When RM appointed Martyn Ratcliffe as non-Executive Chairman in May 2011 (and to Executive Chairman in October 2011), we said that we expected him to be tough in his actions as he attempted to turn around the company’s fortunes (see RM appoints Ratcliffe as Chairman). Well, today it has been announced that Ratcliffe will step down in the summer having led the restructuring, feeling that it is “now an appropriate time to effect a transition”. The search will soon be on for a new non-Executive Chairman. Importantly, from 1st March 2013, RM will also once again have a Chief Executive; since Rob Sirs stepped down from the Group MD role in January 2012 (see Even more changes at top for RM), the division directors have had the pleasure of reporting directly to Ratcliffe. Now they will be reporting to David Brooks, a career RM-er, who has been COO since July 2012.
Ratcliffe has certainly made his mark on RM in the form of a disposals programme (completed in H1) and a restructuring (bringing headcount down from 2,699 in September 2011 to 2,250 in November 2012). The good news in the latest set of results is that, while total revenues fell 7% to £288.7m (when comparing with the 12 months to 30th November 2011), revenue from retained operations nudged up slightly to £285.9m. That’s not to say, though, that RM is anywhere near out of the woods. Over the last year the Group has benefited significantly from the BSF programme in the Managed Services division (up 32% to £81.4m) as the programme reached its peak. 2013 will benefit slightly but from there on revenues will decline significantly. RM will be hoping that some of its recently launched initiatives – such as RM Unify (cloud-based application and content distribution) and RM Books (e-books service) will help make up for the BSF revenue loss. But that is in no way guaranteed. For example, RM admits that for RM Books to really take off a change in the curriculum would be needed as a catalyst.
Fortunately Ratcliffe has ensured that Brooks takes the reins, against a backdrop of continuing tough market conditions in the education sector, in better shape organisationally and financially. In FY12, the adjusted operating profit decreased from £14.1m to £13.6m. But a LBT of £18.5m was converted to a PBT of £8.4m. And, following an improvement in working capital management, cash flow was particularly strong. RM now has a cash balance at the highest it’s been since 2003. As RM states, “it is transitioning into the digital education era”; but it may take schools some time to fully make the change. Continuing tight financial management will be crucial as RM continues to ride out the storm.