FDM ramps up training scheme

During the early days of lockdown, demand for FDM’s (FDM) services dwindled. The company – which recruits, trains and deploys IT and business consultants – said clients had ended placements early because of the pandemic, and assignment numbers tumbled. 

This does not seem to be a problem any more. The group has reported high levels of client demand across “all of its regions” and revenue is up by 16 per cent. The only fly in the ointment is EMEA, where sales fell by 34 per cent year on year to £9.3mn. This was offset by strong growth in Asia Pacific, however, where revenue increased by almost 40 per cent to £24.5mn.

Off the back of the results, analysts at Panmure Gordon have increased their full-year revenue forecasts by 7 per cent to £315.5mn.

Recruitment is now a “key area of focus”, and FDM is investing heavily in training staff – the cost of paid training this year will exceed £20mn, up from £12.5mn in 2021. FDM already has a strong pipeline of talent. Training completions are up 55 per cent year on year at 1,584 and there were 911 people in training at the end of June. 

Hiring more staff doesn’t come cheap in the current climate, however. FDM has increased consultants’ salaries across the group, at an increased cost of £2.4mn in the first half of 2022. Its adjusted operating margin has now fallen from 17 per cent to 16.5 per cent, partly as a result of “record levels of paid training”.

FDM’s balance sheet is strong: the group is debt free and very cash generative, with debtor days edging down from 47 to 45. However, its swelling cost base could put pressure on profit margins and – with a forward PE ratio of 24 – it’s still quite pricey. Hold. 

Last IC View: Buy, 944p, 29 July 2020