RM grows despite school closures

Educational resource provider RM’s (RM.) adjusted operating profit nearly doubled to £8.2m in the six months ended in May, despite the fact that schools were closed for two months and all exams were cancelled in the UK. 

Revenue growth was driven by particularly strong trading in its resources division, up 37 per cent to £48.2m, as schools committed to curriculum spending with a focus on outdoor teaching, physical education and student wellbeing. Its smaller IT business posted more modest growth of 11 per cent, reaching £32.3m, led by an increase in hardware sales. 

RM also noted that its pension moved from a deficit of £23.3m to a surplus of £5.5m. Average net debt over the first half narrowed to £10.4m, compared with £16.3m in the year ended in November, even as the company pursued two major capital projects: consolidating five distribution centres into one automated facility and implementing a new IT system. 

Overall, the group has performed well in the first half, despite a tricky trading environment. In fact, on the back of these results, broker Peel Hunt bumped up its adjusted pre-tax profit estimate for the full year by 8 per cent to £16.2m. Analysts now expect adjusted EPS of 14.5p in 2021, rising to 21.3p in 2022. But there is still some uncertainty ahead, as RM works to recover the impact of Covid-19 on its sales pipeline and contractual agreements. Hold.

Last IC view: Hold, 242p, 08 Jul 2020