kelway have been appointed to provide hardware devices
to customers, where still required under existing contracts and bundled procurement processes, and to manage existing
warranty and maintenance obligations respectively.
Staff cost reductions have been implemented ahead of plan in the half and write downs in the value of remaining inventory
have been significantly less than originally expected. A new Managing Director joined the division on 1 May 2014.
The division generated an adjusted operating profit of £3.0m (2013: £2.5m) with the benefit of both higher hardware revenue
and lower costs than planned through the reshaping process.
IT Services represent over half of the division's revenue. Offerings in this business are being repositioned to be more
appropriate to customers' needs in a market that has changed significantly since Building Schools for the Future ('BSF')
contracts. Revenue from BSF contracts is expected to continue to fall over 2014 and 2015.
In Infrastructure Solutions we continue to provide network solutions including a mix of software tools and third party
hardware. Sales in this area were more subdued than expected.
Digital Platforms and Content is the smallest business within the ET division. There were good client wins for Integris
School Management Systems which benefited from Pearson's decision to exit this market. Penetration of the new
propositions, RM Unify in schools outside Scotland, and RM Books remains modest.
Statement on Principal Risks and Uncertainties
Pursuant to the requirements of the Disclosure and Transparency Rules the Group provides the following information on its
principal risks and uncertainties. The Group considers strategic, operational and financial risks and identifies actions
to mitigate those risks. These risk profiles are updated at least annually. The principal risks and uncertainties
detailed within the Group's 2013 Annual Report remain applicable. This is available from the RM website: www.rmplc.com.
Outlook
The reshaping of the largest division, Education Technology continues with the discontinuing of hardware device
manufacturing and the stand-alone sale of personal computer devices progressing well. As headlined previously, refocusing
this business on software and services will take time with the trend towards devolved procurement at a school level and the
expiry of BSF contracts.
Education Resources and Assessment and Data Services, continue to grow organically and maintain good margins.
Trading performance in the second half is expected to be similar to that in the first half.
Condensed Consolidated Income Statement
for the half-year ended 31 May 2014
Half-year ended 31 May 2014 Half-year ended 31 May 2013 Year ended 30 November 2013
Adjusted Adjustments Total Adjusted Restated (note 3) Adjustments Restated (note 3) Total Restated(note 3) Adjusted Adjustments Total
Notes £000 £000 £000 £000 £000 £000 £000 £000 £000
Revenue 92,110 - 92,110 118,806 - 118,806 261,759 - 261,759
Cost of sales (57,037) - (57,037) (85,349) - (85,349) (187,793) - (187,793)
Gross profit 35,073 - 35,073 33,457 - 33,457 73,966 - 73,966
Operating expenses (27,746) - (27,746) (28,546) - (28,546) (56,757) - (56,757)
- Amortisation of acquisition related intangible assets - (152) (152) - (98) (98) - (195) (195)
- Impairment of goodwill, acquisition related intangible assets and investments - - - - - - - (328) (328)
- Gain on sale of operations - - - - 244 244 - 1,387 1,387
- Share-based payment charges - (399) (399) - (186) (186) - (507) (507)
- Restructuring charge - (83) (83) - (309) (309) - (5,128) (5,128)
- Decrease/(increase) in provision for dilapidations on leased properties and onerous lease contracts - 445 445 - - - - (2,627) (2,627)
- Exceptional credit on settlement - - - - 543 543 - 543 543
(27,746) (189) (27,935) (28,546) 194 (28,352) (56,757) (6,855) (63,612)
Profit from operations 7,327 (189) 7,138 4,911 194 5,105 17,209 (6,855) 10,354
Investment income 280 - 280 221 - 221 730 - 730
Finance costs (575) (171) (746) (687) (88) (775) (1,490) (159) (1,649)
Profit before tax 7,032 (360) 6,672 4,445 106 4,551 16,449 (7,014) 9,435
Tax 5 (1,479) 43 (1,436) (1,174) (33) (1,207) (4,910) 1,643 (3,267)
Profit for the period 5,553 (317) 5,236 3,271 73 3,344 11,539 (5,371) 6,168
Earnings per ordinary share: 6
Basic 6.4p (0.4)p 6.0p 3.6p - 3.6p 12.6p (5.9)p 6.7p
Diluted 6.2p (0.3)p 5.9p 3.6p - 3.6p 12.4p (5.8)p 6.6p
Paid and proposed dividend per share: 7
Interim 0.96p 0.84p 0.84p
Final - - 2.46p
Special - - 16.00p
Adjustments to profit have been presented to give a better guide to business performance (refer to note 1).
All amounts were derived from continuing operations.
Condensed Consolidated Statement of Comprehensive Income
for the half-year ended 31 May 2014
Half-year ended Half-year ended Year ended
31 May 2014 31 May 2013 30 November 2013
Restated (note 3)
£000 £000 £000
Profit for the period 5,236 3,344 6,168
Items that will not be reclassified subsequently to profit and loss:
Defined Benefit Pension Scheme remeasurements (2,385) (6,447) 1,442
Tax on items that will not be reclassified subsequently to profit and loss 188 1,595 (799)
Items that are or may be reclassified subsequently to profit and loss:
Fair value gain/(loss) on hedged financial instruments 618 147 (435)
Exchange gain/(loss) on translation of foreign operations 53 19 (329)
Tax on items that are or may be reclassified subsequently to profit and loss - - 73
Other comprehensive expense for the period (1,526) (4,686) (48)
Total comprehensive income/(expense) for the period attributable to equity holders 3,710 (1,342) 6,120
Condensed Consolidated Balance Sheet
At 31 May 2014
Notes 31 May 2014 31 May 2013 30 November 2013
Restated (note 3)
£000 £000 £000
Non-current assets
Goodwill 14,067 14,395 14,067
Acquisition related intangible assets 612 862 764
Other intangible assets 838 1,868 1,026
Property, plant and equipment 8,271 10,853 9,099
Interest in associate - 58 -
Other receivables 9 1,911 1,911 1,911
Deferred tax assets 4,918 7,410 4,622
30,617 37,357 31,489
Current assets
Inventories 11,559 17,012 10,549
Trade and other receivables 9 32,508 38,556 35,134
Tax asset 107 315 340
Cash and short-term deposits 8 40,278 51,795 63,169
84,452 107,678 109,192
Total assets 115,069 145,035 140,681
Current liabilities
Trade and other payables 10 (75,140) (86,695) (78,917)
Provisions (2,961) (3,837) (7,201)
(78,101) (90,532) (86,118)
Net current assets 6,351 17,146 23,074
Non-current liabilities
Retirement benefit obligation (8,767) (25,341) (15,828)
Other payables 10 (5,652) (2,786) (3,455)
Provisions (6,351) (4,363) (6,255)
(20,770) (32,490) (25,538)
Total liabilities (98,871) (123,022) (111,656)
Net assets 16,198 22,013 29,025
Equity attributable to equity holders of the parent
Share capital 1,870 1,870 1,870
Share premium account 26,997 26,997 26,997
Own shares (2,932) (2,972) (2,972)
Capital redemption reserve 94 94 94
Hedging reserve 144 108 (474)
Translation reserve (332) (37) (385)
Retained earnings (9,643) (4,047) 3,895
Total equity 16,198 22,013 29,025
Condensed Consolidated Cash Flow Statement
for the half-year ended 31 May 2014
Notes Half-year ended Half-year ended Year ended
31 May 2014 31 May 2013 30 November 2013
Restated (note 3)
£000 £000 £000
Profit from operations 7,138 5,105 10,354
Adjustments for:
(Gain)/loss on foreign exchange derivatives (106) (16) 75
Impairment of goodwill - - 328
Amortisation of acquisition related intangible assets 152 98 195
Amortisation of other intangible assets 188 316 582
Depreciation of property, plant and equipment 1,475 1,804 3,919
Gain on sale of operations - (244) (1,387)
Loss on disposal of other intangible assets - 372 736
Gain on disposal of property, plant and equipment (199) (209) (118)
Share-based payment charges 399 186 507
(Decrease)/increase in provisions (391) 306 7,777
Defined Benefit Pension Scheme administration cost 159 248 391
Operating cash flows before movements in working capital 8,815 7,966 23,359
(Increase)/decrease in inventories (1,010) (2,225) 4,238
Decrease in receivables 2,506 19,914 20,383
Decrease in payables:
- decrease in trade and other payables (328) (4,825) (10,779)
- decrease in other provisions (262) - (52)
- decrease in onerous lease and dilapidations provisions (550) (662) (1,331)
- decrease in employee related restructuring provisions (3,112) (532) (1,155)
Cash generated by operations 6,059 19,636 34,663
Defined Benefit Pension Scheme cash contributions:
- deficit catch-up payments (1,861) (2,224) (4,384)
- pension escrow account (8,000) - -
Tax paid (1,311) (121) (1,790)
Borrowing facility arrangement and commitment fees (263) (263) (451)
Interest paid - (2) (20)
Income on sale of finance lease debt 54 79 289
Net cash (outflow)/inflow from operating activities (5,322) 17,105 28,307
Investing activities
Interest received 163 142 441
Proceeds from sale of operations - - 336
Proceeds on disposal of property, plant and equipment 380 265 420
Purchases of property, plant and equipment (813) (1,257) (1,980)
Purchases of other intangible assets - (278) (68)
Increase in short-term deposits - - (6,000)
Net cash used in investing activities (270) (1,128) (6,851)
Financing activities
Ordinary dividends paid 7 (2,257) (2,063) (2,834)
Special dividends paid 7 (14,679) - -
Repayment of obligations under finance leases (2013: Net of proceeds from sale and leaseback of vehicles) (342) - 771
Net cash used in financing activities (17,278) (2,063) (2,063)
Net (decrease)/increase in cash and cash equivalents (22,870) 13,914 19,393
Cash and cash equivalents at the beginning of period 57,169 37,823 37,823
Effect of foreign exchange rate changes (21) 58 (47)
Cash and cash equivalents at the end of period 8 34,278 51,795 57,169
Condensed Consolidated Statement of Changes in Equity
for the half-year ended 31 May 2014
Share capital Share premium Own shares Capital redemption reserve Hedging reserve Translation reserve Retained earnings Total equity
Notes £000 £000 £000 £000 £000 £000 £000 £000
At 1 December 2013 1,870 26,997 (2,972) 94 (474) (385) 3,895 29,025
Profit for the period - - - - - - 5,236 5,236
Other comprehensive income/(expense) - - - - 618 53 (2,197) (1,526)
Total comprehensive income - - - - 618 53 3,039 3,710
Transactions with owners of the company
Share-based payment awards exercised in period - - 40 - - - (40) -
Share-based payment fair value charges - - - - - - 399 399
Ordinary dividends paid 7 - - - - - - (2,257) (2,257)
Special dividends paid 7 - - - - - - (14,679) (14,679)
At 31 May 2014 1,870 26,997 (2,932) 94 144 (332) (9,643) 16,198
Share capital Share premium Own shares Capital redemption reserve Hedging reserve Translation reserve Retained earningsRestated(note 3) Total equityRestated(note 3)
Notes £000 £000 £000 £000 £000 £000 £000 £000
At 1 December 2012 1,870 26,997 (2,972) 94 (39) (56) (662) 25,232
Profit for the period - - - - - - 3,344 3,344
Other comprehensive income/(expense) - - - - 147 19 (4,852) (4,686)
Total comprehensive income/(expense) - - - - 147 19 (1,508) (1,342)
Transactions with owners of the company
Share-based payment fair value charges - - - - - - 186 186
Ordinary dividends paid 7 - - - - - - (2,063) (2,063)
At 31 May 2013 1,870 26,997 (2,972) 94 108 (37) (4,047) 22,013
Share capital Share premium Own shares Capital redemption reserve Hedging reserve Translation reserve Retained earnings Total equity
Notes £000 £000 £000 £000 £000 £000 £000 £000
At 1 December 2012 1,870 26,997 (2,972) 94 (39) (56) (662) 25,232
Profit for the year - - - - - - 6,168 6,168
Other comprehensive (expense)/income - - - - (435) (329)) 716 (48)
Total comprehensive income/(expense) - - - - (435) (329) 6,884 6,120
Transactions with owners of the company
Share-based payment fair value charges - - - - - - 507 507
Ordinary dividends paid 7 - - - - - - (2,834) (2,834)
At 30 November 2013 1,870 26,997 (2,972) 94 (474) (385) 3,895 29,025
Notes to the Condensed Interim Financial Statements
1. General information
RM plc ('Company') is incorporated in the United Kingdom and listed on the London Stock Exchange
.
The unaudited condensed consolidated interim financial statements as at 31 May 2014 and for the 6 months then ended
comprise those of the Company and its subsidiaries (together 'the Group').
Income statement presentation
The income statement for the half-year ended 31 May 2014 is presented in three columns. This presentation is intended to
give a better guide to business performance by separately identifying the following adjustments to profit: the amortisation
of acquisition related intangible assets; the impairment of goodwill, acquisition related intangible assets and
investments; the gain on sale of operations; share-based payment charges; restructuring costs; the change in provisions for
dilapidations on leased properties and onerous lease contracts; and the exceptional credit on settlement. The columns
extend down the income statement to allow the tax and earnings per share impacts of these transactions to be understood.
2. Accounting policies
This condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as
adopted by the European Union.
The annual financial statements of the Group are prepared in accordance with International Financial Reporting Standards
(IFRSs) as adopted by the European Union. As required by the Disclosure and Transparency Rules of the Financial Conduct
Authority (FCA), the condensed set of financial statements has been prepared applying the accounting policies and
presentation that were applied in the preparation of the Group's published consolidated financial statements for the year
ended 30 November 2013.
The preparation of condensed consolidated interim financial statements requires management to make judgements, estimates
and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities,
income and expense. Actual results may differ from these estimates. In preparing these condensed consolidated interim
financial statements, the significant judgements made by management in applying the Group's accounting policies and the key
sources of estimation uncertainty were the same as those that applied to the consolidated financial statements as at and
for the
year ended 30 November 2013
.
Going concern
The Directors have assessed forecast future cash flows over the coming year and are satisfied that the Group's cash
position and agreed working capital facilities are sufficient to meet these cash flows. Given the Group's continued
seasonality and long term education project contractual commitments, cash flows are forecast to be at their highest outflow
between July and September.
Considering the above, the Directors believe that the Group is well placed to manage its business risks successfully
despite the current uncertain economic outlook and have a reasonable expectation that the Group has adequate resources to
continue in operational existence for the foreseeable future. Therefore, they continue to adopt the going concern basis of
accounting in preparing the interim financial statements.
3. Prior year adjustments
a. Employee BenefitsThe Group adopted IAS 19 Employee Benefits (as revised in June 2011) in the year ended 30 November 2013. The Condensed Consolidated Income Statement and the Condensed Consolidated Statement of Comprehensive Income for the half year ended 31 May 2013 have been restated for the impact of this adoption. The effect of the adoption on the half-year ended 31 May 2014 has been provided to
assist comparison.
Half -year ended Half-year ended 31 May 2013
31 May 2014
Effect As reported Adjustment Restated
£000 £000 £000 £000
Consolidated Income Statement
Operating expenses (159) (28,104) (248) (28,352)
_______ _______ _______ _______
Profit from operations (159) (248)
Finance costs (256) (534) (241) (775)
_______ _______ _______ _______
Profit before tax and profit attributable to equity holders (415) (489)
Consolidated Statement of Comprehensive Income
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