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By | Paul Kunert 7th July 2014 14:01

RM: Killing our PC unit hit our top line, but our bottom line is pert

Services margins much fatter than wafer-thin PC ones

Murdering the PC building biz was always going to result in some top-line slippage for Brit specialist education tech supplier RM, but the move to shutter the production line hasn't hurt profits, quite the opposite.

The Oxford-based biz today reported half-year numbers to 31 May with sales down more than 22 per cent to £92.1m from £118.1m this time a year ago, and there were no surprises where this drop was felt.

The Education Technology division, which had built and supplied PCs, posted a 36.2 per cent slide to £52.7m, though RM said higher than expected orders and lower costs helped boost adjusted operating profit to £3m, up from £2.5m a year earlier.

Hardware production ceased last month - though the initial closure decision was made in November. Misco and Kelway were appointed by RM to resell hardware to its customers where required under contract, as well as to manage warranties and provide maintenance.

RM said revenues from the discontinued Building Schools for the Future programme fell in H1 and will continue to do so this year and next.

IT services now comprise over half the turnover in ET and RM also continues to provide network solutions as well as a mix of software tools.

The Assessment and Data Services division - products and services that include systems for producing exams and tests, onscreen marking and the management/ analysis of data - grew sales £300k to £10.1m and posted an adjusted operating profit of £2m, up from £800k.

E-marking pilot projects continue with the UK examination awarding body and unit margins were flattered by the "cumulative impact" of better than expected profitability from a long established contract, the firm said.

The Education Resource wing of RM grew a little over 11 per cent to £29.3m. It sells a line of curriculum products and materials to schools for both general and departmental use. Here adjusted operating profit moved up by £800k to £3.8m.

Group headcount was quite a bit lighter, by some 316 bodies to be precise, with 2,201 people still employed by RM at the end of the half-way stage of fiscal '14 - 300 workers in ET were put at risk of redundancy last autumn when plans to close the PC facility were made public.

Adjusted profit before tax came in at £7m versus £4.4m a year ago and after the revenue took its share of the spoils, net profit was left standing at £5.5m compared to £3.2m.

For a company that was built on hardware, RM's turnaround efforts will not happen in the blink of an eye, but it is making progress. ®

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