TIDMRM.
RNS Number : 1773W
RM PLC
07 February 2017
7 February 2017
RM plc
Final Results for the period ending 30 November 2016
RM plc ("RM"), a leading education resources, software and
services group, reports its final results for the year ending 30
November 2016.
HIGHLIGHTS
Financial 2016 2015 Change
--------------------------------------------------- ------------ ------------ ---------------------
Statutory revenue GBP167.6m GBP178.2m - 6.0%
RM Resources GBP58.8m GBP63.5m - 7.4%
RM Results GBP31.6m GBP30.7m + 2.8%
RM Education GBP77.0m GBP80.2m - 4.0%
Exited businesses GBP0.2m GBP3.7m
Revenue excluding exited businesses* GBP167.5m GBP174.5m - 4.0%
Adjusted** operating profit GBP18.8m GBP18.0m + 4.6%
Adjusted** operating profit margins 11.3% 10.3% + 0.9pp
Statutory profit after tax GBP11.6m GBP15.0m - 22.2%
--------------------------------------------------- ------------ ------------ ---------------------
Adjusted** diluted EPS 17.4p 15.8p + 10.6%
Paid and proposed dividend per 6.00p 5.00p + 20.0%
share
--------------------------------------------------- ------------ ------------ ---------------------
Operational
------------------------------------------------------------------------------------------
* A solid performance delivering adjusted operating
profits up 4.6% at GBP18.8m (2015: GBP18.0m)
* Adjusted operating margin increases to 11.3% (2015:
10.3%) with revenues down as anticipated by 4% to
GBP167.5m
o RM Resources revenues were down 7.4% as difficult UK market
conditions were partially offset by continued growth in international
o Another year of revenue and profit growth in RM Results supported
by new e-assessment contracts and extensions to key customer agreements
o RM Education continued its transition to a software and services
provider with 61% recurring annuity revenues and increased profits
whilst making further progress in reshaping the division
* Profit after tax was GBP11.6m (2015: GBP15.0m), with
the reduction from 2015 being due primarily to a
property provision release of GBP2.4m in the prior
year and a GBP2.1m charge in 2016 for restructuring
and acquisition costs
* Strong cash balance of GBP40m delivered by improving
cash conversion of 84%
* Pension deficit increases to GBP34.8m (2015:
GBP21.9m) as liabilities have been impacted by lower
market discount rates
* Full year paid and proposed dividend increased by 20%
to 6.00p ***
* Proposed acquisition of the Education & Care business
of Connect Group plc for a purchase price of GBP56.5
million announced today
* Market conditions expected to remain challenging in
the short term, which will require continued
management focus to deliver operating margins
------------------------------------------------------------------------------------------
Commenting on the results, David Brooks, Chief Executive of RM,
said:
"2016 has been another year of delivering a solid set of
results, in which we have reported improved profitability and
increased operating margins and are proposing a further increase in
our dividend.
We are also pleased to have announced the proposed acquisition
of the Education & Care business of Connect Group plc. This
acquisition, in combination with our existing RM Resources
operation, would provide a number of strategic and operational
benefits."
* Revenue, adjusted profit and margin numbers exclude Space
Kraft Limited which was sold in December 2015.
** Adjusted operating profit is before the amortisation of
acquisition related intangible assets; impairment of held for sale
assets and related transition costs; the gain/(loss) on sale of
operations; share-based payment charges; restructuring provision
movements, acquisition costs, changes in the provision for
dilapidations and onerous lease contracts and exceptional credit on
the Defined Benefit Pension Scheme and excludes Space Kraft
Limited.
*** The expected timetable for the final dividend and Annual
General Meeting is as follows:
Ex-dividend date for 2016 final dividend 16 March 2017
(4.50 pence per share)
--------------------------------------------- ------------------
Record date for 2016 final dividend 17 March 2017
--------------------------------------------- ------------------
AGM 22 March 2017 at
11.30 a.m.
--------------------------------------------- ------------------
Payment of 2016 final dividend 21 April 2017
--------------------------------------------- ------------------
References to times are to Greenwich Mean Time. If any
of the above times or dates should change, the revised
times and/or dates will be notified to shareholders by
an announcement on a Regulatory Information Service. Payment
of the 2016 final dividend is subject to the approval by
shareholders of the final dividend.
-----------------------------------------------------------------
Contacts
RM plc FTI Consulting
David Brooks, Chief Executive Chris Lane / Elena Kalinskaya
Officer
Neil Martin, Chief Financial
Officer
08450 700 300 020 3727 1000
Chairman's Statement
2016 was a year of good progress for RM. Although revenue
declined as expected, adjusted operating profits and margins
improved compared with the prior year. Cash conversion also
improved markedly and we finished the year with net cash of GBP40
million.
RM Resources saw a decline in revenues compared with the prior
year during which school expenditure on curriculum resources was
higher due to primary school curriculum change. Schools were also
impacted by unfunded increases in pension and National Insurance
costs. International revenues continued to grow and the Division's
margins were maintained.
RM Results delivered good revenue and profit growth supported by
an expanded e-testing managed service contract. The Division's
future market position was further strengthened by the renewal of
several long term contracts and the securing of an e-assessment
contract which, for the first time, combines both e-testing and
e-marking.
RM Education revenues declined as a result of its continued
reshaping whilst profitability grew and operating margins improved.
A further step was undertaken towards the end of the year to remove
UK headcount from the lowest margin parts of the business. 2017
will be the last year in which BSF contracts are a significant
contributor. Recurring annuity revenues are running at over 60% of
the total.
The Group continues to have a strong balance sheet, with cash
and short term deposits at the year-end of GBP40.0 million (2015:
GBP48.3 million). This was after a GBP12 million pension
contribution in the year which included a one off GBP8 million
payment associated with the May 2015 triennial valuation.
The Board is recommending a final dividend of 4.50 pence per
share which would constitute, at 6.00 pence per share in total, an
increase of 20% over the prior year. This demonstrates the
previously stated intention to progress towards a more appropriate
level of dividend cover. The proposed dividend would result in
cover of 2.9 times.
The Company has agreed to buy the Education & Care business
of Connect Group plc, for a purchase price of GBP56.5 million. This
acquisition, which is expected to complete in the first half of
2017, would complement the existing RM Resources business and is
expected to be accretive to the Company's adjusted earnings per
share in the first year. Completion is conditional inter alia upon
shareholder approval and clearance from the Competition &
Markets Authority.
The outlook for 2017 is affected by continued pressure on school
budgets and adverse changes in foreign exchange rates following the
EU Referendum result. However, management is focussed on all three
divisions continuing to deliver sound operating margins.
John Poulter
Chairman
7 February 2017
Extract from Strategic Report
RM plc is a leading education resources, software and services
group. The education sector remains the Company's focus as we
target delivering sustainable shareholder returns with a resilient
and efficient operating model. RM is now delivering double digit
adjusted operating margins and a high return on capital
employed.
Operating Review
The Group is structured in three operating divisions, each with
its own managing director and management team with some staff
functions provided centrally. Approximately 36% (2015: 33%) of
Group headcount is based in India, providing support services and
software development to the operating divisions.
RM Resources
The RM Resources Division consists of the operating business
TTS.
TTS provides education resources used in schools through a
predominantly direct marketing business model with goods supplied
from large, centralised UK distribution centres. Products supplied
are a mix of third party branded and TTS own IPR items manufactured
by a network of third party suppliers with a focus on specialist
curriculum resources.
The Division's strategy is to grow its market share in the
provision of resources to schools, early years and special
educational needs markets via direct catalogue and online sales,
both in the UK and internationally.
After several years of growth RM Resources revenues decreased by
7.4% to GBP58.8 million (2015: GBP63.5 million), with a decline in
UK sales partially offset by continued international revenue
growth. The decline in the UK was driven by much tighter budgets in
primary schools and the end of curriculum change spend that had
benefitted FY14 and FY15. International now represents over 20% of
revenue in this Division.
Divisional adjusted operating margins remained stable at 17.3%
(2015: 17.5%) reflecting the cost reduction activity undertaken
once it was clear that schools and nurseries would spend less on
curriculum resources in the year. Adjusted operating profit was
GBP10.2 million (2015: GBP11.1 million).
TTS UK
Revenue in the UK declined by 10.6% to GBP46.8 million (2015:
GBP52.2 million). The market has been significantly down this year,
impacted by one-off unfunded increases in teacher pension and
National Insurance costs that had to be absorbed within primary
school budgets. The Company estimates that the market for
specialist curriculum resources, an area in which TTS has
historically been very strong, has declined by 11% as primary
schools and nurseries focus their resources budgets on commodity
items, essential in this tighter budgetary environment.
The Company continues to invest in the TTS online channel.
Online orders now make up 35.2% of UK direct marketing sales.
The Board expects the UK education resources market to continue
to be tough as a result of increased pressure on the discretionary
element of school budgets. The Company's focus continues to be on
maintaining sector leading margins while looking to retain its
strong market position as a specialist curriculum resources
supplier.
TTS International
Revenue from international sales to overseas resellers and
international schools increased by 7.5% to GBP12.0 million (2015:
GBP11.1 million). This was driven by strong growth of TTS own IPR
products through reseller channels more than offsetting a decline
in sales to international schools in which the prior year benefited
from a large order, in excess of GBP1 million, from a customer in
the Middle East which was not repeated. The Board expects
international revenues to continue to grow in the coming year.
RM Results
The RM Results business provides IT software and services to
exam boards and professional awarding bodies to allow e-assessment
through the use of onscreen exam marking (e-marking) and onscreen
testing (e-testing). In addition, the Division manages and analyses
educational data on behalf of the UK central government.
The strategy is to grow the e-assessment business through
expanding the scope of solutions to existing customers and to win
new customers in both the UK and overseas markets. Software and
services are provided through a combination of proprietary and
third party, in-house and outsourced arrangements. Internationally,
the business is expected to develop through partnerships and
software licensing rather than as a service based activity.
Revenue increased by 2.9% to GBP31.6 million (2015: GBP30.7
million). The e-assessment part of the business grew strongly by
10.8% which more than offset the planned reduction in the Data
business (15%). Adjusted operating margins increased further to
21.5% (2015: 18.1%). Adjusted operating profit increased by 21.4%
on the prior year to GBP6.8 million (2015: GBP5.6 million).
During the year the business successfully secured several new
contracts and extensions to existing contracts including a new five
year e-testing contract with the Institute of Chartered Accountants
in England and Wales (ICAEW). ICAEW has been a customer for
e-marking for a number of years and RM Results now provides them
with an end-to-end e-assessment offering.
In November 2016, the Council for Curriculum, Examinations and
Assessment in Northern Ireland (CCEA) signed a contract for the
provision of e-marking services for a further two years.
During the year the contract with the Scottish Qualifications
Authority to provide e-marking services for exam scripts in
Scotland was extended to February 2018 with the option to extend by
a further year.
In July 2016 a five year contract to develop and operate an
e-assessment platform for the delivery of English Language tests in
130 countries was signed with Cambridge Assessment.
In addition to the above RM Results has been selected as the
Preferred Bidder for the provision of a Global Assessment Platform
to Oxford University Press's (OUP) English Language Teaching
division. The proposed five year contract provides item and test
authoring, online test delivery and online marking of a range of
OUP English Language testing products through an integrated
technology platform.
The Data business is heavily dependent on the Department for
Education, principally through the National Pupil Database
contract. RM Results and the Department for Education are in
positive discussions over RM continuing to provide data related
services to the Department for Education.
The Board is targeting the growth opportunities in e-assessment
to more than outweigh reduced revenues in the Data business,
thereby allowing the Division to maintain good operating
margins.
RM Education
RM Education is a UK focused business supplying IT software and
services to schools and colleges.
After several years of double digit revenue decline, following
the move away from hardware and a reduction in new school openings
under the Building Schools for the Future (BSF) programme, revenue
decline slowed significantly to 4.0%. The Division turned over
GBP77.0 million (2015: GBP80.2 million). Adjusted operating profit
margins increased to 7.6% (2015: 6.8%). Adjusted operating profit
increased to GBP5.8 million (2015: GBP5.5 million).
The Division's strategy is to move increasingly to recurring
revenue streams while improving margins. The business is
successfully delivering this strategy through the increasing
adoption of its portfolio of services and software products by
existing and new UK school and college customers. Recurring annuity
revenues were over 60% in 2016 which has increased significantly
since 2013 levels (36.5%).
Market trends affecting the business include the demand from
schools for solutions which are low-cost yet can cope with an
increasingly diverse range of technologies. In addition, in the
last five years, purchasing decisions in England have been
increasingly devolved to schools, away from central government and
local authorities. RM Education is starting to see an evolving
trend of schools who are part of Multi-Academy Trust chains (MATs)
looking to source IT centrally as a MAT, therefore representing a
return towards a more aggregated purchasing model.
The RM Education business is made up of Managed Services - IT
outsourcing (43% of revenue), Digital Platforms - Cloud based
software offerings (9%) and Infrastructure (48%) - generally lower
margin solutions aimed at schools who want to run their own IT. The
primary focus for this business going forward is in the Managed
Services and Digital Platform areas. During the year the
Infrastructure part of this Division was restructured away from
some of the lowest margin transactional elements such as network
infrastructure, network installation and third party hardware
sales. This led to a reduction of c.10% of RM Education's UK staff
and a one-off exceptional charge in the year of GBP1.6 million.
Managed Services
The Managed Services offering is primarily the provision of full
IT outsourcing services to UK schools and colleges. Managed
Services revenues increased by 2.8% to GBP33.1 million (2015:
GBP32.2 million). Retention rates of existing customers increased
during the year to 97%. In addition, 54 new schools signed managed
services contracts in the year.
A proportion of the Division's managed service contracts are
subject to long-term project accounting policies, in particular
those relating to BSF. Consequently, as these contracts progress
towards completion, profits continue to benefit from the effects of
good operational performance, risk mitigation and cost control.
Digital Platforms
These include established products such as RM Integris (RM's
cloud based school management system) as well as newer offerings
including RM Unify. Digital Platforms revenues decreased by 9.1% to
GBP7.0 million (2015: GBP7.7 million) as legacy products such as RM
EasiTeach and RM EasiMaths come to their natural end of life.
Underlying sales in RM Integris and RM Unify, the two cloud
platforms that the Company is investing in, together grew by 3.5%
to GBP6.1 million.
Going forward, the priority areas of focus are on winning new RM
Integris primary, secondary and Multi-Academy Trust customers and
on progressing the RM Unify proposition and profile through
embedding and expanding system usage amongst existing customers,
alongside ensuring the renewal of our Scottish schools digital
network contract (Glow) in December 2017, which constitutes a large
proportion of the current RM Unify user base.
Infrastructure
Infrastructure is a very tight margin business including the
tools, products and services to help schools manage their own IT.
Revenues decreased by 8.2% to GBP37.0 million (2015: GBP40.3
million) as the Division continues to move away from lower margin
transactional business. As highlighted above, during the year the
Division restructured this area and reduced the UK workforce. This
acceleration of exiting some of the lowest margins elements of the
Infrastructure business will not alter the overall profitability of
this area but will see revenue decline by double digits in
2017.
RM India
As at 30 November 2016, RM's operation in Trivandrum accounted
for 36% of Group headcount (2015: 33%).
The Indian operation provides services solely to RM Group
companies. Activities include software development, customer and
operational support and back office shared service support (e.g.
customer order entry, IT, finance and HR) and administration.
Employees
Average Group headcount for the year was 1,822 (2015: 1,860),
which is comprised of 1,634 (2015: 1,645) permanent and 188 (2015:
215) temporary or contract staff, of which 1,173 (2015: 1,294) were
located in the UK and 649 (2015: 566) in India. At 30 November 2016
headcount was 1,731 (2015: 1,899).
The following table sets out a more detailed summary of the
permanent staff employed as at 30 November 2016:
Male Female
Executive Directors 2 (100%) 0 (0%)
Senior Managers (excluding Executive
Directors) 42 (76%) 13 (24%)
All employees 1,063 (67%) 528 (33%)
The Company is committed to offering equal employment
opportunities and its policies are designed to attract, retain and
motivate the best staff regardless of gender, sexual orientation,
race, religion, age or disability. The Group gives proper
consideration to applications for employment when these are
received from disabled persons and will employ them in posts
whenever suitable vacancies arise. Employees who become disabled
are retained whenever possible through retraining, use of
appropriate technology and making available suitable alternative
employment.
The Group encourages the participation of all employees in the
operation and development of the business and has a policy of
regular communications. The Group incentivises employees and senior
management through the payment of bonuses linked to performance
objectives, together with the other components of remuneration
detailed in the Remuneration Report.
The Group has a wide range of other written policies, designed
to ensure that it operates in a legal and ethical manner. These
include policies related to health and safety, 'whistle blowing',
anti-bribery and corruption, business gifts, grievance, career
planning, parental leave, systems and network security. All of RM's
employment policies are published internally.
Acquisition
As announced on 7 February 2017, the Company has agreed to buy
the Education & Care business of Connect Group plc, for a
purchase price of GBP56.5 million. Completion is conditional inter
alia upon shareholder approval and clearance from the Competition
& Markets Authority. This acquisition, which is expected to
complete in the first half of 2017, would complement the existing
TTS business and is expected to be accretive to the Company's
adjusted earnings per share in the first year.
Group Financial Performance
Group revenue declined by 5.9% to GBP167.6 million (2015:
GBP178.2 million) as anticipated on a statutory basis and by 4.0%
to GBP167.5 million (2015: GBP174.5 million) on a like-for-like
adjusted basis excluding exited businesses.
Details of the adjustments to operating profit quoted within
this report can been seen in note 2 to the financial
statements.
To provide a better understanding of underlying business
performance, amortisation charges relating to acquisition related
intangible assets, share-based payment charges, restructuring
provision movements, acquisition costs and other items of an
exceptional nature have been disclosed in an adjustments column in
the Income Statement to give 'Adjusted' results. Note 2 to these
financial statements identifies these adjustments highlighting
recurring and non-recurring items.
Adjusted operating profit margins increased again this year from
10.2% in 2015 to 11.1%. Despite the decline in revenue, adjusted
operating profit increased to GBP18.8 million (2015: GBP18.2
million). On a statutory basis, operating profit was GBP15.9
million (2015: GBP19.6 million), with adjustments principally being
a provision of GBP1.6 million for re-structuring, GBP0.5 million of
acquisition costs and share based payments charges of GBP1.0
million. In 2015, there was a provision release associated with an
onerous lease property contract which improved operating profits by
GBP2.4 million.
The Group generated an unadjusted statutory profit before tax of
GBP15.1 million (2015: GBP19.2 million).
The total tax charge within the Income Statement for the year
was GBP3.5 million (2015: GBP4.3 million). The Group's tax charge
for the period, measured as a percentage of profit before tax, was
23% (2015: 22%). The increase is principally due to a higher level
of expenses that are not deductible for tax purposes, primarily due
to the capital costs related to the disposal of SpaceKraft Ltd in
December 2015, and timing differences which offset the reduction in
the UK corporate tax rate. Adjusted basic earnings per share were
17.4 pence (2015: 16.2 pence). Statutory basic earnings per share
were 14.4 pence (2015: 18.5 pence) and statutory diluted earnings
per share were 14.4 pence (2015: 17.8 pence).
RM generated cash from operations for the year of GBP13.4
million (2015: GBP10.9 million), which represents a cash conversion
from operating profit of 84%. Cash and short-term deposits
decreased to GBP40.0 million (2015: GBP48.3 million) despite
payments of GBP12.0 million in the year to the Company's defined
benefit pension scheme, which included a one-off GBP8.0 million
payment which was part of the 2015 triennial valuation. The lowest
cash and short-term deposit position during the year due to
seasonal cash flows was GBP19.4 million.
Cash generated from operations is expected to continue to be
less than operating profit in the year ahead, reflecting the
reversal of a favourable working capital position related to
long-term contracts.
Dividends
The total dividend paid and proposed for the year has been
increased by 20% to 6.00 pence per share (2015: 5.00 pence). This
is comprised of the interim dividend of 1.50 pence per share and,
subject to shareholder approval, a proposed final dividend of 4.50
pence per share. The estimated total cost of normal dividends paid
and proposed for 2016 is GBP4.9 million (2015: GBP4.1 million).
This increased dividend proposal reduces the dividend cover ratio
from 3.2 to 2.9 times.
Defined Benefit Pension Scheme ("Scheme")
At 30 November 2016, the IAS 19 scheme deficit (pre-tax) was
GBP34.8 million (2015: GBP21.9 million). This increase in Scheme
deficit results primarily from a reduction in the discount rate to
3.00% from 3.85% in the previous year, following a significant
reduction in UK corporate bond yields over that period, resulting
in a higher present value of liabilities of the Scheme.
Impact of the EU Referendum vote
The change in economic conditions following the June 23(rd)
referendum decision on UK's membership of the EU has had two
immediate impacts. First, the Group has foreign currency
denominated costs that outweigh foreign currency denominated
revenues and, as a consequence of the changes in exchange rates,
has identified a circa GBP2 million potential impact from this
exposure in the year ending 30 November 2017. The Group will look
at actions to mitigate a proportion of the increased costs. In 2016
we were protected against these movements as a result of our
hedging arrangements that were in place.
Secondly, changes in UK Gilt rates that have followed the
referendum result have also had a negative impact on the IAS19
valuation of the Company's defined benefit pension scheme.
The referendum result has not changed the UK Government's policy
of ring fencing funding for priority areas and, therefore, there is
no foreseen impact on education funding.
Going Concern
The financial position, cash flows and liquidity position are
described in the financial statements and the associated notes. In
addition, the notes to the financial statements include RM's
objectives, policies and processes for managing its capital, its
financial risk management objectives, and its exposure to credit
and liquidity risk. Having reviewed the future plans and
projections for the business, the principal risks that could impact
on the group's liquidity and solvency over the next 12 months and
its current financial position, the Board believes that RM is well
placed to manage its business risks successfully. Therefore, the
Board has a reasonable expectation that RM has adequate resources
to continue in operational existence for the foreseeable future, a
period of not less than 12 months from the date of this report. For
this reason, it continues to adopt the going concern basis of
accounting in preparing the annual financial statements.
In relation to the proposed acquisition of the Education &
Care business of Connect Group plc detailed earlier in this
Strategic Report, the Group has secured a GBP75 million revolving
credit facility with Barclays Bank plc and HSBC Bank plc in
anticipation of the completion of the acquisition. As is usual for
such a facility, there are financial covenants that will need to be
adhered to over the term of the lending. The Directors have carried
out additional due diligence and consider that, should the
transaction complete within the timeframe that is currently
envisaged, the combined group will be able to comply with the terms
of these arrangements. Further details are given in the Directors'
Report.
Financial Viability Statement
In accordance with the UK Corporate Governance code, in addition
to an assessment of going concern, the Directors have also
considered the prospects of the Company over a longer time period.
The period of assessment chosen is three years, which is consistent
with the time over which the Company's medium-term financial plans
are prepared. These financial plans include Income Statements,
Balance Sheets and Cash Flow Statements. They have been assessed by
the Board in conjunction with the principal risks of the Company,
which are documented within the Principal Risks and Uncertainties
section below, along with their mitigating actions.
The Board considers that the principal risks which have the
potential to threaten the Company's business models, future
performance, solvency or liquidity over the three year period
are:
1. Public policy risk - UK education policy priority changes or
restrictions in government funding due to fiscal policy.
2. Operational execution - including:
a. RM Results operational performance over peak examination marking periods
b. significantly increased working capital requirements within
the RM Education and RM Results long-term contract portfolios and
requirements in evolving RM Education business models
c. major adverse performance in a key contract or product which
results in negative publicity and which damages the Group's
brand
3. Business continuity - an event impacting the Group's major
buildings, systems or infrastructure components. This would include
a major incident at TTS's main warehouse.
4. Strategic risks - loss of a significant contract which
underpins an element of a division's activity.
5. Defined Benefit Pension Scheme - funding of the Scheme deficit in adverse market conditions.
Having assessed the above risks, singularly and in combination,
and via sensitivity analysis, the Directors have a reasonable
expectation that the Company will be able to continue in operation
and meet its liabilities as they fall due over the three year
period of assessment and are not aware of any reason that viability
would be an issue for the foreseeable period after this.
In relation to the proposed acquisition of the Education &
Care business of Connect Group plc detailed earlier in this
Strategic Report, the Directors have considered the additional
risks as part of the acquisition working capital due diligence that
could arise as a result. These include considering the impact of
the additional GBP75 million facility that will be used to finance
the acquisition. Having completed the analysis and considered those
risks, the Directors have a reasonable expectation that the Company
will continue in operation and meet its liabilities as they fall
due over the three year period of assessment and are not aware of
any reason why the Company's viability would be an issue for the
foreseeable period after this.
Environmental Matters
The Group's impact on the environment, and its policy in
relation to such matters, are noted in the Directors' Report.
Principal Risks and Uncertainties
The management of the business and the execution of the
Company's strategy are subject to a number of risks. Risks are
reviewed by the Executive Committee, Audit Committee and Board. The
Board confirms that it has carried out a robust assessment of the
principal risks facing the Group and appropriate processes have
been put in place to monitor and mitigate them, further details of
which are given in the Corporate Governance Report. The key
business risks for the Group are set out in the table below.
Risk Description and likely Mitigation
impact
--------------------- ----------------------------- ----------------------------------------
Public policy The majority of RM's The Company seeks to understand
business is funded the education policy environment
from UK government by regular monitoring of policy
sources. Changes positions and by building relationships
in political administration, with education policy makers.
or changes in policy
priorities, might The Group's three divisions
result in a reduction have diverse revenue streams
in education spending, and product/service offerings.
leading to a decline
in market size. The Company's strategy is to
focus on areas of education
UK government funding spend which are important to
in the education meet customers' objectives.
sector is constrained Where the revenues of an individual
by fiscal policy. business is in decline, management
seeks to ensure that the cost
Global economic conditions base is adjusted accordingly.
might result in a
reduction in budgets
available for public
spending generally
and education spending
specifically.
--------------------- ----------------------------- ----------------------------------------
Education practice Education practices The Company seeks to maintain
and priorities may knowledge of current education
change and, as a practice and priorities by maintaining
result, RM's products close relationships with customers.
and services may
no longer meet customer
requirements, leading
to a risk of lower
revenue.
--------------------- ----------------------------- ----------------------------------------
Operational execution RM provides sophisticated The Company invests in maintaining
products and services, a high level of technical expertise.
which require a high
level of technical Internal management control
expertise to develop processes are in place to govern
and support, and the delivery of projects, including
on which its customers regular reviews by relevant
place a high level management. The operational
of reliance, any and financial performance of
significant operational projects, including future obligations,
failure would result the expected costs of these
in reputational damage and potential risks are regularly
and increased costs. monitored by management.
RM is engaged in
the delivery of large,
multi-year projects,
typically involving
the development and
integration of complex
ICT systems, and
may have liability
for failure to deliver
on time.
--------------------- ----------------------------- ----------------------------------------
Data and business RM is engaged in The Company's IS function has
continuity storing and processing invested in developing its Data
personal data, where Centres, and has been successfully
accuracy, privacy certified to ISO/IEC 27001:2005
and security are for the provision of systems,
important. Any significant information and hosting services.
security breach could
damage reputation The Company has established
and impact future a Security and Business Continuity
profit streams. Committee to oversee the security
aspects of the Group's information
The Group would be systems. This covers data integrity
significantly impacted and protection, defence against
if, as a result of external threats (including
a major incident, cyber risks) and disaster recovery.
one of its major
buildings, systems The Group seeks to protect itself
or infrastructure against the consequences of
components could a major incident by implementing
not function for a series of back up and safety
a long period of measures.
time.
The Group has property and business
interruption insurance cover.
--------------------- ----------------------------- ----------------------------------------
People RM's business depends The Company seeks to be an attractive
on highly skilled employer and regularly monitors
employees. Failing the engagement of its employees.
to do so could impact The Company has talent management
operationally on and career planning programmes.
ability to deliver
contractual commitments.
--------------------- ----------------------------- ----------------------------------------
Innovation The IT market is The Company monitors technology
subject to rapid, and market developments and
and often unpredictable, invests to keep its existing
change. As a result products, services and sales
of inappropriate methods up-to-date, as well
technology choices, as seeking out new opportunities
the Group's products and initiatives.
and services might
become unattractive The Group works with teachers
to its customer base. and educators to understand
opportunities and requirements.
The Group's continued
success depends on
developing and/or
sourcing a stream
of innovative and
effective products
for the education
market and marketing
these effectively
to customers.
--------------------- ----------------------------- ----------------------------------------
Dependence on The performance of The Company invests in maintaining
key contracts the RM Education and a high level of technical expertise
RM Results Divisions and on building effective working
are dependent on the relationships with its customers.
winning and extension The Company has in place a range
of long-term contracts of customer satisfaction programmes,
with government, which include management processes
local authorities, designed to address the causes
examination boards of customers' dissatisfaction.
and commercial customers.
--------------------- ----------------------------- ----------------------------------------
Pension The Group operates The Scheme was closed to new
a defined benefit entrants in 2003 and closed
pension scheme in to future accrual of benefits
the UK, which is in October 2012.
in deficit. The scheme
deficit can adversely A pension escrow account was
impact the net assets established in 2014 to fund
position of the trading risk mitigation exercises.
subsidiary RM Education The first of these was completed
Ltd. in October 2014 with the purchase
of a pensioner buy-in from
an insurance company and in
the year a flexible retirement
option exercise was conducted.
The Company evaluates risk
mitigation proposals with the
Scheme trustee.
--------------------- ----------------------------- ----------------------------------------
Financial - capital The Company's ability The Company monitors the level
to pay dividends of distributable reserves in
to shareholders depends RM plc and subsidiary companies
on having sufficient and considers their ability
distributable reserves to make dividend payments, via
in the holding company, the holding company, to the
RM plc. The Group shareholders.
is reliant on continued
dividend distribution
from subsidiaries,
principally TTS,
and ensuring no significant
impairment of RM
plc's carrying assets.
--------------------- ----------------------------- ----------------------------------------
David Brooks
Chief Executive Officer
7 February 2017
Directors' responsibilities statement
The responsibility statement below has been prepared in
connection with the Company's full Annual Report and Accounts for
the year ended 30 November 2016. Certain parts are not included
within this announcement.
Each of the Directors, whose names and functions are listed at
the front of the Annual Report, confirm that, to the best of their
knowledge:
-- the Group financial statements, which have been prepared in
accordance with IFRSs, as adopted by the EU, give a true and fair
view of the assets, liabilities, financial position and profit of
the Group; and
-- the information contained in the Strategic Report includes a
fair review of the development and performance of the business and
the position of the Group, together with a description of the
principal risks and uncertainties that it faces.
The responsibility statement was approved by the Board of
Directors on 7 February 2017 and is on its behalf by:
Greg Davidson
Company Secretary
7 February 2017
CONSOLIDATED INCOME STATEMENT
for the year ended 30 November
2016
Year ended 30 November Year ended 30 November
2016 2015
Adjusted Adjustments Total Adjusted Adjustments Total
Note GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------------------------- ----- ---------- ------------ ---------- ---------- ------------ ----------
Revenue 2 167,615 - 167,615 178,228 - 178,228
Cost of sales (100,365) - (100,365) (109,316) - (109,316)
Gross profit 67,250 - 67,250 68,912 - 68,912
Operating expenses 2 (48,421) (2,907) (51,328) (50,713) 1,392 (49,321)
-------------------------------- ----- ---------- ------------ ---------- ---------- ------------ ----------
Profit from operations 18,829 (2,907) 15,922 18,199 1,392 19,591
Investment income 3 279 - 279 409 894 1,303
Finance costs 4 (1,012) (74) (1,086) (1,510) (149) (1,659)
Profit before tax 18,096 (2,981) 15,115 17,098 2,137 19,235
Tax 5 (3,941) 472 (3,469) (3,984) (289) (4,273)
Profit for the year 14,155 (2,509) 11,646 13,114 1,848 14,962
-------------------------------- ----- ---------- ------------ ---------- ---------- ------------ ----------
Earnings per ordinary share
- basic 6 17.4p 14.4p 16.2p 18.5p
- diluted 6 17.4p 14.4p 15.6p 17.8p
-------------------------------- ----- ---------- ------------ ---------- ---------- ------------ ----------
Paid and proposed dividends
per share
- interim 7 1.50p 1.20p
- final 7 4.50p 3.80p
-------------------------------- ----- ---------- ------------ ---------- ---------- ------------ ----------
Adjustments to results have been presented to give a better guide to
business performance (see note 2).
All amounts were derived from
continuing operations.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 30 November
2016
Year ended Year ended
30 November 30 November
2016 2015
Note GBP000 GBP000
---------------------------------------------------- ----- --------- --------------
Profit for the year 11,646 14,962
Items that will not be reclassified
subsequently to profit or loss
Defined Benefit Pension Scheme
remeasurements (23,555) 2,402
Tax on items that will not be reclassified
subsequently to profit or loss 5 3,970 (950)
Items that are or may be reclassified subsequently
to profit or loss
Fair value gain/(loss) on
hedged instruments 515 (180)
Exchange gain/(loss) on translation
of overseas operations 261 (80)
Tax on items that are or may be reclassified
subsequently to profit or loss 5 32 (36)
Other comprehensive (expense)/income (18,777) 1,156
------------------------------------------------------- ----- --------- --------------
Total comprehensive (expense)/income for
the year attributable to equity holders (7,131) 16,118
------------------------------------------------------- ----- --------- --------------
CONSOLIDATED STATEMENT OF CHANGES
IN EQUITY
for the year
ended 30
November 2016
Capital
Share Share Own redemption Hedging Translation Retained
capital premium shares reserve reserve reserve earnings Total
Note GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------ ----- --------- --------- -------- ----------- --------- ------------ ---------- ---------
At 1 December
2014 1,889 27,018 (2,950) 94 544 (304) (18,177) 8,114
Profit for the
year - - - - - - 14,962 14,962
Other
comprehensive
(expense)/income - - - - (180) (80) 1,416 1,156
Total
comprehensive
(expense)/income - - - - (180) (80) 16,378 16,118
Transactions with
owners
of the Company
Shares issued 1 17 - - - - - 18
Sale of shares
held in
staff share
scheme - - - - - - 55 55
Share-based
payment awards
exercised - - 2,910 - - - (3,038) (128)
Purchase of own
shares - - (2,470) - - - - (2,470)
Share-based
payment fair
value charges - - - - - - 864 864
Ordinary
dividends paid 7 - - - - - - (3,424) (3,424)
At 30 November
2015 1,890 27,035 (2,510) 94 364 (384) (7,342) 19,147
Profit for the
year - - - - - - 11,646 11,646
Other
comprehensive
(expense)/income - - - - 515 261 (19,553) (18,777)
------------------ -----
Total
comprehensive
(expense)/income - - - - 515 261 (7,907) (7,131)
Transactions with
owners
of the Company
Share-based
payment awards
exercised - - 840 - - - (1,450) (610)
Purchase of own
shares - - (317) - - - - (317)
Share-based
payment fair
value charges - - - - - - 1,006 1,006
Ordinary
dividends paid 7 - - - - - - (4,299) (4,299)
At 30 November
2016 1,890 27,035 (1,987) 94 879 (123) (19,992) 7,796
------------------ ----- --------- --------- -------- ----------- --------- ------------ ---------- ---------
CONSOLIDATED BALANCE SHEET
At 30 November At 30 November
2016 2015
Note GBP000 GBP000
--------------------------------------------- ----- --------------- ---------------
Non-current assets
Goodwill 14,067 14,067
Acquisition related intangible assets - 8
Other intangible assets 704 562
Property, plant and equipment 6,219 7,059
Other receivables 8 1,153 1,168
Deferred tax assets 5 8,793 6,121
30,936 28,985
--------------------------------------------- ----- --------------- ---------------
Current assets
Inventories 10,689 10,862
Trade and other receivables 8 24,403 25,592
Cash and short-term deposits 9 39,987 48,320
Assets held for sale - 1,162
75,079 85,936
--------------- ---------------
Total assets 106,015 114,921
---------------------------------------------- ----- --------------- ---------------
Current liabilities
Trade and other payables 10 (54,521) (64,974)
Tax liabilities (1,259) (2,787)
Provisions 11 (3,536) (2,077)
Liabilities directly associated with assets
classified as held for sale - (549)
(59,316) (70,387)
--------------- ---------------
Net current assets 15,763 15,549
---------------------------------------------- ----- --------------- ---------------
Non-current liabilities
Other payables 10 (971) (662)
Provisions 11 (3,157) (2,864)
Defined Benefit Pension Scheme obligation (34,775) (21,861)
(38,903) (25,387)
--------------- ---------------
Total liabilities (98,219) (95,774)
---------------------------------------------- ----- --------------- ---------------
Net assets 7,796 19,147
---------------------------------------------- ----- --------------- ---------------
Equity attributable to shareholders
Share capital 12 1,890 1,890
Share premium account 27,035 27,035
Own shares (1,987) (2,510)
Capital redemption reserve 94 94
Hedging reserve 879 364
Translation reserve (123) (384)
Retained earnings - (deficit) (19,992) (7,342)
Total equity 7,796 19,147
---------------------------------------------- ----- --------------- ---------------
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 30 November 2016
Year ended Year ended
30 November 30 November
2016 2015
Note GBP000 GBP000
------------------------------------------------------ ----- --------- -------------
Profit before tax 15,115 19,235
Investment income 3 (279) (1,303)
Finance costs 4 1,086 1,659
Profit from operations 15,922 19,591
Adjustments for:
Impairment of non-acquisition related intangible
assets 77 150
Amortisation of acquisition-related intangible
assets 8 303
Amortisation of non-acquisition related intangible
assets 239 297
Depreciation and impairment of property, plant
and equipment 2,223 2,406
Gain on sale of operations (135) (65)
Gain on disposal of property, plant and equipment (5) (95)
Loss on foreign exchange derivatives 684 133
Share-based payment charge 1,006 864
Increase/(decrease) in provisions 2,557 (716)
Defined Benefit Pension Scheme administration
cost 845 530
------------------------------------------------------
Operating cash flows before movements in working
capital 23,421 23,398
Decrease/(increase) in inventories 173 (707)
Decrease in receivables 1,056 6,102
Decrease in trade and other payables (10,338) (14,369)
Utilisation of onerous lease and dilapidations
provisions 11 (345) (2,186)
Utilisation of employee-related restructuring
provisions 11 (184) (1,166)
Utilisation of other provisions 11 (396) (132)
Cash generated from operations 13,387 10,940
Defined benefit pension scheme cash contributions (11,984) (3,984)
Tax paid (3,567) (171)
Borrowing facilities arrangement and commitment
fees (422) (447)
Income on sale of finance lease debt 6 45
Net cash inflow from operating activities (2,580) 6,383
------------------------------------------------------ ----- --------- -------------
Investing activities
Interest received 255 364
Repayment of loans by third parties 16 18
Proceeds from sale of other receivables 2 - 1,586
Proceeds from sale of operations 759 -
Proceeds on disposal of property, plant and
equipment 43 165
Purchases of property, plant and equipment (1,333) (1,576)
Purchases of other intangible assets (456) (322)
Amounts transferred from short term deposits 9 2,986 -
Net cash generated by/(used in) investing
activities 2,270 235
------------------------------------------------------ ----- --------- -------------
Financing activities
Dividends paid 7 (4,299) (3,424)
Repayment of capital obligations under vehicle
finance leases - (244)
Proceeds of share capital issue, net of share
issue costs - 18
Proceeds from sale of shares held in Staff
Share Scheme - 55
Purchase of own shares (317) (2,470)
Satisfaction of share-based payment awards (610) (128)
Net cash used in financing activities (5,226) (6,193)
Net (decrease)/increase in cash and cash equivalents (5,536) 425
Cash and cash equivalents at the beginning
of the year 9 42,320 41,893
Effect of foreign exchange rate changes 189 2
Cash and cash equivalents at the end of the
year 9 36,973 42,320
------------------------------------------------------ ----- --------- -------------
1. Preliminary announcement
The preliminary results for the year ended 30 November 2016 have
been prepared in accordance with those International Accounting
Standards (IAS) and International Financial Reporting Standards
(IFRS) issued by the International Accounting Standards Board
(IASB) and adopted for use in the EU and therefore comply with
Article 4 of the EU IAS Regulation applied in accordance with the
provisions of the Companies Act 2006. However, this announcement
does not contain sufficient information to comply with IFRS. The
Group expects to publish a full Strategic Report, Directors' Report
and financial statements which will be delivered before the
Company's annual general meeting on 22 March 2017. The full
Strategic Report and Directors' Report and financial statements
will be published on the Group's website at www.rmplc.com.
The financial information set out in this preliminary
announcement does not constitute the Group's statutory accounts for
the year ended 30 November 2016. Statutory accounts for 2015 have
been delivered to the Registrar of Companies and those for 2016
will be delivered following the Company's annual general meeting.
The auditor's reports on both the 2016 and 2015 accounts were
unqualified, did not draw attention to any matters by way of
emphasis without qualifying their report and did not contain
statements under s498(2) or (3) of the Companies Act 2006 or
equivalent preceding legislation. This Preliminary announcement was
approved by the Board of Directors on 7 February 2017.
Consolidated Income Statement presentation
The Income Statement is presented in three columns. This
presentation is intended to give a better guide to business
performance by separately identifying adjustments to profit which
are considered exceptional in nature or with potential significant
variability year on year in non-cash items which might mask
underlying trading performance.
The columns extend down the Income Statement to allow the tax
and earnings per share impacts of these transactions to be
disclosed. Equivalent adjustments to profit arising in future
years, including increases in or reversals of items recorded, will
be disclosed in a consistent manner.
Adjustments to profit
See note 2 for further details in respect of adjustments to
profit, which have been analysed as recurring and non-recurring
items.
Basis of preparation
The financial statements have been prepared on the historical
cost basis except for certain financial instruments, share-based
payments and pension assets and liabilities which are measured at
fair value. The preparation of financial statements, in conformity
with generally accepted accounting principles, requires the use of
estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Although these estimates are based on the Directors' best
knowledge of current events and actions, actual results ultimately
may differ from those estimates.
Significant accounting policies
The accounting policies used for the preparation of this
announcement have been applied consistently.
2. Operating segments
The Group's business is supplying products, services and solutions
to the UK and international education markets. Information reported
to the Group's Chief Executive for the purposes of resource allocation
and assessment of segmental performance is focussed on the nature of
each type of activity.
The Group is structured into three operating divisions: RM Resources,
RM Results and RM Education. The exited business in the year relates
to SpaceKraft.
A full description of each division, together with comments on its
performance and outlook, is given in the Strategic Report. Corporate
Services consists of central business costs associated with being a
listed company and non-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
RM RM RM Corporate Exited Total
Year ended 30 November 2016 Resources Results Education Services Businesses
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
--------------------------------- ---------- -------- ---------- ---------- ----------- --------
Revenue
UK 46,779 26,925 75,450 - 151 149,305
Europe 5,249 3,231 1,138 - - 9,618
North America 1,723 - 232 - - 1,955
Asia 981 117 50 - - 1,148
Middle East 2,815 - 9 - - 2,824
Rest of the world 1,288 1,307 170 - - 2,765
58,835 31,580 77,049 - 151 167,615
--------------------------------- ---------- -------- ---------- ---------- ----------- --------
Adjusted profit from operations 10,156 6,798 5,820 (3,926) (19) 18,829
Investment income 279
Adjusted finance costs (1,012)
Adjusted profit before tax 18,096
Adjustments (see below) (2,981)
Profit before tax 15,115
--------------------------------- ---------- -------- ---------- ---------- ----------- --------
RM RM RM Corporate Exited Total
Year ended 30 November 2015 Resources Results Education Services Businesses
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
--------------------------------- ---------- -------- ---------- ---------- ----------- --------
Revenue
UK 52,391 26,508 79,285 - 3,279 161,463
Europe 4,062 3,039 423 - 165 7,689
North America 932 - 272 - 64 1,268
Asia 678 109 171 - 22 980
Middle East 4,555 - 7 - 18 4,580
Rest of the world 925 1,069 85 - 169 2,248
63,543 30,725 80,243 - 3,717 178,228
--------------------------------- ---------- -------- ---------- ---------- ----------- --------
Adjusted profit from operations 11,107 5,554 5,494 (4,140) 184 18,199
Investment income 409
Adjusted finance costs (1,510)
Adjusted profit before tax 17,098
Adjustments (see below) 2,137
Profit before tax 19,235
--------------------------------- ---------- -------- ---------- ---------- ----------- --------
Adjustments to administrative expenses
Year ended Year ended
30 November 30 November
2016 2015
GBP000 GBP000
------------------------------------------------ ------------- -------------
Amortisation of acquisition-related intangible
assets 8 303
Impairment of held for sale assets and related
transition costs - 323
Gain on sale of operations (135) (65)
Share-based payment charges 1,006 864
Release of provisions for dilapidations on
leased properties and onerous lease contracts (90) (2,368)
Restructuring 1,593 (243)
Acquisition related costs 525 -
Exceptional credit on Defined Benefit Pension
Scheme - (206)
2,907 (1,392)
------------------------------------------------ ------------- -------------
In the year ended 30 November 2016 notable adjustments to profit
include:
Recurring items:
These are items which occur regularly but which management judge
to have a distorting effect on the underlying results of the Group
or are not regularly monitored for the purpose of determining
business performance. These items include the amortisation of
acquisition related intangible assets; share-based payment charges
and changes in the provision for dilapidations and onerous lease
contracts.
Recurring items are adjusted each year irrespective of
materiality to ensure consistent treatment.
Non-recurring items:
These are items which are non-recurring and are identified by
virtue of either their size or their nature. These items can
include, but are not restricted to, impairment of held for sale
assets and related transition costs; the gain/loss on sale of
operations and restructuring and acquisition costs. As these items
are one-off or non-operational in nature, management considers that
they would distort the Group's underlying business performance.
During the year, the restructuring of the Infrastructure part of
the RM Education division was undertaken to move away from some of
the lowest margin transactional elements such as network
infrastructure, network installation and third party hardware
sales. This led to a reduction of broadly 10% of the RM Education
UK staff and a one-off exceptional charge of GBP1.6m.
During the year, the group incurred professional advisor costs
relating to an acquisition of GBP525,000, see note 15 for further
details.
In the prior year, the Group's 135 Milton Park leased premises
were sub-let to South Oxfordshire District Council for a minimum
period of 3 years. The premises are onerous to the Group's
requirements, as they were at 30 November 2014, and on sub-letting
GBP2.4m was released from the onerous lease provision.
In the prior year, the Group's interests in Newham Learning
Partnership (PSP) ltd were sold for a total cash consideration of
GBP1.6m; and a profit of GBP0.9m was recorded as an adjustment to
Investment income (see note 3).
Segmental assets
RM RM RM Corporate Exited
Resources Results Education Services Businesses Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
--------------------- ---------- -------- ---------- ---------- ----------- --------
At 30 November 2016
Segmental 31,968 7,085 17,803 217 - 57,073
Other 48,942
Total assets 106,015
--------------------- ---------- -------- ---------- ---------- ----------- --------
RM RM RM Corporate Exited
Resources Results Education Services Businesses Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
--------------------- ---------- -------- ---------- ---------- ----------- --------
At 30 November 2015
Segmental 32,962 7,732 16,539 700 1,162 59,095
Other 55,826
Total assets 114,921
--------------------- ---------- -------- ---------- ---------- ----------- --------
3. Investment income
Year ended Year ended
30 November 30 November
2016 2015
GBP000 GBP000
-------------------------------------------- ------------- -------------
Bank interest 123 224
Income on sale of finance lease debt 46 45
Income from sale of other receivables (see
note 2) - 894
Other finance income 110 140
279 1,303
-------------------------------------------- ------------- -------------
4. Finance costs
Year ended Year ended
30 November 30 November
2016 2015
Note GBP000 GBP000
------------------------------------------------------- ------ ------- -------------
Borrowing facilities arrangement fees and
commitment fees 421 467
Net finance costs on defined benefit pension
scheme 498 964
Unwind of discount on long term contract
provisions 37 74
Unwind of discount on onerous lease and dilapidations
provisions 11 84 149
Other finance costs 46 5
-------------------------------------------------------
1,086 1,659
------------------------------------------------------- ------ ------- -------------
5. Tax
a) Analysis of tax charge in the Consolidated
Income Statement
Year ended Year ended
30 November 30 November
2016 2015
GBP000 GBP000
------------------------------------------------ ------------- -------------
Current taxation
UK corporation tax 2,924 3,684
Adjustment in respect of prior years 302 297
Overseas tax 296 278
Total current tax charge 3,522 4,259
------------------------------------------------- ------------- -------------
Deferred taxation
Temporary differences 173 259
Adjustment in respect of prior years (237) (213)
Overseas tax 11 (32)
Total deferred tax (credit)/charge (53) 14
Total Consolidated Income Statement tax charge 3,469 4,273
------------------------------------------------- ------------- -------------
b) Analysis of tax (credit)/charge in the Consolidated Statement
of Comprehensive Income
Year ended Year ended
30 November 30 November
2016 2015
GBP000 GBP000
------------------------------------------------ ------------- -------------
UK corporation tax
Defined benefit pension scheme (1,241) (469)
Share based payments (142) (504)
Deferred tax
Defined benefit pension scheme movements (2,325) 949
Defined benefit pension scheme escrow (749) -
Share based payments 110 540
Deferred tax relating to the change in rate 345 470
Total Consolidated Statement of Comprehensive
Income tax (credit)/charge (4,002) 986
------------------------------------------------- ------------- -------------
c) Reconciliation of Consolidated
Income Statement tax charge
The tax charge in the Consolidated Income Statement reconciles to
the effective rate applied by the Group as follows:
Year ended 30 November Year ended 30 November
2016 2015
Adjusted Adjustments Adjusted Adjustments
Total Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------------------------------- --------- -------- ------- --------- ------- -------
Profit on ordinary activities
before tax 18,096 (2,981) 15,115 17,098 2,137 19,235
Tax at 20% (2015: 20.33%)
thereon: 3,619 (596) 3,023 3,476 434 3,910
Effects of:
- change in tax rate on carried
forward
deferred tax assets 65 - 65 123 - 123
- other expenses not deductible
for tax
purposes 110 - 110 50 - 50
- other temporary timing differences - 151 151 (7) 1 (6)
- R&D tax credit (10) - (10) 4 - 4
- impairments - - - 12 36 48
- overseas tax 81 - 81 246 - 246
- gain on sale of operations - (27) (27) - (182) (182)
- prior period adjustments 76 - 76 80 - 80
Tax charge in the Consolidated
Income Statement 3,941 (472) 3,469 3,984 289 4,273
--------------------------------------- --------- -------- ------- --------- ------- -------
d) Deferred tax
The Group has recognised deferred tax assets as these are anticipated
to be recoverable against profits in future periods. The major deferred
tax assets and liabilities recognised by the Group and movements thereon
are as follows:
Defined
benefit Acquisition
pension Short-term related
Accelerated scheme Share-based timing intangible
Group tax depreciation obligation payments differences assets Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
----------------------------- ------------------ ------------ ------------ ------------- ------------ --------
At 1 December 2014 787 5,351 1,016 1,085 (92) 8,147
Credit/(charge) to income - - (53) (52) 91 (14)
Credit to equity - (1,419) (540) - - (1,959)
Transfer to assets held for
sale (53) - - - - (53)
At 30 November 2015 734 3,932 423 1,033 (1) 6,121
Credit/(charge) to income 112 - (59) (1) 1 53
Charge to equity - 1,980 (110) 749 - 2,619
At 30 November 2016 846 5,912 254 1,781 - 8,793
----------------------------- ------------------ ------------ ------------ ------------- ------------ --------
Certain deferred tax assets and
liabilities have been offset above.
6. Earnings per ordinary share
Year ended 30 November Year ended 30 November
2016 2015
Weighted Weighted
Profit average Pence Profit average Pence
for number per for number per
the year of shares share the year of shares share
GBP000 '000 GBP000 '000
-------------------------------- ---------- ----------- ------- ---------- ----------- -------
Basic earnings per ordinary
share
Basic earnings 11,646 81,144 14.4 14,962 80,954 18.5
Adjustments (see note 2) 2,509 - 3.0 (1,848) - (2.3)
-----------
Adjusted basic earnings 14,155 81,144 17.4 13,114 80,954 16.2
--------------------------------- ---------- ----------- ------- ---------- ----------- -------
Diluted earnings per ordinary
share
Basic earnings 11,646 81,144 14.4 14,962 80,954 18.5
Effect of dilutive potential
ordinary shares: share based
payment awards - - - - 3,080 (0.7)
----------
Diluted earnings 11,646 81,144 14.4 14,962 84,034 17.8
Adjustments (see note 2) 2,509 - 3.0 (1,848) - (2.2)
-----------
Adjusted diluted earnings 14,155 81,144 17.4 13,114 84,034 15.6
--------------------------------- ---------- ----------- ------- ---------- ----------- -------
7. Dividends
Amounts recognised as distributions to equity
holders were:
Year ended Year ended
30 November 30 November
2016 2015
GBP000 GBP000
---------------------------------------------------- ------------- -------------
Final dividend for the year ended 30 November
2015 - 3.80p per share (2014: 3.04p) 3,079 2,451
Interim dividend for the year ended 30 November
2016 - 1.50p per share (2015: 1.20p) 1,220 973
4,299 3,424
---------------------------------------------------- ------------- -------------
The proposed final dividend of 4.50p per share for the year ended
30 November 2016 was approved by the Board on 7 February 2017.
The dividend is subject to approval by Shareholders at the annual
general meeting. The anticipated cost of this dividend is GBP3,660,000
which is not included as a liability at 30 November 2016.
8. Trade and other receivables
2016 2015
Note GBP000 GBP000
------------------------------------ ------ ------- -------
Current
Financial assets
Trade receivables 15,060 17,303
Long-term contract balances - 138
Other receivables 1,294 1,048
Derivative financial instruments 685 138
Accrued income 1,824 1,489
Amounts owed by Group undertakings - -
18,863 20,116
Non-financial assets
Prepayments 5,540 5,476
24,403 25,592
------------------------------------------- ------- -------
Non-current
Financial assets
Other receivables 1,153 1,168
25,556 26,760
------------------------------------------- ------- -------
9. Cash and short-term deposits
2016 2015
GBP000 GBP000
---------------------------------------------- --------- -------
Cash and cash equivalents 36,973 42,320
Short-term deposits 3,014 6,000
39,987 48,320
---------------------------------------------- --------- -------
The short-term deposits are for a maximum period of 6
months at interest rates of 0.70%.
10. Trade and other payables
2016 2015
Note GBP000 GBP000
---------------------------------------------- ------ ------- -------
Current liabilities
Financial liabilities
Trade payables 13,777 11,518
Amounts owed to Group undertakings - -
Other taxation and social security 2,842 4,010
Other payables 2,284 761
Accruals 9,096 12,525
Obligations under finance leases - 40
Derivative financial instruments 45 5
Long-term contract balances 16,766 25,509
44,810 54,368
Non-financial liabilities
Deferred income 9,711 10,606
54,521 64,974
----------------------------------------------------- ------- -------
Non-current liabilities
Non-financial liabilities:
Deferred income:
- due after one year but within two years 462 472
- due after two years but within five years 509 190
971 662
----------------------------------------------------- ------- -------
55,492 65,636
----------------------------------------------------- ------- -------
11. Provisions Onerous
lease and Employee-related
dilapidations restructuring Other Total
Group GBP000 GBP000 GBP000 GBP000
--------------------------------- --------------- ----------------- ------- --------
At 30 November 2014 8,094 365 708 9,167
Utilisation of provisions (2,186) (1,166) (132) (3,484)
Release of provisions (2,368) (85) (423) (2,876)
Increase in provisions - 1,070 1,025 2,095
Effect of movements in exchange
rates - - 2 2
Transfer to held for sale
liabilities (110) - (2) (112)
Unwind of discount 149 - - 149
At 30 November 2015 3,579 184 1,178 4,941
Utilisation of provisions (345) (184) (396) (925)
Release of provisions (161) - (147) (308)
Increase in provisions - 1,844 1,057 2,901
Unwind of discount 84 - - 84
At 30 November 2016 3,157 1,844 1,692 6,693
---------------------------------- --------------- ----------------- ------- --------
Provisions for onerous leases and dilapidations have been recognised
at the present value of the expected obligation at discount rates
of 2.6% (2015: 2.6%) per annum reflecting a risk free discount rate,
applicable to the liabilities. These discounts will unwind to their
undiscounted value over the remaining lives of the leases via a finance
cost within the Income Statement. At 30 November 2016, GBP1,465,000
(2015: GBP1,829,000) of the provision refers to onerous leases, and
GBP1,692,000 (2015: GBP1,750,000) refers to dilapidations. The major
release in the prior year relates to the successful sub-letting of
one of the Group's properties.
The average remaining life of the leases at 30 November 2016 is 3.1
years (2015: 3.5 years).
In making their assessment of the required provisions, the group
is required to estimate the likely sub-let income that could be earned
over the remaining life of the lease. This requires the Directors
to make judgements relating to the likelihood that a property will
be sub-let and the income that will be earned.
Employee related restructuring provisions refer to costs arising
from restructuring to meet the future needs of the Group and are
all expected to be utilised during the following financial year.
Other provisions includes one-off items not covered by any other
category. During the year risk provisions totalling GBP475,000 from
ended BSF contracts were transferred from long-term contract creditors
to provisions. The other most significant element in the provision
at 30 November 2016 relates to regulatory compliance.
Group 2016 2015
GBP000 GBP000
------------------------- ------- -------
Current liabilities 3,536 2,077
Non-current liabilities 3,157 2,864
6,693 4,941
------------------------- ------- -------
12. Share capital
Company and Group Ordinary shares
of 2(2) /(7) p
'000 GBP000
Allotted, called-up and fully paid:
At 1 December 2014 82,640 1,889
Issued in the year 10 1
At 30 November 2015 82,650 1,890
Issued in the year - -
At 30 November 2016 82,650 1,890
---------------------------------------- -------- --------
Ordinary shares issued carry no right
to fixed income.
13. Defined benefit pension scheme
As at 31 May 2015, the triennial valuation for statutory funding
purposes showed a deficit of GBP41,800,000 (31 May 2012:
GBP53,500,000). The Group agreed with the Scheme Trustee that it
will repay this amount via deficit catch-up payments of
GBP4,000,000 in December 2015 and GBP3,600,000 per annum until 30
September 2024. At 30 November 2016 there were amounts outstanding
of GBP300,000 (2015: GBP300,000) for one month's deficit payment
and GBP32,000 (2015: GBP32,000) for Scheme expenses. The next
triennial valuation of the Scheme is due as at 31 May 2018 and may
result in changes to the level of deficit catch-up payments
required.
In addition to the GBP4,000,000 of catch up payments in December
2015, a further GBP4,000,000 contribution was paid in December 2015
into an escrow account established in March 2014, the use of which
within the Scheme is required to be agreed by RM Education Limited
and the Scheme Trustee.
IAS 19 Employee Benefits, amended June 2011, has been adopted in
these financial statements.
14. Related party transactions
Ipswich School
John Poulter, non-executive director of RM plc, is a director of
Ipswich School. Sales made in the year total GBP2,419 and at the
year end there is a balance of GBP90 outstanding.
Grant Thornton LLP
The Company has engaged Grant Thornton to provide advice in
connection with certain acquisition related activities. No payments
were made to Grant Thornton during the year ended 30 November 2016.
Deena Mattar, one of the Company's Non-Executive Directors, is a
member of the Advisory Board of Grant Thornton. Grant Thornton were
chosen from a competitive tender conducted by the Company and Deena
Mattar was not involved in that exercise.
British Educational Suppliers Association
TTS Director Catherine Jeffrey sits on the Executive Council of
BESA, in the year the Group made purchases of GBP7,424.
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.
15. Events after the reporting period
On 7 February 2017, the Company agreed to acquire the entire
issued share capital of Hedgelane Limited (including its principal
trading subsidiary known as The Consortium) from Smiths News
Holdings Limited (part of the Connect Group plc group of companies)
(the "Acquisition"). In connection with the Acquisition, the
Company has entered into a GBP75 million revolving credit facility
(the "New Facility") with Barclays Bank plc and HSBC Bank plc.
Completion of the Acquisition is conditional upon, among other
things, clearance being received from the Competition and Markets
Authority and shareholder approval. The New Facility will become
available upon completion of the Acquisition and will expire 36
months from such date. If the Acquisition does not complete for any
reason, the New Facility will not come into effect and the Current
Facility will remain in force unaffected.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR EALAXEAKXEEF
(END) Dow Jones Newswires
February 07, 2017 02:01 ET (07:01 GMT)
Rm (LSE:RM.)
Historical Stock Chart
From Mar 2024 to Apr 2024
Rm (LSE:RM.)
Historical Stock Chart
From Apr 2023 to Apr 2024