Last checked at 4 Jul 2016 07:00
4th July 2016
RM plc
Interim Results for the period ending 31 May 2016
RM plc ("RM"), the leading education software, services and resources group, reports its interim results for the 6 months ended 31 May 2016.
HIGHLIGHTS
Financial
|
2016
|
2015
|
Change
|
Revenue1
RM Resources RM Results RM Education
Adjusted* operating profit
Adjusted* operating profit margin |
£76.6m
£29.3m £13.2m £34.2m
£7.1m
9.3%
|
£77.7m
£30.6m £10.6m £36.5m
£6.9m
8.9% |
-1.4%
-4.4% +23.6% -6.4%
+2.9%
+0.4pp
|
Adjusted* diluted EPS | 6.1p | 5.8p | +5.2% |
Interim dividend | 1.50p | 1.20p | +25% |
1 The highlights set out above exclude the results of exited businesses. Revenue including exited businesses was £76.8m (H1 2015: £79.8m). Including the results of exited businesses does not change the adjusted operating profit as shown above.
Operational |
· Strong revenue growth in RM Results partially offsetting expected reductions in RM Resources and RM Education
· Adjusted* operating profit improved to £7.1m (H1 2015: £6.9m)
· Adjusted* operating margin continues to improve to 9.3% (H1 2015: 8.9%)
· Cash remains strong at £32.1m
· Interim dividend increased by 25% to 1.50p (H1 2015: 1.20p)
· Confident of meeting full year expectations
|
Commenting on the interim results, David Brooks, Chief Executive of RM, said:
"Trading in the first six months of 2016 has been as expected. We have seen strong growth in RM Results, RM Resources has protected its robust margins despite a modest decline in revenues and RM Education continues to stabilise. Despite a subdued UK education market, our balance sheet remains strong and we are confident of meeting expectations for the full year."
Contacts RM plc |
FTI Consulting 08450 700300 |
David Brooks, Chief Executive Officer | Chris Lane / Antonia Gray |
Neil Martin, Chief Financial Officer | 020 3727 1000
|
08450 700300 |
* 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; impairment of held for sale assets and related transition costs; the gain on sale of operations; share-based payment charges; restructuring program release and changes in the provisions for dilapidations and onerous lease contracts.
RM plc
Interim results for the 6 months ended 31 May 2016
Results
6 months to May 2016 | 6 months to May 2015 | 12 months to November 2015 | ||
Revenue | £76.8m | £79.8m | £178.2m | |
Revenue excluding exited business | £76.6m | £77.7m | £174.5m | |
Adjusted* operating profit | £7.1m | £6.9m | £18.2m | |
Adjusted* profit before tax | £6.5m | £6.3m | £17.1m | |
Profit before tax | £6.0m | £9.2m | £19.2m | |
Adjusted* diluted Earnings per share | 6.1p | 5.8p | 15.6p | |
Ordinary dividend per share | 1.50p | 1.20p | 5.00p | |
Cash and short term deposits | £32.1m | £43.1m | £48.3m |
Revenue declined by 3.8% to £76.8m compared with £79.8m for the same period last year (or by 1.4% when excluding the exited business, SpaceKraft that was sold in December 2015), with growth in the RM Results division being more than offset by the expected decline in the RM Resources and RM Education divisions.
Adjusted* operating profit was £7.1m (H1 2015: £6.9m). Adjusted* profit before tax was £6.5m (H1 2015: £6.3m).
Cash used in operations of £0.4m (H1 2015: cash generated £1.7m) 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 2016 was £32.1m (2015: £43.1m at 31 May 2015, £48.3m at 30 November 2015) which follows a one off additional pension payment of £8m agreed as part of the 2015 triennial agreement.
Adjusted* diluted earnings per share increased by 5% to 6.1p (H1 2015: 5.8p).
Pension
The IAS 19 deficit relating to RM's defined benefit pension scheme has increased since 30 November 2015 by £1.1m to £23.0m (£21.9m at 30 November 2015), primarily due to increased liabilities arising from a reduction in market discount rates more than offsetting cash contributions of £10m and beneficial inflation factors. The deficit net of deferred tax was £18.8m (£17.9m at 30 November 2015).
Dividend
The interim dividend per share has been increased by 25% to 1.50p (H1 2015: 1.20p) reflecting the commitment to reduce dividend cover. The dividend will be payable on 9 September 2016 to shareholders on the register on 12 August 2016.
RM Resources
RM Resources consists of the operating business TTS. TTS provides education resources used in schools in the UK and internationally through a mainly direct marketing business. Products supplied are a mix of third party branded and TTS branded items manufactured from a network of third party suppliers.
6 months to May 2016 | 6 months to May 2015 | 12 months to November 2015 | ||
RM Resources revenue | £29.3m | £30.6m | £63.5m | |
RM Resources adjusted* operating profit | £4.3m | £4.5m | £11.1m |
The above excludes the exited SpaceKraft business which was sold in December 2015.
As anticipated, RM Resources reported a revenue decline of 4.4% to £29.3m (H1 2015: £30.6m). TTS UK direct marketing fell by 8% as a result of the end of the benefit driven by significant curriculum change in UK primary schools and continued tightening of UK schools budgets. Online ordering continues to be strong and now represents 34% of UK orders (28% for the same period in 2015). International revenue grew 18% driven primarily by increased sales of proprietary products in Europe and sales to International schools.
Despite declining revenue, focus on tight cost control has protected the strong margins with adjusted* operating margin remaining constant at 14.6%.
RM Results
The RM Results business provides IT software and e-Assessment services to enable onscreen exam marking (e-marking), onscreen testing (e-testing) and the management and analysis of educational data. Its customers include government ministries, exam boards and professional awarding bodies in the UK and overseas.
6 months to May 2016 | 6 months to May 2015 | 12 months to November 2015 | ||
RM Results revenue | £13.2m | £10.6m | £30.7m | |
RM Results adjusted* operating profit | £2.4m | £1.6m | £5.6m |
Revenue in this division increased by 23.6% to £13.2m (H1 2015: £10.6m). This resulted from growth of 46% in e-Assessment revenues driven by a greater proportion of revenues accounted for in H1 compared to the prior year (+34%) and increased e-testing revenues (+12%). Data revenues declined by 6% as a result of planned contract exits which will also impact revenues in the second half. Adjusted* operating profit increased from £1.6m for the first half of 2015 to £2.4m as a result of the increased revenue.
Increased revenues in e-testing were driven by an expanded 5 year managed services contract for English language exams with Cambridge Assessment.
RM Education
RM Education is a UK focused business supplying ICT software and services to schools and colleges.
6 months to May 2016 | 6 months to May 2015 | 12 months to November 2015 | ||
RM Education revenue | £34.2m | £36.5m | £80.2m | |
RM Education adjusted* operating profit | £2.3m | £2.6m | £5.5m |
As expected revenues in RM Education reduced by 6.4% reflecting the continued transition away from legacy offerings. This reduction reflects a significant slowdown in the revenue decline experienced in this division compared to previous years. The decline was experienced on the back of the government's Building Schools for the Future (BSF) programme stopping and the change of strategy away from making and selling PC client devices.
Good progress was made in the half year in relation to pursuing the division's priority areas in software and services. In particular we extended or renewed all long term managed service contracts that ended in the period including those previously under the BSF programme.
The division generated an adjusted* operating profit of £2.3m (H1 2015: £2.6m) with operating margins of 6.6%. The division includes services subject to long-term project accounting and, as in 2015, profits were positively affected by good operational performance and cost control in long term contract completions.
Corporate Costs
Corporate costs have remained stable at £1.8m (H1 2015: £1.8m).
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 2015 Annual Report remain applicable. This is available from the RM website: www.rmplc.com.
Outlook
Whilst market conditions in the UK Education sector continue to be subdued as a result of pressure on school budgets we are confident of delivering results for the year in line with expectations. Our balance sheet remains strong and the Board is focusing on the right balance of investing in the three divisions while ensuring that margins can be maintained or improved in 2016.
Condensed Consolidated Income Statement | ||||||||||
for the 6 months ended 31 May 2016 | ||||||||||
6 months ended 31 May 2016 | 6 months ended 31 May 2015 | Year ended 30 November 2015 | ||||||||
Adjusted | Adjustments | Total | Adjusted | Adjustments | Total | Adjusted | Adjustments | Total | ||
Note | £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 | |
Revenue | 76,759 | - | 76,759 | 79,806 | - | 79,806 | 178,228 | - | 178,228 | |
Cost of sales | (44,774) | - | (44,774) | (47,612) | - | (47,612) | (109,316) | - | (109,316) | |
Gross profit | 31,985 | - | 31,985 | 32,194 | - | 32,194 | 68,912 | - | 68,912 | |
Operating expenses | (24,910) | - | (24,910) | (25,246) | - | (25,246) | (50,713) | - | (50,713) | |
Amortisation of acquisition related intangible assets | - | (8) | (8) | - | (152) | (152) | - | (303) | (303) | |
Impairment of held for sale assets and related transition costs | - | - | - | - | - | - | - | (323) | (323) | |
Gain on sale of operations | - | 136 | 136 | - | - | - | - | 65 | 65 | |
Share-based payment charges | - | (700) | (700) | - | (385) | (385) | - | (864) | (864) | |
Release of provisions for dilapidations on leased properties and onerous lease contracts | - | 79 | 79 | - | 2,393 | 2,393 | - | 2,368 | 2,368 | |
Restructuring program release | - | - | - | - | 213 | 213 | - | 243 | 243 | |
Exceptional credit on Defined Benefit Pension Scheme | - | - | - | - | - | - | - | 206 | 206 | |
(24,910) | (493) | (25,403) | (25,246) | 2,069 | (23,177) | (50,713) | 1,392 | (49,321) | ||
Profit from operations | 7,075 | (493) | 6,582 | 6,948 | 2,069 | 9,017 | 18,199 | 1,392 | 19,591 | |
Investment income | 114 | - | 114 | 180 | 894 | 1,074 | 409 | 894 | 1,303 | |
Finance costs | (657) | (38) | (695) | (782) | (88) | (870) | (1,510) | (149) | (1,659) | |
Profit before tax | 6,532 | (531) | 6,001 | 6,346 | 2,875 | 9,221 | 17,098 | 2,137 | 19,235 | |
Tax | 4 | (1,372) | (9) | (1,381) | (1,488) | (375) | (1,863) | (3,984) | (289) | (4,273) |
Profit for the period | 5,160 | (540) | 4,620 | 4,858 | 2,500 | 7,358 | 13,114 | 1,848 | 14,962 | |
Earnings per ordinary share: | 5 | |||||||||
Basic | 6.4p | 5.7p | 6.0p | 9.1p | 16.2p | 18.5p | ||||
Diluted | 6.1p | 5.4p | 5.8p | 8.8p | 15.6p | 17.8p | ||||
Paid and proposed dividends per share: | 6 | |||||||||
Interim | 1.50p | 1.20p | 1.20p | |||||||
Final | - | - | 3.80p | |||||||
Adjustments to results have been presented to give a better guide to business performance (see note 1). | ||||||||||
Results from exited business are shown in note 3 to these financial statements. | ||||||||||
Condensed Consolidated Statement of Comprehensive Income |
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for the 6 months ended 31 May 2016 |
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6 months ended | 6 months ended | Year ended | |||||
31 May 2016 | 31 May 2015 | 30 November 2015 | |||||
£000 | £000 | £000 | |||||
Profit for the period | 4,620 | 7,358 | 14,962 | ||||
Items that will not be reclassified subsequently to profit or loss: | |||||||
Defined benefit pension scheme re-measurements | (10,279) | (4,553) | 2,402 | ||||
Tax on items that will not be reclassified subsequently to profit or loss | 1,932 | 911 | (950) | ||||
Items that are or may be reclassified subsequently to profit or loss: | |||||||
Fair value gain/(loss) on hedged instruments | 56 | (114) | (180) | ||||
Exchange gain/(loss) on translation of overseas operations | 60 | (15) | (80) | ||||
Tax on items that are or may be reclassified subsequently to profit or loss | 17 | (27) | (36) | ||||
Other comprehensive (expense)/income | (8,214) | (3,798) | 1,156 | ||||
Total comprehensive (expense)/income | (3,594) | 3,560 | 16,118 | ||||
Condensed Consolidated Balance Sheet | ||||
At 31 May 2016 | ||||
Note | 31 May 2016 | 31 May 2015 | 30 November 2015 | |
£000 | £000 | £000 | ||
Non-current assets | ||||
Goodwill | 14,067 | 14,067 | 14,067 | |
Acquisition related intangible assets | - | 310 | 8 | |
Other intangible assets | 812 | 553 | 562 | |
Property, plant and equipment | 6,950 | 7,695 | 7,059 | |
Other receivables | 9 | 1,166 | 1,172 | 1,168 |
Deferred tax assets | 7,189 | 8,256 | 6,121 | |
30,184 | 32,053 | 28,985 | ||
Current assets | ||||
Inventories | 10,805 | 12,846 | 10,862 | |
Trade and other receivables | 9 | 25,815 | 24,606 | 25,592 |
Tax assets | - | 545 | - | |
Cash and short-term deposits | 7 | 32,118 | 43,103 | 48,320 |
Assets held for sale | - | - | 1,162 | |
68,738 | 81,100 | 85,936 | ||
Total assets | 98,922 | 113,153 | 114,921 | |
Current liabilities | ||||
Trade and other payables | 10 | (56,719) | (68,888) | (64,974) |
Tax liabilities | (1,280) | (780) | (2,787) | |
Provisions | 11 | (1,132) | (2,828) | (2,077) |
Liabilities directly associated with assets classified as held for sale | - | - | (549) | |
(59,131) | (72,496) | (70,387) | ||
Net current assets | 9,607 | 8,604 | 15,549 | |
Non-current liabilities | ||||
Other payables | 10 | (690) | (963) | (662) |
Provisions | 11 | (2,948) | (2,507) | (2,864) |
Defined Benefit Pension Scheme obligation | 12 | (22,958) | (30,016) | (21,861) |
(26,596) | (33,486) | (25,387) | ||
Total liabilities | (85,727) | (105,982) | (95,774) | |
Net assets | 13,195 | 7,171 | 19,147 | |
Equity attributable to shareholders | ||||
Share capital | 1,890 | 1,889 | 1,890 | |
Share premium account | 27,035 | 27,018 | 27,035 | |
Own shares | (2,510) | (2,667) | (2,510) | |
Capital redemption reserve | 94 | 94 | 94 | |
Hedging reserve | 420 | 430 | 364 | |
Translation reserve | (324) | (319) | (384) | |
Retained earnings - (deficit) | (13,410) | (19,274) | (7,342) | |
Total equity | 13,195 | 7,171 | 19,147 | |
Condensed Consolidated Statement of Changes in Equity | |||||||||
for the 6 months ended 31 May 2016 | Share capital | Share premium | Own shares | Capital redemption reserve | Hedging reserve | Translation reserve | Retained earnings | Total | |
Note | £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 | |
At 1 December 2015 | 1,890 | 27,035 | (2,510) | 94 | 364 | (384) | (7,342) | 19,147 | |
Profit for the period | - | - | - | - | - | - | 4,620 | 4,620 | |
Other comprehensive income/(expense) | - | - | - | - | 56 | 60 | (8,330) | (8,214) | |
Total comprehensive income/(expense) | - | - | - | - | 56 | 60 | (3,710) | (3,594) | |
Transactions with owners of the Company: | |||||||||
Sale of shares held in staff share scheme | - | - | - | - | - | - | 21 | 21 | |
Share-based payment fair value charges | - | - | - | - | - | - | 700 | 700 | |
Ordinary dividends paid | 6 | - | - | - | - | - | - | (3,079) | (3,079) |
At 31 May 2016 | 1,890 | 27,035 | (2,510) | 94 | 420 | (324) | (13,410) | 13,195 | |
for the 6 months ended 31 May 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 2014 | 1,889 | 27,018 | (2,950) | 94 | 544 | (304) | (18,177) | 8,114 | |
Profit for the period | - | - | - | - | - | - | 7,358 | 7,358 | |
Other comprehensive expense | - | - | - | - | (114) | (15) | (3,669) | (3,798) | |
Total comprehensive income/(expense) | - | - | - | - | (114) | (15) | 3,689 | 3,560 | |
Transactions with owners of the Company: | |||||||||
Share-based payment awards exercised | - | - | 2,592 | - | - | - | (2,720) | (128) | |
Purchase of own shares | - | - | (2,309) | - | - | - | - | (2,309) | |
Share-based payment fair value charges | - | - | - | - | - | - | 385 | 385 | |
Ordinary dividends paid | 6 | - | - | - | - | - | - | (2,451) | (2,451) |
At 31 May 2015 | 1,889 | 27,018 | (2,667) | 94 | 430 | (319) | (19,274) | 7,171 | |
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 |
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At 1 December 2014 | 1,889 | 27,018 | (2,950) | 94 | 544 | (304) | (18,177) | 8,114 |
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Profit for the year | - | - | - | - | - | - | 14,962 | 14,962 |
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Other comprehensive income/(expense) | - | - | - | - | (180) | (80) | 1,416 | 1,156 |
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Total comprehensive income/(expense) | - | - | - | - | (180) | (80) | 16,378 | 16,118 |
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Transactions with owners of the Company: |
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Shares issued | 1 | 17 | - | - | - | - | - | 18 |
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Sale of shares held in staff share scheme | - | - | - | - | - | - | 55 | 55 |
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Share-based payment awards exercised | - | - | 2,910 | - | - | - | (3,038) | (128) |
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Purchase of own shares | - | - | (2,470) | - | - | - | - | (2,470) |
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Share-based payment fair value charges | - | - | - | - | - | - | 864 | 864 |
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Ordinary dividends paid | 6 | - | - | - | - | - | - | (3,424) | (3,424) |
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At 30 November 2015 | 1,890 | 27,035 | (2,510) | 94 | 364 | (384) | (7,342) | 19,147 |
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Condensed Consolidated Cash Flow Statement | ||||
for the 6 months ended 31 May 2016 | ||||
6 months ended | 6 months ended | Year ended | ||
31 May 2016 | 31 May 2015 | 30 November 2015 | ||
Note | £000 | £000 | £000 | |
Profit before tax | 6,001 | 9,221 | 19,235 | |
Investment income | (114) | (1,074) | (1,303) | |
Finance costs | 695 | 870 | 1,659 | |
Profit from operations | 6,582 | 9,017 | 19,591 | |
Adjustments for: | ||||
Impairment of acquisition related intangible assets | - | - | 150 | |
Amortisation of acquisition related intangible assets | 8 | 152 | 303 | |
Amortisation of other intangible assets | 120 | 154 | 297 | |
Depreciation and impairment of property, plant and equipment |
1,057 | 1,138 | 2,406 | |
Gain on sale of operations | (136) | - | (65) | |
Loss/(gain) on disposal of property, plant and equipment |
42 | (75) | (95) | |
Loss on foreign exchange derivatives | 133 | 134 | 133 | |
Share-based payment charge | 700 | 385 | 864 | |
Decrease in provisions | 11 | (79) | (2,258) | (716) |
Defined Benefit Pension Scheme administration cost | 12 |
480 | 205 | 530 |
Operating cash flows before movements in working capital |
8,907 | 8,852 | 23,398 | |
Decrease/(increase) in inventories | 57 | (2,242) | (707) | |
(Increase)/decrease in receivables | (353) | 7,594 | 6,102 | |
Movement in payables: | ||||
- decrease in trade and other payables | (8,233) | (10,805) | (14,369) | |
- utilisation of onerous lease and dilapidations provisions | 11 |
(306) | (959) | (2,186) |
- utilisation of employee-related restructuring provisions | 11 |
(94) | (599) | (1,166) |
- utilisation of other provisions | 11 | (381) | (105) | (132) |
Cash (used in)/generated by operations | (403) | 1,736 | 10,940 | |
Defined Benefit Pension Scheme cash contributions |
(9,992) | (1,992) | (3,984) | |
Tax paid | (1,882) | (632) | (171) | |
Borrowing facilities arrangement and commitment fees |
(365) | (183) | (447) | |
Income on sale of finance lease debt | 16 | - | 45 | |
Net cash (outflow)/inflow from operating activities | (12,626) | (1,071) | 6,383 | |
Investing activities | ||||
Interest received | 98 | 163 | 364 | |
Repayment of loans by third parties | - | 14 | 18 | |
Proceeds from sale of other receivables | - | 1,586 | 1,586 | |
Proceeds from sale of operations | 759 | - | - | |
Proceeds on disposal of property, plant and equipment | 13 | 122 | 165 | |
Purchases of property, plant and equipment | (1,019) | (370) | (1,576) | |
Purchases of other intangible assets | (369) | (170) | (322) | |
Net cash (used in)/generated by investing activities | (518) | 1,345 | 235 | |
Financing activities | ||||
Ordinary dividends paid | 6 | (3,079) | (2,451) | (3,424) |
Repayment of capital obligations under vehicle finance leases | - | (177) | (244) | |
Proceeds of share capital issue, net of share issue costs | - | - | 18 | |
Proceeds from sale of shares held in Staff Share Scheme | 21 | - | 55 | |
Purchase of own shares | - | (2,309) | (2,470) | |
Satisfaction of share-based payment awards | - | (128) | (128) | |
Net cash used in financing activities | (3,058) | (5,065) | (6,193) | |
Net (decrease)/ increase in cash and cash equivalents | (16,202) | (4,791) | 425 | |
Cash and cash equivalents at the beginning of the period/year | 42,320 | 41,893 | 41,893 | |
Effect of foreign exchange rate changes | - | 1 | 2 | |
Cash and cash equivalents at the end of period/ year | 7 | 26,118 | 37,103 | 42,320 |
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 2016 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 impairment of held for sale assets and related transition costs, the gain on sale of operations; share-based payment charges; restructuring program releases; and movements 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 2016 adjustments to profit include a £0.7m share based payment fair value charge in accordance with IFRS 2 and a £0.1m profit on the disposal of investment in subsidiary entity, SpaceKraft Limited.
Other Comprehensive Income Also during the period, £10.3m of actuarial losses relating to the defined benefit pension scheme deficit have been recognised in Other Comprehensive Income. These have been mainly offset by deficit reduction payments of £10.0m. |
2. Accounting policies |
This condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the European Union. |
The annual financial statements of the Group are prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. As required by the Disclosure and Transparency Rules of the Financial Conduct Authority (FCA), the condensed set of financial statements has been prepared applying the accounting policies and presentation that were applied in the preparation of the Group's published Consolidated Financial Statements for the year ended 30 November 2015. |
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 2015. |
Going concern |
The Directors, having made appropriate enquiries, consider that the Group has adequate resources to continue in operational existence for the foreseeable future and that therefore it is appropriate to adopt the going concern basis in preparing the Interim Financial Statements. |
3. Segmental results
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. |
This Segmental analysis shows the results and assets of these divisions. Revenue is that earned by the Group from third parties.
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| Segmental assets |
| ||||||||||||||||||||||||
| RM Resources | RM Results | RM Education | Corporate Services | Exited Businesses | Total |
| |||||||||||||||||||
| At 31 May 2016 | £000 | £000 | £000 | £000 | £000 | £000 |
| ||||||||||||||||||
| Segmental | 34,444 | 5,662 | 15,949 | 3,362 | - | 59,417 |
| ||||||||||||||||||
| Other | 39,505 |
| |||||||||||||||||||||||
| Total assets | 98,922 |
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|
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|
| |||||||||||||||||||||||||
| RM Resources | RM Results | RM Education | Corporate Services | Exited Businesses | Total |
| |||||||||||||||||||
| At 31 May 2015 | £000 | £000 | £000 | £000 | £000 | £000 |
| ||||||||||||||||||
| Segmental | 34,553 | 6,067 | 17,422 | 409 | 1,416 | 59,867 |
| ||||||||||||||||||
| Other | 53,286 |
| |||||||||||||||||||||||
| Total assets | 113,153 |
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|
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|
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| RM Resources | RM Results | RM Education | Corporate Services | Exited Businesses | Total |
| |||||||||||||||||||
| At 30 November 2015 | £000 | £000 | £000 | £000 | £000 | £000 |
| ||||||||||||||||||
| Segmental | 32,962 | 7,732 | 16,539 | 700 | 1,162 | 59,095 |
| ||||||||||||||||||
| Other | 55,826 |
| |||||||||||||||||||||||
| Total assets | 114,921 |
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|
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| Other non-segmented assets includes tax assets, cash and short-term deposits and other non division-specific assets.
|
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4. Tax |
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Corporation tax for the interim period is charged at the expected effective tax rate for the financial year ending 30 November 2016, based upon adjusted profit as explained within note 1. The charge incorporates both current and deferred taxation: |
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6 months ended 31 May 2016 | 6 months ended 31 May 2015 | Year ended 30 November 2015 | ||||||||||||||||||||||||
Adjusted | Adjustments | Total | Adjusted | Adjustments | Total | Adjusted | Adjustments | Total |
| |||||||||||||||||
£'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
| |||||||||||||||||
| ||||||||||||||||||||||||||
Profit before tax | 6,532 | (531) | 6,001 | 6,346 | 2,875 | 9,221 | 17,098 | 2,137 | 19,235 |
| ||||||||||||||||
Tax charge | (1,372) | (9) | (1,381) | (1,488) | (375) | (1,863) | (3,984) | (289) | (4,273) |
| ||||||||||||||||
| ||||||||||||||||||||||||||
Effective tax rate | 21.0% | -1.7% | 23.0% | 23.4% | 13.0% | 20.2% | 23.3% | 13.5% | 22.2% |
| ||||||||||||||||
5. Earnings per ordinary share | ||||||||||
6 months ended 31 May 2016 | 6 months ended 31 May 2015 | Year ended 30 November 2015 | ||||||||
Profit after tax | Weighted average number of shares | Pence per share | Profit after tax | Weighted average number of shares | Pence per share | Profit after tax | Weighted average number of shares | Pence per share | ||
£000 | 000 | £000 | 000 | £000 | 000 | |||||
Basic earnings per ordinary share: | ||||||||||
Basic earnings | 4,620 | 80,954 | 5.7 | 7,358 | 80,913 | 9.1 | 14,962 | 80,954 | 18.5 | |
Adjustments (see note 1) | 540 | - | 0.7 | (2,500) | - | (3.1) | (1,848) | - | (2.3) | |
Adjusted basic earnings | 5,160 | 80,954 | 6.4 | 4,858 | 80,913 | 6.0 | 13,114 | 80,954 | 16.2 | |
Diluted earnings per ordinary share: | ||||||||||
Basic earnings | 4,620 | 80,954 | 5.7 | 7,358 | 80,913 | 9.1 | 14,962 | 80,954 | 18.5 | |
Effect of dilutive potential ordinary shares: share-based payment awards | - | 4,245 | (0.3) | - | 3,010 | (0.3) | - | 3,080 | (0.7) | |
Diluted earnings per ordinary share | 4,620 | 85,199 | 5.4 | 7,358 | 83,923 | 8.8 | 14,962 | 84,034 | 17.8 | |
Adjustments (see note 1) | 540 | - | (2,500) | - | (1,848) | - | ||||
Adjusted diluted earnings | 5,160 | 85,199 | 6.1 | 4,858 | 83,923 | 5.8 | 13,114 | 84,034 | 15.6 | |
6. Dividends |
| |||||
Amounts recognised as distributions to equity holders were: |
| |||||
6 months ended | 6 months ended | Year ended | ||||
31 May 2016 | 31 May 2015 | 30 November2015 | ||||
£000 | £000 | £000 | ||||
Final dividend for the year ended 30 November 2015 - 3.80p per share (2014: 3.04p) | 3,079 | 2,451 | 2,451 | |||
Interim dividend for the year ended 30 November 2015 - 1.20p per share | - | - | 973 | |||
3,079 | 2,451 | 3,424 | ||||
The proposed interim dividend of 1.50p per share was approved by the Board on 4 July 2016. The anticipated cost of £1,214,000 has not been included as a liability at 31 May 2016. |
| |||||
7. Cash and short-term deposits | ||||
31 May 2016 | 31 May 2015 | 30 November 2015 | ||
£000 | £000 | £000 | ||
Cash and cash equivalents | 26,118 | 37,103 | 42,320 | |
Short-term deposits | 6,000 | 6,000 | 6,000 | |
Cash and short-term deposits | 32,118 | 43,103 | 48,320 | |
8. Long-term contracts | ||||
31 May 2016 | 31 May 2015 | 30 November 2015 | ||
Note | £000 | £000 | £000 | |
Amounts due from contract customers included in trade and other receivables | 9 | 1 | 83 | 138 |
Amounts due to contract customers included in trade and other payables | 10 | (21,664) | (29,245) | (25,509) |
(21,663) | (29,162) | (25,371) | ||
9. Trade and other receivables | ||||
31 May 2016 | 31 May 2015 | 30 November 2015 | ||
£000 | £000 | £000 | ||
Current | ||||
Financial assets | ||||
Trade receivables | 18,319 | 17,264 | 17,303 | |
Long-term contract balances | 1 | 83 | 138 | |
Other receivables | 1,796 | 826 | 1,048 | |
Derivative financial instruments | - | 340 | 138 | |
Accrued income | 762 | 2,155 | 1,489 | |
20,878 | 20,668 | 20,116 | ||
Non-financial assets | ||||
Prepayments | 4,937 | 3,938 | 5,476 | |
25,815 | 24,606 | 25,592 | ||
Non-current | ||||
Financial assets | ||||
Other receivables | 1,166 | 1,172 | 1,168 |
10. Trade and other payables | |||||
31 May 2016 | 31 May 2015 | 30 November 2015 | |||
£000 | £000 | £000 | |||
Current | |||||
Financial liabilities | |||||
Trade payables | 11,707 | 9,748 | 11,518 | ||
Other payables | 315 | 1,053 | 761 | ||
Derivative financial instruments | - | 26 | 5 | ||
Accruals | 8,813 | 12,507 | 12,525 | ||
Obligations under finance leases | - | 106 | 40 | ||
20,835 | 23,440 | 24,849 | |||
Non-financial liabilities | |||||
Other taxation and social security | 4,006 | 4,059 | 4,010 | ||
Long-term contract balances | 21,664 | 29,245 | 25,509 | ||
Deferred income | 10,214 | 12,144 | 10,606 | ||
35,884 | 45,448 | 40,125 | |||
56,719 | 68,888 | 64,974 | |||
Non-current | |||||
Non-financial liabilities | |||||
Deferred income: | |||||
- due after one year but within two years | 422 | 667 | 472 | ||
- due after two years but within five years | 268 | 296 | 190 | ||
690 | 963 | 662 | |||
11. Provisions | |||||
Onerous lease and dilapidations | Employee-related restructuring | Other | Total | ||
£000 | £000 | £000 | £000 | ||
At 1 December 2015 | 3,579 | 184 | 1,178 | 4,941 | |
Utilisation of provisions | (306) | (94) | (381) | (781) | |
Release of provisions | (150) | - | (58) | (208) | |
Increase in provisions | - | - | 90 | 90 | |
Unwind of discount | 38 | - | - | 38 | |
At 31 May 2016 | 3,161 | 90 | 829 | 4,080 |
12. Defined Benefit Pension scheme
In the half-years ended 31 May 2016 and 31 May 2015 the financial position of the Group's Defined Benefit Pension Scheme has been rolled forward from the respective prior period end. The roll forward includes updating for actual investment returns for the periods; market derived discount rates on liabilities; and market derived inflation assumptions. Mortality assumptions have been held in line with those applied at 30 November 2015 of the preceding financial year.
The last triennial valuation at 31 May 2015 was used as the basis for the 30 November 2015 IAS 19 valuation and the roll-forward to 31 May 2016.
As at 31 May 2015, the triennial valuation for statutory funding purposes showed a deficit of £41.8 million (31 May 2012: £53.5 million). The Group agreed with the Scheme Trustees to repay this amount via deficit catch up payments of £4.0 million in December 2015 and £3.6 million per annum until 30 September 2024. In addition the Group pays the administration costs of the scheme including the Payment Protection Fund levy. In the half-year to 31 May 2016 total payments of £6.0 million were made under this arrangement.
In addition to the £4.0 million of catch up payments in December 2015, a further £4.0 million 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. As at 31 May 2016 £7.0 million remained unutilised in an escrow account and has been included within the calculation of the Scheme assets under IAS 19.
The Scheme is closed to future accrual of benefits.
13. Related party transactions
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation.
The Group encourages its Directors and employees to be Governors, Trustees or equivalent of educational establishments. The Group trades with these establishments in the normal course of its business.
Responsibility statement of the directors in respect of the interim financial statements
We confirm that to the best of our knowledge:
· the condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU;
· the interim management report includes a fair review of the information required by:
(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial period and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the period; and
(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial period and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.
By order of the Board,
Neil Martin Chief Financial Officer | |
4 July 2016
INDEPENDENT REVIEW REPORT TO RM PLC
Introduction
We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 31 May 2016 which comprises the Condensed Consolidated Income Statement, Condensed Consolidated Statement of Comprehensive Income, Condensed Consolidated Balance Sheet, Condensed Consolidated Cash Flow Statement, Condensed Consolidated Statement of Changes in Equity and the related explanatory notes. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
This report is made solely to the Company in accordance with the terms of our engagement. Our review has been undertaken so that we might state to the Company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company for our review work, for this report, or for the conclusions we have reached.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the DTR of the UK FCA.
As disclosed in note 2, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the EU. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 31 May 2016 is not prepared, in all material respects, in accordance with IAS 34 as adopted by the EU and the DTR of the UK FCA.
John Bennett
For and on behalf of KPMG LLPChartered AccountantsArlington Business Park, Theale
Reading RG7 4SD
4 July 2016