Computer and technology provider to schools RM (RM) has returned to the black after a major restructuring wiped out reported profits last year, but uncertainty remains as the end of major contracts loom on the horizon. RM has built up a £37.8m cash pile to manage the decline, but analysts are still forecasting that revenue will fall by more than a fifth within two years.
The educational technology division, which supplies computers to schools, not only faces the pressure of ongoing funding pressures on customers and technology price deflation, but also the challenge of pupils using their own laptops. Revenue here fell 13 per cent to £109m and operating margins halved to 3.3 per cent; in the managed services division revenues peaked at £81.4m, but profits more than halved, mainly due to project delays and increased costs on contracts. Revenue is set to decline significantly as major school-building programmes end. Fortunately, RM's educational resources business made up all the shortfall.
A major boardroom reshuffle will see chief operating officer David Brooks take up the role as chief executive in March, while chairman Martyn Radcliffe leaves in the summer along with two other long-serving non-execs.
Numis forecasts a fall in current-year adjusted pre-tax profits from £13.1m to £9.5m on revenues of £241m, giving EPS of 8p (from 10.8p in 2012).
RM (RM) | ||||
|---|---|---|---|---|
| ORD PRICE: | 78p | MARKET VALUE: | £73m | |
| TOUCH: | 78-79.5p | 12-MONTH HIGH: | 93p | LOW: 70p |
| DIVIDEND YIELD: | 3.8% | PE RATIO: | 14 | |
| NET ASSET VALUE: | 27p* | NET CASH: | £37.8m | |
| Year to 30 Sep | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2008 | 289 | 15.4 | 12.3 | 5.81 |
| 2009 | 347 | 16.3 | 14.0 | 6.17 |
| 2010 | 380 | 23.9 | 19.7 | 6.64 |
| 30-Nov | (£m) | (£m) | (p) | (p) |
| 2011** | 351 | -23.4 | -25.3 | 3.00 |
| 2012 | 289 | 8.4 | 5.4 | 3.00 |
| % change** | -4 | - | - | - |
Ex-div: 17 Apr Payment: 15 May *Includes intangible assets of £18m, or 19p a share ** 14 months **annualised | ||||
