Broker snap: RM to focus more on US

26th Jul 2010 12:13

Social housing firm Connaught may have been the most high profile early casualty of the government's spending cuts but educational information technology provider RM Group is feeling the effects of them too.The company said in a trading update on Monday morning that full year results "will reflect exceptional costs of c.£1.5m related to actions taken in response to the Department for Education's (DfE) recently announced review of the BSF (Building Schools for the Future) programme". Full year market profit before tax estimates range between £18.30m and £20.7m, and earnings per share (EPS) forecasts run from 15.40p to 16.50p, broker Daniel Stewart notes. "The abrupt shift in government education policy and resulting abandonment of the BSF programme clearly impacts RM's long-term strategy. The promotion of Academies should in part offset this change, and also release working capital that would otherwise be tie up in the lengthy BSF bidding process. However, clarity on this new direction should not emerge until after the autumn spending review," Daniel Stewart's Mike Jeremy predicts."We expect RM to devote renewed attention to its overseas opportunities, notably in the US," Jeremy adds.With the stock trading on an undemanding rating and with the yield at 4.6%, the broker is sticking with its "hold" rating.