News

25 September 2012 | Education | RM plc

RM plc – stabilisation and innovation

RM plc issued an Interim Management Statement covering the period from 1 June 2012 to 24 September 2012. Trading in the third quarter of RM's 2012 financial year has continued to progress in line with the Board's expectations for adjusted operating profit for the current year.

​While the stabilisation and recovery of the Group continues to be positive, the Board remains cautious due to the previously reported market changes over the next few years.

Net cash at 31 August 2012 increased significantly to £13.2m from net debt including deferred consideration of £18.5m a year earlier.

RM plans to close its defined benefit pension plan following consultation with employees. A plan to reduce the deficit is likely to include an initial cash contribution of £5m before the year end and on-going annual deficit recovery payments of slightly more than £3.4m p.a.

During the period the Company announced the launch of RM Books, which it says is the first e-book system designed specifically for schools, with the first customers now live. RM Books is free to use, includes hundreds of free curriculum literature books and provides access to high quality curriculum textbook titles from leading education publishers using a pricing model designed to be compatible with school budgets. The online system enables schools to rent, buy and manage e-books which can be viewed on, or downloaded to, virtually any internet enabled device, eliminating the major budget and technology constraints to e-book adoption in schools. RM Books is not expected to contribute positively to profitability during the investment phase.

RM has also launched an innovative single sign-on application launch pad and library called RM Unify. This new platform brings together cloud based services and applications via the Unify Application Library. The upgraded version of Glow will include RM Unify, giving all maintained schools in Scotland access to the platform.

Comment:

RM is changing its business model to survive and prosper in the era of austerity. Revenues are set to decline further due to the phased conclusion of the BSF programme and continued pressure on IT and infrastructure spending. Reducing its cost base and innovation are key drivers in determining its future success. The shares which were around £10 in the heady days of the internet bubble and over £2 prior to the start of the economic crises trade on a modest forward P/E ratio of 8x and on a price to free cashflow multiple of 6.3x (81p on 25/09/12).

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