As children return to school after the long summer break we take a look at six investment opportunities in the education market.
"I have never let my schooling interfere with my education." ~ Mark Twain
If Britain's high streets seem a little quiet these days it's because children have (finally) returned to school after the long summer break. Around 10 million school children will make their way back to over thirty thousand schools this week, and meet up with almost half a million teachers. That's a lot of kids, a lot of teachers and a lot of schools. And where there are people there may be money to be made. So here are six of my best plays on the back-to-school market.
It's hard to believe that someone who once wrote a song about violence in an American school can possibly be involved in the education sector. But Bob "I don't like Mondays" Geldof is the man behind Ten Alps
(LSE: TAL)
. The multi-channel media company produces a wide range of television programmes, and also plays a leading role in the Government-funded specialist Teacher's TV channel. Profits last year more than trebled to £2m, and are expected to rise 45% to £2.9m in 2007.
Sticking with teachers, outsourcing specialist Capita
(LSE: CPI)
is Britain's largest provider of supply teachers. Apart from supply teachers, Capita also provides schools with catering staff, laboratory technicians and exam markers, too. Significantly, profits at Capita have almost trebled in the last five years, which may help explain its lofty valuation of 23 times earnings.
RM
(LSE: RM)
, which is a leading supplier of software, hardware and computer services to schools, is another player in the education sector. It is set to cash in on the Government's Computer for Pupils scheme, which will see some £60m up for grabs over the next two years. The Government-backed programme, which is aimed at helping disadvantaged secondary school children, may provide RM with another welcome boost. Last year RM posted profits of £13m, which is expected to rise to £14m this year, and £16m the year after.
Gone are they days when chicken nuggets and chips were the main feature of school dinners. These days, a school meal must include at least two portions of fruit and vegetables, and fried foods are restricted. The Government has also earmarked £240m to subsidise healthy ingredients, and this has been welcomed by contract caterer Compass Group
(LSE: CPG)
, which supplies nearly 2,000 educational establishments with meals.
Turning to school books, WH Smith
(LSE: SMWH)
, Reed Elsevier
(LSE: REL)
which owns Harcourt, and Waterstone'sowner HMV
(LSE: HMV)
are all players in the textbook market. But Pearson
(LSE: PSON)
, which generates almost 90% of its revenue from books, is the world's biggest educational publisher. Its brands include Dorling Kindersley, Prentice Hall and Longman. Under chief executive Marjorie Scardino, Pearson has disposed of many of its non-media assets to focus on what it describes as "education in the broadest sense of the word".
They say that all work and no play makes Jack a dull boy, and Stagecoach Theatre Arts
(LSE: STA)
may provide just the outlet for children with thespian ambitions. It provides a secure environment in more than 500 theatre schools for children to learn the major disciplines of performance. Its roll-call of budding stars includes Anyi Wang who played Tam in Miss Saigon and Chloe Jones and Alexander Thompson who starred in Chitty Chitty Bang Bang. But while Stagecoach has recorded notable success with limelight and greasepaint, this has not been translated into bottom-line profit yet.
And finally a quote from my old schoolmaster Mr. Ryan who loved to say, "There are three good reasons to be a teacher - June, July and August"
> Education, Education, Education | Text Book Investments
