Rm Plc · LSE:RM.
Rm — FY2003 Earnings Presentation
26 slides from Rm's earnings presentation, December 2003
Slide 1: RM plc – Preliminary Results
1 RM plc – Preliminary Results Year ended 30th September 2003 Tim Pearson - CEO Mike Greig - Group Finance Director
Slide 2: Headlines
2 Headlines • Good financial performance Profit before tax and goodwill amortisation £8.6m Record turnover excluding Learning Schools Programme (LSP) £214.3m Record order intake >£300m Against a background of generally flat market and school funding difficulties • Significant progress in developing
Slide 3: Context
3 Controlling costs Context Improving efficiency and effectiveness • 2002 Strategic Review Areas of growth Expanding from education ICT supplier … … into broadly-based education services Group • Making educational ICT business the best it can be Focusing on customer satisfaction Controlling costs Im
Slide 4: Financial headlines
4 Financial headlines FY2003 FY2002 • Turnover up 6.6% £215.5m £202.2m • Turnover exc LSP up 17% £214.3m £182.9m • Operating expenses excluding goodwill £45.7m £47.2m* • Profit before tax and goodwill up 72% £8.6m £5.0m* • Net funds at 30th September up £5.7m £38.4m £32.7m • Diluted EPS exc goodwill
Slide 5: Turnover
5 Turnover 250 • Record turnover excluding LSP of £214.3m • Record H2 turnover of £130.1m 200 • Turnover from four strategic projects won during 2003 of £11m 150 £m 100 Growth in turnover H1 H2 Full year Total -4% 15% 7% 50 ex LSP 12% 21% 17% ex LSP and projects 11% 12% 11% 0 1998 1999 2000 2001 200
Slide 6: Strategic projects
6 Strategic projects Contract Contract signed Value Term Classroom 2000 Lot 3 (Northern Ireland) February £21m 5 years QCA February £23m 6 years South Yorkshire eLearning Programme May £34m 44 months South Lanarkshire Council July £31m 7 years • Accounting treatment Separable elements accounted for
Slide 7: Gross profit and business mix
7 Gross profit and business mix 29.1 28.6 28.6 27.8 • Gross profit 24.7% 24.9 25.1 25.1 25.2 22.3 22.2 25.3 24.3 excluding projects 26.1% % • H2 gross profit 24.3% excluding projects 26.4% 1998 1999 2000* 2001 2002 2003 Gross profit percentage (by half year) *excludes exceptional cost of sales • Edu
Slide 8: Operating costs (excluding goodwill amortisation)
8 Operating costs (excluding goodwill amortisation) 25.0 23.3 23.0 22.9 22.8 • Controlling costs 21.0 22.2 Full year benefit of 2002 cost reductions £m 16.6 16.2 15.6 14.3 12.2 Absence of bonus and recruitment savings • Investments in 2003 Bidding for strategic projects 1998 1999 2000 2001 2002* 200
Slide 9: Profit and loss
9 Profit and loss £’000 FY2003 FY2002 Turnover 215,494 202,158 Gross profit 53,285 51,244 Selling & distribution (26,968) (26,457) Research and development (11,729) (13,836) Administration (excluding goodwill) (7,021) (6,892)* Operating profit (excluding goodwill) 7,567 4,059* Profit before tax (exc
Slide 10: Tax and pensions
10 Tax and pensions • This year’s tax rate (18%) below standard rate (30%) Tax charge £1.54m vs standard rate £2.59m R&D tax credit benefit – £250,000 One-off resolution of prior year items – £860,000 Future years’ tax rate expected to be c.28% (R&D tax credit benefit) • Pensions Final salary scheme
Slide 11: Cash flow and balance sheet
11 Cash flow and balance sheet • Continued excellent cash generation 53.0 £18.6m net cash inflow from operating activities Strong September cash collections 45.1 41.9 £m 2003 2002 41.1 38.4 Cash 40.6 39.1 36.5 £m 32.7 Stocks 13.8 10.0 27.1 Debtors 44.3 43.0 • Continued tight control of capital expen
Slide 12: Net funds balances
12 Net funds balances • Minimum and average balances significantly Net funds £m 2003 2002 2001 below year end Year end (30th Sep) 38.4 32.7 27.1 • Peakschoolhaus acquisition – 1st Oct 2003 Year average 31.5 23.1 7.1 £1.5m initial cash consideration Year minimum 18.6 16.7 (10.2) Up to £1.4m deferred
Slide 13: Schools funding
13 Schools funding Cost pressure Percentage Percentage Addition to of schools’ pressure in minimum funding • Government year 2003/04 spending 2004-05 level in 2004-05 Impact of budget settlement less than feared Teachers’ pay: headline award; 60% 3.4% 2.0% overhang from 2002 pay award; Some supplier
Slide 14: Educational ICT business
14 Educational ICT business Network PC Software Learning • Innovation Services Tools Software Whole Course Tablet PC – Digital Video Editing – Easiteach Studio / Literacy Software ICT Kaleidos – Community Connect 3 enhancements Broadband Services Education Services Broadband caching – ICT Alive – Wi
Slide 15: Education software
15 Education software • Electronic learning credits (eLCs) Strong spending ahead of August cut-off for first round of funding Substituting for core school budget spending • European Commission decision on BBC Digital Curriculum Significant clarifications of conditions imposed on the BBC BBC investme
Slide 16: Customer satisfaction
16 Customer satisfaction • Continuing Customer Satisfaction programme Externally audited measure 11,000 responses Customer Satisfaction 5,600 improvement suggestions 17 specific improvement projects completed Bonus objective for managers • New programme of improvement projects for 2004 Jul-03 Oct-02
Slide 17: RM Education Solutions India
17 RM Education Solutions India • Indian subsidiary started in May 50 people in place Average age 28 48% with post-graduate qualifications Already contributing to development • Rationale Reducing cost of R&D projects Improving economics of some project bids Facilitating higher levels of service to c
Slide 18: Strategic projects
18 Strategic projects • Identified as one of two strategic growth areas in 2002 RM Strategic Project Checklist Dedicated bid team 9 Strategic project bid team in place from start 2003 Project management skills 9 £110m strategic project wins during the year Broad range of capabilities 9 • Reinforced
Slide 19: Education services
19 Education services Network PC Software Learning • Significant market opportunity Services Tools Software Whole Course Bigger market size than educational ICT Software ICT • Run rate at end 2003 c.£15 million Broadband Education Services Services • Delivering strategic project commitments Managed
Slide 20: Education services
20 Education services Assessment QCA KS3 ICT Assessment Project Individual Individual Individual markers markers markers Computer-delivered & marked ICT assessment at KS3 First large-scale computer-based test in English schools First test delivery in June 2004 Exam scripts Test delivery every year u
Slide 21: Acquisitions
21 Acquisitions • Criteria Shareholder value enhancing Increasing educational intellectual property – software or education services capabilities • Synergy Acquisitions inherit RM’s balance sheet strength and track record Joint bids for projects that either separately couldn’t Additional products an
Slide 22: Corporate development
22 Corporate development Group structure RM Group Forvus Softease 3T RM RM RM Education PeakSchoolhaus Australasia Solutions India Schools / Colleges / Universities LEAs / Central Government & Agencies
Slide 23: Corporate development
23 Corporate development Group structure RM Group Tim Pearson Products & Services Finance & IS Sales & Marketing Rob Sirs Mike Greig Tony Dale
Slide 24: Sales and marketing
24 Sales and marketing • Structural changes implemented Group Sales & Marketing Director in place Dedicated Strategic Project bid team Sector-based sales and marketing teams Dedicated new business resource Solutions Group established • RM.com > 20% of low-value orders now transacted online 160,000 S
Slide 25: Trading outlook
25 Trading outlook • Early in the year • Educational ICT market generally flat Some growth in broadband and eLCs • General climate of “more for less” in IT Pressure on ASPs and margins • Schools funding • Benefits of actions already taken Full-year contribution from Forvus and Peakschoolhaus Turnove
Slide 26: Conclusion
26 Conclusion • Good progress In transition Developing a strategically attractive position Long-term attractive market • Significant opportunity To add more value for our customers To improve long-term business model • Lots more to do – strategically and operationally – to get where we want to