RM plc (RM.) RM plc: Preliminary Results for the year ended 30
November 2022 29-March-2023 / 07:00 GMT/BST
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29 March 2023
RM plc
Preliminary Results for the year ended 30 November 2022
RM plc ("RM"), a leading supplier of technology and resources to
the education sector, reports its final results for the year ended
30 November 2022.
Mark Cook, Chief Executive of RM, said:
"RM's performance in FY2022 was materially impacted by the
challenges associated with the IT implementation project in our
Consortium business. These challenges led to us having to take a
number of actions, including suspending the payment of dividends. I
recognise that there is much to be done to rebuild value for our
stakeholders, but I'm pleased to report that we now have a much
more stable financial and operational position, including a renewed
banking facility which will run until July 2025.
"My priorities as RM's CEO are clear. Firstly, to continue to
strengthen the Company's finances, secondly, to review the IT
enterprise architecture and thirdly, to embed a transformation
approach across the business. The third priority is about retaining
the 50 years of Education IP in the Company, but also to better
leverage the product opportunities in the Education sector and
ensure a sharper focus on customer excellence and satisfaction.
"While there is much to be done, the business and market
fundamentals are positive and the whole team at RM are focussed on
delivering for our customers, improving outcomes for learners and
unlocking value for all our stakeholders."
Highlights
-- Revenue growth of 4% driven by strong growth in RM Assessment
and the TTS business in RM Resources
-- Adjusted operating profit* of GBP7.5m (2021: GBP16.5m) from
continuing operations impacted by ITimplementation in RM Resources
and RM Technology division turnaround
-- Adjusted operating profit of GBP9.1m including discontinuing
operations associated with the RM Integris andRM Finance
businesses
-- A further GBP2.8m of IPv4 addresses sold in the second half
were treated as other income
-- Statutory loss of GBP14.5m (2021: profit of GBP4.2m) reflects
the level of adjusting items primarilyassociated with the IT
implementation
-- Adjusted Net Debt** increased to GBP46.8m (2021: GBP18.3m)
reflects lower profits and exceptional spend
-- No dividend proposed as condition of extended banking
facility
-- Business now on a more stable footing on which to leverage
transformation programme to deliver improvedshareholder value:? IT
implementation in Consortium now complete following significant
challenges ? GBP70m banking facility extended to July 2025 with
revised covenants ? GBP8.5m of surplus IPv4 addresses sold in
December 2022 to reduce net debt levels ? Proposed sale of RM
Integris and RM Finance businesses will raise up to GBP16m and
simplify portfoliowithin RM Technology
GBPM 2022 2021 Variance
Revenue from continuing operations 214.2 206.1 +4%
Adjusted* operating profit from continuing operations 7.5 16.5 -55%
Adjusted* operating profit margin 3.5% 8.0% -4.5pp
Adjusted* profit before tax from continuing operations 5.3 15.1 -65%
Profit from discontinued operations 1.6 2.0 -20%
Statutory profit/(loss) after tax (14.5) 4.2 -
Adjusted* diluted EPS from continuing operations 4.2p 14.0p -9.8p
Diluted EPS from continuing operations (19.3)p 2.6p -
Dividend per share - 4.7p -
Adjusted Net debt** 46.8 18.3
IAS 19 Pension surplus/(deficit) 22.6 30.4
* Throughout this statement, adjusted operating profit and EPS
are stated after adjusting items (See Note 2) which are identified
by virtue of their size, nature and/or incidence. The treatment of
adjusted items is applied consistently period on period and is
consistent with the way that underlying trading performance is
measured by management.
** Alternative performance measure, see Note 2.
Notes to Editors:
RM provides market-leading products and services to educational
institutions, exam bodies and international governments which
improve, simplify and support education and learning.
The education sector is transforming, and RM is well positioned
to capitalise on this through its three divisions.
-- RM Resources is the established provider of education
resources for early years, primary schools, andsecondary schools
across the UK and to 80 countries internationally.
-- RM Assessment (formerly RM Results) is a leading provider of
assessment software, supporting examawarding bodies, universities,
and governments worldwide to digitise their assessment
delivery.
-- RM Technology (formerly RM Education) is a market-leading
supplier of ICT software, technology andservices to UK schools and
colleges.
Presentation and live webcast details
A presentation for analysts and investors will be held today at
9.00am. The audio and slide presentation will be webcast live and
on demand at the following website:
https://www.investis-live.com/rmplc/64146e954aa86d150050e0cf/rmak
The webcast will also be accessible via a live conference
call:
United Kingdom (Local) +44 20 3936 2999
United Kingdom (Toll-Free) +44 808 189 0158
Access Code: 645206
For additional details and registration for the webcast, please
contact Headland Consultancy on +44 203 805 4822 /
rm@headlandconsultancy.com.
Posting of Annual Report and Accounts RM will post the Annual
Report and Accounts 2022. It will be available for inspection at
the National Storage Mechanism which is located at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism and
available to view or download in pdf format from the Company's
website at https://www.rmplc.com/reports
Contacts:
RM plc
Mark Cook, Chief Executive Officer
Emmanuel Walter, Chief Financial Officer (interim)
Tarryn Riley, Head of Investor Relations (interim)
Headland Consultancy (PR adviser to RM) 0203 805 4822
Stephen Malthouse (smalthouse@headlandconsultancy.com)
Chloe Francklin (cfrancklin@headlandconsultancy.com)
Jemma Savage (jsavage@headlandconsultancy.com)
Chair Statement
Overview
2022 was a difficult year for the Group, dominated by the
challenging deployment of the new IT system into the Consortium
brand of the Resources Division. This impacted customer service in
that part of the business and the financial performance of the
Group overall as additional costs were incurred, putting the Group
under unnecessary financial stress.
Thanks to the determination and hard work of the team, the
situation is now under control. A stable footing both financially
and from a systems perspective has been established.
Notwithstanding the significant impact of this event on profit and
shareholder value, the Group delivered 4% revenue growth, including
the highest ever revenues from the Assessment Division and TTS
Resources brand.
This is my first annual statement since taking over as Chair and
it is helpful to set out my perspective on the Group and our
priorities. RM has market leading positions, channel strength and a
good product and market fit across its portfolio. The business
operates in an important and resilient marketplace and is well
positioned to deliver sustainable growth in response to a number of
positive structural trends in the education market. However, as the
team had already acknowledged, there is a need for a period of
transformation to improve the way in which RM is structured and
executes in order to be able to deliver effectively on these
opportunities.
A requirement to change
With this in mind, at the start of the year, the Company laid
out a reset of its strategy with a 2-year transition phase, with
the aims of simplifying and focussing its portfolio, strengthening
the leadership team and restructuring the Technology Division.
Progress continues in each of these areas, including the
announcement of the sale of the RM Integris and Finance products
from the Technology Division for up to GBP16m. However, the
implementation phase of the internal IT system replacement and
warehouse consolidation and automation programme, in development
since 2018, has been a substantial setback. The difficulties in
deployment and subsequent remediation of these in the Consortium
business dominated the management agenda in the second half of the
year and led to an even greater urgency to bring about change.
Now on a platform to progress
In response, the business has now stabilised the IT platform and
made the final deployment in the Consortium business to complete
this phase of the programme. A new interim Chief Technology Officer
has been appointed and the wider implementation programme has been
paused to enable management to reconsider the wider IT
architecture. A new interim Chief Financial Officer, Emmanuel
Walter, has been appointed, bringing greater financial rigour and
control. To respond to the liquidity challenges the Group has been
facing, the business accelerated the sale of some surplus assets of
Internet Protocol v4 (IPV4) addresses from its connectivity
business and restructured its GBP70m banking facility which is now
extended to July 2025. It will also benefit from the strategic sale
of the RM Integris and RM Finance businesses mentioned earlier
which is anticipated to complete in the first half of 2023.
This provides a sound footing on which to continue to develop
the business and focus on optimising the portfolio value of a Group
that delivers significant value in the education sector. I have
been working closely with the leadership team to identify the
necessary actions to unlock that value and will continue to ensure
that they have the Board's full support to do so.
Thanks to the team
Navigating this year has required exceptional efforts from so
many of the people within the RM business and I have been impressed
by their resilience and passion for our purpose and for their
customers and on behalf of the Board I would like to thank the
whole team.
We have continued to evolve the Board and leadership of the
Group. Most notably, Mark Cook joined as Chief Executive Officer in
January 2023, replacing Neil Martin who stepped down after 7 years
with the Group. Mark brings with him important experience in
transformation and creating shareholder value. Paul Dean will be
retiring as Chair of the Audit and Risk Committee after the
publication of the FY2022 preliminary results and will be replaced
by Richard Smothers who joined the Board in January 2023. As
mentioned, Emmanuel Walter joined as interim Chief Financial
Officer in July 2022.
I would like to thank Neil and Paul for their contributions to
RM and wish them both well in the future.
To support continuity through a period of change, the Company
has agreed to extend the term of Patrick Martell's appointment as
the senior independent Non-Executive Director by one year to 31
December 2023 which will take him into his tenth year with the
Group.
During the last year, the Board has had to step up in what has
been a dynamic and testing environment. I'm thankful to my fellow
Board members for their efforts and commitment during this period
helping RM to steer a path to a more stable position.
Dividend
A condition of the new extended and amended banking facility
agreement has been to restrict dividend distribution until the
Company has reduced its net debt to Last Twelve Months (LTM) EBITDA
(post IFRS 16) leverage to less than 1x for two consecutive
quarters and therefore, we are not able to recommend the payment of
a dividend.
The Board understands the importance of dividends to our
shareholders and are clear that reinstating the dividend is a key
milestone on our recovery path.
Outlook
The macroeconomic backdrop remains challenging with inflation
continuing to put pressure on our own operations and on school
budgets. However, RM now has the benefit of a stable operating and
financial platform on which to focus more fully on rebuilding and
optimising shareholder value from its portfolio and I am confident
in the positive progress that will be made.
Helen Stevenson
Chair
Chief Executive Officer's statement
I am pleased to have joined RM at an important point for the
Group. The attraction of the role was clear with a business in a
socially important and resilient sector and with strong market
positions. The organisation has a deep and rich heritage in the
Education sector and will celebrate 50 years of trading in 2023. It
is a sector that is experiencing structural change, most notably
associated with the use of technology which was advanced through
its experience during the pandemic in 2020 and 2021, and this
creates an interesting growth opportunity and positive inflection
point for RM.
At the same time, RM acknowledged in last year's annual report,
that it is a business that needs to change. I have spent the best
part of my career working in technology businesses and leading
business transformations. My priority is clear, to work with the
Board and the leadership team to bring that experience to bear with
the objective of building value for all our stakeholders. There is
much to be done, but the work by the team over the last 6 months,
has put RM back on a much firmer financial and operational footing,
and I am committed to ensuring that the Group takes full advantage
of the opportunities in its chosen markets.
2022 Performance
Despite a disappointing bottom line financial performance in
2022 with profitability levels materially below that of previous
years, the top line gave cause for encouragement. Revenue growth
was 4% and the Assessment Division and the TTS resources brand
delivered record revenues benefitting from UK and international
sales growth. As we have noted previously, profitability in 2022
was negatively impacted by increased costs related to the IT
implementation and inflation impacts on costs, in particular
international freight costs that were several multiples higher than
pre-pandemic levels, combined with ongoing drag from the Technology
Division pending benefits from its turnaround.
The impact of the IT implementation challenges was broader than
just profitability. The requirement to stabilise the operational
performance in Consortium and to fix the implementation issues
drove materially higher levels of borrowing than planned. Dividends
were suspended as a consequence alongside further actions to
prioritise net debt, such as the accelerated sale of IPv4 addresses
in the second half.
I recognise that there is much to be done to rebuild value for
all our stakeholders, but we start 2023 with a more stable
financial and operational position.
-- Banking support has been secured with an extension of our
GBP70m credit facility to July 2025 withcovenants that are
manageable within our outlook.
-- The IT implementation programme is now stable with the
completion of the implementation of the new systeminto Consortium
with the Digital e-commerce platform going live in the early part
of 2023.
-- The proposed sale of the RM Integris and RM Finance
businesses from the Technology Division for up toGBP16m supports
the turnaround activity and simplification of the Division.
-- In addition, further restructuring work is ongoing to refocus
activities and to bring greater commercialclarity and
simplification.
Transformation approach to Continuous Improvement
My near-term focus will be to continue to strengthen the Group
finances alongside looking at the value creation path ahead. I am
working with the management team to pinpoint all opportunities that
drive enterprise value utilising our expertise in the education
sector, product design and the potential from a digital
transformation. We are focussed on building shareholder and
enterprise value in a short time frame and as a result building
operating margin in each of the divisions.
My initial observation of RM is that it has great people,
customers, and a long heritage of education knowledge to design,
build and deliver products and services to UK and international
customers.
As we go through this inflection point and transformation of the
business, we want to retain the 50 years of Education IP in the
Company, bringing in new talent where needed to leverage the
product opportunities in the Education sector and having a laser
focus on Customer Excellence and satisfaction.
This approach will be supported with a culture of continuous
improvement embedded across the organisation as part of our
transformation plan and allow us to serve our education customers
with care and compassion but, at the same time, with ruthless
operational efficiencies from behind the scenes.
We will review our enterprise architecture to fit the needs of
the strategy and the future operating model and this in turn will
unlock value drivers relating to operations, working capital, and
overhead.
This transformation programme will become the one stop shop to
keep all of our stakeholders updated on our progress and the
framework against which I will hold myself and the management team
to account regarding execution.
Looking ahead at the priorities
The market fundamentals and trends that underpin the current
strategy are clear and well founded and create opportunity for
RM.
-- Increasing use of technology in education
-- Digital delivery of assessment
-- Aggregated school procurement
These trends are providing opportunity in the near term and will
only strengthen further over time. They played a role in helping
the business deliver revenue growth in 2022, particularly in a
number of the contract wins delivered in the Assessment and
Technology Divisions.
I see RM as having autonomous operating divisions with strong
market positions and channel strength in their own right and where
the corporate governance offers a control framework in which our
business leaders have clear decision-making authority. As a result,
the central overhead functions should be small and use short lines
of communication to ensure prompt and unambiguous decision making.
These functions will also provide specialist resource that provides
synergy and access to expertise and a programme management cadence
for the overall transformation execution.
I will continue to evaluate and review the strategy and core
operating business units over the coming months alongside the
continuous improvement work that is in progress.
IT Programme
Given the delays and overspend associated with the Group IT
programme, a priority is to reset these plans. The programme is at
a natural review point following the completion of the
implementation of the end-to-end system into the Consortium
resources brand in the early part of 2023. We have also implemented
ServiceNow into the Technology Division and Group IT and an updated
HR system across the Group.
The front-end website of the system, back-end support and
automated distribution centre will bring great value to the
Consortium business and represent a step change in its digital and
operational capabilities and customer experience, providing a
wealth of new functionality, automation and data transparency.
This new digital experience ranges from the simplicity of
customer self-service options and improved product shopping list
functionality to new product comparison and predictive search
functionality. This is coupled with personalised content for
specific customer account types, and a shared shopping basket
across complex users.
With the IT system now fully implemented into Consortium, we
will use the period of stability and reduced spend levels to remove
the dependency of expensive 3rd party resources that were heavily
used through the implementation phase and develop our own
capabilities to retain knowledge and IP inside RM.
Importantly, we will review the IT enterprise architecture and
structural requirements of the wider business alongside a review of
the future operating model. We will be open minded about what is
required in each area rather than assume that the current
architecture is deployed throughout and no further deployment
phases are planned in 2023.
Revenue and Gross Margin development
We continue to see growth opportunities in each division. These
are in part from leveraging the structural growth opportunities
that exist around the increasing use of technology and the clearer
customer targeting of larger School buying groups that are
increasing through the academisation process in English Schools.
Furthermore, there are opportunities associated with continuing to
improve execution and the development of a more commercial
culture.
There is a specific focus on gross margin development which is
of increased importance given the inflationary backdrop. All areas
of the business have been challenged to improve their commercial
response to managing indexation, pricing and account management
which is being centrally coordinated and reviewed.
There is also a focus on customer and product profitability and
ensuring that all contractual relationships are profitable for the
Group. This is a key aspect of the turnaround in the Technology
Division.
Spend and Working Capital
There are a number of initiatives in train around improving
working capital cycles and inventory management and reviewing
spending plans across the Group. It is important to me that we
mirror the spending behaviour of our customers where budgets are
currently challenged or uncertain as a result of the macroeconomic
backdrop and ensure that all of our spend is essential. We have
established a Technology Board to review all plans in this area
across the Group covering structures, spend, licensing and asset
management and also a Staffing Board to regularly review all hiring
decisions and employment levels.
People
Talent and culture remain a focus and RM has a strong
purpose-led culture and committed employees who care about
education and learners. This has been immediately evident to me
throughout my early interactions with people regularly
demonstrating that they care about the work that we do within
education. On behalf of the Executive team, I would like to thank
everyone in RM for their incredible commitment through 2022 and the
warm welcome that they have shown me and I look forward to working
with them in the year ahead.
Outlook
The government continues to make education a priority and it is
one of the few departments that has received increased funding. The
wider macroeconomic backdrop however continues to create
uncertainty and challenges for school budgets with higher than
expected pay increases, persistently high energy prices and high
inflation. In turn this puts pressure on our own operations and, as
outlined, ensuring we have the right cost base will remain a key
priority.
That said, growth is expected in each of our divisions in the
year ahead. The Resources Division is most sensitive to
inflationary environments, but we are optimistic for the recovery
in the Consortium brand following the disruption of the previous
year now that we have a stable and materially improved technology
platform with strong digital capabilities. We also expect the
international markets to be more resilient and continue the strong
underlying growth we have experienced over a number of years.
Assessment should continue to grow on the back of a good year in
2022 and has the benefit of new customer wins from the previous
year and a positive marketplace.
The Technology Division should benefit from the turnaround
actions taken in 2022 and, although this work is ongoing, it is now
more effectively and commercially organised aligning its
go-to-market structure with its product verticals. Technology will
focus more on profitability and operating margin and benefits from
some positive wins in 2022 and is focussed on key government funded
initiatives such as the Connect the Classroom connectivity
programme where it has a strong presence. We also expect to
conclude the sale of the RM Integris and RM Finance businesses in
the first half of 2023 which has required significant effort and
commitment over the last year.
I am personally energised about the opportunities ahead and
driving enterprise value at RM. While there is much to be done, the
business and market fundamentals are positive and the whole team at
RM are focussed on delivering for our customers, improving outcomes
for learners and unlocking value for all our stakeholders.
Mark Cook
Chief Executive Officer
Chief Financial Officer's statement
Overview
RM's results and financial performance for the year have been
heavily impacted by the IT implementation program and its rollout
for the Consortium brand in the RM Resources division. Trading
disruption and elevated program costs have materially impacted
performance for the year compared to 2021 and increased the net
debt position.
Group revenue from continuing operations increased by 3.9% to
GBP214.2m (2021: GBP206.1m) with all divisions either flat or
growing in 2022 despite the disruption caused by the IT
implementation programme. The return of UK School exams and
customer and volume growth in RM Assessment resulted in a 22%
(GBP7.1m) increase in divisional revenue. RM Resources revenues
were flat on 2021 with strong growth of 40% (GBP6.5m) in
international revenues, and 10% (GBP5.2m) in the TTS brand, before
being negatively impacted by the IT implementation disruption
within the Consortium brand with revenues reduced by 26%
(GBP11.7m).
Adjusted operating profit2 from continuing operations decreased
by 55% to GBP7.5m (2021: GBP16.5m) predominately driven by the
disruption from the IT Programme implementation which in addition
to reducing revenues inflated warehouse and distribution costs. In
addition, the Group continued to experience higher freight costs
and high wage inflation pressure throughout the year, most
significantly in India.
The Group recorded a Statutory operating loss from continuing
operations of GBP21.6m, a decrease of GBP25.2m from the 2021 profit
of GBP3.6m. The loss is driven by the increased costs associated
with our large capital programs and in particular the IT
implementation process for the Consortium brand. Adjustments also
include costs incurred as part of the divestment of the RM Integris
and RM Finance businesses announced in November 2022 and planned
restructuring activities. These costs are partially offset by the
sale of GBP2.8m of surplus IPv4 addresses and a small gain
(GBP0.2m) on the sale of a freehold property in the period.
In the year the Group agreed to sell the RM Integris and RM
Finance businesses from within the RM Technology division for a
consideration of up to GBP16m. This transaction is subject to
shareholder approval which is in progress. The performance of these
businesses in both 2022 and 2021 have been classified and presented
as discontinued operations within the financial statements. In the
year the businesses generated GBP4.9m of revenue (2021: GBP4.7m)
and GBP1.6m of adjusted operating profit (2021: GBP2.0m). In
addition, the Group disposed of a small declining legacy software
product called iCase from within the RM Assessment division for
USDAUD 0.2m. Transactions costs of GBP0.8m were incurred in the
year associated with disposal activities.
Adjusted net debt closed the year at GBP46.8m (2021: GBP18.3m).
Adjusted cash generated1 from operations was GBP7.5m (2021:
GBP18.12m), including the negative impact of the disruption within
the Consortium brand, with the IT implementation in that area of
the business significantly reducing operating cash inflows. The
GBP28.5m (2021: GBP17.0m) net debt increase for the year included
GBP28.3m (2021: GBP22.6m) of spend associated with our capital
programs. The implementation of the programs for the Consortium
brand will complete in the first half of 2023, with further
implementation activity subject to an on-going review led by the
new Chief Executive.
Following the end of the financial year, RM concluded two
important activities that further improve the financial position of
the Group;
-- In December 2022, the Group sold a portion of their Internet
Protocol v4 (IPv4) addresses for a totalconsideration of GBP8.5m in
cash.
-- In March 2023, the Group secured an agreement with Lenders to
extend the existing GBP70m facility to July2025. This agreement
includes re-setting covenants under the facility as described in
the Treasury section.
1 Adjusted cash generated from continuing operations is defined
as cash from operations excluding the impact of adjustments which
includes major investment costs including dual run costs, proceeds
on sale of non-core assets, and other property related items.
Further details can be found in Note 2.
2 2021 cashflow adjusted to reflect the reclassification of
customer development activity from contract fulfilment assets to
intangibles as set out in Note 14.
Group Financial Performance
Income statement
GBPm 2022 2021
Adjusted2 Adjustment1 Statutory Adjusted2 Adjustment1 Statutory
Revenue 214.2 - 214.2 206.1 - 206.1
Operating profit/(loss) 7.5 (29.1) (21.6) 16.5 (12.9) 3.6
Profit/(Loss) before tax 5.3 (26.1) (20.8) 15.1 (11.5) 3.6
Tax (1.8) 6.5 4.7 (3.3) 1.9 (1.4)
Profit/(Loss) after tax from continuing operations 3.5 (19.6) (16.1) 11.8 (9.6) 2.2
Profit after tax from discontinued operations3 1.6 - 1.6 2.0 - 2.0
Profit/(Loss) after tax 5.1 (19.6) (14.5) 13.8 (9.6) 4.2
1. Adjustments reflect the amortisation of acquisition related intangible assets; major investment costsincluding dual run costs, profits on sale of non-core assets, and other property related items. Further details canbe found in Note 2. 2. Non-GAAP measures. See Note 2 3. Discontinued activities relate to the RM Integris and RM Finance businesses and the i-Case product.
Group revenue from continuing operations increased by 3.9% to
GBP214.2m (2021: GBP206.1m).
UK revenues from continuing operations, outside of Consortium,
increased GBP9.5m to GBP141.1m being 7.2% higher than prior year.
However, the brand disruption in Consortium led to an overall
revenue decline of 1.3%. Total International revenues from
continuing and discontinued operations were up to GBP10.3m.
Adjusted operating profit margins from continuing operations2
reduced to 3.5% (2021: 8.0%). Adjusted operating profit from
continuing operations reduced by 55% to GBP7.5m (2021: GBP16.5m).
Statutory operating profit from continuing operations decreased by
GBP25.2m to a GBP21.6m loss (2021: profit of GBP3.6m).
To provide an understanding of business performance excluding
the effect of significant change programmes and material
transactions, certain costs are identified as 'adjustments' 2 to
business performance.
In 2022 Adjusted items comprised the following:
2022 2021
GBPm GBPm
Amortisation charges associated with acquisition related intangible assets 1.8 2.0
Disposal related costs1 0.8 -
Dual running property & licence costs2 5.4 2.1
IT platform costs incurred and expensed2 17.4 8.3
Impairment of IT Capital Programme3 2.2 -
Onerous provision for IS licenses 1.2 -
Onerous lease commitments - 0.5
Restructuring costs 0.3 -
Total adjustments to administrative expenses 29.1 12.9
Gain on sale of property4 (0.2) (1.4)
Sale of IPv4 addresses5 (2.8) -
Total adjustments6 26.1 11.5
1 Costs incurred directly as part of the disposal of the RM
Integris and RM Finance businesses from its Technology
division.
2Adjusted items relate to spending on our two large capital
programmes. These items have been disclosed as adjustments because
they are material to the relevant segment and only exist through to
the completion of the capital programme.
3 The group has impaired elements of the IT capital programme
costs, previously capitalised, which relate to functionality that
is paused where the Group has no current active plans to proceed to
implement. This impairment may be reversed if the Group
subsequently implements this functionality.
4 In the year the final owned warehouse facility was disposed as
part of the warehouse consolidation project for GBP3.3m, generating
a GBP0.2m profit on disposal. In 2021 another warehouse was
disposed of as part of the same program for consideration of
GBP3.2m, generating a profit on sale of GBP1.4m
5 In the year the Group accelerated sales of surplus IPv4
assets, generating GBP2.8m in proceeds from its Connectivity
business over and above the ordinary levels seen in each if the
previous five years
6 Non-GAAP measures. See Note 2
Reflecting the elevated adjusted items, statutory profit before
tax from continuing operations fell to a GBP20.8m loss (2021:
profit of GBP3.6m) after deducting net interest charges of GBP2.2m
(2021: GBP1.4m) in relation to the Group's credit facility and
finance costs related to the defined benefit pension schemes and
adding back GBP2.8m of other income related to additional IPv4
address sales made in the second half of the year and GBP0.2m for
the gain on the sale of a freehold property.
The total tax charge for the year for continuing operations was
a GBP4.7m credit (2021: GBP1.4m cost). There are multiple tax
effects influencing the tax rate in income, costs, deferred tax
effects and the impact of no tax charge in the discontinued
businesses. These effects are explained in more detail in Note
5c.
Statutory profit after tax from continuing operations decreased
by GBP18.3m to a loss of GBP16.1m (2021: profit of GBP2.2m).
Operations classified as discontinued at the year-end generated
GBP1.6m of profit after tax (2021: GBP2.0m). Reported Group profit
after tax decreased by GBP18.7m to a loss of GBP14.5m (2021: profit
of GBP4.2m).
Adjusted diluted earnings per share from continuing operations
decreased to 4.2 pence (2021: 14.0 pence). Statutory basic and
diluted earnings per share from continuing operations were a loss
of 19.3 pence (2021: 2.6 pence).
Cash flow
Adjusted net debt1 closed the year at GBP46.8m (2021: GBP18.3m).
Adjusted cash generated from operations2 was GBP7.5m (2021:
GBP18.13m), including the negative impact of the disruption within
the Consortium brand, with the IT implementation in that area of
the business significantly reducing operating cash. On a statutory
basis, net cash outflow from operating activities was GBP20.8m.
The GBP28.5m net debt increase for the year included GBP28.3m
(2021: GBP22.6m) of spending associated with our capital programs.
This exceptional spend was offset by:
-- Accelerated sales of GBP2.8m of surplus IPv4 assets from its
Connectivity business over and above theordinary levels seen in
each if the previous five years
-- The sale of the remaining owned property for GBP3.3m as part
of the warehouse consolidation project.
Cash outflows for the year also include contributions to the
defined benefit pension schemes of GBP4.5m (2021: GBP4.5m), net
interest payments of GBP2.3m (2021: GBP0.6m), a dividend payment of
GBP2.5m (2021: GBP3.9m), leasing charges of GBP3.5m (2021: GBP3.9m)
offset by tax credits of GBP0.9m (2021: GBP0.1m payment).
1 Non-GAAP measures. See Note 2
2 Adjusted cash generated from operations is defined as cash
from operations excluding the impact of adjustments which includes
major investment costs including dual run costs, proceeds on sale
of non-core assets, and other property related items. Further
details can be found in Note 2.
3Restated as described in Note 14 for held for sale assets and a
reclassification of contract fulfilment costs to intangibles.
Balance Sheet - continuing operations
The Group had net assets of GBP60.6m at 30 November 2022 (2021:
GBP87.01m). The balance sheet includes Non-current assets of
GBP133.3m (2021: GBP146.21m), of which GBP49.4m (2021: GBP49.2m) is
Goodwill and GBP24.0m (2021: GBP35.0m) relates to the Groups
defined benefit pension scheme which is discussed further
below.
Operating PPE, intangible and right of use assets total GBP57.8m
(2021: GBP60.21m) and includes acquired brands, customer
relationships and Intellectual property as well as costs relating
to the warehouse consolidation and IT implementation programs. IP
Address assets utilised as part of the Connectivity business are
included at nil cost.
Net current liabilities of GBP49.2m (2021: GBP1.4m) includes
borrowings of GBP48.7m (2021: GBP19.7m included in non-current
liabilities which are classified as current, see treasury section
for further information) and a number of elevated balances
predominately resulting from the IT systems implementation program
particularly Inventory, trade receivables and trade payables.
Non-current liabilities of GBP23.4m (2021: GBP57.8m) includes
lease liabilities of GBP19.1m (2021: GBP21.1m) which is
predominately associated with the Group utilisation of properties
including the new Harrier Park warehouse. See point above on
borrowings which have been classified as current liabilities in
2022 but in non-current in 2021. Deferred tax liabilities of
GBP2.3m (2021: GBP10.8m) primarily comprises deferred tax
liabilities on the net pension surplus and acquisition related
intangibles of GBP9.1m (2021: GBP11.3m) offset in 2022 by a
recoverable deferred tax asset relating to taxable losses incurred
during the year of GBP7.1m.
1Restated as described in Note 14 for held for sale assets and a
reclassification of contract fulfilment costs to intangibles.
Divisional performance
RM Resources
RM Resources provides education resources and supplies to
schools and nurseries in the UK and internationally. Products
supplied are a mix of own-designed items, own branded and
third-party products.
Continuing Operations GBPm 2022 2021
TTS 58.3 53.1
Consortium 33.6 45.3
International 22.4 16.0
RM Resources revenue 114.4 114.4
RM Resources adjusted operating profit 2.8 10.1
RM Resources revenues were flat at GBP114.4m (2021: GBP114.4m)
with strong TTS UK and International sales being offset by an
GBP11.7m (25.8%) reduction in Consortium brand revenue driven by
the disruption caused by the IT programme implementation in the
year. UK education revenue decreased by 6.6% (TTS up 9.8%,
Consortium down 25.8%), with international revenues up GBP6.5m,
40.4%.
International sales comprise two key channels, international
distributors, through which RM Resources sells its own-developed
products to over 80 countries, and international schools to whom it
sells a broader portfolio of educational supplies. International
revenues increased by 40.4% to GBP22.4m (2021: GBP16.0m),
benefiting from reduced COVID related disruption and an increase in
the product range offered internationally.
Divisional adjusted operating profit decreased to GBP2.8m (2021:
GBP10.1m) and adjusted operating margins decreased to 2.5% (2021:
8.8%). The division was primarily impacted by the challenges
associated with the IT programme implementation which reduced
revenues and increased costs associated with warehouse,
distribution and staffing expenditure. The Division also
experienced elevated freight costs in the year which did start to
decrease through the second half.
RM Assessment
RM Assessment provides IT software and end-to-end digital
assessment services to enable online exam marking, online testing
and the management and analysis of educational data. Customers
include government ministries, exam boards and professional
awarding bodies in the UK and overseas.
Continuing Operations GBPm 2022 2021
RM Assessment revenue 38.9 31.9
RM Assessment adjusted operating profit 7.4 5.7
RM Assessment provides IT software and end-to-end digital
assessment services to enable online exam marking, testing and the
management and analysis of educational data. Customers include
government ministries, exam boards, professional awarding bodies
and Universities in the UK and internationally.
Revenue from continuing operations increased by 22% on the prior
year to GBP38.9m (2021: GBP31.9m) driven by a full year of UK
school examinations in 2022 and expansion in customer numbers and
volumes.
Adjusted operating profit from continuing operations increased
by 29% on the prior year to GBP7.4m (2021: GBP5.7m), with operating
margins increasing to 18.9% (2021: 17.9%), benefitting from the
increased revenues. Operating costs were higher than planned
primarily driven by elevated costs on a small number of development
contracts and higher than anticipated wage inflation in India.
In the year, the division agreed to the sale of a small
declining legacy software product, i-case, for USDAUD 0.2m, which
was acquired as part of the SoNET acquisition in 2019. It delivered
GBP0.5m (2021: GBP0.6m) of revenue and GBP0.2m (GBP0.3m) of
adjusted operating profit in 2022.
RM Technology
RM Technology provides ICT software and services to UK schools
and colleges.
Continuing Operations GBPm 2022 2021
Services 55.0 53.6
Digital Software Platforms 5.9 6.3
RM Technology revenue 60.9 59.9
RM Technology adjusted operating profit 2.2 5.1
Revenue from continuing operations increased by GBP1.0m, 1.7% to
GBP60.9m (2021: GBP59.9m) benefitting from a new large multi-year
infrastructure contract driving growth in Services.
The Division sold GBP1.3m of IPv4 addresses in the year (2021:
GBP0.4m) as part of an ongoing programme of selling surplus assts
to the growth needs of the Connectivity business which it has done
in the previous five years. These sales have been included in the
revenue above. During the second half of the year, the Division
accelerated the sale of a further GBP2.8m of IPv4 surplus addresses
to support the liquidity of the wider Group. Due to the nature of
these sales, they have been classified as adjusting other income
and not included in revenue or adjusted earnings. Further sales of
GBP8.5m were made subsequent to year end.
Adjusted operating profit from continuing operations decreased
by 57% to GBP2.2m (2021: GBP5.1m), the primary driver being lower
gross margins which reflects a less favourable product and customer
mix, which also reduced operating efficiencies due to higher
staffing costs.
In the year the division announced the sale of the RM Integris
and RM Finance businesses for consideration of up to GBP16m. In the
year ended 30 November 2022 these businesses generated GBP4.9m of
revenue (2021: GBP4.7m) and GBP1.6m of adjusted operating profit
(2021: GBP2.0m) and are classified as discontinued operations and
therefore not included in adjusted operating profit. Assets
(GBP0.4m) and liabilities (GBP2.2m) associated with the RM Integris
and RM Finance businesses are held for sale at the balance sheet
date.
Services
The Services offering is primarily the provision of IT
outsourcing and associated technology services (managed services)
and managed broadband connectivity to UK schools and colleges.
Total Services revenues improved by 2.6% to GBP55.0m (2021:
GBP53.6m) with managed services, hardware, and infrastructure
revenues improving 4.7% (2021: declining 4%) to GBP42.4m (2021:
GBP40.5m). This was driven by the benefit of a new large multi-year
infrastructure contract won in the year. Connectivity revenue
decreased 3.8% (2021: 9%) to GBP12.6m (2021: GBP13.1m).
Digital Software Platforms
The Digital Software Platform offering covers a number of
cloud-based products and services such as RM Unify (authentication
and identity management system) and RM SafetyNet (internet
filtering software) as well as other content and network software
offerings. Digital Platforms revenues from continuing operations
decreased marginally to GBP5.9m (2021: GBP6.3m).
Dividend
A condition of the new extended and amended banking facility has
been to restrict dividend distribution until the Company has a net
debt to LTM EBITDA (post IFRS 16) leverage below 1x for two
consecutive quarters and therefore we are not able to recommend the
payment of a final dividend.
A final 2021 dividend of 3.0p per share, GBP2.5m was paid in
2022.
RM plc is a non-trading investment holding Company and derives
its profits from dividends paid by subsidiary companies. The
Company has GBP30.8m (2021: GBP35.8m) of distributable reserves, as
at 30 November 2022, available to support dividends in the future
when the facility restrictions are lifted. The Directors regularly
review the Group's capital structure and dividend policy, ahead of
announcing results and during the annual budgeting process, looking
at longer-term sustainability. The Directors do so in the context
of the Company's ability to execute the strategy and to invest in
opportunities to grow the business and enhance shareholder
value.
The dividend policy is influenced by a number of the principal
risks identified in the table of 'Principal and Emerging Risks and
Uncertainties' set out above which could have a negative impact on
the performance of the Group or its ability to distribute
profits.
Treasury Management
In the period to 31 May 2022 the Company's banking facility was
extended to July 2024, with the terms of the facility being held
consistent with those of the prior agreement. The debt facilities
at 31 May 2022 were subject to financial covenants of a maximum of
2.5 times. Net Debt/adjusted LTM EBITDA (pre-IFRS 16) and at least
4 times interest cover/adjusted LTM EBITDA (pre IFRS16). On 31 May
2022 the results of the covenant tests were 2.61 and 13.73
respectively.
Subsequent to 31 May 2022 the lenders agreed to amend the net
debt/ adjusted LTM EBITDA (pre-FRS16) covenant to 3.0x at May 2022
and November 2022 and made it clear there was no intention of
accelerating all or any part of the loan repayments. However as
this was outside of the control of the Directors at 31 May 2022,
borrowings were classified as current liabilities at the balance
sheet date.
Prior to the end of the year, the Group entered discussions with
lenders to extend the facility by a further year to July 2025 and
to review the timing and type of covenant testing. As part of this
process the lenders postponed the 30 November covenant test timing,
however despite no breach of the facility agreement at the balance
sheet date the borrowings have been classified as current
liabilities as at 30 November 2022.
Since the year-end, the Group has secured an agreement with
Lenders which extends the existing GBP70m facility to July 2025.
This agreement provides lenders a fixed and floating charge over
the shares of all obligor companies (except for RM plc) and has
reset the covenants under the facility as follows:
-- a quarterly LTM EBITDA (post IFRS16) covenant test from May
2023 to November 2024 which is then replacedby a quarterly LTM
EBITDA (post IFRS16) leverage test and interest cover both of which
are required to be below 4xfrom February 2025.
-- Subject to the sale of the RM Integris and RM Finance
businesses and receipt of at least GBP10m ofproceeds, an additional
liquidity covenant will come into effect. This covenant would
include both a 'hard' and a'soft' liquidity covenant. The 'hard'
covenant requires the Company to have liquidity greater than GBP7.5
million onthe last business day of the month and liquidity not be
below GBP7.5 million at the end of two consecutive weekswithin a
month.
The 'soft' covenant requires the Company to have liquidity
greater than GBP12.5 million at any point during the cash flow
forecast period. Unlike the 'hard' covenant, a breach of the 'soft'
covenant does not constitute an event of default under the Facility
Agreement but, instead, requires the Company to notify the Lenders
of the breach and be available to discuss plans to increase
liquidity.
Treasury activities are managed centrally for the Group
including banking relationships and foreign currency hedging. The
Group has foreign currency-denominated costs that outweigh foreign
currency-denominated revenues and therefore increased currency
volatility creates an exposure. This is primarily attributed to US
Dollar and Indian rupee exposure. This risk is managed through
currency hedging against exchange rate movements, typically 12
months into the future. The Group is also working to rebalance its
exposure by growing its foreign currency-denominated sales ahead of
its costs to reduce the currency imbalance and more naturally hedge
this risk over time.
Defined Benefit Pension Schemes
The Company operates two defined benefit pension schemes ("RM
Education Scheme" and "Care Scheme") and participates in a third,
multi-employer, defined benefit pension scheme (the "Platinum
Scheme"). All schemes are now closed to future accrual of
benefits.
The IAS19 net position (pre-tax) across the Group reduced by
GBP7.7m to a surplus of GBP22.6m (2021: GBP30.4m) with both the RM
Education Scheme and the Platinum Scheme being in surplus. The
reduction has been driven by actual inflation experience over the
period and a decrease in the value of Scheme assets more than
offsetting the positive impact of higher discount rates which is
based on corporate bond yields.
The 31 May 2021 triennial valuation for the current schemes was
completed in the year with the total scheme deficit reducing from
GBP46.5m to GBP21.6m. The deficit recovery payments of GBP4.4m per
annum will continue until end 2024, before reducing to GBP1.2m
until the end of 2026 when recovery payments cease.
Since the year-end, the Group has agreed further positions with
the Trustee of the current schemes. The agreement provides the main
two pension schemes with a second ranking fixed and floating charge
over the shares of all obligor companies (except for RM plc) and a
payment of GBP0.5m at bi-annual intervals starting on August 2024
which is contingent upon the adjusted debt leverage ratio being
less than 3.2x at that date. The definition of adjusted leverage is
aligned to the banking facility outlined above.
The Group has also agreed to pay a one-off additional
contribution of GBP0.1m to the Platinum Scheme.
Going Concern
The financial statements have been prepared on a going concern
basis which the Directors consider to be appropriate for the
following reasons.
The Directors have prepared cash flow forecasts for the period
to the end of May 2024 which indicate that taking into account
reasonably plausible downsides as discussed below, the Company has
sufficient funds to meet its liabilities as they fall due for at
least 12 months from the date of this report.
In assessing the going concern position the Directors have
considered the balance sheet position and the level of available
finance not drawn down.
At 30 November 2022, the Group had net debt of GBP46.8m
(November 2021: GBP18.3m) and drawn facilities of GBP49.0m
(November 2021: GBP20m). RM Group has a GBP70m (2021: GBP70m)
committed bank facility ("the facility") at the date of this report
and the details of an extension and amendment to the facility are
included in the Treasury section of the CFO section. Further
details are set out in Note 31. Liquidity headroom at 30 November
2022 was GBP23.2m (2021: GBP47.9m). Average net debt over the year
to 30 November 2022 was GBP46.8m (2021: GBP15.8m) with a maximum
borrowings position of GBP64.1m (2021: GBP29.7m). The drawn
facilities are expected to fluctuate over the period considered for
going concern and are not anticipated to be fully repaid in this
period.
Since the year-end, the Group has secured an agreement with
Lenders, which extends the existing GBP70m facility to July 2025.
This agreement provides lenders a fixed and floating charge over
the shares of all obligor companies (except for RM plc) and has
reset the covenants under the facility. For going concern purposes
the Board have assessed performance against the following
covenants:
-- a quarterly LTM EBITDA (post IFRS16) covenant test from May
2023 to November 2024
-- a 'hard' liquidity covenant test requiring the Company to
have liquidity greater than GBP7.5 million on thelast business day
of the month and liquidity not be below GBP7.5 million at the end
of two consecutive weeks within amonth. As outlined in the previous
Treasury Management section, this covenant test is conditional on
the sale ofthe RM Integris and RM Finance businesses.
The Chief Financial Officer's statement outlines the performance
of the Group in the year to 30 November 2022. This statement
highlights the material impact of the IT implementation in the
Consortium brand of RM Resources, where the disruption materially
reduced revenues and elevated costs in what was already a
challenging market backdrop of inflationary pressures on school
budgets. The Assessment division benefited from the first full UK
exam series since 2019 and expanded customer numbers and volumes
and the remainder of the RM Resources division delivered a strong
performance with TTS UK revenues growing 10% and International
revenues 40%. Despite the reduction in operating cash flows caused
by the IT implementation disruption the Group generated GBP6.4m of
adjusted operating cash in the year.
However, the resulting impact was a materially reduced operating
performance versus 2021, with the Group making an operating loss
for the year and reporting a significant elevation of the Net Debt
position.
For going concern purposes, the Group has assessed a base case
scenario that assumes no significant downturn in UK or
International markets from that experienced in the year to 30
November 2022 and assumes a broadly similar macroeconomic
environment to that currently being experienced.
The base case reflects shareholders voting in favour of the sale
of the RM Integris and RM Finance businesses from the RM Technology
Division. The net proceeds of the Sale, when received, will provide
the Group with additional liquidity to strengthen the Continuing
Group's balance sheet and reduce indebtedness as well as support
the Group's strategy to build a more focused, sustainable business
for the long-term.
As discussed in detail within this report the IT implementation
in the Consortium brand significantly impacted the performance of
the Group in 2022. The base case reflects the finalisation of this
project within the Consortium brand in time for schools peak buying
season. There are no further IT program implementations included in
the base case in the outlook period.
Revenue growth in the base case is driven from four key
areas:
-- Reduced Consortium disruption in 2023 following finalisation
of the IT implementation, although volumesin the three-year budget
period are not expected to return to 2019 levels.
-- New contract wins in RM Assessment and RM Technology and
increased hardware and infrastructure revenuesin RM Technology
associated with the UK government's three-year Connect the
Classroom program for which they haveprovided GBP150m in
funding.
-- International volume growth in the RM Resources business,
although this is modelled below that seen in2022.
Overall margins in the base budget are flat from 2022 to 2023
and a marginal increase in 2024. The increase in FY24 is largely
the result of revenue growth, revenue mix and some underlying
service delivery improvements.
Adjusted net debt reduces materially within the assessment
period which is largely the result of GBP8.5m of IPv4 address sales
(which have already occurred) and the proceeds from the sale of the
RM Integris and RM Finance businesses. The base budget includes
investment required to maintain the existing customer base and
enable the growth modelled and does not include the payment of
dividends.
There are working capital initiatives built into the underlying
budget, which are focussed on aligning to the pre COVID and pre-IT
implementation run rate positions rather than seeking to go
further. There is no further management of working capital modelled
within the base case.
Under the base case, taking account of available facilities and
existing cash resources and the net proceeds of the Sale, the
working capital available to the Continuing Group is sufficient to
meet its liabilities as they fall due for at least 12 months from
the date of this report.
If the Sale were not to proceed and the Group's results over the
relevant period continue to be in line with the Company's current
expectations, it is not expected to be in breach of the financial
covenants contained in its financing documents and would have
sufficient liquidity headroom at all times within the 12-month
period.
In connection with the Sale and as part of the Group's business
planning process, the Board has closely monitored the Group's
financial forecasts, key uncertainties, and sensitivities. As part
of this exercise, the Board has reviewed a number of scenarios,
including a base case and reasonable worst case downside scenario,
both where the Sale does proceed and where the Sale does not
proceed. This scenario includes:
RM Resources
-- School budgets are more challenged than expected and schools
focus on essentials leading to a 10%reduction in TTS brand volumes
in 2023 and 2024 taking them below 2022 in both years. Consortium
brand revenues arealso decreased by 10% in 2024.
-- IT system implementation timelines are extended reducing
revenues by c.20% in the Consortium brandthrough the peak period in
2023 taking them below 2022 levels
-- International volume growth is materially below that seen in
2022, with expected growth reduced by onehalf
-- Consortium overdue receivables remain elevated until the half
year 2023 and the business experiences ahigher volume of returns
than is usual for the business resulting from the IT implementation
challenges Thisscenario results in a c.GBP4m reduction in liquidity
headroom.
RM Technology
-- Removal of revenue growth in the RM Technology business
reflecting a more challenging market environmentrelated to new
hardware and infrastructure wins. This results in a c9% reduction
in 2023 revenues and c7% in 2024,resulting in 2023 revenues being
below those in 2022.
RM Assessment
-- Pipeline delays and reduced conversion in the RM Assessment
division reduces new business revenues byc90% in 2023 and c80% in
2024. This reduces revenue growth in the base case down to
contracted positions.
Central Corporate
-- Central efficiency targets are not achieved in 2023 or 2024
which increase central costs in 2023 to be15% above 2022 and in
line with 2022 in 2024.
Other
-- The GBP4m contingent portion of the proceeds from the sale of
the RM Integris and RM Finance businesses isnot received.
-- Central bank interest rates are maintained above 4% for the
entire assessment review period
While the Board believes that all reasonable worst case downside
scenarios occurring together is highly unlikely, under these
combined scenarios and shareholders voting in favour of the sale of
the RM Integris and RM Finance businesses, the Group would continue
to have reasonable headroom against the Facility and comply with
covenants.
Were the Sale not to proceed for any reason and the Group
performed in line with its reasonable worst case downside scenarios
the Group would have sufficient, but limited, liquidity headroom,
and the covenants would not be breached in the 12 months following
the date of this report.
The Board's assessment of the likelihood of a further downside
scenario is remote, particularly with the positive progress on
finalising the IT Implementation in Consortium at the date of this
report. The Board has reviewed the downside scenario which would
result in liquidity and covenant breaches outlined below.
In addition to the reasonable worst-case scenario the Board have
performed a reverse stress test and in that scenario the first
covenant that would breach would be the liquidity covenant in
September 2023 in the circumstance that the sale were not to
proceed and the RM resources revenue for that period were to reduce
by a further 9% from the reasonable worst case scenario. The Board
consider the possibility of this scenario occurring to be highly
remote.
The Board has also considered a number of mitigating actions
which could be enacted, if necessary, to ensure that reasonable
headroom against the facility is maintained in all cases and the
Group complies with covenants. These mitigating actions are
expected to have little to no implications to the ongoing business
and include (but are not limited to) reducing un-committed spend,
delaying recruitment and executing further IPv4 sales.
Therefore, the Board has a reasonable expectation that the
Company has adequate resources to continue in operational existence
and meet its liabilities as they fall due for a period of not less
than 12 months from the date of approval of these Financial
Statements, having considered both the availability of financial
facilities and the forecast liquidity and expected future covenant
compliance. For this reason, the Company continues to adopt the
going concern basis of accounting in preparing the annual Financial
Statements.
Internal Control
Management acknowledged that control improvements were required
entering the year which were outlined in the Audit and Risk
Committee report in 2021. This was compounded during the year by
the operational disruption caused by the challenges associated with
the IT system implementation and further control findings
identified during the half year results review.
As a result, a more thorough review and reset of the internal
control environment was initiated utilising specialist external
resource, reporting directly to the new Interim CFO, with the remit
to review all aspects of the internal control framework.
The Audit and Risk Committee is being updated regularly with
respect to progress related to remediation activities as well as
reviewing ongoing control improvements identified, and while
progress has been made, these continue into 2023.
Management, based on the controls review detailed above, have
provided the committee with assurance that where controls were not
designed, implemented or operating effectively there were
appropriate mitigating actions in place to conclude that the
financial statements do not contain material errors.
This is outlined in more detail in the Audit and Risk Committee
report.
Directors' Responsibility Statement
The 2022 Annual Report and Accounts which will be issued in
March 2023, contains a responsibility statement in compliance with
DTR 4.1.12 of the Listing Rules which sets out that as at the date
of approval of the Annual Report on 29 March 2023, the directors
confirm to the best of their knowledge:
-- the Group and unconsolidated Company financial statements,
prepared in accordance with the applicable setof accounting
standards, give a true and fair view of the assets, liabilities,
financial position and profit orloss of the Group and Company, and
the undertakings included in the consolidation taken as a whole;
and
-- the performance review contained in the Annual Report and
Accounts includes a fair review of thedevelopment and performance
of the business and the position of the Group and the undertakings
including theconsolidation taken as a whole, together with a
description of the principal risks and uncertainties they face.
Emmanuel Walter
Chief Financial Officer (interim)
29 March 2023
CONSOLIDATED INCOME STATEMENT
for the year ended 30 November 2022
Year ended 30 November 2022 Year ended 30 November 2021
Restated Restated Restated
Adjusted Adjustments Total Adjusted Adjustments Total
Note GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Continuing operation
Revenue 2 214,167 - 214,167 206,149 - 206,149
Cost of sales (146,878) - (146,878) (138,771) - (138,771)
Gross profit 67,289 - 67,289 67,378 - 67,378
Operating expenses (58,956) (26,833) (85,789) (50,752) (12,882) (63,634)
Increase in allowance for receivables (850) - (850) (157) - (157)
Impairment losses - (2,236) (2,236) - - -
Profit / (loss) from operations 7,483 (29,069) (21,586) 16,469 (12,882) 3,587
Finance income 3 614 - 614 28 - 28
Other income 3 - 3,010 3,010 - 1,399 1,399
Finance costs 4 (2,825) - (2,825) (1,396) - (1,396)
Profit / (loss) before tax 5,272 (26,059) (20,787) 15,101 (11,483) 3,618
Tax 5 (1,760) 6,458 4,698 (3,282) 1,858 (1,424)
Profit / (loss) for the year from continuing 3,512 (19,601) (16,089) 11,819 (9,625) 2,194
operation
Profit for the year from discontinuing 1,590 - 1,590 2,000 - 2,000
operations
Profit / (loss) from the year 5,102 (19,601) (14,499) 13,819 (9,625) 4,194
Earnings per ordinary share on continuing
operations
- basic 6 4.4p (19.3)p 14.2p 2.6p
- diluted 6 4.3p (19.3)p 14.0p 2.6p
Earnings per ordinary share on discontinuing
operations
- basic 6 1.9p 1.9p 2.4p 2.4p
- diluted 6 1.9p 1.9p 2.4p 2.4p
Earnings per share on total operations
- basic 6.1p (17.4)p 16.6p 5.0p
- diluted 6.0p (17.4)p 16.4p 5.0p
Paid and proposed dividends per share 7
- interim - 1.70p
- final - 3.00p
Throughout this statement, adjusted profit and EPS measures are
stated after adjusting items which are identified by virtue of
their size, nature and/or incidence. The treatment of adjusted
items is applied consistently period on period and is consistent
with the way that underlying trading performance is measured by
management (see Note 2 for details). The restatement is detailed in
Note 14.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 30 November 2022
Year ended Year ended
30 November 2022 30 November 2021
Note GBP000 GBP000
(Loss) / profit for the year (14,499) 4,194
Items that will not be reclassified subsequently to profit or loss
Defined Benefit Pension Scheme remeasurements 13 (12,157) 44,860
Tax on items that will not be reclassified subsequently to profit or loss 5 2,914 (10,364)
Items that are or may be reclassified subsequently to profit or loss
Fair value (loss)/ gain on hedged instruments (440) 242
Tax on items that are or may be reclassified subsequently to profit or loss 5 11 (45)
Exchange gain / (loss) on translation of overseas operations 301 (180)
Other comprehensive (expense) / income (9,371) 34,513
Total comprehensive (expense) / income (23,870) 38,707
CONSOLIDATED BALANCE SHEET Restated * Restated *
At 30 November At 30 November At 30 November
2022 2021 2020
Note GBP000 GBP000 GBP000
Non-current assets
Goodwill 49,401 49,202 49,322
Intangible assets 25,510 26,088 20,870
Property, plant and equipment 15,892 16,217 8,423
Right of Use asset 16,364 18,018 19,391
Defined Benefit Pension Scheme surplus 13 23,959 35,037 665
Other receivables 8 291 82 63
Contract fulfilment assets 1,713 1,486 1,566
Deferred tax assets 5 173 156 5,333
133,303 146,286 105,633
Current assets
Inventories 26,359 19,055 18,594
Trade and other receivables 8 36,203 33,661 31,271
Contract fulfilment assets 1,727 1,360 728
Assets held for sale 418 3,034 4,793
Tax assets 2,733 3,665 2,633
Cash at bank 1,911 3,560 5,941
69,351 64,335 63,960
Total assets 202,654 210,621 169,593
Current liabilities
Trade and other payables 9 (65,639) (61,695) (61,817)
Tax liabilities - - (163)
Provisions 11 (2,142) (2,066) (435)
Overdraft - (2,082) (2,480)
Borrowings (48,728) - -
Liabilities directly associated with assets classified as (2,082) - -
held for sale
(118,591) (65,843) (64,895)
Net current (liabilities) /assets (49,240) (1,508) 128,855
Non-current liabilities
Other payables 9 (19,094) (21,072) (20,987)
Provisions 11 (666) (1,475) (3,998)
Deferred tax liability (2,306) (10,830) (3,339)
Defined Benefit Pension Scheme obligation 13 (1,354) (4,686) (19,318)
Borrowings 10 - (19,744) (4,779)
(23,420) (57,807) (52,421)
Total liabilities (142,011) (123,650) (117,316)
Net assets 60,643 86,971 52,277
Equity attributable to shareholders
Share capital 12 1,917 1,917 1,917
Share premium account 27,080 27,080 27,080
Own shares (444) (444) (841)
Capital redemption reserve 94 94 94
Hedging reserve (263) 177 (65)
Translation reserve (581) (882) (702)
Retained earnings 32,840 59,029 24,794
Total equity 60,643 86,971 52,277
* The prior year has been restated please refer to Note 14
CONSOLIDATED STATEMENT OF
CHANGES IN EQUITY
for the year ended 30 November
2022
Share Share Own Capital redemption Hedging Translation Retained Total
capital premium shares reserve reserve reserve earnings
Note GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
At 1 December 2020 - 1,917 27,080 (841) 94 (65) (702) 24,794 52,277
as restated
Profit for the year- - - - - - - 4,194 4,194
restated
Other comprehensive - - - - 242 (180) 34,451 34,513
income/(expense)
Total comprehensive - - - - 242 (180) 38,645 38,707
income/(expense)
Transactions with
owners of the Company:
Share-based payment - - 397 - - - (397) -
awards exercised
Share-based payment - - - - - - (100) (100)
fair value charges
Deferred Tax on - - - - - - - -
Share-based payments
Ordinary dividends 7 - - - - - - (3,913) (3,913)
paid
At 1 December 2021 1,917 27,080 (444) 94 177 (882) 59,029 86,971
Loss for the year - - - - - - (14,499) (14,499)
Other comprehensive - - - - (440) 301 (9,232) (9,371)
income/(expense)
Total comprehensive - - - - (440) 301 (23,731) (23,870)
income /(expense)
Transactions with
owners of the Company:
Share-based payment - - - - - - 40 40
fair value charges
Deferred Tax on - - - - - - -
Share-based payments
Ordinary dividends 7 - - - - - - (2,498) (2,498)
paid
At 30 November 2022 1,917 27,080 (444) 94 (263) (581) 32,840 60,643
The restatement is detailed in Note 14.
CONSOLIDATED CASH FLOW STATEMENT
Restated
for the year ended 30 November 2022 Year ended Year ended
30 November 2022 30 November 2021
Note GBP000 GBP000
(Loss) /profit before tax from continuing operations (20,787) 3,618
Profit before tax from discontinuing operations 1,590 2,000
Proceeds on disposal of intangible licences (2,791) -
Gain on disposal of property (221) (1,399)
Finance income 3 (612) (28)
Finance costs 4 2,825 1,396
(Loss)/ profit from operations, including discontinued operations (19,996) 5,587
Adjustments for:
Amortisation and impairment of intangible assets 4,354 2,406
Depreciation and impairment of property, plant and equipment 5,149 4,281
Utilisation of contract fulfillment asset 2,326 1,446
(Gain)/ loss on disposal of property, plant and equipment 41 (50)
Loss/(gain) on foreign exchange derivatives (204) 64
Share-based payment (credit)/ charge 40 (100)
(Decrease) / increase in provisions 1,469 (353)
Defined Benefit Pension Scheme administration cost 13 8 52
Operating cash flows before movements in working capital (6,813) 13,333
(Increase) / decrease in inventories (7,304) (460)
(Increase) / decrease in receivables (4,095) (2,318)
(Increase) in contract fulfilment assets (2,920) (1,999)
Movement in payables
- increase in trade and other payables 5,517 1,177
- utilisation of provisions 11 (1,514) (528)
Cash (used in) / generated from operations (17,129) 9,205
Defined benefit pension scheme cash contributions 13 (4,537) (4,450)
Tax credited / (paid) 880 (135)
Net cash inflow from operating activities (20,786) 4,620
Investing activities
Interest received 3 28
Proceeds on disposal of intangible licences 2,791 -
Proceeds on disposal of property, plant and equipment 3,299 3,214
Purchases of property, plant and equipment (1,575) (8,024)
Purchases of other intangible assets (3,627) (7,805)
Net cash used in investing activities 891 (12,587)
Financing activities -
Dividends paid 7 (2,498) (3,913)
Drawdown of borrowings 10 73,000 58,000
Repayment of borrowings 10 (44,000) (43,000)
Borrowing facilities arrangement and commitment fees (436) (497)
Interest paid (2,312) (675)
Payment of leasing liabilities (3,461) (3,889)
Net cash generated by/ (used in) financing activities 20,293 6,026
Net (decrease) /increase in cash and cash equivalents 398 (1,941)
Cash and cash equivalents at the beginning of the year 1,478 3,461
Effect of foreign exchange rate changes 35 (42)
Cash and cash equivalents at the end of the year 1,911 1,478
Bank overdraft - (2,082)
Cash at bank 1,911 3,560
Cash and cash equivalents at the end of the year 1,911 1,478
The restatement is detailed in Note 14.
1. Preliminary announcement
The consolidated preliminary results are based on International
Financial Reporting Standards (IFRS) as adopted by the EU and were
also in accordance with international financial reporting standards
adopted pursuant to Regulation (EC) No 1606/2002 as it applies in
the European Union.
The 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 25 May 2023. 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 2022. Statutory accounts for 2021 have
been delivered to the Registrar of Companies and those for 2021
will be delivered following the Company's annual general meeting.
The 2022 statutory accounts are amended for the restatement of
certain customer contract fulfilment costs being reclassified as
intangible assets as set out in Note 14. The auditor's reports on
both the 2022 and 2021 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. This Preliminary announcement was
approved by the Board of Directors on 29 March 2023.
Consolidated Income Statement presentation
The Directors assess the performance of the Group using an
adjusted operating profit and profit before tax. The Board believes
that presentation of the Group results in this way is relevant to
an understanding of the Group's financial performance (and that of
each segment). Underlying performance excludes adjusted items which
are identified by virtue of their size, nature and/or incidence.
The treatment of adjusted items is applied consistently period on
period. This presentation is consistent with the way that financial
performance is measured by management, reported to the Board, the
basis of financial measures for senior management's compensation
schemes and assists in providing supplementary information that
assists the user to understand the underlying financial
performance, position and trends of the Group. Further details are
provided in Note 2.
Basis of preparation
The financial statements have been prepared on the historical
cost basis except for certain financial instruments, share-based
payments and pension assets and liabilities which are measured at
fair value. In addition, assets held for sale are stated at the
lower of previous carrying amount and the fair value less costs to
sell. The preparation of financial statements, in conformity with
generally accepted accounting principles, requires the use of
estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Although these estimates are based on the Directors' best
knowledge of current events and actions, actual results ultimately
may differ from those estimates.
As permitted by s408 of the Companies Act 2006 the Company has
elected not to present its own profit and loss account or statement
of comprehensive income for the year. The profit attributable to
the Company is disclosed in the footnote to the Company's balance
sheet.
Going concern
The financial statements have been prepared on a going concern
basis which the Directors consider to be appropriate for the
following reasons.
The Directors have prepared cash flow forecasts for the period
to the end of May 2024 which indicate that taking into account
reasonably plausible downsides as discussed below, the Company has
sufficient funds to meet its liabilities as they fall due for at
least 12 months from the date of this report.
In assessing the going concern position the Directors have
considered the balance sheet position and the level of available
finance not drawn down.
At 30 November 2022, the Group had net debt of GBP46.8m
(November 2021: GBP18.3m) and drawn facilities of GBP49.0m
(November 2021: GBP20m). RM Group has a GBP70m (2021: GBP70m)
committed bank facility ("the facility") at the date of this report
and the details of an extension and amendment to the facility are
included in the Treasury section in the CFO statement. Further
details are set out in Note 10. Liquidity headroom at 30 November
2022 was GBP23.2m (2021: GBP47.9m). Average net debt over the year
to 30 November 2022 was GBP46.8m (2021: GBP15.8m) with a maximum
borrowings position of GBP64.1m (2021: GBP29.7m). The drawn
facilities are expected to fluctuate over the period considered for
going concern and are not anticipated to be fully repaid in this
period.
Since the year-end, the Group has secured an agreement with
Lenders, which extends the existing GBP70m facility to July 2025.
This agreement provides lenders a fixed and floating charge over
the shares of all obligor companies (except for RM plc) and has
reset the covenants under the facility. For going concern purposes
the Board have assessed performance against the following
covenants:
-- a quarterly LTM EBITDA (post IFRS16) covenant test from May
2023 to November 2024
-- a 'hard' liquidity covenant test requiring the Company to
have liquidity greater than GBP7.5 million on thelast business day
of the month and liquidity not be below GBP7.5 million at the end
of two consecutive weeks within amonth.
The Chief Financial Officer's statement outlines the performance
of the Group in the year to 30 November 2022. This statement
highlights the material impact of the IT implementation in the
Consortium brand of RM Resources, where the disruption materially
reduced revenues and elevated costs in what was already a
challenging market backdrop of inflationary pressures on school
budgets. The Assessment division benefited from the first full UK
exam series since 2019 and expanded customer numbers and volumes
and the remainder of the RM Resources division delivered a strong
performance with TTS UK revenues growing 10% and International
revenues 40%. Despite the reduction in operating cash flows caused
by the IT implementation disruption the Group generated GBP6.4m of
adjusted operating cash in the year.
However, the resulting impact was a materially reduced operating
performance versus 2021, with the Group making an operating loss
for the year and reporting a significant elevation of the Net Debt
position.
For going concern purposes, the Group has assessed a base case
scenario that assumes no significant downturn in UK or
International markets from that experienced in the year to 30
November 2022 and assumes a broadly similar macroeconomic
environment to that currently being experienced.
The base case reflects shareholders voting in favour of the sale
of the RM Integris and RM Finance businesses from the RM Technology
Division. The net proceeds of the Sale, when received, will provide
the Group with additional liquidity to strengthen the Continuing
Group's balance sheet and reduce indebtedness as well as support
the Group's strategy to build a more focused, sustainable business
for the long-term.
As discussed in detail within this report the IT implementation
in the Consortium brand significantly impacted the performance of
the Group in 2022. The base case reflects the finalisation of this
project within the Consortium brand in time for schools peak buying
season. There are no further IT program implementations included in
the base case in the outlook period.
Revenue growth in the base case is driven from four key
areas:
-- Reduced Consortium disruption in 2023 following finalisation
of the IT implementation, although volumesin the three-year budget
period are not expected to return to 2019 levels.
-- New contract wins in RM Assessment and RM Technology and
increased hardware and infrastructure revenuesin RM Technology
associated with the UK government's three-year Connect the
Classroom program for which they haveprovided GBP150m in
funding.
-- International volume growth in the RM Resources business,
although this is modelled below that seen in2022.
Overall margins in the base budget are flat from 2022 to 2023
and a marginal increase in 2024. The increase in FY24 is largely
the result of revenue growth, revenue mix and some underlying
service delivery improvements.
Adjusted net debt reduces materially within the assessment
period which is largely the result of GBP8.5m of IPv4 address sales
(which have already occurred) and the proceeds from the sale of the
RM Integris and RM Finance businesses. The base budget includes
investment required to maintain the existing customer base and
enable the growth modelled and does not include the payment of
dividends.
There are working capital initiatives built into the underlying
budget, which are focussed on aligning to the pre COVID and pre-IT
implementation run rate positions rather than seeking to go
further. There is no further management of working capital modelled
within the base case.
Under the base case, taking account of available facilities and
existing cash resources and the net proceeds of the Sale, the
working capital available to the Continuing Group is sufficient to
meet its liabilities as they fall due for at least 12 months from
the date of this report.
If the Sale were not to proceed and the Group's results over the
relevant period continue to be in line with the Company's current
expectations, it is not expected to be in breach of the financial
covenants contained in its financing documents and would have
sufficient liquidity headroom at all times within the 12-month
period.
In connection with the Sale and as part of the Group's business
planning process, the Board has closely monitored the Group's
financial forecasts, key uncertainties, and sensitivities. As part
of this exercise, the Board has reviewed a number of scenarios,
including a base case and reasonable worst case downside scenario,
both where the Sale does proceed and where the Sale does not
proceed. This scenario includes:
RM Resources
-- School budgets are more challenged than expected and schools
focus on essentials leading to a 10%reduction in TTS brand volumes
in 2023 and 2024 taking them below 2022 in both years. Consortium
brand revenues arealso decreased by 10% in 2024.
-- IT system implementation timelines are extended reducing
revenues by c.20% in the Consortium brandthrough the peak period in
2023 taking them below 2022 levels
-- International volume growth is materially below that seen in
2022, with expected growth reduced by onehalf
-- Consortium overdue receivables remain elevated until the half
year 2023 and the business experiences ahigher volume of returns
than is usual for the business resulting from the IT implementation
challenges Thisscenario results in a c.GBP4m reduction in liquidity
headroom.
RM Technology
-- Removal of revenue growth in the RM Technology business
reflecting a more challenging market environmentrelated to new
hardware and infrastructure wins. This results in a c9% reduction
in 2023 revenues and c7% in 2024,resulting in 2023 revenues being
below those in 2022.
RM Assessment
-- Pipeline delays and reduced conversion in the RM Assessment
division reduces new business revenues byc90% in 2023 and c80% in
2024. This reduces revenue growth in the base case down to
contracted positions.
Central Corporate
-- Central efficiency targets are not achieved in 2023 or 2024
which increase central costs in 2023 to be15% above 2022 and in
line with 2022 in 2024.
Other
-- The GBP4m contingent portion of the proceeds from the sale of
the RM Integris and RM Finance businesses isnot received.
-- Central bank interest rates are maintained above 4% for the
entire assessment review period.
While the Board believes that all reasonable worst case downside
scenarios occurring together is highly unlikely, under these
combined scenarios and shareholders voting in favour of the sale of
the RM Integris and RM Finance businesses, the Group would continue
to have reasonable headroom against the Facility and comply with
covenants.
Were the Sale not to proceed for any reason and the Group
performed in line with its reasonable worst case downside scenarios
the Group would have sufficient, but limited, liquidity headroom,
and the covenants would not be breached in the 12 months following
the date of this report.
The Board's assessment of the likelihood of a further downside
scenario is remote, particularly with the positive progress on
finalising the IT Implementation in Consortium at the date of this
report. The Board has reviewed the downside scenario which would
result in liquidity and covenant breaches outlined below.
In addition to the reasonable worst-case scenario the Board have
performed a reverse stress test and in that scenario the first
covenant that would breach would be the liquidity covenant in
September 2023 in the circumstance that the sale were not to
proceed and the RM resources revenue for that period were to reduce
by a further 9% from the reasonable worst case scenario. The Board
consider the possibility of this scenario occurring to be highly
remote.
The Board has also considered a number of mitigating actions
which could be enacted, if necessary, to ensure that reasonable
headroom against the facility is maintained in all cases and the
Group complies with covenants. These mitigating actions are
expected to have little to no implications to the ongoing business
and include (but are not limited to) reducing un-committed spend,
delaying recruitment and executing further IPv4 sales.
Therefore, the Board has a reasonable expectation that the
Company has adequate resources to continue in operational existence
and meet its liabilities as they fall due for a period of not less
than 12 months from the date of approval of these Financial
Statements, having considered both the availability of financial
facilities and the forecast liquidity and expected future covenant
compliance. For this reason, the Company continues to adopt the
going concern basis of accounting in preparing the annual Financial
Statements.
Liquidity
Should the sale proceed as expected, for a liquidity breach to
occur, Group revenue and EBITDA would be required to fall by
GBP44.7m and GBP18.2m respectively in 2023 and GBP54.9m and
GBP22.2m respectively in 2024. The Board considers this scenario to
be highly remote in terms of likelihood of occurrence. Should the
sale not occur, which the Board considers to be highly unlikely,
the required revenue and EBITDA reduction is less significant at
GBP41.7m and GBP17.0m respectively in 2023 and GBP50.9m and
GBP20.6m respectively in 2024.
Covenants
Should the sale proceed, as expected, for a covenant breach to
occur Group revenue and EBITDA would be required to fall by
GBP25.9m and GBP10.7m respectively in 2023. In the scenario that
the sale does not occur EBITDA is increased, and the required
scenario is more severe requiring a revenue and EBITDA reduction of
GBP29.4m and GBP12.1m respectively in 2023.
The Board has also considered a number of mitigating actions
which could be enacted, if necessary, to ensure that reasonable
headroom against the facility is maintained in all cases and the
Group complies with covenants. These mitigating actions are
expected to have little to no implications to the ongoing business
and include (but are not limited to) reducing discretionary spend,
delaying recruitment and executing further IPv4 sales.
Therefore, the Board has a reasonable expectation that the
Company has adequate resources to continue in operational existence
and meet its liabilities as they fall due for a period of not less
than 12 months from the date of approval of these Financial
Statements, having considered both the availability of financial
facilities and the forecast liquidity and expected future covenant
compliance. For this reason, the Company continues to adopt the
going concern basis of accounting in preparing the annual Financial
Statements.
Significant accounting policies
The accounting policies used for the preparation of this
announcement have been applied consistently.
Alternative Performance Measures (APMs)
In response to the Guidelines on APMs issued by the European
Securities and Markets Authority (ESMA) and the Financial Reporting
Council (FRC), additional information on the APMs used by the Group
is provided below.
The following APMs are used by the Group:
- Adjusted operating profit
- Adjusted operating margin
- Adjusted profit before tax
- Adjusted tax
- Adjusted profit after tax
- Adjusted earnings per share
- Adjusted diluted earnings per share
- Adjusted cash conversion
- EBITDA
- Net debt
- Average net debt
- Loan covenants
Further explanation of what each APM comprises and
reconciliations between Statutory reported measures and adjusted
measures are shown in Note 2.
The Board believes that presentation of the Group results in
this way is relevant to an understanding of the Group's financial
performance (and that of each segment). Underlying performance
excludes adjusted items which are identified by virtue of their
size, nature and/or incidence. The treatment of adjusted items is
applied consistently period on period. This presentation is
consistent with the way that financial performance is measured by
management, reported to the Board, the basis of financial measures
for senior management's compensation schemes and assists in
providing supplementary information that assists the user to
understand the underlying financial performance, position and
trends of the Group.
The APMs used by the Group are not defined terms under IFRS and
may therefore not be comparable with similarly titled measures
reported by other companies. They are not intended to be a
substitute for, or superior to, GAAP measures. All APMs relate to
the current year results and comparative periods where
provided.
2. Operating Segments
The Group's business is supplying products, services and
solutions to the UK and international education markets.
Information reported to the Group's Chief Executive for the
purposes of resource allocation and assessment of segmental
performance is focused on the nature of each type of activity.
The Group is structured into three operating divisions: RM
Resources, RM Assessment and RM Technology. The Chief Operating
Decision Maker review segments at an adjusted operating profit
level and adjustments are not allocated to segments. Adjustments
includes the impairment of intangible asset, which is not allocated
by segment nor may be broken out by segment.
A full description of each revenue generating division, together
with comments on its performance and outlook, is given in the
Strategic Report. Corporate Services consists of central business
costs associated with being a listed company and non-division
specific pension costs.
This Segmental analysis shows the result and assets of these
divisions. Revenue is that earned by the Group from third parties.
Net financing costs and tax are not allocated to segments as the
funding, cash and tax management of the Group are activities
carried out by the central treasury and tax functions.
During the year, the Group has conditionally agreed to sell the
RM Integris and RM Finance Business within RM Technology. The
segment information reported on the next pages does not include any
amounts for these discontinuing operations.
Segmental results
RM RM RM Corporate
Total
Resources* Assessment Technology Services
Year ended GBP000 GBP000 GBP000 GBP000 GBP000
Revenue
UK 91,939 23,324 59,416 - 174,679
Europe 12,919 8,153 71 - 21,143
North America 3,555 142 1,374 - 5,071
Asia 880 1,299 - - 2,179
Middle East 3,305 167 - - 3,472
Rest of the world 1,768 5,855 - - 7,623
114,366 38,940 60,861 - 214,167
Adjusted profit/(loss)from operations 2,811 7,378 2,173 (4,879) 7,483
Investment income 614
Other income -
Finance costs (2,825)
Adjusted profit before tax 5,272
Adjustments (see Note 6) (26,059)
Profit before tax (20,787)
RM RM RM Corporate
Total
Resources* Assessment Technology Services
Year ended GBP000 GBP000 GBP000 GBP000 GBP000
Revenue
UK 98,446 18,847 59,625 - 176,918
Europe 8,849 6,104 86 - 15,039
North America 1,882 - 138 - 2,020
Asia 772 1,036 - - 1,808
Middle East 2,004 159 - - 2,163
Rest of the world 2,469 5,724 8 - 8,201
114,422 31,870 59,857 - 206,149
Adjusted profit/(loss) from operations 10,073 5,706 5,098 (4,408) 16,469
Investment income 28
Finance costs (1,396)
Adjusted profit before tax 15,101
Adjustments (11,483)
Profit before tax 3,618
Adjustments to cost of sales and administrative expenses Restated*
Year ended Year ended
30 November 2022 30 November 2021
GBP000 GBP000
Adjustments to administrative expenses
Amortisation of acquisition related intangible assets 1,839 2,010
Disposal related costs 845 -
Dual running costs related to investment strategy 5,372 2,064
Configuration of SaaS licenses (ERP) 17,355 8,337
Impairment of ERP solution 2,236 -
Onerous provision for IS licenses 1,168 -
Onerous lease - 471
Restructuring costs 254 -
Total adjustments to administrative expenses 29,069 12,882
Other income
Sale of property (219) (1,399)
Sale of IP addresses (2,791) -
Total adjustments to other income (3,010) (1,399)
Total adjustments 26,059 11,483
Tax impact (Note 5) (6,458) (1,858)
Total adjustments after tax 19,601 9,625
*The prior year has been restated to show sale of property as
other income rather than adjustments to administrative expenses.
See Note 14.
The amortisation of acquisition related intangible assets is an
annual recurring adjustment to profit that is a non-cash charge
arising from historical investing activities. This adjustment is to
clearly communicate with the investment analyst community in common
with peer companies across the technology sector. The income
generated from the use of these intangible assets is, however,
included in the adjusted profit measures.
Other adjusted items:
These are items which are identified by virtue of either their
size or their nature to be important to understanding the
performance of the business including the comparability of the
results year on year. These items can include, but are not
restricted to, impairment; gain on held for sale assets and related
transaction costs; changes in the provision for exceptional
property costs; the gain/loss on sale of operations and
restructuring and acquisition costs.
In 2018, following a large acquisition in the Resources
division, the Group announced a new warehouse strategy which
involved the disposal of 5 warehouses (including 3 warehouses from
the newly acquired group of companies) into one new automated
warehouse. Interlinked with the automation software was a
requirement to change the ERP solution. The Group believes that
whilst this programme spans a number of years, it's size,
complexity and number of unusual costs and income are material to
the understanding of the trading performance of the business
including the comparability of results year on year. As a result,
all significant costs or income relating to this programme have
been treated as an adjustment to profit, consistently period to
period. Whilst this programme is ongoing, the Group have paused
certain elements of this programme at the end of the year, and so
do not anticipate further dual run elements in future years.
During the year, and prior year this programme included the
following costs and income:
-- Dual run related costs during the period of (GBP2.8m
2021:GBP1.0m), relate to costs associated with the newwarehouse
that is not yet fully operational but was acquired at the end of
November 2020. These costs include itemssuch as utilities, security
and increased warehouse staff to test the new facility and to
transfer inventory. Otherdual run costs include IT costs (excluding
configuration costs of SaaS licenses) being expensed that relate
torunning of IT systems not yet in use (GBP2.6m) and a provision
for onerous license contracts of GBP1.2m (2021 GBP1.1m).
-- During the period the Group disposed of one of the assets
reclassified as Held for Sale at 30 November2020, which was a
warehouse that was no longer be required following the estates
strategy review. This warehousesale generated proceeds of GBP3.3m
and a profit after direct selling costs and costs of moving from
the warehouse ofGBP0.2m.
-- In the prior year a warehouse sale generated proceeds of
GBP3.2m and a profit after direct selling costsand costs of moving
from the warehouse of GBP1.4m.
-- The configuration and customisation costs relating to our ERP
programme "Evolution", which represents asignificant investment.
These costs total GBP17.8m (2021:GBP8.3m) including the tax credits
of GBP0.5m (2021:GBP0.2m)recoverable based on the development work
undertaken in Evolution.
In addition to the warehouse programme, the Group believes the
following items to be significantly large enough and unusual in
their incidence to impact the understanding of the performance of
the Group if not adjusted. In the year ended 30 November 2022,
these items comprised:
-- The Group has agreed a disposal, subject to shareholder
approval (anticipated in H1 2023) for our MIS andFinance
businesses. The costs incurred in this process are treated as an
adjustment to profit (GBP0.8m).
-- The group has impaired elements of the ERP programme costs,
previously capitalised (GBP2.2m), which relateto functionality that
is paused where the Group has no current active plans to proceed to
implement. Thisimpairment may be reversed if the Group subsequently
implements this functionality.
-- The Group commenced a transformation programme in 2022 and
has expensed GBP0.3m of redundancy costs in theyear.
During the year ended 30 November 2021 other items
comprised:
-- The impairment of a right of use asset and onerous service
charges relating to a leased office, which nolonger met our
requirements following a change in working practises after the
COVID-19 pandemic (GBP0.5m). The costsrelating to the new
replacement leased office that meets working practises requirements
is included in thesegmental results.
Net debt is the total of borrowings (GBP48.7m (2021: GBP19.7m)),
cash at bank (GBP1.9m (2021: GBP3.6m)) and overdraft (GBPnil (2021:
GBP2.1m)) which was GBP46.8m as at 30 November 2022 (2021:
GBP18.3m). Lease liabilities of GBP19.1m (2020: GBP20.9m) are
excluded from this measure as they are not included in the
measurement of net debt for the purpose of covenant calculations.
Net debt is a key metric measured by management as it is used in
covenant calculations. Accordingly, and as set out in Note 31
following the updates to arrangements with our banking syndicate
the definition the Group applies to Net Debt will change in FY23 to
include the impact of IFRS16 lease liabilities as the new covenants
will be calculated on this basis. The details of our covenant
calculations are set out in Note 10, and is based on an EBITDA
basis (Earnings (being Adjusted Operating profit) before interest,
tax, depreciation and amortisation).
Average net debt is calculated by taking the net debt on a daily
basis and dividing by number of days.
The above adjustments have the following impact on the cash flow
statement:
2022 2022 2022 2021 2021 2021
Statutory Adjustment Adjusted cash Statutory Adjustment Adjusted cash
measure flows measure flows
Profit before tax (GBP000) (20,787) 26,059 5,272 3,618 11,483 15,101
Profit from operations (GBP000) (21,586) 29,069 7,483 3,587 12,882 16,469
Cash generated from operations (17,129) 24,480 7,351 9,205 8,916 18,121
Net cash inflow from operating (20,786) 24,480 3,694 4,620 8,916 13,536
activities
Net cash used in investing 891 (1,403) (512) (12,587) 10,427 (2,160)
activities
Net cash used in financing 20,293 - 20,293 6,026 - 6,026
activities
Net increase in cash and cash 398 23,077 23,475 (1,941) 19,343 17,402
equivalents
Adjusted cash conversion percentage is defined as adjusted cash
inflow from operating activities as a percentage of adjusted profit
before tax.
The adjustments have the following impact on key metrics:
2022 2022 2022 2021 2021 2021
Statutory Adjustment Adjusted Statutory Adjustment Adjusted
measure measure measure measure
Gross profit (GBP000) 67,289 - 67,289 67,378 - 67,378
Profit from operations (GBP000) (21,586) (29,069) 7,483 3,587 (12,882) 16,469
Operating margin (%) -10.0% -14.0% 3.0% 2.0% -6.0% 8.0%
EBITDA (GBP'000) (12,083) (26,059) 13,976 10,274 (12,882) 23,156
Profit before tax (GBP000) (20,787) (26,059) 5,272 3,618 (11,483) 15,101
Tax (GBP000) 4,698 6,458 (1,760) (1,424) 1,858 (3,282)
Profit after tax (GBP000) (16,089) (19,601) 3,512 2,194 (9,625) 11,819
Earnings per share (see Note
6)
Basic (Pence) 4.2 - (19.3) 14.2 - 2.6
Diluted (Pence) 4.2 - (19.3) 14.0 - 2.6
Adjusted operating profit is defined as the profit before
operations excluding the adjustments referred to above. Operating
margin is defined as the operating profit as a percentage of
revenue. EBITDA is defined as the profit from operations before
amortisation and depreciation costs. The impact of tax is set out
in Note 5.
3.Investment and other income
Restated
Year ended Year ended
30 November 2022 30 November 2021
GBP000 GBP000
Finance income:
Bank interest 5 24
Net finance income on defined benefit pension scheme 607 -
Other finance income 2 4
Finance income 614 28
Other income:
Sale of property 219 1,399
Sale of IP addresses 2,791 -
Other income 3,010 1,399
Total finance and other income 3,624 1,427
4.Finance costs
Year ended Year ended
30 November 2022 30 November 2021
GBP000 GBP000
Borrowing facilities arrangement fees and commitment fees 425 462
Net finance costs on defined benefit pension scheme 39 254
Interest on lease of Right of Use assets 347 361
Interest on bank loans and overdrafts 2,014 319
2,825 1,396
5.Tax
a) Analysis of tax charge in the Consolidated Income Statement
Year ended Year ended
30 November 2022 30 November 2021
GBP000 GBP000
Current taxation
UK corporation tax 301 442
Adjustment in respect of prior years 121 (58)
Overseas tax 495 (94)
Total current tax charge 917 290
Deferred taxation
Temporary differences (4,854) 1,398
Adjustment in respect of prior years (109) (258)
Overseas tax (652) (6)
Total deferred (credit)/ charge (5,615) 1,134
Total Consolidated Income Statement tax (credit) / charge (4,698) 1,424
b) Analysis of tax (credit) / charge in the Consolidated Statement of Comprehensive Income
Year ended Year ended
30 November 2022 30 November 2021
GBP000 GBP000
UK corporation tax
Defined benefit pension scheme - (800)
Share based payments - (10)
Pension escrow account - (328)
Deferred tax
Defined benefit pension scheme movements (2,407) 9,310
Defined benefit pension scheme escrow - 328
Share based payments - 42
Fair value movements of hedging instruments (11) 45
Deferred tax relating to the change in rate (507) 1,822
Total Consolidated Statement of Comprehensive Income tax (credit) / charge (2,925) 10,409
c) Reconciliation of Consolidated Income Statement
tax charge
The tax charge in the Consolidated Income Statement reconciles to the effective rate applied by the Group as
follows:
Year ended 30 November 2022 Year ended 30 November 2021
Adjusted Adjustments Total Adjusted Adjustments Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Profit/(loss) on ordinary activities before tax* 6,862 (26,059) (19,197) 17,101 (11,483) 5,618
Tax at 19% (2021: 19%) thereon: 1,304 (4,951) (3,647) 3,249 (2,182) 1,067
Effects of:
- change in tax rate on carried forward - - - (27) 788 761
deferred tax assets
- other expenses not deductible for tax purposes 14 100 114 (52) - (52)
- non-taxable gains - (43) (43) - (266) (266)
- impact of super deduction (56) - (56)
- change in rate on current year movements 64 (1,564) (1,500)
- other temporary timing differences - - - 212 - 212
- overseas tax losses not recognised 396 - 396 - - -
- effect of profits/losses in various overseas tax 60 - 60 18 - 18
jurisdictions
- Prior period adjustments - UK (153) - (153) (60) (198) (258)
- Prior period adjustments - overseas 131 - 131 (58) - (58)
Tax charge/(credit) in the Consolidated Income Statement 1,760 (6,458) (4,698) 3,282 (1,858) 1,424
*Includes discontinued operations
d) Deferred tax
The Group has recognised deferred assets as these are
anticipated to be recognised against future periods. The major
deferred tax assets and liabilities recognised by the Group and the
movements thereon are as follows:
Accelerated Defined Share-based Short-term Acquisition related
Group tax benefit pension payments timing Losses intangible assets Total
depreciation scheme obligation differences
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
At 1 December 2020 329 3,543 519 942 - (3,339) 1,994
(Credit)/charge to (564) - (241) 77 - (405) (1,133)
income
(Charge)/ credit to
other comprehensive - (11,131) (42) (362) - - (11,535)
income
At 30 November 2021 (235) (7,588) 236 657 - (3,744) (10,674)
(Charge)/credit to (556) - (179) 164 5,842 344 5,615
income
(Charge)/ credit to
other comprehensive - 1,937 - (319) 1,307 - 2,925
income
At 30 November 2022 (791) (5,651) 57 502 7,149 (3,400) (2,134)
Certain deferred tax assets and liabilities have been offset
above.
6.Earnings per share
Year ended 30 November 2022 Year ended 30 November 2021
Profit for Weighted average Pence per Weighted average Pence per
the year number of shares share number of shares share
GBP000 '000 GBP000 '000
Basic earnings per ordinary share
Basic earnings from continuing operations (16,089) 83,256 (19.3) 2,194 83,150 2.6
Adjustments (see Note 2) 19,601 - 23.5 9,625 - 11.6
Adjusted basic earnings from continuing 3,512 83,256 4.2 11,819 83,150 14.2
operations
Basic earnings from discontinuing 1,590 83,256 1.9 2,000 83,150 2.4
operations
Adjusted basic earnings from discontinuing 1,590 83,256 1.9 2,000 83,150 2.4
operations
Diluted earnings per ordinary share
Basic earnings (16,089) 83,256 (19.3) 2,194 83,150 2.6
Effect of dilutive potential ordinary - 1,335 0.3 - 1,302 (0.0)
shares: share based payment awards
Diluted earnings from continuing (16,089) 84,591 (19.0) 2,194 84,452 2.6
operations
Adjustments (see Note 2) 19,601 - 23.2 9,625 - 11.4
Adjusted diluted earnings from continuing 3,512 84,591 4.2 11,819 84,452 14.0
operations
Basic diluted earnings from discontinuing 1,590 84,591 1.9 2,000 84,452 2.4
operations
Adjusted diluted earnings from 1,590 84,591 1.9 2,000 84,452 2.4
discontinuing operations
7.Dividends
Amounts recognised as distributions to equity holders were:
Year ended Year ended
30 November 2022 30 November 2021
GBP000 GBP000
Final dividend for the year ended 30 November 2022 - 3.0 p per share (2021: 3.0p) 2,498 2,497
Interim dividend for the year ended 30 November 2022 - nil p per share (2021: 1.70 p) - 1,416
2,498 3,913
The Directors do not propose a final dividend for the year ended
30 November 2022.
8.Trade and other receivables
2022 2021
GBP000 GBP000
Current
Financial assets
Trade receivables 24,441 21,792
Other receivables 1,934 1,629
Derivative financial instruments - 164
Accrued income from customer contracts 2,288 2,463
Amounts owed by Group undertakings - -
28,663 26,048
Non-financial assets
Prepayments 7,540 7,613
36,203 33,661
Non-current
Financial assets
Amounts owed by Group undertakings - -
Other receivables 291 82
291 82
36,494 33,743
9.Trade and other payables
2022 2021
GBP000 GBP000
Current liabilities
Financial liabilities
Trade payables 34,269 21,277
Lease liabilities 3,144 3,126
Other payables 2,721 2,968
Derivative financial instruments 272 -
Accruals 10,516 15,368
50,922 42,739
Non-financial liabilities
Other taxation and social security 3,149 4,604
Deferred income from customer contracts 11,568 14,353
65,639 61,696
Non-current liabilities
Financial liabilities
Lease liabilities
- due after one year but within two years 2,062 1,993
- due after two years but within five years 4,366 4,975
- after five years 9,570 10,835
Non-financial liabilities:
Deferred income from customer contracts:
- due after one year but within two years 1,357 1,496
- due after two years but within five years 1,473 1,138
- after five years 266 635
19,094 21,072
84,733 82,768
10.Borrowings
2022 2021
GBP000 GBP000
Bank loan (49,000) (20,000)
Add capitalised fees 272 256
Borrowings (48,728) (19,744)
In the period to 31 May 2022 the facility was extended to July
2024, with the terms of the facility being held consistent with
those of the prior agreement. The debt facilities at 31 May 2022
were subject to financial covenants of a maximum of 2.5 times. Net
Debt/adjusted EBITDA and at least 4 times interest cover/adjusted
EBITDA. On 31 May 2022 the results of the covenant tests were 2.61
and 13.73 respectively.
Subsequent to 31 May 2022 the lenders agreed to amend the net
debt/ adjusted EBITDA covenant to 3.0x at May 2022 and November
2022 and made it clear there was no intention of accelerating all
or any part of the loan repayments. However as this was outside of
the control of the Directors at 31 May 2022, borrowings were
classified as current liabilities at the balance sheet date.
Prior to the end of the year, the Group entered discussions with
lenders to extend the facility by a further year to July 2025 and
to review the timing and type of covenant testing. As part of this
process the lenders postponed the 30 November covenant test timing,
however despite no breach of the facility agreement at the balance
sheet date the borrowings have been classified as current
liabilities as at 30 November 2022.
11.Provisions
Dilapidations & onerous Employee-related Contract risk Total
lease restructuring provisions
Group GBP000 GBP000 GBP000 GBP000
At 1 December 2020 1,236 1,028 2,169 4,433
Utilisation of (90) (80) (358) (528)
provisions
Release of provisions - (33) (806) (839)
Increase in provisions 316 - 170
486
Impact of foreign (12) 1 - (11)
exchange
At 30 November 2021 1,450 916 1,175
3,541
Utilisation of (239) (960) (317) (1,516)
provisions
Release of provisions (159) - (758) (917)
Increase in provisions 219 254 1,227 1,700
At 30 November 2022 1,271 210 1,327
2,808
Employee-related restructuring provisions refer to costs arising
from restructuring to meet the future needs of the Group. As
described in Note 2, the Group completed the sale of warehouses
planned in the 2018 estates review and has therefore utilised the
provision held in 2021. The Group commenced further restructuring
of GBP0.3m and this is anticipated to be utilised within H1 2023 as
set out in Note 2.
Contract risk provisions includes items not covered by any other
category of which the most significant items are the risk
provisions from ended long term contracts of GBP0.2m (2021:
GBP1.1m) and onerous IT license contracts that have been made
during the year of GBP1.2m (2021: GBPnil). During 2022, the release
of GBP667,000 (2021: GBP806,000) primarily relates to market
movements in year that relate to our LGPS contracts.
Dilapidations increased by GBP219,000 during the year and the
increase is reflected as an addition in Right of Use assets. A
further lease was exited in the year (in accordance with the 2018
estates strategy (see Note 2) which utilised GBP239,000 and
released a further GBP159,000 provision held.
During the year the overall movement on long term provisions was
a decrease of GBP718,000 (2021: decrease of GBP2,523,000). This is
primarily relating to TUPE pension schemes provision based on the
Group's estimated impact of market movements from the last
published (2019) triennial data. In the current year the movement
in the TUPE pension related balance has been taken through Other
Comprehensive Income.
12.Share capital
Ordinary shares of 22/7p
'000 GBP000
Allotted, called-up and fully paid:
At 30 November 2020, 2021 and 2022 83,875 1,917
13.Pensions
a. Defined contribution scheme
The Group operates or contributes to a number of defined
contribution schemes for the benefit of qualifying employees. The
assets of these schemes are held separately from those of the
Company. The total cost charged to income of GBP2,047,000 (2021:
GBP2,255,000) represents contributions payable to these schemes by
the Group at rates specified in employment contracts. At 30
November 2022 GBP262,000 (2021: GBP257,000) due in respect of the
current financial year had not been paid over to the schemes.
b. Local government pension schemes
The Group has TUPE employees who retain membership of local
government pension schemes. The Group makes payments to these
schemes for current service costs in accordance with its
contractual obligations. The total costs charged to income for
these schemes was GBP180,000 (2021: GBP165,000). The amount due in
respect of these schemes at 30 November 2022 was GBP40,000 (2021:
GBP77,000). The balance sheet liability is included within
provisions and incorporates information from over 15 local
government pension schemes. The provision is calculated by
reference to the latest published triennial valuations and the
Group discloses the net position of the Group's estimated share of
assets and liabilities. rolled forward by taking known cash
contributions, market movements in GILTs and CPI, and average asset
returns from the LGPS website, Together these assumptions have led
to the calculation of a surplus at 30 November 2022 (2021:
liability of GBP715,000). The Group discloses the net position of
the Group's estimated share of assets and liabilities. The surplus
is not recognised as the Group does not have a right to
recovery.
There is judgment in determining the appropriate accounting
treatment for the participation in these schemes as either a
defined benefit or defined contribution scheme, in particular as to
whether actuarial and investment risk fall in substance on the
Company.
c. Defined benefit pension schemes
The Group has both defined benefit and defined contribution
pension schemes. There are three defined benefit pension
schemes.
The Research Machines plc 1988 Pension Scheme (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 2021 by a qualified
independent actuary. IAS 19 Employee Benefits (revised) liabilities
at 30 November 2022 have been rolled forward based on this
valuation's base data.
As at 31 May 2021, the triennial valuation for statutory funding
purposes showed a deficit of GBP15,386,000 (31 May 2018:
GBP40,600,000). The Group agreed with the Scheme Trustees that it
will repay this amount via deficit catch-up payments of
GBP3,200,000 per annum until 31 December 2024. The next triennial
valuation will be due as at 31 May 2024.
At 30 November 2022 there were amounts outstanding of GBP266,667
(2021: GBP308,000) for one month's deficit payment and GBPnil
(2021: GBPnil) for Scheme expenses.
The parent company RM plc has entered into a pension protection
fund compliant guarantee in respect of scheme liabilities. No
liability has been recognised for this within the Company as the
Directors consider that the likelihood of it being called upon is
remote.
The Consortium CARE scheme (CARE scheme)
Until 31 December 2005, The Consortium for Purchasing and
Distribution Ltd ("The Consortium", acquired by the Company on 30
June 2017 and now RM Educational Resources Ltd) operated a pension
scheme (the "Consortium CARE" scheme) providing benefits on both a
defined benefit (final salary-linked) and a defined contribution
basis. From 1 January 2006, the defined benefit (final
salary-linked) and defined contribution sections were closed and
all employees, subject to the eligibility conditions set out in the
Trust Deed and Rules, joined a new defined benefit (Career Average
Revalued Earnings) section. From 28 February 2011 the scheme was
closed to future accruals.
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 2021 by a qualified
independent actuary. IAS 19 Employee Benefits (revised) liabilities
at 30 November 2022 have been rolled forward based on this
valuation's base data.
As at 31 May 2021, the triennial valuation for statutory funding
purposes showed a deficit of GBP6,240,000. The Group agreed with
the Scheme Trustees that it will repay this amount via deficit
catch-up payments of GBP1,200,000 per annum until 31 December 2026.
The next triennial valuation will be due as at 31 May 2024.
Prudential Platinum Pension (Platinum scheme)
The Consortium acquired West Mercia Supplies in April 2012
(prior to the Company acquiring The Consortium). Upon acquisition
by The Consortium of West Mercia Supplies, a pension scheme (the
Platinum scheme) was set up providing benefits on both a defined
benefit (final salary-linked) and a defined contribution basis for
West Mercia employees. The most recent full actuarial valuation was
carried out by the independent actuaries XPS Pensions Group on 31
December 2018. The results of the full valuation were adjusted and
rolled forward to form the basis for the current year valuation.
The scheme is administered within a legally separate trust from The
Consortium and the Trustees are responsible for ensuring that the
correct benefits are paid, that the scheme is appropriately funded
and that the scheme assets are appropriately invested. The
valuation of the scheme at 31 December 2018 was a surplus of
GBP213,000 (31 December 2015: deficit GBP70,000).
Amounts recognised in the Income Statement and in the Statement of Comprehensive Income
Year ended 30 November Year ended 30 November
2022 2021
GBP000 GBP000
Administrative expenses and taxes (7) (52)
Operating expense (7) (52)
Interest cost (5,326) (4,827)
Interest on Scheme assets 5,894 4,573
Net interest income/ (expense) 568 (254)
Income/ (expense) recognised in the Income Statement 561 (306)
Effect of changes in demographic assumptions 2,053 620
Effect of changes in financial assumptions 135,098 (3,203)
Effect of experience adjustments (20,544) 847
Total actuarial gains/ (losses) 116,607 (1,736)
Return on Scheme assets excluding interest on Scheme assets (129,453) 46,596
(Expense) / income recognised in the Statement of Comprehensive (12,846) 44,860
Income
(Expense) / income recognised in Total Comprehensive Income (12,285) 44,554
The total expense recognised in the Statement of Total
Comprehensive Income comprise the GBP12.8m above offset by a
release of GBP0.6m relating to LGPS provisions.
The effect of changes in financial assumptions is principally
due to the significant increase in the discount rates
- see sensitivity information further below. The discount rates
have significantly increased as a result of an increase in
corporate bond yields over the period, which have led to a lower
value being placed on the Schemes' liabilities. This has been
broadly matched by a corresponding fall in asset values. The asset
returns over the period reflect low returns on growth assets such
as equities, as well as returns on Liability Driven Investment
(LDI) holdings which are designed to move in the same way as
liabilities following changes to interest rates and market-implied
inflation - see LDI information further below.
Reconciliation of the Scheme assets and obligations
through the year
RM scheme CARE Platinum Year ended 30 Year ended 30
scheme scheme November 2022 November 2021
GBP000 GBP000 GBP000 GBP000 GBP000
Assets
At start of year 316,722 17,858 3,061 337,641 287,061
Interest on Scheme assets 5,524 316 54 5,894 4,573
Return on Scheme assets excluding interest (123,023) (5,335) (1,095) (129,453) 46,596
on Scheme assets
Administrative expenses - 20 (27) (7) (52)
Contributions from Group 3,452 1,059 26 4,537 4,450
Contributions from employees - - - - -
Benefits paid (5,331) (625) (14) (5,970) (4,987)
At end of year 197,344 13,293 2,005 212,642 337,641
Obligations
At start of year (282,178) (22,544) (2,568) (307,290) (305,714)
Interest cost (4,892) (389) (45) (5,326) (4,827)
Actuarial (losses) 107,713 7,661 1,234 116,608 (1,736)
Benefits paid 5,331 625 14 5,970 4,987
Past service cost (GMP) - - - - -
Current service costs - - - - -
Contributions from employees - - - - -
At end of year (174,026) (14,647) (1,364) (190,037) (307,290)
Pension deficit - (1,354) - (1,354) (4,686)
Pension surplus 23,318 - 641 23,959 35,037
Net pension surplus/ (deficit) 23,318 (1,354) 641 22,605 30,351
Reconciliation of net defined benefit obligation
Year ended 30 November Year ended 30 November
2022 2021
GBP000 GBP000
Net surplus /(obligation) at the start of the year 30,351 (18,653)
Cost included in Income Statement 561 (306)
Scheme remeasurements included in the Statement of Comprehensive (12,844) 44,860
Income
Cash contribution 4,537 4,450
Net pension surplus 22,605 30,351
Obligation by participant status Year ended 30 November Year ended 30 November
2022 2021
GBP000 GBP000
Active - 1,611
Vested deferreds 145,134 243,139
Retirees 44,905 62,540
190,039 307,290
Value of Scheme assets Fair Value Year ended 30 November Year ended 30 November
hierarchy 2022 2021
GBP000 GBP000
Cash and cash equivalents, including Level 1 6,691 542
escrow
Equity instruments Level 1 - 129,809
Equity instruments Level 2 18,459 27,529
Equity instruments Level 3 73,447 -
Debt instruments Level 2 2,005 3,061
Liability driven investments Level 1 79,476 -
Liability driven investments Level 2 13,270 150,147
Insurance contract Level 3 19,294 26,553
212,642 337,641
Significant actuarial assumptions
Year ended 30 November 2022 Year ended 30
November 2021
Discount rate (RM scheme) 4.40% 1.75%
Discount rate (CARE scheme) 4.45% 1.75%
Discount rate (Platinum scheme) 4.35% 1.75%
Rate of RPI price inflation (RM Scheme) 3.05% 3.15%
Rate of RPI price inflation (CARE Scheme) 3.10% 3.15%
Rate of RPI price inflation (Platinum Scheme) 3.00% 3.15%
Rate of CPI price inflation - period before 1 2.05% 2.15%
January 2030
Rate of CPI price inflation - period after 1 3.05% 3.15%
January 2030
Rate of salary increases (Platinum scheme) NA NA
Rate of pensions increases
pre 6 April 1997 service 1.50% 1.50%
pre 1 June 2005 service 2.90% 2.90%
post 31 May 2005 service 1.95% 2.05%
Post retirement mortality table S3PA CMI 2021 1.25% . 2020 and 2021 weight S2PA CMI 2020 1.25%
parameters of 10%
Weighted average duration of defined benefit 18 years 24 years
obligation
Assumed life expectancy on retirement at age 65:
Retiring at the accounting date (male member aged 21.6 21.9
65)
Retiring in 20 years after the accounting date 22.8 23.3
(male member aged 45)
14. Restatement for accounting error and classification
The comparative period financial statements are being restated
to reflect three prior year errors, being 1. During the year
certain customer contract fulfilment assets have been reassessed as
fulfilling thecapitalisation criteria of IAS38, which should be
applied prior to an IFRS15 evaluation of contract assets.Restated
figures as at 30 November 2021 reflect the reclassification of
GBP2,682k that was previously capitalisedwithin Contract fulfilment
assets to Intangible assets. Restated figures as at 30 November
2020 reflect thereclassification of GBP1,854k that was previously
capitalised within Contract fulfilment assets to Intangible
assets.There is no impact on income statement, current assets or
any other balance sheet line items from this restatementas the
asset is still under development. 2. We have restated revenue for
prior periods to correct for a mechanical error, which arose from
previousforecasts of exam script volumes not being updated at a
point when the actual volumes were known. The aggregateimpact of
this correction is to reduce revenues recognised in periods prior
to the year ended 30 November 2022 byGBP538k and to increase
contract liabilities recognised by GBP538k. A restatement to reduce
retained earnings as at 1December 2020 by GBP538k has been made,
with an equivalent increase in contract. 3. The income from sale of
property in FY21 (GBP1,399k) is also reclassified from operating
expenses to otherincome as shown below.
Results from discontinuing operations, together with the assets
or liabilities expected to be disposed of have also been
reclassified as held for sale in the prior year.
These adjustments have the following impact on the primary
statements for the year ended 30 November 2021:
Year ended 30 November 2021
Consolidated Income Statement As reported Discontinued operations Restatement Impact Restated
(1) (2)
GBP000 GBP000 GBP000
Revenues 210,853 (4,704) - 206,149
Cost of Sales (140,220) 1,449 - (138,771)
Gross Profit 70,633 (3,255) - 67,378
Operating expenses (63,647) 1,255 (1,399) (63,791)
Profit from operations 6,986 (2,000) (1,399) 3,587
Investment income 28 - - 28
Other income - - 1,399 1,399
Finance costs (1,396) - - (1,396)
Profit before tax 5,618 (2,000) - 3,618
Tax (1,424) - - (1,424)
Profit/ (loss) for the year from continuing 4,194 (2,000) - 2,194
operations
Profit from the year from discontinuing operations - 2,000 - 2,000
Profit/ (loss) for the year from continuing 4,194 - - 4,194
operations
(1) Impact of discontinued operations; (2) Impact of
restatements
There is no impact on the consolidated statement of income.
Year ended 30 November 2021 Year ended 30 November 2020
Consolidated Balance As Discontinued Restatement Restated As Discontinued Restatement Restated
Sheet reported operations(1) Impact(2) reported operations(1) Impact(2)
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Non-current assets
Goodwill 49,202 - - 49,202 49,322 - - 49,322
Intangible assets 23,405 - 2,683 26,088 19,016 - 1,854 20,870
Property, plant and 16,217 (85) - 16,132 8,423 - - 8,423
equipment
Right of Use asset 18,018 - - 18,018 19,391 - - 19,391
Defined Benefit 35,037 - - 35,037 665 - - 665
Pension Scheme surplus
Other receivables 82 - - 82 63 - - 63
Contract fulfilment 4,169 - (2,683) 1,486 3,420 - (1,854) 1,566
assets
Deferred tax assets 156 - - 156 5,333 - - 5,333
146,286 (85) - 146,201 105,633 - - 105,633
Current assets
Inventories 19,055 - - 19,055 18,594 - - 18,594
Trade and other 33,865 (323) (204) 33,338 31,475 - (204) 31,271
receivables
Contract fulfilment 1,360 - - 1,360 728 - - 728
assets
Held for sale asset 3,034 408 - 3,442 4,793 - - 4,793
Tax assets 3,665 - - 3,665 2,633 - - 2,633
Cash at bank 3,560 - - 3,560 5,941 - - 5,941
64,539 85 (204) 64,420 64,164 - (204) 63,960
Total assets 210,825 - (204) 210,621 169,797 - (204) 169,593
Current liabilities
Trade and other (61,369) 2,021 (326) (59,674) (61,491) - (326) (61,817)
payables
Tax liabilities - - - - (163) - - (163)
Provisions (2,066) - - (2,066) (435) - - (435)
Overdraft (2,082) - - (2,082) (2,480) - - (2,480)
Liabilities held for - (2,021) - (2,021) - - - -
sale
(65,517) - (326) (65,843) (64,569) - (326) (64,895)
Net current (978) 85 (530) (1,423) (405) - (530) (935)
(liabilities) /assets
Non-current
liabilities
Other payables (21,072) - - (21,072) (20,987) - - (20,987)
Provisions (1,475) - - (1,475) (3,998) - - (3,998)
Deferred tax liability (10,830) - - (10,830) (3,339) - - (3,339)
Defined Benefit
Pension Scheme (4,686) - - (4,686) (19,318) - - (19,318)
obligation
Borrowings (19,744) - - (19,744) (4,779) - - (4,779)
(57,807) - - (57,807) (52,421) - - (52,421)
Total liabilities (123,324) - (326) (123,650) (116,990) - (326) (117,316)
Net assets 87,501 - (530) 86,971 52,807 - (530) 52,277
Equity attributable to
shareholders
Share capital 1,917 - - 1,917 1,917 - - 1,917
Share premium account 27,080 - - 27,080 27,080 - - 27,080
Own shares (444) - - (444) (841) - - (841)
Capital redemption 94 - - 94 94 - - 94
reserve
Hedging reserve 177 - - 177 (65) - - (65)
Translation reserve (882) - - (882) (702) - - (702)
Retained earnings 59,559 - (530) 59,029 25,324 - (530) 24,794
Total equity 87,501 - (530) 86,971 52,807 - (530) 52,277
Year ended 30 November 2021
Consolidated Cash Flow Statement As Discontinued operations Restatement Impact Restated
reported (1) (2)
GBP000 GBP000 GBP000
Profit before tax from continuing operations 5,618 (2,000) - 3,618
Profit before tax from discontinuing operations 2,000 2,000
Investment income (28) - - (28)
Other income - - (1,399) (1,399)
Finance costs 1,396 - - 1,396
Profit from operations 6,986 - (1,399) 5,587
Adjustments for:
Amortisation and impairment of intangible assets 2,406 - - 2,406
Depreciation and impairment of property, plant and 4,281 - - 4,281
equipment
Utilisation of contract asset - - 1,446 1,446
(Gain)/ loss on disposal of property, plant and (1,449) - 1,399 (50)
equipment
(Gain) on foreign exchange derivatives 64 - - 64
Share-based payment charge (100) - - (100)
Increase/(decrease) in provisions (353) - - (353)
Defined Benefit Pension Scheme administration cost 52 - - 52
Operating cash flows before movements in working 11,887 - 1,446 13,333
capital
Decrease /(increase) in inventories (460) - - (460)
Decrease in receivables (2,318) - - (2,318)
(Increase) in contract fulfilment assets (1,381) - (618) (1,999)
Movement in payables
- increase/ (decrease) in trade and other payables 1,177 - - 1,177
- utilisation of provisions (528) - - (528)
Cash generated from operations 8,377 - 828 9,205
Defined benefit pension scheme cash contributions (4,450) - - (4,450)
Tax paid (135) - - (135)
Net cash inflow from operating activities 3,792 - 828 4,620
Investing activities
Interest received 28 - - 28
Proceeds on disposal of property, plant and equipment 3,214 - - 3,214
Purchases of property, plant and equipment (8,024) - - (8,024)
Purchases of other intangible assets (6,977) - (828) (7,805)
Net cash used in investing activities (11,759) - (828) (12,587)
Financing activities
Dividends paid (3,913) - - (3,913)
(Repayment)/ drawdown of borrowings 15,000 43,000 - 58,000
Borrowing facilities arrangement and commitment fees (497) - - (497)
Interest paid (675) - - (675)
Payment of leasing liabilities (3,889) - - (3,889)
Net cash (used in)/ generated by financing activities 6,026 43,000 - 49,026
Net increase in cash and cash equivalents (1,941) 43,000 - 41,059
Cash and cash equivalents at the beginning of the 3,461 - - 3,461
year
Effect of foreign exchange rate changes (42) - - (42)
Cash and cash equivalents at the end of the year 1,478 43,000 - 44,478
15. Post balance sheet events
On 28 March 2022, the Group agreed to amend and extend the bank
facility with our lenders to July 2025, with key changes including
removing the GBP30m accordion. This new agreement will provide the
lenders fixed and floating charges over the shares of all obligor
companies (except for RM plc). Obligor companies comprise all
trading and holding companies in the group except for RM Education
Solutions India Pvt Limited. Financial covenants from May 2023 to
November 2024 will be on a minimum EBITDA basis on a rolling 12
months and then revert to a 4 times interest cover/ EBITDA (post
IFRS16). A condition of the new extended and amended banking
facility agreement has been to restrict dividend distribution until
the company has reduced its net debt to EBITDA leverage to less
than 1x for two consecutive quarters.
There are no other post balance sheet events.
-----------------------------------------------------------------------------------------------------------------------
Dissemination of a Regulatory Announcement that contains inside
information in accordance with the Market Abuse Regulation (MAR),
transmitted by EQS Group. The issuer is solely responsible for the
content of this announcement.
-----------------------------------------------------------------------------------------------------------------------
ISIN: GB00BJT0FF39
Category Code: MSCH
TIDM: RM.
LEI Code: 2138005RKUCIEKLXWM61
OAM Categories: 1.1. Annual financial and audit reports
3.1. Additional regulated information required to be disclosed under the laws of a Member State
Sequence No.: 233244
EQS News ID: 1594965
End of Announcement EQS News Service
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