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RNS
RM PLC  -  RM.   

Interim Results

Released 07:00 04-Jul-2017

RNS Number : 9934J
RM PLC
04 July 2017
 

4 July 2017

 

RM plc

Interim Results for the period ending 31 May 2017

 

RM plc ("RM"), the leading education resources, IT software and services group, reports its interim results for the 6 months ended 31 May 2017.

 

HIGHLIGHTS

 

 

Financial

 

 

2017

 

 

2016

 

 

Change

 

 

Revenue1

 

RM Resources

RM Results

RM Education

 

Adjusted* operating profit

 

Adjusted* operating profit margin

 

£71.3m

 

£25.5m

£13.5m

£32.4m

 

£7.1m

 

10.0%

 

£76.6m

 

£29.3m

£13.2m

£34.2m

 

£7.1m

 

9.3%

 

- 6.9%

 

- 12.9%

+ 2.2%

- 5.4%

 

+ 0.2%

 

+0.7pp

 

Adjusted* diluted EPS

7.5p

6.1p

+ 23.7%

Interim dividend

1.65p

1.50p

+ 10.0%

1 Excludes the results of the exited Space Kraft business in 2016, H1 2016 revenue was £0.2m and operating loss was £0.0m.

Operational

 

·       Revenue1 down 6.9% to £71.3m reflecting continued reduction in UK Resources revenues and lower infrastructure and project spend in RM Education

 

·       Adjusted* operating profit of £7.1m is in line with prior year

 

·       Increased adjusted* operating margins of 10.0%   

 

·       Cash balance of £29.3m (31 May 2016: £32.1m) as at 31 May 2017

 

·       Pension deficit reduced to £22.2m (30 Nov 2016: £34.8m) primarily reflecting positive assets performance

 

·       The acquisition of the Connect Education and Care business was completed on 30 June 2017 supported by a £75m unsecured revolving credit facility

 

·       Interim dividend increased by 10% to 1.65p

 

 

Commenting on the interim results, David Brooks, Chief Executive of RM, said:

"Trading in the first six months has been as expected. We have grown our margins to 10.0% with improvements in RM Results and RM Education. RM Resources experienced a more difficult period as demand for discretionary curriculum products continued to be impacted by increased pressure on school budgets. We welcome the Connect Education and Care business into the Group and are presently planning for integration. The Board's expectations for the full year results remain unchanged."

 

Contacts

RM plc

 

FTI Consulting

David Brooks, Chief Executive Officer

Chris Lane / Elena Kalinskaya

Neil Martin, Chief Financial Officer

020 3727 1000

 

08450 700300


 

 

 

RM plc

Interim results for the 6 months ended 31 May 2017

Results


6 months to

6 months to

12 months to

Revenue

Adjusted* operating profit

Adjusted* profit before tax

Adjusted* profit after tax

Statutory operating profit

Statutory tax credit/(charge)

Adjusted* diluted Earnings per share

Ordinary dividend per share

Cash and short term deposits

 

Revenue declined by 7.1% to £71.3m versus the same period last year (or by 6.9% when excluding the exited business, SpaceKraft which was sold in December 2015), with growth in the RM Results division being more than offset by decline in the RM Resources and RM Education divisions.

Adjusted* operating profit was in line with the prior year at £7.1m.  Adjusted* profit before tax was £6.6m. 

Cash used in operations of £4.1m (H1 2016: cash used £0.4m) primarily reflected the utilisation of the 2016 restructuring provision (£1.8m) and higher inventory (£1.8m). Net cash and short-term deposits at 31 May 2017 were £29.3m. 

The adjusted tax charge in the period was £0.4m with an effective tax rate of 5.7% (H1 2016: 21.0%). The reduction in the tax rate reflects the one-time benefit of a reduction in the transfer pricing tax provision of £1.0m associated with cross border intra-group transactions between the UK and India.

Adjusted* diluted earnings per share increased by 23.7% to 7.5p

Pension

The IAS 19 deficit relating to RM's defined benefit pension scheme has decreased since 30 November 2016 by £12.6m to £22.2m (30 November 2016: £34.8m), primarily reflecting positive assets performance and changes in demographic assumptions which more than offset the impact of lower discount rates. During the period the methodology used in establishing discount rates was changed to better reflect management's estimate of the long-dated credit risk implied in bond yields appropriate for the cash flow liabilities in the scheme.

The current deficit recovery plan agreed in May 2015 includes payments of £3.6m per annum until 2024. The next triennial valuation is in May 2018.

Dividend

The interim dividend per share has been increased by 10.0% to 1.65p. The dividend will be payable on 8 September 2017 to shareholders on the register on 11 August 2017.

 

RM Resources

This division provides education resources used in schools in the UK and internationally through a mainly direct marketing business.  Products supplied are a mix of third party branded and TTS branded items manufactured from a network of third party suppliers.


6 months to

6 months to

12 months to

RM Resources revenue

RM Resources adjusted* operating profit

The above excludes the exited SpaceKraft business which was sold in December 2015.

RM Resources reported a revenue decline of 12.9% to £25.5m (H1 2016: £29.3m).  UK direct marketing revenues decreased by 20% with schools continuing to focus on buying essentials as a result of ongoing tightened UK budgets for schools.

International revenues grew by 29% primarily driven by increased sales of proprietary products.

Online ordering continues to grow and now represents 44% of UK orders (H1 2016: 34%).

Operating margins reduced to 11.1% (2016: 14.6%) impacted by lower UK revenues and adverse foreign exchange movements which more than offset a £1.1m reduction in operating costs in the period.

The acquisition of the Connect Education and Care business was concluded on 30 June 2017. The focus is on successfully combining this highly complementary business within RM Resources to create scale and a market leading position and to deliver meaningful synergies.

 

RM Results

The RM Results business provides IT software and e-Assessment services to enable onscreen exam marking (e-marking), onscreen testing (e-testing) and the management and analysis of educational data.  Customers include government ministries, exam boards and professional awarding bodies in the UK and overseas.


6 months to

6 months to

12 months to

RM Results revenue

RM Results adjusted* operating profit

 

Revenue increased by 2.2% to £13.5m (H1 2015: £13.2m). This growth reflects benefits from a new 5 year framework agreement signed with Oxford University Press to deliver a global assessment platform and the timing of revenues accounted for in the first half that more than offset lower Data contract revenues.

Adjusted* operating profit increased to £2.8m (H1 2016: £2.4m) due to improved operating margins of 20.5% (H1 2016: 18.0%).

 

RM Education

RM Education is a UK focused business supplying ICT software and services to schools and colleges.


6 months to

6 months to

12 months to

RM Education revenue

RM Education adjusted* operating profit

 

As expected, revenues in RM Education reduced by 5.4% reflecting the continued transition away from legacy offerings. These included reduced Building Schools for the Future infrastructure spend and lower warranty and network revenues. 

In the period we were selected by Education Scotland to continue to deliver our largest Digital platform contract providing Glow authentication and portal services over 5 years. We were also awarded a 3 year contract for Connectivity services for over 500 schools in Hertfordshire.

Despite the reduction in revenue, the division significantly improved operating margins to 9.6% (H1 2016: 6.6%) reflecting the benefits of the cost action taken in the prior year.

 

Corporate Costs

Corporate costs have reduced to £1.6m (H1 2016: £1.8m) reflecting reduced administration and project costs associated with the defined benefit pension scheme.

 

Statement on 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. These risk profiles are updated at least annually. The principal risks and uncertainties detailed within the Group's 2016 Annual Report remain applicable. This is available from the RM website: www.rmplc.com.

Following the acquisition of Connect Education and Care, one further risk has been added as below:

Risk - Acquisition

Description and likely impact - RM plc acquisition fails to generate anticipated revenues, synergies and/or cost savings.

Mitigation - RM performed pre-transaction due diligence, has engaged an integration specialist to support the process and will closely monitor actual performance to ensure we are meeting operational and financial targets. Any divergence from these plans will result in management action to improve performance and minimise the risk of financial impact. Executive management and the Board will receive regular reports on the status of the acquisition with formal reviews supported by the Group's internal audit function.

 

Outlook

Whilst market conditions in the UK Education sector continue to be challenging as a result of pressure on school budgets the Board's expectations for the full year results remain unchanged. Our balance sheet remains strong and the Board is focusing on the integration of the Connect Education and Care business and investing in the three divisions while ensuring that margins can be maintained or improved in the current year.

 

Condensed Consolidated Income Statement







for the 6 months ended 31 May 2017











6 months ended 31 May 2017

6 months ended 31 May 2016

Year ended 30 November 2016



Adjusted

Adjustments

Total

Adjusted

Adjustments

Total

Adjusted

Adjustments

Total


Note

£000

£000

£000

£000

£000

£000

£000

£000

£000












Revenue


71,285

-

71,285

76,759

-

76,759

167,615

-

167,615

Cost of sales


(41,628)

-

(41,628)

(44,774)

-

(44,774)

(100,365)

-

(100,365)












Gross profit


29,657

-

29,657

31,985

-

31,985

67,250

-

67,250

Operating expenses

4

(22,551)

(2,766)

(25,317)

(24,910)

(493)

(25,403)

(48,421)

(2,907)

(51,328)























Profit from operations


7,106

(2,766)

4,340

7,075

(493)

6,582

18,829

(2,907)

15,922

Investment income


170

-

170

114

-

114

279

-

279

Finance costs


(716)

(36)

(752)

(657)

(38)

(695)

(1,012)

(74)

(1,086)












Profit before tax


6,560

(2,802)

3,758

6,532

(531)

6,001

18,096

(2,981)

15,115

Tax

5

(373)

435

62

(1,372)

(9)

(1,381)

(3,941)

472

(3,469)












Profit for the period


6,187

(2,367)

3,820

5,160

(540)

4,620

14,155

(2,509)

11,646












Earnings per ordinary share:

6










Basic


7.6p


4.7p

6.4p


5.7p

17.4p


14.4p

Diluted


7.5p


4.6p

6.1p


5.4p

17.4p


14.4p












Paid and proposed dividends per share:

7










Interim




1.65p



1.50p



1.50p

Final




-



-



4.50p























Adjustments to results have been presented to give a better guide to business performance (see note 4).




All amounts were derived from continuing operations.








 

 

Condensed Consolidated Statement of Comprehensive Income




for the 6 months ended 31 May 2017







6 months ended 31 May 2017

6 months ended 31 May 2016

Year ended 30 November 2016



£000

£000

£000






Profit for the period


3,820

4,620

11,646






Items that will not be reclassified subsequently to profit or loss:









Defined benefit pension scheme remeasurements


11,366

(10,279)

(23,555)

Tax on items that will not be reclassified subsequently to profit or loss

(1,905)

1,932

3,970






Items that are or may be reclassified subsequently to profit or loss:









Fair value (loss)/gain on hedged instruments


(553)

56

515

Exchange gain on translation of overseas operations


60

60

261

Tax on items that are or may be reclassified subsequently to profit or loss

51

17

32

Other comprehensive income/(expense)


9,019

(8,214)

(18,777)

Total comprehensive income/(expense)


12,839

(3,594)

(7,131)






 

 

Condensed Consolidated Balance Sheet





At 31 May 2017












6 months ended

6 months ended

Year ended


Note

31 May 2017

31 May 2016

30 November 2016

£000

£000

£000

Non-current assets





Goodwill


14,067

14,067

14,067

Other intangible assets


762

812

704

Property, plant and equipment


5,112

6,950

6,219

Other receivables

10

1,144

1,166

1,153

Deferred tax assets


6,706

7,189

8,793



27,791

30,184

30,936

Current assets





Inventories


12,501

10,805

10,689

Trade and other receivables

10

24,899

25,815

24,403

Cash and short-term deposits

8

29,268

32,118

39,987



66,668

68,738

75,079






Total assets

3

94,459

98,922

106,015






Current liabilities





Trade and other payables

11

(48,119)

(56,719)

(54,521)

Tax liabilities


(403)

(1,280)

(1,259)

Provisions

12

(1,748)

(1,132)

(3,536)



(50,270)

(59,131)

(59,316)






Net current assets


16,398

9,607

15,763






Non-current liabilities





Other payables

11

(1,051)

(690)

(971)

Provisions

12

(3,367)

(2,948)

(3,157)

Defined Benefit Pension Scheme obligation

13

(22,238)

(22,958)

(34,775)



(26,656)

(26,596)

(38,903)






Total liabilities


(76,926)

(85,727)

(98,219)






Net assets


17,533

13,195

7,796






Equity attributable to shareholders




Share capital


1,890

1,890

1,890

Share premium account


27,035

27,035

27,035

Own shares


(1,987)

(2,510)

(1,987)

Capital redemption reserve


94

94

94

Hedging reserve


326

420

879

Translation reserve


(63)

(324)

(123)

Retained earnings - (deficit)


(9,762)

(13,410)

(19,992)

Total equity


17,533

13,195

7,796

 

 

Condensed Consolidated Statement of Changes in Equity

















for the 6 months ended 31 May 2017


Share capital

Share premium

Own shares

Capital redemption reserve

Hedging reserve

Translation reserve

Retained earnings

Total


Note

£000

£000

£000

£000

£000

£000

£000

£000











At 1 December 2016


1,890

27,035

(1,987)

94

879

(123)

(19,992)

7,796

Profit for the period


-

-

-

-

-

-

3,820

3,820

Other comprehensive income/(expense)


-

-

-

-

(553)

60

9,512

9,019

Total comprehensive income/(expense)


-

-

-

-

(553)

60

13,332

12,839

Transactions with owners of the Company:









Share-based payment fair value adjustments

-

-

-

-

-

-

558

558

Ordinary dividends paid

7

-

-

-

-

-

-

(3,660)

(3,660)

At 31 May 2017


1,890

27,035

(1,987)

94

326

(63)

(9,762)

17,533











for the 6 months ended 31 May 2016


Share capital

Share premium

Own shares

Capital redemption reserve

Hedging reserve

Translation reserve

Retained earnings

Total


Note

£000

£000

£000

£000

£000

£000

£000

£000











At 1 December 2015


1,890

27,035

(2,510)

94

364

(384)

(7,342)

19,147

Profit for the period


-

-

-

-

-

-

4,620

4,620

Other comprehensive expense


-

-

-

-

56

60

(8,330)

(8,214)

Total comprehensive income/(expense)


-

-

-

-

56

60

(3,710)

(3,594)

Transactions with owners of the Company:









Sale of shares held in staff share scheme


-

-

-

-

-

-

21

21

Share-based payment fair value adjustments

-

-

-

-

-

-

700

700

Ordinary dividends paid

7

-

-

-

-

-

-

(3,079)

(3,079)

At 31 May 2016


1,890

27,035

(2,510)

94

420

(324)

(13,410)

13,195








for the year ended 30 November 2016


Share capital

Share premium

Own shares

Capital redemption reserve

Hedging reserve

Translation reserve

Retained earnings

Total


Note

£000

£000

£000

£000

£000

£000

£000

£000











At 1 December 2015


1,890

27,035

(2,510)

94

364

(384)

(7,342)

19,147

Profit for the year


-

-

-

-

-

-

11,646

11,646

Other comprehensive income/(expense)


-

-

-

-

515

261

(19,553)

(18,777)

Total comprehensive income/(expense)


-

-

-

-

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 adjustments

-

-

-

-

-

-

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

 

 

Condensed Consolidated Cash Flow Statement





for the 6 months ended 31 May 2017







6 months ended 31 May 2017

6 months ended 31 May 2016

Year ended 30 November 2016


Note

£000

£000

£000

Profit before tax


3,758

6,001

15,115

Investment income


(170)

(114)

(279)

Finance costs


752

695

1,086

Profit from operations


4,340

6,582

15,922

Adjustments for:





Impairment of acquisition related intangible assets


-

-

77

Amortisation of acquisition related intangible assets


-

8

8

Amortisation of other intangible assets


101

120

239

Depreciation and impairment of property, plant and equipment


1,237

1,057

2,223

Gain on sale of operations


-

(136)

(135)

Loss/(gain) on disposal of property, plant and equipment


7

42

(5)

(Gain)/loss on foreign exchange derivatives


(491)

133

684

Share-based payment fair value adjustment


558

700

1,006

Increase/(decrease) in provisions

12

482

(79)

2,557

Defined Benefit Pension Scheme administration cost

13

318

480

845

Operating cash flows before movements in working capital


6,552

8,907

23,421

(Increase)/decrease in inventories


(1,812)

57

173

(Increase)/decrease in receivables


(422)

(353)

1,056

Movement in payables:





 - decrease in trade and other payables


(6,392)

(8,233)

(10,338)

 - utilisation of onerous lease and dilapidations provisions

12

(15)

(306)

(345)

 - utilisation of employee-related restructuring provisions

12

(1,752)

(94)

(184)

 - utilisation of other provisions

12

(295)

(381)

(396)

Cash (used in)/generated by operations


(4,136)

(403)

13,387

Defined Benefit Pension Scheme cash contributions


(1,992)

(9,992)

(11,984)

Tax paid


(563)

(1,882)

(3,567)

Borrowing facilities arrangement and commitment fees


(193)

(365)

(422)

Income on sale of finance lease debt


-

16

6

Net cash (outflow)/inflow from operating activities


(6,884)

(12,626)

(2,580)

Investing activities





Interest received


89

98

255

Repayment of loans by third parties


8

-

16

Proceeds from sale of operations


-

759

759

Proceeds on disposal of property, plant and equipment


18

13

43

Purchases of property, plant and equipment


(110)

(1,019)

(1,333)

Purchases of other intangible assets


(158)

(369)

(456)

Amounts transferred from short-term deposits


3,014

-

2,986

Net cash generated by/(used in) investing activities


2,861

(518)

2,270

Financing activities





Ordinary dividends paid

7

(3,660)

(3,079)

(4,299)

Proceeds from sale of shares held in Staff Share Scheme


-

21

-

Purchase of own shares


-

-

(317)

Satisfaction of share-based payment awards


-

-

(610)

Net cash used in financing activities


(3,660)

(3,058)

(5,226)

Net (decrease) in cash and cash equivalents


(7,683)

(16,202)

(5,536)

Cash and cash equivalents at the beginning of the period/year


36,973

42,320

42,320

Effect of foreign exchange rate changes


(22)

-

189

Cash and cash equivalents at the end of period/ year

8

29,268

26,118

36,973

 

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 2017 and for the 6 months then ended comprise those of the Company and its subsidiaries (together 'the Group').

 


 

Condensed 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 4 for further details in respect of adjustments to profit, which have been analysed as recurring and non-recurring items.

 

Other Comprehensive Income

During the period, £11.4m of actuarial gains relating to the defined benefit pension scheme deficit have been recognised in Other Comprehensive Income. These include deficit reduction payments of £2.0m.

 

 

2. Accounting policies

 

This condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the European Union.

 

 

The annual financial statements of the Group are prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. 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 2016.

 

 

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 significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the Consolidated Financial Statements as at and for the year ended 30 November 2016.

 


 

Going concern

 

The Directors, having made appropriate enquiries, consider that the Group has adequate resources to continue in operational existence for the foreseeable future and that therefore it is appropriate to adopt the going concern basis in preparing the Interim Financial Statements.

 

In relation to the proposed acquisition of the Education & Care business of Connect Group PLC, the Directors have, as part of the acquisition working capital due diligence, considered the additional risks that could arise as a result. These include considering the impact of the additional £75 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.

 

At the point of signing the New Facility will be in use as referred to in note 15.

 

 

 

3. Segmental results

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.

 

Corporate Services consists of central business costs associated with being a listed company 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.

 

 

6 months ended 31 May 2017


RM Resources

RM Results

RM Education

Corporate Services

Exited Businesses

Total



£000

£000

£000

£000

£000

£000

Revenue


25,480

13,450

32,355

-

-

71,285

Adjusted profit/(loss) from operations

2,827

2,751

3,098

(1,570)

-

7,106

Adjusted investment income







170

Adjusted finance costs







(716)

Adjusted profit before tax







6,560

Adjustments  (see note 4)







(2,802)

Profit before tax







3,758









6 months ended 31 May 2016


RM Resources

RM Results

RM Education

Corporate Services

Exited Businesses

Total



£000

£000

£000

£000

£000

£000

Revenue


29,265

13,155

34,188

-

151

76,759

Adjusted profit/(loss) from operations


4,272

2,364

2,264

(1,806)

(19)

7,075

Adjusted investment income







114

Adjusted finance costs







(657)

Adjusted profit before tax







6,532

Adjustments  (see note 4)







(531)

Profit before tax







6,001









Year ended 30 November 2016


RM Resources

RM Results

RM Education

Corporate Services

Exited Businesses

Total



£000

£000

£000

£000

£000

£000

Revenue


58,835

31,580

77,049

-

151

167,615

Adjusted profit/(loss) 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 note 4)







(2,981)

Profit before tax







15,115

 

 








Segmental assets









RM Resources

RM Results

RM Education

Corporate Services

Exited Businesses

Total

At 31 May 2017

£000

£000

£000

£000

£000

£000

Segmental


33,533

6,912

17,682

138

-

58,265

Other







36,194

Total assets






94,459


















RM Resources

RM Results

RM Education

Corporate Services

Exited Businesses

Total

At 31 May 2016

£000

£000

£000

£000

£000

£000

Segmental


34,444

5,662

15,949

3,362

-

59,417

Other



39,505

Total assets







98,922


















RM Resources

RM Results

RM Education

Corporate Services

Exited Businesses

Total

At 30 November 2016


£000

£000

£000

£000

£000

£000

Segmental


31,968

7,085

17,803

217

-

57,073

Other



48,942

Total assets







106,015

 

Other non-segmented assets includes tax assets, cash and short-term deposits and other non division-specific assets.

 

4. Adjustments to Consolidated Income Statement











6 months ended

6 months ended

Year ended



31 May 2017

31 May 2016

30 November 2016

Operating expenses


£000

£000

£000

Amortisation of acquisition related intangible assets


-

(8)

(8)

Gain on sale of operations


-

136

135

Share-based payment charges


(558)

(700)

(1,006)

(Increase)/decrease of provisions for dilapidations on leased properties and onerous lease contracts


(884)

79

90

Acquisition costs


(1,324)

-

(525)

Restructuring costs


-

-

(1,593)



(2,766)

(493)

(2,907)






Finance costs


(36)

(38)

(74)



(2,802)

(531)

(2,981)


Tax


435

(9)

472



(2,367)

(540)

(2,509)

 

In the 6 months ended 31 May 2017 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, finance costs 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 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.

 

5. Tax

Corporation tax for the interim period is charged at the expected effective tax rate for the financial year ending 30 November 2017, based upon adjusted profit as explained within note 4. The charge incorporates both current and deferred taxation:

 


6 months ended 31 May 2017

6 months ended 31 May 2016

Year ended 30 November 2016


Adjusted

Adjustments

Total

Adjusted

Adjustments

Total

Adjusted

Adjustments

Total


£000

£000

£000

£000

£000

£000

£000

£000

£000











Profit before tax

6,560

(2,802)

3,758

6,532

(531)

6,001

18,096

(2,981)

15,115

Tax charge

(373)

435

62

(1,372)

(9)

(1,381)

(3,941)

472

(3,469)











Effective tax rate

5.7%

15.5%

(1.6%)

21.0%

(1.7%)

23.0%

21.8%

15.8%

23.0%

 

The reduction in our tax rate reflects the one-time benefit of £978,000, due to a reduction in the transfer pricing tax provision associated with cross border intra-group transactions between the UK and India.

 

6. Earnings per ordinary share





















6 months ended 31 May 2017

6 months ended 31 May 2016

Year ended 30 November 2016


Profit after tax

Weighted average number of shares

Pence per share

Profit after tax

Weighted average number of shares

Pence per share

Profit after tax

Weighted average number of shares

Pence per share


£000

'000


£000

'000


£000

'000


Basic earnings per ordinary share:










Basic earnings

3,820

81,324

4.7

4,620

80,954

5.7

11,646

81,144

14.4

Adjustments (see note 4)

2,367

-

2.9

540

-

0.7

2,509

-

3.0

Adjusted basic earnings

6,187

81,324

7.6

5,160

80,954

6.4

14,155

81,144

17.4











Diluted earnings per ordinary share:










Basic earnings

3,820

81,324

4.7

4,620

80,954

5.7

11,646

81,144

14.4

Effect of dilutive potential ordinary shares: share-based payment awards

-

1,248

(0.1)

-

4,245

(0.3)

-

-

-

Diluted earnings per ordinary share

3,820

82,572

4.6

4,620

85,199

5.4

11,646

81,144

14.4

Adjustments (see note 4)

2,367

-

2.9

540

-

0.7

2,509

-

3.0

Adjusted diluted earnings

6,187

82,572

7.5

5,160

85,199

6.1

14,155

81,144

17.4

 

 

7. Dividends




Amounts recognised as distributions to equity holders were:





6 months ended

6 months ended

Year ended


31 May 2017

31 May 2016

30 November 2016


£000

£000

£000





Final dividend for the year ended 30 November 2016 - 4.50p per share (2015: 3.80p)

3,660

3,079

3,079

Interim dividend for the year ended 30 November 2016 - 1.50p per share (2015: 1.20p)

-

-

1,220






3,660

3,079

4,299

 

 

The proposed interim dividend of 1.65p per share was approved by the Board on 30 June 2017. The anticipated cost of £1,342,000 has not been included as a liability at 31 May 2017.

 

8. Cash and short-term deposits












6 months ended 31 May 2017

6 months ended 31 May 2016

Year ended 30 November 2016



£000

£000

£000

Cash and cash equivalents


29,268

26,118

36,973

Short-term deposits


-

6,000

3,014



29,268

32,118

39,987











9. Long-term contracts












6 months ended 31 May 2017

6 months ended 31 May 2016

Year ended 30 November 2016


Note

£000

£000

£000

Amounts due from contract customers included in trade and other receivables

10

206

1

-

Amounts due to contract customers included in trade and other payables

11

(12,389)

(21,664)

(16,766)



(12,183)

(21,663)

(16,766)











10. Trade and other receivables












6 months ended 31 May 2017

6 months ended 31 May 2016

Year ended 30 November 2016


Note

£000

£000

£000

Current





Financial assets





Trade receivables


16,896

18,319

15,060

Long-term contract balances

9

206

1

-

Other receivables


1,214

1,796

1,294

Derivative financial instruments


362

-

685

Accrued income


1,681

762

1,824



20,359

20,878

18,863

Non-financial assets





Prepayments


4,540

4,937

5,540



24,899

25,815

24,403






Non-current





Financial assets





Other receivables


1,144

1,166

1,153



26,043

26,981

25,556

 

11. Trade and other payables












6 months ended 31 May 2017

6 months ended 31 May 2016

Year ended 30 November 2016


Note

£000

£000

£000

Current





Financial liabilities





Trade payables


11,525

11,707

13,777

Other payables


964

315

2,284

Derivative financial instruments


45

-

45

Accruals


8,336

8,813

9,096

Long-term contract balances

9

12,389

21,664

16,766



33,259

42,499

41,968

Non-financial liabilities





Deferred income


10,993

10,214

9,711

Other taxation and social security


3,867

4,006

2,842



14,860

14,220

12,553



48,119

56,719

54,521






Non-current





Non-financial liabilities





Deferred income:





- due after one year but within two years


603

422

462

- due after two years but within five years


448

268

509



1,051

690

971



49,170

57,409

55,492






12. Provisions











Onerous lease and dilapidations

Employee-related restructuring

Other

Total


£000

£000

£000

£000






At 1 December 2016

3,157

1,844

1,692

6,693

Utilisation of provisions

(15)

(1,752)

(295)

(2,062)

Release of provisions

(66)

-

(364)

(430)

Increase in provisions

870

-

3

873

Unwind of discount

41

-

-

41

At 31 May 2017

3,987

92

1,036

5,115

 

13. Defined Benefit Pension scheme

One Group sponsored defined benefit pension scheme is in operation, the Research Machines plc 1988 Pension Scheme ("Scheme").

The Scheme is a funded 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 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 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 2015 by a qualified independent actuary, this was used as the basis for the 30 November 2016 IAS 19 valuation and the roll forward to 31 May 2017.

As at 31 May 2015, the triennial valuation for statutory funding purposes showed a deficit of £41.8m (31 May 2012: £53.5m). The Group agreed with the Scheme Trustees that it will repay this amount via deficit catch-up payments of £4.0m in December 2015 and £3.6m per annum until 30 September 2024. 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 the half year to 31 May 2017, total payments of £2.0m were paid into the Scheme under this arrangement. As at 31 May 2017 there is £7.0m in an escrow account which has been included in the calculation of the Scheme assets, the use of which within the Scheme is required to be agreed by RM Education Limited and the Scheme Trustee.

The entire deficit position of the Scheme is held within these financial statements on the balance sheet as RM Education Limited in substance bears all of the material risks associated with the Scheme.

The parent company RM plc has entered into a pension protection fund compliance 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.

14. 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.

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 (the Education and Care part of the Connect Group PLC group of companies) (the "Acquisition"). In connection with the Acquisition, the Company has entered into a £75 million revolving credit facility (the "New Facility") with Barclays Bank plc and HSBC Bank plc. The Acquisition received clearance from the Competition and Markets Authority on 1 June 2017 and the New Facility came into use as at 30th June 2017 and will expire 36 months from this date.

 

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 IAS 34 Interim Financial Reporting  as adopted by the EU;

 

·       the interim management report includes a fair review of the information required by:

 

a)      DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

 

b)      DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.

 

By order of the Board,

Neil Martin

Chief Financial Officer

 

 

4 July 2017

 

 

INDEPENDENT REVIEW REPORT TO RM PLC 

Conclusion 

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 31 May 2017 which comprises Condensed Consolidated Income Statement, Condensed Consolidated Statement of Comprehensive Income, Condensed Consolidated Balance Sheet, Condensed Consolidation Cash Flow Statement, Condensed Consolidated Statement of Change in Equity and the related explanatory notes. 

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 31 May 2017 is not prepared, in all material respects, in accordance with IAS 34 Interim Financial Reporting as adopted by the EU and the Disclosure Guidance and Transparency Rules ("the DTR") of the UK's Financial Conduct Authority ("the UK FCA").   

Scope of review 

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK.  A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.  We read the other information contained in the half-yearly financial report and consider whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements. 

A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit.  Accordingly, we do not express an audit opinion.  . 

Directors' responsibilities 

The half-yearly financial report is the responsibility of, and has been approved by, the directors.  The directors are responsible for preparing the half-yearly financial report in accordance with the DTR of the UK FCA. 

As disclosed in note 2, the annual financial statements of the group are prepared in accordance with International Financial Reporting Standards as adopted by the EU.  The directors are responsible for preparing the condensed set of financial statements included in the half-yearly financial report in accordance with IAS 34 as adopted by the EU. 

Our responsibility 

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

The purpose of our review work and to whom we owe our responsibilities

This report is made solely to the company in accordance with the terms of our engagement to assist the company in meeting the requirements of the DTR of the UK FCA.  Our review has been undertaken so that we might state to the company those matters we are required to state to it in this report and for no other purpose.  To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company for our review work, for this report, or for the conclusions we have reached. 

 

John Bennett

for and on behalf of KPMG LLP 

Chartered Accountants 

Arlington Business Park, Theale

Reading, RG7 4SD

4 July 2017


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