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The Investment Column: RM in the fast stream

Edited Andrew Yates
Monday 18 May 1998 23:02 BST
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WHAT a difference a new government makes. Just over a year ago RM was a successful operator in what was seen as a small and rather dull sector of the information technology industry - supplying computers and educational software to schools. Come the election, everything changed. Gone were the Conservative cuts, in came New Labour and its love for education. Since Tony Blair walked into No 10, RM's share price has almost doubled.

Labour has already earmarked pounds 100m to put more computers in primary schools and help connect them to the Internet. With close to half of that market in its grasp, RM looks certain to benefit. Another bonus is the lottery- funded programme to spend pounds 230m on IT training for teachers.

With the promise of top grades ahead, the market was able to take a benign view of what at first looks like a rather dismal half-term report card. Sales rose by just 3 per cent to pounds 50.5m while pre-tax profits plunged by almost two thirds to pounds 0.6m. But like all clever students, RM had a good excuse lined up, pointing out that schools delayed spending to see if they got any of the Government's grant. And since the half year ended in March, it did not overlap with Labour's boost to school budgets, which kicked in from April.

With its full offering of software, services and internet connections, RM looks ideally placed to reap the benefits. However, with the shares - up 27.5p to 1487.5p yesterday - currently trading on a forward PE ratio of 43, the good news is all in the price.

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