Preliminary Results

RNS Number : 5242N

RM PLC

01 February 2016

 

1 February 2016

RM plc

Preliminary Results for the period ending 30 November 2015

RM plc ("RM"), the leading educational IT and resources group, reports its results for the year ending 30 November 2015.

HIGHLIGHTS

Financial	2015	2014	Change
Revenue RM Resources RM Results RM Education Adjusted* operating profit Adjusted* operating profit margins	£178.2m £63.5m £30.7m £80.2m £18.2m 10.2%	£202.5m £59.1m £27.8m £111.9m £18.5m 9.1%	-12.0% +7.6% +10.4% -28.3% -1.8% +1.1pp
Adjusted* basic EPS Basic EPS Paid and proposed dividend per share	16.2p 18.5p 5.00p	16.4p 13.9p 4.00p	-1% +33% +25%

Operational

·      Strong organic growth in RM Resources and RM Results ·      RM Education stabilised with satisfactory margins ·      Adjusted* operating margins continue to improve moving from 9.1% to 10.2% ·      Cash remains strong at £48.3m ·      Disposal of SpaceKraft, the small specialist manufacturing and distribution business ·      Pension triennial valuation agreed with recovery plan reduced to 9 years

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

"2015 was another good year of progress for the Group.  Both RM Resources and RM Results grew organically and RM Education has been reshaped and is now on a stable platform for the future.  The Group's profit margins reaching double digits is a positive milestone.

Market conditions in the UK Education sector will continue to be subdued as a result of increased pressure on school budgets.  Our strategy continues to focus on retaining a leading market position for all three businesses whilst maintaining our stronger operating margins."

* 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; changes in the provision for dilapidations and onerous lease contracts and exceptional credit on Defined Benefit Pension Scheme.

Contacts RM plc	FTI Consulting 08450 700300
David Brooks, Chief Executive Officer	Chris Lane / Antonia Gray
Neil Martin, Chief Financial Officer 08450 700300	020 3727 1000

Extract from Strategic Report

RM's objective is to create shareholder value through the provision of education resources, IT software and IT services to the education sector. 

Operating Review

The Group is structured in three operating divisions, each with its own managing director and management team.  Some staff functions are provided centrally.  Approximately 33% (2014: 28%) 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.  In December 2015 we divested our small special educational needs business, SpaceKraft, for £0.8m which is separately identified as Held for Sale as at 30 November 2015. This enables the RM Resources management team to focus on the much larger TTS operation and exit from manufacturing activities that were required as part of the SpaceKraft business model.

TTS provides education resources used in schools through a mainly direct marketing business model with goods supplied from large, centralised UK distribution centres.  Products supplied are a mix of third party branded and TTS branded items manufactured by a network of third party suppliers.

The Division's strategy is to grow market share in the provision of resources to UK schools, early years and special educational needs markets via direct catalogue and online sales.  TTS also supplies a subset of these products through UK and international distributors as well as directly to international schools.

Divisional revenue increased by 7.6% to £63.5 million (2014: £59.1 million), with UK market share gains and a 31.6% increase in international revenues.  Divisional revenue increased by 12.2% in the first six months but only by 3.7% in the second half of the year as first half sales benefited from the curriculum changes that drove strong sales of new products.

Divisional adjusted operating margins remained consistent at 17.5% reflecting the benefits of continued growth and strong control over costs.  Adjusted operating profit was £11.1 million (2014: £10.3 million). 

TTS UK Direct Marketing

Revenue from TTS UK direct marketing increased by 4.0% to £48.3 million (2014: £46.4 million).  The first half of the year was very strong, showing 11.9% year on year increase, with the last effects of the uplift supported by changes to the curriculum in English primary schools.  However, in the second half revenue in this area decreased by 2.9% reflecting the tighter budgets within schools.

We continue to make significant investment in TTS' online channel.  Online orders now make up 30% of direct marketing sales and a completely new e-commerce platform will be released this year. 

We expect the UK education resources market to continue to be subdued as a result of increased pressure on the discretionary element of school budgets.  Our focus will be on maintaining sector leading margins while looking to retain our strong market position.

TTS International

Revenue from international sales to overseas resellers and to international schools increased by 31.6% to £11.1 million (2014: £8.5 million).  This was driven by growth in Europe and the Americas and included a large contract in the Middle East.  We expect international revenues to continue to grow in the coming year.

TTS UK Distributors

Revenue from sales to UK trade partners decreased by 1.5% to £4.1 million (2014: £4.2 million), reflecting the tightness of budgets in the wider UK education resources marketplace.

RM Results

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

The strategy is to primarily grow the e-assessment side of the business through expanding the scope of solutions to existing customers through the provision of leading software products and services 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 10.4% to £30.7 million (2014: £27.8 million).  Adjusted operating margins increased further to 18.1% (2014: 16.7%).  Adjusted operating profit increased by 19.5% on the prior year to £5.6 million (2014: £4.6 million).

During the year the business was successful in securing a three year contract with the education charity, AQA, the largest UK schools exam awarding body, to provide e-marking services alongside the current provider.

Internationally, the business is pursuing opportunities for the onscreen marking of paper-based exams as well as onscreen testing, often bidding with partner organisations.  In the UK, examination and curricula changes introduced by the English Department for Education have significantly changed the phasing of exams so that the vast majority are taken in the summer term, which has moved revenue phasing into the second half of the year.  There is a long-term trend from paper-based to onscreen testing in the e-assessment market, though the adoption of such systems for school based examinations is low.

The educational data side of the business is heavily dependent on the Department for Education, principally through the National Pupil Database and RAISE Online contracts. These contracts include the capture and publishing of data for the school performance tables in England and both are up for retender in the next twelve months. However, we have successfully managed these contracts for over 10 years.  We are in the process of exiting a number of other smaller data services, non-profit making contracts.

We are targeting the growth opportunities in e-assessment to more than outweigh reduced revenues in the educational data business, thereby allowing us to maintain good operating margins.

RM Education

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

The Division's strategy is to return to sustainable top line growth by developing the adoption of its portfolio of software products and services to existing and new UK school and college customers.

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 hardware and software.  In addition, purchasing decisions in England have been increasingly devolved to schools and academy groups and away from central government and local authorities.  This has required a change in the way the Division engages with its market and has resulted in an increased focus on the top c.2,000 customers. 

As anticipated, the change of strategy away from selling hardware devices and a reduction in new school openings under the Building Schools for the Future (BSF) scheme led to overall revenue in RM Education declining by 28.3% to £80.2 million (2014: £111.9 million).  However, adjusted operating profit margins remained stable at 6.8% (2014: 6.9%)  Adjusted operating profit was £5.5 million (2014: £7.7 million).

Managed Services

The Managed Services offering is primarily the provision of full IT outsourcing services to schools and colleges.  As anticipated, revenues in 2015 again declined with a reduction in new school openings under the BSF programme.  Managed Services revenues decreased by 35.5% to £32.2 million (2014: £50.0 million).  However, the retention rates of existing customers increased significantly during the year to over 80%.  In addition, 44 new schools signed managed services contracts in the year. 

A proportion of our 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 and cost control. 

Digital Platforms

These include established products such as RM Integris (RM's cloud-based school management system), RM Easimaths curriculum software and RM EasiTeach whole class teaching software as well as newer offerings including RM Unify.  Digital Platforms revenues increased by 1.4% to £7.7 million (2014: £7.6 million).

Revenue from RM Integris increased following good market share gains including over 350 schools in Derbyshire.  The strategy is to increase RM's market share by focussing on its cloud-based platform, competitive price point and investing to develop its relevance across primary, secondary and multi academy school customers in a market currently dominated by a large competitor and with low levels of switching between suppliers. 

RM Unify is a technology platform to allow customers easy access to the varied digital, cloud-based, educational specific content and materials that are now available online. During the year the Scottish government chose to extend its contract (providing RM Unify to all schools in Scotland) by another two years to January 2018.

Going forward the priority areas of focus are on winning new RM Integris primary, secondary and multi academy school customers and on progressing the RM Unify proposition and profile through embedding and expanding system usage amongst existing customers.

Infrastructure

Infrastructure includes the tools, products and services to help schools manage their own IT.  RM Education's internet business is also included as well as the provision of third party hardware that allows RM to meet all the ICT needs of its customers. Revenues decreased by 25.8% to £40.3 million (2014: £54.3 million) as we continue the transition from manufacturing our own PC client devices and associated warranties and installations and move to a more technology agnostic services and support provider.

On the support and network tools side the focus is on ensuring that existing customers renew their support contracts and are on the latest version of our software.

RM is an internet broadband and e-safety service provider to approximately 5,000 schools.  RM designs and manages networks, procuring and integrating bandwidth and provides its own and third party e-safety products.    This business is underpinned by one large regional consortium which accounts for a large share of its revenue.   The contract runs until 2018 though volumes are variable.  The priority in this area is on growing customer numbers and improving retention rates.

RM no longer manufactures computers.  However, some customers do still want RM to provide all their ICT needs, including PC client devices.  RM therefore sources third party hardware which is shipped directly to customer sites when required. This is a low margin activity but is seen to be supportive of the broader relationship with our customers which is a critical success factor in being an infrastructure partner of choice to schools.

RM India

As at 30 November 2015, RM's operation in Trivandrum accounted for 33% of Group headcount (2014: 28%).

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 1,860 (2014: 1,870) which is comprised of 1,645 (2014: 1,640) permanent and 215 (2014: 230) temporary or contract staff, of which 1,294 (2014: 1,360) were located in the UK and 566 (2014: 510) in India. At 30 November 2015 headcount was 1,899 (2014: 1,778).

The following table sets out a more detailed summary of the permanent staff employed as at 30 November 2015:

	Male	Female
Directors	2 (100%)	0 (0%)
Senior Managers (excluding Directors)	54 (81%)	13 (19%)
All employees	1,113 (66%)	583 (34%)

The Group 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.

Group Financial Performance

Group revenue declined by 12.0% to £178.2 million (2014: £202.5 million) as anticipated.

To provide a better understanding of underlying business performance, amortisation charges relating to acquisition related intangible assets, share-based payment charges and other items of an exceptional nature have been disclosed in an adjustments column in the Income Statement to give 'Adjusted' results.

Adjusted operating profit margins increased again this year from 9.1% in 2014 to 10.2%.  Despite the decline in revenue, adjusted operating profit decreased only marginally to £18.2 million (2014: £18.5 million). On a statutory basis, operating profit was £19.6 million (2014: £16.5 million) with adjustments principally benefiting from a release of a £2.4 million provision for dilapidations on leased properties and onerous lease contracts more than offsetting the share based payments charge of £0.9 million.

The Group generated an increased unadjusted statutory profit before tax of £19.2 million (2014: £15.8 million).

The total tax charge within the Income Statement for the year was £4.3 million (2014: £4.2 million).  The Group's tax charge for the period, measured as a percentage of profit before tax, was 22% (2014: 26%). The decrease is principally due to the reduction in the UK corporate tax rate and an adjustment on finalisation of a prior year corporation tax return. Adjusted basic earnings per share were 16.2 pence (2014: 16.4 pence).  Statutory basic earnings per share were 18.5 pence (2014: 13.9 pence) and statutory diluted earnings per share were 17.8 pence (2014: 13.0 pence).

RM generated cash from operations for the year of £10.9 million (2014: £19.1 million). Cash and short-term deposits increased to £48.3 million (2014: £47.9 million). The lowest cash and short-term deposit position during the year due to seasonal cash flows was £34.0 million (2014: £25.9 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 25% to 5.00 pence per share (2014: 4.00 pence).  This comprises an already paid interim dividend of 1.20 pence per share and, subject to shareholder approval, a proposed final dividend of 3.80 pence per share.  The estimated total cost of normal dividends paid and proposed for 2015 is £4.1 million (2014: £3.2 million). This increased dividend proposal reduces the dividend cover ratio from 4.1 to 3.2.

Defined Benefit Pension Scheme

At 30 November 2015 the IAS 19 scheme deficit (pre-tax) was £21.9 million (2014: £26.8 million). This reduction in Scheme deficit results from the reduction in liabilities due to beneficial membership experience over the three year valuation period ended May 2015, better than assumed returns on the Scheme assets and the shortfall contributions paid by the Company. These have been partially offset by the change in the mortality assumptions and a reduction in the inflation risk premium.

On 11 December 2015, agreement was reached with the Trustee of the RM defined benefit pension scheme ("Scheme") with regards to the triennial valuation as at 31 May 2015. The deficit was agreed at £41.8 million (31 May 2012: £53.5 million).  The deficit recovery plan comprises an initial cash contribution of £4.0 million into the Scheme and £4.0 million into the escrow account previously established for the purposes of further risk mitigation exercises, together with deficit recovery payments remaining at £3.6 million per annum until 2024 (previously 2027).  These funding plans will be assessed at future triennial reviews.

Going Concern

The Directors, having made appropriate enquiries, consider that the Company and the Group have 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 financial statements.

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' 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.

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 Group's strategy are subject to a number of risks.  Risks are reviewed by the Audit Committee and Board. The Board confirms that it has carried out a robust assessment of the principal risks facing the Company 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	Mitigation
Public policy	The majority of RM's business is funded from UK government sources.  Changes in political administration, or changes in policy priorities, might result in a reduction in education spending. UK government funding in the education sector is constrained by fiscal policy. Global economic conditions might result in a reduction in budgets available for public spending generally and education spending specifically.	The Group seeks to understand the education policy environment by regular monitoring of policy positions and by building relationships with education policy makers. The Group's three Divisions have diverse revenue streams and product/service offerings. The Group's strategy is to focus on areas of education spend which are important to meet customers' objectives. Where an individual business' revenues are in decline, management seek to ensure that the cost base supporting these is adjusted accordingly.
Education practice	Education practices and priorities may change and, as a result, RM's products and services may no longer meet customer requirements.	The Group seeks to maintain knowledge of current education practice and priorities by maintaining close relationships with customers.
Operational execution	RM provides sophisticated products and services, which require a high level of technical expertise to develop and support, and on which its customers place a high level of reliance. RM is engaged in the delivery of large, multi-year education projects, typically involving the development and integration of complex ICT systems, and may have liability for failure to deliver on time.	The Group invests in maintaining a high level of technical expertise.  Internal management control processes are in place to govern the delivery of projects, including regular reviews by relevant management.  The operational and financial performance of projects, including future obligations, the expected costs of these and potential risks are regularly monitored by management.
Data and business continuity	RM is engaged in storing and processing sensitive data, where accuracy, privacy and security are important. The Group would be significantly impacted if, as a result of a major incident, one of its major buildings, systems or infrastructure components could not function for a long period of time.	The Group's IS function has invested in developing its Data Centres, and has been successfully certified to ISO/IEC 27001:2005 for the provision of systems, information and hosting services. The Group has established a Security and Business Continuity Committee to oversee the security aspects of the Group's information systems.  This covers data integrity and protection, defence against external threats (including cyber risks) and disaster recovery. The Group seeks to protect itself against the consequences of a major incident by implementing a series of back up and safety measures. The Group has property and business interruption insurance cover.
People	RM's business depends on highly skilled employees.	The Group seeks to be an attractive employer and regularly monitors the engagement of its employees.  The Group has talent management and career planning programmes.
Innovation	The IT market is subject to rapid, and often unpredictable, change.  As a result of inappropriate technology choices, the Group's products and services might become unattractive to its customer base. 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.	The Group monitors technology and market developments and invests to keep its existing products, services and sales methods up-to-date as well as seeking out new opportunities and initiatives.  The Group works with teachers and educators to understand opportunities and requirements.
Dependence on key contracts	The performance of the RM Education and RM Results Divisions are dependent on the winning and extension of long-term contracts with government, local authorities, examination boards and commercial customers.	The Group invests in maintaining a high level of technical expertise and on building effective working relationships with its customers.  The Group has in place a range of customer satisfaction programmes, which include management processes designed to address the causes of customers' dissatisfaction.
Pension	The Group operates a defined benefit pension scheme in the UK, which is in deficit.  The scheme deficit can adversely impact the net assets position of the trading subsidiary RM Education Ltd.	The Scheme was closed to new entrants in 2003 and closed to future accrual of benefits in October 2012. A pension escrow account was established in 2014 to fund risk mitigation exercises.  The first of these was completed in October 2014 with the purchase a pensioner buy-in from an insurance company and a flexible retirement option exercise is currently in progress. The Group evaluates risk mitigation proposals with the Scheme trustee.
Financial - liquidity	The Group is exposed to counterparty risk on liquid assets.	Limits are placed on the level of deposit with any one counterparty.  Bank selection takes into account credit ratings.
Financial - capital	The Group's ability to pay dividends to shareholders depends on having sufficient distributable reserves in the holding company, RM plc.  Additional losses incurred as a result of significant increases in the pension scheme deficit could further impair the ability of RM Education Ltd to pay dividends up to RM plc.	The Group monitors the level of distributable reserves in subsidiary companies and considers their ability to make dividend payments to the holding company.

David Brooks

Chief Executive Officer

1 February 2016

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 2015. 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 1 February 2016 and is signed on its behalf by:

Greg Davidson

Company Secretary

CONSOLIDATED INCOME STATEMENT
for the year ended 30 November 2015
			Year ended 30 November 2015								Year ended 30 November 2014
			Adjusted		Adjustments      Total						Adjusted	Adjustments        Total
		Note	£000		£000		£000				£000	£000	£000
Revenue		2	178,228		-		178,228				202,544	-	202,544
Cost of sales			(109,316)		-		(109,316)				(126,974)	-	(126,974)
Gross profit			68,912		-		68,912				75,570	-	75,570
Operating expenses			(50,713)		-		(50,713)				(57,044)	-	(57,044)
Amortisation of acquisition related intangible assets			-		(303)		(303)				-	(303)	(303)
Impairment of held for sale assets and related transition costs			-		(323)		(323)				-	-	-
Gain on sale of operations			-		65		65				-	429	429
Share-based payment charges			-		(864)		(864)				-	(932)	(932)
Release of/(increase in) provisions for dilapidations on leased properties and onerous lease contracts			-		2,368		2,368				-	(774)	(774)
Restructuring provision release/(charge)			-		243		243				-	(472)	(472)
Exceptional credit on Defined Benefit Pension Scheme			-		206		206				-	-	-
			(50,713)		1,392		(49,321)				(57,044)	(2,052)	(59,096)
Profit from operations			18,199		1,392		19,591				18,526	(2,052)	16,474
Investment income		3	409		894		1,303				476	-	476
Finance costs		4	(1,510)		(149)		(1,659)				(924)	(269)	(1,193)
Profit before tax			17,098		2,137		19,235				18,078	(2,321)	15,757
Tax		5	(3,984)		(289)		(4,273)				(4,359)	201	(4,158)
Profit for the year			13,114		1,848		14,962				13,719	(2,120)	11,599
Earnings per ordinary share		6
- basic			16.2p		2.3p		18.5p				16.4p	(2.5)p	13.9p
- diluted			15.6p		2.2p		17.8p				15.4p	(2.4)p	13.0p
Paid and proposed dividends per share		7
- interim							1.20p						0.96p
- final							3.80p						3.04p
Adjustments to results have been presented to give a better guide to business performance (see note 1). All amounts were derived from continuing operations.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 30 November 2015
					Year ended 30 November 2015			Year ended 30 November 2014
					Note		£000		£000
Profit for the year							14,962		11,599
Items that will not be reclassified subsequently to profit or loss
Defined Benefit Pension Scheme re-measurements							2,402		(21,892)
Tax on items that will not be reclassified subsequently to profit or loss					5		(950)		4,378
Items that are or may be reclassified subsequently to profit or loss
Fair value (loss)/gain on hedged instruments							(180)		1,018
Exchange (loss)/gain on translation of overseas operations							(80)		81
Tax on items that are or may be reclassified subsequently to profit or loss					5		(36)		657
Other comprehensive income/(expense)							1,156		(15,758)
Total comprehensive income/(expense) for the year attributable to equity holders							16,118		(4,159)

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 30 November 2015
			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 2013			1,870		26,997		(2,972)	94		(474)		(385)		3,895		29,025
Profit for the year			-		-		-	-		-		-		11,599		11,599
Other comprehensive income/(expense)			-		-		-	-		1,018		81		(16,857)		(15,758)
Total comprehensive income/(expense)			-		-		-	-		1,018		81		(5,258)		(4,159)
Transactions with owners of the Company
Shares issued			19		21		(18)	-		-		-		-		22
Share-based payment awards exercised			-		-		40	-		-		-		(40)		-
Share-based payment fair value charges			-		-		-	-		-		-		932		932
Dividends paid	7		-		-		-	-		-		-		(17,706)		(17,706)
At 30 November 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	13		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

CONSOLIDATED BALANCE SHEET
at 30 November 2015
			At 30 November 2015	At 30 November 2014
		Note	£000	£000
Non-current assets
Goodwill			14,067	14,067
Acquisition related intangible assets			8	461
Other intangible assets			562	537
Property, plant and equipment			7,059	8,040
Other receivables		8	1,168	1,878
Deferred tax assets		5	6,121	8,147
			28,985	33,130
Current assets
Inventories			10,862	10,604
Trade and other receivables		8	25,592	32,928
Tax assets			-	821
Cash and short-term deposits		9	48,320	47,893
Assets held for sale		10	1,162	-
			85,936	92,246
Total assets			114,921	125,376
Current liabilities
Trade and other payables		11	(64,974)	(79,085)
Tax liabilities			(2,787)	(600)
Provisions		12	(2,077)	(3,660)
Liabilities directly associated with assets classified as held for sale		10	(549)	-
			(70,387)	(83,345)
Net current assets			15,549	8,901
Non-current liabilities
Other payables		11	(662)	(1,657)
Provisions		12	(2,864)	(5,507)
Defined Benefit Pension Scheme obligation			(21,861)	(26,753)
			(25,387)	(33,917)
Total liabilities			(95,774)	(117,262)
Net assets			19,147	8,114
Equity attributable to shareholders
Share capital		13	1,890	1,889
Share premium account			27,035	27,018
Own shares			(2,510)	(2,950)
Capital redemption reserve			94	94
Hedging reserve			364	544
Translation reserve			(384)	(304)
Retained earnings - (deficit)			(7,342)	(18,177)
Total equity			19,147	8,114

CONSOLIDATED CASH FLOW STATEMENT
for the year ended 30 November 2015
	Year ended 30 November 2015		Year ended 30 November 2014
	Note	£000	£000
Profit before tax		19,235	15,757
Investment income		(1,303)	(476)
Finance costs		1,659	1,193
Profit from operations		19,591	16,474
Adjustments for:
Impairment of acquisition related intangible assets		150	-
Amortisation of acquisition related intangible assets		303	303
Amortisation of other intangible assets		297	417
Depreciation and impairment of property, plant and equipment		2,406	3,415
Gain on sale of operations		(65)	(429)
Loss on disposal of other intangible assets		-	73
Gain on disposal of property, plant and equipment		(95)	(398)
Loss/(gain) on foreign exchange derivatives		133	(83)
Share-based payment charge		864	932
(Decrease)/increase in provisions		(716)	1,339
Defined Benefit Pension Scheme administration cost		530	475
Operating cash flows before movements in working capital		23,398	22,518
Increase in inventories		(707)	(55)
Decrease in receivables		6,102	2,792
Decrease in trade and other payables		(14,369)	(708)
Utilisation of onerous lease and dilapidations provisions	12	(2,186)	(836)
Utilisation of employee-related restructuring provisions	12	(1,166)	(4,348)
Utilisation of other provisions	12	(132)	(289)
Cash generated from operations		10,940	19,074
Defined benefit pension scheme cash contributions (2014: including £8m escrow payment)		(3,984)	(11,821)
Tax paid		(171)	(2,527)
Borrowing facilities arrangement and commitment fees		(447)	(353)
Income on sale of finance lease debt		45	55
Net cash inflow from operating activities		6,383	4,428
Investing activities
Interest received		364	403
Repayment of loans by third parties		18	33
Proceeds from sale of other receivables		1,586	-
Proceeds on disposal of property, plant and equipment		165	661
Purchases of property, plant and equipment		(1,576)	(2,597)
Purchases of other intangible assets		(322)	(1)
Net cash generated by/(used in) investing activities		235	(1,501)
Financing activities
Ordinary and Special dividends paid	7	(3,424)	(17,706)
Repayment of capital obligations under vehicle finance leases		(244)	(530)
Proceeds of share capital issue, net of share issue costs		18	22
Proceeds from sale of shares held in Staff Share Scheme		55	-
Purchase of own shares		(2,470)	-
Satisfaction of share-based payment awards		(128)	-
Net cash used in financing activities		(6,193)	(18,214)
Net increase/(decrease) in cash and cash equivalents		425	(15,287)
Cash and cash equivalents at the beginning of the year		41,893	57,169
Effect of foreign exchange rate changes		2	11
Cash and cash equivalents at the end of the year	9	42,320	41,893

 

1. Preliminary announcement

The preliminary results for the year ended 30 November 2015 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 23 March 2016. 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 2015.  Statutory accounts for 2014 have been delivered to the Registrar of Companies and those for 2015 will be delivered following the Company's annual general meeting. The auditor's reports on both the 2015 and 2014 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 1 February 2016.

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 the following 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 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, changes in the provision for dilapidations and onerous lease contracts and exceptional credit on Defined Benefit Pension Scheme. 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

During the year ended 30 November 2015 adjustments to profit include:

·      In March 2015 the Group's interests in Newham Learning Partnership (PSP) Ltd were sold for a total cash consideration of £1.6m; and a profit of £0.9m was recorded as an adjustment to investment income.

·      In May 2015 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 £2.4m has been released from the onerous lease provision in the year.

At the balance sheet date, the Group's 100% investment in SpaceKraft Ltd was identified for disposal and was subsequently disposed in December 2015. Assets and liabilities relating to SpaceKraft Ltd have been transferred to held for sale at the balance sheet date. An impairment of £233,000 has been recognised in acquisition related intangible assets and property, plant and equipment and charged to the income statement in addition to related transition costs.

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. The Group is structured into three operating divisions:  RM Resources, RM Results and RM Education. A full description of each division, together with comments on its performance and outlook, is given in the Strategic Report. This Segmental analysis shows the results and assets of these divisions.  Revenue is that earned by the Group from third parties. Exited businesses in both years include the results and assets of operations held for sale at 30 November 2015 and other exited businesses.

	RM	RM	RM	Corporate	Exited	Total
Year ended 30 November 2015	Resources	Results	Education	Services	Businesses
	£000	£000	£000	£000	£000	£000
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 note 1)						2,137
Profit before tax						19,235
	RM	RM	RM	Corporate	Exited	Total
Year ended 30 November 2014	Resources	Results	Education	Services	Businesses
	£000	£000	£000	£000	£000	£000
Revenue
UK	50,601	27,136	110,712	-	3,302	191,751
Europe	3,885	37	315	-	167	4,404
North America	943	-	206	-	51	1,200
Asia	2,977	119	-	-	3	3,099
Rest of the world	653	535	680	-	222	2,090
	59,059	27,827	111,913	-	3,745	202,544
Adjusted profit before tax	10,314	4,648	7,700	(4,152)	16	18,526
Investment income						476
Adjusted finance costs						(924)
Adjusted profit before tax						18,078
Adjustments  (see note 1)						(2,321)
Profit before tax						15,757
Segmental assets	RM	RM	RM	Corporate	Exited
	Resources	Results	Education	Services	Businesses	Total
	£000	£000	£000	£000	£000	£000
At 30 November 2015
Segmental	32,962	7,732	16,539	700	1,162	59,095
Other						55,826
Total assets						114,921
	RM	RM	RM	Corporate	Exited
	Resources	Results	Education	Services	Businesses	Total
	£000	£000	£000	£000	£000	£000
At 30 November 2014
Segmental	32,734	6,636	27,334	353	1,236	68,293
Other						57,083
Total assets						125,376

3. Investment income
		Year ended 30 November 2015			Year ended 30 November 2014
			£000		£000
Bank interest			224		242
Income on sale of finance lease debt			45		55
Income from sale of other receivables (see note 1)			894		-
Other finance income			140		179
			1,303		476

4. Finance costs
	Year ended 30 November 2015		Year ended 30 November 2014
	Note	£000	£000
Borrowing facilities arrangement fees and commitment fees		467	467
Finance lease interest		5	21
Net finance costs on defined benefit pension scheme		964	379
Unwind of discount on long term contract provisions		74	57
Unwind of discount on onerous lease and dilapidations provisions	12	149	269
		1,659	1,193

5. Tax
a) Analysis of tax charge in the Consolidated Income Statement
	Year ended 30 November 2015		Year ended 30 November 2014
		£000	£000
Current taxation
UK corporation tax		3,684	3,117
Adjustment in respect of prior years		297	627
Overseas tax		278	437
Total current tax charge		4,259	4,181
Deferred taxation
Temporary differences		259	34
Adjustment in respect of prior years		(213)	(57)
Overseas tax		(32)	-
Total deferred tax charge/(credit)		14	(23)
Total Consolidated Income Statement tax charge		4,273	4,158
b) Analysis of tax charge/(credit) in the Consolidated Statement of Comprehensive Income
	Year ended 30 November 2015		Year ended 30 November 2014
		£000	£000
UK corporation tax
Defined benefit pension scheme		(469)	(1,533)
Share based payments		(504)	-
Deferred tax
Defined benefit pension scheme movements		949	(2,185)
Defined benefit pension scheme escrow		-	(660)
Share based payments		540	(657)
Deferred tax relating to the change in rate*		470	-
Total Consolidated Statement of Comprehensive Income tax charge/(credit)		986	(5,035)

          * Relates entirely to the defined benefit pension scheme.

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 2015						Year ended 30 November 2014
				Adjusted	Adjustments      Total					Adjusted		Adjustments        Total
				£000	£000	£000				£000		£000		£000
Profit on ordinary activities before tax				17,098	2,137	19,235				18,078		(2,321)		15,757
Tax at 20.33% (2014: 21.67%) thereon				3,476	434	3,910				3,918		(503)		3,415
Effects of:
- change in tax rate on carried forward   deferred tax assets				123	-	123				-		-		-
- other expenses not deductible for tax   purposes				50	-	50				104		-		104
- temporary timing differences unrecognised   for deferred tax				-	-	-				4		-		4
- other temporary timing differences				(7)	1	(6)				-		28		28
- R&D tax credit				4	-	4				(77)		-		(77)
- impairments				12	36	48				-		-		-
- overseas tax				246	-	246				207		-		207
- gain on sale of operations				-	(182)	(182)				-		(93)		(93)
- prior period adjustments				80	-	80				203		367		570
Tax charge in the Consolidated Income Statement				3,984	289	4,273				4,359		(201)		4,158

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:
	Accelerated tax depreciation		Defined  benefit pension scheme obligation		Share-based payments		Short-term timing differences		Acquisition related intangible assets		Total
	£000		£000		£000		£000		£000		£000
At 1 December 2013	988		3,166		181		440		(153)		4,622
Credit/(charge) to income	(201)		-		178		(15)		61		23
Credit to equity	-		2,185		657		660		-		3,502
At 30 November 2014	787		5,351		1,016		1,085		(92)		8,147
Credit/(charge) to income	-		-		(53)		(52)		91		(14)
Charge 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
Certain deferred tax assets and liabilities have been offset above.

6. Earnings per ordinary share
		Year ended 30 November 2015									Year ended 30 November 2014
		Profit for  the year			Weighted average number of shares		Pence per share			Profit for  the year				Weighted average number of shares		Pence per share
			£000		'000						£000			'000
Basic earnings per ordinary share
Basic earnings			14,962		80,954		18.5				11,599			83,702		13.9
Adjustments (see note 1)			(1,848)		-		(2.3)				2,120			-		2.5
Adjusted basic earnings			13,114		80,954		16.2				13,719			83,702		16.4
Diluted earnings per ordinary share
Basic earnings			14,962		80,954		18.5				11,599			83,702		13.9
Effect of dilutive potential ordinary shares: share based payment awards			-		3,080		(0.7)				-			5,346		(0.9)
Diluted earnings			14,962		84,034		17.8				11,599			89,048		13.0
Adjustments (see note 1)			(1,848)		-		(2.2)				2,120			-		2.4
Adjusted diluted earnings			13,114		84,034		15.6				13,719			89,048		15.4
The weighted average number of shares for the year ended 30 November 2015 has been calculated based upon the weighted average of the number of ordinary shares of 22/7p each.
7. Dividends
Amounts recognised as distributions to equity holders were:
									Year ended 30 November 2015						Year ended 30 November 2014
											£000				£000
Final dividend for the year ended 30 November 2014 - 3.04p per share (2013: 2.46p)											2,451				2,257
Special dividend for the year ended 30 November 2013 - 16.00p per share											-				14,678
Interim dividend for the year ended 30 November 2015 - 1.20p per share (2014: 0.96p)											973				771
											3,424				17,706
The proposed final dividend of 3.80p per share for the year ended 30 November 2015 was approved by the Board on 1 February 2016. The dividend is subject to approval by Shareholders at the annual general meeting. The anticipated cost of this dividend is £3,079,000 which is not included as a liability at 30 November 2015.

8. Trade and other receivables
					2015		2014
					£000		£000
Current
Financial assets
Trade receivables					17,303		24,830
Long-term contract balances					138		154
Other receivables					1,048		743
Derivative financial instruments					138		565
Accrued income					1,489		1,571
					20,116		27,863
Non-financial assets
Prepayments					5,476		5,065
					25,592		32,928
Non-current
Financial assets
Other receivables					1,168		1,878
					26,760		34,806
Currency profile of receivables
Sterling					26,303		34,387
US Dollar					150		163
Euro					44		-
Indian Rupee					263		256
					26,760		34,806
9. Cash and short-term deposits
					2015			2014
					£000			£000
Cash and cash equivalents					42,320			41,893
Short-term deposits					6,000			6,000
					48,320			47,893
The short-term deposits are for a maximum period of 6 months at interest rates of 0.80-0.85%.

10. Held for sale operations
At the balance sheet date, the Group's 100% investment in SpaceKraft Limited was identified for disposal by the Board and was being actively marketed for sale but had not been disposed. This has been determined not to meet the IFRS 5 Non-current Assets Held for Sale and Discontinued Operations definition of discontinued operations but has been recorded as held for sale and presented separately in the balance sheet. In December 2015, the entire share capital of SpaceKraft Limited was disposed. The proceeds on disposal were lower than the combined book value of the net assets of the company and of the Group relating specifically to the company. Accordingly, an impairment of £233,000 has been recognised in acquisition related intangible assets and property, plant and equipment. The corresponding deferred tax liability on the acquisition related intangible assets has also been released.
The major classes of assets and liabilities comprising the operations classified as held for sale at 30 November 2015 are as follows:
			Net assets of entity before impairment on classification to held for sale			Net assets arising on consolidation			Impairment on classification to held for sale			Net assets held for sale
			£000			£000			£000			£000
Acquisition related intangible assets			-			150			(150)			-
Property, plant and equipment			155			-			(83)			72
Deferred tax assets			53			-			-			53
Inventories			454			-			-			454
Trade and other receivables			583			-			-			583
Total assets held for sale			1,245			150			(233)			1,162
Trade and other payables			(437)			-			-			(437)
Provisions			(112)			-			-			(112)
Deferred tax liabilities			-			(30)			30			-
Total liabilities directly associated with assets held for sale			(549)			(30)			30			(549)
Net assets held for sale			696			120			(203)			613

The total pre-tax charge in the income statement relating to the assets held for sale is £323,000, comprising an impairment charge of £233,000 as detailed above and related transition costs.

11. Trade and other payables
		2015	2014
		£000	£000
Current liabilities
Financial liabilities
Trade payables		11,518	12,793
Other taxation and social security		4,010	4,673
Other payables		761	2,066
Accruals		12,525	14,041
Obligations under finance leases		40	230
Derivative financial instruments		5	3
Long-term contract balances		25,509	31,320
		54,368	65,126
Non-financial liabilities
Deferred income		10,606	13,959
		64,974	79,085
Non-current liabilities
Financial liabilities
Obligations under finance leases		-	49
Non-financial liabilities:
Deferred income:
- due after one year but within two years		472	1,077
- due after two years but within five years		190	531
		662	1,657
		65,636	80,742

12. Provisions		Onerous lease and dilapidations	Employee-related restructuring	Other	Total
Group		£000	£000	£000	£000
At 1 December 2013		7,885	4,241	1,330	13,456
Utilisation of provisions		(836)	(4,348)	(289)	(5,473)
Release of provisions		(524)	(366)	(431)	(1,321)
Increase in provisions		1,298	838	95	2,231
Effect of movements in exchange rates		2	-	3	5
Unwind of discount		269	-	-	269
At 30 November 2014		8,094	365	708	9,167
Increase in provisions		-	1,070	1,025	2,095
Utilisation of provisions		(2,186)	(1,166)	(132)	(3,484)
Release of provisions		(2,368)	(85)	(423)	(2,876)
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
Disclosure of provisions				2015	2014
				£000	£000
Current liabilities				2,077	3,660
Non-current liabilities				2,864	5,507
				4,941	9,167
Provisions for onerous leases and dilapidations have been recognised at the present value of the expected obligation at discount rates of 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 2015, £1,829,000 (2014: £5,738,000) of the provision refers to onerous leases, and £1,750,000 (2014: £2,356,000) refers to dilapidations. The major release in the year relates to the successful sub-letting of one of the Group's properties.
The average remaining life of the leases at 30 November 2015 is 3.5 years (2014: 5.1 years).
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. The major release of Group provisions during the year relates to the successful completion of certain legal activities and a re-assessment of provisions recognised as part of the exit of operations following the 2011 Strategic Review.  The significant elements in the provision at 30 November 2015 and the increase in the year are related to regulatory initiatives.

13. Share capital
		Ordinary shares of 2p		Ordinary shares of 22/7p		Total
		Number	£000	Number	£000	£000
Allotted, called-up and fully paid:		'000		'000
At 1 December 2013		93,515	1,870	-	-	1,870
Share consolidation		(93,515)	(1,870)	81,826	1,870	-
Issued in the year		-	-	814	19	19
At 30 November 2014		-	-	82,640	1,889	1,889
Issued in the year		-	-	10	1	1
At 30 November 2015		-	-	82,650	1,890	1,890

During the year 10,000 ordinary shares of 2²/₇p each were issued following the exercise of options under the RM plc 2004 Company Share Option Plan. The exercise price was £1.742 per option.

Ordinary shares issued carry no right to fixed income.

 

END

 

 

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