Despite economic uncertainty, outsourced IT solutions venture FDM has delighted investors with outstanding interim figures to June.

Over recent years FDM, whose origins are in staffing, has seen its consultant business outgrow its contracting business, with chief executive Rod Flavell exploiting a niche in between the expensive, larger IT services providers and the lower cost, but lower quality, off-shoring model.

Today, FDM employs more than 245 specially trained consultants known as ‘Mounties’, specialising in applications such as Sun Microsystems’ Java and Microsoft.net, the building blocks of the Internet and modern IT infrastructure. Burgeoning demand for skills in these areas means FDM is experiencing buoyant demand for its Mounties from an array of clients including ABN Amro, Barclays and the BBC as well as EADS and BT.

Half time figures revealed a 31% pre-tax profits increase to £2.4m, on 4% top line growth to £25.4m, reflecting margin gains on the back of high utilisation rates and record levels of demand for Mounties. Flavell was keen to flag up the widening of gross margins to 25.6% (2007: 20.9%), while FDM finished the period with £5.3m of net cash, allowing for a dividend increase to 1p (2007: 0.8p).

For the year, analysts see a pre-tax advance from £4.3m to £5.1m and 20% earnings growth to 15p, as well as a 3.5p dividend. On those estimates, FDM trades on a curiously low prospective multiple of 5.5, a heavy discount to the wider sector, and offers a yield north of 4%.

First backed by Growth Company Investor at 79p, FDM is incorrectly perceived as a staffing business rather than a high margin IT services venture and investors have failed to understand that its banking sector exposure is weighted towards essential IT systems development and support spend. Fast growing, expanding its margins and illogically undervalued, FDM is a strong buy.

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FDM Group	AIM	£18.23m	78.50p	0.00p
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Other company articles:
FDM Group			20/08/2008
Company Watch Review			09/02/2007
Mounties rescue FDM’s margins			10/04/2006
Newcomer - FDM			10/05/2005