Annual Report • Nov 30, 2015
Annual Report
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Technology and resources for education
RM plc Annual Report and Financial Statements Year ended 30 November 2015
Physical and curriculum resources for schools and nurseries in the UK and internationally
different products
3,000 'own brand' products
c. 500 new products each year
20,000+ schools
80 Sell to over countries
Direct marketing business model
E-assessment and education data analysis to exam boards and central government in the UK and internationally
UK's largest provider of on-screen marking of high-stakes schools exams
Technology to allow on-screen testing
c. 13m exam scripts processed per annum
Systems to help create the English schools performance tables
c. 300 staff, over 50% in India
Software, services and technology to UK schools and colleges
c. 2,000 customers
Complete range of technology offerings and support to schools and colleges
Direct sales business model
UK market leader
700+ Full IT outsourcing to customers
c. 1,000 staff, 30% in India
• Positive adjustments of £2.1m
Disposal of SpaceKraft business from RM Resources division Held for Sale in the Accounts at 30 November 2015 and sold in December 2015
Cash remains strong at £48.3m (£47.9m as at 30 November 2014)
Pension triennial valuation agreed with 9 year deficit recovery plan and £8m one-off additional contribution in 2016
• Full year paid and proposed dividend increases 25% to 5.00p
2015 was a year of good progress for RM with two of the three divisions showing strong organic growth. The Group's overall operating profit margin reached double digits and cash generation was robust, leading to a healthy year-end cash position.
RM Resources produced a good performance with encouraging growth in TTS and a further increase in strong margins. Since the year end we have sold the small SpaceKraft operation.
RM Results also delivered good revenue and profit growth and secured a new e-marking contract with the UK's largest schools examination body, AQA.
RM Education revenues declined as anticipated while it continues to move away from IT hardware towards being a services and software business and as a result of the rundown of the government's building schools for future programme. We now believe we have established a stabilised platform for this business.
The Group has a strong balance sheet, with cash and short term deposits at the year-end of £48.3 million (2014: £47.9 million).
In December, agreement was reached with the Trustee of the RM Defined Benefit Pension Scheme with regards to the triennial valuation as at 31 May 2015, reducing the recovery period to 9 years.
The Board is recommending a final dividend of 3.80 pence per share which would constitute, at 5.00 pence per share in total, an increase of 25% over the prior year. This demonstrates our previously-stated intention to progress towards a more appropriate level of dividend cover.
While the UK Education market remains subdued, our strategy will be to continue to focus on retaining a leading market position for all three businesses whilst maintaining our stronger operating margins.
Chairman 1 February 2016
The Group has a strong balance sheet, with cash and short term deposits at the year-end of £48.3 million.
John Poulter Chairman
RM's objective is to create shareholder value through the provision of education resources, IT software and IT services to the education sector.
The Group is structured in three operating divisions, each with its own managing director and management team. Some staff functions are provided centrally. Approximately 33% (2014: 28%) of Group headcount is based in India, providing support services and software development to the operating divisions.
The RM Resources Division consists of the operating business TTS. In December 2015 we divested our small special educational needs business, SpaceKraft, for £0.8m which is separately identified as Held for Sale as at 30 November 2015. This enables the RM Resources management team to focus on the much larger TTS operation and exit from manufacturing activities that were required as part of the SpaceKraft business model.
TTS provides education resources used in schools through a mainly direct marketing business model with goods supplied from large, centralised UK distribution centres. Products supplied are a mix of third party branded and TTS branded items manufactured by a network of third party suppliers.
The Division's strategy is to grow market share in the provision of resources to UK schools, early years and special educational needs markets via direct catalogue and online sales. TTS also supplies a subset of these products through UK and international distributors as well as directly to international schools.
Divisional revenue increased by 7.6% to £63.5 million (2014: £59.1 million), with UK market share gains and a 31.6% increase in international revenues. Divisional revenue increased by 12.2% in the first six months but only by 3.7% in the second half of the year as first half
sales benefited from the curriculum changes that drove strong sales of new products.
Divisional adjusted operating margins remained consistent at 17.5% reflecting the benefits of continued growth and strong control over costs. Adjusted operating profit was £11.1 million (2014: £10.3 million).
Revenue from TTS UK direct marketing increased by 4.0% to £48.3 million (2014: £46.4 million). The first half of the year was very strong, showing an 11.9% year-on-year increase, with the last effects of the uplift supported by changes to the curriculum in English primary schools. However, in the second half revenue in this area decreased by 2.9% reflecting the tighter budgets within schools.
We continue to make significant investment in TTS' online channel. Online orders now make up 30% of direct marketing sales and a completely new e-commerce platform will be released this year.
We expect the UK education resources market to continue to be subdued as a result of increased pressure on the discretionary element of school budgets. Our focus will be on maintaining sector leading margins while looking to retain our strong market position.
Revenue from international sales to overseas resellers and to international schools increased by 31.6% to £11.1 million (2014: £8.5 million). This was driven by growth in Europe and the Americas and included a large contract in the Middle East. We expect international revenues to continue to grow in the coming year.
Revenue from sales to UK trade partners decreased by 1.5% to £4.1 million (2014: £4.2 million), reflecting the tightness of budgets in the wider UK education resources marketplace.
David Brooks Chief Executive Officer
The RM Results business provides IT software and services to enable onscreen exam marking (e-marking), onscreen testing (e-testing) and the management and analysis of educational data. Its customers include government ministries, exam boards and professional awarding bodies in the UK and around the world.
The strategy is to primarily grow the e-assessment side of the business through expanding the scope of solutions to existing customers through the provision of leading software products and services and to win new customers in both the UK and overseas markets. Software and services are provided through a combination of proprietary and third party, in-house and outsourced arrangements. Internationally the business is expected to develop through partnerships and software licensing rather than as a service based activity.
Revenue increased by 10.4% to £30.7 million (2014: £27.8 million). Adjusted operating margins increased further to 18.1% (2014: 16.7%). Adjusted operating profit increased by 19.5% on the prior year to £5.6 million (2014: £4.6 million).
During the year the business was successful in securing a three year contract with the education charity, AQA, the largest UK schools exam awarding body, to provide e-marking services alongside the current provider.
Internationally, the business is pursuing opportunities for the onscreen marking of paper-based exams as well as onscreen testing, often bidding with partner organisations. In the UK, examination and curricula changes introduced by the English Department for Education have significantly changed the phasing of exams so that the vast majority are taken in the summer term which has moved revenue phasing into the second half of the year. There is a long-term trend from paper-based to onscreen testing in the e-assessment market, though the adoption of such systems for school based examinations is low.
The educational data side of the business is heavily dependent on the Department for Education, principally through the National Pupil Database and RAISE Online contracts. These contracts include the capture and publishing of data for the
school performance tables in England and both are up for retender in the next twelve months. However, we have successfully managed these contracts for over 10 years. We are in the process of exiting a number of other smaller data services, non-profit making contracts.
We are targeting the growth opportunities in e-assessment to more than outweigh reduced revenues in the educational data business, thereby allowing us to maintain good operating margins.
RM Education is a UK focused business supplying IT software and services to schools and colleges.
The Division's strategy is to return to sustainable top line growth by developing the adoption of its portfolio of software products and services to existing and new UK school and college customers.
Market trends affecting the business include the demand from schools for solutions which are lowcost yet can cope with an increasingly diverse range of hardware and software. In addition, purchasing decisions in England have been increasingly devolved to schools and academy groups and away from central government and local authorities. This has required a change in the way the Division engages with its market and has resulted in an increased focus on the top c.2,000 customers.
As anticipated, the change of strategy away from selling hardware devices and a reduction in new school openings under the Building Schools for the Future (BSF) scheme led to overall revenue in RM Education declining by 28.3% to £80.2 million (2014: £111.9 million). However, adjusted operating profit margins remained stable at 6.8% (2014: 6.9%). Adjusted operating profit was £5.5 million (2014: £7.7 million).
The Managed Services offering is primarily the provision of full IT outsourcing services to schools and colleges. As anticipated, revenues in 2015 again declined with a reduction in new school openings under the BSF programme. Managed Services revenues decreased by 35.5% to £32.2 million (2014: £50.0 million). However, the retention rates of existing customers increased significantly
during the year to over 80%. In addition, 44 new schools signed managed services contracts in the year.
A proportion of our managed service contracts are subject to long-term project accounting policies, in particular those relating to BSF. Consequently, as these contracts progress towards completion, profits continue to benefit from the effects of good operational performance and cost control.
These include established products such as RM Integris (RM's cloud-based school management system), RM Easimaths curriculum software and RM Easiteach whole class teaching software as well as newer offerings including RM Unify. Digital Platforms revenues increased by 1.4% to £7.7 million (2014: £7.6 million).
Revenue from RM Integris increased following good market share gains including over 350 schools in Derbyshire. The strategy is to increase RM's market share by focussing on its cloud-based platform, competitive price point and investing to develop its relevance across primary, secondary and multi academy school customers in a market currently dominated by a large competitor and with low levels of switching between suppliers.
RM Unify is a technology platform to allow customers easy access to the varied digital, cloudbased, educational specific content and materials that are now available online. During the year the Scottish government chose to extend its contract (providing RM Unify to all schools in Scotland) by another two years to January 2018.
Going forward the priority areas of focus are on winning new RM Integris primary, secondary and multi academy school customers and on progressing the RM Unify proposition and profile through embedding and expanding system usage amongst existing customers.
Infrastructure includes the tools, products and services to help schools manage their own IT. RM Education's internet business is also included as well as the provision of third party hardware that allows RM to meet all the ICT needs of its customers. Revenues decreased by 25.8% to
£40.3 million (2014: £54.3 million) as we continue the transition from manufacturing our own PC client devices and associated warranties and installations and move to a more technology agnostic services and support provider.
On the support and network tools side the focus is on ensuring that existing customers renew their support contracts and are on the latest version of our software.
RM is an internet broadband and e-safety service provider to approximately 5,000 schools. RM designs and manages networks, procuring and integrating bandwidth and provides its own and third party e-safety products. This business is underpinned by one large regional consortium which accounts for a large share of its revenue. The contract runs until 2018 though volumes are variable. The priority in this area is on growing customer numbers and improving retention rates.
RM no longer manufactures computers. However, some customers do still want RM to provide all their ICT needs, including PC client devices. RM therefore sources third party hardware which is shipped directly to customer sites when required. This is a low margin activity but is seen to be supportive of the broader relationship with our customers which is a critical success factor in being an infrastructure partner of choice to schools.
As at 30 November 2015, RM's operation in Trivandrum accounted for 33% of Group headcount (2014: 28%).
The Indian operation provides services solely to RM Group companies. Activities include software development, customer and operational support and back office shared service support (e.g. customer order entry, IT, finance and HR) and administration.
Average Group headcount for the year was 1,860 (2014: 1,870) which is comprised of 1,645 (2014: 1,640) permanent and 215 (2014: 230) temporary or contract staff, of which 1,294 (2014: 1,360) were located in the UK and 566 (2014: 510) in India. At 30 November 2015 headcount was 1,899 (2014: 1,778). The following table sets out a more detailed summary of the permanent staff employed as at 30 November 2015:
| Male | Female | |
|---|---|---|
| Directors | 2 (100%) | 0 (0%) |
| Senior Managers (excluding Directors) |
54 (81%) | 13 (19%) |
| All employees | 1,113 (66%) | 583 (34%) |
The Group is committed to offering equal employment opportunities and its policies are designed to attract, retain and motivate the best staff regardless of gender, sexual orientation, race, religion, age or disability. The Group gives proper consideration to applications for employment when these are received from disabled persons and will employ them in posts whenever suitable vacancies arise. Employees who become disabled are retained whenever possible through retraining, use of appropriate technology and making available suitable alternative employment.
The Group encourages the participation of all employees in the operation and development of the business and has a policy of regular communications. The Group incentivises employees and senior management through the payment of bonuses linked to performance objectives, together with the other components of remuneration detailed in the Remuneration Report.
The Group has a wide range of other written policies, designed to ensure that it operates in a legal and ethical manner. These include policies related to health and safety, 'whistle blowing', antibribery and corruption, business gifts, grievance, career planning, parental leave, systems and network security. All of RM's employment policies are published internally.
Group revenue declined by 12.0% to £178.2 million (2014: £202.5 million) as anticipated.
To provide a better understanding of underlying business performance, amortisation charges relating to acquisition related intangible assets, share-based payment charges and other items of an exceptional nature have been disclosed in an
adjustments column in the Income Statement to give 'Adjusted' results.
Adjusted operating profit margins increased again this year from 9.1% in 2014 to 10.2%. Despite the decline in revenue, adjusted operating profit decreased only marginally to £18.2 million (2014: £18.5 million). On a statutory basis, operating profit was £19.6m (2014: £16.5m) with adjustments principally benefiting from a release of a £2.4m provision for dilapidations on leased properties and onerous lease contracts more than offsetting the share-based payments charge of £0.9m.
The Group generated an increased unadjusted statutory profit before tax of £19.2 million (2014: £15.8 million).
The total tax charge within the Income Statement for the year was £4.3 million (2014: £4.2 million). The Group's tax charge for the period, measured as a percentage of profit before tax, was 22% (2014: 26%). The decrease is principally due to the reduction in the UK corporate tax rate and an adjustment on finalisation of a prior year corporation tax return. Adjusted basic earnings per share were 16.2 pence (2014: 16.4 pence). Statutory basic earnings per share were 18.5 pence (2014: 13.9 pence) and statutory diluted earnings per share were 17.8 pence (2014: 13.0 pence).
RM generated cash from operations for the year of £10.9 million (2014: £19.1 million). Cash and short-term deposits increased to £48.3 million (2014: £47.9 million). The lowest cash and short-term deposit position during the year due to seasonal cash flows was £34.0 million (2014: £25.9 million).
Cash generated from operations is expected to continue to be less than operating profit in the year ahead, reflecting the reversal of a favourable working capital position related to long-term contracts.
The total dividend paid and proposed for the year has been increased by 25% to 5.00 pence per share (2014: 4.00 pence). This comprises an already paid interim dividend of 1.20 pence per share and, subject to shareholder approval, a proposed final dividend of 3.80 pence per share. The estimated total cost of normal dividends paid and proposed for 2015 is £4.1 million (2014: £3.2 million).
This increased dividend proposal reduces the dividend cover ratio from 4.1 to 3.2.
At 30 November 2015 the IAS 19 scheme deficit (pre-tax) was £21.9 million (2014: £26.8 million). This reduction in Scheme deficit results from the reduction in liabilities due to beneficial membership experience over the three year valuation period ended May 2015, better than assumed returns on the Scheme assets and the shortfall contributions paid by the Company. These have been partially offset by the change in the mortality assumptions and a reduction in the inflation risk premium.
On 11 December 2015, agreement was reached with the Trustee of the RM Defined Benefit Pension Scheme ("Scheme") with regards to the triennial valuation as at 31 May 2015. The deficit was agreed at £41.8 million (31 May 2012: £53.5 million). The deficit recovery plan comprises an initial cash contribution of £4.0 million into the Scheme and £4.0 million into the escrow account previously established for the purposes of further risk mitigation exercises, together with deficit recovery payments remaining at £3.6 million per annum until 2024 (previously 2027). These funding plans will be assessed at future triennial reviews.
The Directors, having made appropriate enquiries, consider that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future and that therefore it is appropriate to adopt the going concern basis in preparing the financial statements.
In accordance with the UK Corporate Governance code, in addition to an assessment of going concern, the Directors have also considered the prospects of the Company over a longer time period. The period of assessment chosen is three years, which is consistent with the time over which the Company's medium-term financial plans are prepared. These financial plans include Income Statements, Balance Sheets and Cash Flow Statements. They have been assessed by the Board in conjunction with the principal risks of the Company, which are documented within the Principal Risks and Uncertainties section below, along with their mitigating actions.
The Board considers that the principal risks which have the potential to threaten the Company's business models, future performance, solvency or liquidity over the three year period are:
Having assessed the above risks, singularly and in combination, and via sensitivity analysis, the Directors have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the three year period of assessment and are not aware of any reason that viability would be an issue for the foreseeable period after this.
The Group's impact on the environment, and its policy in relation to such matters, are noted in the Directors' Report.
The management of the business and the execution of the Group's strategy are subject to a number of risks. Risks are reviewed by the Audit Committee and Board. The Board confirms that it has carried out a robust assessment of the principal risks facing the Company and appropriate processes have been put in place to monitor and mitigate them, further details of which are given in the Corporate Governance Report. The key business risks for the Group are set out in the table below.
| Risk | Description | Mitigation | |
|---|---|---|---|
| Public policy | The majority of RM's business is funded from UK government sources. Changes in political administration, or changes in policy priorities, might result in a reduction in education spending. |
The Group seeks to understand the education policy environment by regular monitoring of policy positions and by building relationships with education policy makers. |
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| UK government funding in the education sector is constrained by fiscal policy. |
The Group's three Divisions have diverse revenue streams and product/service offerings. |
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| Global economic conditions might result in a reduction in budgets available for public spending generally and education spending specifically. |
The Group's strategy is to focus on areas of education spend which are important to meet customers' objectives. Where an individual business' revenues are in decline, management seek to ensure that the cost base supporting these is adjusted accordingly. |
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| Education practice | Education practices and priorities may change and, as a result, RM's products and services may no longer meet customer requirements. |
The Group seeks to maintain knowledge of current education practice and priorities by maintaining close relationships with customers. |
|
| Operational execution |
RM provides sophisticated products and services, which require a high level |
The Group invests in maintaining a high level of technical expertise. |
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| of technical expertise to develop and support, and on which its customers place a high level of reliance. |
Internal management control processes are in place to govern the delivery of projects, including regular reviews by |
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| RM is engaged in the delivery of large, multi-year education projects, typically involving the development and integration of complex ICT systems, and may have liability for failure to deliver on time. |
relevant management. The operational and financial performance of projects, including future obligations, the expected costs of these and potential risks are regularly monitored by management. |
| Risk | Description | Mitigation | ||
|---|---|---|---|---|
| Data and business continuity |
RM is engaged in storing and processing sensitive data, where accuracy, privacy and security are important. |
The Group's IS function has invested in developing its Data Centres, and has been successfully certified to ISO/IEC 27001:2005 for the provision of systems, |
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| The Group would be significantly impacted if, as a result of a major |
information and hosting services. | |||
| incident, one of its major buildings, systems or infrastructure components could not function for a long period of time. |
The Group has established a Security and Business Continuity Committee to oversee the security aspects of the Group's information systems. This covers data integrity and protection, defence against external threats (including cyber risks) and disaster recovery. |
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| The Group seeks to protect itself against the consequences of a major incident by implementing a series of back up and safety measures. |
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| The Group has property and business interruption insurance cover. |
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| People | RM's business depends on highly skilled employees. |
The Group seeks to be an attractive employer and regularly monitors the engagement of its employees. The Group has talent management and career planning programmes. |
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| Innovation | The IT market is subject to rapid, and often unpredictable, change. As a result of inappropriate technology choices, the Group's products and services might become unattractive to its customer base. |
The Group monitors technology and market developments and invests to keep its existing products, services and sales methods up-to-date as well as seeking out new opportunities and initiatives. |
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| The Group's continued success depends on developing and/or sourcing a stream of innovative and effective products for the education market and marketing these effectively to customers. |
The Group works with teachers and educators to understand opportunities and requirements. |
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| Dependence on key contracts |
The performance of the RM Education and RM Results Divisions are dependent on the winning and extension of long term contracts with government, local authorities, examination boards and commercial customers. |
The Group invests in maintaining a high level of technical expertise and on building effective working relationships with its customers. The Group has in place a range of customer satisfaction programmes, which include management processes designed to address the causes of customers' dissatisfaction. |
| Risk | Description | Mitigation |
|---|---|---|
| Pension | The Group operates a defined benefit pension scheme in the UK, which is in deficit. The scheme deficit can adversely |
The Scheme was closed to new entrants in 2003 and closed to future accrual of benefits in October 2012. |
| impact the net assets position of the trading subsidiary RM Education Ltd. |
A pension escrow account was established in 2014 to fund risk mitigation exercises. The first of these was completed in October 2014 with the purchase of a pensioner buy-in from an insurance company and a flexible retirement option exercise is currently in progress. |
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| The Group evaluates risk mitigation proposals with the Scheme trustee. |
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| Financial – liquidity | The Group is exposed to counterparty risk on liquid assets. |
Limits are placed on the level of deposit with any one counterparty. Bank selection takes into account credit ratings. |
| Financial – capital | The Group's ability to pay dividends to shareholders depends on having sufficient distributable reserves in the holding company, RM plc. Additional losses incurred as a result of significant increases in the pension scheme deficit could further impair the ability of RM Education Ltd to pay dividends up to RM plc. |
The Group monitors the level of distributable reserves in subsidiary companies and considers their ability to make dividend payments to the holding company. |
Chief Executive Officer 1 February 2016
John Poulter (73) was appointed as Non-Executive Chairman of RM plc on 1 May 2013. He is also Chairman of the Nomination Committee of the Board. Mr Poulter is currently Chairman of 4imprint Group plc. He is a former Chairman and former Chief Executive of Spectris plc and has also been a Non-Executive Director of a number of public and private companies including FTSE 250 constituents BTP plc, RAC plc and Kidde plc.
Lord Andrew Adonis (52) joined the Board on 1 October 2011. He served 12 years in government as a Minister and special adviser, including Secretary of State for Transport, Minister for Schools, Head of the No.10 Policy Unit, and senior No. 10 adviser on education, public services and constitutional reform. Before joining government, he was Public Policy Editor of the Financial Times. Lord Adonis is Interim Chair of the National Infrastructure Commission, and Non-Executive Director of Dods (Group) PLC and a number of charitable organisations.
David Brooks (46) was appointed Chief Executive Officer of RM plc on 1 March 2013, having been appointed to the Board as Chief Operating Officer on 1 July 2012. He originally joined RM, with a degree in computing, on the Group's graduate scheme. He has gained extensive experience in the education sector across many parts of the RM Group and is an alumnus of the Harvard Business School Advanced Management Programme.
Committee membership as at the date of this report: (a) Audit Committee Member
Patrick Martell (52) joined the Board on 1 January 2014 as a Non-Executive Director and was appointed Chair of the Remuneration Committee on 19 March 2014. Mr Martell is a former Group CEO of St Ives plc, having joined in 1980. He was appointed to the Board of St Ives plc on 1 August 2003 and held the position of Managing Director, Media Products and Managing Director, UK Operations from 2006 to 2009, at which point he was appointed Group CEO. Mr Martell is currently Chief Executive of the Business Intelligence Division of Informa plc.
Neil Martin (43) joined the Company and the Board on 28 September 2015. Prior to joining RM, he was CFO for UK and Ireland for the Adecco Group, the leading provider of HR solutions listed on the Swiss Stock Exchange. He was CFO at the UK listed, IT staffing company, Spring plc until it was acquired by Adecco in 2009. Mr Martin started his career by spending seven years at Exxon Mobil.
Deena Mattar FCA (50) joined the Board on 1 June 2011 as a Non-Executive Director and was appointed Chair of the Audit Committee on 26 March 2012. She served as Group Finance Director of Kier Group plc from 2001 to 2010, having joined the Group in 1998 as Finance Director of Kier National. Prior to this she held senior positions at KPMG. Ms Mattar is also a Non-Executive Director of Wates Group Ltd. and, until its recent sale to Schneider Electric, she was a Non-Executive Director and Chairman of the Audit Committee for Invensys plc. She is also a former Non-Executive Director of Lamprell plc.
The Directors submit their report together with the audited consolidated and Company financial statements for the year ended 30 November 2015.
The Corporate Governance Report is incorporated into this report by reference.
The total dividend paid and proposed for the year has been increased by 25% to 5.00 pence per share (2014: 4.00 pence). This comprises an interim dividend of 1.20 pence per share paid in September 2015 and, subject to shareholder approval, a final dividend of 3.80 pence per share.
The Group has in place appropriate treasury policies and procedures, which are approved by the Board. The treasury function manages interest rates for both borrowings and cash deposits for the Group and is also responsible for ensuring there is sufficient headroom against any banking covenants contained within its credit facilities, and for ensuring there are appropriate facilities available to meet the Group's strategic plans.
In order to mitigate and manage exchange rate risk, the Group routinely enters into forward contracts and continues to monitor exchange rate risk in respect of foreign currency exposures.
All these treasury policies and procedures are regularly monitored and reviewed. It is the Group's policy not to undertake speculative transactions which create additional exposures over and above those arising from normal trading activity.
The Group recognises that its activities must be carried out in an environmentally friendly and compliant manner. Good standards of environmental performance are adopted to minimise the potential negative environmental impact of products and processes and also to promote sustainability. These actions include efficient utility usage, waste reduction/recycling and use of energy saving features in products.
The Group is required to report Scope 1 and 2 emissions for all Group companies within the Annual Report and has elected to report emissions for the year to 30 September 2015.
Set out below are all of the emission sources required to be reported under the Companies Act 2006 (Strategic Report and Directors' Reports) Regulations 2013.
The GHG Protocol Corporate Accounting and Reporting Standard (revised edition) has been applied. The figures include emissions arising from all financially controlled assets, as well as business travel arising from air and other vehicle use.
The Board is recommending a dividend of 5.00 pence per share in total, an increase of 25% over the prior year.
John Poulter
All emissions factors have been selected from the emissions conversion factors published annually by Defra (which can be found at www.gov.uk/measuring-and-reporting-environmental-impacts-guidance-for-businesses).
| Year ended 30 September 2015 | Year ended 30 September 2014 | |||||
|---|---|---|---|---|---|---|
| Scope | Source | Country | Tonnes CO2 ℮ |
Absolute totals Tonnes CO2 ℮ |
Tonnes CO2 ℮ |
Absolute totals Tonnes CO2 ℮ |
| Scope 1 | Air travel | UK | 1,017 | 733 | ||
| Air travel | India | 350 | 397 | |||
| Van/car travel | UK | 658 | 800 | |||
| Van/car travel | India | 115 | 96 | |||
| Gas | UK | 689 | 2,829 | 758 | 2,784 | |
| Scope 2 | Electricity and gas | UK | 2,227 | 2,844 | ||
| Electricity and gas | India | 713 | 2,940 | 730 | 3,574 | |
| Total | 5,769 | 6,358 |
Emissions have also been analysed using an intensity metric, which will enable the Company to monitor how well emissions are controlled on an annual basis, independent of fluctuations in the levels of activity. The metric used is 'emissions per full-time equivalent (FTE) employee'. The Group's emissions per employee are shown in the table below:
| Tonnes CO2 ℮/employee |
Year ended 30 September 2015 |
Year ended 30 September 2014 |
|---|---|---|
| Scope 1 | 1.56 | 1.49 |
| Scope 2 | 1.62 | 1.91 |
| Total | 3.18 | 3.40 |
The Group has implemented a health and safety management system which aims to continually improve health and safety implementation and is designed to meet the requirements of OHSAS 18001. The following objectives are incorporated into the health and safety management system:
Neither the Company nor any of its subsidiaries made any political donations or incurred any political expenditure during the year.
On 29 January 2016 the Company had received notifications that the following parties were interested in accordance with DTR 5:
| Percentage of | ||||
|---|---|---|---|---|
| No. of | Issued Share Capital | No. of shares | No. of shares | |
| Shareholder | shares | as at 29 January 2016 | Direct | Indirect |
| Schroders Investment Management Ltd | 17,078,778 | 20.66% | 17,078,778 | 0 |
| Aberforth Partners | 13,434,000 | 16.25% | 0 | 13,434,000 |
| Artemis Investment Management LLP | 8,754,376 | 10.59% | 5,740,463 | 3,013,913 |
| Majedie Asset Management Ltd | 5,269,910 | 6.38% | 0 | 5,269,910 |
| The Wellcome Trust Ltd | 4,798,752 | 5.81% | 0 | 4,798,752 |
The Company has one class of share capital, ordinary shares. All the shares rank pari passu. There are no special control rights in relation to the Company's shares. As at 30 November 2015, the RM plc Employee Share Trust owned 1,614,170 ordinary shares in the Company (1.95% of the issued share capital); any voting or other similar decisions relating to those shares would be taken by the Trustees, who may take account of any recommendation of the Board of the Company.
The Group enters into long-term contracts to supply ICT products and services to its customers. Wherever possible, these contracts do not have change of control provisions, but some significant contracts do include such provisions.
In January 2012 the Group entered into a £30 million revolving credit facility with Barclays Bank plc, which has been extended to March 2017. This facility has a change of control provision and is subject to termination in the event of change of control of the Company.
At the Annual General Meeting held on 25 March 2015, members renewed the authority under section 701 of the Companies Act 2006 to make market purchases on the London Stock Exchange of up to 8,264,001 ordinary shares, being 10% of the issued share capital of the Company. The minimum price which may be paid for each share is the nominal value. The maximum price which may be paid for a share is an amount equal to the higher of (1) 5% above the average of the middle market quotations of the Company's ordinary shares as derived from the London Stock Exchange Daily Official List for the five business days immediately preceding the day on which such share is contracted to be purchased and (2) the amount stipulated by Article 5(1) of the Buy-back and Stabilisation Regulation 2003. This authority has not been used since the Annual General Meeting.
The Directors will seek to renew this authority at the next Annual General Meeting scheduled for 23 March 2016.
The Group has overseas branches in Italy and Singapore.
Details of those Directors who have held office during the financial year and up to the date of signing this report and any changes since the start of the financial year are given below:
John Poulter
Lord Andrew Adonis
David Brooks
Iain McIntosh (resigned 28 September 2015)
Patrick Martell
Neil Martin (appointed 28 September 2015)
Deena Mattar
Biographical details of the current Directors are given in the Directors' Biographies section of the Annual Report. At the forthcoming Annual General Meeting all continuing Directors will stand for re-election in accordance with best practice and guidance set out in the UK Corporate Governance Code. The Directors who are proposed for re-election or election have either a letter of appointment or a service contract, details of which can be found in the Remuneration Report.
The Group has provided indemnity insurance for one or more of the Directors during the financial year and at the date of signing this report. The Directors also have the benefit of a Deed of Indemnity in respect of liabilities which may attach to them in their capacity as Directors of the Company. These provisions are qualifying third party indemnity provisions as defined by section 234 of the Companies Act 2006.
As far as the Directors are aware, there is no relevant audit information (as defined by section 418(3) of the Companies Act 2006) of which the Company's auditor is unaware and each of the Directors have taken reasonable steps in order to make
themselves aware of relevant audit information and to establish that the Company's auditor is aware of that information.
A resolution to reappoint KPMG LLP as auditor of the Company will be proposed at the next Annual General Meeting.
The Directors are responsible for preparing the Annual Report and the Group and Company financial statements in accordance with applicable UK law and regulations.
UK company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors are required to prepare the Group financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and have elected to prepare the Company financial statements on the same basis. Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and the Group and of the profit or loss of the Group for that year.
In preparing those financial statements, the Directors are required to:
The Directors are responsible for keeping proper accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and to enable them to
ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report, Directors' Report, Remuneration Report, Corporate Governance Report and Audit Committee Report that complies with that law and those regulations.
Each of the Directors, whose names and functions are listed at the front of the Annual Report, confirm that, to the best of their knowledge:
We consider the annual report and accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group's position and performance, business model and strategy.
A copy of the Group financial statements is posted on the Group's website www.rmplc.com. The Directors are responsible for the maintenance and integrity of the Group's website and the financial information included on the website. Information published on the website is accessible in many countries with differing legal requirements but only legislation in the United Kingdom governing the preparation and dissemination of financial statements applies to the Group.
The forthcoming Annual General Meeting will be held on 23 March 2016 at 140 Eastern Avenue, Abingdon, Oxfordshire OX14 4SB, at the time set out in the Annual General Meeting notice. The notice of the Annual General Meeting contains the full text of resolutions to be proposed.
By Order of the Board
Company Secretary 1 February 2016
As Chairman, I am responsible for ensuring that the Company has high standards of corporate governance. On behalf of the Board, I confirm that the Company has complied with the provisions of the UK Corporate Governance Code 2014 (the "Code") throughout the 12 month period ended 30 November 2015. How we have applied the principles of the Code is set out in the table below.
The Code itself provides a framework for corporate governance and, irrespective of the Code, the Board tries to foster throughout the organisation a culture of open and honest communication, constructive challenge and proper division of responsibilities, all set within a structure containing appropriate checks and balances. The Board sees this as a positive contributor to effective business operations.
This Corporate Governance Report provides a summary of the arrangements that are in place and the above is intended to set the context within which those arrangements operate and the importance placed on them by the Board.
Chairman
Every company should be headed by an effective board which is collectively responsible for the success of the company.
There should be a clear division of responsibilities at the head of the company between the running of the board and the executive responsibility for the running of the company's business. No one individual should have unfettered powers of decision.
The Chairman is responsible for leadership of the board and ensuring its effectiveness on all aspects of its role.
There is a clear distinction between the role of the Non-Executive Directors on the Board, which is chaired by the Chairman, and the Chief Executive Officer and Chief Financial Officer, who have executive responsibility for the running of the Company's business.
The Chairman sets the Board's agenda and ensures that adequate time is available for the discussion of all agenda items. The Chairman promotes a culture of openness and debate. He also ensures constructive relations between the Executive Directors and the Non-Executive Directors. The Chairman ensures effective communication with shareholders.
The Chairman meets the independence criteria.
As part of their role as members of a unitary board, nonexecutive directors should constructively challenge and help develop proposals on strategy.
The Non-Executive Directors scrutinise strategic proposals for the Group and monitor performance on an ongoing basis. The controls in place to ensure the integrity of financial information and systems of risk management are described elsewhere in the Annual Report.
The board and its committees should have the appropriate balance of skills, experience, independence and knowledge of the company to enable them to discharge their respective duties and responsibilities effectively.
There should be a formal, rigorous and transparent procedure for the appointment of new directors to the board.
All directors should be able to allocate sufficient time to the company to discharge their responsibilities effectively.
All directors should receive induction on joining the board and should regularly update and refresh their skills and knowledge.
The board should be supplied in a timely manner with information in a form and of a quality appropriate to enable it to discharge its duties.
The Board consists of the Chief Executive Officer and Chief Financial Officer plus, currently, four Non-Executive Directors including the Chairman. All of the Non-Executive Directors are considered by the Board to be independent of the management of the Company and free from any business or other relationship which could materially interfere with the exercise of their independent judgment. The Directors have a combination of financial, business and educational expertise which is suited to the nature of the Company.
A separate Nomination Committee, comprised of all Non-Executive Directors, including the Chairman, is responsible for identifying and nominating candidates to fill Board vacancies. While the Chairman chairs the Nomination Committee, the Senior Independent Director would do so if the Committee was dealing with the appointment of a new Chairman. An external search consultancy, which had no other connection to the Company, assisted with the appointment of Neil Martin as Chief Financial Officer (appointment effective 28 September 2015).
The Board ensures that on appointment and thereafter all Directors have sufficient time to carry out their duties.
All Directors receive an induction on joining the Board. All Directors have extensive experience and possess relevant skills and knowledge to perform their duties.
The Board is supplied with monthly management accounts and detailed operational reviews.
All Directors have access to the advice and services of the Company Secretary or suitably qualified alternative, and all the Directors are able to take independent professional advice, if necessary, at the Company's expense. All Directors are also invited to attend meetings of the Executive Committee and have access to managers within the Group.
The board should undertake a formal and rigorous annual evaluation of its own performance and that of its committees and individual directors.
The performance of the Board and each Board Committee is reviewed on an annual basis and a review was conducted during the year ended 30 November 2015.
The performance of the Chairman is assessed by the Non-Executive Directors led by the Senior Independent Director. The Senior Independent Director also meets with the Non-Executive Directors without the Chairman being present on such other occasions as considered appropriate.
The performance of the Chief Executive Officer is assessed by the Chairman, in consultation with the other Non-Executive Directors. The performance of the Chief Financial Officer is assessed by the Chief Executive Officer, in consultation with the Chairman and other Non-Executive Directors.
The Chairman also holds meetings with the Non-Executive Directors without the Executive Directors present when considered appropriate.
All directors should be submitted for re-election at regular intervals, subject to continued satisfactory performance.
All Directors are appointed for specific terms subject to annual re-election.
The board should present a fair, balanced and understandable assessment of the company's position and prospects.
The board is responsible for determining the nature and extent of the principal risks it is willing to take in achieving its strategic objectives. The board should maintain sound risk management and internal control systems.
The board should establish formal and transparent arrangements for considering how they should apply the corporate reporting and risk management and internal control principles and for maintaining an appropriate relationship with the company's auditors. In preparing the Annual Report to shareholders, the Directors consider that they present a summarised but fair, balanced and easily understood assessment of the Group's performance and position and provide guidance on its future prospects.
The Company operates a risk management and internal control process, further details of which are given elsewhere in this Report. This process is reviewed at least on an annual basis. The Directors confirm that they have carried out a robust assessment of the principal risks facing the Company. Further details of those risks are in the Strategic Report.
The Audit Committee is comprised of Non-Executive Directors and meets at least three times a year. The Chief Executive Officer and Chief Financial Officer are invited to attend. The Audit Committee meets separately with the Company's auditor without the Executive Directors present. Further details are set out in the Audit Committee Report.
Executive directors' remuneration should be designed to promote the long-term success of the company. Performance-related elements should be transparent, stretching and rigorously applied.
The Remuneration Committee carefully considers the elements of remuneration paid to Executive Directors and the basis on which they are paid. In all cases, remuneration is designed to promote the long-term success of the Company. The Remuneration Report sets out further details.
During the period, neither the Chief Executive Officer nor the Chief Financial Officer held any Non-Executive positions with other companies.
There should be a formal and transparent procedure for developing policy on executive remuneration and for fixing the remuneration packages of individual directors. No director should be involved in deciding his or her own remuneration.
Remuneration packages for individual Directors are set by the Remuneration Committee after, if required, receiving information from independent sources and the Company's Human Resources function. Further details are provided in the Remuneration Report. The Chief Executive Officer and Chief Financial Officer may be invited to attend the Committee's meetings but are not involved in deciding their own remuneration. The Chairman of the Remuneration Committee is available to discuss remuneration with shareholders as required.
There should be a dialogue with shareholders based on the mutual understanding of objectives. The board as a whole has responsibility for ensuring that a satisfactory dialogue with shareholders takes place.
The Chief Executive Officer and Chief Financial Officer offer meetings with major shareholders at least twice a year after the announcement of preliminary full year and interim results. The Chairman also meets with shareholders, as appropriate.
Deena Mattar is Senior Independent Director and is available to shareholders if they have concerns which contact through the normal channels has failed to resolve.
All Non-Executive Directors are available to meet institutional shareholders on an ad hoc basis.
The board should use general meetings to communicate with investors and to encourage their participation
All Directors make themselves available at the Annual General Meeting to respond to any questions raised by the investors in attendance.
The Board of Directors meets regularly to review strategic, operational and financial matters, including proposed acquisitions and divestments, and has a formal schedule of matters reserved to it for decision. It approves the interim and annual financial statements, the annual financial plan, significant Stock Exchange announcements, significant contracts and capital investment, in addition to reviewing the effectiveness of the internal control systems and business risks faced by the Group. Where appropriate, it has delegated authority to committees of Directors.
There are three Board committees: Audit, Remuneration and Nomination, each of which comprises only independent Non-Executive Directors.
The Audit Committee is chaired by Deena Mattar. The Audit Committee is comprised solely of independent Non-Executive Directors. The Audit Committee meets at least three times a year. The Company's external auditor, Chief Executive Officer, Chief Financial Officer, Company Secretary, and the Group Financial Controller, who is Head of Internal Audit, normally attend these meetings. The Audit Committee is responsible for reviewing the accounting policies, internal control environment and the financial information contained in the annual and interim reports. It provides an opportunity for the Non-Executive Directors to make independent judgments and contributions, thus furthering the effectiveness of RM's internal controls, both financial and otherwise. Further details of the Audit Committee's activities are given in the Audit Committee Report. The terms of reference for the Audit Committee are published on www.rmplc.com.
The Remuneration Committee is chaired by Patrick Martell. The Remuneration Committee is comprised solely of independent Non-Executive Directors. Executive Directors and senior managers may be invited to attend Committee meetings but will not be present during any discussion of their own pay arrangements. The Remuneration Committee sets the remuneration of the Executive Directors and recommends and monitors the level and structure of remuneration for senior management. It also considers grants and
performance conditions under RM's share-based payment schemes and reviews RM's employment strategy generally. Further details of the Remuneration Committee's activities are given in the Remuneration Report. The terms of reference for the Remuneration Committee are published on www.rmplc.com.
The Nomination Committee is chaired by the Chairman and includes all of the independent Non-Executive Directors. The Nomination Committee recommends to the Board candidates for appointment as Directors. It meets as required, when the Group is considering the appointment of Directors. The terms of reference for the Nomination Committee are published on www.rmplc.com.
Details of the number of meetings of the Board and each Committee and individual attendances by Directors are set out in the table below.
| Board Meetings |
Audit Committee |
Remuneration Committee |
Nomination Committee |
|
|---|---|---|---|---|
| Number of meetings held in the period | 10 | 3 | 6 | 1 |
| John Poulter | 10 | 3 | 6 | 1 |
| Lord Andrew Adonis | 10 | 3 | 6 | 1 |
| David Brooks | 10 | n/a | n/a | n/a |
| Iain McIntosh1 | 8 | n/a | n/a | n/a |
| Patrick Martell | 10 | 3 | 6 | 1 |
| Neil Martin2 | 2 | n/a | n/a | n/a |
| Deena Mattar | 10 | 3 | 6 | 1 |
Retired 28 September 2015
Appointed 28 September 2015
The Executive Committee is chaired by the Chief Executive Officer. The Executive Committee comprises the Chief Executive Officer, Chief Financial Officer and other senior managers within the Group. The Executive Committee normally meets on a monthly basis to discuss policy and operational issues. Those issues outside the delegated authority levels set by the Board are referred to the Board for its decision. All Non-Executive Directors are invited to attend the Executive Committee.
In order to maintain dialogue with institutional shareholders, the Executive Directors offer to meet with them following interim and final results announcements, or otherwise, as appropriate. Other Directors are available to meet institutional shareholders on request. The Annual Report is made available on the Company's website (www.rmplc.com), and sent to shareholders, as appropriate, at least 20 working days before the Annual General Meeting. Each issue for consideration at the Annual General Meeting is proposed as a separate resolution. All Directors generally attend the Annual General Meeting.
The Board takes regular account of the significance of social, ethical and environmental ('SEE') matters related to the Group's business of providing IT services and solutions (including software, managed services and consultancy) to educational institutions.
The Board considers that it has received adequate information to enable it to assess significant risks to the Company's short and long-term value arising from SEE matters and has concluded that the risks associated with SEE matters are minimal. The Board will continue to monitor those risks on an ongoing basis and will implement appropriate policies and procedures if those risks become significant.
The Group maintains an ongoing process in respect of internal control to safeguard shareholders' investments and the Group's assets and to facilitate the effective and efficient operation of the Group.
These processes enable the Group to respond appropriately, and in a timely fashion, to significant business, operational, financial, compliance and other risks, in line with the Code, which may otherwise prevent the achievement of the Group's objectives.
The Group recognises that it operates in a highly competitive market that can be affected by factors and events outside its control. Details of the main risks faced by the Group are set out in the "Principal Risks and Uncertainties" table in the Strategic Report. It is committed to mitigating risks arising wherever possible. Internal controls that are considered, applied and monitored appropriately, are an essential tool in achieving this objective.
The key elements of Group internal control, which have been effective during 2015 and up to the date of approval of the financial statements are set out below:
The Directors have overall responsibility for establishing financial and other reporting procedures to provide them with a reasonable basis on which to make proper judgments as to the financial position and prospects of the Group, and have responsibility for establishing the Group's system of internal control and for monitoring its effectiveness. The Group's systems are designed to provide Directors with reasonable assurance that physical and financial assets are safeguarded,
transactions are authorised and properly recorded and material errors and irregularities are either prevented or detected with the minimum of delay. However, systems of internal financial control can provide only reasonable and not absolute assurance against material misstatement or loss.
The key features of the systems of internal financial control include:
The majority of the Group's financial and management information is processed and stored on computer systems. The Group is dependent on systems that require sophisticated computer networks. The Group has established controls and procedures over the security of data held on such systems, including business continuity arrangements.
Both the Board and Audit Committee have reviewed the operation and effectiveness of this framework of internal control for the period and up to the date of approval of the Annual Report.
We continue to make significant investment in TTS' online channel. Online orders now make up 30% of direct marketing sales and a completely new e-commerce platform will be released this year.
The Audit Committee operates under terms of reference approved by the Board, with the purposes of:
The Audit Committee reviewed the form and content of the Annual Report and the interim results prior to their publication to provide assurance that the disclosure made in the financial statements was properly set in context.
The Audit Committee reviewed and considered the following areas:
As part of this process the Audit Committee received reports from the management and the external auditor. The external auditor provided its audit opinion along with its audit findings that were of significance in relation to the audit of the annual financial statements and a high-level review of the interim financial statements. The Audit Committee reviewed these reports with the external auditor.
The Audit Committee considers that the significant accounting judgements upon which the accounts are based relate primarily to long-term contract accounting and the related margin recognition.
Long-term contracts represent a significant part of the Group's business and the accounting is inherently judgemental. To decide the margin to be recognised or loss to be provided, it is necessary to estimate future costs. Also, the Group may sign variations, extensions and/or new contracts with an existing customer and it is necessary to assess whether or not, for accounting purposes, these should be combined with an existing contract.
Monthly management accounts and reports are provided to the Board and Audit Committee. These management accounts are based on detailed information obtained by management which take into account the following:
Where a contract has a significant impact on revenue and profit or where there is a significant variation to the contract outturn or a significant judgement is required this information is typically included in the management accounts and discussed by the Board and the Audit Committee.
Taking into account the track record and experience of the management team which prepares the costs to complete on long-term contracts and after reviewing the presentations and reports from management and the auditors and consulting with the auditor, the Audit Committee was satisfied that, overall, the financial statements appropriately addressed the critical judgements and key estimates (both in respect to the amounts reported and the disclosures).
Management reported to the Committee that they were not aware of any material misstatements. The auditor reported to the Committee that they had not found any misstatements in the course of their work. The Audit Committee was also satisfied that the significant assumptions used for determining the value of assets and liabilities had been appropriately scrutinised, challenged and were sufficiently robust.
The Audit Committee considered and is satisfied that, taken as a whole, the Annual Report 2015 is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group's performance, business model and strategy.
During the period the Audit Committee comprised Deena Mattar BSc (Econ), FCA (Chair), John Poulter, Lord Andrew Adonis and Patrick Martell, all of whom are independent Non-Executive Directors. The Group considers that Deena Mattar as a Fellow of the Institute of Chartered Accountants in England and Wales and former FTSE250 Finance Director has significant recent and relevant financial experience.
David Brooks (Chief Executive Officer), Iain McIntosh MA, FCA (Chief Financial Officer until 28 September 2015), Neil Martin, ACMA (Chief Financial Officer from 28 September 2015), Ed Warwick MEng, FCA (Group Financial Controller until 3 January 2016) and other management as appropriate are invited to attend Audit Committee meetings.
The Audit Committee met three times during the period. All of these meetings were part of the regular schedule of meetings set out in the Committee's terms of reference.
Audit Committee meetings have formal agendas, which cover all of the areas of responsibility set out in the Committee's terms of reference. These agendas include meetings with the external auditor without Executive Directors or managers of the Company present.
The Audit Committee recommended, and shareholders approved at the Company's Annual General Meeting on 25 March 2015, the re-appointment of KPMG LLP as Group external auditor.
KPMG has been the Group's auditor since 2011. The external auditor is required to rotate the audit partner responsible for the Group audit every five years and, as such, a new lead audit partner will be appointed in 2016.
There are no contractual obligations restricting the Group's choice of external auditor.
The Audit Committee has reviewed the scope and results of the audit services, and the cost effectiveness and independence and objectivity of the external auditor.
The Audit Committee approved the appointment of RM's Group Financial Controller (Ed Warwick MEng FCA until 3 January 2016 with his successor to be appointed) as Head of Internal Audit. For the purposes of this role, the Group Financial Controller reported directly to the Chair of the Audit Committee. The Audit Committee, with the advice and support of the Head of Internal Audit, sets an internal audit plan, focussed on financial controls and risk areas. The Head of Internal Audit reports on progress against this plan at Audit Committee meetings. Internal audit activities are undertaken on a peer-to-peer basis, or by contracting a suitably qualified third-party firm of accountants.
The Audit Committee has considered the issue of the provision of non-audit work by the external auditor and has agreed a policy intended to ensure that the objectivity of the external auditor is not compromised. The policy sets a limit for fees for non-audit work and states that nonaudit work should only be undertaken by the external auditor where there is a clear commercial benefit in doing so. Any significant activity must be approved, in advance, by at least two Audit Committee members.
The Audit Committee's policy is to include a cap on fees for non-audit work of 25% of the annual audit fee. This fee incorporates a review of the Group's interim results. In exceptional circumstances it may be appropriate for the auditors to carry out non-audit work in excess of this cap. If this is the case the type of work and the fee is considered very carefully by the Audit Committee in advance of appointing the auditors to the work. Fees for total non-audit work in the period were 18.7% of the annual audit fee.
The Board has put in place an organisational structure with clearly defined lines of responsibility and delegation of authority to Executive management. A Group-wide approval matrix is in place. Individuals are made aware of their level of authority and their budgetary responsibility which enables them to identify and monitor financial performance. There are established policies and procedures, which are subject to regular review. The Boards of the operating companies work within terms of reference and any matters outside those terms or the agreed business plan are referred to the Group Board for approval.
The Board has the primary responsibility for identifying the principal business risks facing the Group and developing appropriate policies to manage those risks. It delegates responsibility for operational risks to the Executive Committee which meets monthly.
The Audit Committee reviews and comments upon both the Group's Annual and interim results prepared by management.
Executive managers are required to produce a business plan for approval at the beginning of each financial year and detailed financial reporting is formally compiled monthly and reviewed by the Board. Consolidated management accounts are produced each month and results measured against plan and the previous year to identify significant variances. Forecasts are produced each month during the year, with variances to plan being measured.
The existing finance systems and procedures allow the Board to derive confidence in the completeness and accuracy of the recording of financial transactions. The processes in place and the level of analytical detail given within the management accounts facilitate the identification of unreliable data. The Group's treasury activities are operated within a defined policy designed to control the Group's cash and to minimise its exposure to foreign exchange and liquidity risk.
The Audit Committee meets periodically to review reports from management and the external auditor so as to derive reasonable assurance on behalf of the Board that financial control procedures are in place and operate effectively. An internal audit plan is set with the Audit Committee and updates on progress are provided periodically. The internal audit work is performed on a peerto-peer review basis or by engaging a third party firm of accountants and is directed by a qualified accountant who is independent of the business divisions.
The Group has adopted a formal 'whistleblowing' policy, which allows staff to raise concerns about possible improprieties. No concerns were raised during the year.
RM conducts all its business in an honest and ethical manner and seeks to ensure that all associates and business partners do the same.
The Bribery Act 2010 sets clear standards of behaviour, which govern the Group's operations. The Group has implemented policies and procedures to ensure that it is transparent and ethical in all business dealings. The Group has an anti-corruption and anti-bribery policy which sets out the legal standards the Group enforces as part of its ongoing commitment to implement adequate procedures to guard against illegal practices. Staff certification of compliance with the policy is regularly reported to the Committee.
As with any business, RM is exposed to risks as an inherent part of creating value for shareholders. As described above, the Group has put in place processes designed to identify these principal risks and to manage and mitigate the effect of them. The Audit Committee is responsible for ensuring that risks are properly considered and the Board is responsible for deciding what risks should be taken and how best to manage and mitigate the risks.
The Audit Committee is satisfied that the Group's risk management and internal control processes are appropriate to the business and Executive management has identified and addressed the principal risks affecting RM.
The most significant risks the Group is exposed to are set out in the Strategic Report.
Chair, Audit Committee 1 February 2016
The RM Results strategy is to grow the e-assessment side of the business in both the UK and overseas markets.
On behalf of the Board, I am pleased to present the Remuneration Report for the year ended 30 November 2015.
This Report is divided into the following three sections:
Part A – Introduction Part B – Remuneration Policy Part C – Implementation Report
The introduction in this Part A provides an overview of the Report and explains any major decisions or changes in remuneration made during the year and the context of those changes (if any). It also summarises the functioning and membership of the Remuneration Committee.
The Implementation Report in Part C will be put to an advisory vote at the next Annual General Meeting. The Remuneration Policy in Part B has not changed and so will not be put to a vote, though it is noted that, following feedback received last year, we have provided some extra clarity and detail.
The Committee operates under terms of reference approved by the Board with the purposes of determining, on behalf of the Board and shareholders, the remuneration of the Executive Directors and senior employees throughout the Group. The Committee also oversees major policy changes (if any) to the overall reward structure of employees throughout the Group. In particular, the Committee keeps under review incentive plans operated throughout the Group so as to ensure that these plans are structured appropriately and are coherent. The Committee's terms of reference can be found on the Group's website at www.rmplc.com.
The membership of the Remuneration Committee during the year ended 30 November 2015 comprised Lord Andrew Adonis, Patrick Martell, Deena Mattar and John Poulter, all of whom are independent Non-Executive Directors. The other Directors attend meetings by invitation.
None of the members of the Remuneration Committee has any personal financial interest in the Company other than through fees received or as a shareholder. They are not involved in the day-today running of the business and have no personal conflicts of interest which could materially interfere with the exercise of their independent judgement.
During the year, the following key decisions were considered by the Committee:
Chair, Remuneration Committee 1 February 2016
The Remuneration Committee is responsible for the remuneration of the Directors and senior employees across the Group.
RM's Remuneration Policy is designed to promote the long-term success of the company. The Policy is designed to attract, retain and motivate Directors and senior employees, both to achieve the Group's business objectives and to deliver outstanding shareholder returns. To achieve this, RM's Remuneration Policy aims to provide 'median' reward compared to comparator groups when acceptable levels of performance have been delivered. For the achievement of outstanding performance, it aims to deliver 'upper quartile' remuneration compared to comparator groups.
Under these arrangements, the variable component of the remuneration package is designed to be focused on performance. These incentive arrangements enable Executive Directors and senior employees to have the opportunity to earn higher levels of reward but only if they enhance shareholder returns by meeting the Group's short-term and long-term targets. The Remuneration Policy therefore seeks to ensure that Executive Directors and senior employees are focused on the achievement of key company objectives. The Committee is satisfied that this model provides appropriate alignment with shareholder interests and therefore acts as an appropriate motivator.
The Committee, together with the entire Board, also recognises the need for investment in the longterm future of the Company, not just performance in a single year. Since such measures are difficult to quantify, the Committee retains the discretion to adjust annual bonus payments to ensure
that balance is maintained between short-term performance and longer-term investment.
The Committee has reviewed the level of risk inherent in the Remuneration Policy and is satisfied that there is an appropriate balance between encouraging entrepreneurial behaviour from Executive Directors and senior employees, whilst at the same time ensuring that there are no areas of the Policy which encourage undue risk taking. In relation to the target setting process and other matters arising in relation to the operation of the annual bonus and long-term incentive plans, the Committee considers that the structure should not encourage excessive risk taking.
The following table sets out a summary of the various components of remuneration for Executive Directors, their purpose and link to strategy, how it operates, the maximum opportunity available, the nature of any applicable performance metrics and changes (if any) made during the year.
| Element | Purpose and link to strategy | Operation |
|---|---|---|
| Fixed Pay | ||
| Base Salary | To attract and retain talent by ensuring that |
Reviewed annually, with changes usually taking effect from 1 January (see note 1 below). Reviews take account of: |
| salaries are competitive in the market. |
• business performance and the wider economic and market conditions; |
|
| • market position relative to relevant comparator groups; |
||
| • the range of salary increases (if any) across the Group; and |
||
| • individual experience and performance. |
||
| Reviews may be conducted at other times if appropriate (e.g. on a change in responsibility). |
||
| Pension (see also note 2 below) |
To attract and retain talent by ensuring that remuneration is competitive in the market. |
Entitlement is the same as for other employees within the Group. Cash allowance alternative where individuals are subject to HMRC pension limits (subject to there being the same overall cost to the Group). |
| Benefits | To attract and retain talent by ensuring that remuneration is competitive in the market. |
Entitlement is the same as for other employees within the Group. The range of benefits offered to employees is reviewed periodically to ensure that offerings are in line with market practice. |
| Variable Pay | ||
| Annual Bonus | Provides an element of at risk pay, which incentivises good annual |
Reviewed annually prior to the start of each financial year to ensure targets support short-term and long-term business strategy. Targets are intended to: |
| financial results. | • be stretching but realistic; |
|
| • reflect expectations of the investor community; |
||
| • avoid unnecessary risk taking; and |
||
| • encourage long-term decision-making (e.g. incentivising long-term investments). |
||
| LTIPs | Incentivises Directors to achieve returns for shareholders over a longer time frame. |
Awards are granted to Executives and senior management typically no more than once per year, with the vesting of awards being based on criteria designed to align with shareholder interests and encourage long-term performance. |
Notes:
| Element Purpose and link to strategy Operation |
Maximum Opportunity | Performance Metrics | Changes for 2015/16 |
|---|---|---|---|
| Fixed Pay | |||
| To attract and retain Reviewed annually, with changes usually taking effect from Base Salary talent by ensuring that 1 January (see note 1 below). Reviews take account of: salaries are competitive in • business performance and the wider economic and the market. market conditions; |
Base salaries will be determined from the outcome of reviews. |
None. | No change to policy. |
| • market position relative to relevant comparator groups; • the range of salary increases (if any) across the Group; and |
|||
| • individual experience and performance. Reviews may be conducted at other times if appropriate (e.g. on a change in responsibility). |
|||
| To attract and retain Entitlement is the same as for other employees within the Pension talent by ensuring Group. Cash allowance alternative where individuals are (see also note 2 below) that remuneration is subject to HMRC pension limits (subject to there being the competitive in the market. same overall cost to the Group). |
Up to 7% of base salary depending upon level of employee contribution. |
None. | No change to policy. |
| Benefits To attract and retain Entitlement is the same as for other employees within talent by ensuring the Group. The range of benefits offered to employees is that remuneration is reviewed periodically to ensure that offerings are in line competitive in the market. with market practice. |
Private healthcare. Permanent health insurance. Life assurance. Car allowance. Mobile phone allowance. |
None. | No change to policy. |
| Variable Pay | |||
| Provides an element Reviewed annually prior to the start of each financial Annual Bonus of at risk pay, which year to ensure targets support short-term and long-term incentivises good annual business strategy. Targets are intended to: financial results. • be stretching but realistic; • reflect expectations of the investor community; • avoid unnecessary risk taking; and • encourage long-term decision-making (e.g. incentivising long-term investments). |
55% of base salary for on-target performance, with a maximum figure for over-performance of 110% of base salary. |
Set by the Committee at the beginning of each year to focus on alignment with shareholders' interests. |
No change to policy. |
| Incentivises Directors Awards are granted to Executives and senior management LTIPs to achieve returns for typically no more than once per year, with the vesting shareholders over a longer of awards being based on criteria designed to align time frame. with shareholder interests and encourage long-term performance. |
150% of base salary. | Set by the Committee at the date of grant to align with shareholders' interests over a period of not less than 3 years. |
No change to policy. |
The Committee has implemented the following shareholding policy for all Executive Directors in order to further align their interests with those of the Company's shareholders:
The principles set out elsewhere in this Policy, in particular those in paragraphs 2 and 3 above, apply both to existing Executive Directors and to any new Executive Directors on recruitment. No other amounts or forms of remuneration which would be outside the parameters set out in this Policy would be payable (unless agreed with shareholders).
Malus and clawback provisions are in place, and will continue to be maintained, in relation to the variable, performance related remuneration of the Executive Directors (annual bonus and LTIPs).
In respect of each award under the RM plc Performance Share Plan 2010 ("PSP Scheme"), the clawback applies where there is a deliberate act of fraud (whether by the Executive Directors or anybody else) that results in the misstatement of the Company's results. The clawback operates to the later of (a) one year from the relevant PSP award vesting and (b) the completion of the next audit of the Group's accounts after the award vests.
In respect of annual bonuses, the payment of all bonuses is at the discretion of the Remuneration Committee and the clawback applies where the Company suffers significant financial or reputational damage as a result of gross or serious misconduct, fraudulent misrepresentation, the Executive being convicted of a criminal offence, wilful default of the relevant Service Agreement or a breach of Company policy or procedure. The clawback operates for up to 18 months after the end of the relevant financial year to which the bonus relates.
The fees payable to Non-Executive Directors are considered periodically by reference to comparable roles in companies of a similar size and complexity as the Company. Fees are not performance-related. Out-of-pocket expenses (such as travel costs) incurred in performing those duties are reimbursed by the Company. It is noted that the fees payable to Non-Executive Directors have not been increased in recent years.
The graphs below provide estimates of the potential future reward for each of the Executive Directors based on their current roles, the Remuneration Policy outlined above and base salaries as at 1 December 2015. However, it is noted that the illustrations show maximum LTIP awards at 150% of base salary, whereas the typical value of LTIP awards is lower (e.g. as is shown in paragraph 2 of Part C of this Remuneration Report, the value of LTIP awards made during the year ended 30 November 2015 was 107% of base salary for David Brooks and 97% of base salary for Neil Martin).
Explanations:
| Base | Benefits | Pension | Total | ||
|---|---|---|---|---|---|
| Fixed (£000) |
300 | 16 | 21 | 337 | |
| On-target | On-target is assumed to be an annual bonus equal to 55% of base salary and an LTIP award of 25% of maximum |
||||
| Maximum | • Full pay-out of annual variable pay i.e., 110% of base salary |
||||
| • Maximum vesting of LTIP awards |
Neil Martin – Chief Financial Officer
Explanations:
| Base | Benefits | Pension | Total | ||
|---|---|---|---|---|---|
| Fixed (£000) |
275 | 16 | 19 | 310 | |
| On-target | On-target is assumed to be an annual bonus equal to 55% of base salary and an LTIP award of 25% of maximum |
||||
| Maximum | • Full pay-out of annual variable pay i.e., 110% of base salary |
||||
| • Maximum vesting of LTIP awards |
This policy sets out the remuneration structure applicable to Directors of the Company. Salary levels and incentive arrangements applicable to other Group employees are determined by reference to local employment conditions for comparative roles.
Budgeted salary increases for Group employees are taken into consideration when determining increases for the Executive Directors.
Employees are provided with a competitive benefits package including (as appropriate) private healthcare, permanent health insurance, life assurance, car allowance, mobile phone allowance and pension.
The closure to future accrual of benefits of RM Education Ltd's Defined Benefit Pension Scheme in October 2012 applied equally to all employees, including Directors.
Consistent with Directors, the majority of employees are eligible to participate in an annual bonus scheme with conditions linked to their personal performance, the performance of their operating subsidiary and the Group overall.
The Group does not consult with employees in respect of the Remuneration Policy. However, the Committee receives regular updates on salary and bonus levels across the Group and is aware of how the remuneration of Directors compares to employees.
In addition, when setting remuneration levels for the Executive Directors, the Committee takes account of the levels of remuneration received by executive directors of similar companies.
Remuneration consultants have not been engaged during the period.
The Committee's policy on Executive Directors' service contracts is for them to contain a maximum notice period of one year. Each service contract expires at the respective normal retirement date of the Executive Director but is subject to earlier termination for cause or if notice is given under the contract. The contracts are designed to allow for flexibility to deal with each case on its own particular merits in accordance with the law and policy as they have developed at the relevant time. In the event that the Company wishes to terminate the employment of an Executive Director, it will take into account the Executive Director's obligations to mitigate losses when deciding on an appropriate level of compensation.
Details of the Directors' service contracts and/or letters of appointment who served for all or part of the year ended 30 November 2015 are shown in the table below:
| Initial agreement date | Expiry date of current agreement |
Notice to be given by employer and individual |
|
|---|---|---|---|
| Current Directors | |||
| John Poulter | 1 May 2013 | 30 April 2019 | 6 months |
| Lord Andrew Adonis | 1 October 2011 | 30 September 2017 | 3 months |
| David Brooks | 1 July 2012 | Indefinite | 12 months |
| Neil Martin | 28 September 2015 | Indefinite | 12 months |
| Deena Mattar | 1 June 2011 | 31 May 2017 | 3 months |
| Patrick Martell | 1 January 2014 | 31 December 2016 | 3 months |
| Past Directors | |||
| Iain McIntosh | 22 October 2009 | n/a | 12 months |
RM Education's strategy is to return to sustainable top line growth by developing the adoption of its portfolio of software products and services to existing and new UK school and college customers.
The tables below set out a Single Figure of remuneration for each of the Directors in respect of the year ended 30 November 2015 and, in respect of those Directors, the equivalent figures for the year ended 30 November 2014:
| Salary | Taxable | Annual | Retirement | Termination | |||
|---|---|---|---|---|---|---|---|
| and fees | benefits | bonus | LTIPs | benefits | payments | Total | |
| Name | £000 | £000 | £000 | £000 | £000 | £000 | £000 |
| Executive | |||||||
| David Brooks | 3001 | 11 | 165 | 749 | 211 | - | 1,246 |
| Iain McIntosh (resigned 28 September 2015) |
1961 | 8 | - | 479 | 121 | 250 | 945 |
| Neil Martin (appointed 28 September 2015) |
481 | 3 | 25 | - | 31 | - | 79 |
| Non-Executive | |||||||
| John Poulter | 120 | - | - | - | - | - | 120 |
| Lord Andrew Adonis | 36 | - | - | - | - | - | 36 |
| Patrick Martell | 39 | - | - | - | - | - | 39 |
| Deena Mattar | 43 | - | - | - | - | - | 43 |
| Total | 782 | 22 | 190 | 1,228 | 36 | 250 | 2,508 |
Year ended 30 November 2014
| Salary | Taxable | Annual | Retirement | Termination | |||
|---|---|---|---|---|---|---|---|
| Name | and fees £000 |
benefits £000 |
bonus £000 |
LTIPs £000 |
benefits £000 |
payments £000 |
Total £000 |
| Executive | |||||||
| David Brooks | 2961 | 11 | 248 | - | 211 | - | 576 |
| Iain McIntosh | 2351 | 11 | 155 | - | 161 | - | 417 |
| Non-Executive | |||||||
| John Poulter | 120 | - | - | - | - | - | 120 |
| Lord Andrew Adonis | 36 | - | - | - | - | - | 36 |
| Jo Connell (retired 19 March 2014) |
14 | - | - | - | - | - | 14 |
| Patrick Martell (appointed 1 January 2014) |
35 | - | - | - | - | - | 35 |
| Deena Mattar | 42 | - | - | - | - | - | 42 |
| Total | 778 | 22 | 403 | - | 37 | - | 1,240 |
Notes:
The following provides details of how the 'Single Figure' has been calculated:
These comprise the benefits noted in Part B above other than retirement related benefits. The figure included in the above table in respect of such benefits is calculated based on the taxable value of such benefits.
As stated in the Remuneration Policy, on-target performance is paid out at 55% of base salary, with over-performance capped at a maximum of 110% of base salary.
At the start of the year, the Committee decided that David Brooks' bonus should be based upon targets for Group adjusted operating profit for the year, both before and after movements in work-inprogress ("Pre-WIP" and "Post-WIP" respectively). The reason for setting both Pre-WIP and Post-WIP targets was to ensure that the long-term trends of the Company's underlying business operations were captured. The Committee took analyst forecasts into account when setting the relevant targets.
In the year, the Pre-WIP target for Group adjusted operating profit was met and the Post-WIP target exceeded. The Committee decided that it would be appropriate to award an on-target bonus of 55% of base salary.
Neil Martin was appointed on 28 September 2015. As agreed at the time of Mr Martin joining the Company, the Committee considered that it would be appropriate to pay the bonus for the year based on an on-target outcome, pro-rated for the two months of employment in the year.
In the year, two awards previously granted under the RM plc Performance Share Plan 2010 (the "PSP Scheme") vested. On 2 December 2014, the award granted to David Brooks and Iain McIntosh under the Scheme on 1 December 2011 vested in full, the performance criteria having been fully met. For
David Brooks, 250,000 shares vested at a value of £1.595 per share, making the total value of the award £398,750. For Iain McIntosh, 300,000 shares vested at a value of £1.595 per share, making the total value of the award £478,500. On 3 August 2015, the award granted to David Brooks under the Scheme on 6 August 2012 vested. Of the maximum 250,000 shares in the original award, 205,882 shares vested (based on the extent to which the relevant performance criteria had been met). The value of the shares that vested was £349,999 (based on a share price of £1.70 on the date of vesting).
David Brooks and Neil Martin are both members of a defined contribution pension scheme operated by RM Education Ltd, into which the Group makes a contribution of 7% of base salary. A salary sacrifice arrangement is operated in relation to this scheme (for all employees), meaning that base salary is reduced by the contribution that would otherwise be made by the individual, with that amount then being added to the employer contribution made to the scheme. However, to make the figures in the above tables more meaningful, base salaries are stated prior to the reduction in base salary as a result of that salary sacrifice arrangement.
Iain McIntosh was not a member of the defined contribution pension scheme noted above. Instead he received a cash allowance equivalent to 7% of base salary in lieu of such contribution. Again, to make the figures in the above tables more meaningful, the cash received in lieu of pension contribution is shown as a retirement benefit and not as part of base salary.
David Brooks is also a member of RM Education Ltd's Defined Benefit Pension Scheme which closed to future accrual with effect from 31 October 2012. During the year, the increase in Mr Brooks' accrued pension under that scheme was nil.
Iain McIntosh left the Company on 28 September 2015. On the cessation of his employment, as a good leaver, he received the value of his base salary and a payment towards loss of benefits which would have accrued to him during his twelve months' notice period. No bonus was paid to him in respect of the 2015 financial year. No further compensation for loss of benefits was paid.
The awards granted under the RM plc Performance Share Plan 2010 in July 2013 and August 2014 both lapsed in full and no other long-term incentive plan awards are outstanding. On the cessation of his employment, he received a payment totalling £250,000. This comprised of £235,000 in lieu of twelve months' base salary and £15,000 for loss of benefits. The Remuneration Committee exercised its discretion in respect of the payment of £15,000 for loss of benefits in light of Mr McIntosh's performance during the period prior to him leaving the Company.
During the year ended 30 November 2015, the following long-term incentive awards were made:
| Name | Type of share |
award Grant date | Face value of award £000 |
Percentage that would vest at threshold performance |
Maximum percentage of the face value where this is more than the face value |
The end of the period over which the performance conditions have to be fulfilled |
A summary of performance targets and measures |
|---|---|---|---|---|---|---|---|
| David Brooks | PSP1 | 5 August 2015 |
320 (107% of base salary)2 |
25% | n/a | 6 August 2018 | Relative TSR performance4 |
| Neil Martin | PSP1 | 2 October 2015 |
267 (97% of base salary)3 |
25% | n/a | 4 October 2018 | Relative TSR performance4 |
Notes:
The following graph shows the value, by 30 November 2015, of £100 invested in RM plc on 30 November 2008 compared with the value of £100 invested in the FTSE Small Cap (ex. Investment Trusts) Index on the same date. The other points plotted are the values at intervening financial year-ends.
The table below sets out details of:
| 2009 | 2010 | 20111 | 20122 | 20133 | 2014 | 2015 | |
|---|---|---|---|---|---|---|---|
| Single Figure (£000) | 548 | 517 | 426 | 286 | 379 | 576 | 1,246 |
| Annual variable element award rates against maximum opportunity |
48% | 56% | 0% | 0% | 58%4 | 75% | 50% |
| Long-term incentive vesting rates against maximum opportunity |
0% | 40% | 0% | 0% | 0% | 0% | 91% |
Notes:
The following table sets out, in respect of the year ended 30 November 2015 and the immediately preceding financial year, the total remuneration paid to all employees as compared to other significant distributions and payments.
| 2015 | 2014 | |
|---|---|---|
| £m | £m | |
| Total remuneration to employees | 66.8 | 69.1 |
| Total remuneration to Directors | 2.5 | 1.2 |
| Dividends paid | 3.4 | 17.7 |
| Corporation tax paid | 0.2 | 2.5 |
| Defined benefit pension cash contribution | 4.0 | 11.8 |
The average increase in pay for permanent employees across the Group between the year ended 30 November 2014 and the year ended 30 November 2015 was 3.4% (3.1% in the UK and 6.7% in India). As noted in Part A of this Report, there was no increase in the base salary of the Chief Executive Officer during the year.
Voting at the Annual General Meeting held on 25 March 2015 in respect of the remuneration report for the year ended 30 November 2014 was as follows:
| % of votes in favour |
% of votes against |
Number of votes withheld |
|
|---|---|---|---|
| Resolution to approve the remuneration report | 85.35 | 14.64 | 1,253,604 (1.52%) |
| Resolution to approve the Directors' remuneration policy | 73.28 | 26.71 | 129,392 (0.16%) |
The beneficial interests of the Directors (including connected persons as defined for the purposes of section 96B(2) of the Financial Services and Markets Act 2000) in the ordinary shares of RM plc as at 30 November 2015 were:
| 30 November 2015 | 30 November 2014 | |
|---|---|---|
| John Poulter | 87,500 | 87,500 |
| Lord Andrew Adonis | - | - |
| David Brooks | 245,163 | 3,976 |
| Patrick Martell | 5,000 | - |
| Neil Martin | - | - |
| Deena Mattar | 17,933 | 17,933 |
As at 30 November 2015, the Executive Directors had the following interests in the Company's share plans1 :
| David Brooks | Date of Grant | No. of Options |
Exercise Price |
Date of Grant | No. of Shares / Options |
Performance Conditions |
|---|---|---|---|---|---|---|
| 6/12/06 | 10,000 | £1.742 | 10/7/13 | 125,000 | See note 4 | |
| 28/11/07 | 20,000 | £1.973 | 4/8/14 | 180,000 | See note 4 | |
| 5/8/15 | 180,000 | See note 4 |
| Neil Martin | None. | Date of Grant | No. of Shares / Options |
Performance Conditions |
|---|---|---|---|---|
| 2/10/15 | 160,000 | See note 4 |
Relevant information relating to the Service Contracts of the Directors is set out in Part B of this Report (Remuneration Policy).
Details of the Remuneration Committee and its membership are contained in Part A of this Report (Introduction).
This Report has been prepared in accordance with Schedule 8 of the Large and Medium-Sized Companies and Group (Accounts and Reports) Regulations 2008, as amended by The Large and Medium-Sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013. The Report also meets the relevant requirements of the Listing Rules of the UK Listing Authority and illustrates how the principles of the UK Corporate Governance Code relating to Directors' remuneration are applied by the Company.
The Group's auditors are required to comment on whether certain parts of the Group's Remuneration Report have been prepared in accordance with Schedule 8 of the Large and Medium-Sized Companies and Group (Accounts and Reports) Regulations 2008. Accordingly, the following sections of this Part C of this Report have been audited by KPMG LLP:
By Order of the Board
Chair, Remuneration Committee 1 February 2016
We have audited the financial statements of RM plc for the year ended 30 November 2015 set out on pages 51 to 100. In our opinion:
In arriving at our audit opinion above on the financial statements the risk of material misstatement that had the greatest effect on our audit was as follows.
Refer to page 29 (Audit Committee statement), page 60 (accounting policy) and page 79 (financial disclosures).
We selected for detailed testing a number of long-term contracts based on the magnitude of revenue recognised in the year and risk indicators (such as contracts with a significant change in the estimate of lifetime revenue, margin or risk provision, loss making contracts and contracts with a large work in progress balance). For the contracts we selected, we read any variations, extensions and new contracts and considered, amongst other matters, whether the new agreement provided value to the customer on a stand-alone basis
(and therefore should be treated as a separate contract) or whether, together with an existing contract, it was effectively a single project with an overall profit margin (and therefore should be accounted for as a revision to the existing contract). We assessed the completeness and accuracy of costs included in contract estimates, including those for specified contract risks, by reading the contract and customer correspondence and obtaining evidence to support selected inputs.
Where a contract had been selected for detailed work during a prior year's audit and the contract is now in a stable managed service phase, we determined whether the margin in the current year was in line with our expectation. We also assessed the adequacy of the Group's disclosure about estimation uncertainty regarding longterm contract outcome.
The materiality for the Group financial statements as a whole was set at £1.0 million determined with reference to a benchmark of Group profit before taxation, normalised to exclude this year's restructuring charge, and the decrease in provision for dilapidations on leased properties and onerous lease contracts as disclosed in the Adjustments column on the face of the income statement, of which it represents 6%.
We report to the Audit Committee any corrected or uncorrected identified misstatements exceeding £50,000, in addition to other identified misstatements that warrant reporting on qualitative grounds.
Of the Group's ten reporting components, we subjected four to audits for Group reporting purposes and two to specified risk-focused audit procedures. The components for which we performed specified risk-focused procedures were not individually financially significant enough to require an audit for Group reporting purposes, but did present specific individual risks that needed to be addressed. These Group procedures covered 98% of total Group revenue for components subject to audit and 0% for those subject to specified
risk-focused procedures; 89% of the total profits and losses that made up Group profit before tax for components subject to audit and 5% for those subject to specified risk-focused procedures; and 96% of total Group assets for components subject to audit and 2% for those subject to specified riskfocused procedures.
The Group audit team instructed component auditors as to the significant areas to be covered, and the information to be reported back. The Group audit team approved the component materialities, which ranged from £0.5 million to £0.8 million, having regard to the mix of size and risk profile of the Group across the components. The work on two of the six components was performed by component auditors and the rest by the Group audit team.
The Group audit team visited one component location in Nottingham, UK, including to assess the audit risk and strategy. Telephone meetings were held with the component auditors in the UK and India. At these meetings, including the site visit, the findings reported to the Group audit team were discussed in more detail.
In our opinion:
Based on the knowledge we acquired during our audit, we have nothing material to add or draw attention to in relation to:
Under ISAs (UK and Ireland) we are required to report to you if, based on the knowledge we acquired during our audit, we have identified other information in the annual report that contains a material inconsistency with either that knowledge or the financial statements, a material misstatement of fact, or that is otherwise misleading.
In particular, we are required to report to you if:
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or
Under the Listing Rules we are required to review:
We have nothing to report in respect of the above responsibilities.
As explained more fully in the Directors' Responsibilities Statement set out on page 18, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. A description of the scope of an audit of financial statements is provided on the Financial Reporting Council's website at www.frc.org.uk/auditscopeukprivate. This report is made solely to the Company's members as a body and is subject to important explanations and disclaimers regarding our responsibilities, published on our website at www.kpmg.com/uk/auditscopeukco2014a, which are incorporated into this report as if set out in full and should be read to provide an understanding of the purpose of this report, the work we have undertaken and the basis of our opinions.
Chartered Accountants Arlington Business Park, Theale, Reading, RG7 4SD
1 February 2016
| Year ended 30 November 2015 | Year ended 30 November 2014 | |||||||
|---|---|---|---|---|---|---|---|---|
| Note | Adjusted £000 |
Adjustments £000 |
Total £000 |
Adjusted £000 |
Adjustments £000 |
Total £000 |
||
| Revenue | 3 | 178,228 | - | 178,228 | 202,544 | - | 202,544 | |
| Cost of sales | (109,316) | - | (109,316) | (126,974) | - | (126,974) | ||
| Gross profit | 68,912 | - | 68,912 | 75,570 | - | 75,570 | ||
| Operating expenses | 5 | (50,713) | - | (50,713) | (57,044) | - | (57,044) | |
| Amortisation of acquisition related intangible assets |
13 | - | (303) | (303) | - | (303) | (303) | |
| Impairment of held for sale assets and related transition costs |
20 | - | (323) | (323) | - | - | - | |
| Gain on sale of operations | - | 65 | 65 | - | 429 | 429 | ||
| Share-based payment charges | - | (864) | (864) | - | (932) | (932) | ||
| Release of/(increase in) provisions for dilapidations on leased properties and |
||||||||
| onerous lease contracts | 22 | - | 2,368 | 2,368 | - | (774) | (774) | |
| Restructuring costs Exceptional credit on Defined Benefit Pension Scheme |
24 | - - |
243 206 |
243 206 |
- - |
(472) - |
(472) - |
|
| (50,713) | 1,392 | (49,321) | (57,044) | (2,052) | (59,096) | |||
| Profit from operations | 5 | 18,199 | 1,392 | 19,591 | 18,526 | (2,052) | 16,474 | |
| Investment income | 7 | 409 | 894 | 1,303 | 476 | - | 476 | |
| Finance costs | 8 | (1,510) | (149) | (1,659) | (924) | (269) | (1,193) | |
| Profit before tax | 17,098 | 2,137 | 19,235 | 18,078 | (2,321) | 15,757 | ||
| Tax | 9 | (3,984) | (289) | (4,273) | (4,359) | 201 | (4,158) | |
| Profit for the year | 13,114 | 1,848 | 14,962 | 13,719 | (2,120) | 11,599 | ||
| Earnings per ordinary share | 10 | |||||||
| - basic | 16.2p | 2.3p | 18.5p | 16.4p | (2.5)p | 13.9p | ||
| - diluted | 15.6p | 2.2p | 17.8p | 15.4p | (2.4)p | 13.0p | ||
| Paid and proposed dividends per share |
11 | |||||||
| - interim | 1.20p | 0.96p | ||||||
| - final | 3.80p | 3.04p |
Adjustments to results have been presented to give a better guide to business performance (see note 1). All amounts were derived from continuing operations.
| Year ended | Year ended | ||
|---|---|---|---|
| Note | 30 November 2015 £000 |
30 November 2014 £000 |
|
| Profit for the year | 14,962 | 11,599 | |
| Items that will not be reclassified subsequently to profit or loss |
|||
| Defined Benefit Pension Scheme remeasurements | 24 | 2,402 | (21,892) |
| Tax on items that will not be reclassified subsequently to profit or loss |
9 | (950) | 4,378 |
| Items that are or may be reclassified subsequently to profit or loss |
|||
| Fair value (loss)/gain on hedged instruments | (180) | 1,018 | |
| Exchange (loss)/gain on translation of overseas operations | (80) | 81 | |
| Tax on items that are or may be reclassified subsequently to profit or loss |
9 | (36) | 657 |
| Other comprehensive income/(expense) | 1,156 | (15,758) | |
| Total comprehensive income/(expense) for the year attributable to equity holders |
16,118 | (4,159) |
| Capital | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Share | Share | redemption | Hedging | Translation | Retained | ||||
| capital | premium | Own shares | reserve | reserve | reserve | earnings | Total | ||
| Note | £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 | |
| At 1 December 2013 | 1,870 | 26,997 | (2,972) | 94 | (474) | (385) | 3,895 | 29,025 | |
| Profit for the year | - | - | - | - | - | - | 11,599 | 11,599 | |
| Other comprehensive income/(expense) |
- | - | - | - | 1,018 | 81 | (16,857) | (15,758) | |
| Total comprehensive income/(expense) |
- | - | - | - | 1,018 | 81 | (5,258) | (4,159) | |
| Transactions with owners of the Company | |||||||||
| Shares issued | 23 | 19 | 21 | (18) | - | - | - | - | 22 |
| Share-based payment awards exercised |
- | - | 40 | - | - | - | (40) | - | |
| Share-based payment fair value charges |
26 | - | - | - | - | - | - | 932 | 932 |
| Dividends paid | 11 | - | - | - | - | - | - | (17,706) | (17,706) |
| At 30 November 2014 | 1,889 | 27,018 | (2,950) | 94 | 544 | (304) | (18,177) | 8,114 | |
| Profit for the year | - | - | - | - | - | - | 14,962 | 14,962 | |
| Other comprehensive (expense)/income |
- | - | - | - | (180) | (80) | 1,416 | 1,156 | |
| Total comprehensive (expense)/income |
- | - | - | - | (180) | (80) | 16,378 | 16,118 | |
| Transactions with owners of the Company | |||||||||
| Shares issued | 23 | 1 | 17 | - | - | - | - | - | 18 |
| Sale of shares held in staff share scheme |
- | - | - | - | - | - | 55 | 55 | |
| Share-based payment awards exercised |
- | - | 2,910 | - | - | - | (3,038) | (128) | |
| Purchase of own shares |
- | - | (2,470) | - | - | - | - | (2,470) | |
| Share-based payment fair value charges |
26 | - | - | - | - | - | - | 864 | 864 |
| Ordinary dividends paid |
11 | - | - | - | - | - | - | (3,424) | (3,424) |
| At 30 November 2015 | 1,890 | 27,035 | (2,510) | 94 | 364 | (384) | (7,342) | 19,147 |
| At 30 November 2015 | At 30 November 2014 | |||
|---|---|---|---|---|
| Note | £000 | £000 | ||
| Non-current assets | ||||
| Goodwill | 12 | 14,067 | 14,067 | |
| Acquisition related intangible assets | 13 | 8 | 461 | |
| Other intangible assets | 13 | 562 | 537 | |
| Property, plant and equipment | 14 | 7,059 | 8,040 | |
| Other receivables | 18 | 1,168 | 1,878 | |
| Deferred tax assets | 9 | 6,121 | 8,147 | |
| 28,985 | 33,130 | |||
| Current assets | ||||
| Inventories | 16 | 10,862 | 10,604 | |
| Trade and other receivables | 18 | 25,592 | 32,928 | |
| Tax assets | - | 821 | ||
| Cash and short-term deposits | 19 | 48,320 | 47,893 | |
| Assets held for sale | 20 | 1,162 | - | |
| 85,936 | 92,246 | |||
| Total assets | 114,921 | 125,376 | ||
| Current liabilities | ||||
| Trade and other payables | 21 | (64,974) | (79,085) | |
| Tax liabilities | (2,787) | (600) | ||
| Provisions | 22 | (2,077) | (3,660) | |
| Liabilities directly associated with | ||||
| assets classified as held for sale | 20 | (549) | - | |
| (70,387) | (83,345) | |||
| Net current assets | 15,549 | 8,901 | ||
| Non-current liabilities | ||||
| Other payables | 21 | (662) | (1,657) | |
| Provisions | 22 | (2,864) | (5,507) | |
| Defined Benefit Pension Scheme obligation | 24 | (21,861) | (26,753) | |
| (25,387) | (33,917) | |||
| Total liabilities | (95,774) | (117,262) | ||
| Net assets | 19,147 | 8,114 | ||
| Equity attributable to shareholders | ||||
| Share capital | 23 | 1,890 | 1,889 | |
| Share premium account | 27,035 | 27,018 | ||
| Own shares | 25 | (2,510) | (2,950) | |
| Capital redemption reserve | 94 | 94 | ||
| Hedging reserve | 364 | 544 | ||
| Translation reserve | (384) | (304) | ||
| Retained earnings - (deficit) | (7,342) | (18,177) | ||
| Total equity | 19,147 | 8,114 |
The notes on pages 59 to 100 form an integral part of these financial statements.
These Financial Statements of RM plc, registered number 01749877, were approved and authorised for issue by the Board of Directors on 1 February 2016.
On behalf of the Board of Directors,
David Brooks Neil Martin
Director Director
| Year ended | Year ended | ||
|---|---|---|---|
| 30 November 2015 | 30 November 2014 | ||
| Note | £000 | £000 | |
| Profit before tax | 19,235 | 15,757 | |
| Investment income | (1,303) | (476) | |
| Finance costs | 1,659 | 1,193 | |
| Profit from operations | 19,591 | 16,474 | |
| Adjustments for: | |||
| Impairment of acquisition related intangible assets | 13 | 150 | - |
| Amortisation of acquisition related intangible assets | 13 | 303 | 303 |
| Amortisation of other intangible assets | 13 | 297 | 417 |
| Depreciation and impairment of property, plant and equipment | 14 | 2,406 | 3,415 |
| Gain on sale of operations | (65) | (429) | |
| Loss on disposal of other intangible assets | - | 73 | |
| Gain on disposal of property, plant and equipment | (95) | (398) | |
| Loss/(gain) on foreign exchange derivatives | 133 | (83) | |
| Share-based payment charge | 864 | 932 | |
| (Decrease)/increase in provisions | (716) | 1,339 | |
| Defined Benefit Pension Scheme administration cost | 24 | 530 | 475 |
| Operating cash flows before movements in working capital | 23,398 | 22,518 | |
| Increase in inventories | (707) | (55) | |
| Decrease in receivables | 6,102 | 2,792 | |
| Decrease in trade and other payables | (14,369) | (708) | |
| Utilisation of onerous lease and dilapidations provisions | 22 | (2,186) | (836) |
| Utilisation of employee-related restructuring provisions | 22 | (1,166) | (4,348) |
| Utilisation of other provisions | 22 | (132) | (289) |
| Cash generated from operations | 10,940 | 19,074 | |
| Defined Benefit Pension Scheme cash contributions (2014: including £8m escrow payment) | (3,984) | (11,821) | |
| Tax paid | (2,527) | ||
| Borrowing facilities arrangement and commitment fees | (171) | (353) | |
| (447) | |||
| Income on sale of finance lease debt | 7 | 45 | 55 |
| Net cash inflow from operating activities | 6,383 | 4,428 | |
| Investing activities | |||
| Interest received | 364 | 403 | |
| Repayment of loans by third parties | 18 | 33 | |
| Proceeds from sale of other receivables | 1,586 | - | |
| Proceeds on disposal of property, plant and equipment | 165 | 661 | |
| Purchases of property, plant and equipment | 14 | (1,576) | (2,597) |
| Purchases of other intangible assets | 13 | (322) | (1) |
| Net cash generated by/(used in) investing activities | 235 | (1,501) | |
| Financing activities | |||
| Ordinary and Special dividends paid | (3,424) | (17,706) | |
| Repayment of capital obligations under vehicle finance leases | (244) | (530) | |
| Proceeds of share capital issue, net of share issue costs | 18 | 22 | |
| Proceeds from sale of shares held in Staff Share Scheme | 55 | - | |
| Purchase of own shares | (2,470) | - | |
| Satisfaction of share-based payment awards | (128) | - | |
| Net cash used in financing activities | (6,193) | (18,214) | |
| Net increase/(decrease) in cash and cash equivalents | 425 | (15,287) | |
| Cash and cash equivalents at the beginning of the year | 41,893 | 57,169 | |
| Effect of foreign exchange rate changes | 2 | 11 | |
| Cash and cash equivalents at the end of the year | 19 | 42,320 | 41,893 |
| Capital | |||||||
|---|---|---|---|---|---|---|---|
| Share | Share | redemption | Retained | ||||
| capital | premium | Own shares | reserve | earnings | Total | ||
| Note | £000 | £000 | £000 | £000 | £000 | £000 | |
| At 1 December 2013 | 1,870 | 26,997 | (2,972) | 94 | 30,895 | 56,884 | |
| Profit for the year | - | - | - | - | 6,281 | 6,281 | |
| Total comprehensive income | - | - | - | - | 6,281 | 6,281 | |
| Transactions with owners of the Company | |||||||
| Shares issued | 23 | 19 | 21 | (18) | - | - | 22 |
| Share-based payment awards exercised | - | - | 40 | - | (40) | - | |
| Share-based payment fair value charges | 26 | - | - | - | - | 932 | 932 |
| Dividends paid | 11 | - | - | - | - | (17,706) | (17,706) |
| At 30 November 2014 | 1,889 | 27,018 | (2,950) | 94 | 20,362 | 46,413 | |
| Profit for the year | - | - | - | - | 7,386 | 7,386 | |
| Total comprehensive income | - | - | - | - | 7,386 | 7,386 | |
| Transactions with owners of the Company | |||||||
| Shares issued | 23 | 1 | 17 | - | - | - | 18 |
| Sale of shares held in staff share scheme | - | - | - | - | 55 | 55 | |
| Share-based payment awards exercised | - | - | 2,910 | - | (3,038) | (128) | |
| Purchase of own shares | - | - | (2,470) | - | - | (2,470) | |
| Share-based payment fair value charges | 26 | - | - | - | - | 864 | 864 |
| Ordinary dividends paid | 11 | - | - | - | - | (3,424) | (3,424) |
| At 30 November 2015 | 1,890 | 27,035 | (2,510) | 94 | 22,205 | 48,714 |
The notes on pages 59 to 100 form an integral part of these financial statements.
As permitted by section 408 of the Companies Act 2006, no separate income statement is presented for the parent company, RM plc.
| At 30 November 2015 | At 30 November 2014 | |||
|---|---|---|---|---|
| Note | £000 | £000 | ||
| Non-current assets | ||||
| Investments | 15 | 65,016 | 64,255 | |
| Other receivables | 18 | 918 | 1,628 | |
| 65,934 | 65,883 | |||
| Current assets | ||||
| Trade and other receivables | 18 | 5,216 | 14,372 | |
| Tax assets | 46 | 53 | ||
| 5,262 | 14,425 | |||
| Total assets | 71,196 | 80,308 | ||
| Current liabilities | ||||
| Amounts owed to Group undertakings | 21 | (17,091) | (29,002) | |
| Net current liabilities | (11,829) | (14,577) | ||
| Non-current liabilities | ||||
| Provisions | 22 | (5,391) | (4,893) | |
| Total liabilities | (22,482) | (33,895) | ||
| Net assets | 48,714 | 46,413 | ||
| Equity attributable to equity holders | ||||
| Share capital | 23 | 1,890 | 1,889 | |
| Share premium account | 27,035 | 27,018 | ||
| Own shares | 25 | (2,510) | (2,950) | |
| Capital redemption reserve | 94 | 94 | ||
| Retained earnings | 22,205 | 20,362 | ||
| Total equity | 48,714 | 46,413 |
The notes on pages 59 to 100 form an integral part of these financial statements.
These Financial Statements of RM plc, registered number 01749877, were approved and authorised for issue by the Board of Directors on 1 February 2016.
On behalf of the Board of Directors,
David Brooks Neil Martin
Director Director
| Year ended | Year ended | ||
|---|---|---|---|
| 30 November 2015 | 30 November 2014 | ||
| Note | £000 | £000 | |
| Profit before tax | 7,391 | 6,228 | |
| Investment income | (9,363) | (8,520) | |
| Finance costs | 821 | 304 | |
| Loss from operations | (1,151) | (1,988) | |
| Adjustments for: | |||
| Impairment of investment in subsidiary | 15 | 126 | - |
| Increase in provisions | 22 | 498 | 4,464 |
| Operating cash flows before movements in working capital | (527) | 2,476 | |
| Decrease/(increase) in receivables | 7,631 | (7,825) | |
| (Decrease)/increase in payables | (10,790) | 22,602 | |
| Cash (utilised by)/generated from operations | (3,686) | 17,253 | |
| Dividends received | 7,966 | 8,000 | |
| Net cash generated from operating activities | 4,280 | 25,253 | |
| Investing activities | |||
| Increase in investments | - | (7,775) | |
| Income from sale of other receivables | 1,604 | 33 | |
| Interest received | 83 | 173 | |
| Net cash generated from/(used in) investing activities | 1,687 | (7,569) | |
| Financing activities | |||
| Dividends paid | (3,424) | (17,706) | |
| Purchase of own shares | (2,470) | - | |
| Satisfaction of share-based payments | (128) | - | |
| Proceeds from share capital issue, net of share issue costs | 55 | 22 | |
| Net cash used in financing activities | (5,967) | (17,684) | |
| Net increase in cash and cash equivalents | - | - | |
| Cash and cash equivalents at the beginning of the year | - | - | |
| Cash and cash equivalents at the end of the year | - | - |
RM plc ('Company') is incorporated in the United Kingdom and listed on the London Stock Exchange. It is the parent company of a group of companies ('Group') whose business activities and financial position, together with the factors likely to affect its future development, performance and position and risk management policies are presented in the Strategic Report and the Directors' Report.
The Income Statement is presented in three columns. This presentation is intended to give a better guide to business performance by separately identifying the following adjustments to profit which are considered exceptional in nature or with potential significant variability year on year in non-cash items which might mask underlying trading performance: the amortisation of acquisition related intangible assets; impairment of held for sale assets and related transition costs; the gain/loss on sale of operations; share-based payment charges; restructuring costs and changes in the provision for dilapidations and onerous lease contracts. The columns extend down the Income Statement to allow the tax and earnings per share impacts of these transactions to be disclosed. Equivalent adjustments to profit arising in future years, including increases in or reversals of items recorded, will be disclosed in a consistent manner.
During the year ended 30 November 2015 adjustments to profit include:
£2.4m has been released from the onerous lease provision in the year.
• At the balance sheet date, the Group's 100% investment in SpaceKraft Ltd was identified for disposal and was subsequently disposed in December 2015. Assets and liabilities relating to SpaceKraft Ltd have been transferred to held for sale at the balance sheet date. Impairments of £150,000 and £83,000 respectively have been recognised in acquisition related intangible assets and property, plant and equipment and charged to the income statement in addition to related transition costs of £90,000.
The accounting policies are drawn up in accordance with those International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and adopted for use in the EU and therefore comply with Article 4 of the EU IAS Regulation applied in accordance with the provisions of the Companies Act 2006.
These accounting policies have been consistently applied to the years presented unless otherwise specified.
The financial statements are prepared on a going concern basis. The Directors' reasons for continuing to adopt this basis are set out in the Going Concern section of the Strategic Report.
The financial statements have been prepared on the historical cost basis except for certain financial instruments, share-based payments and pension assets and liabilities which are measured at fair value. The preparation of financial statements, in conformity with generally accepted accounting principles, requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on the Directors' best knowledge of current events and actions, actual results ultimately may differ from those estimates.
The Group financial statements incorporate the financial statements of the Company and all its subsidiaries for the periods during which they were members of the Group.
Inter-company balances and transactions between Group companies are eliminated on consolidation. On acquisition, assets and liabilities of subsidiaries are measured at their fair values at the date of acquisition with any excess of the cost of acquisition over this value being capitalised as goodwill.
In the Company accounts, investments in subsidiaries are stated at cost less any provision for impairment where appropriate.
The acquisition of subsidiaries is accounted for using the acquisition method. The cost of the acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given and liabilities incurred or assumed in exchange for control. The acquired company's identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 Business Combinations are recognised at their fair value at the acquisition date.
Revenue represents amounts receivable for goods supplied and services provided to third parties net of VAT and other sales-related taxes.
Revenue from the sale of goods and services is recognised upon transfer to the customer of the significant risks and rewards of ownership. This is generally when goods are despatched to, or services performed for, customers. Revenue on hardware and perpetual software licences is recognised on shipment providing there are no unfulfilled obligations that are essential to the functionality of the delivered product and with consideration of any significant credit risk uncertainty. If such obligations exist, revenue is recognised as they are fulfilled. Revenue from term licences is spread over the period of the
licence, reflecting the Group's obligation to support the relevant software products or update their content over the term of the licence. Revenue from contracts for maintenance, support and annually and other periodically contracted products and services is recognised on a pro-rata basis over the contract period. Revenue from installation, consultancy and other services is recognised when the service has been provided. For multiple element arrangements revenue is allocated to each element on a fair value basis. The portion of the revenue allocated to an element is recognised when the revenue recognition criteria for that element have been met. Appropriate provisions for returns, trade discounts and other allowances are deducted from revenue. Where customer payments are received in advance of the recognition of revenue, the amount is included within deferred income and is aged dependent upon the estimated recognition profile.
Revenue on long-term contracts is recognised while contracts are in progress. Revenue is recognised proportionally to the stage of completion of the contract, based on the fair value of goods and services provided to date, taking into account the sign-off of milestone delivery by customers.
Long-term contracts represent those accounted for in accordance with the principles of IAS 18 Revenue.
Profit on long-term contracts is recognised when the outcome of the contract can be assessed with reasonable certainty, including assessment of contingent and uncertain future expenses. Thereafter profit is recognised based upon the expected outcome of the contract and the revenue recognised at the balance sheet date as a proportion of total contract revenue.
If the outcome of a long-term contract cannot be assessed with reasonable certainty, no profit is recognised. Any expected loss on a contract as a whole, is recognised as soon as it is foreseen. The loss is calculated using a discounted cash flow model utilising a discount rate that reflects an estimate of the market's assessment of the time value of money and the risks specific to the liability. Any unwinding of the discount is included in the Income Statement in finance costs.
Where the cumulative fair value of goods and services provided exceeds amounts invoiced the balance is included within trade and other receivables as long-term contract balances. Where amounts invoiced exceed the fair value of goods and services provided the excess is first set off against long-term contract balances and then included in amounts due to long-term contract customers within trade and other payables.
Pre-contract costs are expensed until the awarding of the contract to the Group is considered to be virtually certain which is not before the Group has been appointed sole preferred bidder. Once virtual certainty has been established and the contract is expected to be awarded within a reasonable timescale and pre-contract costs are expected to be recovered from the contract's net cash flows, then pre-contract costs are usually recognised as an asset and accounted for as long-term contract costs.
All intangible assets, except goodwill, are stated at cost less accumulated amortisation and any accumulated impairment losses.
Goodwill represents the amount by which the fair value of the cost of a business combination exceeds the fair value of net assets acquired. Goodwill is not amortised and is stated at cost less any accumulated impairment losses.
The recoverable amount of goodwill is tested for impairment annually or when events or changes in circumstance indicate that it might be impaired. Impairment charges are deducted from the carrying value and recognised immediately in profit or loss. For the purpose of impairment testing, goodwill is allocated to each of the Group's cash generating units expected to benefit from the synergies of the combination. If the recoverable amount of the cash generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period.
Research and development costs associated with the development of software products or enhancements and their related intellectual property rights are expensed as incurred until all of the following criteria can be demonstrated, in which case they are capitalised as an intangible asset:
The technological feasibility for the Group's software products is assessed on an individual basis and is generally reached shortly before the products or services are released, and late in the development cycle. Capitalised development costs are amortised on a straight-line basis over their useful lives, once the product is available for use. Useful lives are assessed on a project-by-project basis.
Intangible assets purchased separately, such as software licences that do not form an integral part of hardware and the costs of internally generated software for the Group's use, are capitalised at cost and amortised over their useful lives of 2-8 years.
For business combinations occurring after 1 October 2004, the Group's transition date to IFRS, net assets acquired includes an assessment of the fair value of separately identifiable acquisition related intangible assets in addition to other assets, liabilities and contingent liabilities purchased. These are amortised over their useful lives which are individually assessed.
Property, plant and equipment assets are stated at cost, less accumulated depreciation and any accumulated impairment losses where appropriate.
Property, plant and equipment are depreciated by equal annual instalments to write down the assets to their estimated disposal value at the end of their useful lives as follows:
| Freehold property | Up to 50 years |
|---|---|
| Leasehold building improvements | Up to 25 years |
| Plant and equipment | 3 - 10 years |
| Computer equipment | 2 - 5 years |
| Vehicles | 2 - 4 years |
At each balance sheet date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of any impairment loss. Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash generating unit to which the asset belongs.
The recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash generating unit) is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately.
Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the
carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash generating unit) in prior periods. A reversal of an impairment loss is recognised as income immediately.
Trade and other receivables are not interest bearing and are stated at their original invoiced value reduced by appropriate allowances for estimated irrecoverable amounts.
Cash comprises cash at bank and in hand and deposits with a maturity of three months or less. Bank overdrafts are included in cash only to the extent that the Group has the right of set-off. Short-term deposits represent cash deposited with a maturity period in excess of three months and where the deposited amounts cannot be recalled on demand.
Trade payables on normal terms are not interest bearing and are stated at original invoiced amount.
The Group holds derivative financial instruments to hedge its foreign currency exposure.
On initial designation of the derivative as the hedging instrument, the Group formally documents the relationship between the hedging instrument and hedged item, including the risk management objectives and strategy in undertaking the hedge transaction and the hedged risk, together with the methods that will be used to assess the effectiveness of the hedging relationship. The Group makes an assessment, both at the inception of the hedge relationship as well as on an ongoing basis, as to whether the hedging instruments are expected to be "highly effective" in offsetting the changes in the fair value or cash flows of the respective hedged items attributable to the hedged risk, and whether the actual results of each hedge are within a range of 80 – 125 percent. For a cash flow hedge of a forecast transaction, the transaction should be highly probable to occur and should present an exposure to variations in cash flows that could ultimately affect reported profit or loss.
Derivatives are recognised initially at fair value and attributable transaction costs are recognised in profit or loss as incurred. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are accounted for as described below. Fair value measurements are classified using a fair value hierarchy that reflects the significance of the accuracy of inputs used in making the measurements.
When a derivative is designated as the hedging instrument in a hedge of the variability in cash flows attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction that could affect profit or loss, the effective portion of changes in the fair value of the derivative is recognised in Other Comprehensive Income and presented in the hedging reserve in equity. Any ineffective portion of changes in the fair value of the derivative is recognised immediately in profit or loss.
When the hedged item is a non-financial asset, the amount accumulated in equity is included in the carrying amount of the asset when the asset is recognised. In other cases the amount accumulated in equity is reclassified to profit or loss in the same period that the hedged item affects profit or loss. If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated or exercised, or the designation is revoked, then hedge accounting is discontinued prospectively. If the forecast transaction is no longer expected to occur, then the balance in equity is reclassified in profit or loss.
When a derivative financial instrument is not designated in a hedge relationship that qualifies for hedge accounting, all changes in its fair value are recognised immediately in profit or loss.
Finished goods and work-in-progress are valued at cost on a first in first out basis, including appropriate labour costs and other overheads. Raw materials and bought in finished goods are valued at purchase price. Stocks are recognised when the Group has the rights and obligations of ownership, which in the case of supply from the Far East may be from the point of production or the point
of shipment. All inventories are reduced to net realisable value where lower than cost. Provision is made for obsolete, slow moving and defective items where appropriate.
A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognised as a finance cost.
A provision for restructuring is recognised when the Group has approved a detailed and formal restructuring plan, and the restructuring either has commenced or has been announced publicly. Future operating losses are not provided for.
A provision for onerous contracts is recognised when the expected benefits to be derived by the Group from a contract are lower than the unavoidable cost of meeting its obligations under the contract. The provision is measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract. Before a provision is established, the Group recognises any impairment loss on the assets associated with that contract.
A dilapidations provision is recognised when the Group has an obligation to rectify, repair or reinstate a leased premises to a certain condition in accordance with the lease agreement. The provision is measured at the present value of the estimated cost of rectifying, repairing or reinstating the leased premises at a specified future date. To the extent that future economic benefits associated with leasehold improvements are expected to flow to the Group, this cost is capitalised within the leasehold improvement category of property, plant and equipment and is depreciated over its useful economic life.
Where assets are financed by leasing agreements which give rights approximating to ownership, the assets are treated as if they had been purchased outright. The amount capitalised is the lower of the fair value or the present value of the minimum lease payments during the lease term determined at the inception of the lease. The assets are depreciated over the shorter of the lease term or their useful life. Obligations relating to finance leases, net of finance charges in respect of future periods, are included, as appropriate, under other payables due within or after one year. The finance charge element of rentals is charged to finance costs in the Income Statement over the lease term.
All other leases are classified as operating leases, the rentals of which are charged to the Income Statement on a straight line basis over the lease term.
The Group operates a number of executive and employee share schemes. For all grants of sharebased payments, the fair value as at the date of grant is calculated using a pricing model and the corresponding expense is recognised over the vesting period. Where the vesting period is shortened after the date of grant, the remaining expense is recognised over the shortened vesting period. Over the vesting period and at vesting the cumulative expense is adjusted to take into account the number of awards expected to or actually vesting as a result of survivorship and where this reflects non-market-based performance conditions. Share-based payment charges which are incurred by a subsidiary undertaking are included as an increase in Investments in subsidiary undertakings within the parent company, and a capital contribution in the subsidiary.
The Group has both defined benefit and defined contribution pension schemes. For the defined benefit scheme, based on the advice of a qualified independent actuary at each balance sheet date and using the projected unit method, the administrative expenses are charged to operating profit, with the interest cost, net of interest on scheme assets, reported as a financing item. Defined Benefit Pension Scheme remeasurements are recognised directly in equity such that the balance sheet reflects the scheme's surplus or deficit as at the balance sheet date.
Contributions to defined contribution plans are charged to operating profit as they become payable.
The Employee Share Trust, which holds ordinary shares of the Company in connection with certain share schemes, is consolidated into the financial statements. Any consideration paid to the Trust for the purchase of the Company's own shares is shown as a movement in shareholders' equity.
Current tax, including UK corporation tax and foreign tax, is provided at amounts expected to be paid or recovered using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date.
Deferred taxation is accounted for using the balance sheet liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax bases used in computation of taxable profit. Deferred tax liabilities are recognised for all taxable temporary differences except in respect of investments in subsidiaries where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.
Current tax balances are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities.
Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary difference can be utilised. Their carrying amount is reviewed at each balance sheet date on the same basis.
Deferred tax is measured on an undiscounted basis, and at the tax rates that are expected to apply in the periods in which the asset or liability is settled. It is recognised in the Income Statement except when it relates to items credited or charged directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and when the Group
intends to settle its current tax assets and liabilities on a net basis.
The Group presents its financial statements in Sterling because this is the currency in its primary operating environment. Balance sheet items of subsidiary undertakings whose functional currency is not Sterling are translated into Sterling at the period-end rates of exchange. Income Statement items and the cash flows of subsidiary undertakings are translated at the average rates for the period. Exchange differences on the translation of subsidiary opening net assets at closing rates of exchange and the differences arising between the translation of profits at average and closing exchange rates are recorded as movements in the currency translation reserve.
Transactions denominated in foreign currencies are translated into Sterling at rates prevailing at the dates of the individual transactions. Foreign currency monetary assets and liabilities are translated at the rates prevailing at the balance sheet date. Exchange gains and losses arising are charged or credited to the Income Statement within operating costs. Foreign currency non-monetary amounts are translated at rates prevailing at the time of establishing the fair value of the asset or liability.
Dividends are recognised as a liability in the period in which the shareholders' right to receive payment has been established.
In applying the Group's accounting policies the Directors are required to make judgements, estimates and assumptions. Actual results may differ from these estimates. The Group's key risks are set out in the Strategic Report and give rise to the following estimations and judgements which are disclosed within the relevant note to the Report and Accounts:
The IFRIC interpretations, amendments to existing standards and new standards that are mandatory and relevant for the Company's accounting periods beginning on or after 1 December 2014 have been adopted. The following new standards and interpretations have been adopted in the current period but have not impacted the reported results or the financial position:
At the date of authorisation of these financial statements, the following Standards and Interpretations which have not been applied in these financial statements were in issue but not yet effective/endorsed (and in some cases had not yet been adopted by the EU):
Amendments to IAS 1: Disclosure Initiative
IFRS 9 Financial Instruments
The Directors are finalising their analysis and do not expect that the adoption of the standards listed above will have a material impact on the financial statements of the Company and Group in future periods, except potentially for IAS 19 (defined benefit plans), IFRS 9 (measurement and disclosure of financial instruments) and IFRS 15 (revenue and deferred income). IFRS 15 will first apply for the year ended 30 November 2019, and an exercise to investigate the impact on the Group is planned during the coming financial year.
| Year ended 30 November 2015 |
Year ended 30 November 2014 |
|
|---|---|---|
| £000 | £000 | |
| Revenue from supply of products | 85,834 | 93,998 |
| Revenue from rendering of services | 78,009 | 92,807 |
| Revenue from the sale of licences and receipt of royalties | 14,385 | 15,739 |
| Total revenue | 178,228 | 202,544 |
The Group's business is supplying products, services and solutions to the UK and international education markets.
The Group is structured into three operating divisions: RM Resources, RM Results and RM Education.
A full description of each division, together with comments on its performance and outlook, is given in the Strategic Report.
This Segmental analysis shows the results and assets of these divisions. Revenue is that earned by the Group from third parties.
Exited businesses in both years includes the results and assets of operations held for sale at 30 November 2015 and other exited businesses.
| Corporate | Exited | |||||
|---|---|---|---|---|---|---|
| RM Resources | RM Results | RM Education | Services | Businesses | Total | |
| Year ended 30 November 2015 | £000 | £000 | £000 | £000 | £000 | £000 |
| Revenue | ||||||
| UK | 52,391 | 26,508 | 79,285 | - | 3,279 | 161,463 |
| Europe | 4,062 | 3,039 | 423 | - | 165 | 7,689 |
| North America | 932 | - | 272 | - | 64 | 1,268 |
| Asia | 678 | 109 | 171 | - | 22 | 980 |
| Middle East | 4,555 | - | 7 | - | 18 | 4,580 |
| Rest of the world | 925 | 1,069 | 85 | - | 169 | 2,248 |
| 63,543 | 30,725 | 80,243 | - | 3,717 | 178,228 | |
| Adjusted profit from operations | 11,107 | 5,554 | 5,494 | (4,140) | 184 | 18,199 |
| Investment income | 409 | |||||
| Adjusted finance costs | (1,510) | |||||
| Adjusted profit before tax | 17,098 | |||||
| Adjustments (see note 1) | 2,137 | |||||
| Profit before tax | 19,235 | |||||
| RM Resources | RM Results | RM Education | Corporate Services |
Exited Businesses |
Total | |
| Year ended 30 November 2014 | £000 | £000 | £000 | £000 | £000 | £000 |
| Revenue | ||||||
| UK | 50,601 | 27,136 | 110,712 | - | 3,302 | 191,751 |
| Europe | 3,885 | 37 | 315 | - | 167 | 4,404 |
| North America | 943 | - | 206 | - | 51 | 1,200 |
| Asia | 2,977 | 119 | - | - | 3 | 3,099 |
| Rest of the world | 653 | 535 | 680 | - | 222 | 2,090 |
| 59,059 | 27,827 | 111,913 | - | 3,745 | 202,544 | |
| Adjusted profit from operations | 10,314 | 4,648 | 7,700 | (4,152) | 16 | 18,526 |
| Investment income | 476 | |||||
| Adjusted finance costs | (924) | |||||
| Adjusted profit before tax | 18,078 | |||||
| Adjustments (see note 1) | (2,321) | |||||
| Profit before tax | 15,757 |
| Corporate | Exited | |||||
|---|---|---|---|---|---|---|
| RM Resources | RM Results | RM Education | Services | Businesses | Total | |
| At 30 November 2015 | £000 | £000 | £000 | £000 | £000 | £000 |
| Segmental | 32,962 | 7,732 | 16,539 | 700 | 1,162 | 59,095 |
| Other | 55,826 | |||||
| Total assets | 114,921 |
| Corporate | Exited | |||||
|---|---|---|---|---|---|---|
| RM Resources | RM Results | RM Education | Services | Businesses | Total | |
| At 30 November 2014 | £000 | £000 | £000 | £000 | £000 | £000 |
| Segmental | 32,734 | 6,636 | 27,334 | 353 | 1,236 | 68,293 |
| Other | 57,083 | |||||
| Total assets | 125,376 |
Included within the disclosed segmental assets are non-current assets (excluding deferred tax assets) of £22,404,000 (2014: £24,552,000) located in the United Kingdom and £460,000 (2014: £432,000) located in India. Other non-segmented assets includes other receivables, tax assets and cash and short-term deposits.
Profit from operations is stated after charging/(crediting):
| Year ended | Year ended | ||
|---|---|---|---|
| 30 November 2015 | 30 November 2014 | ||
| Note | £000 | £000 | |
| Amortisation of acquisition related intangible assets | 13 | 303 | 303 |
| Amortisation of other intangible assets | 13 | 297 | 417 |
| 600 | 720 | ||
| Depreciation of property, plant and equipment: | |||
| - charged in cost of sales | 857 | 992 | |
| - charged in operating expenses | 1,408 | 1,668 | |
| 14 | 2,265 | 2,660 | |
| Impairment of acquisition related intangible assets | 150 | - | |
| Impairment of property, plant and equipment | 141 | 755 | |
| 2,556 | 3,415 | ||
| Selling and distribution costs | 26,302 | 27,922 | |
| Research and development costs | 7,089 | 10,520 | |
| Administrative expenses - adjusted | 17,322 | 18,602 | |
| Operating expenses - adjusted | 50,713 | 57,044 | |
| Adjustments to administrative expenses (see Consolidated Income Statement) | (1,392) | 2,052 | |
| Total operating expenses | 49,321 | 59,096 | |
| Gain on disposal of property, plant and equipment | (95) | (398) | |
| Loss on disposal of other intangible assets | - | 73 | |
| Cost of inventories recognised as an expense | 66,407 | 54,290 | |
| Staff costs | 6 | 67,516 | 69,147 |
| Operating lease expense | 4,202 | 4,070 | |
| Foreign exchange (gain)/loss | (342) | 156 | |
| Decrease in inventory obsolescence provision | (62) | (1,394) | |
| Fees payable to the Company's auditor | |||
| Fees payable to the Company's auditor for the audit of these Financial Statements: |
|||
| - the audit of the Company's Financial Statements | 16 | 16 | |
| - the audit of the Company's subsidiaries pursuant to legislation | 163 | 167 | |
| Other fees payable to the Company's auditor: | |||
| - other services pursuant to legislation | 49 | 15 | |
| - other compliance | 2 | 2 | |
| 230 | 200 |
The average number of persons employed by the Group during the year was as follows:
| Year ended | Year ended | |
|---|---|---|
| 30 November 2015 | 30 November 2014 | |
| Number | Number | |
| Research and development, products and services | 1,465 | 1,525 |
| Marketing and sales | 257 | 209 |
| Corporate services | 138 | 136 |
| 1,860 | 1,870 |
Aggregate emoluments of persons employed by the Group comprised:
| Year ended | Year ended | |
|---|---|---|
| 30 November 2015 £000 |
30 November 2014 £000 |
|
| Wages and salaries | 55,585 | 56,891 |
| Termination payments | 1,070 | 838 |
| Social security costs | 4,896 | 5,332 |
| Other pension costs | 5,101 | 5,154 |
| Share-based payments (note 26) | 864 | 932 |
| 67,516 | 69,147 |
The Company employs no staff (2014: none).
Information regarding the remuneration of the Directors is shown in the Remuneration Report.
| Year ended | Year ended | |
|---|---|---|
| 30 November 2015 | 30 November 2014 | |
| £000 | £000 | |
| Bank interest | 224 | 242 |
| Income on sale of finance lease debt | 45 | 55 |
| Income from sale of other receivables (see note 1) | 894 | - |
| Other finance income | 140 | 179 |
| 1,303 | 476 |
| Year ended 30 November 2015 |
Year ended 30 November 2014 |
||
|---|---|---|---|
| Note | £000 | £000 | |
| Borrowing facility arrangement fees and commitment fees Finance lease interest |
467 5 |
467 21 |
|
| Net finance costs on Defined Benefit Pension Scheme | 24 | 964 | 379 |
| Unwind of discount on long-term contract provisions | 74 | 57 | |
| Unwind of discount on onerous lease and dilapidations provisions | 22 | 149 | 269 |
| 1,659 | 1,193 |
| Year ended | Year ended | |
|---|---|---|
| 30 November 2015 | 30 November 2014 | |
| £000 | £000 | |
| Current taxation | ||
| UK corporation tax | 3,684 | 3,117 |
| Adjustment in respect of prior years | 297 | 627 |
| Overseas tax | 278 | 437 |
| Total current tax charge | 4,259 | 4,181 |
| Deferred taxation | ||
| Temporary differences | 259 | 34 |
| Adjustment in respect of prior years | (213) | (57) |
| Overseas tax | (32) | - |
| Total deferred tax charge/(credit) | 14 | (23) |
| Total Consolidated Income Statement tax charge | 4,273 | 4,158 |
| Year ended 30 November 2015 £000 |
Year ended 30 November 2014 £000 |
|
|---|---|---|
| UK corporation tax | ||
| Defined Benefit Pension Scheme | (469) | (1,533) |
| Shared based payments | (504) | - |
| Deferred tax | ||
| Defined Benefit Pension Scheme movements | 949 | (2,185) |
| Defined Benefit Pension Scheme escrow | - | (660) |
| Share-based payments | 540 | (657) |
| Deferred tax relating to the change in rate* | 470 | - |
| Total Consolidated Statement of | ||
| Comprehensive Income tax charge/(credit) | 986 | (5,035) |
*Relates entirely to the Defined Benefit Pension Scheme
The tax charge in the Consolidated Income Statement reconciles to the effective rate applied by the Group as follows:
| Year ended 30 November 2015 | Year ended 30 November 2014 | |||||
|---|---|---|---|---|---|---|
| Adjusted £000 |
Adjustments £000 |
Total £000 |
Adjusted £000 |
Adjustments £000 |
Total £000 |
|
| Profit on ordinary activities before tax | 17,098 | 2,137 | 19,235 | 18,078 | (2,321) | 15,757 |
| Tax at 20.33% (2014: 21.67%) thereon: | 3,476 | 434 | 3,910 | 3,918 | (503) | 3,415 |
| Effects of: | ||||||
| - change in tax rate on carried forward deferred tax assets |
123 | - | 123 | - | - | - |
| - other expenses not deductible for tax purposes |
50 | - | 50 | 104 | - | 104 |
| - temporary timing differences unrecognised for deferred tax |
- | - | - | 4 | - | 4 |
| - other temporary timing differences | (7) | 1 | (6) | - | 28 | 28 |
| - R&D tax charge/(credit) | 4 | - | 4 | (77) | - | (77) |
| - impairments | 12 | 36 | 48 | - | - | - |
| - overseas tax | 246 | - | 246 | 207 | - | 207 |
| - gain on sale of operations | - | (182) | (182) | - | (93) | (93) |
| - prior period adjustments | 80 | - | 80 | 203 | 367 | 570 |
| Tax charge in the Consolidated Income Statement |
3,984 | 289 | 4,273 | 4,359 | (201) | 4,158 |
The Summer Budget Statement on 8 July 2015 announced that the UK corporation tax rate will reduce to 19% by 2017 and 18% by 2020 and this was substantively enacted on 26 October 2015.
This will reduce the Group's future current tax charge accordingly. The deferred tax assets at 30 November 2015 have been calculated based on the rates applicable when they are expected to reverse in the foreseeable future.
The Group has recognised deferred tax assets as these are anticipated to be recoverable against profits in future periods. The major deferred tax assets and liabilities recognised by the Group and movements thereon are as follows:
| Defined | Acquisition | |||||
|---|---|---|---|---|---|---|
| Benefit Pension | Short-term | related | ||||
| Accelerated tax | Scheme | Share-based | timing | intangible | ||
| depreciation | obligation | payments | differences | assets | Total | |
| Group | £000 | £000 | £000 | £000 | £000 | £000 |
| At 1 December 2013 | 988 | 3,166 | 181 | 440 | (153) | 4,622 |
| Credit/(charge) to income | (201) | - | 178 | (15) | 61 | 23 |
| Credit to equity | - | 2,185 | 657 | 660 | - | 3,502 |
| At 30 November 2014 | 787 | 5,351 | 1,016 | 1,085 | (92) | 8,147 |
| Credit/(charge) to income | - | - | (53) | (52) | 91 | (14) |
| Charge to equity | - | (1,419) | (540) | - | - | (1,959) |
| Transfer to assets | ||||||
| held for sale | (53) | - | - | - | - | (53) |
| At 30 November 2015 | 734 | 3,932 | 423 | 1,033 | (1) | 6,121 |
Certain deferred tax assets and liabilities have been offset above.
The Group has recognised deferred tax assets in jurisdictions where these are expected to be recoverable against profits in future periods. At the balance sheet date, the Group has an unrecognised gross deferred tax asset of £3,257,000 (2014: £3,227,000) which is available for offset against future profits within the United States of America. A deferred tax asset has not been recognised in respect of any of this amount due to uncertainty surrounding the future use of these losses.
No deferred tax liability is recognised on temporary differences of £175,000 (2014: £203,000) relating to the unremitted earnings of overseas subsidiaries as the Group is able to control the timings of the reversal of these temporary differences and it is probable that they will not reverse in the foreseeable future.
| Year ended 30 November 2015 | Year ended 30 November 2014 | |||||
|---|---|---|---|---|---|---|
| Weighted | Weighted | |||||
| average | average | |||||
| Profit for | number of | Pence per | Profit for | number of | Pence per | |
| the year | shares | share | the year | shares | share | |
| £000 | '000 | £000 | '000 | |||
| Basic earnings per ordinary share | ||||||
| Basic earnings | 14,962 | 80,954 | 18.5 | 11,599 | 83,702 | 13.9 |
| Adjustments (see note 1) | (1,848) | - | (2.3) | 2,120 | - | 2.5 |
| Adjusted basic earnings | 13,114 | 80,954 | 16.2 | 13,719 | 83,702 | 16.4 |
| Diluted earnings per ordinary share | ||||||
| Basic earnings | 14,962 | 80,954 | 18.5 | 11,599 | 83,702 | 13.9 |
| Effect of dilutive potential ordinary shares: | ||||||
| share-based payment awards | - | 3,080 | (0.7) | - | 5,346 | (0.9) |
| Diluted earnings | 14,962 | 84,034 | 17.8 | 11,599 | 89,048 | 13.0 |
| Adjustments (see note 1) | (1,848) | - | (2.2) | 2,120 | - | 2.4 |
| Adjusted diluted earnings | 13,114 | 84,034 | 15.6 | 13,719 | 89,048 | 15.4 |
Amounts recognised as distributions to equity holders were:
| Year ended 30 November 2015 £000 |
Year ended 30 November 2014 £000 |
|
|---|---|---|
| Final dividend for the year ended 30 November 2014 of 3.04p per share (2013: 2.46p) |
2,451 | 2,257 |
| Special dividend for the year ended 30 November 2013 of 16.00p per share |
- | 14,678 |
| Interim dividend for the year ended 30 November 2015 of 1.20p per share (2014: 0.96p) |
973 | 771 |
| 3,424 | 17,706 |
The proposed final dividend of 3.80p per share for the year ended 30 November 2015 was approved by the Board on 1 February 2016. The dividend is subject to approval by shareholders at the annual general meeting. The anticipated cost of this dividend is £3,079,000, which is not included as a liability at 30 November 2015.
| £000 |
|---|
| 23,761 |
| (9,694) |
| At 30 November 2015 and 30 November 2014 | 14,067 |
|---|---|
The discount rates used for goodwill impairment reviews and the carrying amount of goodwill is allocated as follows:
| 30 November 2015 | Year ended 30 November 2014 |
|||
|---|---|---|---|---|
| Group | Pre tax discount rate |
£000 | Pre tax discount rate |
£000 |
| RM Resources - TTS Group Limited | 9.5% | 11,111 | 10.2% | 11,111 |
| RM Results | 15.2% | 2,956 | 11.5% | 2,956 |
| 14,067 | 14,067 |
Further information pertaining to the performance and future strategy of the divisions can be found within the Strategic Report.
A review of the forecast future cash flows of TTS Group Limited and of RM Results indicated no impairment was required.
The recoverable amounts of the Cash Generating Units ('CGU') are determined from value in use calculations. The key assumptions for the value in use calculations are those regarding the discount rates and growth rates.
The Group monitors its post-tax Weighted Average Cost of Capital and those of its competitors using market data. In considering the discount rates applying to CGUs, the Directors have considered the relative sizes, risks and the inter-dependencies of its CGUs and their relatively narrow operation within the education products and services market. The impairment reviews use a discount rate adjusted for pre-tax cash flows. Analysis of the sensitivity of the resultant impairment reviews to changes in the discount rate is included below.
The Group prepares cash flow forecasts derived from the most recent annual financial plan approved by the Board, which also contains forecasts for the two years following, and extrapolates cash flows based on internal forecasts with terminal rates of between 0% and 3% (2014: between 0% and 3%).
The sensitivity of goodwill carrying values to reasonably possible changes in key assumptions has been performed. No changes produce a significant movement in the carrying value of goodwill allocated to a CGU and therefore no sensitivity analysis is presented.
| Acquisition | ||||||
|---|---|---|---|---|---|---|
| Intellectual | related | |||||
| Customer | property & | intangible | Other | |||
| Group | relationships | Brands | database assets | assets sub-total | software assets | Total |
| £000 | £000 | £000 | £000 | £000 | £000 | |
| Cost | ||||||
| At 1 December 2013 | 1,599 | 564 | 325 | 2,488 | 2,689 | 5,177 |
| Additions | - | - | - | - | 1 | 1 |
| Effect of movements in exchange rates |
- | - | - | - | 9 | 9 |
| Disposals | - | - | - | - | (73) | (73) |
| At 30 November 2014 | 1,599 | 564 | 325 | 2,488 | 2,626 | 5,114 |
| Additions | - | - | - | - | 322 | 322 |
| Transfers to assets held for sale | (955) | (454) | - | (1,409) | - | (1,409) |
| At 30 November 2015 | 644 | 110 | 325 | 1,079 | 2,948 | 4,027 |
| Accumulated amortisation and impairment losses |
||||||
| At 1 December 2013 | 1,119 | 280 | 325 | 1,724 | 1,663 | 3,387 |
| Charge for the year | 191 | 112 | - | 303 | 417 | 720 |
| Effect of movements in exchange rates |
- | - | - | - | 9 | 9 |
| At 30 November 2014 | 1,310 | 392 | 325 | 2,027 | 2,089 | 4,116 |
| Charge for the year | 191 | 112 | - | 303 | 297 | 600 |
| Impairment on re-classification to assets held for sale |
98 | 52 | - | 150 | - | 150 |
| Transfers to assets held for sale | (955) | (454) | - | (1,409) | - | (1,409) |
| At 30 November 2015 | 644 | 102 | 325 | 1,071 | 2,386 | 3,457 |
| Carrying amount | ||||||
| At 30 November 2015 | - | 8 | - | 8 | 562 | 570 |
| At 30 November 2014 | 289 | 172 | - | 461 | 537 | 998 |
A review of the carrying amount of Acquisition related intangibles associated with held for sale assets and liabilities resulted in an impairment of £150,000 being recognised in the year.
The carrying amount of Acquisition related intangible assets and Other software assets at 30 November 2015 include impairment losses of £443,000 (2014: £443,000) and £275,000 (2014: £275,000) respectively.
A review of other intangible assets at the balance sheet date indicated there was no additional impairment loss in the year ended 30 November 2015 (2014: £nil).
The carrying amount of Other software assets at 30 November 2015 included purchased software assets of £210,000 (2014: £9,000), and internally developed software assets of £351,000 (2014: £528,000).
During the year, no material expenditure on research and development is considered to have met the criteria whereby the expenditure is capitalised as an intangible asset (2014: £nil). The carrying amount of capitalised research and development at 30 November 2015 was £nil (2014: £nil).
| Freehold land & | Short leasehold | Plant & | Computer | |||
|---|---|---|---|---|---|---|
| buildings | improvements | equipment | equipment | Vehicles | Total | |
| Group | £000 | £000 | £000 | £000 | £000 | £000 |
| Cost | ||||||
| At 1 December 2013 | 2,779 | 4,559 | 4,767 | 6,918 | 2,859 | 21,882 |
| Additions | 314 | 1,216 | 383 | 583 | 101 | 2,597 |
| Effect of movements in exchange rates |
- | 12 | 30 | 45 | 7 | 94 |
| Disposals | (81) | - | (392) | (156) | (1,457) | (2,086) |
| At 30 November 2014 | 3,012 | 5,787 | 4,788 | 7,390 | 1,510 | 22,487 |
| Additions | 6 | 417 | 242 | 884 | 27 | 1,576 |
| Effect of movements in exchange rates |
- | (7) | (19) | (21) | (4) | (51) |
| Transfers between categories | - | 53 | 442 | (498) | 3 | - |
| Transfers to assets held for sale |
- | (256) | (194) | (216) | (70) | (736) |
| Disposals | (14) | - | (414) | (119) | (450) | (997) |
| At 30 November 2015 | 3,004 | 5,994 | 4,845 | 7,420 | 1,016 | 22,279 |
| Accumulated depreciation and impairment | ||||||
| At 1 December 2013 | 883 | 3,149 | 3,266 | 3,738 | 1,747 | 12,783 |
| Charge for the year | 97 | 432 | 559 | 1,196 | 376 | 2,660 |
| Effect of movements in exchange rates |
- | 6 | 25 | 37 | 4 | 72 |
| Impairment | - | 379 | 69 | 277 | 30 | 755 |
| Disposals | (67) | - | (387) | (142) | (1,227) | (1,823) |
| At 30 November 2014 | 913 | 3,966 | 3,532 | 5,106 | 930 | 14,447 |
| Charge for the year | 123 | 425 | 426 | 1,131 | 160 | 2,265 |
| Effect of movements in exchange rates |
- | (3) | (17) | (20) | (2) | (42) |
| Transfers between categories | (245) | 2 | 468 | (240) | 15 | - |
| Impairment | - | 21 | 85 | 22 | 13 | 141 |
| Transfers to assets held for sale |
- | (238) | (136) | (237) | (53) | (664) |
| Disposals | (10) | - | (409) | (119) | (389) | (927) |
| At 30 November 2015 | 781 | 4,173 | 3,949 | 5,643 | 674 | 15,220 |
| Carrying value | ||||||
| At 30 November 2015 | 2,223 | 1,821 | 896 | 1,777 | 342 | 7,059 |
| At 30 November 2014 | 2,099 | 1,821 | 1,256 | 2,284 | 580 | 8,040 |
The carrying value of vehicles at the year end included £50,000 (2014: £444,000) held under finance leases.
The subsidiary undertakings of the Company at 30 November 2015 were:
| Country of | Class of | |||
|---|---|---|---|---|
| Name | Principal activity | incorporation | share | % held |
| RM Education Limited | Software, services & systems | England | Ordinary | 100% |
| TTS Group Limited | Resource supply | England | Ordinary | 100% |
| RM Education Solutions India Pvt Limited * | Software and corporate services | India | Ordinary | 100% |
| SpaceKraft Limited | Resource supply | England | Ordinary | 100% |
| RM Books Limited | Software services | England | Ordinary | 100% |
| RM Group US LLC | Non-trading | USA | Ordinary | 100% |
| RM Education Inc. | Non-trading | USA | Ordinary | 100% |
| DACTA Limited | Non-trading | England | Ordinary | 100% |
| RM Pension Scheme Trustee Limited | Corporate Trustee | England | Ordinary | 100% |
| RM Schools Limited | Dormant | England | Ordinary | 100% |
* Held through subsidiary undertaking.
The investment in subsidiary undertakings comprises:
| Capital contribution | ||||
|---|---|---|---|---|
| Investment in | shared-based | |||
| share capital | payments | Quasi-equity loan | Total | |
| Company | £000 | £000 | £000 | £000 |
| Cost | ||||
| At 1 December 2013 | 45,267 | 9,048 | 7,077 | 61,392 |
| Investment in RM Education Limited | 11,920 | - | (7,077) | 4,843 |
| Share-based payments | - | 932 | - | 932 |
| At 30 November 2014 | 57,187 | 9,980 | - | 67,167 |
| Share-based payments | - | 864 | - | 864 |
| At 30 November 2015 | 57,187 | 10,844 | - | 68,031 |
| Impairment | ||||
| At 1 December 2013 | 5,844 | - | - | 5,844 |
| Reversal of impairment | (2,932) | - | - | (2,932) |
| At 30 November 2014 | 2,912 | - | - | 2,912 |
| Impairments | 103 | - | - | 103 |
| At 30 November 2015 | 3,015 | - | - | 3,015 |
| Carrying value | ||||
| At 30 November 2015 | 54,172 | 10,844 | - | 65,016 |
| At 30 November 2014 | 54,275 | 9,980 | - | 64,255 |
The accumulated impairment loss at 30 November 2015 includes £2,927,000 relating to the Company's investment in SpaceKraft Limited (2014: £2,824,000). The assumptions for the impairment reviews performed are outlined in note 12.
| Group | 2015 £000 |
2014 £000 |
|---|---|---|
| Components | 133 | 141 |
| Finished goods | 10,729 | 10,463 |
| 10,862 | 10,604 |
Finished goods at 30 November 2014 included £449,000 disclosed as a comparator within assets held for sale in these financial statements.
| Group | Note | 2015 £000 |
2014 £000 |
|---|---|---|---|
| Contract costs incurred plus recognised profits less recognised losses to date | 369,997 | 440,840 | |
| Less: Progress billings | (395,368) | (472,006) | |
| (25,371) | (31,166) | ||
| Amounts due from contract customers included in trade and other receivables | 18 | 138 | 154 |
| Amounts due to contract customers included in trade and other payables | 21 | (25,509) | (31,320) |
| (25,371) | (31,166) |
Total revenue from long-term contracts recognised in the year ended 30 November 2015 amounted to £53,784,000 (2014: £69,600,000).
The Group's long-term contracts represent a significant part of the Group's business. As a result of the accounting for these contracts, as outlined in note 2, it is necessary for the Directors to assess the outcome of each contract and also estimate future costs and contracted revenues to establish ultimate contract profitability. Key judgements include performance indicator outcomes, future inflation rates, implementation/software development costs and whether the contract variations and extensions should be combined with existing arrangements. Profit is then recognised based on these judgements and, depending on the maturity of the contract portfolio, a greater or lesser proportion of Group profit will arise from long-term contracts.
Sensitivity to assumptions has been considered but due to their nature it is not practicable to perform an analysis.
| Group | Company | ||||
|---|---|---|---|---|---|
| Note | 2015 £000 |
2014 £000 |
2015 £000 |
2014 £000 |
|
| Current | |||||
| Financial assets | |||||
| Trade receivables | 17,303 | 24,830 | - | - | |
| Long-term contract balances | 17 | 138 | 154 | - | - |
| Other receivables | 1,048 | 743 | - | 6 | |
| Derivative financial instruments | 138 | 565 | - | - | |
| Accrued income | 1,489 | 1,571 | 59 | - | |
| Amounts owed by Group undertakings | - | - | 5,143 | 14,366 | |
| 20,116 | 27,863 | 5,202 | 14,372 | ||
| Non-financial assets | |||||
| Prepayments | 5,476 | 5,065 | 14 | - | |
| 25,592 | 32,928 | 5,216 | 14,372 | ||
| Non-current | |||||
| Financial assets | |||||
| Other receivables | 1,168 | 1,878 | 918 | 1,628 | |
| 26,760 | 34,806 | 6,134 | 16,000 | ||
| Currency profile of receivables | |||||
| Sterling | 26,303 | 34,387 | 6,134 | 16,000 | |
| US Dollar | 150 | 163 | - | - | |
| Euro | 44 | - | - | - | |
| Indian Rupee | 263 | 256 | - | - | |
| 26,760 | 34,806 | 6,134 | 16,000 |
The amounts owed by Group undertakings to the Company are repayable on demand and bear interest at LIBOR plus 2%.
The Directors consider that the carrying amounts of trade and other receivables approximates their fair values.
The Company's Non-current Other receivables includes the gross amounts owed by the Company's equity investments in BSF delivery company, Essex Schools (Holdings) Ltd (2014: included Newham Learning Partnership (PSP) Ltd). The interest charged on these receivables is 11.75% pa.
| Group | 2015 £000 |
2014 £000 |
|---|---|---|
| Government | 8,879 | 10,016 |
| Commercial | 8,424 | 14,814 |
| 17,303 | 24,830 |
Trade receivables includes an allowance for estimated irrecoverable amounts at 30 November 2015 of £1,165,000 (2014: £1,361,000), based on management's knowledge of the customer, externally available information and expected payment likelihood. This allowance has been determined by reference to specific receivable balances and past default experience. New customers are subject to credit checks where available, using third party databases prior to being accepted.
| 2015 | 2014 | |
|---|---|---|
| Group | £000 | £000 |
| Not past due | 13,835 | 18,128 |
| Overdue by less than 60 days | 1,387 | 3,955 |
| Overdue by between 60 and 90 days | 876 | 1,074 |
| Overdue by more than 90 days | 1,205 | 1,673 |
| 17,303 | 24,830 |
| Group | Company | |||
|---|---|---|---|---|
| 2015 | 2014 | 2015 | 2014 | |
| £000 | £000 | £000 | £000 | |
| Cash and cash equivalents | 42,320 | 41,893 | - | - |
| Short-term deposits | 6,000 | 6,000 | - | - |
| 48,320 | 47,893 | - | - |
The short-term deposits are for a maximum period of 6 months at interest rates of 0.80-0.85%.
The interest and currency profile of cash and short-term deposits is disclosed in note 29.
At the balance sheet date, the Group's 100% investment in SpaceKraft Limited was identified for disposal by the Board and was being actively marketed for sale but had not been disposed. This has been determined not to meet the IFRS 5 Non-current Assets Held for Sale and Discontinued Operations definition of discontinued operations but has been recorded as held for sale and presented separately in the balance sheet. In December 2015, the entire share capital of SpaceKraft Limited was disposed. The proceeds on disposal were lower than the combined book value of the net assets of the company and of the Group relating specifically to the company. Accordingly, impairments have been recognised in acquisition related intangible assets and property, plant and equipment of £150,000 and £83,000 respectively. The corresponding deferred tax liability on the acquisition related intangible assets has also been released.
The major classes of assets and liabilities comprising the operations classified as held for sale at 30 November 2015 are as follows:
| Net assets of entity | ||||
|---|---|---|---|---|
| before impairment | Impairment on | |||
| on classification | Net assets arising | classification to | Net assets held | |
| to held for sale | on consolidation | held for sale | for sale | |
| Group | £000 | £000 | £000 | £000 |
| Acquisition related intangible assets | - | 150 | (150) | - |
| Property, plant and equipment | 155 | - | (83) | 72 |
| Deferred tax assets | 53 | - | - | 53 |
| Inventories | 454 | - | - | 454 |
| Trade and other receivables | 583 | - | - | 583 |
| Total assets held for sale | 1,245 | 150 | (233) | 1,162 |
| Trade and other payables | (437) | - | - | (437) |
| Provisions | (112) | - | - | (112) |
| Deferred tax liabilities | - | (30) | 30 | - |
| Total liabilities directly associated | ||||
| with assets held for sale | (549) | (30) | 30 | (549) |
| Net assets held for sale | 696 | 120 | (203) | 613 |
The total pre-tax charge in the income statement relating to the assets held for sale is £323,000, comprising an impairment charge of £233,000 as detailed above and related transition costs.
| Group | Company | ||||
|---|---|---|---|---|---|
| Note | 2015 £000 |
2014 £000 |
2015 £000 |
2014 £000 |
|
| Current liabilities | |||||
| Financial liabilities | |||||
| Trade payables | 11,518 | 12,793 | - | - | |
| Amounts owed to Group undertakings | - | - | 17,091 | 29,002 | |
| Other taxation and social security | 4,010 | 4,673 | - | - | |
| Other payables | 761 | 2,066 | - | - | |
| Accruals | 12,525 | 14,041 | - | - | |
| Obligations under finance leases | 40 | 230 | - | - | |
| Derivative financial instruments | 5 | 3 | - | - | |
| Long-term contract balances | 17 | 25,509 | 31,320 | - | - |
| 54,368 | 65,126 | 17,091 | 29,002 | ||
| Non-financial liabilities | |||||
| Deferred income | 10,606 | 13,959 | - | - | |
| 64,974 | 79,085 | 17,091 | 29,002 | ||
| Non-current liabilities | |||||
| Financial liabilities | |||||
| Obligations under finance leases | - | 49 | - | - | |
| Non-financial liabilities | |||||
| Deferred income | |||||
| - due after one year but within two years | 472 | 1,077 | - | - | |
| - due after two years but within five years | 190 | 531 | - | - | |
| 662 | 1,657 | - | - | ||
| 65,636 | 80,742 | 17,091 | 29,002 |
The amounts owed to Group undertakings by the Company are payable on demand and bear interest at LIBOR plus 2%.
| Group | Company | |||||
|---|---|---|---|---|---|---|
| 2015 | 2014 | 2015 | 2014 | |||
| £000 | £000 | £000 | £000 | |||
| Sterling | 65,156 | 79,700 | 17,091 | 29,002 | ||
| US Dollar | 26 | 208 | - | - | ||
| Euro | 4 | 80 | - | - | ||
| Indian Rupee | 449 | 754 | - | - | ||
| Singapore Dollar | 1 | - | - | - | ||
| 65,636 | 80,742 | 17,091 | 29,002 |
The Directors consider that the carrying amount of trade and other payables approximates their fair value.
| 2015 | 2014 | |||
|---|---|---|---|---|
| Present value of | Present value of | |||
| Minimum lease | minimum lease | Minimum | minimum lease | |
| payments | payments | lease payments | payments | |
| Group | £000 | £000 | £000 | £000 |
| Within one year | 40 | 40 | 236 | 230 |
| In the second to fifth years inclusive | - | - | 49 | 49 |
| 40 | 40 | 285 | 279 | |
| Less: finance charges allocated to future periods | - | - | (6) | - |
| Present value of minimum lease payments | 40 | 40 | 279 | 279 |
Interest charged on vehicle finance lease contracts is at the Bank of England base rate plus 2% fixed at the date of acquiring the asset, and the vehicles are leased until they are 4 years old.
| Onerous lease | Employee-related | |||
|---|---|---|---|---|
| and dilapidations | restructuring | Other | Total | |
| Group | £000 | £000 | £000 | £000 |
| At 1 December 2013 | 7,885 | 4,241 | 1,330 | 13,456 |
| Utilisation of provisions | (836) | (4,348) | (289) | (5,473) |
| Release of provisions | (524) | (366) | (431) | (1,321) |
| Increase in provisions | 1,298 | 838 | 95 | 2,231 |
| Effect of movements in exchange rates | 2 | - | 3 | 5 |
| Unwind of discount | 269 | - | - | 269 |
| At 30 November 2014 | 8,094 | 365 | 708 | 9,167 |
| Utilisation of provisions | (2,186) | (1,166) | (132) | (3,484) |
| Release of provisions | (2,368) | (85) | (423) | (2,876) |
| Increase in provisions | - | 1,070 | 1,025 | 2,095 |
| Effect of movements in exchange rates | - | - | 2 | 2 |
| Transfer to held for sale liabilities | (110) | - | (2) | (112) |
| Unwind of discount | 149 | - | - | 149 |
| At 30 November 2015 | 3,579 | 184 | 1,178 | 4,941 |
Provisions for onerous leases and dilapidations have been recognised at the present value of the expected obligation at discount rates of 2.6% per annum reflecting a risk free discount rate, applicable to the liabilities. These discounts will unwind to their undiscounted value over the remaining lives of the leases via a finance cost within the Income Statement. At 30 November 2015, £1,829,000 (2014: £5,738,000) of the provision refers to onerous leases, and £1,750,000 (2014: £2,356,000) refers to dilapidations. The major release in the year relates to the successful sub-letting of one of the Group's properties.
The average remaining life of the leases at 30 November 2015 is 3.5 years (2014: 5.1 years).
Employee related restructuring provisions refer to costs arising from restructuring to meet the future needs of the Group and are all expected to be utilised during the following financial year.
Other provisions includes one-off items not covered by any other category. The major release of Group provisions during the year relates to the successful completion of certain legal activities and a reassessment of provision recognised as part of the exit of operations following the 2011 Strategic Review. The significant elements in the provision at 30 November 2015 and the increase in the year are related to regulatory compliance.
| 2015 | 2014 | |
|---|---|---|
| Group | £000 | £000 |
| Current liabilities | 2,077 | 3,660 |
| Non-current liabilities | 2,864 | 5,507 |
| 4,941 | 9,167 |
| Company | |
|---|---|
| Non-current liabilities | £000 |
| At 1 December 2013 | 429 |
| Release of provisions | (429) |
| Increase in provisions | 4,983 |
| At 30 November 2014 | 4,893 |
| Increase in provisions | 498 |
| At 30 November 2015 | 5,391 |
The increase in provisions during the year relates to the guarantee of an intergroup balance between subsidiary undertakings.
The Directors consider that the carrying amounts of provisions in the Group and the Company approximate their fair value.
| Company and Group | Ordinary shares of 2p | Ordinary shares of 22/7p | Total | ||
|---|---|---|---|---|---|
| Allotted, called-up and fully paid | '000 | £000 | '000 | £000 | £000 |
| At 1 December 2013 | 93,515 | 1,870 | - | - | 1,870 |
| Share consolidation | (93,515) | (1,870) | 81,826 | 1,870 | - |
| Issued in the year | - | - | 814 | 19 | 19 |
| At 30 November 2014 | - | - | 82,640 | 1,889 | 1,889 |
| Issued in the year | - | - | 10 | 1 | 1 |
| At 30 November 2015 | - | - | 82,650 | 1,890 | 1,890 |
During the year 10,000 ordinary shares of 22/7p each were issued following the exercise of options under the RM plc 2004 Company Share Option Plan. The exercise price was £1.742 per option.
Ordinary shares issued carry no right to fixed income.
The Group operates or contributes to a number of defined contribution schemes for the benefit of qualifying employees. The assets of these schemes are held separately from those of the Company. The total cost charged to income of £4,930,000 (2014: £4,914,000) represents contributions payable to these schemes by the Group at rates specified in employment contracts. At 30 November 2015 £332,000 (2014: £373,000) due in respect of the current financial year had not been paid over to the schemes.
The Group has TUPE employees who retain membership of local government pension schemes. The Group makes payments to these schemes for current service costs in accordance with its contractual obligations, most of which are limited through reimbursement rights under the contracts. The total costs charged to income for these schemes was £171,000 (2014: £240,000). The amount due in respect of these schemes at 30 November 2015 was £49,000 (2014: £28,000).
One Group sponsored Defined Benefit Pension Scheme is in operation, the Research Machines plc 1988 Pension Scheme ("Scheme"). The Scheme is a funded scheme. The Scheme provides benefits to qualifying employees and former employees of RM Education Limited, but was closed to new members with effect from 1 January 2003 and closed to future accrual of benefits from 31 October 2012. The assets of the Scheme are held separately from those of RM Education Limited in a trustee-administered fund. The Trustee is a limited company. Directors of the Trustee company are appointed by RM Education Ltd and by members.
Under the Scheme, employees were entitled to retirement benefits of 1/60th of final salary for each qualifying year on attainment of retirement age of 60 or 65 years and additional benefits based on the value of individual accounts. No other post-retirement benefits were provided by the Scheme.
The most recent actuarial valuation of Scheme assets and the present value of the defined benefit obligation was carried out for statutory funding purposes at 31 May 2015 by a qualified independent actuary. IAS 19 Employee Benefits (revised) liabilities at 30 November 2015 have been rolled forward based on this valuation's base data.
As at 31 May 2015, the triennial valuation for statutory funding purposes showed a deficit of £41,800,000 (31 May 2012: £53,500,000). RM Education Limited agreed with the Scheme Trustee that it will repay this amount via deficit catch up payments of £4,000,000 in December 2015 and £3,600,000 per annum until 30 September 2024. There was one month's deficit payment of £300,000 outstanding at 30 November 2015 (2014: £300,000). The next triennial valuation of the Scheme is due as at 31 May 2018 and may result in changes to the level of deficit catch up payments required.
In addition to the £4,000,000 of catch up payments in December 2015, a further £4,000,000 contribution was paid in December 2015 into an escrow account established in March 2014, the use of which within the Scheme is required to be agreed by RM Education Limited and the Scheme Trustee.
Scheme assets are measured at bid-price at 30 November 2015. The present value of the defined benefit obligation was measured using the projected unit method.
The entire deficit position of the Scheme is held within these financial statements on the balance sheet as RM Education Limited in substance bears all of the material risks associated with the Scheme.
IAS 19 Employee Benefits, amended June 2011, has been adopted in these financial statements.
The parent company RM plc has entered into a pension protection fund compliance guarantee in respect of scheme liabilities.
No liability has been recognised for this within the Company as the Directors consider that the likelihood of it being called upon is remote.
| Amounts recognised in the Income Statement and in the Statement of Comprehensive Income | |
|---|---|
| ----------------------------------------------------------------------------------------- | -- |
| Year ended | Year ended | ||
|---|---|---|---|
| 30 November 2015 | 30 November 2014 | ||
| Note | £000 | £000 | |
| Administrative expenses and taxes | (530) | (475) | |
| Operating expense | (530) | (475) | |
| Interest cost | (7,352) | (7,513) | |
| Interest on Scheme assets | 6,388 | 7,134 | |
| Net interest expense | 8 | (964) | (379) |
| Expense recognised in the Income Statement | (1,494) | (854) | |
| Effect of changes in demographic assumptions | (1,785) | 1,198 | |
| Effect of changes in financial assumptions | (3,155) | (26,666) | |
| Effect of experience adjustments | 5,716 | - | |
| Total actuarial gains/(losses) | 776 | (25,468) | |
| Return on Scheme assets excluding interest on Scheme assets | 1,626 | 3,576 | |
| Income/(expense) recognised in the | |||
| Statement of Comprehensive Income | 2,402 | (21,892) | |
| Income/(expense) recognised in Total Comprehensive Income | 908 | (22,746) |
| Year ended | Year ended | |
|---|---|---|
| 30 November 2015 | 30 November 2014 | |
| £000 | £000 | |
| Assets | ||
| At start of year | 165,839 | 147,688 |
| Interest on Scheme assets | 6,388 | 7,134 |
| Return on Scheme assets excluding interest on Scheme assets | 1,626 | 3,576 |
| Administrative expenses | (530) | (475) |
| Contributions from Group | 3,984 | 11,821 |
| Benefits paid | (3,278) | (3,905) |
| At end of year | 174,029 | 165,839 |
| Obligations | ||
| At start of year | (192,592) | (163,516) |
| Interest cost | (7,352) | (7,513) |
| Actuarial gains/(losses) | 776 | (25,468) |
| Benefits paid | 3,278 | 3,905 |
| At end of year | (195,890) | (192,592) |
| Deficit in Scheme and obligation recognised on the Balance Sheet | (21,861) | (26,753) |
| Reconciliation of net defined benefit obligation | Year ended 30 November 2015 |
Year ended 30 November 2014 |
|---|---|---|
| £000 | £000 | |
| Net obligation at the start of the year | (26,753) | (15,828) |
| Cost included in Income Statement | (1,494) | (854) |
| Scheme remeasurements included in the Statement of Comprehensive Income |
2,402 | (21,892) |
| Cash contribution | 3,984 | 11,821 |
| Deficit in Scheme and obligation recognised on the Balance Sheet | (21,861) | (26,753) |
| Obligation by participant status | Year ended Year ended |
||
|---|---|---|---|
| 30 November 2015 | 30 November 2014 | ||
| £000 | £000 | ||
| Vested deferreds | 171,194 | 169,392 | |
| Retirees | 24,696 | 23,200 | |
| 195,890 | 192,592 |
| Value of Scheme assets | Year ended 30 November 2015 £000 |
Year ended 30 November 2014 £000 |
|---|---|---|
| Fair value of Scheme assets with a quoted market price | ||
| Cash and cash equivalents, including escrow | 3,676 | 3,469 |
| Equity instruments | 87,669 | 84,218 |
| Debt instruments | 59,102 | 54,952 |
| Value of unquoted Scheme assets | ||
| Insurance contract | 23,582 | 23,200 |
| 174,029 | 165,839 |
| Significant actuarial assumptions | Year ended 30 November 2015 |
Year ended 30 November 2014 |
|---|---|---|
| Discount rate | 3.85% | 3.85% |
| Rate of RPI price inflation | 3.25% | 3.20% |
| Rate of CPI price inflation | 2.35% | 2.30% |
| Rate of pensions increases | ||
| pre 6 April 1997 service | 1.50% | 1.35% |
| pre 1 June 2005 service | 3.20% | 3.10% |
| post 31 May 2005 service | 2.20% | 2.10% |
| Post retirement mortality table | S2PA CMI 2014 1.50% | S1NA CMI 2013 1.25% |
| Weighted average duration of defined benefit obligation | 24 years | 25 years |
| Assumed life expectancy on retirement at age 65: | ||
| Retiring today (male member aged 65) | 22.7 | 22.3 |
| Retiring in 20 years (male member aged 45) | 24.8 | 24.1 |
| 2015 | 2014 | |
|---|---|---|
| £000 | £000 | |
| Expected employer contributions for the year ended 30 November 2016 | 11,984 | 3,984 |
| Expected total benefit payments | ||
| Year 1 | 3,371 | 2,186 |
| Year 2 | 3,466 | 2,247 |
| Year 3 | 3,564 | 2,309 |
| Year 4 | 3,665 | 2,373 |
| Year 5 | 3,768 | 2,439 |
| Years 6 - 10 | 20,507 | 13,247 |
| ------------------------- 30 November 2015 ------------------------- | 30 November 2014 | ||||||
|---|---|---|---|---|---|---|---|
| -0.1% | +0.1% | ||||||
| discount | discount | ||||||
| Base | rate | rate | -0.1% RPI | +0.1% RPI | Life +1 yr | Base | |
| £m | £m | £m | £m | £m | £m | £m | |
| Analysis of net balance sheet position | |||||||
| Fair value of Scheme assets | 174.0 | 174.4 | 173.7 | 173.8 | 174.2 | 174.6 | 165.8 |
| Present value of Scheme obligations | (195.9) | (200.8) | (191.2) | (192.2) | (199.7) | (199.7) | (192.6) |
| Deficit | (21.9) | (26.4) | (17.5) | (18.4) | (25.5) | (25.1) | (26.8) |
| Actuarial assumptions | |||||||
| Discount rate | 3.85% | 3.75% | 3.95% | 3.85% | 3.85% | 3.85% | 3.85% |
| Rate of RPI | 3.25% | 3.25% | 3.25% | 3.15% | 3.35% | 3.25% | 3.20% |
| Rate of CPI | 2.35% | 2.35% | 2.35% | 2.25% | 2.45% | 2.35% | 2.30% |
| Mortality table | --------------------- S2PA CMI 2014 1.5% -------------------- | S1NA CMI 2013 1.25% | |||||
| Rating (years) | - | - | - | - | - | (1) | - |
The RM plc Employee Share Trust (EST) was established in March 2003 to hedge the future obligations of the Group in respect of shares awarded under the RM plc Co-Investment Plan, RM plc Performance Share Plan and Deferred Bonus Plan. The EST has waived any entitlement to the receipt of normal dividends in respect of all of its holding of the Company's ordinary shares, and also waived its entitlement to the 2014 special dividend. The EST's waiver of dividends may be revoked or varied at any time.
| Ordinary shares of 2p | Ordinary shares of 22/7p | |
|---|---|---|
| '000 | '000 | £000 |
| 1,811 | - | 2,972 |
| (40) | - | (40) |
| 1 | - | - |
| (1,772) | 1,551 | - |
| - | 800 | 18 |
| - | 2,351 | 2,950 |
| - | (2,272) | (2,910) |
| - | 1,535 | 2,458 |
| - | - | 12 |
| - | 1,614 | 2,510 |
The valuation of the shares is weighted average cost.
The Group operates the following executive and employee equity settled share-based payment schemes:
In addition to the above, there were two further schemes open during the year; one of which was closed at the year end, the other had no activity during the year.
The fair values of awards made under these schemes have been assessed using Black-Scholes and Monte-Carlo models, as appropriate to the scheme, at the date of grant. The fair values of the schemes are expensed over the period between grant and vesting.
Share-based payment awards exercised in the period and disclosed in the Statement of Changes in Equity represents the impact on retained earnings of releasing the fair value charge accrued under IFRS 2 Share-based Payment, which for the deferred bonus scheme, is partially matched by the release of own-shares held.
The Group has in place a share option scheme which issued options over shares in the Company. There have been various performance conditions attached to share option grants including EPS, share-price and share purchase conditions. Options are usually forfeited if an employee leaves the Group before the options vest.
Details of share options outstanding are as follows:
| Weighted average | ||||
|---|---|---|---|---|
| Number of | Weighted average | share price at | ||
| Group | share options | exercise price | exercise | Exercise price range |
| At 1 December 2013 | 1,543,400 | £1.81 | £1.45 - £2.05 | |
| Exercised during the year | (14,000) | £1.54 | £1.57 | |
| Lapsed during the year | (250,400) | £1.58 | ||
| At 30 November 2014 | 1,279,000 | £1.86 | £1.54 - £2.05 | |
| Exercised during the year | (10,000) | £1.74 | £1.76 | |
| Lapsed during the year | (328,500) | £1.74 | ||
| At 30 November 2015 | 940,500 | £1.90 | £1.74 - £2.05 |
The options outstanding at 30 November 2015 had a weighted average contractual life of 1.8 years (2014: 2.4 years). All of the outstanding options at the end of the current and prior period are exercisable. No option grants were made under this scheme in the current year (2014: nil).
The Group uses performance share plans for the remuneration of senior executives and senior management. Details of Directors' awards are contained within the Remuneration Report. Participation has been subject to various vesting conditions, including EPS, total shareholder return and share price conditions. If the participants leave the Group's employment then in most circumstances the award lapses.
Details of performance share plan shares are as follows:
| Group | Maximum number of shares | Market price on grant |
|---|---|---|
| At 1 December 2013 | 5,594,267 | |
| Granted during the year | 1,755,000 | £1.55 |
| Lapsed during the year | (2,003,434) | |
| At 30 November 2014 | 5,345,833 | |
| Granted during the year | 1,735,000 | £1.67-£1.78 |
| Lapsed during the year | (564,118) | |
| Exercised during the year | (2,271,715) | |
| At 30 November 2015 | 4,245,000 |
The plans outstanding at 30 November 2015 had a weighted average contractual life of 1.8 years (2014: 1.3 years).
The fair values of shares granted during the year are determined using a Monte-Carlo model which gives fair values in the range of £1.00 and £1.19 per share under the TSR performance condition.
Inputs to the model are as follows:
| 5 August 2015 | 2 October 2015 | |
|---|---|---|
| Group | TSR | TSR |
| Share price at grant | £1.78 | £1.67 |
| Exercise price | £Nil | £Nil |
| Expected life | 3 years | 3 years |
| Expected dividends | 2.38% | 2.54% |
The expected life used in the modelling has been adjusted, based on management's best estimate, for the effects of non-transferability and exercise restrictions.
Comparator company volatility is assessed using annualised, daily historic TSR growth assessed over a period prior to the date of grant that corresponds to the performance period of three years. The company correlation uses historic pairwise correlations of the companies over a three year period. The fair value of the TSR element is based on a large number of stochastic projections of Company and comparator TSR.
In March 2003 the Company established the RM plc Employee Share Trust to hedge the future obligations of the Group in respect of share scheme awards. These shares are used to hedge the estimated liability but, until vesting, represents own shares held – see note 25.
The RM plc 2002 Staff Share Scheme historically made annual grants of shares in RM plc to almost all employees, although no awards were made in the current year or the prior year. At grant, the Trustee of the Scheme purchased shares on the open market and holds these in trust on behalf of the employees, hence the shares are not shown in the Group or Company balance sheets. The shares vest to the employees after a minimum of three years, but normally after five years. The Scheme was an HMRC approved employee share scheme constituted under a trust.
| Ordinary shares of 2p | Ordinary shares of 22/7p | Total cost | |
|---|---|---|---|
| Group | Number | Number | £000 |
| RM plc 2002 Staff Share Scheme | 325,876 | - | 534 |
| RML Staff Share Scheme | 1,361 | - | 1 |
| At 30 November 2013 | 327,237 | - | 535 |
| Transferred into own shares | (1,361) | - | (1) |
| Sold or transferred | (43,555) | - | (71) |
| Share consolidation | (282,321) | 246,827 | - |
| Sold or transferred | - | (40,261) | (76) |
| At 30 November 2014 | - | 206,566 | 387 |
| RM plc 2002 Staff Share Scheme | - | 206,566 | 387 |
| Sold or transferred | - | (206,566) | (387) |
| At 30 November 2015 | - | - | - |
| RM plc 2002 Staff Share Scheme | - | - | - |
The Scheme held the following shares:
During the year, the Staff Share Scheme was wound up and the shares were transferred from the Trust to the relevant employees with the excess being sold and the proceeds returned to the Company.
The Group had in place a deferred bonus plan for the remuneration of executives and senior management. The remaining outstanding award vested in February 2014, and the Board has no plans to utilise this scheme in the future.
Assigning a fair value charge to share-based payments requires estimation of: the projected share price; the number of instruments which are likely to vest; other non-market based performance conditions. Assigning a fair value charge requires continuing reassessment of these estimates.
The Company has entered into guarantees relating to the performance and liabilities of certain major contracts of its subsidiaries. The Directors are not aware of any circumstances that have given rise to any liability under such guarantees and consider the possibility of any arising to be remote.
The Group has provided performance guarantees and indemnities relating to performance bonds and letters of credit issued by its banks on its behalf, in the ordinary course of business. The Directors are not aware of any circumstances that have given rise to any liability under such guarantees and indemnities and consider the possibility of any arising to be remote.
The Group had outstanding commitments for future minimum lease payments (to the next lease break or to the end of the lease, whichever is sooner) under non-cancellable operating leases which fall due as follows:
| 2015 | 2014 | |
|---|---|---|
| Group | £000 | £000 |
| Within 1 year | 3,011 | 3,347 |
| In years 2 to 5 inclusive | 8,263 | 9,824 |
| After year 5 | 334 | 621 |
| 11,608 | 13,792 |
Operating lease commitments represent rentals payable by the Group for certain of its office properties and include the period up to the first break clause of the lease.
The terms of these leases are subject to renegotiation on average terms of 2.0 years (2014: 2.5 years) and rentals are fixed for an average of 2.0 years (2014: 2.0 years).
The Company had no operating leases during the year.
The Group had the following capital expenditure commitments:
| 2015 | 2014 | |
|---|---|---|
| Group | £000 | £000 |
| Contracted but not provided for | 140 | 243 |
The Company had no capital commitments at the end of either year.
| Group | Company | |||
|---|---|---|---|---|
| 2015 | 2014 | 2015 | 2014 | |
| £000 | £000 | £000 | £000 | |
| Financial assets | ||||
| Trade and other receivables - current | 20,116 | 27,863 | 5,202 | 14,372 |
| Trade and other receivables - non-current | 1,168 | 1,878 | 918 | 1,628 |
| Cash and short-term deposits | 48,320 | 47,893 | - | - |
| 69,604 | 77,634 | 6,120 | 16,000 | |
| Financial liabilities | ||||
| Trade and other payables - current | (54,368) | (65,126) | (17,091) | (29,002) |
| Trade and other payables - non-current | - | (49) | - | - |
| Provisions - current | (2,077) | (3,660) | - | - |
| Provisions - non-current | (2,864) | (5,507) | (5,391) | (4,893) |
| (59,309) | (74,342) | (22,482) | (33,895) |
All financial assets are classified as loans and receivables except for forward foreign exchange contracts of £138,000 (2014: £565,000) which are classified as fair value through profit or loss.
All liabilities classified as financial liabilities are held at amortised cost except for forward foreign exchange contracts of £5,000 (2014: £3,000) which are classified as fair value through profit or loss.
The Directors consider that the carrying amount of all financial assets and financial liabilities approximates their fair value. Fair value information for financial assets and financial liabilities not shown at fair value is therefore not disclosed.
It is, and has been throughout the period under review, the Group's policy that no trading in financial instruments shall be undertaken and the Group does not hold or issue derivative financial instruments for speculative purposes.
The main risks arising from the Company's financial assets and liabilities are market risk (foreign currency risk and interest rate risk), credit risk and liquidity risk. The Board reviews and agrees policies on a regular basis for managing the risks associated with these assets and liabilities.
All liabilities classified as financial liabilities are held at amortised cost except for forward foreign exchange contracts of £5,000 (2014: £3,000) which are classified as fair value through profit or loss.
The Group also maintains foreign currency denominated cash accounts, but only holds balances required to settle its payables.
Operations are also subject to foreign exchange risk from transactions in currencies other than their functional currency and, once recognised, the revaluation of foreign currency denominated assets and liabilities. Principally, this relates to transactions arising in US Dollars and Indian Rupees. Specifically, the Group purchases a proportion of its inventory in US Dollars and operating costs in the Group's subsidiary RM Education Solutions India Pvt Ltd are in Indian Rupees.
In order to manage these risks the Group enters into derivative transactions in the form of forward foreign currency contracts. To manage the US Dollar to Sterling risk, the forward foreign currency contracts purchased are designed to cover 85% of forecast currency denominated purchases and the contracts are set up to provide coverage over the fixed price periods of up to 12 months. To manage the Indian Rupee to Sterling risk, the contracts purchased are designed to cover 80% of forecast Indian Rupee costs and are renewed on a revolving basis of approximately 11 to 12 months.
The total amount of outstanding forward foreign exchange contracts to which the Group was committed was:
| 2015 | |||||
|---|---|---|---|---|---|
| Currency | Contract type |
Forward contract value Currency '000 |
Forward contract value £000 |
Mark to market value £000 |
Fair value £000 |
| US Dollar | Sell | (239) | 154 | 159 | (5) |
| US Dollar | Buy | 9,500 | (6,226) | (6,312) | 86 |
| Indian Rupee | Buy | 520,660 | (5,005) | (5,057) | 52 |
| (11,077) | (11,210) | 133 |
| Currency | Contract type |
Forward contract value Currency '000 |
Forward contract value £000 |
Mark to market value £000 |
Fair value £000 |
|---|---|---|---|---|---|
| US Dollar | Sell | (187) | 117 | 120 | (3) |
| US Dollar | Buy | 8,055 | (4,848) | (5,158) | 310 |
| Indian Rupee | Buy | 476,900 | (4,520) | (4,775) | 255 |
| (9,251) | (9,813) | 562 |
The fair value of the derivative financial instruments is estimated by discounting the future contracted cash flow, using readily available market data and represents a level 2 measurement in the fair value hierarchy under IFRS 7. These fair value gains/(losses) are included within trade and other receivables and trade and other payables respectively.
Of these, forward foreign currency exchange contracts with a contract value of £11,077,000 (2014: £9,251,000) and fair value gain of £133,000 (2014: gain £562,000) have been designated as effective hedges in accordance with IAS 39 Financial Instruments: Recognition and Measurement. The movement in fair value of hedged derivative financial instruments during the year was a debit of £429,000 (2014: credit £1,090,000) which has been recognised in Other Comprehensive Income and presented in the hedging reserve in equity. In addition, the Group retains the gain or loss on realised foreign currency contracts used to hedge non-financial assets which are realised when the asset is recognised. A fair value gain of £231,000 (2014: £18,000 loss) has been realised on forward contracts which were designated as effective hedges in accordance with IAS 39 Financial Instruments: Recognition and Measurement. The movement in value of realised forward contracts was a credit of £249,000 (2014: debit £72,000) which has been recognised in Other Comprehensive Income and presented in the hedging reserve in equity.
No forward foreign currency exchange contracts have been designated as ineffective hedges in accordance with IAS 39 Financial Instruments: Recognition and Measurement at 30 November 2015 (2014: nil).
Commercially effective hedges may lead to income statement volatility in the future, particularly if the hedges do not meet the criteria of an effective hedge in accordance with IAS 39 Financial Instruments: Recognition and Measurement.
The following table details how the Group's income and equity would increase/(decrease) if there was a 10% increase in the amount of the respective currency which could be purchased with £1 Sterling (assuming all other variables remain constant), for example from \$1.60 : £1 to \$1.76 : £1 at the balance sheet date. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the period end for a 10% change in foreign currency. A 10% weakening of Sterling against the relevant currency would be estimated to have a comparable but opposite impact on income and equity.
| Sensitivity | 2015 | 2014 | ||
|---|---|---|---|---|
| Income | Equity | Income | Equity | |
| Group | £000 | £000 | £000 | £000 |
| 10% increase in foreign exchange rates against Sterling: | ||||
| US Dollar | (19) | 547 | 4 | 525 |
| Indian Rupee | 12 | (95) | 45 | (117) |
| Euro | (4) | (52) | 7 | (41) |
In management's opinion, the sensitivity analysis is unrepresentative of the inherent foreign exchange risk as the period end exposure does not reflect the exposure during the period, as the analysis does not reflect management's proactive monitoring methods and processes for exchange risk.
The only significant interest bearing financial assets held by the Group are cash and short-term deposits which comprise cash held by the Group and Company and short-term bank deposits with an original maturity of six months or less. Surplus Sterling balances are invested in the money market, or with financial institutions on maturing terms from within 24 hours up to a period of six months with interest earned based on the relevant national inter-bank rates available at the time of investing. During the year, average cash and short-term deposits were £48,107,000 (2014: £47,460,000), and the maximum bank overdraft was £nil (2014: £nil).
The interest and currency profile of cash and short-term deposits is shown below:
| 2015 | 2014 | |||||
|---|---|---|---|---|---|---|
| Group | Floating rate £000 |
Interest free £000 |
Total £000 |
Floating rate £000 |
Interest free £000 |
Total £000 |
| Sterling cash and cash equivalents | 39,746 | 2,002 | 41,748 | 35,633 | 5,722 | 41,355 |
| Sterling short-term deposits | 6,000 | - | 6,000 | 6,000 | - | 6,000 |
| US Dollar | - | 470 | 470 | - | 126 | 126 |
| Euro | - | 24 | 24 | - | 72 | 72 |
| Indian Rupee | - | 78 | 78 | - | 289 | 289 |
| Singapore Dollar | - | - | - | - | 51 | 51 |
| 45,746 | 2,574 | 48,320 | 41,633 | 6,260 | 47,893 |
The Group has a £30,000,000 committed revolving credit facility with Barclays Bank plc signed on 27 January 2012, £3,000,000 of which is allocated to an on-demand working capital facility and £600,000 allocated to a performance bond facility, leaving £26,400,000 unallocated.
Interest payable on any utilised revolving credit facility is fixed 2.5% above LIBOR for the remainder of the committed term (to March 2017) subject to certain financial ratios. A commitment fee of 1.2% is payable on the unutilised balance and an arrangement fee of £75,000 (2014: £75,000) has been paid in 2015 and is recognised in the Consolidated Income Statement on an effective interest rate basis over the duration of the facility. The total paid since the inception of the facility is £625,000.
The weighted average effective interest rates at the balance sheet date were as follows:
| 2015 | 2014 | |||
|---|---|---|---|---|
| Weighted average | Weighted average | |||
| Floating rate | interest rate | Floating rate | interest rate | |
| Group | £000 | % | £000 | % |
| Financial assets: | ||||
| Cash and short-term deposits | 45,746 | 0.49 | 41,633 | 0.55 |
| Trade and other receivables (non-current) | 1,168 | 9.85 | 1,878 | 10.39 |
The interest rate risk sensitivity (assuming all other variables remain constant):
| 2015 | 2014 | |||
|---|---|---|---|---|
| Income sensitivity | Equity sensitivity | Income sensitivity | Equity sensitivity | |
| Group | £000 | £000 | £000 | £000 |
| 1% increase in interest rates | 406 | 406 | 437 | 437 |
| 1% decrease in interest rates | (406) | (406) | (437) | (437) |
The Group's principal financial assets are bank balances and trade and other receivables. The Group's credit risk is primarily attributable to its trade receivables. Credit checks are performed on new customers and before credit limits are increased. The amounts presented in the balance sheet are net of allowances for doubtful receivables. Note 18 includes an analysis of trade receivables by type of customer and of the ageing of unimpaired trade receivables.
The credit risk on liquid funds and derivative financial instruments is limited because the counterparties are banks with high credit ratings assigned by international credit rating agencies. The Group has no significant concentration of credit risk, with exposure spread over a large number of counterparties and customers and a large proportion are ultimately backed by the UK Government.
The carrying amount of financial assets represents the maximum credit exposure. The Group does not hold any collateral to cover its risks associated with financial assets.
Cash is managed to ensure that sufficient liquid funds are available with a variety of counterparties, to meet short, medium and long-term cash flow forecasting requirements.
The Group meets its seasonal working capital requirements from current funds. At the balance sheet date, the Group had a £30,000,000 three year committed revolving credit facility to March 2017 held with Barclays Bank plc, of which £3,600,000 has been allocated. The unallocated facilities at the end of the year were £26,400,000 of working capital funding capacity at the end of the year. At 30 November 2015, £300,000 of the performance bond facility was drawn down (2014: £300,000).
The Group monitors capital through the calculation and review of economic profit. A monthly working capital charge on Group operating assets (excluding primarily goodwill, cash, provisions treated as adjustments and tax balances) or credit on Group operating liabilities is applied to the Group adjusted operating profit to provide economic profit, as follows:
| Year ended | Year ended | |
|---|---|---|
| 30 November 2015 | 30 November 2014 | |
| £000 | £000 | |
| Adjusted profit from operations | 18,199 | 18,526 |
| Capital return on net operating liabilities | 2,716 | 3,287 |
| Economic profit | 20,915 | 21,813 |
The remuneration of the Directors and other key management personnel of the Group during the year, in aggregate, was:
| Year ended | Year ended | |
|---|---|---|
| 30 November 2015 | 30 November 2014 | |
| Group | £000 | £000 |
| Short-term employee benefits | 2,739 | 3,065 |
| Post-employment benefits | 317 | 285 |
| Termination payments | 250 | 169 |
| Share-based payment | 495 | 578 |
Share-based payments above include a fair value charge for executive Directors of £103,000 in respect of awards to David Brooks (2014: £136,000), £9,000 in respect of Neil Martin (2014: £nil) and £41,000 in respect of Iain McIntosh (2014: £104,000).
Further information about the remuneration of individual Directors is provided in the audited part of the Remuneration Report.
During the year, the Company entered into the following transactions with its subsidiary undertakings:
| Year ended | Year ended | |
|---|---|---|
| 30 November 2015 | 30 November 2014 | |
| Company | £000 | £000 |
| Receipts/(payments) | ||
| Management recharges | (535) | (447) |
| Net inter-company interest income | 460 | 37 |
| Dividends received | 7,966 | 8,000 |
Total amounts owed between the Company and its subsidiary undertakings are disclosed in notes 18 and 21 respectively.
RM plc Board Director Lord Andrew Adonis is a member of the Advisory Board of TES Global Limited (formerly TSL Education Limited), from which the Group made purchases of £5,512 and sales of £1,778 in the previous year. There were no similar transactions for the current year.
RM plc Board Director Lord Andrew Adonis is a director of Dods (Group) plc from which the Group made purchases during the previous year of £474. There were no similar transactions for the current year.
RM plc Board Director Deena Mattar is a director of Wates Group Limited for which there was a retention balance owing to the Group of £2,106 in the previous year. There was no similar balance owing at the current year-end.
The Group uses PricewaterhouseCoopers LLP to provide certain consultancy and assurance services, but excluding external audit services. Former RM plc Director Iain McIntosh's wife is an equity partner in PricewaterhouseCoopers LLP. She has not been involved in any services provided to the Group. The Group made purchases from PricewaterhouseCoopers LLP for the year ended 30 November 2015 of £256,040 (2014: £255,350) and the balance outstanding at 30 November 2015 was £21,600 (30 November 2014: £nil).
The Group encourages its Directors and employees to be Governors, Trustees or equivalent of educational establishments. The Group trades with these establishments in the normal course of its business.
In December 2015, the entire share capital of SpaceKraft Limited was disposed. The investment was recorded as held for sale and presented separately in the balance sheet at 30 November 2015 (see note 20).
The proceeds on disposal were lower than the combined book value of the SpaceKraft Limited net assets and of the Group relating specifically to the company. Accordingly, impairments have been recognised in acquisition related intangible assets and property, plant and equipment of £150,000 and £83,000 respectively.
| Ex-dividend date for 2015 final dividend | 10 March 2016 |
|---|---|
| Record date for 2015 final dividend | 11 March 2016 |
| Annual General Meeting | 23 March 2016 |
| Payment of 2015 final dividend | 8 April 2016 |
| Announcement of 2016 interim results | July 2016 |
| Preliminary announcement of 2016 results | February 2017 |
Information about the Group's activities is available from RM at www.rmplc.com.
Information for investors is available at www.rmplc.com. Enquiries can be directed to Greg Davidson, Company Secretary, at the Group head office address or at [email protected].
Shareholders can access the details of their holdings in RM plc via the Shareholder Services option within the investor section of the corporate website at www.rmplc.com. Shareholders can also make changes to their address details and dividend mandates online. All enquiries about individual shareholder matters should be made to the registrars either via email at [email protected] or telephone: 0871 664 0300. Calls cost 12p per minute plus your phone company's access charge. Calls outside the United Kingdom will be charged at the applicable international rate. Lines are open between 09:00 - 17:30, Monday to Friday excluding public holidays in England and Wales.
To help shareholders, the Capita Share Portal at www.capitashareportal.com contains a shareholders' frequently asked questions section.
Shareholders are able to receive company communication via email. By registering your email address, you will receive emails with a web link to information posted on our website. This can include our report and accounts, notice of meetings and other information we communicate to our shareholders.
Electronic communication brings numerous benefits, which include helping us reduce our impact on the environment, increased security (your documents cannot be lost in the post or read by others) and faster notification of information and updates. To sign-up to receive e-communications go to Capita Asset Services' Share Portal at www.capitashareportal.com. All you need to register is your investor code, which can be found on your share certificate or your dividend tax voucher. The Share Portal is a secure online site where you can manage your shareholding quickly and easily. You can check your shareholding and account transactions, change your name, address or dividend mandate details online at any time.
Please note that beneficial owners of shares who have been nominated by the registered holders of those shares to receive information rights under section 146 of the Companies Act 2006 are required to direct all communications to the registered holder of their shares rather than to Capita Asset Services, or to the Company directly.
If you have received two or more copies of this document, it may be because there is more than one account in your name on the shareholder register. This may be due to either your name or address appearing on each account in a slightly different way. For security reasons, Capita will not amalgamate the accounts without your written consent. If you would like to amalgamate your multiple accounts into one account, please write to Capita Asset Services.
Greg Davidson
140 Eastern Avenue Milton Park Milton Abingdon Oxfordshire OX14 4SB United Kingdom
Telephone: +44 (0)8450 700 300
RM plc's registered number is 01749877
KPMG LLP Arlington Business Park Theale Reading RG7 4SD
Numis Securities Ltd 10 Paternoster Square London EC4M 7LT
Peel Hunt LLP 120 London Wall London EC2Y 5ET
FTI Consulting Ltd 200 Aldersgate Aldersgate Street London EC1A 4HD
Capita Asset Services The Registry 34 Beckenham Road Beckenham Kent BR3 4TU
Osborne Clarke One London Wall London EC2Y 5EB
140 Eastern Avenue Milton Park Milton Abingdon Oxfordshire OX14 4SB
Telephone: +44 (0)8450 700 300 Fax: +44 (0)8450 700 400
Stock code: RM.
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