The extent of the challenge facing the newly re-focused RM was revealed this morning as it published results for the 14 months to 30 November 2011. Even without unpicking the detail in the figures – the comparison with the previous year is made more difficult by the change in year end – it’s clear how difficult 2011was for RM. Revenue for the 14-month period dropped to £350.8m from £380.1m in the 12-months of FY10 and the group made a pre-tax loss of £23.4m (FY10 PBT £23.9m).
The pro-forma figures are slightly less depressing, showing an adjusted operating profit of £14.1m on revenue of £310m for the 12 months to 30 November 2011, compared to profits of £21.4m on revenues of £376m for the previous 12 months. In other words, it appears that the underlying business is still profitable.
RM is feeling the effect of the cancellation of the Building Schools for the Future (BSF) programme (BSF revenues declined by around 18%) but that is far from its only ailment. Perhaps more importantly, it’s paying the price for failing to recognise the severity of the slowdown in its core education market, its unsuccessful international expansion strategy and a lack of innovation in recent years. Regular UKHotViews readers will be familiar with the medicine that Executive Chairman Martyn Ratcliffe has prescribed to turn things around (see the HotViews archive). It’s too early to tell whether that medicine is working, but it is clear that RM enters 2012 a very much more streamlined and focused organisation with a substantially reduced cost base and tighter working capital management.
RM will need to be very focused to overcome the challenges that still lie ahead. Not least of these is the anticipated steep decline in BSF revenue, which is expected to peak in 2012 and “decline significantly thereafter”. But RM is still the leading software player in the UK education market which a huge installed base (see our report on the UK Education SITS Supplier Landscape), a position which it ought to be able to exploit in the medium term. Indeed, there is talk of ‘several innovative new opportunities’ being evaluated which hold promise for RM’s business in the UK education IT market in the longer term. RM may be down, but it’s certainly not out.