Final Results
FDM Group PLC
21 March 2007
Embargoed for release at 7.00am 21 March 2007
FDM Group plc
("FDM" or the "Group")
PRELIMINARY RESULTS FOR YEAR ENDED 31 DECEMBER 2006
The Board of FDM Group plc, (LSE: FDMG), the IT staffing and services business,
today announces its preliminary results for the year ended 31 December 2006.
Financial highlights
* Sales increased by 27% to £44.50 million (2005: £35.07 million)
* Gross profit (net fee income) increased by 27% to £8.60 million
(2005: £6.79 million)
* Adjusted profit before tax increased by 36% to £2.92 million
(2005: £2.15 million) +
* Profit before tax £2.78m (2005: £1.60m)
* Adjusted fully diluted earnings per share increased by 2.5p to 9.3p
(2005: 6.8p) +
* Fully diluted earnings per share of 8.7p (2005: 6.8p)
* Final dividend of 1.3 pence per share, making a total dividend for 2006 of
1.9 pence per share (2005: 1.5p)
* Net cash position of £1.98 million at 31 December 2006
(31 December 2005: £2.34 million)
+ excluding FRS20 share-based payment charges and the exceptional costs
of the April 2005 flotation
Operating highlights
* Overall gross margins remained stable, and well ahead of industry average,
at 19.3% (2005: 19.4%)
* Operating margin increased to 6.4% in 2006 from 6.1% in 2005
* Growth in contractor headcount of 34% from 465 at start of year to 625 at
31 December 2006
* Growth in number of internally trained, higher margin Mounties to 154 at 31
December 2006 (31 December 2005: 93); Mountie utilisation rates steady at
97.8%
* New training academy opened in City of London in January 2007, creating
additional capacity to service client demand, especially in London's key
financial services industry
* New clients won during the year include Lloyd's Register, Monster and
Nomura
* Demand for skilled IT professionals in key markets remains very strong
* Current trading conditions remain very favourable and the Board is
confident in the outcome for the current year
Ivan Martin, FDM's Chairman, commented:
"2006 has been another year of considerable progress for FDM, with the Group
delivering significant revenue and profit growth. Within our chosen markets, the
outlook for 2007 looks positive and the Board is confident in the future
prospects of the Group."
Rod Flavell, FDM's Chief Executive Officer, added:
"There is clear evidence that the IT staffing and recruitment market remains
strong and continues to grow. We recognise that the outsourcing of IT to
offshore locations may save costs. However, poor delivery can also affect the
overall quality and productivity that end users actually experience. Many
companies recognise the limits and scope of the offshoring model and are now
bringing business critical activities back in-house. This trend will continue to
drive demand for FDM's blend of services in 2007."
For further information please contact:
FDM Group Plc Noble & Company Limited Pelham PR
Tel: 0870 060 3100 Tel: 020 7763 2200 Tel: 020 7743 6679
Rod Flavell, Chief Executive Officer Nick Naylor Archie Berens
Julian Divett, Chief Operating Officer Nick Athanas
ABOUT FDM
FDM is an international IT company providing IT staffing, and IT services to
companies for over 20 years. With offices in the UK, USA and Europe, FDM has
maintained its leadership in this highly competitive marketplace by investing in
a unique, industry-leading IT training programme (FDM Academy).
FDM provides IT services across multiple business sectors: Financial Services;
Systems Integrators and Software Houses; Telecommunications and Broadband;
Media; and Transportation. Clients include over 150 blue-chip organisations such
as JP Morgan, Sony, Barclays, Deutsche Bank, EDS, The BBC, Siemens and T-Mobile.
FDM has established solid partnerships with industry heavyweights including IBM,
Oracle, Sybase, Sun and Microsoft, enabling the Group to offer services in
leading-edge technical environments.
Like a number of other organisations in this sector, FDM supplies freelance IT
contractors to clients. However, FDM (through the FDM Academy) also trains,
certifies and places its own employed consultants (known as Mounties). This sets
FDM apart from the majority of its competitors in the IT staffing market, who
rely on a shared agency database of IT contractors.
OPERATING STRUCTURE
FDM delivers its services to clients through two business units:
IT Staffing - offering a unique mix of freelance contractors and Mounties,
ensuring properly qualified staff will be on site for the duration of clients'
projects, whilst reducing staffing costs.
Global Services - a low risk, highly scalable services model, that has been
designed to increase efficiency, whilst decreasing management overheads. From
development, support and training, FDM provides highly skilled teams to build
the right solution to meet clients' business needs.
FDM ACADEMY
FDM's award-winning Academy runs a unique fast track training programme designed
to provide the programmers of today and tomorrow. The Academy provides a
hi-tech apprenticeship scheme for programmers in Sun Microsystems' Java and
Microsoft's C# and .Net. With recently introduced finance and testing streams,
FDM Academy is well placed for the future. Over 1000 IT professionals have now
graduated from the Academy.
FDM Group plc
("FDM" or the "Group")
Preliminary results for the year ended 31 December 2006
Chairman's Statement
Chairman's Statement
Introduction
It gives me great pleasure to report that 2006 has been another year of
considerable progress for FDM, with the Group delivering significant revenue and
profit growth. This is the fourth successive year of sales and profit growth for
FDM and the Group is well positioned for the future.
I became Chairman of FDM in October 2006, when Brian Divett stepped down from
the role. On behalf of the Board, I would like to thank Brian for his enormous
contribution to the business over the years. Brian, a founding shareholder of
the Group, has been part of the FDM story for 16 years and has overseen the
creation of the company and its transformation into one of the UK's leading IT
recruitment businesses.
Results
During 2006, FDM has seen all of its operations, both geographically and by
function, perform well. Revenues during the year grew by 27% to £44.5m (2005:
£35.1m), enabling the business to generate an adjusted operating profit of
£2.84m (2005: £2.13m) after adding back exceptional float costs and FRS20
share-based payments, which represents year-on-year growth of 33%. Adjusted
profits before tax were £2.92m, compared to £2.15m in 2005. Adjusted fully
diluted earnings per share grew by 2.5p to 9.3p (2005: 6.8p).
Against the background of our success in 2006, the Board is pleased to recommend
a final dividend of 1.3p per share for the second half of the year, making a
total dividend for the year ended 31 December 2006 of 1.9p per share (2005:
1.5p).
Operations
Our UK business performed exceptionally well during the year, showing growth in
adjusted profit before tax of 41.5%. This was ably supported by steady
performances from our operations in the US, Germany and Luxembourg. I am pleased
that we have continued to grow our client base, with new wins including Lloyds
Register, Monster and Nomura. We have also seen increased cross-selling to our
customers across geographies, including contracts with Deutsche Bank, HSBC, ABN
AMRO and Commerzbank through both mainland Europe and in the USA.
The FDM Academy, our unique training capability from which the Mounties
graduate, continues to draw students from the USA and Europe, including the new
member states in the EU.
During January 2007, a new office in the City of London was opened for business
in response to increasing demand from our clients and from applicants to the FDM
Academy. Given that a considerable amount of FDM's work is sourced from
organisations operating in London, the establishment of the new FDM Academy
represents a logical step in our development. I am pleased to report that we are
receiving increasing numbers of applications for Mountie training places in
London.
As our Chief Executive explains in more detail in his review, there continues to
be a shortage of trained IT skills across the Western world, with the problem
especially acute in the newer areas of IT such as Java and .Net. Virtually all
blue chip organisations are adopting these new programming techniques to deploy
new systems as well as to refresh legacy applications. Together with our
existing facilities, the new FDM Academy in London will enable us to better
satisfy this growing demand for our services. Overseas, FDM is also looking for
additional opportunities to increase its output of Mounties and to further
improve the trading performance of its operations.
Board changes
On 14 December 2006, we announced that April Denney, Group Finance Director, had
resigned as an employee of the Group and had stepped down from the Board with
immediate effect. Since this date, the finance function of FDM has been run by
an Interim Finance Director and the Group Financial Controller. The Group are
currently in the process of recruiting a suitable Finance Director to replace
April Denney. The Board anticipate making a further announcement shortly in
respect of such an appointment.
The departure of April Denney is currently subject to a dispute between April
Denney and the Company. The Board rejects Miss Denney's claim having taken
advice from the Company's solicitors, and intends vigorously to contest it.
Outlook
The strong performance of FDM during the year has been largely delivered because
of the professionalism and endeavours of our staff, many having been with the
Group for over 10 years. I would like to put on record my appreciation for their
dedication, hard work and enthusiasm during the year. I look forward to working
with them into the future.
2007 is predicted to exhibit considerable growth in demand for IT resources,
especially in Eastern and Mid-Europe as new members integrate into the EU. The
shortage of IT skills is equally severe in the USA. FDM already has established
operations in Germany, Luxembourg and USA and is therefore well placed to
capitalise on these overseas growth opportunities.
Within our chosen markets, the outlook for 2007 looks positive and the Board is
confident in the future prospects of the Group, notwithstanding the additional
cost involved with the opening of the new London office. I look forward to
updating shareholders on our progress later in the year.
Ivan Martin
Chairman
21 March 2007
FDM Group plc
("FDM" or the "Group")
Preliminary results for the year ended 31 December 2006
Chief Executive's Review
Introduction
I am delighted with FDM's performance in 2006. The Group exceeded its sales and
profit targets and continued to invest in its infrastructure. We also increased
the number of Mounties (FDM's trained IT consultants) working on client sites.
Operating margins remain strong and we have managed costs and cash to maximise
our working capital.
Financial Results
The results for 2006 reflect the successful execution of our growth strategy.
Revenues increased by 27% from £35.07m to £44.50m, driven by: a growth in the
number of clients to whom we provide services; the expansion of our Mountie
teams; and an increase in the number of contractors we have placed with clients.
Pre-tax profit increased by 33% to £2.92m (2005 £2.15m) after adding back float
costs and FRS20 share-based payments and our gross margin was stable at 19.3%
(2005: 19.4%). Efficient cost control ensured that our operating margin
increased to 6.4% from 6.1% in the previous year.
The considerable increase in sales during the year combined with the overall
growth of the business led to a greater working capital requirement. At the end
of 2006, we had £1.98m of cash (31 December 2005: £2.34m). Since the year end,
debtor days have improved significantly.
Key performance indicators
The Mounties are still a fundamental part of the Group's growth strategy and
will enable us to maximise the opportunity provided by the current shortage of
IT skills. The Mountie programme allows us to train experts in the markets with
the most demand, helping us to continue to grow and maintain margins.
Our ability to increase the throughput of Mounties was a critical factor behind
FDM opening a new location in London on 29 January 2007, giving us an immediate
increase in capacity aligned with a new trainee and client pool. Utilisation of
Mounties is steadily increasing and is currently running at 98% (2005: 95%) and
with the number of Mounties increasing to 154 on billing at the end of 2006 (93
at the end of 2005), we can clearly see continuing demand for this resource.
FDM's Market
There is clear evidence that the IT staffing and recruitment market remains
strong and continues to grow. The high utilisation rates, alongside our growth
in Mountie numbers, shows that there is robust demand for suitably qualified IT
professionals.
FDM expects to see this demand continue in 2007, for a number of reasons. Until
recently, it had been assumed that the sub-contracting of various IT functions
to businesses based in cheaper offshore locations would become the established
model, especially for North American and European corporations. However, while
this approach may save costs, poor delivery can also affect the overall quality
and productivity that actually experienced by end users. Culture, language and
simple lack of familiarity with relevant business practice are increasingly
cited as reasons why the offshoring route often fails to fulfil customer
expectations. Accordingly, a number of large organisations have now decided to
bring business-critical IT functions back "in house", thus creating further
demand for suitably qualified IT professionals in their home markets. FDM is
ideally placed to benefit from this trend.
The substantial growth in regulation, especially in the financial services
industry, has forced all types of businesses to adopt new systems in order to
comply. In most cases, the solutions are technological. This clearly creates a
requirement for staff with the appropriate training and skills for the relevant
systems to be properly and effectively installed.
Hedge Funds, Private Equity Houses, Investment Banks, Asset Managers and
Insurance Companies are all developing increasingly sophisticated financial
products in their efforts to outperform their competitors. Again, the products
they offer rely on technology for their effective delivery; but its
implementation and maintenance rely on people with the necessary qualifications.
Apart from the Financial Services industry, the dynamics of other sectors also
suggest that demand will be equally robust. For example, the Media and
Communications industries - in which FDM is very active - are going through a
rapid period of rationalisation. New Media has established itself as a
mainstream and increasingly dominant form of communication. These industries
rely heavily on technologically-adept professionals in order for them to operate
effectively and deliver the services that they have promoted to their customers.
Software and Systems Integration are also industries in which FDM has an
excellent track record of working with established operators to deliver and
maintain high-performance and functionally rich systems. The software industry
is enjoying a renaissance in terms of development and adoption of new systems
and this is a further reason why the need for suitably skilled IT personnel
remains so strong.
In summary, market conditions remain very buoyant, driven by several related
factors, the common denominator being that all types of business increasingly
rely on technology to function effectively. Demand for the staff and skillset
provided by FDM therefore continues to be robust.
Review of operations
Following the reorganisation implemented on 1 July 2006, FDM now operates
through 2 divisions: IT Staffing and Global Services. These divisions are
supported by the FDM Academy, our industry-leading IT training programme.
IT Staffing
This division provides clients in the UK and overseas with both Mounties and
freelance contractors to staff their IT requirements. We operate a flexible
delivery model that benefits both FDM and our clients and enables them to
optimise workloads during project lifecycles.
FDM is selective about the business it undertakes, avoiding low-margin and
preferred supplier lists. Our aim is to develop new account managers to
cross-sell our higher-margin services. At the end of 2006 we had 38 sales staff,
a growth of 31% on the previous year.
In the UK, the IT Staffing Division enjoyed another strong year of sales growth,
up 28.7%, with 391 contractors on billing at 31 December 2006 (2005: 284) and
123 Mounties (2005: 70). We have also increased our client base, and now have
over 150 clients including British Airways, Monster UK, Barclays Wealth
Management and the Metropolitan Police.
In mainland Europe, we continued to invest in the Sales and Mounties teams and
have seen headcount growth of 19% to 89 on billing at 31 December 2006 (2005:
75). At 31 December 2006 we had 64 contractors and 25 Mounties deployed with
clients. In the USA we also achieved 13.6% growth in sales compared to 2005.
FDM Global Services
This division was created in July 2006 from the merger of FDM Commercial
Training and FDM Project Services. Previously, both divisions had reported
separately. However, the Board felt that as both operating units shared the same
resource and clients, it was more logical from an operational and client
management perspective to combine them as one. It would also make reporting
future comparisons more straightforward.
FDM Global Services manages teams of Mounties and freelance trainers delivering
a range of services, such as Development, Support, Testing and End User
Education to our clients, both on and off site.
Since 1 July 2006, the newly aligned group has exceeded our internal performance
expectations, producing £4.0m (2005: £1.9m) of revenues and net fee income of
£1.3m (2005: £0.6m) in the second half of the year.
New project wins included the Metropolitan Police, Morley Asset Management and
Oracle Corporation, whilst existing clients such as Reuters, ABN-AMRO, British
Airways and HSBC increased the use of our services by enhancing the scope of the
projects currently underway. The current year has started well, with the
division performing in line with company expectations.
FDM Academy
It is FDM's intention to maintain and build upon the high standards of training
that the Mountie programme has delivered thus far. As stated above, demand for
highly-skilled IT professionals will continue to be very strong and it is
therefore essential that we are able to meet this requirement, both in terms of
capacity and quality.
The opening of FDM's new Academy in the City of London took place on time and
within budget and we do not expect that it will adversely impact our financial
performance in the current year. We are very pleased with the progress so far
and we are already attracting local recruits from the London catchment area.
The new academy will play a crucial role in improving FDM's ability to rapidly
service the demands of a growing client base.
Outlook
We have delivered our fourth consecutive year of sales and profit growth in
2006, at the same time as investing in our infrastructure to ensure we develop
our business in our chosen markets. Since the beginning of the year, we have
seen an increase in revenues, and all our key metrics show that we have started
the current year positively.
Overall market conditions are exhibiting consistently high demand. Investment
in IT systems and infrastructure is growing, but has not reached the dangerously
high levels experienced during the Millennium and is therefore more likely to be
sustainable in the medium term.
Against this backdrop, FDM will continue its strategy of focusing not on pure
volume-driven, commodity business, but instead on higher-margin projects where
the best opportunities exist for our specific skillset to be applied. With our
home-grown supply of suitably skilled IT professionals, we see the consistent
achievement of gross margins approaching 20% as a realistic and sustainable
goal.
We believe that, based on current trading levels, the continued execution of our
business strategy and the strength of the market, we will achieve a successful
outcome for the current financial year.
Rod Flavell
Chief Executive Officer
21 March 2007
PROFIT & LOSS ACCOUNT
Notes 2006 2005
Restated (Note 3)
£000 £000
Turnover 2 44,504 35,068
Cost of sales (35,906) (28,274)
Gross profit 8,598 6,794
Administrative expenses excluding exceptional items 3 (5,943) (4,824)
Exceptional administrative expenses 3 - (447)
Administrative expenses (5,943) (5,271)
Other operating income 43 47
Operating profit 2,698 1,570
Interest receivable and similar income 100 93
Interest payable and similar charges (19) (68)
Profit on ordinary activities before taxation 2,779 1,595
Tax on profit on ordinary activities (743) (666)
Profit on ordinary activities after taxation 2,036 929
Basic earnings per share 5 8.9p 4.3p
Diluted earnings per share 5 8.7p 4.2p
BALANCE SHEET
Note 2006 2005
£000 £000 £000 £000
Fixed assets
Intangible assets 16 14
Tangible assets 186 190
202 204
Current assets
Debtors 6 10,110 7,704
Cash at bank 2,002 2,568
12,112 10,272
Creditors: amounts falling due within one year (4,575) (4,323)
Net current assets 7,537 5,949
Net assets 7,739 6,153
Capital and reserves
Called up share capital 232 232
Capital redemption reserve 63 63
Share premium 3,332 3,332
Profit and loss account 4,112 2,526
Equity shareholders' funds 7,739 6,153
CASHFLOW STATEMENT
2006 2005
£000 £000
Cash flow statement
Cash flow from operating activities 1,024 781
Returns on investments and servicing of finance 81 25
Taxation (824) (513)
Capital expenditure (102) (51)
Equity dividends (368) (814)
Cash outflow before financing (189) (572)
Financing (170) 1,693
(Decrease)/increase in cash in the year (359) 1,121
Reconciliation of net cash flow
to movement in net funds
(Decrease)/increase in cash in the year (359) 1,121
Cash outflow from decrease in debt financing - 1,800
Change in net funds (359) 2,921
Translation differences (8) (19)
Movement in net funds in the year (367) 2,902
Net funds/(debt) at the start of the year 2,342 (560)
Net funds at the end of the year 1,975 2,342
ABRIDGED NOTES
1. Basis of Preparation
a) The financial information for the years ended 31
December 2006 and 31 December 2005 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 2005 are restated on
adoption of FRS20 which changes the accounting for share-based payments, as
outlined below.
b) The audited accounts for the year ended 31 December 2005
have been delivered to the Registrar of Companies. The Annual Report and
Financial Statements for the year ended 31 December 2006 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 FRS20 Accounting for share-based
payments. This results in a change of accounting policy for employee share
schemes, whereby the fair value of options granted is recognised as an expense
in the current year profits with a corresponding increase in equity. Fair value
is measured at the date of grant and spread over the period until the employee
becomes unconditionally entitled to the options. This change in accounting
policy has had an positive impact on the Group's profit after tax for the year
ended 31 December 2005 of £30,000 but has had no impact in the net assets as at
31 December 2005
2. Segmental Turnover
The geographical analysis of turnover by origin is as follows:
2006 2005
£000 £000
UK 37,177 27,952
Europe 5,040 5,102
USA 2,287 2,014
44,504 35,068
3. Administration 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.
In accordance with FRS 20 - Share-based payments, a charge of £137,296 has been
made to administrative expenses for the year ended 31 December 2006, for the
year ended 31 December 2005 the UITF 17 Share option charge has been removed and
replaced with the FRS 20 - Share-based payment charge.
2005
(restated)
£000
UITF 17 Share option charges 140
FRS20 Share-based payment charges (110)
30
4. Dividends
The board of directors are recommending a final dividend of 1.3 pence per share
for the year, increasing the total dividend for 2006 to 1.9 pence per share.
5. Earnings per share
Basic earnings per share is computed by dividing the net profit attributable to
ordinary share holders by the weighted average number of ordinary share in issue
during the year which was 22,943,962. Diluted earnings per share is computed by
dividing the net profit attributable to ordinary shareholders by the weighted
number of ordinary share in issue after adjusting for the effects of all
potential ordinary share that were outstanding during the year which were
369,237.
6. Debtors
Group Company
2006 2005 2006 2005
£000 £000 £000 £000
Trade debtors 9,888 7,440 8,758 5,898
Amounts owed by Group undertakings - - 47 49
Other debtors 31 70 14 5
Prepayments and accrued income 161 147 150 121
10,080 7,657 8,969 6,073
Amounts receivable after more than one year:
Deferred tax asset 30 47 30 47
10,110 7,704 8,999 6,120
Included in other debtors is corporation tax recoverable of £15,000 (2005:
£49,000).
7. Circulation to Shareholders
Copies of the Company's Annual Report will be sent to shareholders on 29 March
2007 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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