Slide 1: 6 months to 31 May 2014
6 months to 31 May 2014 David Brooks Chief Executive Officer lain Mcintosh Chief Financial Officer To be read in conjunction with the Interim Results announcement released on 7 July 2014
Slide 2: Overview
Overview • Good operational performance – As expected revenue declined 22.5% – Adjusted operating margin increased from 4.1% to 8.0% • Reshaping of Education Technology continues • Organic growth and strong margins in ADS and Education Resources • Strong balance sheet – Cash and short term deposits
Slide 3: Business review: Education Technology
Education Technology • New divisional Managing Director started 1 May • Services offerings being repositioned to appeal to changed market post BSF • RM Neon new network management monitoring suite launched within Infrastructure Solutions • Growth in School Management Systems within Digital Platforms
Slide 4: Group Revenue & Adjusted Operating Profit
Group Revenue & Adjusted Operating Profit Revenue Adjusted operating profit declined by 22.5% increased by 49% £7.3m £118.8m Adjusted Operating Profit 120 £4.9m £92.1m by Segment* £m Revenue £m 100 80 60 40 20 0 6 months to 31 May 2013 6 months to 31 May 2014 *Adjusted operating profit and EPS are b
Slide 5: FY14 Half-Year Divisional Summary
FY14 Half-Year Divisional Summary 6 months to 31 May 2014 Assessment Education Education Unallocated and Data Total £m Resources Technology Central costs Services 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 Revenue 9.8 10.1 26.4 29.3 82.6 52.7 - - 118.8 92.1 Adjusted Operating 0.8 2.0 3.0 3.8
Slide 6: Assessment and Data Services
Assessment and Data Services Financial performance Revenue Adjusted operating profit £26.5m £4.1m £2.0m £9.8m £10.1m £0.8m Full year 2013 H1 2013 H1 2014 Full year 2013 H1 2013 H1 2014 6
Slide 7: Assessment and Data Services
Assessment and Data Services • E-marking pilot with AQA • Caribbean Examinations Council win internationally • Margins remain strong with H1 performance flattered by cumulative impact of improved forecast lifetime profitability on an established long term contract 38% e-marking and e-testing Data Se
Slide 8: Education Resources
Education Resources Financial performance Revenue Adjusted operating profit £54.0m £7.2m £29.3m £3.8m £26.4m £3.0m Full year 2013 H1 2013 H1 2014 Full year 2013 H1 2013 H1 2014 8
Slide 9: Education Resources
Education Resources • Organic revenue growth – TTS UK Catalogue & Online revenue increased 12.4% – TTS International revenue increased 53.6% – TTS UK trade & CSR revenue decreased by 24.2% – SpaceKraft revenue increased 1.8%; no longer loss making • Good margins which increased from 11.3% to 13.1% 7
Slide 10: Education Technology
Education Technology Financial performance Revenue Adjusted operating profit £181.2m £8.6m £82.6m £3.0m £52.7m £2.5m Full year 2013 H1 2013 H1 2014 Full year 2013 H1 2013 H1 2014 10
Slide 11: Reshaping of Education Technology
Reshaping of Education Technology • Third party hardware partners contracted 6% – Misco to provide PC & client device hardware 7% – Kelway to manage hardware maintenance & warranty claims • Move into refurbished single office for 17% Abingdon-based staff to complete in Q4 53% • Factory exit on track
Slide 12: Financial summary: Education Technology
Education Technology • New divisional Managing Director started 1 May • Services offerings being repositioned to appeal to changed market post BSF • RM Neon new network management monitoring suite launched within Infrastructure Solutions • Growth in School Management Systems within Digital Platforms
Slide 13: Group Financial Summary
Group Financial Summary 6 months to 6 months to Year to £m % Change 31 May 2013 31 May 2014 30 Nov 2013 Revenue 118.8 92.1 (23)% 261.8 Adjusted* EBITDA 7.0 9.0 28% 21.7 Adjusted* operating profit 4.9 7.3 49% 17.2 Adjusted* profit before tax 4.4 7.0 58% 16.4 Adjusted* diluted EPS 3.6p 6.2p 72% 12.4p
Slide 14: Cash Flow Bridge
Cash Flow Bridge 80 £6.1m 70 60 Cash £m 50 £(16.9)m 40 £(8.0)m £(1.9)m £(2.2)m 30 £63.2m 20 £40.3m 10 0 Cash & short Cash generated Dividends Pension escrow Pension Other Cash & short term deposits at by operations account contribution term deposits at 30 November established 31 May 2014 2013 14
Slide 15: Pensions
Pensions IAS 19 balance sheet deficit decreased since last year end £m Investments at 31 May 2014 Equities 48% Deficit at 30 Nov 2013 (15.8) £(12.7)m net of tax Fixed income Escrow account establishment 8.0 • Gilts 24% • Corporate bonds 23% Cash contribution 1.9 Cash 5% Asset returns 6.4 Total 100%
Slide 16: Pension Risk Mitigation
Pension Risk Mitigation • Escrow account established with £8.0m for risk mitigation exercises – Funds usage to be mutually agreed between Company and Trustees • Pensioner buy-in – Quotations received from 4 providers to de-risk pensions in payment – Buy-in instrument expected to replace fixed income
Slide 17: Outlook
Outlook
Slide 18: Outlook
Outlook • Education Resources continues to grow organically with strong margins • ADS operational focus on the biggest volume of scripts to date. Margins remain good • One-off benefit of lower costs than planned through the Education Technology restructuring process in FY14. Repositioning to softwar
Slide 19: Appendices
Appendices RM pic
Slide 20: We make technology work for schools' teaching and learning needs
We make & Software Tools Suppor technology work for schools’ teaching and learning needs Schools. — Management ss ; Solutions _“ ""S — 3 , CPPS A eS Connectivity Consultancy ~~ reno & e-safety Education 20
Slide 21: Assessment: technology to streamline the assessment cycle
AWARDING ORGANISATION Soe Saif im mini ed | HU 0) REGULATOR if ; NTT @ Se TELL é @ |alalala|b6L@ RGiarcacr e% ar © RM Results Powerful technology and expertise to streamline the assessment cycle, from exam writing to results analysis and presentation 21
Slide 22: Education Resources
Education Resources (is) :SpaceKraft 22
Slide 23: Income Statement
Income Statement 6 months to 31 May £m 2013 2014 Adjusted Adjustments Total Adjusted Adjustments Total Revenue 118.8 - 118.8 92.1 - 92.1 Cost of sales (85.3) - (85.3) (57.0) - (57.0) Gross profit 33.5 - 33.5 35.1 - 35.1 Gross profit % 28.2% - 28.2% 38.1% - 38.1% Operating expenses (28.5) - (28.5) (2
Slide 24: Balance Sheet
Balance Sheet £m 31 May 31 May 2013 2014 Goodwill and acquisition intangibles 15.3 14.7 Property, plant & equipment and software intangibles 12.7 9.1 Other receivables 1.9 1.9 Deferred tax assets 7.4 4.9 Total non-current assets 37.4 30.6 Inventories 17.0 11.6 Trade & other receivables 38.6 32.5 Tax
Slide 25: Cash Flow
Cash Flow 6 months to 6 months to Operating cash flows – £m 31 May 2013 31 May 2014 Profit from operations 5.1 7.1 Amortisation 0.4 0.3 Depreciation 1.8 1.5 Share-based payments 0.2 0.4 Other adjustments 0.5 (0.5) Operating cash flows before movements in working capital 8.0 8.8 Increase in inventori
Slide 26: Impact of Revised IAS19 Pension Standard
Impact of Revised IAS19 Pension Standard The adjustments made as a result of adopting IAS19 Employee Benefits in the FY13 Income Statement are as follows: Assessment Unallocated Education Education £m and Data Central Total Resources Technology Services costs Interim FY13 Adjusted operating 0.9 3.0