TIDMRM.
RNS Number : 3856O
RM PLC
09 February 2021
9th February 2021
RM plc
Unaudited Preliminary Results for the year ended 30 November
2020
Resilient performance as trading recovered through H2 following
COVID-19 impact
RM plc ("RM"), a leading supplier of technology and resources to
the education sector, reports its final results for the year ended
30 November 2020.
Highlights
-- Financial performance materially impacted by COVID-19 with
school closures and exam cancellations globally - revenue down by
16%
-- Trading improved progressively through H2 as education establishments reopened
-- Focus on cash and costs enabled a robust financial position
with net debt reducing to GBP1m (2019: GBP15m)
-- Short term outlook remains uncertain following further restrictions and exam cancellations
-- Confidence in medium term outlook supports proposed final dividend at 3.00 pps
-- Digital and automation investment programmes fully restarted
with longer term operational and financial benefits
-- Well positioned to capitalise on longer term market trends in education
GBPM 2020 2019 Variance
Revenue 189.0 223.8 -16%
Adjusted* operating profit 14.4 27.6 -48%
Adjusted* operating profit
margin 7.6% 12.4% -4.8pp
Adjusted* profit before
tax 13.4 26.6 -50%
Statutory profit after tax 8.4 19.1 -56%
Adjusted* diluted EPS 13.0p 26.4p -51%
Diluted EPS 10.1p 23.0p -56%
Proposed dividend per share 3.00p 2.00p +50%
-------- -------- ---------
Net debt 1.3 15.0
Pension deficit 18.7 6.0
-------- -------- ---------
* Adjusted operating profit is before the amortisation of
acquisition related intangible assets; gains on sale of property
and investment assets; restructuring costs; exceptional inventory
and impairment adjustments; GMP pension equalisation costs on
defined benefit schemes and acquisition related costs.
Commenting on the results, David Brooks, Chief Executive of RM,
said:
"2020 was a year in which RM showed good resilience and I'd like
to pay tribute to our people and our customers who showed real
innovation and ingenuity through testing times.
In the first half of 2021 we expect some uncertainty to continue
with school closures and the cancellation of UK exams. However, the
actions taken over the last year put us in a stronger financial and
operational position to meet these challenges.
Looking further out, RM is well placed to capitalise on the
longer-term trends in our markets, in particular the shift to
digital enablement in education."
Notes to Editors:
RM provides market-leading products and services to educational
institutions, exam bodies and international governments which
improve, simplify and support education and learning.
The education sector is transforming, 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 to 80 countries internationally.
-- RM Results is a leading provider of assessment software,
supporting exam awarding bodies, universities and governments
worldwide to digitise their assessment delivery.
-- RM Education is a market-leading supplier of ICT software,
technology and services to UK schools and colleges.
Ex-dividend date for 2020 final dividend 18(th) March 2021
Record date for 2020 final dividend 19(th) March 2021
------------------
AGM 8(th) April 2021
------------------
Payment of 2020 final dividend 30(th) April 2021
------------------
References to times are to Greenwich Mean Time. If any
of the above times or dates should change, the revised
times and/or dates will be notified to shareholders by
an announcement on a Regulatory Information Service.
Payment of the 2020 final dividend is subject to the
approval by shareholders.
Presentation and live webcast details
A presentation for analysts and investors will be held today at
9.00am.
The audio and slide presentation will be webcast live and on
demand at the following website:
https://www.investis-live.com/rmplc/601024829a13881000797f1c/pwpp
The presentation will also be accessible via a live conference
call:
United Kingdom : 0800 640 6441
United Kingdom (Local): 020 3936 2999
All other locations : +44 203 936 2999
Participant access code: 400013
Contacts:
RM plc
David Brooks, Chief Executive Officer 08450 700 300
Neil Martin, Chief Financial Officer
Headland Consultancy (PR adviser to RM)
Stephen Malthouse (smalthouse@headlandconsultancy.com) 07734 956201
Chloe Francklin (cfrancklin@headlandconsultancy.com) 07834
974624
Strategic Report
Chairman's statement
Performance
RM's trading in 2020 was inevitably dominated by the
consequences of Covid-19 and the response to its effects. These are
covered in detail in the reports which follow and demanded rapid
adaptation by management and all the employees, and thanks are due
to all concerned. These efforts were successful insofar as the
company delivered a creditable, albeit reduced, level of profit and
a strong year-end balance sheet.
RM Resources, one of the largest UK suppliers of teaching and
learning products for schools and nurseries, experienced a collapse
in demand in March as schools adapted to sudden closure. However,
the market improved as the year progressed such that, in the latter
months, running revenues were close to those enjoyed in 2019.
Initial indications are that business in the 2021 school shutdown
has fallen less precipitously, although the impact overall will
depend on duration and is necessarily uncertain.
Both RM Results and its' examination awarding body customers had
to react to last minute cancellations of public examinations.
Planned provision was by then well-advanced and both revenues and
associated costs were largely committed. As cancellations in 2021
have been announced earlier, revenues are likely to be reduced as
mitigating action can be taken by all parties. New international
contracts were secured, but overseas travel is essential to frame
details around precise customer requirements, and this will remain
an impediment well into 2021.
RM Education, supplying services and software support to
schools, was less affected by closures as routine IT infrastructure
support was maintained as a necessity.
The Board
During the year, Deena Mattar and Andy Blundell retired from the
Board and I reiterate the Board's thanks for their service and
valuable contribution.
Paul Dean was appointed as an NED and Chairman of the Audit
Committee on 4 February 2020 and Vicky Griffiths was appointed as
an NED on 1 July 2020. Their biographical details showing the
relevance of their qualifications and experience to RM, follow
later in this report.
Although not occurring during the year, and as previously
announced, David Brooks, our current CEO, will be leaving the
company on 31st March 2021, shortly before the date of the AGM.
That would normally be the occasion on which to thank him for his
service and to wish him well. However, in anticipation of his
absence, I should like to take this opportunity on behalf of the
Board to do so in this report. David has worked at RM for over 25
years. During the past eight years, as CEO, the company has
undergone significant restructuring and development. RM has
benefited greatly from his leadership and he leaves with the
Board's thanks and best wishes for the future.
The search for a successor is well-advanced and the Board
anticipates making an announcement shortly.
Dividend
The Board did not feel it prudent, in light of the prevailing
uncertainty, to pay a dividend in 2020 but, given the company's
performance and current situation, payment of a final dividend of
3p a share is being recommended to shareholders.
Outlook
Having regard to the outlook for the individual divisions, the
Board is confident that the continuing challenges will be
effectively addressed, as in 2020, and that RM's future is
secure.
John Poulter
Chairman
8 February 2021
Chief Executive Officer's statement
RM showed good resilience in 2020 despite the business being
significantly impacted by the closure of schools and nurseries and
the cancellation of exams due to COVID-19.
Trading in the second and third quarters saw the biggest
downturn when compared with 2019. Revenue and profit were
materially down in RM Resources and RM Results while RM Education
was less impacted, reflecting the nature of its work. Profit in RM
Resources was the most affected as revenue declined sharply on the
back of education establishment closures. Across the organisation
we implemented a range of cost saving initiatives which enabled all
three divisions to remain profitable.
For the year, Group revenue was down 16% and adjusted operating
profit declined by 48% compared with 2019. Statutory profit after
tax decreased by 56%, however despite the change in profit, careful
financial management meant that RM finished the year with an
improved net debt position of GBP1.3m (2019 - GBP15m).
Our Response to COVID-19
We responded to the pandemic in three phases:
1. Plan and Stabilise
-- Business continuity planning supported all office staff
working from home immediately on lockdown
-- Initial focus on safeguarding our people and supporting customers and suppliers
-- COVID-19 stress test scenarios established, and activities
initiated to manage funding and cost base
-- Dividend cancelled and capital programmes deferred to conserve cash
2. Run Lean
-- Permanent staff recruitment stopped, temporary staffing
levels and discretionary spend materially reduced
-- Board, Executive team and wider senior leaders temporarily reduced salaries by up to 25%
-- Banks relaxed covenants and wider cash conservation
activities put in place. Additional funding was not required
-- Government job retention scheme used cautiously in the first
half of the year with focus on RM Resources. Company maintained
100% employee pay. We stopped use of the scheme at the end of May
ahead of schools reopening in June and paid back these receipts to
the government by the end of September
3. Recovery
-- Innovation teams established to assess COVID-19 impact on market and customers
-- Customers engaged to assess short and longer term needs
-- Capital programmes restarted alongside review of Target
Operating Model and working practices
-- Trading returned to more normal levels during Q4
Operating Review
RM Resources had a challenging year of trading as schools and
nurseries both in the UK and internationally closed for extended
periods of time. Revenue in the UK was impacted significantly in Q2
but recovered to more normal levels by the end of Q4. Following a
strong Q1, international revenues were materially down on the prior
year.
During 2020, we continued the programme to consolidate the
current estate of distribution centres to a single, automated
centre. The building construction was completed and formally handed
over, with our [15 year] lease starting in November 2020. 2021 will
be spent equipping the centre with automation equipment, followed
by transitioning stock from the current warehouses. Our current
plan is to have the distribution centre fully operational in the
first half of 2022. During the year we sold one of our freehold
properties and have agreed heads of terms for the sale of the
remaining two freehold properties.
In RM Results trading was impacted by the cancellation of exams
and assessments around the world. The division has a mixture of
recurring revenues and volume related fees associated with the
volume of exams taken which, despite some contractual protection,
clearly experienced a decline as many exams were cancelled or
deferred around the world.
Whilst the development of the sales pipeline during the year has
been significantly restricted by COVID-19 disruption and travel
restrictions, we were pleased to win two contracts to provide full
end-to-end digital assessment including, for the first time, remote
invigilation and also a global research test which will be
delivered across circa 70 countries.
The acquisition of SoNET Systems Pty Ltd ("SoNET") in 2019 has
enabled RM Results to offer full end-to-end digital assessment
services in the online testing and marking of exams to customers.
During 2020 we have also started to partner with 3(rd) parties to
provide remote invigilation (proctoring) of exams to both new and
existing customers to facilitate the remote taking of high-stakes
assessments safely and securely.
Trading in RM Education was less impacted by COVID-19 in 2020
than the other two divisions. The provision and support of
technology was still needed in schools as they moved between
in-class and remote learning models. There was a strong focus in
schools to plan the move of their learning materials to the cloud
and we see this as a continued opportunity for this division going
forward. The sales pipeline has been impacted by COVID-19 as
schools made operating safely their key priority.
Current COVID situation
In January UK governments announced a new set of school closures
with immediate effect. In addition, England and Northern Ireland
confirmed GCSEs and A levels in 2021 would not go ahead as planned.
Scotland had already announced the cancelled of school 2021 exams
late last year. It is too early to judge what the precise impact on
trading in 2021 will be as the length of school closures, the
contract covers for exam cancellations and the effect on
international business remain uncertain. We intend to continue the
investment in our digital and automation programmes to upgrade our
IT systems and consolidate our distribution centres.
Future Market Trends
The education marketplace is changing. Some of these trends are
in response to COVID-19 while others have been in the pipeline for
some time. If we look beyond the disruption of the current
pandemic, there are longer-term market trends that should be
positive for RM. To help understand this change and RM's response
to it, this section maps out four key market trends and gives
specific examples of opportunities for the business to deliver
shareholder return.
The education market trends we are seeing are:
1. Becoming more Digital
2. Modernisation of Assessment
3. Flexible Learning
4. Buyer Aggregation
Provided below are further details on these trends, together
with examples of emerging customer requirements as well as RM's
response.
1. Becoming more Digital
Education has traditionally lagged many sectors when it comes to
digitisation. Whether it is the delivery of teaching and learning
or the buying of products and services online, digital adoption has
been slow. However, we are starting to see a change in the
marketplace which has been accelerated by COVID-19 in 2020. There
have been associated developments in curriculum as education
systems around the world are starting to include the development of
sequencing and coding skills into the curriculum. This is reflected
by the growth for robotics within the education environment which
is expected to more than double between 2019 and 2027. Schools and
nurseries are increasingly ordering online and utilising more
digitised materials in conjunction with physical resources to
deliver a blended teaching solution. In parallel, schools and
nurseries are increasingly using digital tools and channels to
search and select learning resources.
2. Modernisation of Assessment
Market Trend Our response Examples of progress
Becoming more Digital
Customers are seeking Technology solutions Launching two new
digital resources which create immersive robots in 2021 which
for their children environments promote independent
to engage with which Robotics designed thinking and computational
are different to for Early Years enhancing skills for young
laptops or tablet cause and effect learners in the
through ICT classroom and beyond
----------------------------- -------------------------------
Online purchasing Investing in our On our journey to
of education supplies e-commerce functionality 100% of orders being
Expanding marketing online, this figure
activities across increased to over
a broader portfolio 60% in 2020 (up
of digital marketing 10%)
channels
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Modernisation of
Assessment Providing end-to-end Won two contracts
Move to computer-based secure assessments in 2020 with Accountancy
high-stakes testing onscreen Awarding bodies
in flexible locations to provide on screen
to suit test takers testing, remote
(including home) invigilation and
on screen marking
----------------------------- -------------------------------
Increasing use of Providing digital Won contracts to
digital technology assessment platforms provide digital
for baseline assessments designed to support assessment for international
in international standardised assessments research studies,
research studies in multiple countries, for example winning
- that inform education languages and with the Global Trends
policy both online and offline in International
delivery capabilities Mathematics and
to deal with variations Science Study which
in infrastructure will be delivered
in different geographies in c. 70 countries
in 2023
----------------------------- -------------------------------
Flexible Learning
Schools needing to Helping schools move Launching new Managed
provide remoting learning materials Services proposition
learning to the cloud - RM's unique cloud
proposition for
schools
----------------------------- -------------------------------
Education bodies Helping curriculum Providing formative
wanting to bring authorities bring assessment solution
digital assessment curriculum content to customers in
into the curriculum and digital assessment Australia
as a learning tool, into the schools
and as a precursor setting to aid with
to enabling digital learning.
exams
----------------------------- -------------------------------
Buyer Aggregation
MAT and nursery chains Dedicated sales team Over 30 commercial
buying products on engaging with MAT agreements across
behalf of their establishments and nursery chains MATs and nursery
Customised product chains in 2020
collections and bespoke Targeting a material
marketing for consolidated increase of new
groups agreements in 2021
Single dedicated
ecommerce site across
RM Resources entire
portfolio
----------------------------- -------------------------------
MATS looking for Investing in increased Our major IT programme
visibility of the self-service/data delivering in stages
purchasing habits capability through 2021 and
of their schools 2022
----------------------------- -------------------------------
Many qualifications are still completed using paper-based exams.
In the last five years we have seen these exams converted into a
digitised form and marked on-screen. The digitisation of
high-stakes assessments is complex and a niche area of expertise
but we have seen COVID-19 start to accelerate the adoption of
technologies that are modernising assessments. More exam awarding
bodies in the UK and internationally are now moving towards a model
of computer-based paperless assessments and utilising broader
technology enablement around the end-to-end assessment process.
3. Flexible Learning
COVID-19 has forced many learners to remotely engage with their
education, and technology underpins this shift. This is
accelerating understanding in the market of the role technology can
play in improving the flexibility of learning models, reducing the
workload for teachers and driving value from ongoing digital
assessment as part of the learning journey. We expect this increase
in awareness to continue beyond the short term 'remote' learning
demands of COVID-19 as focus shifts to the ongoing value technology
can add to the delivery of educational outcomes.
4. Buyer Aggregation
England has seen Multi Academy Trusts (MAT) continue to grow.
Over the next three years, the number of schools in MAT groupings
of all sizes is set to continue to expand with the biggest
continuous growth in this area predicted to come from MATs with
between 6 and 11 schools. Correspondingly, spend through the MAT
sector is predicted to grow in the same time frame. In addition,
the provision of nursery education in the UK is consolidating with
the larger chains acquiring and growing. Across the nursery sector,
the market value of spend through nursery chains is predicted to
increase each year over the next three years through the
acquisition of single site nurseries. These changes are leading to
a growing trend for central bodies to oversee, and step-in to, the
purchasing for educational establishments.
Market Trends in Action
Workforce
Average Group headcount for the year was 1,837 (2019: 2,011),
which is comprised of 1,716 (2019: 1,811) permanent and 121 (2019:
200) temporary or contract staff, of which 1,072 (2019: 1,239) were
located in the UK, 729 (2019: 754) in India and 36 in Australia
(2019: 18).
As at 30 November 2020, headcount was 1,853 (2019: 1,983). The
following table sets out a more detailed summary of the permanent
staff employed as at 30 November 2020:
Male Female
Executive Directors 2 (100%) 0 (0%)
Executive Committee and direct reports
(excluding EAs and PAs) 23 (53.5%) 20 (46.5%)
Senior Managers (excluding Executive Directors) 33 (63.5%) 19
(36.5%)
All employees 1,055 (62%)
650 (38%)
The Company recognises that talented people are core to the
success of the business. The Company is committed to promoting a
culture of equal opportunity, diversity and inclusion and its
policies, procedures and working practices are designed to attract,
retain and motivate the best staff regardless of their age, race,
gender, religious or philosophical belief, sexual orientation,
disability or educational background. There is a flexible work
policy and practices to encourage gender diversity.
The Company does not operate an employees' share scheme due to
the size and geography of the Group's workforce. The Company's
emphasis is on fair pay structures across the Group and bonus
schemes that support and encourage a high-performance culture.
The Company wants to ensure that all employees receive fair and
equal treatment, and this applies to recruitment and selection,
terms and conditions of employment, promotion, training,
development opportunities and employment benefits. HR policies and
procedures, including pay and bonus processes, are reviewed to
ensure there is no gender bias and last year we rolled out
unconscious bias training to all recruiting managers. Our internal
communications strategy ensures that diversity and inclusion is
talked about on a frequent basis.
Last year we set ourselves the target of having at least 30% of
senior positions held by females and we have met this target. There
is now an increasingly balanced gender split across our Executive
and their direct reports. We support employees with high potential
through leadership development programmes.
The Group gives equal consideration to applications for
employment received from candidates with disabilities. Employees
who become disabled are retained whenever possible through
retraining, use of appropriate technology and making available
suitable alternative employment within the Group.
Regular assessments of the developmental needs of employees are
carried out across the organisation and feedback on this is given
and where appropriate training provided. The Group incentivises
employees and senior management through the payment of bonuses
linked to performance objectives, together with the other
components of remuneration detailed in the Remuneration Report.
The Group has a wide range of other written policies designed to
ensure that it operates in a legal and ethical manner. These
include policies related to health and safety, 'whistle blowing',
anti-bribery and corruption, business gifts, anti-harassment and
bullying, equal opportunities, grievance, parental leave and
systems and network security. All of RM's employment policies are
published internally.
The Corporate Governance Report sets out the Company's Board
Diversity Policy.
RM India
As at 30 November 2020, RM's operation in Trivandrum accounted
for 41% of Group headcount (2019: 38%).
The Indian operation provides services solely to RM Group
companies. Activities include software development, customer and
operational support, back office shared service support (e.g.
customer order entry, IT, finance and HR) and administration.
Purpose, Values, Strategy and Culture
The Company has a clear and stated purpose of "Enriching the
lives of learners worldwide."
Our vision is "Enabling the improvement of educational outcomes
around the world."
Our strategic goals are:
Employees: building a great organisation together
Growth: delivering ambitious results
Proposition: developing winning products and services
Customer: at the heart of everything we do
In the RM Results and RM Education divisions we do this "through
the innovative use of existing and emerging technologies"
and in the RM Resources division we do this "with our innovative
products and outstanding services"
Underpinning our culture are our set of '5 To Drive'
behaviours:
Consider it Done: We hold ourselves accountable, as individuals
and as a company, for delivering on our promises. We can be relied
upon to get the job done for our customers and ourselves. We are
tenacious in delivering positive results and respond energetically
when faced with new challenges.
Make it Simple : We make complex issues easy to understand and
we strive for the simplest solutions that deliver the most
significant results for our customers and ourselves. We say it as
it is and don't assume that how we have done it in the past will
necessarily be how we do it in the future.
Win Together: We are at our best when working with our customers
and with our colleagues - motivated by the belief that diverse
teams are much more successful than the sum of their parts. We
strive to see things from the point of view of others, building
trust, showing humility and working collaboratively to get great
results.
Be Brave: We are ambitious, and we push the boundaries to
deliver great results for our customers and for our business. We do
not settle for less than great, or shy away from the difficult, and
we don't let fear stifle our true potential.
Be Curious: We have an intense desire to understand our
customers and to imagine new possibilities for our business and
theirs. We are hungry to learn, seek out new ideas and best
practice, to expand our networks and to develop our understanding.
We are inquisitive, creative and we question how things are and can
be done.
These are intended to drive positive and aligned behaviours
throughout the organisation. They are intended to benefit not just
the Company itself and its staff but also all stakeholders with
whom we do business. Each month, employees that demonstrate these
behaviours are given awards recognising this.
The Board receives regular reports and updates from the CEO, CFO
and General Counsel as well as other members of the Executive and
the Group. These reports and updates cover a wide range of matters
in order to ensure that policy, practices and behaviour in the
Group are aligned with the
Company's purpose, values and strategy and that any issues that
may give rise to concerns are brought to the attention of the
Board. This has included reviews on particular parts of the
business, any significant customer issues, compliance updates,
disputes and whistle-blower concerns. The Board requests further
information on any matters that they consider relevant. The Board
requires ongoing updates, seeks assurance as to the proposed
actions to resolve such matters and receives information on the
corrective actions taken.
Section 172 (1) Statement
The Company's Directors, individually and collectively, have
acted in a way that they consider, in good faith, is most likely to
promote the success of the Company for the benefit of its members
as a whole.
Examples of how the Board has had regard, in its principal
decisions made during the year, to the various factors set out in
Section 172(1), and the impact that regard has had, are set out
below. Additionally, examples appear throughout this Annual Report
and these are incorporated into this Section 172(1) Statement.
________________________________________________________________________________
Key of factors considered:
GBP Financial R Reputation Sh Acting fairly between
impact members
LT Long-term C Community & environment BR Fostering business
impact relationships
W Employees
Board Decision Factors Factors considered in accordance
with s.172(1) and effect
Continue to keep LT, GBP,
distribution centres Rep, BR * This would maintain our relationship and reputation
open to supply schools with schools as a trusted partner
with resources and C
maintain the IT
systems of schools W * This would enable schools to stay open for the
during the COVID-19 benefit of the wider community
lockdown
* The need to ensure employees are able to continue to
work safely
------------------------ -----------------------------------------------------------------------
Investments in a GBP, LT,
new IT system and W * This is an important investment for the long-term
a new fully automated future of the business
national distribution BR, R
centre
* This would enable RM Resources to provide a market
leading fully digital service to customers with
enhanced user experience
------------------------ -----------------------------------------------------------------------
Extension of Board's W
workforce engagement * This would enable the Board to hear the views of the
workforce more clearly, helping the Board to have
regard to these issues when making decisions
R
* This would enhance the Company's reputation as a good
employer
------------------------ -----------------------------------------------------------------------
Maintaining the GBP, Sh,
Company's financial LT * This would help maintain the liquidity of the Group
position during in the face of the uncertainty caused by the COVID-19
the COVID-19 crisis crisis and prevent it impacting long-term plans
W
* Senior management should demonstrate personal
commitment to the future of the business by a salary
BR, R, sacrifice
C
* That the Group should only take government support
when necessary
------------------------ -----------------------------------------------------------------------
Non- Financial Information Statement
This Strategic Report together with the Directors' Report,
Corporate Governance Report and Audit Committee Report provide
details of the non-financial matters required by sections 414CA and
414CB of the Companies Act 2006.
Environmental Policy and Reporting
The Environmental Policy and Reporting section in the Directors'
Report is incorporated into this report.
Principal and Emerging Risks and Uncertainties
The management of the business and the execution of the
Company's strategy are subject to a number of risks. The Company
has a structured approach to the assessment and management of
risks. A detailed risk register is maintained, in which risks are
categorised under the following categories: political, strategic,
operational, financial and emerging. The full register is reviewed
at least annually by each division to ensure that the risks that
could potentially affect each division are properly captured. The
register also includes a summary of the steps taken to manage or
mitigate against those risks and the person or people responsible
for the relevant actions. This register is then consolidated and
Group-wide risks added, to ensure that the register covers the
entire Group's operations. This is then reviewed by the Executive
Committee, the Audit Committee and the Board. As such, the Board
confirms that it has carried out a robust assessment of the
principal and emerging risks facing the Group and appropriate
processes have been put in place to monitor and mitigate them.
Further details are also set out in the Corporate Governance
Report.
The key business risks for the Group are set out in the table
below.
Risk and categorisation Description and likely Mitigation
impact
----------------------- ------------------------------ ----------------------------------------
Public policy The majority of RM's The Company reviews the education
(Political Risk) business is funded policy environment by regular
from UK government monitoring of policy positions
sources. Changes and by building relationships
in political administration, with education policy makers.
or changes in policy
priorities, might The Group's three divisions
result in major changes have diverse revenue streams
to the exam system and product/service offerings.
or a reduction in
education spending, The Company's strategy is to
leading to a decline focus on areas of education
in market size. spend which are important to
meet customers' objectives.
UK government funding Where the revenue of an individual
in the education business is in decline, management
sector is constrained seeks to ensure that the cost
by fiscal policy. base is adjusted accordingly.
Global economic conditions
might result in a
reduction in budgets
available for public
spending generally
and education spending
specifically in the
area in which RM
specialise.
----------------------- ------------------------------ ----------------------------------------
Education practice Education and assessment The Company maintains knowledge
(Political Risk) practices and priorities of current education practice
may change and, as and priorities by maintaining
a result, RM's products close relationships with customers.
and services may
no longer meet customer The Company is evolving its
requirements, leading product and service offering
to a risk of lower to helps its customers with
revenue. their developing requirements.
----------------------- ------------------------------ ----------------------------------------
Impact of UK's There may be an adverse The Group has adapted its processes
exit from the change in the economic to support the Brexit deal,
European Union and/or fiscal environment is managing the principal risk
(Political Risk) as a result of the areas identified and will continue
UK's exit from the to monitor developments.
EU and costs could
increase and/or revenues
reduce as a result.
----------------------- ------------------------------ ----------------------------------------
Operational execution RM provides sophisticated The Company invests in maintaining
(Operational products and services, a high level of technical expertise.
Risk) which require a high
level of technical Internal management control
expertise to develop processes are in place to govern
and support, and the delivery of all projects
on which its customers (including internal projects),
place a high level including regular reviews by
of reliance. Any relevant management. The operational
significant operational and financial performance of
/ system failure projects, including future obligations,
would result in reputational the expected costs of these
damage and increased and potential risks are regularly
costs. monitored by management and,
as appropriate, the Board.
RM is engaged in
the delivery of large, The Company has internal policies
multi-year projects, and procedures across a wide
typically involving range of areas including bribery
the development and and corruption, health and safety,
integration of complex privacy, employment, competition
IT systems and may law and tax which are regularly
have liability for monitored and reviewed to ensure
failure to deliver we assess and take account of
on time. higher risks levels and comply
with all relevant laws and regulations.
RM's increasing international
business make it
subject to laws in
other countries and
higher risk jurisdictions.
----------------------- ------------------------------ ----------------------------------------
Data and business RM is engaged in The Company has made a commitment
continuity storing and processing to maintain effective Information
(Operational personal data, where Security and Business Continuity
and Emerging accuracy, privacy management systems and achieve
Risk) and security are ISO27001 and ISO22301 certifications
important. Any significant for all business areas to demonstrate
security breach could the robustness and effectiveness
damage reputation, of those systems.
impact future profit
streams and lead The Company has a rolling investment
to potential regulatory programme managed by a dedicated
action. security and compliance function
and overseen by the Group Security
The Group would be and Business Continuity Committee,
significantly impacted which reports into the Group
if, as a result of Executive Committee. This programme
a major incident, covers data integrity and protection,
one of its key buildings, defence against external threats
systems, key supply (including cyber risks) and
chain partners or business continuity planning.
infrastructure components
could not function The Company analyses all information
for a long period security and data protection
of time or at a key incidents (including their root
time. cause), changes in the regulatory
framework, and breaches that
have occurred in other companies
to identify opportunities for
improvement.
The Group seeks to protect itself
against the consequences of
a major incident by implementing
a series of back-up and safety
measures. It also manages risks
with key suppliers by regularly
reviewing their security and
business continuity systems,
conducting assessments and running
joint tests.
The Group has cyber insurance
and property and business interruption
insurance cover.
----------------------- ------------------------------ ----------------------------------------
People RM's business depends The Company seeks to be an attractive
(Operational on highly skilled employer and regularly monitors
Risk) employees. Failing the engagement of its employees.
to recruit and retain The Company has talent management
such employees could and career planning programmes.
impact operationally
on RM's ability to
deliver contractual
commitments.
----------------------- ------------------------------ ----------------------------------------
Transformation Issues in implementing Steering committees are established
Risk major programs could for all major programs which
(Operational lead to business will include a member of the
Risk) disruption and loss Executive Committee. Currently
of intended benefits. there are 2 major programmes
to develop a new automated warehouse
and migrate to new CRM and ERP
systems. A number of mechanisms
are in place to monitor the
ongoing impact of the various
activities, including where
appropriate staff consultations
and satisfaction surveys, and
ongoing customer feedback.
The Board is kept appraised
of the current status of such
activities and projects on a
regular and ongoing basis.
----------------------- ------------------------------ ----------------------------------------
Innovation The IT market and The Company actively monitors
(Strategic Risk) elements of the education technology and market developments
resources market and invests to keep its existing
are subject to rapid, products, services and sales
and often unpredictable, methods up to date, as well
change. As a result as seeking out new opportunities
of inappropriate and initiatives.
technology, product
and marketing choices The Group works with teachers
or a failure to adopt and educators to understand
and develop new technologies opportunities and requirements.
quickly enough, the
Group's products
and services might
become unattractive
to its customer base,
or new market opportunities
missed.
The Group's continued
success depends on
developing and/or
sourcing a stream
of innovative and
effective products
for
the education market
and marketing these
effectively to customers.
----------------------- ------------------------------ ----------------------------------------
Dependence on The performance of The Company invests in maintaining
key contracts the RM Education and a high level of technical expertise
(Strategic Risk) RM Results divisions and in building effective working
is dependent on the relationships with its customers.
winning and extension The Company has in place a range
of long-term contracts of customer satisfaction programmes,
with government, which include management processes
local authorities, designed to address the causes
examination boards of customers' dissatisfaction.
and commercial customers.
----------------------- ------------------------------ ----------------------------------------
Impact of the The impact of the The Company manages its relationship
COVID-19 pandemic COVID-19 pandemic with its customers, supplier
(Operational has put pressure on and other stakeholders. It works
Risk) those with whom we closely with customers to avoid
trade and there are potential bad debts and to manage
risks from customer the impact of costs increases
closures, pricing from key suppliers.
pressures and service
delivery pressures The Company worked closely with
from delays to exams. customers after the exam cancelations
in 2020 and is doing so again
with the cancellation of summer
2021 exams..
----------------------- ------------------------------ ----------------------------------------
Pensions The Group operates The Company evaluates risk
(Financial Risk) two defined benefit mitigation proposals with the
pension schemes in trustees of these respective
the UK (the "RM Education Schemes.
Scheme" and the "CARE
Scheme" respectively) The Platinum Scheme is a multi-employer
both of which are scheme over which the Company
closed to future has no direct control. However,
accrual. It also due to the small number of
participates in a the Company's employees who
third defined benefit are in this Scheme, the risk
pension scheme (the to the Company from this Scheme
"Platinum Scheme"). is limited.
Scheme deficits can The Company assesses potential
adversely impact pension costs of staff from
the net assets position other employers that would
of the trading subsidiaries transfer across to the Company
RM Education Ltd and take this into account
and RM Educational in its bids for new contracts.
Resources Ltd.
Pension costs can
be significant in
respect of staff
that transfer across
to us, where they
are members of Local
Authority pension
schemes.
----------------------- ------------------------------ ----------------------------------------
Treasury The Group is exposed The Company regularly monitors
(Financial Risk) to treasury risks treasury risks. It actively
including fluctuating looks to create natural currency
exchange rates and hedges where possible balancing
liquidity. foreign currency sales and purchase
levels and hedges net balances
9-12 months into the future
for material imbalances.
The Company remains cautious
with liquidity risk and carefully
manages its debt leverage position.
----------------------- ------------------------------ ----------------------------------------
David Brooks
Chief Executive Officer
8 February 2021
Chief Financial Officer's statement
Overview
RM's financial performance was materially impacted by COVID-19
in 2020. Following a positive start to the year with revenue growth
in the first quarter, the closure of schools at the end of March
and subsequent cancellation of exams around the world had a
significant impact on the Group through the remainder of the year
and resulted in full year revenue decline of 16%. The organisation
implemented a range of cost savings initiatives which enabled all
three divisions to remain profitable but the impact of the pandemic
broadly halved profit levels and adjusted diluted earnings per
share. Net debt levels reduced by GBP14m, benefiting from a number
of activities that were initiated to conserve cash, ending the year
at GBP1.3m.
Group Financial Performance
Group revenue decreased by 16% to GBP189.0m (2019:
GBP223.8m).
GBPM 2020(1) 2019(1)
Unaudited Adjusted Adjustment(2) Statutory Adjusted Adjustment(2) Statutory
--------- -------------- ---------- --------- -------------- ----------
Revenue 189.0 - 189.0 223.8 - 223.8
Operating
profit 14.4 (2.9) 11.5 27.6 (3.5) 24.2
Profit before
tax 13.4 (2.9) 10.5 26.6 (3.5) 23.2
Tax (2.6) 0.5 (2.1) (4.7) 0.6 (4.1)
Profit after
tax 10.8 (2.4) 8.4 21.9 (2.8) 19.1
=============== ========= ============== ========== ========= ============== ==========
1. 2020 results reflect the adoption of the new accounting
standard IFRS16. Results in the table for 2019 are presented as
reported at the time and not restated as RM took the modified
approach to adoption. This approach has been taken throughout the
narrative below and explanations are provided in the notes to the
accounts to highlight the impacts. IFRS16 has impacted the profit
before tax by less than GBP0.1m in 2020.
2. Adjustments reflect the amortisation of acquisition related
intangible assets; one time property related items, including a
stock write down, restructuring costs, costs associated with GMP
equalisation and profits on the sale of non-core assets. Further
details are defined and reconciled in note 5 of the notes to the
financial statements.
The pandemic impacted revenues in the UK and internationally. UK
revenues fell by 14% with international revenues down 25%
reflecting a 41% reduction in RM Resources international
revenues.
Adjusted operating profit margins reduced to 7.6% (2019: 12.4%).
Adjusted operating profit reduced by 48% to GBP14.4m (2019:
GBP27.6m).
In order to provide a better understanding of underlying
business performance, some costs are identified as 'adjustments'
(2) to underlying business performance. In 2020 these are broken
down as follows:
Amortisation charges associated with acquisition GBP2.0m
related intangible assets
Impairment of intangible software GBP0.7m
---------
Restructuring costs GBP1.0m
---------
One time property related items GBP-0.6m
---------
One time sale of investment GBP-0.7m
---------
Stock obsolescence associated with revised GBP0.4m
warehouse strategy
---------
Pension GMP equalisation GBP0.2m
---------
Total adjustments (2) GBP2.9m
---------
Taking into consideration the adjustments of GBP2.9m (2019:
GBP3.5m), statutory operating profit decreased to GBP11.5m (2019:
GBP24.2m).
The Group generated a statutory profit before tax of GBP10.5m
(2019: GBP23.2m) with a net interest charge of GBP1.0m which
relates to the Group credit facility and finance costs related to
the defined benefit pension schemes.
The total tax charge within the Income Statement was GBP2.1m
(2019: GBP4.1m). The Group's tax charge for the year, measured as a
percentage of profit before tax, was 19.8% (2019: 17.7%) and was
impacted by the increase in the deferred tax rate which raised the
effective tax rate by 2.4% as a percentage of profit before tax.
Statutory profit after tax decreased 56% to GBP8.4m (2019:
GBP19.1m).
Adjusted diluted earnings per share decreased to 13.0 pence
(2019: 26.4 pence). Statutory basic earnings per share were 10.2
pence (2019: 23.2 pence) and statutory diluted earnings per share
were 10.1 pence (2019: 23.0 pence).
RM generated cash from operations for the year of GBP27.8m
(2019: GBP19.9m).
Cash generation benefited from reduced inventory levels, a
favourable movement in trade and other payables, including positive
trading impacts of GBP8.1m and VAT deferral of GBP2.4m, and gains
through the sale of non-core property and investments of GBP1.6m.
This cash generated was utilised through capital expenditure of
GBP8.5m (2019: GBP6.0m), contributions to the defined benefit
pension scheme of GBP4.1m (2019: GBP4.6m) and tax payments of
GBP2.6m (2019: GBP3.6m). Dividends were suspended in 2020 as part
of the activities to conserve cash. As a result, net debt was
reduced to GBP1.3m at the end of the year (2019: GBP15.0m).
RM is currently progressing two large capital projects;
consolidation of five distribution centres into a single automated
facility and a group-wide IT system implementation. In March we
paused the capital spend associated with the single automated
facility and the IT system implementation. The construction of the
building continued under contract and was completed at the end of
November when RM commenced the lease of this facility. These
projects, alongside wider capital investments, will drive further
elevated capital expenditure over the next two years, likely to be
more than GBP20m in total. A proportion of this spend will be
recovered by the subsequent sale of a further two freehold
properties following the completion of the sale of one freehold
property in 2020 generating GBP2.9m of cash and an exceptional
profit on sale of GBP0.7m. Heads of terms are agreed for sales on
the remaining two properties with exchange expected in the first
half of 2021. Both projects are scheduled to conclude by the end of
2022 and deliver good financial and operational benefits.
Dividend
Following the impact of COVID-19 and subsequent lockdown, RM
took the decision to cancel the 2019 final dividend. No interim
dividend was paid in the year (2019: 2.0p). The Board proposes a
2020 final dividend of 3.0 pence per share (2019: nil) which is
subject to shareholder approval. The estimated cost of the ordinary
dividend proposed is GBP2.5m (2019: GBP1.7m paid).
The Board is committed to a long-term sustainable dividend
policy and the Company has GBP36.2m of distributable reserves, as
at 30 November 2020, available to support the dividend policy.
RM plc is a non-trading investment holding company and derives
its profits from dividends paid by subsidiary companies. The
Directors consider the Group's capital structure and dividend
policy at least twice a year, ahead of announcing results and
during the annual budgeting process, looking at longer-term
sustainability. The Directors do so in the context of the Company's
ability to execute the strategy and to invest in opportunities to
grow the business and enhance shareholder value.
The dividend policy is influenced by a number of the principal
risks identified in the table of 'Principal and Emerging Risks and
Uncertainties' set out above which could have a negative impact on
the performance of the Group or its ability to distribute
profits.
Defined Benefit Pension Schemes ("Schemes")
The Company operates two defined benefit pension schemes ("RM
Education Scheme" and "Care Scheme") and participates in a third,
multi-employer, defined benefit pension scheme (the "Platinum
Scheme"). Following the closure of one warehouse during the year
(which impacted the Platinum Scheme), all schemes are closed to
future accrual of benefits.
The IAS19 net deficit (pre-tax) across the Group increased by
GBP12.7m to GBP18.7m (2019: GBP6.0m) with the Platinum Scheme being
in surplus. This increase was caused by an increase in the
liabilities of the Schemes driven primarily by lower discount
rates.
The Group deficit recovery plan payments across all schemes in
2020 were GBP4.1m which was down slightly on the GBP4.6m in the
prior year. Following the triennial review at 31 December 2019, the
Group agreed with the Trustee of the Consortium Care Scheme to
contribute GBP0.7m per annum until 31 December 2027.
RM Resources
RM Resources revenues decreased by 19% to GBP92.4m (2019:
GBP114.5) resulting from the widespread school closures in the UK
and internationally in response to the COVID-19 pandemic. UK
education revenue reduced by 15% with international revenues down
41% .
Divisional adjusted operating profit reduced to GBP3.1m (2019:
GBP13.7m) and operating margins decreased to 3.3% (2019: 12.0%).
The reduction was predominantly driven by lower revenues.
Underlying operating costs were reduced by 13% but these were
offset by a cost of GBP2.1m associated with higher debtor and stock
write down charges largely associated with the impact of
COVID-19.
UK
UK education revenues decreased by 13% to GBP78.5m (2019:
GBP90.1m). This decline was broadly in line with the UK key
competitor market set representing the impact of the pandemic and
school closures. This performance reflects an improvement in
underlying performance in the schools' market offset by two areas
that disproportionally impacted RM Resources. The most impacted
market sector was the Early Years sector which declined by more
than double that of the schools' market. This is also the sector in
which RM Resources has the highest market share. Furthermore,
revenues were negatively impacted by the loss of the Wales
framework agreement at the end of 2019 and the break-up of a
nursery chain contract into small agreements in which the business
did not win all the sub-agreements.
Revenues arising from the TTS brand fell only 9% in the UK
benefiting from its clearly differentiated position and innovative,
own-developed product portfolio. The Consortium brand saw its
revenues decline more than the comparative market set as trading
was disproportionately impacted by the contract loss and Early
Years market.
International
International sales are made through two key channels,
international distributors, through which we sell own-developed
products to over 80 countries, and international English curriculum
schools to whom we sell a wider portfolio of education supplies.
International revenues declined by 41% to GBP12.8m (2019:
GBP21.4m). This was again as a direct result of school closures,
which in some countries was for a more extended period than that
encountered in the UK. There were fewer students in International
schools which also saw higher remote learning adoption. The region
most impacted was the US which saw sales down 81%.
RM Results
Revenue decreased by 16% on the prior year to GBP31.6m (2019:
GBP37.7m) as growth in new contracts was materially reduced as a
result of the large number of exams cancelled globally resulting
from the COVID-19 pandemic which impacted the variable element of
many of our contracts.
Geography RM Customer Exam Cancellations
Exam Bodies
UK General Exams 4 75%
UK Other 5 35%
EMEA 8 90%
Australia / NZ 5 0%
Asia 2 35%
ROW 3 70%
Adjusted operating profit fell by 24% on the prior year to
GBP6.6m (2019: GBP8.7m), with adjusted operating margins decreasing
to 20.9% (2019: 23.2%).
RM Results signed two new end-to-end digital assessment
contracts in the year that include e-testing, e-marking and, for
the first-time, remote invigilation. The division has also signed a
global baseline test with International Association for the
Evaluation of Educational Achievement to deliver the Trends in
International Mathematics and Science study across c. 70 countries
and also agreed several important contract renewals. More widely
the sales pipeline has been restricted by COVID-19 disruption and
will remain challenging until travel restrictions are eased.
RM Education
Revenues in the division reduced by 9% to GBP65.0m (2019:
GBP71.6m) driven primarily by the conclusion of the Building
Schools for the Future (BSF) programmes in 2019 which resulted in a
GBP5m reduction in revenue in 2020. The Division proved to be more
resilient with regard to UK school closures resulting from COVID-19
as most schools remained operational and required technology
support as they continued to teach vulnerable children and those of
key workers and support remote learning throughout the lockdown.
The sales pipeline was impacted through most of the year and
remains challenging as school management teams focus on managing
the changing COVID-19 protocols and policies. Adjusted operating
margins were retained at similar levels to the prior year at 14.3%
(2019: 14.5%) delivering adjusted operating profit of GBP9.3m
(2019: GBP10.4m). This reduction reflects the lower revenues
partially offset by benefits from a pre-COVID restructuring
programme and reduced discretionary spend through lockdown.
The division is made up of Services (83% of revenue) and Digital
Platforms (17%) with a key focus of the division to build its
annuity revenue offerings which accounted for 70% of revenue in
2020.
Services
The Services offering is primarily the provision of IT
outsourcing and associated technology services (managed services)
and managed broadband connectivity to UK schools and colleges.
Total Services revenues declined by 11% to GBP54.0m (2019:
GBP60.8m) with managed services revenues declining 12% to GBP42.0m.
This was driven primarily by the absence of BSF revenues and a
slight reduction in site numbers through the year as converting the
sales pipeline became challenged. Connectivity declined 7% to
GBP12.0m due entirely to lower sales of unbundled IP addresses with
underlying connectivity revenues up marginally.
Digital Software Platforms
The Digital Software Platform offering covers a number of key
cloud-based products and services such as RM Integris (school
management system), RM Unify (authentication and identity
management system) and RM SafetyNet (internet filtering system) as
well as other content, finance and network software offerings.
Digital Platforms revenues increased by 2% to GBP10.9m (2019:
GBP10.8m) driven by sales of RM Unify which is used as part of
enabling a cloud platform in schools.
Impact of UK withdrawal from the European Union
The Company will continue to monitor the evolving situation
following the UK withdrawal from the EU given the recent trade deal
agreement and uncertainty regarding the flow of products through
key ports. The Group had European sales of GBP11.9m in 2020, of
which GBP6.4m relate to physical product sales in RM Resources and
GBP5.6m relate to software and services sales in RM Results and RM
Education.
Treasury Management
The Company's financial position is supported by a revolving
credit facility of GBP70million that is shared between two banks,
HSBC and Barclays. It also has an additional accordion arrangement
for a further GBP30million, enabling the Group to extend the
facility to GBP100m. The facility is committed to June 2022 but has
the option of a further 2-year extension. The associated financial
covenants are based on the definition of finance leases prior to
the implementation of the new accounting standard, IFRS16.
Treasury activities are managed centrally for the Group
including banking relationships and foreign currency hedging. The
Group has foreign currency denominated costs that outweigh foreign
currency denominated revenues and therefore increased currency
volatility creates an exposure. This is primarily attributed to US
Dollar and Indian rupee exposure. This risk is managed through
currency hedging against exchange rate movements, typically 9-12
months into the future. The Group is also working to rebalance its
exposure by growing its foreign currency denominated sales ahead of
its costs to reduce the currency imbalance and more naturally hedge
this risk over time.
Going Concern
The financial position, cashflows and liquidity position are
described in the financial statements and the associated notes. In
addition, the notes to the financial statements include RM's
objectives, policies and processes for managing its capital,
financial risk management objectives, and exposure to credit and
liquidity risk.
The Group ended the year with a net debt of GBP1.3m which is a
decrease of GBP13.7m on the prior year end position of GBP15.0m.
The average net debt position during the year was GBP16.3m with the
highest borrowing point being GBP29.6m relative to the banking
revolving credit facility of GBP70million.
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
of not less than 12 months from the date of approval of these
financial statements 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 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. Management are not aware of any
reasons why the extension would be not be granted, if requested to
the lenders.
Throughout FY20 the COVID-19 pandemic has impacted the Group
primarily as a result of widespread school closures and the
cancellation of UK and some International summer exam sessions. In
December, prior to the recent COVID-19 school closures the Group
was trading in line with internal budgets and forecasts. During
previous periods of school closures and subsequent limited school
re-openings, the RM Education division continued to provide
software, services and technology to UK schools, but the volume of
hardware and new installations fell slightly. The RM Results
division continues to provide digital assessment solutions for
International awarding bodies and is currently in discussions with
these customers about the impact of COVID-19 on their exam cycles.
While returning close to previous performance during the schools
re-opening in FY20, sales of consumables to UK and International
schools by the Group's third division, RM Resources, have been
materially lower over the periods of lockdown driven by the volume
of pupils in schools and nurseries. Actions taken by management to
reduce the impact of COVID-19 included a temporary furloughing of
employees, later repaid, a deferral of pension deficit payments,
also later repaid, and pausing of discretionary spending and
capital projects. The proposed FY19 final dividend was also
cancelled to protect group cash flow. All business units were
profitable in FY20.
The Group has assessed a number of scenarios for going concern
purposes and is using a base case scenario assessment based on the
known COVID restrictions at January 2021, namely that UK schools
will remain closed in quarter 1 FY21, the UK Government
announcements of exam cancellations included and reduced
international exam volumes ("base case "). Management has
considered a severe but plausible downside scenario based on
further lockdowns after March 2021 in varying months across the
going concern period to reflect the risk of further school closures
in quarter 4 FY21 and quarter 1 FY22 ("downside scenario"). Under
this downside scenario, the forecasts assume that trading during
future lockdowns is equivalent to that experienced to date in the
current Government imposed lockdown during January 2021. This is
similar to levels experienced in June 2020 when only certain year
groups had returned to school.
Under the downside scenario, management would take the decision
to reduce further discretionary spend. The levels of discretionary
spend reductions are being actively reassessed with the
announcements by UK Government indicating their desires to get
schools operating normally as soon as practical. Under the downside
scenarios the Group has headroom against its available facilities
without using all its available options in relation to cash
management, and considers there are sufficient controllable actions
it can take, even if a more severe downside case were to
materialise, to operate within the facility's covenants. At present
the directors consider a more severe downside case to be highly
unlikely, given the vaccine rollout and the communicated desire by
the UK Government to prioritise the reopening of schools at the
earliest opportunity.
Therefore, the Board has a reasonable expectation that the Group
and Company has adequate resources to continue in operational
existence and meet their 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 and Company
continues to adopt the going concern basis of accounting in
preparing the annual financial statements.
Financial Viability Statement
In accordance with the UK Corporate Governance Code, in addition
to an assessment of going concern, the Directors have also
considered the prospects of the Group and Company over a longer
time period. The period of assessment chosen is three years, which
is consistent with the time period over which the Group's
medium-term financial budgets are prepared. These financial budgets
include Income Statements, Balance Sheets and Cash Flow Statements.
They have been assessed by the Board in conjunction with the
principal risks of the Group, which are documented within the
Principal and Emerging Risks and Uncertainties section above, along
with their mitigating actions.
The Board considers that the principal risks which have the
potential to threaten the Group's business models, future
performance, solvency or liquidity over the three-year period
are:
1. Public policy risk - UK education policy priority changes or
restrictions in government funding due to fiscal policy.
2. Operational execution - including:
a. Major adverse performance in a key contract or product which
results in negative publicity and which damages the Group's
brand.
b. Delays and failure to exploit the benefits of key projects
where we are investing more significant levels of discretionary
capital expenditure.
3. Business continuity - an event impacting the Group's major
buildings, systems or infrastructure components. This would include
a major incident at one of the RM Resources' main warehouses.
4. Strategic risks
a. Loss of a significant contract which underpins an element of a division's activity.
b. Significant reduction in gross margins.
c. Further impacts of COVID-19 lockdowns and exam cancellations.
Having assessed the above risks, singularly and in combination,
and via sensitivity analysis, the Directors have a reasonable
expectation that the Company will be able to continue in operation
and meet its liabilities as they fall due over the three-year
period of assessment and are not aware of any reason that viability
would be an issue.
Neil Martin
Chief Financial Officer
8 February 2021
CONSOLIDATED INCOME STATEMENT (UNAUDITED)
for the year ended
30 November 2020
Year ended 30 November Year ended 30 November
2020 2019
Adjusted Adjustments Total Adjusted Adjustments Total
Note GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Revenue 2 188,999 - 188,999 223,765 - 223,765
Cost of sales (114,669) (365) (115,034) (132,140) - (132,140)
Gross profit 74,330 (365) 73,965 91,625 - 91,625
Operating expenses (59,647) (1,842) (61,489) (63,985) (3,462) (67,447)
Impairment losses (248) (705) (953) - - -
Profit from operations 14,435 (2,912) 11,523 27,640 (3,462) 24,178
Other income 3 21 - 21 153 - 153
Finance costs 4 (1,055) - (1,055) (1,155) (8) (1,163)
Profit before tax 13,401 (2,912) 10,489 26,638 (3,470) 23,168
Tax 5 (2,552) 477 (2,075) (4,746) 640 (4,106)
Profit for the year 10,849 (2,435) 8,414 21,892 (2,830) 19,062
Earnings per ordinary
share
- basic 6 13.1p 10.2p 26.6p 23.2p
- diluted 6 13.0p 10.1p 26.4p 23.0p
------------------------ ----- ---------- ------------ ---------- ---------- ------------ ----------
Paid and proposed
dividends per share 7
- interim - 2.00p
- final 3.00p -
------------------------ ----- ---------- ------------ ---------- ---------- ------------ ----------
The results for the year ended 30 November 2020 have been
presented under IFRS16. The previous year's results have not been
restated (see note 14). Adjustments to results have been presented
to give a better guide to business performance (see note 2).
All amounts were derived from continuing operations.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(UNAUDITED)
for the year ended 30 November
2020
Year ended Year ended 30 November2019
30 November
2020
Note GBP000 GBP000
----------------------------------------- ---- ----- --------------- -------------------------------
Profit for the year 8,414 19,062
Items that will not be reclassified
subsequently to profit or loss
Defined Benefit Pension
Scheme remeasurements 13 (16,302) (8,033)
Tax on items that will not be
reclassified
subsequently to profit or loss 5 2,851 1,418
Items that are or may be reclassified
subsequently to profit or loss
Fair value gain/ (loss)
on hedged instruments 346 (806)
Exchange loss on translation
of overseas operations (205) (211)
Other comprehensive expense (13,310) (7,632)
--------------------------------------------- ----- --------------- -------------------------------
Total comprehensive (expense)/
income (4,896) 11,430
--------------------------------------------- ----- --------------- -------------------------------
CONSOLIDATED BALANCE SHEET (UNAUDITED)
At 30 November At 30 November
2020 2019
Note GBP000 GBP000
-------------------------------------------- --------- --------------- -------------------
Non-current assets
Goodwill 49,322 49,107
Intangible assets 22,354 23,274
Property, plant and equipment 8,423 9,183
Right of Use asset 19,391 -
Defined Benefit Pension Scheme surplus 13 665 976
Other receivables 8 63 939
Contract fulfilment assets 3,420 2,193
Deferred tax assets 5 5,333 3,457
108,971 89,129
-------------------------------------------- --------- --------------- -------------------
Current assets
Inventories 18,594 22,151
Trade and other receivables 8 31,317 31,238
Contract fulfilment assets 728 844
Held for sale asset 4,793 1,428
Tax assets 2,030 382
Cash at bank 5,941 5,534
63,403 61,577
--------------- -------------------
Total assets 172,374 150,706
-------------------------------------------- --------- --------------- -------------------
Current liabilities
Trade and other payables 9 (61,491) (51,231)
Tax liabilities (163) (117)
Provisions 11 (435) (1,585)
Overdraft (2,480) (4,006)
(64,569) (56,939)
--------------- -------------------
Net current (liabilities) /assets (1,166) 4,638
-------------------------------------------- --------- --------------- -------------------
Non-current liabilities
Other payables 9 (20,987) (3,483)
Provisions 11 (3,998) (3,868)
Deferred tax liability (3,339) (3,356)
Defined Benefit Pension Scheme obligation 13 (19,318) (6,951)
Borrowings 10 (4,779) (16,534)
(52,421) (34,192)
--------------- -------------------
Total liabilities (116,990) (91,131)
-------------------------------------------- --------- --------------- -------------------
Net assets 55,384 59,575
-------------------------------------------- --------- --------------- -------------------
Equity attributable to shareholders
Share capital 12 1,917 1,917
Share premium account 27,080 27,080
Own shares (841) (1,007)
Capital redemption reserve 94 94
Hedging reserve (65) (411)
Translation reserve (702) (497)
Retained earnings 27,901 32,399
Total equity 55,384 59,575
-------------------------------------------- --------- --------------- -------------------
CONSOLIDATED STATEMENT OF CHANGES
IN EQUITY (UNAUDITED)
for the year
ended 30 November
2020
Share Share Own Capital Hedging Translation Retained Total
capital premium shares redemption reserve reserve earnings
reserve
Note GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------ ----- --------- -------- -------- ----------- --------- ------------ --------- ---------
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 options
exercised - - 416 - - - (416) -
Share-based
payment fair
value charges - - - - - - 686 686
Ordinary
dividends paid 7 - - - - - - (6,348) (6,348)
At 1 December
2019 1,917 27,080 (1,007) 94 (411) (497) 32,399 59,575
------------------ ----- --------- -------- -------- ----------- --------- ------------ --------- ---------
Profit for the
year - - - - - - 8,414 8,414
Other
comprehensive
(expense)/income - - - - 346 (205) (13,451) (13,310)
------------------ -----
Total
comprehensive
(expense)/income - - - - 346 (205) (5,037) (4,896)
Transactions with
owners
of the Company:
Share-based
payment awards
exercised - - 166 - - - (166) -
Share-based
payment fair
value charges - - - - - - 705 705
At 30 November
2020 1,917 27,080 (841) 94 (65) (702) 27,901 55,384
------------------ ----- --------- -------- -------- ----------- --------- ------------ --------- ---------
CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED)
for the year ended 30 November 2020 Year ended Year ended
30 November 30 November
2020 2019
Note GBP000 GBP000
----------------------------------------------- ----- --------- -------------
Profit before tax 10,489 23,168
Investment income 3 (21) (153)
Finance costs 4 1,055 1,163
Profit from operations 11,523 24,178
Adjustments for:
Pension GMP 170 -
Amortisation and impairment of intangible
assets 3,778 2,690
Depreciation and impairment of property,
plant and equipment 3,718 1,584
(Gain) on disposal of other asset (713) -
Loss on disposal of other intangible
assets - 10
(Gain)/ loss on disposal of property,
plant and equipment (949) 26
(Gain) on foreign exchange derivatives (625) (29)
Share-based payment charge 705 686
Increase/(decrease) in provisions 1,443 (758)
Defined Benefit Pension Scheme administration
cost 13 37 262
-----------------------------------------------
Operating cash flows before movements
in working capital 19,087 28,649
Decrease /(increase) in inventories 3,557 (4,115)
Decrease in receivables 2,520 7,638
(Increase) in contract fulfilment
assets (1,111) (1,602)
Movement in payables
- increase/ (decrease) in trade and
other payables 6,012 (7,483)
- utilisation of provisions 11 (2,284) (3,161)
Cash generated from operations 27,781 19,926
Defined benefit pension scheme cash
contributions 13 (4,094) (4,618)
Tax paid (2,589) (3,639)
Net cash inflow from operating activities 21,098 11,669
----------------------------------------------- ----- --------- -------------
Investing activities
Interest received 21 153
Acquisition net of cash acquired - (7,109)
Acquisition related costs - (728)
Proceeds on disposal of investment 1,560 -
asset
Proceeds on disposal of property,
plant and equipment 2,900 8
Purchases of property, plant and equipment (5,801) (2,876)
Purchases of other intangible assets (2,660) (3,159)
Net cash used in investing activities (3,980) (13,711)
----------------------------------------------- ----- --------- -------------
Financing activities
Dividends paid 7 - (6,348)
(Repayment)/ drawdown of borrowings 10 (12,000) 10,000
Borrowing facilities arrangement and
commitment fees (226) (529)
Interest paid (501) (513)
Payment of leasing liabilities (2,523) -
Net cash (used in)/ generated by financing
activities (15,250) 2,610
Net increase in cash and cash equivalents 1,868 568
Cash and cash equivalents at the beginning
of the year 1,528 712
Effect of foreign exchange rate changes 65 248
Cash and cash equivalents at the end
of the year 3,461 1,528
----------------------------------------------- ----- --------- -------------
1. Preliminary announcement
The consolidated preliminary results are based on International
Financial Reporting Standards (IFRS) as adopted by the EU and were
also in accordance with international financial reporting standards
adopted pursuant to Regulation (EC) No 1606/2002 as it applies in
the European Union.
The financial information set out above does not constitute the
company's statutory accounts for the years ended 30 November 2020
or 2019. The financial information for 2019 is derived from the
statutory accounts for 2019 which have been delivered to the
registrar of companies. The auditor has reported on the 2019
accounts; their report 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 undersection 498 (2) or (3) of the Companies
Act 2006. The statutory accounts for 2020 will be finalised on the
basis of the financial information presented by the directors in
this preliminary announcement and will be delivered to the
registrar of companies in due course .
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.
Basis of preparation
The financial statements have been prepared on the historical
cost basis except for certain financial instruments, share-based
payments and pension assets and liabilities which are measured at
fair value. In addition, assets held for sale are stated at the
lower of previous carrying amount and the fair value less costs to
sell. The preparation of financial statements, in conformity with
generally accepted accounting principles, requires the use of
estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Although these estimates are based on the Directors' best
knowledge of current events and actions, actual results ultimately
may differ from those estimates.
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
of not less than 12 months from the date of approval of these
financial statements 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 and is subject to annual
covenant tests in May and November related to the leverage and
interest cover of the Group. The Group had net debt of GBP1.3m at
30 November 2020; the average net debt position during the year was
GBP16.3m with the peak borrowing point being GBP29.6m. The facility
is committed until June 2022 with the option of a further two-year
extension to June 2024. Management are not aware of any reasons why
the extension would be not be granted, if requested to the
lenders
Throughout FY20 the COVID-19 pandemic has impacted the Group
primarily as a result of widespread school closures and the
cancellation of UK and some International summer exam sessions. In
December, prior to the recent COVID-19 school closures the Group
was trading in line with internal budgets and forecasts. During
previous periods of school closures and subsequent limited school
re-openings, the RM Education division continued to provide
software, services and technology to UK schools, but the volume of
hardware and new installations fell slightly. The RM Results
division continues to provide digital assessment solutions for
International awarding bodies and is currently in discussions with
these customers about the impact of COVID-19 on their exam cycles.
While returning close to previous performance during the schools
re-opening in FY20, sales of consumables to UK and International
schools by the Group's third division, RM Resources, have been
materially lower over the periods of lockdown driven by the volume
of pupils in schools and nurseries. Actions taken by management to
reduce the impact of COVID-19 included a temporary furloughing of
employees, later repaid, a deferral of pension deficit payments,
also later repaid, and pausing of discretionary spending and
capital projects. The proposed FY19 final dividend was also
cancelled to protect group cash flow. All business units were
therefore profitable in FY20.
The Group has assessed a number of scenarios for going concern
purposes and is using a base case scenario assessment based on the
known COVID restrictions at January 2021, namely that UK schools
will remain closed in quarter 1 FY21, the UK Government
announcements of exam cancellations included and reduced
international exam volumes ("base case"). Management has considered
a potentially severe but plausible downside scenario based on
further lockdowns after March 2021 in varying months across the
going concern period to reflect the risk of further school closures
in quarter 4 FY21 and quarter 1 FY22 ("downside scenario"). Under
this downside scenario, the forecasts assume that trading during
future lockdowns is equivalent to that experienced to date in the
current Government imposed lockdown during January 2021. This is
similar to levels experienced in June 2020 when only certain year
groups had returned to school.
Under the downside scenario, management would take the decision
to pause further discretionary spend. The levels of discretionary
spend pauses are being actively reassessed with the announcements
by UK Government indicating their desires to get schools operating
normally as soon as practical. Under the downside scenarios the
Group has headroom against its available facilities without using
all its available options in relation to cash management, and
considers there are sufficient controllable actions it can take,
even if a more severe downside case were to materialise, to operate
within the facility's covenants. At present the directors consider
a more severe downside case to be highly unlikely, given the
vaccine rollout and the communicated desire by the UK Government to
prioritise the reopening of schools at the earliest
opportunity.
Therefore, the Board has a reasonable expectation that the Group
and Company has adequate resources to continue in operational
existence and meet their 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 and Company
continues to adopt the going concern basis of accounting in
preparing the annual financial statements.
Significant accounting policies
The accounting policies used for the preparation of this
announcement have been applied consistently.
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
- Net debt
Further explanation of what each APM comprises and
reconciliations between Statutory reported measures and adjusted
measures are shown in note 2.
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 and predictability of occurrence.
2. Operating Segments
The Group's business is supplying products, services and
solutions to the UK and international education markets.
Information reported to the Group's Chief Executive for the
purposes of resource allocation and assessment of segmental
performance is focused on the nature of each type of activity.
The Group is structured into three operating divisions: RM
Resources, RM Results and RM Education.
A full description of each revenue generating division, together
with comments on its performance and outlook, is given in the
Strategic Report. Corporate Services consists of central business
costs associated with being a listed company and non-division
specific pension costs.
This Segmental analysis shows the result 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 (Unaudited)
RM RM RM Corporate Total
Resources* Results Education Services
Year ended 30 November GBP000 GBP000 GBP000 GBP000 GBP000
2020
------------------------------- ----------- -------- ---------- ---------- --------
Revenue
UK 80,956 20,473 63,977 - 165,406
Europe 6,362 5,042 533 - 11,937
North America 777 - 412 - 1,189
Asia 848 1,250 - - 2,098
Middle East 2,196 225 - - 2,421
Rest of the world 1,303 4,589 56 - 5,948
92,442 31,579 64,978 - 188,999
------------------------------- ----------- -------- ---------- ---------- --------
Adjusted profit/(loss)from
operations 3,081 6,607 9,296 (4,549) 14,435
Investment income 21
Adjusted finance costs (1,055)
Adjusted profit before
tax 13,401
Adjustments (2,912)
Profit before tax 10,489
------------------------------- ----------- -------- ---------- ---------- --------
RM RM RM Corporate Total
Resources* Results Education Services
Year ended 30 November GBP000 GBP000 GBP000 GBP000 GBP000
2019
------------------------------- ----------- -------- ---------- ---------- --------
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 (3,470)
Profit before tax 23,168
------------------------------- ----------- -------- ---------- ---------- --------
* Included in UK are International Sales via UK Distributors of
GBP1,352,000 (2019: GBP1,944,000).
Adjustments to cost of sales and administrative
expenses (Unaudited)
Year ended Year ended
30 November 30 November
2020 2019
GBP000 GBP000
------------------------------------------------- ------------- -------------
Adjustments to cost of sales
Exceptional inventory adjustments 365 -
Adjustments to administrative expenses
Amortisation of acquisition related
intangible assets 1,986 1,577
Acquisition related costs - 728
Property related (income)/costs (670) 335
Impairment of intangible assets 705 -
Gain on sale of Essex LEP loan (673) -
Pension GMP 170 -
Restructuring costs 1,029 822
Total adjustments to administrative
expenses 2,547 3,462
Total adjustments 2,912 3,462
-------------------------------------------------- ------------- -------------
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. The recurring item relates to the
amortisation of acquisition related intangible assets. Recurring
items are 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; 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. 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, which was a warehouse that will no longer be
required following the estates strategy review and a non-current
other receivable. These transactions resulted in a profit of
GBP1.3m.
The Group's previously announced an estates strategy review,
includes moving to one new automated warehouse. As a result of the
new warehouse functionality, we have undertaken a review of
inventory and the inventory that is not compliant with the
automated solution has been written off. Normal inventory write
downs are included in operating profit.
The restructuring costs in the current year, relate to a group
restructuring programme that was announced in December 2019 and
completed in the year. The costs in the prior year relate to the
estates review noted above.
The impairment costs relate to aspects of the ERP solution we
are investing in, that will require rework.
The Group provided for the increase in estimated liability of
equalising GMPs in our defined benefit pension schemes of
GBP170,000 that arise from the recent Court ruling on valuation of
transfer values.
During 2019 the Group acquired SoNET Systems Pty Limited and
incurred GBP728,000 of associated acquisition costs comprising
advisor fees, related intangible impairment and integration
costs.
During 2019 the Group exited a number of key properties and
entered into new properties resulting in non-recurring exceptional
costs of GBP335,000.
The Group previously announced an estates strategy review that
will mean relocating a number of activities in the RM Resources
division to one location. During 2019 the timing and impact of this
was reviewed and includes a provision for improved contributions to
the impacted defined benefit scheme.
The adjustments have the following impact on key metrics:
2020 2020 2020 2019 2019 2019
Measure Adjustment Adjusted Measure Adjustment Adjusted
measure measure
Profit from operation
(GBP000) 11,523 2,912 14,435 24,178 3,462 27,640
Profit before tax
(GBP000) 10,489 2,912 13,401 23,168 3,470 26,638
Earnings per share
(see note 6)
Basic (Pence) 10.2 2.9 13.1 23.2 3.4 26.6
Diluted (Pence) 10.1 2.9 13.0 23.0 3.4 26.4
3. Other income (Unaudited)
Year ended Year ended
30 November 30 November
2020 2019
GBP000 GBP000
---------------------- ------------- -------------
Bank interest 21 136
Other finance income - 17
21 153
---------------------- ------------- -------------
4. Finance costs (Unaudited)
Year ended Year ended
30 November 30 November
2020 2019
Note GBP000 GBP000
--------------------------------------- ------ ------- -------------
Borrowing facilities arrangement fees
and commitment fees 468 592
Net finance costs on defined benefit
pension scheme 13 83 (6)
Unwind of discount on onerous lease
and dilapidations provisions 11 - 22
Interest on lease of Right of Use 151 -
assets
Interest on bank loans and overdrafts 353 555
1,055 1,163
--------------------------------------- ------ ------- -------------
5. Tax (Unaudited)
a) Analysis of tax charge in the Consolidated Income
Statement
Year ended Year ended
30 November 30 November
2020 2019
GBP000 GBP000
-------------------------------------- ------------- -------------
Current taxation
UK corporation tax 1,632 4,179
Adjustment in respect of prior years (305) (479)
Overseas tax 391 385
Total current tax charge 1,718 4,085
--------------------------------------- ------------- -------------
Deferred taxation
Temporary differences 345 247
Adjustment in respect of prior years 21 (288)
Overseas tax (9) 62
Total deferred charge 357 21
Total Consolidated Income Statement
tax charge 2,075 4,106
--------------------------------------- ------------- -------------
b) Analysis of tax (credit)/charge in the Consolidated Statement
of Comprehensive Income
Year ended Year ended
30 November 30 November
2020 2019
GBP000 GBP000
----------------------------------------------- ------------- -------------
UK corporation tax
Defined benefit pension scheme (240) (735)
Share based payments (18) (38)
Pension escrow account (328) (353)
Deferred tax
Defined benefit pension scheme movements (2,408) (624)
Defined benefit pension scheme escrow 297 437
Share based payments 66 (105)
Deferred tax relating to the change (220) -
in rate
Total Consolidated Statement of Comprehensive
Income tax credit (2,851) (1,418)
------------------------------------------------ ------------- -------------
c) Reconciliation of Consolidated Income Statement tax
charge
The tax charge in the Consolidated Income Statement reconciles
to the effective rate applied by the Group as follows:
Year ended 30 November Year ended
2020 30 November 2019
Adjusted Adjustments Total Adjusted Adjustments Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Profit/(loss) on ordinary
activities before tax 13,401 (2,912) 10,489 26,638 (3,470) 23,168
Tax at 19% (2019: 19%)
thereon: 2,546 (553) 1,993 5,061 (659) 4,402
Effects of:
- change in tax rate on
carried forward
deferred tax assets (137) 391 254 - - -
- other expenses not deductible
for tax purposes 194 (119) 75 133 - 133
- other temporary timing
differences 54 - 54 (4) (28) (32)
- impairments - - - - 47 47
- effect of profits/losses
in various overseas tax
jurisdictions 53 - 53 67 - 67
- Prior period adjustments
- UK (158) (196) (354) (511) - (511)
Tax charge/(credit) in the
Consolidated Income Statement 2,552 (477) 2,075 4,746 (640) 4,106
d) Deferred tax
The Group has recognised deferred tax assets as these are
anticipated to be recoverable against profits in future periods.
The major deferred tax assets and liabilities recognised by the
Group and movements thereon are as follows:
Group Accelerated Defined Share-based Short-term Acquisition Total
tax depreciation benefit payments timing related
pension differences intangible
scheme assets
obligation
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------ ------------------ ------------ ------------ ------------- ------------ -------
At 1 December
2018 1,021 392 396 1,548 (2,789) 568
Acquired through
subsidiary - - - 69 (807) (738)
(Credit)/charge
to income (305) - (78) 94 268 (21)
(Charge)/ credit
to equity - 624 105 (437) - 292
At 30 November
2019 716 1,016 423 1,274 (3,328) 101
(Charge)/credit
to income (387) - 162 (121) (11) (357)
Credit/(charge)
to equity - 2,527 (66) (211) - 2,250
At 30 November
2020 329 3,543 519 942 (3,339) 1,994
------------------ ------------------ ------------ ------------ ------------- ------------ -------
6. Earnings per share (Unaudited)
Year ended 30 Year ended 30 November
November 2020 2019
Profit Weighted Pence per Weighted Pence
for average share average per
the number number share
year of shares of shares
GBP000 '000 GBP000 '000
------------------------------- ------- ----------- ------ ------- ----------- -------
Basic earnings per ordinary
share
Basic earnings 8,414 82,576 10.2 19,062 82,341 23.2
Adjustments (see note
2) 2,435 - 2.9 2,830 - 3.4
-------------------------------- ------- ----------- ------ ------- ----------- -------
Adjusted basic earnings 10,849 82,576 13.1 21,892 82,341 26.6
-------------------------------- ------- ----------- ------ ------- ----------- -------
Diluted earnings per ordinary
share
Basic earnings 8,414 82,576 10.2 19,062 82,341 23.2
Effect of dilutive potential
ordinary shares: share based
payment awards - 888 (0.1) - 577 (0.2)
Diluted earnings 8,414 83,464 10.1 19,062 82,918 23.0
Adjustments (see note
2) 2,435 - 2.9 2,830 - 3.4
-----------
Adjusted diluted earnings 10,849 83,464 13.0 21,892 82,918 26.4
-------------------------------- ------- ----------- ------ ------- ----------- -------
7. Dividends (Unaudited)
Amounts recognised as distributions to equity holders
were:
Year ended Year ended
30 November 30 November
2020 2019
GBP000 GBP000
----------------------------------------- -------------- -------------
Final dividend for the year ended
30 November 2019 - nil p per share
(2018: 5.70p) - 4,698
Interim dividend for the year ended 30
November 2020 - nil p per share (2019:
2.0p) - 1,650
- 6,348
-------------------------------------------------------- -------------
The proposed final dividend of 3.00p per share for the year
ended 30 November 2020 was approved by the board on 8 February
2021. The dividend is subject to approval by Shareholders at the
annual general meeting. The anticipated cost of this dividend is
GBP2,481,183.
8. Trade and other receivables (Unaudited)
2020 2019
GBP000 GBP000
------------------- ------- -------
Current
Financial assets
Trade receivables 22,907 21,343
Other receivables 1,498 1,897
Accrued income 1,997 2,384
26,402 25,624
Non-financial assets
Prepayments 4,915 5,614
31,317 31,238
------------------- ------- -------
Non-current
Financial assets
Other receivables 63 939
63 939
------------------- ------- -------
31,380 32,177
------------------- ------- -------
9. Trade and other payables (Unaudited)
2020 2019
GBP000 GBP000
------------------------------------ ------- -------
Current liabilities
Financial liabilities
Trade payables 20,620 19,136
Lease liabilities 4,067 -
Other taxation and social security 6,847 4,364
Other payables 2,503 2,081
Derivative financial instruments 76 461
Accruals 10,740 11,849
44,853 37,891
Non-financial liabilities
Deferred income 16,638 13,340
61,491 51,231
------------------------------------ ------- -------
Non-current liabilities
Financial liabilities
Lease liabilities
- due after one year but within 2,301 -
two years
- due after two years but within 4,500 -
five years
- after five years 11,346 -
Non-financial liabilities:
Deferred income:
- due after one year but within
two years 1,356 1,783
- due after two years but within
five years 1,309 1,561
- after five years 175 139
20,987 3,483
------------------------------------ ------- -------
82,478 54,714
------------------------------------ ------- -------
10. Borrowings (Unaudited)
2020 2019
GBP000 GBP000
---------------------- -------- ---------
Bank loan (5,000) (17,000)
Add capitalised fees 221 466
Borrowings (4,779) (16,534)
----------------------- -------- ---------
Net debt is the total of borrowings, cash at bank and overdraft
which was GBP1.3m as at 30 November 2020 (2019: GBP15.0 m).
11. Provisions (Unaudited)
Onerous Employee-related Other Total
lease restructuring
and dilapidations
Group GBP000 GBP000 GBP000 GBP000
---------------------------- ------------------- ------------------ ------------------- -------------------
At 1 December 2018 3,518 2,617 3,237 9,372
Acquisition 28 - - 28
Utilisation of provisions (1,940) (1,221) - (3,161)
Release of provisions (802) (12) (872) (1,686)
Increase in provisions 27 836 15 878
Unwind of discount 22 - - 22
----------------------------- -------------------
At 30 November 2019 853 2,220 2,380 5,453
Utilisation of provisions - (2,284) - (2,284)
Release of provisions - - (525) (525)
Increase in provisions 381 1,092 314 1,787
Impact of foreign exchange 2 - - 2
At 30 November 2020 1,236 1,028 2,169 4,433
----------------------------- ------------------- ------------------ ------------------- -------------------
The onerous lease was exited in 2019. In making their assessment
of the required onerous lease provisions, the Group was required to
estimate the likely sub-let income that could be earned over the
remaining life of the lease. This required the Directors to make
judgements relating to the likelihood that a property will be
sub-let and the income that will be earned.
Employee-related restructuring provisions refer to costs arising
from restructuring to meet the future needs of the Group. As
described in note 2, the Group is undergoing an estates review and
GBP1.1m of the utilisation relates to this programme. A separate
restructuring programme was announced in December 2019 and
completed during the year. The majority of the restructuring
provision is expected to be utilised during 2022.
Other provisions includes one-off items not covered by any other
category of which the most significant items are the risk
provisions from ended long term contracts transferred from
long-term contract creditors to provisions. The release of
GBP525,000 primarily relates to onerous contract risks that have
either been re-negotiated or terminated during the year and the
increase in provisions relate to new contract risks identified in
the year.
12. Share capital (Unaudited)
Ordinary shares
of 2(2) /(7) p
'000 GBP000
Allotted, called-up and
fully paid:
At 30 November 2018,
2019 and 2020 83,875 1,917
13. Defined benefit schemes (Unaudited)
a. Defined contribution scheme
The Group operates or contributes to a number of defined
contribution schemes for the benefit of qualifying employees. The
assets of these schemes are held separately from those of the
Company. The total cost charged to income of GBP2,861,000 (2019:
GBP4,489,000) represents contributions payable to these schemes by
the Group at rates specified in employment contracts. At 30
November 2020 GBP233,000 (2019: GBP308,000) due in respect of the
current financial year had not been paid over to the schemes.
b. Local government pension schemes
The Group has TUPE employees who retain membership of local
government pension schemes. The Group makes payments to these
schemes for current service costs in accordance with its
contractual obligations. The total costs charged to income for
these schemes was GBP157,000 (2019: GBP143,000). The amount due in
respect of these schemes at 30 November 2020 was GBP75,000 (2019:
GBP51,000). The balance sheet liability is included within
provisions (see note 11 ) and incorporates information from over 14
local government pension schemes. The provision is calculated by
reference to the latest published triennial valuations and the
Group discloses the net position of the Group's share of assets and
liabilities.
c. Defined benefit pension schemes
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 The Consortium in June 2017, the
Consortium CARE Scheme (the "CARE scheme") and the Platinum Scheme
(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 The Consortium
being just one of a number of employers. The number of the Group's
employees in that Scheme is small (and none by 30 November 2020)
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. An estimate for Guaranteed Minimum Pensions ('GMPs') transfer
values was expensed (see below for further explanation).
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 30
November 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. In
the year the Platinum scheme shows a surplus and the RM and CARE
schemes are in deficit.
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.
Under the Scheme, employees were entitled to retirement benefits
of 1/60th of final salary for each qualifying year on attainment of
retirement age of 60 or 65 years and additional benefits based on
the value of individual accounts. No other post-retirement benefits
were provided by the 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 30 November 2020 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 GBP40,600,000 (31 May 2015:
GBP41,800,000). The Group agreed with the Scheme Trustees that it
will repay this amount via deficit catch-up payments of
GBP3,700,000 per annum until 31 May 2026.
The Research Machines plc 1988 Pension Scheme (RM Scheme)
continued
At 30 November 2020 there were amounts outstanding of GBP308,300
(2019: GBP308,000) for one month's deficit payment and GBPnil
(2019: GBPnil) for Scheme expenses. The escrow bank account that
was set up to manage the deficit risk in 2014 was closed during
2019 as the funds were paid over to the RM Scheme.
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 (CARE scheme)
Until 31 December 2005, The Consortium for Purchasing and
Distribution Ltd ("The Consortium", acquired by the Company on 30
June 2017) operated a pension scheme (the "Consortium 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
disclosures in this report make allowance for this change.
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, The Consortium
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 2019 was a deficit of GBP5.9m.
Prudential Platinum Pension (Platinum scheme)
The Consortium acquired West Mercia Supplies in April 2012
(prior to the Company acquiring The Consortium). Upon acquisition
by The Consortium of West Mercia Supplies, a pension scheme (the
Platinum 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 Pensions Group on 31
December 2018. 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 The
Consortium 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 GBP70,000).
Amounts recognised in the Income Statement and
in the Statement of Comprehensive Income
Year ended Year ended
30 November 30 November
2020 2019
Note GBP000 GBP000
---------------------------------- ----- ------------- -------------
Administrative expenses and
taxes (7) (174)
Current service costs (30) (88)
Operating expense (37) (262)
---------------------------------- ----- ------------- -------------
Interest cost (5,611) (7,219)
Interest on Scheme assets 5,528 7,225
Net interest expense 4 (83) 6
---------------------------------- ----- ------------- -------------
Past service cost (350) -
----- -------------
Expense recognised in the Income
Statement (470) (256)
---------------------------------- ----- ------------- -------------
Effect of changes in demographic
assumptions (406) 1,586
Effect of changes in financial
assumptions (44,944) (45,476)
Effect of experience adjustments 2,197 2,150
Total actuarial (losses)/gains (43,153) (41,740)
Return on Scheme assets excluding
interest on Scheme assets 26,851 33,707
Expense recognised in the Statement
of Comprehensive Income (16,302) (8,033)
----------------------------------------- ------------- -------------
Expense recognised in Total
Comprehensive Income (16,772) (8,289)
---------------------------------- ----- ------------- -------------
GMP equalisation
Since the 30 November 2018 year-end an allowance has been made
for the possible liabilities arising from potential adjustment of
benefits to allow for inequalities in any Guaranteed Minimum
Pensions for current members. In November 2020, the High Court
ruled on the Lloyds Bank GMP inequalities case regarding the
equalisation of post-1990 GMP within transfer values paid since 17
May 1990. An estimated allowance for the potential costs of
equalising the transfer values has been made. In the Director's
view, the range of outcomes is not material even though this is an
estimate.
RPI/CPI reform
On 25 November 2020, the government and UK Statistics Authority
confirmed that RPI will be changing from February 2030 to bring it
into line with the CPIH index, with no compensation to the holders
of index-linked gilts. In the year ended 30 November 2020, the
Group has revised the RPI and CPI assumptions to reflect the
expectations that these reforms proceed as planned. The impact of
these changes in assumptions has increased the closing deficit by
around GBP3m.
Reconciliation of the Scheme assets
and obligations through the year
RM scheme CARE scheme Platinum Year ended Year ended
scheme 30 November 30 November
2020 2019
GBP000 GBP000 GBP000 GBP000 GBP000
Assets
At start of year 239,696 14,815 2,653 257,164 218,330
Interest on Scheme assets 5,159 310 59 5,528 7,225
Return on Scheme assets
excluding interest on
Scheme assets 25,522 1,081 252 26,855 33,707
Administrative expenses - (7) (7) (174)
Contributions from Group 3,700 319 75 4,094 4,618
Contributions from employees - 6 6 19
Benefits paid (5,928) (607) (44) (6,579) (6,561)
------------------------------- ---------- ------------ --------- ------------- -------------
At end of year 268,149 15,918 2,994 287,061 257,164
------------------------------- ---------- ------------ --------- ------------- -------------
Obligations
At start of year (241,542) (19,920) (1,677) (263,139) (220,634)
Interest cost (5,160) (413) (38) (5,611) (7,219)
Actuarial (losses)/ gains (39,984) (2,731) (442) (43,157) (41,740)
Benefits paid 5,928 607 44 6,579 6,561
Past service cost (GMP) (130) (40) (180) (350) -
Current service costs - - (30) (30) (88)
Contributions from employees - - (6) (6) (19)
------------------------------- ---------- ------------ --------- ------------- -------------
At end of year (280,888) (22,497) (2,329) (305,714) (263,139)
------------------------------- ---------- ------------ --------- ------------- -------------
Pension deficit (12,739) (6,579) - (19,318) (6,951)
------------------------------- ---------- ------------ --------- ------------- -------------
Pension surplus - - 665 665 976
------------------------------- ---------- ------------ --------- ------------- -------------
Net pension deficit (12,739) (6,579) 665 (18,653) (5,975)
------------------------------- ---------- ------------ --------- ------------- -------------
Included within the CARE Scheme obligations is an unfunded
liability of GBP183,000 (2019: GBP190,000) which is a liability of
the Group and not the Scheme.
Reconciliation of net defined benefit
obligation
Year ended Year ended
30 November 30 November
2020 2019
GBP000 GBP000
----------------------------------------- ------------- -------------
Net obligation at the start of the
year (5,975) (2,304)
Cost included in Income Statement (470) (256)
Scheme remeasurements included in the
Statement of Comprehensive Income (16,302) (8,033)
Cash contribution 4,094 4,618
Net pension deficit (18,653) (5,975)
------------------------------------------ ------------- -------------
Obligation by participant status Year ended Year ended
30 November 30 November
2020 2019
GBP000 GBP000
----------------------------------------- ------------- -------------
Active 1,463 976
Vested deferreds 254,650 216,540
Retirees 49,601 45,623
305,714 263,139
----------------------------------------- ------------- -------------
Value of Scheme assets Year ended Year ended
30 November 30 November
2020 2019
GBP000 GBP000
----------------------------------------- ------------- -------------
Fair value of Scheme assets with
a quoted market price
Cash and cash equivalents, including
escrow 1,629 986
Equity instruments 135,547 128,445
Debt instruments 2,995 2,653
Liability driven investments 117,486 97,191
Value of unquoted Scheme assets
Insurance contract 29,404 27,889
287,061 257,164
----------------------------------------- ------------- -------------
Significant actuarial assumptions
Year ended Year ended
30 November 30 November
2020 2019
-------------------------------------------- ------------- -------------
Discount rate (RM scheme) 1.60% 2.15%
Discount rate (CARE scheme) 1.50% 2.10%
Discount rate (Platinum scheme) 1.60% 2.20%
Rate of RPI price inflation 2.90% 2.95%
Rate of CPI price inflation 2.10% 1.85%
Rate of salary increases (Platinum
scheme) NA 1.85%
Rate of pensions increases
pre 6 April 1997 service 1.50% 1.50%
pre 1 June 2005 service 2.80% 2.85%
post 31 May 2005 service 2.00% 2.00%
Post retirement mortality table S2PA CMI S2PA CMI
2019 1.25% 2018 1.25%
Weighted average duration of defined 23 years 23 years
benefit obligation
Assumed life expectancy on retirement
at age 65:
Retiring at the accounting date
(male member aged 65) 22.4 22.3
Retiring in 20 years after the accounting
date (male member aged 45) 23.7 23.6
--------------------------------------------- ------------- -------------
14. Impact of adoption of IFRS16 - Leases (Unaudited)
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 IFRIC 4. 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 at 1 December 2019 is set out below:
As reported IFRS16 Adopted
impact IFRS
16
GBP'000 GBP'000 GBP'000
--------------------------- ------------ -------- ---------
Non-current assets
Right of use asset - 7,031 7,031
Other non current assets 89,129 - 89,129
89,129 7,031 96,160
--------------------------- ------------ -------- ---------
Current assets 61,577 - 61,577
Total assets 150,706 7,031 157,737
--------------------------- ------------ -------- ---------
Current liabilities
Trade and other payables (51,231) 210 (51,021)
Lease liabilities - (7,241) (7,241)
Other current liabilities (5,708) - (5,708)
(56,939) (7,031) (63,970)
-
Net current liabilities 4,638 (7,031) (2,393)
--------------------------- ------------ -------- ---------
-
Non-current liabilities (34,192) - (34,192)
-
Total liabilities (91,131) (7,031) (98,162)
-
Net assets 59,575 - 59,575
--------------------------- ------------ -------- ---------
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
Previously the Company determined at contract inception whether
an arrangement was or contained a lease under IFRIC 4: Determining
whether an Arrangement contains a Lease. The Company now assesses
whether a contract is or contains a lease based on the definition
of a lease. On transition to IFRS 16, the Company elected to apply
the practical expedient to apply IFRS 16 only to contracts that
were previously identified as leases. Contracts that were not
previously identified as leases under IAS 17 and IFRIC 4 were not
reassessed for whether there is a lease under IFRS 16. Therefore,
the definition of a lease under IFRS 16 was applied only to
contracts entered into or changed on or after 1 December 2019.
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. The weighted average discount
rate on transition was 1.98%.
Extension options
Some property leases contain options exercisable by the Group to
vary the lease term. The Group assesses at the lease commencement
date or at the date of transition whether it is reasonably certain
to exercise its options and the most likely lease term is used in
determining the lease liability.
The Group has estimated that the potential future lease
payments, should it exercise the extension option, would result in
an increase in lease liability of GBP3.2m.
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 Consolidated Income
Statement
As reported IFRS16 impact Amounts
before adoption
of IFRS16
GBP'000 GBP'000 GBP'000
------------------------ ------------ -------------- -----------------
Revenue 188,999 - 188,999
Cost of sales (115,034) 67 (115,101)
------------------------ ------------ -------------- -----------------
Gross profit 73,965 67 73,898
Operating expenses (61,489) 153 (61,642)
Impairment losses (953) - (953)
------------------------ ------------ -------------- -----------------
Profit from operations 11,523 220 11,303
Investment income 21 - 21
Finance costs (1,055) (151) (904)
------------------------ ------------ -------------- -----------------
Profit before tax 10,489 69 10,420
Tax (2,075) (13) (2,062)
------------ -------------- -----------------
Profit for the period 8,414 56 8,358
------------------------ ------------ -------------- -----------------
Impact on the Consolidated Statement
of Financial Position
As reported IFRS16 impact Amounts
before adoption
of IFRS16
GBP'000 GBP'000 GBP'000
------------------------------------- ------------ -------------- -----------------
Non-current assets
Goodwill 49,322 - 49,322
Other intangible assets 22,354 - 22,354
Property, plant and equipment 8,423 - 8,423
Right of use asset 19,391 19,391 -
Defined Benefit Pension
Scheme Surplus 665 - 665
Other receivables 63 - 63
Contract fulfilment assets 3,420 - 3,420
Deferred tax assets 5,333 - 5,333
------------------------------------- ------------ -------------- -----------------
108,971 19,391 89,580
------------------------------------- ------------ -------------- -----------------
Current assets
Inventories 18,594 - 18,594
Trade and other receivables 31,317 2,660 28,657
Contract fulfilment assets 728 - 728
Held for sale asset 4,793 - 4,793
Corporation tax assets 2,030 (13) 2,043
Cash and short-term deposits 5,941 - 5,941
------------------------------------- ------------ -------------- -----------------
63,403 2,647 60,756
Total assets 172,374 22,038 150,336
------------------------------------- ------------ -------------- -----------------
Current liabilities
Trade and other payables (61,491) (3,835) (57,656)
Tax liabilities (163) - (163)
Provisions (435) - (435)
Overdraft (2,480) - (2,480)
(64,569) (3,835) (60,734)
Net current liabilities (1,166) (1,188) 22
------------------------------------- ------------ -------------- -----------------
Non-current liabilities
Other payables (20,987) (18,147) (2,840)
Provisions (3,998) - (3,998)
Deferred tax liability (3,339) - (3,339)
Defined Benefit Pension
Scheme obligation (19,318) - (19,318)
Borrowings (4,779) - (4,779)
------------------------------------- ------------ -------------- -----------------
(52,421) (18,147) (34,274)
Total liabilities (116,990) (21,982) (95,008)
Net assets 55,384 56 55,328
------------------------------------- ------------ -------------- -----------------
Equity attributable to shareholders
Share capital 1,917 - 1,917
Share premium account 27,080 - 27,080
Own shares (841) - (841)
Capital redemption reserve 94 - 94
Hedging reserve (65) - (65)
Translation reserve (702) - (702)
Retained earnings 27,901 56 27,845
Total equity 55,384 56 55,328
------------------------------------- ------------ -------------- -----------------
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.
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