Slide 1: RM plc Preliminary Results
1 RM plc Preliminary Results Year ended 30 September 2005 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 – Openn
Slide 2: Headlines
2 Headlines • Strong performance 15 … despite tricky market conditions and BSF investment Profit growth: up 11% on last year (after £1.8m BSF expenditure) 10 Order growth: up 15% on last year £m Successful education project delivery Customer satisfaction continues to increase 5 • Positive medium-ter
Slide 3: Financial headlines
3 Financial headlines 2005 2004 2003 • Turnover £263m £263m £215m • Operating profit margin* 4.4% 4.0% 3.5% • Profit before tax* up 11% £12.8m £11.6m £8.6m • Diluted EPS* up 12% 10.5p 9.4p 6.9p† • Dividend per share up 5% 4.85p 4.6p 4.35p • Net funds £21.8m £25.8m £38.4m (£10.4 million of PFI capex
Slide 4: Turnover
4 Turnover • Group turnover: £263 million 300 Replacement of £15 million of ‘one-off’ turnover last year PC average selling price decline: 11% 200 particularly impacted university and college sectors £m Full-year contribution from 2004 acquisitions (TTS and Sentinel) 100 Growth in long-term project
Slide 5: Business mix and gross profit
5 Business mix and gross profit Support Network Software Broadband Learning • Infrastructure software and services up 11% Services Tools Software Increased contribution from long term projects Managed Services Whole Course Software • Education software and services down 4% ICT Less eLC spend Hardwar
Slide 6: Operating costs
6 Operating costs* • Up £4.2 million Full year impact of last year’s acquisitions: £3.3 million Leasing cost changes: £0.4 million • Selling and distribution includes education project bid costs BSF bid costs: £1.8 million (FY2004: £0.1 million) College & university sales and marketing expenditure r
Slide 7: Leasing
7 Leasing • RM has always provided financing options to customers Switched from outsourced to in-house at end FY2004 • Business benefits Greater control and flexibility of offer to customers Improved profits • Accounting treatment Under previous arrangement: benefit showed as a reduction in operatin
Slide 8: Profit and loss
8 Profit and loss £million FY2005 FY2004 change Turnover 262.7 263.3 0% Gross profit 73.7 68.5 8% Selling & distribution (34.2) (32.8) 5% Research & development (16.8) (14.5) 16% Administration (excluding goodwill charges) (11.2) (10.7) 4% Operating profit (excluding goodwill charges) 11.5 10.5 10%
Slide 9: Tax and pensions
9 Tax and pensions • Effective tax rate: 26.9% (FY2004: 27.3%) R&D tax credit benefit Benefit expected to continue in future years • Pensions FRS17 Pension deficit pre-tax: £15.9 million (FY2004: £14.9 million) post-tax: £11.1 million (FY2004: £10.4 million) Investment return more than offset by dis
Slide 10: Cash flow
10 Cash flow £m £m £m Operating profit 11.5 Operating cash flow 17.2 Net funds - 30 Sep 2004 25.8 (before goodwill charges) Depreciation/sale of 8.4 Interest 1.0 Free cash flow 10.3 fixed assets Change in working (2.7) Tax (3.7) PFI capex (now (10.4) capital* complete) Dividends (4.2) Other capex (n
Slide 11: Cash and net funds balances
11 Cash and net funds balances £million 30 September 2005 Cash and investments 22.9 Issued loan notes 1.1 Net funds 21.8 53.0 Issuable loan notes 1.2 45.1 Deferred cash consideration 2.4 41.1 41.2 40.6 Net funds less deferred consideration 18.2 38.4 38.5 £m 32.7 27.1 • £34 million of exceptional spe
Slide 12: IFRS
12 IFRS • Areas of significant impact Goodwill: amortisation will cease Pensions: deficit on balance sheet (FY2005: £11.1 million) Share-based payments: share options will be expensed: usage already significantly reduced in favour of co-investment scheme: already expensed but calculations change Res
Slide 13: Context
13 Context • Strong performance in FY2005 Spend per customer up in primary and secondary Increased number of Community Connect 3 customers • Building sustainable competitive advantages Education projects: track record of order wins and effective delivery • Market evolution Building Schools for the F
Slide 14: FY2005 market challenges
14 FY2005 market challenges • Commodity PC hardware market University and college PC hardware market increasingly low margin – sales & marketing expenditure reduced Differentiated PC offer performed well (RM ONE, RM Mobile ONE, RM Tablet) • Educational software market Evidence of eLC under-spend and
Slide 15: Customer success
15 Customer success • Customer satisfaction continues to increase Our key non-financial performance measure Three years of year-on-year improvement is a world-class performance* Majority of staff have customer satisfaction element to remuneration • Reputation improving amongst non-customers … but co
Slide 16: Hardware and distribution
16 Hardware and distribution • PC hardware Educationally differentiated PCs have been successful RM ONE significant volume shipped to schools RM Mobile ONE launched in September • Interactive whiteboards Dedicated funding was available until end March 2005 • TTS Turnover and profit slightly ahead of
Slide 17: Delivery
17 Delivery QCA 47,000 pupils taking online tests RM building a track record of excellence compared with 1,200 in 2004 225,000 exam scripts processed Cambridge Assessment electronically 1,500 teachers using Tablet PC Warwickshire LEA • Excellent progress on all projects based teacher toolkits 4,200
Slide 18: The 'education enterprise solution'
18 The ‘education enterprise solution’ Current approach Enterprise approach Separate systems Integrated web-delivered systems Minimal interaction between systems / no shared data Common data standards / no barriers between systems Limited, piecemeal access outside the establishment Consistent access
Slide 19: Education information systems; Teacher development
19 Education information systems Leading position in education data services • Welsh national pupil database • Performance tables • RAISEonline – single authoritative source of school performance data (formerly iPANDA) Management information systems • Web-delivered school MIS product to launch at BE
Slide 20: Assessment
20 Assessment RM leads the way in online assessment • UK assessment landscape … the innovative new Key Stage 3 (age 12-13) >50 million individual scripts annually ICT Literacy Assessment created by the British government’s Qualifications and Curriculum c. £750 million spend Authority (QCA) is garner
Slide 21: Scottish Schools Digital Network
21 Scottish Schools Digital Network We had 96 expressions of interest and many excellent • A national education intranet for Scotland bids. It was a difficult choice but the winner’s Brings together education delivery and school management educational credentials Single ‘portal’ for > 800,000 users
Slide 22: Scottish Schools Digital Network
22 Scottish Schools Digital Network • Technically advanced Learners Personalised, highly secure access Close integration with existing school management systems Web-based: access anywhere •Teacher planning & preparation tools • National scale •Education workflow 32 local authorities Education Teache
Slide 23: Building Schools for the Future
23 Building Schools for the Future • 15-year programme to rebuild/refurbish all secondary schools in England £45 billion total spend / £5 billion ICT spend Indications that programme may extend to primary schools in future • RM target Leading ICT partner to the BSF programme, winning at least 30% of
Slide 24: Building Schools for the Future
24 Building Schools for the Future Update on phasing data Number of LEAs Total schools Procurement Number of BSF schools opening (rebuilds & refurbs completed) in wave In wave starts from GY 2007/08 GY 2008/09 GY 2009/10 GY 2010/11 Wave 1 18 170 2004 44 71 36 16 Wave 2 10 89 Q4 2005 42 42 5 Wave 3 1
Slide 25: Order book
25 Order book Visibility improving • Order intake in FY2005: Up 15% on FY2004 Significantly exceeded shipments in year • Year end order book and deferred revenue: Up significantly on FY2004 £140 million increase since FY2002 Represent > 85% of FY2005 turnover • Business remains subject to short-term
Slide 26: Outlook
26 Outlook • Still early in the year Visibility improving … but RM remains a seasonal business • Individual schools market weakness since beginning of 2005/06 academic year Workforce remodelling programme: every teacher to have 10% non-contact time from Sept 2005 Introduction of ‘teaching and learni
Slide 27: Conclusions
27 Conclusions • Strong performance … despite tricky market conditions and BSF investment • Track record of delivery Orders Turnover Profit Customer satisfaction • Improved visibility • Well-positioned for long-term opportunity
Slide 28: RM plc Preliminary Results
28 RM plc Preliminary Results Year ended 30 September 2005 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 – Open
Slide 29: Appendices
29 Appendices SN
Slide 30: Education projects
30 Education projects Education projects Complex service delivery 9 Multi-year 9 > £5m revenue 9 Contract Value/phasing Term Dudley Grid for Learning Contract award: Jan 1999 >£50m broadly flat 10 years RM characteristics Classroom 2000 Lot 3 (Northern Ireland) Contract award: Feb 2003 £21m early h/
Slide 31: Education projects
31 Education projects Accounting treatment and financial impact • Pre-contract costs not taken to the balance sheet unless contract “virtually certain” In accordance with UITF 34 “Pre-contract costs” • Separable elements Accounted for using relevant Group accounting policy for that element Turnover
Slide 32: Building Schools for the Future
32 Building Schools for the Future A major opportunity for RM BSF – critical success factor RM • Secondary schools: £45 billion, 15-year programme Educational vision 9 Rebuild/refurbish all secondary schools in England, including: Technology expertise 9 school build; facilities management; ICT manag
Slide 33: Awards
33 Awards • BETT Awards Easiteach Literacy / Easiteach Numeracy / MathsAlive / Kaleidos • E-learning Awards Sonica Spanish • Education Resources Awards RM ONE / TTS Active World Play Mats • Nursery World Awards TTS Active World Play Mats / Tizzy’s First Tools • Helpdesk Institute Helpdesk Support Te