Rm Plc · LSE:RM.
Rm — FY2010 Earnings Presentation
56 slides from Rm's earnings presentation, Sep 30, 2010
Slide 1: RM plc Year to 30 September 2010
RM plc Year to 30 September 2010 Terry Sweeney Chief Executive Iain McIntosh CFO
Slide 2: Agenda
Agenda Headlines Financial review Market context Operations and Strategy Summary and Outlook Questions 2
Slide 3: Headlines
Headlines A resilient esilient b business siness continuing ontin ing to deli deliver e st strong ong results es lts despite challenging circumstances Profitable growth Third successive year of record revenue and profits Strong cash conversion Excellent delivery More new schools commissioned More ex
Slide 4: Financial headlines
Financial headlines Growth G o th in revenue, e en e pprofit ofit and cash ash Increased dividend Year to Sep 2009 009 2010 0 0 change g Revenue £346.9m £380.1m +10% Adjusted* operating profit £17.7m £19.9m +12% Adjusted* basic EPS 15.3p 16.3p +7% Committed revenues at year-end £419m £385m –8% N t f
Slide 5: RM Strategy
RM Strategy gy A focused, growing and resilient international education business Grow Our aim A broadly-based broadly based and international education business To build a growing international business which is known by its shareholders for delivering Deliver profitable growth, its education Superi
Slide 6: RM Operations
RM Operations p Three distinct segments Schools Technology Assessment Platforms Classroom technology including learning Systems, platforms and outsourcing for testing platforms, computer systems and interactive and qualifications. teaching equipment. Collection, analysis and distribution of performa
Slide 7: Our strengths
Our strengths Superior education solutions Strong UK Global growth market market positions Rapidly Financially developing secure international channels h l Forward visibility 7
Slide 8: Financial review
Financial review
Slide 9: Group revenue and profit
Group revenue and profit Diversification Di e sifi ation strategy st ateg continuing ontin ing to prove p o e successful, s essf l with ith growth g o th in all three segments Assessment and Data Services Education Resources Learning Technologies £380.1m +10% £346.9m 22.9 +18% £19.9m +12% +20% 20% 1
Slide 10: Operating profit
Operating profit Reported Repo ted ope operating ating profit p ofit reflects efle ts BSF exceptional e eptional costs osts and exceptional pension credit £24.1m £19.9m £1 5 £1.5m £7 0 £7.0m £1 3 £1.3m FY-2010 adjusted BSF exceptional Exceptional pension Amortisation of FY-2010 operating operating p
Slide 11: Revenue by geography
Revenue by geography Reducing Red ing reliance elian e on UK revenue, e en e further f the international inte national growth g o th in the medium term 4% 2% 7% UK US Europe 99% 87% Rest of World FY-2006 FY-2010 £262m £380m 11
Slide 12: Revenue visibility
Revenue visibility y Strong committed revenues despite review of BSF programme Contracts won since year-end > 2 years 1 - 2 years < 1 year £445m £410m £411 £411m £330m £148m 7% £122m 4% £134m £104m £67m £85m 53% £85m 36% £73m £204m £178m £146m £151m Learning Technologies - BSF Learning Technologies
Slide 13: Shareholder return
Shareholder return Uninterrupted EPS and dividend growth since 2002 Earnings Dividend RM 3-year CAGR: 10% RM 3-year CAGR: 7% RM EPS* RM DPS 16.3p FTSE 250 EPS FTSE 250 DPS 6.64p 15 2p 15.2p FTSE Small Cap EPS FTSE Small Cap DPS 6.17p 5.81p 13.0p 5.49p 12.3p 5.17p 11.5p 4.85p 4 60p 4.60p 10.5p 4.35p
Slide 14: Income statement
Income statement Year to 30 Sep £m 2009 2010 Adjusted Adjusted Adjustments* Total Revenue 346.9 380.1 - 380.1 Cost of sales (255.7) (280.4) - (280.4) Gross profit 91.2 99.7 - 99.7 Gross profit % 26.3% 26.2% - 26.2% Selling & distribution (39 8) (39.8) (45 7) (45.7) - (45 7) (45.7) Research & develop
Slide 15: Cash flow
Cash flow 140% cash conversion Operating cash flows – £m FY 2009 FY-2009 FY 2010 FY-2010 Profit from operations (excluding pension credit) (A) 16.1 16.9 Amortisation 2.4 2.5 Depreciation 8.3 7.6 Share-based payments 1.0 1.4 Other adjustments (0.4) 0.4 Operating cash flows before movements in working
Slide 16: Balance sheet
Balance sheet 30 Sep S 30 Sep S £m 2009 2010 £m 2009 2010 Cash and cash 13.3 13.8 equivalents Goodwill and acquisition intangibles 38.8 37.9 Bank loans (8.3) (11.5) Property, p y, plant p & equipment q p and software intangibles g 23.9 24.2 I Issued d loan l notes t (3 6) (3.6) (1 4) (1.4) Interest
Slide 17: Cost control
Cost control Accelerating delivery capability in India Headcount up 60% (September 2009 to September 2010) Development RM Easiteach Next Generation largely developed in India Shared services Rationalisation Logistics and warehouses Business integration Restructuring Rapid response to DfE BSF review
Slide 18: Pensions
Pensions Action A i to significantly i ifi l reduce d risk i k in i UK defined benefit pension scheme UK Defined Benefit Pension Scheme May 2009 triennial valuation agreed Consistent record of management action 2002: base retirement age increased to 65 2003: closed to new members Management g action
Slide 19: Change of year end
Change g of y year end FY-2011 – fourteen months to November 2011 Rationale Separates planning from busiest operational period Separates close of financial year from busiest operational period November aligns with business planning and operational cycles ...and avoids calendar year-end crowding Repo
Slide 20: Market context
Market context
Slide 21: Market context UK
Market context UK Frontline F ontline s school hool b budgets dgets protected p ote ted and capital apital spending programme p og amme continues June 2010: Budget 2010/11 education budget largely maintained Teachers pay frozen for two years from 2011/12 July 2010: Review of BSF programme October 20
Slide 22: Market context US
Market context US Interactive classrooms: lower penetration than UK Interactive whiteboards %age classrooms* Learning platform: embryonic UK 77% Extensive use of assessment & performance systems US 36% *Source: Futuresource 2010 Federal focus on improvement National Education Technology Plan UK educ
Slide 23: Market context Australia / RoW
Market context Australia / RoW Education technology: lower penetration than UK Interactive whiteboards %age classrooms* Australia 46% Australia EMEA 10% China 4% Strong and stable economy India 0% Building the Education Revolution UK 77% AUS$16 2 billion AUS$16.2 billi school h l rebuild b ild progr
Slide 24: Operations and Strategy
Operations and St t Strategy
Slide 25: Learning Technologies
Learning Technologies UK market ma ket leade leader with ith strong st ong eme emerging ging position in the US and Asia Pacific Schools Technology Classroom technology including learning platforms, computer systems and interactive teaching equipment. Infrastructure and managed services including sy
Slide 26: Learning Technologies Strategy
Learning g Technologies g Strategy Schools Technology Classroom technology including learning platforms, computer systems and interactive teaching equipment. Infrastructure and managed services including systems, networking, MIS, access control and cashless catering. Assessment Learning and d Data D
Slide 27: Learning Technologies
Learning g Technologies g Revenue growth in UK and internationally plus margin progression Asia Pacific US £273.9m £263.7m +4% UK +22% +20% +7% £216.5m £9.3m +16% £8.0m +33% £6.0m +3% 3.4% 2.8% 3.0% FY-2008 FY-2009 FY-2010 FY-2008 FY-2009 FY-2010 R Revenue Adjusted Operating FY-2008 restated with US
Slide 28: Learning Technologies UK
Learning Technologies UK Demand held upp as expected e pe ted in 2010 Continued success in winning long-term contracts Revenue growth: +3% Building Schools for the Future: 22% of Learning Technologies UK revenue ‘Transactional’ Transactional business Growth in software/services Renewals ...offset by
Slide 29: Learning Technologies UK
Learning Technologies UK Well positioned for fo 2011 – committed ommitted revenues e en es pprovide o ide solid platform and RM aligned with key policy developments Committed revenues: £341m Building Schools for the Future: £202m Other contracts: £139m Period of significant change for UK customers A
Slide 30: Learning Technologies US
Learning Technologies US Moving Mo ing to towards a ds a s scalable alable b business siness exploiting e ploiting RM Group G o p intelle intellectual t al property Revenue growth: +7% (+9% in US$ terms) Cobb County contract now largely complete RM Advisory Board Three areas of focus Dr. Kenneth S.
Slide 31: Learning Technologies Asia-Pac
Learning Technologies Asia-Pac Moving Mo ing ffrom om lega legacy s schools hools MIS contracts ont a ts to a broadly-based b oadl based education business Revenue growth: +20% Non-MIS (school management information systems) products: +87% Concentrated on Australia Direct sales team and trade partne
Slide 32: Education Resources
Education Resources Strong UK market positions based on unique products and services Classroom Resources Curriculum-focused products including teaching equipment & materials, materials furniture and software. software Assessment Learning and d Data D t T h l i Technologies Well-established businesse
Slide 33: Education Resources Strategy
Education Resources Strategy Classroom Resources Curriculum-focused products including teaching equipment & materials, materials furniture and software. software Assessment Learning and d Data D t T h l i Technologies Strategy Grow UK market share Accelerate development p of ‘own’ products Dev
Slide 34: Education Resources
Education Resources Continued Contin ed revenue e en e growth g o th in flat UK market ma ket Margin reflects investment to enable growth £83.3m +30% £7.7m +10% £63 9m £63.9m £7 1m £7.1m +19% +11% £6.4m £53.6m 12.0% 11.1% 9.3% FY-2008 FY-2009 FY-2010 FY-2008 FY-2009 FY-2010 R Revenue Adjusted Operat
Slide 35: Education Resources
Education Resources Strong St ong growth g o th in 2010 s supporting ppo ting in investment estment to b build ild a strong st ong and sustainable business Strong revenue growth: +30% (Organic: +25%) Market share gain New trade partners International business: +29% 2010 outturn in line with Manageme
Slide 36: Education Resources
Education Resources Concentrating Con ent ating on RM-’own’ RM ’o n’ and e exclusive l si e p products od ts which hi h deliver deli e real eal education value Easiteach Next Generation (interactive whole-class teaching) 25 language variants Global OEM network Potential pull-through of related RM cl
Slide 37: Education Resources
Education Resources Well-positioned Well positioned to respond espond to UK policy poli changes hanges Opportunities for further growth in the UK and internationally UK revenues largely from frontline school budgets Yorkshire Purchasing Targeting further market share gain in the UK Organisation Loca
Slide 38: Assessment and Data
Assessment and Data Strong strategic client relationships with international reach Assessment Platforms Systems, platforms and outsourcing for testing and qualifications. Collection, analysis and distribution of performance data for teachers, parents and policy makers. Assessment Learning and d Data
Slide 39: Assessment and Data Strategy
Assessment and Data Strategy Assessment Platforms Systems, platforms and outsourcing for testing and qualifications. Collection, analysis and distribution of performance data for teachers, parents and policy makers. Assessment Learning and d Data D t T h l i Technologies Strategy Further penetrate U
Slide 40: Assessment and Data
Assessment and Data £22.9m +18% +0% £19.4m £19.3m +9% £2.8m £2.6m +24% £2.1m 13.2% 12.2% 10.9% FY-2008 FY-2009 FY-2010 FY-2008 FY-2009 FY-2010 R Revenue Adjusted Operating Profit 40
Slide 41: Assessment and Data
Assessment and Data Strong St ong revenue e en e growth g o th in 2010 ffrom om e existing isting and ne new strategic st ategi clients Strong revenue growth: +18% Assessment: +27% ACCA and International Baccalaureate moving to volume Data: +7% Increasing volume 5.5 million scripts processed on-scre
Slide 42: Assessment and Data Services
Assessment and Data Services Significant opportunities pipeline Current sales activity in Europe and Asia Pacific Long sales cycles On-screen marking UK ‘high-stakes’ examinations – c.two-thirds marked on-screen Professional qualification providers On-screen testing Developing unique intellectual pr
Slide 43: Summary and Outlook
Summary and O tl k Outlook
Slide 44: Summary and Outlook
Summary and Outlook A resilient esilient b business siness well-positioned ell positioned to respond espond to UK education ed ation policy changes and international opportunities Superior 2010 – a record year education solutions Profitable growth Strong UK Global growth Excellent delivery market ma
Slide 45: RM Inspiring Education
RM Inspiring Education Pngaging Tel daliale|
Slide 46: Appendices
Appendices
Slide 47: A resilient business with a diverse product range
RM A resilient esilient b business siness with ith a diverse di e se product p od t range ange serving se ing the international education market Schools Technology Assessment Platforms Classroom technology including learning Systems, platforms and outsourcing for testing platforms, computer systems
Slide 48: 35 years of superior solutions
35 years of superior solutions Learning First in innovation Spaces First Windows PC for UK education Data Services First PC networks for UK education On-Screen First UK education Internet service Marking First UK education Internet content service Learning First non-proprietary whiteboard software P
Slide 49: Market context UK
Market context UK UK Education and DfE (England) spending UK Education Ed i and d DfE Spending S di UK Education & Training Budget DfE (England) £57.8 billion 2010-11 £89.0 billion Schools £46.5 billion Central Activities £0.4 billion Area Based Grants £1.2 billion Children & Families Young People 4
Slide 50: Market context UK
Market context UK Positive Positi e demog demographic aphi changes hanges – pupil p pil n numbers mbe s in England in increase ease from 2011 8000 Secondary pupils* (11 - 15) 7500 Pupils* (5 - 15) Primary pupils* (5 - 10) 6000 7000 4000 2000 6500 0 2009 2010 2011 2012 2013 2014 2009 2010 2011 2012 2
Slide 51: A UK secondary school
A UK secondary school Dimensions Education delivered through ICT Annual budget: £5.2m …across all curriculum subjects 1,000 pupils gy Interactive classroom technology 165 staff (100 teachers) High computer:pupil ratio 3 ICT staff Learning platforms 800 computers Home access and parental reporting 20
Slide 52: BSF
BSF Schools open Schools open DfE BSF Review R i Authority end FY-2010 FY-2011 and beyond Total Essex - 4 4 ‘Financial close’ projects continue Hackney 3 - 3 ‘Preferred bidder’ projects scaled back Haringey 11 1 12 Hull 1 8 9 In bid projects stopped Islington 4 - 4 Knowsley 7 - 7 Impact on RM Lambet
Slide 53: Assessment and Data
Assessment and Data Strong St ong technology te hnolog and ope operational ational capabilities apabilities at the heart hea t of the education process Candidate School Pupil, Student, Professional Qualification On-screen Testing Provider Examination Board, Professional Education / On-screen Associa
Slide 54: Revenue by activity
Revenue by y activity y Reducing reliance on UK transactional hardware revenue 28% 33% 35% 40% Managed services Software and services 19% 4% Physical classroom resources 23% 18% Hardware FY-2006 FY-2010 £262m £380m Managed services: Long-term contract project delivery (inc. software, services and ha
Slide 55: Awards
Awards Nursery World Awards 2010 Learning Impact Awards 2009 Glow TTS – Mirror Trays, Willow Teepees, Easi-Torch, Stone Wall Education Resources Awards 2010 ICT Excellence Awards 2009 TTS Activity Tree Support for Schools Practical Practical Preschool Awards 2010 BETT Awards 2010 Pre‐School Inclusiv
Slide 56: 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 £0.7m Forvus Data analysis Jul 2003 £4.0m peakschoolhaus Education inspection services Oct 2003 £1.6