Half-year Report

RNS Number : 5023M

FDM Group (Holdings) plc

31 July 2017

 

FDM Group (Holdings) plc

Interim Results

FDM Group (Holdings) plc ("the Company") and its subsidiaries (together "the Group" or "FDM"), a global professional services provider with a focus on Information Technology ("IT")  today announces its Interim Results for the six months ended 30 June 2017.

Highlights

	30 June 2017	30 June 2016	% change
Revenue	£117.1m	£86.5m	+35.4%
Mountie revenue	£100.8m	£76.7m	+31.4%
Adjusted operating profit1	£22.4m	£16.6m	+34.9%
Profit before tax	£20.6m	£15.5m	+32.9%
Adjusted profit before tax1	£22.3m	£16.5m	+35.2%
Basic earnings per share	14.0p	10.7p	+30.8%
Adjusted basic earnings per share1	15.5p	11.5p	+34.8%
Cash flow generated from operations	£20.0m	£15.7m	+27.4%
Cash conversion	96.8%	101.2%	-4.4%

·       Strong trading and operational performance

·       Further geographic expansion, with North America Mountie revenue up 56%, APAC 137%, UK and Ireland 14% and EMEA 12%, against the corresponding period

·       Mounties assigned to client sites at week 26² were up 20% at 2,947

·       Mountie utilisation rate³ for the six months to 30 June 2017 was 96.7% (2016: 97.5%)

·       Strong client acquisition across the Group with, globally, 35 new clients secured in the period

·       Continued sector diversification, with 71% of new clients outside the financial services sector 

·       Online applications to join training programmes increased by 32% on the first half last year

·       741 training completions in the six months to 30 June 2017 (2016: 701)

·       Interim dividend per share of 12.0 pence, an increase of 29% (2016: interim dividend of 9.3 pence)

·       FDM Group (Holdings) plc entered the FTSE 250 in June 2017

¹ The adjusted operating profit and adjusted profit before tax are calculated before performance share  plan expenses (including associated taxes). The adjusted basic earnings per share is calculated before the impact of performance share plan expenses (including associated taxes).

² Week 26 in 2017 commenced on 26 June 2017 (2016: week 26 commenced on 27 June 2016).

³ Utilisation is calculated as the ratio of cost of utilised Mounties to the total Mountie payroll cost. 
 

Rod Flavell, Chief Executive Officer, said:

"This has been a very positive first half with good growth in Mountie revenue and operating profit, driven in particular by excellent performances in our North America and APAC regions together with a very strong close to the period in the UK. Mountie revenue generated outside of the UK was 50% of total Mountie revenue in the period, up from 43% for the first half last year and, at the time of writing, I am delighted to be able to report that we have achieved another significant milestone as we have comfortably passed 3,000 Mounties assigned to client sites.

With our proven business model, continuing geographic expansion, growing customer base and portfolio of established training facilities, the Board anticipates that the Group's performance for the full year will be comfortably ahead of its previous expectations."

Enquiries

For further information:

FDM	Rod Flavell - CEO Mike McLaren - CFO	020 7067 0000 (today) 0203 056 8240 (thereafter)
Weber Shandwick	Nick Oborne/ Tom Jenkins	020 7067 0000

Forward-looking statements

This Interim Report contains statements which constitute "forward-looking statements". Although the Group believes that the expectations reflected in these forward-looking statements are reasonable, it can give no assurance that these expectations will prove to be correct. Because these statements involve risks and uncertainties, actual results may differ materially from those expressed or implied by these forward-looking statements.

About FDM

FDM Group (Holdings) plc ("the Company") and its subsidiaries (together "the Group" or "FDM") is a global professional services provider with a focus on Information Technology ("IT").

The Group's principal business activities are recruiting, training and placing its own permanent IT and business consultants ("Mounties") at client sites. The Group also supplies contractors to clients, either to supplement its own employed consultants' skill sets or to provide greater experience where required. FDM specialises in a range of technical and business disciplines including Development, Testing, Support, Project Management Office, Data Services, Business Analysis, Business Intelligence and Cyber Security.

FDM has dedicated training centres and sales operations located in London, Leeds, Glasgow, New York, Virginia, Toronto, Frankfurt, Singapore and Hong Kong. FDM also operates in China, Ireland, France, Switzerland, Austria, Denmark, Australia and South Africa. FDM has established partnerships with key universities, enabling it to recruit high quality graduates to train as Mounties.

FDM is a strong advocate of diversity and inclusion in the workplace, with around 75 nationalities working together as a team. The Group became an early adopter of the UK's Gender Pay Gap reporting policy, making FDM the sixth company in the UK to release their figures. FDM also ranked in the Top 50 Social Mobility Employer Index this year.

 

Interim Management Review

Strategy

FDM's strategy is to deliver customer led, sustainable profitable growth on a consistent basis, through its well established Mountie model. This strategy requires that all activities and investments produce the appropriate level of profit and cash returns, deliver sustained and measurable improvements for all stakeholders including customers, staff and shareholders and further FDM's objective of launching the careers of talented people worldwide.

FDM is focussed on delivering against four key objectives to achieve its strategic aims: attracting, training and developing high-calibre Mounties; investing in leading edge training Academies; growing and diversifying its client base; and expanding its geographic presence. The Group continued to make strong progress against all four objectives in the first half of 2017.

(i)            FDM attracted 39,000 online applications in the period, an increase of 32% on the equivalent period in 2016 with 741 individuals completing training in the period having passed FDM's rigorous selection and assessment criteria, compared with 701 for the equivalent period in 2016.

(ii)           The Group's investment programme has continued into 2017, with the opening of a new Academy in Singapore and the expansion of its existing Frankfurt Academy, bringing the total number of permanent Academies in the Group to nine and the total training capacity (the number of available training seats at a point in time) to 768 seats.

(iii)         35 new clients were won globally in the first half of 2017, of which 25 are non-financial services sector clients.

(iv)          Growth in Mountie headcount and revenue was achieved across all four of our operating regions in the first half of 2017, whilst FDM placed Mounties for the first time in Australia, Spain and Portugal.

Group results

The Group delivered a good performance in the period with revenue increasing by 35% to £117.1 million (2016: £86.5 million), up 29% on a constant currency basis. Mountie revenue increased by 31% to £100.8 million (2016: £76.7 million), with contractor revenue also increasing by 66% to £16.3 million (2016: £9.8 million). Whilst the Group's strategy remains to focus on growing Mountie headcount and Mountie revenue, contractor revenue increased in the period as a result of meeting specific client demands which has resulted in a changed revenue mix and a reduced gross margin of 43% (2016: 46%).

Mounties assigned to client sites at week 26 2017 totalled 2,947, an increase of 20% from 2,452 at week 26 2016 and an increase of 9% from 2,705 at week 52 2016. Total headcount assigned to client sites at week 26 2017 was 3,188 (week 26 2016: 2,610) of which 241 were contractors (week 26 2016: 158). At week 26 we had 46% of our Mounties placed outside of the UK (week 26 2016: 42%). The ex-military model continues its growth with 235 ex-military Mounties deployed worldwide at week 26 2017 (week 26 2016: 185).

An analysis of Mountie revenue and headcount by region is set out in the table below:

	Six months to 30 June 2017 Mountie revenue £m	Six months to 30 June 2016 Mountie revenue £m	Year to 31 December 2016 Mountie revenue £m	2017 Mounties assigned to  client site at week 26	2016 Mounties assigned to  client site at week 26	2016 Mounties assigned to  client site at week 52
UK and Ireland	51.0	44.6	93.9	1,641	1,468	1,505
North America	36.9	23.6	54.2	892	702	832
EMEA	6.5	5.8	12.0	143	143	135
APAC	6.4	2.7	7.2	271	139	233
	100.8	76.7	167.3	2,947	2,452	2,705

Adjusted Group operating margin has decreased to 19.1% (2016: 19.2%) reflecting the gross margin impact of the changed sales mix, offset in part through the Group's focus on managing overheads in the period.

The reported results include the benefit arising from favourable exchange rate movements; on a constant currency basis Mountie revenue increased by 24% with profit before tax up by 30%.
 

Segmental review

UK and Ireland

Mounties deployed on client sites in the UK and Ireland at week 26 2017 were 1,641, an increase of 12% over 1,468 at week 26 2016, generating an increase of 14% in Mountie revenue for the six month period to 30 June 2017. Total revenue generated in the region during the same period was up 26% to £66.3 million (2016: £52.7 million). The higher increase in total revenue is a result of an increase in contractor revenue. Adjusted operating profit increased by 8% to £14.7 million (2016: £13.6 million).

FDM's presence in public sector services grew by 30% over week 26 2016, with 263 Mounties placed in week 26 2017. Training capacity in the region is unchanged from June 2016 at 394 seats, as the Group had completed its most recent investment programme in training facilities prior to June 2016.

North America

Our North American region has seen significant growth. The region delivered a strong performance in the six months to 30 June 2017 with Mountie revenue increasing by 56% to £36.9 million (2016: £23.6 million) resulting in adjusted operating profit increasing to £7.6 million (2016: £2.8 million). Mounties placed on client sites totalled 892 at week 26 2017 (week 26 2016: 702).

The success story in North America is a result of both new client wins and increased penetration with existing clients as they experience the value and quality of the FDM model.

As with the UK, the Group undertook significant investment in training facilities in the period leading up to 30 June 2016, therefore, training capacity in the North American region remains unchanged compared with prior year at 256 seats.

EMEA (Europe, Middle East and Africa, excluding UK and Ireland)

Revenue from EMEA business increased by 12% to £6.5 million (2016: £5.8 million), with adjusted operating profit of £0.3 million (2016: £0.4 million). Mounties deployed on client sites remained unchanged at 143 for both week 26 2017 and week 26 2016.

In the first six months of 2017, FDM has invested in its Frankfurt Academy and office, increasing its training capacity from 20 up to 48 seats, meaning it is well placed to expand in the German market. FDM continues to explore opportunities in the smaller Swiss and Austrian markets.

APAC (Asia Pacific)

APAC Mountie revenue grew significantly by 137% to £6.4 million (2016: £2.7 million). Mounties placed on site at week 26 were 271, up from 139 at week 26 2016.

With a training capacity of 30 seats, the Singapore Academy and sales office opened in April 2017. FDM now has two dedicated training facilities in the APAC region, with a training capacity of 70 seats. A small adjusted operating loss of £0.3 million was generated in the period (2016: loss of £0.2 million) reflecting investment in facilities and people in the region. Mounties were placed in Australia for the first time in 2017.

Adjusting items

The Group presents adjusted results, in addition to the statutory results, as the Directors consider that they provide an indication of underlying performance. The adjusted results are stated before performance share plan expenses including associated taxes (where applicable).

The performance share plan expenses including social security costs were £1.7 million in the six months to 30 June 2017 (2016: £1.0 million). Details of the performance share plan are set out in note 11 to the Condensed Consolidated Interim Financial Statements.

Net finance expense

As the Group has no borrowings, finance costs are minimal. The net charge for the period represents £12,000 of finance income and a finance expense of £64,000 representing non-utilisation charges on the undrawn element of the Group's revolving credit facility.

Taxation

The tax charge of £5.5 million represents the effective tax charge on the Group profit before taxation at the Group's effective tax rate of 26.8% (2016: 25.8%). The effective rate is higher than the underlying UK rate because of profits earned in higher tax jurisdictions.

Earnings per share

The basic earnings per share increased in the period to 14.0 pence (2016: 10.7 pence) whilst adjusted basic earnings per share was 15.5 pence (2016: 11.5 pence). Diluted earnings per share was 14.0 pence, there was no dilution for the period to 30 June 2016.

Dividend

An interim dividend of 12.0 pence per ordinary share (2016: 9.3 pence) was declared by the Directors on 28 July 2017 and will be payable on 22 September 2017 to holders of record on 25 August 2017. The Board continues to follow a progressive dividend policy, its aim being to steadily increase the Group's base dividend, on an annual basis, approximately in line with the growth in the Group's earnings per share.

Cash flow and net funds

Net cash flow from operating activities increased from £11.9 million in the half year to 30 June 2016 to £13.7 million in the first six months to 30 June 2017. Cash conversion was 97%, with the decrease from 101% in 2016 attributable to movements in working capital. The Group's cash balance at 30 June 2017 was £29.3 million (2016: £19.1 million) and undrawn facilities of £20.0 million are available until 31 August 2018 (2016: £20.0 million).

Related party transactions

Details of related party transactions are included in note 12 to the Condensed Interim Financial Statements.

Principal risks facing the business                                                                                                                 

The Group faces a number of risks and uncertainties which could have a material impact upon its long-term performance. The principal risks and uncertainties faced by the Group are set out in the Annual Report and Accounts for the year ended 31 December 2016 on pages 34 to 39.

Since the approval of the last Annual Report and Accounts, the Board has reviewed the Group's Risk Register with particular focus on the strategic risks of: economic environment, exposure in financial services sector and balancing supply and demand. The Board's assessment of its principal risks remains unchanged from that as set out in the Annual Report and Accounts for the year ended 31 December 2016. The Board considers that the Group has appropriate mitigation at this time and will continue to monitor its key risks.

 

Summary and outlook

We are pleased with FDM's financial performance for the six months to 30 June 2017 and the Board anticipates that the Group's results for the full year will be comfortably ahead of its previous expectations.

By order of the Board Rod Flavell  Chief Executive Officer Mike McLaren Chief Financial Officer 28 July 2017

 

Condensed Consolidated Income Statement

for the six months ended 30 June 2017

		Six months to 30 June 2017	Six months to 30 June 2016	Year ended 31 December 2016
		(Unaudited)	(Unaudited)	(Audited)
	Note	£000	£000	£000
Revenue		117,098	86,513	189,403
Cost of sales		(66,367)	(46,816)	(103,291)
Gross profit		50,731	39,697	86,112
Administrative expenses		(30,048)	(24,179)	(50,691)
Operating profit		20,683	15,518	35,421
Finance income		12	18	28
Finance expense		(64)	(63)	(128)
Net finance expense		(52)	(45)	(100)
Profit before income tax		20,631	15,473	35,321
Taxation	7	(5,529)	(3,992)	(9,139)
Profit for the period		15,102	11,481	26,182
Earnings per ordinary share
		pence	pence	pence
Basic	9	14.0	10.7	24.4
Diluted	9	14.0	10.7	24.2

 

Condensed Consolidated Statement of Comprehensive Income

for the six months ended 30 June 2017

		Six months to 30 June 2017	Six months to 30 June 2016	Year ended 31 December 2016
		(Unaudited)	(Unaudited)	(Audited)
		£000	£000	£000
Profit for the period		15,102	11,481	26,182
Other comprehensive income Items that may be subsequently reclassified to profit or loss
Exchange differences on retranslation of foreign operations (net of tax)		(348)	714	1,388
Total other comprehensive (expense)/ income		(348)	714	1,388
Total comprehensive income for the period		14,754	12,195	27,570

 

Condensed Consolidated Statement of Financial Position

as at 30 June 2017

					30 June 2017	30 June 2016	31 December 2016
					(Unaudited)	(Unaudited)	(Audited)
			Note		£000	£000	£000
Non-current assets
Property, plant and equipment					5,271	4,996	5,011
Intangible assets					19,320	19,546	19,533
Deferred income tax assets					1,486	340	772
					26,077	24,882	25,316
Current assets
Trade and other receivables					36,383	30,595	29,164
Cash and cash equivalents			10		29,311	19,139	27,844
					65,694	49,734	57,008
Total assets					91,771	74,616	82,324
Non-current liabilities
Deferred income tax liabilities					-	391	-
					-	391	-
Current liabilities
Trade and other payables					29,115	23,894	24,628
Current income tax liabilities					3,737	3,350	4,358
					32,852	27,244	28,986
Total liabilities					32,852	27,635	28,986
Net assets					58,919	46,981	53,338
Equity attributable to owners of the parent
Share capital					1,075	1,075	1,075
Share premium					7,873	7,873	7,873
Capital redemption reserve					52	52	52
Translation reserve					1,116	790	1,464
Other reserves					4,371	1,489	2,470
Retained earnings					44,432	35,702	40,404
Total equity					58,919	46,981	53,338

 

Condensed Consolidated Statement of Cash Flows

for the six months ended 30 June 2017

			Six months to 30 June 2017	Six months  to 30 June 2016	Year ended  31 December 2016
			(Unaudited)	(Unaudited)	(Audited)
		Note	£000	£000	£000
Cash flows from operating activities
Profit before tax for the period			20,631	15,473	35,321
Adjustments for:
Depreciation and amortisation			680	525	1,180
Finance income			(12)	(18)	(28)
Finance expense			64	63	128
Share-based payment charge (including associated social security costs)			1,713	1,033	2,217
Increase in trade and other receivables			(7,220)	(6,002)	(4,571)
Increase in trade and other payables			4,106	4,586	5,126
Cash flows generated from operations			19,962	15,660	39,373
Interest received			12	18	28
Income tax paid			(6,300)	(3,789)	(8,751)
Net cash flow from operating activities			13,674	11,889	30,650
Cash flows from investing activities
Acquisition of property, plant and equipment			(780)	(1,155)	(1,735)
Acquisition of intangible assets			(14)	(28)	(60)
Net cash used in investing activities			(794)	(1,183)	(1,795)
Cash flows from financing activities
Finance costs paid			(57)	(56)	(128)
Dividends paid		8	(11,074)	(14,515)	(24,514)
Net cash used in financing activities			(11,131)	(14,571)	(24,642)
Exchange (losses)/ gains on cash and cash equivalents			(282)	644	1,271
Net increase/ (decrease) in cash and cash equivalents			1,467	(3,221)	5,484
Cash and cash equivalents at beginning of period			27,844	22,360	22,360
Cash and cash equivalents at end of period			29,311	19,139	27,844

 

Condensed Consolidated Statement of Changes in Equity

for the six months ended 30 June 2017

	Share capital	Share premium	Capital redemption reserve	Translation reserve		Other reserves		Retained earnings		Total equity
	£000	£000	£000	£000		£000		£000		£000
Unaudited
Balance at 1 January 2017	1,075	7,873	52	1,464		2,470		40,404		53,338
Profit for the period	-	-	-	-		-		15,102		15,102
Other comprehensive (expense)/ income for the period	-	-	-	(348)		-		-		(348)
Total comprehensive (expense)/ income for the period	-	-	-	(348)		-		15,102		14,754
Share-based payments (note 11)	-	-	-	-		1,901		-		1,901
Dividends (note 8)	-	-	-	-		-		(11,074)		(11,074)
Total transactions with owners, recognised directly in equity	-	-	-	-		1,901		(11,074)		(9,173)
Balance at 30 June 2017	1,075	7,873	52	1,116		4,371		44,432		58,919

	Share capital	Share premium	Capital redemption reserve	Translation reserve		Other reserves		Retained earnings		Total equity
	£000	£000	£000	£000		£000		£000		£000
Unaudited
Balance at 1 January 2016	1,075	7,873	52	76		589		38,736		48,401
Profit for the period	-	-	-	-		-		11,481		11,481
Other comprehensive  income for the period	-	-	-	714		-		-		714
Total comprehensive income for the period	-	-	-	714		-		11,481		12,195
Share-based payments (note 11)	-	-	-	-		900		-		900
Dividends (note 8)	-	-	-	-		-		(14,515)		(14,515)
Total transactions with owners, recognised directly in equity	-	-	-	-		900		(14,515)		(13,615)
Balance at 30 June 2016	1,075	7,873	52	790		1,489		35,702		46,981

 

Condensed Consolidated Statement of Changes in Equity (continued)

for the six months ended 30 June 2017

	Share capital	Share premium	Capital redemption reserve	Translation reserve	Other reserves	Retained earnings	Total equity
	£000	£000	£000	£000	£000	£000	£000
Audited
Balance at 1 January 2016	1,075	7,873	52	76	589	38,736	48,401
Profit for the year	-	-	-	-	-	26,182	26,182
Other comprehensive income for the year	-	-	-	1,388	-	-	1,388
Total comprehensive income for the year	-	-	-	1,388	-	26,182	27,570
Share-based payments	-	-	-	-	1,881	-	1,881
Dividends (note 8)	-	-	-	-	-	(24,514)	(24,514)
Total transactions with owners, recognised directly in equity	-	-	-	-	1,881	(24,514)	(22,633)
Balance at 31 December 2016	1,075	7,873	52	1,464	2,470	40,404	53,338

 

Notes to the Condensed Consolidated Interim Financial Statements

1          General information

The Group is an international professional services provider focusing principally on IT, specialising in the recruitment, training and placement of its own permanent IT consultants.

The Company is a public limited company incorporated and domiciled in the UK with a Premium Listing on the London Stock Exchange. The Company's registered office is 3rd Floor, Cottons Centre, Cottons Lane, London SE1 2QG and its registered number is 07078823.

These Condensed Interim Financial Statements were approved for issue by the Board of Directors of the Group on 28 July 2017. They have not been audited, but have been subject to an independent review by PricewaterhouseCoopers LLP, whose independent report is included.

These Condensed Interim Financial Statements do not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. The Annual Report and Accounts for the year ended 31 December 2016 was approved by the Board of Directors of the Group on 7 March 2017 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 of the Companies Act 2006.

2          Basis of preparation

These Condensed Interim Financial Statements for the six months ended 30 June 2017 have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority and IAS 34 'Interim Financial Reporting' as adopted by the European Union. These Condensed Interim Financial Statements should be read in conjunction with the Annual Report and Accounts for the year ended 31 December 2016, which has been prepared in accordance with IFRSs as adopted by the European Union.

Going concern basis

The Group's continued and forecast global growth, positive operating cash flow and liquidity position, together with its distinctive business model and infrastructure, enable the Group to manage its business risks. The Group's forecasts and projections show that it will continue to operate with adequate cash resources and within the current working capital facilities. The Group passed all bank covenants tested in the period and forecasts that all covenants will be passed for a period of at least twelve months from the date of signing this interim report.

Having reassessed the principal risks, the Directors considered it appropriate to adopt the going concern basis of accounting in preparing the interim financial information.

3          Significant accounting policies

These Condensed Interim Financial Statements have been prepared in accordance with the accounting policies, methods of computation and presentation adopted in the financial statements for the year ended 31 December 2016, except for; certain IAS 34 Interim Financial Reporting requirements in respect of income tax.

The Directors have considered all new, revised or amended standards and interpretations which are mandatory for the first time for the financial year ending 31 December 2017, and concluded that none have had any significant impact on these interim financial statements. New, revised or amended standards and interpretations that are not yet effective have not been early adopted. With the exception of IFRS 16 'Leases', the Directors do not anticipate that the adoption of these standards and interpretations will have a material impact on the Group's financial statements in the period of initial application. The Group has carried out an assessment of the likely impact of IFRS 16 'Leases', on its lease portfolio as at 31 December 2016. Application of the new standard will result in a material increase in assets and liabilities on the Consolidated Statement of Financial Position, however the impact on net assets and the income statement will not be material. IFRS 16 is mandatory for financial years commencing on or after 1 January 2019. At this stage, the Group does not intend to adopt the standard before its effective date.

 

4          Significant accounting estimates and assumptions

The preparation of the Group's Condensed Interim Financial Statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities, at the end of the reporting period. However, uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of the asset and liability affected in future periods. The judgements, estimates and assumptions applied in the Condensed Interim Financial Statements, including the key sources of estimation uncertainty, were the same as those applied in the Group's annual financial statements for the year ended 31 December 2016, with the following exception:

·      The estimate of the provision for income taxes, which is determined in the interim financial statements using the estimated average annual effective income tax rate applied to the pre-tax income of the interim period.

The following are considered to be the Group's significant areas of judgement:

Share-based payment charge

A share-based payment charge is recognised in respect of share awards based on the Directors' best estimate of the number of shares that will vest based on the performance conditions of the awards, which comprise adjusted EPS growth and the number of employees that will leave before vesting. The charge is calculated based on the fair value on the grant date using the Black Scholes model and is expensed over the vesting period.

Impairment of goodwill

For impairment testing of goodwill the weighted average cost of capital ("WACC") is calculated to reflect a required rate of return. The WACC is used to discount the estimated future cash flows of the Group to arrive at a value in use, which is compared to the carrying value of the goodwill and other net assets of the respective cash generating unit at the balance sheet date. If the value in use is greater than the carrying value of goodwill and other net assets at the balance sheet date, there is no impairment.

5          Seasonality

The Group is not significantly impacted by seasonality trends. A lower number of working days in the first half of the year is approximately offset by increased annual leave in the second half of the year.

6          Segmental reporting

Management has determined the operating segments based on the operating reports reviewed by the Board of Directors that are used to assess both performance and strategic decisions. Management has identified that the Executive Directors are the chief operating decision maker in accordance with the requirements of IFRS 8 'Operating segments'.

At 30 June 2017, the Board of Directors consider that the Group is organised into four core geographical operating segments:

(1)   UK and Ireland;

(2)   North America;

(3)   Europe, Middle East and Africa, excluding UK and Ireland ("EMEA"); and

(4)   Asia Pacific ("APAC").

Each geographical segment is engaged in providing services within a particular economic environment and is subject to risks and returns that are different from those of segments operating in other economic environments.

All segment revenue, profit before income taxation, assets and liabilities are attributable to the principal activity of the Group, being an international professional services provider with a focus on IT.

 

6        Segmental reporting (continued)

Segmental reporting for the six months ended 30 June 2017

	UK and	North
	Ireland	America	EMEA	APAC	Total
	£000	£000	£000	£000	£000
Revenue	66,330	37,732	6,515	6,521	117,098
Depreciation and amortisation	(398)	(219)	(18)	(50)	(685)
Segment operating profit/ (loss)	13,365	7,307	304	(293)	20,683
Finance income	10	1	1	-	12
Finance costs	(54)	(3)	(5)	(2)	(64)
Profit/ (loss) before income tax	13,321	7,305	300	(295)	20,631
Total assets	64,349	17,377	5,440	4,605	91,771
Total liabilities	(16,087)	(9,840)	(2,134)	(4,791)	(32,852)

Included in total assets above are non-current assets (excluding deferred tax) as follows:

	UK and	North
	Ireland	America	EMEA	APAC	Total
	£000	£000	£000	£000	£000
30 June 2017	22,401	1,465	318	407	24,591

Segmental reporting for the six months ended 30 June 2016

	UK and	North
	Ireland	America	EMEA	APAC	Total
	£000	£000	£000	£000	£000
Revenue	52,662	25,112	5,814	2,925	86,513
Depreciation and amortisation	(373)	(120)	(7)	(25)	(525)
Segment operating profit/ (loss)	12,825	2,559	383	(249)	15,518
Finance income	15	-	3	-	18
Finance costs	(54)	(2)	(5)	(2)	(63)
Profit/ (loss) before income tax	12,786	2,557	381	(251)	15,473
Total assets	56,348	11,383	4,670	2,215	74,616
Total liabilities	(15,945)	(7,999)	(2,075)	(1,616)	(27,635)

 

6        Segmental reporting (continued)

Included in total assets above are non-current assets (excluding deferred tax) as follows:

	UK and	North
	Ireland	America	EMEA	APAC	Total
	£000	£000	£000	£000	£000
30 June 2016	23,010	1,301	33	198	24,542

Segmental reporting for the year ended 31 December 2016

	UK and	North
	Ireland	America	EMEA	APAC	Total
	£000	£000	£000	£000	£000
Revenue	112,912	56,782	12,082	7,627	189,403
Depreciation and amortisation	(762)	(334)	(18)	(66)	(1,180)
Segment operating profit/ (loss)	26,058	8,909	1,199	(745)	35,421
Finance income	20	-	7	1	28
Finance costs	(106)	(4)	(14)	(4)	(128)
Profit/ (loss) before income tax	25,972	8,905	1,192	(748)	35,321
Total assets	60,232	14,265	4,974	2,853	82,324
Total liabilities	(17,791)	(6,686)	(1,862)	(2,647)	(28,986)

Included in total assets above are non-current assets (excluding deferred tax) as follows:

	UK and	North
	Ireland	America	EMEA	APAC	Total
	£000	£000	£000	£000	£000
31 December 2016	22,755	1,551	26	212	24,544

Information about major customers

Three customers each represent 10% or more of the Group's revenue from all four operating segments and are presented as follows:

	Six months to        30 June          2017	Six months to       30 June             2016	Year ended        31 December 2016
	£000	£000	£000
Revenue from customer A	23,444	9,737	26,126
Revenue from customer B	4,680	11,410	19,647
Revenue from customer C	12,310	5,753	15,761

7          Taxation

Income tax expense is recognised based on management's estimate of the weighted average annual income tax rate expected for the full financial year. The estimated average annual tax rate used for the six months ended 30 June 2017 is 26.8% (the estimated tax rate for the six months ended 30 June 2016 was 25.8%).

8          Dividends

2017

An interim dividend of 12 pence per ordinary share was declared by the Directors on 28 July 2017 and will be payable on 22 September 2017 to holders of record on 25 August 2017.

2016

An interim dividend of 9.3 pence per ordinary share was declared by the Directors on 26 July 2016 and paid on 23 September 2016 to holders of record on 26 August 2016. In respect of the full year to 31 December 2016, the Board proposed a final dividend of 10.3 pence per share.  This was approved by shareholders at the Annual General Meeting on 27 April 2017, and was paid on 16 June 2017 to shareholders of record on 26 May 2017.

9          Earnings per ordinary share

Basic earnings per share is calculated by dividing the profit attributable to ordinary equity holders of the parent company by the weighted average number of ordinary shares in issue during the period.

				Six months to 30 June 2017		Six months to 30 June 2016		Year ended 31 December 2016
Profit for the period		£000		15,102		11,481		26,182
Average number of ordinary shares in issue (thousands)		Number		107,518		107,518		107,518
Basic earnings per share		Pence		14.0		10.7		24.4

Adjusted basic earnings per share is calculated by dividing the profit attributable to ordinary equity holders of the parent company, excluding performance share plan expense (including social security costs), by the weighted average number of ordinary shares in issue during the period.

			Six months to 30 June 2017		Six months to 30 June  2016	Year ended  31 December 2016
Profit for the period (basic earnings)		£000	15,102		11,481	26,182
Share-based payment expense (including social security costs) (see note 11)		£000	1,713		1,033	2,217
Tax effect of share-based payment expense		£000	(173)		(169)	(672)
Adjusted profit for the period		£000	16,642		12,345	27,727
Average number of ordinary shares in issue (thousands)		Number		107,518	107,518	107,518
Adjusted basic earnings per share		Pence		15.5	11.5	25.8

 

9          Earnings per ordinary share (continued)

Diluted earnings per share

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. The Company has one type of dilutive potential ordinary shares in the form of share options; the number of shares in issue has been adjusted to include the number of shares that would have been issued assuming the exercise of the share options.

				Six months to 30 June 2017		Six months to 30 June 2016		Year ended 31 December 2016
Profit for the period (basic earnings)		£000		15,102	11,481		26,182
Average number of ordinary shares in issue (thousands)		Number		107,518	107,518		107,518
Adjustment for share options (thousands)		Number		554	-		585
Diluted number of ordinary shares in issue (thousands)		Number		108,072	107,518		108,103
Diluted earnings per share	Pence			14.0	10.7		24.2

10        Analysis of net cash (non-GAAP measure)

		30 June 2017	30 June 2016	31 December  2016
		£000	£000	£000
Cash and cash equivalents		29,311	19,139	27,844

Net cash is defined as borrowings less net cash and cash equivalents. The Group had undrawn borrowings at 30 June 2017 of £20,000,000 (2016: £20,000,000).

11        Share-based payments

During the six month period ended 30 June 2017 the Group recognised share-based payment charges of £1,337,000 (2016: £900,000) and associated social security costs of £376,000 (2016: £133,000). Also recognised in 'Other reserves' is deferred tax of £564,000 (2016: £nil).

12        Related party transactions

During the six month period ended 30 June 2017 the Company paid £18,000 (six months ended 30 June 2016: £18,000) to Rod Flavell, Chief Executive Officer and Sheila Flavell, Chief Operating Officer, for rent of an apartment used for short-term employee accommodation. The rent payable was at market rate, no balances were outstanding at period end (2016: £nil). At no time during the six months to 30 June 2017 or during 2016 was the apartment used by any of the Directors.

During the six month period ended 30 June 2017 the Company paid £16,000 (six months ended 30 June 2016: £30,240) for contractor IT services to Viper Business Solutions Limited, which is a limited company wholly owned by the daughter of Sheila Flavell. The IT services performed were provided to a client of the Group and were charged at market rate, no balances were outstanding at period end (2016: £8,064).

A number of the Directors' family members are employed by the Group. The employment relationships are at market rate and are carried out on an arm's length basis.

 

12           Related party transactions (continued)

The key management personnel comprise the Directors of the Group. The compensation of key management is set out below:

	Six months to 30 June 2017	Six months to 30 June 2016	Year ended 31 December 2016
	£000	£000	£000
Short-term employee benefits	1,243	1,201	2,712
Post-employment benefits	4	17	32
Share-based payments	357	204	241
	1,604	1,422	2,985

13        Financial instruments

There are no material differences between the fair value of the financial assets and liabilities included within the following categories in the Condensed Consolidated Statement of Financial Position and their carrying value:

•      Trade and other receivables

•      Cash and cash equivalents

•      Trade and other payables

 

Statement of Directors' Responsibilities

The Directors confirm that these condensed interim financial statements have been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting" as adopted by the European Union, and that the interim management report includes a fair review of the information required by DTR 4.2.7R and DTR 4.2.8R of the Disclosure and Transparency Rules of the Financial Conduct Authority, namely:

·      An indication of important events that have occurred during the first six months and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and

·      Material related party transactions in the first six months and any material changes in the related party transactions described in the last Annual Report.

Directors who held office during the period:

Ivan Martin                                                        Non-Executive Chairman

Roderick Flavell                                                 Chief Executive Officer

Sheila Flavell                                                      Chief Operating Officer

Michael McLaren                                              Chief Financial Officer

Andrew Brown                                                  Chief Commercial Officer

Peter Whiting                                                    Non-Executive Director

Robin Taylor                                                      Non-Executive Director

Michelle Senecal de Fonseca                         Non-Executive Director

David Lister                                                        Non-Executive Director

The Executive Directors and Chairman of FDM were listed in the Annual Report and Accounts of the Company for the year ended 31 December 2016 and remained the same in the six months to 30 June 2017.

By order of the Board
Rod Flavell  Chief Executive Officer	Mike McLaren Chief Financial Officer
28 July 2017

 

Independent review report to FDM Group (Holdings) plc

Report on the condensed consolidated interim financial statements

Our conclusion

We have reviewed FDM Group (Holdings) plc's condensed consolidated interim financial statements (the "interim financial statements") in the interim report of FDM Group (Holdings) plc for the 6 month period ended 30 June 2017. Based on our review, nothing has come to our attention that causes us to believe that the interim financial statements are not prepared, in all material respects, in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

What we have reviewed

The interim financial statements comprise:

·      the condensed consolidated statement of financial position as at 30 June 2017;

·      the condensed consolidated income statement and the condensed consolidated statement of comprehensive income for the period then ended;

·      the condensed consolidated statement of cash flows for the period then ended;

·      the condensed consolidated statement of changes in equity for the period then ended; and

·      the explanatory notes to the interim financial statements.

The interim financial statements included in the interim report have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

As disclosed in note 2 to the interim financial statements, the financial reporting framework that has been applied in the preparation of the full annual financial statements of the Group is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

Responsibilities for the interim financial statements and the review

Our responsibilities and those of the directors

The interim report, including the interim financial statements, is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim report in accordance with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

Our responsibility is to express a conclusion on the interim financial statements in the interim report based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of complying with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority and for no other purpose. We do not, in giving this conclusion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

 

Responsibilities for the interim financial statements and the review (continued)

What a review of interim financial statements involves

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.

A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

We have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim financial statements.

PricewaterhouseCoopers LLP

Chartered Accountants

London

28 July 2017

 

END

 

 

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