RM plc · LSE:RM.
RM — H1 2004 Earnings Presentation
31 slides from RM's earnings presentation, May 2004
Slide 1: RM plc – Interim Results
1 RM plc – Interim Results Six months to 31st March 2004 Tim Pearson - CEO Mike Greig - Group Finance Director
Slide 2: Headlines
2 Headlines • Strong first-half performance – sizeable one-off benefits Contribution from 2003 Education Project wins Favourable US dollar rate movements • Business model developing Education Project wins Emerging examinations and assessment opportunity Renewed investment in educational software Ini
Slide 3: Financial headlines
3 Financial headlines Six months to 31st March 2004 2003 • Turnover £108.9m £85.4m • Profit before tax (excluding goodwill amortisation) £2.7m (£0.8m) • Net cash inflow from operating activities £7.9m £4.3m • Net funds at 31st March £34.4m £33.2m • Diluted EPS before goodwill amortisation 2.2p (0.6p
Slide 4: Turnover
4 Turnover 140 120 100 • Turnover growth of 28% 80 £m Major contribution from Education Projects won last year 60 40 Impact of recently acquired subsidiaries 20 Individual schools/colleges turnover flat 0 H100 H200 H101 H201 H102 H202 H103 H203 H104 nb: tight education funding in GY03/04 • Infrastru
Slide 5: Gross profit percentage
5 Gross profit percentage • Subsidiaries’ gross margins above Group average • Benefit from US dollar rate decline during period • Higher volumes contribute to better recovery of fixed costs 25.1 25.2 28.6 27.8 25.3 26.6 24.3 • Education Projects 22.3 22.2 % Separable elements – margin recognised on
Slide 6: Operating costs
6 Operating costs (excluding goodwill amortisation) 26.7 25.0 23.3 23.0 22.9 22.8 22.2 • Recently acquired subsidiaries 21.0 £m • Increased Education Projects bidding costs 16.2 and education services development All expensed during period • Research and development 2000 2001 2002 2003 2004 Will inc
Slide 7: Profit and loss
7 Profit and loss Six months to 31st Mar Twelve months to 30th Sep £’000 2004 2003 2003 Turnover 108,944 85,363 215,494 Gross profit 28,968 21,623 53,285 Selling & distribution (15,090) (13,293) (26,968) Research and development (6,614) (5,760) (11,729) Administration (excluding goodwill amortisatio
Slide 8: Balance sheet
8 Balance sheet • Good cash position £m 31st March 30th September Particularly good debtor position at half-year 2004 2003† 2003† • Acquisitions – cash impact over last 12 months Intangible fixed assets 16.3 5.9 10.8 Tangible fixed assets 15.2 17.4 17.1 Forvus – £3.3 million (July 2003) Stocks 12.0
Slide 9: Cash flow
9 Cash flow • Further excellent cash generation £m Six months to 31st Mar Twelve months to 30th Sep • Average cash below half-year end position 2004 2003 2003 Net cash inflow from 7.9 4.3 18.6 • Future cash requirements for PFI projects operating activities Dudley refresh capex – £5 million in 2004
Slide 10: Strategic direction
10 Strategic direction Controlling costs Improving efficiency and effectiveness Areas of growth Grow market share in educational ICT business Develop education services businesses Win and deliver strategic projects
Slide 11: Schools funding
11 Schools funding • Government year 2004/05 settlement Generally more benign funding environment … but schools still unwinding deficit budgets CSR 2002 77 Still anticipate flat ICT spend in the short-term Budget 2004 68 72 63 • Budget: CSR settlement pre-announced £ billion 4.4% pa (real terms) y-o
Slide 12: Support Broadband Services
12 Network Support Software Learning Tools Software Whole Broadband Course Services Software ICT Managed Education Services Services Education Hardware Services Infrastructure Education
Slide 13: Market / competition analysis
13 Market / competition analysis Managed Broadband Network Learning Tools Whole Course ICT Education Education Hardware Support Services Services Software Software Software Services Services Market Size Large Medium Medium Small Medium Medium Medium Large Large RM 9 9 9 9 9 9 9 9 9 Dell 9 Viglen 9 9
Slide 14: Individual schools ICT business
14 Individual schools ICT business • Market remains broadly flat • RM revenues in line with last year +ve factors: Volume, interactive whiteboard initiative, broadband/Internet vs –ve factors: ASP decline (c. 6%), commodity competition, difficult funding environment • RM remains clear market leader
Slide 15: Individual schools ICT business
15 Individual schools ICT business • Broadband and Internet DfES focus area Revenue growth Targeted investment in educational-specific value added – filtering, caching, email • Hardware Differentiation through innovative design – All-in-One / Tablet PC / Intellidesk 34% increase in volumes Strong ma
Slide 16: Individual schools ICT business
16 Individual schools ICT business • Interactive whiteboards Good market share progress over last two years Dedicated DfES funding (£25 million in each of GY 2003/04 & GY 2004/05) Fiercely competitive market environment Margin pressure • Easiteach An emerging standard for interactive whiteboard soft
Slide 17: Education Projects
17 Education Projects Education Projects • £110 million Education Project wins in 2003 Complex service delivery 9 • £36 million Education Project wins in 2004 Multi-year 9 Project Estimated value/term Status > £5m revenue 9 Warwickshire PFI £16m/8 years Awarded RM Competences Dedicated bid team 9 Ne
Slide 18: Education projects
18 Education projects School Warwickshire PFI Classroom Data Tablet PC • Overview Projector £16 million / 8-year PFI project Wireless Access Point Classroom PC 1,500 teachers / 1,500 classrooms / 40,000 pupils • Teacher Toolkit School network Wireless Tablet PC Kaleidos Existing Classroom data proje
Slide 19: Education – forces for change
19 Education – forces for change • Workforce reform Reducing teacher workload New models for delivering education support • 14-19 reform Radical proposals for delivery and assessment “Electronic transcript” of achievement • Examination and assessment Response to 14-19 agenda On-screen testing ICT “b
Slide 20: Examination and assessment services
20 Examination and assessment services • Examinations and assessment “On-screen assessment will shortly touch the life of every learner in this country … Public examinations cost c. £750 million* pa in the UK “Advances in technology have given us the Significant changes anticipated over next decade
Slide 21: QCA KS3 ICT Project
21 QCA KS3 ICT Project Computer-delivered and marked ICT assessment at KS3 First large-scale computer-based test in English schools Process-based assessment Pilot tests in 2004 to 2006 Full test delivery from 2007 600,000 pupils in 4,000 secondary schools Central Point System (national test manageme
Slide 22: Acquisitions
22 Acquisitions 3T Productions (2000 £5.4 million) – interactive design Rationale: joint project working, introduction to Education Project customers Softease (2001 £4.9 million) – packaged educational software Rationale: applications for RM WindowBox, codebase for Easiteach, brand & channel, export
Slide 23: Sentinel Products
23 Sentinel Products • Acquired 27th February 2004 Initial consideration £4.3m (cash), deferred consideration £1.8 million (loan notes) Turnover £1.39m, PBT £0.45m (year to 30th September 2003) • Develops and distributes the Ranger suite of network management tools Appeals to a different customer ba
Slide 24: Board
24 Board • Rob Sirs joins the Board as Executive Director Group Products and Services Director 13-year record of delivery in RM • Five strong, independent Non-Executives Mike Tomlinson appointed as Non-Executive Director (January 2004) Former Chief Inspector of Schools (Ofsted) Currently heading the
Slide 25: Second-half investments
25 Second-half investments • Software R&D BBC plan expected shortly Focus areas company confidential • International RM Australasia New CEO appointed Sydney office opened Exploratory activity in North America Looking at other opportunities
Slide 26: Trading outlook
26 Trading outlook • First half never a good indicator of full-year performance • Performance so far includes one-off benefits: Favourable impact of US dollar exchange rate changes Education Project shipments • Individual schools market remains highly competitive • We expect continuing ICT hardware
Slide 27: Conclusion
27 Conclusion • Still much to do … To compensate for declining commodity ICT margins To build a more robust and resilient business model • … good progress so far Evolving from existing ICT business Education Projects – longer-term visibility Education services – non-deflationary Operating margin – 2
Slide 28: Appendices
28 Appendices RR. www.rm.com
Slide 29: RM Group
29 RM Group Forvus Softease RM RM RM Education Sentinel 3T Australasia Solutions India Products PeakSchoolhaus Data & statistical Packaged Interactive ICT software, Management and Software Packaged Ofsted inspection analysis services educational design and systems and administration development for
Slide 30: Education funding
30 Education funding Local Taxes National Taxes Relatively small centrally administered ICT schemes DfES NDPB-managed projects Learning and Skills Council Aggregated demand on behalf of schools: Local Education Broadband provision Authorities Funding held back for LEA projects HE, FE and Lifelong Le
Slide 31: Education Projects
31 Education Projects Accounting treatment • Separable elements Accounted for using relevant Group accounting policy for that element • Bundled elements Accounted for in accordance with SSAP 9 “Stocks and long-term contracts” Turnover recognised based upon percentage completion Profit only recognise