RM looks to plug £40m sales hole
Firm still cashing in on BSF projects in H1 2013 but warns that scheme's axe will put big dent in its top line
RM has issued a solid set of numbers for the first half of its fiscal year but continues to warn that it needs to reshape its business in preparation for the end of the Building Schools for the Future (BSF) scheme.
The Oxfordshire-based system builder saw revenue for the six months to the start of May decline 2.6 per cent year on year to £118.8m. But adjusted operating profit for the period jumped 18.2 per cent to £5.2m.
Sales at is value-added distribution Education Resources division were down 7.7 per cent to £26.4m, while adjusted operational income slipped by about a quarter to £3m. RM's e-testing Assessment and Data Services division grew its H1 revenue by just over three per cent to £9.8m. Operating profit grew by half to £0.9m.
Turnover at the firm's core Education Technology (ET) division was down marginally to £82.6m, with operational profit growing from £1.6m to £2.7m on an annual basis. RM is expecting stronger sales in the second half of the year as its remaining business from the axed BSF scheme continues to roll in.
But over the next two years the company is bracing for a decline in divisional revenue of about £40m per annum. In today's stock market statement, RM pointed to some early successes for its newer offerings, including the RM Unify cloud proposition and its e-book business.
Chairman John Poulter said: "RM continues to trade profitably and has a strong balance sheet. However, the UK education sector is, and will remain, under financial constraint and revenue is expected to decline. The Education Technology [division] is the focus of immediate attention by the new CEO [David Brooks] and his team.
"Considerable effort is being directed to improve the profitability of the ET business by both commercial and efficiency improvements and through an appraisal of each of the constituent elements of the business. The board expects to be in a position to provide greater insight by the end of the year. The other two segments, Education Resources and Assessment and Data Services, continue to develop and trade successfully."
Poulter went on to state that RM has "the security of very substantial cash resources". The company will assess in the coming months how much extra money it has on its hands with a view to determining "the magnitude and method of returning any surplus to shareholders".