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RM slashes debt pile

The education technology group saw a strong year across all three of its divisions
February 5, 2019

RM (RM.) has its 2017 acquisition of education supplies business the Consortium to thank for strong top-line growth last year. That's not to say that the group didn't log any underlying sales growth, but it did only amount to a meagre 2 per cent. More positively, RM’s international business has doubled in size over the past four years, with sales now approaching £30m.

IC TIP: Buy at 240p

Resources – the largest division by sales and profits – enjoyed a 45 per cent surge in sales to £122m, stemming partly from a £59.7m contribution from Consortium. True, the operating margin contracted slightly from 13.9 per cent to 13.7 per cent, but that was down to Consortium’s lower margins and a higher proportion of revenues from lower-margin exclusive contracts.

The RM Results e-assessment division saw a minimal 0.6 per cent rise in sales to £31.8m, but the adjusted operating margin there climbed from 24.5 per cent to 25.6 per cent. The division also signed seven new contracts in 2018, six with overseas clients. Meanwhile, sales for the education business dipped 4 per cent to £67.6m, reflecting RM’s exit from various long-term contracts. 

House broker Peel Hunt expects adjusted pre-tax profits of £26.4m and EPS of 25.6p for FY2019 (from £26m and 25.8p in FY2018).

RM (RM)    
ORD PRICE:240pMARKET VALUE:£201m
TOUCH:238-246p12-MONTH HIGH:244pLOW: 173p
DIVIDEND YIELD:3.2%PE RATIO:12
NET ASSET VALUE:66p*NET DEBT:11%
Year to 30 Nov 2018Turnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201420315.813.94.0
201517819.218.55.0
201616815.114.46.0
201718614.615.86.6
201822121.020.77.6
% change+19+44+31+15
Ex-div:14 Mar   
Payment:12 Apr   
*Includes intangible assets of £63.6mm or 76p a share