- Clients seem to be battening down the hatches
- Slowing demand will hurt 2024 performance, company says
- Stock plunges 16% to multi-year lows
Today’s update from FDM (FDM) confirmed slowing demand as clients take that bit longer to make decisions and are being that bit more careful with investment budgets.
This is not new news, the FTSE 250 technology and technical skills supplier to corporates has been saying as much for much of 2023. Getting its highly trained contract professionals placed in organisations won’t get easier next year either and that’s why investors are getting cold feet with the stock.
FORECASTS CUT BACK
Updated consensus estimates are now calling for adjusted operating profits and revenues of £47.4 million and £332 million, down 12% and 5% respectively, with one broker cutting 2024 guidance by 26% and 18%, Megabuyte analysts say.
As of the end of October, FDM had 4,136 consultants assigned to clients, down from 5,014 in October last year and 4,602 at the end of June.
The shares fell 16% in morning trade, plunging to a multi-year low of 393.25p, valuing the business at about £360 million, putting the company at serious risk of demotion from the mid-cap index at the next reshuffle.
FDM remains a financially robust business, with £35.3 million in cash as of 31 October, with no debt. That will help it through these tougher times and the company is prioritising ‘the right skill sets’ to position itself to meet client demands as market conditions and demand recover.
CLIENTS BATTENING DOWN THE HATCHES
‘We suspect FDM will certainly find it more difficult to win new logos and expand wallet share in today's environment, although its adaptive approach has given it some resilience in the past, with the ability to ramp up/down its full-time employee base efficiently - minimising margin hits and losses from underutilisation,’ said Megabuyte analyst Shekhan Ali.
Yet the question remains, with so many corporates apparently rushing through the AI door to bolster their businesses, why aren’t they onboarding specialist skills to help?
This, in theory, should be just where a company like FDM should be prospering through early adopters.
That FDM is not may suggest that executives are more worried about being burned by the macro climate than gaining an edge on competition by investing early.
