RM slashes costs as cuts continue to bite

But education specialist remains upbeat, citing new contract wins and a strong underlying business as reasons to be cheerful

RM has warned of declining revenues in its pre-close, six-month, pre-trading update as government education cuts hit home.

According to the statement covering the six months ending 31 March 2011 and released to the London Stock Exchange today, RM said trading is “in line with expectations” for the year as a whole.

Revenue for the first half of the year will decline on last year, the statement said, reflecting the “challenging education market conditions anticipated in UK learning technologies, the slowdown in interactive classroom fit-out demand in the US and lower customer demand for developments and enhancements in the assessment and data business”.

Because of continued “subdued demand”, RM management has taken action to reduce its cost base in the “areas of the business which are most affected”. This is expected to yield an annualised reduction in the cost base of over £5m, at a cost of around £1.7m, according to the firm.

As also predicted in its 2010 annual results, RM intends to change its financial year end from 30 September to 30 November. This will mean that 2011 will be a 14-month period.

Terry Sweeney, chief executive of RM, said in the statement: “Market conditions continue to be subdued as customers respond to changes in policy and funding. Consequently we are aligning our cost base to reflect the new conditions and to protect group profitability.

"RM continues to win new strategic customers such as the Scottish Qualifications Authority, to extend existing relationships and to grow committed forward revenues, demonstrating the underlying strength of our business,” he added.