RM's (RM.) strong top-line momentum through the first half was buoyed by its acquisition of The Consortium last June, which contributed £24m in sales to the group’s dominant resources segment. This doubled revenue for the division year on year, although – encouragingly – resources' original TTS brand also enjoyed organic growth of 5 per cent in the UK and 12 per cent internationally.
Consortium’s profits are typically second-half weighted, meaning RM’s overall adjusted operating margin reduced from 9.2 per cent to 8.8 per cent. Still, management expects it to generate £4m in annual synergies by 2020.
Resources’ performance helped mitigate the slight decline in revenue seen at RM’s other two businesses, results and education. Sales for results fell 8.9 per cent to £12.3m, stemming from an anticipated reduction in data contract revenues, and the absence of a major new e-assessment project in the corresponding period in FY2017. The good news is that the segment won three new overseas contracts during the period. Education, meanwhile, saw revenues slip 2.6 per cent to £31.5m, due to ongoing reductions in the government’s Building Schools for the Future spend.
Broker Peel Hunt forecasts adjusted pre-tax profit of £24.7m and EPS of 23.9p for the year to November 2018 (from £20.5m and 22p in FY2017).
| RM (RM) | ||||
| ORD PRICE: | 240p | MARKET VALUE: | £198m | |
| TOUCH: | 230-246p | 12-MONTH HIGH: | 240p | LOW: 154p |
| DIVIDEND YIELD: | 2.9% | PE RATIO: | 13 | |
| NET ASSET VALUE: | 49p* | NET DEBT: | 58% | |
| Half-year to 31 May | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2017 | 71.3 | 3.8 | 4.7 | 1.65 |
| 2018 | 94.9 | 6.9 | 6.8 | 1.90 |
| % change | +33 | +84 | +45 | +15 |
| Ex-div: | 9 Aug | |||
| Payment: | 7 Sep | |||
| *Includes intangible assets of £64.6m, or 78p a share | ||||
