The Investment Column: RM cashes in on IT revolution
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Your support makes all the difference.RM, the UK's leading supplier of computer systems to schools and colleges, should be a big beneficiary from yesterday's Budget. Gordon Brown's pledge to add pounds 1bn to the funding of schools for a year from April 1998 and another pounds 1.3bn from the windfall tax over the next five years to tackle repairs and bring IT up to date will mean more available cash for information technology. Of the pounds 21bn that British schools currently have to spend each year, less than 1 per cent - pounds 200m - goes on IT.
RM has muscled in on the obvious areas of growth, supplying half the UK's secondary schools and two-fifths of its primary schools with computers and popular educational software. One of its best products is SuccessMaker. A government study showed that using it for just 15 minutes a day for six months improved children's maths skills three-fold. What's more, RM continues to grab share from its only big rival, Exemplar, a joint venture between Apple and Acorn.
One reason is the weakness of Exemplar's package. The group still uses non-standard proprietary software, while RM offers the more universal Microsoft system, compatible with educational publishers like Dorling Kindersley, and sells directly to schools, offering good back-up support.
RM's Internet service offers even greater potential. The group supplies more than half of the UK's secondary schools with dial-up Internet services and a lucrative network connection which allows a whole classroom to use the Internet simultaneously. For use of the system, schools pay around pounds 3,000 a year. Mike Greig, finance director, reckons that RM has more than two-thirds of the schools' Internet market.
Currently hefty telephone charges are keeping the lid on growth, but an agreement between BT and the cable groups on a cap of around pounds 600 a year looks imminent.
Floated at 175p in 1994, Budget euphoria lifted RM's shares 55p to 862.5p yesterday, putting them on a forward multiple of 30 times. Obviously not cheap, but given the prospects they could still go higher.
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