Final Results

FDM Group PLC 04 April 2006 FDM GROUP PLC ("FDM" or the "Group") PRELIMINARY RESULTS The Board of FDM Group Plc, (LSE: FDMG), the IT services provider, is pleased to announce its preliminary results for the year ended 31 December 2005. Financial highlights • Sales increased by 6.4% to £35.07m (FY04: £32.97m) • Group gross profit margin increased to 19.4% (FY04: 19.0%) • Adjusted* profit before tax increased by 19.2% to £2.15m (FY04: £1.81m) o Profit before tax of £1.57m (FY04 £1.81m) • Adjusted* fully diluted earnings per share of 6.8p o Fully diluted earnings per share of 4.1p • Net cash position as at 31st December 2005 of £2.34m • Dividend of 1.0 pence per share for the second half, making a total dividend for 2005 of 1.5 pence per share * These adjustments are the adding back of float costs and UITF 17 share option charges. Operational highlights • Mountie numbers increased by 17% to 116 at the 22nd of March 2006 (98 in March 2005), with a further 109 in training • Utilisation of Mounties during the period of 94.7% (FY04: 94.4%) • Total contractors on billing increased by 9.2% over the period from 426 to 465 at 31st December 2005 and has continued to grow subsequently to 553 at the end of March 2006 • 75 new customers won during the period, including First Choice Holidays, Credit Suisse First Boston, GlaxoSmithKline Biological Services, ABN AMRO and JP Morgan Cazenove • Successful flotation on AiM in April 2005, raising £3.0m (net) for the Company Rod Flavell, CEO of FDM Group commented, "We have delivered a solid performance in 2005 during which time we have developed the business, invested in the future and built a platform for future growth that will take advantage of an expanding market. Since the beginning of the current financial year we have seen an increase in both revenues and profits and all key business metrics have led to a positive start to 2006, continuing the trend for growth set in 2005. We have seen our contractor numbers increase from 465 at the year end to a current total of 553 and have won new clients such as M&G Investment Management, BNP Paribas and British Airways. Based on current trading levels, the continued execution of our business strategy and the strength of the market, we view the future with confidence and anticipate a successful outcome for the current financial year." ENQUIRIES: FDM Group Plc Noble & Company Limited ICIS Tel: 0870 060 3100 Tel: 0207 763 2200 Tel: 0207 651 8688 Rod Flavell, Chief Executive Officer Nick Naylor Tom Moriarty Julian Divett, Chief Operating Nick Athanas Caroline Evans-Jones Officer Chairman's and Chief Executive's Statement We are delighted to report to our shareholders that our first year as an AiM quoted company has been a year of considerable achievement for FDM and we intend to continue to build on this success during 2006. We have seen demand for our specialist IT consultants, the Mounties, grow significantly over the year and believe that our Mountie business model, which is unique in the IT staffing sector, leaves us well positioned to capitalise on the expected ongoing growth in the IT recruitment market. Overview The 2nd quarter of 2005 saw the successful flotation of the FDM Group on AiM with a placing with institutional investors to raise £3.5m of new money (before expenses) for the Group. The funds raised at this time have been invested by the Board in the development and organic growth of the Group and we are particularly pleased to report that we now have a number of major institutional investors on our share register. 2005 was the Group's 3rd successive year of operating profits growth (before float costs), sales revenue growth, and gross margin growth - all our key metrics which shows the strength behind the Group's business. Our UK business performed exceptionally well, showing an adjusted(1) profit before tax growth of 18.5%, supported by increased net and gross profit contributions from our overseas offices. Demand at all three of our divisions: IT Staffing, IT Professional Services and IT Training grew over the year and we are pleased to report that we won over 75 new clients in the year, including First Choice Holidays, Credit Suisse First Boston and GlaxoSmithKline Biological Services. The FDM Academy, our unique training centre from which the Mounties graduate, continues to draw students from Europe and the USA, and is now attracting students from our new EU member states such as Poland, Slovakia and Latvia. With the demand for highly skilled IT staff on the increase, we will continue to grow this side of our business in 2006. Against the background of our success in 2005 the Board is recommending a dividend of 1.0 pence per share for the second half of the year making a total dividend of 2005 to 1.5 pence per share. The Board will continue to keep its dividend policy under review. In November 2005 we welcomed Karl Monaghan to our Board as a Non-Executive Director. With his wide experience and knowledge of the capital markets he will bring added strength to the Board to help meet the challenges ahead. The strong performance of the Group reflects the professionalism of our staff, many of whom have been with the Group for over 10 years. The depth and spread of their expertise is well recognised within the IT Services industry and we will continue to build on this. We would like to express our appreciation for their performance in the year. Their commitment and loyalty is the cornerstone of our continuing success. Financial results The results for the year reflect the successful execution of a growth strategy that is designed to grow revenues and importantly to maintain and enhance margins. Revenues increased by 6.4% from £32.97m to £35.07m, driven by an increasing number of customers moving from consultancy and planning to programming, implementation and testing phases bolstered by the addition of new customers. Revenues in the second half were £18.63m, an increase of £1.44m over the same period in the prior year and an increase of 13.3% on the first half of the year, which is particularly encouraging. Importantly, the new business won by FDM in the year has been higher margin business, replacing some older lower margin business relationships. Gross margins for the year increased to 19.4% as compared to 19.0% in the prior year. A larger proportion of high margin business in conjunction with tight control of costs has resulted in significant profits growth with adjusted profit before tax, which includes the adding back of float costs and UITF 17 share option charges, increasing by 19.2% to £2.15m. Unadjusted profit before tax, which reflects the impact of float costs and UITF share option charges was £1.57m for the year. Key performance indicators The Mounties, FDM's employed IT contractors, are fundamental to the Group's business strategy. Trained in the most in-demand IT skills, these employees are placed with clients, generating higher margins for the business than freelance IT contractors. Therefore the growth of the FDM Academy, which trains the Mounties, and the resultant growth in Mountie numbers is a key focus of management's attention and efforts. Utilisation of Mounties is steadily increasing and is currently running at 94.7%. We have significantly increased the number of Mounties training to 109 throughout the Group (as at 22nd March 2006), with various marketing initiatives having successfully generated increased interest in the scheme. At the end of February 2006 the FDM Academy was receiving 32 new applications per week. The investment in our own training facilities is justified by current Mountie deployment levels. In line with FDM's expansion plans, we currently have 116 Mounties on billing, an increase of 17% from this time last year. FDM's market There is clear evidence that the IT staffing and recruitment market remains strong and continues to grow. Charge out rates remain robust. Recent research in Recruitment International magazine indicates that freelance IT contractors in the City are on average now being paid £50 per hour, a level that has not been reached since 2001. The demand is set to continue to be driven by factors such as the requirement for expenditure on security and compliance work. (Source: iProfileStats/Association of Technology Staffing Companies.) In addition, market commentators have identified FDM's key focus area: web enablement for major multinational organisations, as one of the future high growth areas. A recent survey conducted amongst 25,000 IT contractors, shows that the financial services sector has risen from 3rd to 2nd largest user of IT contractors, and now accounts for 24% of the market. (Source: Giant Group Plc, Feb 2006). We are now at a stage in the technology cycle where global organisations are seeking a significant competitive advantage by implementing major enhancements to their technology platforms, processes and systems. This is particularly the case in the financial sector where FDM has a strong market presence. Another feature of the market is the trend away from outsourcing of certain IT functions to low cost economies. Several large financial institutions have recently announced plans to move areas such as system development and support back to "near shore" operations, which is expected to drive demand for these services within the home markets. JobServe, one of the UK's leading IT job boards, consistently shows that the number of contracts requiring either Java or .NET skills, in which FDM specialises, is continuing to increase. According to the National Computing Centre and the Association of Technology Staffing Companies, C#, .NET and Java will be the most in-demand skills in the UK IT staffing market in 2006. These factors lead us to believe that the niche sector of the general IT recruitment and training market in which we focus is currently at the beginning of a prolonged period of growth. IT Staffing We provide our clients with both Mounties and freelance contractors to staff their IT requirements, this mixed approach providing economic benefits for both FDM and our customers. By combining Mounties and freelance contractors at our client sites, we are able to cross sell our higher value margin services and additional FDM solutions. The number of contractors throughout the Group currently stands at a record level of 553 as at the end of March 2006 which compares to 426 at the beginning of 2005. UK operations We are pleased to report that we have delivered a strong performance from IT staffing in the year and all indicators currently point towards continued growth this year. With 432 contractors in the UK, we have also significantly grown our customer base and now have over 130 customers including Deutsche Bank, Siemens, Royal Bank of Scotland, EDS, Sony and Unisys. New contracts won in the year include LogicaCMG, ABN AMRO and JP Morgan Cazenove. As stated above, our training facilities have been expanded to meet the current high demand for skilled contractors and we currently have 89 people in training in the UK with a total of 109 people in training throughout the Group. At present we have 4 distinct training programmes: Java, .NET, Banking and Testing which are aligned towards the areas of greatest demand. In addition, we have accelerated graduate turnaround times for certain sectors, specifically banking, by focusing training on the core requirements of the sector. This initiative has lead to the placement of specialist banking contractors with major financial organisations during the year. Mainland Europe and US In mainland Europe, we have made steady progress achieving modest growth in the markets in which we operate. It is still early days in these markets for FDM and we are currently investing in these areas to take advantage of the growth offered. Similarly, we are seeing improvement in the performance in the US market. We have invested in the sales and finance functions in the US in order that we are well positioned to expand operations in this area. Increasingly, our larger customers have a requirement for an IT services partner that can provide solutions on a global scale. The Board believes that by investing in global operations, the Company will be well positioned to better fulfil international contracts. By increasing and improving our visibility in these overseas markets and concentrating on our core businesses the Board anticipates being able to fuel turnover growth during 2006 without compromising gross margins. IT Professional Services The professional services division has made a significant contribution in the year and continues to perform strongly. We currently have 30 people within the division which generally consists of managed Mountie teams providing small development work and application support. New contract wins in this division in 2005 included ABN AMRO and Goldman Sachs. IT Training Our IT Training division offers project based training programmes for a range of business sectors, including local and central government, investment management, banking and re-insurance. The level of requirement for training can be linked to the volume of new application releases in the sectors in which we operate. During the year, we saw a thinning in the number of new applications and therefore a reduced demand for training programmes, although several new contracts were secured with new clients including Deloitte MCS and STT Limited. Since the beginning of the current financial year, we have seen this trend reverse and we are currently experiencing significant demand for long term training contracts. Outlook We have delivered a solid performance in 2005 during which time we have developed the business, invested in the future and built a platform for future growth that will take advantage of an expanding market. Since the beginning of the current financial year we have seen an increase in both revenues and profits and all key business metrics have led to a positive start to 2006, continuing the trend for growth set in 2005. We have seen our contractor numbers increase from 465 at the year end to 553 and have won new clients such as M&G Investment Management, BNP Paribas and British Airways. Based on current trading levels, the continued execution of our business strategy and the strength of the market, we view the future with confidence and anticipate a successful outcome for the current financial year. Brian Divett Rod Flavell Non-Executive Chairman Chief Executive Officer 4th April 2006 (1) These adjustments are the adding back of float costs and UITF 17 share option charges Consolidated Profit and Loss Account For the year ended 31 December 2005 Note 2005 2004 £000 £000 (as restated - see note 1) Turnover 2 35,068 32,971 Cost of sales (28,274) (26,692) ---------- ----------- Gross profit 6,794 6,279 -------------------------------- ---------- ----------- Administrative expenses excluding (4,854) (4,486) exceptional items Exceptional administrative 3 (447) - expenses ------------ ----------- -------------------------------- Administrative expenses (5,301) (4,486) Other operating income 47 15 ------------ ----------- Operating profit 1,540 1,808 Interest receivable and similar 93 14 income Interest payable and similar (68) (17) charges ------------ ------------ Profit on ordinary activities before taxation 1,565 1,805 Tax on profit on ordinary 4 (666) (590) activities ------------ ------------ Profit on ordinary activities after taxation 899 1,215 Dividends 5 (414) (297) ------------- ------------ Retained profit for the 485 918 financial year ============= ============= Basic earnings per share 6 4.1p 5.0p ====== ====== Diluted earnings per share 6 4.1p 5.0p ====== ====== The turnover and operating profit arose from continuing operations. Consolidated Balance Sheet For the year ended 31 December 2005 2005 2004 £000 £000 £000 £000 (as restated - see note 1) Fixed assets Intangible assets 14 11 Tangible assets 190 237 ---- ---- 204 248 Current assets Debtors 7,704 6,498 Cash at bank and in hand 2,568 1,536 ---- ---- 10,272 8,034 Creditors: amounts falling due within one year (4,323) (4,645) ---- ---- Net current assets 5,949 3,389 ---- ---- Total assets less current liabilities 6,153 3,637 Creditors: amounts falling due after - (1,600) more than one year ---- ---- Net assets 6,153 2,037 ==== ==== Capital and reserves Called up share capital 232 187 Capital redemption 63 63 reserve Share premium 3,332 - Profit and loss account 2,526 1,787 ---- ---- Equity shareholders' 6,153 2,037 funds ==== ==== Consolidated Cash Flow Statement For the year ended 31 December 2005 2005 2004 £000 £000 Cash flow statement Cash flow from operating activities 781 857 Returns on investments and servicing of finance 25 (3) Taxation (513) (155) Capital expenditure (51) (148) Equity dividends (814) 103 -------- -------- Cash inflow before financing (572) 654 Financing 1,693 (339) -------- -------- Increase in cash in the year 1,121 315 ======== ======== Reconciliation of net cash flow to movement in net funds Increase in cash in the year 1,121 315 Cash outflow from movement in lease financing - 3 Cash outflow/(inflow) from decrease/(increase) in debt financing 1,800 (1,800) -------- -------- Change in net funds 2,921 (1,482) Translation differences (19) 6 -------- -------- Movement in net funds in the year 2,902 (1,476) Net (debt)/funds at the start of the year (560) 916 -------- -------- Net funds /(debt) at the end of the year 2,342 (560) ======== ======= Notes to the Preliminary Results 1. Basis of preparation a) The financial information for the years ended 31 December 2005 and 31 December 2004 above does not constitute the company's statutory financial statements but is extracted from the audited accounts for those years. The auditors have reported on those accounts; their reports were unqualified and did not contain statements under Section 237 (2) or (3) of the Companies Act 1985. The amounts shown for the year ended 31 December 2004 are restated on adoption of FRS21, which changes the accounting for dividends, as outlined below. b) The audited accounts for the year ended 31 December 2004 have been delivered to the Registrar of Companies. The Annual Report and Financial Statements for the year ended 31 December 2005 will be delivered to the Registrar of Companies following the Annual General Meeting. Copies will be available to the public at the Company's registered office: Second Floor, Lanchester House, Trafalgar Place, Brighton BN1 4FL c) The Group's accounting policies have been applied consistently, except for the adoption of FRS21 Events after the balance sheet date. This results in a change of accounting policy for dividends, whereby dividends are charged in the financial statements in the period in which they become a legal obligation. This change in accounting policy has no impact on the group's profit after tax or cash flows, but increases retained reserves and net assets at 31 December 2004 by £298,000. There is no change to the Company's ability to pay dividends or to the Company's dividend policy. 2. Segmental Information -Turnover The geographical analysis of turnover is as follows: 2005 2004 £000 £000 UK 27,952 26,734 Europe 5,102 5,145 USA 2,014 1,092 --------- --------- 35,068 32,971 ========== ========= 3. Exceptional Administrative Expenses On 7 April 2005, the Company's shares were admitted to trading on the Alternative Investment Market (AiM) of the London Stock Exchange. The costs of listing charged to the profit and loss account amounted to £447,000. 4. Taxation The group effective tax rate of 42% for 2005 is higher than prior years, as it reflects the impact of UITF 17 charges and the float costs outlined above. The underlying rate remains similar at 33% (2004: 32%). 5. Dividends The Group has adopted Financial Reporting Standard 21, events after the balance sheet date, resulting in a change of accounting policy for dividends, whereby dividends are charged in the financial statement in the period in which they become a legal obligation. The Board of Directors are recommending a final dividend of 1.0 pence per share for the year, increasing the total dividend for 2005 to 1.5 pence per share. 6. Earnings per share Basic earnings per share is computed by dividing the net profit attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the year, which was 21,803,760. Diluted earnings per share is computed by dividing the net profit attributable to ordinary shareholders by the weighted average number of ordinary shares in issue after adjusting for the effects of all potential dilutive ordinary shares that were outstanding during the year which were 161,361. 7. Circulation to Shareholders Copies of the Company's Annual Report will be sent to shareholders on 19th April 2006 with further copies available from the Company Secretary, FDM Group Plc, 2nd Floor Lanchester House, Trafalgar Place, Brighton, East Sussex. BN1 4FL. This information is provided by RNS The company news service from the London Stock Exchange

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