Interim Results
RM PLC
27 May 2003
27th May 2003
RM announces Interim results for the six months to 31st March 2003
RM plc, the UK's leading supplier of ICT software, systems and services to
education establishments, announces results for the six months ended 31st March
2003.
Highlights
• Results ahead of market expectations
• Group turnover of £85.4m (2002: £ 89.1m)
• Underlying turnover (excluding Learning Schools Programme*) up 12% to
£84.6m (2002: £75.8m)
• Operating costs down 8% to £22.9m (2002: £25m)
• Interim loss before tax and goodwill amortisation much reduced at
£0.8m (2002: £4.7m loss before exceptional costs) (note: RM's business is
highly seasonal, with the majority of turnover and an even higher
proportion of gross profit arising in second half of the year)
• Continuing strong cash generation with net funds at 31st March of
£33.2m (2002: £26.3m)
• Unchanged interim dividend of 0.95p per share
• Significant progress in strategic projects with £110m business wins in
first half
*RM's response to a one-off government lottery funded teacher training project
which has now finished
Commenting today, Tim Pearson, Chief Executive of RM said:
'RM is now a healthier business with a reduced cost base, improved customer
satisfaction and strengthened management. During the first half of the year our
core schools business has grown faster than the market as a whole, and we've
made excellent progress with our strategic projects activities.
'As always RM's core business is highly seasonal, and the first half is not a
good indicator of full-year performance. Whilst it is difficult this year to
predict the impact of the school budget settlement, I believe that RM will see
good progress for the year as a whole.'
- Ends -
For further information, please contact:
Tim Pearson, CEO RM plc 08709 200200
Mike Greig, Finance Director
Phil Hemmings, Director of Investor Relations
Andrew Fenwick Brunswick 020 7404 5959
Fiona Fong
A briefing to analysts will take place at 9.30 am on Tuesday 27th May at
Brunswick's offices, 16 Lincoln's Inn Fields, London WC2A 3ED.
A live audio feed will be available to analysts who are unable to attend this
meeting in person. Please dial telephone number: +44 (0) 20 8901 6903 to access
this facility. A copy of the presentation will be available on www.rm.com at
9.30am.
Chairman's Statement
Fifteen months after Tim Pearson took over as CEO, RM's business is
significantly healthier, with a reduced cost base, improved customer
satisfaction and strengthened management. We have seen growth in our core
schools ICT business; made excellent progress in our strategic projects
activities; and efficiency and effectiveness are improving across the business.
Results
Results for the six months to 31st March 2003 were ahead of market expectations.
As anticipated, the government's lottery-funded teacher training project has now
effectively finished, resulting in a decrease in Learning Schools Programme
(LSP) revenues. Underlying turnover (excluding LSP) increased 12% to £84.6
million (2002: £75.8 million), reflecting good growth in the Group's core
schools business - albeit from a relatively weak comparative period. Total
Group turnover was £85.4 million (2002: £89.1 million).
Operating costs (excluding amortisation of goodwill) for the period were down 8%
to £22.9 million (2002: £25 million excluding exceptional costs), reflecting the
impact of the cost reduction programme put in place during the second half of
last year.
RM's business is highly seasonal, with the majority of turnover, and an even
higher proportion of gross profit, arising in the second half of the year. This
year, as expected, the seasonality has resulted in a loss at the Interim stage.
Loss before tax and amortisation of goodwill was much reduced at £0.8 million
(2002: £4.7 million loss before exceptional costs), and diluted loss-per-share
before amortisation of goodwill was 0.6p (2002: 3.5p loss before exceptional
costs).
RM continues to be strongly cash generative, with net funds at the end of the
period of £33.2 million - up £6.9 million on a year ago. Net cash inflow from
operating activities was £4.3 million (2002: £12.2 million).
The Board has declared an unchanged interim dividend of 0.95p, payable on 4th
July 2003 to shareholders on the register at 6th June 2003.
Market
The government continues to focus on education as a key priority, with further
top-line funding growth planned over the next three years.
However, we reported at our Preliminary Results announcement that changes to
teachers' pay arrangements were putting individual schools' budgets under
pressure. Following the start of the new government financial year it has
become clear that some schools are experiencing budget difficulties.
To a limited extent this issue can be countered by the reserves schools have
built up, and the DfES has allowed schools to use devolved capital funding to
cover certain shortfalls. However, complex funding changes, with different
effects on different schools, make it hard to predict the level of our
individual schools business in the second half.
RM's strategic project contracts are funded from sources other than individual
school budgets, and growth in this area of our business is unlikely to be
impacted by the state of individual school budgets.
Operations
We have made good progress in each of the three stages of our medium-term plan:
controlling costs; improving efficiency and effectiveness; and identifying areas
of growth.
Controlling costs
The immediate benefits of last year's cost reduction programme have now been
achieved, and the Group is operating on a significantly lower cost base than it
was a year ago. We have made, and will continue to make, limited investments to
allow us to address market opportunities.
RM Education Solutions India Pvt Ltd - our wholly-owned software development
company - is now established in Thiruvananthapuram, India. Initial development
projects have been identified, which are related to our strategic project wins
and will reduce the need to take on UK contract staff.
Whilst cost management remains important, our focus has now moved to improving
efficiency.
Improving efficiency and effectiveness
Our continuous customer satisfaction programme is now providing us with a clear
and current view of how customers feel about us. We have received more than
7,000 customer responses and over 3,000 individual improvement suggestions.
Satisfaction levels have increased, and the most common customer suggestions are
being used to drive business improvements that will increase them further.
The Group's PC and 3rd party products business has performed well as a result of
a better-targeted product range. In particular a much more attractive mobile
computing offer - including the RM Tablet PC - has driven a four-fold volume
increase in this area.
RM Community Connect 3 has now established itself as our flagship product for
schools networking, with significant growth in both server and station licence
sales.
Education software product sales continue to be impacted by confusion related to
the DfES Curriculum Online initiative and the anticipation of the BBC's entry
into the market. However, 3T Productions made a strong contribution during the
period, and our education services business as a whole has seen growth.
Identifying growth
The dedicated strategic projects team we put in place a year ago has made
excellent progress, achieving business wins worth £110 million from the £120
million bid pipeline reported at our preliminary results announcement in
November 2002. The bid pipeline now stands at approximately half the size it
was in November 2002.
Our success in bidding for strategic projects demonstrates the attractiveness of
RM as a partner, and the value of the projects we have won increases the
visibility of revenues for future years.
RM brings a broad range of capabilities to these projects. The Group has
technical, operational, educational and financial strengths, and can also
demonstrate a track record of successful delivery of large and complex
educational projects.
Education services - a key area of growth for the Group - is making progress,
with both the South Yorkshire eLearning Programme and the Qualifications and
Curriculum Authority contracts including a broad range of education services
elements.
Prospects
RM has made good progress during the last six months, with our core schools
business growing faster than the market as a whole and our strategic projects
activity performing well.
Turnover from our strategic projects contracts will be ahead of expectations for
the year. However, because these projects are all in their start-up phase, they
will not contribute significantly to profits during 2003.
As always RM's core schools business is highly seasonal, and the first half is
never a good indicator of full-year performance. In particular this year, it is
difficult to predict the full impact of the school budget settlement.
Although this is a more uncertain outlook than I would wish, education spending
has increased steadily over the last decade and RM is exposed to less volatility
than the general ICT market. The Board believes that, for the year as a whole,
RM will see good progress.
CONSOLIDATED PROFIT AND LOSS ACCOUNT
Half year ended Year ended
31st March 31st March 30th September
£000 2003 2002 2002
__________________________________________________ ________________ ________________ ________________
Turnover 85,363 89,133 202,158
Cost of sales (63,740) (69,351) (150,914)
__________________________________________________ ________________ ________________ ________________
Gross profit 21,623 19,782 51,244
__________________________________________________ ________________ ________________ ________________
Operating expenses:
Selling & distribution (13,293) (14,548) (26,457)
Research & development (5,760) (6,557) (13,836)
Administration (4,922) (13,317) (17,848)
__________________________________________________ ________________ ________________ ________________
(23,975) (34,422) (58,141)
__________________________________________________ ________________ ________________ ________________
Operating loss (2,352) (14,640) (6,897)
Operating (loss)/profit:
__________________________________________________ ________________ ________________ ________________
Before exceptional items and goodwill amortisation (1,296) (5,249) 4,059
Exceptional administration - (8,468) (8,968)
Amortisation of goodwill (1,056) (923) (1,988)
__________________________________________________ ________________ ________________ ________________
Net interest receivable 532 509 983
__________________________________________________ ________________ ________________ ________________
Loss on ordinary activities before taxation (1,820) (14,131) (5,914)
(Loss)/Profit on ordinary activities before taxation
analysed:
__________________________________________________ ________________ ________________ ________________
Before exceptional items and goodwill amortisation (764) (4,740) 5,042
Exceptional administration - (8,468) (8,968)
Amortisation of goodwill (1,056) (923) (1,988)
__________________________________________________ ________________ ________________ ________________
(1,820) (14,131) (5,914)
__________________________________________________ ________________ ________________ ________________
Tax credit on loss on ordinary activities 214 3,488 1,095
__________________________________________________ ________________ ________________ ________________
Loss on ordinary activities after taxation (1,606) (10,643) (4,819)
Dividends paid and proposed (847) (897) (3,767)
__________________________________________________ ________________ ________________ ________________
Retained loss (2,453) (11,540) (8,586)
__________________________________________________ ________________ ________________ ________________
(Loss)/Earnings per ordinary share:
Basic (1.8p) (11.3p) (5.1p)
Diluted (1.8p) (11.2p) (5.1p)
Diluted - before amortisation of goodwill (0.6p) (10.3p) (3.0p)
Diluted - before amortisation of goodwill and (0.6p) (3.5p) 3.8p
exceptional items
CONSOLIDATED BALANCE SHEET
As at As at As at
31st March 31st March 30th September
£000 2003 2002 2002
__________________________________________________ ________________ ________________ ________________
Fixed assets
Intangible fixed assets 5,952 8,235 7,141
Tangible fixed assets 17,420 23,603 20,199
Investment in own shares 165 - -
__________________________________________________ ________________ ________________ ________________
23,537 31,838 27,340
Current assets
Stocks 8,452 8,712 9,954
Debtors 33,768 41,302 43,041
Investments - short term cash deposits 14,670 9,236 20,157
Cash at bank and in hand 22,307 23,927 18,968
__________________________________________________ ________________ ________________ ________________
79,197 83,177 92,120
Creditors
Amounts falling due within one year (57,713) (63,340) (70,327)
__________________________________________________ ________________ ________________ ________________
Net current assets 21,484 19,837 21,793
__________________________________________________ ________________ ________________ ________________
Total assets less current liabilities 45,021 51,675 49,133
Creditors
Amounts falling due after more than one year (4,659) (4,942) (5,943)
Provisions for liabilities and charges (1,726) (5,261) (2,131)
__________________________________________________ ________________ ________________ ________________
Net assets 38,636 41,472 41,059
__________________________________________________ ________________ ________________ ________________
Capital and reserves
Called-up share capital 1,794 1,888 1,794
Share premium account 20,349 20,349 20,349
Capital redemption reserve 94 - 94
Profit and loss account 16,399 19,235 18,822
__________________________________________________ ________________ ________________ ________________
Equity shareholders' funds 38,636 41,472 41,059
__________________________________________________ ________________ ________________ ________________
CONSOLIDATED CASH FLOW STATEMENT
Half year ended Year ended
31st March 31st March 30th September
£000 2003 2002 2002
__________________________________________________ ________________ ________________ ________________
Net cash inflow from operating activities 4,339 12,212 25,019
Returns on investments and servicing of finance 532 509 983
Taxation (291) (2,701) (4,209)
Capital expenditure and financial investment (1,208) (2,460) (3,506)
Acquisitions and disposals - (498) (499)
Equity dividends paid (2,870) (3,020) (3,916)
__________________________________________________ ________________ ________________ ________________
Net cash inflow before use of liquid resources and 502 4,042 13,872
financing
Management of liquid resources 5,487 (1,141) (12,062)
Financing (2,680) (22) (3,903)
__________________________________________________ ________________ ________________ ________________
Increase/(Decrease) in cash in the period 3,309 2,879 (2,093)
__________________________________________________ ________________ ________________ ________________
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS
Half year ended Year ended
31st March 31st March 30th September
£000 2003 2002 2002
__________________________________________________ ________________ ________________ ________________
Increase/(Decrease) in cash in the period 3,309 2,879 (2,093)
Capital element of finance lease payments 20 5 11
Cash (outflow)/inflow from change in liquid resources (5,487) 1,141 12,062
Settlement of loan notes 2,660 - 522
__________________________________________________ ________________ ________________ ________________
Change in net cash resulting from cash flows 502 4,025 10,502
Issue of loan notes - (4,764) (4,898)
Exchange translation 30 (22) (9)
__________________________________________________ ________________ ________________ ________________
Movement in net funds in the period 532 (761) 5,595
Net funds brought forward 32,663 27,068 27,068
__________________________________________________ ________________ ________________ ________________
Net funds carried forward 33,195 26,307 32,663
__________________________________________________ ________________ ________________ ________________
NOTES TO THE INTERIM STATEMENTS
1. Basis of preparation
The financial information contained in this statement does not constitute
statutory accounts within the meaning of section 240 of the Companies Act 1985,
and has not been audited or reviewed.
The unaudited financial statements for the half years ended 31st March 2002 and
31st March 2003 have been prepared on a basis consistent with the statutory
accounts for the year ended 30th September 2002. Those accounts received an
unqualified auditor's report and have been filed with the Registrar of
Companies.
2. Tax credit on loss on ordinary activities
The tax credit for the half year ended 31st March 2003 has been provided at the
estimated effective rate for the full year.
3. Dividend
The proposed interim dividend of 0.95p per ordinary share (2002: 0.95p) will be
paid on 4th July 2003 to shareholders on the register on 6th June 2003.
4. Loss per share
Loss per share for the half year ended 31st March 2003 is based on a loss of
£1,606,000 (2002: loss of £10,643.000).
Basic loss per share is based on 89,623,535 ordinary shares (2002: 94,377,184),
being the weighted average number of ordinary shares in issue during the half
year ended 31st March 2003.
The diluted loss per share is based on a weighted average of 89,624,717 (2002:
94,607,543) ordinary shares issued and issuable.
A reconciliation of basic loss per share with diluted loss per share is as
follows:
Half year ended 31st March Half year ended 31st March
2003 2002
Loss after No. of Pence per Loss after No. of Pence per
tax Shares share tax Shares share
(£000) ('000) £000 ('000)
Basic loss per share (1,606) 89,624 (1.8) (10,643) 94,377 (11.3)
Impact of share options - 1 - - 231 0.1
_______________________________________ _________ _________ _________ _________ _________ _________
Diluted loss per share (1,606) 89,625 (1.8) (10,643) 94,608 (11.2)
_______________________________________ _________ _________ _________ _________ _________ _________
Supplementary loss per share before amortisation of goodwill and exceptional items:
Diluted loss per share (1,606) 89,625 (1.8) (10,643) 94,608 (11.2)
Effect of amortisation of goodwill 1,056 - 1.2 923 - 0.9
_______________________________________ _________ _________ _________ _________ _________ _________
Diluted loss per share before amortisation
of goodwill (550) 89,625 (0.6) (9,720) 94,608 (10.3)
Effect of exceptional items - - - 6,402 - 6.8
_______________________________________ _________ _________ _________ _________ _________ _________
Diluted loss per share before amortisation
of goodwill and exceptional items (550) 89,625 (0.6) (3,318) 94,608 (3.5)
_______________________________________ _________ _________ _________ _________ _________ _________
In order to show results from operating activities on a comparable basis, an
adjusted loss per share is presented which excludes items of an unusual nature
and goodwill amortisation as shown above.
NOTES TO THE INTERIM STATEMENTS
5. Investment in own shares
Following shareholder approval the Company implemented a long term incentive
plan for senior executives in the Group. Under the plan, contingent awards of
shares ('Matching shares') are made pro rata to shares acquired by the
participants ('Investment shares'). The interest in shares awarded by the
Company will only vest if prescribed minimum performance conditions relating to
total shareholder return (TSR - share price growth plus reinvested dividends)
and earnings per share are achieved over a three year period. Above that
minimum, the interest will vest in whole or in part depending on the level of
achievement of the performance conditions.
The Group has purchased shares in order to provide investment shares. These
shares are held by an Employee Share Trust and are shown within fixed assets as
investment in own shares and comprised 150,000 Ordinary shares of 2p each at
31st March 2003.
6. Reserves and reconciliation of movements in shareholders' funds
Half year ended 31st March 2003
£000 Share capital Share premium Capital Profit and loss Total
account redemption account shareholders'
reserve funds
Beginning of the period 1,794 20,349 94 18,822 41,059
Retained loss for the period - - - (2,453) (2,453)
Exchange translation differences - - - 30 30
_____________________________ ____________ ____________ ____________ ____________ _____________
End of the period 1,794 20,349 94 16,399 38,636
_____________________________ ____________ ____________ ____________ ____________ _____________
7. Reconciliation of operating loss to operating cash flows
Half year ended Year ended
31st March 31st March 30th September
£000 2003 2002 2002
Operating loss (2,352) (14,640) (6,897)
Depreciation charge 3,953 4,360 8,805
Exceptional amortisation of intangible fixed assets - 5,000 5,000
Normal amortisation of intangible fixed assets 1,189 1,418 2,619
Profit on disposal of fixed assets (131) (135) (130)
Decrease in stock 1,502 2,271 1,029
Decrease in debtors 9,273 12,465 11,660
(Decrease)/Increase in creditors (9,095) 1,473 2,933
_____________________________________________________ _____________ _____________ _____________
Net cash inflow from operating activities 4,339 12,212 25,019
_____________________________________________________ _____________ _____________ _____________
This information is provided by RNS
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