Rm Plc · LSE:RM.
Rm — H1 2003 Earnings Presentation
29 slides from Rm's earnings presentation, 2003
Slide 1: RM plc – Interim Results
1 RM plc – Interim Results Six months ended 31st March 2003 Tim Pearson - CEO Mike Greig - Group Finance Director
Slide 2: Headlines
2 Headlines • Results ahead of market expectations Much improved on last year Still a loss – but RM is a seasonal business Continued good cash generation • Healthier company Reduced cost base Improved customer satisfaction Stronger management • Growth in core business • Significant progress in strat
Slide 3: Financial headlines – six months to 31st March
3 Financial headlines – six months to 31st March 2003 2002 • Turnover £85.4m £89.1m • Turnover (ex LSP) £84.6m £75.8m • Gross profit percentage 25.3% 22.2% • Operating expenses excluding goodwill £22.9m £25.0m* • Profit/(loss) before tax and goodwill (£0.8m) (£4.7m)* • Net funds at 31st March £33.2m
Slide 4: Turnover
4 Turnover • Underlying turnover (exc. LSP) up 12% • Strong performances from: Six months to 31st March Broadband and Internet 3T PC (esp. mobile PCs) Whiteboards Activity 2003 2002 £m £m • Core education software flat Infrastructure software and services 26.2 24.8 • Initial strategic projects turno
Slide 5: Gross profit percentage
5 Gross profit percentage 29.1 28.6 28.6 27.8 • Increased by 3.1% from H1 2002 24.9 25.1 25.1 25.2 22.3 22.2 25.3 Better fixed cost utilisation following cost reductions in H2 2002 % Lower contribution from LSP Good hardware margins US$ rate benefit 1998 1999 2000* 2001 2002 2003 Gross profit percen
Slide 6: Operating costs
6 Operating costs (excluding exceptionals & goodwill amortisation) 25.0 23.3 23.0 22.9 22.2 21.0 £m 16.6 16.2 15.6 14.3 12.2 • H1 operating costs – down 8% to £22.9m Benefit of cost reductions in H2 2002 1998 1999 2000 2001 2002 2003 Strategic project bid costs Operating costs (excluding exceptional
Slide 7: Profit and loss
7 Profit and loss £’000 Six months to 31st March 12 months 2003 2002 2002 Turnover 85,363 89,133 202,158 Gross profit 21,623 19,782 51,244 Selling & distribution (13,293) (14,548) (26,457) Research and development (5,760) (6,557) (13,836) Administration (excluding goodwill and exceptionals) (3,866)
Slide 8: Cash flow and balance sheet
8 Cash flow and balance sheet • Continued strong cash generation • Capital expenditure low £m 31st March 30th September Depreciation - £3.9m; Capex - £1.0m 2003 2002 2002 Some Capex deferred Net cash inflow from 4.3 12.2 25.0 • Debtors operating activities Good DSO and flatter half-year shipments pr
Slide 9: Progress
9 Progress • Costs under control Run rate down 8% Controlling costs • Core business performing satisfactorily 12% growth in underlying business Improving efficiency and effectiveness • Customer satisfaction improving • Four major strategic project wins Areas of growth Worth £110m in total • Educatio
Slide 10: Education market background
10 Education market background • Funding changes Many and complex changes – different impacts for different schools LEA funding allocations up 6.5% Total Standards Fund allocation decreases (though ICT Grant is unchanged) • Cost increases Employers’ pension contributions increase 1% increase in Nati
Slide 11: Cost management
11 Controlling costs Cost management Improving efficiency and effectiveness Areas of growth • Major benefits of cost reductions now achieved Continue to look for cost reduction opportunities • Average H1 headcount Permanent staff 1,280 (H1 2002: 1,510) Temporary staff 200 (H1 2002: 212) Total staff
Slide 12: Customers
12 Customers Controlling costs Improving efficiency and effectiveness Strategy Areas of growth • Customer satisfaction Establish measure Identify issues Drive improvements • Customer relationships Improve relationships with loyal customers Develop relationships with occasional customers
Slide 13: Customers Satisfaction Rating
13 Customers Controlling costs Improving efficiency and effectiveness Continually improving satisfaction Areas of growth • 7,000 survey responses • 3,000 customer suggestions • Immediate issues responded to on a daily basis • Monthly pareto analysis identifies systematic improvements – eg: Courier a
Slide 14: Customers
14 Customers Controlling costs Improving efficiency and effectiveness Enhancing relationships Areas of growth • Transforming Teaching and Learning Conferences 766 attendees representing 555 secondary schools (80% senior managers) Keynote speakers included: Estelle Morris MP, Professor Tim Brighouse,
Slide 15: Business systems
15 Controlling costs Business systems Improving efficiency and effectiveness Areas of growth • RMi Single database across all corporate information Web delivered Low cost, scaleable, secure infrastructure Highly productive development environment • Benefits Flexibility – able to rapidly respond to n
Slide 16: Education software
16 Controlling costs Education software Improving efficiency and effectiveness Areas of growth • Curriculum Online - Electronic Learning Credits (eLCs) £30m for GY02/03 (to be spent by August 2003) £100m pa for GY03/06 Slow start to spending – DfES estimate c.£8m in market so far • Easiteach range e
Slide 17: Infrastructure software & services
17 Controlling costs Infrastructure software & services Improving efficiency and effectiveness Areas of growth • Community Connect 31,000 station licences added (2002: 24,000) 518 servers added (2002: 357) • Broadband caching requirement Fundamental component of effective broadband architecture Dire
Slide 18: Infrastructure software & services
18 Infrastructure software & services Controlling costs Improving efficiency and effectiveness Support services Areas of growth • Tynemouth College Contract renewal for College-wide managed ICT service 260 desktops – £1.55m over six years • Aylesbury College Preferred bidder for College-wide managed
Slide 19: PC & 3rd party products
19 Controlling costs PC & 3rd party products Improving efficiency and effectiveness Areas of growth • Mobile (laptop and Tablet PC) offer increasingly important Four-fold increase in volume between H1 2002 and H1 2003 Tablet PC positions RM at leading edge • Whole-class teaching products (interactiv
Slide 20: Strategic Projects
20 Controlling costs Strategic Projects Improving efficiency and effectiveness Areas of growth Contract Status Value Term Classroom 2000 Lot 3 (Northern Ireland) Won Contract signed – February £21m 5 years QCA Won Contract signed – February £23m 6 years South Yorkshire eLearning Programme Won Contra
Slide 21: Strategic projects
21 Strategic projects Controlling costs Improving efficiency and effectiveness Details Areas of growth • Classroom 2000 Lot 3 (Northern Ireland) RM sub-contractor to SX3 (part of Viridian Group) Single managed network environment for 237 post-primary and 48 special needs schools Based on Community C
Slide 22: Strategic projects
22 Strategic projects Controlling costs Improving efficiency and effectiveness Details Areas of growth • QCA RM prime contractor (consortium includes Tata Infotech, ICAA, 3T Productions) Provision of managed testing service for national ICT tests for Key Stage 3 SATs (14-year olds) Educational test
Slide 23: Strategic projects
23 Strategic projects Controlling costs Improving efficiency and effectiveness RM’s strengths Areas of growth • Established a dedicated team with defined processes Identifying opportunities on a broader basis Developing relationships Mature approach to evaluating risk and reward • Safe pair of hands
Slide 24: Strategic projects
24 Strategic projects Controlling costs Improving efficiency and effectiveness Pipeline Areas of growth • Digesting recent contract wins • Centralised initiatives remain a trend • Looking forward Lower opportunity rate (pipeline half of November 2002) Higher proportion of PFI projects
Slide 25: Education services
25 Education services Controlling costs Improving efficiency and effectiveness Progress Areas of growth • Dedicated team in place Strategic development Business development Delivery • Acquisitions Looked seriously at a number – rejected all Criteria: strategic fit, long-term shareholder value enhanc
Slide 26: Business model
26 Business model Market leader 9 Best channel to schools 9 Growing education funding 9 Cash generative 9 Public sector 9 Sector specialist 9 Broadening offer (from ICT to education services) UK-centric 9 International activities based on large, visible contracts Strategic project capability 9 All a
Slide 27: Expectations for second half
27 Expectations for second half • Effect of funding situation hard to determine Unlikely to see same core business growth as in H1 • Revenue Upside from strategic projects trading in H2 2003 (nb: start up phase, so little profit contribution) Planned end of LSP (£6 million in H2 2002) • Operating co
Slide 28: Prospects
28 Prospects • Education remains a key social priority • Continuing to improve Higher levels of customer satisfaction Developing customer relationships Strong strategic project capability Emerging education services business “ICT is to education what penicillin is to medicine” Estelle Morris speakin
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