RM flogging or axing units in painful shake-up

Nearly one in five jobs to go

Education supplier RM - faced with no uplift in market conditions on the horizon - is laying off staff, and flogging or shuttering some of its loss-making subsidiaries. The move plunged its share price by nearly a quarter.

The LSE-listed firm today revealed it will axe more than one-fifth of the workforce as it restructures its business arm, accounting for 9 per cent of turnover, in a bid to cut costs by £20m a year.

Following a strategic review, RM plans to hone in on areas where it has "depth" knowledge, integrate acquisitions in better ways to squeeze out costs, try to moderate seasonality – 60 per cent of its sales are skewed to the second half of the year – and chop direct sales abroad.

The board confirmed it will seek to sell UK subs, including classroom furniture unit ISIS, control and cashless catering system biz Easytrace and offload or close Lego joint venture DACTA.

"For sale" signs will also be erected outside its international businesses, and a buyer will be sought for Computrac in the US and for its sub in Oz.

RM said some of the businesses to be spun off or chopped are loss-making entities and expunging them would improve medium-term profits.

But it reckoned that cutting staffing levels is also necessary.

"The proposal is to reduce permanent headcount in the continuing operations by approximately 13 per cent from the July 2011 level.

"Including the businesses to be exited, and the actions taken in March 2011, the proposal would reduce Group permanent headcount by approximately 23 per cent from the September 2010 level," said RM.

The Coalition government's collapse of the Building Schools for the Future programme hit RM hard last year – it was the biggest supplier to the scheme by a country mile – and it has already made some redundancies to offset the loss in business.

However, its own polling of head teachers in primary and secondary education showed that 70 per cent of schools are forecasting cuts in capital expenditure, with 40 per cent expecting to spend less on IT.

"After a decade of increasing education budgets, the current climate provides a sharp contrast," said.

"Recent reductions in UK public sector expenditure and the termination of the Building Schools for the Future ("BSF") programme have, and will continue to have, an impact on the group in the next few years," it added.

RM has decided to restructure its three operating units, Learning Technologies, Education Resources and Assessment & Data, into four divisions: Education Technology, Managed Services, Education Resources and Education Software.

Shareholders should expect the changes to result in a one-off charge of £35m but the majority will relate to goodwill on the balance sheet and will not impact cash, the firm added.

A number of board changes have also been confirmed: director John Windeler's term in office ends on 1 October, Professor Tim Brighouse is set to resign at the end of next month and, after 21 years, Robin Sirs also leaves at the end of November. Director and chairman Sir Bryan Carsberg does not intend to seek re-election in March.

The share price has sunk by 24.57 per cent at the time of asking to 76 pence. ®