RM plc Annual Report 2015

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FY2015 Annual Report · RM plc

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Technology
and resources
for education

RM plc Annual Report and Financial Statements
Year ended 30 November 2015

Physical and curriculum resources
for schools and nurseries in the
UK and internationally

E-assessment and education
data analysis to exam boards
and central government in the
UK and internationally

Software, services and technology
to UK schools and colleges

customers

UK’s largest provider of
on-screen marking of
high-stakes schools exams

Complete range of technology
offerings and support to
schools and colleges

Direct sales business model

market leader

Full IT outsourcing to

customers

Technology to allow
on-screen testing

exam scripts processed
per annum

staff, 30% in India

different products

‘own brand’ products

new products each year

schools

Sell to over

countries

Direct marketing
business model

Systems to help create
the English schools
performance tables

staff

staff, over 50% in India

19,0003,000c. 50020,000+ 80c. 300c. 20c. 13mc. 300c. 2,000UK700+ c. 1,000

Highlights

A good year of progress in line with expectations

• Revenue down 12% to £178.2m as growth in

RM Results and RM Resources is more than offset
by phased transition in RM Education

• Adjusted operating margin increased from 9.1% to 10.2%

• Adjusted operating profit of £18.2m (£18.5m in 2014)

Statutory Profit Before Tax improves 22% to £19.2m
(£15.8m in 2014)

• Positive adjustments of £2.1m

Disposal of SpaceKraft business from RM Resources division
Held for Sale in the Accounts at 30 November 2015
and sold in December 2015

Cash remains strong at £48.3m
(£47.9m as at 30 November 2014)

Pension triennial valuation agreed
with 9 year deficit recovery plan and
£8m one-off additional contribution in 2016

Proposed final dividend increased by 25% to 3.80p

• Full year paid and proposed dividend

increases 25% to 5.00p

Contents

Overview

Chairman’s Statement 02

Strategic Report 04

Governance

Directors’ Biographies 13

Directors’ Report 14

Corporate Governance Report 20

Audit Committee Report 29

Remuneration Report 34

Financial Statements

Independent Auditor’s Report 48

Consolidated Income Statement 51

Consolidated Statement of Comprehensive Income 52

Consolidated Statement of Changes in Equity 53

Consolidated Balance Sheet 54

Consolidated Cash Flow Statement 55

Company Statement of Changes in Equity 56

Company Balance Sheet 57

Company Cash Flow Statement 58

Notes to the Financial Statements 59

Shareholder Information

Shareholder Information 102

Chairman’s
Statement

2015 was a year of good progress for RM with two of
the three divisions showing strong organic growth.
The Group’s overall operating profit margin reached
double digits and cash generation was robust,
leading to a healthy year-end cash position.

In December, agreement was reached with
the Trustee of the RM Defined Benefit Pension
Scheme with regards to the triennial valuation
as at 31 May 2015, reducing the recovery period
to 9 years.

RM Resources produced a good performance with
encouraging growth in TTS and a further increase
in strong margins. Since the year end we have sold
the small SpaceKraft operation.

RM Results also delivered good revenue and profit
growth and secured a new e-marking contract with
the UK’s largest schools examination body, AQA.

RM Education revenues declined as anticipated
while it continues to move away from IT hardware
towards being a services and software business
and as a result of the rundown of the government’s
building schools for future programme. We now
believe we have established a stabilised platform
for this business.

The Group has a strong balance sheet, with
cash and short term deposits at the year-end of
£48.3 million (2014: £47.9 million).

The Board is recommending a final dividend of
3.80 pence per share which would constitute,
at 5.00 pence per share in total, an increase of
25% over the prior year. This demonstrates our
previously-stated intention to progress towards a
more appropriate level of dividend cover.

While the UK Education market remains subdued,
our strategy will be to continue to focus on retaining
a leading market position for all three businesses
whilst maintaining our stronger operating margins.

John Poulter
Chairman
1 February 2016

The Group has a
strong balance
sheet, with cash
and short term
deposits at the
year-end of
£48.3 million.

John Poulter
Chairman

Strategic
Report

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

Operating Review

The Group is structured in three operating
divisions, each with its own managing director
and management team. Some staff functions are
provided centrally. Approximately 33% (2014: 28%)
of Group headcount is based in India, providing
support services and software development to
the operating divisions.

RM Resources

The RM Resources Division consists of the operating
business TTS. In December 2015 we divested
our small special educational needs business,
SpaceKraft, for £0.8m which is separately identified
as Held for Sale as at 30 November 2015. This
enables the RM Resources management team to
focus on the much larger TTS operation and exit
from manufacturing activities that were required as
part of the SpaceKraft business model.

TTS provides education resources used in schools
through a mainly direct marketing business model
with goods supplied from large, centralised UK
distribution centres. Products supplied are a mix
of third party branded and TTS branded items
manufactured by a network of third party suppliers.

The Division’s strategy is to grow market share in
the provision of resources to UK schools, early
years and special educational needs markets
via direct catalogue and online sales. TTS also
supplies a subset of these products through UK
and international distributors as well as directly to
international schools.

Divisional revenue increased by 7.6% to
£63.5 million (2014: £59.1 million), with UK
market share gains and a 31.6% increase in
international revenues. Divisional revenue
increased by 12.2% in the first six months but only
by 3.7% in the second half of the year as first half

sales benefited from the curriculum changes that
drove strong sales of new products.

Divisional adjusted operating margins remained
consistent at 17.5% reflecting the benefits of
continued growth and strong control over costs.
Adjusted operating profit was £11.1 million
(2014: £10.3 million).

TTS UK Direct Marketing

Revenue from TTS UK direct marketing increased
by 4.0% to £48.3 million (2014: £46.4 million).
The first half of the year was very strong, showing an
11.9% year-on-year increase, with the last effects of
the uplift supported by changes to the curriculum
in English primary schools. However, in the
second half revenue in this area decreased by 2.9%
reflecting the tighter budgets within schools.

We continue to make significant investment in
TTS’ online channel. Online orders now make up
30% of direct marketing sales and a completely new
e-commerce platform will be released this year.

We expect the UK education resources market to
continue to be subdued as a result of increased
pressure on the discretionary element of school
budgets. Our focus will be on maintaining sector
leading margins while looking to retain our strong
market position.

TTS International

Revenue from international sales to overseas
resellers and to international schools increased by
31.6% to £11.1 million (2014: £8.5 million). This was
driven by growth in Europe and the Americas and
included a large contract in the Middle East. We
expect international revenues to continue to grow
in the coming year.

TTS UK Distributors

Revenue from sales to UK trade partners decreased
by 1.5% to £4.1 million (2014: £4.2 million),
reflecting the tightness of budgets in the wider
UK education resources marketplace.

Our strategy continues to focus
on retaining a leading market
position for all three businesses
whilst maintaining our stronger
operating margins.

David Brooks
Chief Executive Officer

RM Results

The RM Results business provides IT software
and services to enable onscreen exam marking
(e-marking), onscreen testing (e-testing) and the
management and analysis of educational data. Its
customers include government ministries, exam
boards and professional awarding bodies in the UK
and around the world.

The strategy is to primarily grow the e-assessment
side of the business through expanding the
scope of solutions to existing customers through
the provision of leading software products and
services and to win new customers in both the UK
and overseas markets. Software and services are
provided through a combination of proprietary and
third party, in-house and outsourced arrangements.
Internationally the business is expected to develop
through partnerships and software licensing rather
than as a service based activity.

Revenue increased by 10.4% to £30.7 million
(2014: £27.8 million). Adjusted operating margins
increased further to 18.1% (2014: 16.7%). Adjusted
operating profit increased by 19.5% on the prior
year to £5.6 million (2014: £4.6 million).

During the year the business was successful in
securing a three year contract with the education
charity, AQA, the largest UK schools exam awarding
body, to provide e-marking services alongside the
current provider.

Internationally, the business is pursuing
opportunities for the onscreen marking of
paper-based exams as well as onscreen testing,
often bidding with partner organisations. In the
UK, examination and curricula changes introduced
by the English Department for Education have
significantly changed the phasing of exams so
that the vast majority are taken in the summer
term which has moved revenue phasing into
the second half of the year. There is a long-term
trend from paper-based to onscreen testing in the
e-assessment market, though the adoption of such
systems for school based examinations is low.

The educational data side of the business is heavily
dependent on the Department for Education,
principally through the National Pupil Database
and RAISE Online contracts. These contracts
include the capture and publishing of data for the

school performance tables in England and both
are up for retender in the next twelve months.
However, we have successfully managed these
contracts for over 10 years. We are in the process
of exiting a number of other smaller data services,
non-profit making contracts.

We are targeting the growth opportunities in
e-assessment to more than outweigh reduced
revenues in the educational data business, thereby
allowing us to maintain good operating margins.

RM Education

RM Education is a UK focused business supplying
IT software and services to schools and colleges.

The Division’s strategy is to return to sustainable
top line growth by developing the adoption of
its portfolio of software products and services to
existing and new UK school and college customers.

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

As anticipated, the change of strategy away from
selling hardware devices and a reduction in new
school openings under the Building Schools for
the Future (BSF) scheme led to overall revenue in
RM Education declining by 28.3% to £80.2 million
(2014: £111.9 million). However, adjusted operating
profit margins remained stable at 6.8% (2014: 6.9%).
Adjusted operating profit was £5.5 million
(2014: £7.7 million).

Managed Services

The Managed Services offering is primarily the
provision of full IT outsourcing services to schools
and colleges. As anticipated, revenues in 2015
again declined with a reduction in new school
openings under the BSF programme. Managed
Services revenues decreased by 35.5% to £32.2
million (2014: £50.0 million). However, the retention
rates of existing customers increased significantly

during the year to over 80%. In addition, 44 new
schools signed managed services contracts in
the year.

A proportion of our managed service contracts are
subject to long-term project accounting policies,
in particular those relating to BSF. Consequently,
as these contracts progress towards completion,
profits continue to benefit from the effects of good
operational performance and cost control.

Digital Platforms

These include established products such as
RM Integris (RM’s cloud-based school management
system), RM Easimaths curriculum software and
RM Easiteach whole class teaching software
as well as newer offerings including RM Unify.
Digital Platforms revenues increased by 1.4% to
£7.7 million (2014: £7.6 million).

Revenue from RM Integris increased following good
market share gains including over 350 schools in
Derbyshire. The strategy is to increase RM’s market
share by focussing on its cloud-based platform,
competitive price point and investing to develop
its relevance across primary, secondary and multi
academy school customers in a market currently
dominated by a large competitor and with low
levels of switching between suppliers.

RM Unify is a technology platform to allow
customers easy access to the varied digital, cloud-
based, educational specific content and materials
that are now available online. During the year the
Scottish government chose to extend its contract
(providing RM Unify to all schools in Scotland) by
another two years to January 2018.

Going forward the priority areas of focus are on
winning new RM Integris primary, secondary
and multi academy school customers and on
progressing the RM Unify proposition and profile
through embedding and expanding system usage
amongst existing customers.

Infrastructure

Infrastructure includes the tools, products and
services to help schools manage their own IT.
RM Education’s internet business is also included
as well as the provision of third party hardware
that allows RM to meet all the ICT needs of its
customers. Revenues decreased by 25.8% to

£40.3 million (2014: £54.3 million) as we continue
the transition from manufacturing our own PC
client devices and associated warranties and
installations and move to a more technology
agnostic services and support provider.

On the support and network tools side the focus
is on ensuring that existing customers renew their
support contracts and are on the latest version of
our software.

RM is an internet broadband and e-safety service
provider to approximately 5,000 schools. RM
designs and manages networks, procuring and
integrating bandwidth and provides its own and
third party e-safety products. This business is
underpinned by one large regional consortium
which accounts for a large share of its revenue.
The contract runs until 2018 though volumes are
variable. The priority in this area is on growing
customer numbers and improving retention rates.

RM no longer manufactures computers. However,
some customers do still want RM to provide all their
ICT needs, including PC client devices. RM therefore
sources third party hardware which is shipped
directly to customer sites when required. This is a
low margin activity but is seen to be supportive of
the broader relationship with our customers which
is a critical success factor in being an infrastructure
partner of choice to schools.

RM India

As at 30 November 2015, RM’s operation in
Trivandrum accounted for 33% of Group headcount
(2014: 28%).

The Indian operation provides services solely
to RM Group companies. Activities include
software development, customer and operational
support and back office shared service support
(e.g. customer order entry, IT, finance and HR)
and administration.

Employees

Average Group headcount for the year was 1,860
(2014: 1,870) which is comprised of 1,645 (2014:
1,640) permanent and 215 (2014: 230) temporary
or contract staff, of which 1,294 (2014: 1,360) were
located in the UK and 566 (2014: 510) in India. At 30
November 2015 headcount was 1,899 (2014: 1,778).

The following table sets out a more detailed
summary of the permanent staff employed as at
30 November 2015:

Male

Female

Directors

2 (100%)

0 (0%)

Senior Managers
(excluding Directors)

54 (81%)

13 (19%)

All employees

1,113 (66%)

583 (34%)

The Group is committed to offering equal
employment opportunities and its policies are
designed to attract, retain and motivate the best
staff regardless of gender, sexual orientation, race,
religion, age or disability. The Group gives proper
consideration to applications for employment
when these are received from disabled persons
and will employ them in posts whenever suitable
vacancies arise. Employees who become disabled
are retained whenever possible through retraining,
use of appropriate technology and making
available suitable alternative employment.

The Group encourages the participation of all
employees in the operation and development
of the business and has a policy of regular
communications. The Group incentivises
employees and senior management through
the payment of bonuses linked to performance
objectives, together with the other components of
remuneration detailed in the Remuneration Report.

The Group has a wide range of other written
policies, designed to ensure that it operates in a
legal and ethical manner. These include policies
related to health and safety, ‘whistle blowing’, anti-
bribery and corruption, business gifts, grievance,
career planning, parental leave, systems and
network security. All of RM’s employment policies
are published internally.

Group Financial
Performance

Group revenue declined by 12.0% to £178.2 million
(2014: £202.5 million) as anticipated.

To provide a better understanding of underlying
business performance, amortisation charges
relating to acquisition related intangible assets,
share-based payment charges and other items of
an exceptional nature have been disclosed in an

adjustments column in the Income Statement to
give ‘Adjusted’ results.

Adjusted operating profit margins increased again
this year from 9.1% in 2014 to 10.2%. Despite
the decline in revenue, adjusted operating profit
decreased only marginally to £18.2 million (2014:
£18.5 million). On a statutory basis, operating
profit was £19.6m (2014: £16.5m) with adjustments
principally benefiting from a release of a £2.4m
provision for dilapidations on leased properties and
onerous lease contracts more than offsetting the
share-based payments charge of £0.9m.

The Group generated an increased unadjusted
statutory profit before tax of £19.2 million (2014:
£15.8 million).

The total tax charge within the Income Statement
for the year was £4.3 million (2014: £4.2 million).
The Group’s tax charge for the period, measured
as a percentage of profit before tax, was 22%
(2014: 26%). The decrease is principally due to
the reduction in the UK corporate tax rate and
an adjustment on finalisation of a prior year
corporation tax return. Adjusted basic earnings
per share were 16.2 pence (2014: 16.4 pence).
Statutory basic earnings per share were 18.5 pence
(2014: 13.9 pence) and statutory diluted earnings
per share were 17.8 pence (2014: 13.0 pence).

RM generated cash from operations for the year
of £10.9 million (2014: £19.1 million). Cash and
short-term deposits increased to £48.3 million
(2014: £47.9 million). The lowest cash and
short-term deposit position during the year
due to seasonal cash flows was £34.0 million
(2014: £25.9 million).

Cash generated from operations is expected
to continue to be less than operating profit
in the year ahead, reflecting the reversal of a
favourable working capital position related to
long-term contracts.

Dividends

The total dividend paid and proposed for the year
has been increased by 25% to 5.00 pence per share
(2014: 4.00 pence). This comprises an already
paid interim dividend of 1.20 pence per share and,
subject to shareholder approval, a proposed final
dividend of 3.80 pence per share. The estimated
total cost of normal dividends paid and proposed
for 2015 is £4.1 million (2014: £3.2 million).

This increased dividend proposal reduces the
dividend cover ratio from 4.1 to 3.2.

Defined Benefit Pension Scheme

At 30 November 2015 the IAS 19 scheme deficit
(pre-tax) was £21.9 million (2014: £26.8 million).
This reduction in Scheme deficit results from
the reduction in liabilities due to beneficial
membership experience over the three year
valuation period ended May 2015, better than
assumed returns on the Scheme assets and the
shortfall contributions paid by the Company.
These have been partially offset by the change in
the mortality assumptions and a reduction in the
inflation risk premium.

On 11 December 2015, agreement was reached
with the Trustee of the RM Defined Benefit Pension
Scheme (“Scheme”) with regards to the triennial
valuation as at 31 May 2015. The deficit was agreed
at £41.8 million (31 May 2012: £53.5 million). The
deficit recovery plan comprises an initial cash
contribution of £4.0 million into the Scheme and
£4.0 million into the escrow account previously
established for the purposes of further risk
mitigation exercises, together with deficit recovery
payments remaining at £3.6 million per annum until
2024 (previously 2027). These funding plans will be
assessed at future triennial reviews.

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.

Financial Viability
Statement

In accordance with the UK Corporate Governance
code, in addition to an assessment of going
concern, the Directors have also considered the
prospects of the Company over a longer time
period. The period of assessment chosen is three
years, which is consistent with the time over
which the Company’s medium-term financial
plans are prepared. These financial plans include
Income Statements, Balance Sheets and Cash
Flow Statements. They have been assessed by the

Board in conjunction with the principal risks of
the Company, which are documented within the
Principal Risks and Uncertainties section below,
along with their mitigating actions.

The Board considers that the principal risks which
have the potential to threaten the Company’s
business models, future performance, solvency or
liquidity over the three year period are:

Public policy risk – UK education policy priority
changes or restrictions in government funding
due to fiscal policy.

2. Operational execution – including:

RM Results operational performance over
peak examination marking periods

b. Significantly increased working capital

requirements within the RM Education and
RM Results long-term contract portfolios
and requirements in evolving RM Education
business models

c. Major adverse performance in a key
contract or product which results in
negative publicity and which damages
the Group’s brand

3. Business continuity – an event impacting
the Group’s major buildings, systems or
infrastructure components. This would include
a major incident at TTS’ warehouse.

4. Strategic risks – loss of a significant

contract which underpins an element of a
Division’s activity.

5. Defined Benefit Pension Scheme – funding
of the Scheme deficit in adverse market
conditions.

Having assessed the above risks, singularly and
in combination, and via sensitivity analysis, the
Directors have a reasonable expectation that the
Company will be able to continue in operation and
meet its liabilities as they fall due over the three
year period of assessment and are not aware of
any reason that viability would be an issue for the
foreseeable period after this.

Environmental Matters

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

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. The Board confirms that it has carried out a robust
assessment of the principal risks facing the Company and appropriate processes have been put in place to
monitor and mitigate them, further details of which are given in the Corporate Governance Report. The key
business risks for the Group are set out in the table below.

Risk

Description

Mitigation

Public policy

The majority of RM’s business is funded
from UK government sources. Changes
in political administration, or changes
in policy priorities, might result in a
reduction in education spending.

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

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.

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
an individual business’ revenues are in
decline, management seek to ensure
that the cost base supporting these is
adjusted accordingly.

Education practice

Education practices and priorities may
change and, as a result, RM’s products
and services may no longer meet
customer requirements.

The Group seeks to maintain knowledge
of current education practice and
priorities by maintaining close
relationships with customers.

Operational
execution

RM provides sophisticated products
and services, which require a high level
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 major
incident, 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 a Security
and Business Continuity Committee
to oversee the security aspects of the
Group’s information systems. This covers
data integrity and protection, defence
against external threats (including cyber
risks) and disaster recovery.

The Group seeks to protect itself against
the consequences of a major incident
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, 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.

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 of a pensioner buy-in from
an insurance company and a flexible
retirement option exercise is currently
in progress.

The Group evaluates risk mitigation
proposals with the Scheme trustee.

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

The Group is exposed to counterparty
risk on liquid assets.

Financial – capital

The Group’s ability to pay dividends
to shareholders depends on having
sufficient distributable reserves in the
holding company, RM plc. Additional
losses incurred as a result of significant
increases in the pension scheme
deficit could further impair the ability
of RM Education Ltd to pay dividends
up to RM plc.

David Brooks
Chief Executive Officer
1 February 2016

Directors’
Biographies

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

John Poulter (73) was appointed as Non-Executive
Chairman of RM plc on 1 May 2013. He is also
Chairman of the Nomination Committee of
the Board. Mr Poulter is currently Chairman of
4imprint Group plc. He is a former Chairman and
former Chief Executive of Spectris plc and has also
been a Non-Executive Director of a number of
public and private companies including FTSE 250
constituents BTP plc, RAC plc and Kidde plc.

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

Lord Andrew Adonis (52) joined the Board on
1 October 2011. He served 12 years in government
as a Minister and special adviser, including
Secretary of State for Transport, Minister for
Schools, Head of the No.10 Policy Unit, and senior
No. 10 adviser on education, public services and
constitutional reform. Before joining government,
he was Public Policy Editor of the Financial Times.
Lord Adonis is Interim Chair of the National
Infrastructure Commission, and Non-Executive
Director of Dods (Group) PLC and a number of
charitable organisations.

David Brooks
Chief Executive Officer

David Brooks (46) was appointed Chief Executive
Officer of RM plc on 1 March 2013, having been
appointed to the Board as Chief Operating Officer
on 1 July 2012. He originally joined RM, with a
degree in computing, on the Group’s graduate
scheme. He has gained extensive experience in the
education sector across many parts of the RM Group
and is an alumnus of the Harvard Business School
Advanced Management Programme.

Committee membership as at the date of this report:
(a)
(r)
(n)

Audit Committee Member
Remuneration Committee Member
Nomination Committee Member

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

Patrick Martell (52) joined the Board on
1 January 2014 as a Non-Executive Director
and was appointed Chair of the Remuneration
Committee on 19 March 2014. Mr Martell is a former
Group CEO of St Ives plc, having joined in 1980.
He was appointed to the Board of St Ives plc on
1 August 2003 and held the position of Managing
Director, Media Products and Managing Director,
UK Operations from 2006 to 2009, at which point he
was appointed Group CEO. Mr Martell is currently
Chief Executive of the Business Intelligence Division
of Informa plc.

Neil Martin
Chief Financial Officer

Neil Martin (43) joined the Company and the
Board on 28 September 2015. Prior to joining RM,
he was CFO for UK and Ireland for the Adecco Group,
the leading provider of HR solutions listed on the
Swiss Stock Exchange. He was CFO at the UK listed,
IT staffing company, Spring plc until it was acquired
by Adecco in 2009. Mr Martin started his career by
spending seven years at Exxon Mobil.

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

Deena Mattar FCA (50) joined the Board on
1 June 2011 as a Non-Executive Director and
was appointed Chair of the Audit Committee
on 26 March 2012. She served as Group Finance
Director of Kier Group plc from 2001 to 2010, having
joined the Group in 1998 as Finance Director of
Kier National. Prior to this she held senior positions
at KPMG. Ms Mattar is also a Non-Executive Director
of Wates Group Ltd. and, until its recent sale to
Schneider Electric, she was a Non-Executive
Director and Chairman of the Audit Committee for
Invensys plc. She is also a former Non-Executive
Director of Lamprell plc.

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 2015.

Set out below are all of the emission sources
required to be reported under the Companies
Act 2006 (Strategic Report and Directors’ Reports)
Regulations 2013.

The GHG Protocol Corporate Accounting and
Reporting Standard (revised edition) has been
applied. The figures include emissions arising from
all financially controlled assets, as well as business
travel arising from air and other vehicle use.

Directors’
Report

The Directors submit their report together with
the audited consolidated and Company financial
statements for the year ended 30 November 2015.

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

Dividends

The total dividend paid and proposed for the
year has been increased by 25% to 5.00 pence
per share (2014: 4.00 pence). This comprises an
interim dividend of 1.20 pence per share paid
in September 2015 and, subject to shareholder
approval, a final dividend of 3.80 pence per share.

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.

The Board is
recommending
a dividend of
5.00 pence per
share in total, an
increase of 25%
over the prior year.

John Poulter
Chairman

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 2015

Year ended 30 September 2014

Scope 1

Air travel

Van/car travel

Gas

Scope 2

Electricity and gas

India

Electricity and gas

India

Total

1,017

350

658

115

689

2,227

713

2,829

2,940

5,769

733

397

800

758

2,844

730

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

Health and safety

Year ended
30 September 2015

Year ended
30 September 2014

1.56

1.62

3.18

1.49

1.91

3.40

The Group has implemented a health and safety management system which aims to continually improve health
and safety implementation and is designed to meet the requirements of OHSAS 18001. The following objectives
are incorporated into the health and safety management system:

• 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 29 January 2016 the Company had received notifications that the following parties were interested
in accordance with DTR 5:

Shareholder

Percentage of
Issued Share Capital
as at 29 January 2016

No. of
shares

No. of shares
Direct

No. of shares
Indirect

Schroders Investment Management Ltd

17,078,778

20.66%

17,078,778

Aberforth Partners

Artemis Investment Management LLP

Majedie Asset Management Ltd

The Wellcome Trust Ltd

13,434,000

8,754,376

5,269,910

4,798,752

16.25%

10.59%

6.38%

5.81%

13,434,000

5,740,463

3,013,913

5,269,910

4,798,752

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 2015, the RM plc Employee
Share Trust owned 1,614,170 ordinary shares in the Company (1.95% of the issued share capital); any voting or
other similar decisions relating to those shares would be taken by the Trustees, who may take account of any
recommendation of the Board of the Company.

The Group enters into long-term contracts to supply ICT products and services to its customers. Wherever
possible, these contracts do not have change of control provisions, but some significant contracts do include
such provisions.

In January 2012 the Group entered into a £30 million revolving credit facility with Barclays Bank plc, which has
been extended to March 2017. This facility has a change of control provision and is subject to termination in the
event of change of control of the Company.

Repurchase of own shares

At the Annual General Meeting held on 25 March 2015, members renewed the authority under section 701 of
the Companies Act 2006 to make market purchases on the London Stock Exchange of up to 8,264,001 ordinary
shares, being 10% of the issued share capital of the Company. The minimum price which may be paid for each
share is the nominal value. The maximum price which may be paid for a share is an amount equal to the higher
of (1) 5% above the average of the middle market quotations of the Company’s ordinary shares as derived from
the London Stock Exchange Daily Official List for the five business days immediately preceding the day on which
such share is contracted to be purchased and (2) the amount stipulated by Article 5(1) of the Buy-back and
Stabilisation Regulation 2003. This authority has not been used since the Annual General Meeting.

The Directors will seek to renew this authority at the next Annual General Meeting scheduled for 23 March 2016.

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

Lord Andrew Adonis

David Brooks

Iain McIntosh (resigned 28 September 2015)

Patrick Martell

Neil Martin (appointed 28 September 2015)

Deena Mattar

Biographical details of the current Directors are
given in the Directors’ Biographies section of
the Annual Report. At the forthcoming Annual
General Meeting all continuing Directors will
stand for re-election in accordance with best
practice and guidance set out in the UK Corporate
Governance Code. The Directors who are proposed
for re-election or election have either a letter of
appointment or a service contract, details of which
can be found in the Remuneration Report.

The Group has provided indemnity insurance for
one or more of the Directors during the financial
year and at the date of signing this report. The
Directors also have the benefit of a Deed of
Indemnity in respect of liabilities which may
attach to them in their capacity as Directors of
the Company. These provisions are qualifying
third party indemnity provisions as defined by
section 234 of the Companies Act 2006.

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
have taken reasonable steps in order to make

themselves aware of relevant audit information and
to establish that the Company’s auditor is aware of
that information.

A resolution to reappoint KPMG LLP as auditor of
the Company will be proposed at the next Annual
General Meeting.

Directors’ responsibilities statement

The Directors are responsible for preparing the
Annual Report and the Group and Company
financial statements in accordance with applicable
UK law and regulations.

UK company law requires the Directors to prepare
financial statements for each financial year. Under
that law the Directors are required to prepare
the Group financial statements in accordance
with International Financial Reporting Standards
(IFRSs) as adopted by the European Union and
have elected to prepare the Company financial
statements on the same basis. Under company
law the Directors must not approve the financial
statements unless they are satisfied that they give
a true and fair view of the state of affairs of the
Company and the Group and of the profit or loss of
the Group for that year.

In preparing those financial statements, the
Directors are required to:

• 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

Annual General Meeting

The forthcoming Annual General Meeting will be
held on 23 March 2016 at 140 Eastern Avenue,
Abingdon, Oxfordshire OX14 4SB, at the time set out
in the Annual General Meeting notice. The notice of
the Annual General Meeting contains the full text of
resolutions to be proposed.

By Order of the Board

Greg Davidson
Company Secretary
1 February 2016

ensure that the financial statements comply with
the Companies Act 2006. They are also responsible
for safeguarding the assets of the Group and hence
for taking reasonable steps for the prevention and
detection of fraud and other irregularities.

Under applicable law and regulations, the Directors
are also responsible for preparing a Strategic
Report, Directors’ Report, Remuneration Report,
Corporate Governance Report and Audit Committee
Report that complies with that law and those
regulations.

Each of the Directors, whose names and functions
are listed at the front of the Annual Report, confirm
that, to the best of their knowledge:

•

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

the information contained in the Strategic Report
includes a 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.

We consider the annual report and accounts, taken
as a whole, is fair, balanced and understandable
and provides the information necessary for
shareholders to assess the Group’s position and
performance, business model and strategy.

A copy of the Group financial statements is posted
on the Group’s website www.rmplc.com. The
Directors are responsible for the maintenance and
integrity of the Group’s website and the financial
information included on the website. Information
published on the website is accessible in many
countries with differing legal requirements but
only legislation in the United Kingdom governing
the preparation and dissemination of financial
statements applies to the Group.

Corporate
Governance
Report

Introduction from the Chairman

As Chairman, I am responsible for ensuring that
the Company has high standards of corporate
governance. On behalf of the Board, I confirm that
the Company has complied with the provisions
of the UK Corporate Governance Code 2014 (the
“Code”) throughout the 12 month period ended
30 November 2015. How we have applied the
principles of the Code is set out in the table below.

The Code itself provides a framework for corporate
governance and, irrespective of the Code, the Board
tries to foster throughout the organisation a culture
of open and honest communication, constructive
challenge and proper division of responsibilities, all
set within a structure containing appropriate checks
and balances. The Board sees this as a positive
contributor to effective business operations.

This Corporate Governance Report provides a
summary of the arrangements that are in place
and the above is intended to set the context
within which those arrangements operate and the
importance placed on them by the Board.

John Poulter
Chairman

Compliance with the UK Corporate Governance Code 2014

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.

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 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.

The Non-Executive Directors scrutinise strategic proposals
for the Group and monitor performance on an ongoing
basis. The controls in place to ensure the integrity of
financial information and systems of risk management
are described elsewhere in the Annual Report.

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. While the Chairman chairs
the Nomination Committee, the Senior Independent
Director would do so if the Committee was dealing
with the appointment of a new Chairman. An external
search consultancy, which had no other connection to
the Company, assisted with the appointment of Neil
Martin as Chief Financial Officer (appointment effective
28 September 2015).

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

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

All Directors receive an induction on joining the Board.
All 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.

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.

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 principal 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.

The performance of the Board and each
Board Committee is reviewed on an annual basis
and a review was conducted during the year ended
30 November 2015.

The performance of the Chairman is assessed by the
Non-Executive Directors led by the Senior Independent
Director. The Senior Independent Director also
meets with the Non-Executive Directors without the
Chairman being present on such other occasions as
considered appropriate.

The performance of the Chief Executive Officer is
assessed by the Chairman, in consultation with the
other Non-Executive Directors. The performance of the
Chief Financial Officer is assessed by the Chief Executive
Officer, in consultation with the Chairman and other
Non-Executive Directors.

The Chairman also holds meetings with the Non-
Executive Directors without the Executive Directors
present when considered appropriate.

All Directors 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, further details of which are given
elsewhere in this Report. This process is reviewed at
least on an annual basis. The Directors confirm that they
have carried out a robust assessment of the principal
risks facing the Company. Further details of those risks
are in the Strategic Report.

The Audit Committee is comprised of Non-Executive
Directors and meets at least three times a year. The
Chief Executive Officer and Chief Financial Officer are
invited to attend. The Audit Committee meets separately
with the Company’s auditor without the Executive
Directors present. Further details are set out in the Audit
Committee Report.

Code of Best Practice – Principles

RM Statement of compliance

REMUNERATION

The Level and Components of Remuneration

Executive directors’ remuneration should be designed
to promote the long-term success of the company.
Performance-related elements should be transparent,
stretching and rigorously applied.

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.

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.

The Remuneration Committee carefully considers the
elements of remuneration paid to Executive Directors
and the basis on which they are paid. In all cases,
remuneration is designed to promote the long-term
success of the Company. The Remuneration Report sets
out further details.

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

Remuneration packages for individual Directors are
set by the Remuneration Committee after, if required,
receiving information from independent sources and
the Company’s Human Resources function. Further
details are provided in the Remuneration Report. The
Chief Executive Officer and Chief Financial Officer may
be invited to attend the Committee’s meetings but are
not involved in deciding their own remuneration. The
Chairman of the Remuneration Committee is available
to discuss remuneration with shareholders as required.

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.

Constructive Use of General Meetings

The board should use general meetings to
communicate with investors and to encourage
their participation

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

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 three Board committees: Audit,
Remuneration and Nomination, each
of which comprises only independent
Non-Executive Directors.

The Audit Committee is chaired by Deena Mattar.
The Audit Committee is comprised solely of
independent Non-Executive Directors. The Audit
Committee meets at least three times a year.
The Company’s external auditor, Chief Executive
Officer, Chief Financial Officer, Company Secretary,
and the Group Financial Controller, who is
Head of Internal Audit, normally attend these
meetings. The Audit Committee is responsible
for reviewing the accounting policies, internal
control environment and the financial information
contained in the annual and interim reports.
It provides an opportunity for the Non-Executive
Directors to make independent judgments and
contributions, thus furthering the effectiveness of
RM’s internal controls, both financial and otherwise.
Further details of the Audit Committee’s activities
are given in the Audit Committee Report. The terms
of reference for the Audit Committee are published
on www.rmplc.com.

The Remuneration Committee is chaired by
Patrick Martell. The Remuneration Committee is
comprised solely of independent Non-Executive
Directors. Executive Directors and senior managers
may be invited to attend Committee meetings
but will not be present during any discussion of
their own pay arrangements. The Remuneration
Committee sets the remuneration of the Executive
Directors and recommends and monitors the
level and structure of remuneration for senior
management. It also considers grants and

performance conditions under RM’s share-based
payment schemes and reviews RM’s employment
strategy generally. Further details of the
Remuneration Committee’s activities are given in
the Remuneration Report. The terms of reference
for the Remuneration Committee are published on
www.rmplc.com.

The Nomination Committee is chaired by the
Chairman and includes all of the independent
Non-Executive Directors. The Nomination
Committee recommends to the Board candidates
for appointment as Directors. It meets as required,
when the Group is considering the appointment of
Directors. The terms of reference for the Nomination
Committee are published on www.rmplc.com.

Board attendance

Details of the number of meetings of the Board and each Committee and individual attendances by Directors are
set out in the table below.

Board
Meetings

Audit
Committee

Remuneration
Committee

Nomination
Committee

n/a

Number of meetings held in the period

John Poulter

Lord Andrew Adonis

David Brooks

Iain McIntosh1

Patrick Martell

Neil Martin2

Deena Mattar

1. Retired 28 September 2015
2. Appointed 28 September 2015

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 otherwise, as appropriate. Other Directors are available
to meet institutional shareholders on request. The Annual Report is made available on the Company’s website
(www.rmplc.com), and sent to shareholders, as appropriate, at least 20 working days before the Annual General
Meeting. Each issue for consideration at the Annual General Meeting is proposed as a separate resolution.
All Directors generally attend the Annual General Meeting.

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.

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 Code, which
may otherwise prevent the achievement of the
Group’s objectives.

The Group recognises that it operates in a highly
competitive market that can be affected by factors
and events outside its control. Details of the main
risks faced by the Group are set out in the “Principal
Risks and Uncertainties” table in the Strategic
Report. It is committed to mitigating risks arising
wherever possible. Internal controls that are
considered, applied and monitored appropriately,
are an essential tool in achieving this objective.

The key elements of Group internal control, which
have been effective during 2015 and up to the date
of approval of the financial statements are set
out below:

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

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

• A financial planning process with an annual
financial plan approved by the Board, which
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

• Regular reviews by the Executive Committee
of the Group’s systems and procedures, the
principal risks facing the Company and the steps
taken to mitigate and address those risks

• Periodic reviews by the Audit Committee of
the principal risks facing the Company and
mitigating actions as noted above, as well as of
the Group’s systems and procedures to identify
and address those risks

The majority of the Group’s financial and
management information is processed and
stored on computer systems. The Group is
dependent on systems that require sophisticated
computer networks. The Group has established
controls and procedures over the security of
data held on such systems, including business
continuity arrangements.

Both the Board and Audit Committee have
reviewed the operation and effectiveness of this
framework of internal control for the period and up
to the date of approval of the Annual Report.

We continue to make significant
investment in TTS’ online channel.
Online orders now make up 30%
of direct marketing sales and a
completely new e-commerce
platform will be released this year.

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 auditors, overseeing
the relationship with the Company’s
external auditors (including recommending
remuneration levels and considering non-audit
services), assessing the auditors 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 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 accounts
are based relate primarily to long-term contract
accounting and the related margin recognition.

Long-term contracts represent a significant part
of the Group’s business and the accounting is
inherently judgemental. To decide the margin to
be recognised or loss to be provided, it is necessary
to estimate future costs. Also, the Group may sign
variations, extensions and/or new contracts with
an existing customer and it is necessary to assess
whether or not, for accounting purposes, these
should be combined with an existing contract.

Monthly management accounts and reports are
provided to the Board and Audit Committee. These
management accounts are based on detailed
information obtained by management which take
into account the following:

• 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

Where a contract has a significant impact on
revenue and profit or where there is a significant
variation to the contract outturn or a significant
judgement is required this information is typically
included in the management accounts and
discussed by the Board and the Audit Committee.

Taking into account the track record and experience
of the management team which prepares the
costs to complete on long-term contracts and
after reviewing the presentations and reports from
management and the auditors and consulting with
the auditor, the Audit Committee was satisfied
that, overall, the financial statements appropriately
addressed the critical judgements and key
estimates (both in respect to the amounts reported
and the disclosures).

Management reported to the Committee that they
were not aware of any material misstatements. The
auditor reported to the Committee that they had
not found any misstatements in the course of their
work. The Audit Committee was also satisfied that
the significant assumptions used for determining the
value of assets and liabilities had been appropriately
scrutinised, challenged and were sufficiently robust.

The Audit Committee considered and is satisfied
that, taken as a whole, the Annual Report 2015 is
fair, balanced and understandable and provides
the information necessary for shareholders to
assess the Group’s performance, business model
and strategy.

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 and Patrick Martell, all of
whom are independent Non-Executive Directors.
The Group considers that Deena Mattar as a Fellow
of the Institute of Chartered Accountants in England
and Wales and former FTSE250 Finance Director has
significant recent and relevant financial experience.

David Brooks (Chief Executive Officer), Iain McIntosh
MA, FCA (Chief Financial Officer until 28 September
2015), Neil Martin, ACMA (Chief Financial Officer
from 28 September 2015), Ed Warwick MEng, FCA
(Group Financial Controller until 3 January 2016)
and other management as appropriate are invited
to attend Audit Committee meetings.

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 25 March 2015,
the re-appointment of KPMG LLP as Group
external auditor.

KPMG has been the Group’s auditor since 2011.
The external auditor is required to rotate the audit
partner responsible for the Group audit every five
years and, as such, a new lead audit partner will be
appointed in 2016.

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

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 Group Board for approval.

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 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.

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 approved the appointment
of RM’s Group Financial Controller (Ed Warwick
MEng FCA until 3 January 2016 with his successor
to be appointed) as Head of Internal Audit. For
the purposes of this role, the Group Financial
Controller reported directly to the Chair of the Audit
Committee. The Audit Committee, with the advice
and support of the Head of Internal Audit, sets an
internal audit plan, focussed on financial controls
and risk areas. The Head of Internal Audit reports
on progress against this plan at Audit Committee
meetings. Internal audit activities are undertaken
on a peer-to-peer basis, or by contracting a suitably
qualified third-party firm of accountants.

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 auditors to carry out
non-audit work in excess of this cap. If this is the
case the type of work and the fee is considered
very carefully by the Audit Committee in advance of
appointing the auditors to the work. Fees for total
non-audit work in the period were 18.7% of the
annual audit fee.

Main control procedures

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
1 February 2016

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 or by engaging a third
party firm of accountants and is 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.

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.

The RM Results
strategy is to grow
the e-assessment
side of the business
in both the UK and
overseas markets.

Remuneration
Report

Part A - Introduction

2. Membership of the Committee

On behalf of the Board, I am pleased to present
the Remuneration Report for the year ended
30 November 2015.

This Report is divided into the following
three sections:

Part A – Introduction
Part B – Remuneration Policy
Part C – Implementation Report

The introduction in this Part A provides an overview
of the Report and explains any major decisions or
changes in remuneration made during the year
and the context of those changes (if any). It also
summarises the functioning and membership of the
Remuneration Committee.

The Implementation Report in Part C will be put
to an advisory vote at the next Annual General
Meeting. The Remuneration Policy in Part B has not
changed and so will not be put to a vote, though it
is noted that, following feedback received last year,
we have provided some extra clarity and detail.

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.

The membership of the Remuneration Committee
during the year ended 30 November 2015
comprised Lord Andrew Adonis, Patrick Martell,
Deena Mattar and John Poulter, all of whom are
independent Non-Executive Directors. The other
Directors attend meetings by invitation.

None of the members of the Remuneration
Committee has any personal financial interest in
the Company other than through fees received or as
a shareholder. They are not involved in the day-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 2014.

• Approval of the Remuneration Report for the

year ended 30 November 2014.

• Agreement that there would be no increase in
remuneration for any Director during the year.

• The grant of PSP awards to Executive Directors

and senior management in August 2015.

• Approval of the termination payment made to
Iain McIntosh (CFO until 28 September 2015).

• Approval of the remuneration payable for Neil

Martin (CFO from 28 September 2015).

• The grant of a PSP award to Neil Martin in
October 2015 following his appointment.

Patrick Martell
Chair, Remuneration Committee
1 February 2016

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.

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 promote
the long-term success of the company. The
Policy is designed to attract, retain and motivate
Directors and senior employees, both to achieve
the Group’s business objectives and to deliver
outstanding shareholder returns. To achieve
this, RM’s Remuneration Policy aims to provide
‘median’ reward compared to comparator groups
when acceptable levels of performance have been
delivered. For the achievement of outstanding
performance, it aims to deliver ‘upper quartile’
remuneration compared to comparator groups.

Under these arrangements, the variable component
of the remuneration package is designed to
be focused on performance. These incentive
arrangements enable Executive Directors and
senior employees to have the opportunity to
earn higher levels of reward but only if they
enhance shareholder returns by meeting the
Group’s short-term and long-term targets. The
Remuneration Policy therefore seeks to ensure
that Executive Directors and senior employees
are focused on the achievement of key company
objectives. The Committee is satisfied that this
model provides appropriate alignment with
shareholder interests and therefore acts as an
appropriate motivator.

The Committee, together with the entire Board, also
recognises the need for investment in the 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

Element

Fixed Pay

Base Salary

Pension
(see also
note 2 below)

Benefits

Variable Pay

Annual Bonus

LTIPs

Notes:

Purpose and link to strategy

Operation

Maximum Opportunity

Performance Metrics

Changes for 2015/16

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

Reviewed annually, with changes usually taking effect from
1 January (see note 1 below). 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).

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

Entitlement is the same as for other employees within the
Group. Cash allowance alternative where individuals are
subject to HMRC pension limits (subject to there being the
same overall cost to the Group).

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.

Base salaries will be determined

None.

from the outcome of reviews.

No change to policy.

Up to 7% of base salary depending

None.

No change to policy.

Private healthcare.

None.

No change to policy.

upon level of employee

contribution.

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

of each year to focus on alignment with

figure for over-performance of

shareholders’ interests.

110% of base salary.

150% of base salary.

Set by the Committee at the date

No change to policy.

of grant to align with shareholders’

interests over a period of not less than

3 years.

1. As noted in Part A above, the Committee did not increase the base salary of any Directors during the year. Since

the end of the financial year, having applied the principles set out in the table above, the Committee has increased
the base salary of David Brooks to £318,000 with effect from 1 April 2016. As agreed upon his appointment, the
Committee has reviewed Neil Martin’s terms and increased his base salary from £275,000 on his appointment to
£286,200 with effect from 1 April 2016.

Element

Fixed Pay

Purpose and link to strategy

Operation

Maximum Opportunity

Performance Metrics

Changes for 2015/16

Base Salary

To attract and retain

Reviewed annually, with changes usually taking effect from

talent by ensuring that

1 January (see note 1 below). Reviews take account of:

Base salaries will be determined
from the outcome of reviews.

None.

No change to policy.

salaries are competitive in

the market.

• business performance and the wider economic and

market conditions;

• market position relative to relevant comparator groups;

•

the range of salary increases (if any) across the Group;

and

•

individual experience and performance.

Reviews may be conducted at other times if appropriate

(e.g. on a change in responsibility).

Pension

(see also

To attract and retain

Entitlement is the same as for other employees within the

talent by ensuring

Group. Cash allowance alternative where individuals are

note 2 below)

that remuneration is

subject to HMRC pension limits (subject to there being the

competitive in the market.

same overall cost to the Group).

Benefits

To attract and retain

Entitlement is the same as for other employees within

talent by ensuring

the Group. The range of benefits offered to employees is

that remuneration is

reviewed periodically to ensure that offerings are in line

competitive in the market.

with market practice.

Variable Pay

Annual Bonus

Provides an element

of at risk pay, which

Reviewed annually prior to the start of each financial

year to ensure targets support short-term and long-term

incentivises good annual

business strategy. Targets are intended to:

financial results.

• be stretching but realistic;

•

reflect expectations of the investor community;

• avoid unnecessary risk taking; and

• encourage long-term decision-making

(e.g. incentivising long-term investments).

LTIPs

Incentivises Directors

to achieve returns for

Awards are granted to Executives and senior management

typically no more than once per year, with the vesting

shareholders over a longer

of awards being based on criteria designed to align

time frame.

with shareholder interests and encourage long-term

performance.

Notes:

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.

55% of base salary for on-target
performance, with a maximum
figure for over-performance of
110% of base salary.

None.

No change to policy.

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.

No change to policy.

2. 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.

3. Shareholding Policy

5. Clawback

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:

Malus and clawback provisions are in place, and
will continue to be maintained, in relation to the
variable, performance related remuneration of the
Executive Directors (annual bonus and LTIPs).

In respect of each award under the RM plc
Performance Share Plan 2010 (“PSP Scheme”),
the clawback applies where there is a deliberate
act of fraud (whether by the Executive Directors or
anybody else) that results in the misstatement of
the Company’s results. The clawback operates to
the later of (a) one year from the relevant PSP award
vesting and (b) the completion of the next audit of
the Group’s accounts after the award vests.

In respect of annual bonuses, the payment of all
bonuses is at the discretion of the Remuneration
Committee and the clawback applies where
the Company suffers significant financial or
reputational damage as a result of gross or serious
misconduct, fraudulent misrepresentation, the
Executive being convicted of a criminal offence,
wilful default of the relevant Service Agreement
or a breach of Company policy or procedure. The
clawback operates for up to 18 months after the
end of the relevant financial year to which the
bonus relates.

6. Non-Executive Director Fees

The fees payable to Non-Executive Directors are
considered periodically by reference to comparable
roles in companies of a similar size and complexity
as the Company. Fees are not performance-related.
Out-of-pocket expenses (such as travel costs)
incurred in performing those duties are reimbursed
by the Company. It is noted that the fees payable to
Non-Executive Directors have not been increased in
recent years.

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. the prevailing share price as at 30 November
each year (applied to the total number of
shares held); or

b. 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. Policy on Recruitment

The principles set out elsewhere in this Policy, in
particular those in paragraphs 2 and 3 above, apply
both to existing Executive Directors and to any
new Executive Directors on recruitment. No other
amounts or forms of remuneration which would be
outside the parameters set out in this Policy would
be payable (unless agreed with shareholders).

7. 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 2015. However,
it is noted that the illustrations show maximum LTIP awards at 150% of base salary, whereas the typical value
of LTIP awards is lower (e.g. as is shown in paragraph 2 of Part C of this Remuneration Report, the value of LTIP
awards made during the year ended 30 November 2015 was 107% of base salary for David Brooks and 97% of
base salary for Neil Martin).

David Brooks – Chief Executive Officer

Neil Martin – 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

337

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

Fixed
(£000)

On-target

275

310

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

Maximum

• Full pay-out of annual variable pay

Maximum • Full pay-out of annual variable pay

i.e., 110% of base salary

• Maximum vesting of LTIP awards

8. Comparison of Remuneration Policy

This policy sets out the remuneration structure applicable to Directors of the Company. Salary levels and
incentive arrangements applicable to other Group employees are determined by reference to local employment
conditions for comparative roles.

Budgeted salary increases for Group employees are taken into consideration when determining increases for the
Executive Directors.

Employees are provided with a competitive benefits package including (as appropriate) private healthcare,
permanent health insurance, life assurance, car allowance, mobile phone allowance and pension.

The closure to future accrual of benefits of RM Education Ltd’s Defined Benefit Pension Scheme in October 2012
applied equally to all employees, including Directors.

Consistent with Directors, the majority of employees are eligible to participate in an annual bonus scheme
with conditions linked to their personal performance, the performance of their operating subsidiary and the
Group overall.

The Group does not consult with employees in respect of the Remuneration Policy. However, the Committee
receives regular updates on salary and bonus levels across the Group and is aware of how the remuneration of
Directors compares to employees.

In addition, when setting remuneration levels for the Executive Directors, the Committee takes account of the
levels of remuneration received by executive directors of similar companies.

Remuneration consultants have not been engaged during the period.

9. 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 2015 are shown in the table below:

Initial agreement date

Expiry date of
current agreement

Notice to be given by
employer and individual

Current Directors

John Poulter

1 May 2013

30 April 2019

Lord Andrew Adonis

1 October 2011

30 September 2017

1 July 2012

28 September 2015

Indefinite

1 June 2011

31 May 2017

1 January 2014

31 December 2016

6 months

3 months

12 months

3 months

22 October 2009

n/a

12 months

David Brooks

Neil Martin

Deena Mattar

Patrick Martell

Past Directors

Iain McIntosh

RM Education’s strategy is to
return to sustainable top line
growth by developing the
adoption of its portfolio of
software products and services
to existing and new UK school
and college customers.

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 2015 and, in respect of those Directors, the equivalent figures for the year ended 30 November 2014:

Year ended 30 November 2015

Salary
and fees
£000

Taxable
benefits
£000

Annual
bonus
£000

Retirement
benefits
£000

Termination
payments
£000

LTIPs
£000

Name

Executive

David Brooks

Iain McIntosh
(resigned 28
September 2015)

Neil Martin
(appointed 28
September 2015)

Non-Executive

John Poulter

Lord Andrew Adonis

Patrick Martell

Deena Mattar

Total

3001

1961

481

120

782

165

749

479

211

121

250

Total
£000

1,246

945

120

190

1,228

250

2,508

Year ended 30 November 2014

Salary
and fees
£000

Taxable
benefits
£000

Annual
bonus
£000

Retirement
benefits
£000

Termination
payments
£000

LTIPs
£000

Total
£000

2961

2351

120

778

248

155

403

211

161

576

417

120

1,240

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 following provides details of how the ‘Single
Figure’ has been calculated:

Taxable 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.

Annual bonus

As stated in the Remuneration Policy, on-target
performance is paid out at 55% of base salary, with
over-performance capped at a maximum of 110%
of base salary.

At the start of the year, the Committee decided
that David Brooks’ bonus should be based upon
targets for Group adjusted operating profit for the
year, both before and after movements in work-in-
progress (“Pre-WIP” and “Post-WIP” respectively).
The reason for setting both Pre-WIP and Post-
WIP targets was to ensure that the long-term
trends of the Company’s underlying business
operations were captured. The Committee took
analyst forecasts into account when setting the
relevant targets.

In the year, the Pre-WIP target for Group adjusted
operating profit was met and the Post-WIP target
exceeded. The Committee decided that it would be
appropriate to award an on-target bonus of 55% of
base salary.

Neil Martin was appointed on 28 September 2015.
As agreed at the time of Mr Martin joining the
Company, the Committee considered that it would
be appropriate to pay the bonus for the year based
on an on-target outcome, pro-rated for the two
months of employment in the year.

LTIPs

In the year, two awards previously granted under
the RM plc Performance Share Plan 2010 (the “PSP
Scheme”) vested. On 2 December 2014, the award
granted to David Brooks and Iain McIntosh under
the Scheme on 1 December 2011 vested in full, the
performance criteria having been fully met. For

David Brooks, 250,000 shares vested at a value
of £1.595 per share, making the total value of the
award £398,750. For Iain McIntosh, 300,000 shares
vested at a value of £1.595 per share, making the
total value of the award £478,500. On 3 August
2015, the award granted to David Brooks under the
Scheme on 6 August 2012 vested. Of the maximum
250,000 shares in the original award, 205,882 shares
vested (based on the extent to which the relevant
performance criteria had been met). The value of
the shares that vested was £349,999 (based on a
share price of £1.70 on the date of vesting).

Retirement benefits

David Brooks and Neil Martin are both members of
a defined contribution pension scheme operated
by RM Education Ltd, into which the Group makes a
contribution of 7% of base salary. A salary sacrifice
arrangement is operated in relation to this scheme
(for all employees), meaning that base salary is
reduced by the contribution that would otherwise
be made by the individual, with that amount then
being added to the employer contribution made
to the scheme. However, to make the figures in the
above tables more meaningful, base salaries are
stated prior to the reduction in base salary as a
result of that salary sacrifice arrangement.

Iain McIntosh was not a member of the defined
contribution pension scheme noted above. Instead
he received a cash allowance equivalent to 7%
of base salary in lieu of such contribution. Again,
to make the figures in the above tables more
meaningful, the cash received in lieu of pension
contribution is shown as a retirement benefit and
not as part of base salary.

David Brooks is also a member of RM Education
Ltd’s Defined Benefit Pension Scheme which closed
to future accrual with effect from 31 October 2012.
During the year, the increase in Mr Brooks’ accrued
pension under that scheme was nil.

Termination payments

Iain McIntosh left the Company on 28 September
2015. On the cessation of his employment, as
a good leaver, he received the value of his base
salary and a payment towards loss of benefits
which would have accrued to him during his twelve
months’ notice period. No bonus was paid to him
in respect of the 2015 financial year. No further
compensation for loss of benefits was paid.

The awards granted under the RM plc Performance Share Plan 2010 in July 2013 and August 2014 both lapsed in full
and no other long-term incentive plan awards are outstanding. On the cessation of his employment, he received a
payment totalling £250,000. This comprised of £235,000 in lieu of twelve months’ base salary and £15,000 for loss
of benefits. The Remuneration Committee exercised its discretion in respect of the payment of £15,000 for loss of
benefits in light of Mr McIntosh’s performance during the period prior to him leaving the Company.

2. Directors’ long-term incentive plans

During the year ended 30 November 2015, the following long-term incentive awards were made:

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

6 August 2018

n/a

4 October 2018

A summary of
performance
targets and
measures

Relative TSR
performance4

Type of
share
award Grant date

Face value
of award
£000

Name

David Brooks

PSP1

Neil Martin

PSP1

5 August
2015

320 (107% of
base salary)2

2 October
2015

267 (97% of
base salary)3

Notes:

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

The face value of the award has been calculated by multiplying the maximum number of shares in the award
(180,000 shares) by the share price on the date of grant of the award (178.00 pence).

The face value of the award has been calculated by multiplying the maximum number of shares in the award
(160,000 shares) by the share price on the date of grant of the award (167.00 pence).

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 2015, of £100 invested in RM plc on 30 November 2008
compared with the value of £100 invested in the FTSE Small Cap (ex. Investment Trusts) Index on the same date.
The other points plotted are the values at intervening financial year-ends.

Total Shareholder Return

£300

£250

£200

£150

£100

£50

2008

2009

2010

2011

2012

2013

2014

2015

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 six 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.

2009

2010

20111

20122

20133

2014

548

48%

517

56%

426

286

379

58%4

576

75%

2015

1,246

50%

40%

91%

Single Figure (£000)

Annual variable element award
rates against maximum opportunity

Long-term incentive vesting rates
against maximum opportunity

Notes:

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 2015 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

2015
£m

66.8

2.5

3.4

0.2

4.0

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 2014 and the year ended 30 November 2015 was 3.4% (3.1% in the UK and 6.7% in India).
As noted in Part A of this Report, there was no increase in the base salary of the Chief Executive Officer
during the year.

2014
£m

69.1

1.2

17.7

2.5

11.8

7. Statement of shareholder voting

Voting at the Annual General Meeting held on 25 March 2015 in respect of the remuneration report for the year
ended 30 November 2014 was as follows:

% of votes
in favour

% of votes
against

Number of votes
withheld

Resolution to approve the remuneration report

Resolution to approve the Directors’ remuneration policy

85.35

73.28

14.64

26.71

1,253,604 (1.52%)

129,392 (0.16%)

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 2015
were:

30 November 2015

30 November 2014

John Poulter

Lord Andrew Adonis

David Brooks

Patrick Martell

Neil Martin

Deena Mattar

87,500

245,163

5,000

17,933

87,500

3,976

17,933

9. Directors’ interests in share plans

As at 30 November 2015, 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

Date of Grant

No. of Shares
/ Options

Performance
Conditions

10/7/13

4/8/14

5/8/15

125,000

See note 4

180,000

See note 4

180,000

See note 4

Neil Martin

None.

Date of Grant

No. of Shares
/ Options

Performance
Conditions

2/10/15

160,000

See note 4

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.

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. 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.

5. The PSP award granted in 2013 was a

conditional share award. The awards granted
in 2014 and 2015 respectively were awards
of options, with an exercise price of £0.00
per option. If the options granted in August
2014 vest, they would be exercisable in the
period 7 August 2017 to 2 August 2024. If
the options granted in August 2015 vest,
they would be exercisable in the period
6 August 2018 to 1 August 2025. If the options
granted in October 2015 vest, they would be
exercisable in the period 4 October 2018 to
30 September 2025.

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.

The Group’s auditors are required to comment on
whether certain parts of the Group’s Remuneration
Report have been prepared in accordance with
Schedule 8 of the Large and Medium-Sized
Companies and Group (Accounts and Reports)
Regulations 2008. Accordingly, the following
sections of this Part C of this Report have been
audited by KPMG LLP:

• 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
1 February 2016

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 2015 set out on
pages 51 to 100. 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 2015 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 £43.9m;
Receivables £0.1m; Payables £25.5m)

Refer to page 29 (Audit Committee statement),
page 60 (accounting policy) and page 79
(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 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 – We make 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 in the forecasts
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). We assessed the completeness
and accuracy of costs included in contract
estimates, including those for specified contract
risks, by reading the contract and customer
correspondence and obtaining evidence to
support selected inputs.

Where a contract had been selected for detailed
work during a prior year’s audit and the contract
is now in a stable managed service phase, we
determined whether the margin in the current
year was in line with our expectation. We also
assessed the adequacy of the Group’s disclosure
about estimation uncertainty regarding 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 £1.0 million determined
with reference to a benchmark of Group profit
before taxation, normalised to exclude this year’s
restructuring charge, and the decrease in provision
for dilapidations on leased properties and onerous
lease contracts as disclosed in the Adjustments
column on the face of the income statement, of
which it represents 6%.

We report to the Audit Committee any corrected
or uncorrected identified misstatements
exceeding £50,000, in addition to other identified
misstatements that warrant reporting on
qualitative grounds.

Of the Group’s ten reporting components, we
subjected four to audits for Group reporting
purposes and two to specified risk-focused
audit procedures. The components for which we
performed specified risk-focused procedures were
not individually financially significant enough to
require an audit for Group reporting purposes, but
did present specific individual risks that needed to
be addressed. These Group procedures covered
98% of total Group revenue for components subject
to audit and 0% for those subject to specified

risk-focused procedures; 89% of the total profits
and losses that made up Group profit before tax
for components subject to audit and 5% for those
subject to specified risk-focused procedures; and
96% of total Group assets for components subject
to audit and 2% for those subject to specified risk-
focused procedures.

The Group audit team instructed component
auditors as to the significant areas to be covered,
and the information to be reported back. The Group
audit team approved the component materialities,
which ranged from £0.5 million to £0.8 million,
having regard to the mix of size and risk profile
of the Group across the components. The work
on two of the six components was performed by
component auditors and the rest by the Group
audit team.

The Group audit team visited one component
location in Nottingham, UK, including to assess the
audit risk and strategy. Telephone meetings were
held with the component auditors in the UK and
India. At these meetings, including the site visit, the
findings reported to the Group audit team were
discussed in more detail.

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;

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; and

the information given in the Corporate
Governance Report with respect to internal
control and risk management systems in relation
to financial reporting processes and about share
capital structures (“the specified Corporate
Governance information”) is consistent with the
financial statements.

5. We have nothing to report on the
disclosures of principal risks

Based on the knowledge we acquired during our
audit, we have nothing material to add or draw
attention to in relation to:

•

the Directors’ Financial Viability Statement on
page 9, concerning the principal risks, their
management, and, based on that, the Directors’
assessment and expectations of the Group’s
continuing in operation over the 3 years to
30 November 2018; or

the disclosures on page 59 of the financial
statements concerning the use of the going
concern basis of accounting.

6. 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
position, 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

• 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 9,
in relation to going concern and longer-term
viability; and

the part of the Corporate Governance Statement
on pages 21 to 24 relating to the Company’s
compliance with the eleven provisions of the
2014 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 18,
the Directors are responsible for the preparation
of the financial statements and for being satisfied
that they give a true and fair view. A description
of the scope of an audit of financial statements
is provided on the Financial Reporting Council’s
website at www.frc.org.uk/auditscopeukprivate.
This report is made solely to the Company’s
members as a body and is subject to important
explanations and disclaimers regarding our
responsibilities, published on our website at
www.kpmg.com/uk/auditscopeukco2014a, which
are incorporated into this report as if set out in full
and should be read to provide an understanding
of the purpose of this report, the work we have
undertaken and the basis of our opinions.

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

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

1 February 2016

Consolidated Income Statement

Year ended 30 November 2015

Year ended 30 November 2014

Adjusted

Adjustments

Note

£000

Total

£000

Adjusted

Adjustments

£000

Revenue

Cost of sales

Gross profit

178,228

(109,316)

68,912

Operating expenses

(50,713)

178,228

202,544

(109,316)

(126,974)

68,912

75,570

(50,713)

(57,044)

Total

£000

202,544

(126,974)

75,570

(57,044)

Amortisation of acquisition
related intangible assets

Impairment of held for sale assets
and related transition costs

Gain on sale of operations

Share-based payment charges

Release of/(increase in)
provisions for dilapidations
on leased properties and
onerous lease contracts

Restructuring costs

Exceptional credit on Defined
Benefit Pension Scheme

Profit from operations

Investment income

Finance costs

Profit before tax

Tax

Profit for the year

(303)

(323)

(864)

2,368

243

206

(303)

429

(932)

(774)

(472)

429

(932)

(774)

(472)

(50,713)

1,392

(49,321)

(57,044)

(2,052)

(59,096)

18,199

1,392

19,591

18,526

(2,052)

16,474

409

894

1,303

(1,510)

17,098

(3,984)

13,114

(149)

(1,659)

2,137

19,235

(289)

(4,273)

1,848

14,962

476

(924)

18,078

(4,359)

13,719

476

(269)

(1,193)

(2,321)

15,757

201

(4,158)

(2,120)

11,599

Earnings per ordinary share

- basic

- diluted

16.2p

15.6p

2.3p

2.2p

18.5p

17.8p

16.4p

15.4p

(2.5)p

(2.4)p

Paid and proposed
dividends per share

- interim

- final

1.20p

3.80p

Adjustments to results have been presented to give a better guide to business performance (see note 1).
All amounts were derived from continuing operations.
The notes on pages 59 to 100 form an integral part of these financial statements.

13.9p

13.0p

0.96p

3.04p

Consolidated Statement of
Comprehensive Income

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 (loss)/gain on hedged instruments

Note

Exchange (loss)/gain on translation of overseas operations

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

Other comprehensive income/(expense)

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

Year ended
30 November 2015

Year ended
30 November 2014

£000

14,962

2,402

(950)

(180)

(80)

(36)

1,156

16,118

£000

11,599

(21,892)

4,378

1,018

657

(15,758)

(4,159)

The notes on pages 59 to 100 form an integral part of these financial statements.

Consolidated Statement of
Changes in Equity

redemption

Hedging

Translation

Retained

capital

premium

Own shares

reserve

earnings

Capital

Note

£000

At 1 December 2013

1,870

26,997

(2,972)

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

At 30 November 2014

1,889

27,018

(2,950)

Profit for the year

Other comprehensive
(expense)/income

Total comprehensive
(expense)/income

Transactions with owners of the Company

Shares issued

Sale of shares held in
staff share scheme

Share-based payment
awards exercised

Purchase of own
shares

Share-based payment
fair value charges

Ordinary
dividends paid

2,910

(2,470)

£000

(474)

£000

(385)

£000

Total
£000

3,895

29,025

11,599

1,018

(16,857)

(15,758)

1,018

(5,258)

(4,159)

544

(40)

932

(17,706)

(304)

(18,177)

8,114

14,962

(180)

(80)

1,416

1,156

(180)

(80)

16,378

16,118

(3,038)

(128)

(2,470)

864

(3,424)

At 30 November 2015

1,890

27,035

(2,510)

364

(384)

(7,342)

19,147

The notes on pages 59 to 100 form an integral part of these financial statements.

Consolidated Balance Sheet

At 30 November 2015

At 30 November 2014

Note

12
13
13
14
18
9

16
18

19
20

21
22
24

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
Assets held for sale

Total assets
Current liabilities

Trade and other payables
Tax liabilities
Provisions

Liabilities directly associated with
assets classified as held for sale

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)

Total equity

£000

14,067
8
562
7,059
1,168
6,121
28,985

10,862
25,592
-
48,320
1,162
85,936
114,921

(64,974)
(2,787)
(2,077)

(549)
(70,387)
15,549

(662)
(2,864)
(21,861)
(25,387)
(95,774)
19,147

1,890
27,035
(2,510)
94
364
(384)
(7,342)
19,147

£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

The notes on pages 59 to 100 form an integral part of these financial statements.

These Financial Statements of RM plc, registered number 01749877, were approved and authorised for issue
by the Board of Directors on 1 February 2016.

On behalf of the Board of Directors,

David Brooks
Director

Neil Martin
Director

Consolidated Cash Flow Statement

Year ended
30 November 2015

Year ended
30 November 2014

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

Impairment of acquisition related intangible assets
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 disposal of other intangible assets
Gain on disposal of property, plant and equipment
Loss/(gain) on foreign exchange derivatives
Share-based payment charge
(Decrease)/increase in provisions
Defined Benefit Pension Scheme administration cost

Note

13
13
13
14

Operating cash flows before movements in working capital
Increase in inventories
Decrease in receivables
Decrease in trade and other payables
Utilisation of onerous lease and dilapidations provisions
Utilisation of employee-related restructuring provisions
Utilisation of other provisions
Cash generated from operations
Defined Benefit Pension Scheme cash contributions (2014: including £8m escrow payment)
Tax paid
Borrowing facilities arrangement and commitment fees
Income on sale of finance lease debt
Net cash inflow from operating activities
Investing activities
Interest received
Repayment of loans by third parties
Proceeds from sale of other receivables
Proceeds on disposal of property, plant and equipment
Purchases of property, plant and equipment
Purchases of other intangible assets

22
22
22

14
13

Net cash generated by/(used in) investing activities
Financing activities

Ordinary and Special dividends paid
Repayment of capital obligations under vehicle finance leases
Proceeds of share capital issue, net of share issue costs
Proceeds from sale of shares held in Staff Share Scheme
Purchase of own shares
Satisfaction of share-based payment awards

Net cash used in financing activities
Net increase/(decrease) 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

The notes on pages 59 to 100 form an integral part of these financial statements.

£000

19,235
(1,303)
1,659
19,591

150
303
297
2,406
(65)
-
(95)
133
864
(716)
530
23,398
(707)
6,102
(14,369)
(2,186)
(1,166)
(132)
10,940
(3,984)
(171)
(447)
45
6,383

364
18
1,586
165
(1,576)
(322)
235

(3,424)
(244)
18
55
(2,470)
(128)
(6,193)
425
41,893
2
42,320

£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
(11,821)
(2,527)
(353)
55
4,428

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

(17,706)
(530)
22
-
-
-
(18,214)
(15,287)
57,169
11
41,893

Company Statement of
Changes in Equity

At 1 December 2013

Profit for the year

Total comprehensive income

Transactions with owners of the Company

Shares issued

Capital

redemption

Retained

capital

premium

Own shares

reserve

earnings

Note

£000

Total
£000

1,870

26,997

(2,972)

30,895

56,884

(18)

6,281

(40)

932

(17,706)

1,889

27,018

(2,950)

20,362

46,413

2,910

(2,470)

7,386

(3,038)

(128)

(2,470)

864

(3,424)

Share-based payment awards exercised

Share-based payment fair value charges

Dividends paid

At 30 November 2014

Profit for the year

Total comprehensive income

Transactions with owners of the Company

Shares issued

Sale of shares held in staff share scheme

Share-based payment awards exercised

Purchase of own shares

Share-based payment fair value charges

Ordinary dividends paid

At 30 November 2015

1,890

27,035

(2,510)

22,205

48,714

The notes on pages 59 to 100 form an integral part of these financial statements.

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

Company Balance Sheet

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

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

At 30 November 2015

At 30 November 2014

Note

£000

65,016

918

65,934

5,216

5,262

71,196

(17,091)

(11,829)

(5,391)

(22,482)

48,714

1,890

27,035

(2,510)

22,205

48,714

£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

The notes on pages 59 to 100 form an integral part of these financial statements.

These Financial Statements of RM plc, registered number 01749877, were approved and authorised for issue by
the Board of Directors on 1 February 2016.

On behalf of the Board of Directors,

David Brooks
Director

Neil Martin
Director

Company Cash Flow Statement

Year ended
30 November 2015

Year ended
30 November 2014

Note

Profit before tax

Investment income

Finance costs

Loss from operations

Adjustments for:

Impairment of investment in subsidiary

Increase in provisions

Operating cash flows before movements in working capital

Decrease/(increase) in receivables

(Decrease)/increase in payables

Cash (utilised by)/generated from operations

Dividends received

Net cash generated from operating activities

Investing activities

Increase in investments

Income from sale of other receivables

Interest received

Net cash generated from/(used in) investing activities

Financing activities

Dividends paid

Purchase of own shares

Satisfaction of share-based payments

Proceeds from share capital issue, net of share issue costs

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

7,391

(9,363)

821

(1,151)

126

498

(527)

7,631

(10,790)

(3,686)

7,966

4,280

1,604

1,687

(3,424)

(2,470)

(128)

(5,967)

The notes on pages 59 to 100 form an integral part of these financial statements.

£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)

(17,706)

(17,684)

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

Adjustments to profit

During the year ended 30 November 2015
adjustments to profit include:

•

In March 2015 the Group’s interests in Newham
Learning Partnership (PSP) ltd were sold for a
total cash consideration of £1.6m; and a profit
of £0.9m was recorded as an adjustment to
Investment income.

In May 2015 the Group’s 135 Milton Park
leased premises were sub-let to South
Oxfordshire District Council for a minimum
period of 3 years. The premises are surplus
to the Group’s requirements, as they were
at 30 November 2014, and on sub-letting

£2.4m has been released from the onerous lease
provision in the year.

• At the balance sheet date, the Group’s 100%

investment in SpaceKraft Ltd was identified for
disposal and was subsequently disposed in
December 2015. Assets and liabilities relating
to SpaceKraft Ltd have been transferred to held
for sale at the balance sheet date. Impairments
of £150,000 and £83,000 respectively have been
recognised in acquisition related intangible
assets and property, plant and equipment and
charged to the income statement in addition to
related transition costs of £90,000.

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 accounts, 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.

Profit on long-term contracts is recognised when
the outcome of the contract can be assessed
with reasonable certainty, including assessment
of contingent and uncertain future expenses.
Thereafter profit is recognised based upon
the expected outcome of the contract and the
revenue recognised at the balance sheet date as a
proportion of total contract revenue.

If the outcome of a long-term contract cannot be
assessed with reasonable certainty, no profit is
recognised. Any expected loss on a contract as a
whole, is recognised as soon as it is foreseen. The
loss is calculated using a discounted cash flow
model utilising a discount rate that reflects an
estimate of the market’s assessment of the time
value of money and the risks specific to the liability.
Any unwinding of the discount is included in the
Income Statement in finance costs.

Where the cumulative fair value of goods and
services provided exceeds amounts invoiced
the balance is included within trade and other

receivables as long-term contract balances. Where
amounts invoiced exceed the fair value of goods
and services provided the excess is first set off
against long-term contract balances and then
included in amounts due to long-term contract
customers within trade and other payables.

Pre-contract costs are expensed until the awarding
of the contract to the Group is considered to be
virtually certain which is not before the Group has
been appointed sole preferred bidder. Once virtual
certainty has been established and the contract
is expected to be awarded within a reasonable
timescale and pre-contract costs are expected to
be recovered from the contract’s net cash flows,
then pre-contract costs are usually recognised
as an asset and accounted for as long-term
contract costs.

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.

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

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:

a. 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

f. 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, the Group’s transition date to IFRS,
net assets acquired includes an assessment of
the fair value of separately identifiable acquisition
related intangible assets in addition to other assets,
liabilities and contingent liabilities purchased.
These are amortised over their useful lives which
are individually assessed.

Property, plant and equipment

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 and other receivables

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

Cash 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.

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 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.

Deferred tax assets are recognised to the extent
that it is probable that future taxable profit will be
available against which the temporary difference
can be utilised. Their carrying amount is reviewed
at each balance sheet date on the same basis.

Deferred tax is measured on an undiscounted basis,
and at the tax rates that are expected to apply in the
periods in which the asset or liability is settled. It is
recognised in the Income Statement except when
it relates to items credited or charged directly to
equity, in which case the deferred tax is also dealt
with in equity. Deferred tax assets and liabilities are
offset when they relate to income taxes levied by
the same taxation authority and when the Group

intends to settle its current tax assets and liabilities
on a net basis.

Adoption of new and revised International
Financial Reporting Standards

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

• Long-term contract outcome – see note 17

• Retirement benefit scheme valuation – see note 24

• Onerous lease provision – see note 22

The IFRIC interpretations, amendments to existing
standards and new standards that are mandatory
and relevant for the Company’s accounting periods
beginning on or after 1 December 2014 have
been adopted. The following new standards and
interpretations have been adopted in the current
period but have not impacted the reported results
or the financial position:

• Annual Improvements to IFRSs 2010–2012 Cycle

• Annual Improvements to IFRSs 2011–2013 Cycle

• Defined Benefit Plans: Employee Contributions –

Amendments to IAS 19

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):

• Amendments to IAS 27: Equity Method in

Separate Financial Statements

• Amendments to IAS 1: Disclosure Initiative

• Annual Improvements to IFRSs 2012–2014 Cycle

• Amendments to IAS 16 and IAS 38:

Clarification of Acceptable Methods of
Depreciation and Amortisation

• Amendments to IFRS 11: Accounting for

Acquisitions of Interests in Joint Operations

• Amendments to IAS 16 and IAS 41: Bearer Plants

• Amendments to IAS 19: Defined Benefit Plans:

Employee Contributions

• Amendments to IAS 27: Equity Method in

Separate Financial Statements

• Amendments to IFRS 10 and IAS 28: Sale or
Contribution of Assets between an Investor
and its Associate or Joint Venture

• Amendments to IFRS 10, IFRS 12 and

IAS 28: Investment entities: Applying the
Consolidation Exception

• Goodwill valuation and impairment – see note 12

• Amendments to IAS 1: Disclosure Initiative

•

IFRS 9 Financial Instruments

IFRS 14 Regulatory Deferral Accounts

IFRS 15 Revenue from Contracts with Customers

The Directors are finalising their analysis and do not expect that the adoption of the standards listed above
will have a material impact on the financial statements of the Company and Group in future periods, except
potentially for IAS 19 (defined benefit plans), IFRS 9 (measurement and disclosure of financial instruments) and
IFRS 15 (revenue and deferred income). IFRS 15 will first apply for the year ended 30 November 2019, and an
exercise to investigate the impact on the Group is planned during the coming financial year.

3. Revenue

Revenue from supply of products

Revenue from rendering of services

Revenue from the sale of licences and receipt of royalties

Total revenue

4. Operating segments

Year ended
30 November 2015

Year ended
30 November 2014

£000

85,834

78,009

14,385

178,228

£000

93,998

92,807

15,739

202,544

The Group’s business is supplying products, services and solutions to the UK and international
education markets.

The Group is structured into three operating divisions: RM Resources, RM Results and RM Education.

A full description of each division, together with comments on its performance and outlook, is given in the
Strategic Report.

This Segmental analysis shows the results and assets of these divisions. Revenue is that earned by the Group
from third parties.

Exited businesses in both years includes the results and assets of operations held for sale at 30 November 2015
and other exited businesses.

Segmental results

Year ended 30 November 2015

£000

RM Resources

RM Results

RM Education

Services

Businesses

Corporate

Exited

Total

£000

Revenue

Europe

North America

Asia

Middle East

Rest of the world

52,391

26,508

79,285

4,062

3,039

932

678

4,555

109

925

1,069

423

272

171

63,543

30,725

80,243

3,279

161,463

165

169

7,689

1,268

980

4,580

2,248

3,717

178,228

Adjusted profit from operations

11,107

5,554

5,494

(4,140)

184

18,199

Investment income

Adjusted finance costs

Adjusted profit before tax

Adjustments (see note 1)

Profit before tax

Year ended 30 November 2014

£000

RM Resources

RM Results

RM Education

Services

Businesses

Corporate

Exited

50,601

27,136

110,712

119

535

315

206

680

27,827

111,913

3,885

943

2,977

653

59,059

10,314

4,648

7,700

(4,152)

3,302

167

222

3,745

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

409

(1,510)

17,098

2,137

19,235

Total

£000

191,751

4,404

1,200

3,099

2,090

202,544

18,526

476

(924)

18,078

(2,321)

15,757

Segmental assets

At 30 November 2015

Segmental

Other

Total assets

At 30 November 2014

Segmental

Other

Total assets

RM Resources

RM Results

RM Education

Services

Businesses

£000

32,962

£000

7,732

£000

16,539

£000

700

£000

1,162

Corporate

Exited

RM Resources

RM Results

RM Education

Services

Businesses

£000

32,734

£000

6,636

£000

27,334

£000

353

£000

1,236

Corporate

Exited

Total

£000

59,095

55,826

114,921

Total

£000

68,293

57,083

125,376

Included within the disclosed segmental assets are non-current assets (excluding deferred tax assets) of
£22,404,000 (2014: £24,552,000) located in the United Kingdom and £460,000 (2014: £432,000) located in India.
Other non-segmented assets includes other receivables, tax assets and cash and short-term deposits.

5. Profit from operations

Profit from operations is stated after charging/(crediting):

Note

Amortisation of acquisition related intangible assets

Amortisation of other intangible assets

Depreciation of property, plant and equipment:

- charged in cost of sales

- charged in operating expenses

Impairment of acquisition related intangible assets

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 disposal of property, plant and equipment

Loss on disposal of other intangible assets

Cost of inventories recognised as an expense

Staff costs

Operating lease expense

Foreign exchange (gain)/loss

Decrease 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

- other compliance

Year ended
30 November 2015

Year ended
30 November 2014

£000

303

297

600

857

1,408

2,265

150

141

2,556

26,302

7,089

17,322

50,713

(1,392)

49,321

(95)

66,407

67,516

4,202

(342)

(62)

163

230

£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

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

Year ended
30 November 2015

Year ended
30 November 2014

Number

1,465

257

138

1,860

Number

1,525

209

136

1,870

Aggregate emoluments of persons employed by the Group comprised:

Wages and salaries

Termination payments

Social security costs

Other pension costs

Share-based payments (note 26)

Year ended
30 November 2015

Year ended
30 November 2014

£000

55,585

1,070

4,896

5,101

864

67,516

£000

56,891

838

5,332

5,154

932

69,147

The Company employs no staff (2014: 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

Income from sale of other receivables (see note 1)

Other finance income

8. Finance costs

Note

Borrowing facility arrangement fees and commitment fees

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

Year ended
30 November 2015

Year ended
30 November 2014

£000

224

894

140

1,303

£000

242

179

476

Year ended
30 November 2015

Year ended
30 November 2014

£000

467

964

149

1,659

£000

467

379

269

1,193

9. Tax

a) 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 charge/(credit)

Total Consolidated Income Statement tax charge

Year ended
30 November 2015

Year ended
30 November 2014

£000

3,684

297

278

4,259

259

(213)

(32)

4,273

£000

3,117

627

437

4,181

(57)

(23)

4,158

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

Year ended
30 November 2015

Year ended
30 November 2014

UK corporation tax

Defined Benefit Pension Scheme

Shared based payments

Deferred tax

Defined Benefit Pension Scheme movements

Defined Benefit Pension Scheme escrow

Share-based payments

Deferred tax relating to the change in rate*

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

*Relates entirely to the Defined Benefit Pension Scheme

£000

(469)

(504)

949

540

470

986

£000

(1,533)

(2,185)

(660)

(657)

(5,035)

c) 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 2015

Year ended 30 November 2014

Adjusted

Adjustments

£000

Total

£000

Adjusted

Adjustments

£000

Total

£000

Profit on ordinary activities before tax

17,098

2,137

19,235

18,078

(2,321)

15,757

Tax at 20.33% (2014: 21.67%) thereon:

3,476

434

3,910

3,918

(503)

3,415

Effects of:

- change in tax rate on carried forward

deferred tax assets

- other expenses not deductible for

tax purposes

- temporary timing differences

unrecognised for deferred tax

- other temporary timing differences

- R&D tax charge/(credit)

- impairments

- overseas tax

- gain on sale of operations

- prior period adjustments

Tax charge in the

123

(7)

246

123

104

(6)

246

(77)

207

203

(93)

367

104

(77)

207

(93)

570

(182)

Consolidated Income Statement

3,984

289

4,273

4,359

(201)

4,158

Factors that may affect future tax charges

The Summer Budget Statement on 8 July 2015 announced that the UK corporation tax rate will reduce to
19% by 2017 and 18% by 2020 and this was substantively enacted on 26 October 2015.

This will reduce the Group’s future current tax charge accordingly. The deferred tax assets at 30 November 2015
have been calculated based on the rates applicable when they are expected to reverse in the foreseeable future.

d) 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

depreciation

obligation

payments

differences

Group

At 1 December 2013

Credit/(charge) to income

Credit to equity

At 30 November 2014

Credit/(charge) to income

Charge to equity

Transfer to assets
held for sale

At 30 November 2015

£000

988

(201)

787

(53)

734

£000

3,166

2,185

5,351

(1,419)

3,932

£000

181

178

657

1,016

(53)

(540)

423

£000

440

(15)

660

1,085

(52)

assets

£000

(153)

(92)

Total

£000

4,622

3,502

8,147

(14)

(1,959)

(53)

1,033

(1)

6,121

Certain deferred tax assets and liabilities have been offset above.

The Group has recognised deferred tax assets in jurisdictions where these are expected to be recoverable
against profits in future periods. At the balance sheet date, the Group has an unrecognised gross deferred tax
asset of £3,257,000 (2014: £3,227,000) which is available for offset against future profits within the United States
of America. A deferred tax asset has not been recognised in respect of any of this amount due to uncertainty
surrounding the future use of these losses.

No deferred tax liability is recognised on temporary differences of £175,000 (2014: £203,000) relating to the
unremitted earnings of overseas subsidiaries as the Group is able to control the timings of the reversal of these
temporary differences and it is probable that they will not reverse in the foreseeable future.

10. Earnings per ordinary share

Year ended 30 November 2015

Year ended 30 November 2014

Weighted

average

Weighted

average

Profit for

number of

Pence per

Profit for

number of

Pence per

the year

£000

‘000

the year

£000

‘000

Basic earnings per ordinary share

Basic earnings

Adjustments (see note 1)

14,962

80,954

(1,848)

Adjusted basic earnings

13,114

80,954

18.5

(2.3)

16.2

11,599

83,702

2,120

13,719

83,702

Diluted earnings per ordinary share

13.9

2.5

16.4

Basic earnings

14,962

80,954

18.5

11,599

83,702

13.9

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

Diluted earnings

Adjustments (see note 1)

3,080

14,962

84,034

(1,848)

Adjusted diluted earnings

13,114

84,034

(0.7)

17.8

(2.2)

15.6

5,346

11,599

89,048

2,120

13,719

89,048

(0.9)

13.0

2.4

15.4

11. Dividends

Amounts recognised as distributions to equity holders were:

Final dividend for the year ended 30 November 2014
of 3.04p per share (2013: 2.46p)

Special dividend for the year ended 30 November 2013
of 16.00p per share

Interim dividend for the year ended 30 November 2015
of 1.20p per share (2014: 0.96p)

Year ended
30 November 2015

Year ended
30 November 2014

£000

2,451

973

3,424

£000

2,257

14,678

771

17,706

The proposed final dividend of 3.80p per share for the year ended 30 November 2015 was approved by the
Board on 1 February 2016. The dividend is subject to approval by shareholders at the annual general meeting.
The anticipated cost of this dividend is £3,079,000, which is not included as a liability at 30 November 2015.

12. Goodwill

Group

Cost

At 1 December 2013, 30 November 2014 and 30 November 2015

Accumulated impairment losses

At 1 December 2013, 30 November 2014 and 30 November 2015

Carrying amount

At 30 November 2015 and 30 November 2014

£000

23,761

(9,694)

14,067

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

Group

RM Resources - TTS Group Limited

RM Results

Year ended
30 November 2015

Year ended
30 November 2014

Pre tax

discount rate

£000

discount rate

9.5%

15.2%

11,111

2,956

14,067

10.2%

11.5%

£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% (2014: 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.

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 2013

1,599

564

325

2,488

2,689

5,177

Additions

Effect of movements in
exchange rates

Disposals

At 30 November 2014

Additions

Transfers to assets held for sale

At 30 November 2015

Accumulated amortisation
and impairment losses

At 1 December 2013

Charge for the year

Effect of movements in
exchange rates

At 30 November 2014

Charge for the year

Impairment on re-classification
to assets held for sale

Transfers to assets held for sale

At 30 November 2015

Carrying amount

At 30 November 2015

At 30 November 2014

1,599

(955)

644

1,119

191

1,310

191

(955)

644

289

564

(454)

110

280

112

392

112

(454)

102

172

325

2,488

(73)

2,626

322

(73)

5,114

322

(1,409)

325

1,079

2,948

4,027

325

1,724

303

2,027

303

150

(1,409)

1,663

417

2,089

297

3,387

720

4,116

600

150

(1,409)

325

1,071

2,386

3,457

461

562

537

570

998

A review of the carrying amount of Acquisition related intangibles associated with held for sale assets and
liabilities resulted in an impairment of £150,000 being recognised in the year.

The carrying amount of Acquisition related intangible assets and Other software assets at 30 November 2015
include impairment losses of £443,000 (2014: £443,000) and £275,000 (2014: £275,000) respectively.

A review of other intangible assets at the balance sheet date indicated there was no additional impairment loss
in the year ended 30 November 2015 (2014: £nil).

The carrying amount of Other software assets at 30 November 2015 included purchased software assets of
£210,000 (2014: £9,000), and internally developed software assets of £351,000 (2014: £528,000).

During the year, no material expenditure on research and development is considered to have met the criteria
whereby the expenditure is capitalised as an intangible asset (2014: £nil). The carrying amount of capitalised
research and development at 30 November 2015 was £nil (2014: £nil).

14. Property, plant and equipment

Freehold land &

Short leasehold

Plant &

Computer

buildings

improvements

equipment

Vehicles

£000

Group

Cost

At 1 December 2013

Additions

Effect of movements in
exchange rates

Disposals

At 30 November 2014

Additions

Effect of movements in
exchange rates

Transfers between categories

Transfers to assets held
for sale

Disposals

2,779

314

(81)

3,012

(14)

4,559

1,216

5,787

417

(7)

(256)

4,767

383

(392)

4,788

242

(19)

442

(194)

(414)

6,918

583

(156)

7,390

884

(21)

(498)

(216)

(119)

Total

£000

21,882

2,597

(2,086)

22,487

2,859

101

(1,457)

1,510

1,576

(4)

(70)

(450)

(51)

(736)

(997)

At 30 November 2015

3,004

5,994

4,845

7,420

1,016

22,279

Accumulated depreciation and impairment

At 1 December 2013

Charge for the year

Effect of movements in
exchange rates

Impairment

Disposals

At 30 November 2014

Charge for the year

Effect of movements in
exchange rates

Transfers between categories

Impairment

Transfers to assets held
for sale

Disposals

At 30 November 2015

Carrying value

At 30 November 2015

At 30 November 2014

883

(67)

913

123

(245)

(10)

781

3,149

432

379

3,966

425

(3)

(238)

3,266

559

(387)

3,532

426

(17)

468

(136)

(409)

3,738

1,196

277

(142)

5,106

1,131

(20)

(240)

(237)

(119)

4,173

3,949

5,643

2,223

2,099

1,821

896

1,256

1,777

2,284

1,747

376

(1,227)

930

160

(2)

(53)

(389)

674

342

580

12,783

2,660

755

(1,823)

14,447

2,265

(42)

141

(664)

(927)

15,220

7,059

8,040

The carrying value of vehicles at the year end included £50,000 (2014: £444,000) held under finance leases.

15. Investments in subsidiary undertakings

The subsidiary undertakings of the Company at 30 November 2015 were:

Name

Principal activity

Country of

incorporation

Class of
share

RM Education Limited

Software, services & systems

England

Ordinary

TTS Group Limited

Resource supply

England

Ordinary

% held

100%

RM Education Solutions India Pvt Limited *

Software and corporate services

India

Ordinary

100%

SpaceKraft Limited

RM Books Limited

RM Group US LLC

RM Education Inc.

DACTA Limited

Resource supply

Software services

Non-trading

RM Pension Scheme Trustee Limited

Corporate Trustee

RM Schools Limited

Dormant

* Held through subsidiary undertaking.

The investment in subsidiary undertakings comprises:

England

Ordinary

England

Ordinary

100%

USA

Ordinary

100%

Ordinary

100%

England

Ordinary

100%

England

Ordinary

England

Ordinary

100%

Company

Cost

At 1 December 2013

Investment in RM Education Limited

Share-based payments

At 30 November 2014

Share-based payments

At 30 November 2015

Impairment

At 1 December 2013

Reversal of impairment

At 30 November 2014

Impairments

At 30 November 2015

Carrying value

At 30 November 2015

At 30 November 2014

Capital contribution

Investment in

shared-based

share capital

payments

Quasi-equity loan

£000

45,267

11,920

57,187

9,048

932

9,980

864

57,187

10,844

5,844

(2,932)

2,912

103

3,015

54,172

54,275

10,844

9,980

7,077

(7,077)

Total

£000

61,392

4,843

932

67,167

864

68,031

5,844

(2,932)

2,912

103

3,015

65,016

64,255

The accumulated impairment loss at 30 November 2015 includes £2,927,000 relating to the Company’s
investment in SpaceKraft Limited (2014: £2,824,000). The assumptions for the impairment reviews performed
are outlined in note 12.

16. Inventories

Group

Components

Finished goods

2015

£000

133

10,729

10,862

2014

£000

141

10,463

10,604

Finished goods at 30 November 2014 included £449,000 disclosed as a comparator within assets held for sale in
these financial statements.

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

Note

2015

£000

2014

£000

369,997

440,840

(395,368)

(472,006)

(25,371)

(31,166)

138

154

(25,509)

(25,371)

(31,320)

(31,166)

Total revenue from long-term contracts recognised in the year ended 30 November 2015 amounted to
£53,784,000 (2014: £69,600,000).

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.

18. Trade and other receivables

Group

Company

Note

2015

£000

2014

£000

2015

£000

2014

£000

Current

Financial assets

Trade receivables

Long-term contract balances

Other receivables

Derivative financial instruments

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

17,303

24,830

138

1,048

138

1,489

20,116

5,476

25,592

154

743

565

1,571

27,863

5,065

32,928

5,143

5,202

5,216

14,366

14,372

1,168

26,760

1,878

34,806

918

6,134

1,628

16,000

26,303

34,387

6,134

16,000

150

263

163

256

26,760

34,806

6,134

16,000

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

The Directors consider that the carrying amounts of trade and other receivables approximates their fair values.

The Company’s Non-current Other receivables includes the gross amounts owed by the Company’s equity
investments in BSF delivery company, Essex Schools (Holdings) Ltd (2014: included Newham Learning
Partnership (PSP) Ltd). The interest charged on these receivables is 11.75% pa.

Analysis of trade receivables by type of customer

Group

Government

Commercial

2015

£000

8,879

8,424

17,303

2014

£000

10,016

14,814

24,830

Trade receivables includes an allowance for estimated irrecoverable amounts at 30 November 2015 of £1,165,000
(2014: £1,361,000), based on management’s knowledge of the customer, externally available information and
expected payment likelihood. This allowance has been determined by reference to specific receivable balances
and past default experience. New customers are subject to credit checks where available, using third party
databases prior to being accepted.

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

2015

£000

2014

£000

13,835

18,128

1,387

876

1,205

3,955

1,074

1,673

17,303

24,830

Group

Company

2015

£000

42,320

6,000

48,320

2014

£000

41,893

6,000

47,893

2015

£000

2014

£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 29.

20. Held for sale operations

At the balance sheet date, the Group’s 100% investment in SpaceKraft Limited was identified for disposal by
the Board and was being actively marketed for sale but had not been disposed. This has been determined not
to meet the IFRS 5 Non-current Assets Held for Sale and Discontinued Operations definition of discontinued
operations but has been recorded as held for sale and presented separately in the balance sheet. In
December 2015, the entire share capital of SpaceKraft Limited was disposed. The proceeds on disposal were
lower than the combined book value of the net assets of the company and of the Group relating specifically
to the company. Accordingly, impairments have been recognised in acquisition related intangible assets and
property, plant and equipment of £150,000 and £83,000 respectively. The corresponding deferred tax liability on
the acquisition related intangible assets has also been released.

The major classes of assets and liabilities comprising the operations classified as held for sale at
30 November 2015 are as follows:

Net assets of entity

before impairment

Impairment on

on classification

Net assets arising

classification to

Net assets held

to held for sale

on consolidation

held for sale

Group

Acquisition related intangible assets

Property, plant and equipment

Deferred tax assets

Inventories

Trade and other receivables

Total assets held for sale

Trade and other payables

Provisions

Deferred tax liabilities

Total liabilities directly associated
with assets held for sale

Net assets held for sale

£000

155

454

583

1,245

(437)

(112)

(549)

696

£000

150

(30)

120

£000

(150)

(83)

for sale

£000

454

583

(233)

1,162

(203)

(437)

(112)

(549)

613

The total pre-tax charge in the income statement relating to the assets held for sale is £323,000, comprising an
impairment charge of £233,000 as detailed above and related transition costs.

21. Trade and other payables

Current liabilities

Financial liabilities

Trade payables

Group

Company

Note

2015

£000

2014

£000

2015

£000

2014

£000

11,518

12,793

Amounts owed to Group undertakings

17,091

29,002

Other taxation and social security

Other payables

Accruals

Obligations under finance leases

Derivative financial instruments

Long-term contract balances

Non-financial liabilities

Deferred income

Non-current liabilities

Financial liabilities

4,010

761

12,525

25,509

54,368

10,606

64,974

4,673

2,066

14,041

230

31,320

65,126

13,959

79,085

17,091

29,002

17,091

29,002

Obligations under finance leases

Non-financial liabilities

Deferred income

- due after one year but within two years

- due after two years but within five years

472

190

662

1,077

531

1,657

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

65,636

80,742

17,091

29,002

Currency profile of trade and other payables

Sterling

US Dollar

Euro

Indian Rupee

Singapore Dollar

Group

Company

2015

£000

2014

£000

2015

£000

2014

£000

65,156

79,700

17,091

29,002

449

208

754

65,636

80,742

17,091

29,002

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

2015

2014

Present value of

Minimum lease

minimum lease

Minimum

minimum lease

payments

lease payments

payments

£000

236

285

(6)

279

£000

230

279

Interest charged on vehicle finance lease contracts is at the Bank of England base rate plus 2% fixed at the
date of acquiring the asset, and the vehicles are leased until they are 4 years old.

22. Provisions

Group

At 1 December 2013

Utilisation of provisions

Release of provisions

Increase in provisions

Effect of movements in exchange rates

Unwind of discount

At 30 November 2014

Utilisation of provisions

Release of provisions

Increase in provisions

Effect of movements in exchange rates

Transfer to held for sale liabilities

Unwind of discount

At 30 November 2015

Onerous lease

Employee-related

and dilapidations

restructuring

£000

7,885

(836)

(524)

1,298

269

8,094

(2,186)

(2,368)

(110)

149

3,579

£000

4,241

(4,348)

(366)

838

365

(1,166)

(85)

1,070

Other

£000

1,330

(289)

(431)

708

(132)

(423)

1,025

(2)

Total

£000

13,456

(5,473)

(1,321)

2,231

269

9,167

(3,484)

(2,876)

2,095

(112)

149

184

1,178

4,941

Provisions for onerous leases and dilapidations have been recognised at the present value of the expected
obligation at discount rates of 2.6% per annum reflecting a risk free discount rate, applicable to the liabilities.
These discounts will unwind to their undiscounted value over the remaining lives of the leases via a finance
cost within the Income Statement. At 30 November 2015, £1,829,000 (2014: £5,738,000) of the provision refers to
onerous leases, and £1,750,000 (2014: £2,356,000) refers to dilapidations. The major release in the year relates to
the successful sub-letting of one of the Group’s properties.

The average remaining life of the leases at 30 November 2015 is 3.5 years (2014: 5.1 years).

Employee related restructuring provisions refer to costs arising from restructuring to meet the future needs of the
Group and are all expected to be utilised during the following financial year.

Other provisions includes one-off items not covered by any other category. The major release of Group provisions
during the year relates to the successful completion of certain legal activities and a reassessment of provision
recognised as part of the exit of operations following the 2011 Strategic Review. The significant elements in the
provision at 30 November 2015 and the increase in the year are related to regulatory compliance.

Disclosure of provisions

Group

Current liabilities

Non-current liabilities

Company
Non-current liabilities

At 1 December 2013

Release of provisions

Increase in provisions

At 30 November 2014

Increase in provisions

At 30 November 2015

2015

£000

2,077

2,864

4,941

2014

£000

3,660

5,507

9,167

£000

429

(429)

4,983

4,893

498

5,391

The increase in provisions during the year relates to the guarantee of an intergroup balance between
subsidiary undertakings.

The Directors consider that the carrying amounts of provisions in the Group and the Company approximate
their fair value.

23. Share capital

Company and Group
Allotted, called-up and fully paid

At 1 December 2013

Share consolidation

Issued in the year

At 30 November 2014

Issued in the year

At 30 November 2015

Ordinary shares of 2p

Ordinary shares of 22/7p

‘000

93,515

£000

1,870

‘000

(93,515)

(1,870)

81,826

814

£000

1,870

Total

£000

1,870

82,640

1,889

82,650

1,890

During the year 10,000 ordinary shares of 22/7p each were issued following the exercise of options under the
RM plc 2004 Company Share Option Plan. The exercise price was £1.742 per option.

Ordinary shares issued carry no right to fixed income.

24. 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 £4,930,000 (2014: £4,914,000) represents contributions payable to these schemes by the Group at
rates specified in employment contracts. At 30 November 2015 £332,000 (2014: £373,000) due in respect of the
current financial year had not been paid over to the schemes.

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 £171,000 (2014: £240,000). The amount due in respect of these schemes at 30 November
2015 was £49,000 (2014: £28,000).

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
those of RM Education Limited in a trustee-administered fund. The Trustee is a limited company. Directors of the
Trustee company are appointed by RM Education Ltd and by members.

Under the Scheme, employees were entitled to retirement benefits of 1/60th of final salary for each qualifying
year on attainment of retirement age of 60 or 65 years and additional benefits based on the value of individual
accounts. No other post-retirement benefits were provided by the Scheme.

The most recent actuarial valuation of Scheme assets and the present value of the defined benefit obligation was
carried out for statutory funding purposes at 31 May 2015 by a qualified independent actuary. IAS 19 Employee
Benefits (revised) liabilities at 30 November 2015 have been rolled forward based on this valuation’s base data.

As at 31 May 2015, the triennial valuation for statutory funding purposes showed a deficit of £41,800,000 (31
May 2012: £53,500,000). RM Education Limited agreed with the Scheme Trustee that it will repay this amount via
deficit catch up payments of £4,000,000 in December 2015 and £3,600,000 per annum until 30 September 2024.
There was one month’s deficit payment of £300,000 outstanding at 30 November 2015 (2014: £300,000). The next
triennial valuation of the Scheme is due as at 31 May 2018 and may result in changes to the level of deficit catch
up payments required.

In addition to the £4,000,000 of catch up payments in December 2015, a further £4,000,000 contribution was
paid in December 2015 into an escrow account established in March 2014, the use of which within the Scheme is
required to be agreed by RM Education Limited and the Scheme Trustee.

Scheme assets are measured at bid-price at 30 November 2015. The present value of the defined benefit
obligation was measured using the projected unit method.

The entire deficit position of the Scheme is held within these financial statements on the balance sheet as
RM Education Limited in substance bears all of the material risks associated with the Scheme.

IAS 19 Employee Benefits, amended June 2011, has been adopted in these financial statements.

The parent company RM plc has entered into a pension protection fund compliance guarantee in respect of
scheme liabilities.

No liability has been recognised for this within the Company as the Directors consider that the likelihood of it
being called upon is remote.

Amounts recognised in the Income Statement and in the Statement of Comprehensive Income

Year ended
30 November 2015

Year ended
30 November 2014

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

Effect of experience adjustments

Total actuarial gains/(losses)

Return on Scheme assets excluding interest on Scheme assets

Income/(expense) recognised in the
Statement of Comprehensive Income

Income/(expense) recognised in Total Comprehensive Income

£000

(530)

(7,352)

6,388

(964)

(1,494)

(1,785)

(3,155)

5,716

776

1,626

2,402

908

£000

(475)

(7,513)

7,134

(379)

(854)

1,198

(26,666)

(25,468)

3,576

(21,892)

(22,746)

Reconciliation of the Scheme assets and obligations through the year

Assets

At start of year

Interest on Scheme assets

Return on Scheme assets excluding interest on Scheme assets

Administrative expenses

Contributions from Group

Benefits paid

At end of year

Obligations

At start of year

Interest cost

Actuarial gains/(losses)

Benefits paid

At end of year

Deficit in Scheme and obligation recognised on the Balance Sheet

Year ended
30 November 2015

Year ended
30 November 2014

£000

165,839

6,388

1,626

(530)

3,984

(3,278)

174,029

(192,592)

(7,352)

776

3,278

(195,890)

(21,861)

147,688

7,134

3,576

(475)

11,821

(3,905)

165,839

(163,516)

(7,513)

(25,468)

3,905

(192,592)

(26,753)

Reconciliation of net defined benefit obligation

Year ended
30 November 2015

Year ended
30 November 2014

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

£000

(26,753)

(1,494)

2,402

3,984

(21,861)

£000

(15,828)

(854)

(21,892)

11,821

(26,753)

Year ended
30 November 2015

Year ended
30 November 2014

£000

171,194

24,696

195,890

£000

169,392

23,200

192,592

Year ended
30 November 2015

Year ended
30 November 2014

£000

3,676

87,669

59,102

23,582

174,029

3,469

84,218

54,952

23,200

165,839

Significant actuarial assumptions

Year ended
30 November 2015

Year ended
30 November 2014

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

3.85%

3.25%

2.35%

1.50%

3.20%

2.20%

3.85%

3.20%

2.30%

1.35%

3.10%

2.10%

Post retirement mortality table

S2PA CMI 2014 1.50%

S1NA CMI 2013 1.25%

Weighted average duration of defined benefit obligation

24 years

25 years

Assumed life expectancy on retirement at age 65:

Retiring today (male member aged 65)

Retiring in 20 years (male member aged 45)

22.7

24.8

22.3

24.1

Expected cash flows

Expected employer contributions for the year ended 30 November 2016

Expected total benefit payments

Year 1

Year 2

Year 3

Year 4

Year 5

Years 6 - 10

2015

£000

11,984

3,371

3,466

3,564

3,665

3,768

20,507

2014

£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 2015 -------------------------

30 November 2014

-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

174.0

174.4

173.7

173.8

174.2

174.6

Present value of Scheme obligations

(195.9)

(200.8)

(191.2)

(192.2)

(199.7)

Base

£m

165.8

(192.6)

(26.8)

3.85%

3.20%

2.30%

(21.9)

(26.4)

(17.5)

(18.4)

(25.5)

(25.1)

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

3.25% 3.25% 3.25% 3.15% 3.35% 3.25%

2.35% 2.35% 2.35% 2.25% 2.45% 2.35%

--------------------- S2PA CMI 2014 1.5% --------------------

S1NA CMI 2013 1.25%

(1)

Deficit

Actuarial assumptions

Discount rate

Rate of RPI

Rate of CPI

Mortality table

Rating (years)

25. 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.

Company and Group

At 1 December 2013

Share-based payment awards exercised

Transfer from RML Staff Share Scheme

Share consolidation

Shares issued

At 30 November 2014

Shares released to award holders

Shares re-purchased

Transaction costs

At 30 November 2015

Ordinary shares of 2p

Ordinary shares of 22/7p

‘000

1,811

(40)

(1,772)

‘000

1,551

800

2,351

(2,272)

1,535

1,614

The valuation of the shares is weighted average cost.

26. Share-based payments

£000

2,972

(40)

2,950

(2,910)

2,458

2,510

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

a) employee share option schemes

b) performance share plans

In addition to the above, there were two further schemes open during the year; one of which was closed at the
year end, the other had no activity during the year.

The fair values of awards made under these schemes have been assessed using Black-Scholes and Monte-Carlo
models, as appropriate to the scheme, at the date of grant. The fair values of the schemes are expensed over the
period between grant and vesting.

Share-based payment awards exercised in the period and disclosed in the Statement of Changes in Equity
represents the impact on retained earnings of releasing the fair value charge accrued under IFRS 2 Share-based
Payment, which for the deferred bonus scheme, is partially matched by the release of own-shares held.

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 2013

Exercised during the year

Lapsed during the year

At 30 November 2014

Exercised during the year

Lapsed during the year

At 30 November 2015

Number of

Weighted average

share price at

Weighted average

share options

exercise price

exercise

Exercise price range

1,543,400

(14,000)

(250,400)

1,279,000

(10,000)

(328,500)

940,500

£1.81

£1.54

£1.58

£1.86

£1.74

£1.90

£1.57

£1.76

£1.45 - £2.05

£1.54 - £2.05

£1.74 - £2.05

The options outstanding at 30 November 2015 had a weighted average contractual life of 1.8 years (2014: 2.4 years).
All of the outstanding options at the end of the current and prior period are exercisable. No option grants were
made under this scheme in the current year (2014: nil).

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 2013

Granted during the year

Lapsed during the year

At 30 November 2014

Granted during the year

Lapsed during the year

Exercised during the year

At 30 November 2015

Maximum number of shares

Market price on grant

5,594,267

1,755,000

(2,003,434)

5,345,833

1,735,000

(564,118)

(2,271,715)

4,245,000

£1.55

£1.67-£1.78

The plans outstanding at 30 November 2015 had a weighted average contractual life of 1.8 years (2014: 1.3 years).

The fair values of shares granted during the year are determined using a Monte-Carlo model which gives fair
values in the range of £1.00 and £1.19 per share under the TSR performance condition.

Inputs to the model are as follows:

Group

Share price at grant

Exercise price

Expected life

Expected dividends

5 August 2015
TSR

2 October 2015
TSR

£1.78

£Nil

3 years

2.38%

£1.67

£Nil

3 years

2.54%

The expected life used in the modelling has been adjusted, based on management’s best estimate, for the effects
of non-transferability and exercise restrictions.

Comparator company volatility is assessed using annualised, daily historic TSR growth assessed over a period
prior to the date of grant that corresponds to the performance period of three years. The company correlation
uses historic pairwise correlations of the companies over a three year period. The fair value of the TSR element is
based on a large number of stochastic projections of Company and comparator TSR.

In March 2003 the Company established the RM plc Employee Share Trust to hedge the future obligations
of the Group in respect of share scheme awards. These shares are used to hedge the estimated liability but,
until vesting, represents own shares held – see note 25.

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 holds these in trust on behalf of the employees, hence the shares are
not shown in the Group or Company balance sheets. The shares vest to the employees after a minimum of three
years, but normally after five years. The Scheme was an HMRC approved employee share scheme constituted
under a trust.

The Scheme held the following shares:

Group

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

Sold or transferred

At 30 November 2015

RM plc 2002 Staff Share Scheme

Ordinary shares of 2p

Ordinary shares of 22/7p

Total cost

Number

325,876

1,361

327,237

(1,361)

(43,555)

(282,321)

Number

246,827

(40,261)

206,566

(206,566)

£000

534

535

(1)

(71)

(76)

387

(387)

During the year, the Staff Share Scheme was wound up and the shares were transferred from the Trust to the
relevant employees with the excess being sold and the proceeds returned to the Company.

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.

Performance conditions – estimation uncertainty

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.

27. Guarantees and contingent liabilities

a) 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.

b) 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.

28. Commitments

a) 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

2015

£000

3,011

8,263

334

11,608

2014

£000

3,347

9,824

621

13,792

Operating lease commitments represent rentals payable by the Group for certain of its office properties and
include the period up to the first break clause of the lease.

The terms of these leases are subject to renegotiation on average terms of 2.0 years (2014: 2.5 years) and rentals
are fixed for an average of 2.0 years (2014: 2.0 years).

The Company had no operating leases during the year.

b) 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.

2015

£000

140

2014

£000

243

29. Financial risk management

Carrying value of financial assets and financial liabilities

Group

Company

2015

£000

2014

£000

2015

£000

2014

£000

Financial assets

Trade and other receivables - current

20,116

27,863

5,202

14,372

Trade and other receivables - non-current

Cash and short-term deposits

Financial liabilities

1,168

48,320

69,604

1,878

47,893

77,634

918

1,628

6,120

16,000

Trade and other payables - current

(54,368)

(65,126)

(17,091)

(29,002)

Trade and other payables - non-current

Provisions - current

Provisions - non-current

(2,077)

(2,864)

(49)

(3,660)

(5,507)

(5,391)

(4,893)

(59,309)

(74,342)

(22,482)

(33,895)

All financial assets are classified as loans and receivables except for forward foreign exchange contracts of
£138,000 (2014: £565,000) which are classified as fair value through profit or loss.

All liabilities classified as financial liabilities are held at amortised cost except for forward foreign exchange
contracts of £5,000 (2014: £3,000) which are classified as fair value through profit or loss.

The Directors consider that the carrying amount of all financial assets and financial liabilities approximates their
fair value. Fair value information for financial assets and financial liabilities not shown at fair value is therefore
not disclosed.

It is, and has been throughout the period under review, the Group’s policy that no trading in financial
instruments shall be undertaken and the Group does not hold or issue derivative financial instruments for
speculative purposes.

The main risks arising from the Company’s financial assets and liabilities are market risk (foreign currency risk
and interest rate risk), credit risk and liquidity risk. The Board reviews and agrees policies on a regular basis for
managing the risks associated with these assets and liabilities.

Foreign currency risk

a) Translation

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

b) 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 Indian Rupee costs and are renewed on a revolving
basis of approximately 11 to 12 months.

The total amount of outstanding forward foreign exchange contracts to which the Group was committed was:

Contract

Forward contract value

Mark to market value

2015

Currency

US Dollar

Indian Rupee

type

Sell

Buy

Currency ‘000

(239)

9,500

520,660

£000

159

(6,312)

(5,057)

(11,210)

£000

154

(6,226)

(5,005)

(11,077)

2014

Fair value

£000

(5)

133

Contract

Forward contract value

Mark to market value

Fair value

Currency

US Dollar

Indian Rupee

type

Sell

Buy

Currency ‘000

(187)

8,055

476,900

£000

117

(4,848)

(4,520)

(9,251)

£000

120

(5,158)

(4,775)

(9,813)

£000

(3)

310

255

562

The fair value of the derivative financial instruments is estimated by discounting the future contracted cash flow, using
readily available market data and represents a level 2 measurement in the fair value hierarchy under IFRS 7. These fair
value gains/(losses) are included within trade and other receivables and trade and other payables respectively.

Of these, forward foreign currency exchange contracts with a contract value of £11,077,000 (2014: £9,251,000)
and fair value gain of £133,000 (2014: gain £562,000) have been designated as effective hedges in accordance
with IAS 39 Financial Instruments: Recognition and Measurement. The movement in fair value of hedged
derivative financial instruments during the year was a debit of £429,000 (2014: credit £1,090,000) which has been
recognised in Other Comprehensive Income and presented in the hedging reserve in equity. In addition, the
Group retains the gain or loss on realised foreign currency contracts used to hedge non-financial assets which
are realised when the asset is recognised. A fair value gain of £231,000 (2014: £18,000 loss) has been realised on
forward contracts which were designated as effective hedges in accordance with IAS 39 Financial Instruments:
Recognition and Measurement. The movement in value of realised forward contracts was a credit of £249,000
(2014: debit £72,000) which has been recognised in Other Comprehensive Income and presented in the hedging
reserve in equity.

No forward foreign currency exchange contracts have been designated as ineffective hedges in accordance with
IAS 39 Financial Instruments: Recognition and Measurement at 30 November 2015 (2014: nil).

Commercially effective hedges may lead to income statement volatility in the future, particularly if the hedges
do not meet the criteria of an effective hedge in accordance with IAS 39 Financial Instruments: Recognition
and Measurement.

c) 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

2015

2014

Income

£000

Equity

£000

Income

£000

Equity

£000

(19)

(4)

547

(95)

(52)

525

(117)

(41)

In management’s opinion, the sensitivity analysis is unrepresentative of the inherent foreign exchange risk
as the period end exposure does not reflect the exposure during the period, as the analysis does not reflect
management’s proactive monitoring methods and processes for exchange risk.

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 £48,107,000 (2014: £47,460,000), and the maximum bank overdraft was £nil (2014: £nil).

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

Group

Floating rate

Interest free

£000

Total

£000

Floating rate

Interest free

£000

Total

£000

Sterling cash and cash equivalents

39,746

2,002

41,748

35,633

5,722

41,355

2015

2014

Sterling short-term deposits

6,000

US Dollar

Euro

Indian Rupee

Singapore Dollar

470

126

289

6,000

126

289

45,746

2,574

48,320

41,633

6,260

47,893

The Group has a £30,000,000 committed revolving credit facility with Barclays Bank plc signed on 27 January 2012,
£3,000,000 of which is allocated to an on-demand working capital facility and £600,000 allocated to a performance
bond facility, leaving £26,400,000 unallocated.

Interest payable on any utilised revolving credit facility is fixed 2.5% above LIBOR for the remainder of the
committed term (to March 2017) subject to certain financial ratios. A commitment fee of 1.2% is payable on the
unutilised balance and an arrangement fee of £75,000 (2014: £75,000) has been paid in 2015 and is recognised in
the Consolidated Income Statement on an effective interest rate basis over the duration of the facility. The total
paid since the inception of the facility is £625,000.

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

Group

Financial assets:

2015

2014

Weighted average

Floating rate

interest rate

Floating rate

interest rate

£000

Cash and short-term deposits

Trade and other receivables (non-current)

45,746

1,168

0.49

9.85

41,633

1,878

0.55

10.39

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

Group

1% increase in interest rates

1% decrease in interest rates

Credit risk

2015

2014

Income sensitivity

Equity sensitivity

Income sensitivity

Equity sensitivity

£000

406

(406)

£000

406

(406)

£000

437

(437)

£000

437

(437)

The Group’s principal financial assets are bank balances and trade and other receivables. The Group’s credit risk
is primarily attributable to its trade receivables. Credit checks are performed on new customers and before credit
limits are increased. The amounts presented in the balance sheet are net of allowances for doubtful receivables.
Note 18 includes an analysis of trade receivables by type of customer and of the ageing of unimpaired
trade receivables.

The credit risk on liquid funds and derivative financial instruments is limited because the counterparties are
banks with high credit ratings assigned by international credit rating agencies. The Group has no significant
concentration of credit risk, with exposure spread over a large number of counterparties and customers and a
large proportion are ultimately backed by the UK Government.

The carrying amount of financial assets represents the maximum credit exposure. The Group does not hold any
collateral to cover its risks associated with financial assets.

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 plc,
of which £3,600,000 has been allocated. The unallocated facilities at the end of the year were £26,400,000 of
working capital funding capacity at the end of the year. At 30 November 2015, £300,000 of the performance bond
facility was drawn down (2014: £300,000).

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:

Year ended
30 November 2015

Year ended
30 November 2014

£000

18,199

2,716

20,915

£000

18,526

3,287

21,813

Adjusted profit from operations

Capital return on net operating liabilities

Economic profit

30. Related party transactions

a) Key management personnel

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

Group

Short-term employee benefits

Post-employment benefits

Termination payments

Share-based payment

Year ended
30 November 2015

Year ended
30 November 2014

£000

2,739

317

250

495

£000

3,065

285

169

578

Share-based payments above include a fair value charge for executive Directors of £103,000 in respect of
awards to David Brooks (2014: £136,000), £9,000 in respect of Neil Martin (2014: £nil) and £41,000 in respect of
Iain McIntosh (2014: £104,000).

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

b) 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 2015

Year ended
30 November 2014

£000

(535)

460

7,966

(447)

8,000

Total amounts owed between the Company and its subsidiary undertakings are disclosed in notes 18 and 21
respectively.

c) 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 and sales of £1,778 in the previous year.
There were no similar transactions for the current year.

Dods (Group) plc

RM plc Board Director Lord Andrew Adonis is a director of Dods (Group) plc from which the Group made
purchases during the previous year of £474. There were no similar transactions for the current year.

Wates Group Limited

RM plc Board Director Deena Mattar is a director of Wates Group Limited for which there was a retention balance
owing to the Group of £2,106 in the previous year. There was no similar balance owing at the current year-end.

PricewaterhouseCoopers LLP

The Group uses PricewaterhouseCoopers LLP to provide certain consultancy and assurance services,
but excluding external audit services. Former RM plc Director Iain McIntosh’s wife is an equity partner in
PricewaterhouseCoopers LLP. She has not been involved in any services provided to the Group. The Group made
purchases from PricewaterhouseCoopers LLP for the year ended 30 November 2015 of £256,040 (2014: £255,350)
and the balance outstanding at 30 November 2015 was £21,600 (30 November 2014: £nil).

The Group encourages its Directors and employees to be Governors, Trustees or equivalent of educational
establishments. The Group trades with these establishments in the normal course of its business.

31. Events after the reporting period

In December 2015, the entire share capital of SpaceKraft Limited was disposed. The investment was recorded as
held for sale and presented separately in the balance sheet at 30 November 2015 (see note 20).

The proceeds on disposal were lower than the combined book value of the SpaceKraft Limited net assets and
of the Group relating specifically to the company. Accordingly, impairments have been recognised in acquisition
related intangible assets and property, plant and equipment of £150,000 and £83,000 respectively.

100

Shareholder
Information

Financial calendar

Ex-dividend date for 2015 final dividend

Record date for 2015 final dividend

Annual General Meeting

Payment of 2015 final dividend

Announcement of 2016 interim results

10 March 2016

11 March 2016

23 March 2016

8 April 2016

July 2016

Preliminary announcement of 2016 results

February 2017

Corporate website

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

To help shareholders, the Capita Share Portal
at www.capitashareportal.com contains a
shareholders’ frequently asked questions section.

Investor information

Electronic communication

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 registrars either via email at
shareholderenquiries@capita.co.uk or telephone:
0871 664 0300. Calls cost 12p per minute plus your
phone company’s access charge. Calls outside
the United Kingdom will be charged at the
applicable international rate. Lines are open
between 09:00 - 17:30, Monday to Friday excluding
public holidays in England and Wales.

102

Shareholders are able to receive company
communication via email. By registering your
email address, you will receive emails with a web
link to information posted on our website. This
can include our report and accounts, notice of
meetings and other information we communicate
to our shareholders.

Electronic communication brings numerous
benefits, which include helping us reduce our
impact on the environment, increased security
(your documents cannot be lost in the post
or read by others) and faster notification of
information and updates. To sign-up to receive
e-communications go to Capita Asset Services’
Share Portal at www.capitashareportal.com. All you
need to register is your investor code, which can be
found on your share certificate or your dividend tax
voucher. The Share Portal is a secure online site
where you can manage your shareholding quickly
and easily. You can check your shareholding and
account transactions, change your name, address
or dividend mandate details online at any time.

Auditor

KPMG LLP
Arlington Business Park
Theale
Reading RG7 4SD

Financial Advisers and Stockbrokers

Numis Securities Ltd
10 Paternoster Square
London EC4M 7LT

Peel Hunt LLP
120 London Wall
London EC2Y 5ET

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

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

103

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

–