Rm Regulatory News (RM.)

6 July 2015

RM plc announces interim results for the 6 months ended 31 May 2015

RM plc, the educational ICT and resources group, announces its interim results for the 6 months ended 31 May 2015.

Results Highlights

· Total revenue of £79.8m (2014: £92.1m) and adjusted* operating profit margin increased to 8.7%

o RM Resources revenue growth of 11% and operating profit margin increased to 13.9%

o RM Results revenue growth of 5% with 15.1% operating profit margin

o RM Education revenue declined as expected with operating profit margin increased to 7.0%

· Adjusted* operating profit decreased by 5% to £6.9m (2014: £7.3m). Adjusted* profit before tax of £6.3m (2014: £7.0m)

· Adjusted* profit before tax is lower than statutory profit before tax by £2.9m (2014: higher by £0.4m) mainly reflecting the release of a provision following the sub-lease of one surplus property

· Adjusted* diluted EPS: 5.8p (2014: 6.2p)

· Net cash and short-term deposits of £43.1m (2014: £40.3m at 31 May)

· Pension deficit increased to £30.0m (2014: £26.8m at 30 November). Deficit net of deferred tax was £24.0m

· Interim dividend per share increased by 25% to 1.20p (2014: 0.96p).

Outlook

· RM Results and RM Resources expected to continue to grow revenue with strong margins

· RM Education expected to continue to improve margins with focus on software and services

· Revenue growth is expected in 2016 with all three divisions growing in 2017

· 2015 year-end cash position likely to be ahead of current market expectations.

David Brooks, RM's CEO, said:

"We have delivered another good half year of results and are on track with our journey back to growth. RM Resources and RM Results have continued to grow and deliver strong margins. RM Education continues to improve margins as we focus on software and services. These results together with our strong balance sheet give us a stable platform for RM's long term future."

* Throughout this statement, adjusted profit and adjusted EPS are stated before 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; the gain on sale of operations; share-based payment charges; restructuring program costs and changes in the provision for dilapidations and onerous lease contracts.

RM plc

Interim results for the 6 months ended 31 May 2015

Results

* Throughout this statement, adjusted profit and adjusted EPS are stated before 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; the gain on sale of operations; share-based payment charges; restructuring program costs and changes in the provision for dilapidations and onerous lease contracts.

Revenue declined 13% to £79.8m compared with £92.1m for the same period last year, with growth in the RM Results and RM Resources divisions being more than offset by the expected decline in the RM Education division following the decision to discontinue the sale of personal computing devices announced in 2013.

Adjusted* profit before tax was £6.3m (2014: £7.0m). Adjusted* operating profit was £6.9m (2014: £7.3m). Profit before tax was £9.2m (2014: £6.7m).

Operating capital efficiency remained strong. Cash generated by operations of £1.7m (2014: £6.1m) reflects a reduction in the negative working capital associated with long-term contracts and the unwinding of related cash balances. Net cash and short-term deposits at 31 May 2015 was £43.1m (2014: £40.3m at 31 May, £47.9m at 30 November).

Adjusted* diluted earnings per share decreased by 6% to 5.8p (2014: 6.2p). Diluted earnings per share were 8.8p (2014: 5.9p).

In March terms were agreed with South Oxfordshire District Council to sub-let one of the Group's buildings in Abingdon, resulting in a reduction in the onerous lease provision held on the balance sheet by £2.4m.

In March 2015 RM sold its equity and junior subordinated loan note interests in Newham Learning Partnership (PSP) Limited. The total consideration was £1.6m and resulted in a profit of £0.9m, recorded as adjusted investment income.

The IAS 19 deficit relating to RM's defined benefit pension scheme has increased since 30 November 2014 to £30.0m (2014: £26.8m at 30 November), primarily due to increased liabilities arising from a reduction in market interest rates. The deficit net of deferred tax was £24.0m (2014: £21.4m at 30 November).

In the year ended 30 November 2014, Group expenditure relating to administering the defined benefit pension scheme was included in Corporate Services adjusted* profit from operations, where previously it had been included within the divisional results. The divisional results for the 6 months ended 31 May 2014 have been restated to be consistent with this treatment with £407,000 of cost allocated to Corporate Services from RM Education (£346,000) and RM Results £(61,000), with no impact on total adjusted profit from operations.

Dividend

Reflecting the Board's continued confidence in the business, the interim dividend per share has been increased by 25% to 1.20p (2014: 0.96p). The dividend will be payable on 11 September 2015 to shareholders on the register on 14 August 2015.

RM Resources

The RM Resources division comprises two operating businesses: TTS and SpaceKraft. TTS, which represents over 90% of divisional revenue, is a value-added distribution business offering a wide range of curriculum products and materials to schools for both general and departmental use. SpaceKraft supplies products and installation services for the Special Educational Needs market.

RM Resources reported revenue growth of 11% to £32.7m (2014: £29.3m). TTS UK direct catalogue and online revenue rose 13% benefitting from strong curriculum focused propositions; International revenue grew 17% and represented 13% of TTS revenue in the period.

Adjusted* operating margins improved further to 13.9% (2014: 13.1%).

RM Results

The RM Results division provides products and services that include secure, innovative systems for creating high-stakes exams and tests, onscreen testing, onscreen marking and the management and analysis of educational data.

Revenue in this division increased by 5% to £10.6m (2014: £10.1m). Adjusted* operating profit decreased from £2.0m for the first half of 2014 to £1.6m as performance in the first half of 2014 was flattered by the cumulative impact of an improvement in the forecast lifetime profitability on an established long-term contract.

In February RM Results signed a 3-year contract to provide the education charity AQA with e-marking services alongside DRS, their existing supplier. The division has also been selected as preferred supplier to provide e-assessment services to a world leading professional membership organisation, ICAEW, an existing customer for e-marking.

RM Education

The RM Education division supplies IT Services, Internet Services, Infrastructure Solutions and Digital Platforms and Content to UK schools and colleges.

As expected divisional revenues reduced by 31% reflecting the inclusion of RM's own hardware revenues in 2014 and lower BSF activity.

The division generated an adjusted* operating profit of £2.6m (2014: £3.4m) with operating margins increasing from 6.4% to 7.0%. The division includes services subject to long-term project accounting and, as in 2014, profits were positively affected by good operational performance and cost control in completing BSF contracts.

Good progress was made in the half with respect to pursuing the division's priority areas in software and services. Positive engagement with major Multi Academy Trusts has resulted in a wide ranging framework agreement being signed with one trust and with RM Education being awarded preferred bidder status on another. 98% of maintained primary schools in Derbyshire have contracted to transfer to RM Integris, the division's cloud-based School Management Systems platform. A new internet connectivity contract was signed with West Berkshire.

Statement on Principal Risks and Uncertainties

Pursuant to the requirements of the Disclosure and Transparency Rules the Group provides the following information on its principal risks and uncertainties. The Group considers strategic, operational and financial risks and identifies actions to mitigate those risks. These risk profiles are updated at least annually. The principal risks and uncertainties detailed within the Group's 2014 Annual Report remain applicable. This is available from the RM website: www.rmplc.com.

Outlook

The RM Resources and RM Results divisions, which represented 54% of the Group's revenues and 70% of the Group's profit in the half, continue to grow organically and maintain good margins. RM Education continues to make good progress focusing on software and services and improving margins.

Trading in the year is running in line with the Board's expectations and we are confident that the Group will return to revenue growth in 2016 with all three divisions growing by 2017. The cash position at year end is likely to be ahead of current market expectations.

Notes to the Condensed Interim Financial Statements

1. General information

RM plc ('Company') is incorporated in the United Kingdom and listed on the London Stock Exchange. The unaudited Condensed Consolidated Interim Financial Statements as at 31 May 2015 and for the 6 months then ended comprise those of the Company and its subsidiaries (together 'the Group').

Condensed Consolidated Income Statement presentation

The Income Statement is presented in three columns. This presentation is intended to give a better guide to business performance by separately identifying 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; the gain on sale of operations; share-based payment charges; restructuring program costs; and changes in the provisions for dilapidations and onerous lease contracts. The columns extend down the Income Statement to allow the tax and earnings per share impacts of these transactions to be disclosed. Equivalent material 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 6 months ended 31 May 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.

· 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 period.

2. Accounting policies

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

The annual financial statements of the Group are prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. As required by the Disclosure and Transparency Rules of the Financial Conduct Authority (FCA), the condensed set of financial statements has been prepared applying the accounting policies and presentation that were applied in the preparation of the Group's published Consolidated Financial Statements for the year ended 30 November 2014.

The preparation of the Condensed Consolidated Interim Financial Statements, in conformity with generally accepted accounting principles, requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Interim Financial Statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on the Directors' best knowledge of current events and actions, actual results ultimately may differ from those estimates.

In preparing these Condensed Consolidated Interim Financial Statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the Consolidated Financial Statements as at and for the year ended 30 November 2014.

Going concern

The Directors, having made appropriate enquiries, consider that 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 Interim Financial Statements.