We know that good staff are hard to come by in many industries at the moment and the squeeze on technology talent predates the pandemic. This backcloth is great for FDM (FDM) and its army of IT experts, called ‘Mounties’.

Run by the founding husband and wife team of Rod and Sheila Flavell, the chief executive and chief operating officer respectively, clients mainly come from the banking, insurance and finance world, although this is expanding as new technology disrupts almost every industry, from energy, media and government departments.

Key to its success is FDM’s Mounties model where technical IT consultants are drawn from university graduates, people returning to work and, importantly ex-forces personnel, where officers with great people and technical skills are looking for a new career. All are trained for free by FDM in return for at least two years of full-time service.

Installed in a client’s operations, FDM’s Mounties provide a wide range of technical and business functions, such as business development, IT testing, project management, data and business analysis, and product support. They are also increasingly being trained in areas such as cloud applications, robotic process automation and artificial intelligence.

With still almost half of its customer base in the UK and Ireland, FDM has huge opportunities to grow both at home and overseas. It already has substantial operations in the North America with smaller but fast-growing set-ups in Europe, the Middle East and Asia-Pacific.

The company hasn’t said much to the market since half year results in July 2021, where the company bore the unsurprising effects of lockdowns.

Yet this masked excellent management of the Covid outbreak, allowing the company to emerge with rising demand, ramped-up recruitment and training and high Mountie utilisation rates of 96.9%.

Since those results the stock has largely tracked sideways, but that’s set to change, we believe. A 2021 full year trading update is expected in the coming week or two, and we think the news will be good, with proof of a better second half performance likely to be coupled with strong demand drivers from widespread digital transformation and typically strong cash flows.

Analysts are forecasting roughly £45 million of 2021 pre-tax profit. Earnings growth for 2022 is anticipated in the low-to-mid teens but there is scope for upgrades to filter through this year.

The 2022 price to earnings multiple stands at around 34. FDM’s track record of operational excellence could see more investors prepared to pay such a premium rating if the next trading update surpasses expectations. However, investors should appreciate there is no guarantee it will issue positive news. We like the stock for its longer term potential, not simply to trade it around news updates.

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