RNS Number:7912V
RMR PLC
13 May 2002
RMR PLC
PRELIMINARY RESULTS ANNOUNCEMENT
For the year ended 28 February 2002
CHAIRMAN'S STATEMENT
Overview
The year to February 2002 was characterised by a dismal and deteriorating
trading performance that necessitated a continual examination of RMR's business
model and organisational structure. During the year the cost base was
restructured several times and the business is now significantly reduced in size
and scale.
The results reflect the poor trading performance and restructuring costs with
sales of £617,000 and a loss of £6.3 million for the year.
In the interim statement for the six months to 31 August 2001, I reported that I
thought we now had the base on which to build a successful business as a
provider of technology and content solutions to organisations with complex
information needs through our Elevate event and e-learning software. The
e-learning marketplace was to be a particular focus with much of our future
sales effort centred on the Elevate e-learning product. The acquisition of
Learning Angles Limited ("LA"), an e-learning company, formed an important part
of this strategy of focusing on the e-learning sector to take advantage of the
market demand for technology supported training.
During the last quarter of the financial year significant effort was put into
improving the sales performance and several experienced sales executives were
recruited to enable the LA team to concentrate on the rich content business.
Despite this LA failed to produce any sales from the date of its acquisition and
as a result the Board decided to discontinue it. On 5 March 2002 the Company
announced that it was taking steps to remove Gwyn Jones and Chris Thomas, the
two vendors of LA, from the Board and it was to commence legal proceedings
against them to recover the shares in RMR plc paid as consideration for LA. On
the 6 March 2002 the Company received the resignations of Chris Thomas and Gwyn
Jones. The third vendor has agreed to return both the consideration and deferred
shares and agreement was reached with him on his service contract.
Some progress continued to be made with the Elevate events and e-learning
software business in the second half year but unfortunately the necessary
critical mass of deals was not achieved to justify continuing the business at
the same level. In the light of this a further restructuring was undertaken in
March 2002 to reduce the cost base further to match our current order book. The
UK Business Review describes the actions that were taken.
Over the last six months, the Board has continued to review a range of potential
acquisition targets that could benefit in some way from our infrastructure,
product range, cash and stock market listing. Discussions have been held with
businesses both within and outside of the Company's core software business but
unfortunately to date, none of these have met the Company's acquisition criteria
of having proven growth potential and ability to enhance shareholder value.
However, several are still under active consideration and I hope to be able to
make a further announcement in the near future.
Business review - UK
In the first few months of the financial year, RMR continued to produce its own
self-commissioned conferences as well as working more closely on producing
events with third parties who had existing content and community. For the most
part revenues on these activities were derived from online advertising either by
RMR selling virtual advertising directly or having revenue-sharing arrangements
with third parties who sold online advertising on their events. With the decline
in online advertising, this model did not generate sufficient revenues to cover
the level of resource employed. Therefore in the first half of the year we
redefined the business model with revenues to be accrued from licensing our
software to third parties rather than selling online advertising. As a result we
reduced the number of employees from 80 at the beginning of the year to 47 in
August 2001.
At the same time we expanded into technology-supported learning with the launch
of our product, Elevate e-learning which was under development in the first half
of 2001. The e-learning marketplace was considered to be potentially the most
promising source of revenue for the Company. In this regard acquisitions and
strategic partnerships were felt to play a key role in developing the business
and we acquired Learning Angles Limited, an e-learning company, in November
2001. The acquisition was meant to introduce a growing revenue line in rich
content and was expected to help in the development of sales of Elevate
learning. We expected the LA business to contribute revenues of £500,000 for the
period to 28 February 2002. As mentioned in my overview, no sales were in fact
achieved.
During the year we have also continued to develop sophisticated web and portal
sites with a focus on projects in the e-government and charity sectors. This
work has produced reasonable revenues and remains part of RMR's core activities.
In the Overview, I referred to the most recent restructuring in March 2002. This
has reduced the cost base through redundancy and relocation from extensive
offices to more suitable, smaller premises that are also in Eynsham. The slimmed
down business of less than ten employees has retained the core competencies
created over the last three years and will continue to allow RMR to be a
provider of software solutions as well as carrying out sophisticated web
development work.
Business review - US
RMR completed its first dedicated US event in June 2001 with the launch of a US
Banking event organised in conjunction with the American Bankers Association as
primary partner. This event was based on our original business model of
producing a self-commissioned conference and deriving revenues from the sale of
virtual exhibitions stands and sponsorship space. Although the revenues on US
Banking were encouraging, the development, production and selling of such events
is extremely resource intensive and only cash generative on achievement of a
large critical mass of events. There were not sufficient of these events and
during the year we decided to follow a similar strategic direction to the UK.
Ultimately, this led us to close the US operation in November 2001.
Results
The turnover for the 12 months to 28 February 2002 was £617,000 (2001: £2.052
million) of which 28 percent (£174,000) represented revenues generated from our
events and e-learning software. The balance of revenue of £443,000 has come from
the development of web and portal sites. Included in software revenues is
£123,000 of income from the US operation.
Principally as a result of below target revenues, a pre-tax loss of £6.345
million was incurred for the year ended (2000: loss of £6.316 million). This
loss comprises a trading loss of £4.545 million, asset write-downs and
restructuring costs of £1.2 million and a goodwill write-off of £600,000 on the
LA acquisition. The second half trading loss of £1.738 million is below the loss
of £2.807 million incurred in the first half and the estimated loss of £2
million referred to in the statement of 5 March 2002.
The cash position at 28 February 2002 was £1.538 million compared to a balance
of £6.270 million at 28 February 2001. For the twelve months, there was a loss
per share of 11.12p (2001: 11.88p).
Board changes
The strategic and operational changes have coincided with changes in the Board
composition. Dr Michael Peagram and Kazia Kantor resigned from their
non-executive positions in August and September 2001 respectively. Robert
Jackson and Mark Smith resigned as executive directors in September and October
2001.
I was appointed executive chairman in September 2001. Ned Carroll also joined
the Board as a non-executive director in October 2001 and following the
acquisition of LA, Chris Thomas and Gwyn Jones joined the Board in executive and
non-executive positions. As already mentioned in the Overview, Chris Thomas and
Gwyn Jones resigned from the Board on 6 March 2002.
Prospects
The restructuring carried out in March 2002 has resulted in a much reduced
operation with a cost base of below £500,000 per annum. With a far lower
breakeven revenue target the business should be in a position to operate on a
cash neutral basis during the second quarter of the current financial year.
Whilst this is a more satisfactory state of affairs, the Board continues to
investigate potential corporate deals that will utilise the Company's product
portfolio, stock market listing and bring value to shareholders.
Michael Mills
Executive Chairman
GROUP PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 28 FEBRUARY 2002
Continuing Discontinued
operations operations Total Total
2002 2002 2002 2001
£'000 £'000 £'000 £'000
Turnover 494 123 617 2,052
Cost of sales (2,068) (326) (2,394) (3,606)
Gross result (1,574) (203) (1,777) (1,554)
Operating costs (2,348) (584) (2,932) (4,623)
Goodwill write-off (600) - (600) -
Restructuring costs (1,200) - (1,200) (330)
Professional costs prior to Company flotation - (255)
Administrative expenses (4,148) (584) (4,732) (5,208)
Operating loss (5,722) (787) (6,509) (6,762)
Net interest 164 446
Loss for the year (6,345) (6,316)
Basic and diluted loss per share (pence) (11.12)p (11.88)p
There were no recognised gains or losses other than the loss for the financial
year.
BALANCE SHEET AT 28 FEBRUARY 2002
Group Group Company Company
2002 2001 2002 2001
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Fixed assets
Tangible assets 86 1,235 - -
Investments - - 4,264 4,264
86 1,235 4,264 4,264
Current assets
Debtors 188 603 - 11,847
Cash at bank and in hand 1,538 6,270 4 5
1,726 6,873 4 11,852
Creditors: amounts (470) (966) - -
falling due within one
year
Net current assets 1,256 5,907 4 11,852
Total assets less current 1,342 7,142 4,268 16,116
liabilities
Creditors: amounts - (55) - -
falling due after more
than one year
Net assets 1,342 7,087 4,268 16,116
Capital and reserves
Called up share capital 6,110 5,510 6,110 5,510
Share premium account 10,650 10,650 10,650 10,650
Profit and loss account (15,418) (9,073) (12,492) (44)
Shareholders' funds 1,342 7,087 4,268 16,116
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 28 FEBRUARY 2002
2002 2001
£'000 £'000
Net cash outflow from operating activities (4,645) (6,139)
Returns on investments and servicing of finance
Interest element of finance lease rentals (6) (10)
Interest received 170 456
164 446
Capital expenditure and financial investment
Purchase of tangible fixed assets (92) (922)
Sale of tangible fixed assets 37 59
Purchase of investments (150) -
(205) (863)
Cash outflow before management of liquid resources and (4,686) (6,556)
financing
Financing
Issue of share capital - 12,823
Expenses paid in connection with the issue of share capital - (449)
Capital element of finance lease and hire purchase contracts (46) (73)
Net cash (outflow)/inflow from financing (46) 12,301
(Decrease)/increase in cash (4,732) 5,745
NOTES TO THE PRELIMINARY ANNOUNCEMENT
For the year ended 28 February 2002
1. Basis of preparation
The financial statements have been prepared under the historical cost convention
and in accordance with applicable United Kingdom accounting standards up to and
including FRS 19.
The financial statements have been prepared on the going concern basis because
the directors have taken appropriate steps to reduce the cost base and hence the
Group will have adequate resources to continue trading and meet liabilities as
they fall due.
The principal accounting policies of the Group have remained unchanged from the
previous year and are set out below.
2. Basis of consolidation
The consolidated financial statements have been prepared on the merger method of
accounting using the principles set out in Financial Reporting Standard 6, '
Acquisitions and mergers'. Under merger accounting, the results and cash flows
of RMR plc and its subsidiaries, with the exception of Learning Angles Limited,
are combined from the beginning of the financial period in which the merger
occurred and their assets and liabilities combined at the amounts at which they
were previously recorded. The consolidated profit and loss account, balance
sheet and cash flow comparatives are restated on the combined basis. Learning
Angles Limited is dealt with by the acquisition method of accounting.
3. Loss per ordinary share
The loss per share is based on a loss of £6,345,000 (2001: £6,316,000), being
the loss attributable to ordinary shareholders, and a weighted average of
57,042,573 (2001: 53,186,129) ordinary shares.
The comparative figures have been calculated using merger accounting principles,
which require the use of the number of shares issued in the share for share
exchange transaction as the weighted average number of shares.
4. Share capital
2002 2001
£'000 £'000
Authorised
100,000,000 Ordinary shares of 10p each 10,000 10,000
Allotted, called up and fully paid
61,102,847 (2000: 55,102,847) Ordinary shares of 10p each 6,110 5,510
6,000,000 Ordinary shares of 10p each were allotted, at par, during the year to
fund the acquisition of Learning Angles Limited. The market price of the shares
at that date was 6.25p.
The following share options, which include directors' share options, were
outstanding on 28 February 2002:
Number of shares over
which options granted Exercise price Exercise period
Share option scheme
5,590,463 10p Exercisable up to 1 November 2011
Other share options
4,412,527 3.56p* Currently exercisable with no cessation date
755,087 11.56p Granted to employees on a monthly basis over a maximum
period of three years service and are immediately
exercisable
on grant
* The share options were issued prior to the Company's flotation when the
nominal share value was 1p per share. On flotation the nominal value per share
was 10p per share. The status of these share options is currently being reviewed
by the Board.
5. Reconciliation of movements in shareholders' funds
Group
2002 2001
£'000 £'000
Loss for the financial year (6,345) (6,316)
Issue of shares 600 12,736
Expenses of share issues - (585)
Adjustments for merger accounting - 87
Net addition to shareholders' funds (5,745) 5,922
Shareholders' funds at 1 March 2001 7,087 1,165
Shareholders' funds at 28 February 2002 1,342 7,087
6. Publication of non-statutory accounts
The financial information set out in this preliminary announcement does not
constitute statutory accounts as defined in Section 240 of the Companies Act
1985.
The Balance Sheets as 28 February 2002 and the Group Profit and Loss
Account, Consolidated Cash Flow Statement and associated notes for the year
then ended have been extracted from the Group's 2002 statutory financial
statements upon which the auditors' opinion is unqualified and does not
include any statement under Section 237 of the Companies Act 1985.
7. Report and accounts
Copies of the 2002 Report and Accounts will be sent to shareholders in due
course.
8. Announcement
Copies of the 2002 Report and Accounts will be available from the Nominated
Adviser, Smith & Williamson Corporate Finance, No 1 Riding House Street, London
W1A 3AS for one month from the date of this announcement.
This information is provided by RNS
The company news service from the London Stock Exchange
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