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Interim Results

RM plc (RM.)
Interim Results

16-Jul-2024 / 07:00 GMT/BST


16 July 2024

RM plc

Interim Results for the six months ended 31 May 2024

Strategic plan driving strong progress in contract wins and business transformation

 

RM plc (‘RM’), a leading global educational technology (‘EdTech’), digital learning and assessment solution provider, reports its interim results for the six months ended 31 May 2024.

 

Financial highlights

£m

HY24

HY23

Variance

Revenue from continuing operations

79.2

87.6

(9.6%)

Loss before tax from continuing operations1

(6.8)

(3.1)

(121.9%)

Discontinued operations2

-

10.3

 n/a

Statutory (loss)/profit after tax1

(6.8)

8.2

(183.0%)

Diluted EPS from continuing operations1

(8.1)p

(2.5)p

(224.0%)

Adjusted performance measures3:

 

 

 

Adjusted operating loss from continuing operations

(0.6)

(4.5)

86.3%

Adjusted EBITDA

1.9

(1.5)

227.2%

Adjusted loss before tax from continuing operations

(3.7)

(6.7)

45.5%

Adjusted diluted EPS from continuing operations

(4.1)p

(6.7)p

38.8%

Adjusted net debt 1,4

52.7

50.7

1.3%

 

Overview

  • HY financial performance reflects the extent of the transformation RM has undergone, and the actions taken to set the business up for growth in the future
  • Revenue from continuing operations1 of £79.2m, down 9.6% (HY23: £87.6m), predominantly reflecting the closure of the Consortium business at the start of the period and to an extent the changing nature of contracts in Assessment won during the first half, for which revenue will be recognised in future periods
  • Adjusted operating loss improved by 86.3% to £0.6m (HY23: loss of £4.5m), driven by the closure of the Consortium business and higher underlying profitability of the ongoing business
  • Statutory loss after tax of £6.8m (HY23: profit of £8.2m), with the swing reflecting the inclusion in HY23 of £8.5m of income generated from IP sales and a £10.3m gain on the sale of RM Integris and RM Finance
  • Adjusted net debt of £52.7m (FY23: £45.6m / HY23: £50.7m)
  • Signed amended and extended banking agreement providing a firm foundation to execute against new strategic plan

Good progress made against the strategic plan set out in March 2024

  • Encouraging early momentum in the new business pipeline:
    • In Assessment, contract wins have moved towards longer-term, recurring, contracted relationships, with a contracted order book5 of £66.9m - 51% higher than the £44.2m at the start of the period and a pipeline of opportunities valued at £170m
    • Signed a flagship long-term contract with International Baccalaureate to support its move towards fully digital assessment and accreditation processes across all geographies. This win is the first for our Global Accreditation Platform, which lies at the heart of our strategic growth plans
    • Despite H1’s revenue dip, TTS had strong growth in France, Switzerland and Ireland where Robotics is a key focus and has an encouraging order book for H2
    • Continued growth from international schools in UAE and a 3-year extension to the GEMS Education contract with exclusivity in early years and primary; RM is also establishing a legal entity in Dubai to better service customers in the region
  • Expanded product portfolio across all divisions, powered by own-IP technology and with a strong customer focus:
    • RM Technology launched NX-Generation Services, its first holistic IT services portfolio including AI modules, aimed at Multi-Academy Trust schools to drive efficiencies and technological improvements
    • 100 new products launched by TTS in key strategic areas of Early Years, Special Educational Needs and Robotics during the half, with a further 50 to be released in H2
    • Established RM Consulting, a new business unit which will support Assessment clients moving forward with their digital assessment journey
  • Strong progress made in cost-saving programme, with £6.6m of annualised cost savings identified and initiated, on track towards £10m target
  • Design work for streamlined target operating model established, which once implemented will create greater agility and gross cost synergies of £4m (being part of the £10m target)

Current trading and outlook

  • Reflecting the shift to longer-term recurring contracts in Assessment, leading to revenue on H1 contract wins being accounted for in future periods, and uncertainty regarding the timing of a general election having impacted UK schools’ spending in H1, the Board now expects full-year revenue to be broadly flat year on year (excluding Consortium)
  • Trading in H2 to date has started on an upward trajectory in line with our expectation for like-for-like revenue decline in H1 to be offset by H2 performance
  • Adjusted Operating Profit for the full year is expected to be in line with market expectations
  • During FY24 we fully expect to operate within our banking covenants, allowing for working capital and capital expenditure required to fund our future growth plans, alongside continuing interest payments and committed pension contributions

Mark Cook, Chief Executive of RM, said:

“Our first half performance reflects the extent of the transformation RM has undergone, and the action we have taken to set the business up for growth in the future.

“I am delighted that during the period, International Baccalaureate has become a foundation customer of our Global Accreditation Platform for digital assessments, with a long-term strategic relationship. In addition, we have grown the pipeline of assessment platform customers by 70% to £170m, and the Assessment contracted order book by 50%.

“Looking ahead, we see significant opportunities to expand our use of AI, both to create efficiencies within the business and to enhance solutions to drive improved outcomes for educators, assessors and learners with time-saving and adaptive tools.

“This is an exciting period for RM, and although it will take time for the financial benefits to flow through, I am confident that our strategy for growth will deliver for all our stakeholders. I’d like to take this opportunity to thank everyone for their significant contribution and hard work.”

Notes

  1. HY23 restated for the capitalisation of £1.3m of independent business review costs, previously expensed as described in Note 12.
  2. Continuing operations includes the results of RM’s TTS, Consortium, Assessment and Technology businesses. Continuing operations excludes the results of the RM Integris and RM Finance businesses which were sold on 31 May 2023.
  3. Throughout this statement, adjusted operating (loss)/profit, adjusted EBITDA, adjusted (loss)/profit before tax and adjusted EPS are Alternative Performance Measures, stated after adjusting items (See Note 4 to the financial statements) which are identified by virtue of their size, nature and/or incidence. The Group reports adjusting items which are used by the Board to monitor and manage the performance of the Group, in order to ensure that decisions taken align with the Group’s long-term interests. Adjusting items are identified by virtue to the size, nature or incidence at a segment level and their treatment is applied consistently year-on-year.
  4. Adjusted net debt is defined as the total of borrowings less capitalised fees, cash and cash equivalents and overdrafts. Lease liabilities of £15.6m (30 November 2023: £16.5m) are excluded from this measure as they are not included in the measurement of adjusted net debt for the purpose of covenant calculations.
  5. Contracted order book represents secured revenue, supported by a contract, that is yet to be recognised as revenue in the financial statements. We have introduced this metric for our Assessment division to provide greater visibility of the increasing trend towards securing longer-term strategic contractual revenue.              

 


Presentation details

A presentation by Management for investors and analysts is available on the company website at https://www.rmplc.com/.

 

Contacts:

RM plc         investorrelations@rm.com

Mark Cook, Chief Executive Officer 

Simon Goodwin, Chief Financial Officer

Fiona O’Nolan, Investor Relations 

 

Headland Consultancy (Financial PR)       +44 203 805 4822

Stephen Malthouse (smalthouse@headlandconsultancy.com)

Chloe Francklin (cfrancklin@headlandconsultancy.com)

Dan Mahoney (dmahoney@headlandconsultancy.com)

 

Notes to Editors:

About RM

RM was founded in 1973, with a mission to improve the educational outcomes of learners worldwide. More than fifty years on, we are a trusted global EdTech, digital learning and assessment solution provider, transforming learners, educators, and accreditors to be more productive, resilient, and sustainable. Our simple approach enables us to deliver best in class solutions to optimise accreditation outcome.

RM is focused on delivering a consistently high-quality digital experience, acting as a trusted consultative partner to provide solutions that deliver real impact for learners worldwide. Our three businesses include:

  • Assessment - a global provider of assessment software, supporting exam awarding bodies, universities, and governments worldwide to digitise their assessment delivery.
  • TTS (Technical Teaching Solutions) – an established provider of education resources for early years, primary schools, and secondary schools across the UK and to ministries of education and independent institutions worldwide.
  • Technology - a market-leading advisor and enabler of ICT software, technology and bespoke services to UK schools and colleges.

 


Chief Executive’s Review

Business review

I am pleased with our performance in the first half, as RM executes its new Strategic Plan for revenue and profit growth, as announced at our full-year results in March, with a focus on securing longer-term contracts in our core Assessment business. This included the contract with International Baccalaureate to support their move towards fully digital assessment and accreditation processes across all geographies. The business continued to make good progress towards its financial and operational turnaround, and we saw improved margin performance across our customer facing services and products despite some pre-election uncertainty in UK school budget spending and the impact from the Consortium business which ceased trading in December 2023.

We delivered a solid performance in the half following the decisive cost actions taken last year, which continue into FY24. Revenue (excluding Consortium) was £78.3m, down 3.2% (HY23: £80.9m), adjusted operating loss (including Consortium) was £(0.6)m, improved 86.3% (HY23: loss of £(4.5)m), and we grew total Group adjusted EBITDA by 227% to £1.9m (HY23: £(1.5)m). Revenue has been impacted by the continued pressure on UK schools’ budgets, with some pre-election uncertainty affecting our Technology and TTS UK businesses, and the changes in our revenue mix, moving towards recurring and longer-term contracts in our Assessment business, where new strategic contract wins in the first half will start to contribute to revenue over a longer time period as customers get access to, and utilise our Global Accreditation Platform. As a result, we now expect revenue for the full year to be broadly flat. Adjusted Operating Profit for the full year remains in line with expectations.

Due to this change in the revenue mix, we are introducing a new Assessment revenue metric, with the contract order book at 31 May 2024 of £66.9m, an increase of over 50% since 30 November 2023, with good momentum in strategic contracts, cross selling to existing customers and customer renewals. The majority of this new revenue is derived from our own IP. In addition, we have a pipeline of active opportunities in Assessment valued at £170m, defined as opportunities where we are preferred bidder or in bid. This strengthening of revenue visibility is largely due to the commitment we have made to building a Global Accreditation Platform for our Assessment clients and our focus on building a stronger sales & marketing function facing into our customer groups.

Strategic Plan update

In March, we unveiled our Strategic Plan for growth, to capitalise on the significant future growth opportunities in the $222 billion Global EdTech market1, with our core ambition to support learners with a ‘lifetime of learning experience,’ enriching the lives of learners globally. We unveiled our intention to become a leading global EdTech company with significant investment in our Portfolio of Products and Solutions for the coming years. This new strategic and operational focus will enable RM to unlock its true value.

Underpinning this transformation are a number of key priorities for FY24 and beyond to deliver on our intent to become a company that has 3-4 times the value that it has today, de-leveraged, a dividend paying company delivering double digit growth with EBITDA 5x that of FY23.

  1. Build an organisation for success

As we progress with the delivery of our new strategy, we are reviewing and refining our execution to best enable us to respond in the most agile way to the ever-changing EdTech and education landscape, an approach adopted to ensure we make the right decisions with the right information to create a sustainable business.

We are taking our current global award-winning assessment solution and developing it to become a truly scalable, end-to-end digital accreditation platform. Core to the future of RM, are the digital solutions that support a learner’s assessment of progress towards an examination, as well as the accreditor’s ability to provide a platform to enable and enhance their examination assessment to take advantage of the education transformation towards fully on-screen digital examinations.

As announced in May, RM signed a significant new contract expansion with International Baccalaureate (‘IB’) to deepen its longstanding partnership of more than 15 years. The new agreement includes the transformational delivery of IB’s Diploma and Career-Related Programmes as digital assessments, marking a significant milestone for both organisations. For RM, this project is fully aligned with its strategy to build a Global Accreditation Platform that enables the digital transformation towards fully digital on-screen examinations, which in turn will provide IB learners with enhanced opportunities throughout their programmes. In the first half of the financial year, our Assessment business commenced the platform development project with IB as the first foundational customer and we are forming a new development team who will be responsible for the new end-to-end Global Accreditation Platform. In addition to new strategic customer wins, our Assessment business has grown its contract order book to £66.9m as it continues to be the preferred partner of choice to global accreditors.

  1. Create clear line of sight to three customer groups – accreditors, educators and learners

In the past RM has spoken about how we are organised rather than the customers we serve. We now have a single clear go to market approach; for our products and solutions, serving customers from early years to industry and professional qualifications with a clear and unified portfolio roadmap, a company ethos that is much simpler with a cleaner line of sight to our customers, and with a new target operating model framework.

The design work to deliver this streamlined and customer-centric target operating model (TOM) commenced in the half, creating greater agility on completion.

Aimed at Multi-Academy Trust schools, our Technology business launched NX-Generation Services - its first holistic IT services portfolio, which includes AI modules and which promotes continual improvement across technology, skills and security. NX-Generation Services will transform education systems, making them more efficient and equitable whilst unlocking cost and time savings for our clients.

 

  1. Develop services and solutions to drive revenue

Supporting this strategy, we have a Strategic Portfolio Roadmap of RM owned and developed IP; with products and solutions to be delivered to accreditors, educators, and directly to learners for adjacent solutions.

A core component of the future RM portfolio is to build, at scale, our Global Accreditation Platform and we already have customers, with new, long-term commitments, as future users of the platform as part of our digital assessment solution.

In June, we announced the launch of RM Consulting, a new business unit which will work with assessors and awarding bodies to help them define, design and deliver digital programmes, maximising the benefits realised for educators and learners alike, and allowing our clients to fully benefit from our well-established expertise in education and the use of technology. RM Consulting will form a key pillar of the Group’s growth strategy, working alongside, and being supported by the building of our Global Accreditation Platform.

TTS launched 100 new products in our key strategic areas of Early Years, Special Educational Needs and Robotics during the half, with a further 50 to be released in H2.

We have developed an RM AI large language model that has been implemented with a new AI / human interface, curriculum rich solution. This is now being used to generate content for the TTS website and optimises the linkage between over 8,000 products and the National Curriculum. Using this solution has significantly increased the efficiency of deploying National Curriculum enhanced product descriptions and by adding in National Curriculum content to the AI engine, we will be able to develop further product enhancements aimed at helping teachers improve their teaching resources e.g. subscription model for educators and learners to digital curriculum resources to supplement RM physical resources.

 

  1. Build a stronger financial platform

We are focused on building a stronger financial platform to support our strategic growth plans. In March our lenders gave us their support with an amended and extended banking agreement to 2026. We continue to work hard to deleverage the business through operating cash flow and will continue to seek to reduce this. During the period, we have identified £6.6m of annualised cost savings across a number of operational areas, following a review by our strengthened executive leadership team. We realised £1.8m of annualised savings relating to the closure of the Consortium business on top of the two-into-one distribution centre consolidation which realised £1.5m annualised savings (previously announced). We initiated further areas of efficiency within Assessment, Technology, Group Costs and further consolidated our property portfolio, realising other cost savings of £4.8m. Plans are still in progress to identify further annualised savings in the second half towards the stated target of £10m of annualised savings identified during the current financial year, bringing the total to £20m of annualised savings since I joined RM.

Note:

  1. Source: IMARC Group

 

Building a sustainable organisation

Building RM into a sustainable organisation is a critical outcome of the successful execution of our strategic plans, and our people are fundamental to achieving our plans. Our new Chief People Officer and strengthened Senior Leadership team have made communication and engagement across the organisation a priority. We established a Workforce Engagement Group to coordinate initiatives with Board sponsorship. In our recent Employee Engagement Survey in May, where 84% of the organisation shared feedback with us, our score improved by 7pts to 63. The most significant increases in survey scores were linked to Executive Leadership keeping people informed and communicating an inspiring vision, as well as Company Confidence in that we are focused on long-term success and will have the potential to succeed over the next three years. We have optimised our office footprint – ‘mothballing’ our London office and a floor of the Head Office in Abingdon, bringing teams together and increasing collaboration, while also reflecting our hybrid working and we closed TTS’ distribution centre in Nottingham to increase efficiency.

We have made good progress on our carbon reduction, with additional benefit from the reduced office footprint. In the first half we saw a 417 tonne reduction in our CO2 emissions, benefiting from our recently signed Zero Carbon Electricity contract. This represents a 27% reduction since FY23.

 

 

Financial Review

Group financial performance

£m

HY24

HY23

Variance

Revenue from continuing operations

79.2

87.6

(9.6%)

Loss before tax from continuing operations1

(6.8)

(3.1)

(121.9%)

Discontinued operations2

-

10.3

 n/a

Statutory (loss)/profit after tax1

(6.8)

8.2

(

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