RM plc: Proposed sale of the RM Integris and RM Finance Business

This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 ("UK MAR"), and is disclosed in accordance with the Company's obligations under Article 17 of UK MAR. Upon the publication of this announcement via a Regulatory Information Service, this inside information is now considered to be in the public domain. The person responsible for making this disclosure on behalf of the Company is Mark Lagler, Group General Counsel and Company Secretary of the Company.

28 November 2022

RM plc
Proposed sale of the RM Integris and RM Finance Business

Continuation of RM's transformation strategy

Cash proceeds intended to reduce debt and strengthen the balance sheet

RM plc, a leading supplier of technology and resources to the education sector (LSE: RM) ("RM", the "Company" or, together with its subsidiary undertakings, the "Group"), today announces that it has conditionally agreed to sell the RM Integris and RM Finance Business and related assets of its principal trading subsidiary, RM Education Limited ("RMEL"), (the "RM Integris and RM Finance Business") to The Key Support Services Limited ("The Key").

Total consideration for the Sale, which will constitute a Class 1 transaction, will be up to £16.0 million in cash on a cash-free/debt-free basis and subject to customary normalised working capital adjustments (the "Sale"). This agreement follows the strategic review outlined earlier this year. Completion of the Sale ("Completion") is expected to take place during the first half of 2023.

Highlights:

• Sale of the RM Integris and RM Finance Business to The Key for a consideration of up to £16.0 million in cash.
• Initial consideration of £12.0 million in cash will be paid on completion, adjusted to reflect the normalised working capital position of the RM Integris and RM Finance Business.
• The remaining consideration will be paid in cash subject to the satisfaction of certain conditions, including those relating to competition clearance.
• The net proceeds of the Sale will be used to reduce Group indebtedness and strengthen its balance sheet.
• The Sale executes against the previously outlined strategy to restructure the RM Technology Division and to refocus its strategy on its core Managed Services business.
• The Sale constitutes a Class 1 transaction under the Listing Rules of the Financial Conduct Authority (the "FCA"), (the "Listing Rules") and is therefore conditional upon, amongst other things, shareholder approval.

Neil Martin, Chief Executive Officer of RM plc, commented:

"This Sale allows RM to better focus our resources and efforts within RM Technology to take greater advantage of the market opportunity presented by the growth in larger school groups and the increasing use of technology. In addition to its strategic importance, the net proceeds of the Sale will reduce our debt levels across the Group, thereby supporting our transformation strategy to deliver long term value for our stakeholders.

"RM Integris and RM Finance are both good products and will be well placed to develop as part of The Key, which we believe is a good outcome for our customers, employees, and other stakeholders. We thank all our employees for their excellent work, especially those in the RM Integris and RM Finance Business."

Enquiries:

Notes to Editors:

RM plc is a leading supplier to the international education sector, with a turnover of £211m and approximately 2,000 employees globally. Established in 1973, RM provides market-leading products and services to educational institutions, exam bodies and international governments which improve, simplify and support education and learning. The education sector is transforming, and RM is well positioned to capitalise on this through its three divisions:

• RM Resources, an established provider of education resources for early years, primary schools, and secondary schools across the UK and to eighty countries internationally.
• RM Assessment, a leading provider of assessment software, supporting exam awarding bodies, universities, and governments worldwide to digitise their assessment delivery.

• RM Technology, a market-leading supplier of ICT software, technology and services to UK schools and colleges.

Further Information on the Sale

1.                   Background to, and reasons for, the Sale

Technology is playing an ever-greater role in education – from the classroom to the way schools and trusts are managed. Schools and trusts are asking for more advice, guidance, and support to realise the benefits that technology can bring. RM's expertise in the education sector and its national scale mean it can deliver value for customers in this market by being a platform-led managed services company. 

The continued conversion to Academy status and the growth of Multi-Academy Trusts are changing the landscape of English schools. RM's target customers are mid-sized Multi-Academy Trusts, which it expects will make up most of the market within the next few years. In contrast, RM Integris and RM Finance are popular with single-site primary schools, and the product is not developed to meet the growing requirements of the Group's target Multi-Academy Trust customers. The Sale of the RM Integris and RM Finance Business is a strategic decision to enable the Group to focus on meeting the growing demand from its target customer base. It is part of the wider restructure of the RM Technology business, as set out in the Group's transformation plan announced in February 2022.

2.                   Principal terms of the Sale

The Sale Agreement

The Company (as guarantor), RMEL and The Key have entered into a sale and purchase agreement (the "Sale Agreement") pursuant to which RMEL has conditionally agreed to sell the entire issued share capital of a newly incorporated, wholly owned subsidiary of RMEL, Schools Educational Software Limited ("Newco"), to The Key.

Newco will acquire the RM Integris and RM Finance Business as part of the hive-down transaction prior to Completion.

The initial consideration payable under the Sale Agreement is £12.0 million in cash (the "Initial Consideration"). The Initial Consideration will be paid on a cash-free/debt-free basis and adjusted to reflect the normalised working capital position of the RM Integris and RM Finance Business.

The total consideration will increase by up to an additional £4.0 million (the "Additional Consideration") to £16.0 million subject to satisfaction of certain conditions, including those related to competition clearance. This includes deferred cash consideration of £550,000, which will be payable subject to set thresholds relating to hosting uptime and assistance in transfer of services from RM's India subsidiary.

If the Additional Consideration is not payable, but The Key divests Newco (or all, or substantially all, of its business and assets) within a defined period following Completion a divestment fee of up to £4.0 million will be payable to RMEL subject to certain conditions being met.

The Sale Agreement contains certain warranties, undertakings, covenants, and indemnities from RMEL to The Key in respect of the RM Integris and RM Finance Business which are in a customary form for such a transaction.

The Sale constitutes a Class 1 transaction under the Listing Rules and, as such, the Sale Agreement is conditional upon the approval of the Company's shareholders in a general meeting (the "General Meeting"). A Class 1 circular (the "Circular") which is required to be approved by the FCA, containing, amongst other things, further details of the Sale, the Company's board of directors' (the "Board") recommendation to vote in favour of the resolution approving the Sale (the "Resolution") and the notice convening the General Meeting will be published by the Company in due course and will be available for inspection at https://www.rmplc.com/announcements in due course.

In the event that the Resolution is not approved by shareholders at the General Meeting on or before the date falling 12 months from the date of the Sale Agreement (the "Longstop Date") and Completion does not occur, the Company has agreed to pay The Key a break fee of £343,887 in cash.

Further details of the Sale Agreement will be set out in the Circular.

The TSA

Prior to Completion, RMEL and Newco will also enter into a transitional services agreement (the "TSA").  The services under the TSA will generally be provided for up to one year following Completion.

Further details of the TSA will be set out in the Circular.

3.                   Information on the RM Integris and RM Finance Business

RM Integris is a leading school management information system in England. Flexible and easy-to-use, RM Integris is designed to give teachers and administration staff the tools they need for flexible, efficient working. RM Finance is a financial management system for administering school finances and budgeting. Together, this business has approximately 3,000 customers.

4.                   Information on the continuing Group

The Sale of the RM Integris and RM Finance Business is part of a wider restructure of RM's Technology business under the Group's transformation strategy which was announced in February 2022. The Group is focused on improving its go-to-market strategies. The RM Resources and RM Assessments divisions will remain unaffected by the Sale.

5. Financial impact of the Sale

The RM Integris and RM Finance Business had unaudited revenues of £4.7 million and unaudited profit before tax of £2.0 million for the year ended 30 November 2021. Unaudited gross assets were £413,000 for the same period.1

1As the financial information for the RM Integris and RM finance business has been extracted from the RM Technology segment, consistent with the segmental disclosures in note 4 to the FY21 Financial Statements, finance costs have not been attributed to the result in deriving the profit before tax.  Net financing costs and tax are not allocated to segments as the funding, cash and tax management of the Group are activities carried out by the central treasury and tax functions.  The income statement balances are as per the RM accounting system for these products.  The only calculation here is that the profit before tax figure includes a share of the divisional overhead charges which is consistent with the approach used for the segmental results as per note 4 cited above.

Important notice

This announcement is for information purposes only and does not constitute or form part of any offer to issue or sell, or the solicitation of an offer to acquire, purchase or subscribe for, any securities in any jurisdiction and should not be relied upon in connection with any decision to subscribe for or acquire ordinary shares in the capital of the Company.  In particular, this announcement does not constitute or form part of any offer to issue or sell, or the solicitation of an offer to acquire, purchase or subscribe for, any securities in the United States.

This announcement has been issued by, and is the sole responsibility of, the Company. No person has been authorised to give any information or to make any representations other than those contained in this announcement and, if given or made, such information or representations must not be relied on as having been authorised by the Company.

No statement in this announcement is intended to be a profit forecast or profit estimate and no statement in this announcement should be interpreted to mean that earnings per share of the Company for the current or future financial years would necessarily match or exceed the historical published earnings per share of the Company.

This announcement may include statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "plans", "projects", "anticipates", "expects", "intends", "may", "will", "would" or "should" or, in each case, their negative or other variations or comparable terminology. These forward-looking statements include matters that are not historical facts. They appear in a number of places throughout this announcement and include statements regarding the directors of the current Company's intentions, beliefs or expectations concerning, among other things, the Company's results of operations, financial condition, liquidity, prospects, growth, strategies, and the Company's markets. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances. Actual results and developments could differ materially from those expressed or implied by the forward-looking statements. Forward-looking statements may and often do differ materially from actual results. Any forward-looking statements in this announcement are based on certain factors and assumptions, including the directors of the Company's current view with respect to future events and are subject to risks relating to future events and other risks, uncertainties and assumptions relating to the Company's operations, results of operations, growth strategy and liquidity. Whilst the directors of the Company consider these assumptions to be reasonable based upon information currently available, they may prove to be incorrect. Save as required by applicable law or the Listing Rules of the Financial Conduct Authority or the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority, the Company undertakes no obligation to release publicly the results of any revisions to any forward-looking statements in this announcement that may occur due to any change in the directors of the Company's expectations or to reflect events or circumstances after the date of this announcement.

Neither the content of the Company's website nor any website accessible by hyperlinks to the Company's website is incorporated in, or forms part of, this announcement.

Certain figures contained in this announcement, including financial information, have been subject to rounding adjustments. Accordingly, in certain instances, the sum or percentage change of the numbers contained in this announcement may not conform exactly with the total figure given.

All references to time in this announcement are to London time, unless otherwise stated.