RM Group shares hit by school spending cuts

THE Government’s decision to axe its school rebuilding scheme sent shares plunging in educational supplier RM Group today after it revealed £200 million of projects were now at risk.

The Oxfordshire-based firm said it had been named as preferred bidder for seven Building Schools for the Future (BSF) projects, which will be subject to review and "may be scaled back significantly".

Shares in RM dropped around 13% at one stage on the news.

The Government dealt a blow to the sector yesterday when it announced the £55 billion scheme would be scrapped as part of spending cuts.

Around 715 schools will see their re-building projects cancelled as a result.

RM has been a major beneficiary of the BSF initiative in recent years, providing IT and software services, such as interactive whiteboards and classroom technology.

But the Government said the wider national programme had been "beset by massive overspends, tragic delays, botched construction projects and needless bureaucracy".

It will continue with 44 projects that have reached "financial close", but review others on a case-by-case basis where preferred bidders have been appointed and stop all those remaining.

RM confirmed 14 of its BSF projects had reached financial close, but that the seven projects under threat were worth £200 million - of which £121 million were already included in the £505 million disclosed as committed revenues in recent interim results.

As well as the bid costs involved in these projects, the Government’s move will also call a halt to a potentially lucrative future revenue stream.

But Terry Sweeney, chief executive of RM, sought to assure the group was "well-placed to adapt to changes in capital spending programmes".

"We have strong relationships at individual school, local government and central government levels," he said.

"We will continue to analyse the impact of the Department for Education’s review and, as appropriate, update the market in due course," he added.

Construction firms will also lose future revenue streams following the BSF cancellation, with groups such as Balfour Beatty, Costain and Carillion having been key firms involved.