More Mounties and fewer contractors are driving growth for IT consultancy business FDM (FDM) as the £1bn-plus company reports half year results to 30 June.
FDM is an IT services and contract staffing provider operating internationally.
At the heart of its strategy is what it calls the Mounties model, under which graduates (and increasingly ex-military services personnel) are trained for free by FDM in return for at least two years of full-time service.
Mounties are parachuted in to clients to provide a wide range of technical and business functions, such as business development, testing, project management, data and business analysis, and production support. Mounties do their time wearing their FDM hats, although they often end up being taken on as full time employees by the end client.
This is the big money-spinner for FDM, particularly in the investment banking sector. While its roots are firmly in the UK, the company has expanded with impressive success in the US and other international markets.
MOUNTIE MODEL IS A PROFIT ENGINE
The latest figures show headline revenue increasing by only 1% to £117.8m. Revenue growth was low as a result of a deliberate decision to trust in its Mounties workforce and stop using for-hire contractors. This is far more profitable business, as the results show.
Mountie revenue rose 17% (after stripping out currency oscillations) as the company continues to win new customers. This had a positive impact on earnings, with adjusted pre-tax profit increasing 12% to £25m. That’s pretty much bang on track with full year £50.2m pre-tax profit forecasts, based on Stockdale estimates.
This is despite significant growth investment during the period, including bolstering the Mountie workforce, more sales people, more training and new office openings. This is not spending money in a hope to grow, this is investment predicated on transparent customer demand.
Mountie numbers reached 3,416 versus Stockdale’s 3,411 forecast. Equivalent numbers were 2,022 in 2015. Utilisation rate, or how much of the Mountie team’s time is put to revenue earning use, stands at 97.2%.
‘With the benefits of the expansion likely to be seen in the late second half and beyond, the risk to our forecasts appears very much on the upside,’ says Stockdale’s Gareth Evans.
FDM has a proven record as a nimble, high-quality execution business with substantial UK and overseas growth potential. That the share price has nudged 5p lower to 995p today reflects the bang on track nature of these results.
Yet it is worth considering that the stock has rallied from 287p per share when it re-joined the stock market a little more than four years ago.
