Interim Results

RNS Number : 9660L
RM PLC
17 May 2010
 



 

RM announces interim results for the six months to 31 March 2010

RM, the international provider of education solutions, announces interim results for the six months to 31 March 2010.

Operational headlines

§ Strong revenue growth in Education Resources, BSF and US

§ Excellent project win rate including seven BSF project awards year-to date

§ Investment in business development in Education Resources and US

§ Committed revenues at May 2010: £505m (May 2009: £425m)

Financial headlines

§ Revenue up 10%: £156.4m (2009: £141.9m)

§ Adjusted* profit from operations: £1.2m (2009: £0.8m)

§ Adjusted* profit before tax: £1.2m (2009: £1.0m)

§ Adjusted* EPS: 1.0p (2009: 0.8p)

§ Dividend per share up 5%: 1.39p (2009: 1.32p)

§ Net cash: £4.0m (2009: £4.0m)

§ Net funds less deferred consideration: £(1.5)m (2009: £(0.7)m)

*Before amortisation of acquisition related intangible assets

Commenting on the results, Terry Sweeney, Chief Executive of RM, said: 

"We've executed well so far in 2010. Group revenue is up, with a particularly strong performance from Education Resources and long-term committed revenues now stand at £505m, including seven new BSF project wins.

"As we always comment at this stage, the seasonality of RM's business means that the first half of the financial year is not a good indicator of results for the year as a whole. However, sales momentum continues across the business and we have seen good progress in each of our divisions. We anticipate further progress in the second half and growth for the year as a whole.

"We look forward to responding to the requirements created by the emerging education policies of the new UK Government and to further growth in international markets. Over the last five years we have broadened the range of education products and services we sell, significantly increased our international footprint, and built a substantial order book. These factors, combined with strong customer loyalty from our individual schools customers, make us a resilient business which is not dependent on any one product or market area."

For further information, please contact:

 

Terry Sweeney, Chief Executive

RM plc

Iain McIntosh, CFO

08450 700300

Phil Hemmings, Director of Corporate Affairs




Andrew Fenwick

Brunswick

Chris Blundell

020 7404 5959

Franziska Boehnke




A briefing to analysts will take place at 09:30 on Monday 17 May 2010 at Brunswick, 16 Lincoln's Inn Fields, London, WC2A 3ED.  A live audio feed will be available to those analysts and shareholders unable to attend this meeting in person. To access this facility, call +44 (0) 1452 561 371, conference ID 74793193. 

A copy of the presentation will be available at www.rm.com from 08:30 on 17 May 2010.

 

Interim Management Report

RM executed well in the first half of 2010. Group revenue increased by 10% year-on-year, and long-term committed revenues increased by 19% reflecting an excellent performance in winning and extending large education projects. 

Results

 


Six months to

Year to


Mar

Mar

Sep


2010

2009

2009

Revenue

£156.4m

£141.9m

£346.9m

Adjusted* profit from operations

£1.2m

£0.8m

£17.7m

Adjusted* profit before tax

£1.2m

£1.0m

£17.9m

Profit before tax

£0.4m

£0.2m

£16.3m

Adjusted* EPS

1.0p

0.8p

15.3p

Dividend per share

1.39p

1.32p

6.17p

Net cash

£4.0m

£4.0m

£5.0m

Net funds less deferred consideration

£(1.5)m

£(0.7)m

£(0.7)m

* Adjusted profit and EPS are before amortisation of acquisition related intangible assets and 2009 acquisition integration costs

RM's business is seasonal, reflecting buying patterns in the education market. Profit in the first half of the year is small relative to that for the year as a whole and is not a good indicator of the outcome for the full year.

Total Group revenue increased by 10% to £156.4m (2009: £141.9m). Of this increase, 7% growth was organic and 3% growth was generated by 2009 acquisitions. Each of our divisions and territories performed well, with Education Resources making a particularly strong contribution to the increase in revenue.

Committed revenues (including education projects won since period end) increased 19% to £505m (May 2009: £425m).

Adjusted* profit from operations increased to £1.2m (2009: £0.8m). Adjusted* earnings per share increased to 1.0p (2009: 0.8p). Profit before tax increased to £0.4m (2009: £0.2m).

The Group's cash position was well controlled in the period. Cash generated by operations was £11.3m (2009: £2.9m). Net cash at the end of the period was £4.0m (Mar 2009: £4.0m; Sep 2009: £5.0m). Total net debt, including loan notes and deferred consideration payable on acquisitions, was £1.5m (Mar 2009: £0.7m; Sep 2009: £0.7m).

Reflecting continued confidence in the Group's progress, the Board is increasing the interim dividend by 5% to 1.39p per share (2009: 1.32p). The dividend is payable on 2 July 2010 to shareholders on the register on 4 June 2010.

Our strategy

RM is a group of education companies, operating internationally. The Group is structured as three distinct divisions, each with a particular product focus and with specific market objectives:

£ Learning Technologies provides ICT (information and communications technology) products and services, principally for schools. Its market objectives are to build on its number one position in the UK market by continuing to offer innovative solutions and to grow its presence and product range in the US.

£ Education Resources provides curriculum-focused products for use in school classrooms. Its market objectives are to grow its UK market share and to establish an international presence by working with channel partners.

£ Assessment and Data Services provides technology outsourcing and process management services to support the delivery of testing and assessment. Its market objectives are to expand its UK position by driving further use of technology for assessment and to further develop its international business.

Across each of our three divisions we offer superior solutions that help teachers to teach and learners to learn. We aim to deliver profitable growth for our shareholders by achieving leading positions in our existing markets, by expanding the breadth of education products and services we offer, and by establishing positions in selected international territories.

Learning Technologies

 


Six months to

Year to


Mar

Mar

Sep


2010

2009

2009

Learning Technologies total revenue

£107.8m

£107.5m

£263.7m

   UK and RoW ex. BSF

£82.3m

£87.0m

£199.5m

   BSF

£14.2m

£11.8m

£38.9m

   US

£11.3 m

£8.7m

£25.3m

Learning Technologies divisional operating (loss)/profit

£(0.9)m

£(1.3)m

£8.0m

Revenue in our Learning Technologies division was in line with last year, with growth in the UK from BSF (Building Schools for the Future) and in our US business, offset by a decrease in revenues from individual schools in the UK and the rest of the world. Overall revenue was £107.8m (2009: £107.5m). Revenue from BSF projects increased by 20% reflecting both the commissioning of new schools and managed service delivery in existing schools. US revenue increased by 30% (26% organic growth at constant currency).

The divisional operating loss was £0.9m (2009: loss of £1.3m).

We made excellent progress building our order book during the period. A combination of new business wins and extensions of existing projects contributed in excess of £50m to committed revenues during the period. In addition, in excess of £113m of major project wins have been achieved since the period end.

We continue to be the market leading supplier of managed ICT services to new-build and refurbished schools in the UK. During the half-year, we were selected for three more BSF projects and since the end of the period we have been selected for a further four projects. In total we have now been selected for 19 out of 47 BSF projects, which is ahead of our target of winning one in three. In addition, we have also had significant success in winning schools being renewed under the Academies and One-School Pathfinder programmes.

Revenue from transactional business with individual UK schools reflects both a flat market and the increase in the proportion of educational ICT spend being made through the BSF programme. We anticipate that with a strong set of innovative products, including an improved version of our Kaleidos learning platform and new functionality for our Community Connect network family, we will maintain our strong position in this market. Our individual schools customers continue to show strong loyalty to RM; two-thirds of last year's UK revenues not under long term contracts came from schools that had bought from RM in every one of the last five years.

In the US we have invested in our sales function to capitalise on the enthusiasm we see for interactive classroom technology. We have had discussions with senior officials from the newly-established Office of Educational Technology of the US Department of Education, which reinforce our view that the US will continue to increase its investment in educational technology.

RM Education Resources

 


Six months to

Year to


Mar

Mar

Sep


2010

2009

2009

Education Resources revenue

£38.3m

£26.5m

£63.9m

Education Resources divisional operating profit

£0.9m

£1.6m

£7.1m

Our Education Resources division showed excellent revenue growth in the period, reflecting both strong performances in our existing businesses and the impact of 2009 acquisitions. Overall revenue growth was 45%, of which 33% was organic and 12% arose from acquisitions. TTS performed particularly well in the period and Isis Concepts, the learning spaces business we acquired in May 2009, made a good start.

Divisional operating profit was £0.9m (2009: £1.6m), reflecting planned investment during the period intended to provide the capacity to support further revenue growth in the second half of the year and beyond. The leadership team in our Education Resources division has been significantly strengthened, including the recruitment of a new Managing Director for TTS. Sales and marketing expenditure increased by £2m year-on-year, reflecting both increased activity in existing businesses and the impact of 2009 acquisitions.

Education Resources is increasingly operating as a single business under the leadership of Rob Sirs. During the period we rationalised our property portfolio, reducing the number of individual warehouse locations from thirteen to eight. We also integrated the Pisces business we acquired last year into TTS.

We continue to enhance the channels we use to address the market and expand the range of market sectors we target. We are seeing particularly strong growth in the early years area and, with the acquisition of Pisces Art, in the art and craft segment.

Our curriculum software business is now focused on internationally exploitable products, most particularly RM Easiteach, our interactive whole class teaching tool. External research suggests that interactive whiteboard sales will grow significantly over the next three years and RM Easiteach is well-positioned in this market, with distribution through a number of international partners.

We have signed a letter of intent with LEGO Education to set up a joint venture which secures the European distribution rights to LEGO Education products for ten years (from 1 January 2011). The joint venture company, LEGO Education Europe, will continue to focus on developing the European distribution channel for LEGO Education products, accelerate the development of educational support materials, and develop an online LEGO Education community.

 

RM Assessment and Data Services

 


Six months to

Year to


Mar

Mar

Sep


2010

2009

2009

Assessment and Data Services revenue

£10.3m

£7.9m

£19.3m

Assessment and Data Services divisional operating profit

£1.2m

£0.6m

£2.6m

Assessment and Data Services delivered strong revenue growth, reflecting both increased activity from existing strategic partners and initial contributions from our relationships with ACCA and the International Baccalaureate. Revenue increased by 30% to £10.3m (2009: £7.9m).

Future growth in this division will be driven by increasing the use our strategic partners make of our services and by developing new strategic relationships. We are already responsible for providing on-screen marking services for over half of the UK examinations offered by Cambridge Assessment. During the period we continued to develop our relationship with the International Baccalaureate and added the QCDA (Qualifications and Curriculum Development Agency) to our list of strategic partners.

Assessment and Data Services division also represents a significant international opportunity; our capabilities are world-class, and the UK has a strong reputation in this area. We have begun initial pilot activity for partners in Slovenia and Poland, and are exploring other opportunities.

Risks

A statement of risks is included in the Audit Committee Report within RM's most recent Annual Report, which is available on the Group's investor relations Web site. These remain the key risks the Group is exposed to.

Specific risks which affect H2-2010 are:

£ Education budgets - Whilst school budgets have been set for the UK Government's year 2010/11, with a new Government in place, priorities may change and our customers may change their spending plans.

£ Execution - We anticipate installing equipment in, and beginning service delivery for, a substantial number of schools over the summer. This is a complex operational activity and requires significant working capital investment. In addition, the outsourced services we provide for qualifications providers will be handling a larger volume of scripts than ever before during the summer marking season.

£ Securing orders - As is always the case with RM, the seasonal nature of our business, which results from schools scheduling major installations of ICT equipment during their summer holiday, means that a very large proportion of the year's profit arises in the second half. Achieving the result for the year requires a substantial amount of order intake in the second half.

People

Mike Greig, Group Finance Director, retired from the Board on 31 March and was succeeded by Iain McIntosh. Mike served as RM's Finance Director for over twenty years, during which time his insight and sound commercial judgement helped transform the Group from a privately-held computer manufacturer into the international education solutions business it is today. The Board thanks him for his enormous contribution to RM's success and wishes him well for the future. Iain joins us with a wealth of financial experience, most recently as CFO of Axon, the FTSE250 business transformation consultancy.

As ever, RM's success is strongly linked to the talent and commitment of our people. The Board thanks everyone who works for the Group for their contribution.

Outlook

As we always comment at this stage, the seasonality of RM's business means that the first half of the financial year is not a good indicator of results for the year as a whole. However, sales momentum continues across the business and we have seen good progress in each of our divisions. We anticipate further progress in the second half and growth for the year as a whole.

Longer term, we are continuing to execute our strategy. We look forward to responding to the requirements created by the emerging education policies of the new UK Government and to further growth in international markets. Over the last five years we have broadened the range of education products and services we sell, significantly increased our international footprint, and built a substantial order book. These factors, combined with strong customer loyalty from our individual schools customers, make RM a resilient business which is not dependent on any one product or market area.

 

 

Condensed consolidated income statement

for the half-year ended 31 March 2010

 


Notes

Half-year ended

Half-year ended

Year ended



31 March

31 March

30 September



2010

2009

2009


1

Adjusted

Adjust-

ments

Total

Adjusted

Adjust-

ments

Total

Adjusted

Adjust-

ments

Total



£000

£000

£000

£000

£000

£000

£000

£000

£000

Revenue

3

156,420

-

156,420

141,922

-

141,922

346,917

-

346,917

Cost of sales


 

(114,559)

-

(114,559)

(104,252)

-

(104,252)

(255,680)

-

(255,680)

Gross profit


41,861

-

41,861

37,670

-

37,670

91,237

-

91,237

Selling and distribution costs


(23,878)

-

(23,878)

(20,560)

-

(20,560)

(39,839)

-

(39,839)

Research and development expenses


(7,575)

-

(7,575)

(7,594)

-

(7,594)

(13,731)

-

(13,731)

Administrative expenses


(9,282)

(809)

(10,091)

(8,713)

(731)

(9,444)

(20,024)

(1,483)

(21,507)

- Acquisition integration costs


-

-

-

-

-

-

-

(89)

(89)

Share of results of associates


79

(11)

68

18

(14)

4

22

(19)

3



(40,656)

(820)

(41,476)

(36,849)

(745)

(37,594)

(73,572)

(1,591)

(75,163)

Profit from operations


1,205

(820)

385

821

(745)

76

17,665

(1,591)

16,074

Investment income


721

-

721

632

-

632

1,192

-

1,192

Finance costs


(713)

-

(713)

(480)

-

(480)

(947)

-

(947)

Profit before tax


1,213

(820)

393

973

(745)

228

17,910

(1,591)

16,319

Tax

4

(315)

236

(79)

(253)

217

(36)

(3,809)

448

(3,361)

Profit for the period attributable to equity holders of the parent


898

(584)

314

720

(528)

192

14,101

(1,143)

12,958












Earnings per ordinary share:

5










Basic


1.0p

(0.7)p

0.3p

0.8p

(0.6)p

0.2p

15.3p

(1.3)p

14.0p

Diluted


1.0p

(0.7)p

0.3p

0.8p

(0.6)p

0.2p

15.2p

(1.2)p

14.0p












Paid and proposed dividend per share:

6










Interim




1.39p



1.32p



1.32p

Final




-



-



4.85p












 

Adjustments relate to amortisation of acquisition related intangible assets and for 2009 acquisition integration costs of £89,000.

 

All activities relate to continuing operations.

 

 

Condensed consolidated statement of comprehensive income

for the half-year ended 31 March 2010

 



Half-year ended

Half-year ended

Year

ended



31 March

31 March

30 September



2010

2009

2009



£000

£000

£000

Profit for the period


314

192

12,958

Exchange gains on translation of foreign operations


653

950

957

Actuarial gains/(losses) on defined benefit pension scheme


(3,536)

(8,899)

(14,582)

Fair value loss on interest rate swap


(60)

-

(61)

Current tax on items taken directly to equity


33

121

31

Deferred tax on items taken directly to equity


956

2,297

3,893

Other comprehensive (expense)/income for the period


(1,954)

(5,531)

(9,762)

Total comprehensive (expense)/income for the period attributable to equity holders of the parent


(1,640)

(5,339)

3,196

 

Total tax credited to equity was £989,000 (2009: period to 31 March £2,418,000; year to 30 September £3,924,000)

 

Condensed consolidated balance sheet

as at 31 March 2010

 


Notes

31 March

31 March

30 September



2010

2009

2009



£000

£000

£000






Non-current assets





Goodwill


34,276

31,581

33,818

Acquisition related intangible assets


4,235

5,262

4,981

Other intangible assets


2,663

2,332

2,654

Property, plant and equipment


21,069

17,912

21,321

Interest in associates


1,035

968

967

Deferred tax assets


6,515

3,596

5,227



69,793

61,651

68,968

Current assets





Inventories


21,935

18,418

19,905

Trade and other receivables

8

71,629

59,635

86,164

Tax asset


175

657

-

Cash and cash equivalents


12,674

12,048

13,297



106,413

90,758

119,366






Non-current assets held for sale


-

2,580

-

Total assets


176,206

154,989

188,334






Current liabilities





Trade and other payables

9

(91,592)

(76,752)

(96,829)

Tax liabilities


-

-

(1,320)



(91,592)

(76,752)

(98,149)






Net current assets


14,821

14,006

21,217






Non-current liabilities





Retirement benefit obligation

10

(15,705)

(8,300)

(12,786)

Bank loans


(8,636)

(8,037)

(8,281)

Deferred tax liabilities


(50)

(203)

(51)

Other payables

9

(5,002)

(8,353)

(7,654)

Provisions


(538)

(500)

(589)



(29,931)

(25,393)

(29,361)






Total liabilities


(121,523)

(102,145)

(127,510)

Net assets


54,683

52,844

60,824






Equity attributable to equity holders of the parent





Share capital


1,868

1,863

1,863

Share premium account


27,135

26,642

26,725

Own shares


(1,305)

(1,045)

(1,246)

Capital redemption reserve


94

94

94


(121)

-

(61)

Translation reserve


1,777

1,117

1,124

Retained earnings


25,235

24,173

32,325

Total equity


54,683

52,844

60,824

 

 

Condensed consolidated cash flow statement

for the half-year ended 31 March 2010

 


Notes

31 March

31 March

30 September



2010

2009

2009



£000

£000

£000

Profit from operations


385

76

16,074

Adjustments for:





Gain on foreign exchange derivatives


(458)

(98)

(160)

Amortisation of acquisition related intangible assets


820

745

1,511

Amortisation of other intangible assets


611

465

914

Depreciation of property, plant and equipment


3,933

4,462

8,331

Gain on disposal of property, plant and equipment


(152)

(51)

(499)

Loss on disposal of other intangible assets


-

72

123

(Decrease)/increase in provisions


(51)

-

61

Share-based payment charge


528

208

1,021

Operating cash flows before movements in working capital


5,616

5,879

27,376

(Increase)/decrease in inventories


(2,030)

1,952

1,129

Decrease/(increase) in receivables


14,994

13,146

(12,814)

Decrease in payables


(7,248)

(18,061)

(798)

Cash generated by operations


11,332

2,916

14,893

Defined benefit pension contribution in excess of current service cost

10

(936)

(1,360)

(2,773)

Tax paid


(1,983)

(937)

(3,272)

Income on sale of finance lease debt


417

338

622

Interest paid:





 - bank overdrafts and loans


(359)

(246)

(464)

 - other


(35)

(34)

(67)

Net cash inflow from operating activities


8,436

677

8,939






Investing activities





Interest received


202

122

226

Proceeds on disposal of property, plant and equipment


254

215

949

Purchases of property, plant and equipment


(3,684)

(3,053)

(7,737)

Purchases of other intangible assets


(521)

(597)

(1,398)

Acquisition of subsidiaries and business combinations, net of cash acquired


-

(2,094)

(3,418)

Net cash used in investing activities


(3,749)

(5,407)

(11,378)






Financing activities





Dividends paid

6

(4,492)

(4,206)

(5,425)

Proceeds from share capital issue, net of share issue costs


198

53

91

Repayment of borrowings assumed in acquisitions


-

(2,477)

(2,477)

Increase in borrowings


-

6,419

7,419

Purchase of own shares


(735)

(1,146)

(1,347)

Repayment of loan notes and deferred consideration


(352)

(681)

(1,059)

Net cash used in financing activities


(5,381)

(2,038)

(2,798)






Net decrease in cash and cash equivalents


(694)

(6,768)

(5,237)






Cash and cash equivalents at the beginning of period


13,297

18,291

18,291

Effect of foreign exchange rate changes


71

525

243

Cash and cash equivalents at the end of period

7

12,674

12,048

13,297

 

 

Group net funds

for the half-year ended 31 March 2010

 


Year

 ended

Cash flow

Non-cash movements

Half-year ended


30 September 2009


Foreign exchange

Other

31 March 2010


£000

£000

£000

£000

£000

Cash and cash equivalents

13,297

(694)

71

-

12,674

Borrowing

(8,281)

-

(355)

-

(8,636)

Net cash

5,016

(694)

(284)

-

4,038

Loan notes

(3,606)

352

-

(132)

(3,386)

Net funds

1,410

(342)

(284)

(132)

652

Deferred consideration

(2,120)

-

(12)

-

(2,132)

Net funds less deferred consideration

(710)

(342)

(296)

(132)

(1,480)

 

 

Condensed consolidated statement of changes in equity

for the half-year ended 31 March 2010

 


Share capital

Share premium account

Own shares

Capital redemption reserve

Hedging Reserve

Translation reserve

Retained earnings

Total equity


£000

£000

£000

£000

£000

£000

£000

£000

At 1 October 2009

1,863

26,725

(1,246)

94

(61)

1,124

32,325

60,824

Profit for the half year

-

-

-

-

-

-

314

314

Exchange differences on translation of foreign operations

-

-

-

-

-

653

-

653

Actuarial gains/(losses) on defined benefit scheme

-

-

-

-

-

-

(3,536)

(3,536)

Fair value loss on interest rate swap

-

-

-

-

(60)

-

-

(60)

Tax credit on items taken directly to equity

-

-

-

-

-

-

989

989

Purchase of shares

-

-

(586)

-

-

-

-

(586)

Transfer in respect of issue of shares to employee trusts

-

217

-

-

-

-

(217)

-

Share-based payment awards exercised in period

-

-

527

-

-

-

(676)

(149)

Share-based payment charges

-

-

-

-

-

-

528

528

Dividends paid

-

-

-

-

-

-

(4,492)

(4,492)

Share issues

5

193

-

-

-

-

-

198

At 31 March 2010

1,868

27,135

(1,305)

94

(121)

1,777

25,235

54,683

 

 

Condensed consolidated statement of changes in equity continued

 

 

 

 

 

Share capital

Share premium account

Own shares

Capital redemption reserve

Hedging Reserve

Translation reserve

Retained earnings

Total equity


£000

£000

£000

£000

£000

£000

£000

£000

At 1 October 2008

1,863

26,578

(1,323)

94

167

35,908

63,287

Profit for the half year

-

-

-

-

-

-

192

192

Exchange differences on translation of foreign operations






950

-

950

Actuarial gains/(losses) on defined benefit scheme

-

-

-

-

-

-

(8,899)

(8,899)

Tax credit on items taken directly to equity

-

-

-

-

-

-

2,418

2,418

Purchase of shares

-

-

(1,006)

-

-

-

-

(1,006)

Transfer in respect of issue of shares to employee trusts

-

11

-

-

-

-

(11)

-

Share-based payment awards exercised in the period

-

-

1,284

-

-

-

(1,437)

(153)

Share-based payment charges

-

-

-

-

-

-

208

208

Dividends paid

-

-

-

-

-

-

(4,206)

(4,206)

Share issues

-

53

-

-

-

-

-

53

At 31 March 2009

1,863

26,642

(1,045)

94

-

1,117

24,173

52,844

 


Share capital

Share premium account

Own shares

Capital redemption reserve

Hedging Reserve

Translation reserve

Retained earnings

Total equity


£000

£000

£000

£000

£000

£000

£000

£000

At 1 October 2008

1,863

26,578

(1,323)

94

-

167

35,908

63,287

Profit for the year

-

-

-

-

-

-

12,958

12,958

Exchange differences on translation of foreign operations

-

-

-

-

-

957

-

957

Actuarial gains/(losses) on defined benefit scheme

-

-

-

-

-

-

(14,582)

(14,582)

Fair value loss on interest rate swap

-

-

-

-

(61)

-

-

(61)

Tax credit on items taken directly to equity

-

-

-

-

-

-

3,924

3,924

Purchase of shares

-

-

(1,207)

-

-

-

-

(1,207)

Transfer in respect of issue of shares to employee trusts

-

56

-

-

-

-

(56)

-

Share-based payment awards exercised in year

-

-

1,284

-

-

-

(1,423)

(139)

Share-based payment charges

-

-

-

-

-

-

1,021

1,021

Dividends paid

-

-

-

-

-

-

(5,425)

(5,425)

Share issues

-

91

-

-

-

-

-

91

At 30 September 2009

1,863

26,725

(1,246)

94

(61)

1,124

32,325

60,824

 

 

Notes to the condensed interim financial statements

 

1. General information

RM plc is a company incorporated in the United Kingdom. The unaudited condensed consolidated interim financial statements as at 31 March 2010 and for the six months then ended comprise those of the Company and its subsidiaries (together the Group).

 

The information for the year ended 30 September 2009 does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies. The auditors' report on those accounts was not qualified, did not draw attention to any matters by way of emphasis and did not contain statements under section 498(2) or (3) of the Companies Act 2006.

 

Income statement presentation

The income statement for the half-year ended 31 March 2010 has been presented in three columns. This presentation is intended to give a better guide to business performance by separately identifying the amortisation charge relating to acquisition related intangible assets and for 2009 acquisition integration costs. The columns extend down the income statement to allow the tax and earnings per share impacts of these transactions to be understood.

 

2. Accounting policies

The annual financial statements of RM plc are prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union. The condensed set of financial statements included within this interim report has been prepared in accordance with International Accounting Standard (IAS) 34 - Interim Financial Reporting, as required by the UK Listing Authority's December 2006 Disclosure and Transparency Rules.

 

The accounting policies applied by the Group in the condensed consolidated interim financial statements are the same as those applied by the Group in its consolidated financial statements for the year ended 30 September 2009.

 

The preparation of condensed consolidated interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.  In preparing these condensed consolidated interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements as at and for the year ended 30 September 2009.

 

Going concern

The Directors have assessed forecast future cash flows over the coming year and are satisfied that the Group's agreed working capital facilities are sufficient to meet these cash flows. Given the Group's continued seasonality and Building Schools for the Future contractual commitments, cash flows are forecast to be at their highest outflow between July and September.

 

Shareholder approval was gained at the Company's 18 January 2010 Annual General Meeting to amend its Articles of Association to change the calculation of borrowing limits to align with the Association of British Insurers (ABI) Investment Committee Guidelines.  In accordance with the ABI Guidelines this approval removed the requirement that in calculating adjusted share capital and reserves, for the purposes of establishing borrowing limits, a deduction is made for the book values of goodwill and other intangible assets shown on the Group balance sheet. The Group's forecast funding requirements are comfortably within the borrowing limits established using the revised Articles.

 

Considering the above, the Directors believe that the Group is well placed to manage its business risks successfully despite the current uncertain economic outlook and have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the interim report and accounts.

 

3. Business segments

The Group's business is supplying products and services to education. The Group's operating divisions are Learning Technologies which includes Education Management Systems and US operations; Education Resources; and Assessment and Data Services. These divisions are the basis on which the group reports its primary segment information.

 

The following disclosure shows the result and total assets of these divisions:

 

Divisional result

 

Half-year ended 31 March 2010

Learning Technologies (incl. United States)

Education Resources

Assessment and Data Services

Total


£000

£000

£000

£000

Revenue

107,815

38,331

10,274

156,420

Adjusted operating profit*

(874)

927

1,152

1,205

Net investment income and finance costs




8

Adjusted profit before tax*




1,213

Amortisation of acquisition related intangible assets




(820)

Profit before tax




393






Group profit before tax




314

Share of associate result




79

Profit before tax




393

 

Half-year ended 31 March 2009

Learning Technologies (incl. United States)

Education Resources

Assessment and Data Services

Total


(Restated)

(Restated)

(Restated)

(Restated)


£000

£000

£000

£000

Revenue

107,538

26,491

7,893

141,922

Adjusted operating profit*

(1,317)

1,551

587

821

Net investment income and finance costs




152

Adjusted profit before tax*




973

Amortisation of acquisition related intangible assets




(745)

Profit before tax




228






Group profit before tax




224

Share of associate result




4

Profit before tax




228

 

Year ended 30 September 2009

Learning Technologies (incl. United States)

Education Resources

Assessment and Data Services

Total


(Restated)

(Restated)

(Restated)

(Restated)


£000

£000

£000

£000

Revenue

263,699

63,881

19,337

346,917

Adjusted operating profit*

8,037

7,072

2,556

17,665

Net investment income and finance costs




245

Adjusted profit before tax*




17,910

Amortisation of acquisition related intangible assets




(1,502)

Acquisition integration costs




(89)

Profit before tax




16,319






Group profit before tax




16,316

Share of associate result




3

Profit before tax




16,319

 

* before amortisation of acquisition related intangible assets and 2009 acquisition integration costs.

3. Business segments continued

 

Comparative interim and prior year-end divisional results have been restated to reflect certain changes to the measurement of their performance. Changes include the movement of all investment income and finance costs from divisional profit; and a basis change for the allocation of corporate costs between divisions. In addition, consistent with the disclosure for the year to 30 September 2009, interim divisional results for the comparative period have been restated to reflect the inclusion of US operations in RM Learning Technologies (previously disclosed within Education Resources). These changes to divisional profit are considered to better reflect the divisions' operating performance. The impact of these changes is summarised below:

 

Half-year ended 31 March 2009

£1,390,000 of revenue and £243,000 of operating loss moved from Education Resources to Learning Technologies reflecting transfer of US operations.

 

The transfer of allocated investment income and finance costs from divisional operating profit reduced profit by £310,000 (Learning Technologies' loss increased by £357,000; Education Resources' profit increased by £32,000; and Assessment and Data Services' profit increased by £15,000).

 

The change in the allocation basis of corporate costs increased Learning Technologies' loss by £447,000; increased Education Resources' profit by £311,000; and increased Assessment and Data Services' profit by £136,000.

 

Year ended 30 September 2009

The transfer of allocated investment income and finance costs from divisional operating profit reduced Learning Technologies' profit by £965,000.

 

The change in the allocation basis of corporate costs reduced Learning Technologies profit by £1,182,000; increased Education Resources' profit by £792,000; and increased Assessment and Data Services profit by £390,000.

 

 

Divisional assets

Divisional total assets include all assets except for tax asset balances and cash and cash equivalents which are shown as non-divisional balances:

 

Half-year ended 31 March 2010

Learning Technologies (incl. United States)

Education Resources

Assessment and Data Services

Total


£000

£000

£000

£000

Total assets





- Divisional

92,199

54,024

10,619

156,842

- Other




19,364





176,206

 

Half-year ended 31 March 2009

Learning Technologies (incl. United States)

Education Resources

Assessment and Data Services

Total


(Restated)

(Restated)




£000

£000

£000

£000

Total assets





- Divisional

93,818

37,502

7,368

138,688

- Other




16,301





154,989

 

Comparative interim divisional assets for the half-year ended 31 March 2009 have been restated, to reflect the inclusion of US operating assets of £4,269,000 in Learning Technologies following their movement from Education Resources.

 

Year ended 30 September 2009

Learning Technologies (incl. United States)

Education Resources

Assessment and Data Services

Total


£000

£000

£000

£000

Total assets





- Divisional

103,532

60,088

6,190

169,810

- Other




18,524





188,334

 

 

4. Tax

Corporation tax for the interim period is charged at the expected effective tax rate for the full financial year, based upon adjusted profit which is before adjustments for acquisition related intangible asset amortisation and 2009 acquisition integration costs. The charge incorporates both current and deferred taxation:

 


Half-year ended

Half-year ended

Year ended


31 March

31 March

30 September


2010

2009

2009


£000

£000

£000


Adjusted

Adjust-ments

Total

Adjusted

Adjust-

ments

Total

Adjusted

Adjust-

ments

Total

Profit before tax

1,213

(820)

393

973

(745)

228

17,910

(1,591)

16,319

Tax (charge)/credit

(315)

236

(79)

(253)

217

(36)

(3,809)

448

(3,361)

Effective rate

26.0%

28.8%

20.1%

26.0%

29.1%

15.8%

21.3%

28.2%

20.6%

 

In the year to 30 September 2009 the tax rate on adjusted profit benefitted by 3.7% from finalising prior year Research and Development tax credits.

 

 

5. Earnings per ordinary share

The calculation of the basic and diluted earnings per ordinary share is shown below. As explained in note 1, adjusted diluted earnings per share have also been presented which remove the impact of amortisation of acquisition related intangible assets and 2009 acquisition integration costs.

 

Basic earnings per ordinary share:


Half-year ended

Half-year ended

Year ended


31 March

31 March

30 September


2010

2009

2009


Profit after tax

£'000

Weighted average number of shares

'000

Pence per share

Profit after tax

£'000

Weighted average number of shares

'000

Pence per share

Profit after tax

£'000

Weighted average number of shares

'000

Pence per share

Basic earnings per ordinary share

314

92,547

0.3

192

92,439

0.2

12,958

92,408

14.0

Effect of amortisation of acquisition related intangible assets and 2009 acquisition integration costs

584

-

0.7

528

-

0.6

1,143

-

1.3

Basic earnings per ordinary share adjusted for amortisation of acquisition related intangible assets and 2009 acquisition integration costs

898

92,547

1.0

720

92,439

0.8

14,101

92,408

15.3

 

5. Earnings per ordinary share continued

 

Diluted earnings per ordinary share:


Half-year ended

Half-year ended

Year ended


31 March

31 March

30 September


2010

2009

2009


Profit after tax

£'000

Weighted average number of shares

'000

Pence per share

Profit after tax

£'000

Weighted average number of shares

'000

Pence per share

Profit after tax

£'000

Weighted average number of shares

'000

Pence per share

Basic earnings per ordinary share

314

92,547

0.3

192

92,439

0.2

12,958

92,408

14.0

Effect of dilutive potential ordinary shares: share options

-

118

-

-

273

-

-

240

-

Diluted earnings per ordinary share

314

92,665

0.3

192

92,712

0.2

12,958

92,648

14.0

Effect of amortisation of acquisition related intangible assets and 2009 acquisition integration costs

584

-

0.7

528

-

0.6

1,143

-

1.2

Diluted earnings per ordinary share adjusted for amortisation of acquisition related intangible assets and 2009 acquisition integration costs

898

92,665

1.0

720

92,712

0.8

14,101

92,648

15.2

 

 

6. Dividends

Amounts recognised as distributions to equity holders in the period:

 

 

Half-year ended

Half-year ended

Year ended


31 March

31 March

30 September


2010

2009

2009


£000

£000

£000

Final dividend for the year ended 30 September 2009 of 4.85p (2008: 4.55p) per share

4,492

4,206

4,206

Interim dividend for the year ended 30 September 2009 of 1.32p per share

-

-

1,219


4,492

4,206

5,425

 

The proposed interim dividend of 1.39p per share was approved by the Board on 14 May 2010. The expected cost of £1.3m has not been included as a liability at 31 March 2010.

 

 

7. Net funds

Cash and cash equivalents comprise cash held by the Group and other short-term bank deposits with an original maturity of three months or less.

 

The Group meets its seasonal working capital requirements through various facilities. The Group has an annual unsecured sterling dealing line of $40m (set at a minimum of £25m at November 2009 exchange rates and being £26m at March 2010 exchange rates) with HSBC, which was renewed in November 2009. The Group also has an additional £10m revolving credit facility which expires on 12 November 2010 with HSBC and a further annual overdraft facility of £3m with Barclays Bank plc.

 

The Group also has a committed acquisition borrowing facility of £25m with HSBC which expires in July 2013. At 31 March 2010 £8.6m of this facility was drawn down, with the movement in the six months being due to foreign exchange losses. The £8.6m comprises £1.0m in Sterling and £7.6m in US dollars ($10.0m). The facility can be repaid before expiry, at the discretion of the Group.

 

The Group's cash and cash equivalents of £12.7m comprises £7.1m in Sterling, £3.2m in US dollars and £2.4m in other operating currencies.

 

8. Trade and other receivables

 


31 March

31 March

30 September


2010

2009

2009

Current

£000

£000

£000

Trade receivables

47,257

41,382

64,826

Long-term contract balances

14,031

10,262

13,222

Other receivables

2,672

1,448

1,462

Prepayments

7,056

6,196

5,481

Accrued income

613

347

1,173


71,629

59,635

86,164

 

9. Trade and other payables

 


31 March

31 March

30 September


2010

2009

2009

Current

£000

£000

£000

Trade payables

29,240

21,325

27,239

Other taxation and social security

9,145

6,768

10,202

Other payables - other

3,732

637

3,158

Accruals

25,773

24,423

29,217

Long-term contract payments on account

-

1,010

-

Deferred income

18,416

21,755

23,258

Loan notes

3,386

397

2,220

Deferred consideration

1,900

437

1,535


91,592

76,752

96,829





Non-current




Deferred income

4,770

4,471

5,683

Loan notes

-

3,386

1,386

Deferred consideration

232

496

585


5,002

8,353

7,654

 

 

10. Defined benefit pension scheme

In the half-years ended 31 March 2010 and 2009 the financial position of the Group's defined benefit pension scheme has been rolled forward from the respective prior year end. The roll forward includes updating for actual investment returns for the periods; market derived discount rates on liabilities; and market derived inflation assumptions. Mortality assumptions have not been updated at the half-years. At 31 March 2010 the market derived discount rate, given by high grade corporate bond yields, was 5.7%.

 

The latest triennial valuation as at 31 May 2009 is currently in draft and was used as the basis for the 30 September 2009 IAS 19 valuation and the roll-forward to 31 March 2010. In addition to current service contributions, since 31 May 2009 the Group has continued to make £1.7m per annum deficit catch up payments agreed with the scheme's trustees in the 2006 valuation.

 

11. Related party transactions

Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation. There have been no other related party transactions in the period.

 

 

Responsibility statement

We confirm that to the best of our knowledge:

a)     the condensed set of financial statements has been prepared in accordance with IAS 34 - Interim Financial Reporting;

b)     the interim management report includes a fair review of the information required by the Disclosure and Transparency Rules 4.2.7R - indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year; and

c)     the interim management report includes a fair review of the information required by the Disclosure and Transparency Rules 4.2.8R -disclosure of related parties' transactions and changes therein.

 

By order of the Board,

 

 

 

 

 

 

 


Terry Sweeney

Chief Executive

Iain McIntosh

Chief Financial Officer

 

17 May 2010

 

 

 

 

Independent review report to RM plc

 

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 31 March 2010 which comprises the condensed consolidated income statement, condensed consolidated statement of comprehensive income, the condensed consolidated balance sheet, the condensed consolidated cash flow statement, the condensed consolidated statement of changes in equity and related notes 1 to 11. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

 

This report is made solely to the Company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board.  Our work has been undertaken so that we might state to the Company those matters we are required to state to them in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our review work, for this report, or for the conclusions we have formed.

 

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors.  The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdoms' Financial Services Authority.

 

As disclosed in note 2, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union.  The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting," as adopted by the European Union.

 

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

 

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

 

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 31 March 2010 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

 

 

 

 

 

 

Deloitte LLP

Chartered Accountants and Statutory Auditors

Reading, United Kingdom

17 May 2010

 

 

 

This document has been made available as a .pdf download from RM's investor relations Web site (www.rm.com/investors). If you have obtained this document as a download, please note the following.

 

Neither an audit nor a review provides assurance on the maintenance and integrity of the Web site, including controls used to achieve this, and in particular whether any changes may have occurred to the financial information since first published.  These matters are the responsibility of the directors but no control procedures can provide absolute assurance in this area

 

Legislation in the United Kingdom governing the preparation and dissemination of financial information differs from legislation in other jurisdictions

 

 


 


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