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RM’s core division will soon be resources, not tech, reckons analyst

Future lies in exam tests and curriculum kit

The inevitable after-effects of withdrawing from hardware production and dwindling Building Schools for the Future contracts are leaving a huge hole at RM.

The education specialist today filed interim results for the six months ended 31 May, and they make for good reading ... if you're a rival.

Total revenue fell 13.3 per cent year-on-year to £79.8m as the Education unit that once built PCs and resold related accessories declined “as expected”.

RM Education fell to £36.5m from £52.7, but RM Resources (curriculum products and materials) grew 11.6 per cent to £32.7m, and RM Results (systems for exams, tests and marking) posted £10.6m, up from £10.1m in the corresponding prior year period.

The company remains an ICT provider to schools but this is no longer the main growth driver in the business. The company forecast growth in the Education division from the next fiscal year but this will be off the back of software and services, not boxes.

RM was once the biggest recipient of BSF business but the coalition put a bullet in the programme back in 2010, favouring instead the Academies schemes.

This, plus RM’s belated decision in 2013 to shutter its PC production line and get out of related product reselling, has come at a cost both to the top line and the hundreds of staffers made redundant.

The company had little option but to take direct action, given the losses it was suffering and its management has previously warned investors the recovery will take time.

The Resources and Results units represented 70 per cent of gross profit in the first six months of this financial year. Total gross profit crossed the line at £32.19m, versus £35.07m a year ago.

Operating expenses were clipped to £23.17m, leaving an operating profit of £9.2m, boosted by the release of onerous lease contracts (£2.06m). This compared with an operating profit of £7.13m in the first half of last year.

Profit after the tax man and finance costs were accounted for stood at £7.3m, up from £5.23m.

Analyst Megabuyte pointed out today that RM revenues peaked at £376m in fiscal ’10 and given the mammoth decline in the Education sub, “the core division going forward is really RM Resources, which isn’t even a technology business.” ®

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