The Building Schools for the Future (BSF) closure will lumber RM with £1.5m in exceptional costs in its fiscal second half, the education supplier has revealed.
RM was recently pinpointed as the IT supplier worst hit by the government’s decision to shelve the £55bn scheme and today the firm spelled out where the move leaves its business.
The London-listed outfit informed the City this morning that it had set aside £1.5m against exceptional costs relating to BSF changes to be taken in the second half of its fiscal 2010 ending 30 September.
The government announced that BSF projects that have reached financial close will continue and those where preferred bidders have been appointed will be individually reviewed. All others will be stopped.
RM clarified that it had reached financial close on 14 projects before the BSF bombshell was dropped on 5 July and one since then. These 15 projects are worth a combined £272m, £212m of which RM has yet to recognise and the firm said it expects the remaining business under these contracts to still be available.
In addition, RM had reached preferred bidder stage on six further projects representing revenue of £167m and comprising 76 schools. Thirteen of these schools are sample schools and may yet go ahead, RM said.
“Depending on the final contractual outcome of these projects, some or all of these costs will be written off in H2-2010,” the firm stated.
RM also announced it has moved to slash costs associated with bidding for BSF projects. Contract staff have been reduced and its strategic bid team has been refocused on other activities. A consultation process with those affected has been initiated, with restructuring costs dependent on the outcome.
RM stressed that underlying trading expectations for the full year remain unchanged.
On a positive note, RM said projects that have already reached financial close will cover all the BSF school deliveries previously expected for its full year. They will also cover 80 per cent of next year’s expected figure, but just 40 per cent of 2012’s anticipated number.
RM chief executive Terry Sweeney admitted that education budgets in general would come under pressure following the emergency Budget, but remained upbeat.
“While this will present challenges for RM, the strategy of diversification we have been adopting over recent years positions us well,” he said.
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