Analysts back RM's optimistic view

System builder reckons education spending will remain strong

Education supplier RM’s bullish profit forecast is not madness and the company’s form might even be sustainable, according to analysts.

RM recently issued an interim management statement to the City for the first half of its financial year, 1 October 2008 to 6 February 2009. And despite the downturn, RM said its expectations for the full year remain unchanged.

Phil Hemmings, director of corporate affairs, said: “We are required to give the City a qualitative, chatty view of the company’s expectation for the next six months.

“We see no indication that there will be a dip in spending in education. Everyone has budgets, and nobody has told them not to spend the budgets,” he said.
Hemmings added that he anticipates schools and colleges will be looking to ensure they spend the rest of their budget before the year is out.

He did acknowledge, however, that their present level of spending is based on events over the past

10 years, and that building a model for the next three years could prove tricky.
RM has planned diversification for some time to spread the risk, he explained. In November, the firm bought Computrac, a US supplier of interactive classroom technology, for $8m (£5.5m).

It now operates in the Australian education market, and has diversified into non-IT supplies, with the acquisition of suppliers such as SpaceKraft and Dacta.

“The plan is to have enough footprint in enough markets to keep the growth going,” said Hemmings.

Quocirca analyst Clive Longbottom confirmed RM’s prediction. “The government is hoping to keep spending going in the public sector to try to mitigate the top-line view of the recession.

“So the education arena is not going to be starved of money for the foreseeable future.”