- Shares plunge by more than a third after disappointing first-half results
- Dividend cancelled
- Analysts cut their earnings’ forecasts
Shares in education technology group RM plc (RM.) slumped by 34% to 65.1p following the announcement of disappointing first half 2022 results that have prompted analysts’ to downgrade their earnings’ forecasts.
Profit was impacted by freight costs, inflation and higher than expected costs associated with the implementation of its new IT project. Investors will be concerned that the first-half dividend has been cancelled. Revenue growth of 4% was in line with consensus. However adjusted (EBIT), earnings before interest and tax fell by 42% year-on-year to £5 million.
RM Resources’ performance was helped by robust demand from international markets with international revenue up 41%. RM Assessment is benefiting from the first half of 2022 being the first period to include a full set of exams since 2019. This has been reflected in an improved pipeline achieving preferred bidder status on 10 new contracts during the first half.
RM Technology continues to face challenges, but the appointment of a new leader and news that during the first half it secured the largest infrastructure contract in the market provided at least some encouragement.
DIVIDEND CANCELLED
RM's board said the implementation of its new IT platform was proving ‘more challenging than anticipated’, leading to extended timelines and increased project costs.
Higher programme costs and delayed working capital has caused net debt to rise to £41 million. As a result the board has decided to ‘prioritise balance sheet prudence’ and not pay a first-half dividend. Management have said that they will revisit the situation at the end of the year when the group is further through the IT implementation,
EARNINGS DOWNGRADE
Commenting on today’s first half results Peel Hunt analyst James Lockyer said: ‘We increase our full year 2022 revenue estimates by 2%. But with higher costs we reduce our full year 2022 (EBIT) earnings before interest and tax by 10%, together with slightly increased interest leads to our earnings per share falling by 13%’.
