TIDMRM.
RNS Number : 1819S
RM PLC
07 July 2020
7 July 2020
RM plc
Interim results for the period ended 31 May 2020
Resilient response in supporting the education system
RM plc ("RM"), a leading supplier of technology and resources to
the education sector, reports its interim results for the period
ending 31 May 2020.
HIGHLIGHTS
-- Positive Q1 offset by COVID-19 dominated Q2 as improving
momentum was impacted by school closures and exam cancellations
-- Revenues 17% lower and adjusted operating profits reduced by
57%; largely a consequence of the reduction in RM Resources which
saw year on year Q2 sales decline 48%; RM Results and RM Education
were down by 32% and 8% in Q2 respectively
-- Net debt of GBP14m vs. GBP21m as at same period last year
benefitting from cash conservation actions
-- No interim dividend is proposed
-- Trading has begun to improve as education systems start to reopen
2020 2019 Change %
---------------------------------- ----------- ----------- ----------
Revenue GBP79.3m GBP95.5m -17.0%
Adjusted* operating profit GBP4.2m GBP9.7m -56.9%
Statutory operating profit GBP2.8m GBP8.8m -67.7%
Adjusted* operating profit
margin 5.3% 10.2% -4.9pp
Adjusted* diluted EPS 3.2p 9.1p -64.8%
Interim dividend 0.0p 2.0p -100%
Net debt GBP14.4m GBP21.2m
Pension deficit GBP23.3m GBP17.8m
---------------------------------- ----------- ----------- ----------
The results for the first 6 months of 2020 have been prepared
under the IFRS16 accounting standard. The results for the
comparative period for first 6 months of 2019 have not
been restated. The impact of IFRS16 on the adjusted and
statutory operating profit in 2020 is GBP0.1m.
* Throughout this statement, adjusted profit and 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. These include the amortisation of
acquisition related intangible assets; acquisition costs,
impairment, exceptional property related costs and exceptional
sale of assets.
David Brooks, Chief Executive of RM, said:
"In Q1, going into the COVID-19 crisis, RM was trading as
expected. Through Q2, trading was significantly impacted as schools
and nurseries closed. I would like to take this opportunity to
thank our employees and customers who have shown real ingenuity and
resilience through these difficult months. As education systems
start to reopen, we are seeing trading improve and RM will look to
play a key role in helping our customers' transition to new ways of
working."
Presentation and live webcast details
A presentation for analysts and investors will be held today at
9.00am. The presentation will be accessible via the following link:
https://www.investis-live.com/rmplc/5ef30ed17b676e1e00c47cc4/zpzp
Contacts:
RM plc
David Brooks, Chief Executive
Officer
Neil Martin, Chief Financial
Officer 08450 700 300
Headland Consultancy (PR
adviser to RM)
Stephen Malthouse (smalthouse@headlandconsultancy.com) 07734 956201
Abena Affum (aaffum@headlandconsultancy.com) 07799 088801
Notes to Editors:
RM is a UK listed Education technology company, providing
market-leading products and services to educational institutions,
exam bodies and international governments which improve, simplify
and support education and learning.
Technology is transforming Education, and RM is well positioned
to capitalise on this through its three divisions:
-- RM Resources is the established provider of education
resources for early years, primary schools and secondary schools
across the UK and internationally. Our trusted brands, TTS and
Consortium, develop and supply resources to help bring the
curriculum to life for teachers and students across over 80
different countries.
-- RM Results is a leading provider of digital assessment
services, enabling e-marking, e-testing and the management and
analysis of educational data. RM Results typically marks
approximately 200 million exam pages, working with exam awarding
bodies, universities and governments.
-- RM Education is a market-leading supplier of ICT software,
technology and services in the UK. It helps schools save time and
money and enables them to enhance the impact of technology on
teaching and learning.
Response to COVID-19
Below is an overview of our response to the pandemic which has
been structured in three phases:
1. Plan and Stabilise
We enacted business continuity plans to allow all employees who
could do their job remotely to work from home. We ensured employees
going to sites e.g. distribution centre workers, could do so in a
safe environment and implemented actions to conserve cash.
2. Run Lean
To continue to deliver to our customers while managing our cost
base, we stopped permanent staff recruitment, brought down
temporary staffing levels, and the Board and Executive team reduced
salaries by up to 25%. We selectively used the UK government
furlough job retention scheme, primarily in RM Resources, where
trading was most materially impacted. We stopped use of the scheme
on 1 June, when schools reopened, and as a result of improved
trading we expect to repay these receipts to the government in this
financial year. All our employees on furlough were paid 100% of
their salary.
3. Recovery
As schools and nurseries start to re-open for more pupils we are
seeing an increase in demand for our products and services. We have
established a team to focus on how our end markets and customers
will change as a result of the COVID-19 pandemic.
Stress tests
Throughout the evolving nature of the pandemic we have regularly
reviewed and adapted the stress tests to be applied to ensure that
we have appropriate measures in place to secure our financial and
operational resilience. As a result, we have taken actions to
balance the financial viability of the organisation with its
long-term success and have ensured appropriate financial resilience
against these stress test scenarios. Nevertheless, due to the
uncertainty, we have increased net debt leverage covenants for
2020.
Financial Results
RM plc
Interim results for the 6 months ended 31 May 2020
Results
6 months to 6 months 12 months
May 2020 to May 2019 to November
2019
----------------------------- ------------ ------------- -------------
Revenue GBP79.3m GBP95.5m GBP223.8m
Adjusted* operating profit GBP4.2m GBP9.7m GBP27.6m
Adjusted* profit before GBP3.5m GBP9.3m GBP26.6m
tax
Adjusted* profit after GBP2.7m GBP7.5m GBP21.9m
tax
Statutory profit after GBP1.5m GBP6.8m GBP19.1m
tax
Adjusted* diluted Earnings
Per Share 3.2p 9.1p 26.4p
Diluted Earnings Per Share 1.8p 8.2p 23.0p
Ordinary dividend per share 0.0p 2.0p 2.0p
Net debt GBP14.4m GBP21.2m (GBP15.0m)
----------------------------- ------------ ------------- -------------
RM's financial results have been materially impacted by the
COVID-19 crisis. Revenue has decreased by 17% on prior year to
GBP79.3m (H1 2019: GBP95.5m) primarily driven by trading in RM
Resources on the back of schools and nurseries shutting in response
to COVID-19. Q1 trading showed positive momentum with Group revenue
up 2% year on year. However, trading in Q2 (March-May) was down by
33% as RM Resources revenue decreased by 48%.
Adjusted operating profit decreased by 57% to GBP4.2m driven by
revenue decline in RM Resources and the impact of cancelled exams
in RM Results.
The organisation undertook a number of cost actions to mitigate
the impact of the revenue reduction. These included the reduction
of temporary staff, freezing permanent hiring, reductions in senior
management pay, removal of the 2020 annual bonus accrual, selective
utilisation of the government job retention scheme and reductions
in discretionary spend. These actions, alongside a restructuring
that took place in December 2019, helped reduce staff-related and
marketing cost in the first half by GBP7m versus the previous year.
These have been partially offset by the SoNET acquisition which was
not in the previous year, charges associated with an increase in
our customer credit risk and some increased property and IT
costs.
Adjusted profit before tax was GBP3.5m, a decrease of 62% on H1
2019 and diluted earnings per share decreased to 1.8p (2019:
8.2p).
Net debt at the half year was GBP14m which has improved by GBP7m
compared with May 2019. This position has benefited by GBP16m as a
result of a number of activities to conserve cash as a result of
the uncertainty caused by COVID-19. Actions taken included pausing
capital programmes, deferral of certain tax payments, an agreed
payment holiday on deficit repair payments associated with the
defined benefit pension schemes and cancellation of the 2019 final
dividend.
Net debt has also benefited from the sale of two assets (a
surplus property and an investment in a learning education
partnership vehicle as part of the Building Schools for the Future
programme) generating sales proceeds of GBP4.5m. These transactions
generated a profit on sale of GBP1.3m which was treated as
exceptional and not included in adjusted operating profit.
We have a revolving credit facility of GBP70m and we agreed an
increase in the net debt leverage covenant from 2.5x to 3.5x for
2020.
Divisional Summaries
RM Resources
This division provides education resources and supplies used in
schools and nurseries in the UK and internationally. Products
supplied are a mix of own designed items, own branded and third
party products.
6 months 6 months 12 months
to May 2020 to May 2019 to November
2019
-------------------------------- ------------- ------------- -------------
RM Resources revenue GBP35.1m GBP49.2m GBP114.5m
RM Resources adjusted operating GBP(2.1)m GBP3.1m GBP13.7m
profit / (loss)
-------------------------------- ------------- ------------- -------------
RM Resources is the division that has been most impacted by
school and nursery closures put in place to stop the spread of
COVID-19. Revenue decreased by 29% compared to H1 2019. At the end
of Q1 trading in the UK was flat on last year but offset by
international sales which were down primarily due to the absence of
a large order in South America in Q1 2019 that was not repeated. In
Q2, revenue decreased by 48% as the lock-down came into effect.
The division made an adjusted operating loss of GBP2.1m driven
by the sharpness and pace of the revenue decline limiting cost
mitigation actions as well as a GBP1m charge associated with the
ageing of our receivables and credit position of some customers,
most notably international distributors.
In March we paused the capital spend associated with the
programme to consolidate our four distribution centres into a
single automated facility. The construction of the building
continues, under contract, with limited delays currently
expected.
During the period, we sold the warehouse that was exited in Q1
which generated sales proceeds of GBP2.9m and a profit on sale of
GBP0.7m. The profit was treated as exceptional and is not included
in the adjusted operating profit.
With schools and nurseries opening to more pupils we have seen
an increase in demand in recent weeks. However, we still expect
trading in the UK and internationally to be negatively impacted
through the second half of 2020 and into 2021 as schools and
nurseries navigate the journey to full capacity.
RM Results
RM Results provides IT software and end-to-end digital
assessment services to enable online exam marking, online testing
and the management and analysis of educational data. Customers
include government ministries, exam boards and professional
awarding bodies in the UK and overseas.
6 months 6 months 12 months
to May 2020 to May 2019 to November
2019
------------------------------ ------------- ------------- -------------
RM Results revenue GBP15.1m GBP16.8m GBP37.7m
RM Results adjusted operating GBP3.0m GBP4.5m GBP8.7m
profit
------------------------------ ------------- ------------- -------------
Revenue decreased by 10% to GBP15.1m (H1 2019: GBP16.8m) driven
primarily by the cancellation of many exams this summer. Q1 revenue
was up by 25% on the same period last year benefitting from new
client volume increases and the acquisition of SoNET in the second
half of 2019. Q2 revenue was down by 32% impacted by COVID-19 which
required the cancellation or deferral of exams around the
world.
The development of the sales pipeline has been significantly
restricted by COVID-19 disruption and travel restrictions. That
said, during the period we won a new contract with the
International Association for the Evaluation of Educational
Achievement (IEA) to deliver on-screening testing technology for
their Trends in International Mathematics and Science Study (TIMSS)
programme across c.70 countries.
Exam awarding bodies are currently planning how to deliver
assessments in the autumn and winter as well as building resilience
into their processes and systems to ensure they can provide exams
in 2021.
RM Education
RM Education provides ICT software and services to UK schools
and colleges.
6 months 6 months 12 months
to May 2020 to May 2019 to November
2019
-------------------------------- ------------- ------------- -------------
RM Education revenue GBP29.1m GBP29.5m GBP71.6m
RM Education adjusted operating GBP4.9m GBP4.3m GBP10.4m
profit
-------------------------------- ------------- ------------- -------------
Revenue remained relatively stable in the first half compared
with the same period last year, decreasing less than 2% reflecting
the recurring revenue nature of software and services. The division
provided technology support for schools open for the pupils of key
workers and supporting remote learning.
Profit increased by 12% driven by the stable revenue and a cost
saving programme planned in 2019 and initiated at the start of this
financial year.
Despite the challenges to progress key sales activities, two
Multi Academy Trust wins were achieved in the first half covering
IT programmes across 14 schools.
The blended approach of in-school and remote learning for pupils
looks likely to continue as COVID-19 remains a factor. RM Education
is well positioned to technically support UK schools in the
transition to, and successful delivery of, this new model for
teaching and learning.
Corporate Costs
Corporate costs have been reduced compared with the prior year
at GBP1.6m (H1 2019: GBP2.2m), primarily as a result of lower
staff-related costs. These corporate costs include public company
and management costs, operating costs associated with the delivery
of the group-wide systems replacement project that are not
capitalised, costs associated with administration and management of
the defined benefit pension schemes and share based payment charges
for the Group.
Pension
The IAS 19 deficit relating to RM's defined benefit pension
schemes has increased to GBP23.3m (31 May 2019: GBP17.8m; 30
November 2019: GBP6.0m). This increase has been driven primarily by
a reduction in the discount rate which is based on corporate bond
yields partially offset by favourable movements in inflation
rates.
The current deficit recovery plans include payments of GBP4.1m
per annum.
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. Risk management systems are monitored on an ongoing
basis. The principal risks and uncertainties detailed within the
Group's 2019 Annual Report remain applicable. This is available
from the RM website: www.rmplc.com. In summary, those risks relate
to public policy, education practice, the impact of UK's exit from
the European Union, operational execution, data and business
continuity, people, integration risk, innovation, dependence on key
contracts, pensions and dividends.
Since the year end the COVID-19 pandemic has impacted the Group
primarily as a result of UK Government announcing the widespread
closure of schools and the cancellation of summer exam sessions.
The business continuity risks of our customers that could lead to
extensive school closures and reduced examinations, such as a
pandemic, is now considered as an additional risk. The risk impacts
our divisions in different ways, with RM Education continuing to
provide software and services to UK schools but with reduced
technology sales, RM Results providing digital assessment solutions
for International awarding bodies but with reduced volumes and RM
Resources has traded at lower volumes. RM's response is managed
through an Executive management crisis response committee which
manages and coordinates actions appropriate to the
circumstances.
Dividend
The Board has decided not to pay an interim dividend in light of
the current uncertainty.
Outlook
While COVID-19 continues to impact education systems in the UK
and internationally, the demand for our products and services is
difficult to predict. During this time, we will need to be flexible
in managing costs and will need to keep operating models under
continuous review.
Notwithstanding the continued uncertainty, RM remains in a
strong financial position. Trading has improved in recent weeks as
schools and nurseries start to welcome back pupils and we expect to
remain profitable in the second half of the year. We will restart
our two major capital programmes to consolidate our distribution
centres and replace many of our IT systems. Both of these
programmes are critical to the long term success of RM.
The move to technology under-pinning remote and blended learning
and, in time, more on-screen assessments, will accelerate the
digitisation of the education sector. Over the long term this will
be a positive for our business.
Condensed Consolidated Income Statement
For the 6 months ended 31 May 2020
6 months ended 31 6 months ended 31 Year ended 30 November
May 2020 May 2019 2019
Adjusted Adjustments Total Adjusted Adjustments Total Adjusted Adjustments Total
Note GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------ ----- --------- ------------ ---------- --------- ------------ ---------- ---------- ------------ ----------
Revenue 79,267 - 79,267 95,489 - 95,489 223,765 - 223,765
Cost
of sales (45,732) - (45,732) (54,749) - (54,749) (132,140) - (132,140)
Gross
profit 33,535 - 33,535 40,740 - 40,740 91,625 - 91,625
Operating
expenses 4 (29,337) (1,349) (30,686) (31,010) (896) (31,906) (63,985) (3,462) (67,447)
Profit
from
operations 4,198 (1,349) 2,849 9,730 (896) 8,834 27,640 (3,462) 24,178
Other
income 8 - 8 159 - 159 153 - 153
Finance
costs (659) - (659) (578) (8) (586) (1,155) (8) (1,163)
------------ ----- --------- ------------ ---------- --------- ------------ ---------- ---------- ------------ ----------
Profit
before
tax 3,547 (1,349) 2,198 9,311 (904) 8,407 26,638 (3,470) 23,168
Tax 5 (841) 151 (690) (1,767) 157 (1,610) (4,746) 640 (4,106)
------------ ----- --------- ------------ ---------- --------- ------------ ---------- ---------- ------------ ----------
Profit
for the
period 2,706 (1,198) 1,508 7,544 (747) 6,797 21,892 (2,830) 19,062
------------ ----- --------- ------------ ---------- --------- ------------ ---------- ---------- ------------ ----------
Earnings
per
ordinary
share: 6
Basic 3.3p 1.8p 9.2p 8.3p 26.6p 23.2p
Diluted 3.2p 1.8p 9.1p 8.2p 26.4p 23.0p
Paid
and
proposed
dividends
per share: 7
Interim - 2.0p 2.0p
Final - - -
The results for the first 6 months of 2020 have been prepared
under the IFRS16 accounting standard. The results for the
comparative period for first 6 months of 2019 have not been
restated. The accompanying notes form part of these financial
statements
All amounts were derived from continuing operations.
Condensed Consolidated Statement of Comprehensive Income
For the 6 months ended 31 May 2020
6 months 6 months Year ended
ended 31 ended 31 30 November
May 2020 May 2019 2019
GBP000 GBP000 GBP000
-------------------------------------------- ---------- ---------- -------------
Profit for the period 1,508 6,797 19,062
Items that will not be reclassified
subsequently to profit or loss:
Defined benefit pension scheme
remeasurements (18,111) (17,520) (8,033)
Tax on items that will not be reclassified
subsequently to profit or loss 3,147 3,031 1,418
Items that are or may be reclassified
subsequently to profit or loss:
Fair value gain/ (loss) on hedged
instruments 393 106 (806)
Exchange (loss)/ gain on translation
of overseas operations (99) 29 (211)
Other comprehensive (expense) (14,670) (14,354) (7,632)
--------------------------------------------- ---------- ---------- -------------
Total comprehensive (expense)/income (13,162) (7,557) 11,430
--------------------------------------------- ---------- ---------- -------------
Condensed Consolidated Balance Sheet
At 31 May 2020
Note 31 May 31 May 30 November
2020 2019 2019
-------------------------------- -----
GBP000 GBP000 GBP000
-------------------------------- ----- ---------- ---------- ------------
Non-current assets
Goodwill 49,232 45,164 49,107
Other intangible assets 22,697 18,600 23,274
Property, plant and equipment 5,558 10,253 9,183
Right of use asset 18 6,011 - -
Defined Benefit Pension
Scheme Surplus 627 710 976
Other receivables 294 922 939
Contract fulfilment assets 11 2,729 1,543 2,193
Deferred tax assets 6,512 5,724 3,457
-------------------------------- ----- ---------- ---------- ------------
93,660 82,916 89,129
Current assets
Inventories 22,557 24,971 22,151
Trade and other receivables 8 24,589 38,561 31,238
Contract fulfilment assets 11 1,124 708 844
Held for Sale Asset 12 3,065 - 1,428
Corporation tax assets 1,810 409 382
Cash and short-term deposits 3,945 1,748 5,534
-------------------------------- ----- ---------- ---------- ------------
57,090 66,397 61,577
Total assets 3 150,750 149,313 150,706
-------------------------------- ----- ---------- ---------- ------------
Current liabilities
Trade and other payables 9 (45,136) (53,418) (51,231)
Lease liabilities (1,582) - -
Tax liabilities (88) (469) (117)
Provisions 13 (1,169) (6,383) (1,585)
Overdraft (2,635) (2,255) (4,006)
-------------------------------- ----- ---------- ---------- ------------
(50,610) (62,525) (56,939)
Net current assets 6,480 3,872 4,638
-------------------------------- ----- ---------- ---------- ------------
Non-current liabilities
Other payables 9 (3,105) (2,382) (3,483)
Lease liabilities (4,429) - -
Provisions 13 (2,594) (798) (3,868)
Deferred tax liability (3,525) (2,684) (3,356)
Defined Benefit Pension
Scheme obligation 14 (23,953) (18,471) (6,951)
Borrowings 10 (15,697) (20,665) (16,534)
-------------------------------- ----- ---------- ---------- ------------
(53,303) (45,000) (34,192)
Total liabilities (103,913) (107,525) (91,131)
-------------------------------- ----- ---------- ---------- ------------
Net assets 46,837 41,788 59,575
-------------------------------- ----- ---------- ---------- ------------
Equity attributable to shareholders
Share capital 1,917 1,917 1,917
Share premium account 27,080 27,080 27,080
Own shares (982) (1,044) (1,007)
Capital redemption reserve 94 94 94
Hedging reserve (18) 501 (411)
Translation reserve (596) (257) (497)
Retained earnings 19,342 13,497 32,399
-------------------------------- ----- ---------- ---------- ------------
Total equity 46,837 41,788 59,575
-------------------------------- ----- ---------- ---------- ------------
Condensed Consolidated Statement of Changes in Equity
for the 6 Share Share Own Capital Hedging Translation Retained Total
months ended capital premium shares redemption reserve reserve earnings
31 May 2020 reserve
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
--------------------- --------- --------- -------- ------------ --------- ------------ ---------- ---------
At 1 December
2019 1,917 27,080 (1,007) 94 (411) (497) 32,399 59,575
Profit for
the period - - - - - - 1,508 1,508
Other comprehensive
income/(expense) - - - - 393 (99) (14,964) (14,670)
---------------------- --------- --------- -------- ------------ --------- ------------ ---------- ---------
Total comprehensive
income/(expense) - - - - 393 (99) (13,456) (13,162)
Transactions
with owners of
the Company:
Share-based
payment awards
exercised - - 25 - - - (25) -
Share-based payment
fair value
adjustments - - - - - - 424 424
---------------------- --------- --------- -------- ------------ --------- ------------ ---------- ---------
At 31 May
2020 1,917 27,080 (982) 94 (18) (596) 19,342 46,837
---------------------- --------- --------- -------- ------------ --------- ------------ ---------- ---------
for the 6 months Share Share Own Capital Hedging Translation Retained Total
ended 31 May capital premium shares redemption reserve reserve earnings
2019 reserve
Note GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------ ----- --------- --------- -------- ----------- --------- ------------ ---------- ---------
At 1 December
2018 as reported 1,917 27,080 (1,423) 94 395 (286) 27,215 54,992
IFRS15
restatement - - - - - - (1,185) (1,185)
------------------ ----- --------- --------- -------- ----------- --------- ------------ ---------- ---------
At 1 December
2018 1,917 27,080 (1,423) 94 395 (286) 26,030 53,807
Profit for
the period - - - - - - 6,797 6,797
Other
comprehensive
income/(expense) - - - - 106 29 (14,489) (14,354)
------------------ ----- --------- --------- -------- ----------- --------- ------------ ----------
Total
comprehensive
income/(expense) - - - - 106 29 (7,692) (7,557)
Transactions with
owners of the Company:
Share-based
payment awards
exercised - - 379 - - - (379) -
Share-based payment
fair value adjustments - - - - - - 236 236
Ordinary
dividends
paid 7 - - - - - - (4,698) (4,698)
------------------ ----- --------- --------- -------- ----------- --------- ------------ ---------- ---------
At 31 May 2019 1,917 27,080 (1,044) 94 501 (257) 13,497 41,788
------------------ ----- --------- --------- -------- ----------- --------- ------------ ---------- ---------
for the year Share Share Own Capital Hedging Translation Retained Total
ended capital premium shares redemption reserve reserve earnings
30 November 2019 reserve
Note GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------ ----- --------- --------- -------- ------------ --------- ------------ ---------- --------
At 1 December
2018
as reported 1,917 27,080 (1,423) 94 395 (286) 27,215 54,992
IFRS15
restatement - - - - - - (1,185) (1,185)
------------------ ----- --------- --------- -------- ------------ --------- ------------ ---------- --------
At 1 December
2018 1,917 27,080 (1,423) 94 395 (286) 26,030 53,807
Profit for the
year - - - - - - 19,062 19,062
Other
comprehensive
income/(expense) - - - - (806) (211) (6,615) (7,632)
------------------ ----- --------- --------- -------- ------------ --------- ------------ ---------- --------
Total
comprehensive
income/(expense) - - - - (806) (211) 12,447 11,430
Transactions with
owners of the Company:
Share-based
payment
awards exercised - - 416 - - - (416) -
Share-based payment
fair value adjustments - - - - - - 686 686
Ordinary
dividends
paid 7 - - - - - - (6,348) (6,348)
------------------ ----- --------- --------- -------- ------------ --------- ------------ ---------- --------
At 30 November
2019 1,917 27,080 (1007) 94 (411) (497) 32,399 59,575
------------------ ----- --------- --------- -------- ------------ --------- ------------ ---------- --------
Condensed Consolidated Cash Flow Statement
6 months 6 months Year ended
ended 31 ended 31 30 November
May 2020 May 2019 2019
Note GBP000 GBP000 GBP000
----------------------------------------- ----- ---------- ---------- -------------
Profit before tax 2,198 8,407 23,168
Investment income (8) (159) (153)
Finance costs 659 586 1,163
----------------------------------------- ----- ---------- ---------- -------------
Profit from operations 2,849 8,834 24,178
Adjustments for:
Amortisation and impairment of
intangible assets 2,264 1,069 2,690
Depreciation and impairment of
property, plant and equipment 1,958 860 1,584
(Gain)/ loss on disposal of other
intangible assets - (15) 10
(Gain)/ loss on disposal of property,
plant and equipment (980) 19 26
(Gain) on sale of non-current other (713) - -
receivable
(Gain) on foreign exchange derivatives (540) (35) (29)
Share-based payment fair value
adjustment 424 236 686
Increase/ (decrease) in provisions 13 671 (1,155) (758)
Defined Benefit Pension Scheme
administration cost 14 - 191 262
----------------------------------------- ----- ---------- ---------- -------------
Operating cash flows before movements
in working capital 5,933 10,004 28,649
(Increase) in inventories (406) (6,935) (4,115)
Decrease in receivables 6,299 197 7,638
(Increase) in contract fulfilment
assets (816) (750) (1,602)
Movement in payables:
- decrease in trade and other
payables (5,919) (4,766) (7,483)
- utilisation of provisions 13 (2,182) (1,036) (3,161)
Cash generated by/ (used in) operations 2,909 (3,286) 19,926
Defined Benefit Pension Scheme
cash contributions (992) (2,208) (4,618)
Tax paid (1,758) (1,650) (3,639)
----------------------------------------- ----------
Net cash inflow/ (outflow) from
operating activities 159 (7,144) 11,669
----------------------------------------- ----- ---------- ---------- -------------
Investing activities
Interest received 8 130 153
Acquisition of net cash acquired - - (7,109)
Acquisition related costs - - (728)
Proceeds on disposal of non-current 1,560 - -
other receivable
Proceeds on disposal of property,
plant and equipment 2,900 - 8
Purchases of property, plant and
equipment (701) (1,787) (2,876)
Purchases of other intangible assets (1,361) (1,377) (3,159)
----------------------------------------- ----- -------------
Net cash generated by/ (used in)
investing activities 2,406 (3,034) (13,711)
----------------------------------------- ----- ---------- ---------- -------------
Financing activities
Dividends paid 7 - (4,698) (6,348)
(Repayment)/ drawdown of borrowings (1,000) 14,000 10,000
Borrowing facilities arrangement
and commitment fees (205) (145) (529)
Repayment of lease obligations (1,345) - -
Interest paid (332) (194) (513)
Net cash (used in)/ generated by
financing activities (2,882) 8,963 2,610
----------------------------------------- ----- ---------- ---------- -------------
Net (decrease)/increase in cash
and cash equivalents (317) (1,215) 568
Cash and cash equivalents at the
beginning of the period/year 1,528 712 712
Effect of foreign exchange rate
changes 99 (4) 248
----------------------------------------- ----- ---------- ---------- -------------
Cash and cash equivalents at the
end of period/ year 1,310 (507) 1,528
----------------------------------------- ----- ---------- ---------- -------------
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 2020 and for
the 6 months then ended comprise those of the Company and its
subsidiaries (together 'the Group').
The comparative figures for the financial year ended 30 November
2019 are not the Group's statutory accounts for that financial year
(see note 2). Those accounts have been reported on by the Group's
auditor and delivered to the registrar of companies. The report of
the auditor was (i) unqualified, (ii) did not include a reference
to any matters to which the auditor drew attention by way of
emphasis without qualifying their report, and (iii) did not contain
a statement under section 498 (2) or (3) of the Companies Act
2006.
Condensed Consolidated Income Statement presentation
The Directors assess the performance of the Group using an
adjusted operating profit and profit before tax. The Directors use
this measurement basis as it excludes the effect of transactions
that could distort the understanding of the Group's performance for
the year and comparability between periods. This includes making
certain adjustments for income and expense which are one-off in
nature, or non-cash items and those with potential variability year
on year which might mask underlying performance. Further details
are provided in note 2.
Other Comprehensive Income
During the period, GBP18.1m of actuarial losses relating to the
defined benefit pension scheme deficit have been recognised in
Other Comprehensive Income. These include cash contributions from
the Company of GBP1.0m.
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 2019, with the exception
of the adoption of IFRS 16 - Leases. The impact of this restatement
has been set out in Note 18 to this Half Year financial
information.
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 2019.
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:
- Adjusted operating profit
- Adjusted profit before tax;
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, as adjustment items are identified by virtue of their
size, nature and/or incidence. 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 assists in providing
supplementary information that assists the user to understand
better the financial performance, position and trends of the Group.
In determining whether an event or transaction is an adjustment,
the Board considers both quantitative and qualitative factors such
as the frequency or predictability of occurrence.
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.
Going concern
The financial statements have been prepared on a going concern
basis which the directors consider to be appropriate for the
following reasons.
The directors have prepared cash flow forecasts for the period
to the end of July 2021 which indicate that, taking account of
reasonably plausible downsides as discussed below, the company will
have sufficient funds to meet its liabilities as they fall due for
that period. The Group has a bank facility ("the facility") which
totalled GBP70m at the date of this report. The Group had net debt
of GBP 14.4m at 31 May 2020. The facility is committed until 2022
and is subject to covenant tests related to the leverage of the
Group and interest cover annually in May and November. In June
2020, the banks agreed an extension of the covenant ratios for
2020.
Since the year end the COVID-19 pandemic has impacted the Group
primarily as a result of widespread school closures and the
cancellation of UK summer exam sessions. Prior to the COVID-19
school closures the Group was trading in line with internal budgets
and forecasts. During the period of school closures and subsequent
limited school re-openings, the RM Education division continues to
provide software, services and technology to UK schools, but the
volume of hardware and new installations has fallen. The RM Results
division continues to provide digital assessment solutions for
International awarding bodies, and is currently in discussions with
these customers about the reduction of volumes as a result of
COVID-19 in the current exam cycles. Sales of consumables to UK and
International schools by the Group's third division, RM Resources,
have been materially lower over the lockdown period but since the
announcement for certain year groups to return, and the subsequent
phased reopening from 1 June 2020, have started to increase.
The Group has assessed a number of scenarios for going concern
purposes and is using a base case scenario assessment that UK
schools fully re-open no later than September and normal trading
activities largely resume from that point ("base case "), subject
to a reduced demand in the RM Resources division until 2021.
Management has considered a severe but potentially plausible
downside scenario where schools fully re-open in September, with a
further month lockdown prior to Christmas ("downside scenario"),
and an extreme scenario where UK schools do not materially re-open
until March 2021 ("severe downside case"). Under both the downside
and severe downside cases, the forecasts assume that trading during
future lockdowns is equivalent to that experienced during the first
few months of the Government imposed the lockdown on 23 March 2020
and, in the case of the severe downside case, that revenues
generated in RM Results and RM Education are principally restricted
to those that are contracted at the date of this report.
Under all scenarios the Group has availed itself of government
initiatives such as VAT deferment, and furloughing a portion of
employees that are not directly supporting the Company's existing
contracts until the end of May 2020. The Company has also agreed
with the Pension Trustees to defer deficit repayments for this
calendar year, but now plans to rectify the deferred deficit
repayments by the end of the calendar year and these voluntary
repayments are included in all the scenarios forecasted. In
addition, management has taken the decision to pause certain
discretionary spend, senior staff have taken voluntary reduction in
remuneration and capital expenditure has been delayed, which have
been reflected in all the scenarios. The pauses in discretionary
spend are being reassessed in light of current trading after recent
government announcements. Under all scenarios the Group has
headroom against its available facilities and considers there are
sufficient controllable actions it can take, even if the severe
downside case were to materialise, to operate within the facility's
covenants. At present the directors consider the severe downside
case to be highly unlikely given the phased reopening of schools
from 1 June 2020 in line with the UK Government announcements ,
with the aim of getting schools back to normal from September, and
that this is a necessary step in restarting the wider economy.
Therefore, the Board has a reasonable expectation that the Group
has sufficient funds to meet its liabilities as they fall due for a
period of not less than 12 months from the date of approval of the
financial statements. For this reason, the Group continues to adopt
the going concern basis of accounting in preparing the annual
financial statements.
3 . Operating segments
The Group's business is supplying products, services and
solutions to the UK and international education markets.
Information reported to the Group's Chief Executive for the
purposes of resource allocation and assessment of segmental
performance is focussed on the nature of each type of activity.
The Group is structured into three operating divisions: RM
Resources, RM Results and RM Education.
Corporate Services consists of central business costs associated
with being a listed company, share based payment charges and
non-division specific pension costs.
This segmental analysis shows the results and assets of these
divisions. Revenue is that earned by the Group from third parties.
Net financing costs and tax are not allocated to segments as the
funding, cash and tax management of the Group are activities
carried out by the central treasury and tax functions.
Segmental results
6 months ended 31 Corporate
May 2020 RM Resources* RM Results RM Education Services Total
GBP000 GBP000 GBP000 GBP000 GBP000
------------------------ -------------- ----------- ------------- ---------- --------
Revenue
UK 30,742 9,831 28,640 - 69,213
Europe 2,500 2,617 159 - 5,276
North America 468 - 271 - 739
Asia 331 534 - - 865
Middle East 403 116 - - 519
Rest of the world 641 2,009 5 - 2,655
35,085 15,107 29,075 - 79,267
------------------------ -------------- ----------- ------------- ---------- --------
Adjusted profit/(loss)
from operations (2,051) 2,969 4,873 (1,593) 4,198
Adjusted other income 8
Adjusted finance
costs (659)
------------------------- -------------- ----------- ------------- ---------- --------
Adjusted profit before
tax 3,547
Adjustments (see
note 4) (1,349)
------------------------- -------------- ----------- ------------- ---------- --------
Profit before tax 2,198
------------------------- -------------- ----------- ------------- ---------- --------
6 months ended 31 RM Resources* RM Results RM Education Corporate Total
May 2019 Services
GBP000 GBP000 GBP000 GBP000 GBP000
------------------------ -------------- ----------- ------------- ---------- --------
Revenue
UK 41,421 13,270 28,113 - 82,804
Europe 3,345 2,304 575 - 6,224
North America 1,208 - 134 - 1,342
Asia 634 566 545 - 1,745
Middle East 863 - - - 863
Rest of the world 1,774 654 83 - 2,511
49,245 16,794 29,450 - 95,489
------------------------ -------------- ----------- ------------- ---------- --------
Adjusted profit/(loss)
from operations 3,087 4,544 4,340 (2,241) 9,730
Adjusted other income 159
Adjusted finance
costs (578)
------------------------- -------------- ----------- ------------- ---------- --------
Adjusted profit before
tax 9,311
Adjustments (see
note 4) (904)
------------------------- -------------- ----------- ------------- ---------- --------
Profit before tax 8,407
------------------------- -------------- ----------- ------------- ---------- --------
Year ended 30 November RM Resources* RM Results RM Education Corporate Total
2019 Services
GBP000 GBP000 GBP000 GBP000 GBP000
------------------------ -------------- ----------- ------------- ---------- --------
Revenue
UK 95,034 27,700 69,748 - 192,482
Europe 8,404 4,966 923 - 14,293
North America 4,141 - 187 - 4,328
Asia 1,348 1,652 541 - 3,541
Middle East 2,575 96 - - 2,671
Rest of the world 3,024 3,260 166 - 6,450
114,526 37,674 71,565 - 223,765
------------------------ -------------- ----------- ------------- ---------- --------
Adjusted profit/(loss)
from operations 13,691 8,731 10,407 (5,189) 27,640
Investment income 153
Adjusted finance
costs (1,155)
------------------------- -------------- ----------- ------------- ---------- --------
Adjusted profit before
tax 26,638
Adjustments (see
note 4) (3,470)
------------------------- -------------- ----------- ------------- ---------- --------
Profit before tax 23,168
------------------------- -------------- ----------- ------------- ---------- --------
* Included in UK are international sales via UK distributors
Segmental assets
Other non-segmental assets include tax assets, cash and
short-term deposits and other non-division specific assets.
Segmental
assets
---------------- ----------------------------------------- --------------------------------------- ----------------------------------------- -------------------------------------- --------
RM Resources RM Results RM Education Corporate Total
Services
At 31 May
2020 GBP000 GBP000 GBP000 GBP000 GBP000
---------------- ----------------------------------------- --------------------------------------- ----------------------------------------- -------------------------------------- --------
Segmental 96,427 22,838 17,216 1,364 137,845
Other 12,905
----------------- ----------------------------------------- --------------------------------------- ----------------------------------------- -------------------------------------- --------
Total assets 150,750
----------------- ----------------------------------------- --------------------------------------- ----------------------------------------- -------------------------------------- --------
RM Resources RM Results RM Education Corporate Total
Services
At 31 May
2019 GBP000 GBP000 GBP000 GBP000 GBP000
---------------- ----------------------------------------- --------------------------------------- ----------------------------------------- -------------------------------------- --------
Segmental 106,802 15,469 16,731 1,375 140,377
Other 8,936
----------------- --------------------------------------------------------------------------------------------------------------------------------------------------------------------- --------
Total assets 149,313
----------------- ----------------------------------------- --------------------------------------- ----------------------------------------- -------------------------------------- --------
RM Resources RM Results RM Education Corporate Total
Services
At 30 November GBP000 GBP000 GBP000 GBP000 GBP000
2019
----------------------------------------- --------------------------------------- ----------------------------------------- -------------------------------------- --------
Segmental 105,489 20,072 13,208 1,562 140,331
Other 10,375
----------------- --------------------------------------------------------------------------------------------------------------------------------------------------------------------- --------
Total assets 150,706
----------------- ----------------------------------------- --------------------------------------- ----------------------------------------- -------------------------------------- --------
4 . Adjustments to profit before tax
6 months 6 months Year ended
ended ended
31 May 2020 31 May 2019 30 November
2019
Note GBP000 GBP000 GBP000
----------------------------- ----- ------------ ------------ ------------
Amortisation of acquisition
related intangible assets 1,007 603 1,577
Acquisition related costs 15 - 243 728
Property related costs - 50 335
Profit on sale of assets (1,344) - -
Impairment 706 - -
Restructuring costs 980 - 822
----------------------------- ----- ------------ ------------ ------------
Operating expenses 1,349 896 3,462
Finance costs - 8 8
Profit before tax 1,349 904 3,470
----------------------------- ----- ------------ ------------ ------------
In the 6 months ended 31 May 2020 notable adjustments to profit
include:
Recurring items:
These are items which occur regularly but which management judge
to have a distorting effect on the underlying results of the Group
or are not regularly monitored for the purpose of determining
business performance. These items include the amortisation of
acquisition related intangible assets.
Recurring items are treated as adjusted each year irrespective
of materiality to ensure consistent treatment.
Highlighted items:
These are items which are non-recurring and are identified by
virtue of either their size or their nature. These items can
include, but are not restricted to, impairment of held for sale
assets and related transaction costs; exceptional property related
costs; the gain/loss on sale of operations and restructuring and
acquisition costs. As these items are one-off or non-operational in
nature, management considers that they would distort the Group's
underlying business performance.
During the period the Group disposed of the asset held for Sale
at 30 November 2019 and a non-current other receivable. These
transactions resulted in a profit of GBP1.3m.
The restructuring programme charge was announced in December
2019 and completed in the period.
The impairment charge relates to development activity on our ERP
programme that needs to be re-performed.
5 . Tax
6 months ended 31 6 months ended 31 Year ended 30 November
May 2020 May 2019 2019
Adjusted Adjustments Total Adjusted Adjustments Total Adjusted Adjustments Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------ --------- ------------ ------- --------- ------------ -------- --------- ------------ --------
Profit
before
tax 3,547 (1,349) 2,198 9,311 (904) 8,407 26,638 (3,470) 23,168
Tax charge (841) 151 (690) (1,767) 157 (1,610) (4,746) 640 (4,106)
------------ --------- ------------ ------- --------- ------------ -------- --------- ------------ --------
Effective
tax rate 23.7% (11.2%) 31.4% 19.0% (17.4%) 19.2% 17.8% (18.4%) 17.7%
------------ --------- ------------ ------- --------- ------------ -------- --------- ------------ --------
In the 6 month period to 31 May 2020, there has been a GBP0.3m
impact to the tax on the adjustment items relating to the change in
deferred tax rate from 17% to 19%. This in turn has moved the
effective interest rate on adjustments by 16%.
6. Earnings per ordinary share
6 months ended 6 months ended Year ended 30 November
31 May 2020 31 May 2019 2019
Profit Weighted Pence Profit Weighted Pence Profit Weighted Pence
after average per after average per after average per
tax number share tax number share tax number share
of of of
shares shares shares
GBP000 '000 GBP000 '000 GBP000 '000
Basic
earnings per
ordinary
share:
Basic
earnings 1,508 82,492 1.8 6,797 82,220 8.3 19,062 82,341 23.2
Adjustments
(see
note 4) 1,198 - 1.5 747 - 0.9 2,830 - 3.4
-------------
Adjusted
basic
earnings 2,706 82,492 3.3 7,544 82,220 9.2 21,892 82,341 26.6
------------- ------- --------- ------- --------- ------- --------- ---------------
Diluted
earnings
per ordinary
share:
Basic
earnings 1,508 82,492 1.8 6,797 82,220 8.3 19,062 82,341 23.2
Effect of
dilutive
potential
ordinary
shares:
share-based
payment
awards - 1,015 - - 583 (0.1) - 577 (0.2)
-------------
Diluted
earnings
per
ordinary
share 1,508 83,507 1.8 6,797 82,803 8.2 19,062 82,918 23.0
Adjustments
(see
note 4) 1,198 - 1.4 747 - 0.9 2,830 - 3.4
-------------
Adjusted
diluted
earnings 2,706 83,507 3.2 7,544 82,803 9.1 21,892 82,918 26.4
------------- ------- --------- ------- --------- ------- --------- ---------------
7. Dividends
Amounts recognised as distributions to equity holders were:
6 months 6 months Year ended
ended ended
31 May 31 May 30 November
2020 2019 2019
GBP000 GBP000 GBP000
------------------------------------- ---------- --------- ------------
Final dividend for the year ended
30 November 2019 - nil p per share
(2018: 5.70p) - 4,698 4,698
Interim dividend for the year ended
30 November 2019 -2.0p per share
(2018: 1.90p) - - 1,650
- 4,698 6,348
------------------------------------------------ --------- ------------
The Board is not recommending a dividend.
8. Trade and other receivables
6 months 6 months Year ended
ended 31 ended 31 30 November
May 2020 May 2019 2019
Note GBP000 GBP000 GBP000
---------------------------------- ------ ---------- ---------- -------------
Current
Financial assets
Trade receivables 14,272 18,291 21,343
Other receivables 1,388 3,335 1,897
Derivative financial instruments - 488 -
Accrued income 3,564 8,345 2,384
------------------------------------------ ---------- ---------- -------------
19,224 30,459 25,624
Non-financial assets
Prepayments 5,365 8,102 5,614
------------------------------------------ ---------- ---------- -------------
24,589 38,561 31,238
----------------------------------------- ---------- ---------- -------------
Non-current
Financial assets
Other receivables 294 922 939
------------------------------------------ ---------- ---------- -------------
294 922 939
24,883 39,483 32,177
----------------------------------------- ---------- ---------- -------------
9. Trade and other payables
6 months 6 months Year ended
ended 31 ended 31 30 November
May 2020 May 2019 2019
Note GBP000 GBP000 GBP000
---------------------------------- ------ ---------- ---------- -------------
Current
Financial liabilities
Trade payables 10,565 22,664 19,136
Other taxation and social
security 7,953 3,888 4,364
Other payables 2,518 1,701 2,081
Derivative financial instruments 21 - 461
Accruals 8,783 12,131 11,849
------------------------------------------ ---------- ---------- -------------
29,840 40,384 37,891
Non-financial liabilities
Deferred income 15,296 13,034 13,340
45,136 53,418 51,231
----------------------------------------- ---------- ---------- -------------
Non-current
Non-financial liabilities
Deferred income:
- due after one year but
within two years 1,310 1,778 1,783
- due after two years but
within five years 1,645 604 1.561
- After 5 years 150 - 139
3,105 2,382 3,483
48,241 55,800 54,714
----------------------------------------- ---------- ---------- -------------
The Group has utilised COVID-19 Government incentives to defer
the second quarter VAT, PAYE and NI payments.
10. Borrowings
6 months 6 months Year ended
ended 31 ended 31 30 November
May 2020 May 2019 2019
GBP000 GBP000 GBP000
------------------ ---------- ---------- -------------
Bank loan (16,000) (21,000) (17,000)
Capitalised fees 303 335 466
------------------- ---------- ---------- -------------
(15,697) (20,665) (16,534)
------------------ ---------- ---------- -------------
During the period the Group has repaid GBP1.0 million of the
facility. For details of the facility please see note 30 in the
annual report and financial statements for the year ended 30
November 2019.
In June 2020, the facility covenants have been extended from 2.5
times Net Debt/ EBITDA to 3.5 times Net Debt/ EBITDA for 2020.
The bank covenants are calculated using accounting standards
that applied in 2017 in respect of leases so are not impacted by
the introduction of IFRS16.
11. Contract fulfilment assets
6 months 6 months Year ended
ended 31 ended 31 30 November
May 2020 May 2019 2019
GBP000 GBP000 GBP000
------------- ---------- ---------- -------------
Current 1,124 708 844
Non-current 2,729 1,543 2,193
3,853 2,251 3,037
------------- ---------- ---------- -------------
Contract fulfilment assets represent investment in contract
which are recoverable and are expected to provide benefits over the
life of the contract. These costs are capitalised only when they
relate directly to a contract and are incremental to securing the
contract.
12. Held for Sale Asset
As reported in the Annual Report and Financial Statements for
the year ended 30 November 2019, the Group is undergoing a
programme to consolidate the current estate of five distribution
centres to a single automated centre. During the period the Group
has disposed of one distribution centre and has reclassified a
further distribution centre as Held for Sale.
13. Provisions
Onerous Employee-related Other Total
lease restructuring
and dilapidations
GBP000 GBP000 GBP000 GBP000
--------------------------- ------------------- ----------------- ------- --------
At 1 December 2019 853 2,220 2,380 5,453
Increase in provisions 35 980 - 1,015
Utilisation of provisions - (2,182) - (2,182)
Release of provisions - - (523) (523)
At 31 May 2020 888 1,018 1,857 3,763
--------------------------- ------------------- ----------------- ------- --------
14. Defined Benefit Pension Scheme
The Group has both defined benefit and defined contribution
pension schemes. There are three defined benefit pension schemes,
the Research Machines plc 1988 Pension Scheme (the "RM Scheme")
and, following the acquisition of RM Educational Resources Limited
("The Consortium", acquired by the Company on 30 June 2017), the
CARE Scheme and the Platinum Scheme. The RM Scheme and the CARE
Scheme are both operated for employees and former employees of the
Group only. The Platinum Scheme is a multi-employer scheme, with RM
Educational Resources Limited being just one of a number of
employers. The Group plays no active part in managing that Scheme,
although the number of the Group's employees in that Scheme is
small and so the impact / risk to the Group from that Scheme is
limited.
For all three Schemes, based on the advice of a qualified
independent actuary at each balance sheet date and using the
projected unit method, the administrative expenses and current
service costs are charged to operating profit, with the interest
cost, net of interest on scheme assets, reported as a financing
item.
Defined benefit pension scheme remeasurements are recognised as
a component of other comprehensive income such that the balance
sheet reflects the scheme's surplus or deficit as at the balance
sheet date. Contributions to defined contribution plans are charged
to operating profit as they become payable.
Scheme assets are measured at bid-price, where available, at 31
May 2020. The present value of the defined benefit obligation was
measured using the projected unit method.
Under the guidance of IFRIC 14, the Group are able to recognise
a pension surplus on the balance sheet for all three schemes. At 31
May 2020, the Platinum scheme shows a surplus and the RM and CARE
schemes are in deficit.
Change in Estimate:
During the six months to 31 May 2020, the Group has proposed
that RPI inflation continues to be set in line with market break
even expectations less an inflation risk premium. The inflation
risk premium has been retained at 0.2%, but an additional 0.1%
deduction has been made to reflect potential market distortions
caused by the RPI reform proposals. As a result, the impact is
expected to be a c.GBP3m reduction in the Defined Benefit
Obligation. The impact is treated as a change in accounting
estimate in accordance with IFRS/IAS19.
The Research Machines plc 1988 Pension Scheme (RM Scheme)
The Scheme provides benefits to qualifying employees and former
employees of RM Education Limited, but was closed to new members
with effect from 1 January 2003 and closed to future accrual of
benefits from 31 October 2012. The assets of the Scheme are held
separately from RM Education Limited's assets in a
trustee-administered fund. The Trustee is a limited company.
Directors of the Trustee company are appointed by RM Education Ltd
and by members. The Scheme is a funded scheme.
The most recent actuarial valuation of Scheme assets and the
present value of the defined benefit obligation was carried out for
statutory funding purposes at 31 May 2018 by a qualified
independent actuary. IAS 19 Employee Benefits (revised) liabilities
at 31 May 2019 have been rolled forward based on this valuation's
base data.
As at 31 May 2018, the triennial valuation for statutory funding
purposes showed a deficit of GBP40.6m (31 May 2015: GBP41.8m). The
Group agreed with the Scheme Trustees that it will repay this
amount via deficit catch-up payments of GBP3.7m per annum until 31
May 2026. As part of the management of the COVID-19 pandemic the
Group initially agreed with the trustees to defer deficit payments
until the next financial year, but the Group is considering earlier
repayment based on trading activities as schools reopen. At 31 May
2020 there were amounts outstanding of GBP0.9m (2019: GBP0.3m) for
three month's deficit payment and GBPnil (2019: GBP32,000) for
Scheme expenses.
The parent company RM plc has entered into a pension protection
fund compliant guarantee in respect of scheme liabilities. No
liability has been recognised for this within the Company as the
Directors consider that the likelihood of it being called upon is
remote.
The Consortium CARE Scheme
Until 31 December 2005, RM Educational Resources Limited
operated the CARE Scheme providing benefits on both a defined
benefit (final salary-linked) and a defined contribution basis.
From 1 January 2006, the defined benefit (final salary-linked) and
defined contribution sections were closed and all employees,
subject to the eligibility conditions set out in the Trust Deed and
Rules, joined a new defined benefit (Career Average Revalued
Earnings) section. As at 28 February 2011 the Scheme was closed to
future accruals.
The Scheme is subject to the Statutory Funding Objective under
the Pensions Act 2004. A valuation of the Scheme is carried out at
least once every three years to determine whether the Statutory
Funding Objective is met. As part of the process, RM Educational
Resources Limited must agree with the trustees of the Scheme the
contributions to be paid to address any shortfall against the
Statutory Funding Objective. The Statutory Funding Objective does
not currently impact on the recognition of the Scheme in these
accounts. The Scheme is managed by a Board of Trustees appointed in
part by the Company and in part from elections by members of the
Scheme. The Trustees have responsibility for obtaining valuations
of the fund, administering benefit payments and investing Scheme
assets. The Trustees delegate some of these functions to their
professional advisers where appropriate. The valuation of the
Scheme at 31 December 2016 was a deficit of GBP4.2m.
Prudential Platinum Pension
The Consortium acquired West Mercia Supplies in April 2012
(prior to the Company acquiring The Consortium). Upon acquisition
of West Mercia Supplies by The Consortium, a pension scheme was set
up providing benefits on both a defined benefit (final
salary-linked) and a defined contribution basis for West Mercia
employees. The most recent full actuarial valuation was carried out
by the independent actuaries, XPS Group, on 31 December 2018. Using
the assumptions below the results of the full valuation were
adjusted and rolled forward to form the basis for the current year
valuation. The Scheme is administered within a legally separate
trust from RM Educational Resources Limited and the Trustees are
responsible for ensuring that the correct benefits are paid, that
the Scheme is appropriately funded and that the Scheme assets are
appropriately invested. The valuation of the Scheme at 31 December
2018 was a surplus of GBP213,000 (31 December 2015: deficit of
GBP70,000).
15. 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.
16. Acquisition
On 13 June 2019, the Group acquired all the shares in SoNET
Systems Pty Ltd. There have been no changes to the provisional fair
values disclosed in note 20 in the Annual Report for the year ended
30 November 2019.
17. Post balance sheet event
There are no post balance sheet events.
18. Impact of adoption of IFRS 16 - Leases
IFRS 16 - Leases sets out the principles for the recognition,
measurement, presentation and disclosure of leases. It has replaced
existing lease guidance, including IAS 17 Leases and IFRIC14. IFRS
16 is effective for annual periods beginning on or after 1 January
2019.
The Group has used the modified retrospective adoption approach
under which the Group has applied all of the requirements of IFRS
16 with effect from 1 December 2019.
The Group has made opening balance sheet adjustments arising
from changes to the accounting for lease contracts . The impact of
the new standard on its 2019 interim accounts is set out below:
Restated IFRS 16 impact Unaudited
Income statement
Balance sheet for period Balance sheet
as at 1 December ended 31 as at 31 May
2019 May 2020 2020
---------------------------
GBP'000 GBP'000 GBP'000
--------------------------- ------------------ ----------------- --------------
Tangible fixed assets 7,356 1,345 6,011
Lease contract creditors (7,356) (1,345) (6,011)
Retained earnings surplus - - -
As a lessee, the Group previously classified leases as operating
or finance leases based on its assessment of whether the lease
transferred significantly all of the risks and rewards incidental
to ownership of the underlying asset to the Group. Under IFRS 16,
the Group recognises right-of-use assets and lease liabilities for
all the leases on its balance sheet. The Group used the following
practical expedients when applying IFRS 16 to leases previously
classified as operating leases:
- applied the exemption not to recognise right-of-use assets and
liabilities for leases of low value or for which the lease term
ends within 12 months of the date of initial application if the
lease is not anticipated to renew, on a lease-by-lease basis
- excluded initial direct costs from the measurement of the
right-of-use asset at the date of initial application
- used hindsight when determining the lease term if the contract
contains options to extend or terminate the lease
- applied the exemption not to separate non-lease components
such as service charges from lease rental charges
Under transition rules for leases classified as operating
leases, lease liabilities were measured at the present value of the
remaining lease payments, discounted at the Group's incremental
borrowing rate at 1 December 2019.
Right-of-use assets are measured at cost, which comprised the
initial amount of the lease liability adjusted for any lease
payments made at or before the adoption date, less any lease
incentives received at or before the adoption date.
At 1 December 2019 the Group had no lease commitments previously
classified as finance leases under IAS 17.
The Group is not required to make any adjustments on transition
to IFRS 16 for which it acts as a lessor.
Detailed primary statement restatements
Detailed primary statement restatements arising from the
adoption of IFRS 16 are set out below.
Impact on the Half year Condensed Consolidated Income
Statement
As reported IFRS16 impact Amounts before
adoption of
IFRS16
GBP'000 GBP'000 GBP'000
---------------
Revenue 79,267 - 79,267
Cost of sales (45,732) (22) (45,754)
------------------------
Gross profit 33,535 (22) 33,513
Operating expenses (30,686) (109) (30,795)
------------------------
Profit from operations 2,849 (131) 2,718
Investment income 8 - 8
Finance costs (659) 131 (528)
------------------------
Profit before tax 2,198 - 2,198
Tax (690) - (690)
Profit for the period 1,508 - 1,508
------------------------ ------------ -------------- ---------------
The IFRS16 impact includes an increase in depreciation of
GBP1.3m and a reduction of lease expenses of GBP1.4m.
Impact on the Half year Condensed Consolidated Statement of
Financial Position
As reported IFRS16 impact Amounts before
adoption of
IFRS16
GBP'000 GBP'000 GBP'000
-------------------------------- ------------ -------------- ---------------
Non-current assets
Goodwill 49,232 - 49,232
Other intangible assets 22,697 - 22,697
Property, plant and equipment 5,558 - 5,558
Right of use asset 6,011 (6,011) -
Defined Benefit Pension Scheme
Surplus 627 - 627
Other receivables 294 - 294
Contract fulfilment assets 2,729 - 2,729
Deferred tax assets 6,512 - 6,512
-------------------------------- ------------
93,660 (6,011) 87,649
-------------------------------- ------------ -------------- ---------------
Current assets
Inventories 22,557 - 22,557
Trade and other receivables 24,589 - 24,589
Contract fulfilment assets 1,124 - 1,124
Held for Sale asset 3,065 - 3,065
Corporation tax assets 1,810 - 1,810
Cash and short-term deposits 3,945 - 3,945
-------------------------------- ------------ -------------- ---------------
57,090 - 57,090
Total assets 150,750 (6,011) 144,739
-------------------------------- ------------ -------------- ---------------
Current liabilities
Trade and other payables (45,136) - (45,136)
Lease liabilities (1,582) 1,582 -
Tax liabilities (88) - (88)
Provisions (1,169) - (1,169)
Overdraft (2,635) - (2,635)
(50,610) 1,582 (49,028)
Net current assets 6,480 1,582 8,062
-------------------------------- ------------ -------------- ---------------
Non-current liabilities
Other payables (3,105) - (3,105)
Lease liabilities (4,429) 4,429 -
Provisions (2,594) - (2,594)
Deferred tax liability (3,525) - (3,525)
Defined Benefit Pension Scheme
obligation (23,953) - (23,953)
Borrowings (15,697) - (15,697)
-------------------------------- ------------ ---------------
(53,303) 4,429 (48,874)
Total liabilities (103,913) 6,011 (97,902)
Net assets 46,837 - 46,837
-------------------------------- ------------ -------------- ---------------
Equity attributable to shareholders
Share capital 1,917 - 1,917
Share premium account 27,080 - 27,080
Own shares (982) - (982)
Capital redemption reserve 94 - 94
Hedging reserve (18) - (18)
Translation reserve (596) - (596)
Retained earnings 19,342 - 19,342
------------ -------------- ---------------
Total equity 46,837 - 46,837
-------------------------------- ------------ -------------- ---------------
Right-of-use assets: non-current assets have been impacted due
to recognition of right-of-use assets on 1 December 2019. The
right-of-use assets are initially measured at cost, which comprises
the initial amount of the lease liability adjusted for any lease
payments made at or before the adoption date less any lease
incentives received at or before the adoption date (reclassified on
the opening balance sheet).
Lease liabilities: Financial liabilities have been impacted due
to the recognition of lease liabilities. This liability is
initially measured at the present value of the lease payments that
are not paid at the adoption date, discounted using the Group's
incremental borrowing rate. The lease payments comprise fixed
payments, including in-substance fixed payments such as service
charges and variable lease payments that depend on an index or a
rate, initially measured using the minimum index or rate at
commencement date. The lease liabilities have been classified
between current and non-current.
Impact on the Half year Condensed Consolidated Statement of Cash
Flows
As a result of the adoption of IFRS 16, certain
reclassifications are required in relation to the recognition of
right to use assets and lease liabilities. Although IFRS 16 has no
impact on the Group's total cash flow, outflows from financing
activities increase while cash outflows from operating activities
decrease, as recognition of rental costs, previously recognised
solely as cash outflows from operations are now apportioned between
finance charges and reduction of the lease obligation.
Impact on the Consolidated Statement of Changes in Equity
Consolidated statement of changes in equity as at 1 December
2019 shows the cumulative effect of initially applying IFRS 16 as
nil impact.
Responsibility statement of the directors in respect of the
half-yearly financial report
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 Guidance and Transparency Rules,
being an indication of important events that have occurred during
the first six months of the financial year 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 year; and
b) DTR 4.2.8R of the Disclosure Guidance and Transparency Rules,
being related party transactions that have taken place in the first
six months of the current financial year 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
6 July 2020
INDEPENDENT REVIEW REPORT TO RM PLC
Conclusion
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 2019 which comprises Condensed Consolidated
Income Statement, Condensed Consolidated Statement of Comprehensive
Income, Condensed Consolidated Balance Sheet, Condensed
Consolidated Statement of Changes in Equity, Condensed Consolidated
Cash Flow Statement and the related explanatory notes.
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
2019 is not prepared, in all material respects, in accordance with
IAS 34 Interim Financial Reporting as adopted by the EU and the
Disclosure Guidance and Transparency Rules ("the DTR") of the UK's
Financial Conduct Authority ("the UK FCA").
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. We read the other information contained in the
half-yearly financial report and consider whether it contains any
apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) 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.
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 International Financial
Reporting Standards as adopted by the EU. The directors are
responsible for preparing the condensed set of financial statements
included in the half-yearly financial report in accordance with IAS
34 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.
The purpose of our review work and to whom we owe our
responsibilities
This report is made solely to the company in accordance with the
terms of our engagement to assist the company in meeting the
requirements of the DTR of the UK FCA. 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.
John Bennett
for and on behalf of KPMG LLP
Chartered Accountants
2 Forbury Place
33 Forbury Road
Reading
RG1 3AD
6 July 2020
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR UNOBRRNUBRAR
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