RM PLC Interim Results
Transparency directive : regulatory news
|
RM plc (RM.)
16 July 2024 RM plc Interim Results for the six months ended 31 May 2024 Strategic plan driving strong progress in contract wins and business transformation
RM plc (‘RM’), a leading global educational technology (‘EdTech’), digital learning and assessment solution provider, reports its interim results for the six months ended 31 May 2024.
Financial highlights
Overview
Good progress made against the strategic plan set out in March 2024
Current trading and outlook
Mark Cook, Chief Executive of RM, said: “Our first half performance reflects the extent of the transformation RM has undergone, and the action we have taken to set the business up for growth in the future. “I am delighted that during the period, International Baccalaureate has become a foundation customer of our Global Accreditation Platform for digital assessments, with a long-term strategic relationship. In addition, we have grown the pipeline of assessment platform customers by 70% to £170m, and the Assessment contracted order book by 50%. “Looking ahead, we see significant opportunities to expand our use of AI, both to create efficiencies within the business and to enhance solutions to drive improved outcomes for educators, assessors and learners with time-saving and adaptive tools. “This is an exciting period for RM, and although it will take time for the financial benefits to flow through, I am confident that our strategy for growth will deliver for all our stakeholders. I’d like to take this opportunity to thank everyone for their significant contribution and hard work.” Notes
A presentation by Management for investors and analysts is available on the company website at https://www.rmplc.com/.
Contacts: RM plc investorrelations@rm.com Mark Cook, Chief Executive Officer Simon Goodwin, Chief Financial Officer Fiona O’Nolan, Investor Relations
Headland Consultancy (Financial PR) +44 203 805 4822 Stephen Malthouse (smalthouse@headlandconsultancy.com) Chloe Francklin (cfrancklin@headlandconsultancy.com) Dan Mahoney (dmahoney@headlandconsultancy.com)
Notes to Editors: About RM RM was founded in 1973, with a mission to improve the educational outcomes of learners worldwide. More than fifty years on, we are a trusted global EdTech, digital learning and assessment solution provider, transforming learners, educators, and accreditors to be more productive, resilient, and sustainable. Our simple approach enables us to deliver best in class solutions to optimise accreditation outcome. RM is focused on delivering a consistently high-quality digital experience, acting as a trusted consultative partner to provide solutions that deliver real impact for learners worldwide. Our three businesses include:
Business review I am pleased with our performance in the first half, as RM executes its new Strategic Plan for revenue and profit growth, as announced at our full-year results in March, with a focus on securing longer-term contracts in our core Assessment business. This included the contract with International Baccalaureate to support their move towards fully digital assessment and accreditation processes across all geographies. The business continued to make good progress towards its financial and operational turnaround, and we saw improved margin performance across our customer facing services and products despite some pre-election uncertainty in UK school budget spending and the impact from the Consortium business which ceased trading in December 2023. We delivered a solid performance in the half following the decisive cost actions taken last year, which continue into FY24. Revenue (excluding Consortium) was £78.3m, down 3.2% (HY23: £80.9m), adjusted operating loss (including Consortium) was £(0.6)m, improved 86.3% (HY23: loss of £(4.5)m), and we grew total Group adjusted EBITDA by 227% to £1.9m (HY23: £(1.5)m). Revenue has been impacted by the continued pressure on UK schools’ budgets, with some pre-election uncertainty affecting our Technology and TTS UK businesses, and the changes in our revenue mix, moving towards recurring and longer-term contracts in our Assessment business, where new strategic contract wins in the first half will start to contribute to revenue over a longer time period as customers get access to, and utilise our Global Accreditation Platform. As a result, we now expect revenue for the full year to be broadly flat. Adjusted Operating Profit for the full year remains in line with expectations. Due to this change in the revenue mix, we are introducing a new Assessment revenue metric, with the contract order book at 31 May 2024 of £66.9m, an increase of over 50% since 30 November 2023, with good momentum in strategic contracts, cross selling to existing customers and customer renewals. The majority of this new revenue is derived from our own IP. In addition, we have a pipeline of active opportunities in Assessment valued at £170m, defined as opportunities where we are preferred bidder or in bid. This strengthening of revenue visibility is largely due to the commitment we have made to building a Global Accreditation Platform for our Assessment clients and our focus on building a stronger sales & marketing function facing into our customer groups. Strategic Plan update In March, we unveiled our Strategic Plan for growth, to capitalise on the significant future growth opportunities in the $222 billion Global EdTech market1, with our core ambition to support learners with a ‘lifetime of learning experience,’ enriching the lives of learners globally. We unveiled our intention to become a leading global EdTech company with significant investment in our Portfolio of Products and Solutions for the coming years. This new strategic and operational focus will enable RM to unlock its true value. Underpinning this transformation are a number of key priorities for FY24 and beyond to deliver on our intent to become a company that has 3-4 times the value that it has today, de-leveraged, a dividend paying company delivering double digit growth with EBITDA 5x that of FY23.
As we progress with the delivery of our new strategy, we are reviewing and refining our execution to best enable us to respond in the most agile way to the ever-changing EdTech and education landscape, an approach adopted to ensure we make the right decisions with the right information to create a sustainable business. We are taking our current global award-winning assessment solution and developing it to become a truly scalable, end-to-end digital accreditation platform. Core to the future of RM, are the digital solutions that support a learner’s assessment of progress towards an examination, as well as the accreditor’s ability to provide a platform to enable and enhance their examination assessment to take advantage of the education transformation towards fully on-screen digital examinations. As announced in May, RM signed a significant new contract expansion with International Baccalaureate (‘IB’) to deepen its longstanding partnership of more than 15 years. The new agreement includes the transformational delivery of IB’s Diploma and Career-Related Programmes as digital assessments, marking a significant milestone for both organisations. For RM, this project is fully aligned with its strategy to build a Global Accreditation Platform that enables the digital transformation towards fully digital on-screen examinations, which in turn will provide IB learners with enhanced opportunities throughout their programmes. In the first half of the financial year, our Assessment business commenced the platform development project with IB as the first foundational customer and we are forming a new development team who will be responsible for the new end-to-end Global Accreditation Platform. In addition to new strategic customer wins, our Assessment business has grown its contract order book to £66.9m as it continues to be the preferred partner of choice to global accreditors.
In the past RM has spoken about how we are organised rather than the customers we serve. We now have a single clear go to market approach; for our products and solutions, serving customers from early years to industry and professional qualifications with a clear and unified portfolio roadmap, a company ethos that is much simpler with a cleaner line of sight to our customers, and with a new target operating model framework. The design work to deliver this streamlined and customer-centric target operating model (TOM) commenced in the half, creating greater agility on completion. Aimed at Multi-Academy Trust schools, our Technology business launched NX-Generation Services - its first holistic IT services portfolio, which includes AI modules and which promotes continual improvement across technology, skills and security. NX-Generation Services will transform education systems, making them more efficient and equitable whilst unlocking cost and time savings for our clients.
Supporting this strategy, we have a Strategic Portfolio Roadmap of RM owned and developed IP; with products and solutions to be delivered to accreditors, educators, and directly to learners for adjacent solutions. A core component of the future RM portfolio is to build, at scale, our Global Accreditation Platform and we already have customers, with new, long-term commitments, as future users of the platform as part of our digital assessment solution. In June, we announced the launch of RM Consulting, a new business unit which will work with assessors and awarding bodies to help them define, design and deliver digital programmes, maximising the benefits realised for educators and learners alike, and allowing our clients to fully benefit from our well-established expertise in education and the use of technology. RM Consulting will form a key pillar of the Group’s growth strategy, working alongside, and being supported by the building of our Global Accreditation Platform. TTS launched 100 new products in our key strategic areas of Early Years, Special Educational Needs and Robotics during the half, with a further 50 to be released in H2. We have developed an RM AI large language model that has been implemented with a new AI / human interface, curriculum rich solution. This is now being used to generate content for the TTS website and optimises the linkage between over 8,000 products and the National Curriculum. Using this solution has significantly increased the efficiency of deploying National Curriculum enhanced product descriptions and by adding in National Curriculum content to the AI engine, we will be able to develop further product enhancements aimed at helping teachers improve their teaching resources e.g. subscription model for educators and learners to digital curriculum resources to supplement RM physical resources.
We are focused on building a stronger financial platform to support our strategic growth plans. In March our lenders gave us their support with an amended and extended banking agreement to 2026. We continue to work hard to deleverage the business through operating cash flow and will continue to seek to reduce this. During the period, we have identified £6.6m of annualised cost savings across a number of operational areas, following a review by our strengthened executive leadership team. We realised £1.8m of annualised savings relating to the closure of the Consortium business on top of the two-into-one distribution centre consolidation which realised £1.5m annualised savings (previously announced). We initiated further areas of efficiency within Assessment, Technology, Group Costs and further consolidated our property portfolio, realising other cost savings of £4.8m. Plans are still in progress to identify further annualised savings in the second half towards the stated target of £10m of annualised savings identified during the current financial year, bringing the total to £20m of annualised savings since I joined RM. Note:
Building a sustainable organisation Building RM into a sustainable organisation is a critical outcome of the successful execution of our strategic plans, and our people are fundamental to achieving our plans. Our new Chief People Officer and strengthened Senior Leadership team have made communication and engagement across the organisation a priority. We established a Workforce Engagement Group to coordinate initiatives with Board sponsorship. In our recent Employee Engagement Survey in May, where 84% of the organisation shared feedback with us, our score improved by 7pts to 63. The most significant increases in survey scores were linked to Executive Leadership keeping people informed and communicating an inspiring vision, as well as Company Confidence in that we are focused on long-term success and will have the potential to succeed over the next three years. We have optimised our office footprint – ‘mothballing’ our London office and a floor of the Head Office in Abingdon, bringing teams together and increasing collaboration, while also reflecting our hybrid working and we closed TTS’ distribution centre in Nottingham to increase efficiency. We have made good progress on our carbon reduction, with additional benefit from the reduced office footprint. In the first half we saw a 417 tonne reduction in our CO2 emissions, benefiting from our recently signed Zero Carbon Electricity contract. This represents a 27% reduction since FY23.
Financial Review Group financial performance
Divisional performance1,2
Group revenue from continuing operations decreased by 9.6% to £79.2m (HY23: £87.6m) reflecting the changing shape of revenue recognition in Assessment, for which revenue will be recognised in future periods, and we ceased trading in the Consortium business at the start of the period. Adjusted revenue excluding Consortium was down 3.2% to £78.3m from £80.9m in HY23. Adjusted operating loss from continuing operations improved by 86.3% to £(0.6)m (HY23: £(4.5)m) predominately driven by the lower operating loss for Consortium. RM TTS revenues decreased by 5.2% to £33.6m (HY23: £35.4m) driven by the timing of large International orders and revenue recognition. TTS International (down £1.9m) has built the pipeline for H2 with a growing order book that will convert to revenue in H2, producing growth on a year-on-year basis. While the UK education market continues to be challenging, the business outperformed the market and revenues in the UK were broadly flat year-on-year with market share up to 16.6% (HY23: 15.3%), despite heavy discounting by peers. Following the closure of the Consortium business, TTS has experienced a positive halo effect, benefiting from new customers buying Consortium-like products through TTS, then buying TTS products in addition. Divisional adjusted operating profit decreased to £0.1m (HY23: £1.7m) and adjusted operating margin decreased to 0.4% (HY23: 4.7%) driven predominantly by reduced revenues and due to TTS bearing the full cost of both operating warehouses, prior to the merger into a single warehouse late in H1. RM Consortium revenues decreased by 87.4% to £0.8m (HY23: £6.7m) following the decision to cease trading in December 2023. RM Assessment revenues were flat year on year at £19.7m (HY23: £19.7m) driven by natural declines in legacy projects coming to an end (£0.9m), offset by long term contract wins in both FY23 and HY24. These wins drove significant growth in the underlying business from contracted customers (+11%) with both UK (+17%) and International (+9%) revenue streams performing strongly. Divisional adjusted operating profit decreased to £2.3m (HY23: £3.2m) and adjusted operating margin decreased to 11.6% (HY23: 16.2%) driven by increased allocations of corporate overheads. RM Technology revenues decreased slightly to £25.1m down 2.4% (HY23: £25.7m) reflecting a further stabilisation of the business and the ongoing strategy of focusing on larger MAT customers as opposed to individual schools, within a market which continues to have budgetary challenge and uncertainty arising from the General Election. Divisional adjusted operating profit increased to £0.8m (HY23: loss of £0.5m) and adjusted operating margin increased to 3.2% (HY23: (1.8)%). Adjusted operating loss improved by 86.3% to £0.6m (HY23: loss of £4.5m) predominately driven by the closure of the Consortium business and higher underlying profitability of the ongoing business. Further good progress has been made on delivering the target £10m annualised savings, of which £6.6m has been identified and progressed in HY24, mainly from property rationalisation, cost reduction in Technology and Consortium, with the remaining savings to be determined by the end of the financial year. Adjusted EBITDA increased to £1.9m (HY23: £(1.5)m) reflecting improvement in our operational efficiency. Loss before tax from continuing operations grew to £6.8m, despite improvements in adjusted operating losses from the closure of the Consortium business and higher underlying profitability of the ongoing business, however the comparable loss of £4.4m in HY23 included £8.5m of income generated from the sale of IP addresses. Adjusted loss before tax was £3.7m (HY23: £6.7m), which was due to reduced adjusted operating losses in HY24 (see above), partly offset by higher finance costs. Statutory loss after tax was £6.8m (HY23: profit after tax of £8.2m), which was driven by £3.0m reduced adjusted loss before tax (see above) and the inclusion in HY23 of £8.5m of income generated from the sale of IP addresses and a £10.3m total gain on the sale of RM Integris and RM Finance. Adjusted diluted loss per share was (4.1)p (HY23: (6.7)p).
RM Consortium closure On 24 November 2023, the Group announced the decision to close the RM Consortium business, part of the RM Resources division, with trading ceasing on 8 December 2023 after which all unfulfilled orders were cancelled. The liquidation of RM Consortium inventories continues.
Adjusting items To provide an understanding of business performance excluding the effect of significant change programmes and material transactions, certain costs are identified as ‘adjustments’ to business performance as set out below:
1 Restructuring costs in HY24 relate to the implementation of the Group’s new Target Operating Model announced last year. The HY23 costs relate to previous initiatives. 2 During the six months ended 31 May 2024, the Group released £0.1m of onerous contract provisions previously recognised in the year ended 30 November 2023 as part of the £38.9m charge arising from the announcement of the closure of the Consortium business and the subsequent termination of the ERP replacement programme. 3 Independent Business Review related costs undertaken on behalf of the lenders and pension scheme. 4 The configuration and customisation costs relating to the ERP replacement programme incurred in the prior period, which were expensed in accordance with IAS 38: Intangible Assets and IFRIC agenda decisions but have been treated as adjusting items as they were a significant component of the Group’s historic warehouse strategy. These costs totalled £3.5m in 2023 based on the development work undertaken. 5 Income generated in 2023 following the completion of the sale of IP addresses totalling £8.5m. 6 During 2023, Group completed the disposal of the Integris and Finance business which generated a gain on sale of operations of £9.5m.
Inventory Inventories remained broadly flat at £14.4m (FY23: £14.0m) in line with revenues. Corporate Costs Corporate costs in the period were £3.5m, up from £2.8m in HY 2023, as a result of increased allocations for certain overhead functions, along with the cost associated with share plan awards for management. Taxation The total tax charge for the year for continuing operations was £0.0m (HY23: £0.9m). There are multiple tax effects influencing the tax rate in income, costs, deferred tax effects and the impact of no tax charge in the discontinued businesses. Cash flow, Net Debt and Lender Agreement The first half of the financial year is normally a working capital outflow period for the Group, with inventory purchases ahead of the second half peak selling period, with the majority of cash inflow from the examinations sessions also coming in the second half. This seasonality continued in the first half of 2024 with net cash outflow from operating activities of £0.4m (HY23: £18.1m) during the half. The operating cash outflow in HY23 was offset by proceeds from the sale of further surplus IPv4 assets (£8.5m) and the sale of RM Integris and RM Finance (£8.8m), which completed in the period. These sales were not repeated in HY24. As a result of this return to more normal seasonal working capital movements, we closed the period at £52.7m of net debt (HY23: £50.7m, FY23: £45.6m), in line with expectations. Since the year end, the Group has secured an agreement with Lenders, which extends the existing £70.0m bank facility to July 2026. The fixed charge over the shares of each of the obligor companies (except for RM plc), and the fixed and floating charge over all assets of the obligor companies granted previously to Lenders, remains in place. Under the amended facility covenants have been reset as follows:
Balance Sheet The Group had net assets of £12.2m at 31 May 2024 (FY23: £17.8m). The balance sheet includes non-current assets of £83.4m (FY23: £81.5m), of which £38.5m (FY23: £38.5m) is goodwill and £15.4m (FY23: £12.8m) relates to the Group’s defined benefit pension scheme which is discussed further below. Operating PPE, intangible and right-of-use assets total £27.1m (FY23: £27.8m) and includes acquired brands, customer relationships and Intellectual property as well as costs relating to the warehouse consolidation. Net current liabilities of £0.1m (FY23: net current assets of £8.9m) includes cash and cash equivalents of £nil (FY23: £8.1m) and bank overdrafts of £0.6m (FY23: £nil). Non-current liabilities of £71.2m (FY23: £72.6m) includes borrowings of £52.1m (FY23: £53.7m) and lease liabilities of £13.3m (FY23: £14.3m) which are predominately associated with the Group utilisation of properties. Dividend A condition of the previously extended and amended banking facility agreement remains the same, which was to restrict dividend distribution until the Company has reduced its net debt to LTM EBITDA (post IFRS 16) leverage to less than 1x for two consecutive quarters, and therefore we are not currently able to recommend the payment of a final dividend. The Board understands the importance of dividends to our shareholders and are clear that reinstating the dividend is a key milestone on our recovery path. Pension The Company operates two defined benefit pension schemes (“RM Scheme” and “CARE Scheme”) and participates in a third, multi-employer, defined benefit pension scheme (the “Platinum Scheme”). All schemes are now closed to future accrual of benefits. As set out in Note 10, the net IAS 19 surplus increased by £3.0m to £15.4m during the period with the RM Scheme, CARE Scheme and Platinum Scheme now in surplus. The increases were driven by returns on scheme assets and cash contributions, which more than offset the negative impact of higher price inflation assumptions. The 31 May 2021 triennial valuation for the RM and CARE schemes was completed in 2022, with the total scheme deficit reducing from £46.5m to £21.6m. The deficit recovery payments of £4.4m per annum will continue until the end of 2024, before reducing to £1.2m until the end of 2026 when recovery payments cease. Internal Controls During the year, the Group has continued to evolve its commitment to document and embed financial and governance controls. The project, will roll out across the key business processes of purchase-to-pay, order-to-cash, forecast-to-fulfil and record-to-report, and will document the end-to-end workstreams, with education and reference materials hosted in a dedicated portal, and collate control evidence. Additional resource has been added to the Internal Audit & Internal Controls team in order to carry out regularised walkthroughs of the processes and validate that controls are operating as designed, and the evidence of these controls is appropriate. As a by-product of providing greater assurance to management over the effectiveness of financial controls, the Group also expects, in time, to transition to a controls-based audit approach. The Audit and Risk Committee is being updated regularly with respect to progress of the project and ongoing improvements to the control environment. Where controls currently are not designed, implemented, or operating as effectively as they should, management have provided the Committee with assurance that appropriate mitigating actions are in place to conclude that these Financial Statements do not contain material errors. Going Concern In assessing the going concern position, the Directors have considered the balance sheet position as included on page 14 and the level of available finance not drawn down. The net current liabilities and adjusted net debt for the Group at 31 May 2024 were £0.1m and £52.7m respectively (30 November 2023: net current assets of £8.9m and £45.6m respectively). RM Group plc has a bank facility (“the facility”) which totalled £70.0m at the date of this report. The facility maturity was extended in March 2024 and is committed until July 2026. The terms of the revised facility are as disclosed in Note 31 of the 2023 Annual Report and Financial Statements. The debt facilities are subject to financial covenants. Details of these covenants can be found in the ‘Cash Flow, Net Debt and lender agreement’ section above. The Directors have prepared cash flow forecasts for the period to 12 months from the date of this report which indicate there is headroom for both covenants at each measurement period. A number of reasonably plausible downside scenario sensitivities have been assessed, alongside a review of mitigating actions which are within management’s control. If the downside scenarios are all applied together without mitigation actions, which management believe is unlikely, the covenants would remain complied with but without any headroom on the liquidity covenant in December 2024. Applying the mitigating actions the Directors are satisfied that the company would have sufficient funds to meet its liabilities as they fall due for at least 12 months from the date of this report. Further detail on the Directors assessment of going concern, including details in relation to the base assessment and the reasonably plausible downside scenario are set out in Note 1 to the financial statements below.
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 Board considers that the categories of principal risks and uncertainties which could have a material impact on the Group's performance in the remaining six months of the financial year remain in line with those stated on pages 38 to 41 of the 2023 Annual Report and Financial Statements, which is available at: https://www.rmplc.com/reports
Directors’ Responsibility Statement We confirm that to the best of our knowledge:
By order of the Board,
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTSCONDENSED CONSOLIDATED INCOME STATEMENT
The restatement is detailed in Note 12. CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME/(EXPENSE)
The restatement is detailed in Note 12. The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTSCONDENSED CONSOLIDATED BALANCE SHEET
The restatement is detailed in Note 12. The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTSCONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
1 The capital redemption reserve arose from the repurchase of issued share capital. It is not distributable. 2 The Group hedging reserve arises from cash flow hedges entered into by the Group. The reserve is not distributable as the gains and losses are unrealised. 3 The Group translation arises on consolidation from the unrealised movement of foreign exchange on the net assets of overseas entities. This reserve is not distributable. The restatement is detailed in Note 12. The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTSCONDENSED CONSOLIDATED CASH FLOW STATEMENT
The restatement is detailed in Note 12. The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS1. Basis of preparationThe unaudited condensed consolidated financial statements for the six months ended 31 May 2024:
The information relating to the year ended 30 November 2023 is extracted from the Group’s published Annual Report and Financial Statements for that year, which has been delivered to the Registrar of Companies, and on which the auditors’ report was unqualified and did not contain any emphasis of matter or statements under section 498(2) or 498(3) of the UK Companies Act 2006. Deloitte, the Company's auditors, have not undertaken an independent review of the condensed set of financial statements in this interim report, consistent with the same period in the prior year. The preparation of the unaudited condensed consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the end of the reporting period, and the reported amounts of revenue and expenses during the period. Actual results could vary from these estimates. These estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. 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. Risk management systems are monitored on an ongoing basis. The principal risks and uncertainties detailed within the Group’s Annual Report and Financial Statements for the year ended 30 November 2023 remain applicable. This is available from the RM website: www.rmplc.com. The principal risks and uncertainties that could have a significant effect on the Group’s financial performance, include the following:
Going concern The unaudited condensed consolidated financial statements for the six months ended 31 May 2024 have been prepared on a going concern basis which the Directors consider to be appropriate for the following reasons. At 31 May 2024, the Group had net debt of £52.7m (30 November 2023: £45.6m) and drawn facilities of £54.0m (30 November 2023: £55.0m). Average Group net debt over the six months to 31 May 2024 was £51.9m (year to 30 November 2023: £55.9m) with a maximum borrowings position of £57.4m (year to 30 November 2023: £64.8m). The Group has a £70.0m (2023: £70.0m) committed bank facility (“the facility”) at the date of this report. During the period the Group’s debt facilities were subject to financial covenants on a minimum rolling 12-month historical period (“LTM EBITDA”) which varied over time (quarter ended May 2024: requirement of £7.5m), a hard liquidity requirement to maintain net debt below £62.5m and a soft liquidity covenant of £57.5m. The soft liquidity covenant was a limit used for lender reporting, whereas breaching the hard liquidity covenant could constitute an event of default. Due to a deterioration of financial performance of the Consortium business, the Group breached the facility’s LTM EBITDA covenant from the third quarter of the financial year ended 30 November 2023. It successfully received waivers from its lenders for both the third and fourth quarters of the financial year. On 6 March 2024 the Group secured an extension of the existing £70.0m facility to July 2026. This agreement provides lenders a fixed and floating charge over the shares of all obligor companies (except for RM plc), and reset the covenants under the facility. For going concern purposes the Board have assessed the Group’s forecast performance against the following covenants:
The Directors of the Group have prepared cash flow forecasts for the period of 12 months after the date of this report which indicate that taking into account the aggregate impact of reasonably plausible downsides as discussed below, the Group is expected to comply with all debt covenants in place and will have sufficient funds to meet its liabilities as they fall due for at least 12 months from the date of this report. These cashflows utilise a base case and reasonably possible downside scenario case. For going concern purposes, the Group has assessed a base case scenario that assumes no significant downturn in UK or International markets from that experienced in the year to 30 November 2023 and assumes a broadly similar macroeconomic environment to that currently being experienced. The drawn facilities are expected to fluctuate over the period considered for going concern, but remain within the covenants, and are not anticipated to be fully repaid in this period. The Group is assuming revenue growth across all businesses in the base case, driven from the following key areas:
Operating profit margin growth in the base case includes annualised savings from restructuring programmes commenced in the period. As part of the Group's business planning process, the Directors of the Group have closely monitored the Group's financial forecasts, key uncertainties, and sensitivities. As part of this exercise, the Directors of the Group reviewed a number of scenarios, including the base case and reasonable worst-case downside scenarios. The aggregate impact of reasonably plausible downsides has been taken together to form a reasonable worst-case scenario that removes a number of the growth assumptions from the base case including:
The reasonable worst-case scenario has the following impact on the base case budget for the Group:
While the Directors of the Group believe that all reasonable worst-case downside scenarios occurring together is highly unlikely, the Group would continue to comply with covenants under the facility, albeit in December 2024 with no headroom on the hard liquidity covenant. The Directors of the Group’s assessment of the likelihood of a further downside scenario is remote. The Directors of the Group also considered a number of mitigating actions which could be enacted, if necessary, to ensure that reasonable headroom against the facility and associated covenants is maintained in all cases. These mitigating actions include not paying discretionary bonuses and extending payment terms with key suppliers, albeit at a much lower level for the latter than were taken in FY23. These are actions the Group has taken before and therefore the Directors are confident of their ability to deliver these mitigating actions if required. Having considered both the availability of financial facilities and the forecast liquidity and expected future covenant compliance, including the trading results of the Group between the date of the balance sheet and date of signature of this report, the Directors of the Group have a reasonable expectation that the Group has adequate resources to continue in operational existence and meet its liabilities as they fall due for a period of not less than 12 months from the date of approval of these financial statements. For this reason, the Group continues to adopt the going concern basis of accounting in preparing these financial statements. Alternative Performance Measures (APMs) In response to the Guidelines on APMs issued by the European Securities and Markets Authority (ESMA) and the Financial Reporting Council (FRC), additional information on the APMs used by the Group is provided below. The following APMs are used by the Group:
Further explanation of what each APM comprises and reconciliations between statutory reported measures and adjusted measures are shown in Note 4. The Board believes that presentation of the Group results in this way is relevant to an understanding of the Group’s financial performance (and that of each segment). Underlying performance excludes adjusted items which are identified by virtue of their size, nature and/or incidence. The treatment of adjusted items is applied consistently period on period. This presentation is consistent with the way that financial performance is measured by management, reported to the Board, the basis of financial measures for senior management’s compensation schemes and provides supplementary information that assists the user to understand the underlying financial performance, position and trends of the Group. The APMs used by the Group are not defined terms under IFRS and may therefore not be comparable with similarly titled measures reported by other companies. They are not intended to be a substitute for, or superior to, GAAP measures. All APMs relate to the current year results and comparative periods where provided. New accounting pronouncements adopted On 1 December 2023, the Group adopted certain new accounting policies, including IFRS 17: Insurance Contracts, Amendment to IAS 8: Definition of Accounting Estimates and Amendments to IAS 12: Deferred Tax Related to Assets and Liabilities arising from a Single Transaction, to comply with amendments to IFRS, none of which had a material impact on the consolidated results, financial position or cash flows of the Group. Further details are provided in the Group’s Annual Report and Financial Statements for the year ended 30 November 2023. Key sources of estimation uncertainty In applying the Group’s accounting policies the Directors are required to make estimates and assumptions. Actual results may differ from these estimates. The following are considered key sources of estimation uncertainty:
Critical accounting judgements In applying the Group’s accounting policies the Directors are required to make judgements and assumptions, actual results may differ from these. The following are considered key critical accounting judgments:
2. Operating SegmentsThe Group’s business is supplying products, services and solutions to the UK and international education markets. The Chief Executive Officer is the Chief Operating Decision Maker. The Chief Operating Decision Maker reviews segments at an adjusted operating profit level and adjustments are not allocated to segments. Information reported to the Group’s Chief Executive Officer for the purposes of resource allocation and assessment of segmental performance is focused on the nature of each type of activity. The Group was historically structured into three operating Divisions: RM Resources, RM Assessment and RM Technology, however, following the decision by management to separately monitor the results of the Consortium and TTS brands in June 2023, the previously reported RM Resources segment has been allocated between the RM TTS segment, which continues to be operated by the Group, and the RM Consortium segment which has ceased trading. Typically, two of the divisions are impacted by seasonality trends. RM TTS experiences increased revenues in March, June, July and October in line with customer financial and academic years. In RM Assessment scanning revenues are recognised over the period of the scanning activity and create seasonality depending on the timing of exam sessions and the number and type of examinations being sat. UK government assessment scanning revenues are spread typically between May to July. This Segmental analysis shows the result 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
1 Included in UK are International Sales via UK Distributors of £542,000.
1 Included in UK are International Sales via UK Distributors of £315,000. 2 The restatement is detailed in Note 12. In addition, following the decision by management to separately monitor the results of Consortium and TTS brands in June 2023, the previously reported RM Resources segment has been allocated between the RM TTS segment, which continues to be operated by the Group, and the RM Consortium segment which has ceased trading. Prior year comparatives have been restated accordingly.
Segmental assets
3. Revenue
4. Alternative Performance MeasuresAs set out in Note 1, the Group uses alternative performance measures that the Board believes reflects the trading performance of the Group, and it is these adjusted measures that the Board use as the primary measures of performance measurement during the year.
The restatement is detailed in Note 12. Adjusted items: These are items which are identified by virtue of either their size or their nature to be important to understanding the performance of the business including the comparability of the results year on year. These items can include, but are not restricted to, impairment; gain on held-for-sale assets and related transaction costs; changes in the provision for exceptional property costs; the gain/loss on sale of operations; and restructuring and acquisition costs. On 24 November 2023, the Group announced the closure of the RM Consortium business and the consequent termination of the Group’s ERP programme which had formed part of the Group's 2018 warehouse strategy to transfer all its previous warehouse operations into one new automated warehouse together with an interlinked ERP solution which was planned to be rolled out to the whole Group. The Group believes that the size, complexity and number of unusual costs associated with these developments, were material to the understanding of the trading performance of the business including the comparability of results year-on-year. As a result, all significant costs relating to these developments have also been treated as an adjustment to profit, consistently period to period. The amortisation of acquisition related intangible assets is an annual recurring adjustment to profit that is a non-cash charge arising from historical investing activities. This adjustment is made to clearly highlight the amounts relating to historical acquisitions and is in common with peer companies across the technology sector. The income generated from the use of these intangible assets is, however, included in the adjusted profit measures. The following costs and income were identified as adjusted items:
Adjusted net debt of £52.7m (30 November 2023: £45.6m) is the total of borrowings less capitalised fees of £52.1m (30 November 2023: £53.7m), bank overdraft of £0.6m (30 November 2023: £nil) and cash at bank of £nil (30 November 2023: £8.1m). Lease liabilities of £15.6m (30 November 2023: £16.5m) are excluded from this measure as they are not included in the measurement of adjusted net debt for the purpose of covenant calculations. Adjusted net debt is a key metric measured by management as it is used in covenant calculations. The above adjustments have the following impact on key metrics:
The restatement is detailed in Note 12. Adjusted operating profit is defined as the profit from continuing operations before excluding the adjustments referred to above. Operating margin is defined as the operating profit as a percentage of revenue. 5. Tax
The restatement is detailed in Note 12. For the interim periods, the ETR is calculated by applying a forecast full year ETR to the interim results. The standard rate of corporation tax in the UK for the period is 25% (2023: 25%).
6. Discontinuing Operations and Assets held for saleDiscontinued operations On 31 May 2023, the Group completed the sale of the RM Integris and RM Finance Businesses and related assets, to The Key Support Services Limited. Total consideration for the sale was £16.0 million on a cash free/debt free basis of which £12.0 million was received on completion subject to at £3.3m normalised working capital adjustment and £4.0m receivable subject to satisfaction of certain conditions, including those related to competition clearance in cash, of which £3.5m was received in June 2023 and £0.5m was received in July 2023. Income statement analysis of discontinued operations
Gain on disposal of discontinued operations
Profit for the year from discontinued operations
Total comprehensive income for the financial year from discontinued operations
7. Earnings per share
The restatement is detailed in Note 12. In accordance with IAS 33 the diluted loss per share is corrected on the face of the Income Statement to reflect the undiluted figure as a loss should not be diluted. 8. Borrowings
At 31 May 2024, the Group had drawn down £54.0m (30 November 2023: £55.0m) of the £70.0m committed revolving credit facility, which expires in July 2026. For further details of committed revolving credit facility please see Note 31 in the Group’s Annual Report and Financial Statements for the year ended 30 November 2023.
9. Provisions
Disclosure of provisions
10. Defined benefit pension schemesThere are three defined benefit pension schemes: The Research Machines plc 1988 Pension Scheme (RM Scheme), The Consortium CARE Scheme (CARE Scheme) and The Prudential Platinum Pension (Platinum Scheme). In addition, the Group has TUPE employees who retain membership of Local Government Pension Schemes, many of which have a customer contractual guarantee whereby the Group reimburses for any IAS 19 deficit when it ceases to be a participating employer and are therefore accounted for as a defined benefit arrangement, with actuarial movements recognised through Other Comprehensive Income. For further details of each of these schemes please see Note 26 in the Group’s Annual Report and Financial Statements for the year ended 30 November 2023. Reconciliation of net defined benefit obligation
Significant actuarial assumptions
The Group has agreed with the RM Scheme Trustees that it will make catch-up payments of £3,200,000 per annum until 31 December 2024 and with the CARE Scheme Trustees that it will make catch-up payments of £1,200,000 per annum until 31 December 2026. During the year ended 30 November 2023, the Group agreed with the Trustees of the RM and CARE Schemes to provide the Schemes with a second ranking fixed and floating charge over the shares of all obligor companies (except for RM plc) and a payment of £0.5m each at bi-annual intervals starting on August 2023 which is contingent upon the adjusted debt leverage ratio being less than 3.2x at that date. No such payments were made in August 2023 or February 2024. 11. Related Party TransactionsTransactions 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. The sole significant related party transaction relates to the provision of contract staff by Searchlight Business Services Limited, of which Mark Cook (the Chief Executive Officer of RM plc) is non-Executive Chairman. In the six months to 31 May 2024 the Group purchased services totalling £0.3m. Mr Cook is not involved in the commercial discussions relating to this supply. 12. Restatement for accounting error and classificationThe comparative Interim Results for the six months ended 31 May 2023 have been restated to reflect a prior period accounting error relating to the treatment of £1,342,000 of independent business review costs which were previously expensed to operating profit (and included in adjustments to operating expenses in the Group’s alternative performance measures as set out in Note 4), but which should instead have been capitalised as part of the related borrowing facility in accordance with IFRS. This prior period year accounting error was fully corrected in the results for the year ended 30 November 2023. In addition:
These adjustments have the following impact on the primary statements for the six months ended 31 May 2023: Condensed Consolidated Income Statement
Condensed Consolidated Statement of Comprehensive Income
Condensed Consolidated Balance Sheet
Condensed Consolidated Cash Flow Statement
13. Post balance sheet eventsThere are no post balance sheet events.
Dissemination of a Regulatory Announcement, transmitted by EQS Group. The issuer is solely responsible for the content of this announcement. |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ISIN: | GB00BJT0FF39 |
| Category Code: | IR |
| TIDM: | RM. |
| LEI Code: | 2138005RKUCIEKLXWM61 |
| OAM Categories: | 1.2. Half yearly financial reports and audit reports/limited reviews |
| Sequence No.: | 334245 |
| EQS News ID: | 1946637 |
| End of Announcement | EQS News Service |
|
|
source : webdisclosure.com