RM plc (RM.)
RM plc: Interim Results for the six months ended 31 May 2023
09-Aug-2023 / 07:00 GMT/BST
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9 Aug 2023
RM plc
Interim Results for the six months ended 31 May 2023
Business stabilising, transformation programme initiated
and significant cost savings identified and executed
Consortium underperformance clouds value of the rest of the Group
RM plc ("RM"), a leading supplier of technology and resources to the education sector, reports its half year results
for the six months ended 31 May 2023.
Mark Cook, Chief Executive of RM, said "In the first half of the year, our focus has been on the task of stabilising
the business financially and operationally. This has seen us improve controls, processes, and the team's capability.
Alongside this, we have taken decisive action to reduce our cost base and working capital. Whilst we have accomplished
a lot, the most material challenge has been the negative impact of the Consortium business which clouds the good
progress made across the rest of the Group. The consequences of its slower recovery can be seen in our financial
performance and has impacted our expectations for the full year.
Now that the 'heavy lifting' stabilisation work is nearing completion, the Transformation Programme, which is focused
on improving growth and profit, has identified significant continuous improvement opportunities, which are being
reviewed, quantified, and prepared for execution. We have made a good early start in actioning these opportunities, but
it will take time for them to be reflected in our financial performance. I continue to be excited by the compelling
opportunity to deliver value creation in a growing global EdTech market."
Financial highlights
-- Revenue of GBP87.6m, down 11% (H1 2022: GBP97.9m), with strong progress in RM Assessment and International
(RM Resources) partially offsetting lower trading volumes in Consortium (RM Resources), which was impacted by the
late launch of the ecommerce platform and a more challenging trading environment in schools
-- The reduction in revenues combined with IT implementation costs and delays in the Consortium go-live
flowed through to adjusted operating profit performance, as the Group posted a loss of GBP4.5m
-- Statutory profit up to GBP6.8m (H1 2022: loss of GBP5.9m) reflecting lower costs associated with the IT
implementation and gains on asset disposals
-- Operating within our covenants with Adjusted Net Debt2 of GBP52.0m (HY 22: GBP41.5m) reflecting lower
profits, normalised working capital and exceptional spend delivering business transformation activity including the
independent business review and disposal of operations
-- Completion of the sale of RM Integris and RM Finance, and surplus Internet Protocol v4 ('IPv4') addresses
for net cash proceeds of GBP17.2m.
Strategic highlights
-- Leadership team strengthened with appointments of Simon Goodwin as Chief Financial Officer, joining at
the end of August, and Dr. Grainne Watson as Chief Digital Officer who joined in June
-- "Evolution" ecommerce platform supporting the Consortium business live but customer volumes slower to
return than anticipated
-- Transformation Programme begun, with clear actions taken in the first half to reduce operating costs,
bring key skills in-house, strengthen our management team, and rebuild our finance function
-- Identified significant continuous improvement and cost savings opportunities within each of the three
divisions and at Group level, with estimated annualised cost savings of GBP10m in FY24
-- Development of strategic roadmap expected to conclude in the second half - with a clear focus on the
substantial opportunities within the business.
Current trading and outlook
Since the period end, RM Assessment and RM Technology have continued to trade well, with contract extensions signed
with Education Scotland partnership (Glow) and with Brooke Weston Trust (BWT) in RM Technology, with two new contracts
alongside 100% customer renewals for the period in RM Assessment.
As a result of the turnaround actions which have taken place in the RM Technology division, we would expect to start to
see the results come through into revenue growth for the business in the second half, and small single digit growth for
the full year.
We expect the strong performance in the RM Assessment business to continue in the second half of the year and
therefore, the year as a whole.
Whilst our stabilisation is nearly complete, the operational issues within Consortium have continued to be a drag on
both management time and the overall business, and this is reflected in the financial performance in the first half. We
expected to see growth across all our business units and are disappointed by the continuing operational and trading
challenges in RM Resources, dominated by Consortium, and exacerbated by the more challenging budgetary environment in
schools. As we work to recover sales and win back the trust of our customers, we expect Consortium trading to continue
to be below where we would expect it to be, impacting our expectations for the Group's full year adjusted operating
profit.
We now expect to deliver Group adjusted operating profit on or around breakeven for the full year, and in excess of
GBP10million of identified annualised cost savings to benefit in FY24.
GBPm H1 2023 H1 20222 Variance FY 20222
Revenue from continuing operations 87.6 97.9 (10.5)% 214.2
Adjusted1operating (loss)/profit from continuing operations (4.5) 4.5 7.5
Adjusted1 operating (loss)/profit margin (5.1)% 4.6% 3.5%
Adjusted1 (loss)/profit before tax from continuing operations (6.7) 3.7 5.3
Profit from discontinued operations 0.8 0.5 60.0% 1.6
Statutory profit/(loss) after tax 6.8 (5.9) (14.5)
Adjusted1 diluted EPS from continuing operations (6.7)p 3.4p (10.1)p 4.2p
Diluted EPS from continuing operations (4.2)p (7.7)p 3.5p (19.3)p
Adjusted1 Net debt 52.0 41.5 46.8
1.Throughout this statement, adjusted operating (loss)/profit
and EPS are Alternative Performance Measures, 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.
2. Amounts at 31 May 2022 have been restated consistently with
the adjustments made at 30 November 2022, see Note 2
Presentation and webcast details
A recording of the presentation for investors and analysts will
be available at 9.00am today via a live webcast and on demand at
the following website:
https://brrmedia.news/RM_HY23
There will be a live Q&A session following the webcast
accessible via a conference call:
United Kingdom (Local) +44 33 0551 0200
Access Code: RM - Half Year Results
For additional details and registration for the webcast, please
contact Headland Consultancy on +44 203 805 4822 /
rm@headlandconsultancy.com.
Contacts:
RM plc investorrelations@rm.com
Mark Cook, Chief Executive Officer
Emmanuel Walter, Chief Financial Officer (interim)
Fiona O'Nolan, Investor Relations
Headland Consultancy (Financial PR) +44 203 805 4822
Stephen Malthouse (smalthouse@headlandconsultancy.com)
Chloe Francklin (cfrancklin@headlandconsultancy.com)
Jemma Savage (jsavage@headlandconsultancy.com)
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.
-- RM Resources is the established provider of education
resources for early years, primary schools, andsecondary schools
across the UK and to 80 countries internationally
-- RM Assessment is a leading provider of assessment software,
supporting exam awarding bodies,universities, and governments
worldwide to digitise their assessment delivery
-- RM Technology is a market-leading supplier of ICT software,
technology and services to UK schools andcolleges
Business Review
Strategic and operational update
The first half of the year was dominated by the extraordinary
closing of the prior year's financial reporting, the launch of a
new "Evolution" ecommerce platform for the Consortium business in
March, and a new automated distribution centre which went live
shortly after that. Through the extended year-end process, we
collectively tackled and overcame a number of challenges to ensure
our financial stability including;
-- GBP70m banking facility extended to July 2025 with revised
covenants
-- Disposal of RM Integris and Finance businesses, and sale of
surplus IPv4 addresses for a net total ofGBP17.2m
-- Agreed funding plan with the Pension Trustees and The
Pensions Regulator
The first half focus has been the need to stabilise the business
and mitigate the considerable negative impact of the Consortium
business, which continues to hold back the overall performance of
the Group in the current year. Alongside this we have focused on
bringing RM's intellectual property in house; improve controls,
processes, and finance team capability; implement cost savings; and
reduce our working capital. We have also taken the decision to
reduce our headcount by circa 325 FTE in a number of operational
and support areas. These combined actions have expected annualised
cost savings in excess of GBP10million in FY24.
These necessary actions across a number of operational areas
have helped get the business back onto a stronger operational
footing and include:
-- Reducing dependency on third parties and bringing key skills
in-house
-- Commenced restructuring and rationalisation of internal
support functions
-- Rebuilt the finance function
-- Reducing working capital through inventory management and
accounts receivable overdue in RM Resources
-- Paused the planned "Evolution" rollout across the rest of the
Group
-- Clearing the backlog of customer queries from prior failures
on Consortium customer orders
-- An internal focus on reducing unnecessary spend Strengthen
and stabilise
After the challenges faced in the prior year, our priorities for
the remainder of FY23 remain to strengthen our financial position,
review the IT enterprise architecture, and embed our Transformation
Programme across the business.
When I first reviewed the business, I used the phrase 'simplify,
strengthen and succeed' to frame the phases the company needed to
progress through to fully get back to financial and operational
fitness. Six months into my role, I have had the opportunity to
take a deeper look at our people, products, services and IP and I
believe there are substantial opportunities to deliver greater
shareholder value from our portfolio of businesses. I therefore
focused my efforts in the half on designing and commencing our
Transformation Programme, with the initial priority of stabilising
the business, which we expect to have been achieved by the year
end, but also quickly taking actions which have some benefits in
the short term as well as in medium and longer term. We have
recruited an experienced Transformation Director, to execute on the
Programme workstreams.
Strengths, opportunities, and recovery within our portfolio
RM has a fantastic portfolio of managed services, IP, and
digital platforms with leading market positions, and our focus is
to better leverage the product opportunities in the education
sector as it continues to embrace digitisation and ensure a sharper
focus on sales & marketing, product, customer excellence and
satisfaction.
We operate across three standalone divisions - RM Resources, RM
Assessment and RM Technology, with RM Resources further split into
three business units of TTS UK and TTS International, which design
and own our proprietary products for schools, and Consortium, our
UK school supplies business. Our portfolio of businesses is not
well understood by the market, and the business has not been taking
full advantage of its enviable market positions across education
and learning in the UK and internationally.
Our divisions operate in a market with structural growth
drivers, strong market positions and continued advancement of
technology across the education sector, with the global EdTech
market expected to grow at a CAGR of 13% to 2028.
RM Resources has three strategic business units: TTS UK and TTS
International collaborate with teachers and educational experts
from across the globe to create unique and innovative learning
resources and learning environments for children in more than 115
countries. Each year TTS's educational experts develop hundreds of
unique curriculum-aligned resources, from concept to creation, with
many of them receiving industry awards. Consortium UK has been
supporting learners and educators for over 50 years, supplying
everything from classroom essentials to cleaning supplies, sports
equipment to musical instruments, with over 35,000 carefully
curated products designed to support the whole school or nursery.
This is underpinned by bespoke account management and digital
shopping solutions that help to save time and money for our
customers.
Across TTS, encompassing both UK and International, we continue
to see positive demand for our unique in-house developed IP,
highlighting the unique value of our curriculum focussed learning
resources in supporting teachers and practitioners in improving
educational attainment. Leveraging TTS's recognised educational
expertise, the brand also successfully launched its first CPD
accredited Early Years podcast series and its associated
assessments which has attracted more than 80k downloads and has
been nominated for three categories at the UK Content Awards.
After the delayed launch in March of a new and much enhanced
"Evolution" ecommerce platform for the Consortium brand, which
completed the planned technology transformation in the Consortium
business unit, marketing activities began to drive customer
volumes. However, the pace of the sales recovery is proving to be
slower than anticipated as customer confidence has been dented by
problems of our own making and needs to be re-built. This is
continuing to impact the financial performance of the division.
Following the completion of the IT and distribution centre
implementations the division is returning to a stable footing after
an extended period of organisational and customer disruption which
primarily impacted the Consortium brand. With new technology
underpinning operations and ecommerce, management focus now shifts
to improving customer return within Consortium and continuous
improvement opportunities leveraging TTS's market-leading IP
globally and optimising the new infrastructure to increase customer
value.
RM Assessment is a global leader in platform delivery of digital
assessment and exam marking solutions for learners, accreditors,
and professional bodies.
The division has made positive progress in the first half, with
successful delivery of the live exam and marking sessions for
customers across the professional qualifications, language testing
and school exam segments of the market. H1 saw a 100% customer
renewal rate with GBP9.5m of customer contract extensions
demonstrating the ongoing commitment of customers to our
services.
Two new customers were secured in the Professional
Qualifications market, worth an initial GBP1.2m over the next 3
years.
The first is a contract to digitise the marking of paper exams
for technical and vocational qualifications, with a customer taking
this first step on their journey to digital examinations. This
service is already live, and first exam sessions have been
delivered successfully.
The second is a contract for an end-to-end digital assessment
solution to support those training for Accountancy qualifications.
This uses the whole of the RM Assessment portfolio to bring digital
exams to life as candidates progress through their learning journey
to qualification. First live exams have already been delivered,
with another positive candidate experience being reported back.
The division's focus on leading customers through the journey to
digital assessment maturity was recognised by an award at the
e-Assessment Association conference, for the 'Most Innovative Use
of Technology in Assessment' for its exam malpractice service,
recognising RM's continued commitment to overcoming the challenges
of digital adoption and enabling the education industry.
RM Technology is a strategic partner for schools, helping them
to drive more engaged learning, more collaborative teaching and
better outcomes through technology by providing platform-based
managed services, ICT solutions and value-added reseller services
to schools, authorities and trusts.
Following a restructuring in FY22 and with new leadership now
established, the Technology division made good progress in the
first half on improving its operating model and efficiency, with
both active value creation and defensive value capture initiatives
underway. The sale of RM Integris and Finance was also completed in
the half and cash proceeds received.
The division has maintained revenue stability across both
Connectivity and Digital Platforms (Software) whilst improving the
gross margin within those business units. The Hardware strategy and
the onboarding of key partners has improved performance since
FY22.
Initiatives and market projects including the DfE's Connect the
Classroom (CTC) have been established, generating a pipeline valued
at GBP11.5m with an expected conversion rate greater than 50%.
Focus on Services continues which has shown growth, improved upsell
and cross-sell which has allowed RM to deliver more value to
existing clients whilst improving share of wallet. We were pleased
to extend our relationships with Education Scotland (Glow) and
Brooke Weston Trust (BWT). However, three large customers lost at
the start of FY22 have impacted revenue in the half and will
continue to do so for the balance of FY23. Gross margin rebuild
across Services, Connectivity and Digital Platforms is progressing
well whilst Hardware sees a slight dip as it moves into volume
sales in line with its strategy to target Multi-Academy Trusts
(MAT). Customer retention remains high at 95% showing that RM
Technologies' relevance and satisfaction continues to be a driver
of its success.
These operational and strategic improvements will take time, and
profit recovery will lag revenue growth, but RM Technology
continues to benefit from a strong market position and channel
reach.
Transformation Programme and strategic roadmap
We embarked on an ambitious Transformation Programme in the
first half, and our priority has initially been focused on Phase 1
which was to stabilise operations and financials, following a very
challenging 2022, and which continues to be impacted by the ongoing
poor trading performance within Consortium. Whilst we have
accomplished a lot, these challenges will continue to dominate the
full year results and cloud the good progress across the rest of
the Group.
The Transformation Programme has five clear workstreams;
Stabilisation, People & Teams, Finance & Corporate,
Divisions, and Strategy, and the identification, execution and
benefit realisation are broken down into six monthly phases. In the
Stabilisation phase we have identified opportunities for growth,
and operational efficiencies - some of which we have actioned
already, albeit they do not yet positively impact our financial
performance. We expect the benefit from these actions to flow from
FY24.
As RM celebrates 50 years of service this year, we are excited
by the opportunity to deliver value creation in a global EdTech
market growing at 14% annually, and the drafting of the strategic
roadmap for the business is expected to conclude in the second
half, setting out our plans for delivering that value. We are
committed to properly understanding our business processes in order
to define the architecture required, enabling us to drive down our
overheads. We remain focused on the substantial IP opportunities
which we see within our TTS businesses, as well as developing the
broader opportunities within the global EdTech market for our
proprietary technology and assessment platform businesses; with the
aim of delivering fully digital assessments to the market and
providing the best connectivity and managed service across
platforms to the education sector.
Financial review
Group performance
Group revenue decreased by 11% to GBP87.6m (H1 2022: GBP97.9m)
largely driven by lower trading volumes in RM Resources, in
particular the Consortium business as it recovers from both the
past mismanagement of the IT implementation programme and the
challenging education market conditions. Whilst Resources had a
difficult H1, the TTS International business grew year on year by
18%. RM Technology revenues declined by 8% reflecting contract
losses in the Services business in FY22 and included GBP1.3m
relating to the sale of excess IPv4 addresses. Subsequent sales of
IPv4 assets have been classified as other income. Revenues in the
RM Assessment division grew by 8% reflecting the results of the
improved sales pipeline and the new contracts won in FY22.
Adjusted Operating Loss was GBP(4.5)m (H1 2022: profit of
GBP4.5m). The profit reduction is most notable in the RM Resources
division, with the impact of lower trading volumes in Consortium
dropping through to the bottom line. RM Technology saw a reduction
due to the lower underlying revenues and IPv4 sales of GBP1.3m.
This was partially offset by strong performance in RM Assessment,
reflecting the results of the increased and improved operational
gearing.
Adjusted loss before tax was GBP6.7m, (H1 2022: profit of
GBP3.7m), which alongside the reduced adjusted operating profit,
was due to higher interest costs.
Adjusted diluted earnings per share decreased to (5.8p) (H1
2022: 4.0p).
Statutory Profit increased to GBP6.8m (H1 2022: loss of
GBP5.9m), predominantly driven by the GBP9.5m gain on the sale of
the RM Integris and RM Finance businesses, and the GBP8.5m benefit
of the sale of IPv4 addresses in May. In the period, GBP3.5m (H1
2022: GBP7.7m) of one-off costs were incurred relating to the
Configuration of SaaS licenses as part of our IT system
implementation as well as GBP1.8m incurred to extend our banking
facilities.
Divisional performance
Our services, delivered across three divisions, are spread
across the key areas of hardware, software and content. Given our
long-term experience, we guide our customers across a complex
landscape with a focus on helping to manage the entire learning and
assessment lifecycle and providing the best connectivity across
platforms.
RM Resources provides educational resources and supplies to
schools and nurseries in the UK and internationally. Products
supplied are a mix of own-designed items, own-branded and
third-party products.
Continuing operations GBPm 6 months to May 2023 6 months to May 2022 Change 12 months to November
2022
TTS 25.1 26.9 (6.7)% 58.3
Consortium 6.7 16.0 (58.1)% 33.6
TTS International 10.3 8.7 18.4% 22.4
RM Resources revenue 42.2 51.6 (18.2)% 114.4
RM Resources adjusted operating profit/ (4.5) 1.2 - 2.8
(loss) Revenue decreased by 18% to GBP42.2m (H1 2022: GBP51.6m). Strong growth in TTS International revenues, which increased by 18% to GBP10.3m (H1 2022: GBP8.7m), was driven by improvements across most geographies but notably Europe where revenues have doubled against pre-pandemic levels of 2019. Revenue in the UK decreased by 26% to GBP31.8m (H1 2022: GBP42.9m) driven by lower trading volumes in the Consortium business where revenues were impacted by lower customer volumes and decreased spend following the disruption of last year's IT implementation.
Adjusted operating loss was GBP4.5m (H1 2022: profit of
GBP1.2m). Profitability was impacted by the lower trading volumes
and increased costs relating to the ongoing dual running of
distribution sites and technology stacks across TTS and
Consortium.
RM Assessment provides IT software and end-to-end digital
assessment services to enable online exam marking, testing and the
management and analysis of educational data. Customers include
government ministries, exam boards, professional awarding bodies
and Universities in the UK and internationally.
Continuing Operations GBPm 6 months to May 2023 6 months to May 2022* Change 12 months to November 2022*
RM Assessment revenue 19.7 18.2 8.2% 38.9
RM Assessment adjusted operating profit 3.2 2.8 14.3% 7.4
* Amounts at 31 May 2022 have been restated consistently with
the adjustments made at 30 November 2022, refer to Note 2.
Revenue from continuing operations increased by 8% to GBP19.7m
(H1 2022: GBP18.2m) driven by volume growth on existing contracts
and the impact of additional revenue from contracts won in
FY22.
Adjusted operating profit from continuing operations increased
by 14% from the prior year to GBP3.2m (H1 2022: GBP2.8m), with
operating margins increasing to 16.2% (H1 2022: 15.4%) reflecting
the benefit of the additional revenues and improved operational
gearing.
RM Technology is a strategic partner for schools to help drive
more engaged learning, more collaborative teaching and better
outcomes through technology and services to UK schools, Academies,
and colleges.
Continuing Operations GBPm 6 months to May 6 months to May Change 12 months to November
2023 2022 2022
Services 22.9 25.1 (8.8)% 55.0
Digital Software Platforms 2.8 2.9 (3.4)% 5.9
RM Technology revenue 25.7 28.0 (8.2)% 60.9
RM Technology adjusted operating profit/ (0.5) 2.0 - 2.2
(loss) Revenue decreased by 8% to GBP25.7m. Excluding GBP1.3m IP sales in FY22, the continuing operations revenue decreased by 3.7%. This was driven primarily by reduced Services sales which lost three key customers during FY22.
Adjusted operating profit decreased to a GBP0.5m loss, mainly
driven by the lower revenues and GBP1.3m of IPv4 sales being
included in the operating profit in H1 2022.
Corporate Costs
Corporate costs in the period were GBP2.8m, up from GBP1.5m in
H1 2022, as a result of higher audit fees, rebuilding the finance
function and losses primarily arising from adverse GBP:AUD
movements.
Disposals
The sale of RM Integris & RM Finance received shareholder
approval and completed at the end of May 2023 with net proceeds of
GBP8.7m received. Subsequently, the transaction was also cleared by
the Competition and Markets Authority, and the additional
consideration of GBP3.5m was received in June. A further GBP0.3m of
the Deferred Consideration was received in July. The conditions
relating to the payment of the remaining GBP0.25m of Deferred
Consideration remain outstanding.
In December 2022 the Group sold a portion of their IPv4
addresses for a total consideration of GBP8.5m in cash. Further
information on these Disposals can be found in Note 15.
Net debt
The first half of the financial year is normally a working
capital outflow period for the Group, with inventory purchases
ahead of the second half peak selling period, with the majority of
cash inflow from the examinations sessions also coming in the
second half. This seasonality continued in 2023 with GBP(12.9)m (H1
2022: cash outflow of GBP6.5m) of adjusted cash outflow from
operations in H1.
The operating cash outflow was offset by proceeds from the sale
of further surplus IPv4 assets (GBP8.5m) and the sale of RM
Integris and RM Finance (GBP8.7m), which completed in the
period.
As a result of this return to more normal seasonal working
capital movements, we closed the period at GBP52.0m of net debt (H1
2022: GBP41.5m, H2 2022: GBP46.8m).
In the period, we opted to restructure and extend our GBP70m
revolving credit facility, which will now run to July 2025, and
includes resetting the covenant tests. From May 2023 to November
2024, a quarterly Last Twelve Months (LTM) EBITDA test applies,
which is then replaced from February 2025 by quarterly LTM EBITDA
leverage and interest cover tests, both of which have a threshold
of 4x. The business operated within these covenant levels for the
duration of the period.
Dividend
A condition of the new extended and amended banking facility
agreement has been to restrict dividend distribution until the
Company has reduced its net debt to LTM EBITDA (post IFRS 16)
leverage to less than 1x for two consecutive quarters, and
therefore we are not currently able to declare a dividend.
The Board understands the importance of dividends to our
shareholders and are clear that reinstating the dividend is a key
milestone on our recovery path.
Pension
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"). All schemes are now closed to future accrual of
benefits.
The IAS19 net position (pre-tax) across the Group reduced by
GBP4.7m in the half to a surplus of GBP17.9m (30 November 2022:
GBP22.6m) with both the RM Education Scheme and the Platinum Scheme
being in surplus. The reduction has been driven by actual inflation
experience over the period and a decrease in the value of scheme
assets more than offsetting the positive impact of higher discount
rates which is based on corporate bond yields.
The 31 May 2021 triennial valuation for the current schemes was
completed in 2022, with the total scheme deficit reducing from
GBP46.5m to GBP21.6m. The deficit recovery payments of GBP4.4m per
annum will continue until the end of 2024, before reducing to
GBP1.2m until the end of 2026 when recovery payments cease.
During the half year ended 31 May 2023, the Group has agreed
further positions with the Trustee of the current schemes. The
agreement provides the main two pension schemes with a second
ranking fixed and floating charge over the shares of all obligor
companies (except for RM plc) and a payment of GBP0.5m at bi-annual
intervals starting on August 2024 which is contingent upon the
adjusted debt leverage ratio being less than 3.2x at that date. The
definition of adjusted leverage is aligned to the banking facility
outlined above.
The Group has also agreed to pay a one-off additional
contribution of GBP0.1m to the Platinum Scheme.
Internal Controls
In the Audit and Risk Committee Report in 2022, the targeted
internal control project was highlighted. The project was
officially launched with relevant stakeholders in April 2023,
covering all aspects of the internal control framework. The Project
office was set up with a clear governance structure and
communication channels. The programme is supported by external
specialist experts. The management team and the Board have been
regularly updated on the progress made against the project
plan.
Board changes
As previously announced, Simon Goodwin will join the Company as
Chief Financial Officer at the end of August. Simon will be central
to the Group's transformation strategy and helping to drive value
across the business. Following Simon's appointment, Emmanuel
Walter, Interim Chief Financial Officer, will leave the Company in
October. We are very grateful to Emmanuel for his support over the
last year.
In addition, Christopher Humphrey joined the Board as a
Non-Executive Director with effect from 7 July 2023, and became a
member of all Board Committees on appointment. Christopher brings
extensive technology and software experience to the RM Board and is
an experienced Non-Executive Director.
Vicky Griffiths, Non-Executive Director, will step down from the
Board with effect from 6 October 2023 due to other commitments. The
Board would like to express its gratitude to Vicky for her
contribution during her appointment.
Going concern
In assessing the going concern position, the Directors have
considered the balance sheet position as included on page 14 and
the level of available finance not drawn down. The net current
assets and adjusted net debt for the Group at 31 May 2023 were
GBP8.1m and GBP52.7m respectively (30 November 2022: net current
liabilities of GBP(49.2)m and GBP46.8m respectively). RM Group plc
has a bank facility ("the facility") which totalled GBP70.0m at the
date of this report. The facility maturity was extended in March
2023 and is committed until July 2025. The terms of the revised
facility are as disclosed in Note 31 of the 2022 Annual Financial
Statements.
The debt facilities are subject to financial covenants from May
2023 to November 2024 on a minimum EBITDA basis for a rolling
12-month historical period ("LTM EBITDA"), and a hard liquidity
requirement to maintain net debt below GBP62.5m. For the period
ending 31 May 2023 the LTM EBITDA minimum basis was GBP3.8m, which
the Group did not breach, and adjusted net debt was below the hard
liquidity requirement.
The Directors have prepared cash flow forecasts for the period
to 12 months from the date of this report utilising a base case and
reasonably plausible downside scenario case. Under the base case,
taking account of available facilities and existing cash resources,
the working capital available to the Group is sufficient to meet
its liabilities as they fall due for at least 12 months from the
date of this report, but is expected to breach its EBITDA covenant
from the third quarter of the financial year in its secured
facility. Under the base case it is not expected to breach the
liquidity covenant test.
If the Group were unable to mitigate sufficiently the reasonably
plausible downside scenario case and were also unable to execute
further cost or cash management programmes, in addition to
breaching the EBITDA covenant as noted above, the Group would also
be at risk of breaching its hard liquidity covenant during
FY24.
The Banks agreeing to amendments to covenants is not within the
Group's control and as a result the Directors cannot conclude that
the possibility of an un-waived breach of covenant is remote.
The Company has shared up to date financial data with the Banks
who remain supportive of management, recognise the issues that the
business has faced and also the steps taken (cost savings and
restructuring) to return to previous levels of financial
performance.
In light of the continued headwinds and the need for the
annualisation of savings to mature, the Company and the Banks are
in discussions and currently expect to agree suitable waivers and
amendments (including potential covenant re-sets and maturity
extension) to allow the Company's facility to remain available.
After due consideration of these factors, the Directors believe
that it remains appropriate to prepare these financial statements
on a going concern basis, However, until agreed with the Banks,
there remains a material uncertainty related to events or
conditions that may cast significant doubt over the Group's ability
to continue as a going concern, and hence realise their assets and
discharge their liabilities in the normal course of business. The
financial statements do not include any adjustments that would
arise from the basis of preparation being inappropriate.
Further detail on the Directors assessment of Going Concern
including details in relation to the base assessment and the
reasonably plausible downside scenario are set out in note 2.
Responsibility statement of the Directors in respect of the
half-yearly financial report
We confirm that to the best of our knowledge:
-- the condensed set of financial statements has been prepared
in accordance with United Kingdom adopted IAS34 Interim Financial
Reporting;
-- the interim management report includes a fair review of the
information required by: a. DTR 4.2.4R of the Disclosure Guidance
and Transparency Rules, being the condensed set of
financialstatements have been prepared in accordance with the
applicable set of accounting standards, gives a true and fairview
of the assets, liabilities, financial position and profit or loss
of the issuer, or the undertakings includedin the consolidation as
a whole b. DTR 4.2.7R of the Disclosure Guidance and Transparency
Rules, being an indication of important eventsthat have occurred
during the first six months of the financial year and their impact
on the condensed set offinancial statements; and a description of
the principal risks and uncertainties for the remaining six months
ofthe year; and c. DTR 4.2.8R of the Disclosure Guidance and
Transparency Rules, being related party transactions that havetaken
place in the first six months of the current financial year and
that have materially affected the financialposition or performance
of the entity during that period; and any changes in the related
party transactionsdescribed in the last annual report that could do
so.
By order of the Board,
Mark Cook
Chief Executive Officer
9 August 2023
Condensed Consolidated Income Statement
For the 6 months ended 31 May 2023
6 months ended 31 May 2023 6 months ended 31 May 2022 Year ended 30 November 2022
Adjusted Adjustments Total Adjusted Adjustments Total Adjusted Adjustments Total
Note GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Continuing operations
Revenue 4 87,564 - 87,564 97,890 - 97,890 214,167 - 214,167
Cost of sales (60,044) - (60,044) (64,988) - (64,988) (146,878) - (146,878)
Gross profit 27,520 - 27,520 32,902 - 32,902 67,289 - 67,289
Operating expenses 5 (32,062) (6,361) (38,423) (28,411) (11,464) (39,875) (59,806) (29,069) (88,875)
Profit/(loss) from (4,542) (6,361) (10,903) 4,491 (11,464) (6,973) 7,483 (29,069) (21,586)
operations
Finance and other 569 8,702 9,271 315 - 315 614 3,010 3,624
income
Finance costs (2,771) - (2,771) (1,086) - (1,086) (2,825) - (2,825)
Profit/(loss) before (6,744) 2,341 (4,403) 3,720 (11,464) (7,744) 5,272 (26,059) (20,787)
tax
Tax 6 1,149 (202) 947 (847) 2,186 1,339 (1,760) 6,458 4,698
Profit/(loss) for the
period from continuing (5,595) 2,139 (3,456) 2,873 (9,278) (6,405) 3,512 (19,601) (16,089)
operations
Profit for the period
from discontinued 15 757 9,534 10,291 511 511 1,590 1,590
operation
Profit/(loss) for the (4,838) 11,673 6,835 3,384 (9,278) (5,894) 5,102 (19,601) (14,499)
period
Earnings per ordinary
share on continuing 7
operations:
Basic (6.7)p (4.2)p 3.5p (7.7)p 4.2p (19.3)p
Diluted (6.7)p (4.2)p 3.4p (7.7)p 4.2p (19.3)p
Earnings per ordinary
share on discontinuing 7
operations:
Basic 0.9p 12.4p 0.6p 0.6p 1.9p 1.9p
Diluted 0.9p 12.2p 0.6p 0.6p 1.9p 1.9p
Earnings per ordinary
share on total 7
operations:
Basic (5.8)p 8.2p 4.1p (7.1)p 6.1p (17.4)p
Diluted (5.8)p 8.1p 4.0p (7.1)p 6.0p (17.4)p
The accompanying notes form part of these financial
statements.
Condensed Consolidated Statement of Comprehensive Income
For the 6 months ended 31 May 2023
6 months ended 31 6 months ended 31 Year ended 30
May 2023 May 2022 November 2022
GBP000 GBP000 GBP000
Profit for the period 6,835 (5,894) (14,499)
Items that will not be reclassified subsequently to
profit or loss:
Defined benefit pension scheme remeasurements (7,462) 5,703 (12,157)
Tax on items that will not be reclassified subsequently 2,015 (1,570) 2,914
to profit or loss
Items that are or may be reclassified subsequently to
profit or loss:
Fair value gain on hedged instruments (289) 88 (440)
Exchange gain/(loss) on translation of overseas (11) 250 301
operations
Tax on items that are or may be reclassified (15) (15) 11
subsequently to profit or loss
Other comprehensive (expense)/income (5,762) 4,456 (9,371)
Total comprehensive (expense)/income 1,073 (1,438) (23,870)
Condensed Consolidated Balance Sheet
6 months ended 6 months ended Year ended
31 May 2023 31/05/2022 30 November
Note Restated * 2022
GBP000 GBP000 GBP000
Non-current assets
Goodwill 49,104 49,458 49,401
Other intangible assets 24,446 27,225 25,510
Property, plant and equipment 15,133 16,647 15,892
Right of use asset 14,804 16,976 16,364
Defined Benefit Pension Scheme Surplus 14 18,537 39,719 23,959
Other receivables 9 281 83 291
Contract fulfilment assets 10 1,582 1,569 1,713
Deferred tax assets 10,101 156 173
133,988 151,834 133,303
Current assets
Inventories 24,153 23,140 26,359
Trade and other receivables 9 33,705 38,299 36,203
Contract fulfilment assets 10 1,824 2,155 1,727
Held for sale asset - 3,034 418
Corporation tax assets 2,305 6,047 2,733
Cash and short-term deposits 3,190 4,258 1,911
65,177 76,933 69,351
Total assets 3 199,165 228,767 202,654
Current liabilities
Trade and other payables 11 (50,303) (58,582) (62,495)
Lease liabilities (3,037) (3,076) (3,144)
Provisions 13 (1,314) (1,677) (2,142)
Overdraft (2,465) (1,899) -
Borrowings 12 - (43,824) (48,728)
Liabilities directly associated with assets classified as held for - - (2,082)
sale
(57,119) (109,058) (118,591)
Net current assets/(liabilities) 8,058 (32,125) (49,240)
Non-current liabilities
Other payables 11 (3,058) (3,825) (3,096)
Lease liabilities (14,923) (17,090) (15,998)
Provisions 13 (592) (1,682) (666)
Deferred tax liability (8,838) (13,098) (2,306)
Defined Benefit Pension Scheme obligation 14 (595) (1,068) (1,354)
Borrowings 12 (52,743) - -
(80,749) (36,763) (23,420)
Total liabilities (137,868) (145,821) (142,011)
Net assets 61,297 82,946 60,643
Equity attributable to shareholders
Share capital 1,917 1,917 1,917
Share premium account 27,080 27,080 27,080
Own shares (444) (444) (444)
Capital redemption reserve 94 94 94
Hedging reserve (552) 265 (263)
Translation reserve (592) (632) (581)
Retained earnings 33,794 54,666 32,840
Total equity 61,297 82,946 60,643
* Amounts at 31 May 2022 have been restated consistently with
the adjustments made at 30 November 2022, refer to Note 2.
Condensed Consolidated Statement of Changes in Equity
for the 6 months ended 31 Share Share Own Capital Hedging Translation Retained
May 2023 capital premium shares redemption reserve reserve earnings Total
reserve
Note GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
At 1 December 2022 1,917 27,080 (444) 94 (263) (581) 32,840 60,643
Profit for the period - - - - - - 6,835 6,835
Other comprehensive income/ - - - - (289) (11) (5,462) (5,762)
(expense)
Total comprehensive income/ - - - - (289) (11) 1,373 1,073
(expense)
Transactions with owners of the
Company:
Share-based payment fair - - - - - - (419) (419)
value adjustments
Ordinary dividends paid 8 - - - - - - - -
At 31 May 2023 1,917 27,080 (444) 94 (552) (592) 33,794 61,297
for the 6 months ended 31 Share Share Own Capital Hedging Translation Retained
May 2022 capital premium shares redemption reserve reserve earnings Total
reserve Restated *
Note GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
At 1 December 2021 1,917 27,080 (444) 94 177 (882) 59,029 86,971
(restated)
(Loss) for the period - - - - - - (5,894) (5,894)
Other comprehensive income/ - - - - 88 250 4,118 4,456
(expense)
Total comprehensive income/ - - - - 88 250 (1,776) (1,438)
(expense)
Transactions with owners of the
Company:
Share-based payment fair - - - - - - (89) (89)
value adjustments
Ordinary dividends paid 8 - - - - - - (2,498) (2,498)
At 31 May 2022 1,917 27,080 (444) 94 265 (632) 54,666 82,946
for the year ended 30 Share Share Own Capital Hedging Translation Retained
November 2022 capital premium shares redemption reserve reserve earnings Total
reserve
Note GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
At 1 December 2021 1,917 27,080 (444) 94 177 (882) 59,029 86,971
(Loss) for the period - - - - - - (14,499) (14,499)
Other comprehensive income/ - - - - (440) 301 (9,232) (9,371)
(expense)
Total comprehensive income/ - - - - (440) 301 (23,731) (23,870)
(expense)
Transactions with owners of the
Company:
Share-based payment fair - - - - - - 40 40
value adjustments
Ordinary dividends paid 8 - - - - - - (2,498) (2,498)
At 30 November 2022 1,917 27,080 (444) 94 (263) (581) 32,840 60,643
* Amounts at 1 December 2021 and 31 May 2022 have been restated
consistently with the adjustments made at 30 November 2022, refer
to Note 2.
Condensed Consolidated Cash Flow Statement 6 months ended 31 May 6 months ended 31 May Year ended 30
2023 2022 November 2022
Note GBP000 GBP000 GBP000
(Loss)/profit before tax from continuing (4,403) (7,744) (20,787)
operations
Profit before tax from discontinuing operations 10,291 511 1,590
Proceeds on disposal of intangible licences (8,531) - (2,791)
Gain on disposal of property - - (221)
Gain on disposal of operations (9,705) - -
Investment income (576) (315) (612)
Finance costs 2,778 1,086 2,825
(Loss)/profit from operations (10,146) (6,462) (19,996)
Adjustments for:
Amortisation and impairment of intangible assets 1,203 1,048 4,354
Depreciation and impairment of property, plant 2,736 2,151 5,149
and equipment
Gain/(Loss) on disposal of property, plant and (4) 73 41
equipment
Utilisation of contract fulfulment asset - - 2,326
(Gain)/loss on foreign exchange derivatives 1,098 (114) (204)
Share-based payment fair value adjustment (419) (89) 40
Increase in provisions 13 331 153 1,469
Defined Benefit Pension Scheme administration 14 (6) 27 8
cost
Operating cash flows before movements in working (5,207) (3,213) (6,813)
capital
(Increase)/decrease in inventories 2,205 (4,085) (7,304)
Decrease/(increase) in receivables 2,926 (4,609) (4,095)
Decrease/(increase) in contract fufilment assets 33 (1,303) (2,920)
Movement in payables:
- decrease in trade and other payables (14,312) 314 5,517
- utilisation of provisions 13 (1,234) (336) (1,514)
Cash (used in)/generated by operations (15,589) (13,232) (17,129)
Defined Benefit Pension Scheme cash (2,275) (2,310) (4,537)
contributions
Tax refunded/(paid) (241) (211) 880
Net cash (outflow)/inflow from operating (18,105) (15,753) (20,786)
activities
Investing activities
Interest received 6 4 3
Proceeds on disposal of intangible licences 8,531 - 2,791
Proceeds on disposal of property, plant and 32 - 3,299
equipment
Proceeds on disposal of operations 8,828 - -
Purchases of property, plant and equipment (463) (857) (1,575)
Purchases of other intangible assets (279) (1,607) (3,627)
Net cash generated by/(used in) investing 16,655 (2,460) 891
activities
Financing activities
Dividends paid 8 - (2,498) (2,498)
Drawdown of borrowings 13,000 24,000 73,000
Repayment of borrowings (8,717) - (44,000)
Borrowing facilities arrangement and commitment (379) (187) (436)
fees
Interest paid (2,393) (820) (2,312)
Repayment of leasing liabilities (1,182) (1,509) (3,461)
Net cash generated by/(used in) financing 329 18,986 20,293
activities
6 months ended 31 May 6 months ended 31 May Year ended 30
2023 2022 November 2022
Note GBP000 GBP000 GBP000
Net (decrease)/increase in cash and cash (1,121) 773 398
equivalents
Cash and cash equivalents at the beginning of 1,911 1,478 1,478
the period/year
Effect of foreign exchange rate changes (65) 108 35
Cash and cash equivalents at the end of period/ 725 2,359 1,911
year
Bank overdraft (2,465) (1,899) -
Cash at bank 3,190 4,258 1,911
Cash and cash equivalents at the end of period/ 725 2,359 1,911
year
Notes to the Condensed Interim Financial Statements
1. General information
RM plc ('Company') is incorporated in the United Kingdom and
listed on the London Stock Exchange. The unaudited Condensed
Consolidated Interim Financial Statements as at 31 May 2023 and for
the 6 months then ended comprise those of the Company and its
subsidiaries (together 'the Group'). Deloitte, the Company's
auditors, have not undertaken an independent review of the
condensed set of financial statements in this half-yearly financial
report as they did in the comparative interim period.
The comparative figures for the financial year ended 30 November
2022 are not the Group's statutory accounts for that financial year
(see Note 2). Those accounts have been reported on by the Group's
auditor and delivered to the registrar of companies. The report of
the auditor was (i) unqualified, (ii) did not include a reference
to any matters to which the auditor drew attention by way of
emphasis without qualifying their report, and (iii) did not contain
a statement under section 498 (2) or (3) of the Companies Act
2006.
Principal risks and uncertainties
Pursuant to the requirements of the Disclosure and Transparency
Rules, the Group provides the following information on its
principal risks and uncertainties. The Group considers strategic,
operational and financial risks and identifies actions to mitigate
those risks. Risk management systems are monitored on an ongoing
basis. The principal risks and uncertainties detailed within the
Group's 2022 Annual Report remain applicable. This is available
from the RM website: www.rmplc.com.
In summary, those risks relate to public policy, education
practice, operational execution, treasury, supply chain, data and
business continuity, environmental, people, transformation,
innovation, dependence on key contracts, impact of a pandemic, and
pensions.
The principal risks remain aligned to those reported in the 2022
Annual Report.
Condensed Consolidated Income Statement presentation
The Directors assess the performance of the Group using Adjusted
Operating Profit and Profit Before Tax. The Directors use Adjusted
Operating Profit and EPS before adjustments to profit 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. Further details are provided
in Note 2.
2. Accounting policies
The condensed set of financial statements included in this
half-yearly financial report has been prepared in accordance with
United Kingdom adopted International Accounting Standard 34 Interim
Financial Reporting and in accordance with the Disclosure, Guidance
and Transparency rules of the United Kingdom's conduct
Authority.
The annual financial statements of the Group are prepared in
accordance with International Financial Reporting Standards (IFRSs)
in accordance with the Disclosure, Guidance and Transparency rules
of the United Kingdom's conduct Authority. As required by the
Disclosure and Transparency Rules of the Financial Conduct
Authority (FCA), the condensed set of financial statements has been
prepared applying the accounting policies and presentation that
were applied in the preparation of the Group's published
Consolidated Financial Statements for the year ended 30 November
2022.
The preparation of the Condensed Consolidated Interim 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
Interim 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.
In preparing these Condensed Consolidated Interim Financial
Statements, the critical judgements made by management in applying
the Group's accounting policies and the key sources of estimation
uncertainty were the same as those that applied to the Consolidated
Financial Statements as at and for the year ended 30 November
2022.
Key sources of estimation uncertainty
In applying the Group's accounting policies the Directors are
required to make estimates and assumptions. Actual results may
differ from these estimates. The following are considered key
sources of estimation uncertainty:
Retirement benefit scheme valuation - The key estimation
sensitivities are the discount rate applied to pension liabilities
together with RPI/CPI and mortality. We note that every 0.1%
movement in discount rate has a c.GBP2.8m impact on the deficit and
a 0.1% movement in RPI has a c.GBP2.4m impact.
Revenue from contracts over time - There is estimation relating
to the output methodology (of script volumes) to determine the
transaction price. This estimation was reviewed during H1 2023 to
reflect our latest expectations. The key estimation sensitivities
are price point changes relating to indexation clauses and expected
unit volumes. We note that every 10% movement in indexation has a
c.GBP0.1m impact on revenue and a 10% movement in unit volumes has
an c.GBP0.1m impact.
Critical accounting judgements
Revenue from RM Assessment contracts A number of judgements are
made to determine performance obligations and the allocation of
revenue to those performance obligations. Each contract is analysed
separately to identify the performance obligations. Judgements are
made as to whether goods and services should be combined and
whether revenue should be recognised at a point in time or over
time. Judgement is also required to allocate the transaction price
to each performance obligation, based on an estimation of the
standalone selling price for scanning and use of the residual
method to determine a value for E-marking.
In concluding that the going concern assessment was appropriate
and that there were no material uncertainties the Directors have
made a number of significant judgements as detailed in Note 2.
Restatement
As set out in the Consolidated Financial Statements for the year
ended 30 November 2022, the Group had restated the comparative
period Finance Statements for the period to 31 May 2022 to reflect
for two prior year errors as detailed in Note 16.
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 diluted earnings per share
-- Adjusted cash conversion
-- Net debt
-- Average net debt
Further explanation of what each APM comprises and
reconciliations between Statutory reported measures and adjusted
measures are shown in Note 5.
The Board believes that presentation of the Group results in
this way is relevant to an understanding of the Group's financial
performance, as adjustment items are identified by virtue of their
size, nature and/or incidence. 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 provides supplementary
information that assists the user to understand better the
financial performance, position and trends of the Group.
In determining whether an event or transaction is an adjustment,
the Board considers both quantitative and qualitative factors such
as the frequency or predictability of occurrence.
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.
Going concern
In assessing the going concern position the Directors have
considered the balance sheet position and the level of available
finance not drawn down, and the performance of the Group for 12
months from the date of these financial statements
At 31 May 2023, the Group had net debt of GBP52.0m (30 November
2022: GBP46.8m) and drawn facilities of GBP54.5m (30 November 2022:
GBP49.0m). RM Group has a GBP70m (30 November 2022: GBP70m)
committed bank facility ("the facility") with liquidity headroom of
GBP15.5m as at 31 May 2023 (30 November 2022: GBP23.2m). Average
net debt over the 6 months to 31 May 2023 was GBP55.9m (6 months to
31 May 2022: GBP37.2m) with a maximum borrowings position of
GBP64.8m (6 months to 31 May 2022: GBP48.7m). The drawn facilities
are expected to fluctuate and are not anticipated to be fully
repaid in the period of 12 months from the date of these financial
statements,
Early in the year, the Group secured an agreement with Lenders,
which extended the existing GBP70m facility to July 2025. This
agreement provides lenders a fixed and floating charge over the
shares of all obligor companies, except for RM plc (which comprise
RM Education Limited, RM Educational Resources Limited, RM plc
Australia Pty Ltd and SoNET Systems Pty Ltd) and has reset the
covenants under the facility. For going concern purposes the Board
have assessed performance against the following covenants:
-- A quarterly minimum EBITDA basis on a rolling 12 months;
and
-- Following the completion the sale of RM Finance and RM
Integris businesses, a 'hard' liquidity covenanttest requiring the
Company to have liquidity greater than GBP7.5 million on the last
business day of the month vs ourGBP70m debt facility and liquidity
not be below GBP7.5 million at the end of two consecutive weeks
within a month
For going concern purposes, the Group has assessed a base case
scenario that assumes no significant downturn in UK or
International markets from that experienced in the period to 31 May
2023 and assumes a broadly similar macroeconomic environment to
that currently being experienced.
Revenue in the base case is driven from four key areas:
-- Low revenue in Consortium in the forecast period following
finalisation of the IT implementation, withvolumes in the forecast
period not expected to return to 2019 levels
-- New contract wins in RM Assessment and RM Technology and
increased hardware and infrastructure revenuesin RM Technology
associated with the UK government's three-year Connect the
Classroom program for which they haveprovided GBP150m in
funding
-- International volume growth in the RM Resources business,
although this is modelled below that seen in2022 and lower than
seen in H1 2023
Gross margins in the base budget are held flat through H2 2023
and a marginal increase in 2024. The increase in FY24 is largely
the result of revenue growth, revenue mix and some underlying
service delivery improvements.
Net debt, while fluctuating within the period, is not expected
to reduce within the assessment period under the base case, as the
conversion of profits into cash is expected to be offset by the
ongoing costs of the transformation programme.
Under the base case, taking account of available facilities and
existing cash resources, the working capital available to the Group
is sufficient to meet its liabilities as they fall due for at least
12 months from the date of this report, but due to performance to
date and effect of the rolling 12 month forecast on the quarterly
EBITDA this is expected to breach its EBITDA covenant for the third
and fourth quarters of this financial year Under the base case it
is not expected to breach the liquidity covenant test. There are no
mitigating factors that could be applied to mitigate the likelihood
of the EBITDA breach.
The Group is in the process of renegotiating with its lenders in
order to secure waivers or amendments to potential covenant
breaches.
As part of the going concern exercise, the Board has closely
monitored the Group's financial forecasts, key uncertainties, and
sensitivities. As part of this exercise, the Board has reviewed a
number of scenarios, including a reasonable worst case downside
scenario which includes:
RM Resources
-- School budgets are more challenged than expected and schools
focus on essentials leading to a 10%reduction from the base case of
TTS brand volumes, taking them below 2022 in the forecast period.
Consortium brandrevenues are not planned to recover during the
forecast period
-- International volume growth is materially below that seen in
2022, with expected growth reduced by onehalf
RM Technology
-- Removal of revenue growth in the RM Technology business
reflecting a more challenging market environmentrelated to new
hardware and infrastructure wins. This results in a c14% reduction
in revenues for the forecastperiod over the base case, resulting in
these being below 2022
RM Assessment
-- Pipeline delays and reduced conversion in the RM Assessment
division reduces new business revenues byc80% in the forecast
period. This reduces revenue growth in the base case down to
contracted positions
Other
-- Central bank interest rates are maintained above 4% for the
entire assessment review period
While the Board believes that all reasonable worst case downside
scenarios occurring together is highly unlikely, under these
combined scenarios, the Group would breach its hard liquidity
covenant in FY24 (in addition to breaching the EBITDA covenant from
the third quarter of this financial year as stated above in the
base case), which would require the Directors to discuss with the
Banks an amendment to the liquidity covenant. Mitigating actions
over and above the suspension of discretionary spend, such as
pausing the transformation projects, would be considered
detrimental to future recovery.
The Banks agreeing to amendments to covenants is not within the
Group's control and as a result the Directors cannot conclude that
the possibility of an un-waived breach of covenant is remote.
The Company has shared up to date financial data with the Banks
who remain supportive of management, recognise the issues that the
business has faced and also the steps taken (cost savings and
restructuring) to return to previous levels of financial
performance.
In light of the continued headwinds and the need for the
annualisation of savings to mature, the Company and the Banks are
in discussions and currently expect to agree suitable waivers and
amendments (including potential covenant re-sets and maturity
extension) to allow the Company's facility to remain available.
After due consideration of these factors, the Directors believe
that it remains appropriate to prepare these financial statements
on a going concern basis, However, until agreed with the Banks
there remains a material uncertainty related to events or
conditions that may cast significant doubt over the Group's ability
to continue as a going concern and hence realise their assets and
discharge their liabilities in the normal course of business. The
financial statements do not include any adjustments that would
arise from the basis of preparation being inappropriate.
3. 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 focussed on the nature of each type of activity.
The Group is structured into three operating divisions: RM
Resources, RM Assessment and RM Technology. Typically, two of the
divisions are impacted by seasonality trends. RM Resources
experiences increased revenues in March, June, July and October in
line with customer financial and academic years. In RM Assessment
scanning revenues are recognised over the period of the scanning
activity and create seasonality depending on the timing of exam
sessions and the number and type of examinations being sat. UK
government assessment scanning revenues are spread typically
between May to July.
Corporate Services consists of central business costs associated
with being a listed company, share based payment charges and
non-division specific pension costs.
This segmental analysis shows the results 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
6 months ended 31 May 2023 RM Resources RM Assessment RM Technology Corporate Services Total
GBP000 GBP000 GBP000 GBP000 GBP000
Revenue
UK* 31,817 12,014 25,624 69,455
Europe 6,480 4,383 32 10,895
North America 1,608 62 19 1,689
Asia 440 517 - 957
Middle East 1,082 79 - 1,161
Rest of the world 731 2,676 - 3,407
42,158 19,731 25,675 - 87,564
Adjusted profit/(loss) from operations (4,508) 3,202 (456) (2,780) (4,542)
Adjusted other income 569
Adjusted finance costs (2,771)
Adjusted (loss) before tax (6,744)
Adjustments (see note 5) 2,341
Profit before tax (4,403)
6 months ended 31 May 2022 RM Resources RM Assessment RM Technology ** Corporate Services Total
GBP000 GBP000 GBP000 GBP000 GBP000
Revenue
UK* 42,923 11,376 26,513 - 80,812
Europe 5,513 4,029 13 - 9,555
North America 1,265 68 1,335 - 2,668
Asia 411 344 - - 755
Middle East 553 78 - - 631
Rest of the world 977 2,354 138 - 3,469
51,642 18,249 27,999 - 97,890
Adjusted profit/(loss) from operations 1,239 2,762 2,016 (1,526) 4,491
Adjusted investment income 315
Adjusted finance costs (1,086)
Adjusted profit before tax 3,720
Adjustments (see note 5) (11,464)
(Loss) before tax (7,744)
** Amounts at 31 May 2022 have been restated to exclude
discontinuing operations.
Year ended 30 November 2022 RM Resources RM Assessment RM Technology Corporate Services Total
GBP000 GBP000 GBP000 GBP000 GBP000
Revenue
UK* 91,939 23,324 59,416 - 174,679
Europe 12,919 8,153 71 - 21,143
North America 3,555 142 1,374 - 5,071
Asia 880 1,299 - - 2,179
Middle East 3,305 167 - - 3,472
Rest of the world 1,768 5,855 - - 7,623
114,366 38,940 60,861 - 214,167
Adjusted profit/(loss) from operations 2,811 7,378 2,173 (4,879) 7,483
Investment income 614
Adjusted finance costs (2,825)
Adjusted profit before tax 5,272
Adjustments (see note 5) (26,059)
(Loss) before tax (20,787)
* Included in UK are international sales via UK distributors
Segmental assets
Other non-segmental assets include tax assets, cash and
short-term deposits and other non-division specific assets.
RM Resources RM Assessment RM Technology Corporate Services Total
At 31 May 2023 GBP000 GBP000 GBP000 GBP000 GBP000
Segmental 124,430 24,174 15,282 1,102 164,988
Other 34,177
Total assets 199,165
RM Resources RM Assessment RM Technology Corporate Services Total
At 31 May 2022* GBP000 GBP000 GBP000 GBP000 GBP000
Segmental 134,268 24,578 16,631 3,067 178,544
Other 50,223
Total assets 28,767
RM Resources RM Assessment RM Technology Corporate Services Total
At 30 November 2022 GBP000 GBP000 GBP000 GBP000 GBP000
Segmental 137,080 23,508 10,936 2,239 173,763
Other 28,891
Total assets 202,654
* Amounts at 31 May 2022 have been restated consistently with
the adjustments made at 30 November 2022, refer to Note 2
4. Revenue
RM Resources RM Technology RM Technology RM Assessment
Transactional Transactional Over time Over time Total
Period ended 31 May 2023 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Supply of products 41,865 6,782 - - 48,647
Rendering services 293 1,464 12,859 32,219
17,603
Licences - 1,722 2,848 2,128 6,698
42,158 9,968 15,707 19,731 87,564
RM Resources RM Technology RM Technology RM Assessment
Transactional Transactional Over time Over time Total
Period ended 31 May 2022 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Supply of products 51,634 5,765 - - 57,399
Rendering services 8 - 16,606 32,921
16,307
Licences** - 1,304 4,324 1,942 7,570
51,642 7,069 20,930 18,249 97,890
** Amounts at 31 May 2022 have been restated to exclude
discontinuing operations
5. Adjustments to profit before tax
In the 6 months ended 31 May 2023 notable adjustments to profit
include the following items:
6 months ended 6 months ended Year ended
31 May 2023 31 May 2022 30 November 2022
GBP000 GBP000 GBP000
Adjustments to administrative expenses:
Amortisation of acquisition related intangible assets 853 1,004 1,839
Dual running cost related to investment strategy (99) 2,758 5,372
Disposal related costs - - 845
Configuration of SaaS licenses 3,497 7,666 17,355
Impairment of ERP system - - 2,236
Onerous provision for IS licences - - 1,168
Independent business review related costs 1,815 - -
Restructuring costs 295 36 254
Total adjustments to administrative expenses 6,361 11,464 29,069
Other income
Sale of property - - (219)
Gain on disposal of operations (171) - -
Sale of IP addresses (8,531) - (2,791)
Total adjustments (2,341) 11,464 26,059
Tax impact (Note 6) 202 (2,186) (6,458)
Total adjustments after tax (2,139) 9,278 19,601
Gain on disposal of discontinued operations (9,534) - -
Total adjustment for the period (11,673) 9,278 19,601
Amortisation of acquisition related intangible assets:
This is an annual recurring adjustment to profit that is a
non-cash charge arising from investing activity. This adjustment is
to 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 five warehouses (including three
warehouses from the newly acquired group of companies) and transfer
into one new automated warehouse. Interlinked with the automation
software was a requirement to change the ERP solution which was
planned to be rolled out across the whole Group, however the
business is currently reviewing the wider IT enterprise
architecture needs for the Group before any further IT
implementations, which would not be before 2024.
The Group believes that whilst these programmes span a number of
years, their size, complexity and number of unusual costs and
income are material to 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
these programmes have been treated as an adjustment to profit,
consistently period to period. The Group has paused certain
elements of this programme and therefore are not incurring dual run
elements in the current year.
During the period this programme included the following costs
and income:
-- Dual run related credits during the period (GBP0.1m), relate
to adjustments to costs associated with thenew warehouse that is
now fully operational
-- The configuration and customisation costs relating to our ERP
programme "Evolution", which represents asignificant investment.
These costs totalled GBP3.5m in the period
In addition to the warehouse programme, the Group believes the
following items to be significantly large enough and unusual in
their incidence to impact the understanding of the performance of
the Group if not adjusted. In the half year ended 31 May 2023,
these items comprised:
-- The Group completed the sale of IP addresses which generated
income of GBP8.5m in the period
-- The Group completed the disposals of the iCase business
during the period which generated a gain on saleof operations of
GBP0.2m.
-- The Group undertook an Independent Business Review on behalf
of the lenders and pension scheme costingGBP1.8m
-- The Group commenced a transformation programme in 2022 which
continued in 2023 and has expensed GBP0.3m ofredundancy costs in
the period
-- The Group recognised GBP0.9m of amortisation of
acquisition-related intangible assets in the period
The Group completed the disposals of the Integris and Finance
business during the period which generated a gain on sale of
operations of GBP11.3m. The costs associated with the disposal of
Integris and Finance businesses have been treated as an adjustment
to profit (GBP1.8m).
Adjusted net debt is the total of borrowings (GBP52.7m (May
2022: GBP43.8m)), cash at bank (GBP3.2m (May 2022: GBP4.3m)) and
overdraft (GBP3.2m (May 2022: GBP1.9m)) which was GBP52.0m as at 31
May 2023 (2021: GBP41.5m).
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:
31-May-23 31-May-22
Adjusted cash Adjustments Statutory Adjusted cash Adjustments Statutory
flows flows
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Profit/(loss) before tax ** (6,744) 2,341 (4,403) 3,720 (11,464) (7,744)
Profit/(loss) from operations ** (4,542) (6,361) (10,903) 4,491 (11,464) (6,973)
Net cash inflow/(outflow) from operating (12,884) (5,221) (18,105) (6,545) (9,208) (15,753)
activities
Net cash (used in)/generated by investing (704) 17,359 16,655 33 (2,493) (2,460)
activities
Net cash (used in)/generated by financing 9,046 (8,717) 329 18,986 - 18,986
activities
Net increase/(decrease) in cash & cash (4,542) 3,421 (1,121) 12,475 (11,702) 773
equivalents
** Amounts at 31 May 2022 have been restated to exclude
discontinued operations
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:
31-May-23 31-May-22
Adjusted Adjustment Statutory Adjusted Adjustment Statutory
measure measure measure ** measure
Gross profit (GBP000) 27,520 - 27,520 32,902 - 32,902
Profit/(loss) from operations (4,542) (6,361) (10,903) 4,491 (11,464) (6,973)
(GBP000)
Operating margin (%) (5.19)% (12.45)% 4.59% (7.12)%
Profit before tax (GBP000) (6,744) 2,341 (4,403) 3,720 (11,464) (7,744)
Tax (GBP000) 1,149 (202) 947 (847) 2,186 1,339
Profit/(loss) after tax (GBP000) (5,595) 2,139 (3,456) 2,873 (9,278) (6,405)
Earnings per share on continuing
operations
Basic (Pence) (6.7) - (4.2) 3.5 - (7.7)
Diluted (Pence) (6.7) - (4.2) 3.4 - (7.7)
** Amounts at 31 May 2022 have been restated to exclude
discontinued operations
Adjusted operating profit is defined as the profit before
operations excluding the adjustments referred to above. Adjusted
operating profit margin is defined as the adjusted operating profit
as a percentage of revenue. The impact of tax is set out in Note
6.
6. Tax
6 months ended 31 May 2023 6 months ended 31 May 2022 Year ended 30 November 2022
Adjusted Adjustments Total Adjusted Adjustments Total Adjusted Adjustments Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Profit before tax (6,744) 2,341 (4,403) 3,720 (11,464) (7,744) 5,272 (26,059) (20,787)
Tax charge 1,149 (202) 947 (847) 2,186 1,339 (1,760) 6,458 4,698
Effective tax rate (17.0%) 8.6% (21.5%) 22.8% (19.1%) 17.3% 33.4% (24.8%) 22.6%
For the interim periods, the ETR is calculated by applying a
forecast full year ETR to the interim results.
The standard rate of corporation tax in the UK for the period is
25%.
7. Earnings per ordinary share
6 months ended 31 May 2023 6 months ended 31 May 2022 * Year ended 30 November 2022
Weighted Weighted Weighted
Profit after tax average Pence per share Profit after tax average Pence per share Profit after tax average Pence per share
number of number of number of
shares shares shares
GBP000 '000 GBP000 '000 GBP000 '000
Basic
earnings per
ordinary
share:
Basic
earnings from (3,456) 83,256 (4.2) (6,405) (7.7) (16,089) (19.3)
continuing 83,048 83,256
operations
Adjustments (2,139) - (2.6) 9,278 - 19,601 -
(see note 5) 11.2 23.5
Adjusted
basic
earnings from (5,595) 83,256 (6.7) 2,873 83,048 3.5 3,512 83,256 4.2
continuing
operations
Basic
earnings from 10,291 83,256 511 1,590
discontinued 12.4 83,048 0.6 83,256 1.9
operation
Adjusted
basic
earnings from 757 83,256 0.9 511 83,048 0.6 1,590 83,256 1.9
discontinued
operation
Diluted
earnings per
ordinary
share:
Basic (3,456) 83,256 (4.2) (6,405) (7.7) (16,089) (19.3)
earnings 83,048 83,256
Effect of
dilutive
potential
ordinary - 1,420
shares: 0.1 - 1,449 0.1 - 1,335 0.3
share-based
payment
awards
Diluted
earnings from (3,456) 84,676 (4.1) (6,405) (7.6) (16,089) (19.0)
continuing 84,497 84,591
operations
Adjustments (2,139) - (2.5) 9,278 - 19,601 -
(see note 5) 11.0 23.2
Adjusted
diluted
earnings from (5,595) 84,676 (6.6) 2,873 84,497 3.4 3,512 84,591 4.2
continuing
operations
Basic diluted
earnings from 511 1,590
discontinued 10,291 84,676 12.2 84,497 0.6 84,591 1.9
operation
Adjusted
diluted
earnings from 757 84,676 0.9 511 84,497 0.6 1,590 84,591 1.9
discontinued
operation
* Amounts at 31 May 2022 have been restated to exclude
discontinued operations
8. Dividends
Amounts recognised as distributions to equity holders were:
6 months 6 months Year ended
ended ended
31 May 2023 31 May 2022 30 November
2022
GBP000 GBP000 GBP000
Final dividend for the year ended 30 November 2022 - nil p per share (2022: - 2,498 2,498
3.0 p)
Interim dividend for the year ended 30 November 2022 - nil p per share - - -
(2022: nil p)
- 2,498 2,498
9. Trade and other receivables
6 months ended 31 May 2023 6 months ended 31 May 2022 Year ended 30 November 2022
Restated *
Note GBP000 GBP000 GBP000
Current
Financial assets
Trade receivables 19,573 20,048 24,441
Other receivables 1,778 2,130 1,934
Derivative financial instruments - 255 -
Accrued income 4,783 5,982 2,288
26,134 28,415 28,663
Non-financial assets
Prepayments 7,571 9,884 7,540
33,705 38,299 36,203
Non-current
Financial assets
Other receivables 281 83 291
281 83 291
33,986 38,382 36,494
* Amounts at 31 May 2022 have been restated consistently with
the adjustments made at 30 November 2022, refer to Note 2
The Directors consider that the carrying amounts of trade and
other receivables approximates their fair values.
10. Contract fulfilment assets
6 months ended 31 May 2023 6 months ended 31 May 2022 Year ended 30 November 2022
Restated *
GBP000 GBP000 GBP000
Current 1,824 2,155 1,727
Non-current 1,582 1,569 1,713
3,406 3,724 3,440
* Amounts at 31 May 2022 have been restated consistently with
the adjustments made at 30 November 2022, refer to Note 2
Contract fulfilment assets represent investments in contracts
which are recoverable and are expected to provide benefits over the
life of the contract. These costs, which relate to contract set-up
costs, are capitalised only when they relate directly to a contract
and are incremental to securing the contract.
11. Trade and other payables
6 months ended 31 May 6 months ended 31 May Year ended 30 November
2023 2022 2022
Restated *
Note GBP000 GBP000 GBP000
Current
Financial liabilities
Trade payables 19,203 24,163 34,269
Other payables 2,893 2,881 2,721
Derivative financial instruments 573 - 272
Accruals 11,682 13,603 10,516
34,351 40,647 47,778
Non-financial liabilities
Other taxation and social security 2,892 3,111 3,149
Deferred income 13,060 14,824 11,568
50,303 58,582 62,495
Non-current non-financial liabilities
Deferred income from customer
contracts:
- due after one year but within two 1,187 1,554 1,357
years
- due after two years but within five 1,664 1,137 1,473
years
- due after five years 207 1,134 266
3,058 3,825 3,096
53,361 62,407 65,591
* Amounts at 31 May 2022 have been restated consistently with
the adjustments made at 30 November 2022, refer to Note 2
12. Borrowings
6 months ended 31 May 2023 6 months ended 31 May 2022 Year ended 30 November 2022
Restated *
GBP000 GBP000 GBP000
Bank loan (53,283) (44,000) (49,000)
Capitalised fees 540 176 272
(52,743) (43,824) (48,728)
* Amounts at 31 May 2022 have been restated consistently with
the adjustments made at 30 November 2022, refer to Note 2 During
the period the Group has drawn down GBP13.0 million of the
committed bank facility ("the facility"). For details of the
facility please see note 31 in the annual report and financial
statements for the year ended 30 November 2022.
In March 2023, the Group secured an agreement with Lenders to
extend the facility to July 2023 and it is therefore within
management's control not to repay within 12 months. As such,
borrowings as at 31 May 2023, have been classified as a non-current
liability, whereas at 31 May 2022 and 30 November 2022 borrowings
are classified as a current liability.
13. Provisions
Onerous lease and
dilapidations Employee-related Contract risk provisions Total
restructuring
and dilapidations
GBP000 GBP000 GBP000 GBP000
At 1 December 2022 1,271 210 1,327 2,808
Utilisation of provisions (13) (571) (650) (1,234)
Release of provisions - - (13) (13)
Increase in provisions - 361 - 361
Impact of foreign (1) - (15) (16)
exchange
At 31 May 2023 1,256 1 649 1,906
- due within one year 708 1 605 1,314
- due after one year 548 - 44 592
1,256 1 649 1,906
14. Defined Benefit Pension Scheme
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 (the "RM Scheme")
and, following the acquisition of RM Educational Resources Limited
("The Consortium", acquired by the Company on 30 June 2017), the
CARE Scheme and the Platinum Scheme. The RM Scheme and the CARE
Scheme are both operated for employees and former employees of the
Group only.
The Platinum Scheme is a multi-employer scheme, with RM
Educational Resources Limited being just one of a number of
employers. The Group plays no active part in managing that Scheme,
and since 30 November 2020 the Group has no employees in this
Scheme.
For all three Schemes, based on the advice of a qualified
independent actuary at each balance sheet date and using the
projected unit method, the administrative expenses and current
service costs are charged to operating profit, with the interest
cost, net of interest on scheme assets, reported as a financing
item.
Defined benefit pension scheme remeasurements are recognised as
a component of other comprehensive income such that the balance
sheet reflects the scheme's surplus or deficit as at the balance
sheet date. Contributions to defined contribution plans are charged
to operating profit as they become payable.
Scheme assets are measured at bid-price, where available, at 31
May 2023. The present value of the defined benefit obligation was
measured using the projected unit method.
Under the guidance of IFRIC 14, the Group is able to recognise a
pension surplus on the balance sheet for all three schemes. At 31
May 2023, the Platinum and RM scheme show a surplus and the CARE
scheme is in deficit.
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.
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 2021 by a qualified
independent actuary. IAS 19 Employee Benefits (revised) liabilities
at 31 May 2021 have been rolled forward based on this valuation's
base data.
As at 31 May 2021, the triennial valuation for statutory funding
purposes showed a deficit of GBP15.4m (31 May 2018: GBP40.6m). The
Group agreed with the Scheme Trustees that it will repay this
amount via deficit catch-up payments of GBP3.2m per annum until 31
December 2024. At 31 May 2023 there were amounts outstanding of
GBP0.3m (2022: GBP0.3m) for one month's deficit payment (2022: 1
months) and GBPnil (2022: GBPnil) 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, RM Educational Resources Limited
operated the 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. As at 28 February 2011 the Scheme was closed to
future accruals.
The Scheme is subject to the Statutory Funding Objective under
the Pensions Act 2004. A valuation of the Scheme is carried out at
least once every three years to determine whether the Statutory
Funding Objective is met. As part of the process, RM Educational
Resources Limited must agree with the trustees of the Scheme the
contributions to be paid to address any shortfall against the
Statutory Funding Objective. The Statutory Funding Objective does
not currently impact on the recognition of the Scheme in these
accounts. The Scheme is managed by a Board of Trustees appointed in
part by the Company and in part from elections by members of the
Scheme. The Trustees have responsibility for obtaining valuations
of the fund, administering benefit payments and investing Scheme
assets. The Trustees delegate some of these functions to their
professional advisers where appropriate. The valuation of the
Scheme at 31 May 2021 was a deficit of GBP6.2m (31 December 2019
deficit GBP5.9m).
The Group agreed with the Scheme Trustees that it will repay
this amount via deficit catch-up payments of GBP1.2m per annum
until 31 December 2026.
Prudential Platinum Pension (Platinum Scheme)
The Consortium acquired West Mercia Supplies in April 2012
(prior to the Company acquiring The Consortium). Upon acquisition
of West Mercia Supplies by The Consortium, a pension 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 triennial full actuarial valuation was
carried out by the independent actuaries XPS Pensions Group on 31
December 2021. Using the assumptions below 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 RM Educational Resources Limited 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 2021 was a surplus of GBP71,800 (31 December
2018: surplus of GBP213,000).
The pension schemes have all seen improvements to their balance
sheet position in the period as shown in the table below.
31-May-23 30-Nov-22 31-May-23 30-Nov-22 31-May-23 30-Nov-22
GBP'000 GBP'000 Discount rate RPI %
RM Scheme 17,877 23,318 5.30% 4.40% 3.15% 3.05%
CARE scheme (595) (1,354) 5.35% 4.45% 3.15% 3.10%
Platinum scheme 660 641 5.30% 4.35% 3.15% 3.00%
31-May-23
GBP'000
Opening surplus 22,605
Gain from changes to financial assumptions on liabilities 25,878
Employer contributions 2,275
Return on assets (33,303)
Interest 516
Experience (losses)/gains on liabilities (37)
Other items 8
Closing surplus 17,942
The key areas of sensitivity in respect to the pension surplus
are the discount rate and RPI. The discount rates improved by
0.9-0.95 percentage points and RPI rates increased by between
0.5-0.15 percentage points. However, the reduction in the pension
deficit of GBP25.9m due to the discount rate impact on liabilities,
is offset by lower than expected invested returns of GBP(33.3)m.
The overall pension surplus decreased by GBP(4.7)m in the
period.
15. Discontinued Operations
RM Integris and RM Finance Business
On 31 May 2023, the Group completed the sale of the RM Integris
and RM Finance Businesses and related assets, to The Key Support
Services Limited. Total consideration for the Sale will be up to
GBP16.0 million on a cash free/debt free basis of which GBP12.0
million was paid on completion subject to at GBP3.3m normalised
working capital adjustment. An additional GBP4.0 million is payable
subject to satisfaction of certain conditions, including those
related to competition clearance) in cash, of which GBP3.5m was
received in June 2023 and GBP0.3m was received in July 2023.
A newly incorporated, wholly owned subsidiary Schools
Educational Software Limited acquired the RM Integris and RM
Finance Business as part of the hive-down transaction prior to
completion.
The disposal of the RM Integris and RM Finance businesses during
the year which generated a gain on sale of operations, net of the
costs associated with the disposal, of GBP9.5m.
6 months ended 6 months ended Year ended
31 May 2023 31 May 2022 30 November 2022
GBP000 GBP000 GBP000
Revenue 2,412 2,430 4,871
Cost of sales (928) (1,172) (1,894)
Gross profit 1,484 1,258 2,977
Operating expenses (727) (747) (1,387)
Profit from operations 757 511 1,590
Gain on disposal of operations 9,534 - -
Profit for the period/year 10,291 511 1,590
16. Restatement for accounting error and classification
The comparative period Financial Statements were restated to
reflect two prior year errors: 1. During the year ended 31 November
2022, certain customer contract fulfilment assets were reassessed
asfulfilling the capitalisation criteria of IAS38, which should
have been applied prior to an IFRS15 evaluation ofcontract assets.
Restated figures as at 31 May 2021 reflect the reclassification of
GBP3,107k that was previouslycapitalised within Contract fulfilment
assets to Intangible assets. There is no impact on Income
Statement, currentassets or any other balance sheet line items from
this restatement as the asset is still under development. 2. During
the year ended 31 November 2022 we restated revenue for prior
periods to correct for a mechanicalerror, which arose from previous
forecasts of exam script volumes not being updated at a point when
the actualvolumes were known. The aggregate impact of this
correction is to reduce revenues recognised in periods prior tothe
period ending 31 May 2022 by GBP0.5m and to increase contract
liabilities recognised by GBP0.5m.
Results from discontinuing operations have also been
reclassified in the prior year period ending 31 May 2022. The
impact of these is set out in Note 15.
The adjustments have the following impact on the primary
statements for the period ending 31 May 2022:
Consolidated Income Statement
6 months ended 31 May 2022
As Discontinued operations Restatement impact Restated
reported (1) (2)
GBP000 GBP000 GBP000 GBP000
Continuing operations
Revenue 100,320 (2,430) - 97,890
Cost of sales (66,160) 1,172 - (64,988)
Gross profit 34,160 (1,258) - 32,902
Operating expenses (40,622) 747 - (39,875)
Profit/(loss) from operations (6,462) (511) - (6,973)
Finance and other income 315 - - 315
Finance costs (1,086) - - (1,086)
Profit/(loss) before tax (7,233) (511) - (7,744)
Tax 1,339 - - 1,339
Profit/(loss) for the period from continuing (5,894) - - (6,405)
operations
Profit for the period from discontinued operation - 511 - 511
Profit/(loss) for the period (5,894) 511 - (5,894)
(1) Impact of discontinued operations; (2) Impact of
restatements
Consolidated Balance Sheet
At 31 May 2022
As reported Discontinued operations (1) Restatement impact (2) Restated
GBP000 GBP000 GBP000 GBP000
Non-current assets
Goodwill 49,458 - - 49,458
Other intangible assets 24,118 - 3,107 27,225
Property, plant and equipment 16,647 - - 16,647
Right of use asset 16,976 - - 16,976
Defined Benefit Pension Scheme Surplus 39,719 - - 39,719
Other receivables 83 - - 83
Contract fulfilment assets 4,677 - (3,107) 1,569
Deferred tax assets 156 - - 156
151,834 - - 151,834
Current assets
Inventories 23,140 - - 23,140
Trade and other receivables 38,503 - (204) 38,299
Contract fulfilment assets 2,155 - - 2,155
Held for sale asset 3,034 - - 3,034
Corporation tax assets 6,047 - - 6,047
Cash and short-term deposits 4,258 - - 4,258
77,137 - (204) 76,933
Total assets 228,971 - (204) 228,767
Current liabilities
Trade and other payables (58,256) - (326) (58,582)
Lease liabilities (3,076) - - (3,076)
Tax liabilities - - - -
Provisions (1,677) - - (1,677)
Overdraft (1,899) - - (1,899)
Borrowings (43,824) - - (43,824)
(108,732) - (326) (109,058)
Net current assets/(liabilities) (31,595) - (530) (32,125)
Non-current liabilities
Other payables (3,825) - - (3,825)
Lease liabilities (17,090) - - (17,090)
Provisions (1,682) - - (1,682)
Deferred tax liability (13,098) - - (13,098)
Defined Benefit Pension Scheme obligation (1,068) - - (1,068)
(36,763) - - (36,763)
Total liabilities (145,495) - (326) (145,821)
Net assets 83,476 - (530) 82,946
At 31 May 2022
As reported Discontinued operations (1) Restatement impact (2) Restated
Share capital GBP000 GBP000 GBP000 GBP000
Share premium account 27,080 - - 27,080
Own shares (444) - - (444)
Capital redemption reserve 94 - - 94
Hedging reserve 265 - - 265
Translation reserve (632) - - (632)
Retained earnings 55,196 - (530) 54,666
Total equity 83,476 - (530) 82,946
(1) Impact of discontinued operations; (2) Impact of
restatements
17. Related party transactions
Transactions between the Company and its subsidiaries, which are
related parties, have been eliminated on consolidation.
The Group encourages its directors and employees to be
Governors, Trustees or equivalent of educational establishments.
The Group trades with these establishments in the normal course of
its business.
The significant related party transactions relate to scanning
services provided by Restore Group and recruitment and executive
search services provided by Searchlight Business Services Ltd.
Services amounting to GBP0.1m were provided by Restore plc
group, which is a supplier to RM of scanning and associated
services. Charles Bligh, a Non-Executive Director of RM plc, was
the CEO of Restore plc, but is not involved in the commercial
discussions relating to this supply as set out in the Annual Report
and Accounts.
Recruitment services amounting to GBP0.1m were provided by
Searchlight Business Services Ltd. As set out in the Annual Report
and Accounts, Mark Cook, the Chief Executive Officer of RM Plc, is
the Non-Executive Chairman of Searchlight Business Services Ltd.
However, Mark is not involved in the commercial discussions
relating to this supply.
18. Post balance sheet event
On 9 June 2023, the Competition and Markets Authority (CMA)
granted Phase 1 clearance for the acquisition of the RM Integris
and RM Finance Business by The Key Support Services Limited. On 21
June 2023, the Group received GBP3.5m of additional consideration
which has been contingent on this clearance. A further GBP0.3m of
the Deferred Consideration was received in July 2023.
By order of the Board,
Emmanuel Walter
Chief Financial Officer (interim)
9 August 2023
-----------------------------------------------------------------------------------------------------------------------
Dissemination of a Regulatory Announcement that contains inside
information in accordance with the Market Abuse Regulation (MAR),
transmitted by EQS Group. The issuer is solely responsible for the
content of this announcement.
-----------------------------------------------------------------------------------------------------------------------
ISIN: GB00BJT0FF39
Category Code: IR
TIDM: RM.
LEI Code: 2138005RKUCIEKLXWM61
OAM Categories: 1.2. Half yearly financial reports and audit reports/limited reviews
2.2. Inside information
Sequence No.: 263255
EQS News ID: 1698985
End of Announcement EQS News Service
=------------------------------------------------------------------------------------
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(END) Dow Jones Newswires
August 09, 2023 02:00 ET (06:00 GMT)
RM (AQSE:RM.GB)
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RM (AQSE:RM.GB)
過去 株価チャート
から 5 2023 まで 5 2024
