Ladies welcome to the RM plc 2022 preliminary results call. My name is Lauren, and I'll be coordinating your call today. There'll be an opportunity for questions at the end of the presentation. If you would like to ask a question, then please press star followed by one on your telephone keypad. If you have joined on the webcast, then please submit a written question in the Q&A tab above the slides. I will now hand you over to your host, Mark Cook, CEO, to begin. Mark, please go ahead.
Hello, good morning, and welcome to RM's full year results for 2022. My name is Mark Cook, Chief Executive Officer, and I'm joined on this webcast by Emmanuel Walter, our Chief Financial Officer. I am very pleased to have recently joined RM in January 2023. That's a really important point for the group. The attraction of the role was clear to me with the businesses in a socially important and resilient sector with strong market positions. The market conditions have remained constant year on year and enable our business to be programmed for growth. This is coupled with RM's deep and rich heritage in the education sector. In fact, we will celebrate 50 years of trading in this year 2023.
As we report on the 2022 results today, we will describe the business challenges created by the delayed IT implementation and the actions we have taken to recover, stabilize the business, and mitigate against the IT architecture approach taken in the past. The agenda for today is split into three segments. Firstly, I will outline the highlights of 2022. Emmanuel will then talk through the financial performance in more detail. I will talk through the operational delivery performance, followed by strategy and outlook. Finally, we will open up the webcast for any questions. In terms of the summary for 2022, this year was dominated by the IT challenges that materially impacted the business, and these negatively affected the heavy trading period for our Consortium brand in the resources division.
Despite last year's delayed IT implementation, I'm now pleased to say that the program named Evolution has been completed. Our Consortium customers are using the new e-commerce platform and website in time for the busy pre-summer holiday trading period. We will talk more about the IT transformation later in this presentation. Despite these challenges, RM delivered revenue growth year-on-year of 4%, an adjusted operating profit of GBP 7.5 million, and this compared to prior year of GBP 16.5 million. The revenue growth was driven by strong performance in the assessment division and in TTS and the international business within the resources division.
The adjusted profit was impacted by the delayed IT implementation. Furthermore, as part of management's portfolio simplification and market focus strategy, there is a proposed sale of RM Integris and finance business for up to GBP 16 million.
We will give more information later in this presentation. I am very pleased to confirm that given the positive confidence in the underlying business and further affirmation of stability with the now successfully implemented IT system into the Consortium business, the banking facility was recently secured with up to GBP 70 million and extended to July 2025 with revised covenants. The business ended FY 2022 with a net debt of GBP 46.8 million.
No dividend is proposed as a condition of the amended banking facility. The business is now on a more stable operational and financial footing, and there is a platform to continue to grow the business and the ability to leverage a transformation approach to deliver improved shareholder value. I do recognize there is much more to be done to rebuild value for our stakeholders.
I will use my experience working in the technology businesses in the past and leading business transformations to ensure this is successfully executed in RM. I will follow on with the approach to transformational improvement later in this presentation. Now I will hand over to RM CFO, Emmanuel Walter, to talk through the 2022 financials in more detail.
Thank you, Mark. Good morning. I'm Emmanuel Walter, the Interim Chief Financial Officer. Today, I will walk you through RM plc financial overview of the business during the year, followed by slide bridging revenue, operating profit, income statement, and cash flow with a year-on-year comparison. Moving on to look at our financial overview. Revenue grew 4% to GBP 240 million, with good growth in assessments up 22%. Resources and Technology are broadly in line with the prior year, despite the challenges we have had in Resources associated with the IT implementation and the impact that has had on Consortium sales. The program challenges, alongside inflationary pressures, impacted the wider financial performance with continuing operations, adjusted operating profit, decreasing by GBP 9 million to GBP 7.5 million.
Adjusted diluted EPS decreased from GBP 0.14 to GBP 0.042. Net debt at the end of 2022 at GBP 46.8 million was GBP 28.6 million higher than at the same time last year, with the increase driven by ongoing investment in our IT program and the return of normal seasonal working capital outflow following COVID disruption. As a reminder, we have a GBP 70 million revolving credit facility in place, which we'll cover in a later slide. Next slide. On this slide, we bridge our +GBP 8.1 million revenue increase versus 2021. In our RM Resources, revenue was in line with 2021 at GBP 114.1 million.
Underlying growth was strong in both the international and TTS businesses, experiencing record levels of sales, up 40% and 10% respectively, which offset some delayed shipments and lost revenue in our Consortium business due to our IT program implementation. We're sales down 26% versus 2021. There was strong revenue growth in our Assessment business of GBP 7.1 million or just 22% to GBP 38.9 million, largely as a result of 2022 being the first full exam series since 2019. In our Technology business, revenue grew by GBP 1 million to GBP 60.9 million, which is mainly driven by a strong performance in digital platforms and services which offset declines in hardware and connectivity. Pipeline development is strengthening with new contract wins across the group. On this slide, we bridge our continuing operating profit movement versus 2021.
Profit reduced in our RM Resources business by GBP 7.3 million, with stable revenue offset by materially higher warehousing, distribution, packaging, and staff costs associated with our IT implementation in Consortium, in addition to inbound freight cost inflation. In our RM Assessment business, profit increased by GBP 1.7 million, with strong revenues from exam. Our RM Technology divisional profit of GBP 2.9 million reflect a less favorable customer and revenue mix than in 2021, despite an increase in revenue of GBP 1 million year-on-year.
The profit was impacted by higher staff costs in addition to the impact of inflation and higher service delivery costs as the business transitioned under a new leadership. In the second half of the year, RM plc accelerated the sales of GBP 2.8 million of IPv4 surplus addresses to support the liquidity of the wider group.
Due to the nature of these sales, we have been classified them as adjusted other income and not including them in revenue or adjusted earnings. On this slide, we set out the key component of our income statement, focusing specifically on the item below adjusted operating profit. Interest was GBP 2.2 million, up GBP 1.4 on last year, comprising the cost of servicing our debt facility together with the finance costs related to our defined benefit suspension schemes.
Total adjusted profit before tax was GBP 9.1 million, including discontinuing, down GBP 9.4 million from GBP 18.5 million in the year. If we look at the continuing element, we made GBP 7.5 million, which is down GBP 9 million. Discontinuing operation decreased GBP 0.4 million to GBP 1.6 million. We had a tax charge of GBP 1.8 million.
Lastly, post-tax adjusted items were GBP 19.6 million, which is a GBP 10 million increase versus 2021. All of these relate to continuing operations. GBP 15.7 million of this balance relate to costs incurred in respect to our new IT platform implementation, with an additional GBP 4 million from dual running costs associated with the implementation. Against this, we have an income of GBP 2.3 million in relation to the sale of property and of IPv4. After deducting adjusted items, we report a loss after tax of GBP 14.5 million, including discontinuing operations. Following slide, we take a look at the key driver of our cash flow, focusing on items below adjusted operating profit. In here, we have an inflow of adjusted cash generated from operation of GBP 7.5 million, which is GBP 7.6 million adverse to 2021.
Exceptional outflows relate mainly to ERP, GBP 19.1 million, Villa, GBP 2.2 million, and dual run costs, GBP 7 million, no Consortium business. The Evolution program of 4.5 related to our Consortium business is now broadly complete as of today, and we do not expect into any further spend on this other than in the course of normal business during 2023. IP sales selling GBP 2.8 million related to surplus IPv4 addresses from the connectivity business in our RM Technology, which was sold during the year. In the year, we also sold freehold property to the value of GBP 3.3 million. Pension costs were GBP 4.5 million in line versus last year. CapEx of GBP 0.5 million relate mostly to business as usual resourcing tooling.
Dividend outflow were GBP 2.5 million compared to GBP 3.9 million in 2021. In the next category of GBP 4.9 million, the outflow split between lease interest GBP 3.5 million, bank interest GBP 2.3 million, which is versus GBP 0.7 million in 2021, and tax inflow of GBP 0.9 million versus outflow of GBP 100k in 2021. Taking all of this movement in consideration, we arrive at a net debt figure of GBP 46.8 million. I will now pass it over to Mark to cover the divisional summary.
Thank you, Emmanuel Walter. In terms of the divisional summary, I will talk through each of our go-to-market divisions to give more insight into our 2022 performance. As a reminder, we have three divisions. Firstly, RM Resources, RM Assessment, and RM Technology. Each of these has a unique value proposition, with all three delivering into the education sector in the U.K. and internationally. If we take a look firstly at RM Resources. RM Resources is a U.K. market leader and international channel with two distinctive brands, TTS and Consortium. The TTS brand provided strong 11% revenue growth year-over-year, and international at 44% growth year-over-year. However, the RM Resources revenues remained flat overall, and this was due to the downturn impact from the Consortium revenues due to the disrupted customer shipments caused by last year's Evolution program IT pro implementation.
Despite the significant supplier in-inflation in the supply chain, the division was able to offset the inflationary cost base, holding margins flat with careful price management and brand mix. The delayed Evolution program last year not only caused the IT program overspend but also drove inefficiencies in the supply chain with warehouse and distribution inefficiencies and additional staff cost alongside higher global freight costs in the international market. A result of all of these factors, it meant a decline in adjusted operating profit to GBP 3.5 million from the prior year of GBP 10.1 million. It is important to reiterate that the delayed IT implementation has now been successfully implemented, and the new Consortium brand website and associated technology is live and operational in time for the peak trading period.
We will cover more on this topic of IT program and additional customer experience later in the presentation. Moving on to RM Assessment division. RM Assessment helps our customers accelerate their adoption of digital and transform assessments to unlock teaching and learning benefits. We provide a lifecycle journey plan for our customers and their end users, i.e., students. We don't just provide a technology platform. Today, RM supports 2.5 million online tests and 21 million online marked tests across 180 countries. Year-on-year, the assessment division had a strong year which produced revenue growth of 23%, partly driven by post-COVID exam recovery, but also by new customer acquisition and expansion. For example, 7 new contract wins plus renewals and expansions. This included our first win in higher education with university admissions testing.
Adjusted operating margins grew proportionally higher than the top line through our continual improvements in operational delivery. Moving on to RM Technology division. RM Technology is a strategic partner for schools and colleges, delivering end-to-end IT solutions with product and licensing deployment, connectivity, security products with service desk and service management delivered remotely or on-premise, and increasingly via managed service. RM Technology can deliver products and solutions via managed services at scale, and this matches the marketplace move towards Multi-Academy Trusts, who in turn look to receive efficiencies from economies of scale in their procurement and provision of IT support. Today, technology supports over 7,000 schools. Further growth is driven through our experience of delivering infrastructure from the Department for Education's Connect the Classroom initiative and the academization towards Multi-Academy Trusts.
As a proof point, revenue growth was driven by our largest MAT group infrastructure win, contracted to deliver GBP 26 million of revenue over five years. Adjusted operating profit showed a decline year-over-year due to product and customer mix and higher staff costs. Following the appointment of a new MD in year, a strategy reset and turnaround has begun to unlock the expected margin and operating profit potential.
As a footnote, the division made disposal announcements of non-core products and services with the sales of surplus IP addresses and the proposed sale of RM Integris and finance business. Further detail will be provided later in the presentation. Moving into some of our key developments. Following the overview of our three divisions, we will move into some areas that we promised to talk on more detail. Firstly, the IT implementation.
The Evolution IT implementation, which is now live in our Consortium brand in RM Resources. This is a major milestone, bringing a new e-commerce and CRM platform that will improve the digital buying experience and is fully integrated with our new automated distribution center in Harrier Park. RM Resources delivers 90% of the U.K.'s primary schools, and we have a circa 9% share of this GBP 1 billion market. We will continue with this digital soft shopping journey from our 11,000 cataloged customers. The enhanced website is a key element to our overall strategy of retaining our loyal customers and at the same time attracting new customers to our brands. The new system provides an extensive list of improved functionalities combined with enhanced buying experience, wrapped into enticing promotions and basket optimization in a new digital shopping experience.
Our customers will have easy access to all of our products. Searching and shopping on our website has never been easier or faster. The Evolution IT program is effectively now complete for this planned release of 4.1 into Consortium. The IT strategy to tie the businesses together with one holistic ERP is not the likely direction of travel for our future technology roadmap. We have paused further implementations into the rest of the business until I have a clear and efficient view of our future operating model that fits with our business strategy, and then the IT and enterprise architecture will follow. We will not repeat the approach of the past. This will enable agility and flexibility in our IT architecture to address future strategic directions of the business. Moving on to the inflation topic.
When considering the impact of inflationary conditions on our overall business, we have a different lens from each of our 3 operational divisions. There's a table that shows that we have a mix of transactional and service contracts across our business. In Resources Division, this is a high-volume transactional business with a global supply chain. We recognize the impact of freight cost inflation in last year's update. Since this period, global freight costs have reduced from an initial peak. However, we have taken 3 specific actions in our Resources business. Firstly, we have locked in freight cost savings with a new multi-year freight forwarding contract. Secondly, we have an increase in our direct shipments. Thirdly, we've launched 11,000 catalogs to digital online with dynamic pricing.
The new IT system enables smarter bundles of products to customers with higher basket values and economies of scale savings from a freight cost perspective. Our new Harrier Park distribution center has automated storage, picking, and packing, giving to operational efficiencies. In our assessment and technology businesses, we have multi-year customer contracts. We've built in consumer and retail price indexation clauses. In addition, contract renewals provide the vehicle to include market and inflation cost increases. For the transactional product and license sales in our technology business, dynamic pricing applies, and we are building a portal to give customers direct access with us and our key distributors on a cost-plus basis. Across our entire business, labor cost inflation is carefully managed. This is with a smarter backfill of indirect labor and use of interim versus permanent colleagues.
For example, a new weekly hiring cadence and a smarter use of higher market attrition. Secondly, a more efficient use of our end-to-end processes to leverage robotic process automation, the start of our transformation journey, and our Indian operation centers. I will now pass to Emmanuel to cover our Class 1 and banking facility transactions.
Thank you, Mark. Let's now cover the Class 1 transaction announced on the 20th of November 2022 to sell RM Integris and Finance. RM Integris and Finance are cloud-based software products used by over 2,000 schools in the U.K. They have maintained the market share but have been unable to grow as they are focused on primary school requirements and cannot meet the needs of the secondary school market without much time and investment. This sale allows RM to better focus on our resources and effort within RM Technology to take great advantage of the market opportunity and the increasing use of technology. In addition to this strategic importance, the net proceeds of the sale will reduce our net debt levels across the group, thereby supporting our transformation strategy, deliver long-term value to our stakeholders.
RM Integris and Finance generated for 2022 revenue of GBP 4.9 million and operating profit of GBP 1.6 million. The total consideration is GBP 60 million on debt-free basis. Sorry. GBP 12 million initial consideration, GBP 4 million additional consideration following a CMA approval. We'll be posting the circular very soon. We expect the initial consideration to be received one month after receiving shareholder approval in April 2023. The Phase I CMA review was initiated in March. We aim to secure Phase I approval and receive the additional GBP 4 million in June at the latest. Going to the next slide. We are pleased to report that RM plc have secured extending our GBP 70 million lender debt commitment for another year to our existing agreement to July 2025.
It will be subject to a quarterly minimum adjusted last twelve months EBITDA, which is now post-IFRS 16 target from May 2023 to November 2024. Which will revert an adjusted ATM, EBIT leverage below 4, and also an interest cover above 4. As soon as GBP 10 million is received from the RM Integris Class 1 transaction, RM plc will be subject to a hard liquidity covenant of GBP 7.5 million headroom versus our GBP 70 million commitment, which will be triggered if our net debt is above GBP 62.5 million for 2 consecutive weeks. We have restriction on dividends until adjusted leverage is below 1 for 2 consecutive quarters. The extended facility puts RM plc on a solid footing. I will now hand over to Mark to cover the strategy and our outlook.
As I stated at the start of this presentation, I'm very pleased to have joined RM at a very important point for the group. The importance is reinforced with the need to stabilize operations and the financials, but also to leverage the platform the business has built over the last 50 years. The education sector is experiencing structural change, most notably associated with the use of technology. This was advanced through its experience during the pandemic in 2020 and 2021. The digital and online marketing and assessment solutions, and with the digital channel smart procurement of resources via economies of scale and with the formation of Multi-Academy Trust. All of this creates an interesting growth opportunity and positive inflection point for RM. RM acknowledged in last year's annual report that it is a business that does need to change.
It's critical to get this pace and impact of change correct. The balance between applying an organizational stretch, but not be disruptive, is something we'll be conscious of going forward. I've spent the best part of my career working in technology businesses and leading business transformations. My priority is clear, to work with the board and the leadership team to bring that experience to bear with the objective of building value for all of our stakeholders. As previously stated, I joined the business in January 2023, and my first 90 days were pretty much pre-programmed. However, I do have some initial observations. Firstly, the market dynamics have remained fairly consistent and are there for drivers of growth. This is with the use of technology in education, with only 9% of schools saying they are digitally mature.
Aggregated school procurement with 14,000 schools predicted to become part of a mid-sized buying group, and overall helping our customers on their digital assessment journey. My major observation, however, is the flawed approach to the IT enterprise architecture. The Evolution program attempted to upgrade and harmonize the company's business processes with an ERP implementation that tied each of the go-to-market divisions together with the supporting corporate services. This program has incurred material costs in excess of the original budget. Misjudged the organization's ability to take on a major change program and materially damaged the financial and operational stability of the business. As highlighted in the key development section, there will be a different approach to IT architecture planning in the future to avoid these lessons learned.
We will review our IT enterprise architecture to fit the needs of the strategy first, then the future operating model. This in turn will unlock value drivers relating to operations, working capital, and overhead through the elimination of non-value-added activities and the automation of our underpinning business processes. Further observation is that RM has great people, customers, and a long heritage of educational knowledge to enable the design, build, and delivery of products and services to U.K. and increasingly into international customers. For example, the TTS development of our BBAC resources. As we go through this inflection point and transformation of the business, we want to retain the 50 years of education intellectual property in the company. Retaining our loyal colleagues, bringing in new talent, and having a laser focus on customer excellence and satisfaction.
This approach will be supported with a culture of continuous improvement embedded across the organization as part of a transformation plan, and will allow us to serve our education customers with care and compassion, and at the same time, with ruthless operational efficiencies from behind the scenes. The transformation program will become the one-stop shop to keep all of our stakeholders updated on our progress, and it will become the framework against which I will hold myself and the management team to account regarding its progress and education.
Moving on to priorities. The priorities are built into three phases: simplify, strengthen, and succeed. To reiterate, we really do have a market USP that allows us to have a unique network of knowledge and insight through our relationships with leading schools, trusts, governments, global tech partners and experts across education and technology.
This USP and expertise needs to be better understood and identified to enable the IP in our people, systems, products and solutions to be fully monetized. I believe we are well-placed to take advantage of the future digital transformation across our sector in the U.K. and internationally by monetizing our expert layer and building digital EdTech platforms. Many of us have been involved in business processes in the past and have come from a continuous improvement background.
I believe there is much more we can do on this improvement journey with an integrated view of our end-to-end processes, a collaborative approach across all of RM, regardless of function or location. As previously stated, my first 90 days of my appointment was to make sure we have stable operations, a team in place, financing secured, IT phase complete, and strategy under review.
I'm pleased to say all of these 90-day checklist items have been executed. The transformation plan will be underpinned by four pillars of a continuous improvement program, revenue margin, spend, working capital, and future operating model, plus the strategic imperatives. In terms of outlook. In conclusion of today's presentation, I would like to summarize that education remains a government funding priority. There are school budget headwinds that exist in the near term, but we are still programmed for growth. Despite challenging macroeconomic backdrop, growth is expected, as I said, in each of the divisions and across the overall business. We will take a transformation approach, focusing on improving margins and operational effectiveness. Lastly, with more stable operating and financial platform, this will enable us to unlock value for all of our stakeholders.
I would also like to thank all of our colleagues from the board, management, and across the business, our external stakeholders and various advisors to make today possible. It really is much appreciated. Thank you.
Thank you. If you would like to ask a question and you have joined on the phone, please press star followed by one on your telephone keypad and ensure that you are unmuted locally. If you change your mind, please press star followed by two. If you have joined on the webcast, please submit a written question in the Q&A tab above the slides. As a reminder, that is star followed by one on the telephone line or submit a written question on the webcast. We will pause for a moment to allow questions to be registered. Okay, we have no questions on the telephone line, so I'll now hand you over to Chloe Franklin to take you through the webcast questions.
Hi, good morning, everyone. The first question is regarding the dividend and board of capital allocation priorities. Please could you provide a comment on how you see the balance between reducing debt and the payment of dividends?
I think to comment on the dividend itself, clearly as you have seen today, our business is on a more stable operational and financial footing, which is therefore a platform to continue the growth strategy and leverage a transformation approach to deliver improved shareholder value. We are working really hard to develop a stronger commercial culture and a tighter grip and spend on working capital. To comment specifically on the dividend, we have a clear path to reduce leverage to one, a cash flow return to a natural level. The board is always keeping already any option to accelerate any progress. Any such action would only be pursued if the board was clear on the dividend on the best interest of all stakeholder.
As previously stated, we have some restriction from the new financing agreement on dividend payment, which has to be the one.
Thank you. The next question is around transformation work in the warehousing and whether this is completed or is it continuing and ongoing?
Yes. Good question. Part of our Evolution program, there was an associated project called Project Villa, which was the consolidation of our warehousing, specifically around our consulting business in the Resources division. We're pleased to say that is now completed. The automated distribution center in Harrier Park is fully operational and is currently handling trading volumes from our new website and consulting business.
Thank you, Mark. The next question is, what is the projected position at the end of this financial year? Do you estimate a net loss after tax, or is that back in a profit, net profit, at the end of the year?
We don't provide forward-looking guidance, and I would like to refer our shareholder to our conferences.
Thank you, Emmanuel. The final question is, can you outline some thoughts around moving margin upwards in both resources and technology?
If I just give a quick comment. I think the only comment is on resource. Clearly, we don't expect a repetition of the disruption around the Consortium go live. We expect a recovery this year, obviously.
Thank you very much. I don't think we have any further questions on the webcast. Should there be anything further, we'll be in touch on a personal basis. I'll now hand back to investors to close off the call.
This concludes today's call. Thank you for joining. You may now disconnect your lines.