TIDMRM.
RNS Number : 8317B
RM PLC
04 February 2020
4 February 2020
RM plc
Preliminary Results for the year ended 30 November 2019
Steady progress and continued international momentum
RM plc ("RM"), a leading supplier of technology and resources to
the education sector, reports its final results for the year ended
30 November 2019.
Highlights
-- Revenue up 1% as a good performance in the technology
divisions offset a more challenging year in RM Resources and the
adverse effects of the adoption of IFRS15
-- International revenue growth of 18% driven primarily by new
wins and the development of existing clients in RM Results
-- Acquisition of e-testing company, SoNET, to augment our
software capability to enable full end-to-end digital
assessment
-- Adjusted* operating profits increased 1% as operating margins remained stable at 12.4%
-- Adjusted* diluted earnings per share grew 2% to 26.4p
-- Net debt increased to GBP15m following the funding of the acquisition
-- Full year paid and proposed dividend increased by 5% to 8.00p
GBPM 2019** 2018** Variance
Revenue 223.8 221.0 +1%
Adjusted* operating profit 27.6 27.5 +1%
Adjusted* operating profit
margin 12.4% 12.4%
Adjusted* profit before
tax 26.6 26.0 +3%
Statutory profit after tax 19.1 16.9 +13%
Adjusted* diluted EPS 26.4p 25.8p +2%
Paid and proposed dividend***
per share 8.00 7.60 +5%
-------- -------- ---------
Net debt 15.0 5.8
Pension deficit 6.0 2.3
-------- -------- ---------
Commenting on the results, David Brooks, Chief Executive of RM,
said:
"This has been a solid year for RM. Revenue and operating profit
have been underpinned by a stronger underlying performance from our
two technology divisions which have offset a challenging year in
our Resources division.
We have continued to make good progress strategically including
the acquisition of SoNET. SoNET enables us to provide end-to-end
digital assessment in this growing market.
In the year ahead, we are well placed to address the market
opportunities across each of our divisions."
Notes to Editors:
RM plc is a leader in the education sector, providing support
throughout the stages of education with its three focused
divisions:
-- RM Resources is an established provider of education
resources for early learning centres, primary schools and secondary
schools across the UK and internationally. Our brands, TTS and
Consortium, develop and supply resources to help bring the
curriculum to life for teachers and students.
-- RM Results is a world-leading provider of e-assessment
services, enabling e-marking, e-testing and the management and
analysis of educational data. RM Results provides the technology to
allow approximately 15 million exams to be taken each year, working
with prominent exam providers, professional bodies, universities
and governments.
-- RM Education is a market-leading supplier of ICT software and
technology services in the UK. It enables schools to save time and
money, create a secure environment and enhance teaching and
learning.
* Adjusted operating profit is before the amortisation of
acquisition related intangible assets; GMP pension equalisation
costs on defined benefit schemes; acquisition related costs;
exceptional property related items and restructuring costs.
** Results for 2019 have been presented following adoption of
the accounting standard, IFRS15. The prior year results have not
been restated to reflect the new accounting standard.
*** The expected timetable for the final dividend and Annual
General Meeting is as follows:
Ex-dividend date for 2019 final dividend 12th March 2020
Record date for 2019 final dividend 13th March 2020
-----------------------------
AGM 26th March 2020 at 11.30a.m.
-----------------------------
Payment of 2019 final dividend 24th April 2020
-----------------------------
References to times are to Greenwich Mean Time. If any of the
above times or dates should change, the revised times and/or
dates will be notified to shareholders by an announcement on
a Regulatory Information Service. Payment of the 2019 final
dividend is subject to the approval by shareholders.
Presentation and live webcast details
A webcast 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/5e2575830a12d41100fabda5/dpdp
The webcast will also be accessible via a live conference
call:
Dial-in (UK): 020 3936 2999
Dial-in (all other locations): +44 20 3936 2999
Conference password: 070394
Contacts
RM plc Headland Consultancy
David Brooks, Chief Executive Stephen Malthouse
Officer Abena Affum
Neil Martin, Chief Financial 0203 805 4844
Officer
08450 700 300
Strategic Report
Chairman's statement
Performance
In 2019, there was marginal growth in each of revenue, adjusted
operating profit and adjusted earnings per share. Net debt at year
end was GBP15m after funding the acquisition of the digital
assessment software company, SoNET Systems.
RM Resources experienced a challenging year with revenue and
profit down, primarily as a result of constrained trading in the
UK. Progress continues on the consolidation of five distribution
centres into a single automated facility which is expected to be
completed by the end of 2021. This project will deliver meaningful
operational and financial benefits.
RM Results delivered a strong performance. The revenue and
profit growth has been driven by new client wins and enhanced
business from existing customers. The acquisition of SoNET during
the year brings new technology to the division, allowing it to
offer end-to-end digital assessment for the developing demand for
online testing and marking of exams.
RM Education revenue growth was driven by a good performance in
the Services business. Profit grew strongly, benefiting from
management focus on cost efficiency alongside the increased revenue
and some one-time benefits.
The Board
Paul Dean has been appointed as of 4 February 2020 and will
assume the Chairmanship of the Audit Committee on his appointment.
Deena Mattar will retire as a Director later in 2020 having
completed 9 years of service as a Director.
Dividend
The Board is recommending a final dividend of 6.0 pence per
share which would constitute, at 8.0 pence per share in total, an
increase of 5% over the prior year.
Outlook
RM enters 2020 in a sound position and continues to have good
cash generative characteristics. The Group remains committed to
delivering long term sustainable growth.
John Poulter
Chairman
3 February 2020
Chief Executive Officer's statement
In 2019 we made strong progress in our two technology divisions,
RM Results and RM Education, while our resources business, RM
Resources, continued to see challenging trading. Overall revenue
and adjusted operating profit both increased modestly and statutory
profit after tax increased more strongly. International revenue
across the Group grew well again.
Operating Review
RM Resources had a challenging year of trading, particularly in
the UK. This included declining legacy revenues from the planned
closure of indirect channels and the focus away from non-education
resources. Revenue in the UK was lower than last year, but in-line
with the wider UK competitive market decline. International
revenues, after a very strong 2018, grew marginally
year-on-year.
During 2019, we continued the programme to consolidate the
current estate of five distribution centres to a single, automated
centre. As well as consolidating the division's head office,
planning permission has been granted for the new distribution
centre and the lease agreement with our development partners has
been signed. We are planning to complete the transition to a single
automated distribution centre by the end of 2021.
The TTS brand grew in the UK and outperformed the wider UK
competitor market set benefitting from its differentiated brand
position and own-developed product portfolio. The Consortium brand
declined more than this benchmark with trading impacted by some
integration issues and the loss of a key customer framework towards
the end of the year. The long term strategy for this division
remains unchanged as we continue to focus on improving operational
efficiency and investing in our differentiated products to drive
growth in the UK and international markets.
RM Results had a strong year of revenue growth. This included
good organic growth on the back of new client wins and existing
customer growth.
In June 2019, we acquired SoNET Systems Pty Ltd ("SoNET").
Headquartered in Melbourne, Australia, SoNET provides Software as a
Service platforms principally to the education and government
sectors. SoNET's e-testing software augments our existing e-marking
capability. This acquisition is enabling RM Results to offer full
end-to-end digital assessment services in the online testing and
marking of exams to both existing and new customers. The addition
of this technology is starting to open new market opportunities and
accelerate the growth of the RM Results division.
The pipeline of opportunities for RM Results continues to be
strong going into 2020.
Adjusted operating profit in RM Education grew strongly in 2019.
Revenue was also up, primarily driven by new customer contracts and
increased spend from existing customers. In the year we signed a
contract with the UK's largest multi-academy trust to deliver IT
managed services to all their schools and help them with their
journey to the cloud. Customer renewal rates remained high and in
the year we continued to look for opportunities to move processes
to our off-shored team in India. Moving forward we see an
opportunity to sharpen our approach to the market by focusing on
the software offerings separately from the services and
infrastructure propositions.
Our Strategic Themes
At the beginning of 2019, on the back of a trend of improved
margins and good cash generation we mapped out a set of four
strategic themes. We believe these themes will enable the Group to
deliver long-term shareholder value. The themes are:
1. Intellectual property ("IP") and technology development
2. International growth
3. Innovate with our customers
4. Efficiency and simplicity
We will consider the potential to accelerate these strategic
themes through acquisitions where appropriate.
Below we define further what we mean by each of the four
strategic themes and map out where we see these themes meeting
growth opportunity.
1. IP and technology development
RM is focused exclusively on the education market and therefore
we have a depth of understanding and expertise. Across all three
divisions we have market leading IP. We continue to increase our
investment in developing our own IP and our product development
capability.
An example opportunity
There's strong growth in technology being used in high stakes
assessment globally. Education policy makers in countries around
the world are looking to digitise their exams systems and move away
from relying on paper solutions, leading to quality and reliability
improvements.
Our approach
Provide customers with an end-to-end digital assessment offering
where the complete exam life-cycle can be delivered without
paper.
Evidence of progress
The acquisition of SoNET, in the second half of 2019, has
accelerated our ability to bring end-to-end digital assessment to
the market. On the back of this, we have been successful in being
awarded preferred bidder status with our first new customer,
delivering end-to-end digital assessments seamlessly in an
integrated platform.
2. International growth
RM's international business grew by 18% in 2019 and has doubled
in the last 4 years. We are continuing to invest in our
international sales and marketing capability as well as taking our
best existing IP to overseas markets.
An example opportunity
The trend is growing in international education systems to
include coding and programming within their early years and primary
school curriculum.
Our approach
We have developed our own unique range of programmable floor
robots that are the perfect starting point for teaching control,
directional language and coding.
Evidence of progress
Sales of our robotics range drove an increase of sales of
Resources products through international distributors by 17% in
2019.
3. Innovate with our customers
Many of our customers across the Group are long-standing. We
will continue to look for ways to help them challenge their
business processes and learning environments and see how we can use
technology solutions to make it as easy as possible to do business
with us.
An example opportunity
In England, the government is urging schools to turn into
academies and move away from local authority control. Groups of
academies are forming into multi-academy trusts (MATs). As these
MATs grow, they are increasingly buying products and services
centrally for all of their schools.
Our approach
We can provide improved quality of service and savings to MATs
who are prepared to buy the ICT across all their schools under a
central contract. The largest benefits come when we provide the MAT
with a fully IT managed service. Our national footprint means we
can offer this to the smallest and largest of MATs.
Evidence of progress
In 2019, we signed a contract with the UK's largest MAT to
provide a full IT managed service to all their schools. This
service includes moving much of the ICT delivery in their schools
to the cloud. It helps underpin their approach to collaboration
across academies and provides them with significant savings that
they can redistribute to teaching and learning priorities.
4. Efficiency and simplicity
Our customers continue to need to save money and are always
looking for more cost effective ways of doing things; therefore RM
needs to continue to drive cost out and be as efficient as
possible. We will continue to look for ways of successfully
automating and offshoring processes across the Group. We will also
invest to simplify our business processes, improve efficiencies,
rationalise inventory and consolidate our supply chain.
An example opportunity
Following the acquisition of Consortium, our Resources division
has five separate distribution centres that service our customers
in the UK and internationally. This footprint of warehouses is
costly and inefficient.
Our approach
We are running a programme to consolidate our distribution
centres from five to a single, automated facility in the East
Midlands. This will lead to significant cost savings and an
improved service to our customers.
Evidence of progress
In 2019, we committed the investment and initiated the programme
to consolidate our warehouse estate. This included moving to four
centres ahead of schedule, gaining planning permission for the new
site, signing the lease with the developer and choosing the
automation partner for the new facility.
Workforce
Average Group headcount for the year was 2,011 (2018: 1,936),
which is comprised of 1,811 (2018: 1,750) permanent and 200 (2018:
186) temporary or contract staff, of which 1,239 (2018: 1,257) were
located in the UK, 754 (2018: 679) in India and 18 in
Australia.
At 30 November 2019, headcount was 1,983 (2018: 1,952). The
following table sets out a more detailed summary of the permanent
staff employed as at 30 November 2019:
Male Female
Executive Directors 2 (100%) 0 (0%)
Senior Managers (excluding Executive
Directors) 41 (75%) 14 (25%)
All employees 1,106 (61%) 711 (39%)
The Group is committed to offering equal employment
opportunities and its policies are designed to attract, retain and
motivate the best staff regardless of gender, sexual orientation,
race, religion, age, disability or educational background. The
Group gives proper consideration to applications for employment
when these are received from disabled persons and will employ them
in posts whenever suitable vacancies arise. Employees who become
disabled are retained whenever possible through retraining, use of
appropriate technology and making available suitable alternative
employment.
The Group encourages the participation of all employees in the
operation and development of the business and has a policy of
regular communications. The Group incentivises employees and senior
management through the payment of bonuses linked to performance
objectives, together with the other components of remuneration
detailed in the Remuneration Report.
The Group has a wide range of other written policies designed to
ensure that it operates in a legal and ethical manner. These
include policies related to health and safety, 'whistle blowing',
anti-bribery and corruption, business gifts, anti-harassment and
bullying, equal opportunities, grievance, career planning, parental
leave and systems and network security. All of RM's employment
policies are published internally.
The Corporate Governance Report sets out the Company's Diversity
Policy.
RM India
As at 30 November 2019, RM's operation in Trivandrum accounted
for 38% of Group headcount (2018: 38%).
The Indian operation provides services solely to RM Group
companies. Activities include software development, customer and
operational support, back office shared service support (e.g.
customer order entry, IT, finance and HR) and administration.
Environmental Matters
The Group's impact on the environment, and its policy in
relation to such matters, are noted in the Directors' Report.
Principal and Emerging Risks and Uncertainties
The management of the business and the execution of the
Company's strategy are subject to a number of risks. The Company
has a structured approach to the assessment and management of
risks. A detailed risk register is maintained, in which risks are
categorised under the following categories: political, strategic,
operational and financial. The full register is reviewed at least
annually by each division to ensure that the risks that could
potentially affect each division are properly captured. The
register also includes a summary of the steps taken to manage or
mitigate against those risks and the person or people responsible
for the relevant actions. This register is then consolidated and
Group-wide risks added, to ensure that the register covers the
entire Group's operations. This is then reviewed by the Executive
Committee, the Audit Committee and the Board. As such, the Board
confirms that it has carried out a robust assessment of the
principal and emerging risks facing the Group and appropriate
processes have been put in place to monitor and mitigate them.
Further details are also set out in the Corporate Governance
Report.
The key business risks for the Group are set out in the table
below.
Risk and categorisation Description and likely Mitigation
impact
----------------------- ------------------------------ ----------------------------------------
Public policy The majority of RM's The Company reviews the education
(Political Risk) business is funded policy environment by regular
from UK government monitoring of policy positions
sources. Changes and by building relationships
in political administration, with education policy makers.
or changes in policy
priorities, might The Group's three divisions
result in a reduction have diverse revenue streams
in education spending, and product/service offerings.
leading to a decline
in market size. The Company's strategy is to
focus on areas of education
UK government funding spend which are important to
in the education meet customers' objectives.
sector is constrained Where the revenue of an individual
by fiscal policy. business is in decline, management
seeks to ensure that the cost
Global economic conditions base is adjusted accordingly.
might result in a
reduction in budgets
available for public
spending generally
and education spending
specifically in the
area in which RM
specialise.
----------------------- ------------------------------ ----------------------------------------
Education practice Education practices The Company maintains knowledge
(Political Risk) and priorities may of current education practice
change and, as a and priorities by maintaining
result, RM's products close relationships with customers.
and services may
no longer meet customer
requirements, leading
to a risk of lower
revenue.
----------------------- ------------------------------ ----------------------------------------
Impact of UK's If there is an adverse The currency elements of this
exit from the change in the economic risk is managed through currency
European Union and/or fiscal environment hedging against exchange rate
(Political Risk) as a result of the movements, typically 9-12 months
UK's exit from the into the future. The Group is
EU without a suitable also working to rebalance its
period for planning exposure by growing its foreign
and implementation, currency denominated sales ahead
costs could increase of its costs to reduce the currency
and/or revenues reduce imbalance and more naturally
as a result. This hedge this risk.
could include cost
increases as a result The Group has also undertaken
of the devaluation a review of the wider risks
of Sterling. associated with the UK's exit
from the EU, including in the
event of a 'no deal' scenario.
The Group is managing the principal
risk areas identified and will
continue to monitor developments.
----------------------- ------------------------------ ----------------------------------------
Operational execution RM provides sophisticated The Company invests in maintaining
(Operational products and services, a high level of technical expertise.
Risk) which require a high
level of technical Internal management control
expertise to develop processes are in place to govern
and support, and the delivery of all projects
on which its customers (including internal projects),
place a high level including regular reviews by
of reliance. Any relevant management. The operational
significant operational and financial performance of
/ system failure projects, including future obligations,
would result in reputational the expected costs of these
damage and increased and potential risks are regularly
costs. monitored by management and,
as appropriate, the Board.
RM is engaged in
the delivery of large, The Company has internal policies
multi-year projects, and procedures across a wide
typically involving range of areas including bribery
the development and and corruption, health and safety,
integration of complex privacy, employment and tax
IT systems, and may which are regularly monitored
have liability for and reviewed to ensure we assess
failure to deliver and take account of higher risks
on time. levels and comply with all relevant
laws and regulations.
RM's increasing international
business make it
subject to laws in
other countries and
higher risk jurisdictions.
----------------------- ------------------------------ ----------------------------------------
Data and business RM is engaged in The Company has made a commitment
continuity storing and processing to maintain effective Information
(Operational personal data, where Security and Business Continuity
Risk) accuracy, privacy management systems and achieve
and security are ISO27001 and ISO22301 certifications
important. Any significant to demonstrate the robustness
security breach could and effectiveness of those systems.
damage reputation
and impact future The Company has a rolling investment
profit streams. programme managed by a dedicated
security and compliance function
The Group would be and overseen by the Group Security
significantly impacted and Business Continuity Committee,
if, as a result of which reports into the Group
a major incident, Executive Committee. This programme
one of its key buildings, covers data integrity and protection,
systems, key supply defence against external threats
chain partners or (including cyber risks) and
infrastructure components business continuity planning.
could not function
for a long period The Group seeks to protect itself
of time or at a key against the consequences of
time. a major incident by implementing
a series of back-up and safety
measures.
The Group has property and business
interruption insurance cover.
----------------------- ------------------------------ ----------------------------------------
People RM's business depends The Company seeks to be an attractive
(Operational on highly skilled employer and regularly monitors
Risk) employees. Failing the engagement of its employees.
to recruit and retain The Company has talent management
such employees could and career planning programmes.
impact operationally
on RM's ability to
deliver contractual
commitments.
----------------------- ------------------------------ ----------------------------------------
Transformation Issues in implementing Steering committees are established
Risk major programs could for all major programs which
(Operational lead to business will include a member of the
Risk) disruption and loss Executive Committee. A number
of intended benefits. of mechanisms are in place to
monitor the ongoing impact of
the various activities, including
where appropriate staff consultations
and satisfaction surveys, and
ongoing customer feedback.
The Board is kept appraised
of the current status of such
activities and projects on a
regular and ongoing basis.
----------------------- ------------------------------ ----------------------------------------
Innovation The IT market and The Company actively monitors
(Strategic Risk) elements of the education technology and market developments
resources market and invests to keep its existing
are subject to rapid, products, services and sales
and often unpredictable, methods up-to-date, as well
change. As a result as seeking out new opportunities
of inappropriate and initiatives.
technology, product
and marketing choices The Group works with teachers
or a failure to adopt and educators to understand
and develop new technologies opportunities and requirements.
quickly enough, the
Group's products
and services might
become unattractive
to its customer base,
or new market opportunities
missed.
The Group's continued
success depends on
developing and/or
sourcing a stream
of innovative and
effective products
for
the education market
and marketing these
effectively to customers.
----------------------- ------------------------------ ----------------------------------------
Dependence on The performance of The Company invests in maintaining
key contracts the RM Education and a high level of technical expertise
(Strategic Risk) RM Results divisions and in building effective working
is dependent on the relationships with its customers.
winning and extension The Company has in place a range
of long-term contracts of customer satisfaction programmes,
with government, which include management processes
local authorities, designed to address the causes
examination boards of customers' dissatisfaction.
and commercial customers.
----------------------- ------------------------------ ----------------------------------------
Pensions The Group operates The Company evaluates risk
(Financial Risk) two defined benefit mitigation proposals with the
pension schemes in trustees of these respective
the UK (the "RM Education Schemes.
Scheme" and the "CARE
Scheme" respectively) The Platinum Scheme is a multi-employer
both of which are scheme over which the Company
closed to future has no direct control. However,
accrual. It also due to the small number of
participates in a the Company's employees who
third defined benefit are in this Scheme, the risk
pension scheme (the to the Company from this Scheme
"Platinum Scheme"). is limited.
Scheme deficits can
adversely impact
the net assets position
of the trading subsidiaries
RM Education Ltd
and RM Educational
Resources Ltd.
----------------------- ------------------------------ ----------------------------------------
Treasury The Group is exposed The Company regularly monitors
(Financial Risk) to treasury risks treasury risks. It actively
including fluctuating looks to create natural currency
exchange rates and hedges where possible balancing
liquidity. foreign currency sales and purchase
levels and hedges net balances
9-12 months into the future
for material imbalances.
The Company remains cautious
with liquidity risk and carefully
manages its debt leverage position.
----------------------- ------------------------------ ----------------------------------------
David Brooks
Chief Executive Officer
3 February 2020
Chief Financial Officer's statement
Overview
RM delivered a solid financial performance in 2019 with progress
across a number key financial measures. Revenues grew marginally in
the year, benefiting from good growth in the two technology
divisions which more than offset a decline in RM Resources and a
GBP2.4m reduction in revenue associated with the adoption of the
IFRS15 accounting standard. Adjusted operating margins were flat
year-on-year which delivered a slight improvement in adjusted
operating profit which flowed through to higher adjusted profit
after tax and an increased adjusted diluted earnings per share.
These improvements in adjusted earnings also flowed through to
increases in statutory profit after tax as post-tax adjustments
were GBP1.5m lower than the prior year. Net debt levels increased
in the year to GBP15m following the funding of an acquisition in
the second half of 2019. The Group agreed a new three year GBP70m
credit facility, with the option to extend for a further two
years.
Group Financial Performance
Group revenue increased by 1% to GBP223.8m (2018: GBP221.0m)
however this includes the adoption of the new accounting standard,
IFRS15, which reduced revenue by GBP2.4m versus the previous
accounting standard. The 2018 numbers have not been adjusted for
IFRS15 as the modified adoption approach was taken
GBPM 2019(1) 2018(1)
Adjusted Adjustment(2) Statutory Adjusted Adjustment(2) Statutory
--------- -------------- ---------- --------- -------------- ----------
Revenue 223.8 - 223.8 221.0 - 221.0
Operating
profit 27.6 (3.5) 24.2 27.5 (4.9) 22.6
Profit before
tax 26.6 (3.5) 23.2 26.0 (5.0) 21.0
Tax (4.7) 0.6 (4.1) (4.7) 0.6 (4.1)
Profit after
tax 21.9 (2.8) 19.1 21.2 (4.3) 16.9
=============== ========= ============== ========== ========= ============== ==========
1. 2019 results reflect the adoption of the new accounting
standard IFRS15. Results in the table for 2018 are presented as
reported at the time and not restated as RM took the modified
approach to adoption. This approach has been taken throughout the
narrative below and explanations are provided in the notes to the
accounts to highlight the impacts.
2. Adjustments reflect the amortisation of acquisition related
intangible assets; acquisition related costs; one time property
related items and restructuring costs and costs associated with GMP
equalisation. Further details are defined and reconciled in note 5
of the notes to the financial statements
Revenues increased notably in our international markets, up 18%
(+GBP4.9m) on the prior year driven by customer development across
new and existing customers in RM Results. This international
performance was also supported by 5 months of revenue (GBP1.7m)
following the acquisition of SoNET, an Australian assessment
software company acquired in June 2019.
Adjusted operating profit margins remained flat at 12.4% (2018:
12.4%). Adjusted operating profit increased slightly to GBP27.6m
(2018: GBP27.5m). However, this was also impacted by the adoption
of IFRS15 which reduced operating profit by GBP1.5m.
In order to provide a better understanding of underlying
business performance, some costs are identified as 'adjustments'
(2) to underlying business performance. In 2019 these are broken
down as follows:
Amortisation charges associated with acquisition GBP1.6m
related intangible assets
Acquisition related costs GBP0.7m
Restructuring costs GBP0.8m
One time property related items GBP0.3m
Total adjustments(2) GBP3.5m
Taking into consideration the adjustments of GBP3.5m (2018:
GBP4.9m), statutory operating profit increased to GBP24.2m (2018:
GBP22.6m).
The Group generated a statutory profit before tax of GBP23.2m
(2018: GBP21.0m) with a net interest charge of GBP1.0m which
primarily relates to the Group credit facility.
The total tax charge within the Income Statement for the year
was GBP4.1m (2018: GBP4.1m). The Group's tax charge for the year,
measured as a percentage of profit before tax, was 17.7% (2018:
19.5%). Statutory profit after tax increased 13% to GBP19.1m (2018:
GBP16.9m).
Adjusted diluted earnings per share increased to 26.4 pence
(2018: 25.8 pence). Statutory basic earnings per share were 23.2
pence (2018: 20.7 pence) and statutory diluted earnings per share
were 23.0 pence (2018: 20.6 pence).
RM generated cash from operations for the year of GBP19.9m
(2018: GBP24.2m) which is down on the prior year primarily due to
higher inventory levels in RM Resources and utilisation of property
and restructuring provisions. This cash generated was utilised to
fund the acquisition of SoNET (GBP7.8m) including purchase cost and
acquisition-related fees, capital expenditure of GBP6.0m (2018:
GBP1.1m), contributions to the defined benefit pension scheme of
GBP4.6m in line with the prior year, tax payments of GBP3.6m and
dividend cash costs of GBP6.3m which were up 13% on the prior year.
As a result, net debt increased to GBP15.0m at the end of the year
(2018: GBP5.8m).
RM is currently progressing two large capital projects;
consolidation of the existing five distribution centres into a
single automated facility and a group-wide IT system
implementation. These projects will drive elevated capital
expenditure over the next two years, likely to be in excess of
GBP20m. A proportion of this spend will be recovered by the
subsequent sale of three freehold properties. Both projects are
scheduled to conclude by the end of 2021 and deliver good financial
and operational benefits.
Dividend
The total dividend paid and proposed for the year has been
increased by 5% to 8.00 pence per share (2018: 7.60 pence). This is
comprised of the interim dividend of 2.00 pence per share paid in
September 2019 and, subject to shareholder approval, a proposed
final dividend of 6.00 pence per share. The estimated total cost of
ordinary dividends paid and proposed for 2019 is GBP6.6m (2018:
GBP6.2m).
The Board is committed to a long-term sustainable dividend
policy and the Company has GBP31.9m of distributable reserves, as
at 30 November 2019, available to support the dividend policy.
RM plc is a non-trading investment holding company and derives
its profits from dividends paid by subsidiary companies. The
Directors consider the Group's capital structure and dividend
policy at least twice a year, ahead of announcing results and
during the annual budgeting process, looking at longer-term
sustainability. The Directors do so in the context of the Company's
ability to execute the strategy and to invest in opportunities to
grow the business and enhance shareholder value.
The dividend policy is influenced by a number of the principal
risks identified in the table of 'Principal and Emerging Risks and
Uncertainties' set out above which could have a negative impact on
the performance of the Group or its ability to distribute
profits.
Defined Benefit Pension Schemes ("Schemes")
The Company operates two defined benefit pension schemes ("RM
Education Scheme" and "Care Scheme") and participates in a third,
multi-employer, defined benefit pension scheme (the "Platinum
Scheme"). Both of the RM Education Scheme and the CARE Scheme are
closed to future accrual of benefits. As a result of the intended
closure of existing warehouses, the Platinum Scheme will become
closed to future accrual of benefits. The number of Group employees
participating in that scheme is very small and so the impact of
that scheme on the Group is limited. A provision has been made this
year to reflect additional pension contributions which may be
required to close the scheme.
The IAS19 net deficit (pre-tax) across the Group increased by
GBP3.7m to GBP6.0m (2018: GBP2.3m) with the Platinum Scheme being
in surplus. This increase was caused by an increase in the
liabilities of the Schemes driven by lower discount rates albeit
the extent was mitigated by a change in mortality and inflation
assumptions and the continuing Group deficit recovery plan
payments.
The Group deficit recovery plan payments across all schemes in
2019 were GBP4.6m which is in line with the prior year. Following
the triennial review at 31 May 2018, the Group agreed with the
Trustee of the RM Education Scheme to contribute GBP3.7m per annum
until 31 May 2026 and to transfer the remaining GBP7m, held in
escrow, into the scheme which was completed in 2019. The triennial
valuation date for the Care Scheme was 31 December 2019.
RM Resources
RM Resources revenues decreased by 6% to GBP114.5m (2018:
GBP121.6m), in part, driven by a GBP3.5m planned reduction in
legacy revenue streams. UK education revenue reduced by 4% and was
partially offset by a 2% increase in international revenues.
Divisional adjusted operating profit reduced to GBP13.7m (2018:
GBP16.6m) and operating margins decreased to 12.0% (2018: 13.7%).
The reduction was driven by lower revenues with operating costs
broadly stable. Cost savings and synergy benefits were offset by
higher warehouse and distribution costs as a percentage of revenue
associated with required changes to staff contract arrangements,
and additional spend in ongoing integration activities.
UK
UK education revenues decreased by 4% to GBP90.1m (2018:
GBP93.7m). This decline was in line with UK competitive market data
representing a difficult economic backdrop driven by continued
uncertainty for schools including the announcement of a required
increase in teachers' pension funding from 16.5% to 23.6% in 2019.
Commitment to fund this pension increase has subsequently been
announced by the new government alongside additional school funding
of GBP14bn over the next 3 years.
Revenues arising from the TTS brand grew 4% in the UK benefiting
from its clearly differentiated position and innovative,
own-developed product portfolio. The Consortium brand saw its
revenues decline more than the comparative market set as trading
was impacted by some integration related issues and the loss of a
customer framework at the end of the year. Delivering an improved
performance in this division remains a key focus moving forward and
a number of actions were taken towards the end of the 2019.
As outlined in 2018, there are a number of legacy revenue
streams in which we have either stopped investment or taken the
strategic decision to close immediately to improve the longer term
position of our core brands. These revenue streams reduced by
GBP3.5m in 2019 to GBP2.8m. This included the closure of our UK
trade channel, where we sold TTS own-developed products through UK
competitors. This should strengthen our RM Resources brand
proposition in the longer term. In addition, there were other
non-education legacy revenue streams in the Consortium brand which
declined by GBP1.2m to GBP2.6m.
The division continues to invest in its online presence and the
online channel continues to deliver proportional growth and now
makes up over half of UK direct education sales.
International
The international business is made up of two key channels,
international distributors, through which we sell own-developed
products to over 80 countries, and international English curriculum
schools to whom we sell a wider portfolio of education supplies.
International revenues increased by 2% to GBP19.5m (2018:
GBP19.1m). This was driven by continued growth of our own-developed
products through distributor channels, more than offsetting a
reduction in international schools revenues, primarily impacted by
lower new school build projects in Europe and the Middle East.
RM Results
Revenue increased by 19% on the prior year to GBP37.7m (2018:
GBP31.8m), with 59% of the increase from new and existing
International customers (including those acquired as part of the
acquisition) and 41% from existing UK customers.
Adjusted operating profit increased by 7% on the prior year to
GBP8.7m (2018: GBP8.2m), with adjusted operating margins decreasing
to 23.2% (2018: 25.6%). The dilution of adjusted operating margin
was expected with the adoption of IFRS 15 alongside the impact of
the SoNET acquisition which delivered GBP1.7m of revenues with
lower operating margins.
RM Results signed a number of new international contracts in the
year and is running pilots with several prospective clients,
providing a strong pipeline of opportunities for further
international growth. The division has also successfully secured
several important contract renewals providing a strong platform for
future activity and further investment in new product IP. One
client has confirmed their intention to insource and formally
notified us that they intend to do this at the end of 2020, this
has been taken into account in our outlook.
In June 2019, RM acquired SoNET for a consideration of GBP7.3m.
SoNET's e-testing software augments RM's existing e-marking
capability enabling RM Results to offer full end-to-end digital
assessment services in the online testing and marking of exams to
both existing and new customers.
The outlook remains positive in the division with the contract
performance in 2019, strong pipeline and product investment
creating a sound platform on which to deliver long term growth.
Progress continues to be made in developing a wider intellectual
property portfolio and M&A opportunities will continue to be
assessed to look to accelerate strategic progress.
RM Education
Revenues in the division increased by 6% to GBP71.6m (2018:
GBP67.6m) driven primarily by the performance of Services including
higher hardware sales and related installation services. Adjusted
operating margins improved to 14.5% (2018: 11.6%) delivering
increased adjusted operating profit of GBP10.4m (2018: GBP7.8m)
benefitting from the higher revenues and good operating leverage
from lower costs and some one-time benefits.
The division is made up of Services (85% of revenue) and Digital
Platforms (15%) and includes a number of legacy services and
contracts that are either in contractual run-off, or in which we
have stopped continued investment. In 2019, they constituted 4% of
revenues (2018; 5%) and are expected to have materially concluded
by 2020.
A key focus of the division is to build its annuity revenue
offerings which now account for over 65% of the revenue (2018:
70%). This proportion is down slightly on the previous year due to
the strong performance in hardware in 2019 and a high level of some
legacy contract spend in its final year.
The following divisional metrics exclude the impact of the
legacy revenues to show the underlying trends.
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 increased by 6% to GBP57.6m (2018:
GBP54.3m) with managed services revenues growing 4% to GBP44.7m and
connectivity revenues growing 13% to GBP12.9m supported, in part,
by higher sales of unbundled IP addresses.
Retention rates in the year for managed outsourced services
contracts with schools were circa 90% and in addition, 72 new
schools signed managed services contracts in the year (2018: 99
schools) resulting in a 5% growth in outsourced school customer
numbers across the year.
Digital Software Platforms
The Digital Software Platform offering covers a number of key
cloud-based products such as RM Integris (school management
system), RM Unify (authentication and portal system) and RM
SafetyNet (internet filtering and safeguarding system) as well as
other content, finance and network software offerings. Digital
Platforms revenues increased by 4% to GBP10.1m (2018: GBP9.7m)
driven by growth in RM Integris and network software. Customer
retention rates of core Digital Platform products remain consistent
and in excess of 90% in the year.
Impact of UK withdrawal from the European Union
The Company will continue to monitor the evolving situation
regarding the UK withdrawal from the EU on 31 January 2019 given
the ongoing risk of a no-deal exit at the end of the transition
period if no trade deal is agreed.
The Group has European sales of GBP14.3m, of which GBP8.4m
relate to physical product sales in RM Resources and GBP5.9m relate
to software and services sales in RM Results and RM Education. The
Group has undertaken a review of the potential changes resulting
from the UK's exit from the EU, including in the event of a 'no
deal' scenario. This review focussed on the principal risk areas of
customers and markets, supply chain, people, treasury, legal, data
and regulation and customs and tax. Following this review, although
we believe the likely impact to be unfavourable, we continue to
believe that it will not have a materially adverse effect on the
Group as a whole, whilst assuming that the UK government does not
fundamentally change its approach to education funding and recent
commitments for increased school funding. We continue to monitor
the evolving nature of the negotiations.
The Group has foreign currency denominated costs that outweigh
foreign currency denominated revenues and therefore increased
currency volatility creates an exposure. This is primarily
attributed to US Dollar and Indian rupee exposure. This risk is
managed through currency hedging against exchange rate movements,
typically 9-12 months into the future. The Group is also working to
rebalance its exposure by growing its foreign currency denominated
sales ahead of its costs to reduce the currency imbalance and more
naturally hedge this risk over time.
Going Concern
The financial position, cashflows and liquidity position are
described in the financial statements and the associated notes. In
addition, the notes to the financial statements include RM's
objectives, policies and processes for managing its capital,
financial risk management objectives, and exposure to credit and
liquidity risk. During the year, the Group renegotiated and
extended its revolving credit facility. The current facility is for
GBP70m with a GBP30m accordion clause, enabling the Group to extend
the facility to GBP100m. The facility is committed to June 2022 but
has the option of a further two year extension. The associated
financial covenants are based on the definition of finance leases
prior to the implementation of the new accounting standard, IFRS16
which RM will adopt in financial year 2020. The Group ended the
year with a net debt of GBP15.0m which is an increase of GBP9.2m on
the prior year end position of GBP5.8m after costs of acquisition
and strategic increases in capital expenditure during the year. The
average net debt position during the year was GBP24.1m with the
highest borrowing point being GBP38.7m.
Having reviewed the future budgets and projections for the
business, the principal risks that could impact on the Group's
liquidity and solvency over the next 12 months and its current
financial position, the Board believes that RM is well placed to
manage its business risks successfully and remain in compliance
with the financial covenants associated with its borrowings.
Therefore, the Board has a reasonable expectation that the Group
and Company have adequate resources to continue in operational
existence for the foreseeable future, a period of not less than 12
months from the date of this report. For this reason, the Company
continues to adopt the going concern basis of accounting in
preparing the annual financial statements.
Financial Viability Statement
In accordance with the UK Corporate Governance Code, in addition
to an assessment of going concern, the Directors have also
considered the prospects of the Group and Company over a longer
time period. The period of assessment chosen is three years, which
is consistent with the time period over which the Group's
medium-term financial budgets are prepared. These financial budgets
include Income Statements, Balance Sheets and Cash Flow Statements.
They have been assessed by the Board in conjunction with the
principal risks of the Group, which are documented within the
Principal and Emerging Risks and Uncertainties section above, along
with their mitigating actions.
The Board considers that the principal risks which have the
potential to threaten the Group's business models, future
performance, solvency or liquidity over the three year period
are:
1. Public policy risk - UK education policy priority changes or
restrictions in government funding due to fiscal policy.
2. Operational execution - including:
a. Major adverse performance in a key contract or product which
results in negative publicity and which damages the Group's
brand.
b. Delays to key projects where we are investing more
significant levels of discretionary capital expenditure.
3. Business continuity - an event impacting the Group's major
buildings, systems or infrastructure components. This would include
a major incident at one of the RM Resources' main warehouses.
4. Strategic risks
a. Loss of a significant contract which underpins an element of a division's activity.
b. Significant reduction in gross margins.
c. Impact of a 'no-deal' Brexit and resulting possible changes
in the fiscal and economic environment
Having assessed the above risks, singularly and in combination,
and via sensitivity analysis, the Directors have a reasonable
expectation that the Company will be able to continue in operation
and meet its liabilities as they fall due over the three year
period of assessment and are not aware of any reason that viability
would be an issue.
Neil Martin
Chief Financial Officer
3 February 2020
CONSOLIDATED INCOME
STATEMENT
for the year ended
30 November 2019
Year ended 30 November Year ended 30 November
2019 2018
Adjusted Adjustments Total Adjusted Adjustments Total
Note GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------------ ----- ---------- ------------ ---------- ---------- ------------ ----------
Revenue 2 223,765 - 223,765 220,977 - 220,977
Cost of sales (132,140) - (132,140) (129,664) - (129,664)
Gross profit 91,625 - 91,625 91,313 - 91,313
Operating expenses 2 (63,985) (3,462) (67,447) (63,819) (4,927) (68,746)
------------------------ ----- ---------- ------------ ---------- ---------- ------------ ----------
Profit from operations 27,640 (3,462) 24,178 27,494 (4,927) 22,567
Other income 3 153 - 153 164 - 164
Finance costs 4 (1,155) (8) (1,163) (1,679) (25) (1,704)
---------- ----------
Profit before tax 26,638 (3,470) 23,168 25,979 (4,952) 21,027
Tax 5 (4,746) 640 (4,106) (4,734) 634 (4,100)
Profit for the year 21,892 (2,830) 19,062 21,245 (4,318) 16,927
------------------------ ----- ---------- ------------ ---------- ---------- ------------ ----------
Earnings per ordinary
share
- basic 6 26.6p 23.2p 26.0p 20.7p
- diluted 6 26.4p 23.0p 25.8p 20.6p
------------------------ ----- ---------- ------------ ---------- ---------- ------------ ----------
Paid and proposed
dividends per share 7
- interim 2.00p 1.90p
- final 6.00p 5.70p
------------------------ ----- ---------- ------------ ---------- ---------- ------------ ----------
The results for the year ended 30 November 2019 have been
presented under IFRS15. The previous year's results have not been
restated (see note 16).
Adjustments to results have been presented to give a better
guide to business performance (see note 2). All amounts were
derived from continuing operations.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 30
November 2019
Year ended Year ended
30 November 30 November
2019 2018
Note GBP000 GBP000
--------------------------------------- ----- -------- --------------
Profit for the year 19,062 16,927
Items that will not be reclassified
subsequently to profit or loss
Defined Benefit Pension
Scheme remeasurements 14 (8,033) 15,693
Tax on items that will not
be reclassified subsequently
to profit or loss 5 1,418 (2,716)
Items that are or may be reclassified
subsequently to profit or loss
Fair value gain on hedged
instruments (806) 822
Exchange loss on translation
of overseas operations (211) (127)
Other comprehensive (expense)/income (7,632) 13,672
------------------------------------------ ----- -------- --------------
Total comprehensive income 11,430 30,599
------------------------------------------ ----- -------- --------------
CONSOLIDATED BALANCE SHEET
At 30 November At 30 November
2019 2018
Note GBP000 GBP000
------------------------------------------- ----- --------------- ---------------
Non-current assets
Goodwill 49,107 45,164
Intangible assets 23,274 18,465
Property, plant and equipment 9,183 9,184
Defined Benefit Pension Scheme surplus 14 976 1,253
Other receivables 8 939 930
Contract fulfilment assets 2,193 -
Deferred tax assets 5 3,457 3,385
89,129 78,381
------------------------------------------- ----- --------------- ---------------
Current assets
Inventories 22,151 17,787
Trade and other receivables 8 31,238 34,878
Contract fulfilment assets 844 -
Held for sale asset 1,428 -
Tax assets 382 424
Cash at bank 5,534 2,634
61,577 55,723
--------------- ---------------
Total assets 150,706 134,104
-------------------------------------------- ----- --------------- ---------------
Current liabilities
Trade and other payables 10 (51,231) (54,637)
Tax liabilities (117) (1,600)
Provisions 12 (1,585) (5,082)
Overdraft (4,006) (1,922)
(56,939) (63,241)
--------------- ---------------
Net current assets/(liabilities) 4,638 (7,518)
-------------------------------------------- ----- --------------- ---------------
Non-current liabilities
Other payables 10 (3,483) (283)
Provisions 12 (3,868) (2,708)
Deferred tax liability 5 (3,356) (2,817)
Defined Benefit Pension Scheme obligation 14 (6,951) (3,557)
Borrowings 11 (16,534) (6,506)
(34,192) (15,871)
--------------- ---------------
Total liabilities (91,131) (79,112)
-------------------------------------------- ----- --------------- ---------------
Net assets 59,575 54,992
-------------------------------------------- ----- --------------- ---------------
Equity attributable to shareholders
Share capital 13 1,917 1,917
Share premium account 27,080 27,080
Own shares (1,007) (1,423)
Capital redemption reserve 94 94
Hedging reserve (411) 395
Translation reserve (497) (286)
Retained earnings 32,399 27,215
Total equity 59,575 54,992
-------------------------------------------- ----- --------------- ---------------
The results for the year ended 30 November 2019 have been
presented under IFRS15. The previous year's results have not been
restated (note 16).
CONSOLIDATED STATEMENT
OF CHANGES IN EQUITY
for the year
ended 30 November
2019
Capital
Share Share Own redemption Hedging Translation Retained
capital premium shares reserve reserve reserve earnings Total
Note GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------ ----- --------- --------- -------- ----------- --------- ------------ --------- --------
At 1 December
2017 1,890 27,035 (1,406) 94 (427) (159) 2,848 29,875
Profit for
the year - - - - - - 16,927 16,927
Other
comprehensive
income/(expense) - - - - 822 (127) 12,977 13,672
Total
comprehensive
income/(expense) - - - - 822 (127) 29,904 30,599
Transactions
with owners
of the Company:
Shares issued 13 27 - (27) - - - - -
Share options
exercised - 45 - - - - - 45
Share-based
payment awards
exercised - - 10 - - - (931) (921)
Share-based
payment fair
value charges - - - - - - 993 993
Deferred Tax
on Share-based
payments - - - - - - 2 2
Ordinary
dividends
paid 7 - - - - - - (5,601) (5,601)
At 1 December
2018 as reported 1,917 27,080 (1,423) 94 395 (286) 27,215 54,992
IFRS 15
restatement - - - - - - (1,185) (1,185)
At 1 December
2018 as restated 1,917 27,080 (1,423) 94 395 (286) 26,030 53,807
------------------ ----- --------- --------- -------- ----------- --------- ------------ --------- --------
Profit for
the year - - - - - - 19,062 19,062
Other
comprehensive
(expense)/income - - - - (806) (211) (6,615) (7,632)
------------------ -----
Total
comprehensive
(expense)/income - - - - (806) (211) 12,447 11,430
Transactions
with owners
of the Company:
Share-based
payment awards
exercised - - 416 - - - (416) -
Share-based
payment fair
value charges - - - - - - 686 686
Ordinary
dividends
paid 7 - - - - - - (6,348) (6,348)
At 30 November
2019 1,917 27,080 (1,007) 94 (411) (497) 32,399 59,575
------------------ ----- --------- --------- -------- ----------- --------- ------------ --------- --------
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 30 November 2019 Year ended Year ended
30 November 30 November
2019 2018
Note GBP000 GBP000
----------------------------------------------- ----- --------- -------------
Profit before tax 23,168 21,027
Investment income 3 (153) (164)
Finance costs 4 1,163 1,704
Profit from operations 24,178 22,567
Adjustments for:
Pension GMP 2 - 1,200
Amortisation of intangible assets 2,690 2,165
Depreciation and impairment of property,
plant and equipment 1,584 1,920
Loss on disposal of other intangible 10 -
assets
Loss on disposal of property, plant
and equipment 26 95
(Gain)/loss on foreign exchange derivatives (29) 79
Share-based payment charge 686 993
(Decrease)/increase in provisions (758) 3,598
Defined Benefit Pension Scheme administration
cost 14 262 645
-----------------------------------------------
Operating cash flows before movements
in working capital 28,649 33,262
(Increase)/decrease in inventories (4,115) 1,626
Decrease/(increase) in receivables 7,638 (5,668)
(Increase) in contract fulfilment (1,602) -
assets
Movement in payables
- decrease in trade and other payables (7,483) (2,805)
- utilisation of provisions 12 (3,161) (2,263)
Cash generated from operations 19,926 24,152
Defined benefit pension scheme cash
contributions 14 (4,618) (4,591)
Tax paid (3,639) (3,134)
Net cash inflow from operating activities 11,669 16,427
----------------------------------------------- ----- --------- -------------
Investing activities
Interest received 153 109
Repayment of loans by third parties - 12
Acquisition net of cash acquired 9 (7,109) -
Acquisition related costs 2 (728) (335)
Proceeds on disposal of property, 8 -
plant and equipment
Purchases of property, plant and equipment (2,876) (1,049)
Purchases of other intangible assets (3,159) (69)
Net cash used in investing activities (13,711) (1,332)
----------------------------------------------- ----- --------- -------------
Financing activities
Dividends paid 7 (6,348) (5,601)
Drawdown/(repayment) of borrowings 11 10,000 (7,000)
Borrowing facilities arrangement and
commitment fees (529) (303)
Interest paid (513) (439)
Share options exercised - 45
Share-based payment awards exercised - (921)
Net cash generated/(used in) by financing
activities 2,610 (14,219)
Net increase in cash and cash equivalents 568 876
Cash and cash equivalents at the beginning
of the year 712 (231)
Effect of foreign exchange rate changes 248 67
Cash and cash equivalents at the end
of the year* 1,528 712
----------------------------------------------- ----- --------- -------------
* Cash and cash equivalents include bank overdrafts as these
form an integral part of the Group's cash management
1. Preliminary announcement
The preliminary results for the year ended 30 November 2019 have
been prepared in accordance with those International Accounting
Standards (IAS) and International Financial Reporting Standards
(IFRS) issued by the International Accounting Standards Board
(IASB) and adopted for use in the EU and therefore comply with
Article 4 of the EU IAS Regulation applied in accordance with the
provisions of the Companies Act 2006. However, this announcement
does not contain sufficient information to comply with IFRS. The
Group expects to publish a full Strategic Report, Directors' Report
and financial statements which will be delivered before the
Company's annual general meeting on 26 March 2020. 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 2019. Statutory accounts for 2018 have
been delivered to the Registrar of Companies and those for 2019
will be delivered following the Company's annual general meeting.
The auditor's reports on both the 2019 and 2018 accounts were
unqualified, did not draw attention to any matters by way of
emphasis without qualifying their report and did not contain
statements under s498(2) or (3) of the Companies Act 2006 or
equivalent preceding legislation. This Preliminary announcement was
approved by the Board of Directors on 3 February 2020.
Consolidated Income Statement presentation
The Directors assess the performance of the Group using an
adjusted operating profit and profit before tax. The Directors use
this measurement basis as it excludes the effect of transactions
that could distort the understanding of the Group's performance for
the year and comparability between periods. This includes making
certain adjustments for income and expense which are one-off in
nature, or non-cash items and those with potential variability year
on year which might mask underlying performance. Further details
are provided in Note 2.
Basis of preparation
The financial statements have been prepared on the historical
cost basis except for certain financial instruments, share-based
payments and pension assets and liabilities which are measured at
fair value. In addition, assets held for sale are stated at the
lower of previous carrying amount and the fair value less costs to
sell. The preparation of financial statements, in conformity with
generally accepted accounting principles, requires the use of
estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Although these estimates are based on the Directors' best
knowledge of current events and actions, actual results ultimately
may differ from those estimates.
Significant accounting policies
The accounting policies used for the preparation of this
announcement have been applied consistently, with the exception of
IFRS15.
Revenue
The Group operates a number of diverse businesses and
accordingly applies a variety of methods for revenue recognition,
based on the principles set out in IFRS15 for the year ended 30
November 2019. Many of the contracts entered into, in the RM
Results division, are long-term and complex in nature.
The revenue and profits recognised in any period are based on
the delivery of performance obligations and an assessment of when
control is transferred to the customer.
In determining the amount of revenue and profits to record, and
related balance sheet items (such as contract fulfilment assets,
trade receivables, accrued income and deferred income) to recognise
in the period, management is required to form a number of
significant judgements and assumptions. This includes:
- The identification of performance obligations included within the contract
- The allocation of revenue to performance obligations including
the impact of variable consideration
- The combination of goods and services into a single performance obligation
- The measurement of progress for performance obligations satisfied over time
- The consideration of onerous contract conditions and associated loss provisions
Revenue is recognised either when the performance obligation in
the contract has been performed (so "point in time" recognition) or
"over time" as control of the performance obligation is transferred
to the customer. For all contracts, the Group determines if the
arrangement with a customer creates enforceable rights and
obligations.
For contracts with multiple components to be delivered,
management applies judgement to consider whether these promised
goods or services are; (i) distinct - to be accounted for as
separate performance obligations; (ii) not distinct - to be
combined with other promised goods or services until a bundle is
identified that is distinct; or (iii) part of a series of goods and
services that are substantially the same and have the same pattern
of transfer to the customer.
At contract inception the total transaction price is estimated,
being the amount to which the Group expects to be entitled and has
rights to under the present contract. This includes an assessment
of any variable consideration where the performance obligation is
satisfied over time. Such amounts are only included based on the
expected value or the most likely outcome method, and only to the
extent it is highly probable that no revenue reversal will
occur.
The transaction price does not include estimates of
consideration resulting from change orders for additional goods and
services until these are agreed.
Once the total transaction price is determined, the Group
allocates this to the identified performance obligations in
proportion to their relative stand-alone selling prices and
recognises revenue when those performance obligations are
satisfied. In our RM Results division the Group may sell customer
bespoke solutions, and in these cases the Group typically uses the
expected cost plus margin or a contractually stated price approach
(if set out by performance obligation in the contract) to estimate
the stand-alone selling price of each performance obligation. Any
remaining performance obligations for which the stand-alone selling
price is highly variable or uncertain, due to not having previously
been sold on a stand-alone basis, is allocated applying the
residual approach.
For each performance obligation, the Group determines if revenue
will be recognised over time or at a point in time. Where the Group
recognises revenue over time for long term contracts, this is
generally due to the Group performing and the customer
simultaneously receiving and consuming the benefits provided over
the life of the contract.
For each performance obligation to be recognised over time, the
Group applies a revenue recognition method that faithfully depicts
the Group's performance in transferring controls of the good or
services to the customer. This decision requires assessment of the
real nature of the goods or services that the Group has promised to
transfer to the customer. The Group applies the relevant input or
output method consistently to similar performance obligations in
other contracts.
When using the output method the Group recognises revenue on the
basis of direct measurements of the value to the customer of the
goods and services transferred to the date relative to the
remaining goods and services under the contract. Where the output
method is used, where the series guidance is applied (see below for
further details), the Group often uses a method of time elapsed
which requires minimal estimation. Certain long term contracts use
output method based on estimation of number of scripts, or level of
service activity. The number of scripts is considered to be
variable consideration.
There is judgment in determining whether a contract has onerous
conditions. When identified the expected loss is provided for at
the time identified.
Transactional (point in time) contracts
The Group delivers goods and services in RM Education and RM
Resources that are transactional services for which revenue is
recognised at the point in time when the control of the goods or
services has transferred to the customer. This may be at the point
of physical delivery of goods and acceptance by a customer or when
the customer obtains control of an asset or service in a contract
with customer-specified acceptance criteria.
The nature of contracts or performance obligations categorised
within this revenue type includes: (i) provision of curriculum and
educational resources for schools and nurseries; (ii) provision of
IT hardware goods and (iii) installation of IT hardware goods.
Over time contracts
The Group delivers services in RM Education and RM Results
divisions under customer contracts with variable duration. The
nature of contracts and performance obligations categorised within
this revenue type is diverse and includes: (i) outsourced service
arrangements in the public and private sectors; and (ii) Right to
Access licenses (see below).
The Group considers that the services provided meet the
definition of a series of distinct goods and services as they are:
(i) substantially the same; (ii) have the same pattern of transfer
(as the series constitutes services provided in distinct time
increments (e.g. daily, monthly, quarterly, exam session, or annual
service)) and therefore treats the series as one performance
obligation. Even if the underlying activities performed by the
Group to satisfy a promise vary significantly throughout the day
and on a day by day basis, that fact, by itself, does not mean the
distinct goods or services are not substantially the same. For the
majority of the over time contracts with customers are in this
category, the Group recognises revenues using the output method as
it best reflects the nature in which the Group is transferring
control of the goods or services to the customer.
Right to Access licenses are those where the Group has a
continuing involvement after the sale or transfer of control to the
customer, which significantly affects the intellectual property to
which the customer has rights. The Group is in a majority of cases
responsible for maintenance, continuing support, updates and
upgrades and accordingly the sale of the initial software is not
distinct. The Group's accounting policy for licenses is discussed
in more detail below.
Contract modifications
The Group's over time contracts are often amended for changes in
contract specifications and requirements. Contract modifications
exist when the amendment either creates new or changes the existing
enforceable rights and obligations. Material modifications are
predominantly extension to contract. The Group considers whether
each contract modification is part of the original contract or is a
separate contract and allocates the transaction price
accordingly.
Licences
Software licenses delivered by the Group can be either "right to
access" or "right to use" licenses. Right to access licenses
require continuous upgrade and updates for the software to remain
useful, all other licenses are treated as Right to use licenses.
The assessment of whether a license is a Right to Access license or
a Right to Use license involves judgement. The key determinant of
whether a license is a Right to Access license is whether the Group
is required to undertake activities that significantly affect the
license intellectual property (or the customer has a reasonable
expectation that it will do so) and the customer is, therefore
exposed to positive or negative impacts resulting from those
changes.
The Group considers for each contract that includes a separate
license performance obligation all the facts and circumstances in
determining whether the license revenue is recognised over time or
at a point in time from the go live date of the license.
Contract fulfilment costs
Contract fulfilment costs are divided into: (i) costs that give
rise to an asset; and (ii) costs that are expensed as incurred.
When determining the appropriate accounting treatment for such
costs, the Group firstly considers any other applicable standards.
If those other standards preclude capitalisation of a particular
cost, then the asset is not recognised under IFRS15.
If other standards are not applicable to contract fulfilment
costs, the Group applies the following criteria which, if met,
result in capitalisation: (i) the costs directly relate to a
contract or to a specifically identifiable anticipated contract;
(ii) the costs generate or enhance resources of the entity that
will be used in satisfying (or continuing to satisfy) performance
obligations in the future; and (iii) the costs are expected to be
recovered. The assessment of this criteria requires the application
of judgement, in particular at which point the capitalisation
ceases and the performance obligation begins.
Amortisation, de-recognition and impairment of contract
fulfilment assets and capitalised costs to date
The Group amortises contract fulfilment assets to cost of sales
over the expected contract period using a systematic basis that
mirrors the pattern in which the Group transfers control of the
service to the customer. The amortisation charge is included within
cost of sales.
A contract fulfilment asset is derecognised either when it is
disposed of or when no further economic benefit are expected to
flow from its use or disposal.
Management is required to determine the recoverability of
contract related assets within property, plant and equipment,
intangible assets as well as contract fulfilment assets, accrued
income and trade receivables. At each reporting date, the Group
determines whether or not the contract fulfilment assets are
impaired by comparing the carrying amount of the asset to the
remaining amount of consideration that the Group expects to receive
less costs that relate to providing services under the relevant
contract. In determining the estimated amount of consideration, the
Group uses the same principles as it does to determine the contract
transaction price, except that any constraints used to reduce the
transaction price will be removed for the impairment test.
Deferred and accrued income
The Group's customer contracts include a diverse range of
payment schedules dependent upon the nature and type of goods and
services being provided. The Group often agrees payment schedules
at the inception of long-term contracts under which it receives
payments throughout the term of the contracts. These payment
schedules may include progress payments as well as regular monthly
or quarterly payments for ongoing service delivery. Payments for
transactional goods or services may be at delivery date, in arrears
or part payment in advance. There are no material financing
arrangements.
Where payments made are greater than the revenue recognised at
the period end date, the Group recognises a deferred income
contract liability for this difference. Where payments made are
less than the revenue recognised at the period end date, the Group
recognises an accrued income contract asset for this difference.
Where accrued income and deferred income exist on the same contract
these balances are shown net.
Alternative Performance Measures (APMs)
In response to the Guidelines on APMs issued by the European
Securities and Markets Authority (ESMA) and the Financial Reporting
Council (FRC), additional information on the APMs used by the Group
is provided below.
The following APMs are used by the Group:
- Adjusted operating profit
- Adjusted profit before tax;
Further explanation of what each APM comprises and
reconciliations between Statutory reported measures and adjusted
measures are shown in note 2.
The Board believes that presentation of the Group results in
this way is relevant to an understanding of the Group's financial
performance, as adjustment items are identified by virtue of their
size, nature and/or incidence. This presentation is consistent with
the way that financial performance is measured by management,
reported to the Board, the basis of financial measures for senior
management's compensation schemes and assists in providing
supplementary information that assists the user to understand
better the financial performance, position and trends of the Group.
In determining whether an event or transaction is an adjustment,
the Board considers both quantitative and qualitative factors such
as the frequency or predictability of occurrence.
2. Operating Segments
The Group's business is supplying products, services and
solutions to the UK and international education markets.
Information reported to the Group's Chief Executive for the
purposes of resource allocation and assessment of segmental
performance is focused on the nature of each type of activity.
The Group is structured into three operating divisions: RM
Resources, RM Results and RM Education.
A full description of each revenue generating division, together
with comments on its performance and outlook, is given in the
Strategic Report. Corporate Services consists of central business
costs associated with being a listed company and non-division
specific pension costs.
This Segmental analysis shows the result and assets of these
divisions. Revenue is that earned by the Group from third parties.
Net financing costs and tax are not allocated to segments as the
funding, cash and tax management of the Group are activities
carried out by the central treasury and tax functions.
Segmental results
RM RM RM Corporate Total
Resources* Results Education Services
Year ended 30 November GBP000 GBP000 GBP000 GBP000 GBP000
2019
---------------------------- ----------- -------- ---------- ---------- --------
Revenue
UK 95,034 27,700 69,748 - 192,482
Europe 8,404 4,966 923 - 14,293
North America 4,141 - 187 - 4,328
Asia 1,348 1,652 541 - 3,541
Middle East 2,575 96 - - 2,671
Rest of the world 3,024 3,260 166 - 6,450
114,526 37,674 71,565 - 223,765
---------------------------- ----------- -------- ---------- ---------- --------
Adjusted profit/(loss)from
operations 13,691 8,731 10,407 (5,189) 27,640
Investment income 153
Adjusted finance costs (1,155)
Adjusted profit before
tax 26,638
Adjustments (see below) (3,470)
Profit before tax 23,168
---------------------------- ----------- -------- ---------- ---------- --------
RM RM RM Corporate Total
Resources* Results Education Services
Year ended 30 November GBP000 GBP000 GBP000 GBP000 GBP000
2018
---------------------------- ----------- -------- ---------- ---------- --------
Revenue
UK 102,515 25,299 66,736 - 194,550
Europe 8,475 3,343 572 - 12,390
North America 2,876 - 185 - 3,061
Asia 1,390 1,495 - - 2,885
Middle East 3,164 - 123 - 3,287
Rest of the world 3,151 1,653 - - 4,804
121,571 31,790 67,616 - 220,977
---------------------------- ----------- -------- ---------- ---------- --------
Adjusted profit/(loss)
from operations 16,626 8,154 7,813 (5,099) 27,494
Investment income 164
Adjusted finance costs (1,679)
Adjusted profit before
tax 25,979
Adjustments (see below) (4,952)
Profit before tax 21,027
---------------------------- ----------- -------- ---------- ---------- --------
* Included in UK are International Sales via UK Distributors of
GBP1,944,000 (2018: GBP2,479,000).
Segmental assets
RM RM RM Corporate
Resources* Results Education Services Total
GBP000 GBP000 GBP000 GBP000 GBP000
--------------------- ----------- -------- ---------- ---------- --------
At 30 November 2019
Segmental 105,489 20,072 13,208 1,562 140,331
Other 10,375
Total assets 150,706
--------------------- ----------- -------- ---------- ---------- --------
RM RM RM Corporate
Resources Results Education Services Total
GBP000 GBP000 GBP000 GBP000 GBP000
--------------------- ----------- -------- ---------- ---------- --------
At 30 November 2018
Segmental 105,170 7,833 13,197 177 126,377
Other 7,727
Total assets 134,104
--------------------- ----------- -------- ---------- ---------- --------
Included within the disclosed segmental assets are non-current
assets (excluding deferred tax assets) of GBP76,559,000 (2018:
GBP74,559,000) located in the United Kingdom, GBP8,475,000 (2018:
nil) located in Australia and GBP638,000 (2018: GBP438,000) located
in India. Other non-segmented assets includes other receivables,
tax assets and cash and short-term deposits.
Adjustments to admnistrative expenses
Year ended Year ended
30 November 30 November
2019 2018
GBP000 GBP000
--------------------------------------- ------------- -------------
Amortisation of acquisition related
intangible assets 1,577 1,207
Acquisition related costs 728 -
Property related costs 335 -
Pension GMP - 1,200
Restructuring costs 822 2,520
3,462 4,927
--------------------------------------- ------------- -------------
Recurring items:
These are items which occur regularly but which management judge
to have a distorting effect on the underlying results of the Group
or are not regularly monitored for the purpose of determining
business performance. The recurring item relates to the
amortisation of acquisition related intangible assets. Recurring
items are adjusted each year irrespective of materiality to ensure
consistent treatment.
Highlighted items:
These are items which are non-recurring and are identified by
virtue of either their size or their nature. These items can
include, but are not restricted to, impairment of held for sale
assets and related transaction costs; changes in the provision for
exceptional property costs; the gain/loss on sale of operations and
restructuring and acquisition costs. As these items are one-off or
non-operational in nature, management considers that they would
distort the Group's underlying business performance.
During the year the Group acquired SoNET Systems Pty Limited
(note 9) and incurred GBP728,000 of associated acquisition costs
comprising advisor fees, related intangible impairment and
integration costs.
During the year the Group exited a number of key properties and
entered into new properties resulting in non-recurring exceptional
costs of GBP335,000.
During the prior year, the Group announced an estates strategy
review that will mean relocating a number of activities in the RM
Resources division to one location. During the year the timing and
impact of this has been reviewed and includes a provision for
improved contributions to the impacted defined benefit scheme.
In 2018 the Group provided for the estimated liability of
equalising GMPs in our defined benefit pension schemes of GBP1.2m
(see note 14).
The adjustments have the following impact on key metrics:
2019 2019 2019 2018 2018 2018
Measure Adjustment Adjusted Measure Adjustment Adjusted
measure measure
Profit from operations
(GBP000) 24,178 3,462 27,640 22,567 4,927 27,494
Profit before tax (GBP000) 23,168 3,470 26,638 21,027 4,952 25,979
Earnings per share:
Basic (Pence) 23.2p 3.4p 26.6p 20.7p 5.3p 26.0p
Diluted (Pence) 23.0p 3.4p 26.4p 20.6p 5.2p 25.8p
3. Investment income
Year ended Year ended
30 November 30 November
2019 2018
GBP000 GBP000
---------------------- ------------- -------------
Bank interest 136 20
Other finance income 17 144
153 164
---------------------- ------------- -------------
4. Finance costs
Year ended Year ended
30 November 30 November
2019 2018
Note GBP000 GBP000
------------------------------------------ ------ ------- -------------
Borrowing facilities arrangement fees
and commitment fees 592 583
Net finance costs on defined benefit
pension scheme 14 (6) 507
Unwind of discount on long term contract
provisions - 48
Unwind of discount on onerous lease
and dilapidations provisions 12 22 85
Interest on bank loans and overdrafts 555 481
------------------------------------------ ------
1,163 1,704
------------------------------------------ ------ ------- -------------
5. Tax
a) Analysis of tax charge in the Consolidated
Income Statement
Year ended Year ended
30 November 30 November
2019 2018
GBP000 GBP000
----------------------------------------------- ------------- -------------
Current taxation
UK corporation tax 4,179 4,289
Adjustment in respect of prior years (479) (313)
Overseas tax 385 395
Total current tax charge 4,085 4,371
------------------------------------------------ ------------- -------------
Deferred taxation
Temporary differences 247 (273)
Adjustment in respect of prior years (288) 2
Overseas tax 62 -
Total deferred charge/(credit) 21 (271)
Total Consolidated Income Statement
tax charge 4,106 4,100
------------------------------------------------ ------------- -------------
5. Tax (continued)
b) Analysis of tax (credit)/charge in the Consolidated
Statement of Comprehensive Income
Year ended Year ended
30 November 30 November
2019 2018
GBP000 GBP000
----------------------------------------------- ------------- -------------
UK corporation tax
Defined benefit pension scheme (735) (380)
Share based payments (38) -
Pension escrow account (353) -
Deferred tax
Defined benefit pension scheme movements (624) 3,048
Defined benefit pension scheme escrow 437 (6)
Share based payments (105) -
Deferred tax relating to the change
in rate - 54
Total Consolidated Statement of Comprehensive
Income tax (credit)/charge (1,418) 2,716
------------------------------------------------ ------------- -------------
c) Reconciliation of Consolidated
Income Statement tax charge
The tax charge in the Consolidated Income Statement reconciles to
the effective rate applied by the Group as follows:
Year ended 30 November Year ended
2019 30 November 2018
Adjusted Adjustments Total Adjusted Adjustments Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
--------------------------------- --------- ------------ ------- --------- ------------ -------
Profit/(loss) on ordinary
activities before tax 26,638 (3,470) 23,168 25,979 (4,952) 21,027
Tax at 19% (2018: 19%) thereon: 5,061 (659) 4,402 4,936 (941) 3,995
Effects of:
- other expenses not deductible
for tax purposes 133 - 133 106 284 390
- other temporary timing
differences (4) (28) (32) (193) 23 (170)
- impairments - 47 47 - - -
- effect of profits/losses
in various overseas tax
jurisdictions 67 - 67 192 - 192
- Prior period adjustments
- UK (511) - (511) (307) - (307)
Tax charge/(credit) in the
Consolidated Income Statement 4,746 (640) 4,106 4,734 (634) 4,100
---------------------------------- --------- ------------ ------- --------- ------------ -------
d) Deferred tax
The Group has recognised deferred tax assets as these are
anticipated to be recoverable against profits in future periods.
The major deferred tax assets and liabilities recognised by the
Group and movements thereon are as follows:
Defined
benefit Acquisition
pension Short-term related
Accelerated scheme Share-based timing intangible
Group tax depreciation obligation payments differences assets Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
--------------------------- ------------------ ------------ ------------ ------------- ------------ --------
At 1 December 2017 1,154 3,440 233 1,657 (2,993) 3,491
(Credit)/charge to
income (133) - 161 36 204 268
Charge to equity - (3,048) 2 (48) - (3,094)
Acquired Deferred
tax assets/(liabilities) - - - (97) - (97)
At 30 November 2018 1,021 392 396 1,548 (2,789) 568
Acquired through
subsidiary 69 (807) (738)
(Charge)/credit to
income (305) - (78) 94 268 (21)
Credit(charge)/ to
equity - 624 105 (437) - 292
At 30 November 2019 716 1,016 423 1,274 (3,328) 101
--------------------------- ------------------ ------------ ------------ ------------- ------------ --------
Certain deferred tax assets and liabilities have been offset
above.
6. Earnings per share
Year ended 30 Year ended 30 November
November 2019 2018
Weighted Weighted
average average
Profit number Pence number Pence
for of shares per of per
the year share shares share
GBP000 '000 GBP000 '000
------------------------------- ---------- ----------- ------- ------- --------- -------
Basic earnings per ordinary
share
Basic earnings 19,062 82,341 23.2 16,927 81,779 20.7
Adjustments (see note
2) 2,830 - 3.4 4,318 - 5.3
---------
Adjusted basic earnings 21,892 82,341 26.6 21,245 81,779 26.0
-------------------------------- ---------- ----------- ------- ------- --------- -------
Diluted earnings per ordinary
share
Basic earnings 19,062 82,341 23.2 16,927 81,779 20.7
Effect of dilutive potential
ordinary shares: share based
payment awards - 577 (0.2) - 460 (0.1)
Diluted earnings 19,062 82,918 23.0 16,927 82,239 20.6
Adjustments (see note
2) 2,830 - 3.4 4,318 - 5.2
---------
Adjusted diluted earnings 21,892 82,918 26.4 21,245 82,239 25.8
-------------------------------- ---------- ----------- ------- ------- --------- -------
7. Dividends
Amounts recognised as distributions
to equity holders were:
Year ended Year ended
30 November 30 November
2019 2018
GBP000 GBP000
------------------------------------- ------------- -------------
Final dividend for the year ended
30 November 2018 - 5.70p per share
(2017: 4.95p) 4,698 4,047
Interim dividend for the year ended
30 November 2019 - 2.00p per share
(2018: 1.90p) 1,650 1,554
6,348 5,601
------------------------------------- ------------- -------------
The proposed final dividend of 6.00p per share for the year
ended 30 November 2019 was approved by the Board on 3 February
2020. The dividend is subject to approval by Shareholders at the
annual general meeting. The anticipated cost of this dividend is
GBP4,948,566.
8. Trade and other receivables
2019 2018
GBP000 GBP000
---------------------------------- ------- -------
Current
Financial assets
Trade receivables 21,343 21,239
Long-term contract balances - 66
Other receivables 1,897 893
Derivative financial instruments - 353
Accrued income 2,384 2,013
25,624 24,564
Non-financial assets
Prepayments 5,614 10,314
31,238 34,878
---------------------------------- ------- -------
Non-current
Financial assets
Other receivables 939 930
32,177 35,808
---------------------------------- ------- -------
9. Acquisitions of subsidiaries
Acquisitions
On 13 June 2019, the Group acquired all of the shares in SoNET
Systems Pty Ltd.
SoNET is a software company which provides SaaS platforms,
principally to the education and government sectors. SoNET's
e-authoring and testing software augments RM Results' existing
e-marking capability, enabling RM Results to offer customers full
end-to-end digital assessment services in the online testing and
marking of exams.
The role of technology in the assessment landscape is changing
and we firmly believe that, in time, on-screen testing will
transform the way that assessments are designed and delivered. It
has been a strategic priority for RM Results to enable end-to-end
digital assessment capability. SoNET's e-testing product,
Assessment Master, is a market leading assessment and testing
platform with functionality going beyond conventional online
examination software (multiple choice etc.) to provide
task-oriented and task-simulated assessments of performance in any
situation.
The fair value of the cash consideration for the acquisition was
GBP7.3m. Transaction fees associated with the acquisition and
expensed to the Consolidated Statement of Comprehensive Income in
2019 were GBP0.3m.
Effect of acquisition
The acquisition had the following effect on the Group's assets
and liabilities:
Fair Value
on Acquisition
GBP'000
--------------------------------------- -----------------------------
Acquisition related intangible assets 4,747
Property, plant and equipment 18
Trade receivables 307
Other receivables 79
Cash and cash equivalents 208
Trade and other payables (538)
Deferred income (853)
Current tax liabilities (38)
Deferred tax (738)
Provisions (28)
--------------------------------------- -----------------------------
New assets acquired 3,164
Goodwill 4,153
Consideration paid 7,317
--------------------------------------- -----------------------------
Satisfied by
Cash 7,317
--------------------------------------- -----------------------------
Total purchase consideration 7,317
--------------------------------------- -----------------------------
Net cashflow on acquisition 7,317
Cash and cash equivalents (208)
--------------------------------------- -----------------------------
Cashflow on acquisition 7,109
--------------------------------------- -----------------------------
The fair values on the acquisition above are provisional.
In the period 14 June 2019 to 30 November 2019 SoNET contributed
revenue of GBP1,700,000 and statutory profit after tax of GBPnil.
If the acquisition had occurred on 1 December 2018 SoNET would have
contributed revenue of GBP3,341,000 and statutory profit after tax
of GBP28,000 in 2019. In determining these amounts, management has
assumed that the fair value adjustments that arose on the date of
acquisition would have been the same if the acquisition occurred on
1 December 2018.
Fair value adjustments
On the acquisition of SoNET all assets were fair valued and
appropriate intangible assets recognised following the principles
of IFRS 3.
A deferred tax liability related to these intangible assets was
also recognised. Management identified the main material intangible
assets as the Intellectual Property of the Company's software and
customer contracts. These intangible assets were valued at GBP4.7m
using the Relief from Royalty method and are being amortised over
3-10 years which is in accordance with the estimated useful
economic life (UEL) and IAS 38.
Goodwill of GBP4.2m represents the excess of the purchase price
over the fair value of the net tangible and intangible assets
acquired. The goodwill arising on the acquisition is largely
attributable to the synergies and values associated with being part
of the enlarged RM Results proposition.
Deferred income has been recognised at fair value at the date of
acquisition.
Acquisition related costs
The group incurred acquisition related costs of GBP0.7m related
to advisor fees, related intangible asset impairment and
acquisition transition costs. These costs have been included in the
administrative expenses in the group's consolidation statement of
comprehensive income in 2019.
10. Trade and other payables
Group
2019 2018
GBP000 GBP000
------------------------------------ ------- -------
Current liabilities
Financial liabilities
Trade payables 19,136 23,119
Other taxation and social security 4,364 4,284
Other payables 2,081 1,857
Derivative financial instruments 461 -
Accruals 11,849 10,557
Long-term contract balances - 4,565
37,891 44,382
Non-financial liabilities
Deferred income 13,340 10,255
51,231 54,637
------------------------------------ ------- -------
Non-current liabilities
Non-financial liabilities:
Deferred income:
- due after one year but within
two years 1,783 235
- due after two years but
within five years 1,561 48
- after five years 139 -
3,483 283
------------------------------------ ------- -------
54,714 54,920
------------------------------------ ------- -------
11. Borrowings
2019 2018
GBP000 GBP000
---------------------- --------- --------
Bank loan (17,000) (7,000)
Add capitalised fees 466 494
Borrowings (16,534) (6,506)
----------------------- --------- --------
12. Provisions Onerous
lease Employee-related
and dilapidations restructuring Other Total
Group Note GBP000 GBP000 GBP000 GBP000
----------------------------- ----- ------------------- ------------------ ------------------ -------------------
At 1 December 2017 3,770 978 1,707 6,455
Utilisation of provisions (694) (1,569) - (2,263)
Release of provisions (43) (37) (479) (559)
Increase in provisions 400 3,201 471 4,072
Unwind of discount 4 85 - - 85
-----------------------------
At 30 November as reported 3,518 2,573 1,699 7,790
Arising on adoption of IFRS
15 - 44 1,538 1,582
At 1 December 2018 restated 3,518 2,617 3,237 9,372
Acquisition 28 - - 28
Utilisation of provisions (1,940) (1,221) - (3,161)
Release of provisions (802) (12) (872) (1,686)
Increase in provisions 27 836 15 878
Unwind of discount 4 22 - - 22
At 30 November 2019 853 2,220 2,380 5,453
----------------------------- ----- ------------------- ------------------ ------------------ -------------------
Provisions for onerous leases and dilapidations have been
recognised at the present value of the expected obligation at
discount rates of 2.6% (2018: 2.6%) per annum reflecting a
risk-free discount rate, applicable to the liabilities. These
discounts will unwind to their undiscounted value over the
remaining lives of the leases via a finance cost within the Income
Statement. At 30 November 2019, GBPnil (2018: GBP925,000) of the
provision refers to onerous leases, and GBP852,000 (2018:
GBP2,593,000) refers to dilapidations. During the year the Group
has exited 5 properties and entered into a number of new building
leases. The releases of provisions associated with the above
property provisions relate to negotiated exit dates that did not
fully align to original lease contract dates.
The average remaining life of the onerous leases at 30 November
2019 is nil years (2018: 1.1 years).
In making their assessment of the required onerous lease
provisions, the group was required to estimate the likely sub-let
income that could be earned over the remaining life of the lease.
This required the Directors to make judgements relating to the
likelihood that a property will be sub-let and the income that will
be earned.
Employee-related restructuring provisions refer to costs arising
from restructuring to meet the future needs of the Group. As
described in note 2, the Group is undergoing an estates review and
GBP0.6m of the increase relates to changes in the timing and
composition of employee costs associates with that review. Of the
GBP2,220,000 provision, GBP1,393,000 is expected to be utilised
during the following financial year.
Other provisions includes one-off items not covered by any other
category of which the most significant items are the risk
provisions from ended long term contracts transferred from
long-term contract creditors to provisions. The release of
GBP872,000 primarily relates to onerous contract risks that have
either been re-negotiated or terminated during the year.
During the year the overall movement on long term provisions was
an increase of GBP1,160,000 (2018: decrease of GBP311,000).
13. Share capital
Company and Group Ordinary shares
of 2(2) /(7) p
'000 GBP000
Allotted, called-up and
fully paid:
At 30 November 2017 82,650 1,890
Issued in 2018 1,200 27
Exercise of share options 25 -
At 30 November 2018 and
2019 83,875 1,917
Ordinary shares issued carry no right to fixed income.
14. Defined benefit schemes
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 GBP4,489,000 (2018:
GBP3,997,000) represents contributions payable to these schemes by
the Group at rates specified in employment contracts. At 30
November 2019 GBP308,300 (2018: GBP324,000) 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 GBP143,000 (2018: GBP120,000). The amount due in
respect of these schemes at 30 November 2019 was GBP51,000 (2018:
GBP71,000).
c. Defined benefit pension schemes
The Group has both defined benefit and defined contribution
pension schemes. There are three defined benefit pension schemes,
the Research Machines plc 1988 Pension Scheme (the "RM Scheme")
and, following the acquisition of The Consortium in June 2017, the
Consortium CARE Scheme (the "CARE scheme") and the Platinum Scheme
(the "Platinum scheme"). The RM Scheme and the CARE Scheme are both
operated for employees and former employees of the Group only. The
Platinum Scheme is a multi-employer scheme, with The Consortium
being just one of a number of employers. The Group plays no active
part in managing that Scheme, although the number of the Group's
employees in that Scheme is small and so the impact / risk to the
Group from that Scheme is limited.
For all three schemes, based on the advice of a qualified
independent actuary at each balance sheet date and using the
projected unit method, the administrative expenses and current
service costs are charged to operating profit, with the interest
cost, net of interest on scheme assets, reported as a financing
item. Last year an estimate for Guaranteed Minimum Pensions
('GMPs') was expensed (see below for further explanation).
Defined benefit pension scheme remeasurements are recognised as
a component of other comprehensive income such that the balance
sheet reflects the scheme's surplus or deficit as at the balance
sheet date. Contributions to defined contribution plans are charged
to operating profit as they become payable.
Scheme assets are measured at bid-price, where available, at 30
November 2019. The present value of the defined benefit obligation
was measured using the projected unit method.
Under the guidance of IFRIC 14, the Group are able to recognise
a pension surplus on the balance sheet for all three schemes. In
the year the Platinum scheme show a surplus and the RM and CARE
schemes are in deficit.
The Research Machines plc 1988 Pension Scheme (RM Scheme)
The Scheme provides benefits to qualifying employees and former
employees of RM Education Limited, but was closed to new members
with effect from 1 January 2003 and closed to future accrual of
benefits from 31 October 2012. The assets of the Scheme are held
separately from RM Education Limited's assets in a
trustee-administered fund. The Trustee is a limited company.
Directors of the Trustee company are appointed by RM Education Ltd
and by members. The Scheme is a funded scheme.
Under the Scheme, employees were entitled to retirement benefits
of 1/60th of final salary for each qualifying year on attainment of
retirement age of 60 or 65 years and additional benefits based on
the value of individual accounts. No other post-retirement benefits
were provided by the Scheme.
The most recent actuarial valuation of Scheme assets and the
present value of the defined benefit obligation was carried out for
statutory funding purposes at 31 May 2018 by a qualified
independent actuary. IAS 19 Employee Benefits (revised) liabilities
at 30 November 2019 have been rolled forward based on this
valuation's base data.
As at 31 May 2018, the triennial valuation for statutory funding
purposes showed a deficit of GBP40,600,000 (31 May 2015:
GBP41,800,000). The Group agreed with the Scheme Trustees that it
will repay this amount via deficit catch-up payments of
GBP3,700,000 per annum until 31 May 2026.
At 30 November 2019 there were amounts outstanding of GBP308,300
(2018: GBP300,000) for one month's deficit payment and GBPnil
(2018: GBP32,000) for Scheme expenses. The escrow bank account that
was set up to manage the deficit risk in 2014 was closed during the
year as the funds were paid over to the RM Scheme.
The parent company RM plc has entered into a pension protection
fund compliant guarantee in respect of scheme liabilities. No
liability has been recognised for this within the Company as the
Directors consider that the likelihood of it being called upon is
remote.
The Consortium CARE scheme (CARE scheme)
Until 31 December 2005, The Consortium for Purchasing and
Distribution Ltd ("The Consortium", acquired by the Company on 30
June 2017) operated a pension scheme (the "Consortium CARE" scheme)
providing benefits on both a defined benefit (final salary-linked)
and a defined contribution basis. From 1 January 2006, the defined
benefit (final salary- linked) and defined contribution sections
were closed and all employees, subject to the eligibility
conditions set out in the Trust Deed and Rules, joined a new
defined benefit (Career Average Revalued Earnings) section. As at
28 February 2011 the scheme was closed to future accruals. The
disclosures in this report make allowance for this change.
The scheme is subject to the Statutory Funding Objective under
the Pensions Act 2004. A valuation of the scheme is carried out at
least once every three years to determine whether the Statutory
Funding Objective is met. As part of the process, The Consortium
must agree with the trustees of the Scheme the contributions to be
paid to address any shortfall against the Statutory Funding
Objective. The Statutory Funding Objective does not currently
impact on the recognition of the scheme in these accounts. The
scheme is managed by a Board of Trustees appointed in part by the
Company and in part from elections by members of the scheme. The
Trustees have responsibility for obtaining valuations of the fund,
administering benefit payments and investing scheme assets. The
Trustees delegate some of these functions to their professional
advisers where appropriate. The valuation of the scheme at 31
December 2016 was a deficit of GBP4.2m.
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. Using the assumptions below the results of the full
valuation were adjusted and rolled forward to form the basis for
the current year valuation. The scheme is administered within a
legally separate trust from The Consortium and the Trustees are
responsible for ensuring that the correct benefits are paid, that
the scheme is appropriately funded and that the scheme assets are
appropriately invested. The valuation of the scheme at 31 December
2018 was a surplus of GBP213,000. (31 December 2015: deficit
GBP70,000.
Amounts recognised in the Income Statement and in the Statement
of Comprehensive Income
Year ended Year ended
30 November 30 November
2019 2018
Note GBP000 GBP000
-------------------------------------------- ----- ------------- -------------
Administrative expenses and taxes (174) (537)
Current service costs (88) (108)
Operating expense (262) (645)
-------------------------------------------- ----- ------------- -------------
Interest cost (7,219) (6,798)
Interest on Scheme assets 7,225 6,291
Net interest expense 4 6 (507)
-------------------------------------------- ----- ------------- -------------
Past service costs (GMP) - (1,200)
----- -------------
Expense recognised in the Income
Statement (256) (2,352)
-------------------------------------------- ----- ------------- -------------
Effect of changes in demographic
assumptions 1,586 (1,230)
Effect of changes in financial assumptions (45,476) 19,884
Effect of experience adjustments 2,150 4,126
Total actuarial (losses)/gains (41,740) 22,780
Return on Scheme assets excluding interest
on Scheme assets 33,707 (7,087)
(Expense)/income recognised in the
Statement of Comprehensive Income (8,033) 15,693
-------------------------------------------- ----- ------------- -------------
(Expense)/income recognised in Total
Comprehensive Income (8,289) 13,341
-------------------------------------------- ----- ------------- -------------
GMP equalisation
UK pension schemes are required to pay equal "Guaranteed Minimum
Pensions" ("GMPs") to men and women following the 1990 legal case
which led to the Barber judgment. Pensions paid have historically
been intrinsically different, for example due to different GMP
pension ages (60 for a woman and 65 for a man) and therefore
difficult to calculate an estimate for pension equalisation.
The court judgment in October 2018 involving the Lloyds Banking
Group's pension schemes provided greater clarity, stating both that
adjustments to benefits would be required, and giving trustees some
details of the methods that could be acceptable for doing so.
The data available on the proportion of the liabilities that
relate to post 1988 GMPs is the best data currently available to
estimate the quantum of Scheme liabilities that need to be
equalised. The Schemes will adopt an approach to GMP equalisation
in a way that is generally structured to minimise the costs of
achieving this.
Our proposed approach can be broadly summarised as follows:
-- Calculate proportion of Scheme's obligations relating to Post 1988 GMP
-- Estimate the proportion of GMPs relating to benefits that
need to be equalised (post 1990 GMPs) based on a break down of the
Scheme rules and individual data for each Scheme.
-- Estimate of the cost of removing GMP inequalities in the Scheme.
In 2018, this resulted in a one-off charge of GBP1m for the
Research Machines plc 1988 Pension Scheme, and an exceptional
charge of GBP0.2m for the Consortium CARE Scheme (see Note 5). As
the members of the Platinum scheme joined during 2012 and didn't
transfer benefits from previous schemes with them, there are no
GMPs in the scheme and therefore no adjustment for equalisation was
necessary.
In the Director's view, the range of outcomes is not material
even though this is an estimate.
Reconciliation of the Scheme assets and obligations through the
year
RM scheme CARE scheme Platinum Year Year
scheme ended ended
30 November 30 November
2019 2018
GBP000 GBP000 GBP000 GBP000 GBP000
----------------------------------- ---------- ------------ --------- ------------- -------------
Assets
At start of year 202,401 13,839 2,090 218,330 224,649
Interest on Scheme assets 6,711 440 74 7,225 6,291
Return on Scheme assets excluding
interest on Scheme assets 32,728 692 287 33,707 (7,087)
Administrative expenses (147) - (27) (174) (537)
Contributions from Group 3,997 401 220 4,618 4,591
Contributions from employees - - 19 19 19
Benefits paid (5,994) (557) (10) (6,561) (9,596)
------------------------------------ -------------
At end of year 239,696 14,815 2,653 257,164 218,330
------------------------------------ ---------- ------------ --------- ------------- -------------
Obligations
At start of year (201,848) (17,396) (1,390) (220,634) (244,885)
Interest cost (6,622) (548) (49) (7,219) (6,798)
Actuarial (losses)/ gains (39,066) (2,533) (141) (41,740) 22,780
Benefits paid 5,994 557 10 6,561 9,596
Past service cost (GMP) - - - (1,200)
Current service costs - - (88) (88) (108)
Contributions from employees - - (19) (19) (19)
At end of year (241,542) (19,920) (1,677) (263,139) (220,634)
------------------------------------ ---------- ------------ --------- ------------- -------------
Pension deficit (1,846) (5,105) - (6,951) (3,557)
------------------------------------ ---------- ------------ --------- ------------- -------------
Pension surplus - - 976 976 1,253
------------------------------------ ---------- ------------ --------- ------------- -------------
Net pension deficit (1,846) (5,105) 976 (5,975) (2,304)
------------------------------------ ---------- ------------ --------- ------------- -------------
Included within the CARE Scheme obligations is an unfunded
liability of GBP190,000 (2018:GBP203,000) which is a liability of
the Group and not the Scheme.
Reconciliation of net defined benefit
obligation
Year ended Year ended
30 November 30 November
2019 2018
GBP000 GBP000
------------------------------------------------- ------------- -------------
Net obligation at the start of the year (2,304) (20,236)
Cost included in Income Statement (256) (2,352)
Scheme remeasurements included in the Statement
of Comprehensive Income (8,033) 15,693
Cash contribution 4,618 4,591
Net pension deficit (5,975) (2,304)
-------------------------------------------------- ------------- -------------
Obligation by participant status Year ended Year ended
30 November 30 November
2019 2018
GBP000 GBP000
---------------------------------- ------------- -------------
Active 976 1,135
Vested deferreds 216,540 177,305
Retirees 45,623 42,194
263,139 220,634
---------------------------------- ------------- -------------
Under the current agreements, the Group expect to pay
approximately GBP4,600,000 in contributions in the year ending 30
November 2020.
Value of Scheme assets Year ended Year ended
30 November 30 November
2019 2018
GBP000 GBP000
------------------------------------------- ------------- -------------
Fair value of Scheme assets with a quoted
market price
Cash and cash equivalents, including
escrow 986 7,696
Equity instruments 128,445 107,006
Debt instruments 2,653 2,090
Liability driven investments 97,191 75,777
Value of unquoted Scheme assets
Insurance contract 27,889 25,761
257,164 218,330
------------------------------------------- ------------- -------------
Significant actuarial assumptions
Year ended Year ended
30 November 30 November
2019 2018
-------------------------------------------- ------------- -------------
Discount rate (RM scheme) 2.15% 3.30%
Discount rate (CARE scheme) 2.10% 3.20%
Discount rate (Platinum scheme) 2.15% 3.40%
Rate of RPI price inflation 2.95% 3.35%
Rate of CPI price inflation 1.80% 2.25%
Rate of salary increases (Platinum scheme) 1.85% 2.25%
Rate of pensions increases
pre 6 April 1997 service 1.50% 1.50%
pre 1 June 2005 service 2.85% 3.20%
post 31 May 2005 service 2.00% 2.10%
Post retirement mortality table S2PA CMI S2PA CMI
2018 1.25% 2017 1.25%
Weighted average duration of defined 23 years 23 years
benefit obligation
Assumed life expectancy on retirement
at age 65:
Retiring at the accounting date (male
member aged 65) 22.3 22.7
Retiring in 20 years after the accounting
date (male member aged 45) 23.6 24.1
--------------------------------------------- ------------- -------------
15. Related party transactions
The Group encourages its Directors and employees to be
Governors, Trustees or equivalent of educational establishments.
The Group trades with these establishments in the normal course of
its business.
Spinfield School
Neil Martin, executive director, is a governor of Spinfield
School. RM Resources made sales of GBP1,107 (2018: GBP10,550). At
the year end there is a balance of GBPnil (2018: GBPnil)
outstanding.
Grant Thornton LLP
Deena Mattar, non-executive director of RM plc, is a
non-executive of the Partnership Oversight Board of Grant Thornton.
Grant Thornton were chosen from a competitive tender conducted by
the Company and Deena Mattar was not involved in that exercise.
The Company has engaged Grant Thornton to provide advice in
connection with certain activities.
The following payments were made in the year: GBP98,901 for
strategy work, GBP27,000 relating to advisory fees in connection
with adoption of IFRS15 and 16, GBP22,172 relation to work on a new
ERP system. There were no accruals at the year end.
In the prior year; GBP167,252 of integration costs, GBP40,945
work for IFRS15, GBP11,870 relating to work on a new ERP system,
and GBP245,606 relating to estate strategy. GBP42,000 was accrued
at the year-end for further ERP work.
UBM plc
Patrick Neil Martell, non-executive director of RM plc, is Chief
Executive Officer of Informa plc. In the year a payment of GBP9,136
was made to UBM plc, a subsidiary of Informa plc, relating to an
online subscription for legal guidance.
16. Impact of adoption of IFRS 15 - Revenue from Contracts with
Customers
IFRS 15 - Revenue from Contracts with Customers (IFRS 15)
establishes a comprehensive framework for determining whether, how
much and when revenue is recognised. It has replaced existing
revenue recognition guidance, including IAS 18 Revenue, IAS 11
Construction Contracts and IFRIC 13 Customer Loyalty Programmes.
IFRS 15 is effective for annual periods beginning on or after 1
January 2018.
The Group has used the modified retrospective adoption approach
under which the Group has applied all of the requirements of IFRS
15 with effect from 1 December 2018.
The Group has made opening balance sheet adjustments arising
from changes to the revenue recognition treatment of goods and
services and the capitalisation of costs to obtain contracts. The
impact of the new standard on its 2019 accounts is set out
below:
IFRS 15
Restated impact
Income statement
Balance for year Balance
sheet as ended 30 sheet as
at 1 December November at 30 November
2018 2019 2019
-------------------------------------
GBP'000 GBP'000 GBP'000
------------------------------------- --------------- ----------------- ----------------
Net current (liabilities)/assets
relating to goods and services (2,898) (2,416) (5,314)
Capitalised contract costs 1,435 882 2,317
Deferred tax asset 278 291 569
Retained earnings (deficit)/surplus (1,185) (1,243) (2,428)
The adoption of IFRS 15 has had five principal impacts:
- The Group has separated performance obligations included in
long-term contracts that were previously combined under IAS 11/18.
The provision of software, services support and maintenance are now
recognised over time, typically the duration of the contract,
following completion of any development activities.
- Where the group performs development activities, these are now
treated as a separate performance obligation. If the customer
retains control of the developed Intellectual Property Rights
("IPR"), the revenue is recognised over the period of development
activity. If the developed IPR is retained by the group, the costs
of development are deferred as a contract fulfilment asset and are
amortised over the subsequent licence period.
- A number of separate performance obligations have been
identified. Previously these would have all been recognised as part
of the long-term contract accounting. Under IFRS 15, certain of
these performance obligations are recognised at a point-in-time,
typically as the goods are delivered to the customer.
- The Group needs to allocate the transaction price to each of
the performance obligations. This requires estimation. Typically,
the group uses observable market prices for certain elements such
as scanning services provided by third parties. For elements, such
as software, that do not have an observable price, the group
applies the residual method to determine the fair value of these
performance obligations.
- Due to the change in revenue recognition, the group has
recognised a deferred tax adjustment at 1 December 2018.
Where the Group incurs identifiable costs that relate to a
specific customer contract then these costs are capitalised as
contract fulfilment assets and amortised over the contract on a
systematic basis consistent with the performance obligations
included in the contract.
Revenue is recognised either when the performance obligation in
the contract has been performed (so 'point in time' recognition) or
'over time' as control of the performance obligation is transferred
to the customer.
During the year to 30 November 2019, revenue is recognised
"point in time" or revenue recognised "over time".
An overview of the impact by division is set out below:
RM Resources
RM Resources provides goods to educational organisations and as
such revenue is recognised at point of sale. UK Schools tend to
purchase the majority of their consumables in preparation for new
school years and hence the second half is seasonally stronger.
RM Education
RM Education provides ICT software and services hardware to UK
schools and colleges. Hardware is recognised at point of delivery
and the remaining services are recognised over time and include a
number of different performance obligations. For some larger long
term contracts the separation of the hardware performance
obligation from the rest of the contract has driven a change in
revenue recognition profile leading to an opening reserves
adjustment.
RM Results
RM Results provides IT software and end-to-end digital
assessment services to enable online exam marking, online testing
and the management and analysis of educational data. Long term
contracts have been split into separate performance obligations all
of which are recognised over time. Whilst this brings some of the
revenue recognition forward, within the financial year, there is
still a significant seasonality towards exam marking periods.
As a result of long implementation periods associated with many
of the bespoke contracts, contract fulfilment assets in relation to
development activity have been recognised in the balance sheet and
has resulted in an opening reserves adjustment.
Detailed primary statement restatements
Detailed primary statement restatements arising from the
adoption of IFRS 15 are set out below.
Impact on the Consolidated Income Statement
As reported IFRS15 impact Amounts before
adoption
of IFRS15
GBP'000 GBP'000 GBP'000
---------------
Revenue 223,765 2,416 226,181
Cost of sales (132,140) (882) (133,022)
------------------------
Gross profit 91,625 1,534 93,159
Operating expenses (67,447) - (67,447)
------------------------
Profit from operations 24,178 1,534 25,712
Investment income 153 - 153
Finance costs (1,163) - (1,163)
------------------------
Profit before tax 23,168 1,534 24,702
Tax (4,106) (291) (4,397)
Profit for the period 19,062 1,243 20,305
------------------------ ------------ -------------- ---------------
Impact on the Consolidated Balance Sheet
As reported IFRS15 impact Amounts before
adoption
of IFRS15
GBP'000 GBP'000 GBP'000
--------------------------------- ------------ -------------- ---------------
Non-current assets
Goodwill 49,107 128 48,979
Other intangible assets 23,274 - 23,274
Property, plant and equipment 9,183 - 9,183
Defined Benefit Pension Scheme
Surplus 976 - 976
Other receivables 939 - 939
Contract fulfilment assets 2,193 2,193 -
Deferred tax assets 3,457 - 3,457
--------------------------------- ------------
89,129 2,321 86,808
--------------------------------- ------------ -------------- ---------------
Current assets
Inventories 22,151 249 21,902
Trade and other receivables 31,238 3,057 28,181
Contract fulfilment assets 844 844 -
Held for sale asset 1,428 - 1,428
Corporation tax assets 382 217 165
Cash and short-term deposits 5,534 - 5,534
--------------------------------- ------------ --------------
61,577 4,367 57,210
---------------
Total assets 150,706 6,688 144,018
--------------------------------- ------------ -------------- ---------------
Current liabilities
Trade and other payables (51,231) (7,885) (43,346)
Tax liabilities (117) 352 (469)
Provisions (1,585) (1,583) (2)
Overdraft (4,006) - (4,006)
(56,939) (9,116) (47,823)
Net current asset/(liabilities) 4,638 (4,749) 9,387
--------------------------------- ------------ -------------- ---------------
Non-current liabilities
Other payables (3,483) - (3,483)
Provisions (3,868) - (3,868)
Deferred tax liability (3,356) - (3,356)
Defined Benefit Pension Scheme
obligation (6,951) - (6,951)
Borrowings (16,534) - (16,534)
--------------------------------- ------------ --------------
(34,192) - (34,192)
---------------
Total liabilities (91,131) (9,116) (82,015)
Net assets 59,575 (2,428) 62,003
--------------------------------- ------------ -------------- ---------------
Equity attributable to shareholders
Share capital 1,917 - 1,917
Share premium account 27,080 - 27,080
Own shares (1,007) - (1,007)
Capital redemption reserve 94 - 94
Hedging reserve (411) - (411)
Translation reserve (497) - (497)
Retained earnings 32,399 (2,428) 34,827
------------ --------------
Total equity 59,575 (2,428) 62,003
--------------------------------- ------------ -------------- ---------------
The opening balance at 1 December 2018 for IFRS15 impacted
balances were GBP1.4m contract fulfilment assets, trade receivables
GBP21.2m, accrued income GBP1.7m and deferred income GBP16.2m.
The Group has taken the practical expedient of applying the
modified retrospective approach so have taken the aggregate of all
contract modifications that occurred before 1 December 2018 into
the opening IFRS15 position.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR GBGDDRDGDGGS
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February 04, 2020 02:01 ET (07:01 GMT)
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