RM PLC Faces Uncertainty Amid Covenant Breach Concerns
Shares in RM PLC have fallen as the company expresses concerns over its ability to continue amid potential covenant breach, engaging in discussions with banks to find solutions.
Shares in RM PLC have fallen after the company expressed material uncertainty regarding its ability to continue as a going concern. It stated that an agreement with banks is crucial, as it anticipates breaching its Ebitda banking covenant in the third quarter of fiscal 2023.
At 0742 GMT, shares were down 29% at 50 pence, reflecting the market's response to the news.
The education-technology group reveals that it is currently engaged in discussions with banks. These negotiations aim to secure suitable waivers and amendments, such as covenant resets and maturity extensions, to ensure the availability of the company's credit line. RM PLC's current debt facility amounts to £70.0 million ($89.2 million).
Operational Challenges Impacting Financial Performance
RM PLC acknowledges that operational issues within its Consortium business have significantly affected both its management and overall performance during the first half. This has resulted in below-expectation sales recovery. Consequently, the board's previous projections for the company's adjusted operating profit for the full year have been revised, now expecting it to be at or around breakeven.
In the six months ending May 31, the company recorded a narrower pretax loss of £4.4 million compared to £7.7 million during the same period the previous year. Additionally, revenue decreased from £97.9 million to £87.6 million.
For fiscal year 2022, RM PLC reported an adjusted operating profit of £7.5 million from continuing operations and £9.1 million, including discontinued operations.