Slide 1: RM plc Interim Results
1 RM plc Interim Results Six months ended 31 March 2006 Tim Pearson - CEO Mike Greig - Group Finance Director
Slide 2: Headlines
2 Headlines • Good performance against a background of tough individual schools market conditions Strong cash generation First half profit …. and investment in Building Schools for the Future • Improving business model • Successful delivery of large, complex government ICT contracts
Slide 3: Financial headlines
3 Financial headlines First interim results under IFRS Six months to 31 Mar Year to 30 Sep 2006 2005* 2005* Revenue up 5% £114.2m £109.2m £262.7m Profit/(loss) before tax £2.0m (£0.9m) £11.5m EPS 1.6p (1.1p) 8.9p Dividend per share up 7% 1.12p 1.05p 4.85p Net cash inflow/(outflow) from operating act
Slide 4: IFRS – UK GAAP reconciliations
4 IFRS – UK GAAP* reconciliations Six months to 31 Mar Year to 30 Sep £’000 2006 2005 2005 IFRS profit/(loss) before tax 1,967 (904) 11,528 Goodwill impairment - 1,247 2,469 IFRS profit before tax and goodwill charges 1,967 343 13,997 Share based payments 81 (8) (14) Pensions (670) (443) (1,260) Hol
Slide 5: Revenue: up 5%
5 Revenue: up 5% • Achieved against tight budgets in individual schools market Six months to 30 Mar • Improving business model Business Mix 2006 2005 Change Revenue Revenue Increased revenue from long-term contracts £m £m % Reduced proportion of PC hardware revenues Infrastructure software & service
Slide 6: Gross profit percentage
6 Gross profit percentage • Gross profit percentage: 26.7% (2005*: 27.2%) • Infrastructure software & services Increasing maturity of education projects business • Education software & services Initial SSDN revenues traded at zero margin in accordance with RM’s accounting policies • Hardware & distr
Slide 7: Operating costs
7 Operating costs • Well-controlled: rapid response to Q1 market conditions Effective operational management Diversion of effort onto projects Operating Costs Six months to 31 Mar • Selling & distribution £m 2006 2005* BSF bid costs: £2.0m (2005: £0.4m) Selling & distribution 16.2 15.9 Research & de
Slide 8: Income statement
8 Income statement Six months to 31 Mar Year to 30 Sep £m 2006 2005* 2005* Revenue 114.2 109.2 262.7 Cost of sales (83.7) (79.5) (188.4) Gross profit 30.5 29.7 74.3 Selling & distribution (16.2) (15.9) (33.9) Research & development (7.5) (7.5) (16.7) Administration (5.6) (6.0) (10.6) Other expense -
Slide 9: Balance sheet
9 Balance sheet Six months to 31 Mar Year to 30 Sep IFRS impacts £m 2006 2005* 2005* Goodwill 20.8 23.4 22.2 • Pension deficit on balance sheet Other intangible assets 1.5 1.7 1.7 • Deferred tax assets primarily relate to Property, plant & equipment 26.1 22.7 24.7 Deferred tax assets 5.5 6.5 7.1 pen
Slide 10: Cash and cash generation
10 Cash and cash generation • Excellent cash generation £m 31 Mar 2006 31 Mar 2005 30 Sep 2005 • RM continues to be a business that turns Cash and cash equivalents 24.5 13.8 22.9 profits into cash Issued loan notes 1.9 1.1 1.1 Net funds 22.6 12.7 21.8 • Deferred consideration reduced by £1.4m Issuab
Slide 11: Pensions, tax and forex
11 Pensions, tax and forex Pensions • Pre-tax deficit at 31 Mar 2006 reduced to £11.1m (30 Sep 2005: £15.9m) Assets and liabilities marked to market; asset returns good, discount rate 5.05% (unchanged) Other assumptions as at 30 Sep 2005 Note: deficit is a volatile measure: 0.1% change in bond yield
Slide 12: Context
12 Context So in the coming five years • Education remains a key government priority investment in schools will rise from £5.6 billion today to reach Featured strongly in March 2006 budget £8 billions a year – a 50 per cent rise making a total of £34 billion • Government commitment to capital invest
Slide 13: First half overview
13 First half overview • Individual schools market: robust performance in difficult conditions English market weakness, particularly in first quarter Teaching and Learning allowances; Planning, Preparation and Assessment time As expected software market difficulties continue – BBC jam launch / eLCs
Slide 14: Building Schools for the Future
14 Building Schools for the Future • Early results: Our strategy Our experience Solihull – contract awarded to RM (we believe the only Place on every shortlist Achieved: 11 shortlisted contract so far); first school goes live in June should give 1-in-3 success bids*; 1 no bid Newcastle – RM aligned
Slide 15: Building Schools for the Future
15 Building Schools for the Future • Element of lottery for ICT suppliers … we think our strategy will work, but areas for improvement • Learned a lot: where we bid, we will do an even better job in the future For the customer: better understanding of requirements – local needs vary For the bidding
Slide 16: Education projects
16 Education projects Progress in period • C2K Lot 6 RM network IPR and integration knowledge at heart of customer requirements Every primary and post-primary school in Northern Ireland to run RM Community Connect • National Pupil Database – Assessment and Achievement Tables Renewal won at higher va
Slide 17: Data and assessment
17 Data and assessment • National Pupil Database – Achievement and Attainment Tables project • e-Marking Cambridge Assessment: large scale processing this summer Successful launch of SCORIS Excellent new e-Marking software application Significant further interest • On-screen testing: QCA Key Stage 3
Slide 18: Innovation and improvement: Scottish Schools Digital Network
18 Innovation and improvement Delivering our values Scottish Schools Digital Network • National education intranet for Scotland • Very large project Over 800,000 users £37.5 million over five years • Well into development phase Engagement with all 32 Scottish Local Authorities Team of 100 people Fir
Slide 19: Innovation and improvement
19 Innovation and improvement Delivering our values • Differentiated PC hardware strategy RM Mobile One Launch of Ecoquiet Low power consumption, low noise PC range Low heat generation – very suitable for BSF 100W power saving over equivalent product • Sonica Spanish and Easiteach for Macintosh • TT
Slide 20: Customer success
20 Customer success Delivering our values • Customer satisfaction continues to improve 7.34 7.21 • Long-term business success depends on customer success 7.0 Putting programmes in place to measure our customers’ success • South Yorkshire eLearning Programme 6.5 18,000 Level 2 ICT qualifications to b
Slide 21: High standards
21 High standards Delivering our values Support excellence • ‘World’s Ten Best Web Support Sites’ – winner for third year running Along with HP, Microsoft, Lucent, Dell, McAfee, Juniper and Reuters • Help Desk Institute awards – top three helpdesk for second year running • Technical seminar rating –
Slide 22: Opportunities
22 Opportunities • Data and assessment • Education resources • BSF • Education enterprise systems MIS and Learning Platforms • ‘Every Child Matters’ – education and wider children’s services provision • International
Slide 23: Outlook
23 Outlook • As always first half not a good indicator of full-year outcome Good first half performance – revenue, profit, cash Market outlook improved from six months ago • Our expectations for the year remain the same … but getting there via a different route • Excellent operational performance Th
Slide 24: Conclusions
24 Conclusions • First-half results demonstrate our improving business model • BSF – long-term opportunity Further investment in FY2007 • Significant other opportunity areas • Education remains a good area to be in
Slide 25: RM plc Interim Results
25 RM plc Interim Results Six months ended 31 March 2006 RM is about improving the life chances of people – worldwide – by delivering outstanding education products and services that help teachers to teach and learners to learn. Customer Success – High Standards – Innovation and Improvement – Openne
Slide 26: Appendices
26 Appendices RR.
Slide 27: Education projects
27 Education projects Education projects Education projects Value/phasing Term Complex service delivery ! Dudley Grid for Learning Contract award: Jan 1999 >£50m broadly flat 10 years Multi-year ! Classroom 2000 Lot 3 (Northern Ireland) Contract award: Feb 2003 £21m early h/w shipments 5 years > £5m
Slide 28: Education projects: accounting treatment and financial impact
28 Education projects Accounting treatment and financial impact • Pre-contract costs not taken to the balance sheet unless contract award probable In practice appointment as preferred bidder • Separable elements Accounted for using relevant Group accounting policy for that element Revenue and profit