Companies: RM.   

Following a profits warning and a below par set of full year results (sales of £242m and profits of £16.3m), RM is trying its best to rehabilitate its reputation. To this end the group, which supplies software and systems to the educational sector, announced that it had secured a contract from South Lanarkshire. This deal is on top of the £5m contract RM already has with the council and vindicates (to an extent) the optimistic remarks made by chief executive Richard Girling regarding the Store Box product back in November. The deal comes just a few days after ING Barings issued a 'sell' recommendation on the stock. It forecast that RM would make £17m this year and produce earnings of around 12.4p. Brokering house Granville Baird is slightly more bullish. They reckon that the company will make profits in the region of £17.7m and earnings of 13.4p. Nevertheless, Baird still believes the company will 'underperform'. At 230p, the shares are leagues below the 1000p they commanded last year, and trade on a p/e of 18.5. If the management can keep winning new business, the current price could begin to look cheap - one times sales is an unusual valuation for the software sector.