FDM cuts guidance as demand for tech staff drops

The market did not react well to a revelation from FDM (FDM) that its performance in 2024 would be “materially below” expectations, with the shares tumbling by 11 per cent in the wake of its full-year results. Like many of its peers, the company – which recruits, trains and deploys IT staff – is struggling with weak client demand.

“Macroeconomic and geopolitical uncertainties impacted client confidence, causing them to defer decisions relating to project commencements and consultant placements,” management explained. 

As such, it ended the year with 3,892 consultants placed with clients, compared with more than 4,900 in 2022. Similarly, only 1,338 consultants were trained during the year, compared with 3,179 in 2022, and just 47 new clients were brought on board, compared with 74 the year before. 

This slower pipeline of work and talent suggests 2024 will be difficult; 2023 wasn’t too disastrous, however. Revenue edged up by 1 per cent to £334mn and adjusted operating profit only dipped by 5 per cent to £49.6mn. Cash conversion also remained strong at 112 per cent and management sustained a full-year dividend of 36p. 

Investors hate uncertainty, though, and FDM admitted that it was “difficult to predict when [client engagement] will gain sufficient strength to deliver meaningful increases in our consultants placed with clients”.

FDM trades on a forward price/earnings ratio of 16 times, far below its five-year average of 24 and roughly in line with the big recruitment companies. Demand for tech staff is still weak however, and it is unclear when things will start to pick up. Hold

Last IC View: Hold, 828p, 15 Mar 2023