TIDMRM.
RNS Number : 9792D
RM PLC
06 February 2018
6 February 2018
RM plc
Final Results for the period ending 30 November 2017
RM plc ("RM"), a leading supplier of technology and resources to
the education sector, reports its final results for the year ending
30 November 2017.
HIGHLIGHTS
Financial 2017 2016 Change
----------------------------------------- ------------ ------------ --------------------
Revenue GBP185.9m GBP167.6m +10.9%
RM Resources GBP83.6m GBP58.8m +42.1%
RM Results GBP31.6m GBP31.6m 0.0%
RM Education GBP70.6m GBP77.0m -8.4%
Adjusted* operating profit GBP22.1m GBP18.8m +17.4%
Adjusted* operating profit 11.9% 11.2% +0.7pp
margins
GBP12.9m GBP11.6m +10.3%
Statutory profit after
tax
----------------------------------------- ------------ ------------ --------------------
Adjusted* diluted EPS 21.9p 17.4p +25.9%
Paid and proposed dividend** 6.60p 6.00p +10.0%
per share
----------------------------------------- ------------ ------------ --------------------
Operational
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* A strong year delivering growth in adjusted operating
profits of 17.4% to GBP22.1m
* Revenues increased by 11% to GBP185.9m and adjusted
operating margins rise to 11.9%
* Acquisition of the Education & Care business of
Connect Group plc (The Consortium) completed 30 June
2017 contributing revenues of GBP27.8m
* Profit after tax grew 10.3% to GBP12.9m (2016:
GBP11.6m)
* Strong cash conversion resulting in net debt of
GBP13.4m (2016: net cash of GBP40.0m) following the
acquisition
* Defined benefit pension deficit decreases to GBP20.2m
(2016: GBP34.8m)
* Full year proposed dividend increased by 10% to 6.60p
-------------------------------------------------------------------
Commenting on the results, David Brooks, Chief Executive of RM,
said:
"2017 was a significant year for the Group and it was
encouraging to see the improvement in underlying operating margins
and strong cash generation. The Group increased revenues following
the acquisition of The Consortium, which we are now confident will
deliver synergies that are approximately double our initial
estimate.
Going forward, despite the continued subdued UK Education
market, 2018 has started in line with our expectations and we are
confident of a year of good progress."
* Adjusted operating profit is before the amortisation of
acquisition related intangible assets; costs associated with the
acquisition of The Consortium and subsequent costs related with the
delivery of synergies; share-based payment charges; and changes in
the provision for onerous lease contracts.
** The expected timetable for the final dividend and Annual
General Meeting is as follows:
Ex-dividend date for 2017 final 15 March 2018
dividend (4.95 pence per share)
--------------------------------------- ---------------
Record date for 2017 final dividend 16 March 2018
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AGM 21 March 2018
at 11.30 a.m.
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Payment of 2017 final dividend 13 April 2018
--------------------------------------- ---------------
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 2017 final dividend is subject to
the approval by shareholders of the final
dividend.
--------------------------------------------------------
Contacts
RM plc FTI Consulting
08450 700300
David Brooks, Chief Executive Jamie Ricketts / Elena
Officer Kalinskaya
Neil Martin, Chief Financial
Officer
08450 700 300 020 3727 1000
Chairman's Statement
2017 was a positive year for RM with revenue, adjusted operating
profits and margins improved compared with the prior year. The
Group completed the acquisition in June 2017 of the Education and
Care business of Connect plc (The Consortium) which is being
combined with TTS. Cash generation was strong and the Company
finished the year with modest net debt of GBP13.4m.
RM Resources increased revenues and profits, driven by the
acquisition. The first few months of ownership have seen good
progress in integrating The Consortium and TTS. The Board expects
the annual synergies from this acquisition to be broadly double the
original estimates of GBP2m. Excluding the effect of the
acquisition, RM Resources saw a decline in revenues compared with
the prior year, with international growth more than offset by
declines in the UK. After a difficult first half, the RM Resources
business stabilised in the second half of the year.
RM Results revenues were unchanged from the prior year but
profits grew strongly. The Division's future was strengthened by
the renewal of a number of long-term contracts and winning several
deals with new customers in both the e-testing and e-marking
areas.
RM Education revenues declined as expected, following a
reshaping of the lower margin elements of the business in late
2016. Profitability and operating margins improved on the prior
year, as did cash generation.
The strong cash performance in all three divisions resulted in a
profit to cash conversion rate of over 100%. The Group's defined
benefit pension schemes deficit, including a small effect from The
Consortium schemes, decreased to GBP20.2m (2016: GBP34.8m).
The Board is recommending a final dividend of 4.95 pence per
share which would constitute, at 6.60 pence per share in total, an
increase of 10% over the prior year.
The outlook for 2018 is still affected by continued pressure on
UK school budgets. However, management is focused on delivering the
synergies from the acquisition in RM Resources, while delivering
continued good operating performance and developing strategies for
top-line growth.
John Poulter
Chairman
5 February 2018
Extract from Strategic Report
RM plc is a leading supplier of technology and resources to the
education sector. Our products and services are used in most parts
of UK education from early years settings, primary and secondary
schools and colleges to major exam boards and central government.
The Company's focus continues to be on delivering sustainable
shareholder returns with a resilient and efficient operating model.
RM is increasing its revenues and adjusted operating margins and
delivering a high return on capital employed.
Operating Review
The Group is structured in three operating divisions, each with
its own managing director and management team, with corporate
services functions provided centrally. Approximately 32% (2016:
36%) of Group headcount is based in India, providing support
services and software development to the operating divisions.
RM Resources
The RM Resources Division now consists of the brands TTS, The
Consortium and West Mercia Supplies.
At the beginning of 2017, the Division comprised TTS only. On 30
June 2017, the Company completed the acquisition of the Education
and Care business of Connect plc, which added The Consortium and
West Mercia Supplies ("The Consortium") brands to RM Resources.
RM Resources provides education resources and supplies used in
UK and international schools and early years establishments.
Products supplied are a mix of commodity, third party branded, own
brand equivalents and TTS own designed items manufactured by a
network of third party suppliers with a focus on specialist
curriculum resources.
The Division's strategy is to grow its market share in the
provision of resources to schools, early years and special
educational needs markets via online sales, a direct sales force
and direct catalogue, both in the UK and internationally.
RM Resources revenues increased by 42% to GBP83.6m following the
acquisition of The Consortium and the inclusion of revenues from
that business from July onwards. Organic TTS revenues declined by
5% to GBP55.9m (2016: GBP58.8m), with UK revenues declining by 12%
to GBP41.1m (2016: GBP46.8m), partially offset by strong growth of
23% in international revenues to GBP14.8m (2016: GBP12.1m).
International revenues now represent 26% of revenue in TTS. In the
five months since being acquired, The Consortium delivered GBP27.8m
of revenues, of which GBP1.0m was from international sales and
GBP1.7m was from non-Education resources sectors.
Divisional adjusted operating profit increased to GBP11.6m
(2016: GBP10.2m) as the Division's profitability benefited from the
acquisition of The Consortium outlined above. However, operating
margins decreased to 13.9% (2016: 17.3% - TTS only). This reduction
was driven by a reduction in TTS's margins to 15.1% (2016: 17.3%),
resulting from a reduction in revenues combined with a more
competitive pricing market and exchange rate impacts which reduced
profits by GBP0.9m. The Consortium (11.3% operating margins)
further diluted the margin of the Division as a whole.
UK
UK revenues increased by 45% to GBP67.8m (2016: GBP46.8m) driven
by the acquisition of The Consortium. Organic TTS UK revenues
decreased by 12% as primary schools and nurseries focussed their
resources budgets more on commodity items. This was due to
discretionary budgets being negatively impacted by unfunded
increases in staff pension and national insurance costs. The
decline in TTS in the UK was more pronounced in the first half of
the year (-20%) than in the second half of the year (-2%). This
reflected some improvement in the market, although we continue to
expect that tight budgets will keep the UK market subdued.
The Company continues to invest in its online channels. Online
orders now make up broadly half of UK direct education sales. We
expect the proportional growth in online sales to continue in
future years, as more customers use it as their preferred method of
ordering.
International
The international business is made up of sales of own designed
products through resellers and distributors to over 70 countries
and sales of a wider portfolio of education supplies directly to
international English curriculum schools. Organic TTS revenues from
international sales to overseas resellers and international schools
increased by 23% to GBP14.8m (2016: GBP12.1m). This was driven by
strong growth of our own designed products through reseller
channels (+32%) and growth in sales to international schools
(+14%). We expect international revenues to continue to grow in the
coming year. The acquisition of The Consortium delivered an
additional increase in sales to international schools (GBP1.0m in
the five months since the acquisition completed). The increased
product range will significantly add to the combined proposition of
the Division going forward.
Integration
The integration of the TTS and The Consortium businesses is
progressing well. A single senior management team consisting of
members from both organisations has been appointed and has started
to rationalise the distribution storage footprint, move to a
combined operating model for the business and develop the go to
market strategy for the UK and internationally. In addition, supply
chain savings and organisational restructuring is in progress.
Better synergies coupled with more scope for operational
efficiencies are now expected, in time, to realise benefits of
approximately double our initial expectations of GBP2m pa. This
outlook assumes no changes to the estate and distribution network
or the potential benefits of delivering a unified set of systems
and processes where beneficial.
The Board is currently not expecting a significant uplift from
revenue synergies in its outlook due to the subdued nature of the
UK market and the increased risks of new online entrants. However,
combined purchasing contracts with aggregated buying groups, the
inclusion of TTS own designed products into The Consortium's sales
channels and a joint approach to maximising the opportunity in
English curriculum international schools are just three of the
initial initiatives being worked on.
RM Results
The RM Results Division provides IT software and services to
exam boards and professional awarding bodies to help them digitise
exams in the UK and internationally through the use of
e-assessment. In addition, the Division manages and analyses
educational data on behalf of the UK central government, which was
part of a 'Data' division.
The strategy is to grow the e-assessment business through
expanding the scope of solutions to existing customers and to win
new customers in both the UK and overseas markets. The target
markets for e-assessment are general qualifications, language
testing, professional awarding bodies and higher education.
Software and services are provided through a combination of
proprietary and third party, in-house and outsourced arrangements.
Internationally, the business is largely expected to develop
through partnerships and software licensing.
Revenue remained stable at GBP31.6m. The e-assessment part of
the business grew by 7%, which offset the planned exit of a number
of contracts in the Data business (-21%). Adjusted operating profit
increased strongly by 14% on the prior year to GBP7.8m (2016:
GBP6.8m).
Adjusted operating margins increased to 24.5% (2016: 21.5%).
RM Results signed a five year agreement in 2017 for the
provision of a Global Assessment Platform to Oxford University
Press (OUP). The contract provides item and test authoring, online
test delivery and online marking of a range of OUP English Language
testing products through an integrated technology platform.
The Division has also successfully secured several key contract
renewals and extensions with existing customers including:
A three year contract extension to continue to provide e-marking
services until 2021 to the education charity, AQA, the UK's largest
schools exam awarding body.
A two year extension with the Department of Education for the
National Pupil Database contract.
An extended e-marking contract with the Caribbean Examinations
Council (CXC).
Following the planned exit of a number of contracts the Data
business now consists of a contract to deliver the National Pupil
Database contract to the Department for Education.
The Board is targeting the growth opportunities in e-assessment
whilst maintaining good operating margins and sees RM Results as
being very well placed to respond to the ever increasing
digitisation of high stakes exams in the UK and internationally.
Organic and non-organic growth options will be considered in this
promising, technology driven area.
RM Education
RM Education is a UK focused business supplying IT software and
services to schools and colleges. In recent years the strategy has
been to improve operating margins and the proportion of annuity
revenue whilst transitioning from its large legacy hardware
manufacturing operations. This should create a more stable software
and services platform from which it can grow.
Revenues in the Division declined by 8% to GBP70.6m (2016:
GBP77.0m) with the planned contract completion of several Building
Schools for the Future (BSF) contracts and the decline of some of
the lower margin legacy infrastructure business. Adjusted operating
profit margins continued to improve, increasing to 9.3% (2016:
7.6%), benefitting from a 12% reduction in the cost base. Adjusted
operating profit increased to GBP6.6m (2016: GBP5.8m).
Recurring annuity revenues increased from 61% to 68% in 2017,
reflecting the continued improvements over recent years since 2013
levels (37%).
The RM Education business is made up of Managed Services - IT
outsourcing (40% of revenue), Digital Platforms (10%) - Cloud-based
software offerings and Infrastructure (50%) - aimed at schools who
want to run their own IT. The primary focus for this business going
forward is increasing its annuity revenues.
Managed Services
The Managed Services offering is primarily the provision of IT
outsourcing services to UK schools and colleges. Managed Services
revenues decreased by 15% to GBP28.1m (2016: GBP33.1m) with several
large BSF contracts coming to an end resulting in lower levels of
project spend and revenues associated with BSF contracts falling to
GBP11m from GBP19m in the prior year. Retention rates of existing
customers during the year was 94% and, in addition, 49 new schools
signed managed services contracts in the year. The proportion of
revenues coming from contracts outside BSF programmes grew from 43%
in 2016 to 60% in 2017.
A proportion of the Division's managed service contracts are
subject to long-term project accounting policies, in particular
those relating to BSF. Consequently, as these contracts complete in
the year or progress towards completion, profits benefit from the
effects of good operational performance, risk mitigation at
completion and wider reductions in the RM Education Division cost
base.
Digital Platforms
The Digital Platform offering covers key products such as RM
Integris (RM's cloud-based school management system) and RM Unify,
our cloud-based authentication and portal system, as well as
certain other legacy content offerings. Digital Platforms revenues
increased by 5% to GBP7.3m (2016: GBP7.0m) as growth in these key
products more than offset declines in those legacy products.
Customer retention rates of core Digital Platform products were 97%
in the year.
The Division also signed a new contract for five years with
Education Scotland to continue to provide RM Unify to all schools
in Scotland.
Infrastructure
Infrastructure is a very tight margin business including the
tools, products and services to help schools manage their own IT.
Revenues decreased by 5% to GBP35.2m (2016: GBP37.0m) as the
Division continues to move away from lower margin transactional
business. As highlighted before, at the end of 2016, the Division
restructured this area and reduced the UK workforce. The retention
rate across the core annuity products of Connectivity and Network
Support within the Infrastructure business was 94%.
A significant new three year contract was tendered for and won
in this Division in 2017 to provide connectivity services to over
500 schools in Hertfordshire.
RM India
As at 30 November 2017, RM's operation in Trivandrum accounted
for 32% of Group headcount (2016: 36%).
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.
Employees
Average Group headcount for the year was 1,787 (2016: 1,822),
which is comprised of 1,633 (2016: 1,634) permanent and 154 (2016:
188) temporary or contract staff, of which 1,172 (2016: 1,173) were
located in the UK and 615 (2016: 649) in India. At 30 November 2017
headcount was 1,907 (2016: 1,731).
The following table sets out a more detailed summary of the
permanent staff employed as at 30 November 2017:
Male Female
Executive Directors 2 (100%) 0 (0%)
Senior Managers (excluding
Executive Directors) 45 (80%) 11 (20%)
All employees 1,102 (62%) 683 (38%)
The Group is committed to offering equal employment
opportunities and its policies are designed to attract, retain and
motivate the best staff regardless of gender, sexual orientation,
race, religion, age, disability or educational background. The
Group gives proper consideration to applications for employment
when these are received from disabled persons and will employ them
in posts whenever suitable vacancies arise. Employees who become
disabled are retained whenever possible through retraining, use of
appropriate technology and making available suitable alternative
employment.
The Group encourages the participation of all employees in the
operation and development of the business and has a policy of
regular communications. 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, grievance, career
planning, parental leave, systems and network security. All of RM's
employment policies are published internally.
The Corporate Governance Report sets out the Company's Diversity
Policy.
Acquisition
As noted above, the Company completed the acquisition of The
Consortium on 30 June 2017 for a purchase price of GBP56.5m (on a
cash free, debt free basis). The acquisition complements the
Company's already existing TTS business and has been accretive to
the Company's adjusted earnings per share.
The final net cash consideration paid was GBP59.0m including
GBP0.5m of cash in the business. The difference between the
headline price of GBP56.5m noted above and the final consideration
paid reflected the positive net working capital position of the
balance sheet of the acquired business as at the date of
completion. Intangible assets of GBP18.1m have been identified
reflecting value associated with the distribution and product
brands acquired, together with a further GBP31.1m of goodwill
alongside GBP9.8m of net assets.
The acquisition was satisfied entirely in cash at completion and
was funded through existing cash reserves and a new GBP75m
revolving credit facility. Further details in relation to that
facility are given in the Directors' Report.
Group Financial Performance
Group revenue grew by 11% to GBP185.9m (2016: GBP167.6m)
supported by the acquisition of The Consortium, which contributed
GBP27.8m. Organic revenues, excluding the benefit of the
acquisition, declined 6% to GBP158.1m (2016: GBP167.6m).
2017 2016
Adjusted Adjustment Statutory Adjusted Adjustment Statutory
--------- ----------- ---------- --------- ----------- ----------
Revenue 185.9 - 185.9 167.6 - 167.6
Operating
profit 22.1 (5.9) 16.2 18.8 (2.9) 15.9
Profit before
tax 20.5 (5.9) 14.6 18.1 (3.0) 15.1
Tax (2.6) 0.9 (1.7) (3.9) 0.5 (3.5)
Profit after
tax 17.9 (5.1) 12.9 14.2 (2.5) 11.6
=============== ========= =========== ========== ========= =========== ==========
Adjusted operating profit margins increased again this year from
11.2% in 2016 to 11.9%. Adjusted operating profit increased to
GBP22.1m (2016: GBP18.8m).
To provide a better understanding of underlying business
performance, amortisation charges relating to acquisition related
intangible assets, share-based payment charges, restructuring
provision movements, acquisition costs and other items of an
exceptional nature have been disclosed in an adjustments column in
the Income Statement to give 'Adjusted' results. Note 2 to the
financial statements identifies these adjustments highlighting
recurring and non-recurring items.
On a statutory basis, operating profit was GBP16.2m (2016:
GBP15.9m), with adjustments principally being GBP2.6m of
acquisition related costs, GBP1.6m for costs associated with
delivering acquisition synergies, share-based payments charges of
GBP0.8m, GBP0.5m of amortisation of acquisition related intangible
assets and a GBP0.4m movement in provisions for onerous lease
contracts.
The Group generated a statutory profit before tax of GBP14.6m
(2016: GBP15.1m) with a net interest charge of GBP1.6m.
The total tax charge within the Income Statement for the year
was GBP1.7m (2016: GBP3.5m). The Group's tax charge for the period,
measured as a percentage of profit before tax, was 12% (2016: 23%).
The reduction is principally due to a reduction of GBP1.2m in the
transfer pricing provision associated with cross border intra-group
transactions between the UK and India which has been agreed with
the relevant tax authorities and a reduction in the UK corporate
tax rate. Statutory profit after tax increased to GBP12.9m (2016:
GBP11.6m).
Adjusted basic earnings per share were 22.0 pence (2016: 17.4
pence). Statutory basic earnings per share were 15.8 pence (2016:
14.4 pence) and statutory diluted earnings per share were 15.7
pence (2016: 14.4 pence).
RM generated cash from operations for the year of GBP20.5m
(2016: GBP13.4m), which represents a cash conversion from operating
profit in excess of 100%. Net debt was GBP13.4m, compared to cash
and short-term deposits of GBP40m in 2016, reflecting the impact of
the acquisition which was satisfied entirely in cash at
completion.
Cash generated from operations is expected to be broadly in line
with operating profit in the year ahead.
Dividends
The total dividend paid and proposed for the year has been
increased by 10% to 6.60 pence per share (2016: 6.00 pence). This
is comprised of the interim dividend of 1.65 pence per share paid
in September 2017 and, subject to shareholder approval, a proposed
final dividend of 4.95 pence per share. The estimated total cost of
normal dividends paid and proposed for 2017 is GBP5.4m (2016:
GBP4.9m). Dividend cover for the year is 3.3 times, as compared to
a figure of 2.9 times in 2016. This reflects the 26% growth in
adjusted basic earnings per share and the 10% growth in dividend
proposed.
The Board is committed to a long-term sustainable dividend
policy with the objective of a dividend cover of between two to
three times adjusted earnings per share over the medium-term. RM
plc has GBP28.6m of distributable reserves as at 30 November 2017
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 Risks and
Uncertainties' set out below and which could have a negative impact
on the performance of the Group or its ability to distribute
profits.
Defined Benefit Pension Schemes ("Schemes")
Prior to the acquisition of The Consortium, the Company operated
one defined benefit pension scheme (the "RM Education Scheme"). As
part of the acquisition of The Consortium, the Company now operates
a further defined benefit pension scheme (the "CARE Scheme") and
participates in a third, multi-employer, defined benefit pension
scheme (the "Platinum Scheme"). Both of the RM Education Scheme and
the CARE Scheme are closed to future accrual of benefits. While the
Platinum Scheme remains open to future accrual of benefits, the
number of Group employees participating in that Scheme is very
small and so the impact of that Scheme on the Group is limited.
Despite the introduction of the two new defined benefit schemes
outlined above, the IAS19 deficit (pre-tax) across the Group
decreased by GBP14.6m to GBP20.2m (Nov 2016: GBP34.8m). This
reduction was primarily driven by an increase in the scheme assets
of the RM Education Scheme of GBP15.6m and a decrease in the
liabilities of that Scheme of GBP2.4m, driven by updated mortality
assumptions. As at 30 November 2017 the net deficit associated with
the CARE Scheme and Platinum Scheme combined was GBP3.7m.
Following a change in actuary during the year the discount
methodology applied under IAS19 for all three Schemes was revised
to better reflect the long dated credit risk of the cashflows for
those Schemes.
Since the acquisition of The Consortium, agreement has been
reached with the Trustees of the CARE Scheme with regards to the
triennial valuation as at 31 December 2016 at a deficit of GBP4.2m,
with recovery payments of GBP379,000 pa over the next ten years. As
a result, the total Group deficit recovery plan cashflow
requirements across all of the above schemes are GBP4.4m pa. The
triennial review for the RM Education Scheme is due in May 2018.
The next review date for the Platinum Scheme is in December
2018.
Impact of the EU Referendum vote
The Company continues to monitor the evolving impacts of the
referendum decision on UK's membership of the EU. The referendum
result has not changed the UK Government's policy of ring fencing
funding for priority areas and, therefore, there is no foreseen
impact on education funding as a whole.
The Group has European sales of GBP11.3m, primarily driven by
the sale of own designed products from the RM Resources Division.
The Group will monitor the nature of the Brexit arrangements as
they influence the trading relationship between the UK and the EU.
It is not expected at this stage that they will fundamentally
change demand for these products which have been growing strongly
in recent years.
The Group has foreign currency denominated costs that outweigh
foreign currency denominated revenues and therefore increased
currency volatility creates an exposure. Exchange rates have been
more stable in 2017 following the post referendum adjustment in
2016 but the Company continues to monitor these closely. 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
denominated sales ahead of its costs to reduce the currency
imbalance and more naturally hedge this risk.
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, its
financial risk management objectives, and its exposure to credit
and liquidity risk. During the year, the Group completed the
acquisition of The Consortium which was supported by an increase in
its revolving credit facility from GBP30m to GBP75m and resulted in
the Group moving to a net current liability position of GBP13.4m.
The maximum net debt position during the period following the
acquisition was GBP37.7m. Having reviewed the future budgets and
projections for the business, the principal risks that could impact
on the Group's liquidity and solvency over the next 12 months and
its current financial position, the Board believes that RM is well
placed to manage its business risks successfully and remain in
compliance with the financial covenants associated with its
borrowings. Therefore, the Board has a reasonable expectation that
the Group and Company have adequate resources to continue in
operational existence for the foreseeable future, a period of not
less than 12 months from the date of this report. For this reason,
the 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 Risks and Uncertainties section below, 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. Significantly increased working capital requirements within
the RM Education and RM Results long-term contract portfolios and
requirements in evolving RM Education business models.
b. Major adverse performance in a key contract or product which
results in negative publicity and which damages the Group's
brand.
c. RM Results operational performance over peak examination marking periods.
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 - loss of a significant contract which
underpins an element of a Division's activity.
5. Defined Benefit Pension Schemes - funding of Scheme deficits in adverse market conditions.
6. Inability to deliver, or a significant delay in
implementation of, the synergies planned alongside the acquisition
of The Consortium whilst still incurring the costs of delivery.
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 for the foreseeable period after this.
Environmental Matters
The Group's impact on the environment, and its policy in
relation to such matters, are noted in the Directors' Report.
Principal 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 and financial. 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 risk 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 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 Description Mitigation
categorisation and likely impact
------------------- ------------------------- ---------------------------------
Public policy The majority The Company reviews the
(Political of RM's business education policy environment
Risk) is funded from by regular monitoring
UK government of policy positions and
sources. Changes by building relationships
in political with education policy
administration, makers.
or changes in
policy priorities, The Group's three divisions
might result have diverse revenue
in a reduction streams and product/service
in education offerings.
spending, leading
to a decline The Company's strategy
in market size. is to focus on areas
of education spend which
UK government are important to meet
funding in the customers' objectives.
education sector Where the revenues of
is constrained an individual business
by fiscal policy. is in decline, management
seeks to ensure that
Global economic the cost base is adjusted
conditions might accordingly.
result in a
reduction in
budgets available
for public spending
generally and
education spending
specifically.
------------------- ------------------------- ---------------------------------
Education Education practices The Company maintains
practice and priorities knowledge of current
(Political may change and, education practice and
Risk) as a result, priorities by maintaining
RM's products close relationships with
and services customers.
may no longer
meet customer
requirements,
leading to a
risk of lower
revenue.
------------------- ------------------------- ---------------------------------
Operational RM provides The Company invests in
execution sophisticated maintaining a high level
(Operational products and of technical expertise.
Risk) services, which
require a high Internal management control
level of technical processes are in place
expertise to to govern the delivery
develop and of projects, including
support, and regular reviews by relevant
on which its management. The operational
customers place and financial performance
a high level of projects, including
of reliance. future obligations, the
Any significant expected costs of these
operational and potential risks are
failure would regularly monitored by
result in reputational management.
damage and increased
costs.
RM is engaged
in the delivery
of large, multi-year
projects, typically
involving the
development
and integration
of complex IT
systems, and
may have liability
for failure
to deliver on
time.
------------------- ------------------------- ---------------------------------
Data and RM is engaged The Company's IS function
business in storing and has invested in developing
continuity processing personal its Data Centres, and
(Operational data, where has been successfully
Risk) accuracy, privacy certified to ISO/IEC
and security 27001:2005 for the provision
are important. of systems, information
Any significant and hosting services.
security breach
could damage The Company has established
reputation and a Group Security and
impact future Business Continuity Committee
profit streams. to oversee the security
aspects of the Group's
The Group would information systems.
be significantly This covers data integrity
impacted if, and protection, defence
as a result against external threats
of a major incident, (including cyber risks)
one of its key and disaster recovery.
buildings, systems
or infrastructure The Group seeks to protect
components could itself against the consequences
not function of a major incident by
for a long period implementing a series
of time. of back up and safety
measures.
The Group has property
and business interruption
insurance cover.
------------------- ------------------------- ---------------------------------
People (Operational RM's business The Company seeks to
Risk) depends on highly be an attractive employer
skilled employees. and regularly monitors
Failing to recruit the engagement of its
and retain such employees. The Company
employees could has talent management
impact operationally and career planning programmes.
on RM's ability
to deliver contractual
commitments.
------------------- ------------------------- ---------------------------------
Integration An inability The Company has established
Risk to deliver, a formal internal steering
or a significant committee to oversee
delay in implementation the integration of The
of, the synergies Consortium. In addition,
planned in relation the Company retained
to the acquisition Grant Thornton to provide
of The Consortium external expertise in
and/or the loss relation to such matters.
of customers
as a result Integration risks are
of related disruption. proactively managed and
a number of mechanisms
are in place to monitor
the ongoing impact of
the various activities,
including staff consultations
and satisfaction surveys
and ongoing customer
feedback.
Financial reports are
generated each month
to ensure that spend
on integration activities
and resulting expected
benefits remain within
budget.
The Board is kept appraised
of the current status
of the integration work
on a regular and ongoing
basis.
------------------- ------------------------- ---------------------------------
Innovation The IT market The Company actively
(Strategic and elements monitors technology and
Risk) of the education market developments and
resources market invests to keep its existing
are subject products, services and
to rapid, and sales methods up-to-date,
often unpredictable, as well as seeking out
change. As a new opportunities and
result of inappropriate initiatives.
technology and
product choices, The Group works with
the Group's teachers and educators
products and to understand opportunities
services might and requirements.
become unattractive
to its customer
base.
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 The performance The Company invests in
on key contracts of the RM Education maintaining a high level
(Strategic and RM Results of technical expertise
Risk) Divisions are and on building effective
dependent on working relationships
the winning and with its customers. The
extension of Company has in place
long-term contracts a range of customer satisfaction
with government, programmes, which include
local authorities, management processes
examination boards designed to address the
and commercial causes of customers'
customers. dissatisfaction.
------------------- ------------------------- ---------------------------------
Pensions The Group operates The RM Education Scheme
(Financial two defined benefit was closed to new entrants
Risk) pension schemes in 2003 and closed to
in the UK (the future accrual of benefits
"RM Education in 2012.
Scheme" and the
"CARE Scheme" The CARE Scheme was
respectively) closed to new entrants
and participates in 2006 and closed to
in a third defined future accrual of benefits
benefit pension in 2011.
scheme (the "Platinum
Scheme"). The Company evaluates
risk mitigation proposals
Scheme deficits with the trustees of
can adversely these respective Schemes.
impact the net
assets position The Platinum Scheme
of the trading is a multi-employer
subsidiaries scheme over which the
RM Education Company has no direct
Ltd and The Consortium control. However, due
for Purchasing to the small number
and Distribution of the Company's employees
Ltd. who are in this Scheme,
the risk to the Company
from this Scheme is
limited.
------------------- ------------------------- ---------------------------------
Dividends The Company's The Company monitors
(Financial ability to pay the level of distributable
Risk) dividends to reserves in RM plc and
shareholders subsidiary companies
depends on having and considers their ability
sufficient distributable to make dividend payments,
reserves in via the holding company,
the holding to the shareholders.
company, RM
plc. The Group
is reliant on
continued dividend
distribution
from subsidiaries
and ensuring
no significant
impairment of
RM plc's carrying
assets.
------------------- ------------------------- ---------------------------------
David Brooks
Chief Executive Officer
5 February 2018
Directors' responsibilities statement
The responsibility statement below has been prepared in
connection with the Company's full Annual Report and Accounts for
the year ended 30 November 2017. Certain parts are not included
within this announcement.
Each of the Directors, whose names and functions are listed at
the front of the Annual Report, confirm that, to the best of their
knowledge:
-- the financial statements, prepared in accordance with the
applicable set of accounting standards, give a true and fair view
of the assets, liabilities, financial position and profit or loss
of the Company and the Group taken as a whole; and
-- the Strategic Report includes a fair review of the
development and performance of the business and the position of the
Company and the Group taken as a whole, together with a description
of the principal risks and uncertainties that they face.
The responsibility statement was approved by the Board of
Directors on 5 February 2018.
Greg Davidson
Company Secretary
5 February 2018
CONSOLIDATED INCOME STATEMENT
for the year ended 30
November 2017
Year ended 30 Year ended 30
November 2017 November 2016
Adjusted Adjustments Total Adjusted Adjustments Total
Note GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------- ----- ------------- ------------ ---------- ---------- ------------ ----------
Revenue 2 185,863 - 185,863 167,615 - 167,615
Cost of
sales (112,857) - (112,857) (100,365) - (100,365)
Gross profit 73,006 - 73,006 67,250 - 67,250
Operating
expenses (50,908) (5,904) (56,812) (48,421) (2,907) (51,328)
------------- ----- ------------- ------------ ---------- ---------- ------------ ----------
Profit from
operations 2 22,098 (5,904) 16,194 18,829 (2,907) 15,922
Investment
income 3 365 - 365 279 - 279
Finance
costs 4 (1,920) (45) (1,965) (1,012) (74) (1,086)
----------
Profit
before
tax 20,543 (5,949) 14,594 18,096 (2,981) 15,115
Tax 5 (2,594) 851 (1,743) (3,941) 472 (3,469)
Profit for
the
year 17,949 (5,098) 12,851 14,155 (2,509) 11,646
------------- ----- ------------- ------------ ---------- ---------- ------------ ----------
Earnings per
ordinary
share
- basic 6 22.0p 15.8p 17.4p 14.4p
- diluted 6 21.9p 15.7p 17.4p 14.4p
------------- ----- ------------- ------------ ---------- ---------- ------------ ----------
Paid and
proposed
dividends
per
share 7
- interim 1.65p 1.50p
- final 4.95p 4.50p
------------- ----- ------------- ------------ ---------- ---------- ------------ ----------
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
for the year ended
30 November 2017
Year ended Year
30 November ended
2017 30
November
2016
Note GBP000 GBP000
--------------------- ------------- ------------ ---------- ------------------------ ----------
Profit for the year 12,851 11,646
Items that will not be reclassified
subsequently to profit or
loss
Defined Benefit
Pension
Scheme
remeasurements 12 17,960 (23,555)
Tax on items that will not
be reclassified subsequently
to profit or loss 5 (3,123) 3,970
Items that are or may be reclassified
subsequently to profit or loss
Fair value
(loss)/gain
on hedged
instruments (1,306) 515
Exchange (loss)/gain on translation
of overseas operations (36) 261
Tax on items that are or
may be reclassified subsequently
to profit or loss 5 (80) 32
Other comprehensive
income/(expense) 13,415 (18,777)
--------------------- ------------- ------------ ---------- ------------------------ ----------
Total comprehensive income/(expense)
for the year attributable to
equity holders 26,266 (7,131)
-------------------------------------------------- ---------- ------------------------ ----------
CONSOLIDATED BALANCE SHEET
At 30 November At 30
2017 November
2016
Note GBP000 GBP000
------------------------------------ ------------------------ ------------------------ ----------
Non-current assets
Goodwill 45,164 14,067
Intangible assets 20,377 704
Property, plant and equipment 10,369 6,219
Defined Benefit Pension
Scheme surplus 12 495 -
Other receivables 8 1,144 1,153
Deferred tax assets 5 6,484 8,793
84,033 30,936
------------------------------------ ------------------------ ------------------------ ----------
Current assets
Inventories 19,413 10,689
Trade and other receivables 8 29,147 24,403
Cash and short-term deposits 1,797 39,987
50,357 75,079
------------------------ ----------
Total assets 134,390 106,015
------------------------------------ ------------------------ ------------------------ ----------
Current liabilities
Trade and other payables 9 (57,636) (54,521)
Tax liabilities (632) (1,259)
Provisions 10 (3,436) (3,536)
Overdraft (2,028) -
(63,732) (59,316)
------------------------ ----------
Net current (liabilities)/assets (13,375) 15,763
------------------------------------ ------------------------ ------------------------ ----------
Non-current liabilities
Other payables 9 (852) (971)
Provisions 10 (3,019) (3,157)
Deferred tax liability 5 (2,993) -
Defined Benefit Pension
Scheme obligation 12 (20,731) (34,775)
Loan 14 (13,188) -
(40,783) (38,903)
------------------------ ----------
Total liabilities (104,515) (98,219)
------------------------------------ ------------------------ ------------------------ ----------
Net assets 29,875 7,796
------------------------------------ ------------------------ ------------------------ ----------
Equity attributable to
shareholders
Share capital 11 1,890 1,890
Share premium account 27,035 27,035
Own shares (1,406) (1,987)
Capital redemption reserve 94 94
Hedging reserve (427) 879
Translation reserve (159) (123)
Retained earnings - (deficit) 2,848 (19,992)
Total equity 29,875 7,796
------------------------------------ ------------------------ ------------------------ ----------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year
ended
30 November 2017
Capital
Share Share Own redemption Hedging Translation Retained
capital premium shares reserve reserve reserve earnings Total
Note GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------ ----- --------- --------- -------- ----------- --------- ------------ ---------- ---------
At 1 December
2015 1,890 27,035 (2,510) 94 364 (384) (7,342) 19,147
Profit for the
year - - - - - - 11,646 11,646
Other
comprehensive
(expense)/income - - - - 515 261 (19,553) (18,777)
Total
comprehensive
(expense)/income - - - - 515 261 (7,907) (7,131)
Transactions with
owners of the
Company
Share-based
payment
awards exercised - - 840 - - - (1,450) (610)
Purchase of own
shares - - (317) - - - - (317)
Share-based
payment
fair value
charges - - - - - - 1,006 1,006
Ordinary
dividends
paid 7 - - - - - - (4,299) (4,299)
At 30 November
2016 1,890 27,035 (1,987) 94 879 (123) (19,992) 7,796
Profit for the
year - - - - - - 12,851 12,851
Other
comprehensive
(expense)/income - - - - (1,306) (36) 14,757 13,415
------------------ -----
Total
comprehensive
(expense)/income - - - - (1,306) (36) 27,608 26,266
Transactions with
owners of the
Company
Share-based
payment
awards exercised - - 581 - - - (581) -
Share-based
payment
fair value
charges - - - - - - 821 821
Ordinary
dividends
paid 7 - - - - - - (5,008) (5,008)
At 30 November
2017 1,890 27,035 (1,406) 94 (427) (159) 2,848 29,875
------------------ ----- --------- --------- -------- ----------- --------- ------------ ---------- ---------
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 30 November Year ended Year
2017 30 November ended
2017 30 November
2016
Note GBP000 GBP000
--------------------------------------- ----- --------- -------------
Profit before tax 14,594 15,115
Investment income 3 (365) (279)
Finance costs 4 1,965 1,086
Profit from operations 16,194 15,922
Adjustments for:
Acquisition related costs 2 2,643 525
Impairment of intangible assets 33 77
Amortisation of intangible assets 1,107 247
Depreciation and impairment of
property, plant and equipment 2,289 2,223
Gain on sale of operations - (135)
Loss on disposal of other intangible 21 -
assets
Loss/(gain) on disposal of property,
plant and equipment 135 (5)
(Gain)/loss on foreign exchange
derivatives (1,306) 684
Share-based payment charge 821 1,006
Increase in provisions 1,997 2,557
Defined Benefit Pension Scheme
administration cost 12 552 845
---------------------------------------
Operating cash flows before movements
in working capital 24,486 23,946
(Decrease)/increase in inventories (27) 173
Decrease in receivables 5,443 1,056
Decrease in trade and other payables (7,129) (10,863)
Utilisation of onerous lease
and dilapidations provisions 10 (308) (345)
Utilisation of employee-related
restructuring provisions 10 (1,697) (184)
Utilisation of other provisions 10 (236) (396)
Cash generated from operations 20,532 13,387
Defined benefit pension scheme
cash contributions 12 (4,187) (11,984)
Tax paid (2,019) (3,567)
Income on sale of finance lease
debt 9 6
Net cash inflow from operating
activities 14,335 (2,158)
--------------------------------------- ----- --------- -------------
Investing activities
Interest received 307 255
Repayment of loans by third parties 16 16
Acquisition net of cash acquired 13 (58,407) -
Acquisition related costs (2,834) -
Proceeds from sale of operations - 759
Proceeds on disposal of property,
plant and equipment 12 43
Purchases of property, plant
and equipment (1,150) (1,333)
Purchases of other intangible
assets (176) (456)
Amounts transferred from short
term deposits 3,014 2,986
Net cash generated by/(used in)
investing activities (59,218) 2,270
--------------------------------------- ----- --------- -------------
Financing activities
Dividends paid 7 (5,008) (4,299)
Drawdown of borrowings 14 14,000 -
Borrowing facilities arrangement
and commitment fees (1,098) (422)
Interest paid (224) -
Purchase of own shares - (317)
Satisfaction of share-based payment
awards - (610)
Net cash used in financing activities 7,670 (5,648)
Net (decrease)/increase in cash
and cash equivalents (37,213) (5,536)
Cash and cash equivalents at
the beginning of the year 36,973 42,320
Effect of foreign exchange rate
changes 9 189
Cash and cash equivalents at
the end of the year (231) 36,973
--------------------------------------- ----- --------- -------------
1. Preliminary announcement
The preliminary results for the year ended 30 November 2017 have
been prepared in accordance with those International Accounting
Standards (IAS) and International Financial Reporting Standards
(IFRS) issued by the International Accounting Standards Board
(IASB) and adopted for use in the EU and therefore comply with
Article 4 of the EU IAS Regulation applied in accordance with the
provisions of the Companies Act 2006. However, this announcement
does not contain sufficient information to comply with IFRS. The
Group expects to publish a full Strategic Report, Directors' Report
and financial statements which will be delivered before the
Company's annual general meeting on 21 March 2018. The full
Strategic Report and Directors' Report and financial statements
will be published on the Group's website at www.rmplc.com.
The financial information set out in this preliminary
announcement does not constitute the Group's statutory accounts for
the year ended 30 November 2017. Statutory accounts for 2016 have
been delivered to the Registrar of Companies and those for 2017
will be delivered following the Company's annual general meeting.
The auditor's reports on both the 2017 and 2016 accounts were
unqualified, did not draw attention to any matters by way of
emphasis without qualifying their report and did not contain
statements under s498(2) or (3) of the Companies Act 2006 or
equivalent preceding legislation. This Preliminary announcement was
approved by the Board of Directors on 5 February 2018.
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. 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.
Significant accounting policies
The accounting policies used for the preparation of this
announcement have been applied consistently.
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 focussed on the nature of each type of activity.
The Group is structured into three operating divisions: RM
Resources, RM Results and RM Education. The exited business in the
year relates to SpaceKraft.
A full description of each 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-specific pension costs.
This Segmental analysis shows the results and assets of these
divisions. Revenue is that earned by the Group from third
parties.
Net financing costs and tax are not allocated to segments as the
funding, cash and tax management of the Group are activities
carried out by the central treasury and tax functions.
Segmental results
RM RM RM Corporate Exited Total
Year ended 30 November
2017 Resources Results Education Services Businesses
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------------ ---------- -------- ---------- ---------- ----------- --------
Revenue
UK 67,826 26,566 68,828 - - 163,220
Europe 7,413 3,258 678 - - 11,349
North America 1,618 - 231 - - 1,849
Asia 1,226 204 691 - - 2,121
Middle East 3,922 - 8 - - 3,930
Rest of the world 1,627 1,590 177 - - 3,394
83,632 31,618 70,613 - - 185,863
------------------------ ---------- -------- ---------- ---------- ----------- --------
Adjusted profit
from operations 11,604 7,761 6,552 (3,819) - 22,098
Investment income 365
Adjusted finance
costs (1,920)
Adjusted profit
before tax 20,543
Adjustments (see
note 2) (5,949)
Profit before tax 14,594
------------------------ ---------- -------- ---------- ---------- ----------- --------
RM RM RM Corporate Exited Total
Year ended 30 November
2016 Resources Results Education Services Businesses
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------------ ---------- -------- ---------- ---------- ----------- --------
Revenue
UK 46,779 26,925 75,450 - 151 149,305
Europe 5,249 3,231 1,138 - - 9,618
North America 1,723 - 232 - - 1,955
Asia 981 117 50 - - 1,148
Middle East 2,815 - 9 - - 2,824
Rest of the world 1,288 1,307 170 - - 2,765
58,835 31,580 77,049 - 151 167,615
------------------------ ---------- -------- ---------- ---------- ----------- --------
Adjusted profit
from operations 10,156 6,798 5,820 (3,926) (19) 18,829
Investment income 279
Adjusted finance
costs (1,012)
Adjusted profit
before tax 18,096
Adjustments (see
note 2) (2,981)
Profit before tax 15,115
------------------------ ---------- -------- ---------- ---------- ----------- --------
Segmental assets
RM RM RM Corporate Exited
Resources Results Education Services Businesses Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------ ---------- -------- ---------- ---------- ----------- --------
At 30 November
2017
Segmental 103,935 6,324 15,627 205 - 126,091
Other 8,299
Total assets 134,390
------------------ ---------- -------- ---------- ---------- ----------- --------
RM RM RM Corporate Exited
Resources Results Education Services Businesses Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------ ---------- -------- ---------- ---------- ----------- --------
At 30 November
2016
Segmental 31,968 7,085 17,803 217 - 57,073
Other 48,942
Total assets 106,015
------------------ ---------- -------- ---------- ---------- ----------- --------
Adjustments to administrative
expenses
Year Year
ended ended
30 November 30 November
2017 2016
GBP000 GBP000
-------------------------------------- ------------- -------------
Amortisation of acquisition-related
intangible assets 503 8
Gain on sale of operations - (135)
Share-based payment charges 821 1,006
Net increase/(release) of provisions
for onerous lease contracts 353 (90)
Acquisition related costs 2,643 525
Restructuring costs 1,584 1,593
5,904 2,907
-------------------------------------- ------------- -------------
Recurring items:
These are items which occur regularly but which management judge
to have a distorting effect on the underlying results of the Group
or are not regularly monitored for the purpose of determining
business performance. These items include the amortisation of
acquisition related intangible assets and share-based payment
charges.
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 of held for sale
assets and related transaction costs; changes in the provision for
onerous lease contracts; 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 year an onerous provision was created for the top
floor of the head office property and an onerous provision release
was made for the continued sub-letting of one of the Group's
properties. For further details see Note 10.
During the year, the Group incurred professional advisor costs
relating to the acquisition and integration of The Consortium, see
Note 13 for further details. Restructuring costs were incurred
during the year which also relate to the integration of The
Consortium.
In the prior year, the restructuring of the Infrastructure part
of the RM Education division was undertaken to move away from some
of the lowest margin transactional elements such as network
infrastructures, network installation and third-party hardware
sales. This lead to a reduction of broadly 10% of the RM Education
UK staff and a one-off exceptional charge of GBP1.6m.
3. Investment income
Year ended Year
30 November ended
2017 30 November
2016
GBP000 GBP000
--------------------------------- ------------- -------------
Bank interest 47 123
Income on sale of finance lease
debt 168 46
Other finance income 150 110
365 279
--------------------------------- ------------- -------------
4. Finance costs
Year ended Year
30 November ended
2017 30 November
2016
Note GBP000 GBP000
--------------------------------------- ------ ------- -------------
Borrowing facilities arrangement
fees and commitment fees 524 421
Net finance costs on defined benefit
pension scheme 12 1,049 498
Unwind of discount on long term
contract provisions 49 37
Unwind of discount on onerous
lease and dilapidations provisions 10 91 84
Interest on bank loans and overdrafts 229 -
Other finance costs 23 46
---------------------------------------
1,965 1,086
--------------------------------------- ------ ------- -------------
5. Tax
a) Analysis of tax charge in the
Consolidated Income Statement
Year ended Year
30 November ended
2017 30 November
2016
GBP000 GBP000
------------------------------------------- ------------- -------------
Current taxation
UK corporation tax 2,976 2,924
Adjustment in respect of prior
years (1,555) 302
Overseas tax 387 296
Total current tax charge 1,808 3,522
-------------------------------------------- ------------- -------------
Deferred taxation
Temporary differences (6) 173
Adjustment in respect of prior
years 104 (237)
Overseas tax (163) 11
Total deferred tax (credit) (65) (53)
Total Consolidated Income Statement
tax charge 1,743 3,469
-------------------------------------------- ------------- -------------
b) Analysis of tax charge/(credit) in the Consolidated
Statement of Comprehensive Income
Year ended Year
30 November ended
2017 30 November
2016
GBP000 GBP000
------------------------------------------- ------------- -------------
UK corporation tax
Defined benefit pension scheme (428) (1,241)
Share based payments - (142)
Deferred tax
Defined benefit pension scheme
movements 3,481 (2,325)
Defined benefit pension scheme
escrow - (749)
Share based payments 80 110
Deferred tax relating to the change
in rate 70 345
Total Consolidated Statement of
Comprehensive Income tax charge/(credit) 3,203 (4,002)
-------------------------------------------- ------------- -------------
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 Year ended
November 2017 30 November
2016
Adjusted Adjustments Adjusted Adjustments
Total Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------------------------- --------- -------- -------- --------- -------- -------
Profit on ordinary
activities before tax 20,543 (5,949) 14,594 18,096 (2,981) 15,115
Tax at 19.33% (2016:
20%) thereon: 3,971 (1,150) 2,821 3,619 (596) 3,023
Effects of:
- change in tax rate
on carried forward
deferred tax assets - - - 65 - 65
- other expenses not
deductible for tax
purposes 211 321 532 110 - 110
- other temporary timing
differences (38) (22) (60) - 151 151
- R&D tax credit - - - (10) - (10)
- effect of profits/losses
in various overseas
tax jurisdictions (100) - (100) 81 - 81
- gain on sale of operations - - - - (27) (27)
- Prior period adjustments
- UK (280) - (280) (28) - (28)
- Prior period adjustments
- overseas (1,170) - (1,170) 104 - 104
Tax charge in the Consolidated
Income Statement 2,594 (851) 1,743 3,941 (472) 3,469
--------------------------------- --------- -------- -------- --------- -------- -------
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:
Defined
benefit Acquisition
Accelerated pension Short-term related
tax scheme Share-based timing intangible
Group depreciation obligation payments differences assets Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
--------------------------- -------------- ------------ ------------ ------------- ------------ --------
At 1 December 2015 734 3,932 423 1,033 (1) 6,121
Credit/(charge)
to income 112 - (59) (1) 1 53
Credit to equity - 1,980 (110) 749 - 2,619
At 30 November 2016 846 5,912 254 1,781 - 8,793
Credit/(charge)
to income (13) - 59 (65) 84 65
Charge to equity - (3,481) (80) (70) - (3,631)
Acquired Deferred
tax assets/(liabilities) 321 1,009 - 11 (3,077) (1,736)
At 30 November 2017 1,154 3,440 233 1,657 (2,993) 3,491
--------------------------- -------------- ------------ ------------ ------------- ------------ --------
Certain deferred tax assets and liabilities have been offset
above.
6. Earnings per ordinary
share
Year ended 30 Year ended
November 2017 30 November
2016
Weighted Weighted
Profit average Profit average
for number Pence for number Pence
the of per the of per
year shares share year shares share
GBP000 '000 GBP000 '000
------------------------------- ------- --------- ------- ------- --------- -------
Basic earnings per
ordinary share
Basic earnings 12,851 81,455 15.8 11,646 81,144 14.4
Adjustments (see note
2) 5,098 - 6.2 2,509 - 3.0
---------
Adjusted basic earnings 17,949 81,455 22.0 14,155 81,144 17.4
-------------------------------- ------- --------- ------- ------- --------- -------
Diluted earnings per
ordinary share
Basic earnings 12,851 81,455 15.8 11,646 81,144 14.4
Effect of dilutive potential
ordinary shares: share-based
payment awards - 179 (0.1) - - -
-------
Diluted earnings 12,851 81,634 15.7 11,646 81,144 14.4
Adjustments (see note
2) 5,098 - 6.2 2,509 - 3.0
---------
Adjusted diluted earnings 17,949 81,634 21.9 14,155 81,144 17.4
-------------------------------- ------- --------- ------- ------- --------- -------
7. Dividends
Amounts recognised as distributions
to equity holders were:
Year ended Year
30 November ended
2017 30 November
2016
GBP000 GBP000
------------------------------------- ------------- -------------
Final dividend for the year ended
30 November 2016 - 4.50p per share
(2015: 3.80p) 3,660 3,079
Interim dividend for the year
ended 30 November 2017 - 1.65p
per share (2016: 1.50p) 1,348 1,220
5,008 4,299
------------------------------------- ------------- -------------
The proposed final dividend of 4.95p per share
for the year ended 30 November 2017 was approved
by the Board on 5 February 2018. The dividend
is subject to approval by Shareholders at the
annual general meeting. The anticipated cost
of this dividend is GBP4,046,000 which is not
included as a liability at 30 November 2017.
8. Trade and other receivables
Year Year ended
ended 30 November
30 November 2016
2017
GBP000 GBP000
------------------------------------ ------------- -------------
Current
Financial assets
Trade receivables 20,770 15,060
Long-term contract balances 3 -
Other receivables 1,146 1,294
Derivative financial instruments - 685
Accrued income 1,366 1,824
Amounts owed by Group undertakings - -
23,285 18,863
Non-financial assets
Prepayments 5,862 5,540
29,147 24,403
------------------------------------ ------------- -------------
Non-current
Financial assets
Other receivables 1,144 1,153
------------------------------------- ------------- -------------
30,291 25,556
------------------------------------ ------------- -------------
9. Trade and other payables
Year Year ended
ended 30 November
30 November 2016
2017
GBP000 GBP000
------------------------------------ ------------- -------------
Current liabilities
Financial liabilities
Trade payables 18,524 13,777
Other taxation and social security 4,765 2,842
Other payables 535 2,284
Derivative financial instruments 389 45
Accruals 12,975 9,096
Long-term contract balances 10,183 16,766
Amounts owed to Group undertakings - -
47,371 44,810
Non-financial liabilities
Deferred income 10,265 9,711
57,636 54,521
------------------------------------ ------------- -------------
Non-current liabilities
Non-financial liabilities:
Deferred income:
- due after one year but within
two years 409 462
- due after two years but within
five years 443 509
852 971
------------------------------------ ------------- -------------
58,488 55,492
------------------------------------ ------------- -------------
10. Provisions Onerous
lease and Employee-related
dilapidations restructuring Other Total
Group GBP000 GBP000 GBP000 GBP000
-------------------- --------------- ----------------- ------- --------
At 1 December
2015 3,579 184 1,178 4,941
Utilisation
of provisions (345) (184) (396) (925)
Release of
provisions (161) - (147) (308)
Increase in
provisions - 1,844 1,057 2,901
Unwind of discount 84 - - 84
--------------------- ---------------
At 30 November
2016 3,157 1,844 1,692 6,693
Acquired on
30 June 165 - - 165
Utilisation
of provisions (308) (1,697) (236) (2,241)
Release of
provisions (1,115) - (568) (1,683)
Increase in
provisions 1,780 831 819 3,430
Unwind of discount 91 - - 91
At 30 November
2017 3,770 978 1,707 6,455
--------------------- --------------- ----------------- ------- --------
Provisions for onerous leases and dilapidations
have been recognised at the present value of
the expected obligation at discount rates of
2.6% (2016: 2.6%) per annum reflecting a risk-free
discount rate, applicable to the liabilities.
These discounts will unwind to their undiscounted
value over the remaining lives of the leases
via a finance cost within the Income Statement.
At 30 November 2017, GBP1,525,000 (2016: GBP1,465,000)
of the provision refers to onerous leases, and
GBP2,245,000 (2016: GBP1,692,000) refers to dilapidations.
During the year an onerous provision was created
for the top floor of the head office property
and an onerous provision release was made for
the successful sub-letting of one of the Group's
properties. Following the acquisition in the
year, the Group's dilapidation provisions as
a whole were reviewed and subsequently increased.
The average remaining life of the leases at 30
November 2017 is 2.1 years (2016: 3.1 years).
In making their assessment of the required provisions,
the group is required to estimate the likely
sub-let income that could be earned over the
remaining life of the lease. This requires 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 and are all expected
to be utilised during the following financial
year.
Other provisions includes one-off items not covered
by any other category of which the most significant
items are the risk provisions from ended BSF
contracts transferred from long-term contract
creditors to provisions, at the year end this
amount is GBP779,000 (2016: GBP475,000).
Disclosure of provisions
Year Year
ended ended
30 November 30 November
2017 2016
GBP000 GBP000
---------------------------------------- ------------- -------------
Current liabilities 3,436 3,536
Non-current liabilities 3,019 3,157
6,455 6,693
---------------------------------------- ------------- -------------
11. Share capital
Company and Group Ordinary
shares of
2(2) /(7)
p
'000 GBP000
Allotted, called-up
and fully paid:
As at 30 November
2015, 2016 and 2017 82,650 1,890
--------------------------- ----------- -------------
Ordinary shares issued
carry no right to fixed
income.
12. 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 CARE Scheme and the Platinum Scheme.
The RM Scheme and the CARE Scheme are both operated
for employees and former employees of the Group
only. The Platinum Scheme is a multi-employer scheme,
with The Consortium being just one of a number
of employers. The Group plays no active part in
managing that Scheme, although the number of the
Group's employees in that Scheme is small and so
the impact / risk to the Group from that Scheme
is limited.
For all three Schemes, based on the advice of
a qualified independent actuary at each balance
sheet date and using the projected unit method,
the administrative expenses and current service
costs are charged to operating profit, with the
interest cost, net of interest on scheme assets,
reported as a financing item.
Defined benefit pension scheme remeasurements
are recognised as a component of other comprehensive
income such that the balance sheet reflects the
scheme's surplus or deficit as at the balance sheet
date. Contributions to defined contribution plans
are charged to operating profit as they become
payable.
Scheme assets are measured at bid-price, where
available, at 30 November 2017. 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 RM
and CARE schemes shown a deficit and the Platinum
scheme is in surplus.
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 2015 by a qualified independent actuary.
IAS 19 Employee Benefits (revised) liabilities
at 30 November 2017 have been rolled forward based
on this valuation's base data.
As at 31 May 2015, the triennial valuation for
statutory funding purposes showed a deficit of
GBP41,800,000 (31 May 2012: GBP53,500,000). The
Group agreed with the Scheme Trustees that it will
repay this amount via deficit catch-up payments
of GBP4,000,000 in December 2015 and GBP3,600,000
per annum until 30 September 2024. At 30 November
2017 there were amounts outstanding of GBP300,000
(2016: GBP300,000) for one month's deficit payment
and GBP32,000 (2016: GBP32,000) for Scheme expenses.
The next triennial valuation of the Scheme is due
as at 31 May 2018 and may result in changes to
the level of deficit catch-up payments required.
In addition to the GBP4,000,000 of catch-up payments
in December 2015, a further GBP4,000,000 contribution
was paid in December 2015 into an escrow account
established in March 2014, the use of which within
the Scheme is required to be agreed by RM Education
Limited and the Scheme Trustee.
The parent company RM plc has entered into a pension
protection fund compliant guarantee in respect
of scheme liabilities. No liability has been recognised
for this within the Company as the Directors consider
that the likelihood of it being called upon is
remote.
The Consortium CARE Scheme
Until 31 December 2005, The Consortium for Purchasing
and Distribution Ltd ("The Consortium", acquired
by the Company on 30 June 2017) operated the CARE
Scheme providing benefits on both a defined benefit
(final salary-linked) and a defined contribution
basis. From 1 January 2006, the defined benefit
(final salary- linked) and defined contribution
sections were closed and all employees, subject
to the eligibility conditions set out in the Trust
Deed and Rules, joined a new defined benefit (Career
Average Revalued Earnings) section. As at 28 February
2011 the Scheme was closed to future accruals.
The Scheme is subject to the Statutory Funding
Objective under the Pensions Act 2004. A valuation
of the Scheme is carried out at least once every
three years to determine whether the Statutory
Funding Objective is met. As part of the process,
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 2016 was a deficit of GBP4.2m.
Prudential Platinum Pension
The Consortium acquired West Mercia Supplies in
April 2012 (prior to the Company acquiring The
Consortium). Upon acquisition by The Consortium
of West Mercia Supplies, a pension scheme was
set up providing benefits on both a defined benefit
(final salary-linked) and a defined contribution
basis for West Mercia employees. The most recent
full actuarial valuation was carried out by the
independent actuaries Xafinity on 31 December
2015. Using the assumptions below the results
of the full valuation were adjusted and rolled
forward to form the basis for the current year
valuation. The Scheme is administered within a
legally separate trust from 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 2015 was a deficit of GBP70,000.
Amounts recognised in the Income Statement and
in the Statement of Comprehensive Income
Year Year
ended ended
30 November 30 November
2017 2016
Note GBP000 GBP000
-------------------------------------------- ----- ------------- -------------
Administrative expenses and taxes (552) (845)
Current service costs (69) -
Operating expense (621) (845)
-------------------------------------------- ----- ------------- -------------
Interest cost (6,946) (7,301)
Interest on Scheme assets 5,897 6,803
Net interest expense 4 (1,049) (498)
-------------------------------------------- ----- ------------- -------------
Expense recognised in the Income
Statement (1,670) (1,343)
-------------------------------------------- ----- ------------- -------------
Effect of changes in demographic
assumptions 7,920 1,838
Effect of changes in financial assumptions (4,608) (36,938)
Effect of experience adjustments 1,898 -
Total actuarial gains/(losses) 5,210 (35,100)
Return on Scheme assets excluding
interest on Scheme assets 12,750 11,545
Income/(expense) recognised in the Statement
of Comprehensive Income 17,960 (23,555)
--------------------------------------------------- ------------- -------------
Income/(expense) recognised in Total
Comprehensive Income 16,290 (24,898)
-------------------------------------------- ----- ------------- -------------
Reconciliation of the Scheme assets and obligations through the
year
RM scheme CARE Platinum Year Year
scheme scheme ended ended
30 November 30 November
2017 2016
GBP000 GBP000 GBP000 GBP000 GBP000
-------------------------- ---------- --------- --------- ------------- -------------
Assets
At start of year 190,983 - - 190,983 174,029
Acquired during the
year - 15,734 1,871 17,605 -
Interest on Scheme
assets 5,706 170 21 5,897 6,803
Return on Scheme
assets excluding
interest on Scheme
assets 12,734 26 (10) 12,750 11,545
Administrative expenses (538) - (14) (552) (845)
Contributions from
Group 3,984 95 108 4,187 11,984
Contributions from
employees - - 9 9 -
Benefits paid (5,981) (237) (12) (6,230) (12,533)
--------------------------- -------------
At end of year 206,888 15,788 1,973 224,649 190,983
--------------------------- ---------- --------- --------- ------------- -------------
Obligations
At start of year/period (225,758) - - (225,758) (195,890)
Acquired during the
year - (21,888) (1,654) (23,542) -
Interest cost (6,692) (236) (18) (6,946) (7,301)
Actuarial gains/(losses) 3,077 1,872 260 5,209 (35,100)
Benefits paid 5,981 237 12 6,230 12,533
Service cost - - (69) (69) -
Contributions from
employees - - (9) (9) -
At end of year (223,392) (20,015) (1,478) (244,885) (225,758)
--------------------------- ---------- --------- --------- ------------- -------------
Pension deficit (16,504) (4,227) - (20,731) (34,775)
--------------------------- ---------- --------- --------- ------------- -------------
Pension surplus - - 495 495 -
--------------------------- ---------- --------- --------- ------------- -------------
Net pension deficit (16,504) (4,227) 495 (20,236) (34,775)
--------------------------- ---------- --------- --------- ------------- -------------
Reconciliation of net defined
benefit obligation
Year ended Year ended
30 November 30 November
2017 2016
GBP000 GBP000
------------------------------------ ------------- -------------
Net obligation at the start
of the year (34,775) (21,861)
Net obligation acquired during (5,937) -
the year
Cost included in Income Statement (1,670) (1,343)
Scheme remeasurements included
in the Statement of Comprehensive
Income 17,959 (23,555)
Cash contribution 4,187 11,984
Net pension deficit (20,236) (34,775)
------------------------------------- ------------- -------------
Year ended Year ended
30 November 30 November
2017 2016
Obligation by participant GBP000 GBP000
status
------------------------------------ ------------- -------------
Active 1,212 -
Vested deferreds 209,869 198,370
Retirees 33,804 27,388
244,885 225,758
------------------------------------ ------------- -------------
Year ended Year ended
30 November 30 November
2017 2016
Value of Scheme assets GBP000 GBP000
------------------------------------ ------------- -------------
Fair value of Scheme assets
with a quoted market price
Cash and cash equivalents,
including escrow 10,535 7,370
Equity instruments 107,814 87,274
Debt instruments 1,973 68,951
Liability driven investments 77,939 -
Value of unquoted Scheme
assets
Insurance contract 26,388 27,388
224,649 190,983
------------------------------------ ------------- -------------
Significant actuarial assumptions
Year Year
ended ended
30 November 30 November
2017 2016
--------------------------------------- ------------- -------------
Discount rate (RM/Platinum schemes) 2.85% 3.00%
Discount rate (CARE scheme) 2.75% n/a
Rate of RPI price inflation 3.20% 3.15%
Rate of CPI price inflation 2.10% 2.15%
Rate of salary increases (Platinum 2.10% n/a
scheme)
Rate of pensions increases
pre 6 April 1997 service 1.50% 1.50%
pre 1 June 2005 service 3.10% 3.10%
post 31 May 2005 service 2.10% 2.20%
Post retirement mortality table S2PA S2PA
CMI CMI
2016 2015
1.25% 1.50%
Weighted average duration of defined 23 years 25 years
benefit obligation
Assumed life expectancy on retirement
at age 65:
Retiring at the accounting date
(male member aged 65) 22.1 22.7
Retiring in 20 years after the
accounting date (male member aged
45) 23.5 24.8
---------------------------------------- ------------- -------------
Following a change of actuary during the year
the discount methodology applied under IAS19 for
all three schemes was revised to better reflect
the long dated credit risk of the cash flows for
those schemes.
13. Acquisitions of subsidiaries
Acquisitions in the current period
On 30 June 2017, the Group acquired all of the
shares in Hedgelane Limited, including its principal
trading subsidiary known as The Consortium. The
Consortium is a leading supplier of branded and
own-branded products primarily to educational
institutions.
The acquisition of The Consortium represents a
strategic opportunity for RM to enhance signi
cantly the scale and offering of its education
resources business. The Board believes that the
combination of RM's education resources business,
TTS, and The Consortium will lead to an expanded,
more diversi ed and better balanced product portfolio,
comprising a wide spectrum of higher, value-added,
curriculum-focussed resources and essential commodity
and education resource products. The businesses
also have complementary geographic coverage and
customer relationships, and combined will have
an improved purchasing position and bene t from
other signi cant operational improvement opportunities.
The fair value of the cash consideration for the
acquisition is GBP59.0m. Transaction fees associated
with the acquisition and expensed to the Consolidated
Statement of Comprehensive Income in 2017 were
GBP2.5m.
Effect of acquisition
The acquisition had the following
effect on the Group's assets and
liabilities:
Fair
Value
on Acquisition
GBP000
--------------------------------------- -------------------
Brands 18,100
Website platform 2,520
Property, plant and equipment 5,473
Inventories 8,695
Trade and other receivables 10,185
Cash and cash equivalents 549
Defined benefit pension scheme
surplus 216
Trade and other payables (9,720)
Defined benefit pension scheme
obligation (6,153)
Current tax liabilities (4)
Deferred tax (1,837)
Provisions (165)
Net assets acquired 27,859
----------------------------------------- -------------------
Goodwill 31,097
Consideration paid 58,956
----------------------------------------- -------------------
Satisfied by
Cash 58,956
Total purchase consideration 58,956
----------------------------------------- -------------------
Net cash flow on acquisition 58,956
Cash and cash equivalents (549)
----------------------------------------- -------------------
Cashflow on acquisition 58,407
----------------------------------------- -------------------
In the period 1 July 2017 to 30 November 2017
The Consortium contributed revenue of GBP27.8m
and statutory profit after tax of GBP0.8m If the
acquisition had occurred on 1 December 2016 The
Consortium would have contributed revenue of GBP58.8m
and statutory profit after tax of GBP1.2m. In
determining these amounts, management has assumed
that the fair value adjustments that arose on
the date of acquisition would have been the same
if the acquisition occurred on 1 December 2016.
Fair value adjustments
On the acquisition of The Consortium, all assets
were fair valued and appropriate intangible assets
recognised following the principles of IFRS 3. Certain
asset fair values are included as provisional in
the short term as management continue to integrate
the acquired business.
A deferred tax liability related to these intangible
assets was also recognised. Management identified
the main material intangible assets as The Consortium
own brand and the website platform. Brands were valued
at GBP18.1m using the Relief from Royalty method
and are being amortised over 15 years which is in
accordance with IAS 38. The website platform was
valued at GBP2.5m by considering the replacement
cost.
Goodwill of GBP31.1m represents the excess of the
purchase price over the fair value of the net tangible
and intangible assets acquired. The goodwill arising
on the acquisition is largely attributable to the
synergies and values associated with being part of
the enlarged RM resources proposition. Stock has
been valued in line with group policy taking into
account the recoverability and obsolescence. The
properties have been restated to fair market value.
Trade and other receivables and payables were all
reviewed and are in line with group policy.
Acquisition related costs
The group incurred acquisition related costs of GBP3.2m
related to advisor fees, banking arrangements and
stamp duty. These costs have been included in the
administrative expenses in the group's consolidation
statement of comprehensive income. Costs relating
to debt raising have been capitalised and amortised
over the life of the loan, see note 14.
14. Borrowings
Group 2017 2016
GBP000 GBP000
Bank loan (14,000) -
Add capitalised fees 812 -
Borrowings (13,188) -
---------------------------------------------- ------------ ---------
Bank and professional service fees relating
to securing the loan have been capitalised and
are amortised over the length of the loan.
15. Related party transactions
The Group encourages its Directors and employees to be
Governors, Trustees or equivalent of educational establishments.
The Group trades with these establishments in the normal course of
its business.
Ipswich School
John Poulter, non-executive director of RM plc, is a director of
Ipswich School. Sales made in the year total GBP12,296 (2016:
GBP2,419) and at the year-end there is a balance of GBP2,929 (2016:
GBP90) outstanding.
Spinfield School
Neil Martin, executive director, is a governor of Spinfield
School. TTS sales made in the year total GBP456 (2016: GBPnil) and
at the year-end there is a nil balance (2016: GBPnil). The
Consortium sales made in the year total GBP669.80 (2016: GBPnil)
and at the year-end there is a balance of GBP83 (2016: GBPnil)
outstanding.
Grant Thornton LLP
Deena Mattar, non-executive director of RM plc, is a
non-executive of the Partnership Oversight Board of Grant Thornton.
Grant Thornton were chosen from a competitive tender conducted by
the Company and Deena Mattar was not involved in that exercise. The
Company has engaged Grant Thornton to provide advice in connection
with certain activities. The following payments were made in the
year - GBP650,000 of integration costs in TTS and The Consortium,
GBP48,000 stock work in The Consortium and GBP25,000 accrual for
IFRS15 work.
TES Global Ltd (formerly TSL Education Ltd)
Lord Andrew Adonis was a Member of Advisory Board until 21 April
2017. During the year, the Group purchased GBP2,695 from the TES
Global Ltd.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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