RM plc Annual Report 2014

FY2014 Annual Report · RM plc

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Technology
and resources
for education

RM plc Annual Report and Financial Statements
Year ended 30 November 2014

The RM plc group of businesses
creates and maintains an extensive
range of innovative solutions and
services - all designed or selected
to meet the specific needs of
educational users.

The RM group comprises the following divisions:

RM Resources

RM Education

This division comprises two operating businesses:
TTS and SpaceKraft. TTS provides a wide range of
resources for use in schools and other educational
settings. TTS is a leading provider of physical resources
to UK schools, with over 14,000 product lines and an
established leadership position in Primary and Early Years
age groups. SpaceKraft is a leading provider of resources
and immersive environments to meet the specific
requirements of learners with Special Educational Needs.

RM Results

Formerly known as Assessment and Data Services,
RM Results supplies government ministries, exam
boards and professional awarding organisations with
technology and expertise to improve efficiency, accuracy
and clarity in the assessment cycle, both in the UK and
internationally. This includes the systems required to
provide the ‘league tables’ for English schools.

RM Results is a business that provides products and
services that include secure, innovative systems for
creating high-stakes exams and tests, onscreen testing,
onscreen marking and the management and analysis
of educational data.

Formerly known as Education Technology,
the division provides technology-based software
and services, specifically designed for UK schools
and other educational establishments, across the
following categories:

Services

Outsourcing, support and implementation services,
including managed services, onsite support,
telephone support and consultancy services.

Infrastructure Solutions

Network software, tools and infrastructure services,
such as the Community Connect network and device
management tools and virtualisation.

Digital Platforms and Content

Access to curriculum resources and school management
solutions, including RM Integris school management
systems, RM Unify ‘launch pad to the cloud’, RM Books
e-book system, RM Easimaths and RM Easiteach.

Internet

The provision of broadband and e-safety solutions.

Contents

Overview

Chairman’s Statement

Strategic Report

Governance

Directors’ Biographies

Directors’ Report

Corporate Governance Report

Audit Committee Report

Remuneration Report

Financial Statements

Independent Auditor’s Report

Consolidated Income Statement

Consolidated Statement of Comprehensive Income

Consolidated Statement of Changes in Equity

Consolidated Balance Sheet

Consolidated Cash Flow Statement

Company Statement of Changes in Equity

Company Balance Sheet

Company Cash Flow Statement

Notes to the Financial Statements

Shareholder Information

Chairman’s
Statement

2014 has been a good year for RM plc. Two of RM’s three
divisions produced encouraging organic growth and all
three showed further improvements in annual operating
margins. Trading performance, which is detailed below,
showed overall Group revenues down as anticipated,
although this was combined with improvements in
profitability, together with good cash generation.

RM Resources (formerly Education Resources), the largest
contributor of profit to the Group, had an excellent year.
TTS generated strong organic growth based on market
share gains and achieved a further increase in already
strong margins, whilst the small SpaceKraft business is
no longer loss making.

RM Results (formerly Assessment and Data Services)
secured new customers and delivered top-line growth
and improving margins.

The reshaping of RM Education (formerly
Education Technology) continues. This year saw
the successful execution of the move away from the
manufacture and sale of hardware devices. A new
managing director was appointed to the division
and priority areas within services and software
have been identified.

£14.7 million as a special dividend and £8.0 million into
a new escrow account to be applied to reducing risks
associated with the Defined Benefit Pension Scheme
which is now closed to accrual of benefits.

The Group has had four years of over 100% conversion of
operating profit to cash generated from operations. It is
anticipated that the Group will remain cash generating
at an operating level, albeit at lower levels of cash
conversion due to the run-down of a favourable working
capital position related to long-term contracts.

The Board is recommending a final dividend of 3.04 pence
per share which would constitute, at 4.00 pence per share
in total, an increase of 21% over the prior year (excluding
the impact of the 16.00p per share special dividend).
Over time, the Board will adopt a progressive dividend
policy towards a more appropriate level of dividend cover.

In the year ahead, we are confident that our two growing
divisions will continue to perform well. RM Education,
with a more focussed business and reduced cost-base,
will take further steps towards building a secure platform
for development.

The Group has a strong balance sheet, with cash and
short-term deposits at the year end of £47.9 million
(2013: £63.2 million). This was after payment of

John Poulter
Chairman
2 February 2015

Two of RM’s
three divisions
produced encouraging
organic growth and all
three showed further
improvements in annual
operating margins.

John Poulter
Chairman

Strategic
Report

RM’s objective is to create shareholder
value through the provision of
resources, software and services
to the education sector.

The strategies by which the Group pursues this objective are specific to the
businesses within the Group and are addressed in the Divisional Reviews
contained later in this report.

We understand the need to
balance customer success and
employee satisfaction with
long-term shareholder return.

David Brooks
Chief Executive Officer

16.00 pence per share was paid at the same time as the
final dividend in April 2014.

Defined Benefit Pension Scheme

The RM Defined Benefit Pension Scheme was closed to
new entrants in 2003. An agreement was reached with
the Trustees to close the Scheme to future accrual of
benefits from 31 October 2012. At 30 November 2014
the IAS 19R scheme deficit (pre-tax) was £26.8 million
(2013: £15.8 million). The principal reason for the
deterioration in the balance sheet position was an
increase in liabilities due to reduced corporate bond
yields which are used to determine the liability discount
rate. In addition, as explained below, an insurance
policy was purchased in the year with the price paid
being higher than the IAS 19R value of liabilities insured,
partially offset by better than assumed returns on Scheme
assets and the shortfall contributions paid by the Group.
The triennial valuation of the Scheme’s position at
31 May 2012 for statutory funding purposes showed a
Scheme deficit of £53.5 million. A deficit recovery plan
over 15 years was agreed with the Trustees for future
annual deficit recovery payments of £3.6 million, these
amounts being guaranteed by the Parent Company.
The Group also pays the Scheme’s expenses, including
the Pension Protection Fund levy.

An escrow account was established in the year to be
utilised for initiatives to reduce the risks related to
the Scheme. These funds are held jointly between
RM Education Ltd, the principal employer, and the
Trustee for the sole purpose of funding risk reduction or
risk management exercises for the Scheme. £8.0 million
was paid into this account in 2014 in addition to the
annual deficit recovery payments to the Scheme.
Total cash payments including expenses for the year were
£11.8 million (2013: £4.4 million).

In October 2014, £4.7 million of the funds in escrow were
paid to the Scheme to help fund a pension buy-in. The
transaction will produce an income stream to the Scheme
which closely matches payments to all 165 existing
pensioners. Such a buy-in largely eliminates the inflation,
interest rate and longevity risks associated with these
pension benefits. The transaction coverage represented
9% of the Scheme members and around 13% of the
total Scheme liability. The insurance premium payable
under the buy-in agreement was £30.7 million. The
insurance premium was funded by way of £26.0 million
of fixed income assets from the Scheme and £4.7 million
paid from the escrow account. This leaves £3.3 million
remaining in the escrow account to be used for future risk
reduction exercises.

Group Financial Performance

Group revenue declined by 22.6% to £202.5 million
(2013: £261.8 million).

To provide a better understanding of underlying business
performance, the Income Statement amortisation
charges relating to acquisition related intangible assets,
share-based payment charges and other non-cash
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 6.6% in 2013 to 9.1%. Adjusted operating profit
increased to £18.5 million (2013: £17.2 million). The Group
generated an unadjusted statutory profit before tax of
£15.8 million (2013: £9.4 million).

The total tax charge within the Income Statement for the
year was £4.2 million (2013: £3.3 million). The Group’s
tax charge for the period, measured as a percentage of
profit before tax, was 26% (2013: 35%). This decrease
is principally due to the reduction in the UK corporate
tax rate and a significant prior year adjustment in 2013,
offset by a lower proportion of ‘Adjustments’ to operating
profit being non-tax deductible. Adjusted basic earnings
per share were 16.4p (2013: 12.6p). Statutory basic
earnings per share were 13.9 pence (2013: 6.7 pence)
and statutory diluted earnings per share were 13.0 pence
(2013: 6.6 pence).

RM delivered another year of good cash generation
with cash generated from operations for the year of
£19.1 million (2013: £34.7 million). Cash and short-term
deposits decreased to £47.9 million (2013: £63.2 million)
principally due to the payment in the year of a
£14.7 million special dividend and the payment of
£8.0 million into a pension escrow account described
in more detail below. The lowest cash position during
the year due to seasonal cash flows was £25.9 million
(2013: £33.0 million).

Cash generated from operations is expected to be
less than operating profit in coming years, reflecting
the reversal of a favourable working capital position
related to long-term contracts and utilisation of
property-related provisions.

Dividends

The total dividend paid and proposed for the year
has been increased by 21% to 4.00 pence per share
(2013: 3.30 pence excluding the 16.00p special
dividend). This comprises an already paid interim
dividend of 0.96 pence per share and, subject to
shareholder approval, a proposed final dividend of
3.04 pence per share. The estimated total cost of normal
dividends paid and proposed for 2014 is £3.2 million
(2013: £3.0 million). In addition, a special dividend of

Divisional Review

TTS UK Distributors

The Group is structured in three operating divisions,
each with its own managing director and management
team. Some staff functions are provided centrally.
Approximately 28% of Group headcount is based in India,
providing support services and software development to
the operating divisions.

RM Resources
The RM Resources division, formerly known as Education
Resources, comprises two operating businesses: TTS
and SpaceKraft.

TTS provides resources used in schools mainly through
a 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 the UK schools, early years and
Special Educational Needs markets via direct catalogue
and online sales and marketing channels as well as
through selective supply of products to UK trade and
international schools and distributors.

Divisional revenue increased by 16% to £62.8 million
(2013: £54.0 million) in a flat UK market, with strong
UK market share gains and an 18% increase in
international revenues.

Divisional adjusted operating margins increased to 16.4%
compared with 13.3% in the prior year reflecting the
benefits of growth and the realisation of efficiency gains
from systems investments made in prior years. Adjusted
operating profit was £10.3 million (2013: £7.2 million).

Further investment is being made in direct marketing
across online and traditional channels and in export
business development to support continued growth.

TTS UK Direct Marketing

Revenue from TTS UK direct marketing increased by 19%
to £46.2 million (2013: £38.8 million) with a particularly
strong performance from products targeted at the new
English primary school curriculum. The proportion of
sales through online channels showed further increases
in the year.

TTS International

Revenue from international sales to overseas resellers and
to international schools increased by 20% to £8.5 million
(2013: £7.0 million). This was driven by growth in Europe,
the Middle East and the Americas.

Revenue from sales to UK trade partners decreased by 7%
to £4.4 million.

SpaceKraft

SpaceKraft supplies products and installation services
for the Special Educational Needs market. Products are
a mix of own-brand manufactured items and third party
sourced. Sales of installations are made direct with other
products supplied through catalogues and online.

Under the leadership of a new management team
appointed at the end of 2013, the recent declining
trend in revenue was reversed with growth of 11% to
£3.7 million (2013: £3.4 million). The business is no
longer loss-making.

RM Results
The RM Results business, formerly known as Assessment
and Data Services, provides onscreen exam marking
(e-marking), onscreen testing (e-assessment) and the
management and analysis of educational data. Its
customers include government ministries, exam boards
and professional awarding bodies around the world,
improving the efficiency, accuracy and clarity of the
assessment cycle.

The strategy in the assessment side of the business is
to expand the scope of services 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 anticipated to evolve
through partnerships and software licensing rather than
as a service-based activity.

Revenue increased by 5% to £27.8 million (2013:
£26.5 million). Adjusted operating margins increased
further to 16.7% (2013: 16.1%). Adjusted operating profit
was £4.6 million (2013: £4.3 million).

The business was successful in securing a contract with
the Caribbean Examinations Council, a new e-marking
customer. The summer 2014 e-marking pilot with the
education charity AQA was completed successfully. RM
Results has subsequently been appointed as one of two
preferred suppliers for long-term e-marking contracts.

Internationally, the business is pursuing opportunities
for the onscreen marking of paper-based exams. In the
UK, examination and curricula changes introduced by
the English Department for Education have reduced
the number of exam retakes, while a move away from
modular courses to final exam-based assessment will
also impact the business in the medium term. There is a
long-term trend from paper-based to onscreen testing,

though the adoption of such systems for school-based
examinations is low.

The educational data side of the business is dependent
on one public sector customer, the Department for
Education. The National Pupil Database and RAISE Online
contracts, which include the capture and publishing of
data for the school performance tables in England, were
extended during the year following the agreement to stop
work on the School Performance Data Programme.

RM Education
Formerly known as Education Technology, RM Education
is a UK-focussed business supplying IT software and
services to schools and colleges. The sale of personal
computing devices ceased from December 2013 and
manufacturing of hardware devices ceased in June 2014.

The divisional strategy, under a new managing director
who was appointed in May 2014, is to continue to
develop and encourage adoption of its portfolio of
software products and services through new and existing
propositions which meet the needs of UK schools.

Market trends affecting the business include the demand
from schools for solutions which are low-cost 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 required a change in the way the division
engages with its market and the review has resulted in an
increased focus on the top c.2,000 customers.

As anticipated, continued funding pressures in the
UK education sector and the change of strategy away
from selling hardware devices led to overall revenue in
RM Education declining by 38% to £111.9 million (2013:
£181.2 million). However, adjusted operating profit
margins increased again this year from 5.2% to 6.9%. Staff
cost reductions were implemented ahead of plan over the
year and write downs in the value of remaining inventory
have been significantly less than originally expected. The
hardware devices business delivered higher revenue with
lower costs than planned but this level of contribution will
not be repeated in future. In addition, the Defined Benefit
Pension Scheme was closed to future accrual of benefit in
October 2012 and the costs relating to the Defined Benefit
Pension Scheme (£1.3 million in 2014 and £0.9 million in
2013) are no longer allocated to individual divisions but
are shown as unallocated costs. Adjusted operating profit
was £7.7 million (2013: £9.4 million).

The performance of the four retained product groups and
the personal computing hardware business, which has
been exited, are reviewed below.

Services

These include implementation, management and
support of IT infrastructure within schools and colleges,
including Building Schools for the Future (BSF) contracts.
As anticipated, revenues in 2014 again declined with
a reduction in new school openings under the BSF
programme. Services revenues decreased by 29% to £61.2
million (2013: £85.7 million).

Many services are subject to long-term project accounting
policies and revenues and profits were positively affected
by good operational performance and cost control in
completing BSF contracts.

Priority areas of focus are on retention of existing
customers at the end of current contracts and on winning
individual school sites.

Digital Platforms and Content

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 Books and RM Unify. Digital Platforms and
Content revenues increased by 4% to £7.6 million.

Revenue from RM Integris increased following good
market share gains including Oxfordshire, won in 2013.
The strategy is to increase RM’s market share in a market
dominated by a large competitor and with low levels of
switching between suppliers. RM Integris is a cloud-based
Software as a Service offering with annual licences.

RM Unify is a product launched by RM in 2013 as a
technology solution to allow customers easy access
to the varied digital, cloud-based, educational specific
content and materials that are now available. RM Unify
incorporates a cloud-based ‘launchpad’ and ‘application
store’ enabling schools to procure and access a wide
variety of digital content in a secure, single sign-on
environment. Revenue is derived from annual school
subscriptions and from fees from sales of third party
applications. The division’s strategy is generally not to
develop its own curriculum software but to provide the
best of what is available from third parties via RM Unify.

RM Books provides the first e-book solution designed
for UK schools. The majority of leading UK textbook
publishers are now participating, with approximately
16,000 titles currently available. The service is free to
schools with RM taking a share of revenue from content
sold through the system. The market penetration of
e-books in consumer markets has increased dramatically
in recent years but e-book adoption in schools is slow
and revenue is still limited. The current focus is on
demonstrating the educational value added.

0808

Priority areas of focus are on winning new RM Integris
customers and on embedding and expanding system
usage amongst existing RM Unify customers.

Network Solutions

Network Solutions includes sales of RM’s Community
Connect and Ranger network management tools and
related provision of hardware such as routers and wireless
systems. Existing products are typically sold as perpetual
licences with annual maintenance contracts. Revenues
decreased by 45% to £8.6 million (2013: £15.7 million) as
demand for established products reduced year on year
with reduced school capital budgets.

Sales of RM Neon, a new generation of network and
device monitoring tools launched in the year, have
been disappointing.

The focus is on ensuring that existing customers
are on the latest version of our software and on
developing enhanced propositions which meet
users’ evolving requirements.

Internet

RM is a broadband and e-safety service provider to
approximately 5,000 schools. RM designs and manages
networks, procuring and integrating bandwidth and
e-safety products from third parties. Competitors include
regional educational aggregators and some of the large
telecom providers who sell to schools directly. The
devolution of purchasing decisions to individual schools
is reducing the likelihood of local authorities procuring
services centrally on their behalf.

This business is dominated by one large regional
consortium which accounts for a large share of its
revenue. This relationship is underpinned by a contract
which runs until 2018 though volumes are variable.

Revenues decreased by 14% to £16.7 million
(2013: £19.3 million) reflecting the end of some regional
consortium contracts and the movement from private to
public networks.

The business’ broadband connectivity and e-safety
propositions were streamlined and simplified during the
year. The priority now is on growing customer numbers.

Personal Computing Hardware

Revenue derived from hardware (RM-branded and third
party computing products, together with maintenance
and warranty and other third party classroom equipment)
decreased by 67% to £17.8 million (2013: £53.1 million)
with RM’s exit of the personal computing devices business
over the course of FY14.

Revenue was significantly higher than planned and the
costs of exit, including obsolescent inventory, were much
lower than expected. These benefits will not
recur in future years.

Third party partners Misco and Kelway have been
appointed to provide hardware devices to customers,
where still required under existing contracts and bundled
procurement processes, and to manage existing warranty
and maintenance obligations respectively.

RM India
As at 30 November 2014, RM’s operation in Trivandrum
accounted for 28% of Group headcount (2013: 25%).

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.

Employees

Average Group headcount for the year was 1,870
(2013: 2,148). At 30 November 2014 headcount was 1,778,
a 12% reduction from 2,018 at 30 November 2013. The
November 2014 headcount comprises 1,568 permanent
and 210 temporary or contract staff, of which 1,274 were
located in the UK and 504 in India.

The following table sets out a more detailed summary of
the permanent staff employed as at 30 November 2014:

Male

Female

Directors

2 (100%)

0 (0%)

Senior Managers
(excluding Directors)

45 (80%)

11 (20%)

All employees

1,037 (66%)

531 (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’, anti-bribery and corruption,
business gifts, grievance, career planning, parental leave,
systems and network security. All of RM’s employment
policies are published internally.

Going Concern

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.

Environmental Matters

The Group’s impact on the environment, and its
policy in relation to such matters, are noted in the
Directors’ Report.

1010

Principal Risks and Uncertainties

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 and appropriate processes put in place to monitor and mitigate them. 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.

UK government funding in the education
sector is constrained by fiscal policy.

Global economic conditions might result
in a reduction in budgets available for
public spending generally and education
spending specifically.

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 understand the education
policy environment by regular monitoring of
policy positions and by building relationships
with education policy makers.

The Group’s three divisions have
diverse revenue streams and
product/service offerings.

The Group’s strategy is to focus on areas
of education spend which are important
to meet customers’ objectives. Where
individual business’ revenues are in decline,
management seek to ensure that the cost
base supporting these is adjusted accordingly.

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 of
technical expertise to develop and support,
and on which its customers place a high level
of reliance.

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.

The Group invests in maintaining a high level
of technical expertise.

Internal management control processes are
in place to govern the delivery of projects,
including regular reviews by 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 would be significantly impacted
if, as a result of a disaster, one of its
major buildings, systems or infrastructure
components could not function for a long
period of time.

People

RM’s business depends on
highly-skilled employees.

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, information and
hosting services.

The Group has established an Information
Security Committee to oversee the security
aspects of the Group’s information systems.
This covers data integrity and protection,
defence against external threats and
disaster recovery.

The Group seeks to protect itself against the
consequences of a disaster by implementing a
series of back-up and safety measures.

The Group has property and business
interruption insurance cover.

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.

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 and services and sales methods
up-to-date as well as seeking out new
opportunities and initiatives.

Dependence on
key contracts

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 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 works with teachers and
educators to understand opportunities
and requirements.

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.

1212

Risk

Pension

Description

Mitigation

The Group operates a defined benefit pension
scheme in the UK, which is in deficit. The
scheme deficit can adversely impact the
net assets position of the trading subsidiary
RM Education Ltd.

The Scheme was closed to new entrants in
2003 and closed to future accrual of benefits
in October 2012.

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 a pensioner buy-in from an
insurance company.

The Group evaluates risk mitigation proposals
with the Scheme trustee.

Financial –
foreign exchange

The Group is exposed to foreign currency
risk with respect to purchases of goods in US
Dollars and from its operations in India.

The Group enters into US Dollar and Indian
Rupee denominated hedging contracts with
approved banking organisations.

The Group is exposed to counterparty risk on
liquid assets.

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.

Limits are placed on the level of deposit with
any one counterparty. Bank selection takes
into account credit ratings.

The Group monitors the level of distributable
reserves in subsidiary companies and
considers their ability to make dividend
payments to the holding company.

Financial –
liquidity

Financial –
capital

David Brooks
Director
2 February 2015

Directors’
Biographies

John Poulter
Chairman (a) (r) (n)

Iain McIntosh
Chief Financial Officer

Iain McIntosh MA, FCA (51) joined RM on 30 November 2009
and was appointed to the Board as a Director on
1 April 2010. Before joining RM, he held equivalent
positions in listed and private equity backed IT and
service companies, most recently as CFO of FTSE 250
listed Axon Group plc. Mr McIntosh initially qualified as
a Chartered Accountant and then spent four years as a
management consultant with McKinsey & Co.

Patrick Martell
Independent Non-Executive Director (a) (r) (n)

Patrick Martell (51) joined the Board on 1 January 2014 as
a Non-Executive Director. 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.

Deena Mattar
Senior Independent Non-Executive Director (a) (r) (n)

Deena Mattar FCA (49) 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.

John Poulter (72) 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 Executive Chairman of 4imprint Group plc. He is
a former Chairman and former Chief Executive of Spectris
plc, a former Non-Executive Chairman of Filtronic plc and
a former Non-Executive Chairman of Hampson Industries
plc. He has also acted as Non-Executive Director to a
number of public and private companies including
FTSE 250 constituents BTP plc, RAC plc and Kidde plc.

Lord Andrew Adonis
Independent Non-Executive Director (a) (r) (n)

Lord Andrew Adonis (51) 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
also a Non-Executive Director of Dods (Group) plc and a
number of charitable organisations.

David Brooks
Chief Executive Officer

David Brooks (45) 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

(r) Remuneration Committee Member

(n) Nomination Committee Member

1414

Two of our three businesses
are growing and make up
two thirds of our profit.
Our RM Education business
is on the road to recovery.

David Brooks
Chief Executive Officer

Directors’
Report

The Directors submit their report together with the
audited consolidated and Company Financial Statements
for the year ended 30 November 2014.

The Corporate Governance Report is incorporated into
this report by reference.

Dividends
The total dividend paid and proposed for the year
has been increased by 21% to 4.00 pence per share
(2013: 3.30 pence). This comprises an interim dividend of
0.96 pence per share paid in September 2014 and, subject
to shareholder approval, a final dividend of 3.04 pence
per share.

Treasury and foreign exchange
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.

Environmental policy and reporting
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 2014.

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.

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).

Emissions by scope

Scope

Source

Country

Tonnes CO2℮

Absolute totals
Tonnes CO2℮

Tonnes CO2℮

Absolute totals
Tonnes CO2℮

Year ended 30 September 2014

Year ended 30 September 2013

Scope 1

Air travel

Van/car travel

Gas

Scope 2

Electricity and gas

India

Electricity and gas

India

Total

733

397

800

758

2,844

730

527

339

1,017

846

3,065

798

2,811

3,863

6,674

2,784

3,574

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

Scope 1

Scope 2

Total

Year ended
30 September 2014

Year ended
30 September 2013

1.49

1.91

3.40

1.34

1.84

3.18

Health and safety
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
management system:

•

Accident reduction

Raising health and safety awareness

Effective training

Risk reduction and management.

Political donations
Neither the Company nor any of its subsidiaries made any political donations or incurred any political expenditure
during the year.

Substantial shareholdings
On 31 January 2015 the Company had received notifications that the following parties were interested in accordance with DTR 5:

Shareholder

No. of
shares

Percentage of
Issued Share Capital
as at 31 January 2015

No. of shares
Direct

No. of shares
Indirect

Schroders Investment Management Ltd

15,071,278

18.24%

15,071,278

Aberforth Partners

Artemis Investment Management LLP

12,505,033

8,754,376

River and Mercantile Asset Management LLP

5,495,398

The Wellcome Trust Ltd

Majedie Asset Management Ltd

4,798,752

4,174,358

15.13%

10.59%

6.65%

5.81%

5.05%

12,505,033

5,740,463

3,013,913

5,495,398

4,798,752

4,174,358

The Takeovers Directive
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 2014, the RM plc Employee Share Trust owned 2,351,321 ordinary
shares in the Company (2.85% of the issued share capital); any voting or other similar decisions relating to those shares would
be taken by the Trustee, 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, 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.

Repurchase of own shares
At the Annual General Meeting held on 19 March 2014, members renewed the authority under section 701 of the Companies
Act 2006 to make market purchases on the London Stock Exchange of up to 8,182,601 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 25 March 2015.

Overseas branches
The Group has overseas branches in Italy and Singapore.

Directors
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
David Brooks
Iain McIntosh
Deena Mattar

Lord Andrew Adonis
Jo Connell (retired 19 March 2014)
Patrick Martell (appointed 1 January 2014)

Biographical details of the current Directors are given on page 14. 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.

1818

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.

Independent auditor and disclosure of
information to auditor
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 has 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.

Directors’ responsibilities statement
The Directors are responsible for preparing the Annual
Report, the Remuneration Report and the 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:

•

select suitable accounting policies and then apply
them consistently;

• make judgments and estimates that are reasonable

and prudent;

•

state whether applicable IFRSs as adopted by the
European Union have been followed, subject to any
material departures disclosed and explained in the
financial statements; and

prepare the financial statements on a going concern
basis unless it is inappropriate to presume that the
Group and the Company will continue in business.

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 this report confirm that, to the best of
their knowledge:

•

the Group Financial Statements, which have been
prepared in accordance with IFRSs, as adopted by the
EU, give a true, balanced and fair view of the assets,
liabilities, financial position and performance of the
Group; and

the information contained in pages 04 to 13 of
this Annual Report includes a true, balanced and fair
review of the development and performance of the
business and the position of the Group, together with
a description of the principal risks and uncertainties
that it faces.

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.

Annual General Meeting
The forthcoming Annual General Meeting will be held
on 25 March 2015 at 140 Eastern Avenue, Milton Park,
Milton, 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

Greg Davidson
Company Secretary
2 February 2015

Corporate
Governance
Report

Statement of compliance
The Group has applied the principles set out in the UK Corporate Governance Code 2010 and also the UK Corporate
Governance Code 2012 (together the “Codes”). The Company has complied with the Codes throughout the 12 month period
ended 30 November 2014.

Compliance with the UK Corporate Governance Codes 2010 and 2012

Code of Best Practice – Principles

RM Statement of compliance

DIRECTORS

The Role of the Board

Every company should be headed by an effective board,
which is collectively responsible for the success of
the company.

The Directors’ responsibilities are outlined in the
Directors’ Report. The Board meets regularly on a formal
basis plus additional ad hoc meetings as necessary.
Further details of the operation of the Board and the
structure of internal governance arrangements are
referred to below.

Division of responsibilities

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.

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

The Chairman is responsible for leadership of the board
and ensuring its effectiveness on all aspects of its role.

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.

Non-executive Directors

As part of their role as members of a unitary board,
non executive 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.

Code of Best Practice – Principles

RM Statement of compliance

EFFECTIVENESS

The composition of the Board

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.

Appointments to the Board

There should be a formal, rigorous and transparent
procedure for the appointment of new directors to
the board.

Commitment

All directors should be able to allocate sufficient
time to the company to discharge their
responsibilities effectively.

Development

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. An external search consultancy,
which had no other connection to the Company,
assisted with the appointment of Patrick Martell as
a Non-Executive Director (appointment effective
1 January 2014).

The Board ensures that on appointment and thereafter
all Directors have sufficient time to carry out their duties.

All directors should receive induction on joining the
board and should regularly update and refresh their
skills and knowledge.

All Non-Executive Directors receive an induction on
joining the Board. All Non-Executive Directors have
extensive experience and possess relevant skills and
knowledge to perform their duties.

Information and Support

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 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.

2222

Code of Best Practice – Principles

RM Statement of compliance

Evaluation

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 2014.

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 are appointed for specific terms subject to
annual re-election.

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 which is reviewed at least on
an annual basis by the Audit Committee and endorsed
by the Board.

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.

Re-election

All directors should be submitted for re-election
at regular intervals, subject to continued
satisfactory performance.

ACCOUNTABILITY

Financial and Business reporting

The board should present a fair, balanced and
understandable assessment of the company’s position
and prospects.

Risk Management and Internal Control

The board is responsible for determining the nature
and extent of the significant risks it is willing to take in
achieving its strategic objectives. The board should
maintain sound risk management and internal
control systems.

Audit Committee and Auditors

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.

Code of Best Practice – Principles

RM Statement of compliance

REMUNERATION

The Level and Components of Remuneration

Levels of remuneration should be sufficient to attract,
retain and motivate directors of the quality required
to run the company successfully, but a company
should avoid paying more than is necessary for this
purpose. A significant proportion of executive directors’
remuneration should be structured so as to link rewards
to corporate and individual performance.

Each of the Chief Executive Officer’s and Chief Financial
Officer’s remuneration consists of basic salary and a
variable annual bonus. Basic salaries are reviewed
annually in the light of individual performance and
market comparisons for similar jobs. Annual bonuses
may be paid as described in the Remuneration Report.

In addition there are long-term incentive schemes in
place as detailed in the Remuneration Report. These
long-term incentive schemes include the Performance
Share Plan and Share Option Plans.

During the period, neither the Chief Executive Officer
nor the Chief Financial Officer held any Non-Executive
positions with other companies.

Procedure

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. The Chief
Executive Officer and Chief Financial Officer may be
invited to attend the Committee’s meetings.

RELATIONS WITH SHAREHOLDERS

Dialogue with Shareholders

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.

Constructive use of the AGM

The board should use the AGM to communicate with
investors and to encourage their participation.

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.

All Directors make themselves available at the Annual
General Meeting to respond to any questions raised by
the investors in attendance.

2424

Board of Directors
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.

Board committees
There are four Board committees: Audit, Remuneration,
Nomination and Transactions; each of which, apart
from the Transactions Committee, comprises only 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 assessment 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 financial controls. 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.

During the period the Remuneration Committee was
chaired by Jo Connell (until 19 March 2014) and Patrick
Martell (from 19 March 2014) and comprised 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 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.

The Transactions Committee comprises the Chairman
plus any one independent Non-Executive Director
and any one Executive Director. The Transactions
Committee meets at such times as are required. The
Transactions Committee approves, enters into and
authorises the execution of all deeds and documents
and does everything that is necessary to give effect
to any ‘substantial transaction’ that has already been
approved in principle by the Board. The terms of
reference for the Transactions Committee are published
on www.rmplc.com.

Board attendance
Details of the number of meetings of the Board, including sub-committees 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

John Poulter

Lord Andrew Adonis

David Brooks

Jo Connell1

Iain McIntosh

Patrick Martell2

Deena Mattar

Notes:

1. Retired 19 March 2014.

2. Appointed 1 January 2014.

Executive Committee
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.

Relations with shareholders
In order to maintain dialogue with institutional shareholders the Executive Directors offer to meet with them following interim
and final results announcements, or as appropriate, with other Directors available to meet institutional shareholders on
request. Where practicable the Annual Report is sent to shareholders at least 20 working days before the Annual General
Meeting and each issue for consideration at the Annual General Meeting is proposed as a separate resolution. All Directors
generally attend the Annual General Meeting.

Social, ethical and environmental issues
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.

2626

The key features of the systems of internal financial
control include:

•

a financial planning process with an annual financial
plan approved by the Board. The plan is regularly
updated providing an updated forecast for the year

• monthly comparison of actual results against plan

• written procedures detailing operational and

financial internal control policies which are reviewed
on a regular basis

•

regular reporting to the Board on treasury and
legal matters

defined investment control guidelines
and procedures

periodic reviews by the Audit Committee of the
Group’s systems and procedures.

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.

On behalf of the Board, the Audit Committee has
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.

Internal control
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 Codes, 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 risks faced by
the Group are set out in the table on pages 11 to 13.
It is committed to mitigating risks arising wherever
possible and accepts that internal controls, applied
and monitored, are an essential tool in achieving
this objective.

The key elements of Group internal control, which have
been effective during 2014 and up to the date of approval
of these Financial Statements, are set out below:

•

the existence of a clear organisational structure with
defined lines of responsibility and delegation of
authority from the Board to its Executive Directors
and operating divisions

a procedure for the regular review of reporting
business issues and risks by operating divisions

regular review meetings with the
operating management

a planning and management reporting system
operated by each division and the Executive Directors

the establishment of prudent operating and
financial policies.

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 delay. However, systems of internal financial
control can provide only reasonable and not absolute
assurance against material misstatement or loss.

Audit
Committee
Report

The Audit Committee operates under terms of reference
approved by the Board, with the purposes of:

• monitoring the integrity of the Financial Statements

of the Company and the Group

•

reviewing the adequacy and effectiveness of
the Group’s internal financial controls and risk
management systems

reviewing the adequacy and security of the Group’s
arrangements for whistleblowing, the procedures
for detecting fraud and the systems and controls
for the prevention of bribery and the reporting
of non-compliance

• monitoring and reviewing the effectiveness of

the Group’s internal audit processes, the remit of
internal audit and its operations

•

considering and making recommendations on
matters relating to the appointment of the Company’s
external auditor, overseeing the relationship
with the Company’s external auditor (including
recommending remuneration levels and considering
non-audit services), assessing the auditor’s
independence and objectivity, reviewing the audit
plan and reviewing the findings of the audit
with the Company’s auditor.

Financial Statements
The Audit Committee reviewed the form and content
of the Annual Report and Financial Statements 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:

•

the methods used to account for significant or
unusual transactions where different approaches
are possible

• whether the Group has followed appropriate
accounting standards and made appropriate
estimates and judgements, taking into account the
views of the Company’s auditor

•

the consistency of, and any changes to, accounting
policies both on a year-on-year basis and across
the Group

the clarity of disclosure in the Company’s
financial reports.

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 Financial
Statements are based relate primarily to long-term
contract accounting and the related revenue recognition.
Long-term contracts represent a significant part of
the Group’s business and the accounting is inherently
judgemental. To determine the revenue to be recognised
it is necessary to assess how far a contract has progressed
and the value of goods and services delivered as a
proportion of the whole contract. 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:

•

the forecast costs to complete on contracts and the
margin to recognise or loss to be provided

contract variations and extensions and whether
they should be combined with existing contractual
arrangements and their impact on recognised
revenue and margin

evaluation of contract deliverables and
whether the delivery criteria have been met for
revenue recognition.

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 auditor 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 the misstatements that they
had found in the course of their work and no material
amounts remain unadjusted. 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 and
Financial Statements 2014 is fair, balanced and
understandable and provides the information necessary
for shareholders to assess the Group’s performance,
business model and strategy.

3030

Composition and qualifications
of the Audit Committee
During the period the Audit Committee comprised
Deena Mattar BSc (Econ), FCA (Chair), John Poulter,
Lord Andrew Adonis, Jo Connell (until 19 March 2014)
and Patrick Martell (from 1 January 2014), 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),
Ed Warwick MEng, FCA (Group Financial Controller) and
other management as appropriate are invited to attend
Audit Committee meetings.

Schedule of 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.

Appointment of external auditor
The Audit Committee recommended, and shareholders
approved at the Company’s Annual General Meeting on
19 March 2014, the appointment of KPMG LLP as Group
external auditor, with KPMG Audit plc not seeking re-
appointment after internal restructuring within KPMG.

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 the
current lead audit partner has been in place since 2011.

There are no contractual obligations restricting the
Group’s choice of external auditor.

Oversight of external audit
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.

Internal audit
The Audit Committee has approved the re-appointment
of RM’s Group Financial Controller, Ed Warwick MEng FCA
as Head of Internal Audit. For the purposes of this role, the
Group Financial Controller reports 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.

Policy on non-audit work
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
non-audit 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 auditor 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 auditor to the work. Fees
for total non-audit work in the period were 2.6% of the
annual audit fee.

Internal control

Control environment

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
Board for approval.

Anti-bribery
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.

Statement of risks
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.

Deena Mattar
Chair, Audit Committee
2 February 2015

Identification and evaluation of business risks
and control objectives

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.

Public reporting

The Audit Committee reviews and comments upon both
the Group’s Annual Report and Financial Statements and
interim results prepared by management.

Management information

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.

Main control procedures

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.

Monitoring

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 peer-to-peer review basis directed by a qualified
accountant who is independent of the business divisions.

‘Whistleblowing’ policy
The Group has adopted a formal ‘whistleblowing’ policy,
which allows staff to raise concerns about possible
improprieties. No concerns were raised during the year.

3232

Cash and short-term
deposits at the year end
were £47.9 million, after
payment of £14.7 million as a
special dividend and an extra
£8 million to the Defined
Benefit Pension Scheme.

John Poulter
Chairman

Remuneration
Report

Part A - Introduction
On behalf of the Board, I am pleased to present
the Remuneration Report for the year ended
30 November 2014.

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 proposed Remuneration Policy set out in
Part B will be put to a binding vote at the next

Annual General Meeting and the Implementation Report
in Part C will be put to an advisory vote.

1. The Remuneration Committee

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.

2. Membership of the Committee

The membership of the Remuneration Committee during
the year ended 30 November 2014 comprised Lord
Andrew Adonis, Jo Connell (until her retirement at the
Annual General Meeting on 19 March 2014), Patrick Martell
(from his appointment on 1 January 2014), Deena Mattar
and John Poulter, all of whom are independent
Non-Executive Directors. Jo Connell was Chair of the
Committee until her retirement, at which point Patrick
Martell became Chair of the Committee. 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-to-day running of the
business and have no personal conflicts of interest
which could materially interfere with the exercise of their
independent judgement.

3. Major decisions on Directors’ remuneration

During the year, the following key decisions were
considered by the Committee:

•

Agreement of the bonuses payable in respect of the
financial year ended 30 November 2013.

Approval of the Remuneration Report for the year
ended 30 November 2013.

The base salary for David Brooks, Chief Executive
Officer, was increased from £250,000 to £300,000, with
effect from 1 January 2014. As noted in last year’s
report, the remuneration of the Chief Executive Officer
was not increased on his appointment to the role of
Chief Executive Officer and it was agreed to defer that
decision until Mr Brooks’ performance in the role after
a period of time could be considered. The increase
noted above followed that performance review and
also a benchmarking exercise.

•

The grant of PSP awards to Executive Directors and
senior management in August 2014.

4. Proposed new Shareholding Policy

This year’s Remuneration Report follows a similar
structure to last year’s report. The key change is the
proposed introduction of a Shareholding Policy, further
details of which are set out below.

Part B – Remuneration Policy
1. General objectives

The Remuneration Committee is responsible for the
remuneration of the Directors and senior employees
across the Group.

RM’s Remuneration Policy is designed to attract, retain
and motivate Executive 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 focussed
on performance. These incentive arrangements enable
Executive Directors and senior employees to have the
opportunity to earn high 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 focussed 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 long-term
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.

2. Components of remuneration for Executive Directors

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:

Base salaries will be determined

None.

from the outcome of reviews.

No change to policy.

Up to 7% of base salary depending

None.

upon level of employee contribution.

No change to policy.

Private healthcare.

None.

No change to policy.

Permanent health insurance.

Life assurance. Car allowance.

Mobile phone allowance.

55% of base salary for on-target

Set by the Committee at the beginning

No change to policy.

performance, with a maximum figure

of each year to focus on alignment with

for over-performance of 110% of

shareholders’ interests.

base salary.

Purpose and link to strategy

Operation

Maximum Opportunity

Performance Metrics

Changes for 2013/14

Element

Fixed Pay

Base Salary

To attract and retain talent
by ensuring that salaries are
competitive in the market.

Pension
(see also
note 1 below)

To attract and retain talent by
ensuring that remuneration is
competitive in the market.

Reviewed annually, with changes usually taking effect from 1
January. Reviews take account of:

•

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).

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

Variable Pay

Annual Bonus

LTIPs

Notes:

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.

Provides an element of at risk
pay, which incentivises good
annual financial results.

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:

•

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).

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.

150% of base salary.

Set by the Committee at the date of grant

See proposed new

to align with shareholders’ interests over a

Shareholding Policy below.

period of not less than 3 years.

No other change to policy.

1. Group company RM Education Ltd operates a defined benefit pension scheme. This closed to new members in 2003 and,

in respect of current members, closed to future accruals on 31 October 2012. David Brooks, CEO, has past benefits accrued
as at 31 October 2012. His entitlements under that Scheme are calculated on the same basis as those of other members.
Since 1 November 2012, Mr Brooks has been a member of a defined contribution pension scheme.

3636

Element

Fixed Pay

Purpose and link to strategy

Operation

Maximum Opportunity

Performance Metrics

Changes for 2013/14

Base Salary

To attract and retain talent

Reviewed annually, with changes usually taking effect from 1

by ensuring that salaries are

January. Reviews take account of:

competitive in the market.

•

business performance and the wider economic and market

Base salaries will be determined
from the outcome of reviews.

None.

No change to policy.

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

To attract and retain talent by

Entitlement is the same as for other employees within the Group.

ensuring that remuneration is

Cash allowance alternative where individuals are subject to

note 1 below)

competitive in the market.

HMRC pension limits (subject to there being the same overall

Benefits

To attract and retain talent by

Entitlement is the same as for other employees within the

ensuring that remuneration is

Group. The range of benefits offered to employees is reviewed

competitive in the market.

periodically to ensure that offerings are in line with market

cost to the Group).

practice.

Variable Pay

Annual Bonus

Provides an element of at risk

Reviewed annually prior to the start of each financial year to

pay, which incentivises good

ensure targets support short-term and long-term business

annual financial results.

strategy. Targets are intended to:

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

Notes:

Incentivises Directors

to achieve returns for

Awards are granted to Executives and senior management

typically no more than once per year, with the vesting of awards

shareholders over a longer

being based on criteria designed to align with shareholder

time frame.

interests and encourage long-term performance.

•

Up to 7% of base salary depending
upon level of employee contribution.

None.

No change to policy.

Private healthcare.
Permanent health insurance.
Life assurance. Car allowance.
Mobile phone allowance.

None.

No change to policy.

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.

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.

See proposed new
Shareholding Policy below.
No other change to policy.

3. Shareholding 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:

1. Within five years of being appointed to the Board, Executive Directors are required to build up, and retain, ordinary shares

in the Company equivalent in value to at least 100% of their base annual salary.

2. Compliance with the Shareholding Policy will be measured as at 30 November each year, based on base salaries as at that date.

3. To comply with the Shareholding Policy, the value of Executive Directors’ shareholdings must exceed the relevant amount

on at least one of the following bases:
(a)
(b)

the prevailing share price as at 30 November each year (applied to the total number of shares held); or
the aggregate of (i) the price actually paid for shares (in the case of prior purchases) and (ii) the value of shares that
have vested through earlier share-based awards, based on the share price applicable on the date of vesting of each
such award.

4. Provided that Executive Directors hold the appropriate level of shares, they may sell shares (i) to realise their LTIP awards

or (ii) upon the exercise of share options. If income tax / national insurance becomes payable on the vesting of any awards,
Executive Directors may still be able to sell shares to satisfy the relevant liability to income tax / national insurance, even
where the appropriate level of shares is not held. In all cases, any such sale will be subject to the normal Listing Rules and
Disclosure and Transparency Rules’ requirements for directors’ dealings.

4. Illustration of Remuneration Policy

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 2014. 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 2014 was 93% of base salary for David Brooks and 92% of base salary for Iain McIntosh).

David Brooks – Chief Executive Officer

Iain McIntosh – Chief Financial Officer

£000

1200

1000

800

600

400

200

Minimum

On-target

Maximum

LTIPs

Variable Pay

Fixed

£000

1200

1000

800

600

400

200

Minimum

On-target

Maximum

LTIPs

Variable Pay

Fixed

Explanations:

Base

Benefits

Pension

Total

Base

Benefits

Pension

Total

Fixed
(£000)

On-target

300

332

On-target is assumed to be an annual
bonus equal to 55% of maximum and
an LTIP award of 25% of maximum

Fixed
(£000)

On-target

235

262

On-target is assumed to be an annual
bonus equal to 55% of maximum and
an LTIP award of 25% of maximum

Maximum •

Full pay-out of annual variable pay
i.e., 110% of base salary

Maximum •

Full pay-out of annual variable pay
i.e., 110% of base salary

• Maximum vesting of LTIP awards

3838

5. Comparison of Remuneration Policy

This policy sets out the remuneration structure applicable to Executive Directors of the Group. 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 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 business 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.

Whilst remuneration consultants have not been engaged during the period, regular benchmarking is undertaken against
comparable companies using salary reports and surveys of established remuneration consultants.

6. Directors’ service contracts and letters of appointment

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 2014 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 2016

Lord Andrew Adonis

1 October 2011

30 September 2017

1 July 2012

22 October 2009

Indefinite

1 June 2011

31 May 2017

1 January 2014

31 December 2016

6 months

3 months

12 months

3 months

6 months

David Brooks

Iain McIntosh

Deena Mattar

Patrick Martell

Past Directors

Jo Connell

20 December 2007

19 March 2014

6 months

Part C – Implementation Report
1. Directors’ Remuneration - Single figure of Remuneration

The tables below set out a single figure of remuneration for each of the Directors in respect of the year ended
30 November 2014 and, in respect of those Directors, the equivalent figures for the year ended 30 November 2013:

Year ended 30 November 2014

Salary
and fees
£000

Taxable
benefits
£000

Annual
bonus
£000

Retirement
Benefits
£000

LTIPs
£000

Total
£000

2961

2351

120

248

155

778

403

211

161

576

417

120

1,240

Salary
and fees
£000

Taxable
benefits
£000

Annual
bonus
£000

LTIPs
£000

Retirement
Benefits
£000

2501

2351

676

158

148

306

Total
£000

436

409

181

161

1,036

Name

Executive

David Brooks

Iain McIntosh

Non-Executive

John Poulter

Lord Andrew Adonis

Jo Connell
(retired 19 March 2014)

Patrick Martell
(appointed 1 January 2014)

Deena Mattar

Total

Year ended 30 November 2013

Name

Executive

David Brooks

Iain McIntosh

Non-Executive

John Poulter

Lord Andrew Adonis

Jo Connell
(retired 19 March 2014)

Patrick Martell
(appointed 1 January 2014)

Deena Mattar

Total

Notes:

1. The section below headed “Retirement Benefits” explains how those benefits have been calculated and presented in the

above tables. The figures for 2013 have been restated in accordance with those notes.

4040

The following provides details of how the ‘single figure’ has been calculated:

Taxable benefits

Annual bonus

LTIPs

Retirement benefits

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 Group adjusted
operating profit for the year. Whilst the specific target is not disclosed for reasons of
commercial sensitivity, the Committee took analyst forecasts into account when setting
targets for bonus payments. Adjusted operating profit for the year exceeded the targets set
and initial analyst forecasts for the year. Taking those targets into account the Committee
considered that a bonus of 83% of base salary was appropriate for David Brooks.

The Committee set similar targets for Iain McIntosh, as well as a further target based on a
reduction in the costs of central corporate overheads. All of those targets were achieved
in full, with Group adjusted operating profit having over-performed as noted above. Based on
those targets, the Committee considered that a bonus of 66% of base salary was appropriate
for Iain McIntosh.

None of the awards previously granted under the RM plc Performance Share Plan 2010
(the “PSP scheme”) were due to vest during the year. It is noted that the award granted
under the PSP scheme in December 2011 vested on 2 December 2014 and this will be included
in next year’s report.

An award to Iain McIntosh under the Group’s Deferred Bonus Plan vested in February 2014.
In respect of this award, £39,487 of Mr McIntosh’s bonus for the financial year ended
30 September 2010 was deferred into 25,151 shares. The value of these shares on vesting in
February 2014 was £32,633, indicating a loss of £6,854 over the period. As such, and in
accordance with section 8(3) of the Large and Medium-sized Companies and Groups
(Accounts and Reports) (Amendment) Regulations 2013, a figure of zero is included in the
above table.

David Brooks is a member 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 a member of the defined contribution pension scheme noted above for
part of the year. During the year, he ceased membership of that scheme and instead now
receives 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.

Note: There were no termination or exit payments made during the year.

2. Directors’ long-term incentive plans

During the year ended 30 November 2014, the following long-term incentive awards were made:

Type of
share
award

PSP1

Face value of
award
£000

Grant
date

4 August
2014

279 (93% of
base salary) 2

PSP1

4 August
2014

217 (92% of
base salary) 2

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

25%

n/a

3 August 2017

n/a

3 August 2017

A summary of
performance
targets and
measures

Relative TSR
performance3

Name

David
Brooks

Iain
McIntosh

Notes:

1. Awards granted under the RM plc Performance Share Plan 2010.

2. The face value of each award has been calculated by multiplying the maximum number of shares in the award
(180,000 shares for David Brooks and 140,000 shares for Iain McIntosh) by the share price on the date of grant of
the award (154.75 pence).

3. Targets are based on relative TSR compared with a comparator group of the companies in the FTSE Small Cap
(ex. Investment Trusts) Index. Threshold vesting is at median performance, maximum vesting at upper quartile
performance, with straight line vesting in between these points.

3. Performance graph

The following graph shows the value, by 30 November 2014, of £100 invested in RM plc on 30 November 2009 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.

Total shareholder return

£200

£150

£100

£50

2009

2010

2011

2012

2013

2014

RM plc

FTSE Small Cap Index
(ex. Investment Trusts)

4. Historical Chief Executive Officer Pay

The table below sets out details of:

•

the total pay for each of the persons who have performed the role of Chief Executive for the current year and the preceding
four financial years. The ‘single figure’ is calculated using the same methodology as that used for the “Single Figure of
Remuneration” table in paragraph 1 above

•

the pay-out of incentive awards as a proportion of the maximum opportunity for the period.

4242

Single Figure (£000)

Annual variable element
award rates against maximum
opportunity

Long-term incentive vesting rates
against maximum opportunity

Notes:

2010

517

56%

20111

426

20122

286

20133

379

58%4

2014

576

75%

40%

1. Terry Sweeney to 24 October 2011 (single figure: £369,000). Rob Sirs from 25 October 2011 to 30 November 2011

(single figure: £57,000).

2. Rob Sirs from 1 December 2011 to 31 January 2012 (single figure: £49,000). Martyn Ratcliffe from 1 February 2012 to

30 November 2012 (single figure: £237,000).

3. Martyn Ratcliffe from 1 December 2012 to 28 February 2013 (single figure: £52,000). David Brooks from 1 March 2013 (single
figure: £327,000). Figures from the single-figure table in paragraph 1 of this Part C have been pro-rated to reflect the period
during which Mr Ratcliffe and Mr Brooks respectively fulfilled the role of Chief Executive Officer.

4. Relates to David Brooks only. Martyn Ratcliffe had no annual variable remuneration.

5. Relative importance of spend on pay

The following table sets out, in respect of the year ended 30 November 2014 and the immediately preceding financial year, the
total remuneration paid to all employees as compared to other significant distributions and payments:

Total remuneration to employees

Total remuneration to Directors

Dividends paid

Corporation tax paid

Defined benefit pension cash contribution

2014
£m

69.1

1.2

17.7

2.5

11.8

2013
£m

87.2

1.1

2.8

1.8

4.4

6. Relative changes in pay – Chief Executive Officer and employees

The average increase in pay for permanent employees across the Group between the year ended 30 November 2013 and the
year ended 30 November 2014 was 4.4% (3.5% in the UK and 18.3% in India). In the year ended 30 November 2014, the base
salary for the Chief Executive Officer increased by 20%. As noted above, the remuneration of the Chief Executive Officer was
not increased on his appointment to the role of Chief Executive Officer and it was agreed to defer that decision until Mr Brooks’
performance in the role after a period of time could be considered. The increase noted above followed that performance
review and also a benchmarking exercise.

7. Statement of shareholder voting

Voting at the Annual General Meeting held on 19 March 2014 in respect of the Remuneration Report for the year ended
30 November 2013 was as follows:

Resolution to approve the remuneration report

Resolution to approve the Directors’ Remuneration Policy

97.85

96.24

2.14

719,768 (0.01%)

3.75

707,414 (0.01%)

% of votes in
favour

% of votes
against

Number of
votes withheld

8. Directors’ shareholdings

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 2014 were:

30 November 2014

30 November 20131

John Poulter

Lord Andrew Adonis

David Brooks

Iain McIntosh

Patrick Martell

Deena Mattar

Notes:

87,500

3,976

131,382

17,933

87,500

3,976

131,382

17,933

1. Shareholdings as at 30 November 2013 have been adjusted to reflect the share consolidation that took place on 20 March

2014, to give a more accurate comparison between the two years shown.

2. Following the vesting of the December 2011 PSP award on 2 December 2014, and the sale of sufficient shares from those
awards to satisfy the tax and national insurance liabilities arising on vesting, the shareholdings of David Brooks and
Iain McIntosh increased to 136,240 and 290,099 shares respectively. No other changes to the Directors’ shareholdings
took place between 1 December 2014 and the date of this Report. In accordance with section 17(b)(iii) of the Large and
Medium-sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013, the above table does not
include interests reported elsewhere in this Report.

9. Directors’ interests in share plans

As at 30 November 2014, the Executive Directors had the following interests in the Company’s share plans1:

Share Options2

PSP Awards3

David Brooks

Date of
Grant

6/12/06

28/11/07

No. of
Options

10,000

20,000

Exercise
Price

£1.742

£1.973

Iain McIntosh

None.

Date of Grant

No. of shares
/ options

Performance
Conditions

1/12/11

6/8/12

10/7/13

4/8/14

250,000

See note 4

250,000

See note 5

125,000

See note 5

180,000

See note 5

Date of Grant

No. of shares
/ options

Performance
Conditions

1/12/11

10/7/13

4/8/14

300,000

See note 4

125,000

See note 5

140,000

See note 5

Notes:

1. To avoid duplication, and in accordance with Section 17(b)(iii) of The Large and Medium-sized Companies and Groups
(Accounts and Reports) (Amendment) Regulations 2013, the figures in the above table do not include the shares or
share-based awards referred to in paragraph 1 (Directors’ Remuneration – Single Figure of Remuneration) or in the table in
paragraph 8 (Directors’ Shareholdings) above.

4444

The Group’s auditor is 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:

•

The “Single Figure of Remuneration” table in
paragraph 1.

Total pension entitlements, as described in the
notes to paragraph 1.

Scheme interests awarded during the year, as set
out in paragraph 2.

Directors’ shareholdings, as set out in paragraph 8.

Directors’ interests in share plans, as set out in
paragraph 9.

By Order of the Board

Patrick Martell
Chair, Remuneration Committee
2 February 2015

2. Granted under “The RM plc 2004 Inland Revenue
Approved Company Share Option Plan and The
RM plc 2004 Non-Inland Revenue Approved Company
Share Option Plan”. All Options lapse if not exercised
within 10 years of the date of grant. The Options
in the above table have vested and are no longer
subject to any performance conditions. Other Options
previously granted but which have lapsed due to the
performance conditions not having been met are
not included.

3. Granted under “The RM plc Performance Share Plan
2010”. All PSP awards are subject to a minimum
vesting period of 3 years.

4. This award vested in full on 2 December 2014. Please

see note 2 in paragraph 8 above.

5. Targets are based on relative TSR compared with
a comparator group of the companies in the FTSE
Small Cap (ex. Investment Trusts) Index. Threshold
vesting is at median performance, maximum vesting
at upper quartile performance, with straight line
vesting in between these points.

6. The PSP awards granted in 2011, 2012 and 2013
were all conditional share awards. The award
granted in August 2014 was an award of options,
with an exercise price of £0.00 per option. If these
options vest, they would be exercisable in the period
7 August 2017 to 2 August 2024.

10. Details of Directors’ Service Contracts

Relevant information relating to the Service Contracts
of the Directors is set out in Part B of this Report
(Remuneration Policy).

11. Remuneration Committee details

Details of the Remuneration Committee and
its membership are contained in Part A of this
Report (Introduction).

12. Compliance with Regulations

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.

Independent Auditor’s Report

to the members of RM plc only

Opinions and conclusions
arising from our audit
1. Our opinion on the financial statements
is unmodified

We have audited the financial statements of RM plc
for the year ended 30 November 2014 set out on
pages 49 to 95. In our opinion:

•

the financial statements give a true and fair view of
the state of the Group’s and of the parent company’s
affairs as at 30 November 2014 and of the Group’s
profit for the year then ended;

the Group financial statements have been properly
prepared in accordance with International Financial
Reporting Standards as adopted by the European
Union (IFRSs as adopted by the EU);

the parent company financial statements have
been properly prepared in accordance with IFRSs as
adopted by the EU and as applied in accordance with
the provisions of the Companies Act 2006; and

the financial statements have been prepared in
accordance with the requirements of the Companies
Act 2006 and, as regards the Group financial
statements, Article 4 of the IAS Regulation.

2. Our assessment of risks of material misstatement

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.

Long-term contracts (Revenue £69.6m;
Receivables £0.2m; Payables £31.3m)

Refer to page 30 (Audit Committee statement),
page 58 (accounting policy) and page 76
(financial disclosures).

•

The risk – Long-term contracts including Building
Schools for the Future implementation and
managed service contracts and e-marking software
and services contracts, represent a significant
part of the Group’s business and the accounting is
inherently judgemental. To determine the revenue
to be recognised it is necessary to assess how far a
contract has progressed. To decide the margin to be

recognised or loss to be provided, it is necessary to
estimate future costs, including contingent amounts
in respect of contract risks. 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.

• Our response – Our audit procedures included,

among others, making an assessment of the Group’s
ability to forecast costs. We assessed the knowledge
and skill of the Group’s project accounting staff by
attending two project review meetings at which the
progress of a number of contracts was discussed. We
assessed the range and seniority of those present,
the quality and relevance of documents prepared
for discussion, the size of the financial variances
for which explanations were sought and the extent
of relevant technical and commercial information
provided. Separately, we compared actual outturn to
previous forecast for a number of contracts.

• 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).
To evaluate whether revenue had been recognised
appropriately for the selected contracts, we read
the contract, determined the contract deliverables
and obtained evidence of whether significant
contract requirements had been met (for example,
by inspecting a customer sign off). 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 revenue and 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 long-term contract outcome.

3. Our application of materiality and an overview of
the scope of our audit

The materiality for the Group financial statements as a
whole was set at £1.1 million determined with reference to
a benchmark of Group profit before taxation, normalised
to exclude this year’s restructuring charge, the gain
on sale of operations and the increase 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 7%.
We consider the adjusted Group profit before taxation to
be one of the principal considerations for members of
the Company in assessing the financial performance of
the Group.

We report to the Audit Committee any corrected or
uncorrected identified misstatements exceeding £55,000,
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; 99% of the total profits and losses
that made up Group profit before tax; and 99% of
total Group assets.

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 £0.75 million to £1 million, having regard to the
mix of size and risk profile of the Group across the
components. The work on three 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.

4. Our opinion on other matters prescribed by the
Companies Act 2006 is unmodified

In our opinion:

•

the part of the Directors’ Remuneration Report to be
audited has been properly prepared in accordance
with the Companies Act 2006; and

the information given in the Strategic Report and
Directors’ Report for the financial year for which the
financial statements are prepared is consistent with
the financial statements.

5. We have nothing to report in respect of the
matters on which we are required to report
by exception

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:

• we have identified material inconsistencies between
the knowledge we acquired during our audit and
the Directors’ statement that they consider that the
annual report and financial statements taken as
a whole is fair, balanced and understandable and
provides the information necessary for shareholders
to assess the Group’s performance, business model
and strategy; or

•

the section of the annual report describing the work
of the Audit Committee does not appropriately
address matters communicated by us to the Audit
Committee.

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

the parent company financial statements and the
part of the Directors’ Remuneration Report to be
audited are not in agreement with the accounting
records and returns; or

certain disclosures of Directors’ remuneration
specified by law are not made; or

4747

• we have not received all the information and

explanations we require for our audit.

Under the Listing Rules we are required to review:

•

the Directors’ statement, set out on page 10, in
relation to going concern; and

the part of the Corporate Governance Statement
on pages 21 to 24 relating to the Company’s
compliance with the nine provisions of the 2010 UK
Corporate Governance Code specified for our review.

We have nothing to report in respect of the
above responsibilities.

Scope and responsibilities

As explained more fully in the Directors’ Responsibilities
Statement set out on page 19, 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.

Tudor Aw (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor

Chartered Accountants
Arlington Business Park, Theale,
Reading, RG7 4SD

2 February 2015

4848

Consolidated Income Statement

Year ended 30 November 2014

Year ended 30 November 2013

Adjusted

Adjustments

Note

£000

Total

£000

Adjusted

Adjustments

£000

202,544

(126,974)

75,570

(57,044)

202,544

261,759

(126,974)

(187,793)

75,570

73,966

(57,044)

(56,757)

Total

£000

261,759

(187,793)

73,966

(56,757)

Revenue

Cost of sales

Gross profit

Operating expenses

Amortisation of acquisition
related intangible assets

Impairment of goodwill

Gain on sale of operations

Share-based payment charges

Increase in provisions for
onerous lease contracts

Restructuring costs

Exceptional credit on settlement

Profit from operations

Investment income

Finance costs

Profit before tax

Tax

(303)

429

(932)

429

(932)

(774)

(472)

(195)

(328)

1,387

(507)

(328)

1,387

(507)

(2,627)

(5,128)

543

(57,044)

(2,052)

(59,096)

(56,757)

(6,855)

(63,612)

18,526

(2,052)

16,474

17,209

(6,855)

10,354

476

(924)

476

730

(269)

(1,193)

(1,490)

(159)

(1,649)

18,078

(2,321)

15,757

16,449

(7,014)

9,435

(4,359)

201

(4,158)

(4,910)

1,643

(3,267)

Profit for the year

13,719

(2,120)

11,599

11,539

(5,371)

6,168

Earnings per ordinary share

- basic

- diluted

16.4p

15.4p

(2.5)p

(2.4)p

13.9p

13.0p

12.6p

12.4p

(5.9)p

(5.8)p

6.7p

6.6p

Paid and proposed
dividends per share

- interim

- final

- special

0.96p

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.

0.84p

2.46p

16.00p

Consolidated Statement of
Comprehensive Income

Year ended
30 November 2014

Year ended
30 November 2013

Note

Profit for the year

Items that will not be reclassified
subsequently to profit or loss

Defined Benefit Pension Scheme remeasurements

Tax on items that will not be reclassified subsequently to
profit or loss

Items that are or may be reclassified
subsequently to profit or loss

Fair value gain/(loss) on hedged instruments

Exchange gain/(loss) on translation of overseas operations

Tax on items that are or may be reclassified subsequently
to profit or loss

Other comprehensive expense

Total comprehensive (expense)/income for the year
attributable to equity holders

£000

11,599

(21,892)

4,378

1,018

657

(15,758)

(4,159)

£000

6,168

1,442

(799)

(435)

(329)

(48)

6,120

Consolidated Statement of
Changes in Equity

redemption

Hedging

Translation

Retained

capital

premium

Own shares

reserve

earnings

Note

£000

Total
£000

Capital

At 1 December 2012

1,870

26,997

(2,972)

Profit for the year

Other comprehensive
income/(expense)

Total comprehensive
income

Transactions with
owners of the
Company

Share-based
payment fair
value charges

Dividends paid

(39)

(56)

(662)

25,232

6,168

(435)

(329)

716

(48)

(435)

(329)

6,884

6,120

507

(2,834)

At 30 November 2013

1,870

26,997

(2,972)

(474)

(385)

3,895

29,025

Profit for the year

Other comprehensive
income/(expense)

Total comprehensive
income/(expense)

Transactions with
owners of the
Company

Shares issued

(18)

Share-based
payment awards
exercised

Share-based
payment fair
value charges

Dividends paid

11,599

1,018

(16,857)

(15,758)

1,018

(5,258)

(4,159)

(40)

932

(17,706)

At 30 November 2014

1,889

27,018

(2,950)

544

(304)

(18,177)

8,114

Consolidated Balance Sheet

At 30 November 2014

At 30 November 2013

Note

12
13
13
14
18
9

16
18

20
21
23

Non-current assets

Goodwill
Acquisition related intangible assets
Other intangible assets
Property, plant and equipment
Other receivables
Deferred tax assets

Current assets
Inventories
Trade and other receivables
Tax assets
Cash and short-term deposits

Total assets
Current liabilities

Trade and other payables
Tax liabilities
Provisions

Net current assets
Non-current liabilities

Other payables
Provisions
Defined Benefit Pension Scheme obligation

Total liabilities
Net assets
Equity attributable to shareholders

Share capital
Share premium account
Own shares
Capital redemption reserve
Hedging reserve
Translation reserve
Retained earnings - (deficit)/earnings

Total equity

£000

14,067
461
537
8,040
1,878
8,147
33,130

10,604
32,928
821
47,893
92,246
125,376

(79,085)
(600)
(3,660)
(83,345)
8,901

(1,657)
(5,507)
(26,753)
(33,917)
(117,262)
8,114

1,889
27,018
(2,950)
94
544
(304)
(18,177)
8,114

£000

14,067
764
1,026
9,099
1,911
4,622
31,489

10,549
35,134
340
63,169
109,192
140,681

(78,917)
-
(7,201)
(86,118)
23,074

(3,455)
(6,255)
(15,828)
(25,538)
(111,656)
29,025

1,870
26,997
(2,972)
94
(474)
(385)
3,895
29,025

These Financial Statements of RM plc, registered number 01749877, were approved and authorised for issue by the
Board of Directors on 2 February 2015.

On behalf of the Board of Directors,

David Brooks
Director

Iain McIntosh
Director

Consolidated Cash Flow Statement

Year ended
30 November 2014

Year ended
30 November 2013

Profit before tax
Investment income
Finance costs
Profit from operations
Adjustments for:

Impairment of goodwill
Amortisation of acquisition related intangible assets
Amortisation of other intangible assets
Depreciation and impairment of property, plant and equipment
Gain on sale of operations
Loss on disposals of other intangible assets
Gain on disposals of property, plant and equipment
(Gain)/loss on foreign exchange derivatives
Share-based payment charge
Increase in provisions
Defined Benefit Pension Scheme administration cost

Operating cash flows before movements in working capital
(Increase)/decrease in inventories
Decrease in receivables
Decrease in payables:

- decrease in trade and other payables
- decrease in onerous lease and dilapidations provisions
- decrease in employee-related restructuring provisions
- decrease in other provisions
Cash generated from operations
Defined benefit pension Scheme cash contributions
- deficit catch-up payments and Scheme expenses
- pension escrow account

Tax paid
Borrowing facilities arrangement and commitment fees
Interest paid
Income on sale of finance lease debt
Net cash inflow from operating activities
Investing activities
Interest received
Repayment of loans by third parties
Proceeds of sale of operations
Proceeds on disposal of property, plant and equipment
Purchases of property, plant and equipment
Purchases of other intangible assets
Increase in short-term deposits

Net cash used in investing activities
Financing activities

Dividends paid
Special dividend paid
(Repayment of)/net proceeds from vehicle finance leases
Proceeds of share capital issue, net of share issue costs

Net cash used in financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effect of foreign exchange rate changes
Cash and cash equivalents at the end of the year

Note

12
13
13
14

21
21
21

14
13
19

11
11

£000

15,757
(476)
1,193
16,474

-
303
417
3,415
(429)
73
(398)
(83)
932
1,339
475
22,518
(55)
2,792

(708)
(836)
(4,348)
(289)
19,074

(3,821)
(8,000)
(2,527)
(353)
-
55
4,428

403
33
-
661
(2,597)
(1)
-
(1,501)

(3,028)
(14,678)
(530)
22
(18,214)
(15,287)
57,169
11
41,893

£000

9,435
(730)
1,649
10,354

328
195
582
3,919
(1,387)
736
(118)
75
507
7,777
391
23,359
4,238
20,383

(10,779)
(1,331)
(1,155)
(52)
34,663

(4,384)
-
(1,790)
(451)
(20)
289
28,307

441
-
336
420
(1,980)
(68)
(6,000)
(6,851)

(2,834)
-
771
-
(2,063)
19,393
37,823
(47)
57,169

Company Statement of
Changes in Equity

Capital

redemption

Retained

capital

premium

Own shares

reserve

earnings

Note

£000

Total
£000

1,870

26,997

(2,972)

27,105

53,094

6,117

507

(2,834)

1,870

26,997

(2,972)

30,895

56,884

(18)

6,281

(40)

932

(17,706)

At 1 December 2012

Profit for the year

Total comprehensive income

Transactions with owners of the Company

Share-based payment fair value charges

Dividends paid

At 30 November 2013

Profit for the year

Total comprehensive income

Transactions with owners of the Company

Shares issued

Share-based payment awards exercised

Share-based payment fair value charges

Dividends paid

At 30 November 2014

1,889

27,018

(2,950)

20,362

46,413

As permitted by section 408 of the Companies Act 2006, no separate income statement is presented for the parent company,
RM plc.

Company Balance Sheet

At 30 November 2014

At 30 November 2013

Non-current assets

Investments

Other receivables

Current assets

Trade and other receivables

Tax assets

Total assets

Current liabilities

Amounts owed to Group undertakings

Net current (liabilities)/assets

Non-current liabilities

Provisions

Total liabilities

Net assets

Equity attributable to equity holders

Share capital

Share premium account

Own shares

Capital redemption reserve

Retained earnings

Total equity

Note

£000

64,255

1,628

65,883

14,372

14,425

80,308

(29,002)

(14,577)

(4,893)

(33,895)

46,413

1,889

27,018

(2,950)

20,362

46,413

These Financial Statements of RM plc, registered number 01749877, were approved and authorised for issue by the
Board of Directors on 2 February 2015.

On behalf of the Board of Directors,

David Brooks
Director

Iain McIntosh
Director

£000

55,548

1,661

57,209

104

57,313

104

(429)

56,884

1,870

26,997

(2,972)

30,895

56,884

Company Cash Flow Statement

Year ended
30 November 2014

Year ended
30 November 2013

Note

Profit before tax

Investment income

Finance costs

Loss from operations

Adjustments for:

Impairment of investment in subsidiary

Profit on disposal of investments

Increase/(decrease) in provisions

Operating cash flows before movements in working capital

Increase in receivables

Increase/(decrease) in payables

Cash generated from/(used in) operations

Dividends received

Net cash generated from operating activities

Investing activities

Increase in investments

Repayment of loans by third parties

Interest received

Net cash (used in)/generated from investing activities

Financing activities

Dividends paid

Special dividend paid

Proceeds from share capital issue, net of share issue costs

Proceeds from disposal of investments

Net cash used in financing activities

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

£000

6,228

(8,520)

304

(1,988)

4,464

2,476

(7,825)

22,602

17,253

8,000

25,253

(7,775)

173

(7,569)

(3,028)

(14,678)

(17,684)

£000

6,117

(6,576)

(426)

555

(77)

(200)

(148)

(10)

(3,686)

(3,844)

6,200

2,356

343

(2,834)

135

(2,699)

Notes to the Financial Statements

1. General information
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.

Consolidated Income Statement presentation

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; the impairment of goodwill; the gain/
loss on sale of operations; share-based payment charges;
restructuring costs; changes in the provision for onerous
lease contracts; and exceptional credit on settlement. The
columns extend down the Income Statement to allow the
tax and earnings per share impacts of these transactions
to be disclosed. Equivalent material adjustments to
profit arising in future years, including increases in
or reversals of items recorded, will be disclosed in a
consistent manner.

2. Significant accounting policies
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.

Basis of preparation

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.

Consolidation

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.

Investment in subsidiaries

In the Company Financial Statements, investments in
subsidiaries are stated at cost less any provision for
impairment where appropriate.

Business combinations

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

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.

Long-term contracts

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 and
related linkage with IAS 11 Construction Contracts.

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

5858

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 recognised as an asset
and accounted for as long-term contract costs.

Intangible assets

All intangible assets, except goodwill, are stated at cost
less accumulated amortisation and any accumulated
impairment losses.

Goodwill

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. For business combinations occurring before 1
October 2004, the Group’s transition date to IFRS, the cost
of goodwill is deemed to be the UK GAAP net book value
at this date.

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

Property, plant and equipment

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 technical feasibility of completing the intangible
asset so that it will be available for use or sale; and

b. an intention to complete the intangible asset and use

or sell it; and

c. ability to use or sell the intangible asset; and

d. how the intangible asset will generate probable future
economic benefits. Among other things, the Group
can demonstrate the existence of a market for the
output of the intangible asset or the intangible asset
itself or, if it is to be used internally, the usefulness of
the intangible asset; and

the availability of adequate technical, financial and
other resources to complete the development and to
use or sell the intangible asset; and

an ability to measure reliably the expenditure
attributable to the intangible asset during
its development.

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.

Other intangible assets

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, 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

Computer equipment

Vehicles

3 - 10 years

2 - 5 years

2 - 4 years

Impairment of tangible and intangible assets
excluding goodwill

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.

Financial instruments

Trade receivables

Trade receivables are not interest bearing and are stated
at their original invoiced value reduced by appropriate
allowances for estimated irrecoverable amounts.

Cash and short-term deposits

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 and other payables

Trade payables on normal terms are not interest bearing
and are stated at original invoiced amount.

Derivative financial instruments

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.

Cash flow hedges

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.

Other non-trading derivatives

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.

Inventories

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.

Provisions

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.

6060

Restructuring

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.

Onerous contracts

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.

Dilapidations provision

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.

Leases

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.

Share-based payments

The Group operates a number of executive and employee
share schemes. For all grants of share-based 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.

Employee benefits

The Group has both defined benefit and defined
contribution pension schemes. For the Defined Benefit
Pension 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.

Employee Share Trust

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.

Taxation

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.

Strategic Report and give rise to the following estimations
and judgements which are disclosed within the relevant
note to the Annual Report and Financial Statements:

•

Long-term contract outcome – see note 17

Defined Benefit Pension Scheme valuation – see note 23

• Onerous lease provision – see note 21

•

Goodwill valuation and impairment – see note 12

Adoption of new and revised International Financial
Reporting Standards

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 2013 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:

•

IFRS 1 First time Adoption of IFRS, amendments to
repeat application, borrowing costs

IFRS 2 Share-based Payment amendment for grant
dates after 30 June 2014

IFRS 3 Business Combinations amendment for
acquisitions after 30 June 2014

IFRS 7 Financial Instruments: Disclosures,
amendments relating to offsetting of assets and
liabilities

IFRS 10 Consolidated Financial Statements

IFRS 11 Joint Arrangements

IFRS 12 Disclosure of Interests in Other Entities

IFRS 13 Fair Value Measurement

IAS 1 Presentation of Financial Statements
amendment relating to comparative information

IAS 16 Property, Plant and Equipment amendment
relating to servicing equipment

IAS 27 Separate Financial Statements (2011)

IAS 28 Investments in Associates and Joint Ventures
issued 2011

IAS 32 Financial Instruments: Presentation
amendments relating to offsetting of assets and
liabilities, and tax effect of equity distributions

IAS 33 Interim Reporting amendment relating to
interim reporting of segment assets

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 presented 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.

Foreign currencies

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

Dividends are recognised as a liability in the period in
which the shareholders’ right to receive payment has
been established.

Key sources of estimation uncertainty and critical
accounting judgements

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

6262

New standards and interpretations not yet adopted

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):

•

IFRS 2 Share-based Payment amendments

IFRS 3 Business Combinations amendments

IFRS 5 Non-current Assets Held for Sale and
Discontinued Operations amendments

IFRS 7 Financial Instruments: Disclosure amendments
in connection with IFRS 9

IFRS 8 Operating Segments amendments

IFRS 9 Financial Instruments as amended 2014

IFRS 10 Consolidated Financial Statements
amendments

IFRS 11 Joint Arrangements amendments

IFRS 12 Disclosure of Interests in Other Entities
amendments

IFRS 13 Fair Value Measurement

IFRS 14 Regulatory Deferral Accounts

IFRS 15 Revenue from Contracts with Customers

3. Revenue

Revenue from supply of products

Revenue from rendering of services

Revenue from the sale of licences and receipt of royalties

Total revenue

•

IAS 16 Property, Plant and Equipment amendments

IAS 19 Employee Benefits amendments

IAS 24 Related Party Disclosure amendments

IAS 27 Separate Financial Statements amendments

IAS 28 Investments in Associates amendments

IAS 34 Interim Financial Reporting amendments

IAS 36 Impairment of Assets amendments

IAS 38 Intangible Assets amendments

IAS 39 Financial Instruments: Recognition and
Measurement amendments

IAS 40 Investment Properties amendments

IAS 41 Agriculture amendments

IFRIC 21 Levies

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 IFRS 7 and 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 2018, and an exercise to investigate
the impact on the Group is planned during the coming
financial year.

Year ended
30 November 2014

Year ended
30 November 2013

£000

93,998

92,807

15,739

202,544

£000

136,307

107,494

17,958

261,759

4. Operating segments
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 (previously known as Education Resources), RM Results
(previously Assessment and Data Services) and RM Education (previously Education Technology).

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 result and assets of these divisions. Revenue is that earned by the Group from third parties.

Segmental results

Year ended 30 November 2014

£000

RM Resources

RM Results

RM Education

Corporate
Services

53,903

27,136

110,712

4,052

994

2,980

875

62,804

10,330

119

535

315

206

680

27,827

111,913

4,648

7,700

(4,152)

18,526

Revenue

Europe

North America

Asia

Rest of the world

Adjusted profit from operations

Investment income

Adjusted finance costs

Adjusted profit before tax

Adjustments (see note 1)

Profit before tax

Corporate
Services

£000

180,661

352

110

181,171

9,406

(3,629)

Year ended 30 November 2013

£000

RM Resources

RM Results

RM Education

46,458

3,248

575

2,764

963

54,008

7,164

23,515

2,718

312

26,545

4,268

Revenue

Europe

North America

Asia

Rest of the world

Adjusted profit from operations
(see note below)

Investment income

Adjusted finance costs

Adjusted profit before tax

Adjustments (see note 1)

Profit before tax

6464

Total
£000

191,751

4,404

1,200

3,099

2,090

202,544

476

(924)

18,078

(2,321)

15,757

Total
£000

250,634

6,353

597

3,102

1,073

261,759

17,209

730

(1,490)

16,449

(7,014)

9,435

In the year ended 30 November 2014 Corporate Services adjusted profit from operations includes £1,272,000 in respect of
costs paid by the Group related to the Defined Benefit Pension Scheme. In 2013 the equivalent costs of £897,000 have been
consistently allocated to Corporate Services, with no impact on overall adjusted profit from operations.

Year ended 30 November 2013

£000

RM Resources

RM Results

RM Education

Corporate
Services

£000

Total
£000

Adjusted profit from operations as
previously disclosed

Adjustment in respect of costs
paid by the Group related to the
Defined Benefit Pension Scheme

Segmental profit for 2013
comparable to 2014

7,164

4,134

8,643

(2,732)

17,209

134

763

(897)

7,164

4,268

9,406

(3,629)

17,209

Segmental assets

At 30 November 2014

Segmental

Other

Total assets

At 30 November 2013

Segmental

Other

Total assets

RM Resources

RM Results

RM Education

£000

33,970

£000

6,636

£000

27,334

Corporate
Services

£000

353

RM Resources

RM Results

RM Education

Corporate Services

£000

31,794

£000

6,890

£000

33,728

£000

221

Total
£000

68,293

57,083

125,376

Total
£000

72,633

68,048

140,681

Included within the disclosed segmental assets are non-current assets (excluding deferred tax assets) of £24,552,000
(2013: £26,311,000) located in the United Kingdom and £432,000 (2013: £556,000) located in India. Other non-segmented
assets includes other receivables, tax assets and cash and short-term deposits.

Note

5. Profit for the year
Profit for the year is stated after charging/(crediting):

Amortisation of acquisition related intangible assets

Amortisation of other intangible assets

Impairment of goodwill

Depreciation of property, plant and equipment:

- charged in cost of sales

- charged in operating expenses

Impairment of property plant and equipment

Selling and distribution costs

Research and development costs

Administrative expenses - adjusted

Operating expenses - adjusted

Adjustments to administrative expenses
(see Consolidated Income Statement)

Total operating expenses

Gain on disposals of property, plant and equipment

Loss on disposals of other intangible assets

Cost of inventories recognised as expense

Staff costs

Operating lease expense

Foreign exchange loss

(Decrease)/increase in inventory obsolescence provision

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

- the audit of the Company's subsidiaries pursuant to legislation

Other fees payable to the Company's auditor:

- other services pursuant to legislation

- tax compliance services

- corporate finance services

6666

Year ended
30 November 2014

Year ended
30 November 2013

£000

303

417

720

992

1,668

2,660

755

3,415

27,922

10,520

18,602

57,044

2,052

59,096

(398)

54,290

69,147

4,070

156

(1,394)

167

200

£000

195

582

328

1,105

1,475

2,444

3,919

31,204

10,665

14,888

56,757

6,855

63,612

(118)

736

89,801

87,247

4,348

354

983

162

202

6. Staff numbers and costs
The average number of persons employed by the Group during the year was as follows:

Research and development, products and services

Marketing and sales

Corporate Services

Aggregate emoluments of persons employed by the Group comprised:

Wages and salaries

Termination payments

Social security costs

Other pension costs

Share-based payments (note 25)

Year ended
30 November 2014

Year ended
30 November 2013

Number

1,525

209

136

1,870

Number

1,645

293

210

2,148

Year ended
30 November 2014

Year ended
30 November 2013

£000

56,891

838

5,332

5,154

932

69,147

£000

69,740

4,942

6,227

5,831

507

87,247

The Company employs no staff (2013: none)

Information regarding the remuneration of the Directors is shown in the Remuneration Report.

7. Investment income

Bank interest

Income on sale of finance lease debt

Other finance income

8. Finance costs

Year ended
30 November 2014

Year ended
30 November 2013

£000

242

179

476

£000

223

289

218

730

Year ended
30 November 2014

Year ended
30 November 2013

Note

Interest on bank overdrafts and loans

Borrowing facilities arrangement fees and commitment fees

Cost of leasing finance

Finance lease interest

Net finance costs on Defined Benefit Pension Scheme

Unwind of discount on long-term contract provisions

Unwind of discount on onerous lease and dilapidations provisions

£000

467

379

269

1,193

£000

495

130

830

159

1,649

9. Tax
Analysis of tax charge in the Consolidated Income Statement

Current taxation

UK corporation tax

Adjustment in respect of prior years

Overseas tax

Total current tax charge

Deferred taxation

Temporary differences

Adjustment in respect of prior years

Overseas tax

Total deferred tax (credit)/charge

Total Consolidated Income Statement tax charge

Year ended
30 November 2014

Year ended
30 November 2013

£000

3,117

627

437

4,181

(57)

(23)

4,158

£000

1,707

859

453

3,019

206

(51)

248

3,267

Analysis of tax (credit)/charge in the Consolidated Statement of Comprehensive Income

UK corporation tax

Defined Benefit Pension Scheme

Deferred tax

Defined Benefit Pension Scheme movements

Defined Benefit Pension Scheme escrow

Share based payments

Total Consolidated Statement of
Comprehensive Income tax (credit)/charge

Year ended
30 November 2014

Year ended
30 November 2013

£000

(1,533)

(2,185)

(660)

(657)

(5,035)

£000

(735)

1,534

(73)

726

6868

Reconciliation of Consolidated Income Statement tax charge

The tax charge in the Consolidated Income Statement reconciles to the effective rate applied by the Group as follows:

Year ended 30 November 2014

Year ended 30 November 2013

Adjusted

Adjustments

£000

Total

£000

Adjusted

Adjustments

£000

Total

£000

Profit before tax

18,078

(2,321)

15,757

16,449

(7,014)

9,435

Tax at 21.67% (2013: 23.33%) thereon:

3,918

(503)

3,415

3,839

(1,637)

2,202

Effects of:

- change in tax rate on carried forward
deferred tax assets

- other expenses not deductible for
tax purposes

- temporary timing differences
unrecognised for deferred tax

- other temporary timing differences

- R&D tax credit

- impairments

- overseas tax

- gain on sale of operations

- prior period adjustments

Tax charge in the
Consolidated Income Statement

104

(77)

207

203

(93)

367

224

(23)

201

104

373

(186)

187

(331)

(77)

207

(93)

570

(242)

(29)

124

952

297

(94)

(331)

(242)

268

124

(94)

952

4,359

(201)

4,158

4,910

(1,643)

3,267

Factors that may affect future tax charges

The Finance Act 2013 confirmed the reduction in the UK corporation tax rate to 20% in 2015. This will reduce the Group’s future
tax charge accordingly.

The deferred tax asset at 30 November 2014 has been calculated based on the rate of 20% which had been substantively
enacted at the balance sheet date.

Deferred tax

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

benefit pension

Acquisition

Short-term

Accelerated tax

scheme

Share-based

timing

intangible

Group

At 1 December 2012

Credit/(charge) to income

Credit/(charge) to equity

At 30 November 2013

Credit/(charge) to income

Credit to equity

At 30 November 2014

depreciation

obligation

payments

differences

£000

1,223

(235)

988

(201)

787

£000

4,700

(1,534)

3,166

2,185

5,351

£000

181

178

657

£000

599

(159)

440

(15)

660

1,016

1,085

assets

£000

(221)

(153)

(92)

Total

£000

6,331

(248)

(1,461)

4,622

3,502

8,147

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 £3,227,000
(2013: £1,200,000) which is available for offset against future profits within the United States of America. Included within this
balance are unrecognised tax losses of £3,206,000 (2013: £1,500,000). 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 £203,000 (2013: £240,000) 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.

7070

10. Earnings per ordinary share

Year ended 30 November 2014

Year ended 30 November 2013

Weighted

average

Weighted

average

Profit for

number of

Pence per

the year

£000

000

Profit for

the year

£000

number of

Pence per

000

Basic earnings per ordinary share

Basic earnings

Adjustments*

11,599

83,702

2,120

Adjusted basic earnings

13,719

83,702

Diluted earnings per ordinary share

Basic earnings

Effect of dilutive potential ordinary
shares: share-based payment awards

Diluted earnings

Adjustments*

11,599

83,702

5,346

11,599

89,048

2,120

Adjusted diluted earnings

13,719

89,048

* Refer to note 1 for an explanation of adjustments to profits.

13.9

2.5

16.4

13.9

(0.9)

13.0

2.4

15.4

6,168

5,371

91,718

11,539

91,718

6,168

91,718

1,153

6,168

5,371

92,871

11,539

92,871

6.7

5.9

12.6

6.7

(0.1)

6.6

5.8

12.4

The weighted average number of shares for the year ended 30 November 2014 has been calculated based upon the weighted
average of the number of ordinary shares of 2p each and ordinary shares of 22/7p each following the share consolidation
(see note 22).

11. Dividends
Amounts recognised as distributions to equity holders were:

Final dividend for the year ended 30 November 2013
of 2.46p per share (2012: 2.25p)

Special dividend for the year ended 30 November 2013
of 16.00p per share (2012: nil)

Interim dividend for the year ended 30 November 2014
of 0.96p per share (2013: 0.84p)

Year ended
30 November 2014

Year ended
30 November 2013

£000

2,257

14,678

771

17,706

£000

2,064

770

2,834

The proposed final dividend of 3.04p per share for the year ended 30 November 2014 was approved by the Board on 30
January 2015. The dividend is subject to approval by shareholders at the annual general meeting. The anticipated cost of this
dividend is £2,460,000, which is not included as a liability at 30 November 2014.

12. Goodwill

Group

Cost

At 1 December 2012, 30 November 2013 and 30 November 2014

Accumulated impairment

At 1 December 2012

Impairment loss

At 30 November 2013 and 30 November 2014

Carrying amount

At 30 November 2013 and 30 November 2014

The discount rates used for goodwill impairment reviews and the carrying amount of goodwill is allocated as follows:

RM Resources - TTS Group Limited

RM Results

2014

2013

Pre tax

discount rate

Pre tax

£000

discount rate

10.2%

11.5%

11,111

2,956

14,067

11.8%

12.0%

£000

23,761

9,366

328

9,694

14,067

£000

11,111

2,956

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% (2013: between 0% and 3%).

Sensitivity analysis

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.

7272

13. Other intangible assets

Acquisition

Intellectual

Customer

property &

intangible

Other

relationships

Brands

database assets

assets sub-total

software assets

£000

Total

£000

Group

Cost

At 1 December 2012

1,599

564

325

2,488

10,336

12,824

Additions

Effect of movements in
exchange rates

Disposals

At 30 November 2013

1,599

564

325

2,488

Additions

Effect of movements in
exchange rates

Disposals

(29)

(7,686)

2,689

(29)

(7,686)

5,177

(73)

At 30 November 2014

1,599

564

325

2,488

2,626

5,114

Accumulated amortisation
and impairment

At 1 December 2012

Charge for the year

Effect of movements in
exchange rates

Disposals

At 30 November 2013

Charge for the year

Effect of movements in
exchange rates

At 30 November 2014

Carrying amount

At 30 November 2014

At 30 November 2013

994

124

1,119

191

1,310

289

480

209

280

112

392

172

284

325

1,528

195

1,724

303

8,058

582

9,586

777

(27)

(26)

(6,950)

1,663

417

(6,950)

3,387

720

325

2,027

2,089

4,116

461

764

537

1,026

998

1,790

A review of other intangible assets at the balance sheet date indicated there was no additional impairment loss in
the year ended 30 November 2014 (2013: £nil).

The carrying amount of Acquisition related intangible assets and Other software assets at 30 November 2014
include impairment losses of £443,000 (2013: £443,000) and £275,000 (2013: £275,000) respectively.

The carrying amount of Other software assets at 30 November 2014 included purchased software assets of £9,000
(2013: £68,000), and internally developed software assets of £528,000 (2013: £958,000).

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 (2013: £nil). The carrying amount of capitalised research and development at
30 November 2014 was £nil (2013: £nil).

14. Property, plant and equipment

Freehold land &

Short leasehold

Plant &

Computer

buildings

improvements

equipment

Vehicles

£000

Total

£000

Group

Cost

At 1 December 2012

2,779

4,493

9,186

13,547

4,214

34,219

Additions

Effect of movements in
exchange rates

Assets reclassified

Disposals

At 30 November 2013

Additions

Effect of movements in
exchange rates

Disposals

2,779

314

(81)

199

(46)

(135)

4,559

1,216

At 30 November 2014

3,012

5,787

Accumulated depreciation
and impairment

2,753

534

(15)

(135)

3,149

432

379

785

883

(67)

913

At 1 December 2012

Charge for the year

Effect of movements in
exchange rates

Assets reclassified

Disposals

At 30 November 2013

Charge for the year

Effect of movements in
exchange rates

Impairment

Disposals

At 30 November 2014

Carrying value

At 30 November 2014

At 30 November 2013

175

(98)

(48)

(4,448)

4,767

383

(392)

4,788

6,760

1,022

(69)

(12)

(4,435)

3,266

559

(387)

1,531

(143)

(8,018)

6,918

583

(20)

(1)

(1,409)

2,859

101

1,980

(307)

(14,010)

21,882

2,597

(156)

(1,457)

(2,086)

7,390

1,510

22,487

10,161

2,320

22,779

1,546

(112)

(7,859)

3,738

1,196

277

(142)

719

(11)

(2)

(1,279)

1,747

376

3,919

(207)

(13,708)

12,783

2,660

755

(1,227)

(1,823)

3,966

3,532

5,106

930

14,447

2,099

1,896

1,821

1,410

1,256

1,501

2,284

3,180

580

1,112

8,040

9,099

The carrying value of vehicles at the year end included £444,000 (2013: £1,032,000) held under finance leases.

7474

15. Investments in subsidiary undertakings
The principal subsidiary undertakings of the Company at 30 November 2014 were:

Name

RM Books Limited

RM Education Limited

Principal activity

Country of
incorporation

Class of
share

Software services

England

Ordinary

Software, services & systems

England

Ordinary

% held

100%

RM Education Solutions India Pvt Limited *

Software and corporate services

India

Ordinary

100%

Space Kraft Limited

TTS Group Limited

Resource supply

England

Ordinary

100%

Resource supply

England

Ordinary

100%

* Held through subsidiary undertaking.

The investment in subsidiary undertakings comprises:

Company

Cost

At 1 December 2012

Disposals

Share-based payments

At 30 November 2013

Investment in RM Education Limited

Share-based payments

At 30 November 2014

Accumulated impairment

At 1 December 2012

Impairment loss

Disposals

At 30 November 2013

Reversal of impairment

At 30 November 2014

Carrying value

At 30 November 2014

At 30 November 2013

Capital contribution

Investment in

shared-based

share capital

payments

Quasi-equity loan

£000

46,281

(1,014)

45,267

11,920

57,187

6,245

555

(956)

5,844

(2,932)

2,912

54,275

39,423

8,541

507

9,048

932

9,980

9,048

7,077

(7,077)

7,077

Total

£000

61,899

(1,014)

507

61,392

4,843

932

67,167

6,245

555

(956)

5,844

(2,932)

2,912

64,255

55,548

The Company purchased an additional 32 shares in its subsidiary undertaking, RM Education Limited, during the year.
The consideration was £11,920,000, satisfied by a reduction of £7,077,500 in the quasi-equity loan and £4,842,500
in additional capital funding.

The impairment loss at 30 November 2014 applied primarily to the Company’s investment in Space Kraft Limited (£2,824,000).
The impairment loss in RM Education Limited was reversed in the year (2013: Space Kraft Limited increase of £555,000).

The assumptions for the impairment reviews performed are outlined in note 12.

16. Inventories

Group

Components

Work in progress

Finished goods

17. Long-term contracts

Group

Contract costs incurred plus recognised profits less recognised losses to date

Less: Progress billings

Amounts due from contract customers included in trade and other receivables

Amounts due to contract customers included in trade and other payables

2014

£000

141

10,463

10,604

2013

£000

845

9,617

10,549

Note

2014

£000

2013

£000

440,840

375,058

(472,006)

(402,095)

(31,166)

(27,037)

154

671

(31,320)

(27,708)

(31,166)

(27,037)

Total revenue from long-term contracts recognised in the year ended 30 November 2014 amounted to £69,600,000
(2013: £91,100,000).

Long-term contract outcome – estimation uncertainty

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.

7676

18. Trade and other receivables

Group

Company

Note

2014

£000

2013

£000

2014

£000

2013

£000

Current

Financial assets

Trade receivables

Long-term contract balances

Other receivables

Accrued income

Amounts owed by Group undertakings

Non-financial assets

Prepayments

Non-current

Financial assets

Other receivables

Currency profile of receivables

Sterling

US Dollar

Euro

Indian Rupee

24,830

24,599

154

1,308

1,571

671

474

2,990

27,863

28,734

5,065

32,928

6,400

35,134

14,366

14,372

104

1,878

34,806

1,911

37,045

1,628

16,000

1,661

1,765

34,387

36,748

16,000

1,765

163

256

224

34,806

37,045

16,000

1,765

A reclassification has been made in the Group comparative figures for 2013 reallocating £2,833,000 of balances previously
included within trade receivables to accrued income reflecting the un-billed nature of these long-term contract related
recoverable amounts.

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 are the gross amounts owed by the Company’s equity investments in BSF
delivery companies, Newham Learning Partnership (PSP) Ltd and Essex Schools (Holdings) Ltd. The interest charged on these
receivables is 11.75% pa.

Analysis of trade receivables by type of customer

Group

Government

Commercial

2014

£000

10,016

14,814

24,830

2013

£000

10,482

14,117

24,599

Trade receivables included an allowance for estimated irrecoverable amounts at 30 November 2014 of £1,361,000
(2013: £1,777,000), 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.

Ageing of unimpaired trade receivables

Group

Not past due

Overdue by less than 60 days

Overdue by between 60 and 90 days

Overdue by more than 90 days

19. Cash and short-term deposits

Cash and cash equivalents

Short-term deposits

2014

£000

18,128

3,955

1,074

1,673

2013

£000

18,273

5,622

323

381

24,830

24,599

Group

Company

2014

£000

41,893

6,000

47,893

2013

£000

57,169

6,000

63,169

2014

£000

2013

£000

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 28.

7878

Group

Company

Note

2014

£000

2013

£000

2014

£000

2013

£000

20. Trade and other payables

Current liabilities

Financial liabilities

Trade payables

Amounts owed to Group undertakings

Other taxation and social security

Other payables

Accruals

Obligations under finance leases

Derivative financial instruments

12,793

12,163

29,002

4,673

2,066

230

14,041

18,395

3,019

1,848

350

544

27,708

64,027

14,890

78,917

29,002

Long-term contract balances

31,320

Non-financial liabilities

Deferred income

Non-current liabilities

Financial liabilities

65,126

13,959

79,085

Obligations under finance leases

438

Non-financial liabilities

Deferred income

due after one year but within two years

due after two years but within five years

1,077

531

1,657

1,827

1,190

3,455

The amounts owed to Group undertakings by the Company are payable on demand and bear interest at LIBOR plus 2%.

80,742

82,372

29,002

Currency profile of trade and other payables

Sterling

US Dollar

Euro

Indian rupee

Group

Company

2014

£000

79,752

208

754

2013

£000

80,284

1,364

193

531

2014

£000

29,002

80,794

82,372

29,002

2013

£000

The Directors consider that the carrying amount of trade and other payables approximates their fair value.

Amounts payable under finance lease contracts

Group

Within one year

In the second to fifth years inclusive

Less: finance charges allocated to future periods

Present value of minimum lease payments

2014

2013

Present value of

Minimum lease

minimum lease

Minimum

minimum lease

payments

lease payments

payments

£000

236

285

(6)

279

£000

230

279

£000

373

446

819

(31)

788

£000

350

438

788

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.

8080

21. Provisions

Group

At 1 December 2012

Utilisation of provisions

Release of provisions

Increase in provisions

Effect of movements in exchange rates

Unwind of discount

At 30 November 2013

Utilisation of provisions

Release of provisions

Increase in provisions

Effect of movements in exchange rates

Unwind of discount

At 30 November 2014

Onerous lease

Employee-related

and dilapidations

restructuring

£000

6,409

(1,331)

2,627

159

7,885

(836)

(524)

1,298

269

8,094

£000

453

(1,154)

4,942

4,241

(4,348)

(366)

838

365

Other

£000

2,175

(52)

(1,092)

320

(21)

1,330

(289)

(431)

708

Total

£000

9,037

(2,537)

(1,092)

7,889

159

13,456

(5,473)

(1,321)

2,231

269

9,167

Provisions for onerous leases and dilapidations have been recognised at the present value of the expected obligation
at discount rates of 3% 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 2014, £5,738,000 (2013: £5,587,000) of the provision refers to onerous leases, and £2,356,000 (2013: £2,298,000)
refers to dilapidations.

The average remaining life of the leases at 30 November 2014 is 5.1 years (2013: 2.1 years). Given the lengths remaining on
onerous leases and current market conditions, no assumption has been made for the Group’s ability to sub-let, with any sub-
letting likely to result in a release of a proportion of the provision held.

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 provision within RM plc Company (see below). The significant elements in the provision at 30 November
2014 continue to be related to on-going legal activity and provisions recognised as part of the exit of operations, both of which
were included in the previous year.

Disclosure of provisions

Group

Current liabilities

Non-current liabilities

Company
Non-current liabilities

At 1 December 2012

Release of provisions

At 30 November 2013

Release of provisions

Increase in provisions

At 30 November 2014

2014

£000

3,660

5,507

9,167

2013

£000

7,201

6,255

13,456

£000

629

(200)

429

(429)

4,893

The Company’s outstanding provisions at 1 December 2013 relating to warranties on businesses sold in previous years has
been released to the Income Statement as it is no longer required.

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.

Total

£000

1,870

22. Share capital

Company and Group

Ordinary shares of 2p

Ordinary shares of 22/7p

Allotted, called-up and fully paid

Number, 000

£000

Number, 000

At 1 December 2012 and 30 November 2013

93,515

1,870

£000

Share consolidation

Issued in the year

At 30 November 2014

(93,515)

(1,870)

81,826

1,870

814

82,640

1,889

During the year 800,000 ordinary shares of 22/7p were issued to the RM plc Employee Share Trust at par, and 14,000 shares
options were exercised at an exercise price of £1.54 from the Employee share option scheme.

Ordinary shares issued carry no right to fixed income.

23. Retirement benefit schemes
a) Defined contribution scheme

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 £4,914,000
(2013: £5,555,000) represents contributions payable to these schemes by the Group at rates specified in employment
contracts. At 30 November 2014 £373,000 (2013: £465,000) due in respect of the current financial year had not been paid over
to the schemes.

8282

b) Local government pension 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 £240,000 (2013: £276,000).
The amount due in respect of these schemes at 30 November 2014 was £28,000 (2013: £24,000).

c) Defined Benefit Pension Scheme

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 RM Education Limited’s
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 2012 by a qualified independent actuary. IAS 19 Employee Benefits liabilities have
been rolled forward based on this valuation’s base data.

As at 31 May 2012, the triennial valuation for statutory funding purposes showed a deficit of £53,500,000 (31 May 2009:
£16,600,000). RM Education Limited agreed with the Scheme Trustees that it will repay this amount via deficit catch up
payments of £4,000,000 per annum until 31 May 2013 and thereafter at £3,600,000 per annum until 31 May 2027. There was one
month’s deficit payment of £300,000 outstanding at 30 November 2014 (2013: £300,000). The next triennial valuation of the
Scheme is due as at 31 May 2015 and may result in changes to the level of deficit catch up payments required.

A further £8,000,000 contribution was paid into an escrow account established during the year, the form of use of which within
the Scheme is required to be agreed by RM Education Limited and the Scheme Trustee.

In October 2014, £4,700,000 of this was paid to the Scheme from the escrow account to help fund a pension buy-in, the income
from which will closely match payments to all 165 existing pensioners. Such a buy-in largely eliminates the inflation, interest
rate and longevity risks associated with these pension benefits. The transaction covered liabilities in respect of 9% of the
Scheme members and around 13% of the total Scheme liability. The insurance premium payable under the buy-in agreement
was £30,700,000. The insurance premium was funded by way of £26,000,000 of fixed income assets from the Scheme and
£4,700,000 paid from the escrow account. This leaves £3,300,000 remaining in the escrow account to be used for future risk
reduction exercises.

Scheme assets are measured at bid-price at 30 November 2014. 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.

The parent company RM plc has entered into a guarantee in respect of the £3,600,000 annual deficit recovery payments
agreed with the Trustees in 2012. The guarantee for the deficit recovery remains in place on condition that the assumptions
underlying the valuation in 2012 remain materially unchanged for all subsequent triennial valuations undertaken.

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
30 November 2014

Year ended
30 November 2013

Note

Administrative expenses and taxes

Operating expense

Interest cost

Interest on Scheme assets

Net interest expense

Expense recognised in the Income Statement

Effect of changes in demographic assumptions

Effect of changes in financial assumptions

Total actuarial losses

Return on Scheme assets excluding interest on Scheme assets

(Expense)/income recognised in the Statement of Comprehensive Income

(Expense)/income recognised in Total Comprehensive Income

Reconciliation of the Scheme assets and obligations through the year

Assets

At start of period

Interest on Scheme assets

Return on Scheme assets excluding interest on Scheme assets

Administrative expenses

Contributions from Group

Benefits paid

At end of period

Obligations

At start of period

Interest cost

Actuarial losses

Benefits paid

At end of period

Deficit in Scheme and obligation recognised on the Balance Sheet

£000

(475)

(7,513)

7,134

(379)

(854)

1,198

(26,666)

(25,468)

3,576

(21,892)

(22,746)

£000

(391)

(6,722)

5,892

(830)

(1,221)

(8,199)

9,641

1,442

221

Year ended
30 November 2014

Year ended
30 November 2013

£000

147,688

129,710

7,134

3,576

(475)

11,821

(3,905)

165,839

(163,516)

(7,513)

(25,468)

3,905

(192,592)

(26,753)

5,892

9,641

(391)

4,384

(1,548)

147,688

(150,143)

(6,722)

(8,199)

1,548

(163,516)

(15,828)

8484

Reconciliation of net defined benefit obligation

Year ended
30 November 2014

Year ended
30 November 2013

Net obligation at the start of the year

Cost included in Income Statement

Scheme remeasurements included in the
Statement of Comprehensive Income

Cash contribution

Deficit in Scheme and obligation recognised on the Balance Sheet

Obligation by participant status

Vested deferreds

Retirees

Value of Scheme assets

Fair value of Scheme assets with a quoted market price

Cash and cash equivalents, including escrow

Equity instruments

Debt instruments

Value of unquoted Scheme assets

Insurance contract

Significant actuarial assumptions

Discount rate

Rate of RPI price inflation

Rate of CPI price inflation

Rate of pensions increases

pre 6 April 1997 service

pre 1 June 2005 service

post 31 May 2005 service

£000

(15,828)

(854)

(21,892)

11,821

(26,753)

2014

£000

169,392

23,200

192,592

2014

£000

3,469

84,218

54,952

23,200

165,839

2014

3.85%

3.20%

2.30%

1.35%

3.30%

2.10%

£000

(20,433)

(1,221)

1,442

4,384

(15,828)

2013

£000

145,944

17,572

163,516

2013

£000

416

74,840

72,432

147,688

2013

4.65%

3.45%

2.55%

1.35%

3.30%

2.25%

Post retirement mortality table

S1NA CMI 2013 1.25%

S1NA CMI 2011 1.25%

Weighted average duration of defined benefit obligation

25 years

24 years

Assumed life expectancy on retirement at age 65:

Retiring today (male member aged 65)

Retiring in 20 years (male member aged 45)

22.3

24.1

22.5

24.2

Expected cash flows

Expected employer contributions per annum

Expected total benefit payments

Year 1

Year 2

Year 3

Year 4

Year 5

Years 6 - 10

£000

3,984

2,186

2,247

2,309

2,373

2,439

13,247

Sensitivities to assumptions - one item changed with all others held constant

------------------- 30 November 2014 -------------------

30 November 2013

-0.1%

+0.1%

discount

Base

£m

rate

£m

rate

-0.1% RPI

+0.1% RPI

Life +1 yr

£m

Analysis of net balance sheet position

Fair value of Scheme assets

165.8

166.1

165.5

165.6

166.0

166.4

Present value of Scheme obligations

(192.6)

(197.5)

(187.8)

(188.5)

(196.7)

(196.2)

Deficit

(26.8)

(31.4)

(22.3)

(22.9)

(30.7)

(29.8)

Actuarial assumptions

Discount rate

Rate of RPI

Rate of CPI

Mortality table

Rating (years)

3.85% 3.75% 3.95% 3.85% 3.85% 3.85%

3.20% 3.20% 3.20% 3.10% 3.30% 3.20%

2.30% 2.30% 2.30% 2.20% 2.40% 2.30%

------------------- S1NA CMI 2013 1.25% -------------------

S1NA CMI 2011 1.25%

(1)

24. Own shares
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.

The trustee of the EST, Computershare Trustees (C.I.) Ltd, purchased 800,000 new ordinary shares during the year at nominal
value, with funds provided by the Group.

8686

Base

£m

147.7

(163.5)

(15.8)

4.65%

3.45%

2.55%

Company and Group

At 1 December 2012

Additions

At 30 November 2013

Share-based payment awards exercised

Transfer from RML Staff Share Scheme

Share consolidation

Shares issued

At 30 November 2014

Ordinary shares of 2p

Ordinary shares of 22/7p

Number 000

1,797

1,811

(40)

(1,772)

1,551

800

2,351

The valuation of the shares is weighted average cost.

25. Share-based payments
The Group operates the following executive and employee equity settled share-based payment schemes:

£000

2,972

(40)

2,950

a) employee share option schemes

b) performance share plans

c) staff share schemes.

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 deferred
bonus scheme is partially matched by the release of own-shares held.

a) Employee share option scheme

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:

Group

At 1 December 2012

Lapsed during the year

At 30 November 2013

Exercised during the year

Lapsed during the year

At 30 November 2014

Number of

Weighted average

share price at

Weighted average

share options

exercise price

exercise

Exercise price range

3,112,900

(1,569,500)

1,543,400

(14,000)

(250,400)

1,279,000

£1.37

£0.93

£1.81

£1.54

£1.58

£1.86

£0.51 - £2.05

£1.45 - £2.05

£1.54 - £2.05

£1.57

The options outstanding at 30 November 2014 had a weighted average contractual life of 2.4 years (2013: 3.0 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 (2013: nil).

b) Performance share plans

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

At 1 December 2012

Granted during the year

Lapsed during the year

At 30 November 2013

Granted during the year

Lapsed during the year

At 30 November 2014

Maximum number of shares

Market price on grant

5,091,505

1,615,000

(1,112,238)

5,594,267

1,755,000

(2,003,444)

5,345,823

£0.74

£1.55

The plans outstanding at 30 November 2014 had a weighted average contractual life of 1.3 years (2013: 1.3 years).

The fair values of shares granted during the year are determined using a Monte-Carlo model which gives a fair value of
£1.01 per share under the TSR performance condition.

Inputs to the model are as follows:

Group

Share price at grant

Exercise price

Expected life

Expected dividends

4 August 2014
TSR

£1.55

£nil

3 years

2.20%

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 shares schemes awarded. These shares are used to hedge the estimated liability but until vesting represents own
shares held – see note 24.

c) Staff share schemes

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 held 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 is an HMRC
approved employee share scheme constituted under a trust.

8888

The Scheme holds the following shares:

Ordinary shares of 2p

Ordinary shares of 22/7p

Group

RM plc 2002 Staff Share Scheme

RML Staff Share Scheme

At 1 December 2012

Sold or transferred

At 30 November 2013

RM plc 2002 Staff Share Scheme

RML Staff Share Scheme

At 30 November 2013

Transferred into own shares

Sold or transferred

Share consolidation

Sold or transferred

At 30 November 2014

RM plc 2002 Staff Share Scheme

Number

358,834

1,361

360,195

(32,958)

327,237

325,876

1,361

327,237

(1,361)

(43,555)

(282,321)

Number

246,827

(40,261)

206,566

£000

588

589

(54)

535

534

535

(1)

(71)

(76)

387

These shares are held for staff and therefore not included in the Group or Company balance sheet.

d) Deferred bonus plan

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.

Details of deferred bonus grants outstanding are as follows:

Group

Number of bonus shares

Market price on grant

At 1 December 2012 and 30 November 2013

Released during the year

At 30 November 2014

Performance conditions – estimation uncertainty

40,074

(40,074)

£1.30

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.

26. Guarantees and contingent liabilities
Guarantees

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.

Contingent liabilities

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.

27. Commitments
Operating leases

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:

Group

Within 1 year

In years 2 to 5 inclusive

After year 5

2014

£000

3,347

9,824

621

13,792

2013

£000

3,593

6,799

1,461

11,853

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 2.5 years (2013: 4.2 years) and rentals are fixed for an
average of 2.0 years (2013: 1.7 years).

The Company had no operating leases during the year.

Capital commitments

The Group had the following capital expenditure commitments:

Group

Contracted but not provided for

The Company had no capital commitments at the end of either year.

28. Financial risk management
Carrying value of financial assets and financial liabilities

2014

£000

243

2013

£000

Group

Company

Financial assets

Trade and other receivables - current

27,863

28,734

14,372

2014

£000

2013

£000

2014

£000

Trade and other receivables - non-current

Cash and short-term deposits

Financial liabilities

1,878

47,893

77,634

1,911

63,169

93,814

1,628

16,000

1,765

Trade and other payables - current

(65,126)

(64,027)

(29,002)

Trade and other payables - non-current

Provisions - current

Provisions - non-current

(49)

(3,660)

(5,507)

(438)

(7,201)

(6,255)

(4,893)

(74,342)

(77,921)

(33,895)

(429)

All financial assets are classified as loans and receivables except for forward foreign exchange contracts of £565,000
(2013: £4,000) which are classified as fair value through profit or loss.

9090

2013

£000

104

1,661

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.

Foreign currency risk

Translation

During the year the Group held operations in the United States of America and India and trades internationally, exposing
the Group to foreign exchange risk on non-Sterling assets, liabilities and cash flows. The individual Group companies have
long-term intra-group loans of £8,905,000 (2013: £8,513,000) denominated in US dollars and the Group applies net investment
hedging to the balances.

The Group also maintains foreign currency denominated cash accounts, but only holds balances required to settle
its payables.

Transaction

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
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:

Group

Forward foreign exchange contracts

2014

2013

Nominal Value

Fair Value

Nominal Value

Fair Value

£000

9,485

£000

562

£000

9,315

£000

(540)

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 nominal value of £9,500,000 (2013: £8,700,000) and fair value gain
of £562,000 (2013: loss £528,000) 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
credit of £1,090,000 (2013: debit £529,000) which has been recognised in Other comprehensive income and presented in the
hedging reserve in equity. In addition the Group retain 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 loss of £18,000 (2013: £54,000 gain) 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 debit of £72,000 (2013: credit
£94,000) 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 (2013: nominal value £600,000, fair value loss £12,000, charge to income £19,000).

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.

Foreign exchange rate sensitivity

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

Group

10% increase in foreign exchange rates against Sterling:

US Dollar

Indian Rupee

Euro

2014

2013

Income

£000

Equity

£000

Income

£000

525

(117)

(41)

115

(14)

Equity

£000

637

(175)

(38)

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.

Interest rate 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 £47,460,000 (2013: £47,670,000), and the maximum bank overdraft
was £nil (2013: £nil).

The interest and currency profile of cash and short-term deposits is shown below:

2014

2013

Group

Floating rate

Interest free

£000

Total

£000

Sterling cash and cash equivalents

35,633

5,722

41,355

Sterling short-term deposits

6,000

US Dollar

Euro

Indian Rupee

Singapore Dollar

126

289

126

289

Floating rate

Interest free

£000

54,229

6,000

195

£000

1,984

474

120

143

Total

£000

56,213

6,000

474

120

338

41,633

6,260

47,893

60,424

2,745

63,169

The Group has a £30,000,000 committed Barclays revolving credit facility 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 3 year committed
term subject to certain financial ratios. A commitment fee of 1.2% is payable on the unutilised balance and an arrangement
fee of £75,000 (2013: £75,000) has been paid in 2014 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 £550,000.

9292

The weighted average effective interest rates at the balance sheet date were as follows:

2014

2013

Weighted

average interest

Weighted average

Floating rate

£000

rate

Floating rate

interest rate

£000

Group

Financial assets:

Cash and short-term deposits

Trade and other receivables (non-current)

41,633

1,878

0.55

10.39

63,169

1,911

0.55

10.41

The interest rate risk sensitivity (assuming all other variables remain constant) is as follows:

Group

1% increase in interest rates

1% decrease in interest rates

Credit risk

2014

2013

Income

Equity

sensitivity

Income

sensitivity

Equity

sensitivity

£000

437

(437)

£000

437

(437)

£000

419

(419)

£000

419

(419)

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.

Liquidity risk

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, 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 2014 £300,000 of the performance bond facility was drawn down (2013: £570,000).

Capital management

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:

Adjusted profit from operations

Capital return on operating liabilities

Economic profit

29. Related party transactions
Key management personnel

Year ended
30 November 2014

Year ended
30 November 2013

£000

18,526

2,295

20,821

£000

17,209

1,831

19,040

The remuneration of the Directors and other key management personnel of the Group during the year, in aggregate, was:

Company

Short-term employee benefits

Post-employment benefits

Termination payments

Share-based payment

Year ended
30 November 2014

Year ended
30 November 2013

£000

3,065

285

169

578

£000

2,855

327

281

Share-based payments above include a fair value charge for executive Directors of £136,000 in respect of awards to
David Brooks (2013: £89,000) and £104,000 in respect of Iain McIntosh (2013: £75,000).

Further information about the remuneration of individual Directors is provided in the audited part of the
Remuneration Report.

Transactions between the Company and its subsidiary undertakings

During the year, the Company entered into the following transactions with its subsidiary undertakings:

Company

Receipts/(payments)

Management recharges

Net inter-company interest income

Dividends received

Year ended
30 November 2014

Year ended
30 November 2013

£000

(447)

8,000

(348)

122

6,200

Total amounts owed between the Company and its subsidiary undertakings are disclosed in notes 18 and 20 respectively.

Other related party transactions

TES Global Limited

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 (2013: £26,094) and to which the Group made sales of £1,778 during
the year (2013: £nil).

9494

Dods (Group) plc

RM plc Board Director Lord Andrew Adonis is a director of Dods (Group) plc from which the Group made purchases of £474
during the year.

Ofcom

Jo Connell, who was an RM plc Board Director until 19 March 2014, is the Chair of the Advisory Committee for Older and
Disabled People within Ofcom, from which the Group made purchases of £8,550 during the year (2013: £8,330).

Wates Group Limited

RM plc Board Director Deena Mattar is a director of Wates Group Limited, to which no sales were made by the Group during the
year (2013: £70,000) but there was a retention balance owing to the Group of £2,106 at 30 November 2014.

PricewaterhouseCoopers LLP

The Group uses PricewaterhouseCoopers LLP to provide certain consultancy and assurance services, but excluding external audit
services. RM Board Director Iain McIntosh’s wife is an equity partner in PricewaterhouseCoopers. She has not been involved in any
services provided to the Group. The Group made purchases from PricewaterhouseCoopers for the year ended 30 November 2014
of £255,350 (2013: £27,800) and the balance outstanding at 30 November 2014 was £nil (30 November 2013: £26,160).

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.

30. Events after the reporting period
On 2 December 2014, after the balance sheet date, the awards granted in December 2011 and February 2012 under the RM plc
Performance Share Plan 2010 vested to participants, with 2,146,000 shares vesting. Details of Performance Share Plan awards
can be found in note 25 b).

The Group’s obligations under the awards were satisfied with shares held by the RM plc Employee Share Trust (see note 24 for
details of Trust holdings at 30 November 2014).

Following vesting of the awards, the RM plc Employee Share Trust repurchased 1,438,000 shares from participants at a cash
cost of £2,293,000, being the market value of the shares at the close of business on 1 December 2014. The repurchase was
made via agreement with participants made before 30 November 2014, taking into account participants’ wishes to retain or
realise vesting shares (particularly in order to cover individual tax liabilities arising).

This transaction is not an adjusting post balance sheet event and will be recorded in the Financial Statements for the year
ending 30 November 2015.

Shareholder
Information

Financial calendar
Ex-dividend date for 2014 final dividend

Record date for 2014 final dividend

Annual General Meeting

Payment of 2014 final dividend

Announcement of 2015 interim results

Preliminary announcement of 2015 results

12 March 2015

13 March 2015

25 March 2015

10 April 2015

July 2015

February 2016

Corporate website
Information about the Group’s activities is available from RM at www.rmplc.com.

Investor information
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
companysecretary@rm.com.

Registrars and
shareholding information
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 registrar either via
email at shareholderenquiries@capita.co.uk or
telephone: 0871 664 0300 (calls cost 10p per minute
plus network extras; lines are open 8.30am to 5.30pm,
Monday to Friday). To help shareholders, the Capita
website at www.capitaassetservices.com contains a
shareholders’ frequently asked questions section.

Electronic communication
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 financial statements, 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), faster notification
of information and updates, easy access (you can check
your shareholding and account transactions online at
any time) and convenience (you can change your name,
address or dividend mandate details online). To sign-up
to receive e-communications go to Capita Asset Services’
Share Portal at www.capitashareportal.com.

Beneficial shareholders with
‘information rights’
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.

Multiple accounts on
the shareholder register
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.

Company Secretary
Greg Davidson

Group head office
and registered office
140 Eastern Avenue
Milton Park
Milton
Abingdon
Oxfordshire OX14 4SB
United Kingdom

Telephone: +44 (0)8450 700 300

Registered number
RM plc’s registered number is 01749877.

Auditor
KPMG LLP
Arlington Business Park
Theale
Reading RG7 4SD

Financial Adviser and Stockbroker
Numis Securities Ltd
10 Paternoster Square
London EC4M 7LT

Financial Public Relations
FTI Consulting Ltd
200 Aldersgate
Aldersgate Street
London EC1A 4HD

Registrar
Capita Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU

Legal Adviser
Osborne Clarke
One London Wall
London EC2Y 5EB

RM plc
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.

www.rmplc.com

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