Education-focused RM is beginning to see the benefit of the restructuring completed last financial year. Its first half results depict a more stable organisation that is trading profitably and is now ready to launch new offerings into the market. But with its Building Schools for the Future (BSF) revenue set to peak this year, and continued pressure on its core products in the UK education market, it’s clear that the next few years will continue to be challenging for RM.
Total revenues for the six months to May, including exited operations, decreased to £124.7m (compared to £128.5m for the six months to May 2011). But revenue from retained operations increased by 3.7% to £122m supported by the continued flow of BSF revenue. RM moved back into profit at the pre-tax level, reporting a PBT of £0.6m compared to a £1.5m loss in the same period last year. Balance sheet management has also improved significantly such that net cash at the end of May was £25.3m (compared to a net debt of £6.9m the year before).
As expected, RM’s Managed Services Division, home of its BSF business, reported revenue of £29.9m, an increase of nearly 35% on the same period last year. Unfortunately, however, these BSF revenues are expected to decline materially in 2013 and beyond as the BSF programme winds down. Moreover, follow-on contracts could well be lower margin deals: adjusted operating profit at the division was just £1m, down from £3m in the six months to May 2011, which RM attributes in part to lower margins in the early stages of a follow-on contract.
At the other end of the scale, the Education Software division was hard hit by changes in the market for school software – overall the division’s revenue declined by nearly 11% to £15.9m. Within that, the Assessment business grew by over 20%, School Management Systems declined by 8% and the Learning Software business declined by more than 50% as schools move away from purchasing expensive integrated learning platforms.
The Education Technology division saw revenue decline by 3.6% to £47.6m – the UK classroom technology and implementation services business suffered most; networks and internet hosting remained broadly flat on the prior year.
RM’s Education Resources division now comprises two operating businesses following last year’s restructuring and subsequent disposals: the distribution business TTS and special needs products provider RM SpaceKraft. The division reported a 1.6% increase in revenue to £28.6m thanks to a near 4% increase in TTS’ turnover during the period.
Despite some significant challenges, RM is now a much more stable and focused business and we’re pleased to see its already innovating. In the medium term, its new offerings – notably including ‘RM Unify’, a cloud-based ‘launchpad’ for schools providing a secure single sign on to a wide variety of applications – could be just what is needed to turn the business around, and help it maintain its position in the UK education sector.
