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RM’s acquisition pays off

The education resources business added £27.8m to its top line via The Consortium, and also reduced its pension deficit
February 6, 2018

RM’s (RM.) acquisition of ‘The Consortium’ last June is already paying off. The education and care business, bought for £56.5m from Connect (CNCT), contributed £27.8m to the group’s resources division – driving up revenues here by 42 per cent to £83.6m. Bosses now expect The Consortium to deliver synergies of around £4m – double their initial estimate.

IC TIP: Buy at 183p

However, strip out the impact of this acquisition, and the top line at the resources segment fell 5 per cent year on year, as budgets for primary schools and nurseries were hit by unfunded rises in staff pension and national insurance costs. Another case of tightening public/municipal budgets impacting the private sector, but the division did stabilise after a “difficult first half”.

Revenues at the education business fell by 8 per cent to £70.6m, due partly to the planned completion of various Building Schools for the Future contracts. Even so, successful cost-cutting helped the division’s adjusted operating margin to rise from 7.6 per cent to 9.3 per cent.

Encouragingly, cash generation was strong, and RM’s defined-benefit pension scheme deficit narrowed from £34.8m to £20.2m year on year.

Analysts at Peel Hunt forecast adjusted pre-tax profits of £24.1m and EPS of 23p for the 12 months to November 2018, up from £19.7m and 20.1p in the 2017 financial year.

RM (RM)    
ORD PRICE:183pMARKET VALUE:£151m
TOUCH:177-185p12-MONTH HIGH:205pLOW: 144p
DIVIDEND YIELD:3.6%PE RATIO:12
NET ASSET VALUE:36.1p*NET DEBT:44.9%
Year to 30 NovTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20132629.46.73.3†
201420315.813.94.0
201517819.218.55.0
201616815.114.46.0
201718614.615.86.6
% change+11-3+10+10
Ex-div:15 Mar   
Payment:13 Apr   

*Includes intangible assets of £65.5m, or 79p a share

†Excludes special dividend of 16p per share