RM is to shed more than a fifth of its workforce as part of a far-reaching overhaul after the schools supplier blamed education spending cuts for a profit warning that pushed its shares down 16 per cent.
The company, which employs 2,500 people, has also shaken-up its star-studded board, appointing as director the former schools minister Lord Adonis.
As recently as last November, RM – which equips classrooms with products ranging from interactive white boards and computers to desks and musical instruments – had been shrugging off the impact of government austerity.
But the Oxfordshire-based company acknowledged on Thursday: “After a decade of increasing education budgets, the current climate provides a sharp contrast.”
Shares fell 16.4p, or 20.6 per cent, to 84.35p, taking losses for the year to 43 per cent, after RM warned of a “challenging period ahead for shareholders and employees”.
Rob Sirs, chief operating officer, is to leave after 21 years. Three non-executive directors are also standing aside. They include Professor Sir Tim Brighouse, former London schools tsar and one of the UK’s best known education experts, who has been a director at RM since 2004.
RM warned that its full-year results were likely to be worse than existing analyst forecasts but declined to quantify by how much.
Before Thursday, brokers had been expecting the company to post its first fall in annual pre-tax profits in four years, from £19.6m to £17m, on sales of about £340m. The company had net cash of £8m as of the end of March
RM added that shareholders – the largest of which are Schroders, Aberforth Partners and Aviva Investors, according to Bloomberg – should anticipate a “material reduction” in this year’s dividend.
The profit warning comes after the Department for Education disclosed a year ago that department capital spending would be reduced by 60 per cent in real terms by 2015.
RM said it planned to consult with employees about a permanent headcount reduction of 13 per cent. The company also plans to dispose of several businesses, taking the total number of staff leaving the company to 23 per cent.
As a result of the strategic review under Martyn Ratcliffe, who replaced John Leighfield as chairman in June, RM said it would focus on “core activities”.
The company plans to sell or close operations that account for almost 9 per cent of revenue, including furniture supplier ISIS, which RM acquired in 2009 to capitalise on the government’s Building Schools for the Future programme.
That programme has since been cancelled, a decision RM said would “continue to have an impact” across the group.
John Windeler, former chairman of Alliance & Leicester, is also to step down from the board while Sir Bryan Carsberg, a former secretary general of the International Accounting Standards Committee, does not intend to seek re-election.