RM plc Interim Report: Adjusted Operating Profit Soars to £2.7m Driven by Assessment Division Growth

RM plc’s Transformation Programme Drives Adjusted Operating Profit to £2.7m, a 200% Increase

For the half year ended 31 May 2026, RM plc posted an adjusted operating profit of £2.7m, a 200% improvement from £0.9m in the same period last year. The company attributes this leap to its ongoing transformation programme focused on divisional simplification, cost reduction, and a strategic shift towards its higher-margin Assessment business. Adjusted EBITDA, excluding share-based payments, rose 48.6% to £5.2m from £3.5m in HY25, underscoring the cumulative impact of operational enhancements.

The loss before tax from continuing operations improved by 32.6% to £2.9m from £4.3m in HY25, and statutory loss after tax reduced by 39.4% to £2.0m from £3.3m. Diluted loss per share from continuing operations narrowed from (4.0)p to (2.1)p, while adjusted diluted EPS improved from (2.0)p to (0.0)p. The £1.4m reduction in loss before tax was driven by a £1.8m rise in adjusted operating profit and a £0.7m cut in finance costs, partially offset by a £1.0m increase in adjusting items linked to separation activities and ERP system transition. These results indicate accelerating benefits from the transformation programme, although statutory profitability has not yet been achieved.

Assessment Division Delivers 25.9% Operating Margin and 100% Customer Renewal Rate in H1

The Assessment division was the key contributor to RM’s profitability gains in H1. While total Assessment revenue remained flat at £20.5m, recurring revenues—comprising core digital platform fees and third-party scanning, excluding one-off projects—increased by 7.3% to £19.0m from £17.7m in HY25. Recurring revenue now represents 92.7% of total Assessment sales, up from 86.3% a year earlier, driven by higher assessment volumes from existing and new customers. Legacy and non-core contract revenues declined to £1.5m from £2.8m.

The division’s adjusted operating margin expanded by 8.3 percentage points to 25.9% (HY25: 17.6%), with adjusted operating profit rising 47.2% to £5.3m from £3.6m. RM reported a 100% renewal rate for all Assessment revenue contracts up for renewal in H1, continuing a positive trend from prior years. Two new three-year contracts were secured in the professional qualifications sector, both supported by the RM Ava platform. The company also set a new record of digitally marking 900,000 high-stakes exam papers in a single day during the summer peak and noted a major customer’s first global digital exams using Ava during the period.

RM Ava Platform Investment Hits £13.5m, 65% Complete

RM Ava, the company’s cloud-based adaptive virtual accreditation platform, remains central to RM’s growth strategy. By the end of H1 FY26, RM had invested £13.5m cumulatively, including £3.7m during the half, with a total planned investment of £20.0m. Approximately 65% of the strategic investment programme is complete, with £6.0m planned for FY26 following a similar amount invested in FY25.

RM Ava aims to digitise the entire assessment lifecycle—exam authoring, sitting, marking, and grading—with new features like a reporting and analytics module expected later in FY26. Its modular, scalable design is intended to enhance customer and candidate experience and enable RM to expand into new markets, including multi-year government-sponsored digital accreditations and professional qualifications. The Assessment opportunity pipeline has more than doubled year-on-year, partly due to this expanded addressable market.

TTS Division Improves Contribution by 16.7% Despite 3.6% Revenue Drop Amid Middle East Conflict

The TTS (Technical Teaching Solutions) division, serving UK schools and 114 countries internationally, reported revenue of £29.6m, down 3.6% from £30.7m in HY25. The decline was attributed to the Middle East conflict impacting international orders and a strategic decision to forgo a site-wide discount offered in HY25 to protect margins. UK revenue fell 3.1% to £21.9m, while international revenue decreased 4.9% to £7.7m.

Despite lower revenue, divisional contribution rose 16.7% to £2.1m from £1.8m, reflecting pricing strategies and operational efficiencies. Adjusted operating profit increased from £0.1m to £0.8m, with the margin expanding to 2.7% from 0.3%. The division launched 67 new own-IP products in H1, including Glow Sequencing Cubes, which generated strong interest. The company emphasized that proprietary products remain a key competitive advantage in a transactional market.

Technology Division Revenue Declines 9.1% to £20.0m Amid UK School Budget Constraints

RM’s Technology division, providing ICT software and services to UK schools and colleges, saw revenue fall 9.1% to £20.0m from £22.0m in HY25. This was due to ongoing UK school budget pressures, supplier cost inflation, and the full impact of price reductions agreed in a long-term contract renewal with the largest customer. The renewal reduces near-term revenue but increases recurring revenue certainty.

Divisional contribution dropped 48.6% to £1.8m from £3.5m, with adjusted operating profit declining to £0.0m from £0.9m and margin falling to 0.0% from 4.1%. Nevertheless, the division secured new and renewed contracts with recurring revenue features, including five-year renewals with WMG Academy Trust and Alpha Schools and new multi-year connectivity deals. The Connect the Classroom government initiative has progressed slower than anticipated but remains a hopeful catalyst. Hardware sales began strongly but were affected by rising global computer component costs.

Group Revenue Falls 4.2% to £70.1m; Full-Year Revenue Expected Slightly Below FY25

Group revenue from continuing operations declined 4.2% to £70.1m in H1 FY26 from £73.2m a year earlier, mainly due to Technology division challenges, with Assessment stable and TTS slightly down. RM expects full-year revenue to be slightly below FY25 levels, citing market headwinds in Technology and geopolitical impacts on TTS international sales.

Despite this, RM remains on track to meet FY26 market expectations for adjusted operating profit (£13.6m) and adjusted EBITDA (£19.0m). The company anticipates a larger share of adjusted operating profit will come from the Assessment division, reflecting its stronger performance and Technology’s relative weakness, consistent with RM’s strategic focus.

Adjusted Net Debt Stable at £59.3m Following Bank Facility Extension to January 2028

At the end of H1, RM’s adjusted net debt stood at £59.3m, marginally improved from £59.6m in HY25, reflecting ongoing RM Ava investment (£3.7m) and the uneven working capital cycle. Adjusted net debt excludes lease liabilities of £17.2m as they are not covenant relevant. The company’s bank facility has been extended to 5 January 2028, with lenders supportive of RM’s strategy.

The Board aims to significantly reduce net debt via non-core asset disposals, with CEO Mark Cook pledging updates on progress. The October 2025 equity placing raised £12.7m net of fees, funding separation activities, RM Ava development, Assessment sales and marketing, and working capital management. Separation efforts included transferring closed defined benefit pension schemes to RM plc and launching Sage X3 ERP in Assessment.

Equity Raise Supports Division Separation, RM Ava Advancement, and Sales Expansion

The £12.7m net proceeds from the October 2025 equity placing have driven RM’s strategic initiatives, including completing legal separation of divisions, accelerating RM Ava development, boosting Assessment sales and marketing, and managing working capital. Each division now operates as a separate legal entity. The Assessment division has recruited seasoned education sector talent to support new business growth. Separation-related restructuring costs of £2.7m were included in HY26 adjusting items, mainly for legal and ERP implementation expenses. While these costs are short-term burdens, they enable future savings and strategic flexibility.

Assessment Opportunity Pipeline Doubles as RM Targets Government and Professional Markets

RM disclosed a more than 100% increase in the Assessment division’s opportunity pipeline year-on-year, driven by RM Ava’s expanded addressable market. Beyond traditional general qualifications, RM is targeting multi-year government-sponsored digital accreditations and professional qualifications. The two new three-year contracts in professional qualifications secured in H1 illustrate this progress.

This strategic expansion leverages Assessment’s growth potential and resilience amid macroeconomic challenges affecting Technology and TTS. The record of 900,000 digitally marked exam papers in one day highlights platform capacity. Early indications suggest continued strong renewal rates. With RM Ava nearing completion of its investment phase and the pipeline doubling, investors will watch for new contract wins in government and professional accreditation sectors.

RM plc FY26 Outlook: On Track for Adjusted Operating Profit Target Led by Assessment

RM confirmed it remains on course to meet FY26 market expectations of £13.6m adjusted operating profit and £19.0m adjusted EBITDA. A greater share of profit is now expected from the Assessment division due to Technology’s underperformance and TTS’s geopolitical headwinds. Full-year revenue is forecast slightly below FY25, reflecting Technology market pressures and TTS international sales impacts.

Strategic priorities include materially reducing net debt through asset disposals, scaling Assessment via platform investment and pipeline conversion, and completing division separation. RM Ava is approximately 65% through its investment programme, with new features expected later in FY26. Investors will also monitor the Connect the Classroom initiative’s progress, which could boost Technology revenue. The extended bank facility provides financial stability, though net debt at £59.3m remains a key focus.