Slide 1: RM plc: Six months to 31 March 2010
RM plc p Six months to 31 March 2010 Terry Sweeney Chief Executive Iain McIntosh CFO
Slide 2: Agenda
Agenda g Headlines Strategy gy Financial review Operating review Learning Technologies Education Resources Assessment and Data Services Looking oo gaahead ead Questions 2
Slide 3: Headlines
Headlines C ti i to Continuing t execute t our strategy t t Good results G Group revenue up 10% Strong growth Education Ed i Resources R Assessment and Data Services Learning Technologies – BSF (Building Schools for the Future) and US Excellent contract win rate Committed revenues at May 2010: £505m
Slide 4: Headlines: Good results
Headlines G d results Good lt Six months to Mar Year to Sep 2009 2010 2009 Revenue £141.9 £156.4m £346.9m Adjusted* profit from operations £0.8m £1.2m £17.7m Adjusted* profit before tax £1 0m £1.0m £1 2m £1.2m £17 9m £17.9m Adjusted* EPS 0.8p 1.0p 15.3p Dividend per share 1.32p 1.39p 6.17p Net cash
Slide 5: Our strategy
Our strategy Add Addressing i ththe global l b l need d for f education d ti products d t and d services i Assessment Platforms Process management and outsourcing for testing and qualifications. Data analysis and dissemination services for teachers, parents and policy makers. } Further build on lead
Slide 6: Revenue by territory
Revenue by territory I Increasing i international i t ti l revenue 3% 2% 8% UK US Europe 87% 99% Rest off World ld H1-2006 H1-2010 £114m £156m 6
Slide 7: Revenue by activity
Revenue by activity R d i reliance Reducing li on UK transactional t ti l hardware h d revenue 26% 34% 34% 36% Managed services 21% Software and services 6% Physical classroom resources 19% 24% Hardware d H1-2006 H1-2010 £114m £156m Managed services: Long-term contract project delivery (inc. softwar
Slide 8: Financial review
Financial review Iain McIntosh CFO
Slide 9: Group revenue and profit
Group p revenue and p profit Assessment and Data Services Education Resources* £156 4m £156.4m Learning Technologies* +10% } First half profitability is not a good £141.9m 10.3 +21% +30% indicator of full-year outcome 7.9 £117.7m +11% 38.3 £17.7m +45% 26.5 7.1 +6% £14.6m 25.0 H1 FY 107.5 107.8 +26%
Slide 10: Revenue visibility
Revenue visibility y Education projects won since period end > 2 years 1 - 2 years £505m < 1 year £425m 115 £380m 7 5% 7.5% 144 5.4% £300m 117 145 80 72 91 201 201 144 Learning Technologies Ed Education ti Resources R 87.1% Assessment and Data Services H1-2007 H1-2008 H1-2009 H1-2010 Committed reven
Slide 11: Customer loyalty
Customer loyalty y y } 66% of Learning Technologies } 45% of TTS customers purchased (UK) transactional revenue comes in every one of the last five years from customers who purchased in every one of the last five years 66% 45% 15% 12% 12% 16% 7% 7% 9% 11% One Two Three Four Five One Two Three Four F
Slide 12: Income statement
Income statement Six months to 31 Mar Year to 30 Sep £ £m 2009 2010 2009 Adjusted Adjusted Adjustments* Total Adjusted Revenue 141.9 156.4 - 156.4 346.9 Cost of Cos o sales sa es ((104.2) 0 ) ((114.5) 5) - ((114.5) 5) ((255.7) 55 ) Gross profit 37.7 41.9 - 41.9 91.2 Gross profit % 26.5% 26.8% - 26.8
Slide 13: Cash flow
Cash flow Cash flow H1-2009 H1-2010 £m Profit from operations 01 0.1 04 0.4 Amortisation 1.2 1.4 Depreciation 4.5 3.9 Share-based payments 0.2 0.5 Other adjustments (0.1) (0.6) Operating cash flows before movements in working capital 5.9 5.6 (Increase)/decrease in inventories 2.0 (2.0) Decrease in r
Slide 14: Balance sheet
Balance sheet Balance sheet 31 Mar 31 Mar 30 Sep £m 2009 2010 2009 Goodwill and acquisition intangibles 36.8 38.5 38.8 Property, plant & equipment and software 22.8 23.7 23.9 intangibles Bank facilities Interest in associates 10 1.0 10 1.0 10 1.0 £25m facility with HSBC committed to July 2013 Deferr
Slide 15: Operating review
Operating review Terry Sweeney Chief Executive Iain McIntosh CFO
Slide 16: RM Learning Technologies update
RM Learning Technologies U d t Update UK – Contract wins in H1-2010 UK Award Customer Activity Term Value Date E ll t project Excellent j t win i rate t Hull BSF 5-year £16m (term) Nov 2009 Three BSF projects (plus four since period end) Essex BSF 5-year £8m (term) Feb 2010 Progress in Academies / O
Slide 17: Learning Technologies performance
Learning Technologies P f Performance £107.5m +0% £107.8m +26% 8.7 +30% 11.3 } First half profitability is not a good £85.6m 11.8 +20% 1.0 14.2 indicator of full-year outcome 2.0 H1 £8.0m FY 82.6 +5% 87.0 -5% 5% 82.3 £6 0m £6.0m -£4.0m -£1.3m -£0.9m H1-2008 H1-2009 H1-2010 2008 2009 2010 US BSF Reve
Slide 18: BSF: Underpinning medium-term growth
Learning Technologies BSF (B (Building ildi Schools S h l for f the th Future) F t ) Underpinning medium-term growth Future BSF Contracted phases Schools opening in year Selected ICT supplier to 19 local Schools Total FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 Authority £m £m authorities (out
Slide 19: Education Resources update
Education Resources U d t Update Strong revenue growth in a flat market O Organic: i +33% 33% Excellent performance in TTS Acquisitions: +12% Isis Concepts and Pisces Art UK curriculum software business stabilised First half profit reflects: Planned investment in capacity to support further growth A
Slide 20: Education Resources performance
Education Resources P f Performance £38.3m +45% } First half profitability is not a good +6% £26.5m indicator of full-year outcome £25.0m £7.1m H1 £6.4m FY £3.1m £1.6m £0.9m H1-2008 H1-2009 H1-2010 2008 2009 2010 Revenue* Adjusted operating profit *H1-2008 and H1-2009 restated with US operations inc
Slide 21: Education Resources growth drivers
Education Resources G Growth th d drivers i Further market penetration Enhanced E h d product d t range Early years and pre-school growth New catalogue areas – furniture, arts and crafts Ch Channel l development d l – direct, di online, li international, i i l trade d EMEA Curriculum software Asia 1
Slide 22: LEGO Education Europe
Education Resources LEGO Ed Education ti E Europe Letter of intent signed to create joint venture with LEGO 51% LEGO LEGO; 49% RM Focus on growing LEGO Education product sales in Europe Distribution of LEGO Education products through channel partners Development of online LEGO Education community In
Slide 23: Assessment and Data Services update
Assessment and Data Services U d t Update Revenue growth ACCA on-screen marking ki Initial activity for International Baccalaureate Contract wins Good period for contract wins Customer Activity Term Award Date On-screen marking relationships with two new strategic partners On-screen IB 5-year Jan 20
Slide 24: Assessment and Data Services performance
Assessment and Data Services P f Performance £10.3m } First half profitability is not a good +30% indicator of full-year outcome +11% £7.9m £7.1m £2.6m H1 £2.1m FY £1.2m £0.5m £0.6m H1-2008 H1-2009 H1-2010 2008 2009 2010 Revenue Adjusted operating profit 24
Slide 25: Assessment and Data Services growth drivers
Assessment and Data Services G Growth th d drivers i Strategic partners St Strong, growing i and d global l b l strategic t t i customer t base b Examination boards, other qualification providers, government agencies Market expansion Assessment c.50% of UK schools scripts marked on line Move to on-s
Slide 26: Looking ahead
Looking ahead Terry Sweeney Chief Executive
Slide 27: UK market landscape
UK market landscape p March 2010 Budget Common Conservative / Liberal Democrat Ed Education ti spending di allocations ll ti confirmed fi d manifesto themes 1.3% spending increase in year to April 2011 Maintaining ‘frontline’ education Focus on efficiency improvements and reducing central costs Pupi
Slide 28: US market landscape
US market landscape p Obama proposed education budget increase of 8% Technology key to Obama’s education plans Office of Educational Technology formed National Education Technology Plan published: Learning Powered by Technology Five key focus areas: Learning, Assessment, Teaching, Infrastructure, Pr
Slide 29: Outlook
Outlook C ti i to Continuing t execute t our strategy t t Highly seasonal business Extremely busy summer ahead School commissioning – BSF and Academies Largest ever on-screen marking programme Continued high demand for education resources products US classroom technology installations Full-year reve
Slide 30: Questions
Questions i
Slide 31: Appendices
Appendices di
Slide 32: Investment proposition
Investment proposition p p Superior education solutions Strong UK market positions U Learning UK ea g Technologies ec o og es UK Assessment and Data UK Education Resources Rapidly developing international channels 150% growth in international sales in FY-2009 Growing visibility Committed revenues: £
Slide 33: 35 years of superior solutions
35 y years of superior p solutions First in innovation Fi t Windows First Wi d PC for f UK education d ti Learning Spaces First PC networks for UK education Data First UK education Internet service Services First UK education Internet content service On-Screen First non-proprietary whiteboard softwa
Slide 34: Learning Technologies UK Market Snapshot
Learning Technologies UK Market Snapshot UK and d RoW R W £1.0bn UK schools ICT spend Source; Atkins / Kable RM Education – UK Product Customer Funding g source Competition p Local dealers Classroom technology Individual schools Individual school budgets Generic technology suppliers Managed services
Slide 35: A UK secondary school
A UK secondary y school Education delivered through ICT Dimensions …across across all curriculum subjects Ann al budget: Annual b dget £5.2m £5 2m Interactive classroom technology 1,000 pupils High computer:pupil ratio 165 staff (100 teachers) Learning platforms 3 ICT staff Home access and parental
Slide 36: BSF: Typical project
BSF T i l project Typical j t Allocation of spend – typical BSF project 15% Data centre Central systems and software Recognised on acceptance* Learning Platform User equipment (inc. PC hardware) 40% In-school systems and software Network equipment Recognised g on acceptance* p Software 10% Implement
Slide 37: BSF: Contract awards
BSF C t t awards Contract d RM Other ICT suppliers Authority Consortium Wave Authority ICT Supplier Wave Bradford – Phase 3 ICT only 6 Manchester Ramesys (Capita) 1 Camden BAM 5 Nottingham Ramesys (Capita) 2 Ealing Balfour Beatty 5 Tameside Ramesys (Capita) 3 Tower Hamlets Ramesys (Capita) 2 Essex S
Slide 38: Accounting treatment
Accounting treatment P j t Projects 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 profit recognised as the goods
Slide 39: Learning Technologies US Market Snapshot
Learning Technologies US Market Snapshot US $17.5bn K-12 schools ICT spend Source: Compass Intelligence RM USA Product Customer Funding source Competition Classroom technology School Districts District budgets Generic technology suppliers Learning platform School Districts District budgets - Curricu
Slide 40: Education Resources UK Market Snapshot
UK Market Snapshot Education Resources £1.5bn Individual schools resources spend – England TTS Source: DCSF Consistent Financial Reporting Product Customer Funding source Competition IIndividual di id l establishment t bli h t Curriculum resources Individual schools Findel / small specialists budget
Slide 41: Assessment and Data Strategic Partners
Strategic Partners Assessment and Data Cambridge Assessment International Baccalaureate ACCA RM Assessment DCSF Product Customer Funding source Competition On-screen marking Qualification providers Customers’ operating costs DRS / Pearson QCDA E-Testing Qualification providers Customers’ operating c
Slide 42: Awards
Awards PfS Awards 2008 Learning Impact Awards 2009 Leeds – Innovation in ICT Glow Education Resources Awards ICT Excellence Awards 2009 TTS Activity Tree TTS Easi-Speak Support for Schools Podium BETT Awards Ten Best Web Support Sites Inclusive Technology 2004/2005/2006 Podium Help Desk Institute Aw
Slide 43: Market landscape
Market landscape p Proportion of GDP spent on education 1995 2000 2006 Primary / All Primary / All Primary / All Secondary education Secondary education Secondary education UK 3.6% 5.2% 3.5% 4.9% 4.3% 5.9% United States 3.8% 6.6% 3.9% 7.0% 4.0% 7.4% Australia 3.6% 5.3% 4.0% 5.6% 4.0% 5.7% OECD avera
Slide 44: UK market landscape
UK market landscape p 3 8% 3.8% 3.1% 3.2% 0.8% -0 0.2% 2% -0.8% -0.9% Central Local Education Police Health Defence Total Public Government Government Sector SITS UK public sector software and IT services market Cumulative Annual Growth Rate 2009-2013 Assumptions: Conservative Government implementin
Slide 45: UK market landscape
UK market landscape p UK Education Budget School School spend on NDPBs £88bn* resources and ICT School staff salaries *Government funding for 2009/10 45 source: Budget 2009
Slide 46: Acquisitions
Acquisitions q Business Activities Date Net cost 3T Productions Interactive design and development Mar 2000 £5 5m £5.5m Softease Educational software Oct 2001 £4.8m Helicon Educational content Feb 2002 £0.7m Forvus Data analysis y Jul 2003 £4.0m peakschoolhaus Education inspection services Oct 2003
Slide 47: Pensions
Defined Benefit Pension Scheme Pensions 2002: retirement age increased to 65 2003: closed to new members 2005: increase in employee contributions 2007: 5% cap on pensionable salary increase IAS 19 deficit 2007/08: £3.5m special company contribution M 2010:£15.7m Mar 2010 £15 7 (Sep (S 2009: 2009 £12
Slide 48: Investment income/finance costs
Investment income/finance / costs Investment income £’000 H1-2009 H1-2010 FY-2009 Bank interest 122 202 226 Income from sale of finance lease debt 338 417 622 Other finance income 172 102 344 632 721 1,192 Finance costs £’000 £ 000 H1-2009 H1 2009 H1-2010 H1 2010 FY-2009 FY 2009 Interest on bank ove
Slide 49: Working capital
Working g capital p Working capital 31 Mar 31 Mar 30 Sep £m 2009 2010 2009 Inventories 18.4 21.9 19.9 Trade receivables 41.4 47.3 64.8 Long-term contract balances 10.3 14.0 13.2 Other receivables 8.0 10.3 8.1 Prepayments / accrued income / other receivables Trade payables (21.3) (29.2) (27.2) Other