Interim Results

RNS Number : 5678B

FDM Group PLC

19 August 2008

 

FOR IMMEDIATE RELEASE

19 August 2008

 

 

 

 

FDM Group plc

 

(“FDM”, the “Group” or the “Company”)

 

Unaudited interim results for the six months ended 30 June 2008

 

FDM (AIM: FDMG), the international IT services business, today announces its interim results for the six month period to 30 June 2008.

 

Financial highlights

 

·      Revenue increased 4.0% to £25.42m (£24.44m)

·      Gross profit increased 27.2% to £6.50m (£5.11m)

·      Gross profit margins moving to 25.6% (20.9%)

·      Profit before tax increased 30.7% to £2.39m (£1.83m)

·      Conversion ratio (the ratio of EBITA to gross profit) increased to 34.9% (34.2%)

·      Diluted earnings per share increased 28.8% to 6.7p (5.2p per share)

·      Interim dividend of 1.0p per share (0.8p)

·      Net cash position of £5.28m (£5.16m)

 

Operational highlights

 

·      Continuation of FDM’s growth strategy:

-     To transform FDM into a high-margin IT services provider

-     Aggressively expand the Mountie offering

-     Pursue organic growth complemented by selective acquisition assessment programme

·      Growing demand for Mounties as demand for Sun Microsystems’ Java and Microsoft’s .Net programming skills increases

·      New customers in the period include EADS, BT, SciSys and HSBC Retail

·      Academy development – London expansion and Manchester nearing full capacity in less than a year

·      Opened new office in Zurich to promote commercial offering within Europe and relocated US office to Manhattan

 

Rod Flavell, Chief Executive Officer of FDM commented:

 

“Despite the backdrop of economic uncertainty, today’s results demonstrate not only the resilience of our Mountie offering but the tremendous growth opportunity facing FDM. 

 

We believe the Mountie model has the potential to generate significant growth for our shareholders at a time when many IT service providers continue to disappoint. We are fast becoming the outsourced IT partner of choice in our core disciplines and I believe demand for our services will continue to remain strong.”

 

For further information please contact:

 

FDM Group Rod Flavell, Chief Executive Officer David Templeman, Group Finance Director	Tel No: + 44 (0) 870 060 3100
Brewin Dolphin Investment Banking Matt Davis / Alison Barrow	Tel No: + 44 (0) 845 213 3219
Buchanan Communications Limited Lisa Baderoon / Jeremy Garcia	Tel No: + 44 (0) 207 466 5000

 

Notes to Editors

 

About FDM Group plc

 

With over 350 employees and revenues of £50mFDM Group Plc (LSE AIM: FDMG) is an international IT services company specialising in consulting and training solutions. Founded in 1984, with its HQ in the UK and a further five international offices, FDM works with over 200 blue-chip clients including the BBC, Barclays, HSBC, AA, RBS and British Airways. Over two thirds of FDM’s employees are IT consultants, termed ‘Mounties’, who have been trained as Developers in the Sun Microsystems Java, Microsoft C#. and Net toolsets, or who have joined the Application Support or Test Analyst streams.

Chairman and Chief Executive’s Statement

Interim results for the six months ended 30 June 2008

 

Introduction

 

We are pleased to report further operational progress across the Group despite the well documented economic slowdown. Our strong performance has predominately been driven by our key strategic objective to transform FDM into a high-margin IT services provider by aggressively expanding our Mountie offering, the primary driver for growth in our business.

 

As a direct consequence, the results for the six-months ended 30 June 2008 are a clear indication that further significant progress has been made as margins continue to grow across our operations.

 

Results

 

The gross profitability of our business operations has increased to £6.50m, up 27.2% over the comparable period (H1 2007: £5.11m) with gross profit margins moving to 25.6% (H1 2007: 20.9%). Profit before tax amounted to £2.39m up 30.7% on the comparable period (H1 2007: £1.83m) and our conversion ratio (the ratio of EBITA to gross profit) increased to 34.9% from 34.2% in H1 2007. Diluted earnings per share increased by 28.8% to 6.7p (H1 2007: 5.2p per share).

 

The Board is maintaining its dividend policy and is pleased to announce an interim dividend of 1.0p per share (H1 2007: 0.8p). The interim dividend will be paid on 26 September 2008 to shareholders on the register as at 29 August 2008.

 

The Mountie model

 

Since FDM’s flotation in April 2005, we have delivered a consistent message to investors that we will transform the business into a high-margin IT services provider and move away from a freelance model.

 

The key driver for the success of this strategy is our unique ‘Mountie’ offering which delivers highly trained technical IT resources to meet the ever-growing demand for Sun’s Java technology and Microsoft’s .Net programming platforms. These two core technical competencies underlie the majority of modern IT resource demand and FDM has an unmatched programme of attracting, training and delivering expert resources in these disciplines.

 

Our Mounties undergo an intensive training programme with us which culminates in accreditation to a recognised industry standard. Once accredited, the Mountie is tied to FDM under a two-year employment contract, enabling us to place our Mountie resources within our blue-chip client base.

 

We have experienced continued strong growth in Mountie numbers being placed with our clients. At 30 June 2008 we had a record-number of 246 Mounties on-billing (H1 2007: 190) and have maintained high utilisation levels during this period of growth at 97.8% (H1 2007: 98.5%).

 

As a result of this demand-led growth for Mountie resources we opened our second metropolitan training centre in Manchester in December 2007 following on from the opening of our London-based Academy in January 2007. Demand is such that our Manchester centre is now nearing full training capacity less than a year after opening and we will be significantly increasing training capacity at our London centre later this year.

 

The success of these metropolitan training centres and the strong demand for the highly skilled Mounties which they are producing is continuing evidence of the scalability of our Mountie model. With the skills-shortage in numerical science graduates worsening in the UK and our ability to source and train ambitious young graduates, we are well placed to continue a sustained drive in Mountie numbers. Given that the IT industry in the UK alone is worth tens of billions of pounds and is second only to financial services as the largest business sector, it is clear that our growth potential is enormous.

 

The demand for our Mountie offering continues to rise despite the general malaise in the world’s economic markets. The move by many corporates over the past six months to instigate tighter controls of expensive IT budgets and move to restrict headcount numbers within IT operations, we believe, merely helps foster greater demand for the Mountie offering. 

 

Many of our larger clients are consistently increasing Mountie levels. This is due to our Mounties delivering technical excellence at a cost that is comparable to offshoring solutions within our operational jurisdictions but with a true onshore capability and delivery service.

 

We believe FDM is now addressing a ‘sweet spot’ in client requirements which has produced record levels of Mountie demand.

 

New Clients

 

We made good progress during the first six months with regards to expanding our customer base including some notable successes in sectors not historically associated with the Group. Wins include EADS, BT, SciSys and HSBC Retail. We believe this trend will continue as we attract more organisations with large IT infrastructures which have Java and .Net at the heart of their applications.

 

International focus

 

Outside of the UK FDM operates from offices in Frankfurt, Luxembourg, New York and a newly established Zurich office. Given the international nature of our blue-chip client base we have been able to successfully develop a number of cross-selling opportunities around our international network and we are now beginning to experience greater traction from these efforts.

 

FDM currently services over 30 corporates from its overseas offices and we believe our international proposition will make a valuable contribution to revenues in the current year. In the longer term we expect to see these centres as key components of FDM’s growth.

 

Freelance business

 

FDM evolved from a traditional freelance model and the placement of IT contractors with clients remains an important part of our business. Our strategy regarding the freelance market has remained clear since flotation in 2005: we find the freelance offering of our business an excellent route to clients and while we value this entry point, we have maintained a progressive policy of shedding low-margin business and driving gross margins. Gross profits from the Freelance business were £2.73m in the first-half of 2008, up 9.2% from £2.5m in the comparable period of 2007. In line with our stated strategy our top-line revenues are down and our gross profit margins are ahead, they now stand at 15.4% up 2% year-on-year (H1 2007: 13.4%).

 

Strategic development

 

The key component of our business success is the Mountie model and we will continue to scale-up our delivery capability by investing in training centres. Investment in our London Academy will at least double the number of training seats and we will continue to assess the potential for demand-led growth in other locations, both within the UK and internationally.

 

We have also embarked on a systematic process of identifying potential acquisition targets that could yield significant margin upside when combined with the Mountie model. We will however, carefully assess the balance of continued investment in our organic growth programme against investment in external targets.

 

Business outlook

 

Our ability to deploy ever growing numbers of Mounties trained in the modern technologies of Java and .Net provides significant confidence in the resilience of our business model, even in today’s current uncertain economic times.

 

Our Mountie model continues to gain traction within client organisations and as a direct consequence, demand for our services has increased.

 

We believe that the potential demand for Mounties far out-strips our current supply capabilities and we will continue to invest in our training centres to deliver increasing numbers of these highly skilled technical resources.

 

The Board therefore remains confident in trading for the current year.

 

We are focussed on delivering a high-margin business for investors and this process continues with margin led growth being the key to our future strategy.

 

In closing, FDM would not be in this position of strength were it not for its professional and dedicated team of employees. The Board would therefore like to take this opportunity of thanking its staff for their significant contribution to the development of the Company and our shareholders for their continued support.

 

 

 

Ivan Martin                             

Chairman

&

Rod Flavell

Chief Executive

 

19 August 2008

Consolidated Income Statement (unaudited)

for the six months ended 30 June 2008

 

 

 

		Unaudited	Unaudited	Audited
		Six Months ended	Six Months ended	Year ended
		30 June 2008	30 June 2007	31 December 2007
	Note	£'000	£'000	£'000
Revenue from continuing operations	2	25,416	24,437	49,826
Cost of Sales		(18,919)	(19,329)	(38,595)
Gross Profit		6,497	5,108	11,231
Administrative Expenses		(4,230)	(3,361)	(7,182)
Operating profit before financing costs		2,267	1,747	4,049
Financial Income		118	86	212
Financial Expenses		-	(8)	(7)
Net financing costs		118	78	205
Profit Before Tax	2	2,385	1,825	4,254
Income Tax expense	3	(807)	(613)	(1,421)
Profit for the period		1,578	1,212	2,833
Earnings per Share (pence)	5
Basic		6.9	5.3	12.3
Diluted		6.7	5.2	12.0

 

Consolidated Statement of Recognised Income & Expenditure (unaudited)

for the six months ended 30 June 2008

 

 

	Unaudited	Unaudited	Audited
	Six Months ended	Six Months ended	Year ended
	30 June 2008	30 June 2007	31 December 2007
	£'000	£'000	£'000
Foreign exchange translation differences	(109)	(5)	113
Deferred tax on share-based payments	15	91	89
Income and expense recognised directly in equity	(94)	86	202
Profit for the Period	1,578	1,212	2,833
Total recognised income and expense for the period	1,484	1,298	3,035

 

Consolidated Balance Sheet (unaudited)

for the six months ended 30 June 2008

 

 

		Unaudited	Unaudited	Audited
		Six Months ended	Six Months ended	Year ended
		30 June 2008	30 June 2007	31 December 2007
	Note	£'000	£'000	£'000
Assets
Property, Plant and Equipment	1	351	316	373
Intangible Assets	1	113	32	110
Deferred Tax Assets		110	184	212
Total Non Current Assets		574	532	695
Trade and other receivables		11,751	8,985	9,527
Income Tax Receivable		-	34	-
Cash and Cash Equivalents		5,283	5,156	5,953
Total Current Assets		17,034	14,175	15,480
Total Assets		17,608	14,707	16,175
Current Liabilities
Bank Overdraft		-	-	-
Trade and other payables		5,206	5,233	481
Income Tax Payable		631	604	830
Total Current Liabilities		5,837	5,837	5,671
Net assets		11,771	8,870	10,504
Equity
Share Capital		232	232	232
Share Premium		3,332	3,332	3,332
Capital Redemption Reserve		63	63	63
Currency Translation Reserve		173	(54)	64
Retained Earnings		7,971	5,297	6,813
Total Equity		11,771	8,870	10,504

 

Consolidated Cashflow Statement

for the six months ended 30 June 2008

 

 

	Unaudited	Unaudited	Audited
	Six Months ended	Six Months ended	Year ended
	30 June 2008	30 June 2007	31 December 2007
	£'000	£'000	£'000
Profit for the period	1,578	1,212	2,833
Adjustments for:
Depreciation and amortisation	130	94	210
Financial income	(118)	(78)	(212)
Financial expense	-	-	7
Equity-settled share based payment expenses	15	69	147
Proceeds from sales of non-current assets	1	-	-
Taxation	807	613	1,421
(Increase)/Decrease in trade and other receivables	(2,431)	1,101	665
Increase in trade and other payables	589	1,133	688
Interest paid	-	(6)	(7)
Tax paid	(880)	(476)	(1,059)
Net Cash from operating activities	(309)	3,662	4,693
Cash flows from investing activities
Interest received	118	84	212
Acquisition of property, plant and equipment	-	-	(380)
Acquisition of non-current assets	(113)	(240)	(109)
Net cash from investing activities	5	(156)	(277)
Cash flows from financing activities
Net cash flow from sales and purchases of own shares by Trust	14	(22)	(22)
Dividends paid	(434)	(299)	(482)
Net cash from financing activities	(420)	(321)	(504)
Net (decrease)/increase in cash and cash equivalents	(724)	3,185	3,912
Cash and Cash equivalents at beginning of period	5,953	1,975	1,975
Effect of exchange rate fluctuations on cash held	54	(4)	66
Cash and Cash equivalents at end of period	5,283	5,156	5,953

 

Notes to un-audited consolidated financial statements

 

1.         Basis of Accounting

 

1.1.       Reporting Entity

 

These consolidate interim financial statements comprise of FDM Group plc (the ‘Company’) and its subsidiaries (together the ‘Group’). These condensed consolidated interim financial statements are presented in pounds sterling, rounded to the nearest thousand. 

 

1.2.       Statement of Compliance

 

These consolidated interim financial statements have been prepared in accordance with International Financial Reporting Standard (IFRS) IAS 34 Interim Financial Reporting as adopted by the EU. They do not include all of the information required for full financial statements and should be read in conjunction with the consolidated financial statements for the Group for the year ended 31 December 2007.

 

1.3        Significant Account Policies

 

The accounting policies and presentation applied by the Group in these condensed consolidated interim financial statements are the same as those applied by the Group in its consolidated financial statements for the year ended 31 December 2007.

 

1.4        Estimates

 

The preparation of financial statements in conformity with IFRSs requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results for which form the basis of making about carrying values of assets and liabilities that are not readily available from other sources. Actual results may differ from these estimates.

 

1.5        Seasonality and Cyclicality

 

            There is no significant seasonality or cyclicality affecting the interim results of the operations.

 
2.         Segmental Information

 

The segmental reporting is based on the geographical location of the division. The Group operates in three geographic areas, the UK being the predominant area.

 

	Un-audited	Un-audited	Audited
	Six Months ended	Six Months ended	Year ended
	30 June 2008	30 June 2007	31 December 2007
Revenue
UK	20,987	20,706	42,560
Europe	3,103	2,822	5,286
America	1,326	909	1,980
	25,416	24,437	49,826
Profit before tax
UK	2,035	1,578	3,796
Europe	203	191	322
America	147	56	136
	2,385	1,825	4,254
Depreciation & Amortisation
UK	(119)	(90)	(199)
Europe	(9)	(2)	(8)
America	(2)	(2)	(3)
	(130)	(94)	(210)
Purchase of non-current Assets
UK	(112)	(238)	(479)
Europe	(1)	(2)	(10)
America	-	-	-
	(113)	(240)	(489)
Total non-current assets
UK	559	512	671
Europe	13	16	21
America	2	4	3
	574	532	695
Total Assets
UK	14,679	12,664	13,755
Europe	2,435	1,747	2,084
America	905	577	629
*   Consolidation adjustments	(411)	(281)	(293)
	17,608	14,707	16,175
Total Liabilities
UK	(5,011)	(5,259)	(5,050)
Europe	(788)	(580)	(669)
America	(449)	(279)	(245)
*    Consolidation adjustments	411	281	293
	(5,837)	(5,837)	(5,671)
Equity attributable to equity holders of the parent
UK	9,668	7,405	8,705
Europe	1,647	1,167	1,415
America	456	298	384
	11,771	8,870	10,504

 

* The consolidated adjustments are the removal of inter-company balances. 

 

The revenue and gross profit derived in these geographical locations can be further broken down into the two divisional sales business units known as IT Staffing and Global Services, as shown below. It is not possible to segment the administrative expenses and assets of the divisions accurately as they are only reportable within the Group’s accounts to the extent shown.

 

	Un-audited	Un-audited	Audited
	Six Months ended	Six Months ended	Year ended
	30 June 2008	30 June 2007	31 December 2007
Revenue
IT Staffing	17,746	18,286	36,312
Global Services	7,670	6,151	13,514
	25,416	24,437	49,826
Gross Profit
IT Staffing	2,732	2,429	5,041
Global Services	3,765	2,679	6,190
	6,497	5,108	11,231

 

3.         Taxation

 

            Current Tax

Current tax expenses for the interim periods represents the expected tax payable on the income for the period, calculated as the estimated average annual effective income tax rate allied to the pre-tax income of the interim period. Income tax for the current and prior periods is classified as a current liability to the extent that is unpaid. Amounts paid in excess of amounts owed are classified as a current asset.

 

 

Deferred Tax

Deferred Tax for the interim period represents the expected tax payable, calculated from the tax differences arising from the carrying values of assets and the recognition of the deferred tax assets arising from the consideration of employee share options granted but not yet exercised at the end of the period. The tax deductible on these options will not be realised until the options have been exercised. Deferred tax is classified as a non-current asset or liability dependant on its nature to the extent that it is not yet realised.

 

4.         Dividends

 

The Directors recommended an interim dividend of 1.0 per share (June 2007: 0.8p) to be paid on 26 September 2008 to shareholders on the register at 29 August 2008.

 

5.         Earnings per share

 

            The calculation of basic earnings per share is based on profit after tax.

 

Earnings per share have been calculated using the weighted average number of shares in issue during the period 22,961,743 (June 2007: 22,953,283). The diluted earnings per share is based on 23,508,017 (June 2007: 23,490,494) and reflects the potential exercise of share options granted.

 

6.         Issued Capital

 

Issued capital as at 30 June 2008 amounted to £232,220, this equates to 23,220,000 1p ordinary shares. There were no movements in the issued capital of the Group in either the current or prior interim reporting period.

7.         Circulation to Shareholders

 

Copies of the consolidated interim statements will be sent to shareholders with further copies available form the Company Secretary, FDM Group PLC, 2^nd Floor Lanchester House, Trafalgar Place, Brighton, East Sussex, BN1 4FU

 

 

 

 

 

 

END

 

 

IR GUUMWRUPRGAR