Interim Results - 6 Months to 31 March 2000
RM PLC
15 May 2000
RM plc Interim Results 2000
Results for the half year ended 31st March 2000
RM plc ('RM'), the leading supplier of information and communications
technology software, services and systems to UK education, today announces
its results for the half year ended 31st March 2000.
Highlights
*Turnover up 10% to £78.1m (1999 £71.1m)
*Order intake strong, with order book in excess of £100m
*Profit before tax and goodwill amortisation £1.5m (1999 £2.5m)
- After £2.1m against cost of Classroom 2000 project in
Northern Ireland
*Interim dividend of 0.8p per share, an increase of 21% (1999 0.66p)
*Software and services revenue increased by 25%
*Learning Schools Programme delivering excellent progress, at the end
of the first half orders received from 2,800 schools representing 50,000
(11%) of the UK's teachers
*RM.com achieves over 15 million page impressions per month
Richard Girling, Chief Executive of RM plc said:
'We are delighted with the progress we have made in the year to date. The
performance of our software and services business has been strong, these
businesses now contribute over 50 % of the Group's turnover.
Looking ahead we remain convinced that the use of ICT in education will
continue to increase dramatically. Our investment in developing internet
related businesses and in our Learning Schools Programme and learning
software activities positions us well to capitalise on the next phase of
this growth.
We expect continued strong financial performance in the second half and are
confident of further good progress for the group.'
Enquiries:
Richard Girling RM plc 01235 826 000
Mike Greig
Andrew Fenwick Brunswick 020 7404 5959
Katie Hall
Chairman's Statement
During the six months to 31 March 2000, RM plc further reinforced its
position as the leading supplier of ICT software, services and systems to UK
education and made excellent progress in its Internet, teacher training and
learning software activities. Financial results for the period exceeded
expectations.
Results
At the time of RM's preliminary results announcement in November 1999 we
reported that, as was the case two years ago, significant additional
government funding for ICT in education would become available in the
second half of RM's next financial year. As anticipated, this has had an
effect on first half results and will accentuate the seasonal pattern by which
the majority of the Group's profit is earned in the second half.
Turnover for the first half grew by 10% to £78.1 million (1999: £71.1
million). Order intake significantly exceeded turnover for the period
and, for the first time, the value of the Group's order book
(in the form of deferred income and order backlog at the close of the
period) was in excess of £100 million.
Profit before tax and goodwill amortisation, but after establishing a £2.1
million provision relating to the Classroom 2000 project, was £1.5 million.
The half-year profit compares with £2.5 million last year and £0.6 million
two years ago. Diluted earnings per share were 1.1p (1999: 1.9p).
The procurement process for Classroom 2000, the £300 million project to
provide managed ICT services to all schools in Northern Ireland, is
progressing satisfactorily. We expect that Trilith (the RM - ICL joint
venture company bidding for the project) will be appointed preferred bidder
this financial year, subject to agreeing suitable commercial terms.
Pending this, a provision against costs associated with the project has been
established.
Our software and services activities continue to grow faster than the
business as a whole, with the Learning Schools Programme making a
particularly significant contribution. Turnover from these areas grew by
25% and these activities now account for more than 50% of the Group's
business.
RM continues to be strongly cash generative. After the £10.7 million
investment to date in the Group's ten-year PFI project to provide the
Dudley Grid for Learning, cash balances at the end of the half were £16.5
million. This compares with £16.6 million a year ago.
The Board has approved the payment of an interim dividend of 0.8p (1999:
0.66p) - an increase of 21%.
Internet presence
RM has an unrivalled Internet presence in the UK education market. Our web
sites serve in excess of 15 million page impressions per month and the Group
leads the way in providing Internet connections, premium content services
and web-based email to UK schools.
Our connections business - Internet for Learning (IfL) - continues to be the
leading Internet service provider in the UK education sector. The
Government has clearly signalled that whole-network connection, using
broadband technology, is the future for Internet in schools - £37 million of
NGfL funding in government year 2000/01 is earmarked for broadband projects.
70% of the 10,000 Internet accounts provided by IfL are whole-network
connections and RM has just announced that it will double the amount of
bandwidth it currently offers to schools. The offer will mean that schools
can connect at twice the bandwidth, for example from 64k to 128k for no
increase in Internet charges. Many secondary schools are already connecting
to the Internet at 256k and the new offer will now allow them to connect at
512k. The group is already providing high bandwidth connections of 2Mb to
over fifty establishments, with bandwidths of 100Mb currently under
development.
As the UK education market's leading ISP RM is well placed to provide
additional value added services to our customers and to build significant
online communities of educationalists and students. RM EasyMail, the Group's
ASP-delivered (application service provider) email service now provides email
facilities for 500,000 users and handles 160,000 items of mail per month. We
also provide web hosting services for 5,000 schools.
RM's Internet content business has been expanded with the launch in February
of Window Box Online (www.wbol.co.uk). This product takes the core RM
Window Box values of integration and ease-of-use online by providing a wide
range of free curriculum resources and teacher support materials. Together
with Living Library and EduWeb, Window Box Online positions RM as the
leading provider of premium educational Internet content in the UK.
On 10 March 2000 RM acquired the web design company 3T Productions Limited
for £5.5 million (structured as a combination of shares, loan notes and
cash.) 3T specialises in producing interactive multimedia content for the
education market and brings with it a strong customer base including the
Teacher Training Agency, the Health Education Authority and BP.
RM has previously collaborated with 3T on a number of projects including the
successful Explore Parliament web site. The addition of 3T's content
creation and management expertise allows us to offer a fuller service to our
Internet customers covering connections, premium content products and
bespoke content development.
Markets
The Group continues to focus on the UK primary and secondary school market
and also has a significant presence in the higher education and further
education sectors. The priority educationalists place on ICT and the
availability of additional government funding have driven the high level of
investment in educational ICT. Whilst this has brought increased competitor
activity RM remains the clear market leader.
Government year 2000/01 sees a considerable increase in the NGfL Standard
Fund grant in England (from £105 million to £168 million, with a further £37
million available specifically for broadband connectivity products.) This
increase has caused some schools to defer expenditure in order to capitalise
on the larger grants available from April 2000.
The RM Window Box, which is used by more than 45% of UK primary schools, is
already the definitive ICT product in its class. This position was
further enhanced during the period by the well-received introduction of
Window Box Online in February and by the announcement of aggressive new
pricing at BETT 2000. RM Window Box is now not only the most appropriate and
effective ICT curriculum tool for primary schools, but also the class leader
for cost-effectiveness.
Our position in secondary schools has been reinforced during the period.
Despite growing competition, the RM Connect product range continues to lead
in terms of strong, educationally relevant product differentiation.
The RM Connect brand has been extended to encompass more of RM's broad range
of capabilities. Under the RM Community Connect name, the product range has
now been enhanced to include more educational value than before and
also provides the options for RM to directly manage customers' networks.
Learning Schools Programme
The Learning Schools Programme - RM's partnership with the Open University
to address the £230 million New Opportunity Fund (NOF) initiative to provide
ICT training for teachers - has made a strong initial contribution in this
half's results. At the end of the first half we had taken orders from 2,800
schools representing 50,000 (11%) of the UK's teachers and a value of
approximately £22 million. These orders are for delivery throughout the
three-year lifetime of the initiative.
All teachers registered on the Learning Schools Programme have the
opportunity to participate in online, Internet-based conferencing. The
Learning Schools Programme conferencing environment is being used by
teachers to exchange views about wider aspects of their profession as well
as specific ICT issues. This has proved to be a valuable part of the
product with contributions from teachers already reaching 10,000 a month.
Engaging customers in online communities of interest is a key element of our
Internet business strategy.
Learning Software
The Group's learning software business, which provides integrated learning
systems, had an excellent half year with its best ever revenue and order
performance. Both our SuccessMaker products and the RM Maths Learning
System are widely acknowledged as having a real ability to improve
educational standards. An increased sales focus in this area of our
business has encouraged more rapid and widespread adoption of them.
The period also saw the introduction of Snapshot, an assessment tool for
primary school mathematics and the demonstration of a prototype whole-class
teaching tool. These two new products build on both the technology and the
experience the Group has gained through the development of RM Maths Learning
System.
Managed Services
The Group now provides managed services for 13,500 desktops in over 300
establishments across the UK. During the period we successfully bid for the
first major contract to be awarded under the government's NGfL Managed
Services scheme. The Scottish Borders contract, worth £4.7 million, is to
provide ICT services - including Internet connections and content and email
- to all 81 schools in the Borders area.
Our ten-year PFI project to provide a complete, managed educational ICT
service to schools in Dudley Metropolitan Borough is now fully operational
and customer reception for this project has been good. During the period
former Grant Maintained schools in Dudley, which which were not part of the
original contract, opted to take the service in a £5.4 million contract
extension. The Dudley Grid for Learning now offers a high-quality,
predictable revenue stream to RM and a platform to offer further ICT
services to schools in the Borough.
Prospects
The March 2000 Budget demonstrated that education remains at the top of the
Government's agenda. The appointment, for the first time, of a Minister for
Technology and Learning demonstrates the continuing, strong commitment to
using ICT as a key modernising force in the education service. Significant
numbers of teachers are now undergoing training under the NOF initiative and
this is building broad-based and informed enthusiasm for using ICT - and
particularly the Internet - in the classroom.
Looking further ahead, it remains my our conviction that the role of ICT in
education will continue to increase dramatically. Our investment in
developing Internet-related businesses, and in our learning software and
Learning Schools Programme activities, puts us in an excellent position to
capitalise on the next phase of growth of ICT in education.
Performance in the second half of the Group's financial year will benefit
from the incremental government funding that became available in April 2000.
The procurement process for the Classroom 2000 project will require further
investment and we will continue to fund the development of new business
areas. Looking at the year as a whole, we expect continued strong financial
performance and the Board is confident of further good progress for the
Group.
John Leighfield
May 2000
RM plc Consolidated Profit and Loss Account
-----------------------------------------------------------------------------
Half year ended Year ended
31 March 31 March 30 September
£000 2000 1999 1999
Turnover
Existing operations 77,799 71,116 162,210
Acquisitions 275 - -
-------- --------- -------------
Total turnover 78,074 71,116 162,210
Operating profit
Existing operations before
amortisation of goodwill 1,227 2,262 11,730
Amortisation of goodwill (87) - -
Acquisitions 50 - -
--------- --------- -------------
Total operating profit 1,190 2,262 11,730
Net interest receivable 242 231 532
--------- --------- -------------
Profit on ordinary activities before
taxation 1,432 2,493 12,262
------------------------------------------------------------------------------
Profit on ordinary activities before
taxation analysed between:
Profit on ordinary activities
before taxation
and amortisation of goodwill 1,519 2,493 12,262
Amortisation of goodwill (87) - -
---------- --------- --------------
1,432 2,493 12,262
---------- --------- --------------
-----------------------------------------------------------------------------
Tax on profit on ordinary
activities (358) (698) (3,065)
----------- --------- -------------
Profit on ordinary activities
after taxation 1,074 1,795 9,197
Dividends paid and proposed (745) (607) (2,633)
----------- --------- -------------
Retained profit 329 1,188 6,564
=========== ========= =============
Earnings per share
Basic 1.2p 2.0p 10.0p
Diluted 1.1p 1.9p 9.8p
RM plc Consolidated Balance Sheet
------------------------------------------------------------------------------
As at As at As at
31 March 31 March 30 September
£000 2000 1999 1999
Fixed assets
Intangible assets 12,483 8,108 7,837
Tangible assets 24,809 13,041 23,032
----------- --------- -------------
37,292 21,149 30,869
Current assets
Stocks 10,822 8,019 10,171
Debtors 35,652 31,497 35,948
Cash at bank and short term deposits 16,536 16,588 17,794
----------- --------- -------------
63,010 56,104 63,913
Creditors
Amounts falling due within one year (52,102) (42,664) (53,578)
----------- --------- -------------
Net current assets 10,908 13,440 10,335
----------- --------- -------------
Total assets less current
liabilities 48,200 34,589 41,204
Creditors
Amounts falling due after more than
one year (6,372) (3,465) (3,531)
Provision for liabilities and
charges (1,130) (56) (1,130)
----------- --------- -------------
Net assets 40,698 31,068 36,543
=========== ========= =============
Capital and reserves
Called up share capital 1,863 1,839 1,842
Other reserve 500 - -
Share premium account 9,334 5,933 6,029
Profit and loss account 29,001 23,296 28,672
----------- --------- -------------
Equity shareholders' funds 40,698 31,068 36,543
=========== ========= =============
RM plc Consolidated Cash Flow Statement
------------------------------------------------------------------------------
Half year ended Year ended
31 March 31 March 30 September
£000 2000 1999 1999
Net cash inflow from operating
activities 4,976 4,839 22,116
Returns on investments and
servicing of finance 242 231 532
Taxation (452) (9) (3,569)
Capital expenditure and financial
investment (4,710) (4,390) (16,693)
Acquisition of subsidiary (325) - -
Equity dividends paid (2,026) (1,635) (2,243)
----------- --------- ------------
Net cash (outflow)/inflow before use
of liquid resources and financing (2,295) (964) 143
Management of liquid resources 4,734 5,646 1,314
Financing 1,037 588 687
----------- --------- -------------
Increase in cash in the period 3,476 5,270 2,144
=========== ========= =============
Reconciliation of net cash flow to movement in net cash
Increase in cash in the period 3,476 5,270 2,144
Cash flow from change in liquid
resources (4,734) (5,646) (1,314)
----------- --------- -------------
Movement in net cash in the period (1,258) (376) 830
Net cash brought forward 17,794 16,964 16,964
----------- --------- -------------
Net cash carried forward 16,536 16,588 17,794
=========== ========= =============
RM plc Notes to the Interim Statements
------------------------------------------------------------------------------
1. Basis of preparation
The financial information contained in this statement does not constitute
statutory accounts within the meaning of section 240 of the Companies Act
1985.
The unaudited consolidated profit and loss account and balance sheet for
the half years ended 31 March 1999 and 31 March 2000 have been prepared on a
basis consistent with the statutory accounts for the year ended 30 September
1999. Those accounts received an unqualified auditor's report and have been
filed with the Registrar of Companies.
2. Cost of sales, gross profit and other operating expenses
Half year ended Year ended
Half year ended 31 March 2000 31 March 30 September
1999 1999
Existing Existing Existing
£000 Operations Acquisitions Total Operations Operations
Cost of sales 58,333 153 58,486 53,296 118,367
---------- ----------- -------- ---------- ------------
Gross profit 19,466 122 19,588 17,820 43,843
---------- ----------- ------- ---------- ------------
Operating expenses(excluding
goodwill amortisation)
Selling &
distribution 10,567 53 10,620 9,030 18,777
Research &
development 4,563 - 4,563 3,313 6,651
Administration 3,109 19 3,128 3,215 6,685
---------- ----------- -------- ---------- ------------
18,239 72 18,311 15,558 32,113
---------- ----------- -------- ---------- ------------
3. Tax on profit on ordinary activities
The tax charge for the half year ended 31 March 2000 has been provided at the
estimated effective rate for the full year.
4. Dividend
The proposed interim dividend of 0.80p per ordinary share (1999: 0.66p) will
be paid on 30 June 2000 to shareholders on the register on 5 June 2000.
5. Earnings per share
Earnings per share for the half year ended 31 March 2000 are based on earnings
of £1,074,000 (1999: £1,795,000).
Basic earnings per share is based on 92,833,654 ordinary shares (1999:
91,612,199), being the weighted average number of ordinary shares in issue
during the half year ended 31 March 2000.
The diluted earnings per share is based on a weighted average of 95,521,435
(1999: 94,345,793)ordinary shares issued and issuable.
A reconciliation of basic earnings per share with diluted earnings per
share is as follows:
Half year ended 31 March 2000 Half year ended 31 March 1999
Profit No. of Pence Profit No. of Pence
after tax Shares per share after tax Shares per share
£000 ('000) £000 ('000)
Basic earnings
per share 1,074 92,834 1.2 1,795 91,612 2.0
Impact of
share options 2,688 (0.1) 2,734 (0.1)
---------------------------- -----------------------------
Diluted
earnings per
share 1,074 95,521 1.1 1,795 94,346 1.9
---------------------------- -----------------------------
6. Intangible assets
£000 Licence Goodwill Total
Cost at 1 October 1999 9,643 - 9,643
Additions - 5,228 5,228
-------------------- -------------------
Cost at 31 March 2000 9,643 5,228 14,871
--------------------- -------------------
Amortisation at 1 October 1999 1,806 - 1,806
Charge for period 495 87 582
--------------------- -------------------
Amortisation at 31 March 2000 2,301 87 2,388
--------------------- -------------------
Net Book Value
--------------------- -------------------
As at 1 October 1999 7,837 - 7,837
--------------------- -------------------
As at 31 March 2000 7,342 5,141 12,483
--------------------- -------------------
On 10 March 2000 the Group acquired 3T Productions Limited for a consideration
of £5.5m, consisting of £2.3m in shares, £2.3m in loan notes and £0.3m paid in
cash plus a further £0.5m payable in either shares or loan notes and £0.1m
payable as cash dependent upon short-term profit meeting financial performance
targets. Goodwill arising from the acquisition is being amortised over five
years.
7. Reconciliation of operating profit to operating cashflows
Half year ended Year ended
31 March 31 March 30 September
£000 2000 1999 1999
Operating profit 1,190 2,262 11,730
Depreciation charge 3,146 1,740 3,889
Amortisation of intangible assets 582 480 951
Profit on disposal of fixed assets (110) (24) (91)
(Increase)/decrease in stock (651) 508 (1,644)
Decrease/(increase) in debtors 721 3,330 (1,574)
Increase/(decrease) in creditors 98 (3,457) 8,855
---------- --------- ---------------
Net cash inflow from operating 4,976 4,839 22,116
activities
========== ========= ===============
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