FDM’s Mounties keep on riding

(By Anthony Miller – Monday, 9th March 2009 8:00am). When we last wrote about ITSA-cum-IT services group FDM back in 2000, they were privately held with prior year revenues around £41m. We said at the time “FDM looks like another mid-size ITSA that will be snapped up by a hungry predator”. Not quite, it seems! Today FDM is AIM-listed (since 2005) with 2008 revenues just reported at £52m (see here). Not what you might call stellar growth over the past decade but at least revenues are 5% higher than 2007 and margins are up too: gross margins were 26.2% (2007: 22.5%) and operating margins were 9.6% (2007: 8.1%). However, UK revenues (80% of the total) declined 2%, though UK PBT rose nearly 14%. About 13% of revenues came from Europe and the balance from America.

FDM runs an operating model more akin to US ITSAs, with a contingent of over 250 ‘employed contractors’ called Mounties (who, I assume, ‘always get their man’?) working alongside traditional freelance contractors. Hence the respectable (for an ITSA) margins. But from what I can see, their services are pretty generic, including AD&M (application development & management), testing and training. I just think this bodyshop model is so exposed in current times; if they failed to grow materially over the past ‘boom’ decade, the outlook surely must look difficult over these next couple of years.