Slide 1: Resources, Software and Services for Education – Year to 30 November 2016
RESOURCES SOFTWARE AND SERVICES FOR EDUCATION YEAR TO 30 NOVEMBER 2016 DAVID BROOKS Chief Executive Officer NEIL MARTIN Chief Financial Officer © 2017, RM plc – 07 February 2017
Slide 2: Highlights
HIGHLIGHTS A solid performance delivering adjusted operating profits up 5% at £18.8m (2015: £18.0m) Adjusted operating margin increases to 11.3% (2015: 10.3%) with revenues down as anticipated by 4% to £167.5m Profit after tax was £11.6m (2015: 15.0m) with the reduction from 2015 being due to the ab
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Slide 4: Financial Summary
FINANCIAL SUMMARY £m FY16 FY15 Variance 3
Slide 5: Cash Flow
CASH FLOW £70m +£0.8m £60m -£8.0m +£13.4m £50m -£4.0m -£4.3m £40m -£3.6m -£1.7m -£0.9m +£0.1m £30m +£48.3m +£40.0m £20m £10m £m Net Cash Cash Proceeds Pension Dividends Tax Capex Share-based Other Net Cash 2015 generated from sale of payments 2016 from operation operations • Cash generated from oper
Slide 6: Pensions
PENSIONS • IAS19 deficit increased to £34.8m (Nov 2015: £21.9m) 5% 40 Discount rate reduced to 3.00% (Nov 2015: 3.85%) 35 IAS19 Deficit level (£m) • • Interest rate sensitivity: 10bps change results 4% 30 Market discount rate in a c. £5m deficit movement 25 • Current recovery plan in place since May
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Slide 8: Education Market Update
EDUCATION MARKET UPDATE SCHOOLS BUDGET UNDER PRESSURE DUE TO INCREASED STAFF COSTS UNDERLYING... Schools’ budget continues Increasing pupil Aggregated buying Digitisation of to be a ring-fenced numbers will increase through Multi Academy end to end exam government priority total schools' budget Trus
Slide 9: Enhancing Children's Learning Through the Provision of Specialist Curriculum Resources
KEY METRICS HOW WE ADD VALUE • 20,000+ schools • Unique own brand IPR curriculum resources • 19,000 different products • 3,000 ‘own IPR products’ ENHANCING • Map our products closely to the curriculum • Direct marketing business model CHILDREN’S • Join up whole school needs by • c. 225 staff supplyi
Slide 10: RM Resources
RM RESOURCES • Revenue decline of 7.4% as school REVENUE ADJUSTED OPERATING PROFIT budgets impacted by increases in staff pension and NI costs 63.5 11.1 59.1 58.8 10.3 10.2 - UK revenues down 10.6% in line with 50.7 market decline of curriculum 7.2 £m £m resources - International revenue growth of 7
Slide 11: RM Resources outlook
RM RESOURCES Difficult UK trading outlook resulting from unfunded increased staff costs set to continue in the short term • International business continues to show strong growth prospects underpinned by own IPR products Strengthening of US Dollar exposes division to c. £1.5m increased costs in 2017
Slide 12: Technology Experts in End-to-End E-Assessment
KEY METRICS HOW WE ADD VALUE • c.20 customers • Very high visibility of future revenues • UK’s largest provider of on-screen marking of high stakes schools’ • Improve quality and speed of exams customer's exam lifecycle • Systems to help create the English TECHNOLOGY schools performance tables • Pro
Slide 13: RM Results
RM RESULTS REVENUE ADJUSTED OPERATING PROFIT • Revenue growth of 3% - 11% growth in e-Assessment 6.8 30.7 31.6 driven by new e-testing contract 27.8 5.6 26.5 £m £m 4.3 4.6 - Data revenues declined 15% in line with planned contract exits • Adjusted operating profit growth of +21% to £6.8m 2013 2014 2
Slide 14: RM Results outlook
RM RESULTS E-assessment business continues to grow with the addition of end to end e-assessment contracts which will more than offset further declines in Data revenues Excellent contract renewal rates with a number of key contracts renewed or in latter stages of renewal Operating margin of 21.5% sus
Slide 15: Trusted Software and Services Partner for School Leaders
KEY METRICS HOW WE ADD VALUE • c.7,000 customers • Save schools money on their IT spend • Full IT outsourcing to 700+ customers • Help schools to make the most of • Direct sales business model their IT investment • UK market leader TRUSTED • Moving to a predictable recurring revenue model • c. 900 s
Slide 16: RM Education
RM EDUCATION • Operating profits up 6% to £5.8m (2015: £5.5m) REVENUE ADJUSTED OPERATING PROFIT • Operating margins improve to 181.2 9.4 7.6% (2015: 6.8%) with revenues down 4% as anticipated 7.7 £m £m 111.9 5.5 5.8 • Continued reshaping of the 80.2 77.0 division - Cost base reduced by c. 10% - Exce
Slide 17: RM Education divisions outlook
RM EDUCATION Well advanced in the software and services transition however further unwind of legacy business and 2016 restructure will result in revenue decline Focus on Managed Services and Digital Platforms will continue to improve the proportion of recurring annuity revenues Ongoing focus on effi
Slide 18: Financial Summary
FINANCIAL SUMMARY REVENUE £M ADJUSTED OPERATING MARGIN* FY16 FY15 Variance FY16 FY15 Variance 58.8 63.5 -7.3% 17.3% 17.5% -20bps 31.6 30.7 2.8% 21.5% 18.1% 340bps 77.0 80.2 -4.0% 7.6% 6.8% 80bps 167.5 174.4 -4.0% 11.3% 10.3% 100bps ADJUSTED OPERATING PROFIT* £M REVENUE ADJUSTED OPERATING PROFIT* FY1
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Slide 20: RM Investment Case
RM INVESTMENT CASE Cash generative Market leading Strong fiscal discipline business specialist brands through changing markets Portfolio business with Strong balance sheet and Increasing proportion of spread of education dividend performance technology recurring budget spend annuity revenue 19 4
Slide 21: Summary RM Group
Another year of delivering solid results in a difficult market Budget pressure on schools expected to continue in 2017 Strong financial management of business has ensured operating margin growth Improving quality of portfolio with growing recurring annuity revenues in technology divisions Proposed a
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Slide 23: Income Statement
INCOME STATEMENT 12 MONTHS TO 30 NOVEMBER 2016 2015 £M ADJUSTED ADJUSTMENTS TOTAL ADJUSTED ADJUSTMENTS TOTAL 22
Slide 24: Cash Flows
CASH FLOWS OPERATING CASH FLOWS - £M 2016 2015 NON-OPERATING CASH FLOWS – £M 23
Slide 25: Balance Sheet
BALANCE SHEET £M 30 NOV 2016 30 NOV 2015 24
Slide 26: Near Term Impact of the EU Referendum
NEAR TERM IMPACT OF THE EU REFERENDUM Foreign Exchange • • Pension • • Education Market • • • 25
Slide 27: Pupil Projections
PUPIL PROJECTIONS Full time equivalent pupil projections for state schools in England 2007 to 2025 Full-time equivalent pupils (000s) 5,500 4,800 4677 4504 Predicted increase (2016-25) of 173,000 FTE pupils 4004 4,100 3325 3,400 2955 Predicted increase (2016-25) of 567,000 FTE pupils 2758 2,700 2,00
Slide 28: UK Education Expenditure (Real Terms)
UK EDUCATION EXPENDITURE (REAL TERMS) Inflation adjusted (base 2015-16) by political party in government Coalition (2010-2015) Cameron £100bn £90bn £80bn Conservative (2015-2020) £70bn Cameron / May Labour (1997-2010) UK Education Spend £60bn Blair/Brown £50bn £40bn Conservative (1987-1997) Thatcher
Slide 29: Staff Costs
STAFF COSTS EMPLOYER STATE PENSION AND NI CONTRIBUTIONS AS % OF EMPLOYEE EARNINGS, FY14 – FY19F 20 National Insurance contributions as a % of employee earnings Pension contributions as a % of employee earnings 16.5% 15 Increases in both pension (2.4% increase) and 14.1% National Insurance contributi