REG-RM plc RM plc: Preliminary Results for the year ended 30 November 2021
15/02/2022 07:15
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RM plc (RM.)
RM plc: Preliminary Results for the year ended 30 November 2021
15-Feb-2022 / 07:00 GMT/BST
Dissemination of a Regulatory Announcement that contains inside information according to
REGULATION (EU) No 596/2014 (MAR), transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.
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15 February 2022
RM plc
Preliminary Results for the year ended 30 November 2021
Improved 2021 performance despite continued COVID-19 disruption
RM plc ("RM"), a leading supplier of technology and resources to the education sector, reports
its final results for the year ended 30 November 2021.
Highlights
• Satisfactory results versus the prior year taking into account continued disruption to
school attendance and examinations
• Revenue up 12% driven by strong trading in RM Resources enabling adjusted operating
profit** improvement of 22%
• Balance sheet remains resilient with net debt** at £18.3m and movement of the pension
position from a deficit to a surplus
• Statutory profit after tax down 45% with £8.3m (2020: £1.7m) of investment program costs
expensed following a change in accounting treatment
• Paid and proposed final dividend of 4.7 pence per share (2020: 3.0p)
• Strategy reset established with plans to deliver sustainable growth
• Good early progress made
£M 2021 2020 Variance
Revenue 210.9 189.0 +12%
Adjusted* operating profit 18.5 15.1 +22%
Adjusted* operating profit margin 8.8% 8.0% +0.8pp
Adjusted* profit before tax 17.1 14.0 +22%
Statutory profit after tax 4.2 7.6 -45%
Adjusted* diluted EPS 16.4p 13.6p +21%
Diluted EPS 5.0p 9.1p -45%
Proposed dividend per share 4.7p 3.0p +1.7p
Net debt** 18.3 1.3
IAS 19 Pension surplus/(deficit) 30.4 (18.7)
* Throughout this statement, adjusted operating profit and EPS are stated after adjusting
items (See Note 2) which are identified by virtue of their size, nature and/or incidence. The
treatment of adjusted items is applied consistently period on period and is consistent with
the way that underlying trading performance is measured by management.
** Alternative performance measure, see Note 2.
Commenting on the results, Neil Martin, Chief Executive of RM, said:
"RM delivered a satisfactory financial performance in another year impacted by COVID-19. While
the current environment remains uncertain, market trends are developing positively for the
longer-term outlook of RM.
This has been an important year strategically as we acknowledge a need to adapt if we are
going to fully capitalise on the supportive structural opportunities and deliver sustainable
growth. We refreshed our strategy to sharpen our focus and have made good early progress
including a number of key leadership appointments across the Group. This is an exciting time
to be involved in education and I continue to be impressed by the commitment and passion of
our colleagues and their desire to improve educational outcomes for our customers".
Notes to Editors:
RM provides market-leading products and services to educational institutions, exam bodies and
international governments which improve, simplify and support education and learning.
The education sector is transforming, and RM is well positioned to capitalise on this through
its three divisions.
Following a review of strategy, the names of the Divisions have changed to align more closely
to their customer proposition
RM Resources (remains the same) is the established provider of education resources for early
years, primary schools and secondary schools across the UK and to 80 countries
internationally.
RM Results becomes RM Assessment, acknowledging its broader product portfolio and the shift
from a focus on digital marking only, to one engaged in digital solutions throughout the
assessment lifecycle. RM Assessment is a leading provider of assessment software, supporting
exam awarding bodies, universities and governments worldwide to digitise their assessment
delivery
RM Education becomes RM Technology highlighting the Division's focus on improving the
technology environment in schools and colleges to support learner outcomes. RM Technology is a
market-leading supplier of ICT software, technology and services to UK schools and colleges
Ex-dividend date for 2021 final dividend 17th March 2022
Record date for 2021 final dividend 18th March 2022
AGM 7th April 2022
Payment of 2021 final dividend 29th April 2022
References to times are to Greenwich Mean Time. If any of the above times or dates should
change, the revised times and/or dates will be notified to shareholders by an announcement on
a Regulatory Information Service. Payment of the 2021 final dividend is subject to the
approval by shareholders.
Presentation and live webcast details
A presentation for analysts and investors will be held today at 9.00am.
The audio and slide presentation will be webcast live and on demand at the following website:
1 https://www.investis-live.com/rmplc/61fab7b66c4c440c00000323/csaeg
The presentation will also be accessible via a live conference call:
Dial-in (UK): 0800 640 6441
Dial-in (Local): 020 3936 2999
Dial-in (all other locations): +44 20 3936 2999
Access code: 896032
For additional details and registration for the webcast, please contact Headland Consultancy
on +44 203 805 4822 / 2 rm@headlandconsultancy.com.
Contacts:
RM plc
Neil Martin, Chief Executive Officer
Mark Berry, Chief Financial Officer
Headland Consultancy (PR adviser to RM) 0203 805 4822
Stephen Malthouse ( 3 smalthouse@headlandconsultancy.com)
Chloe Francklin ( 4 cfrancklin@headlandconsultancy.com)
Jemma Savage ( 5 jsavage@headlandconsultancy.com)
CHAIRMAN'S STATEMENT
Performance
Detailed assessment of the Group's 2021 performance is inevitably dominated by the pandemic.
However, the results reflect the successful efforts of the Group to adapt to the resulting
volatility of customer demand. The trading performance did not match pre-pandemic levels but
was creditable in the light of the challenges presented, and addressed.
In parallel with accommodating these day-to-day fluctuations, good progress has been made on
the warehouse consolidation project and the group-wide IT investment. The new RM Resources
distribution facility is now complete, and the efficiency benefits will flow following systems
integration and the transition of activities from existing sites. The IT project is in early
testing and should also begin to deliver benefits in the current year and will be complete
across all divisions by the end of 2022.
The Resources division, which provides teaching and learning products to support the school
curriculum, saw early demand impacted by school closures in the first quarter but experienced
a strong and pleasing recovery in its UK market following the return to face-to-face teaching.
This produced a sales rate which exceeded pre-pandemic levels. It is uncertain how much of
this volume was catch-up from earlier weakness, but it appears that the division has enjoyed a
useful gain in UK market share. This increase coincided with the widely commented on supply
chain constraints and the consequent necessity for price increases, all of which tested the
organisation. Inevitably, operating costs increased as a result and margins suffered. The
picture overseas was less buoyant as different regional effects of the pandemic made
themselves felt. The outlook for RM Resources is positive, although unpredictable, given the
short cycle nature of the business.
The Digital Assessment division was again constrained by the absence of formal school
examinations in the UK and the difficulties in negotiating new contracts overseas consequent
upon lack of an ability to engage directly with customers. The business delivered a
respectable result in the circumstances. Although the business has good forward visibility
from longer term contracts, performance in 2022 will be affected by a low level of new awards
in 2021 and the extent to which UK school public examinations return to normal. In the longer
term, the increasing attention being given to on-line examinations and assessment should
support positive progress in this division.
The Technology division, providing managed IT services and software for schools had a steady,
if unexciting, year as schools maintained their systems, irrespective of short-term
attendance. The gradual trend to consolidation of schools into multi-academy trusts will
subtly change the nature of the customer relationships and the company will need to offer a
more sophisticated service package. The short-term performance will be relatively flat but it
is noteworthy that the, historically beneficial, long-term Building Schools for the Future
contracts no longer make a contribution.
The Board
Neil Martin was appointed CEO, having previously been CFO, in March 2021. Mark Berry was
appointed CFO, after a period as interim, in September 2021. Further appointments at
below-Board executive level have subsequently been made to strengthen the management team.
Corporate Governance procedures require that I stand down as Chairman by the ninth anniversary
of my appointment, which occurs in May 2022. Accordingly, the Board has conducted a process to
identify and appoint Helen Stevenson as my successor and she will assume the Chairmanship the
day after the announcement of the preliminary results in February. I welcome her and the new
executive team and wish them all, and the Company, well.
Dividend
In the light of the results and the Group's good cash performance, the Board considers it
appropriate to recommend the payment of a final dividend of 3.0 p/share, which together with
the interim dividend would amount to a total of 4.7 p/share.
Outlook
The short term remains subject to COVID-19 uncertainties, but the achievements of the Company
in 2021 set a firm base from which to move forward, supported by the benefits of the current
capital investments.
Chief Executive Officer's statement
RM delivered a resilient performance in 2021 in another year impacted by COVID-19 with school
closures, travel restrictions and the cancellation of school exams in the UK and Ireland.
Our trading was satisfactory taking into account the market conditions and the performance
highlighted some areas of our portfolio that were particularly encouraging, such as the UK
market share gains in our Resources division alongside some areas which require more focused
attention and a clearer direction such as in our Technology division.
Another year impacted by COVID-19
COVID-19 continued to impact the sector with UK schools closed for 8 weeks in the first
quarter of 2021 and school exams cancelled for a second year. School attendance generally ran
at a lower level due to isolation rules which deteriorated further in the fourth quarter as
more children were forced to study from home. Disruption was not isolated to the UK and school
closures were a common occurrence around the world, although we did see exams sat in the
majority of geographies in which we operate.
The related restrictions continued to impact the way we operated with work-from-home guidance
and travel restrictions influencing the way we deliver projects and progress sales pipelines.
Although the organisation has adapted, the changes have come at a time of significant change
in the sector and across our organisation with new leadership, organisational structures, and
the delivery of a complex IT programme.
We also saw significant supply chain constraints build through the year which impacted
pricing, margins, and customer engagement in some parts of the business. Our procurement teams
were agile in establishing alternative supply channels to support the network and we did
increase prices, but the overall impact was negative.
Given the challenges of the year and the change profile in our organisation I have been
delighted by the response of our colleagues who, despite facing a number of challenges,
continued to deliver for our customers and each other.
Whilst the current environment continues to remain uncertain as we enter 2022, with the added
financial challenge of rising inflation impacting our costs and that of our customers, the
pandemic has accelerated a number of important market trends that are positive to the
longer-term outlook of RM.
MARKET TRENDS
The education marketplace is changing. Whilst in part, this is a direct response to COVID-19,
much reflects a movement that has been evolving for some time. Looking beyond the disruption
of the current pandemic, the longer-term market outlook should be positive for RM and our
strategy has been refreshed to ensure it is aligned to capitalise on the benefit from these
trends.
Use of technology in Education Digital delivery of Aggregated School Procurement
Assessment
Accelerating as schools progress Growing engagement on digital Growth in larger school groups
on long digital maturity journey solutions post COVID-19 is key disrupter in buyer
disruption behaviour
Use of technology in Education
Education has traditionally lagged many sectors with respect to digital penetration, with
currently only c. 4% of the $6.5tn global education and training market spend being digital.
In the UK, spend on education technology (defined as spend on technology and support services,
admin software and digital content and learning) was estimated at c. £2bn in 2019. UK
education budgets remain challenged, but despite this, it is anticipated that the proportion
spent on technology will increase over the medium term, given the growing acceptance that
technology can influence a reduction in teacher workload and an improvement in student
attainment. That said, schools are at the start of a long digital maturity journey, beginning
from different places and with different capabilities and resources.
Digital delivery of Assessment
COVID-19 has been accountable for a wide-ranging cancellation of global examinations across a
range of education sectors. This has accelerated a review of the resilience of exam systems
and subsequently the wider value of digital assessment in not only delivering flexibility and
business continuity but also the value it can bring to user experience and data feedback into
the learning process. Business models across education sectors from schools to higher
education and professional qualifications are assessing the impact of learners studying
remotely and consuming materials in different ways and therefore the opportunity for
assessment to adapt accordingly.
Millions of exams are sat globally each year, and this continues to be predominantly on paper.
Indicatively in 2019, 94% of the 38million UK examinations covering schools, professions,
vocation, higher education, and national proficiency tests were done on paper rather than
digitally. The UK is not a leader in digital assessment and RM works with several customers in
different geographies who are further advanced in their digital engagement, but it does give
an indication of the structural opportunity that exists globally for digital assessment
solutions.
Consolidated Procurement across Schools
There has been a transition in recent years in England from schools being maintained and
managed by local authorities, to schools becoming academies and receiving funding directly
from government. Many then come together as a collection of schools in multi-academy trusts
(MATs), the average size of which continues to grow. This transition remains a government
policy focus and a trend that we predict will continue.
Larger MATS are more likely to centralise the procurement of some key services which leads to
a demand for consistency across the school estate and a higher requirement for
professionalism, partnering and demonstration of value delivery. Trends are also starting to
demonstrate an increasing engagement with outsourced support in areas beyond teaching and
learning. This is a positive dynamic for RM as a provider of services such as outsourced IT
services with a national scale and reach that is more mature than many competitors.
Looking ahead
Following my appointment as Chief Executive in the second quarter of 2021, it was clear that
the priority for RM moving forward should be to establish a clear path to long-term
sustainable growth for the benefit of all stakeholders.
RM is a purpose-led organisation with a rich heritage in the education sector following almost
50 years of working exclusively with schools and education bodies globally. Our business has a
unique breadth of knowledge and expertise, strong brands, market positions and industry
renowned customers and partners. We combine this with a cash generative business model and a
resilient balance sheet which provides a positive foundation on which to build.
However, RM has not consistently delivered sustainable growth and the company needs to adapt
its go-to-market approach and customer propositions to the more competitive landscape and a
market that is changing at an accelerating rate. Opportunities exist to improve operational
and commercial execution, reduce complexity and establish clearer accountability.
To address this, we undertook a review of RM's strategy and business model in the second half
of the year. This review has been positive in its output and plans are being progressed which
will build on the strong business foundations and address the opportunities for improvement
that I outlined above. We have made good early progress in changing the go-to-market
divisional structure, maturing customer propositions and investing in leadership positions
across the Group. Importantly in 2022, we move into the implementation phase of the programme
to change our IT platform. The organisation is presently reliant on a legacy technology estate
which results in a higher cost to serve than some competitors, a broader exposure to inflation
and restricted digital and data capabilities. The transition to the new system, which should
be complete by the end of 2022, will see us more than close the technology gap with our peers.
STRATEGY
At a Group level, we have established five simple overarching objectives which are critical to
deliver our growth agenda:-
Why is it important Where are we today In progress
RM Resources Green Refreshed
Define target propositions
customers RM Assessment Amber
Reach more customers New technology
Critical to optimize platform
market share
RM Technology Amber New structure &
leadership
RM Resources Amber Refreshed
propositions
Optimize return on RM Assessment Amber
Improve share of investment where cost New technology
customer spend to sell is high RM Technology Red platform
RM Group Red New structure and
leadership
Customer focus on
trust New technology
Operational Operational efficiency is platform
excellence Tights budgets behind some competitors Amber
Single automated
High-touch warehouse
requirements
Employee engagement
Talent has functional focus
expertise Purpose led organisation
Attract & retain but very challenging Amber New structure and
talent Sector knowledge labour market leadership
Customer empathy New technology
platform
Resilient balance sheet
Maintain strong Need to invest whilst Large capital
financial discipline balancing risk and Good cash generation Green programmes conclude
stakeholder needs in 2022
Prudent fiscal approach
1. Reach more customers
As an organisation focused on a single sector, customer market share is critical and provides
broader commercial opportunities to a portfolio group. It also highlights the value in looking
at adjacent markets in education where we are not currently focused but where the same
customer need exists.
Example opportunity: whilst we are one of the leading brands in the sector, only 2% of UK
schools have an RM Technology Managed Service in a market where this need is increasing.
2. Improve our share of customer spend
The cost to acquire new customers is relatively high and therefore it is critical that once a
relationship is established, it is maintained, and the share of customer spend maximised.
Example opportunity: almost 90% of UK Primary Schools buy from the RM Resources brand, TTS.
The opportunity exists to further leverage the trust in this brand through this channel. For
example, only one third of TTS customers buy wider school supplies from their sister resources
brand, Consortium.
3. Operational excellence
Good customer service and operational efficiency is essential to a sector that delivers a
critical public service to its end customers.
Example opportunity: RM currently trades with a higher cost to serve than some of its
competitors due to its legacy IT platform making it more people intensive to maintain the high
customer service levels required by our customers. As outlined, this platform is being
replaced in the year ahead which will more than close the technology gap on our peers.
4. Attract and retain talent
RM prides itself on a workforce that has functional expertise, deep sector knowledge and
customer empathy. Acquiring, developing and retaining this talent and building a culture of
positive employee engagement is a key success factor.
Example opportunity: In the year, we undertook a culture audit and are refreshing our employee
engagement approach based on the feedback. We have also recently appointed a number of senior
leaders from the education sector and specialisms in broader industry such as Cloud and
Managed Services, to support the strategy execution and broader empowerment.
5. Maintain strong financial discipline
RM has a resilient balance sheet, a cash generative business model and a track record of
prudent fiscal management. It is imperative that this is maintained and remains a focus on the
path to more ambitious growth.
Example Opportunity: our large multi-year investment programmes will be completed in 2022
facilitating a reduction in investment spend and delivery of the financial benefits.
Against the backdrop of these Group-level objectives and coupled with an assessment of our
current execution in light of the changes in our respective markets, the three divisions
revisited their strategies to ensure that they were ambitious and aligned to the growth
agenda. This exercise reconfirmed the need to continue to build on our unique breadth and
depth of domain knowledge, brand strength and capabilities. It also highlighted the necessity
to focus and be clear on the opportunities where we can grow at scale and sustainably
differentiate in the market. This has crystalised a number of activities and exciting changes
that are critical to our growth agenda centred around the clarity of the customer need in a
post COVID environment and the impact of the market trends previously outlined.
Opportunities to unlock growth
Underpinning the 5 strategic objectives to unlock more ambitious growth are three key
opportunities that we will progress and mature over the next 18 months.
Enablers to unlock growth
New digital and automated platforms Portfolio & Operating model Talent & culture
Integrated end to end platform and New divisional structure and Building talent and
automated warehouse enable improved operating model to ensuring the inspiring leadership in a
customer service and data insight whole is greater than the sum purpose led organisation
of its parts
The new digital and automated platforms that will be implemented during 2022 constitute a
significant transformation for the Group. Replacing eight core, but disparate, IT systems
alongside consolidating five distribution centres into a single automated facility will
deliver key benefits which include:
• a secure technology and data estate through connected Group systems, a common financial
system and a Microsoft cloud estate for resiliency;
• improved efficiency and customer experience through automated, integrated processes,
self-serve capability, integrated service management platform and a modern website with
improved user interface;
• improved revenue opportunities delivered through improved data insight from a single view
of the customer and consolidated CRM, tailored and targeted market and improved digital
channels capabilities;
• supply chain optimisation through improved warehouse efficiency and fulfilment performance
and integration of demand with suppliers.
In parallel we have revisited our portfolio and operating model establishing a new divisional
structure with three leadership teams aligned to the divisional model and market focus. This
provides greater customer and domain focus and improved go-to-market execution. We are now
developing the operating model to ensure that the value of RM Group is greater than the sum of
its parts. This is being approached in two ways:
• a focus on leveraging the relationships held in each division to bring broader value to
our customers and a greater awareness of the unique breadth of our Group-wide knowledge
and expertise we have in the sector; and
• revisiting the operating model to ensure that the organisation is delivering efficiently
and effectively. This has identified centres of excellence that can deliver value across
the whole Group rather than being separately delivered in each division. Initial changes
have seen the creation of a single Bid Management function and Architecture and Digital
product development centres.
Talent and culture should always be at the heart of a successful organisation, and this is
particularly important to RM. We have a strong purpose-led culture and committed employees who
care about education and learners, and we see exciting opportunities to continue to evolve and
develop that culture. To support employee engagement, we have undertaken a culture audit,
initiated several equality, diversity and inclusion initiatives and launched a new quarterly
engagement survey which will provide valuable information to support our activities in this
area. In addition, the establishment of the new leadership structure and the appointments made
to key leadership positions in the organisation are designed to foster greater empowerment.
Outlook
The evolving market backdrop provides convincing reasons to believe that the sector is
developing in a constructive and commercially positive way.
The actions taken in the last year and the plans we have in place to unlock growth will take
time to mature and be fully embedded. With the new IT platform and automated warehouse
expected to be fully operational by the end of 2022 and the changes we are making associated
with the strategy refresh and new leadership structure, we are entering an 18 month period of
transition. Following this, we will move into a phase whereby we are able to leverage the
changes and investments made in the business alongside a greater customer and market focus. It
is at this stage where we move beyond pre-COVID levels of financial and operational
performance and will be able to more fully capitalise on the organisation's potential to
deliver sustainable growth with greater agility to exploit customer and market opportunities
as they arise in the future.
All of this represents material change for the organisation, which is essential to achieve its
potential and deliver a sustainable pathway for growth and meet the changing needs of the
education sector. It has been a challenging time to be involved in delivering and supporting
education over the last two years, but this now feels like an exciting time for the sector and
for RM. Our plans rely on dedicated and passionate people to be successful and I continue to
be impressed by the commitment of our colleagues and their desire to not only develop and
advance the organisation but importantly improve educational outcomes for our customers.
Neil Martin
Chief Executive
Chief Financial Officer's statement
Overview
RM's financial performance for the period was resilient despite being materially impacted by
school closures, and the cancellation of all 2021 UK school exams.
Group revenue increased by 11.6% to £210.9m (2020: £189.0m) driven by strong trading in RM
Resources which recovered quickly following the re-opening of UK schools in March 2021.
Revenue growth was driven primarily by demand for UK curriculum resources as schools focused
on curriculum spending to support outdoor teaching, physical education and pupil well-being,
alongside managing COVID-19 transmission risks. Revenues in RM Assessment were broadly in line
with prior year with the partial recovery of global exam activity being offset by a
significant customer in-sourcing a contract in 2020. Hardware and connectivity sales in RM
Technology improved reflecting the ongoing digitisation of school infrastructure.
Adjusted operating profit3 increased by 22.5% to £18.5m (2020: £15.1m) and was driven by
revenue growth partially offset by increased operating costs. Statutory operating profit
decreased by 33.9% to £7.0m (2020: £10.6m) primarily as a result of the accounting policy
change described below.
The group continued to experience higher frictional costs in respect of freight and Brexit;
increased costs associated with the resumption of key projects which were paused in 2020, and
the non-repeat of prior year cost savings associated with our response to the COVID-19
pandemic. In addition, the Group continued to face significant wage inflation pressure through
the year, most significantly in India.
Net debt3 closed the year at £18.3m (2020: £1.3m). The £17.0m net cash outflow reflected good
operating cash generation, offset by planned spending on two large capital programmes, Project
Villa, which comprises the consolidation of five distribution centres into a single automated
facility, and Project Evolution, which comprises the implementation of a new group-wide IT
platform. The completion of both programmes was extended by six months to ensure their
successful implementation. This was due to a need to de-risk the transition due to its
inherent complexity and the impact of ongoing covid restrictions through the year. Both
programmes are expected to complete in 2022 and the Group continues to utilise its £70m
revolving credit facility to fund the investments in them.
Group Financial Performance
Income statement
£m 2021 20201
Adjusted3 Adjustment2 Statutory Adjusted3 Adjustment2 Statutory
Revenue 210.9 - 210.9 189.0 - 189.0
Operating profit 18.5 (11.5) 7.0 15.1 (4.5) 10.6
Profit before tax 17.1 (11.5) 5.6 14.0 (4.5) 9.5
Tax (3.3) 1.9 (1.4) (2.7) 0.8 (1.9)
Profit after tax 13.8 (9.6) 4.2 11.4 (3.7) 7.6
1. Following the IFRS interpretations committee ("IFRIC") agenda decision, we have changed
our accounting treatment and policy for IAS38 Intangible Assets accordingly. Prior year
comparatives have been restated to derecognise previously capitalised SaaS related costs
amounting to £1.7 million. See Note 14.
2. Adjustments reflect the amortisation of acquisition related intangible assets; major
investment strategy costs including dual run costs, profits on sale of non-core assets,
and other property related items. Further details can be found below and in Note 2.
3. Non-GAAP measures. See Note 2.
Group revenue increased by 11.6% to £210.9m (2020: £189.0m).
The pandemic continued to impact revenues in the UK and internationally. UK revenues increased
by 9.8% with international revenues up 24.2%.
Adjusted operating profit margins3 improved to 8.8% (2020: 8.0%). Adjusted operating profit
improved by 22.5% to £18.5m (2020: £15.1m). Statutory operating profit decreased by 33.9% to
£7.0m (2020: £10.6m).
In order to provide an understanding of underlying business performance, certain costs are
identified as 'adjustments' 2 to underlying business performance.
In 2021 Adjusted items comprised the following:
2021 2020
£m £m
Amortisation charges associated with acquisition related intangible assets 2.0 2.0
Stock obsolescence associated with revised warehouse strategy4 - 0.4
Gain on sale of legacy property4 (1.4) (0.7)
Dual running property & licence costs4 2.0 0.6
Gain on sale of legacy investment - (0.7)
Onerous lease commitments 0.5 -
Pension GMP - 0.2
Restructuring costs - 1.0
Net Adjustments before SaaS related expenses 3.1 2.8
IT platform costs incurred and expensed under new accounting guidance2 8.3 1.7
Total adjustments 2 11.5 4.5
The majority of adjusted items relate to planned spending on our two large capital programmes
(4). These items have been disclosed as adjustments because they are material to the relevant
segment.
i. £3.1m of net adjustments relate to amortisation of acquisition intangibles, dual running
and one-off property costs in relation to the warehouse consolidation programme; and
ii. Implementation of Software as a Service ("SaaS") accounting guidance
During the year the Group continued with its implementation of a new group-wide IT platform.
Following the IFRS interpretations committee ("IFRIC") agenda decision, we have changed our
accounting treatment and policy for IAS38 Intangible Assets accordingly. The directors
determined that £8.3m of SaaS related costs incurred during FY21 no longer meet the criteria
for recognition as an asset under IAS38. Accordingly, this amount has instead been expensed to
the income statement. A total of £6.9 million SaaS related costs incurred in the year have
been capitalised and recognised on the balance sheet as an intangible asset.
Prior year comparatives have been restated to derecognise previously capitalised SaaS related
costs amounting to £1.7m.
Taking into consideration the adjustments of £11.5m (2020: £4.5m), statutory operating profit
decreased to £7.0m (2020: £10.6m).
Statutory profit before tax fell to £5.6m (2020: £9.5m) after deducting net interest charges
of £1.4m in relation to the Group's credit facility and finance costs related to the defined
benefit pension schemes.
The total tax charge for the year was £1.4m (2020: £1.9m). The Group's tax charge measured as
a percentage of profit before tax, was 25.3% (2020: 19.9%) driven mainly by an increase in
deferred tax rate which was partially offset by the effect of indexation on the sale of
property.
Statutory profit after tax decreased 45% to £4.2m (2020: £7.6m).
Adjusted diluted earnings per share3 increased to 16.4 pence (2020: 13.6 pence). Statutory
basic earnings per share were 5.0 pence (2020: 9.2 pence) and statutory diluted earnings per
share were 5.0 pence (2020: 9.1 pence).
Cash flow
RM generated cash from operations for the year of £8.4m (2020: £25.9m).
Cash from operations is after charging £6.5m of SaaS related costs incurred during FY21 which
no longer meet the criteria for recognition as an asset under IAS38. Net working capital
outflows for the year were £3.5m as the business returned to growth, and the settlement of
£3.5m of VAT liabilities that were deferred from FY20 under the government's deferral scheme.
The use of cash generated comprised net capital expenditure of £11.8m (2020: £2.1m),
contributions to the defined benefit pension schemes of £4.4m (2020: £4.1m), and tax payments
of £0.1m (2020: £2.6m). Dividend payments were £3.9m having been reinstated following their
suspension in 2020.
Divisional performance
RM Resources
RM Resources revenues increased by 24% to £114.4m (2020: £92.4m) driven by strong curriculum
sales following the re-opening of schools in March. UK education revenue increased by 22% with
international revenues up 39%.
Divisional operating profit increased to £10.1m (2020: £3.1m) and operating margins increased
to 8.8% (2020: 3.3%). The increase was predominantly driven by higher revenues partially
offset by higher product and freight costs associated with COVID-19 and Brexit, reduced
COVID-19 cost saving benefits, and the resumption of the digital and automation projects which
were paused in 2020. Uncertainty remains regarding the impact of the pandemic on supply chains
in both the UK and International markets.
RM Resources continues to make good progress with its warehouse consolidation programme, with
the fit out of the new warehouse and associated office space now complete. The automation and
systems integration prior to the majority of inventory transfer is ongoing, and two of the
five warehouses have now been exited with one exited in the period.
UK
Revenue in the UK increased by 22% to £98.4m (2020: £81.0m) despite schools closed to face to
face teaching for a similar period in 2021 vs. 2020. Our TTS brand performed strongly,
particularly in curriculum sales supporting outdoor teaching, physical education, pupil
wellbeing and COVID-19 transmission management, benefitting from its differentiated position
and innovative, own-developed product portfolio.
International
International sales comprise two key channels, international distributors, through which RM
Resources sells own-developed products to over 80 countries, and international English
curriculum schools to whom it sells a wider portfolio of education supplies. International
revenues increased by 39% to £16.0m (2020: £11.5m) benefiting from reduced restrictions in a
number of key territories vs. the prior year however volumes remain depressed vs. pre pandemic
levels as COVID-19 continues to impact the international landscape with regard to pupil
attendance.
RM Assessment
RM Assessment provides IT software and end-to-end digital assessment services to enable online
exam marking, online testing and the management and analysis of educational data. Customers
include government ministries, exam boards and professional awarding bodies in the UK and
overseas.
Revenue increased by 1% on the prior year to £31.9m (2020: £31.6m) with the partial recovery
of global examination activity in 2021 being offset by a significant customer in-sourcing a
contract in 2020. Revenues remain heavily impacted by lower examination volumes with UK
general exams cancelled and reduced international exam activity being offset by an increase in
professional and language qualification activity.
Exam activity Exam activity
2021 RM customers
vs. 2020 vs. 2019
UK School Exams 3 +10% -95%
UK Other 6 +90% +85%
International 9 +45% -30%
Adjusted operating profit fell by 14% on the prior year to £5.7m (2020: £6.6m), with operating
margins decreasing to 17.9% (2020: 20.9%).
COVID-19 disruption relating to ongoing international travel restrictions and global lockdown
measures continues to adversely impact the sales pipeline development. Wage inflation pressure
through the year increased delivery costs, driven in part by a shortage of in demand skilled
developers in India.
RM Technology
Revenue decreased by 1% to £64.6m (2020: £65.0m) as the division showed its resilience to UK
school closures as schools continued to require technology support with the challenge of
progressing new opportunities.
Adjusted operating profit however decreased by 24% to £7.1m (2020: £9.3m), the key drivers
being the combination of lower gross margins arising from a higher proportion of hardware
sales, together with increased operating costs post lockdown, and the absence of prior-year,
one-off benefits.
Services
The Services offering is primarily the provision of IT outsourcing and associated technology
services (managed services) and managed broadband connectivity to UK schools and colleges.
Total Services revenues declined by 1% to £53.6m (2020: £54.0m) with managed services revenues
declining 4% to £40.5m (2020: £42.0m). This was driven primarily by a reduction in revenues
from long term contracts and a slight reduction in site numbers through the year as converting
the sales pipeline became challenging. Connectivity increased 9% to £13.1m (2020: £12.0m).
Digital Software Platforms
The Digital Software Platform offering covers a number of cloud-based products and services
such as RM Integris (school management system), RM Unify (authentication and identity
management system) and RM SafetyNet (internet filtering system) as well as other content,
finance and network software offerings. Digital Platforms revenues increased marginally to
£11.0m (2020: £10.9m).
Dividend
The Board took the decision not to pay a 2019 final dividend or a 2020 interim dividend as a
result of the pandemic. However, whilst COVID-19 has continued to impact the business, the
Board reinstated the 2020 final dividend and paid an interim dividend in the year of 1.7p
(2020: nil).
In addition, the Board proposes a 2021 final dividend of 3.0 pence per share (2020: 3.0p)
which is subject to shareholder approval. The estimated cost of the final dividend proposed is
£2.5m.
The Board is committed to a long-term sustainable dividend policy and the Company has £35.8m
of distributable reserves, as at 30 November 2021, available to support the dividend policy.
RM plc is a non-trading investment holding company and derives its profits from dividends paid
by subsidiary companies. The Directors consider the Group's capital structure and dividend
policy at least twice a year, ahead of announcing results and during the annual budgeting
process, looking at longer-term sustainability. The Directors do so in the context of the
Company's ability to execute the strategy and to invest in opportunities to grow the business
and enhance shareholder value.
Defined Benefit Pension Schemes
The Company operates two defined benefit pension schemes ("RM Education Scheme" and "Care
Scheme") and participates in a third, multi-employer, defined benefit pension scheme (the
"Platinum Scheme"). Following the closure of one warehouse during the prior year (which
impacted the Platinum Scheme), all schemes are now closed to future accrual of benefits.
The IAS19 net surplus (pre-tax) across the Group increased by £49.1m to £30.4m (2020: £18.7m
deficit) with both the RM Education Scheme and the Platinum Scheme being in surplus. The
improvement was driven primarily by better than expected returns on scheme assets, together
with an increase in the discount rate, which is based on corporate bond yields, both of which
were partially offset by an increase in inflation.
The Group deficit recovery plan payments across all schemes in 2021 were £4.4m (2020: £4.1m).
The triennial valuation as at 31 May 2021 is nearing completion.
Treasury Management
The Company's financial position is supported by a committed revolving credit facility of
£70million that is shared between two banks, HSBC and Barclays. It also has an additional
uncommitted accordion arrangement for a further £30million, enabling the Group to extend the
facility to £100m. The facility was extended during the year and is now committed to July 2023
and retains the option of a further 1-year extension. The associated financial covenants are
based on the definition of finance leases prior to the implementation of the accounting
standard, IFRS16. The Group is reliant on the facility in the short term to manage its net
current liability position.
Treasury activities are managed centrally for the Group including banking relationships and
foreign currency hedging. The Group has foreign currency denominated costs that outweigh
foreign currency denominated revenues and therefore increased currency volatility creates an
exposure. This is primarily attributed to US Dollar and Indian rupee exposure. This risk is
managed through currency hedging against exchange rate movements, typically 9-12 months into
the future. The Group is also working to rebalance its exposure by growing its foreign
currency denominated sales ahead of its costs to reduce the currency imbalance and more
naturally hedge this risk over time.
Going Concern
The financial statements have been prepared on a going concern basis which the Directors
consider to be appropriate for the following reasons.
The Directors have prepared cash flow forecasts for the period to the end of May 2023 which
indicate that, taking into account reasonably plausible downsides as discussed below, the
Company has sufficient funds to meet its liabilities as they fall due for at least 12 months
from the date of this report.
In assessing the going concern position the Directors have considered the balance sheet
position and the level of available finance not drawn down. The balance sheet shows net
current liabilities of £1.0m. At 30 November 2021, the Group had net debt of £18.3m (November
2020: £1.3m) and drawn facilities of £20m (November 2020: £5m). RM Group has a £70m committed
bank facility ("the facility") at the date of this report. Further details are set out in Note
10. Liquidity headroom at 30 November 2021 was £47.9m. Average net debt over the year to 30
November 2021 was £15.8m (2020: £16.3m) with a maximum borrowings position of £29.7m (2020:
£29.6m). The debt facilities are subject to financial covenants of a maximum of 2.5 times Net
Debt/EBITDA and at least 4 times interest cover/EBITDA. These covenants are tested in May and
November. At 30 November 2021 the results of the covenant tests were 0.84 and 22.6
respectively.
The facility was extended by 1 year during 2021 and is committed until July 2023. During this
extension process, the Board initiated conversations regarding a 3-year facility to replace
the current facility when it expires and is confident in obtaining a new or renewed facility
at an appropriate time.
The Chief Financial Officer's statement outlines the performance of the Group in the year to
30 November 2021 including the impact of COVID-19. In this period UK schools were closed for a
number of weeks primarily during Q1, and UK and Irish school exams were cancelled by
respective governments. Despite this backdrop, revenues increased by 12% compared to 2020 and
adjusted profit before tax by 22%. RM Resources continued to provide products to its customers
during school closures and has experienced strong curriculum sales in 2021. In RM Assessment,
whilst the UK general exams saw a significant reduction compared to 2019, other UK assessment
and international examination activity recovered partially. RM Technology continues to be
resilient to UK school closures as it provides the technology support to UK schools and
colleges that has allowed them to operate remotely. Performance by segment is set out in Note
2. Net cash inflow from operating activities was £3.8m.
For going concern purposes, the Group has assessed a base case scenario that assumes no
significant downturn in UK or International markets occurs from that experienced in the year
to 30 November 2021. The base case also incorporates a reduced level of investment expenditure
in 2022 versus that incurred in 2021 relating to the anticipated completion of its two large
capital programmes and assumes a return to shareholders through dividends. Under that base
case RM continues to maintain significant headroom against the committed facility and are
within the Group's covenants.
The Group has assessed a further severe downside scenario that adjusts the base assumptions to
include:
• Further school closures for March through to May 2022 at similar levels of trading
experienced in 2021, comprising a c.30% reduction in divisional revenue in those months;
• Reduced International trading and exams, including an c.25% reduction in International
general school exams against budget;
• Assumes the UK exams that have been cancelled in 2021 are also cancelled in 2022;
• Slower pipeline conversion, a c.50% of budgeted annuity contracts in RM Assessment and RM
Technology being achieved;
• Benefits from our ERP programme are delayed by approximately 1 year
• Business disruption for 2 months in our RM Resources division when the warehouse
automation goes live in 2022 reducing order intake by c.50% in those 2 months;
• Minimal cost mitigations and no significant cash flow deferrals.
The Directors do not believe that all these assumptions occurring together are plausible, but
under these scenarios, in aggregate, the Company continues to have good headroom against the
facility and complies with bank covenants until the facility concludes. Having considered the
severity of this scenario, the Board considers this to be an appropriate worst case scenario.
The Board's assessment of the likelihood of a further downside scenario is remote,
particularly with the continued vaccine booster/ roll out programmes and lifting of
restrictions in key countries and the indications from most governments worldwide that they
intend to lift remaining restrictions as soon as practicable.
Therefore, the Board has a reasonable expectation that the Group has adequate resources to
continue in operational existence and meet its liabilities as they fall due for a period of
not less than 12 months from the date of approval of these financial statements. For this
reason, the Group continues to adopt the going concern basis of accounting in preparing the
annual financial statements.
Mark Berry
Chief Financial Officer
14 February 2022
CONSOLIDATED INCOME
STATEMENT
for the year ended 30 Restated
November 2021
Year ended 30 November 2021 Year ended 30 November 2020
Adjusted Adjustments Total Adjusted Adjustments Total
Note £000 £000 £000 £000 £000 £000
Revenue 2 210,853 - 210,853 188,999 - 188,999
Cost of sales (140,220) - (140,220) (121,551) (365) (121,916)
Gross profit 70,633 - 70,633 67,448 (365) 67,083
Operating expenses (52,164) (11,483) (63,647) (52,119) (4,154) (56,273)
Impairment losses - - - (248) - (248)
Profit from operations 18,469 (11,483) 6,986 15,081 (4,519) 10,562
Other income 3 28 - 28 21 - 21
Finance costs 4 (1,396) - (1,396) (1,055) - (1,055)
Profit before tax 17,101 (11,483) 5,618 14,047 (4,519) 9,528
Tax 5 (3,282) 1,858 (1,424) (2,668) 775 (1,893)
Profit for the year 13,819 (9,625) 4,194 11,379 (3,744) 7,635
Earnings per ordinary
share
- basic 6 16.6p 5.0p 13.8p 9.2p
- diluted 6 16.4p 5.0p 13.6p 9.1p
Paid and proposed 7
dividends per share
- interim 1.70p -
- final 3.00p 3.00p
The previous year's results have been restated (see note 14). Throughout this statement,
adjusted profit and EPS measures are stated after adjusting items which are identified by
virtue of their size, nature and/or incidence. The treatment of adjusted items is applied
consistently period on period and is consistent with the way that underlying trading
performance is measured by management (see note 2).
All amounts were derived from continuing operations.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 30 November 2021 Restated
Year ended Year ended
30 November 2021 30 November 2020
Note £000 £000
Profit for the year 4,194 7,635
Items that will not be reclassified subsequently to profit
or loss
Defined Benefit Pension Scheme remeasurements 13 44,860 (16,302)
Tax on items that will not be reclassified subsequently 5 (10,364) 2,854
to profit or loss
Items that are or may be reclassified subsequently to profit
or loss
Fair value gain on hedged instruments 242 346
Tax on items that are or may be reclassified 5 (45) (3)
subsequently to profit or loss
Exchange loss on translation of overseas operations (180) (205)
Other comprehensive income / (expense) 34,513 (13,310)
Total comprehensive income / (expense) 38,707 (5,675)
The previous year's results have been restated (see note 14).
CONSOLIDATED BALANCE SHEET Restated
At 30 November 2021 At 30 November 2020
Note £000 £000
Non-current assets
Goodwill 49,202 49,322
Intangible assets 23,405 19,016
Property, plant and equipment 16,217 8,423
Right of Use asset 18,018 19,391
Defined Benefit Pension Scheme surplus 13 35,037 665
Other receivables 8 82 63
Contract fulfilment assets 4,169 3,420
Deferred tax assets 5 156 5,333
146,286 105,633
Current assets
Inventories 19,055 18,594
Trade and other receivables 8 33,865 31,475
Contract fulfilment assets 1,360 728
Held for sale asset 3,034 4,793
Tax assets 3,665 2,633
Cash at bank 3,560 5,941
64,539 64,164
Total assets 210,825 169,797
Current liabilities
Trade and other payables 9 (61,369) (61,491)
Tax liabilities - (163)
Provisions 11 (2,066) (435)
Overdraft (2,082) (2,480)
(65,517) (64,569)
Net current (liabilities) /assets (978) (405)
Non-current liabilities
Other payables 9 (21,072) (20,987)
Provisions 11 (1,475) (3,998)
Deferred tax liability (10,830) (3,339)
Defined Benefit Pension Scheme obligation 13 (4,686) (19,318)
Borrowings 10 (19,744) (4,779)
(57,807) (52,421)
Total liabilities (123,324) (116,990)
Net assets 87,501 52,807
Equity attributable to shareholders
Share capital 12 1,917 1,917
Share premium account 27,080 27,080
Own shares (444) (841)
Capital redemption reserve 94 94
Hedging reserve 177 (65)
Translation reserve (882) (702)
Retained earnings 59,559 25,324
Total equity 87,501 52,807
The previous year's results have been restated (see note 14).
CONSOLIDATED
STATEMENT OF
CHANGES IN
EQUITY
for the year
ended 30
November 2021
Share Share Own Capital Hedging Translation Retained
capital premium shares redemption reserve reserve earnings Total
reserve
Note £000 £000 £000 £000 £000 £000 £000 £000
At 1 December
2019 - as 1,917 27,080 (1,007) 94 (411) (497) 32,399 59,575
reported
Configuration 14 - - - - - - (1,798) (1,798)
costs expensed
At 1 December
2019 - as 1,917 27,080 (1,007) 94 (411) (497) 30,601 57,777
restated
Profit for the - - - - - - 7,635 7,635
year- restated
Other
comprehensive - - - - 346 (205) (13,451) (13,310)
income/(expense)
Total
comprehensive - - - - 346 (205) (5,816) (5,675)
income/(expense)
Transactions
with owners of
the Company:
Share-based
payment awards - - 166 - - - (166) -
exercised
Share-based
payment fair - - - - - - 705 705
value charges
At 1 December
2020 - as 1,917 27,080 (841) 94 (65) (702) 25,324 52,807
restated
Profit for the - - - - - - 4,194 4,194
year
Other
comprehensive - - - - 242 (180) 34,451 34,513
income/(expense)
Total
comprehensive - - - - 242 (180) 38,645 38,707
income
/(expense)
Transactions
with owners of
the Company:
Share-based
payment awards - - 397 - - - (397) -
exercised
Share-based
payment fair - - - - - - (100) (100)
value charges
Ordinary 7 - - - - - - (3,913) (3,913)
dividends paid
At 30 November 1,917 27,080 (444) 94 177 (882) 59,559 87,501
2021
CONSOLIDATED CASH FLOW STATEMENT
Restated
for the year ended 30 November 2021 Year ended Year ended
30 November 2021 30 November 2020
Note £000 £000
Profit before tax 5,618 9,528
Investment income 3 (28) (21)
Finance costs 4 1,396 1,055
Profit from operations 6,986 10,562
Adjustments for:
Pension GMP - 170
Amortisation and impairment of intangible assets 2,406 3,038
Depreciation and impairment of property, plant and equipment 4,281 3,718
(Gain) on disposal of other asset - (713)
(Gain)/ loss on disposal of property, plant and equipment (1,449) (949)
Loss/(gain) on foreign exchange derivatives 64 (625)
Share-based payment (credit)/ charge (100) 705
(Decrease) / increase in provisions (353) 1,443
Defined Benefit Pension Scheme administration cost 13 52 37
Operating cash flows before movements in working capital 11,887 17,386
(Increase) / decrease in inventories (460) 3,557
(Increase) / decrease in receivables (2,318) 2,362
(Increase) in contract fulfilment assets (1,381) (1,111)
Movement in payables
- increase in trade and other payables 1,177 6,012
- utilisation of provisions 11 (528) (2,284)
Cash generated from operations 8,377 25,922
Defined benefit pension scheme cash contributions 13 (4,450) (4,094)
Tax paid (135) (2,589)
Net cash inflow from operating activities 3,792 19,239
Investing activities
Interest received 28 21
Proceeds on disposal of investment asset - 1,560
Proceeds on disposal of property, plant and equipment 3,214 2,900
Purchases of property, plant and equipment (8,024) (5,801)
Purchases of other intangible assets (6,977) (801)
Net cash used in investing activities (11,759) (2,121)
Financing activities
Dividends paid 7 (3,913) -
Drawdown/ (repayment) of borrowings 10 15,000 (12,000)
Borrowing facilities arrangement and commitment fees (497) (226)
Interest paid (675) (501)
Payment of leasing liabilities (3,889) (2,523)
Net cash generated by/ (used in) financing activities 6,026 (15,250)
Net (decrease) /increase in cash and cash equivalents (1,941) 1,868
Cash and cash equivalents at the beginning of the year 3,461 1,528
Effect of foreign exchange rate changes (42) 65
Cash and cash equivalents at the end of the year 1,478 3,461
Bank overdraft (2,082) (2,480)
Cash at bank 3,560 5,941
Cash and cash equivalents at the end of the year 1,478 3,461
The previous year's results have been restated (see note 14).
1. Preliminary announcement
The consolidated preliminary results are based on International Financial Reporting Standards
(IFRS) as adopted by the EU and were also in accordance with international financial reporting
standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European
Union.
The Group expects to publish a full Strategic Report, Directors' Report and financial
statements which will be delivered before the Company's annual general meeting on 7 April
2022. The full Strategic Report and Directors' Report and financial statements will be
published on the Group's website at www.rmplc.com.
The financial information set out in this preliminary announcement does not constitute the
Group's statutory accounts for the year ended 30 November 2021. Statutory accounts for 2020
have been delivered to the Registrar of Companies and those for 2021 will be delivered
following the Company's annual general meeting. The 2020 statutory accounts are amended for
the restatement of configuration costs relating to a SaaS platform and are set out in Note 14.
The auditor's reports on both the 2021 and 2020 accounts were unqualified, did not draw
attention to any matters by way of emphasis without qualifying their report and did not
contain statements under s498(2) or (3) of the Companies Act 2006. This Preliminary
announcement was approved by the Board of Directors on 14 February 2022.
Consolidated Income Statement presentation
The Directors assess the performance of the Group using an adjusted operating profit and
profit before tax. The Board believes that presentation of the Group results in this way is
relevant to an understanding of the Group's financial performance (and that of each segment).
Underlying performance excludes adjusted items which are identified by virtue of their size,
nature and/or incidence. The treatment of adjusted items is applied consistently period on
period. This presentation is consistent with the way that financial performance is measured by
management, reported to the Board, the basis of financial measures for senior management's
compensation schemes and assists in providing supplementary information that assists the user
to understand the underlying financial performance, position and trends of the Group. Further
details are provided in Note 2.
Basis of preparation The financial statements have been prepared on the historical cost basis
except for certain financial instruments, share-based payments and pension assets and
liabilities which are measured at fair value. In addition, assets held for sale are stated at
the lower of previous carrying amount and the fair value less costs to sell. The preparation
of financial statements, in conformity with generally accepted accounting principles, requires
the use of estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting period.
Although these estimates are based on the Directors' best knowledge of current events and
actions, actual results ultimately may differ from those estimates.
Going concern
The financial statements have been prepared on a going concern basis which the Directors
consider to be appropriate for the following reasons.
The Directors have prepared cash flow forecasts for the period to the end of May 2023 which
indicate that, taking into account reasonably plausible downsides as discussed below, the
company have sufficient funds to meet its liabilities as they fall due for at least 12 months
from the date of this report.
In assessing the going concern position the Directors have considered the balance sheet
position and the level of available finance not drawn down. The balance sheet shows net
current liabilities of £1.0m. At 30 November 2021, the Group had net debt of £18.3m (November
2020: £1.3m) and drawn facilities of £20m (November 2020: £5m). RM Group has a £70m committed
bank facility ("the facility") at the date of this report. Further details are set out in Note
10. Liquidity headroom at 30 November 2021 was £47.9m. Average net debt over the year to 30
November 2021 was £15.8m (2020: £16.3m) with a maximum borrowings position of £29.7m (2020:
£29.6m). The debt facilities are subject to financial covenants of a maximum of 2.5 times Net
Debt/EBITDA and at least 4 times interest cover/EBITDA. These covenants are tested in May and
November. At 30 November 2021 the results of the covenant tests were 0.84 and 22.6
respectively.
The facility was extended by 1 year during 2021 and is committed until July 2023. During this
extension process, the Board initiated conversations regarding 3 year facilities to replace
the current facility when it expires and is confident in obtaining a new or renewed facility
at an appropriate time. The Board is satisfied that there are several other financing options
that could be put in place to maintain liquidity headroom and that there would be adequate
time to complete negotiation of such arrangements.
The CFO report outlines the performance of the Group in the year to 30 November 2021 including
the impact of COVID-19. In this period UK schools were closed for a number of weeks primarily
during Q1, and many UK and Irish exams were cancelled by respective governments. Despite this
backdrop, revenues increased by 12% compared to 2020 and adjusted profit before tax by 22%. In
RM Resources we continued to provide products to our customers during school closures and have
experienced strong curriculum sales in 2021. In RM Assessment (formerly RM Results), whilst
the UK general exams saw a significant reduction compared to 2019, other UK assessment and
international examination activity recovered partially. RM Technology (formerly RM Education)
continues to be resilient to UK school closures as it provides the technology support to UK
schools and colleges that has allowed them to operate remotely. Performance by segment is set
out in Note 2. Net cash inflow from operating activities was £3.8m.
For going concern purposes the Group has assessed a base case scenario that assumes no further
significant downturn in UK or International markets occurs than that experienced in the year
to 30 November 2021. The base case also incorporates a reduced but still significant level of
investment expenditure in 2022 as we have spent in 2021 relating to our major transformation
projects and assumes a return to shareholders through dividends. Under that base case we
continue to maintain significant headroom against our committed facility and are comfortably
within our covenants.
The Group has assessed a further severe downside scenario that adjusts our base assumptions to
include:
- Further school closures for March through to May 2022 at similar levels of trading
experienced in 2021, comprising a c.30% reduction in divisional revenue in those months;
- Reduced International trading and exams, including an c.25% reduction in International
general school exams against budget;
- Assumes the UK exams that have been cancelled in 2021 are also cancelled in 2022;
- Slower pipeline conversion, a c.50% of budgeted annuity contracts in RM Assessment and RM
Technology being achieved;
- Benefits from our ERP programme are delayed by approximately 1 year
- Business disruption for 2 months in our RM Resources division when the warehouse automation
goes live in 2022 reducing order intake by c.50% in those 2 months;
- Minimal cost mitigations and no significant cash flow deferrals.
The Directors do not believe that all these assumptions occurring together is plausible, but
even considering all these scenarios in aggregate we continue to have good headroom against
the facility and comply with bank covenants until the facility concludes. The Directors also
believe there is reasonable expectation of entering into a new agreement on similar terms as
the existing renewed facility. Having considered the severity of this scenario, the Board
considers this to be an appropriate worst case scenario.
The Board's assessment of the likelihood of a further downside scenario is remote,
particularly with the continued vaccine booster/ roll out programmes and lifting of
restrictions in key countries and the indications from most governments worldwide that they
intend to lift remaining restrictions as soon as practical.
Therefore, the Board has a reasonable expectation that the Group has adequate resources to
continue in operational existence and meet their liabilities as they fall due for a period of
not less than 12 months from the date of approval of these financial statements. For this
reason, the Group continues to adopt the going concern basis of accounting in preparing the
annual financial statements.
Significant accounting policies
The accounting policies used for the preparation of this announcement have been applied
consistently, apart from the treatment of configuration costs relating to a SaaS platform (see
Note 14).
Alternative Performance Measures (APMs)
In response to the Guidelines on APMs issued by the European Securities and Markets Authority
(ESMA) and the Financial Reporting Council (FRC), additional information on the APMs used by
the Group is provided below.
The following APMs are used by the Group:
- Adjusted operating profit
- Adjusted operating margin
- Adjusted profit before tax
- Adjusted tax
- Adjusted profit after tax
- Adjusted earnings per share
- Adjusted cash conversion
- Net debt
Further explanation of what each APM comprises and reconciliations between Statutory reported
measures and adjusted measures are shown in Note 2.
The Board believes that presentation of the Group results in this way is relevant to an
understanding of the Group's financial performance (and that of each segment). Underlying
performance excludes adjusted items which are identified by virtue of their size, nature
and/or incidence. The treatment of adjusted items is applied consistently period on period.
This presentation is consistent with the way that financial performance is measured by
management, reported to the Board, the basis of financial measures for senior management's
compensation schemes and assists in providing supplementary information that assists the user
to understand the underlying financial performance, position and trends of the Group.
The APMs used by the Group are not defined terms under IFRS and may therefore not be
comparable with similarly titled measures reported by other companies. They are not intended
to be a substitute for, or superior to, GAAP measures. All APMs relate to the current year
results and comparative periods where provided.
2. Operating Segments
The Group's business is supplying products, services and solutions to the UK and international
education markets. Information reported to the Group's Chief Executive for the purposes of
resource allocation and assessment of segmental performance is focused on the nature of each
type of activity.
The Group is structured into three operating divisions: RM Resources, RM Assessment (formerly
RM Results) and RM Technology (formerly RM Education). The Chief Operating Decision Maker
review segments at an adjusted operating profit level and adjustments are not allocated to
segments.
A full description of each revenue generating division, together with comments on its
performance and outlook, is given in the Strategic Report. Corporate Services consists of
central business costs associated with being a listed company and non-division specific
pension costs.
This Segmental analysis shows the result and assets of these divisions. Revenue is that
earned by the Group from third parties. Net financing costs and tax are not allocated to
segments as the funding, cash and tax management of the Group are activities carried out by
the central treasury and tax functions.
Segmental results
RM RM RM Corporate Total
Resources Assessment Technology Services
Year ended 30 November 2021 £000 £000 £000 £000 £000
Revenue
UK 98,448 18,846 64,265 - 181,559
Europe 8,849 6,104 91 - 15,044
North America 1,882 - 138 - 2,020
Asia 772 1,036 - - 1,808
Middle East 2,004 159 - - 2,163
Rest of the world 2,469 5,724 66 - 8,259
114,424 31,869 64,560 - 210,853
Adjusted profit/(loss)from operations 10,073 5,706 7,098 (4,408) 18,469
Investment income 28
Finance costs (1,396)
Adjusted profit before tax 17,101
Adjustments (see below) (11,483)
Profit before tax 5,618
RM RM RM Corporate Total
Resources Assessment Technology Services
Year ended 30 November 2020 £000 £000 £000 £000 £000
Revenue
UK 80,956 20,473 63,977 - 165,406
Europe 6,362 5,042 533 - 11,937
North America 777 - 412 - 1,189
Asia 848 1,250 - - 2,098
Middle East 2,196 225 - - 2,421
Rest of the world 1,303 4,589 56 - 5,948
92,442 31,579 64,978 - 188,999
Adjusted profit/(loss) from operations - 3,081 6,607 9,296 (3,903) 15,081
restated
Investment income 21
Finance costs (1,055)
Adjusted profit before tax - restated 14,047
Adjustments (see below) - restated (4,519)
Profit before tax - restated 9,528
Adjustments to cost of sales and administrative expenses Restated
Year ended Year ended
30 November 2021 30 November 2020
£000 £000
Adjustments to cost of sales
Exceptional inventory adjustments - 365
Adjustments to administrative expenses
Amortisation of acquisition related intangible assets 2,010 1,986
Dual running costs related to investment strategy 2,064 611
Sale of property (1,399) (670)
Configuration of SaaS licenses (ERP) 8,337 1,701
Onerous lease 471 -
Gain on sale of Essex LEP loan - (673)
Pension GMP - 170
Restructuring costs - 1,029
Total adjustments to administrative expenses 11,483 4,154
Total adjustments 11,483 4,519
Tax impact (Note 5) (1,858) (775)
Total adjustments after tax 9,625 3,744
The amortisation of acquisition related intangible assets is an annual recurring adjustment to
profit that is a non-cash charge arising from investing activity. This adjustment is to
clearly communicate with the investment analyst community in common with peer companies across
the technology sector. The income generated from the use of these intangible assets is,
however, included in the adjusted profit measures.
Other adjusted items:
These are items which are identified by virtue of either their size or their nature to be
important to understanding the performance of the business including the comparability of the
results year on year. These items can include, but are not restricted to, impairment; gain on
held for sale assets and related transaction costs; changes in the provision for exceptional
property costs; the gain/loss on sale of operations and restructuring and acquisition costs.
In 2018, following a large acquisition in the Resources division, the Group announced a new
warehouse strategy which involved the disposal of 5 warehouses (including 3 warehouses from
the newly acquired group of companies) into one new automated warehouse. Interlinked with the
automation software is a requirement to change the ERP solution which is being rolled out
across the whole Group. The Group believes that whilst this programme spans a number of years,
it's size, complexity and number of unusual costs and income, impact the understanding of the
trading performance of the business including the comparability of results year on year. As a
result, all significant costs or income relating to this programme have been treated as an
adjustment to profit, consistently period to period. This programme is expected to complete by
the end of 2022. The cumulative net adjustments of these interlinked investment programmes has
been £15.8m expense to 30 November 2021 of which £0.9m remains unpaid.
During the year this programme included the following costs and income:
• Dual run related costs during the period (£1.0m), relate to costs associated with the new
warehouse that is not yet fully operational but was acquired at the end of November 2020.
These costs include items such as utilities, security and increased warehouse staff to
test the new facility and to transfer inventory. Other dual run costs include IT costs
(excluding configuration costs of SaaS licenses) being expensed that relate to running of
IT systems not yet in use (£1.1m).
• During the period the Group disposed of one of the assets Held for Sale at 30 November
2020, which was a warehouse that will no longer be required following the estates strategy
review. This warehouse sale generated proceeds of £3.2m and a profit after direct selling
costs and costs of moving from the warehouse of £1.4m.
During the prior year this programme included the following costs and income:
• The gain on sale of a held for sale asset, which was a warehouse that will no longer be
required following the estates strategy review (£0.7m).
• An adjustment to restructuring costs that related to the warehouse disposal (£0.1m) that
were originally provided in 2018 as an adjusting item.
• An inventory obsolescence charge for inventory that was not compliant with the new
automated solution (£0.4m).
• Dual run IT costs (excluding configuration costs of SaaS licenses) being expensed that
relate to running of IT systems not yet in use (£0.6m).
In addition to the warehouse programme, the Group believes the following items to be
significantly large enough and unusual enough to impact the understanding of the performance
of the group if not adjusted. In the year ended 30 November 2021, these items comprised:
• The impairment of a right of use asset and onerous service charges relating to a leased
office, which no longer meets our requirements following a change in working practises
after the COVID-19 pandemic (£0.5m). The costs relating to the new replacement leased
office that meets working practises requirements is included in the segmental results.
• The configuration and customisation costs relating to our ERP programme "Evolution", which
represents a significant investment and would distort the understanding of the trading
performance of the business including the comparability of results year on year if not
adjusted. These costs total £8.3m.
During the year ended 30 November 2020 these items comprised:
• The sale of our investment in Essex LEP (£0.7m).
• A material restructuring programme that spanned 3 months was announced and completed prior
to the COVID-19 pandemic (£0.9m) relating to the RM Technology and RM Assessment
businesses.
• An adjustment to the estimated liability of equalising our GMPs in our defined benefit
schemes and was treated as an adjustment for consistency, period to period. This followed
a Court ruling in 2020 relating to the valuation of transfer values (£0.2m). In 2018 a
charge of £1.2m was treated as an adjusting item.
• Following the IFRIC interpretation in 2021 relating to the accounting treatment for
configuration and customisation costs in a cloud computing arrangement the costs
associated with our ERP programme have been restated (as set out in Note 14) and amount to
£1.7m).
Net debt is the total of borrowings (£19.7m (2020: £4.8m)), cash at bank (£3.6m (2020: £5.9m))
and overdraft (£2.1m (2020: £2.5m)) which was £18.3m as at 30 November 2021 (2020: £1.3m).
Lease liabilities of £20.9m (2020: £22.2m) are excluded from this measure as they are not
included in the measurement of net debt for the purpose of covenant calculations.
Average net debt is calculated by taking the net debt on a daily basis and dividing by number
of days.
The above adjustments that arise during the year have the following impact on the cash flow
statement:
Year ended Year ended
30 November 2021 30 November 2020
Restated Restated Restated
£000 £000 £000 £000 £000 £000
Statutory Adjustments Adjusted cash Statutory Adjustments Adjusted cash
flows flows
Profit before tax 5,618 11,483 17,101 9,528 4,519 14,047
Profit before 6,986 11,483 18,469 10,562 4,519 15,081
operations
Net cash inflow from 3,792 8,917 12,709 19,397 3,511 22,908
operating activities
Net cash used in (11,759) (3,214) (14,973) (2,279) (4,460) (6,739)
investing activities
Net cash used in 6,026 - 6,026 (15,250) - (15,250)
financing activities
Net increase in cash (1,941) 7,186 5,245 1,868 (949) 919
& cash equivalents
Adjusted cash conversion percentage is defined as adjusted cash inflow from operating
activities as a percentage of adjusted profit before tax.
The adjustments have the following impact on key metrics:
Restated Restated Restated
2021 2021 2021 2020 2020 2020
Statutory Adjustment Adjusted Statutory Adjustment Adjusted
measure measure measure measure
Gross profit 70,633 - 70,633 73,965 365 74,330
(£000)
Profit from
operations 6,986 11,483 18,469 10,562 4,519 15,081
(£000)
Operating margin 3.0% 5.0% 9.0% 6.0% 2.0% 8.0%
(%)
Profit before 5,618 (11,483) 17,101 9,528 4,519 14,047
tax (£000)
Tax (£000) (1,424) 1,858 (3,282) (1,893) 775 (2,668)
Profit after tax 4,194 9,625 13,819 7,635 (3,744) 11,379
(£000)
Earnings per
share (see Note
6)
Basic (Pence) 5.0 11.6 16.6 9.2 4.6 13.8
Diluted (Pence) 5.0 11.4 16.4 9.1 4.5 13.6
.
Adjusted operating profit is defined as the profit before operations excluding the adjustments
referred to above. Operating margin is defined as the operating profit as a percentage of
revenue.
3. Other income
Year ended Year ended
30 November 2021 30 November 2020
£000 £000
Bank interest 24 21
Other finance income 4 -
28 21
4. Finance costs
Year ended Year ended
30 November 2021 30 November 2020
Note £000 £000
Borrowing facilities arrangement fees and commitment fees 462 469
Net finance costs on defined benefit pension scheme 13 254 83
Interest on lease of Right of Use assets 361 151
Interest on bank loans and overdrafts 319 352
1,396 1,055
5. Tax
a) Analysis of tax charge in the Consolidated Income
Statement
Restated
Year ended Year ended
30 November 2021 30 November 2020
£000 £000
Current taxation
UK corporation tax 442 1,450
Adjustment in respect of prior years (58) (305)
Overseas tax (94) 391
Total current tax charge 290 1,536
Deferred taxation
Temporary differences 1,398 345
Adjustment in respect of prior years (258) 21
Overseas tax (6) (9)
Total deferred charge 1,134 357
Total Consolidated Income Statement tax charge 1,424 1,893
b) Analysis of tax charge / (credit) in the Consolidated Statement of Comprehensive Income
Year ended Year ended
30 November 2021 30 November 2020
£000 £000
UK corporation tax
Defined benefit pension scheme (800) (240)
Share based payments (10) (18)
Pension escrow account (328) (328)
Deferred tax
Defined benefit pension scheme movements 9,310 (2,408)
Defined benefit pension scheme escrow 328 297
Share based payments 42 66
Fair value movements of hedging instruments 45 3
Deferred tax relating to the change in rate 1,822 (223)
Total Consolidated Statement of Comprehensive Income tax 10,409 (2,851)
charge /(credit)
c) Reconciliation of Consolidated
Income Statement tax charge
The tax charge in the Consolidated Income Statement reconciles to the effective rate applied
by the Group as follows:
Restated
Year ended 30 November 2021 Year ended 30 November 2020
Adjusted Adjustments Total Adjusted Adjustments Total
£000 £000 £000 £000 £000 £000
Profit/(loss) on ordinary 17,101 (11,483) 5,618 14,047 (4,519) 9,528
activities before tax
Tax at 19% (2020: 19%) thereon: 3,249 (2,182) 1,067 2,669 (859) 1,810
Effects of:
- change in tax rate on carried
forward (27) 788 761 (137) 391 254
deferred tax assets
- other expenses not deductible for (52) - (52) 187 (111) 76
tax purposes
- non-taxable gains - (266) (266) - - -
- other temporary timing 212 - 212 54 - 54
differences
- effect of profits/losses in 18 - 18 53 - 53
various overseas tax jurisdictions
- Prior period adjustments - UK (60) (198) (258) (158) (196) (354)
- Prior period adjustments - (58) - (58) - - -
overseas
Tax charge/(credit) in the 3,282 (1,858) 1,424 2,668 (775) 1,893
Consolidated Income Statement
d) Deferred tax
The Group has recognised deferred assets as these are anticipated to be recognised against
future periods. The major deferred tax assets and liabilities recognised by the Group and the
movements thereon are as follows:
Defined Acquisition
Accelerated benefit Share-based Short-term related
Group tax pension payments timing intangible Total
depreciation scheme differences assets
obligation
£000 £000 £000 £000 £000 £000
At 1 December 2019 716 1,016 423 1,274 (3,328) 101
(Credit)/charge to income (387) - 162 (121) (11) (357)
(Charge)/ credit to other - 2,527 (66) (211) - 2,250
comprehensive income
At 30 November 2020 329 3,543 519 942 (3,339) 1,994
(Charge)/credit to income (564) - (241) 77 (405) (1,133)
(Charge)/ credit to other - (11,131) (42) (362) - (11,535)
comprehensive income
At 30 November 2021 (235) (7,588) 236 657 (3,744) (10,674)
Certain deferred tax assets and liabilities have been offset above.
6. Earnings per share
Year ended 30 November 2021 Year ended 30 November 2020
Restated
Profit for Weighted Pence per Weighted Pence per
the year average number share average number share
of shares of shares
£000 '000 £000 '000
Basic earnings per
ordinary share
Basic earnings 4,194 83,150 5.0 7,635 82,576 9.2
Adjustments (see Note 2) 9,625 - 11.6 3,744 - 4.6
Adjusted basic earnings 13,819 83,150 16.6 11,379 82,576 13.8
Diluted earnings per
ordinary share
Basic earnings 4,194 83,150 5.0 7,635 82,576 9.2
Effect of dilutive potential
ordinary shares: share based - 1,302 (0.0) - 888 (0.1)
payment awards
Diluted earnings 4,194 84,452 5.0 7,635 83,464 9.1
Adjustments (see Note 2) 9,625 - 11.4 3,744 - 4.5
Adjusted diluted earnings 13,819 84,452 16.4 11,379 83,464 13.6
7. Dividends
Amounts recognised as distributions to equity holders were:
Year ended Year ended
30 November 2021 30 November 2020
£000 £000
Final dividend for the year ended 30 November 2020 - 3.0p 2,497 -
per share (2019: nil p)
Interim dividend for the year ended 30 November 2021 - 1.70 1,416 -
p per share (2020: nil p)
3,913 -
The proposed final dividend of 3.00p per share for the year ended 30 November 2021 was
approved by the board on 14 February 2021. The dividend is subject to approval by Shareholders
at the annual general meeting. The anticipated cost of this dividend is £2,481,000.
8. Trade and other receivables
Restated
2021 2020
£000 £000
Current
Financial assets
Trade receivables 21,792 22,907
Other receivables 1,629 1,751
Derivative financial instruments 164 -
Accrued income from customer contracts 2,667 1,744
26,252 26,402
Non-financial assets
Prepayments 7,613 5,073
33,865 31,475
Non-current
Financial assets
Other receivables 82 63
82 63
33,947 31,538
9. Trade and other payables
2021 2020
£000 £000
Current liabilities
Financial liabilities
Trade payables 21,277 20,620
Lease liabilities 3,125 4,067
Other taxation and social security 4,603 6,847
Other payables 2,893 2,503
Derivative financial instruments - 76
Accruals 15,444 10,740
47,342 44,853
Non-financial liabilities
Deferred income from customer contracts 14,027 16,638
61,369 61,491
Non-current liabilities
Financial liabilities
Lease liabilities
- due after one year but within two years 1,993 2,301
- due after two years but within five years 4,975 4,500
- after five years 10,835 11,346
Non-financial liabilities:
Deferred income from customer contracts:
- due after one year but within two years 1,496 1,356
- due after two years but within five years 1,138 1,309
- after five years 635 175
21,072 20,987
82,441 82,478
10. Borrowings
2021 2020
£000 £000
Bank loan (20,000) (5,000)
Add capitalised fees 256 221
Borrowings (19,744) (4,779)
Net debt is the total of borrowings, cash at bank and overdraft which was £18.3m as at 30
November 2021 (2020: £1.3 m).
11. Provisions
Dilapidations & Employee-related Contract risk Total
onerous lease restructuring provisions
Group £000 £000 £000 £000
At 1 December 853 2,220 2,380 5,453
2019
Utilisation of - (2,284) - (2,284)
provisions
Release of - - (525) (525)
provisions
Increase in 381 1,092 314 1,787
provisions
Impact of
foreign 2 - - 2
exchange
At 30 November 1,236 1,028 2,169 4,433
2020
Utilisation of (90) (80) (358) (528)
provisions
Release of - (33) (806) (839)
provisions
Increase in 316 - 170 486
provisions
Impact of
foreign (12) 1 - (11)
exchange
At 30 November 1,450 916 1,175 3,541
2021
Employee-related restructuring provisions refer to costs arising from restructuring to meet
the future needs of the Group. As described in Note 2, the Group is undergoing an estates
review and in 2020 £0.1m of the utilisation related to this programme. A separate
restructuring programme was announced in December 2019 and completed during the prior year
with £0.1m paid in 2021. The remaining restructuring provision is expected to be utilised
during 2022 as we complete the estates strategy.
Contract risk provisions includes items not covered by any other category of which the most
significant items are the risk provisions from ended long term contracts. During 2021, the
release of £806,000 (2020: £525,000) primarily relates to onerous contract risks that have
either been re-negotiated or terminated during the year and the increase in provisions relate
to new contract risks identified in the year. During 2021 the Group utilised part of an
onerous contract provision and was able to release the remaining provision on contract
re-negotiation.
During the year the Group decided to leave one property that was no longer suitable in a post
COVID environment requiring collaborative working and have expensed an onerous lease provision
of £104,000. Dilapidations increased by £212,000 during the year and arise from an updated
surveyors report on one lease.
12. Share capital
Ordinary shares of 22/7p
'000 £000
Allotted, called-up and fully paid:
At 30 November 2019, 2020 and 2021 83,875 1,917
13. Defined benefit schemes
a. Defined contribution scheme
The Group operates or contributes to a number of defined contribution schemes for the benefit
of qualifying employees. The assets of these schemes are held separately from those of the
Company. The total cost charged to income of £2,255,000 (2020: £2,861,000) represents
contributions payable to these schemes by the Group at rates specified in employment
contracts. At 30 November 2021 £257,000 (2020: £223,000) due in respect of the current
financial year had not been paid over to the schemes.
b. Local government pension schemes
The Group has TUPE employees who retain membership of local government pension schemes. The
Group makes payments to these schemes for current service costs in accordance with its
contractual obligations. The total costs charged to income for these schemes was £165,000
(2020: £157,000). The amount due in respect of these schemes at 30 November 2021 was £77,000
(2020: £75,000). The balance sheet liability is included within provisions and incorporates
information from over 17 local government pension schemes. The provision is calculated by
reference to the latest published triennial valuations and the Group discloses the net
position of the Group's share of assets and liabilities.
There is judgment in determining the appropriate accounting treatment for the participation in
these schemes as either a defined benefit or defined contribution scheme, in particular as to
whether actuarial and investment risk fall in substance on the Company.
c. Defined benefit pension schemes
The Group has both defined benefit and defined contribution pension schemes. There are three
defined benefit pension schemes.
The Research Machines plc 1988 Pension Scheme (RM Scheme)
The Scheme provides benefits to qualifying employees and former employees of RM Education
Limited, but was closed to new members with effect from 1 January 2003 and closed to future
accrual of benefits from 31 October 2012. The assets of the Scheme are held separately from RM
Education Limited's assets in a trustee-administered fund. The Trustee is a limited company.
Directors of the Trustee company are appointed by RM Education Ltd and by members. The Scheme
is a funded scheme.
Under the Scheme, employees were entitled to retirement benefits of 1/60th of final salary for
each qualifying year on attainment of retirement age of 60 or 65 years and additional benefits
based on the value of individual accounts. No other post-retirement benefits were provided by
the Scheme.
The most recent actuarial valuation of Scheme assets and the present value of the defined
benefit obligation was carried out for statutory funding purposes at 31 May 2018 by a
qualified independent actuary. IAS 19 Employee Benefits (revised) liabilities at 30 November
2021 have been rolled forward based on this valuation's base data.
As at 31 May 2018, the triennial valuation for statutory funding purposes showed a deficit of
£40,600,000 (31 May 2015: £41,800,000). The Group agreed with the Scheme Trustees that it will
repay this amount via deficit catch-up payments of £3,700,000 per annum until 31 May 2026. The
triennial valuation as at 31 May 2021 is in progress but not yet finalised.
At 30 November 2020 there were amounts outstanding of £308,300 (2020: £308,000) for one
month's deficit payment and £nil (2020: £nil) for Scheme expenses.
The parent company RM plc has entered into a pension protection fund compliant guarantee in
respect of scheme liabilities. No liability has been recognised for this within the Company as
the Directors consider that the likelihood of it being called upon is remote.
The Consortium CARE scheme (CARE scheme)
Until 31 December 2005, The Consortium for Purchasing and Distribution Ltd ("The Consortium",
acquired by the Company on 30 June 2017 and now RM Educational Resources Ltd) operated a
pension scheme (the "Consortium CARE" scheme) providing benefits on both a defined benefit
(final salary-linked) and a defined contribution basis. From 1 January 2006, the defined
benefit (final salary- linked) and defined contribution sections were closed and all
employees, subject to the eligibility conditions set out in the Trust Deed and Rules, joined a
new defined benefit (Career Average Revalued Earnings) section. From 28 February 2011 the
scheme was closed to future accruals.
The most recent actuarial valuation of Scheme assets and the present value of the defined
benefit obligation was carried out for statutory funding purposes at 31 December 2019 by a
qualified independent actuary. IAS 19 Employee Benefits (revised) liabilities at 30 November
2021 have been rolled forward based on this valuation's base data.
As at 31 December 2019, the triennial valuation for statutory funding purposes showed a
deficit of £5.9m. The Group agreed with the Scheme Trustees that it will repay this amount via
deficit catch-up payments of £703,000 per annum until 31 December 2028. The triennial
valuation as at 31 May 2021 is in progress but not yet finalised.
Prudential Platinum Pension (Platinum scheme)
The Consortium acquired West Mercia Supplies in April 2012 (prior to the Company acquiring The
Consortium). Upon acquisition by The Consortium of West Mercia Supplies, a pension scheme
(the Platinum scheme) was set up providing benefits on both a defined benefit (final
salary-linked) and a defined contribution basis for West Mercia employees. The most recent
full actuarial valuation was carried out by the independent actuaries XPS Pensions Group on 31
December 2018. The results of the full valuation were adjusted and rolled forward to form the
basis for the current year valuation. The scheme is administered within a legally separate
trust from The Consortium and the Trustees are responsible for ensuring that the correct
benefits are paid, that the scheme is appropriately funded and that the scheme assets are
appropriately invested. The valuation of the scheme at 31 December 2018 was a surplus of
£213,000 (31 December 2015: deficit £70,000).
Amounts recognised in the Income Statement and in the Statement of Comprehensive Income
Year ended 30 November Year ended 30 November
2021 2020
Note £000 £000
Administrative expenses and taxes (52) (7)
Current service costs - (30)
Operating expense (52) (37)
Interest cost (4,827) (5,611)
Interest on Scheme assets 4,573 5,528
Net interest expense 9 (254) (83)
Past service cost - (350)
Expense recognised in the Income Statement (306) (470)
Effect of changes in demographic 620 (406)
assumptions
Effect of changes in financial assumptions (3,203) (44,944)
Effect of experience adjustments 847 2,197
Total actuarial losses (1,736) (43,153)
Return on Scheme assets excluding interest 46,596 26,851
on Scheme assets
Income/ (expense) recognised in the 44,860 (16,302)
Statement of Comprehensive Income
Income/ (expense) recognised in Total 44,554 (16,772)
Comprehensive Income
The effect of changes in financial assumptions is principally due to the reduction in the
discount rate. The strong returns on assets over the period are largely as a result of the
ongoing market recovery following the COVID-19 pandemic. In particular the RM Scheme invests
significantly in return-seeking assets such as global equities which have seen very strong
returns. The effect of strong equity returns coupled with the Scheme's high levels of hedging
have had a positive impact on the assets over the year.
Reconciliation of the Scheme
assets and obligations through
the year
RM scheme CARE scheme Platinum Year ended 30 Year ended 30
scheme November 2021 November 2020
£000 £000 £000 £000 £000
Assets
At start of year 268,149 15,918 2,994 287,061 257,164
Interest on Scheme assets 4,285 240 48 4,573 5,528
Return on Scheme assets excluding 44,910 1,631 55 46,596 26,851
interest on Scheme assets
Administrative expenses - - (52) (52) (7)
Contributions from Group 3,700 696 54 4,450 4,094
Contributions from employees - - - - 6
Benefits paid (4,322) (627) (38) (4,987) (6,575)
At end of year 316,722 17,858 3,061 337,641 287,061
Obligations
At start of year (280,888) (22,497) (2,329) (305,714) (263,139)
Interest cost (4,460) (331) (36) (4,827) (5,611)
Actuarial (losses) (1,152) (342) (242) (1,736) (43,153)
Benefits paid 4,322 626 39 4,987 6,575
Past service cost (GMP) - - - - (350)
Current service costs - - - - (30)
Contributions from employees - - - - (6)
At end of year (282,178) (22,544) (2,568) (307,290) (305,714)
Pension deficit - (4,686) - (4,686) (19,318)
Pension surplus 34,544 - 493 35,037 665
Net pension surplus/ (deficit) 34,544 (4,686) 493 30,351 (18,653)
Included within the CARE Scheme obligations is an unfunded liability of £161,000 (2020:
£183,000) which is a liability of the Group and not the Scheme.
Reconciliation of net defined benefit obligation
Year ended 30 November Year ended 30
2021 November 2020
£000 £000
Net obligation at the start of the year (18,653) (5,975)
Cost included in Income Statement (306) (470)
Scheme remeasurements included in the Statement of 44,860 (16,302)
Comprehensive Income
Cash contribution 4,450 4,094
Net pension surplus / (deficit) 30,351 (18,653)
Obligation by participant status Year ended 30 November 2021 Year ended 30 November 2020
£000 £000
Active 1,611 1,463
Vested deferreds 243,139 254,650
Retirees 62,540 49,601
307,290 305,714
Value of Scheme assets Fair Value hierarchy Year ended 30 Year ended 30
November 2021 November 2020
£000 £000
Cash and cash equivalents, including escrow Level 1 542 1,629
Equity instruments Level 1 129,809 111,373
Equity instruments Level 2 27,529 24,174
Debt instruments Level 2 3,061 2,995
Liability driven investments Level 2 150,147 117,486
Insurance contract Level 3 26,553 29,404
337,641 287,061
Significant actuarial assumptions
Year ended 30 November Year ended 30 November
2021 2020
Discount rate (RM scheme) 1.75% 1.60%
Discount rate (CARE scheme) 1.75% 1.50%
Discount rate (Platinum scheme) 1.75% 1.60%
Rate of RPI price inflation 3.15% 2.90%
Rate of CPI price inflation - period before 1 2.15% 2.10%
January 2030
Rate of CPI price inflation - period after 1 3.15% 2.10%
January 2030
Rate of salary increases (Platinum scheme) NA NA
Rate of pensions increases
pre 6 April 1997 service 1.50% 1.50%
pre 1 June 2005 service 2.90% 2.80%
post 31 May 2005 service 2.05% 2.00%
Post retirement mortality table S2PA CMI 2020 1.25% S2PA CMI 2019 1.25%
Weighted average duration of defined benefit 24 years 23 years
obligation
Assumed life expectancy on retirement at age
65:
Retiring at the accounting date (male member 21.9 22.4
aged 65)
Retiring in 20 years after the accounting 23.3 23.7
date (male member aged 45)
14. Restatement for change in accounting policy
In April 2021, an IFRIC agenda decision was issued in relation to the accounting treatment for
configuration and customisation costs in a cloud computing arrangement. This guidance
clarified that in order for an intangible asset to be capitalised in relation to customisation
and configuration costs in a software-as-a service (SaaS) arrangement, it is necessary for
there to be control of the underlying software asset or for there to be a separate intangible
asset which meets the definition in IAS 38 Intangible Assets. The Group's previous policy was
to capitalise such customisation and configuration costs.
Our major investment IT systems programme, known as Evolution, is predominately is using SaaS
arrangements and third party implementation partners to improve our systems and processes.
Configuration and associated activity costs which had been previously capitalised during 2019
(£2.0m) and 2020 (£2.3m) will now be expensed following the IFRIC interpretation. The
impairment charge expensed in 2020 of £0.7m relating to 2019 costs (now expensed), will be
reversed. As the costs are material and do not relate to underlying trading, all Evolution
Programme costs expensed through the Income Statement in both 2020 and 2021 will be disclosed
as "Adjustments" in the financial statements and therefore not included within the Group's
adjusted profit figures. These adjustments will include certain dual run costs such as the
SaaS licenses themselves (prior to operational use of the system to which the licenses
relate), training relating to the Evolution programme, data migration activities and other
operating costs that were not previously capitalised (2020: £611,000 reclassified to adjusting
expenses (see Note 2)).
In addition, as part of the strategy review currently underway the Directors consider that
certain activities previously classified as Research and Development administration expenses
and certain selling and distribution administration activities are more appropriately
classified as Cost of Sales. Therefore for the year ended 30 November 2020, we have
reclassified £0.1m from administration activities (£5.1m from R&D and £1.7m from selling &
distribution) to cost of sales. This has had no impact on the operating profit reported.
These adjustments have the following impact on the primary statements for the year ended 30
November 2020:
Year ended 30 November 2020
Consolidated Income Statement As reported Restatement Impact Restated
£000 £000 £000
Revenues 188,999 - 188,999
Cost of Sales (115,034) (6,882) (121,916)
Gross Profit 73,965 (6,882) 67,083
Operating expenses (61,489) 5,216 (56,273)
Impairment losses (953) 705 (248)
Profit from operations 11,523 (961) 10,562
Investment income 21 21
Finance costs (1,055) (1,055)
Profit before tax 10,489 (961) 9,528
Tax (2,075) 182 (1,893)
Profit for the year 8,414 (779) 7,635
Year ended 30 November 2020
Consolidated Statement of Comprehensive Income As reported Restatement Impact Restated
£000 £000 £000
Profit for the year 8,414 (779) 7,635
Other comprehensive income (13,310) - (13,310)
Total comprehensive (expense) (4,896) (779) (5,675)
Year ended 30 November 2020
Consolidated Balance Sheet As reported Restatement Impact Restated
£000 £000 £000
Non-current assets
Goodwill 49,322 - 49,322
Intangible assets 22,354 (3,338) 19,016
Property, plant and equipment 8,423 - 8,423
Right of Use asset 19,391 - 19,391
Defined Benefit Pension Scheme surplus 665 - 665
Other receivables 63 - 63
Contract fulfilment assets 3,420 - 3,420
Deferred tax assets 5,333 - 5,333
108,971 (3,338) 105,633
Current assets
Inventories 18,594 - 18,594
Trade and other receivables 31,317 158 31,475
Contract fulfilment assets 728 - 728
Held for sale asset 4,793 - 4,793
Tax assets 2,030 603 2,633
Cash at bank 5,941 - 5,941
63,403 761 64,164
Total assets 172,374 (2,577) 169,797
Current liabilities
Trade and other payables (61,491) - (61,491)
Tax liabilities (163) - (163)
Provisions (435) - (435)
Overdraft (2,480) - (2,480)
(64,569) - (64,569)
Net current (liabilities) /assets (1,166) 761 (405)
Non-current liabilities
Other payables (20,987) - (20,987)
Provisions (3,998) - (3,998)
Deferred tax liability (3,339) - (3,339)
Defined Benefit Pension Scheme obligation (19,318) - (19,318)
Borrowings (4,779) - (4,779)
(52,421) - (52,421)
Total liabilities (116,990) - (116,990)
Net assets 55,384 (2,577) 52,807
Equity attributable to shareholders
Share capital 1,917 - 1,917
Share premium account 27,080 - 27,080
Own shares (841) - (841)
Capital redemption reserve 94 - 94
Hedging reserve (65) - (65)
Translation reserve (702) - (702)
Retained earnings 27,901 (2,577) 25,324
Total equity 55,384 (2,577) 52,807
Year ended 30 November 2020
Consolidated Cash Flow Statement As reported Restatement Impact Restated
£000 £000 £000
Profit before tax 10,489 (960) 9,529
Investment income (21) - (21)
Finance costs 1,055 - 1,055
Profit from operations 11,523 (960) 10,563
Adjustments for:
Pension GMP 170 - 170
Amortisation and impairment of intangible assets 3,778 (740) 3,038
Depreciation and impairment of property, plant and 3,718 - 3,718
equipment
(Gain) on disposal of other asset (713) - (713)
(Gain)/ loss on disposal of property, plant and (949) - (949)
equipment
(Gain) on foreign exchange derivatives (625) - (625)
Share-based payment charge 705 - 705
Increase/(decrease) in provisions 1,443 - 1,443
Defined Benefit Pension Scheme administration cost 37 - 37
Operating cash flows before movements in working 19,087 (1,700) 17,387
capital
Decrease /(increase) in inventories 3,557 - 3,557
Decrease in receivables 2,520 (158) 2,362
(Increase) in contract fulfilment assets (1,111) - (1,111)
Movement in payables
- increase/ (decrease) in trade and other payables 6,012 - 6,012
- utilisation of provisions (2,284) - (2,284)
Cash generated from operations 27,781 (1,858) 25,923
Defined benefit pension scheme cash contributions (4,094) - (4,094)
Tax paid (2,589) - (2,589)
Net cash inflow from operating activities 21,098 (1,858) 19,240
Investing activities
Interest received 21 - 21
Proceeds on disposal of investment asset 1,560 - 1,560
Proceeds on disposal of property, plant and 2,900 - 2,900
equipment
Purchases of property, plant and equipment (5,801) - (5,801)
Purchases of other intangible assets (2,660) 1,858 (802)
Net cash used in investing activities (3,980) 1,858 (2,122)
Financing activities
(Repayment)/ drawdown of borrowings (12,000) - (12,000)
Borrowing facilities arrangement and commitment fees (226) - (226)
Interest paid (501) - (501)
Payment of leasing liabilities (2,523) - (2,523)
Net cash (used in)/ generated by financing (15,250) - (15,250)
activities
Net increase in cash and cash equivalents 1,868 - 1,868
Cash and cash equivalents at the beginning of the 1,528 - 1,528
year
Effect of foreign exchange rate changes 65 - 65
Cash and cash equivalents at the end of the year 3,461 - 3,461
══════════════════════════════════════════════════════════════════════════════════════════════
ISIN: GB00BJT0FF39
Category Code: FR
TIDM: RM.
LEI Code: 2138005RKUCIEKLXWM61
OAM Categories: 1.1. Annual financial and audit reports
Sequence No.: 142967
EQS News ID: 1280454
End of Announcement EQS News Service
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