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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
---|---|---|---|---|---|
Rm Plc | LSE:RM. | London | Ordinary Share | GB00BJT0FF39 | ORD 2 2/7P |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
1.00 | 1.86% | 54.90 | 53.00 | 56.80 | 844,074 | 16:35:02 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
Computers & Software-whsl | 219.04M | -14.5M | -0.1741 | -3.10 | 44.87M |
TIDMRM.
RNS Number : 1773W
RM PLC
07 February 2017
7 February 2017
RM plc
Final Results for the period ending 30 November 2016
RM plc ("RM"), a leading education resources, software and services group, reports its final results for the year ending 30 November 2016.
HIGHLIGHTS
Financial 2016 2015 Change --------------------------------------------------- ------------ ------------ --------------------- Statutory revenue GBP167.6m GBP178.2m - 6.0% RM Resources GBP58.8m GBP63.5m - 7.4% RM Results GBP31.6m GBP30.7m + 2.8% RM Education GBP77.0m GBP80.2m - 4.0% Exited businesses GBP0.2m GBP3.7m Revenue excluding exited businesses* GBP167.5m GBP174.5m - 4.0% Adjusted** operating profit GBP18.8m GBP18.0m + 4.6% Adjusted** operating profit margins 11.3% 10.3% + 0.9pp Statutory profit after tax GBP11.6m GBP15.0m - 22.2% --------------------------------------------------- ------------ ------------ --------------------- Adjusted** diluted EPS 17.4p 15.8p + 10.6% Paid and proposed dividend per 6.00p 5.00p + 20.0% share --------------------------------------------------- ------------ ------------ --------------------- Operational ------------------------------------------------------------------------------------------ * A solid performance delivering adjusted operating profits up 4.6% at GBP18.8m (2015: GBP18.0m) * Adjusted operating margin increases to 11.3% (2015: 10.3%) with revenues down as anticipated by 4% to GBP167.5m o RM Resources revenues were down 7.4% as difficult UK market conditions were partially offset by continued growth in international o Another year of revenue and profit growth in RM Results supported by new e-assessment contracts and extensions to key customer agreements o RM Education continued its transition to a software and services provider with 61% recurring annuity revenues and increased profits whilst making further progress in reshaping the division * Profit after tax was GBP11.6m (2015: GBP15.0m), with the reduction from 2015 being due primarily to a property provision release of GBP2.4m in the prior year and a GBP2.1m charge in 2016 for restructuring and acquisition costs * Strong cash balance of GBP40m delivered by improving cash conversion of 84% * Pension deficit increases to GBP34.8m (2015: GBP21.9m) as liabilities have been impacted by lower market discount rates * Full year paid and proposed dividend increased by 20% to 6.00p *** * Proposed acquisition of the Education & Care business of Connect Group plc for a purchase price of GBP56.5 million announced today * Market conditions expected to remain challenging in the short term, which will require continued management focus to deliver operating margins ------------------------------------------------------------------------------------------
Commenting on the results, David Brooks, Chief Executive of RM, said:
"2016 has been another year of delivering a solid set of results, in which we have reported improved profitability and increased operating margins and are proposing a further increase in our dividend.
We are also pleased to have announced the proposed acquisition of the Education & Care business of Connect Group plc. This acquisition, in combination with our existing RM Resources operation, would provide a number of strategic and operational benefits."
* Revenue, adjusted profit and margin numbers exclude Space Kraft Limited which was sold in December 2015.
** Adjusted operating profit is before the amortisation of acquisition related intangible assets; impairment of held for sale assets and related transition costs; the gain/(loss) on sale of operations; share-based payment charges; restructuring provision movements, acquisition costs, changes in the provision for dilapidations and onerous lease contracts and exceptional credit on the Defined Benefit Pension Scheme and excludes Space Kraft Limited.
*** The expected timetable for the final dividend and Annual General Meeting is as follows:
Ex-dividend date for 2016 final dividend 16 March 2017 (4.50 pence per share) --------------------------------------------- ------------------ Record date for 2016 final dividend 17 March 2017 --------------------------------------------- ------------------ AGM 22 March 2017 at 11.30 a.m. --------------------------------------------- ------------------ Payment of 2016 final dividend 21 April 2017 --------------------------------------------- ------------------ References to times are to Greenwich Mean Time. If any of the above times or dates should change, the revised times and/or dates will be notified to shareholders by an announcement on a Regulatory Information Service. Payment of the 2016 final dividend is subject to the approval by shareholders of the final dividend. ----------------------------------------------------------------- Contacts RM plc FTI Consulting David Brooks, Chief Executive Chris Lane / Elena Kalinskaya Officer Neil Martin, Chief Financial Officer 08450 700 300 020 3727 1000
Chairman's Statement
2016 was a year of good progress for RM. Although revenue declined as expected, adjusted operating profits and margins improved compared with the prior year. Cash conversion also improved markedly and we finished the year with net cash of GBP40 million.
RM Resources saw a decline in revenues compared with the prior year during which school expenditure on curriculum resources was higher due to primary school curriculum change. Schools were also impacted by unfunded increases in pension and National Insurance costs. International revenues continued to grow and the Division's margins were maintained.
RM Results delivered good revenue and profit growth supported by an expanded e-testing managed service contract. The Division's future market position was further strengthened by the renewal of several long term contracts and the securing of an e-assessment contract which, for the first time, combines both e-testing and e-marking.
RM Education revenues declined as a result of its continued reshaping whilst profitability grew and operating margins improved. A further step was undertaken towards the end of the year to remove UK headcount from the lowest margin parts of the business. 2017 will be the last year in which BSF contracts are a significant contributor. Recurring annuity revenues are running at over 60% of the total.
The Group continues to have a strong balance sheet, with cash and short term deposits at the year-end of GBP40.0 million (2015: GBP48.3 million). This was after a GBP12 million pension contribution in the year which included a one off GBP8 million payment associated with the May 2015 triennial valuation.
The Board is recommending a final dividend of 4.50 pence per share which would constitute, at 6.00 pence per share in total, an increase of 20% over the prior year. This demonstrates the previously stated intention to progress towards a more appropriate level of dividend cover. The proposed dividend would result in cover of 2.9 times.
The Company has agreed to buy the Education & Care business of Connect Group plc, for a purchase price of GBP56.5 million. This acquisition, which is expected to complete in the first half of 2017, would complement the existing RM Resources business and is expected to be accretive to the Company's adjusted earnings per share in the first year. Completion is conditional inter alia upon shareholder approval and clearance from the Competition & Markets Authority.
The outlook for 2017 is affected by continued pressure on school budgets and adverse changes in foreign exchange rates following the EU Referendum result. However, management is focussed on all three divisions continuing to deliver sound operating margins.
John Poulter
Chairman
7 February 2017
Extract from Strategic Report
RM plc is a leading education resources, software and services group. The education sector remains the Company's focus as we target delivering sustainable shareholder returns with a resilient and efficient operating model. RM is now delivering double digit adjusted operating margins and a high return on capital employed.
Operating Review
The Group is structured in three operating divisions, each with its own managing director and management team with some staff functions provided centrally. Approximately 36% (2015: 33%) of Group headcount is based in India, providing support services and software development to the operating divisions.
RM Resources
The RM Resources Division consists of the operating business TTS.
TTS provides education resources used in schools through a predominantly direct marketing business model with goods supplied from large, centralised UK distribution centres. Products supplied are a mix of third party branded and TTS own IPR items manufactured by a network of third party suppliers with a focus on specialist curriculum resources.
The Division's strategy is to grow its market share in the provision of resources to schools, early years and special educational needs markets via direct catalogue and online sales, both in the UK and internationally.
After several years of growth RM Resources revenues decreased by 7.4% to GBP58.8 million (2015: GBP63.5 million), with a decline in UK sales partially offset by continued international revenue growth. The decline in the UK was driven by much tighter budgets in primary schools and the end of curriculum change spend that had benefitted FY14 and FY15. International now represents over 20% of revenue in this Division.
Divisional adjusted operating margins remained stable at 17.3% (2015: 17.5%) reflecting the cost reduction activity undertaken once it was clear that schools and nurseries would spend less on curriculum resources in the year. Adjusted operating profit was GBP10.2 million (2015: GBP11.1 million).
TTS UK
Revenue in the UK declined by 10.6% to GBP46.8 million (2015: GBP52.2 million). The market has been significantly down this year, impacted by one-off unfunded increases in teacher pension and National Insurance costs that had to be absorbed within primary school budgets. The Company estimates that the market for specialist curriculum resources, an area in which TTS has historically been very strong, has declined by 11% as primary schools and nurseries focus their resources budgets on commodity items, essential in this tighter budgetary environment.
The Company continues to invest in the TTS online channel. Online orders now make up 35.2% of UK direct marketing sales.
The Board expects the UK education resources market to continue to be tough as a result of increased pressure on the discretionary element of school budgets. The Company's focus continues to be on maintaining sector leading margins while looking to retain its strong market position as a specialist curriculum resources supplier.
TTS International
Revenue from international sales to overseas resellers and international schools increased by 7.5% to GBP12.0 million (2015: GBP11.1 million). This was driven by strong growth of TTS own IPR products through reseller channels more than offsetting a decline in sales to international schools in which the prior year benefited from a large order, in excess of GBP1 million, from a customer in the Middle East which was not repeated. The Board expects international revenues to continue to grow in the coming year.
RM Results
The RM Results business provides IT software and services to exam boards and professional awarding bodies to allow e-assessment through the use of onscreen exam marking (e-marking) and onscreen testing (e-testing). In addition, the Division manages and analyses educational data on behalf of the UK central government.
The strategy is to grow the e-assessment business through expanding the scope of solutions to existing customers and to win new customers in both the UK and overseas markets. Software and services are provided through a combination of proprietary and third party, in-house and outsourced arrangements. Internationally, the business is expected to develop through partnerships and software licensing rather than as a service based activity.
Revenue increased by 2.9% to GBP31.6 million (2015: GBP30.7 million). The e-assessment part of the business grew strongly by 10.8% which more than offset the planned reduction in the Data business (15%). Adjusted operating margins increased further to 21.5% (2015: 18.1%). Adjusted operating profit increased by 21.4% on the prior year to GBP6.8 million (2015: GBP5.6 million).
During the year the business successfully secured several new contracts and extensions to existing contracts including a new five year e-testing contract with the Institute of Chartered Accountants in England and Wales (ICAEW). ICAEW has been a customer for e-marking for a number of years and RM Results now provides them with an end-to-end e-assessment offering.
In November 2016, the Council for Curriculum, Examinations and Assessment in Northern Ireland (CCEA) signed a contract for the provision of e-marking services for a further two years.
During the year the contract with the Scottish Qualifications Authority to provide e-marking services for exam scripts in Scotland was extended to February 2018 with the option to extend by a further year.
In July 2016 a five year contract to develop and operate an e-assessment platform for the delivery of English Language tests in 130 countries was signed with Cambridge Assessment.
In addition to the above RM Results has been selected as the Preferred Bidder for the provision of a Global Assessment Platform to Oxford University Press's (OUP) English Language Teaching division. The proposed five year contract provides item and test authoring, online test delivery and online marking of a range of OUP English Language testing products through an integrated technology platform.
The Data business is heavily dependent on the Department for Education, principally through the National Pupil Database contract. RM Results and the Department for Education are in positive discussions over RM continuing to provide data related services to the Department for Education.
The Board is targeting the growth opportunities in e-assessment to more than outweigh reduced revenues in the Data business, thereby allowing the Division to maintain good operating margins.
RM Education
RM Education is a UK focused business supplying IT software and services to schools and colleges.
After several years of double digit revenue decline, following the move away from hardware and a reduction in new school openings under the Building Schools for the Future (BSF) programme, revenue decline slowed significantly to 4.0%. The Division turned over GBP77.0 million (2015: GBP80.2 million). Adjusted operating profit margins increased to 7.6% (2015: 6.8%). Adjusted operating profit increased to GBP5.8 million (2015: GBP5.5 million).
The Division's strategy is to move increasingly to recurring revenue streams while improving margins. The business is successfully delivering this strategy through the increasing adoption of its portfolio of services and software products by existing and new UK school and college customers. Recurring annuity revenues were over 60% in 2016 which has increased significantly since 2013 levels (36.5%).
Market trends affecting the business include the demand from schools for solutions which are low-cost yet can cope with an increasingly diverse range of technologies. In addition, in the last five years, purchasing decisions in England have been increasingly devolved to schools, away from central government and local authorities. RM Education is starting to see an evolving trend of schools who are part of Multi-Academy Trust chains (MATs) looking to source IT centrally as a MAT, therefore representing a return towards a more aggregated purchasing model.
The RM Education business is made up of Managed Services - IT outsourcing (43% of revenue), Digital Platforms - Cloud based software offerings (9%) and Infrastructure (48%) - generally lower margin solutions aimed at schools who want to run their own IT. The primary focus for this business going forward is in the Managed Services and Digital Platform areas. During the year the Infrastructure part of this Division was restructured away from some of the lowest margin transactional elements such as network infrastructure, network installation and third party hardware sales. This led to a reduction of c.10% of RM Education's UK staff and a one-off exceptional charge in the year of GBP1.6 million.
Managed Services
The Managed Services offering is primarily the provision of full IT outsourcing services to UK schools and colleges. Managed Services revenues increased by 2.8% to GBP33.1 million (2015: GBP32.2 million). Retention rates of existing customers increased during the year to 97%. In addition, 54 new schools signed managed services contracts in the year.
A proportion of the Division's managed service contracts are subject to long-term project accounting policies, in particular those relating to BSF. Consequently, as these contracts progress towards completion, profits continue to benefit from the effects of good operational performance, risk mitigation and cost control.
Digital Platforms
These include established products such as RM Integris (RM's cloud based school management system) as well as newer offerings including RM Unify. Digital Platforms revenues decreased by 9.1% to GBP7.0 million (2015: GBP7.7 million) as legacy products such as RM EasiTeach and RM EasiMaths come to their natural end of life. Underlying sales in RM Integris and RM Unify, the two cloud platforms that the Company is investing in, together grew by 3.5% to GBP6.1 million.
Going forward, the priority areas of focus are on winning new RM Integris primary, secondary and Multi-Academy Trust customers and on progressing the RM Unify proposition and profile through embedding and expanding system usage amongst existing customers, alongside ensuring the renewal of our Scottish schools digital network contract (Glow) in December 2017, which constitutes a large proportion of the current RM Unify user base.
Infrastructure
Infrastructure is a very tight margin business including the tools, products and services to help schools manage their own IT. Revenues decreased by 8.2% to GBP37.0 million (2015: GBP40.3 million) as the Division continues to move away from lower margin transactional business. As highlighted above, during the year the Division restructured this area and reduced the UK workforce. This acceleration of exiting some of the lowest margins elements of the Infrastructure business will not alter the overall profitability of this area but will see revenue decline by double digits in 2017.
RM India
As at 30 November 2016, RM's operation in Trivandrum accounted for 36% of Group headcount (2015: 33%).
The Indian operation provides services solely to RM Group companies. Activities include software development, customer and operational support and back office shared service support (e.g. customer order entry, IT, finance and HR) and administration.
Employees
Average Group headcount for the year was 1,822 (2015: 1,860), which is comprised of 1,634 (2015: 1,645) permanent and 188 (2015: 215) temporary or contract staff, of which 1,173 (2015: 1,294) were located in the UK and 649 (2015: 566) in India. At 30 November 2016 headcount was 1,731 (2015: 1,899).
The following table sets out a more detailed summary of the permanent staff employed as at 30 November 2016:
Male Female Executive Directors 2 (100%) 0 (0%) Senior Managers (excluding Executive Directors) 42 (76%) 13 (24%) All employees 1,063 (67%) 528 (33%)
The Company is committed to offering equal employment opportunities and its policies are designed to attract, retain and motivate the best staff regardless of gender, sexual orientation, race, religion, age or disability. The Group gives proper consideration to applications for employment when these are received from disabled persons and will employ them in posts whenever suitable vacancies arise. Employees who become disabled are retained whenever possible through retraining, use of appropriate technology and making available suitable alternative employment.
The Group encourages the participation of all employees in the operation and development of the business and has a policy of regular communications. The Group incentivises employees and senior management through the payment of bonuses linked to performance objectives, together with the other components of remuneration detailed in the Remuneration Report.
The Group has a wide range of other written policies, designed to ensure that it operates in a legal and ethical manner. These include policies related to health and safety, 'whistle blowing', anti-bribery and corruption, business gifts, grievance, career planning, parental leave, systems and network security. All of RM's employment policies are published internally.
Acquisition
As announced on 7 February 2017, the Company has agreed to buy the Education & Care business of Connect Group plc, for a purchase price of GBP56.5 million. Completion is conditional inter alia upon shareholder approval and clearance from the Competition & Markets Authority. This acquisition, which is expected to complete in the first half of 2017, would complement the existing TTS business and is expected to be accretive to the Company's adjusted earnings per share in the first year.
Group Financial Performance
Group revenue declined by 5.9% to GBP167.6 million (2015: GBP178.2 million) as anticipated on a statutory basis and by 4.0% to GBP167.5 million (2015: GBP174.5 million) on a like-for-like adjusted basis excluding exited businesses.
Details of the adjustments to operating profit quoted within this report can been seen in note 2 to the financial statements.
To provide a better understanding of underlying business performance, amortisation charges relating to acquisition related intangible assets, share-based payment charges, restructuring provision movements, acquisition costs and other items of an exceptional nature have been disclosed in an adjustments column in the Income Statement to give 'Adjusted' results. Note 2 to these financial statements identifies these adjustments highlighting recurring and non-recurring items.
Adjusted operating profit margins increased again this year from 10.2% in 2015 to 11.1%. Despite the decline in revenue, adjusted operating profit increased to GBP18.8 million (2015: GBP18.2 million). On a statutory basis, operating profit was GBP15.9 million (2015: GBP19.6 million), with adjustments principally being a provision of GBP1.6 million for re-structuring, GBP0.5 million of acquisition costs and share based payments charges of GBP1.0 million. In 2015, there was a provision release associated with an onerous lease property contract which improved operating profits by GBP2.4 million.
The Group generated an unadjusted statutory profit before tax of GBP15.1 million (2015: GBP19.2 million).
The total tax charge within the Income Statement for the year was GBP3.5 million (2015: GBP4.3 million). The Group's tax charge for the period, measured as a percentage of profit before tax, was 23% (2015: 22%). The increase is principally due to a higher level of expenses that are not deductible for tax purposes, primarily due to the capital costs related to the disposal of SpaceKraft Ltd in December 2015, and timing differences which offset the reduction in the UK corporate tax rate. Adjusted basic earnings per share were 17.4 pence (2015: 16.2 pence). Statutory basic earnings per share were 14.4 pence (2015: 18.5 pence) and statutory diluted earnings per share were 14.4 pence (2015: 17.8 pence).
RM generated cash from operations for the year of GBP13.4 million (2015: GBP10.9 million), which represents a cash conversion from operating profit of 84%. Cash and short-term deposits decreased to GBP40.0 million (2015: GBP48.3 million) despite payments of GBP12.0 million in the year to the Company's defined benefit pension scheme, which included a one-off GBP8.0 million payment which was part of the 2015 triennial valuation. The lowest cash and short-term deposit position during the year due to seasonal cash flows was GBP19.4 million.
Cash generated from operations is expected to continue to be less than operating profit in the year ahead, reflecting the reversal of a favourable working capital position related to long-term contracts.
Dividends
The total dividend paid and proposed for the year has been increased by 20% to 6.00 pence per share (2015: 5.00 pence). This is comprised of the interim dividend of 1.50 pence per share and, subject to shareholder approval, a proposed final dividend of 4.50 pence per share. The estimated total cost of normal dividends paid and proposed for 2016 is GBP4.9 million (2015: GBP4.1 million). This increased dividend proposal reduces the dividend cover ratio from 3.2 to 2.9 times.
Defined Benefit Pension Scheme ("Scheme")
At 30 November 2016, the IAS 19 scheme deficit (pre-tax) was GBP34.8 million (2015: GBP21.9 million). This increase in Scheme deficit results primarily from a reduction in the discount rate to 3.00% from 3.85% in the previous year, following a significant reduction in UK corporate bond yields over that period, resulting in a higher present value of liabilities of the Scheme.
Impact of the EU Referendum vote
The change in economic conditions following the June 23(rd) referendum decision on UK's membership of the EU has had two immediate impacts. First, the Group has foreign currency denominated costs that outweigh foreign currency denominated revenues and, as a consequence of the changes in exchange rates, has identified a circa GBP2 million potential impact from this exposure in the year ending 30 November 2017. The Group will look at actions to mitigate a proportion of the increased costs. In 2016 we were protected against these movements as a result of our hedging arrangements that were in place.
Secondly, changes in UK Gilt rates that have followed the referendum result have also had a negative impact on the IAS19 valuation of the Company's defined benefit pension scheme.
The referendum result has not changed the UK Government's policy of ring fencing funding for priority areas and, therefore, there is no foreseen impact on education funding.
Going Concern
The financial position, cash flows and liquidity position are described in the financial statements and the associated notes. In addition, the notes to the financial statements include RM's objectives, policies and processes for managing its capital, its financial risk management objectives, and its exposure to credit and liquidity risk. Having reviewed the future plans and projections for the business, the principal risks that could impact on the group's liquidity and solvency over the next 12 months and its current financial position, the Board believes that RM is well placed to manage its business risks successfully. Therefore, the Board has a reasonable expectation that RM has adequate resources to continue in operational existence for the foreseeable future, a period of not less than 12 months from the date of this report. For this reason, it continues to adopt the going concern basis of accounting in preparing the annual financial statements.
In relation to the proposed acquisition of the Education & Care business of Connect Group plc detailed earlier in this Strategic Report, the Group has secured a GBP75 million revolving credit facility with Barclays Bank plc and HSBC Bank plc in anticipation of the completion of the acquisition. As is usual for such a facility, there are financial covenants that will need to be adhered to over the term of the lending. The Directors have carried out additional due diligence and consider that, should the transaction complete within the timeframe that is currently envisaged, the combined group will be able to comply with the terms of these arrangements. Further details are given in the Directors' Report.
Financial Viability Statement
In accordance with the UK Corporate Governance code, in addition to an assessment of going concern, the Directors have also considered the prospects of the Company over a longer time period. The period of assessment chosen is three years, which is consistent with the time over which the Company's medium-term financial plans are prepared. These financial plans include Income Statements, Balance Sheets and Cash Flow Statements. They have been assessed by the Board in conjunction with the principal risks of the Company, which are documented within the Principal Risks and Uncertainties section below, along with their mitigating actions.
The Board considers that the principal risks which have the potential to threaten the Company's business models, future performance, solvency or liquidity over the three year period are:
1. Public policy risk - UK education policy priority changes or restrictions in government funding due to fiscal policy.
2. Operational execution - including: a. RM Results operational performance over peak examination marking periods
b. significantly increased working capital requirements within the RM Education and RM Results long-term contract portfolios and requirements in evolving RM Education business models
c. major adverse performance in a key contract or product which results in negative publicity and which damages the Group's brand
3. Business continuity - an event impacting the Group's major buildings, systems or infrastructure components. This would include a major incident at TTS's main warehouse.
4. Strategic risks - loss of a significant contract which underpins an element of a division's activity.
5. Defined Benefit Pension Scheme - funding of the Scheme deficit in adverse market conditions.
Having assessed the above risks, singularly and in combination, and via sensitivity analysis, the Directors have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the three year period of assessment and are not aware of any reason that viability would be an issue for the foreseeable period after this.
In relation to the proposed acquisition of the Education & Care business of Connect Group plc detailed earlier in this Strategic Report, the Directors have considered the additional risks as part of the acquisition working capital due diligence that could arise as a result. These include considering the impact of the additional GBP75 million facility that will be used to finance the acquisition. Having completed the analysis and considered those risks, the Directors have a reasonable expectation that the Company will continue in operation and meet its liabilities as they fall due over the three year period of assessment and are not aware of any reason why the Company's viability would be an issue for the foreseeable period after this.
Environmental Matters
The Group's impact on the environment, and its policy in relation to such matters, are noted in the Directors' Report.
Principal Risks and Uncertainties
The management of the business and the execution of the Company's strategy are subject to a number of risks. Risks are reviewed by the Executive Committee, Audit Committee and Board. The Board confirms that it has carried out a robust assessment of the principal risks facing the Group and appropriate processes have been put in place to monitor and mitigate them, further details of which are given in the Corporate Governance Report. The key business risks for the Group are set out in the table below.
Risk Description and likely Mitigation impact --------------------- ----------------------------- ---------------------------------------- Public policy The majority of RM's The Company seeks to understand business is funded the education policy environment from UK government by regular monitoring of policy sources. Changes positions and by building relationships in political administration, with education policy makers. or changes in policy priorities, might The Group's three divisions result in a reduction have diverse revenue streams in education spending, and product/service offerings. leading to a decline in market size. The Company's strategy is to focus on areas of education UK government funding spend which are important to in the education meet customers' objectives. sector is constrained Where the revenues of an individual by fiscal policy. business is in decline, management seeks to ensure that the cost Global economic conditions base is adjusted accordingly. might result in a reduction in budgets available for public spending generally and education spending specifically. --------------------- ----------------------------- ---------------------------------------- Education practice Education practices The Company seeks to maintain and priorities may knowledge of current education change and, as a practice and priorities by maintaining result, RM's products close relationships with customers. and services may no longer meet customer requirements, leading to a risk of lower revenue. --------------------- ----------------------------- ---------------------------------------- Operational execution RM provides sophisticated The Company invests in maintaining products and services, a high level of technical expertise. which require a high level of technical Internal management control expertise to develop processes are in place to govern and support, and the delivery of projects, including on which its customers regular reviews by relevant place a high level management. The operational of reliance, any and financial performance of significant operational projects, including future obligations, failure would result the expected costs of these in reputational damage and potential risks are regularly and increased costs. monitored by management. RM is engaged in the delivery of large, multi-year projects, typically involving the development and integration of complex ICT systems, and may have liability for failure to deliver on time. --------------------- ----------------------------- ---------------------------------------- Data and business RM is engaged in The Company's IS function has continuity storing and processing invested in developing its Data personal data, where Centres, and has been successfully accuracy, privacy certified to ISO/IEC 27001:2005 and security are for the provision of systems, important. Any significant information and hosting services. security breach could damage reputation The Company has established and impact future a Security and Business Continuity profit streams. Committee to oversee the security aspects of the Group's information The Group would be systems. This covers data integrity significantly impacted and protection, defence against if, as a result of external threats (including a major incident, cyber risks) and disaster recovery. one of its major buildings, systems The Group seeks to protect itself or infrastructure against the consequences of components could a major incident by implementing not function for a series of back up and safety a long period of measures. time. The Group has property and business interruption insurance cover. --------------------- ----------------------------- ---------------------------------------- People RM's business depends The Company seeks to be an attractive
on highly skilled employer and regularly monitors employees. Failing the engagement of its employees. to do so could impact The Company has talent management operationally on and career planning programmes. ability to deliver contractual commitments. --------------------- ----------------------------- ---------------------------------------- Innovation The IT market is The Company monitors technology subject to rapid, and market developments and and often unpredictable, invests to keep its existing change. As a result products, services and sales of inappropriate methods up-to-date, as well technology choices, as seeking out new opportunities the Group's products and initiatives. and services might become unattractive The Group works with teachers to its customer base. and educators to understand opportunities and requirements. The Group's continued success depends on developing and/or sourcing a stream of innovative and effective products for the education market and marketing these effectively to customers. --------------------- ----------------------------- ---------------------------------------- Dependence on The performance of The Company invests in maintaining key contracts the RM Education and a high level of technical expertise RM Results Divisions and on building effective working are dependent on the relationships with its customers. winning and extension The Company has in place a range of long-term contracts of customer satisfaction programmes, with government, which include management processes local authorities, designed to address the causes examination boards of customers' dissatisfaction. and commercial customers. --------------------- ----------------------------- ---------------------------------------- Pension The Group operates The Scheme was closed to new a defined benefit entrants in 2003 and closed pension scheme in to future accrual of benefits the UK, which is in October 2012. in deficit. The scheme deficit can adversely A pension escrow account was impact the net assets established in 2014 to fund position of the trading risk mitigation exercises. subsidiary RM Education The first of these was completed Ltd. in October 2014 with the purchase of a pensioner buy-in from an insurance company and in the year a flexible retirement option exercise was conducted. The Company evaluates risk mitigation proposals with the Scheme trustee. --------------------- ----------------------------- ---------------------------------------- Financial - capital The Company's ability The Company monitors the level to pay dividends of distributable reserves in to shareholders depends RM plc and subsidiary companies on having sufficient and considers their ability distributable reserves to make dividend payments, via in the holding company, the holding company, to the RM plc. The Group shareholders. is reliant on continued dividend distribution from subsidiaries, principally TTS, and ensuring no significant impairment of RM plc's carrying assets. --------------------- ----------------------------- ----------------------------------------
David Brooks
Chief Executive Officer
7 February 2017
Directors' responsibilities statement
The responsibility statement below has been prepared in connection with the Company's full Annual Report and Accounts for the year ended 30 November 2016. Certain parts are not included within this announcement.
Each of the Directors, whose names and functions are listed at the front of the Annual Report, confirm that, to the best of their knowledge:
-- the Group financial statements, which have been prepared in accordance with IFRSs, as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit of the Group; and
-- the information contained in the Strategic Report includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties that it faces.
The responsibility statement was approved by the Board of Directors on 7 February 2017 and is on its behalf by:
Greg Davidson
Company Secretary
7 February 2017
CONSOLIDATED INCOME STATEMENT for the year ended 30 November 2016 Year ended 30 November Year ended 30 November 2016 2015 Adjusted Adjustments Total Adjusted Adjustments Total Note GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 -------------------------------- ----- ---------- ------------ ---------- ---------- ------------ ---------- Revenue 2 167,615 - 167,615 178,228 - 178,228 Cost of sales (100,365) - (100,365) (109,316) - (109,316) Gross profit 67,250 - 67,250 68,912 - 68,912 Operating expenses 2 (48,421) (2,907) (51,328) (50,713) 1,392 (49,321) -------------------------------- ----- ---------- ------------ ---------- ---------- ------------ ---------- Profit from operations 18,829 (2,907) 15,922 18,199 1,392 19,591 Investment income 3 279 - 279 409 894 1,303 Finance costs 4 (1,012) (74) (1,086) (1,510) (149) (1,659) Profit before tax 18,096 (2,981) 15,115 17,098 2,137 19,235 Tax 5 (3,941) 472 (3,469) (3,984) (289) (4,273) Profit for the year 14,155 (2,509) 11,646 13,114 1,848 14,962 -------------------------------- ----- ---------- ------------ ---------- ---------- ------------ ---------- Earnings per ordinary share - basic 6 17.4p 14.4p 16.2p 18.5p - diluted 6 17.4p 14.4p 15.6p 17.8p -------------------------------- ----- ---------- ------------ ---------- ---------- ------------ ---------- Paid and proposed dividends per share - interim 7 1.50p 1.20p - final 7 4.50p 3.80p -------------------------------- ----- ---------- ------------ ---------- ---------- ------------ ---------- Adjustments to results have been presented to give a better guide to business performance (see note 2). All amounts were derived from continuing operations. CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME for the year ended 30 November 2016 Year ended Year ended 30 November 30 November 2016 2015 Note GBP000 GBP000 ---------------------------------------------------- ----- --------- -------------- Profit for the year 11,646 14,962 Items that will not be reclassified subsequently to profit or loss
Defined Benefit Pension Scheme remeasurements (23,555) 2,402 Tax on items that will not be reclassified subsequently to profit or loss 5 3,970 (950) Items that are or may be reclassified subsequently to profit or loss Fair value gain/(loss) on hedged instruments 515 (180) Exchange gain/(loss) on translation of overseas operations 261 (80) Tax on items that are or may be reclassified subsequently to profit or loss 5 32 (36) Other comprehensive (expense)/income (18,777) 1,156 ------------------------------------------------------- ----- --------- -------------- Total comprehensive (expense)/income for the year attributable to equity holders (7,131) 16,118 ------------------------------------------------------- ----- --------- -------------- CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the year ended 30 November 2016 Capital Share Share Own redemption Hedging Translation Retained capital premium shares reserve reserve reserve earnings Total Note GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 ------------------ ----- --------- --------- -------- ----------- --------- ------------ ---------- --------- At 1 December 2014 1,889 27,018 (2,950) 94 544 (304) (18,177) 8,114 Profit for the year - - - - - - 14,962 14,962 Other comprehensive (expense)/income - - - - (180) (80) 1,416 1,156 Total comprehensive (expense)/income - - - - (180) (80) 16,378 16,118 Transactions with owners of the Company Shares issued 1 17 - - - - - 18 Sale of shares held in staff share scheme - - - - - - 55 55 Share-based payment awards exercised - - 2,910 - - - (3,038) (128) Purchase of own shares - - (2,470) - - - - (2,470) Share-based payment fair value charges - - - - - - 864 864 Ordinary dividends paid 7 - - - - - - (3,424) (3,424) At 30 November 2015 1,890 27,035 (2,510) 94 364 (384) (7,342) 19,147 Profit for the year - - - - - - 11,646 11,646 Other comprehensive (expense)/income - - - - 515 261 (19,553) (18,777) ------------------ ----- Total comprehensive (expense)/income - - - - 515 261 (7,907) (7,131) Transactions with owners of the Company Share-based payment awards exercised - - 840 - - - (1,450) (610) Purchase of own shares - - (317) - - - - (317) Share-based payment fair value charges - - - - - - 1,006 1,006 Ordinary dividends paid 7 - - - - - - (4,299) (4,299) At 30 November 2016 1,890 27,035 (1,987) 94 879 (123) (19,992) 7,796 ------------------ ----- --------- --------- -------- ----------- --------- ------------ ---------- --------- CONSOLIDATED BALANCE SHEET At 30 November At 30 November 2016 2015 Note GBP000 GBP000 --------------------------------------------- ----- --------------- --------------- Non-current assets Goodwill 14,067 14,067 Acquisition related intangible assets - 8 Other intangible assets 704 562 Property, plant and equipment 6,219 7,059 Other receivables 8 1,153 1,168 Deferred tax assets 5 8,793 6,121 30,936 28,985 --------------------------------------------- ----- --------------- --------------- Current assets Inventories 10,689 10,862 Trade and other receivables 8 24,403 25,592 Cash and short-term deposits 9 39,987 48,320 Assets held for sale - 1,162 75,079 85,936 --------------- --------------- Total assets 106,015 114,921 ---------------------------------------------- ----- --------------- --------------- Current liabilities Trade and other payables 10 (54,521) (64,974) Tax liabilities (1,259) (2,787) Provisions 11 (3,536) (2,077) Liabilities directly associated with assets classified as held for sale - (549) (59,316) (70,387) --------------- --------------- Net current assets 15,763 15,549 ---------------------------------------------- ----- --------------- --------------- Non-current liabilities Other payables 10 (971) (662) Provisions 11 (3,157) (2,864) Defined Benefit Pension Scheme obligation (34,775) (21,861) (38,903) (25,387) --------------- --------------- Total liabilities (98,219) (95,774) ---------------------------------------------- ----- --------------- --------------- Net assets 7,796 19,147 ---------------------------------------------- ----- --------------- --------------- Equity attributable to shareholders Share capital 12 1,890 1,890 Share premium account 27,035 27,035 Own shares (1,987) (2,510) Capital redemption reserve 94 94 Hedging reserve 879 364 Translation reserve (123) (384) Retained earnings - (deficit) (19,992) (7,342) Total equity 7,796 19,147 ---------------------------------------------- ----- --------------- --------------- CONSOLIDATED CASH FLOW STATEMENT for the year ended 30 November 2016 Year ended Year ended 30 November 30 November 2016 2015 Note GBP000 GBP000 ------------------------------------------------------ ----- --------- ------------- Profit before tax 15,115 19,235 Investment income 3 (279) (1,303) Finance costs 4 1,086 1,659 Profit from operations 15,922 19,591 Adjustments for: Impairment of non-acquisition related intangible assets 77 150 Amortisation of acquisition-related intangible assets 8 303
Amortisation of non-acquisition related intangible assets 239 297 Depreciation and impairment of property, plant and equipment 2,223 2,406 Gain on sale of operations (135) (65) Gain on disposal of property, plant and equipment (5) (95) Loss on foreign exchange derivatives 684 133 Share-based payment charge 1,006 864 Increase/(decrease) in provisions 2,557 (716) Defined Benefit Pension Scheme administration cost 845 530 ------------------------------------------------------ Operating cash flows before movements in working capital 23,421 23,398 Decrease/(increase) in inventories 173 (707) Decrease in receivables 1,056 6,102 Decrease in trade and other payables (10,338) (14,369) Utilisation of onerous lease and dilapidations provisions 11 (345) (2,186) Utilisation of employee-related restructuring provisions 11 (184) (1,166) Utilisation of other provisions 11 (396) (132) Cash generated from operations 13,387 10,940 Defined benefit pension scheme cash contributions (11,984) (3,984) Tax paid (3,567) (171) Borrowing facilities arrangement and commitment fees (422) (447) Income on sale of finance lease debt 6 45 Net cash inflow from operating activities (2,580) 6,383 ------------------------------------------------------ ----- --------- ------------- Investing activities Interest received 255 364 Repayment of loans by third parties 16 18 Proceeds from sale of other receivables 2 - 1,586 Proceeds from sale of operations 759 - Proceeds on disposal of property, plant and equipment 43 165 Purchases of property, plant and equipment (1,333) (1,576) Purchases of other intangible assets (456) (322) Amounts transferred from short term deposits 9 2,986 - Net cash generated by/(used in) investing activities 2,270 235 ------------------------------------------------------ ----- --------- ------------- Financing activities Dividends paid 7 (4,299) (3,424) Repayment of capital obligations under vehicle finance leases - (244) Proceeds of share capital issue, net of share issue costs - 18 Proceeds from sale of shares held in Staff Share Scheme - 55 Purchase of own shares (317) (2,470) Satisfaction of share-based payment awards (610) (128) Net cash used in financing activities (5,226) (6,193) Net (decrease)/increase in cash and cash equivalents (5,536) 425 Cash and cash equivalents at the beginning of the year 9 42,320 41,893 Effect of foreign exchange rate changes 189 2 Cash and cash equivalents at the end of the year 9 36,973 42,320 ------------------------------------------------------ ----- --------- -------------
1. Preliminary announcement
The preliminary results for the year ended 30 November 2016 have been prepared in accordance with those International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and adopted for use in the EU and therefore comply with Article 4 of the EU IAS Regulation applied in accordance with the provisions of the Companies Act 2006. However, this announcement does not contain sufficient information to comply with IFRS. The Group expects to publish a full Strategic Report, Directors' Report and financial statements which will be delivered before the Company's annual general meeting on 22 March 2017. The full Strategic Report and Directors' Report and financial statements will be published on the Group's website at www.rmplc.com.
The financial information set out in this preliminary announcement does not constitute the Group's statutory accounts for the year ended 30 November 2016. Statutory accounts for 2015 have been delivered to the Registrar of Companies and those for 2016 will be delivered following the Company's annual general meeting. The auditor's reports on both the 2016 and 2015 accounts were unqualified, did not draw attention to any matters by way of emphasis without qualifying their report and did not contain statements under s498(2) or (3) of the Companies Act 2006 or equivalent preceding legislation. This Preliminary announcement was approved by the Board of Directors on 7 February 2017.
Consolidated Income Statement presentation
The Income Statement is presented in three columns. This presentation is intended to give a better guide to business performance by separately identifying adjustments to profit which are considered exceptional in nature or with potential significant variability year on year in non-cash items which might mask underlying trading performance.
The columns extend down the Income Statement to allow the tax and earnings per share impacts of these transactions to be disclosed. Equivalent adjustments to profit arising in future years, including increases in or reversals of items recorded, will be disclosed in a consistent manner.
Adjustments to profit
See note 2 for further details in respect of adjustments to profit, which have been analysed as recurring and non-recurring items.
Basis of preparation
The financial statements have been prepared on the historical cost basis except for certain financial instruments, share-based payments and pension assets and liabilities which are measured at fair value. The preparation of financial statements, in conformity with generally accepted accounting principles, requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on the Directors' best knowledge of current events and actions, actual results ultimately may differ from those estimates.
Significant accounting policies
The accounting policies used for the preparation of this announcement have been applied consistently.
2. Operating segments
The Group's business is supplying products, services and solutions to the UK and international education markets. Information reported to the Group's Chief Executive for the purposes of resource allocation and assessment of segmental performance is focussed on the nature of each type of activity. The Group is structured into three operating divisions: RM Resources, RM Results and RM Education. The exited business in the year relates to SpaceKraft. A full description of each division, together with comments on its performance and outlook, is given in the Strategic Report. Corporate Services consists of central business costs associated with being a listed company and non-specific pension costs. This Segmental analysis shows the results and assets of these divisions. Revenue is that earned by the Group from third parties. Net financing costs and tax are not allocated to segments as the funding, cash and tax management of the Group are activities carried out by the central treasury and tax functions. Segmental results RM RM RM Corporate Exited Total Year ended 30 November 2016 Resources Results Education Services Businesses GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 --------------------------------- ---------- -------- ---------- ---------- ----------- -------- Revenue UK 46,779 26,925 75,450 - 151 149,305 Europe 5,249 3,231 1,138 - - 9,618 North America 1,723 - 232 - - 1,955 Asia 981 117 50 - - 1,148 Middle East 2,815 - 9 - - 2,824 Rest of the world 1,288 1,307 170 - - 2,765
58,835 31,580 77,049 - 151 167,615 --------------------------------- ---------- -------- ---------- ---------- ----------- -------- Adjusted profit from operations 10,156 6,798 5,820 (3,926) (19) 18,829 Investment income 279 Adjusted finance costs (1,012) Adjusted profit before tax 18,096 Adjustments (see below) (2,981) Profit before tax 15,115 --------------------------------- ---------- -------- ---------- ---------- ----------- -------- RM RM RM Corporate Exited Total Year ended 30 November 2015 Resources Results Education Services Businesses GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 --------------------------------- ---------- -------- ---------- ---------- ----------- -------- Revenue UK 52,391 26,508 79,285 - 3,279 161,463 Europe 4,062 3,039 423 - 165 7,689 North America 932 - 272 - 64 1,268 Asia 678 109 171 - 22 980 Middle East 4,555 - 7 - 18 4,580 Rest of the world 925 1,069 85 - 169 2,248 63,543 30,725 80,243 - 3,717 178,228 --------------------------------- ---------- -------- ---------- ---------- ----------- -------- Adjusted profit from operations 11,107 5,554 5,494 (4,140) 184 18,199 Investment income 409 Adjusted finance costs (1,510) Adjusted profit before tax 17,098 Adjustments (see below) 2,137 Profit before tax 19,235 --------------------------------- ---------- -------- ---------- ---------- ----------- -------- Adjustments to administrative expenses Year ended Year ended 30 November 30 November 2016 2015 GBP000 GBP000 ------------------------------------------------ ------------- ------------- Amortisation of acquisition-related intangible assets 8 303 Impairment of held for sale assets and related transition costs - 323 Gain on sale of operations (135) (65) Share-based payment charges 1,006 864 Release of provisions for dilapidations on leased properties and onerous lease contracts (90) (2,368) Restructuring 1,593 (243) Acquisition related costs 525 - Exceptional credit on Defined Benefit Pension Scheme - (206) 2,907 (1,392) ------------------------------------------------ ------------- -------------
In the year ended 30 November 2016 notable adjustments to profit include:
Recurring items:
These are items which occur regularly but which management judge to have a distorting effect on the underlying results of the Group or are not regularly monitored for the purpose of determining business performance. These items include the amortisation of acquisition related intangible assets; share-based payment charges and changes in the provision for dilapidations and onerous lease contracts.
Recurring items are adjusted each year irrespective of materiality to ensure consistent treatment.
Non-recurring items:
These are items which are non-recurring and are identified by virtue of either their size or their nature. These items can include, but are not restricted to, impairment of held for sale assets and related transition costs; the gain/loss on sale of operations and restructuring and acquisition costs. As these items are one-off or non-operational in nature, management considers that they would distort the Group's underlying business performance.
During the year, the restructuring of the Infrastructure part of the RM Education division was undertaken to move away from some of the lowest margin transactional elements such as network infrastructure, network installation and third party hardware sales. This led to a reduction of broadly 10% of the RM Education UK staff and a one-off exceptional charge of GBP1.6m.
During the year, the group incurred professional advisor costs relating to an acquisition of GBP525,000, see note 15 for further details.
In the prior year, the Group's 135 Milton Park leased premises were sub-let to South Oxfordshire District Council for a minimum period of 3 years. The premises are onerous to the Group's requirements, as they were at 30 November 2014, and on sub-letting GBP2.4m was released from the onerous lease provision.
In the prior year, the Group's interests in Newham Learning Partnership (PSP) ltd were sold for a total cash consideration of GBP1.6m; and a profit of GBP0.9m was recorded as an adjustment to Investment income (see note 3).
Segmental assets RM RM RM Corporate Exited Resources Results Education Services Businesses Total GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 --------------------- ---------- -------- ---------- ---------- ----------- -------- At 30 November 2016 Segmental 31,968 7,085 17,803 217 - 57,073 Other 48,942 Total assets 106,015 --------------------- ---------- -------- ---------- ---------- ----------- -------- RM RM RM Corporate Exited Resources Results Education Services Businesses Total GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 --------------------- ---------- -------- ---------- ---------- ----------- -------- At 30 November 2015 Segmental 32,962 7,732 16,539 700 1,162 59,095 Other 55,826 Total assets 114,921 --------------------- ---------- -------- ---------- ---------- ----------- -------- 3. Investment income Year ended Year ended 30 November 30 November 2016 2015 GBP000 GBP000 -------------------------------------------- ------------- ------------- Bank interest 123 224 Income on sale of finance lease debt 46 45 Income from sale of other receivables (see note 2) - 894 Other finance income 110 140 279 1,303 -------------------------------------------- ------------- ------------- 4. Finance costs Year ended Year ended 30 November 30 November 2016 2015 Note GBP000 GBP000 ------------------------------------------------------- ------ ------- ------------- Borrowing facilities arrangement fees and commitment fees 421 467 Net finance costs on defined benefit pension scheme 498 964 Unwind of discount on long term contract provisions 37 74 Unwind of discount on onerous lease and dilapidations provisions 11 84 149 Other finance costs 46 5 ------------------------------------------------------- 1,086 1,659
------------------------------------------------------- ------ ------- ------------- 5. Tax a) Analysis of tax charge in the Consolidated Income Statement Year ended Year ended 30 November 30 November 2016 2015 GBP000 GBP000 ------------------------------------------------ ------------- ------------- Current taxation UK corporation tax 2,924 3,684 Adjustment in respect of prior years 302 297 Overseas tax 296 278 Total current tax charge 3,522 4,259 ------------------------------------------------- ------------- ------------- Deferred taxation Temporary differences 173 259 Adjustment in respect of prior years (237) (213) Overseas tax 11 (32) Total deferred tax (credit)/charge (53) 14 Total Consolidated Income Statement tax charge 3,469 4,273 ------------------------------------------------- ------------- ------------- b) Analysis of tax (credit)/charge in the Consolidated Statement of Comprehensive Income Year ended Year ended 30 November 30 November 2016 2015 GBP000 GBP000 ------------------------------------------------ ------------- ------------- UK corporation tax Defined benefit pension scheme (1,241) (469) Share based payments (142) (504) Deferred tax Defined benefit pension scheme movements (2,325) 949 Defined benefit pension scheme escrow (749) - Share based payments 110 540 Deferred tax relating to the change in rate 345 470 Total Consolidated Statement of Comprehensive Income tax (credit)/charge (4,002) 986 ------------------------------------------------- ------------- ------------- c) Reconciliation of Consolidated Income Statement tax charge The tax charge in the Consolidated Income Statement reconciles to the effective rate applied by the Group as follows: Year ended 30 November Year ended 30 November 2016 2015 Adjusted Adjustments Adjusted Adjustments Total Total GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 -------------------------------------- --------- -------- ------- --------- ------- ------- Profit on ordinary activities before tax 18,096 (2,981) 15,115 17,098 2,137 19,235 Tax at 20% (2015: 20.33%) thereon: 3,619 (596) 3,023 3,476 434 3,910 Effects of: - change in tax rate on carried forward deferred tax assets 65 - 65 123 - 123 - other expenses not deductible for tax purposes 110 - 110 50 - 50 - other temporary timing differences - 151 151 (7) 1 (6) - R&D tax credit (10) - (10) 4 - 4 - impairments - - - 12 36 48 - overseas tax 81 - 81 246 - 246 - gain on sale of operations - (27) (27) - (182) (182) - prior period adjustments 76 - 76 80 - 80 Tax charge in the Consolidated Income Statement 3,941 (472) 3,469 3,984 289 4,273 --------------------------------------- --------- -------- ------- --------- ------- ------- d) Deferred tax The Group has recognised deferred tax assets as these are anticipated to be recoverable against profits in future periods. The major deferred tax assets and liabilities recognised by the Group and movements thereon are as follows: Defined benefit Acquisition pension Short-term related Accelerated scheme Share-based timing intangible Group tax depreciation obligation payments differences assets Total GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 ----------------------------- ------------------ ------------ ------------ ------------- ------------ -------- At 1 December 2014 787 5,351 1,016 1,085 (92) 8,147 Credit/(charge) to income - - (53) (52) 91 (14) Credit to equity - (1,419) (540) - - (1,959) Transfer to assets held for sale (53) - - - - (53) At 30 November 2015 734 3,932 423 1,033 (1) 6,121 Credit/(charge) to income 112 - (59) (1) 1 53 Charge to equity - 1,980 (110) 749 - 2,619 At 30 November 2016 846 5,912 254 1,781 - 8,793 ----------------------------- ------------------ ------------ ------------ ------------- ------------ -------- Certain deferred tax assets and liabilities have been offset above. 6. Earnings per ordinary share Year ended 30 November Year ended 30 November 2016 2015 Weighted Weighted Profit average Pence Profit average Pence for number per for number per the year of shares share the year of shares share GBP000 '000 GBP000 '000 -------------------------------- ---------- ----------- ------- ---------- ----------- ------- Basic earnings per ordinary share Basic earnings 11,646 81,144 14.4 14,962 80,954 18.5 Adjustments (see note 2) 2,509 - 3.0 (1,848) - (2.3) ----------- Adjusted basic earnings 14,155 81,144 17.4 13,114 80,954 16.2 --------------------------------- ---------- ----------- ------- ---------- ----------- ------- Diluted earnings per ordinary share Basic earnings 11,646 81,144 14.4 14,962 80,954 18.5 Effect of dilutive potential ordinary shares: share based payment awards - - - - 3,080 (0.7) ---------- Diluted earnings 11,646 81,144 14.4 14,962 84,034 17.8 Adjustments (see note 2) 2,509 - 3.0 (1,848) - (2.2) ----------- Adjusted diluted earnings 14,155 81,144 17.4 13,114 84,034 15.6 --------------------------------- ---------- ----------- ------- ---------- ----------- ------- 7. Dividends Amounts recognised as distributions to equity holders were: Year ended Year ended 30 November 30 November 2016 2015 GBP000 GBP000 ---------------------------------------------------- ------------- ------------- Final dividend for the year ended 30 November 2015 - 3.80p per share (2014: 3.04p) 3,079 2,451 Interim dividend for the year ended 30 November 2016 - 1.50p per share (2015: 1.20p) 1,220 973
4,299 3,424 ---------------------------------------------------- ------------- ------------- The proposed final dividend of 4.50p per share for the year ended 30 November 2016 was approved by the Board on 7 February 2017. The dividend is subject to approval by Shareholders at the annual general meeting. The anticipated cost of this dividend is GBP3,660,000 which is not included as a liability at 30 November 2016. 8. Trade and other receivables 2016 2015 Note GBP000 GBP000 ------------------------------------ ------ ------- ------- Current Financial assets Trade receivables 15,060 17,303 Long-term contract balances - 138 Other receivables 1,294 1,048 Derivative financial instruments 685 138 Accrued income 1,824 1,489 Amounts owed by Group undertakings - - 18,863 20,116 Non-financial assets Prepayments 5,540 5,476 24,403 25,592 ------------------------------------------- ------- ------- Non-current Financial assets Other receivables 1,153 1,168 25,556 26,760 ------------------------------------------- ------- ------- 9. Cash and short-term deposits 2016 2015 GBP000 GBP000 ---------------------------------------------- --------- ------- Cash and cash equivalents 36,973 42,320 Short-term deposits 3,014 6,000 39,987 48,320 ---------------------------------------------- --------- ------- The short-term deposits are for a maximum period of 6 months at interest rates of 0.70%. 10. Trade and other payables 2016 2015 Note GBP000 GBP000 ---------------------------------------------- ------ ------- ------- Current liabilities Financial liabilities Trade payables 13,777 11,518 Amounts owed to Group undertakings - - Other taxation and social security 2,842 4,010 Other payables 2,284 761 Accruals 9,096 12,525 Obligations under finance leases - 40 Derivative financial instruments 45 5 Long-term contract balances 16,766 25,509 44,810 54,368 Non-financial liabilities Deferred income 9,711 10,606 54,521 64,974 ----------------------------------------------------- ------- ------- Non-current liabilities Non-financial liabilities: Deferred income: - due after one year but within two years 462 472 - due after two years but within five years 509 190 971 662 ----------------------------------------------------- ------- ------- 55,492 65,636 ----------------------------------------------------- ------- ------- 11. Provisions Onerous lease and Employee-related dilapidations restructuring Other Total Group GBP000 GBP000 GBP000 GBP000 --------------------------------- --------------- ----------------- ------- -------- At 30 November 2014 8,094 365 708 9,167 Utilisation of provisions (2,186) (1,166) (132) (3,484) Release of provisions (2,368) (85) (423) (2,876) Increase in provisions - 1,070 1,025 2,095 Effect of movements in exchange rates - - 2 2 Transfer to held for sale liabilities (110) - (2) (112) Unwind of discount 149 - - 149 At 30 November 2015 3,579 184 1,178 4,941 Utilisation of provisions (345) (184) (396) (925) Release of provisions (161) - (147) (308) Increase in provisions - 1,844 1,057 2,901 Unwind of discount 84 - - 84 At 30 November 2016 3,157 1,844 1,692 6,693 ---------------------------------- --------------- ----------------- ------- -------- Provisions for onerous leases and dilapidations have been recognised at the present value of the expected obligation at discount rates of 2.6% (2015: 2.6%) per annum reflecting a risk free discount rate, applicable to the liabilities. These discounts will unwind to their undiscounted value over the remaining lives of the leases via a finance cost within the Income Statement. At 30 November 2016, GBP1,465,000 (2015: GBP1,829,000) of the provision refers to onerous leases, and GBP1,692,000 (2015: GBP1,750,000) refers to dilapidations. The major release in the prior year relates to the successful sub-letting of one of the Group's properties. The average remaining life of the leases at 30 November 2016 is 3.1 years (2015: 3.5 years). In making their assessment of the required provisions, the group is required to estimate the likely sub-let income that could be earned over the remaining life of the lease. This requires the Directors to make judgements relating to the likelihood that a property will be sub-let and the income that will be earned. Employee related restructuring provisions refer to costs arising from restructuring to meet the future needs of the Group and are all expected to be utilised during the following financial year. Other provisions includes one-off items not covered by any other category. During the year risk provisions totalling GBP475,000 from ended BSF contracts were transferred from long-term contract creditors to provisions. The other most significant element in the provision at 30 November 2016 relates to regulatory compliance. Group 2016 2015 GBP000 GBP000 ------------------------- ------- ------- Current liabilities 3,536 2,077 Non-current liabilities 3,157 2,864 6,693 4,941 ------------------------- ------- ------- 12. Share capital Company and Group Ordinary shares of 2(2) /(7) p '000 GBP000 Allotted, called-up and fully paid: At 1 December 2014 82,640 1,889 Issued in the year 10 1 At 30 November 2015 82,650 1,890 Issued in the year - - At 30 November 2016 82,650 1,890 ---------------------------------------- -------- -------- Ordinary shares issued carry no right to fixed income.
13. Defined benefit pension scheme
As at 31 May 2015, the triennial valuation for statutory funding purposes showed a deficit of GBP41,800,000 (31 May 2012: GBP53,500,000). The Group agreed with the Scheme Trustee that it will repay this amount via deficit catch-up payments of GBP4,000,000 in December 2015 and GBP3,600,000 per annum until 30 September 2024. At 30 November 2016 there were amounts outstanding of GBP300,000 (2015: GBP300,000) for one month's deficit payment and GBP32,000 (2015: GBP32,000) for Scheme expenses. The next triennial valuation of the Scheme is due as at 31 May 2018 and may result in changes to the level of deficit catch-up payments required.
In addition to the GBP4,000,000 of catch up payments in December 2015, a further GBP4,000,000 contribution was paid in December 2015 into an escrow account established in March 2014, the use of which within the Scheme is required to be agreed by RM Education Limited and the Scheme Trustee.
IAS 19 Employee Benefits, amended June 2011, has been adopted in these financial statements.
14. Related party transactions
Ipswich School
John Poulter, non-executive director of RM plc, is a director of Ipswich School. Sales made in the year total GBP2,419 and at the year end there is a balance of GBP90 outstanding.
Grant Thornton LLP
The Company has engaged Grant Thornton to provide advice in connection with certain acquisition related activities. No payments were made to Grant Thornton during the year ended 30 November 2016. Deena Mattar, one of the Company's Non-Executive Directors, is a member of the Advisory Board of Grant Thornton. Grant Thornton were chosen from a competitive tender conducted by the Company and Deena Mattar was not involved in that exercise.
British Educational Suppliers Association
TTS Director Catherine Jeffrey sits on the Executive Council of BESA, in the year the Group made purchases of GBP7,424.
The Group encourages its Directors and employees to be Governors, Trustees or equivalent of educational establishments. The Group trades with these establishments in the normal course of its business.
15. Events after the reporting period
On 7 February 2017, the Company agreed to acquire the entire issued share capital of Hedgelane Limited (including its principal trading subsidiary known as The Consortium) from Smiths News Holdings Limited (part of the Connect Group plc group of companies) (the "Acquisition"). In connection with the Acquisition, the Company has entered into a GBP75 million revolving credit facility (the "New Facility") with Barclays Bank plc and HSBC Bank plc. Completion of the Acquisition is conditional upon, among other things, clearance being received from the Competition and Markets Authority and shareholder approval. The New Facility will become available upon completion of the Acquisition and will expire 36 months from such date. If the Acquisition does not complete for any reason, the New Facility will not come into effect and the Current Facility will remain in force unaffected.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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