Slide 1: RM plc Year ended September 2008
RM plc Year ended 30 September 2008 Terry Sweeney Chief Executive Officer Mike Greig Chief Financial Officer
Slide 2: Agenda
Agenda Highlights Financial Review Business Review Outlook and Prospects Questions 2
Slide 3: A very good year
A very good year Strong results Revenue and profits up In line with original plan for the year – even after increased BSF investment International revenue nearly doubled Now 6% of Group total Record committed revenues*: £410m (2007: £330m) Excellent BSF win rate: 5 of 10 contracts awarded in year 49
Slide 4: Financial headlines
Financial headlines Year to 30 September 2008 2007 Revenue £289.5m £270.9m Adjusted* profit before tax £16.4m £15.5m Profit before tax £15.4m £18.4m BSF bid costs £4.7m £3.6m Adjusted* basic EPS 13.1p 12.4p Dividend per share 5.81p 5.49p paid and proposed Operating cash flows £24.0m £23.5m Cash £18.
Slide 5: Revenue
Revenue Revenue up £18.6m (+6.9%) 263.3 262.7 262.3 270.9 289.5 Acquisitions: £10.0m (3.7%) FY-2008 and full-year impact of FY-2007 Organic growth: £8.6m (3.2%) FY-2008 saw continuation of 5-year trends FY-2004 FY-2005 FY-2006 FY-2007 FY-2008 Decreases: Revenue (£m) Commodity hardware: from 51% to 3
Slide 6: Revenue & profit by business
Revenue & profit by business Learning Education Assessment FY-2008 Technologies Resources and Data Total £m (inc. Education (inc. Curriculum Management Systems) Software) Services Revenue 213.1 57.0 19.4 289.5 Divisional profit 11.6 7.1 2.1 20.8 before BSF bid costs BSF bid costs (4.7) - - (4.7) Net
Slide 7: Operating costs & investment income
Operating costs & investment income Operating costs Operating costs £m FY-2008 FY-2007 Acquisitions responsible for all of increase Selling & distribution 35.1 34.0 Impact of FY-2008 acqs and full-year of FY-2007 acqs: £3.2m Research & development 13.2 14.9 Administration 14.8 11.1 Administration Op
Slide 8: Profit margin
Profit margin Transformational investment in BSF programme BSF net investment 20 RM’s Learning Technologies business moves to long-term contracts Profit 15 Long payback – individual contracts c.5 years (from bid) 10 Two sets of sales costs during transition 5 0 Adjusted operating profit before BSF n
Slide 9: Income statement
Income statement Year to 30 September 2007 2008 £m Adjusted Adjusted amortisation of acquisition related Total intangibles Revenue 270.9 289.5 - 289.5 Cost of sales (197.4) (211.7) - (211.7) Gross profit 73.5 77.8 - 77.8 Selling & distribution (34.0) (35.1) - (35.1) Research & development (14.9) (13
Slide 10: Balance sheet
Balance sheet Balance sheet 30 Sep 30 Sep Strong Balance Sheet £m 2008 2007 Goodwill and acquisition intangibles 34.6 27.9 Cash and cash equivalents: £18.3m Property, plant & equipment and software intangibles 24.7 23.5 Interest in associates 1.0 - Deferred tax assets 1.5 2.7 Total non current asset
Slide 11: Cash and funds flow
Cash and funds flow £m £m £m Net funds less Cash generated by deferred consideration Profit from operations * 14.6 15.4 27.4 operations 30 Sep 2007 Depreciation/amortisation* Leasing income less Net cash inflow from 9.5 0.5 9.2 gain on sale of fixed assets interest paid operating activities Change i
Slide 12: Working capital
Working capital Seasonal business Cash & cash equivalents £m FY-2008 FY-2007 FY-2006 FY-2005 Summer peak in activity & working capital requirements 30 September 18.3 29.3 30.1 22.9 Year average 7.0* 16.9 18.9 10.3 Year minimum (9.0)* (1.8) 7.3 0.0 *before acquisition facility borrowing Working capit
Slide 13: Cash and financing
Cash and financing Cash-generative business with conservative financial management Education customers want low-risk stable partner for long-term contracts Reinforced focus on cash Put in place long-term bank facilities £25m facility with HSBC signed in July 2008 Committed for five years To provide
Slide 14: Pensions
Pensions Pension deficit (IAS19): Sep 2008: £0.6m (Sep 2007: £3.3m) £2.7m reduction in year: Additional cash contributions: £3.6m Special contribution to pension scheme: £1.5m Continuation of payment in excess of service charge: £2.1m Market-related movements: (£0.9m) Asset value reduction: (£9.7m)
Slide 15: Shareholder return
Shareholder return Dividend Total: 5.81p per share 6 5.81 5.49 Interim: 1.26p per share 5.17 4.85 4.60 4 Final: 4.55p per share 2 Cash cost: £5.4m 0 2004 2005 2006 2007 2008 Total dividends over last five years Dividend per share (p) 25.92p per share Cash cost: £23.7m 150 Sector 140 RM Total shareho
Slide 16: State of play: RM Group
State of play RM Education focus Deep knowledge and understanding RM Group Assessment Learning Good cultural fit and Education Resources Technologies International (inc. Education Management Data Services (inc. Curriculum Software) Diverse group Systems) Outsourced IT services General resources for
Slide 17: State of play: Market
State of play Market Education is a resilient market Global: priority for developed and developing nations UK: Three-year budgets at central & school level; Government commitment to long-term capital investment Customers not directly affected by economic conditions …but, in longer term, public spend
Slide 18: Strategy
Strategy Education markets only Education customers need suppliers with specialist understanding Deep knowledge of market needs Values shared with the customer base Scale …and we can further develop our world-class education expertise Broadly-based education Group Target wider education budgets, not
Slide 19: Learning Technologies
Learning Technologies Products / services Learning Technologies £m FY-2008 FY-2007 Community Connect 4 launched Revenue 213.1 215.6 550 customers in FY-2008; strategic upgrade for customers Divisional profit 11.6 10.5 before BSF bid costs RM Asus miniBook success 41,000 units sold; perception-changi
Slide 20: Learning Technologies: BSF
Learning Technologies BSF Win rate ahead of target FY-2008 £m BSF Five contract wins (out of ten awarded) during year – 49.5% by value Committed revenue 191 One contract win since year end Twelve contracts in total (out of 26 awarded) Hackney Sunderland Middlesbrough Newham Haringey Southwark £7m £1
Slide 21: Education Resources
Education Resources Growing & profitable Education Resources £m FY-2008 FY-2007 51% increase in revenues Revenue 57.0 37.8 Divisional profit 7.1 6.6 Strong performance in general education resources Organic: new curriculum areas and products; market share Acquisitions: DACTA, SpaceKraft, Inclusive E
Slide 22: Education Resources: offer and acquisitions
Education Resources Focused offer Acquisitions Educationally valuable classroom resources: TTS, MES SpaceKraft Inclusive (25%) Special educational needs: SpaceKraft, Special Direct, Inclusive Special Educational Needs Special Educational Needs Branded products to education (eg: LEGO Education): DACT
Slide 23: Assessment & Data Services
Assessment & Data Services On-screen marking Assessment & Data £m FY-2008 FY-2007 16 long-term contracted customers Revenue 19.4 17.5 …including professional bodies and international customers, as well as Divisional profit 2.1 1.2 examination boards c.3 million exam scripts marked on-screen …without
Slide 24: International
International UK is a world-leader in educational technology International £m FY-2008 FY-2007 International activities in each division Revenue 16.5 8.8 US: RM Educational Software Inc entered market in 2003, profitable since FY-2007 Computrac in FY-2009 Europe: International DACTA European distribu
Slide 25: Computrac
Computrac Interactive whole-class teaching solution provider Southeastern US (based in Georgia) 54 employees Revenue: $28.8m; operating income: $1.3m (year to July 2008) 100% education Solutions supplied to 10,000 K-12 (kindergarten to 12th grade) classrooms Electronic whiteboards, interactive pads,
Slide 26: Outlook
Outlook Early in the year Highly seasonal business Economic climate Creates opportunities as well as threats Adopting cautious approach on spending Continuing to invest in BSF FY-2009 bid costs: c.£4.5m FY-2009 will see revenue growth Computrac BSF 26
Slide 27: Looking ahead
Looking ahead Resilient market Public sector customers Medium-term funding visibility in UK Financially strong Committed revenues: £410m Strong balance sheet and committed bank facilities Strong market positions Opportunities ahead in all our businesses 27
Slide 28: Appendices
Appendices 28
Slide 29: Group structure
Group structure RM Group Assessment Education Learning and Resources Technologies International Data Services (inc. Curriculum Software) (inc. Education Management Systems) RM TTS RM RM Educational Software Inc MES Computrac Forvus Special Direct Sentinel SpaceKraft RM Asia Pacific Inclusive (25%) E
Slide 30: Gross profit & business mix
Gross profit & business mix Previous basis of presentation Gross profit & business mix FY-2008 FY-2007 FY-2006 Rev Gross profit Rev Gross profit Rev Gross profit £m £m % £m £m % £m £m % Infrastructure software & services 94.4 29.7 31.4 90.4 30.3 33.5 88.1 26.7 30.3 Education software & services 51.7
Slide 31: Acquisitions
Acquisitions Business Activities Date Net cost 3T Productions Interactive design and development Mar 2000 £5.5m Softease Educational software Oct 2001 £4.8m Helicon Educational content Feb 2002 £0.7m Forvus Data analysis Jul 2003 £4.0m peakschoolhaus Education inspection services Oct 2003 £1.6m Sent
Slide 32: US market background
US market background Demographics US: >50m K-12 students and growing Projected growth 2005 – 2017: 10% Southeastern US (Georgia, Florida, N. & S. Carolina, Kentucky, Alabama): 7.8m K-12 students Projected growth 2005 – 2017: c.20% 7.5% of GDP spent on education vs. 6.1% in UK (source: OECD) Diversif
Slide 33: Education projects
Education projects Contracts Education Projects Awarded Value Term Dudley Grid for Learning Jan 1999 >£50m 10+2 years Classroom 2000 Lot 3 (Northern Ireland) Feb 2003 £21m complete QCA – Key Stage 3 online testing Feb 2003 £23m 6 years South Yorkshire eLearning Programme May 2003 £34m complete South
Slide 34: Education projects: accounting treatment
Education projects Accounting treatment and financial impact Pre-contract costs not taken to the balance sheet unless contract award virtually certain In practice appointment as selected bidder Separable elements Accounted for using relevant Group accounting policy for that element Revenue and profi
Slide 35: BSF contract awards
BSF Contract awards Local Authority Status Type ICT Supplier Wave Constructor Solihull Contract ICT-only RM 1 BAM / HBG Bristol Contract Consortium Northgate Pathfinder Skanska Bradford Contract Consortium Sun Pathfinder Amey/Costain Newcastle - Consortium In house 1 Aura Lancashire Contract Consort
Slide 36: BSF typical project
BSF Typical project Allocation of spend – typical BSF project Competitive Dialogue Average value of ICT contract: £13m Typical Data centre Stage # bidders Central systems and software 10% Learning Platform OJEU advertisement User equipment Pre-qualification questionnaire 5-10 In-school systems and s