ANNUAL REPORT
AND ACCOUNTS 2018
FDM Group (Holdings) plc
1
Strategic ReportGovernanceFinancial StatementsFDM Group (Holdings) plcAnnual Report and Accounts 2018
Contents
Strategic Report
Highlights
2
4
8
12
18
32
34
36
42
46
We are FDM
Chairman’s Statement
Chief Executive’s Review
Corporate Responsibility
Key Performance Indicators
Business Model
Our Markets
Financial Review
Risk Management
Governance
56
62
Board of Directors
Corporate Governance Report
Audit Committee Report
Nomination Committee Report
Remuneration Report
Directors’ Report
72
80
84
102
Financial Statements
108
Independent auditors’ report to the
members of FDM Group (Holdings) plc
Consolidated Income Statement
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Cash Flows
Consolidated Statement of Changes in Equity
Notes to the Consolidated Financial Statements
Parent Company Statement of Financial Position
Parent Company Statement of Cash Flows
Parent Company Statement of Changes in Equity
Notes to the Parent Company Financial Statements
Shareholder Information
115
116
117
118
119
120
141
142
143
144
148
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FDM Group (Holdings) plcAnnual Report and Accounts 2018
Strategic Report
3
Strategic ReportGovernanceFinancial StatementsFDM Group (Holdings) plcAnnual Report and Accounts 2018 Highlights
Financial
Revenue (£m)
£244.9m
233.6
189.4
+5%
244.9
Mountie revenue1 (£m)
£239.0m
+15%
239.0
207.3
167.3
Adjusted operating profit2 (£m)
+8%
£51.3m
47.3
51.3
37.6
2016
2017
2018
2016
2017
2018
2016
2017
2018
Profit before tax (£m)
£48.3m
43.7
35.3
+11%
48.3
Adjusted profit before tax2 (£m)
+9%
£51.3m
Basic earnings per share (pence)
34.3 pence +15%
47.2
51.3
34.3
29.8
37.5
24.4
2016
2017
2018
2016
2017
2018
2016
2017
2018
Adjusted basic earnings per
share2 (pence)
36.4 pence +12%
Cash flow generated from
operations (£m)
£44.9m
-7%
Cash conversion3 (%)
92.9%
-16%
36.4
32.6
39.4
48.3
44.9
111.5
110.6
92.9
25.8
2016
2017
2018
2016
2017
2018
2016
2017
2018
1 Mountie revenue excludes revenue from contractors. See page 43 for analysis of revenue.
2 The adjusted operating profit and adjusted profit before tax are calculated before Performance Share Plan expenses (including social security costs) of £3.0 million
(2017: £3.6 million). The adjusted basic earnings per share is calculated before the impact of Performance Share Plan expenses (including social security costs and
associated deferred tax). See page 43 for further details of adjusted items.
3 Cash conversion is calculated by dividing cash flow from operations by profit before tax.
4 Week 52 in 2018 commenced on 17 December 2018 (2017: week 52 commenced on 18 December 2017).
5 Utilisation is calculated as the ratio of cost of utilised Mounties to the total Mountie payroll cost.
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FDM Group (Holdings) plcAnnual Report and Accounts 2018
Operational
Recruit
Over 700 university events
attended in 2018
(2017: over 400)
We received over 84,000
online applications
(2017: over 81,000)
Train
2,155 training completions
in 2018, a 33% increase
(2017: 1,626)
Continued investment in
training Academies, with
global training capacity of
848 at year end, up by 9%
over December 2017
7 of our 16 training
locations at the end of the
year were pop-up
Academies
Deploy
Mounties assigned to client
sites at week 524 were up
18% at 3,747 (2017: 3,170)
Mountie utilisation5 rate
unchanged at 97.3%
(2017: 97.3%)
77 new clients secured
globally (2017: 72)
Strategic ReportGovernanceFinancial Statements We are FDM
FDM Group (Holdings) plc (“the Company”) and its subsidiaries
(together “the Group” or “FDM”) operates in the Recruit, Train
and Deploy (“RTD”) sector. Our mission is to bring people and
technology together, creating and inspiring exciting careers
that shape our digital future.
The Group’s principal business activities involve recruiting,
training and deploying 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 additional experience
where required. FDM specialises in a range of technical and
business disciplines including Development, Testing, IT Service
Management, Project Management Office, Data Services,
Business Analysis, Business Intelligence, Cyber Security and
Robotic Process Automation.
The FDM Careers Programme bridges the gap for graduates,
ex-Forces and returners to work, providing them with the
Our brand evolution
We don’t make or sell products – we are a people business and
therefore our employees are our brand. In 2018, we embarked
on a global project to reveal how the FDM brand has evolved
throughout the years, gathering feedback from a variety of
internal and external stakeholders at all levels.
The findings revealed that despite our growth, our values have
largely remained the same. We strive for success, we are
committed to our clients, we say it how it is, we make it
happen and together we are stronger. These values define
what we stand for as a business and unite us in our mission.
#FDMCareers
Our purpose
training and experience required to successfully launch or
To achieve profitable growth for our shareholders,
re-launch their careers. FDM has dedicated training centres
through offering our customers a unique and high-quality
and sales operations located in London, Leeds, Glasgow,
service by creating and inspiring exciting careers that shape
Birmingham, New York NY, Reston VA, Charlotte NC, Austin TX,
our digital future.
Toronto, Frankfurt, Singapore, Hong Kong, Shanghai and Sydney.
Our vision
To be recognised by our clients and industry as the global
leader in the Recruit, Train and Deploy sector.
FDM also operates in Ireland, France, Switzerland,
Austria, Denmark, Spain, Luxembourg, the Netherlands
and South Africa.
Together, FDM is made up of a collective of almost 5,000
people, from a multitude of different backgrounds, life
experiences and cultures. FDM is a strong advocate of
diversity and inclusion in the workplace and the strength
of its brand lies in the talent within.
Together, we are FDM.
Forward-looking statements
This Annual 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.
4
FDM Group (Holdings) plcAnnual Report and Accounts 2018 Together we
are stronger
We make it
happen
Our
Values
We strive for
success
Committed to
our clients
We say it
how it is
Industry awards received during the
year included:
• The JobCrowd’s Top 100 Companies For Graduates To Work For 2018/19
• The Guardian UK 300 Most Popular Graduate Employers for 2018/19
• UK Stock Market Awards – Growth Company of the Year 2018
• Megabuyte Quoted25 – Best Performing Consulting and Systems Integration
Company 2018
• Megabuyte Quoted25 Awards – Top 25 PLCs 2018 (FDM ranked 4th)
• Management Today – Agents of Change Power List 2018 – Rod Flavell, FDM CEO
• Computing Women in IT Excellence Awards – Diversity Employer of the Year 2018
• Information Age Women in IT Awards – Employer of the Year 2018
• Information Age Women in IT Awards – Woman of the Year 2018 – Sheila Flavell,
FDM COO
• Computer Weekly 50 Most Influential Women in UK IT 2018 – Sheila Flavell, FDM COO
• Mogul – Top 1,000 Companies Worldwide for Millennial Women 2018
• Working Mums Awards – Career Progression Award 2018
• Working Mums Awards – Overall Top Employer Award 2018
• Best in Biz Awards North America – Best Place to Work (Gold) 2018
• Military Times Best for Vets Employer 2018
• MilitaryHire.com Veteran Friendly Employers 2018: Opportunity category
• Target Jobs Awards – AGCAS Award for Excellence in Careers and Employability
Service Engagement 2018
• National Undergraduate Employability Awards – Best Collaboration between
a University and Employer 2018
• MINT Minded Company and Fair Company 2018
6
FDM Group (Holdings) plcAnnual Report and Accounts 2018 FDM is a
strong advocate of
diversity and inclusion in the
workplace and the strength of its
brand lies in the talent within
7
Strategic ReportGovernanceFinancial StatementsFDM Group (Holdings) plcAnnual Report and Accounts 2018 Chairman’s
Statement
Total ordinary
dividend
+15%
Ivan Martin
Chairman
I have been privileged to be Chairman
of FDM for the past 12 years, a period which has
seen unabated revenue and profit growth, and I am
pleased that we have someone of David Lister’s calibre,
experience and knowledge of the business, to take on the
role of Chairman at this exciting point in FDM’s evolution.
8
FDM Group (Holdings) plcAnnual Report and Accounts 2018 Chairman’s Statement
I am pleased to present FDM’s Annual
Report for the financial year ended
31 December 2018.
Performance
I am delighted to report another year of
strong performance in 2018. The Group
delivered 18% growth in overall Mountie
headcount, including particularly strong
Culture and values
Dividend
FDM’s business is supported by a strong
The Group is maintaining a progressive
cultural identity which helps to ensure
dividend policy, aimed at increasing the
that our goals are understood and
annual dividend broadly in line with
shared by all of our people. It was
growth in the Group’s earnings per
particularly rewarding to be recognised
share. We intend to pay a final dividend
for the eighth year running by The
of 15.5 pence per share, taking the total
JobCrowd in their ‘Top 100 Companies
ordinary dividend to 30.0 pence per
For Graduates to Work For’. Our
share, up 15% on 2017.
growth in the UK and Ireland, North
consistently high ratings for culture,
America and APAC, closing the year with
colleagues and enjoyment underlines
3,747 Mounties placed on client sites.
our commitment to promoting a strong
People
The Group’s financial position remains
aims.
robust with a closing cash balance of
£33.9 million and no debt.
Governance
culture which supports our strategic
We are very proud of our employees
across the Group, who have again
shown great commitment and
professionalism during 2018. Our
employees work hard to understand
Strategic progress
Our strong operational and financial
performance is driven by our focus on
the four strategic objectives set out on
The Board has always considered robust
what our clients want, building strong
Corporate Governance and a sound
relationships and creating solutions
approach to risk management to be
which help our clients fulfil their
fundamental to the sustainability of the
business ambitions. Our people
Group and its operations. We continue
understand that our clients’ success is
pages 13 to 15 of the Annual Report, and
to review and challenge our approach to
our success.
it is notable that we have made good
progress against each again this year,
including:
risk management, working with our
internal audit function and making
Over the last few years our business has
updates where appropriate to ensure
expanded significantly, by the end of
• More than 2,100 trainees completed
that it remains effective. In July 2018 the
2018 our Mountie headcount had
their training in 2018
Financial Reporting Council published
increased to 3,747, and we now have 350
• We gained 77 new clients across the
its new UK Corporate Governance Code
permanent staff working on
Group
• We expanded our presence in all of
our territories around the world
• We placed Mounties with clients for
the first time in the Netherlands and
in three new US States.
(“2018 Code”), which will apply to FDM
recruitment, training, sales and
with effect from 1 January 2019.
deployment, as well as providing
Amongst other things, the 2018 Code
all-important support to our consultants
encourages companies to engage more
in the field. People underpin everything
actively with stakeholders including
that we do, and in recognition of this we
employees, clients and shareholders,
have appointed a Chief People Officer.
something which we have always
We regard this as a crucial new hire for
focussed on at FDM. The Board and its
our business, creating a senior
committees will work to ensure that our
executive role which reports directly to
framework of risk management and
the CEO and will work closely with the
governance continues to evolve with the
Board on succession planning and people
2018 Code and meets shareholder
development which will support FDM’s
expectations and best practice
sustainability for the benefit of all our
requirements. I report on Corporate
Governance in more detail on page 62 of
stakeholders. Further information on this
appointment is set out in the Nomination
the Annual Report.
Committee Report on page 81.
9
Strategic ReportGovernanceFinancial StatementsFDM Group (Holdings) plcAnnual Report and Accounts 2018 Our results this year reflect the dedication and hard work of our people and, on
behalf of the Board, I would like to thank all our employees for their significant
contribution to the performance of the Group in 2018.
The Board
In March 2018 FDM announced my intention to retire from the Board and that a
search for a new independent Non-Executive Chairman had begun. I am delighted to
say that process has been completed successfully. As announced by the Company on
7 February 2019, David Lister will be appointed to the role of Non-Executive
Chairman with effect from 5 March 2019, and I shall retire from the Board on that
date. David Lister has been an independent Non-Executive Director of the Company
since March 2016 and brings a wealth of relevant board and IT experience after more
than 39 years of working in technology and operations roles across multiple
industries for international businesses. He also has valuable experience in the
professional services sector. Further information about David’s background and
experience is on page 59.
The Board commissioned an externally facilitated evaluation of its effectiveness in
2018 (details of which are in the Nomination Committee Report on page 81). The
results of that review will be helpful for David as he takes on the role of Chairman
and works with his colleagues to ensure that the Board continues to operate as
effectively as possible. Our aim is to create conditions that support sound decision-
making, with input from other stakeholders where appropriate, to promote the
long-term sustainable success of FDM.
I have been privileged to be Chairman of FDM for the past 12 years, a period which
has seen unabated revenue and profit growth and has seen FDM evolve from a
Brighton-based business with around 550 contractors on billing to FTSE 250
Company – a truly international business with global reach and more than 3,700
Mounties on billing. I am pleased that we have someone of David’s calibre,
experience and knowledge of the business, to take on the role of Chairman at this
exciting point in FDM’s evolution, and I wish him and the rest of the Board every
success for the future.
Outlook
The Board is confident that the continuing strong levels of demand for FDM’s
services across all of our territories and the momentum with which we have
commenced the new year will enable the Group to deliver further good operational
and financial progress in 2019.
Ivan Martin
Chairman
5 March 2019
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FDM Group (Holdings) plcAnnual Report and Accounts 2018 Recognised by
The JobCrowd ‘Top 100
Companies For Graduates to
Work For’ for the eighth year running
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Strategic ReportGovernanceFinancial StatementsFDM Group (Holdings) plcAnnual Report and Accounts 2018 Chief Executive’s
Review
Mounties placed
with clients
+18%
Mountie revenue
+15%
Rod Flavell
Chief Executive Officer
Throughout 2018 the Group
invested in its people, training facilities
and technology to sustain the future growth
of the business.
12
FDM Group (Holdings) plcAnnual Report and Accounts 2018 Chief Executive’s Review
Overview
Our strategy
We ended the year with 3,747 Mounties
FDM’s strategy is to deliver customer
FDM’s strategy, which is closely linked to
placed with clients, while each of our
led, sustainable, profitable growth on a
our business model and mirrors the
operating regions increased Mountie
consistent basis, through its well-
Recruit, Train, Deploy sector in which we
headcount in the year. The Group
established Mountie model. This
operate, is underpinned by four key
achieved Mountie revenue of £239.0
strategy requires that all activities and
objectives: Attract, train and develop
million and delivered an adjusted profit
before tax1 of £51.3 million.
investments produce the appropriate
high-calibre Mounties; Invest in
level of profit and return on cash, that
leading-edge training Academies; Grow
they deliver sustained and measurable
and diversify our client base; and
2018 represented a period of significant
improvements for all our stakeholders
Expand our geographic presence.
investment by the Group in our people
including customers, staff and
and infrastructure. We increased
shareholders, and that they further
headcount in three key areas of the
FDM’s objective of launching the careers
business; sales, recruitment and
of talented people worldwide, which
training, thus ensuring we have a firm
remains core to everything we do.
foundation in place to deliver on our
future growth opportunities and
aspirations and our strategic objectives.
Risks 1, 2, 3,
Attract, tr
high-calib
a
i
n
r
4
,
5
,
8
a
n
d
a
9
e n c e
s
d 9
Risks 1, 5, 6, 8 a n
r
u
Expan d o
graphic p r e
o
e
g
Recruit
y
o
l
p
e
D
BRINGING
PEOPLE AND
TECHNOLOGY
TOGETHER
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r
o
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w
u
a
r
n
R
i
s
k
s
1
,
4
,
5
d
c
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i
e
n
div
t b
ersify
ase
,
6,
7, 8 a
n
d 9
I n v e
t
s
r
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d
M
d
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ai
Tr
t i n le ading-e
a i n i n g A cade
For further details on our Business Model see pages 34 to 35.
For further details on our Risks and Risk Management see pages 46 to 53.
1 The adjusted profit before tax is calculated before Performance Share Plan expenses
(including social security costs).
13
Strategic ReportGovernanceFinancial StatementsFDM Group (Holdings) plcAnnual Report and Accounts 2018
Attract, train and develop
Invest in leading-edge
high-calibre Mounties
training Academies
In the UK, FDM remains one of the
FDM Academies are dynamic, high-
leading graduate employers, an
technology facilities, where our skilled
achievement we are striving to emulate
and knowledgeable trainers provide
pop-up compared with 36 in 2017. Our
pop-ups are quick to establish and offer
flexible availability to meet local
across the Group. We are proud of the
first class training. During 2018 the
candidate and client demand.
way we collaborate with leading
capacity of our Toronto Academy was
universities and multiple arms of the
near doubled with the addition of 71
Training capacity (the number of
military. In May 2018, we introduced our
training seats making it the second
available training seats at a given point
innovative new Applicant Tracking
largest Academy in the Group behind
in time) has increased to 848 at
System (JobTrain), which allows better
the Flagship London centre. We have
31 December 2018 (2017: 777). Our
management of applicants through the
also just opened, in February 2019, our
training facilities are key to securing a
recruitment and training process. It
new permanent Academy in Sydney (see
enables applicants to source relevant
page 29 for more information).
information more easily and have a
flow of Mounties to support our growth.
As our training capacity continues to
increase, so has our ratio of trainers to
more user-friendly experience. With
Our leveraging of pop-up centres has
trainees, demonstrating our
online applications up 4% year-on-year
been a particular highlight for the year
commitment to ensuring trainees have
(at over 84,000), FDM is in a strong
with 7 of our 16 training locations at the
the required level of support during
position at the start of 2019.
end of the year being a pop-up and 175
their development.
trainees completing training through a
Our training programme provides
thousands of people each year with the
opportunity to launch or further their
career, with a permanent and
meaningful employment role for a
minimum of two years. 2018 saw us
deliver a 33% increase in training
completions across the Group to 2,155
(2017: 1,626). Investment in training has
generated a 27% increase in training
staff, with 129 people employed across
the Group’s training Academies at
31 December 2018 (2017: 99 employed
in Academies).
Supported by a network of peers, our
Mounties have the opportunity to work
for a broad range of well-known
international businesses having
received comprehensive and role-
specific training. Of our UK graduate
2018 intake surveyed, 89% attended a
state school and 44% were the first in
their family to go to university. Whilst
our business model operates on the
premise that the average length of a
Mountie’s engagement with FDM is
approximately three years, the training
provided by FDM enables our Mounties
to develop exciting and rewarding
careers beyond their time with us.
14
Training capacity in permanent Academies as at 31 December 2018
900
800
700
600
500
400
300
200
100
Singapore
Frankfurt
Toronto
Glasgow
London
Hong Kong
Reston
New York
Leeds
y
t
i
c
a
p
a
c
g
n
n
a
r
T
i
i
FDM Group (Holdings) plcAnnual Report and Accounts 2018
Chief Executive’s Review
Grow and diversify our
client base
Our service offerings
FDM constantly re-evaluates its training
In 2018, our biggest growth stream has
FDM is committed to delivering the
to ensure we deliver, at scale, a
been Development (including Java and
highest level of service to its clients. The
consultant workforce best suited to the
.Net). We have found that our
Group has a concentration of clients in
wide range of technology roles required.
Developers are working more closely
the financial services sector and is
Since our training is modular, we have
with client businesses, as we see client
continually expanding the number of
the flexibility to adapt to small-scale
IT teams working closer with the
service streams it offers to financial
client requests to fill their particular skill
business, creating synergy benefits and
services clients.
gap. We regularly discuss with our
ultimately delivering a better outcome
clients the trends they see developing in
to the business. Although still in its
During the year we worked with 77 new
the technology market, and we make
infancy, during 2018 our RPA offering
clients (2017: 72 new clients) of which
sure we understand how those trends
has taken off and we have dedicated
71% were outside the financial services
will be reflected in their future needs, so
course start dates across the UK in 2019.
sector. Net Mountie headcount growth
that we can continue to train and
was 398 from new clients and 179 from
provide high-calibre Mounties.
FDM’s core training proposition will
existing clients.
continue to evolve, remaining flexible to
Expand our geographic
disciplines includes; Development,
Delivering effective training requires a
FDM’s range of technical and business
best meet the needs of our clients.
presence
Testing, IT Service Management
combination of learning delivery
(“ITSM”), Project Management Office
methods including classroom based
Good progress has been made in each
(“PMO”), Data and Operational Analysis,
training, e-learning and an emphasis on
of the geographic markets in which we
Business Analysis, Business Intelligence,
gaining practical experience using
operate with the number of Mounties
Murex and Salesforce, Cyber Security
appropriate tools and methodologies.
on site increasing in each region. The
and Robotic Process Automation (“RPA”).
Mountie Headcount – split by service offering
largest increase came in the UK and
Ireland, which saw Mountie headcount
increase by 260 (15%), followed by North
America which increased headcount by
231 (24%), APAC which was up by 79
heads (26%), and EMEA which was up by
seven heads (5%).
Our continuing investment in our
training facilities, with Toronto
expanding in 2018 and Sydney having
opened in February 2019, demonstrates
our commitment to increasing our
presence in new and existing markets
for our business.
An overview of the financial performance
and developments in each of our
markets is set out on pages 36 to 40.
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
Jun
2014
Dec
2014
Jun
2015
Dec
2015
Jun
2016
Dec
2016
Jun
2017
Dec
2017
Jun
2018
Dec
2018
Development
PMO
ITSM
Testing
Business Analysis
Data and Operational Analysis
Business Intelligence
Murex
Robotic Process Automation
Salesforce
Cyber Security
15
Strategic ReportGovernanceFinancial StatementsFDM Group (Holdings) plcAnnual Report and Accounts 2018 Our people –
talented, ambitious,
enthusiastic and
diverse
Buy As You Earn share plan, which gives
our employees the opportunity to become
shareholders in the Company. This is an
excellent opportunity for our employees
to share in the success of the Company
and its growth in the coming years.
Looking forward
I anticipate that 2019 will be another
year in which FDM delivers good
operational and financial performance.
We are a people business and we are
proud of the fact our business model
continues to provide an effective
platform for creating and launching
exciting careers. Rewarding our people
is important because they go the extra
mile and take pride in contributing
I would like to extend the Board’s thanks
to every FDM employee, as it is their
commitment and performance that
enables us to continue to grow the
business successfully each year, an
achievement made possible by the
strength and commitment of our
towards the Group’s success. We offer
management, recruitment, sales and
networking opportunities alongside a
training teams.
Rod Flavell
Chief Executive Officer
5 March 2019
variety of social and corporate events as
well as granting achievement awards each
month for exemplary work. Our focus is
on ensuring that our team is performing
successfully and delivering strong
results which support the continuing
growth and development of FDM.
FDM continues to champion a number
of people initiatives. It employs 280
ex-Forces personnel across the UK, USA
and Australia. In 2018 FDM USA was
recognised as a Most Valuable Employer
for Military (by RecruitMilitary.com) and
a Best for Vets Employer (by The Military
Times) for the fifth year running. The
Group also supports the advancement
of women in the IT industry through the
global “FDM Women in IT” initiative, with
30% of the workforce now female. We
were delighted to show a median pay
gap of 0.0% for the second consecutive
year when we published our UK Gender
Pay Gap Report in 2018.
We continue to seek ways to retain and
develop our best people. A number of
our employees were rewarded for their
hard work and commitment to the
Company when the first tranche of
share options under the FDM Group
Performance Share Plan 2014 vested
and became exercisable. Further awards
were made under the Performance
Share Plan during 2018. At the beginning
of 2019 we launched a new all employee
Board changes
Ivan Martin has steered FDM Group
through its first five years as a plc, a
period which has seen significant
change and consistently strong
performance, which included the
Company’s promotion to the FTSE 250
in June 2017. During 12 years as
Chairman of the Board of FDM, Ivan has
provided wisdom and leadership to his
colleagues on the Board, and
commitment to the Group. On behalf of
the Board I thank Ivan for his service
and dedication, and we wish him all the
best for the future after he retires from
the Board on 5 March 2019.
David Lister is already a valued
colleague who has made a significant
contribution to the work of the Board as
a Non-Executive Director over the last
three years. His board experience in
such a wide range of business sectors
will be invaluable to the Board. I look
forward to working with David even
more closely in his new role as
Chairman as we continue to create and
inspire exciting careers that shape our
digital future.
16
FDM Group (Holdings) plcAnnual Report and Accounts 2018 During the year
we worked with 77 new
clients of which 71% were outside
the financial services sector
17
Strategic ReportGovernanceFinancial StatementsFDM Group (Holdings) plcAnnual Report and Accounts 2018 Corporate
Responsibility
Acting responsibly
Diversity and inclusion
We have long recognised that our
FDM has always been a proactive and enthusiastic promoter of diversity, social
reputation is one of the key
mobility and inclusion within its workforce. We value the fact that our colleagues
considerations for our clients when they
come from a wide range of backgrounds and we aim to reflect the diversity of
entrust our Mounties to work at the
education, culture, age, ethnicity, gender and disability which is found in the
heart of their most important projects.
communities where we operate. By ensuring a diverse and inclusive workforce, we
We have gained this reputation by not
broaden the range of skills, expertise and perspectives contributing to the success of
only delivering Mounties of a
our business, enhancing innovation and growth and making our business more
consistently high calibre, but also by
robust and sustainable. We have been a signatory to the United Nations Women’s
behaving responsibly. Good business
Empowerment Principles (UNWEP) since 2013 and the annual FDM Everywoman in
and a culture of responsible behaviour
Technology Awards, recognising and celebrating the achievements of women in the
are inseparable.
IT industry, is now moving into its sixth successful year. By encouraging and
supporting women in the industry we aim to create a more gender-balanced
We work hard to nurture relationships
workforce for FDM and our clients.
with our clients, to become their partner
and create solutions which will help
them to fulfil their business ambitions.
We listen to them carefully, not only
focussing on their current needs, but
also anticipating their future
requirements to ensure that we
continue to offer Mounties with skills at
the leading edge of what they expect.
In this year’s Hampton-Alexander Review report, we were placed first in the
technology sector (FTSE 250 rankings for Women on Boards and in Leadership). We
track our demographic data regularly to make sure it is up to date, and are
transparent with our staff about progress towards diversity targets.
• 30% of our worldwide employees are female;
• 38% of our 2018 UK graduate intake identify as BAME1; and
• 3% of our 2018 UK graduate intake consider themselves to have a disability.
We share their goals, because we
We continue to gather numerous awards in this area, including the following in 2018:
understand that the success of our
• Computing Women in IT Excellence Awards – Diversity Employer of the Year
clients and our Mounties is what drives
• Working Mums Top Employer Awards – Career Progression and Overall Top
our own success. We take the same
Employer Award
approach with our other stakeholders in
• Mogul – Top 1000 Companies Worldwide for Millennial Women
the communities where we operate,
• Information Age Women in IT Awards – Employer Of The Year
recognising the positive impact our
business can have on them, and we
Our UK median gender pay gap reported in 2018 was 0.0%, and our mean gender
know that our shareholders and
pay gap for the same period was 5.7%. These figures are significantly below average
potential investors are increasingly
for the UK, but we recognise that we have more work to do. The Board has therefore
interested to hear about this approach
adopted a formal Board diversity policy which is included on page 65. We aim to
and the activities which arise from it.
further develop our succession planning and talent management programmes to
include initiatives that encourage the development of a diverse range of high-calibre
Our Corporate Responsibility strategy is
employees. By further enhancing the level of interaction between Board members
closely aligned with our business
(particularly Non-Executive Directors) and our senior managers, enabling them to
strategy, and by continuing to develop
gain more exposure to, and understanding of, the Board’s work, we hope to create a
and integrate those strategies further
pipeline of talented individuals with a diversity of backgrounds and experience, who
we will underpin the long-term
may in the future aspire to a Board position.
sustainable success of FDM, delivering
value for our investors and enhancing
the impact which we have on other
stakeholders.
18
FDM Group (Holdings) plcAnnual Report and Accounts 2018 Driving diversity and inclusion
in the workplace
30%
of our worldwide
employees are female
38%
of our UK graduate intake
identify as BAME1
3%
of our UK graduate intake
consider themselves to have
a disability
Mogul – Top 1000 Companies Worldwide
for Millennial Women
Computing Women in IT Excellence Awards
– Diversity Employer of the Year
Working Mums Top Employer Awards
– Career Progression and Overall Top
Employer Award
Information Age Women in IT Awards
– Employer Of The Year
1 Black, Asian or Minority Ethnic.
19
FDM Group (Holdings) plcAnnual Report and Accounts 2018 The table below shows the gender split at different levels within the Group as at 31 December 2018.
As at 31 December 2018
On the Board
Within Senior Management
All employees
Supporting social mobility
Number of males
Number of females
7
11
3,396
2
10
1,452
During 2018 we have reviewed our recruitment processes and made a number of changes to enhance diversity and social
mobility in our recruitment channels. For example:
• we aim to make our opportunities available to those who can show us that they have the aptitude to join our programme and
the attitude our clients are looking for, regardless of where they grew up or went to school;
• we use strength-based interview questions, ensuring candidates are not assessed on previous experience or social capital; and
• all of our staff involved in interviewing applicants to FDM undergo training to help eliminate any unconscious bias.
We are proud that, in 2018, 44% of UK graduate Mounties were the first in their families to go to university, whilst 89% of them
attended a state school. 81% of UK graduate Mounties given the added responsibility of being a Consultant Peer Support (of
which there are 43) are from non-Russell Group universities.
Disability
The Group gives full and fair consideration to the employment of disabled people. At the recruitment and selection stages, we
encourage candidates to disclose any reasonable adjustments they may require us to make so that we can ensure all candidates
have the same opportunities. These adjustments may include, for example, providing additional equipment, adapting our
telephone screening process or adjusting our assessment day interviews and tests to suit individual needs. In the event of
members of staff becoming disabled, every effort is made to ensure that their employment within the Group can continue either
in their current role or in a suitable alternative. The Group endeavours to make any reasonable adjustments to enable disabled
employees to fulfil the responsibilities of their job role. It is the Group’s policy to support disabled employees in all aspects of
their training, development and promotion where it benefits the employee and the Group.
We have been a member of the Business Disability Forum since 2017. The specialist advice and support which they provide
enables us to improve our understanding of how we can further enhance our accessibility to disabled employees and customers.
3% of our UK graduate intake in 2018 identified themselves as having a disability.
Our people
Our clients tell us that our Mounties are
unique and that the blend of skills,
enthusiasm, professionalism and drive to
services globally, for example, delivering
curriculum projects with first- and
second-year students to develop skills for
We are committed to maintaining a great
working environment for all our
employees, supporting them with
succeed which they embody can’t be
real life business challenges, sponsoring
continued personal and professional
found anywhere else. We therefore
student societies and university skills
development, and providing them with
recognise that the success of FDM’s
awards, promoting opportunities for
interesting and challenging work. After
business as a whole is dependent on
women in STEM subjects through
our Mounties finish their formal training
continuing to recruit people of the
bespoke workshops and organising
and are deployed at a client site, they
highest calibre into our graduate training
hackathons and other digital workshops
continue to have access to a comprehensive
programme to enable us to maintain the
to enhance students’ technical expertise
library of e-learning tools to enable them
quality of our Mounties, and we regularly
and industry experience. FDM’s work
to build their skills further and keep
review our assessment and recruitment
with our university partners was
them up to date. We also provide
techniques and processes with this in mind.
recognised when we were awarded the
additional help through our consultant
We draw candidates for graduate training
Engagement in the TARGETjobs National
from over 650 universities around the
Graduate Recruitment Awards 2018, and
AGCAS Award for Careers Service
support network, and offer mentoring
programmes to help them settle in new
roles and workplaces, and to guide and
world and consider students from all
the award for Best Collaboration
inform longer-term career decisions.
degree backgrounds. We maintain close
between a University and Employer in the
relationships with university careers
National Undergraduate Employability
Awards 2018.
20
FDM Group (Holdings) plcAnnual Report and Accounts 2018 Corporate Responsibility
We are pleased to have introduced a
and to arrange for each of our Non-
reward employees who have completed
new apprenticeship scheme in 2018
Executive Directors to attend a number
five and ten years with FDM, in order to
which has enabled a number of our staff
of them during the year. We expect that
thank them for their commitment and
to benefit from additional learning
this will enable our staff to provide
long-standing contribution to the
investment and support across several
useful feedback about our business, and
business. The CEO Award of Excellence
disciplines, including an MBA course and
to enable them to raise ideas or
is FDM’s most prestigious award,
a Leadership and Management
concerns which our Non-Executive
reserved for outstanding employees
programme.
Directors can bring back to the Board
who truly go above and beyond in
for further discussion.
contributing to the success and growth
We also continue to offer a number of
of the Company. In addition:
paid eight-week summer internships
The Board will also continue its
• During 2018 we made further awards
across several departments in our
programme of formal opportunities for
to employees under our discretionary
centres around the world. For students
the managers of our different business
Performance Share Plan (“PSP”).
registered on a four-year sandwich/
teams to attend Board meetings and
• In January 2019 we also launched a
industrial placement degree course, we
discuss the progress they are making,
new Buy As You Earn share plan which
now also offer a 12-month sandwich
and challenges faced, in their work.
is open to all our employees.
placement in our London, Leeds and
There will also be a number of informal
Glasgow centres which enables those
opportunities for senior managers and
These plans provide a longer-term
students to gain industry-relevant skills
the future leaders from amongst their
incentive to enable participants to share
by working alongside experienced
teams to meet the Non-Executive
in the success of our business and reap
professionals in one of our
Directors without the executive team
the rewards of their hard work and
departmental teams. Students taking
being present, enabling the Non-Executive
commitment to our shared goals.
part in these programmes may then
Directors to gain further insight into the
Details of the PSP are set out in note 24
represent FDM as Student Brand
culture in our business and to discuss
to the Consolidated Financial
Ambassadors at their respective
any concerns which may arise.
Statements.
universities and remain in touch with us
throughout their studies. We aim to
In addition to these more formal,
offer many of them permanent
positions on graduation.
structured, events, FDM also
communicates with employees regularly
Engaging with our clients and
shareholders
Engaging with our employees
face-to-face meetings in order to ensure
institutional investors (and prospective
via email, monthly newsletters and
We welcome visits from our clients and
they are supported, especially when
investors) at our centres and Academies.
In 2018 we carried out a project to
placed remotely on site. The FDM
In 2018 there were more than 850 visits
develop FDM’s brand and values. We
Connection Newsletter keeps
by our clients to our global Academies.
interviewed a wide range of
employees up to date with FDM news
stakeholders, including clients, but we
from around the world, ranging from
We work closely with our clients on the
focussed particularly on a global staff
important developments in our
process of interviewing and selecting
survey and in-depth interviews with our
business to congratulating individual
our trainees for deployment as
staff, Mounties and Academy trainees to
employees on noteworthy
Mounties on client projects, and this
help us identify what was important to
achievements. FDM’s Social Media Hub
enhances our understanding of the
them about FDM and to promote the
is displayed on large screens in our
skills and qualities they are looking for.
values shared by our whole
centres globally and serves as an
organisation. Our values are set out
excellent tool to keep employees
During 2018 we hosted more than 100
on page 5.
engaged as well as up to date in real
meetings with investors and potential
time. We are a young, dynamic company
investors, not only with our Executive
During the year we also continued to
that encourages employees to use social
Directors but also involving other senior
develop our Rising Stars breakfast
media professionally and this has helped
managers, to enable shareholders to
events around the world for junior
the Group raise brand awareness and
further their understanding of our work,
employees who are excelling across all
engagement around the world.
culture and activities in other areas.
departments within the business. These
events provide the opportunity to get to
We believe that it is important to
During 2019 we will be developing an
know Sheila Flavell, our Chief Operating
Officer and to brainstorm innovative
ideas for our business and to share
recent developments within their
recognise and reward the commitment
and hard work of our staff. The FDM
Consultant of the Month and FDM Stars
initiatives are designed to reward those
in-house Investor Relations function to
enhance our communication with
shareholders and to increase the
information available to them through
departments. In 2019, we propose to
that are excelling, as nominated by
channels such as our website. We
widen the range of events of this type,
customers and other employees within
expect to be able to report on progress
the business. We also recognise and
in this area in our 2019 Annual Report.
21
Strategic ReportGovernanceFinancial StatementsFDM Group (Holdings) plcAnnual Report and Accounts 2018 We understand the
importance of equipping
students with the skills to enjoy
and engage with STEM subjects
at an early age
22
FDM Group (Holdings) plcAnnual Report and Accounts 2018 Corporate Responsibility
Engaging with the community
We work with numerous charitable partners and community groups through a
combination of employee volunteering, donations, and employee time. We tailor our
community activities to reflect the needs and interests of the different communities
where we operate, prioritising programmes which can use our training expertise to
illustrate the possibilities surrounding a career in technology – particularly for
women – and maintain that each of our charitable ventures aligns with our values.
Schools Engagement Programme
We understand the importance of equipping students with the skills to enjoy and
engage with STEM subjects at an early age. We are proud to work with schools
throughout the UK to cultivate the technologists of tomorrow, supporting our
mission of creating and inspiring exciting careers that shape our digital future. We
aim to target schools in the “cold spots” of social mobility in order to play an active
role in inspiring and developing children’s interest in IT as a career path, building
employee engagement, and further demonstrating our commitment to responsible
corporate citizenship.
We deliver Careers Lab sessions in schools focussing on providing insight to young
people to equip them with the inspiration, knowledge and skills they need to
succeed. We have also partnered with The Harris Federation in and around London
to provide a tailored programme to allow children to experience the commercial
environment of FDM. We have also run a number of “World of Work” days in our UK
Academies, combining coaching on personal branding and coding with opportunities
for paid work experience.
In April 2018 we celebrated International Girls in ICT Day, a global initiative designed
to encourage girls of all ages to explore ICT fields and inspire a love for technology.
We partnered with local schools to host girls aged from 11 to 15 in our Academies in
Hong Kong, Frankfurt, London and New York running interactive Sonic Pi coding
workshops.
We also support events run by TeenTech, which helps teenagers to understand the
wide ranges of careers available in science, engineering and technology. TeenTech
enables schools and students taking part in its programmes to access resources and
support, mentoring, and innovation workshops around the country.
More than 180 students participated directly in our Schools Engagement Programme
in 2018.
Hackathons
During 2018 we also hosted non-technical hackathons bringing together a wide
range of clients, universities, charities and other diversity and inclusion teams across
all sectors, to find and share practical solutions and ideas to tackle obstacles to
enhancing diversity and inclusion. Our events in 2018 focussed on diversity, ethnicity
and neurodiversity, and we have a number of other events planned for 2019 on
subjects such as social mobility.
23
Strategic ReportGovernanceFinancial StatementsFDM Group (Holdings) plcAnnual Report and Accounts 2018 Anthony Nolan
FDM has entered into a partnership with Anthony Nolan, to
raise funds and to encourage our employees to join the
Anthony Nolan stem cell donor register. Anthony Nolan
Ex-Forces and Getting Back to
Business pathways
particularly needs young
people and donors from
Black, Asian and Minority
Ethnic backgrounds to join
the register, to offer the
best chance of a match for
people who need a stem cell
transplant. Our hugely
diverse workforce consists
We recognise that people who have served in the Armed
Forces have many transferable skills, ranging from
adaptability and maturity to responsibility and leadership,
which are crucial to a successful career in the corporate world.
We offer a dedicated ex-Forces Programme in the UK and USA
which provides training to ex-Forces personnel in relevant
commercial skills, assisting them to make a smooth transition
into the civilian workplace and leading to deployment as one
of our IT or business consultants. The Programme is run by
of more than 80 different nationalities and we aim to help in
ex-service personnel and employs ex-servicemen and women
adding much-needed diversity to the register. We provide
from all ranks and across all three services. We are proud
direct sponsorship to our employees who wish to register as
holders of a Gold Award from the UK government’s Defence
donors, as well as supporting fundraising activities and
events. The FDM University Partnerships Team has been
Employer Recognition Scheme, acknowledging our strong
commitment and drive in delivering our pledges under the
working alongside the Anthony Nolan Marrow Group to raise
Armed Forces Covenant, to which we are also a signatory. We
awareness across UK universities. During the year, our people
have also been ranked as one of the Military Times Best for
have raised thousands of pounds and our efforts have
resulted in over 60 donors joining the register.
Vets Employers in 2018.
Walking With The Wounded
Our employees (spearheaded by the Ex-Forces Team) also
work closely with Walking With The Wounded who provide
support for former members of the armed forces who are
struggling to re-integrate back into the civilian world and
sustain their independence.
Our Getting Back to Business Programme aims to address the
challenges faced by professional individuals who have taken
an extended career break and gives them the opportunity to
re-enter the workforce at a level which is appropriate to the
experience they have already gained in their earlier careers.
Returners to work are an invaluable source of talent for our
clients with skills shortages and our Programme aims to boost
that pipeline by providing participants from a diverse range of
In May 2018, 52 FDM employees raised money and took part in
social, ethnic and educational backgrounds with intensive
Walking With The Wounded’s Cumbrian Challenge, with 15
training to learn new skills, refresh existing knowledge and
FDM teams walking a range of different routes. Employees
also participated in the Walking Home for Christmas challenge
help individuals to regain the confidence to return to their
business careers. Approximately 80% of our participants on
to raise funds. In London, we welcomed Walking With The
the Programme are women, and we’re delighted that our work
Wounded representatives to our annual client event in order
in this area has helped us to win the Career Progression award
to promote their work and to encourage clients to support the
and the Overall Top Employer Award at the Working Mums Top
cause.
Employer Awards 2018.
UN Sustainable Development Goals
We recognise that the sustainability of our business has benefits not only for our investors, but for all our stakeholders, as a
result of the much broader impact which we can have on the lives of those in our stakeholder communities.
In 2016 the United Nations (“UN”) introduced 17 Sustainable Development Goals (“UNSDGs”) aimed at improving the lives of
future generations and which the UN hopes to achieve by 2030, in partnership with governments, the private sector and civil
society. In 2018 we reviewed the UNSDGs and identified the three goals which are most closely aligned to our business and
strategy. We are committed to implementing our strategy in a way which will support the achievement of these goals and will
enable us to make our own contribution to the UN’s work towards these ambitious targets.
24
FDM Group (Holdings) plcAnnual Report and Accounts 2018
Corporate Responsibility
United Nations Sustainable
Development Goals
Our contribution
Examples
8
Decent work and
economic growth
Promote sustained,
Our reputation as the
We provide our graduates, ex-Forces
inclusive and
sustainable
leader in our field is
personnel and returners to work with
dependent on the
bespoke IT and business training,
economic growth,
people we employ. In
together with invaluable industry
full and productive
all the territories
experience gained whilst deployed with
employment and
where we operate we
one of our top-quality clients.
decent work for all.
treat our employees
fairly and help them to
Our Schools Engagement Programme
launch fantastic
aims to improve the social mobility of
careers in technology.
teenagers in our local communities by
encouraging them to aim high and
aspire to exciting careers in technology
and science.
5
Gender equality
Achieve gender
Women currently
We are a signatory to the United
equality and
empower all
make up 30% of our
Nations Women’s Empowerment
global workforce and
Principles (UNWEP). Our annual FDM
women and girls.
48% of our senior
Everywoman in Technology Awards
management team.
recognise and celebrate the
We commit to
achievements of women in the IT
continue our efforts to
industry, aiming to create a more
improve gender
gender-balanced workforce for FDM
diversity in our teams
and our clients.
around the world,
• Computing Women in IT Excellence
broadening the range
Awards – Diversity Employer of the
of skills, expertise and
Year
perspectives
• Working Mums Top Employer Awards
contributing to the
– Career Progression and Overall Top
success of our
Employer Award
business, enhancing
• Mogul – Top 1000 Companies
innovation and growth
Worldwide for Millennial Women
and making our
• Information Age Women in IT Awards
business more robust
– Employer Of The Year
and sustainable.
12
Responsible
consumption and
production
Ensure sustainable
We are committed to
For the location of our new Sydney
consumption and
reducing the impact
Academy we chose the cutting-edge
production
patterns.
our operations have
sustainable facility at Barangaroo (see
on the environment by
page 29 for further information).
making our
consumption of
We have moved our on-site and hosted
energy and materials
infrastructure to a cloud-based solution
more sustainable.
which uses best-in-class datacentres to
increase energy efficiency and to
reduce our carbon footprint.
25
Strategic ReportGovernanceFinancial StatementsFDM Group (Holdings) plcAnnual Report and Accounts 2018 Human resource policies and respect for
human rights
As stated on page 18 we are committed to making FDM a great place for all our
employees to work. We have enhanced our policies on maternity, paternity,
adoption, personal and special leave, and on sickness absence, which go beyond the
minimum required by law. We are committed to fulfilling our obligations in
accordance with the relevant legislation for those of our applicants and existing
employees who have disabilities. We give equal consideration to applicants with
disabilities, and our staff who interview applicants receive training in avoiding
unconscious bias in the recruitment process. We modify equipment and working
practices for our disabled colleagues as far as possible, wherever it is practicable
and safe to do so.
We also have in place policies which prohibit discrimination and harassment in the
workplace, and we work hard to promote diversity, inclusion and social mobility.
Further information on these aspects of our work is on pages 18 and 20. We believe
that our policies taken as a whole provide an effective framework to ensure that all
our stakeholders and any other individuals with whom we interact in the course of
our work are treated with respect and dignity, and in a way which accords with the
Universal Declaration of Human Rights.
Anti-slavery and human trafficking policy
FDM is committed to ensuring that there is no modern slavery or human trafficking
in its supply chains or in any part of the business. It has considered the degree of risk
that modern slavery could arise within the organisation or in supply chains.
The nature of FDM’s business and the direct relationship it has with applicants to the
training programmes means that the risk of modern slavery in our own organisation
is low. FDM has reviewed supply chains and taken a number of steps to address the
potential risks of modern slavery and human trafficking.
The Group has put in place an Anti-Slavery and Human Trafficking policy to assist it
in mitigating this risk, and continues to implement a process of due diligence on key
suppliers to ensure compliance with our policy and our obligations under the
Modern Slavery Act 2015. There is a pre-contract due diligence process, used with
new suppliers to ensure that they confirm their commitment to comply with our
policies and values, or that they have in place appropriate equivalent policies of their
own. FDM has also developed a set of standard contractual clauses for inclusion in
supplier contracts which reinforces this approach. The Group aims to promote a
high level of understanding of the risks of modern slavery and familiarises all staff
with these policies on induction. Additional training may be provided to key staff
members where appropriate. The effectiveness of these steps is monitored annually
by the Board.
26
FDM Group (Holdings) plcAnnual Report and Accounts 2018 Corporate Responsibility
We recognise
that people who
have served in the Armed
Forces have many transferable skills,
ranging from adaptability and maturity to
responsibility and leadership
27
Strategic ReportGovernanceFinancial StatementsFDM Group (Holdings) plcAnnual Report and Accounts 2018 Environmental policies
2018 Highlights
We expanded our scope of greenhouse
Our emissions intensity ratio has
New lease signed within carbon neutral
gas reporting in partnership with
reduced by 4%
Barangaroo development in
Carbon Smart
Sydney, Australia
Energy efficiency improvements from
New IT disposal policy in place to reduce
move to Cloud-based IT platforms
environmental impact from waste
Ensuring best practice environmental disclosure
As an IT-focussed global professional services provider, we recognise the importance of quality data management. In 2018 FDM
partnered with Carbon Smart, a leading provider of sustainability data services, to ensure that we continue to follow best
practice in the assessment and reporting of our environmental performance. Our engagement with Carbon Smart has enabled
us to expand the scope of our emissions reporting, providing greater transparency to stakeholders and allowing us to further
identify opportunities to improve FDM’s environmental performance.
As the Group aims to increase its presence in new markets, in line with our wider business strategy, the environmental impacts
associated with our pop-up centres can no longer be considered negligible. We have therefore reported emissions associated
with our pop-up centres for the first time. We have also increased the breadth of our reporting through the publication of direct
(Scope 1) emissions.
FDM’s 2018 emissions intensity (tCO2e/employee) has reduced by 4% relative to the previous financial year’s restated intensity
figure. This reduction is a result of several environmental initiatives across FDM’s global operations.
28
FDM Group (Holdings) plcAnnual Report and Accounts 2018 Corporate Responsibility
Expanding our global presence in a sustainable manner
FDM is committed to growing our business whilst reducing our impact on the environment.
At the end of 2018, we signed a lease for our new Australian Academy at Barangaroo, on Sydney’s western waterfront.
Barangaroo is one of only 18 projects around the world chosen to participate in the C40 Climate Positive Development
Programme, which is focussed on tackling climate change through urban renewal. When completed, Barangaroo aims to be
carbon neutral. This will be achieved through the reduction and offsetting of all energy used on the site; the recycling and
exporting of more water than the amount of drinking water imported, and by achieving ‘zero waste’.
In addition, FDM adopted a new IT disposal policy in 2018, aimed at reducing the impact of its IT waste on the environment. This
policy focusses on the efficient use of charitable donations and environmentally-friendly disposal of redundant equipment.
We also completed a project to move our IT infrastructure from on-site and datacentre hosting into the Microsoft Cloud. In
addition to the benefits this brings in relation to security and resilience, we also expect to see significant gains in energy
efficiency and reductions in carbon emissions. These benefits result from our supplier’s investment in best-in-class datacentres
and cloud services, using renewable energy and realising efficiencies in infrastructure, operations and equipment.
Greenhouse gas emissions
FDM complies with the greenhouse gas (“GHG”) emissions reporting requirements of The Companies Act 2006 (Strategic and
Directors’ Reports) Regulations 2016. The Company reports all material GHG emissions, wherever possible using tonnes of
CO2-equivalent (tCO2e) as the unit, to account for all GHGs which are attributable to human activity, as defined in section 92 of
the Climate Change Act 2008(a). Emissions data is reported for the Group’s worldwide operations. The methodology used to
compile this data is in accordance with DEFRA’s “Environmental Reporting Guidelines: Including mandatory greenhouse gas
emissions reporting guidance (June 2013)”.
Using a financial control approach, calculated GHG emissions arising from business activities in the reporting year to
31 December 2018 are shown in the table below. The increase in our absolute emissions in 2018 has been driven by a 16%
increase in emissions associated with air travel, as we expand our global presence.
Scope 1 emissions2
Natural gas
Company cars
Scope 2 emissions3
Electricity 4
Purchased steam
Scope 3 emissions5
Total emissions
Greenhouse gas emissions intensity ratio:
CO2e tonnes per employee6
Total Emissions (tCO2e)
Year ended
31 December 2018
Year ended
31 December 20171
(restated)
Year ended
31 December 2017
(as reported in 2017)
80
66
14
5955
570
25
1,663
2,338
0.51
81
72
9
562
562
–
1,415
2,058
0.53
–
–
–
562
562
–
1,594
2,156
9.27
1 2017 emissions have been restated to include Scope 1 emissions associated with natural gas and company car usage (company cars previously reported as Scope 3) and
to exclude emissions associated with travel bursaries, as these are considered to be out-of-scope in accordance with best practice reporting guidelines.
2 Scope 1 Emissions: CO2e from direct fuel combustion and company owned vehicles.
3 Scope 2 Emissions: CO2e from the purchase of electricity, heat, steam or cooling by the company for FDM’s own use. This work is partially based on the country-specific
CO2e emission factors developed by the International Energy Agency, ©OECD/ IEA 2018 but the resulting work has been prepared by Carbon Smart Limited and does
not necessarily reflect the views of the International Energy Agency.
4 Our Scope 2 electricity emissions have been calculated using location-based emissions factors and are 570 tCO2e. In line with WRI best practice, our Scope 2
market-based emissions for electricity in 2018 are 602 CO2e tonnes.
5 Scope 3 Emissions: CO2e from company activities, not owned or controlled by the company (i.e. business travel, waste & water consumption).
6 For calculation of the intensity ratio we have replaced ‘£ million’ with ‘employee’ as this is a more useful guide to the business and more reflective of FDM’s business model.
7 In 2017 we reported an intensity ratio of 9.2 CO2e tonnes per £ million of revenue. This is the equivalent of 0.56 CO2e tonnes per employee.
Non-financial performance reporting
We comply with the requirements of sections 414CA and 414CB of the Companies Act 2006. The information provided above is to
help our stakeholders understand our position on key non-financial matters, specifically: employees, social matters, respect of
human rights; environmental matters, and anti-corruption and anti-bribery matters.
29
Strategic ReportGovernanceFinancial StatementsFDM Group (Holdings) plcAnnual Report and Accounts 2018 30
FDM Group (Holdings) plcAnnual Report and Accounts 2018 New lease signed
within carbon neutral Barangaroo
development in Sydney, Australia
31
Strategic ReportGovernanceFinancial StatementsFDM Group (Holdings) plcAnnual Report and Accounts 2018 Key Performance
Indicators
Financial KPIs
Performance
Description
Link to strategy
Link to business model
Link to risk
Mountie revenue (£m)
+15%
Adjusted operating profit1 (£m)
+8%
Adjusted basic earnings per share1 (pence)
+12%
Cash flow generated from operations (£m)
-7%
Cash conversion (%)
-16%
Operational KPIs
Mounties on client sites (week 52)
+18%
Mountie utilisation rate (%)
+0%
Training completions
+33%
2018
2017
2016
2018
2017
2016
2018
2017
2016
2018
2017
2016
2018
2017
2016
2018
2017
2016
2018
2017
2016
2018
2017
2016
239
207
167
51
47
38
Significant growth in Mountie
headcount of 18% has resulted in a
15% growth in Mountie revenue
The Group delivered adjusted
operating profit growth through
increasing Mountie headcount
whilst investing in its operational
capacity
36.4
32.6
25.8
Our growth in adjusted basic
earnings per share (‘EPS’) reflects
the impact of a higher operating
profit and a lower effective tax rate
45
48
The Group closed the year
with cash balances of £33.9 million
(2017: £36.8 million)
39
93
111
111
3,747
3,170
2,705
97.3
97.3
97.4
2,155
1,626
1,807
Cash conversion is lower than 2017
due to a strong close in 2017 in terms
of billing and cash collection and
changes to working capital in 2018, in
particular to the mix of our receivables
Increase in Mountie headcount
across all regions with 77 new
clients won during 2018
Mountie utilisation rate in 2018
remains unchanged from 2017
The number of Mounties
completing training increased by
33%, resulting from the continued
investment in training
1 The adjusted operating profit is calculated before Performance Share Plan expenses (including social security costs). The adjusted basic earnings per share is calculated
before the impact of Performance Share Plan expenses (including social security costs and associated deferred tax).
32
Recruit
Train
Deploy
Recruit
Train
Deploy
Recruit
Train
Deploy
Recruit
Train
Deploy
Deploy
Deploy
Deploy
Recruit
Train
1
1
1
1
1
1
1
1
2
7
2
7
2
7
2
7
2
7
2
7
2
7
2
7
3
8
3
8
3
8
3
8
3
8
3
8
3
8
3
8
4
9
4
9
4
9
4
9
4
9
4
9
4
9
4
9
5
6
5
6
5
6
5
6
5
6
5
6
5
6
5
6
10
10
10
10
10
10
10
10
FDM Group (Holdings) plcAnnual Report and Accounts 2018 Key Performance Indicators
We focus on a number of Key Performance Indicators (“KPIs”) to identify trends in our operating and trading performance.
The Group aims to increase profitability, maintain a robust balance sheet and invest in operations and new locations to
underpin our organic growth. We continue to deliver strong margins, convert profits into operating cash flow for
investment and to provide a return to shareholders. KPI targets, used as a basis for remuneration awards, are also
included in the Remuneration Report.
The adjusted numbers in the KPI analysis remove the impact of costs associated with the Performance Share Plan, to
provide a clear understanding of the underlying trading performance.
FDM’s four key strategic objectives:
Attract, train and develop high-calibre Mounties
Invest in leading-edge training Academies
Grow and diversify our client base
Expand our geographic presence
Financial KPIs
Performance
Description
Link to strategy
Link to business model
Link to risk
Mountie revenue (£m)
+15%
Adjusted operating profit1 (£m)
+8%
Adjusted basic earnings per share1 (pence)
Cash flow generated from operations (£m)
+12%
-7%
Cash conversion (%)
-16%
Operational KPIs
+18%
Mountie utilisation rate (%)
+0%
Training completions
+33%
Mounties on client sites (week 52)
2018
2017
2016
2018
2017
2016
2018
2017
2016
2018
2017
2016
2018
2017
2016
2018
2017
2016
2018
2017
2016
2018
2017
2016
239
207
167
51
47
38
Significant growth in Mountie
headcount of 18% has resulted in a
15% growth in Mountie revenue
The Group delivered adjusted
operating profit growth through
increasing Mountie headcount
whilst investing in its operational
capacity
36.4
32.6
25.8
Our growth in adjusted basic
earnings per share (‘EPS’) reflects
the impact of a higher operating
profit and a lower effective tax rate
45
48
The Group closed the year
with cash balances of £33.9 million
(2017: £36.8 million)
39
93
111
111
3,747
3,170
2,705
97.3
97.3
97.4
2,155
1,626
1,807
Cash conversion is lower than 2017
due to a strong close in 2017 in terms
of billing and cash collection and
changes to working capital in 2018, in
particular to the mix of our receivables
Increase in Mountie headcount
across all regions with 77 new
clients won during 2018
Mountie utilisation rate in 2018
remains unchanged from 2017
The number of Mounties
completing training increased by
33%, resulting from the continued
investment in training
Deploy
Recruit
Train
Deploy
Recruit
Train
Deploy
Recruit
Train
Deploy
Recruit
Train
Deploy
Deploy
Deploy
Recruit
Train
FDM’s principal risks are detailed on pages 46 to 52.
FDM’s four key strategic objectives are explained in more detail on page 13 to 15.
The components of FDM’s business model are shown on pages 34 to 35.
1
1
1
1
1
1
1
1
2
7
2
7
2
7
2
7
2
7
2
7
2
7
2
7
3
8
3
8
3
8
3
8
3
8
3
8
3
8
3
8
4
9
4
9
4
9
4
9
4
9
4
9
4
9
4
9
5
6
10
5
6
10
5
6
10
5
6
10
5
6
10
5
6
10
5
6
10
5
6
10
33
Strategic ReportGovernanceFinancial StatementsFDM Group (Holdings) plcAnnual Report and Accounts 2018 Business
Model
What sets us apart
How our business works
Our people
• As employees of FDM, our Mounties are trained to the
latest industry standards
Global coverage
• International presence with localised support in
dedicated locations
• State-of-the-art training facilities
Track record of success
• Robust credentials and 27 years of operational success
• Cost effective, value added business model
Bespoke approach
• Low-risk solution as FDM retains full accountability
for Mounties
• Scalable capacity with no minimum requirement
• Ability to tailor recruitment and training
• Guaranteed resource for up to two years
• Option to transfer from FDM to permanent at the client
after two years
We recruit
We recruit the best
people amongst:
– Graduates
– Ex-Forces
– Returners to work
We deploy
We place Mounties at a
diverse range of clients;
when placed, Mounties
enter a two-year bond
period
Underpinned by
our values:
Together we
are stronger
We strive
for success
34
FDM Group (Holdings) plcAnnual Report and Accounts 2018 Business Model
The value we create
For our customers
We provide our clients with a first-class, flexible resource
at a competitive price
3,700+
Mounties on site
For our shareholders
FDM has consistently delivered value for our shareholders
15%
growth in
earnings per share
15%
growth in
annual dividends
For our employees
Ongoing professional development and support available
to our employees throughout their career at FDM
4,800
FDM employees globally
80+
nationalities
For our trainees
Our award-winning training enables our trainees to
transition into professional IT and business consultants,
with relevant technical skills and commercial experience
2,155
training completions in 2018
We train
We offer extensive
training to successful
candidates through our
award-winning training
Beyond the two
years
Following completion of
the two-year bond period
there is the option for
Mounties to transition
permanently with clients
or embark on a new
placement with FDM
Committed
to our clients
We say it
how it is
We make
it happen
35
Strategic ReportGovernanceFinancial StatementsFDM Group (Holdings) plcAnnual Report and Accounts 2018 Our Markets
UK and Ireland
Mountie revenue
+18%
UK and Ireland
2018
2017
Mountie revenue
£126.1m £106.7m
Adjusted operating profit1
£36.7m
£31.5m
Mountie numbers
Training completions
2,004
1,744
1,057
839
+3%
EMEA
Mountie revenue
EMEA
2018
2017
Mountie revenue
£13.5m
£13.1m
Adjusted operating profit1
£1.4m
£0.9m
Mountie numbers
Training completions
162
104
155
98
1 The adjusted operating profit/ (loss) is calculated before Performance Share Plan expenses (including social security costs).
36
FDM Group (Holdings) plcAnnual Report and Accounts 2018 Our Markets
North America
Mountie revenue
+10%
North America
2018
2017
Mountie revenue
£81.4m
£73.8m
Adjusted operating profit1
£13.6m
£15.3m
Mountie numbers
Training completions
1,196
825
965
534
+31%
APAC
Mountie revenue
APAC
2018
2017
Mountie revenue
£18.0m
£13.7m
Adjusted operating loss1
£(0.4)m
£(0.3)m
Mountie numbers
Training completions
385
169
306
155
Permanent Academy
FDM centre
37
Strategic ReportGovernanceFinancial StatementsFDM Group (Holdings) plcAnnual Report and Accounts 2018 The number of
Getting Back to Business
Mounties deployed on client sites
at week 52 grew by 95%
38
FDM Group (Holdings) plcAnnual Report and Accounts 2018 Our Markets
UK and Ireland
We closed the year with 2,004 Mounties placed on client sites, an increase
of 15% on last year (1,744). Adjusted operating profit1 increased by 17% to
£36.7 million (2017: £31.5 million), and the UK and Ireland gained 47 new
clients, 85% of which were from outside the financial services and banking
sector. We experienced a strong level of demand in 2018 which we see
continuing into 2019. There has also been good growth in government work,
with headcount up 24%, and sector diversification, with expansion of our
clients in the energy and resources sector.
We operated temporary training centres in Birmingham and Cardiff during
2018, allowing us to meet and generate client demand and tap into the local
graduate market. At week 52, 57% of UK placements were based outside of
London (2017: 55%). 1,057 Mounties completed their training (2017: 839).
The number of ex-Forces Mounties placed with clients stayed near constant at
236 (2017: 239). FDM holds the MoD’s prestigious Employer Recognition
Scheme Gold Award, for “Outstanding support for those who serve and have
served”. The number of Getting Back to Business Mounties deployed on client
sites at week 52 grew by 95% to 86 (2017: 44). There were 11 Getting Back to
Business courses delivered across our London, Glasgow and Leeds Academies.
As part of our planned reduction, and reflecting the fulfilment of specific
customer needs in 2017, contractor revenue decreased by 80% on the prior
year. The UK government announced in its October 2018 Budget that there
would be further consultation in 2019 on the treatment of off-payroll workers;
we see this as a potential opportunity for our clients to further benefit from
our Mountie model.
1 The adjusted operating profit/ (loss) is calculated before Performance Share Plan expenses (including
social security costs).
39
Strategic ReportGovernanceFinancial StatementsFDM Group (Holdings) plcAnnual Report and Accounts 2018 North America
North America Mountie revenue grew 10%, with 16 new clients won in the year.
Adjusted operating profit1 decreased by 11% to £13.6 million (2017: £15.3 million), as
a result of increased investment in training. Mounties on site increased by 24% to
1,196 at week 52 compared with 965 at 2017. There was very strong demand in
Canada, which meant that we brought forward our expansion plans and near
doubled the training capacity of our Toronto Academy from 74 to 145 seats, by
adding six new classrooms. The region added 163 heads in the second half of 2018,
compared with 68 heads in the first half and 73 heads in the second half of 2017.
FDM was recognised as the Best Place to Work at the North America Best in Biz
Awards 2018.
We have established a presence in Austin and Charlotte; where we now have over
70 Mounties placed with clients at year end. As in other regions we use temporary
pop-ups to meet specific client demand, and we operated from St. Louis in the year
and continue to be in Montreal.
EMEA (Europe, Middle East and Africa,
excluding UK and Ireland)
Mountie revenue from our EMEA business grew by 3% to £13.5 million (2017: £13.1 million).
Adjusted operating profit1 was 56% higher at £1.4 million (2017: £0.9 million), the
2017 adjusted operating profit having been impacted by our investment in the
Frankfurt Academy. Mounties on client sites increased to 162 at week 52 compared
with 155 at 2017.
We have restructured our management team in Germany where we are well placed
to meet future demand. Luxembourg is proving to be a successful base with a mix of
demand from existing international and new local clients. There has been growth in
South Africa, although from a small base. Towards the end of the year we began
running training in the Netherlands to meet specific client demand, which we expect
to continue into 2019.
APAC (Asia Pacific)
APAC Mountie revenue increased by 31% over 2017, to £18.0 million (2017: £13.7 million),
with 385 Mounties placed on client site at week 52 (2017: 306). We gained nine
new customers.
The adjusted operating loss1 increased from £0.3 million in 2017 to £0.4 million in
2018, as result of the higher investment costs associated with the development of
our Australian operations. Australian headcount more than doubled in 2018. At the
end of 2018 we signed a ten-year lease for our new Sydney Academy, part of the high
profile Barangaroo urban development project (see page 29 for more information on
its environmental sustainability credentials). This new state-of-the-art Academy
became operational in February 2019 and will provide us with our first permanent
centre in Australia with six classrooms. We have also taken on new temporary space
in Shanghai to provide local training.
1 The adjusted operating profit/ (loss) is calculated before Performance Share Plan expenses
(including social security costs).
40
FDM Group (Holdings) plcAnnual Report and Accounts 2018 FDM was recognised
as ‘Best Place to Work’ at the North
America Best in Biz Awards 2018
41
Strategic ReportGovernanceFinancial StatementsFDM Group (Holdings) plcAnnual Report and Accounts 2018 Financial Review
Adjusted
operating profit
+8%
Adjusted basic EPS
+12%
Mike McLaren
Chief Financial Officer
2018 was a year of strong financial performance
and continued growth as we delivered 5% growth in revenue
to £244.9 million (2017: £233.6 million) and an 8% increase in
adjusted operating profit1 to £51.3 million (2017: £47.3 million), with
adjusted basic earnings per share1 up 12%, to 36.4 pence (2017: 32.6 pence).
We are well-positioned for future growth with a healthy balance sheet
and a proven business model.
FDM Group (Holdings) plcAnnual Report and Accounts 2018 Financial Review
Summary income statement
Revenue
Mountie revenue
Contractor revenue
Adjusted operating profit1
Adjusted profit before tax1
Profit before tax
Adjusted basic EPS1
Basic EPS
Overview
Year ending
31 December 2018
Year ending
31 December 2017
£244.9m
£239.0m
£5.9m
£51.3m
£51.3m
£48.3m
£233.6m
£207.3m
£26.3m
£47.3m
£47.2m
£43.7m
% change
+5%
+15%
-78%
+8%
+9%
+11%
Pence per share
Pence per share
% change
36.4
34.3
32.6
29.8
+12%
+15%
Mountie revenue increased by 15% to £239.0 million (2017: £207.3 million), a 17% increase at constant currencies.
Contractor revenue decreased by 78% to £5.9 million (2017: £26.3 million), the result of meeting specific customer needs
during the first three quarters of 2017, as we continue to focus on our higher-margin Mountie business. Reflecting this mix
of revenues, gross margin was higher at 48.6% (2017: 44.6%). The Group’s strategy remains focussed on growing Mountie
numbers and revenues whilst contractor revenues remain ancillary to the Group and will continue, over the longer term,
in managed decline.
An analysis of Mountie revenue and headcount by region is set out in the table below:
UK and Ireland
North America
EMEA
APAC
2018
Mountie
revenue
£m
126.1
81.4
13.5
18.0
239.0
2017
Mountie
revenue
£m
2018
Mounties
assigned to client site
at week 522
2017
Mountie
assigned to client site
at week 522
106.7
73.8
13.1
13.7
207.3
2,004
1,196
162
385
3,747
1,744
965
155
306
3,170
The Group has used cash generated from operations to continue significant investment in people and infrastructure, thus
ensuring we have a firm foundation in place to deliver on our future growth opportunities and aspirations and our strategic
objectives. Overheads have increased to £70.7 million (2017: £60.5 million), reflecting the Group’s investment in its management,
support, recruitment, sales and training teams during the year with average headcount in these areas of the business
increasing to 561 in 2018 compared with 447 in 2017. Adjusted operating margin in 2018 was 20.9%, up slightly from the
previous year (2017: 20.2%).
Brexit has created some uncertainty in the economy and it is difficult to predict the medium to long term potential impact
on the Group. FDM has a global footprint and is diversified from a geographic perspective as it operates from well-
established, self-contained operating units. Although the risks associated with the uncertainty in the UK and the potential
impact across Europe remain, no material negative impact on trading has been noted to date.
Adjusting items
The Group presents adjusted results, in addition to the statutory results, as the Directors consider that they provide a
useful indication of underlying performance. The adjusted results are stated before Performance Share Plan expenses
including associated taxes. The Performance Share Plan expenses including social security costs were £3.0 million in 2018
(2017: £3.6 million). Details of the Performance Share Plan are set out in note 24 to the Consolidated Financial Statements.
The Directors believe that excluding these costs provides a more meaningful comparison of performance and cash generation.
1 The adjusted operating profit and adjusted profit before tax are calculated before Performance Share Plan expenses (including social security costs). The adjusted
basic earnings per share is calculated before the impact of Performance Share Plan expenses (including social security costs and associated deferred tax).
2 Week 52 in 2018 commenced on 17 December 2018 (2017: week 52 commenced on 18 December 2017).
43
Strategic ReportGovernanceFinancial StatementsFDM Group (Holdings) plcAnnual Report and Accounts 2018 Net finance income
As the Group has no borrowings,
finance costs are minimal. The net credit
for the year comprises £140,000 (2017:
£29,000) of finance income and a
finance expense of £94,000 (2017:
£130,000) representing non-utilisation
charges on the undrawn element of the
Group’s revolving credit facility.
reviews the Group’s dividend policy on a
regular basis and is confident that there
are currently no significant constraints
which would impact this policy. The
Group is debt free, has no significant
capital commitments (its properties are
all leasehold) and has sufficient
distributable reserves and cash balances
to continue to apply this policy. As at
31 December 2018, the Company had
distributable reserves of £38.3 million.
Taxation
The Group’s total tax charge for the year
was £11.3 million, equivalent to an
effective tax rate of 23.3%, on profit
before tax of £48.3 million (2017:
Cash flow and
net funds
At the end of the year, the Group had
cash balances of £33.9 million (2017:
effective tax rate of 26.7% based on a
£36.8 million). Net cash flow from
tax charge of £11.6 million and a profit
operating activities decreased from
before tax of £43.7 million). The
effective tax rate in 2018 is higher than
the underlying UK tax rate of 19%
primarily due to Group profits earned in
higher tax jurisdictions. The drop in
effective rate in 2018 is attributable to
changes in the US federal tax rate.
Earnings per share
The basic earnings per share increased in
the year to 34.3 pence (2017: 29.8 pence),
whilst adjusted basic earnings per share
was 36.4 pence (2017: 32.6 pence).
Diluted earnings per share was 33.8
pence (2017: 29.4 pence).
Dividends
£35.0 million in 2017 to £33.7 million in
2018. Dividends paid in the year totalled
£30.7 million (2017: £24.0 million). Net
capital expenditure was £2.7 million
(2017: £1.4 million) and tax paid was
£11.4 million (2017: £13.3 million).
During the year, the Group, via an
employee benefit trust, purchased
shares sold by option holders upon the
exercise of options under the FDM
Performance Share Plan for a net cash
cost of £3.7 million (2017: £nil).
Cash conversion remains good at 93%.
The decrease from 2017 is primarily due
to a very strong end to 2017 in terms of
billing and cash collection and also
changes to working capital in 2018, in
particular a change to the mix of our
receivables as we have seen sustained
Subject to shareholders’ approval of the
demand from clients with lengthier
final dividend of 15.5 pence per share,
payment cycles. The planned decrease
the Group’s total dividend for the year
will be 30.0 pence per share (2017: 26.0
pence per share). The total ordinary
in our contractor business, which is
relatively less working capital intensive,
has also had a minor impact in our cash
dividends of 30.0 pence per share will
conversion rate compared to 2017.
be covered 1.14 times by basic earnings
per share (2017: 1.15 times covered).
The Group has adopted a progressive
dividend policy. The aim of this policy is
to steadily increase the Group’s base
dividend, on an annual basis,
approximately in line with growth in the
Group’s earnings per share. The Board
Balance sheet
The Group has a robust balance sheet
with £33.9 million of cash and cash
equivalents and no debt.
Mike McLaren
Chief Financial Officer
5 March 2019
44
FDM Group (Holdings) plcAnnual Report and Accounts 2018 The Group has used
cash generated from operations
to continue significant investment
in people and infrastructure
45
Strategic ReportGovernanceFinancial StatementsFDM Group (Holdings) plcAnnual Report and Accounts 2018 Risk Management
Effective risk management is critical to the delivery of the Group’s strategic objectives.
Approach to risk
The Board has overall responsibility for
ensuring risk is effectively managed
across the Group with a focus on
evaluating the nature and extent of the
significant risks which the Board is
willing to take in achieving its strategic
objectives – its ‘risk appetite’. The Board
maintains direct control over the approach
to risk management and the procedures
for the identification, assessment,
management, mitigation and reporting
of risks. The Audit Committee takes
responsibility for overseeing the
effectiveness of sound risk management
and internal control systems.
Principal risks
The principal risks faced by the Group,
their current status and how the Group
mitigates these risks are set out on
pages 48 to 52. The status of each of the
Group’s principal risks is considered
unchanged from the prior year, with the
exception of ‘the ability to upscale as a
result of not securing sites’, which is no
longer considered to be a principal risk.
The Group’s proven track record of
securing new sites, together with its
ability to operate effectively on a short
term basis from pop-ups has resulted in
the Board downgrading this risk. The
alignment to strategic objectives as set
out on pages 48 to 52 indicates those
aspects of the business strategy that
would be impacted by the risk, were
it to materialise.
Identifying and
monitoring key risks
The Board uses the risk register as its
principal tool for monitoring and
reporting risk. The preparation of the
register is led by the Chief Financial
Officer, supported by the senior
management team and it details the
Group’s risks, the impact of each risk,
the likelihood of that risk occurring and
the strength of the mitigating controls in
place and how these are evidenced.
Input is obtained from all areas of the
business, including support functions,
as appropriate. The Board formally
reviews the risk register at the half year
and at the year-end. An Internal Audit
review of the Group’s risk management
processes carried out in 2017 concluded
that the approach is appropriate given
the current scale and complexity of
the business.
The current risk register includes 26
risks categorised between strategic,
operational, compliance and financial
risks, of which ten are considered to be
the Group’s principal risks.
46
FDM Group (Holdings) plcAnnual Report and Accounts 2018 Risk Management
Key risks facing the Group
1
2
3
4
5
6
7
8
9
Changes in the macro-economic environment
Concentration exposure in the financial services sector
Balancing supply and demand –
insufficient Mountie resource
Balancing supply and demand –
excess Mountie resource
Recruitment and development of
highly skilled Mounties
Ability of business to effectively upscale – people
Development of new service offerings
Business interruption – caused by successful
cyber attack or natural disaster
Reputation
10
International regulatory non-compliance
h
g
H
i
t
c
a
p
m
I
w
o
L
5
2
8
9
6
1
3
4
7
10
Unlikely
Likelihood
Almost certain
Impact of Brexit on the Group
Should the UK leave the European Union, either at the end of March 2019 or otherwise in the near term, we believe that our
business model is resilient against many of the threats and uncertainties which are commonly perceived to arise from Brexit.
We have a diversified global geographical footprint and our businesses in each of our territories (including the UK and other EU
countries) are self-sufficient and well-established. They have their own local management teams, and recruit Mounties largely
from within the territories in which they operate. We are not reliant on moving employees to or from the EU and do not expect to
be significantly impacted by any changes to the arrangements for the free movement of workers between the EU and the UK.
The Board recognises that some of FDM’s clients, and the economic conditions in the UK and EU, could be adversely impacted by
the effects of Brexit, which could affect the spending decisions of some clients. Whilst certain scenarios are outside of the
Group’s control, we believe that FDM’s business model is flexible, and the agile resource represented by our Mounties can be
attractive to clients during times of economic or political uncertainty, which could potentially result in an increased demand for
our services. These factors, together with FDM’s strong cash and financial position, give the Board confidence that FDM can
respond appropriately to ameliorate the effect of adverse conditions which may follow Brexit.
FDM Group (Holdings) plc
Annual Report and Accounts 2018
47
Strategic ReportGovernanceFinancial Statements Strategic risks
Risk and impact
Mitigation
Movement in the year
1. Changes in the macro-economic
environment
No change
A global downturn or a downturn in
Whilst external factors such as
The Board’s assessment of this risk is
the territories in which FDM operates,
macro-economic risks are outside of
unchanged in the year, however the
principally the UK and North America,
the Group’s control, the Group has
Board is of the view that the economic
could curtail demand significantly and
effective measures in place to respond
environment is still a key risk to the
the ability of the Group to deploy its
to changes, including robust planning,
Group. There has been some political
Mountie resource, resulting in: an
budgeting and forecasting and
instability in the UK in 2018 as a result
adverse impact on revenue and
resource allocation procedures.
of the uncertainty surrounding the
operating profit; shrinking customer
nature of the Brexit withdrawal
base; negative impact on share price.
The flexible nature of the Group’s
agreement. As noted, macro-economic
Risk owner: Chief Financial Officer
Alignment to Strategic Objectives:
2. Concentration exposure in the
financial services sector
business model enables it to flex
risks are outside of the Group’s control,
resource availability thereby enabling
but the Group will continue to focus on
it to manage its cost base.
ensuring it has effective measures in
place to identify and react quickly to
Notwithstanding the impact of risk 2
changes in macro-economic conditions.
below, the Group is focused on
The Group’s current financial position
diversifying its customer base both by
sector and by geography.
is good, with a strong balance sheet
and significant cash balances.
No change
The majority of the Group’s revenue is
As above, the Group is focused on
The proportion of the Group’s revenue
generated from within the financial
growing its customer base both by
generated from the financial services
services sector. A crisis in the financial
sector and by geography as well as
sector has decreased marginally in
services sector could reduce revenue
diversifying the range of services it
2018. The decrease has not resulted in
significantly and have a negative
offers to existing and potential
a change to the overall assessment.
impact on the majority of the Group’s
financial services clients.
The Board continues to focus on this
KPIs.
Risk owner:
Chief Commercial Officer
Alignment to Strategic Objectives:
risk and the Group has broadened the
spread of its service offerings within
its financial services clients to cover
operational, compliance and IT
services, in addition to increasing its
presence in other sectors.
FDM’s four key strategic objectives:
Attract, train and develop high-calibre Mounties
Invest in leading-edge training Academies
Grow and diversify our client base
Expand our geographic presence
FDM’s four key strategic objectives are explained in more detail on pages 13 to 15.
48
FDM Group (Holdings) plcAnnual Report and Accounts 2018 Risk Management
Risk and impact
Mitigation
Movement in the year
3. Balancing supply and demand
– insufficient Mountie resource
No change
An inability to meet a rapid increase in
The recruitment team maintains
There has been a continued focus by
demand due to insufficient Mountie
strong links to universities and other
management during the year to
resource and an inability to recruit in
recruitment channels.
a timely manner would result in lost
ensure the most efficient utilisation
and deployment of Mounties. A
revenue, eroded customer confidence
An effective social media recruitment
Mountie utilisation rate of 97% was
and an adverse reputational impact.
strategy is in place to maximise
achieved in the year.
applications.
The Group’s reputation amongst
Resource management meetings occur
graduates, together with the career
weekly to ensure supply and demand
programmes it offers, means it is well
issues are identified and resolved.
placed to source sufficient applicants
for its projected growth for the short
The management team is incentivised
to medium term. The Group received a
to maximise utilisation and increase
record number of online applications
flow through of trainees within the
in the year.
Academies.
The Group has the option of using
The ex-Forces and Getting Back to
contractors should a significant
Business programmes, whilst
increase in demand occur which
relatively small in terms of total
cannot be fulfilled by Mountie
headcount, are growing and will help
resource availability.
spread the Group’s access to a wider
talent pool.
No change
Risk owner:
Chief Commercial Officer
Alignment to Strategic Objectives:
4. Balancing supply and demand
– excess Mountie resource
An inability to utilise or redeploy
The flexibility of the Group’s business
The growth and diversification in the
Mounties in the event of a sudden
model is a key mitigation to this risk.
Group’s client base by both number of
decrease in demand would result in a
The Group is able to flex the number
clients and geographical spread
reduction in margin and would
of Mounties it recruits at short notice,
mitigate the risk of the Group not
demotivate Mounties.
thereby responding quickly to a
being able to fully utilise its Mountie
sudden downturn.
resource.
Risk owner:
Chief Commercial Officer
Alignment to Strategic Objectives:
Resource management meetings occur
weekly to ensure supply and demand
issues are identified and resolved in a
timely manner.
49
Strategic ReportGovernanceFinancial StatementsFDM Group (Holdings) plcAnnual Report and Accounts 2018 Operational risks
Risk and impact
Mitigation
Movement in the year
5. Recruitment and development of
highly skilled Mounties
No change
Mounties are the Group’s core asset. A
The Group continually reviews and
With the need to recruit significant
failure to deliver high-quality
benchmarks the remuneration
numbers of Mounties to fulfil forecast
Mounties into its customer base could
packages and incentives it offers to
growth levels, this is perceived to be
result in a loss of customers and
attract graduates. An increase to the
one of the Group’s main risks.
damage to the Group’s reputation.
UK Mounties’ remuneration package
took effect from 1 April 2018.
A combination of the following factors
indicates this risk is being managed
Strong relationships exist with
effectively:
universities and other recruitment
• recruitment levels of Mounties are
channels including ex-Forces
continually being monitored and
personnel. The UK’s Getting Back to
reviewed by the Board;
Business programme is growing.
• there is a broader base of talent
A tailored development programme is
ex-Forces and Getting Back to
in place for Mounties, covering training
Business programmes; and
and development opportunities,
• challenging recruitment targets are
including opportunities after the bond
being met.
from which to recruit through the
period.
The Group actively promotes Women
and use of technology to help with the
in IT initiatives to attract, develop and
recruitment process; for example, a
retain Mountie talent.
new applicant tracking system was
2018 has seen further development
introduced from May 2018.
The Group is focused on promoting its
reputation in the marketplace as a
leading employer.
Risk owner: Chief Executive Officer
Alignment to Strategic Objectives:
6. Ability of business to effectively
upscale – people
No change
The inability of the business to
The Group’s remuneration policy
The Group’s remuneration packages
effectively upscale as a result of not
states that the overall remuneration
remain competitive and, for senior
being able to recruit and retain key
package should be sufficiently
employees, include long-term share
staff with appropriate skills.
competitive to attract, retain and
options to encourage retention.
motivate Executive Directors.
The remuneration packages of all
made from the Group’s Performance
employees are reviewed and
Share Plan, which was launched in
benchmarked regularly to ensure they
2015. The first set of options issued
During 2018, further awards were
remain competitive.
under the Plan vested at 100% in
March 2018.
Risk owner: Chief Executive Officer
Alignment to Strategic Objectives:
The annual appraisal system includes
the identification of training
requirements, which are fulfilled
within the following twelve months.
The Nomination Committee considers
succession matters as a regular
agenda item.
50
FDM Group (Holdings) plcAnnual Report and Accounts 2018 Risk Management
Risk and impact
Mitigation
Movement in the year
7. Development of new service
offerings
No change
The inability of the Group to develop
The Group employs a Chief
The Group is responsive to its
new service offerings and revenue
Information Officer (“CIO”), who is
customer needs which it identifies
streams could result in a loss of
responsible for the development of
through regular contact and feedback
customers and market share.
new service offerings.
from its clients. The Executive
FDM’s flexible training model is able to
client relationships.
Directors are actively involved in key
develop course material relevant to
customers’ needs.
FDM’s state-of-the-art training
Academies are designed to provide
quality training in a professional
environment.
The Group has a number of touch
points with customers, enabling them
to keep up to date with developments
in the marketplace and to identify
customer needs.
No change
Risk owner:
Chief Information Officer
Alignment to Strategic Objectives:
8. Business interruption – caused
by successful cyber-attack or
natural disaster
Major IT system integrity issues or
The Group’s IT Security Team has 50+
Operation of the IT environment is
data security issues, either due to
years of experience and industry
continuously monitored and staff are
internal or external factors, could
certifications and includes a CISO
regularly made aware of the risks of
result in: actual financial loss of funds;
industry-certified expert.
cyber-attacks.
potential loss of sensitive data with
risk of litigation; loss of customer
A Global Standard for Technology
confidence; and damage to
Security is in place.
reputation.
The Group’s IT security policy complies
with ISO 27001.
Staff are regularly made aware of the
risk of a cyber-attack and the
appropriate actions necessary to
mitigate the risk of this occurring.
IT policy and security matters are
regular Board and Audit Committee
agenda items.
The Group’s business continuity plan
has continued to be tested during
2018.
The design and operational
effectiveness of key IT security
controls was reviewed by the Internal
Audit team during 2018.
Risk owner:
Chief Information Officer
Alignment to Strategic Objectives:
51
Strategic ReportGovernanceFinancial StatementsFDM Group (Holdings) plcAnnual Report and Accounts 2018
Operational risks (continued)
Risk and impact
9. Reputation
Mitigation
Movement in the year
No change
Reputation is key to the Group
Robust recruitment and training
The Group continues to invest in staff
maintaining and growing its business.
procedures are in place which reduce
development, quality systems and
Poor quality service or the actions of
the risk of employing persons whose
standard processes to mitigate the risk
Mounties, staff or contractors could
actions could result in a negative
of operational failure.
have an adverse impact on the
impact on FDM’s reputation.
Group’s reputation. A failure to
The Board regularly consults with its
manage any subsequent crisis
FDM has a zero-tolerance policy with
PR advisors.
through a lack of reactive procedures
respect to any inappropriate
could also exacerbate potential
behaviour by an individual employed
During the year, our Company
damage. Any impact could be
by the Group or acting on behalf of the
Secretary was appointed as Head of
far-reaching: failure to meet financial
Group.
targets; litigation; loss of key clients;
Investor Relations to manage the
relationship with shareholders and key
and loss of key staff.
The Group focuses on strong
stakeholders of the business.
Risk owner: Chief Operating Officer
Alignment to Strategic Objectives:
relationship management and
communication with external advisors.
Compliance risk
Risk and impact
Mitigation
Movement in the year
10. International regulatory
non-compliance
No change
Failure to comply with international
The Group has robust recruitment
The Group continues to invest in
tax, legal, employment and other
procedures, which ensure the
appropriately-skilled personnel and
business regulations could result in
employment of appropriately skilled
will outsource where appropriate in
significant fines and/ or revocation of
personnel in areas where compliance
areas where compliance and expertise
business licences.
with legislation is required.
are required. A review of compliance
issues forms part of the Group’s
The Group seeks appropriate advice
Internal Audit scope.
and engages external advisors as
necessary, particularly in overseas
The Group’s existing in-house legal
locations, and actively manages those
and HR functions have been, and
relationships.
continue to be, augmented by new
hires as the Group grows, bringing in
more people with experience and
knowledge of the territories in which
the Group operates.
The Group has invested in a new
enterprise-wide HR solution and
ensures that the relevant staff
undertake training and professional
studies where required.
Risk owner: Chief Financial Officer
Alignment to Strategic Objectives:
n/a
52
FDM Group (Holdings) plcAnnual Report and Accounts 2018 Risk Management
Viability statement
The Directors have assessed the prospects of the Group in accordance with provision C.2.2 of the Code 2016.
The period selected by the Board for its assessment is three years, and was chosen for the following reasons: The core of FDM’s
business is the Mountie model. The period identified approximates to the average lifecycle of Mounties’ engagement with FDM
and therefore the viability period represents the Group’s normal investment cycle in its core asset. Further, the Group’s strategic
plan covers a period of three years and this period is also underpinned by robust financial budgets and forecasts.
In making its assessment, the Board has considered the resilience of the Group, taking into account its current position and
prospects, its cash flow requirements and other key financial assumptions over the three-year period and has sensitised certain
of those assumptions where considered appropriate. As the core of FDM’s business is the Mountie model, the sensitivity analysis
therefore included consideration of the loss of the Group’s two largest customers.
In assessing its viability, the Board has also taken into account the principal risks affecting the Group, including the impact of
Brexit, and how those risks might impact the Group’s future performance, solvency and liquidity should they occur. The
sensitivity analysis noted above, also took into account the impact of certain principal risks, including Brexit, occurring.
The Group’s financial position is strong with cash balances of £33.9 million at the end of the year and no debt.
Based on the results of this assessment, the Directors have a reasonable expectation that the Company will be able to continue
in operation and meet its liabilities as they fall due over the three-year period of their assessment.
The Strategic Report was approved by the Board on 5 March 2019 and signed on its behalf by:
Rod Flavell
Chief Executive Officer
5 March 2019
53
Strategic ReportGovernanceFinancial StatementsFDM Group (Holdings) plcAnnual Report and Accounts 2018 54
FDM Group (Holdings) plcAnnual Report and Accounts 2018 Governance
In this section:
56
Board of Directors
Corporate Governance Report
62
72
80
84
Nomination Committee Report
Remuneration Report
Audit Committee Report
102
Directors’ Report
55
Strategic ReportGovernanceFinancial StatementsFDM Group (Holdings) plcAnnual Report and Accounts 2018 Board of Directors
Member of Remuneration Committee
Chairman of Remuneration Committee
Member of the Audit Committee
Chairman of the Audit Committee
Member of Nomination Committee
Chairman of Nomination Committee
Ivan Martin
Non-Executive
Chairman
Date of Appointment
Chairman October 2006
Chairman of the Nomination Committee January 2015
Experience
Ivan became Non-Executive Chairman of Xceptor (formerly known as Web Services
Integration) in August 2016. Xceptor is a London based international software business
backed by CBPE private equity. He has also been Non-Executive Chairman of Microgen plc
since March 2016.
He was a member of Misys plc’s board and headed its banking software division until 2005.
Previously, Ivan worked at ACT Group plc and spent his earlier career at US multinational
computer business, Unisys Corporation. Between 2007 and 2013, he was Executive
Chairman of Sesame Bankhall Group.
Ivan will retire from the Board and step down as Chairman of the Board and Chairman of
the Nomination Committee on 5 March 2019.
External Appointments:
Microgen plc (Non-Executive Chairman) (appointed March 2016)
Wulstan Capital LLP (various) (Member) (various appointment dates)
Parch Estates Three LLP (Member) (appointed October 2018)
Church Topco Limited (trading as Xceptor) (Non-Executive Chairman) (appointed August 2016)
Church Bidco Limited (Chairman) (appointed August 2016)
Date of Appointment
Founded FDM in 1991
Experience
Rod is the founder and Chief Executive Officer of FDM Group.
He has been instrumental in developing the Group into an international, award-winning
employer with a prestigious client base operating in multiple industries.
Rod is a firm supporter of improving diversity in technology, with clear results achieved by
the Group through its FDM Women in Tech, Getting Back to Business, Ex-Forces and veteran
career transition initiatives. Rod was featured in the Management Today Agents of Change
Power List 2018 for his work promoting gender parity in the workplace.
Roderick (Rod) Flavell
Chief Executive Officer
External Appointments
Rod has no external appointments.
56
FDM Group (Holdings) plcAnnual Report and Accounts 2018 Sheila Flavell
Chief Operating Officer
Date of Appointment
Chief Operating Officer January 2008
Joined FDM in May 1998
Experience
With over 26 years of experience in both the public and private IT sectors internationally
Sheila is passionate about enhancing diversity in the workplace and creating exciting
careers for the next generation of digital talent.
Sheila spearheads FDM’s global Women in Tech initiative and FDM’s Getting Back to
Business Programme, aimed at providing opportunities for returners to work. In addition,
Sheila’s experience and knowledge of the sector has been crucial in driving the Group’s
global expansion programme, taking FDM into the FTSE 250 in June 2017.
Sheila has been called to advise government committees on various issues around the
digital skills gap and has received numerous awards throughout the years including a
Lifetime Achievement Award at the Scotland Women in Technology Awards 2017, Tech
Champion at the TechWomen100 Awards 2018, and being recognised as Woman of the Year
at both the Computing Women in IT Excellence Awards 2017 and the Information Age
Women in IT Awards 2018.
External Appointments:
techUK (Board member) (techUK is the operating name for Information Technology
Telecommunications and Electronics Association)
Institute of Coding Industry Advisory Board (Chair)
Date of Appointment
Chief Commercial Officer January 2008
Joined FDM 1994
Experience
Andy joined FDM in 1994 and has progressed through the Group’s sales team to become
Global Sales Director in 2007.
Andy oversees the expansion of the Group with a focus on the sales and recruitment
functions. Andy’s strategic focus is around developing new service streams in line with
client demands, as well as increasing the number of applicants for the Group’s Graduate
programme, which are both key areas to the success and growth of the Group. Andy also
played a key role in the launch and success of the UK Ex-Forces Programme.
Andrew (Andy) Brown
Chief Commercial Officer
External Appointments
Andy has no external appointments.
Date of Appointment
Chief Financial Officer April 2011
Joined FDM 2011
Experience
Mike is a Fellow of the Institute of Chartered Accountants in England and Wales.
Prior to joining FDM, Mike fulfilled the roles of Group Finance Director and Chief Operating
Officer in a premium listed business in the Software and Services sector. In addition Mike
has been an Independent Non-Executive Chairman and Non-Executive Director on the
boards of a number of other companies. Overall Mike has more than thirty years’
experience of working within the technology sector in a range of senior roles.
Michael (Mike) McLaren
Chief Financial Officer
External Appointments
Mike has no external appointments.
57
Strategic ReportGovernanceFinancial StatementsFDM Group (Holdings) plcAnnual Report and Accounts 2018 Date of Appointment
Non-Executive Director June 2014
Senior Independent Director June 2014
Chairman of the Remuneration Committee June 2014
Experience
Peter has over twenty years of experience as an investment analyst, specialising in the
Software and IT Services sector. Peter joined UBS in 2000 and led its UK small and mid-cap
research team. Between 2007 and 2011 he was Chief Operating Officer of UBS European
Equity Research. One of his responsibilities during this period was the oversight of the
graduate recruitment, training and development programmes, both for the Research
business and the Equities operation as a whole.
External Appointments:
Microgen plc (Senior Independent Director and Chairman of Remuneration Committee)
(appointed February 2012)
Keystone Law Group plc (Non-Executive Director and Chairman of Audit Committee)
(appointed October 2017)
TruFin plc (Non-Executive Director and Chairman of Remuneration Committee) (appointed
February 2018)
D4T4 Solutions plc (Non-Executive Director and Chairman of Remuneration Committee)
(appointed July 2018)
Date of Appointment
Non-Executive Director June 2014
Chairman of the Audit Committee October 2015
Experience
Robin is a member of the Institute of Chartered Accountants of Scotland.
Robin brings many years of experience as a plc director, having held a variety of financial
and general management roles in both Europe and North America, and has experience of
financial reporting, financing, transactions and risk management.
He is currently Chairman of the Audit Committee and a member of the Remuneration and
Nomination Committees at EMIS Group plc, the UK leader in connected healthcare
software, where he is also the Senior Independent Non-Executive Director. He is also a
Non-Executive Director at Alfa Financial Software Holdings plc, a leading developer of
mission-critical software for the asset finance industry.
Robin’s previous roles include Chief Financial Officer of Intec Telecom Systems plc, Chief
Financial Officer of ITNET plc, Chief Financial Officer of JBA Holdings plc, Non-Executive
Director of Phoenix IT Group plc and Non-Executive Director of Fusionex International plc.
External Appointments
Emis Group plc (Senior Independent Director & Chairman of Audit Committee) (appointed
March 2010)
Alfa Financial Software Holdings plc (Non-Executive Director) (appointed May 2017)
Peter Whiting
Non-Executive Director
Robin Taylor
Non-Executive Director
58
FDM Group (Holdings) plcAnnual Report and Accounts 2018 Board of Directors
Date of Appointment
Non-Executive Director January 2016
Experience
Michelle has more than 25 years of experience in international Telecommunications and
Technology. She is currently an area vice president for Citrix Systems after having served as
the Global Director of Cloud & Hosting Services at Vodafone. Prior to Vodafone, Michelle
worked at the European Bank for Reconstruction and Development where she managed the
Telecom, Media & Technology banking team. Michelle is a co-founder and board member of
Women and Telecoms & Technology, a UK not-for-profit organization, and is also a global
council member at Thunderbird School of Global Management in Phoenix, Arizona.
External Appointments
Citrix Area Vice President North Europe (Appointed January 2017)
Women in Telecoms and Technology Limited (Director) (Appointed May 2008)
Thunderbird School of Global Management (Director) (Appointed April 2009)
MOVE Capital (Investment Board member) (Appointed September 2017)
Date of Appointment
Non-Executive Director March 2016
Experience
David has over 39 years of experience in Operations and Technology roles across multiple
industries for international businesses such as Diageo, GlaxoSmithKline, Boots, Reuters,
Royal Bank of Scotland and National Grid. He also has experience in the Professional
Services sector where he was a management consultant at PwC. David is currently the
Non-Executive chairman of HSBC Private Bank (UK) Limited, a Non-Executive Director of
HSBC UK Bank plc and Interxion Holdings SA and is a Member of the Board of Governors
of Nuffield Health.
David will be appointed Chairman of the Board and Chairman of the Nomination
Committee with effect from 5 March 2019. He will step down as a member of the Audit
Committee and the Remuneration Committee on that date.
External Appointments
HSBC Private Bank (UK) Limited (Non-Executive Chairman) (Appointed December 2018)
HSBC UK Bank plc (Non-Executive Director) (Appointed May 2018)
Nuffield Health (Member of Board of Governors) (Appointed February 2014)
Interxion Holdings SA (Non-Executive Director) (Appointed June 2011)
Michelle Senecal
de Fonseca
Non-Executive Director
David Lister
Non-Executive Director
59
Strategic ReportGovernanceFinancial StatementsFDM Group (Holdings) plcAnnual Report and Accounts 2018 Rod was featured
in the Management Today
Agents of Change Power List 2018
for his work promoting gender
parity in the workplace
60
FDM Group (Holdings) plcAnnual Report and Accounts 2018 61
Strategic ReportGovernanceFinancial StatementsFDM Group (Holdings) plcAnnual Report and Accounts 2018 Corporate
Governance Report
Chairman’s
Governance Overview
The promotion of sound corporate
FDM is expected to comply with the
governance has always been a priority,
requirements which are set out in the
and I am sure that it will remain high on
UK Corporate Governance Code (the
On behalf of the Board I am pleased to
present the Corporate Governance Report.
During 2018 the Board commissioned
the first externally-facilitated evaluation
of its effectiveness. The findings from
the evaluation have provided us with an
the Board’s agenda after David Lister
“Code”) issued by the Financial Reporting
succeeds me as Chairman. We recognise
Council and published in April 2016. I am
that one of the key roles of the Board is
delighted to report that we are fully
to ensure that FDM’s culture and values
compliant with the requirements of the
are aligned with our strategy. An
2016 code. We are also mindful of the
effective framework of governance will
help to ensure that our culture and
values strengthen the implementation
reforms embodied in the 2018 UK
Corporate Governance Code, which
applies to FDM with effect from
1 January 2019, and we have already
excellent, independent insight as to how
of our strategy, supporting the long-
the Board operates and performs. I am
particularly pleased that the evaluation
concluded that the Board has effective
systems and procedures in place to
term sustainable success of our
made good progress towards integrating
business, delivering value for our
the new requirements into our approach,
shareholders and enhancing our
where appropriate. We will report
contribution to our other stakeholders
further on these changes next year.
meet its corporate governance
and the communities in which we
obligations and these are continually
operate.
being reviewed.
We take great care to ensure that the
content of our Annual Report is fair,
With this in mind and recognising the
balanced and understandable. A review
significant expansion which FDM has
undergone in the four years since its
by the Audit Committee is detailed on
page 77 and a formal statement from
premium listing, this year FDM
the Directors is included on page 104.
commissioned a global research
programme, interviewing a wide range
Further information on the Board’s
of internal and external stakeholders, to
primary areas of focus in 2018 is set out
refresh our mission and values, and to
on page 67. This Corporate Governance
understand how our culture has
Report aims to provide shareholders
evolved. The results of this project will
and other stakeholders with an
be an important tool for the Board as it
understanding of how we manage our
continues to develop the Group’s
Group and the framework of
strategy to establish our aspirations for
governance and control within which we
FDM in the future.
work, and I hope that you will find it
useful and informative. My Board
colleagues will look forward to meeting
some of you at our 2019 Annual General
Meeting (“AGM”) and will be available
then to answer any questions which our
shareholders may have.
We recognise that one of the key
roles of the Board is to ensure that FDM’s
culture and values are aligned with our strategy.
62
FDM Group (Holdings) plcAnnual Report and Accounts 2018 Corporate Governance Report
UK Corporate
Governance Code
FDM governance framework
(including the Committee Chairs)
Statement of Code compliance
The Board considers that the Company
complied with the Code throughout the
financial year ended 31 December 2018.
Further information on the Code can
be found at:
www.frc.org.uk/directors/corporate-
governance-and-stewardship/
uk-corporate-governance-code
The main principles of the Code
applicable to listed companies are as set
out below, and apply to the Board:
A Leadership
B Effectiveness
C Accountability
D Remuneration
E Relations with shareholders
A Leadership
FDM Group (Holdings) plc Board
Audit
Committee
Nomination
Committee
Remuneration
Committee
Robin Taylor
Ivan Martin
Peter Whiting
The Committees play a key role in
supporting the Board, and information
about the membership of each
Committee can be found in the relevant
Committee’s report. Information is
• Approving material contracts;
• Approving material capital or
operational expenditure;
• Approving Group strategy;
• Approving appointments to the
supplied to the Board in advance of
Board;
meetings and the Chairman ensures
• Determining dividend policy, as well
that all Directors are properly briefed on
as approving and recommending
The role of the FDM Board
The Board meets regularly to plan the
the matters to be discussed.
Group’s strategy and to review
The Board closely monitors the
operational and financial matters. When
management and performance of the
setting and monitoring the
Group, ensuring it operates within the
implementation of the Group’s strategy,
appropriate risk-reward culture to
dividends, as appropriate;
• Reviewing material litigation;
• Reviewing annually the effectiveness
of internal control and the nature and
extent of significant risks identified by
management and associated
the Board considers the impact that it
will have on the Group’s stakeholders,
deliver a sustainable and profitable
business. The Group has established a
mitigation strategies; and
• Approving the annual budget.
including shareholders, employees,
core set of values which were updated
customers and the wider community in
which the Group operates.
in 2018 to reflect the evolution of FDM’s
culture. Each of the Executive Board
Board decisions are generally reached
by consensus at Board meetings.
The Board approves the interim,
preliminary and annual financial
members aims to be a role-model
However, should the situation arise,
embodying these values – promoting
decisions may be taken by a majority of
them and FDM’s culture. The Board
Board members. FDM’s Articles of
statements, the annual budget and
recognises that FDM’s values and
Association provide the Chairman with a
longer-term forecasts, significant
contracts and capital investment. It also
considers the business risks faced by
the Group, ensures that appropriate
controls and other steps are in place to
culture are central to the continued
casting vote in the case of an equality of
success of the Group.
votes.
The Board has identified certain matters
on which decisions are formally
mitigate those risks, and reviews their
reserved for the Board’s approval, a
effectiveness. Where appropriate, it has
delegated certain responsibilities to the
schedule of which is available on the
Group’s website www.fdmgroup.com.
Audit Committee, Remuneration
The Board formally reviewed the scope
Committee and Nomination Committee
of these matters and updated them
(the “Committees”). The terms of
reference and composition of these
Committees are reviewed annually.
during 2018. They include the following:
• Approving financial results and other
financial, corporate and governance
matters;
63
Strategic ReportGovernanceFinancial StatementsFDM Group (Holdings) plcAnnual Report and Accounts 2018 The role of the FDM Board (continued)
Details of the number of meetings of the Board (including sub-Committees at which only certain Directors are required to
attend) and Committees and individual attendances by Directors are set out in the table below.
Number of meetings held in 2018
Ivan Martin
Rod Flavell
Sheila Flavell
Mike McLaren
Andy Brown
Peter Whiting
Robin Taylor
Michelle Senecal de Fonseca
David Lister
Board meetings
attended
Audit Committee
meetings attended
Remuneration
Committee meetings
attended
Nomination
Committee meetings
attended
10
10
10
10
10
10
10
10
9
9
4
n/a1
n/a1,2
n/a1
n/a1,2
n/a1
4
4
4
4
4
n/a1,3
n/a1,3
n/a1
n/a1
n/a1
4
4
3
3
3
3
3
n/a1
n/a1
n/a1
3
3
2
3
1 Not applicable, not a member of the Committee and not required to attend.
2 Rod Flavell and Mike McLaren attended Audit Committee meetings by invitation, not as Committee members. Rod Flavell and Mike McLaren each attended 4/4
meetings during the year.
3 Ivan Martin and Rod Flavell each attended one meeting of the Remuneration Committee during the year at the invitation of the Committee. No Director was present
during any discussion relating to his or her own remuneration.
Chairman, Chief Executive and
Senior Independent Director
The roles of the Chairman and Chief
Executive and division of responsibilities
between them are clearly defined and
agreed by the Board. Ivan Martin is
responsible for the leadership of the
Board, ensuring that it performs its role
effectively, and promoting an effective
working relationship between the
Executive and Non-Executive Directors,
as well as with FDM’s shareholders. Ivan
Martin will step down as Chairman on
5 March 2019 and will be succeeded by
David Lister.
As Chief Executive, Rod Flavell’s main
responsibility is to manage the Group’s
business and to lead the executive
management team in the
implementation of the strategies which
are adopted by the Board. The Executive
Directors under the leadership of the
Chief Executive are responsible for
managing the day-to-day activities of
the Group, communicating the Group’s
objectives to the wider management
team and ensuring that the necessary
resources are available to enable those
objectives to be achieved.
This separation of roles enhances the
independent oversight of executive
management by the Board and
more closely aligns the Board with
shareholders. It also means that no
one individual within the Group has
unfettered powers of decision making.
The Directors’ powers are set out in the
Company’s Articles of Association.
Peter Whiting is the Group’s Senior
Independent Director. In performing
this role, Peter acts as a sounding board
to provide support to the Chairman and
the Non-Executive Directors. He also
provides shareholders with a point of
contact with whom they can meet if
they have any concerns which might not
be addressed through normal channels,
for example with the Chairman or
Executive Directors. The Senior
Independent Director serves as an
important intermediary role in FDM’s
governance process. In carrying out his
role Peter ensures he maintains a
thorough understanding of the views of
the Company’s shareholders.
Role of the Non-Executive
Directors
The Group’s Non-Executive Directors
have a broad and complementary mix of
business skills, knowledge and experience
acquired across diverse business sectors
and territories. This allows them to
provide strong, independent, external
perspectives to Board discussions, which
complement the skills and experience
of the Executive Directors, facilitating a
diversity of views aired at Board meetings.
This enables robust and constructive
debate and improves the quality of the
decision-making process. At the same
time, it also reduces the likelihood of
any one perspective prevailing unduly.
A key role performed by the Non-
Executive Directors is the scrutiny of
executive management in meeting agreed
objectives and monitoring the reporting
of performance. They also constructively
challenge and help develop proposals
on strategy, and ensure that financial
controls are rigorous and that the Group
is operating within the governance and
risk framework approved by the Board.
64
FDM Group (Holdings) plcAnnual Report and Accounts 2018 Corporate Governance Report
Non-Executive Directors are appointed
for an initial minimum period of
three years. Their appointments then
continue until terminated by either the
Director or the Company giving notice
to terminate. They are all subject to
regular re-election at AGMs and their
appointments as Directors would
end if they were not re-elected by the
shareholders. The terms and conditions
of appointment of Non-Executive
Directors, including the expected time
commitment, are available for inspection
at the Company’s registered office.
The Board regularly reviews the
independence of each of the Non-
conduct themselves in Board meetings,
including how they exercise judgement
and independent thinking. Taking these
factors into account, the Board believes
that all the Non-Executive Directors
Executive Directors. When determining
continue to demonstrate their
whether a Non-Executive Director is
independence.
independent, the Board considers each
individual against the criteria set out in
the Code and also considers how they
B Effectiveness
Composition of the Board
The Board currently comprises four
Executive Directors and five Non-
Executive Directors (including the
Non-Executive Chairman). Further
biographical details about each Director,
including information on their prior
experience, are set out on pages 56 to 59.
Board diversity policy
The Board is committed to the further
The Board’s primary obligation is to
• to develop further the level,
make appointments based on objective
frequency and quality of interaction
criteria to ensure that the best
between Board members (including
individuals are appointed for every role.
Non-Executive Directors in particular)
Within this context, the Board is
and those aspiring senior managers
committed to a policy of promoting a
to enable them to gain more exposure
rounded Board which reflects a diversity
to, and understanding of, the Board’s
of all relevant personal attributes,
work; and
including skills, experience, educational
• to review this policy and report on
and professional background, gender,
progress on an annual basis.
race and age. In support of this policy,
promotion of diversity and inclusiveness
the Board intends:
Further information and statistics on
of all kinds throughout our organisation.
In 2018 we were delighted to be able to
report that our median gender pay-gap
remained at 0.0%, and our mean gender
pay-gap was 5.7%, reduced slightly from
the prior year. We have also been
pleased to participate again this year in
the Hampton-Alexander Review which
set a target for the percentage of
women on FTSE boards and leadership
teams to reach one third by 2020.
• to continue only to engage executive
gender diversity at FDM can be found
search firms who have signed up to
within the Corporate Responsibility
the Voluntary Code of Conduct for
report on page 20.
Executive Search Firms on gender
diversity and best practice;
• to require executive search firms to
Conflict of interests
Procedures are in place for the
identify and present an appropriately
disclosure by the Directors of any
diverse range of candidates for each
interest that conflicts, or may possibly
vacancy;
conflict, with the Group’s interests and
• to consider all aspects of diversity
for the appropriate authorisation to be
including gender and ethnicity when
sought if a potential conflict arises, in
reviewing the composition and
accordance with the Company’s Articles
We believe that by making the most of
our differences of approach, and using
balance of the Board as part of the
of Association.
Board’s annual effectiveness
the collective experiences, backgrounds,
evaluation;
In deciding whether to authorise a
skill-sets and knowledge of our talented
and diverse employees, we will drive
innovation and success and achieve
more for our stakeholders. This applies
equally to our Board. The composition
of our Board is vital to its effectiveness
and that, in turn, enhances good
governance.
• to ensure that the succession
conflict or potential conflict of interest
planning and talent management
programme includes initiatives to
only non-interested Directors (i.e. those
that have no interest in the matter
develop the pipeline of talent, to
under consideration) will be able to take
encourage and monitor the
the relevant decision. In taking such a
development of a diverse range of
decision the Directors must act in a way
internal high-calibre employees and
they consider, in good faith, will be most
to promote diversity in appointments
likely to promote the success of the
to the senior management team who
Company and may impose such limits or
will in turn aspire to a Board position;
conditions as they think fit. The Board
has reviewed the procedures in place
and considers that they operate
effectively. No actual conflicts of
interest arose during the year under
review or to the date of this report.
65
Strategic ReportGovernanceFinancial StatementsFDM Group (Holdings) plcAnnual Report and Accounts 2018 Appointments to the Board
The Board operates a formal and
Board commitment
When making new appointments, the
• Meetings with the Company’s key
advisors and major shareholders,
transparent procedure for the
Board considers other demands on
where necessary;
appointment of new directors, the
Directors’ time to ensure that they are
• Meetings with employees at different
primary responsibility for which is
able to devote sufficient time and focus
delegated to the Nomination
to their role at FDM. New external
Committee. There is more information
appointments may not be undertaken
about this procedure and the way the
without the prior approval of the Board,
Nomination Committee applied it in
and where any significant new
respect of the appointment of David
appointments are approved by the
Lister as Chairman on page 81.
Board, we intend to explain in the
subsequent Annual Report the Board’s
The Board recognises its responsibility
rationale in giving that approval. For
for succession planning and regularly
FDM’s Executive Directors we recognise
considers the balance of skills,
that external board exposure can be
experience and knowledge of the Board
useful as part of their development as
to ensure it remains appropriate to the
Directors, but we will not normally
business and that the Board is best
permit them to take on more than one
placed to achieve the Group’s strategic
external non-executive directorship at
FDM Academies and centres. In
addition, the location of Board
meetings is periodically rotated to
ensure that Board members have
further opportunity to meet
employees at different sites;
• Provision of a legal and regulatory
memorandum and briefing on the
duties of directors of listed
companies;
• Details of the Group’s corporate
structure, Board and Committee
structures and arrangements and key
policies and procedures; and
• The latest statutory financial reports
objectives. With this in mind, the
FTSE 100 level (or another equivalent
and management accounts.
Nomination Committee intends to ask
the Group’s newly-appointed Chief
significant appointment). Sheila Flavell is
on the board of techUK. No other
The Chairman, in conjunction with the
Executive Director currently has an
Company Secretary, ensures that
People Officer to commence a detailed
review of the existing plans for the
succession and talent management for
external commitment.
the Board and the senior management
Non-Executive Directors are expected
team. Further details of this and the
to commit at least 24 days per annum to
other work undertaken by the
FDM and in practice may commit
Nomination Committee are set out on
considerably more time than this. The
pages 80 to 83. This is a significant
project which will take some time to
Board is satisfied that each of the
Non-Executive Directors (including the
complete, and it will continue to be a key
priority for the Board throughout the
current financial year. We expect to be
able to report on this in further detail in
Chair) has sufficient time to devote to
the business of the Group and keeps
this under regular review.
next year’s Annual Report.
The current key external commitments
of the Directors are included within
their biographies on pages 56 to 59.
Directors are provided with updates on
changes in the legal and regulatory
environment in which the Company
operates. These are incorporated into
the annual agenda of the Board’s
activities along with wider business and
industry updates. The Company’s
principal external advisors provide
updates to the Board, at least annually,
on the latest developments in their
respective fields, and relevant update
sessions are included in the Board’s
meetings. The Company Secretary
updates the Board as appropriate on
developments in corporate governance
and any relevant legal or regulatory
Details of the remuneration received by
changes. In this way, each Director
each of the Executive Directors for the
year ended 31 December 2018 are
shown in the single figure table
presented on page 89 of the
Remuneration Report.
Board induction and
development
On appointment, each Director takes
keeps their skills and knowledge current
so they remain competent at fulfilling
their role, both on the Board and on any
Committee of which they are a member.
Specific training and development
needs of individual directors are
explored as part of board evaluations
(and may be requested by individual
directors directly) and are addressed by
part in a tailored induction programme,
the provision of in-house training or
designed to give him or her an
external courses, as appropriate. Each
understanding of the Group’s business,
of the Non-Executive Directors also
governance and stakeholders.
Elements of the programme include:
• Briefings from senior management to
provide a business overview, update
on current trading conditions and
strategic commercial issues;
receives training and development in
the course of outside roles held by them
which contributes to the currency of
their knowledge and experience in
performing their work at FDM.
66
FDM Group (Holdings) plcAnnual Report and Accounts 2018 Corporate Governance Report
Information and support
The Board meets regularly throughout the year, following an agenda which is agreed in advance based on themes from the
Group business plan. The setting of the agenda is led by the Chairman in discussion with the Chief Executive and the Company
Secretary, but all Board members are welcome to put forward topics for discussion.
Standing items, including operational and financial reviews and Committee updates are considered at each scheduled Board
meeting, with unplanned items such as commercial or property-related decisions considered as and when required. In addition,
potential topics are identified for strategy sessions, management updates and other Board discussions.
Ahead of each Board meeting, all Board members are supplied with an agenda and a pack containing specific papers on
particular strategic issues, as well as reports and management information on current trading, operational issues, compliance,
risk, accounting and financial matters. The Chairman works with the Company Secretary to ensure that the supporting papers
are clear, accurate, timely and of sufficient detail to enable the Board to discharge its duties effectively. The Board’s forward
agenda is co-ordinated with those of its Committees and the Chairs of the Committees report on the activity of their Committees
at Board meetings, with copies of Committee meeting minutes being circulated to all Directors (where appropriate).
At regular intervals throughout the year, senior managers from around the Group attend Board meetings to update the Board on
progress being made and matters arising in their parts of the Group’s business. To ensure that there is sufficient time for the
Board to discuss matters of a material or more discursive nature, Board dinners and other informal gatherings are held after
certain scheduled Board meetings which allow the Directors greater time to discuss key topics with additional internal and
external participants. In particular this enables the Non-Executive Directors to explore business and operational issues in
greater depth with the senior managers who have reported to the Board.
The key areas of focus by the Board in 2018
Strategy
• Reviewed the Group’s three-year plan (2018-2020)
• Review of the development of new service offerings
• Strategic updates from the Group’s senior management teams
Operational
• Reviewed the requirements for Academy space, including approval of new Academy
locations
• Business updates from the Group’s senior management teams
Financial
• Review and renewal of treasury and risk appetite policy
Risk
Governance
• Monthly trading statements
• Full year and half year results
• Group budgets and re-forecasts
• Approval of dividends
• Review of Risk Register and risk management process
• Externally-facilitated review of the effectiveness of the Board and its committees
• Launch of a new succession planning and talent development programme
• Gender Pay Gap reporting
• Update on Modern Slavery Act compliance
• Approval of updated terms of reference for the Board’s committees
• Review and update of the Schedule of Matters Reserved for the Board
• Viability statement; assessment and approval
• Going concern review
Employees
• Planning for the introduction of a new all-employee Buy-As-You-Earn share scheme
All Board Directors have access to the Company Secretary, who advises them on Board and Governance matters. The Audit
Committee received external training covering updates in corporate governance and corporate reporting. The Remuneration
Committee received external training on developments during the year in governance and trends in shareholder expectations
and good practice relating to executive remuneration. As well as the support of the Company Secretary, there is a procedure in
place for any Director to take independent external professional advice at the Company’s expense in the furtherance of their duties.
67
Strategic ReportGovernanceFinancial StatementsFDM Group (Holdings) plcAnnual Report and Accounts 2018 Evaluation of the Board and
its Committees
In accordance with current best practice
Re-election of Directors at the
2019 AGM
The Company’s Articles of Association
Risk management and
internal control
The Board is ultimately responsible for
and the Code, the Board undertakes an
require that existing Directors offer
maintaining sound risk management
annual formal evaluation of its
themselves for re-election at intervals
and internal control systems. These
performance and effectiveness and that
of no more than three years. At the 2019
systems are designed to meet the
of each Director and its Committees.
AGM, in compliance with Code provision
Group’s needs and to manage the risks
The process is led by the Nomination
B.7.1 (and reflecting the Company’s
to which it is exposed, including the
Committee, and it is the Board’s policy
membership of the FTSE 250), all
risks of failure to achieve business
to invite external advisors to assist with
Directors will retire and offer
objectives and of material misstatement
that evaluation every three years.
themselves for re-election (other than
or loss. However, such risks cannot be
Ivan Martin, who will be retiring from
eliminated. The Group’s systems can
In June and July 2018 the Board and
the Board on 5 March 2019).
only provide reasonable but not
Committee evaluation was facilitated
absolute assurance. They can never
externally by Carrie Coombs and Neil
In determining whether a Director
completely protect against factors such
Britten of CK Coombs & Co, an
should be proposed for re-election at
as unforeseeable events, human
independent consultancy firm, whose
the 2019 AGM, the Board took into
fallibility or fraud.
only connection with the Group is its
account the Nomination Committee’s
work on the Board evaluation.
advice based on the results of a review
The Board has established a continuous
of each Director’s contribution to the
process for identifying and managing
The final evaluation report and
suggested priorities were discussed by
Board’s effectiveness, which formed
part of the 2018 Board evaluation. This
the significant risks faced by the Group
(in accordance with Financial Reporting
the Board at its meeting in July 2018,
and the Board has implemented a
number of changes to its way of working
review confirmed that all Directors
continue to be effective and
demonstrate commitment to their roles
Council’s ‘Guidance on Risk
Management Internal Control and
Related Financial and Business
to reflect some of the main
recommendations of the evaluation
report. The changes to the composition
of the Board which arise as a result of
the appointment of David Lister as
Chairman in March 2019 will provide a
further opportunity for the Board in
further developing some of the
priorities which were identified during
the evaluation. The Chairman and
Company Secretary will assess progress
against the priorities agreed during the
evaluation process at regular intervals
during 2019.
The Non-Executive Directors met
without the Chairman to evaluate Ivan
Martin’s performance as Chairman and
concluded that he had continued to
operate effectively in the role.
and so the Committee recommended
Reporting’ (September 2014)). The
Board’s view of the Group’s key risks
and how the Group seeks to manage
those risks is set out on pages 46 to 52.
The Group has in place appropriate
internal control and risk management
systems around financial reporting.
The Group accounting function is
centralised and financial information is
held on a central accounting system,
from which internal management
reporting, budgeting and external
reporting is collated.
The Board regularly reviews the
effectiveness of the Group’s internal
controls which have been in place from
1 January 2018 to the date of approval of
this report.
their re-appointment.
C Accountability
Financial and business
reporting
In its reporting to shareholders, the
Board recognises its responsibility to
present a fair, balanced and
understandable assessment of the
Group’s position and prospects. The
Board has ensured that processes are in
place to achieve this and more
information on the processes can be
found in the Audit Committee Report on
page 77. A statement of the Directors’
responsibilities in relation to the Annual
Report is set out on pages 104 and 105.
The Directors consider this Annual
Report and Accounts, taken as a
whole, to be fair, balanced and
understandable, and consider that it
provides the information necessary for
shareholders to assess the Group’s
position and performance, business
model and strategy.
68
FDM Group (Holdings) plcAnnual Report and Accounts 2018 Corporate Governance Report
An outsourced internal audit function is
Workplace Harassment and
in place for the Group and the scope of
Information Security and the General
work undertaken during the year was
Data Protection Regulation.
carried out in accordance with the
Successful completion of the training
three-year Internal Audit Plan which was
is monitored and employees’
approved by the Audit Committee on
understanding can be refreshed as
behalf of the Board during 2017. A more
appropriate;
detailed overview of the areas of focus
• An outsourced Internal Audit function
and programme of work undertaken by
is in place, working for and reporting
the Internal Audit team in the year
back to the Audit Committee;
E Relations with
shareholders
During 2018 the business has continued
to work to improve its communication
with shareholders through a review of
its reporting and the information
available on the FDM website. FDM has
established an internal investor
appears on page 77.
• A formal budgeting process occurs
relations function led by Mark Heather,
annually. The budgets and forecasts
the Company Secretary, and we are
The key elements of the system of
are reviewed, approved and
internal controls include:
monitored by the Board; and
• The Board meets on a regular basis
• Regular meetings occur between the
and is responsible for the operational
Executive Board and senior
strategy, reviewing operating results,
management team.
identification and mitigation of risks
and communication and application
of the Group’s policies and
procedures;
The Audit Committee
The composition and work of the Audit
Committee, including its relationship
• The Group has a clear organisational
with the external auditors, is set out in
structure with defined responsibilities
the Audit Committee Report on pages
and accountabilities;
72 to 78.
D Remuneration
The Company’s policy on remuneration
and detail of the remuneration of each
Director is given in the Remuneration
Report on pages 84 to 100.
• Regular reports are made available to
the Board on key developments,
financial performance against budget
and operational issues in the
business;
• Operational and financial controls and
procedures are in place including:
authorisation and approval policies
for financial expenditure;
authorisation and approval policies
for contracts and agreements; signing
authorities; IT application controls;
and appropriate segregation of duties
and reviews by management. Further,
there are additional procedures in
place to address other risks to the
business, including a Code of Conduct
and Ethics, an Anti-Fraud policy, an
Anti-Slavery & Human Trafficking
policy, an Anti-Bribery & Corruption
policy, and a Conflicts of Interest
policy;
• The Group’s finance and support
functions are centralised;
• The Group has implemented a portal
to deliver training to all employees on
key regulatory and compliance
matters such as Health & Safety,
planning to increase significantly the
quality of information which is available
on our website about our approach to
Corporate Responsibility and other
important topics. In next year’s Annual
Report we will report on the changes
which have emerged from that review,
with the aim of ensuring that our
investment community has an
enhanced understanding of FDM’s
strategy, business model, competitive
position, financial information and
strategic progress.
In order to maintain dialogue with
institutional shareholders, the Chief
Executive Officer and Chief Financial
Officer meet with the Company’s major
shareholders following interim and final
results announcements and otherwise
as appropriate. The Company Secretary
also talks periodically with shareholders
and potential investors to explain
details of our business model, Mountie
recruitment, training and deployment
programme, and our approach to other
important aspects of our work such as
inclusion, diversity and social mobility.
The Company uses the AGM as an
opportunity to communicate with its
shareholders and welcomes their
participation. Shareholders who attend
the AGM have the opportunity to ask
questions and all Directors are expected
to be available to take questions.
69
Strategic ReportGovernanceFinancial StatementsFDM Group (Holdings) plcAnnual Report and Accounts 2018 Notice of the AGM, which will be held at
Together with members of the Sales
10.30am on Thursday 25 April 2019 at 5
team, the CEO, CFO and CCO meet on a
New Street Square, London EC4A 3TW,
regular basis with customers in our
is enclosed with this report. In
different territories to discuss their
accordance with the Code, the Notice of
particular requirements. In the last year,
AGM will be sent to shareholders at
we hosted over 850 client visits to our
least 20 working days before the meeting
FDM academy sites around the world,
and any other notice of general meeting
enabling our clients to see our training
will be sent to shareholders at least 14
programme in action, as well as to carry
days before each general meeting and
out interviews and assessments prior to
will include details of the proposed
engaging our Mounties to work on their
resolutions and explanatory notes.
projects. The senior members of our
sales team maintain close long-term
The Board proposes separate
relationships with senior executives in
resolutions for each issue and proxy
our client organisations which ensure
forms allow shareholders who are
that we are able to anticipate our clients’
unable to attend the AGM (or general
needs, and regularly update the
meeting, as applicable) to vote for or
structure and content of our training
against or withhold their vote on each
programme to reflect commercial and
resolution. As soon as practical after the
technological changes in the sectors in
conclusion of the AGM (or general
which our clients work.
meeting, as applicable), we will
announce the proxy votes cast,
The Executive Directors meet regularly
including details of votes withheld, to
with partners that promote the
the London Stock Exchange via its
transition to the civilian work
Regulatory News Service. We will also
environment from the Armed Forces,
publish the information on our website.
and those returning to work after a
career break. Sheila Flavell chairs the
The Company’s Articles of Association
Institute of Coding’s Industry Advisory
can only be amended if such
Board and sits on the main Board of
amendment is approved by the
techUK and its Diversity Council, she has
Company’s shareholders by way of
special resolution.
advised government committees
on issues including bridging the digital
skills gap and enhancing diversity in
The Group’s website (www.fdmgroup.com)
the workplace.
The Corporate Governance Report was
approved by the Board on 5 March 2019
and signed on its behalf by:
Ivan Martin
Chairman
5 March 2019
is the primary source of information on
the Group.
Engagement with
stakeholders
In addition to the Company’s
shareholders, the Board has identified
the following key stakeholders:
employees, prospective candidates and
customers. The Executive Directors
regularly travel spending time in each of
the FDM centres and meeting with
employees at all levels of seniority. This
enables them to promote FDM’s culture
and values throughout the organisation.
The FDM Newsletter allows the Group’s
culture to be spread from the Executive
team to each FDM employee.
70
FDM Group (Holdings) plcAnnual Report and Accounts 2018 The Group has established
a core set of values which were
updated in 2018 to reflect the
evolution of FDM’s culture
71
Strategic ReportGovernanceFinancial StatementsFDM Group (Holdings) plcAnnual Report and Accounts 2018 Audit Committee
Report
Chairman’s
introduction
I am pleased to present the report of
the Audit Committee for the year ended
31 December 2018 which sets out the
key responsibilities of the Committee in
more detail, together with information
on our activities during the period.
Last year we reported that a three-year
risk-based Internal Audit Plan had been
approved by the Audit Committee during
2017. That plan covers the key financial,
operational and regulatory aspects of
our business. The Plan was refreshed
during the year but remains broadly
unchanged from that approved in 2017.
Details of the work undertaken by the
Internal Audit team during the year are
set out on page 75. This work included a
review of core financial controls, a review
of the Group’s commercial contracting
processes, a review of resource
management processes and an
assessment of the current status of
FDM’s business continuity plans.
Effective risk management is critical to
the delivery of the Group’s strategic
objectives. Overall management of
the risks to our business rests with
the Board, but the Audit Committee
has delegated responsibility for
oversight of the measures we have
in place, and this remains a key
focus for the Committee’s work.
The Audit Committee considers
that the internal audit process is
an effective tool in the overall context
of the Group’s risk management systems.
72
FDM Group (Holdings) plcAnnual Report and Accounts 2018 Audit Committee Report
We carried out an internal review of the
Group’s risk management process twice
Priorities
Last year, in addition to the business as usual work, the Committee set itself two key
during the year, in accordance with our
priorities for 2018. We have made good progress in respect of both priorities, as
standard practice. This review resulted
outlined below:
2018 priorities
Progress
Focus on internal controls
The three-year Internal Audit Plan,
and risk management,
developed in 2017, has been a key
with a particular emphasis
mechanism in assessing the effectiveness of
on assessing wider
operational controls. The work carried out
operational controls.
during the year covered the operational
areas of commercial contracting, resource
management and business continuity. The
Committee considered the findings of all
three reviews and a number of changes have
been made in each of the areas noted which
will further strengthen the overall control
environment.
Review plans to upgrade
The Group’s IT strategic plan approved in
systems to support the
2017 has been further developed. The
further expansion of the
Committee will be monitoring progress with
business internationally.
the implementation of a number of projects
under this plan, including an upgrade of the
Group’s Billing and Finance systems.
These areas will remain a key focus for 2019 as we continue to progress our
three-year Internal Audit Plan and the roll out of our IT strategic plan, with
particular emphasis on continuing enhancement to our cyber-security
arrangements. In addition, the Committee intends to monitor closely the
impact on FDM and its key markets of the UK’s withdrawal from the EU and
the UK Government’s plans for future trading and finance which will emerge
during the transition period that begins in March 2019.
in some minor changes to our Group
Risk Register, and concluded that the
risk management process is operating
effectively across the business. Further
information about these changes is set
out on page 46.
Cyber security risk will always be a
significant threat to the way we operate
our business, and so the development
of FDM’s IT systems to keep pace with
the growth of the Group, with a
particular emphasis on security,
continues to be a key priority for the
Committee, particularly with the
introduction this year of the General
Data Protection Regulation. As a
consequence of this, the Audit
Committee receives regular reports
from our Chief Information Officer on
the steps which are being taken to
ensure we are prepared for the threat of
a cyber-attack. In addition we also
received an update on some recent
improvements in physical security and
some changes to our hardware
infrastructure which have been
designed to increase further the
resilience and security of our systems.
The Audit Committee continues to
challenge management with regard to
the key judgement areas and significant
financial reporting items, and these are
disclosed in this report on page 76.
In May 2018 I visited FDM’s finance team
at our office in Brighton and was
encouraged by the additional insight
that they were able to provide to me
about their work and the controls which
are in place to manage risk in their area
of the business.
73
Strategic ReportGovernanceFinancial StatementsFDM Group (Holdings) plcAnnual Report and Accounts 2018 Role of the Committee
The Committee is appointed by and
Composition
During the year, the members of the
reports to the Board. The Committee’s
Committee were Robin Taylor, the
terms of reference are available in the
Chairman of the Committee, Michelle
Corporate Governance section of the
Senecal de Fonseca, David Lister and
Group’s website at
www.fdmgroup.com.
Peter Whiting. The Board is satisfied
that Robin Taylor, Committee Chair and
a chartered accountant with significant
The key responsibilities of the
financial experience in a public company
Committee are to:
environment, has the current and
• monitor the application of financial
relevant financial and accounting
reporting and internal control
experience which is required by the
principles set out in the Code, and to
Code. Michelle Senecal de Fonseca,
maintain an appropriate relationship
David Lister and Peter Whiting also have
During the year, the Chief Executive
Officer, Chief Financial Officer, Chief
Information Officer, Group Financial
Controller, in-house Senior Legal
Counsel, Group Data Protection Officer
and other senior management attended
certain meetings at the invitation of the
Committee in order to ensure that the
Committee remained fully informed of
events and developments within the
business. Presentations were received
on legal, regulatory and IT security
matters, contributing to the
Committee’s role in monitoring the
with the Company’s auditors;
experience in financial and reporting
management of risk.
• monitor the integrity of the financial
matters through their other business
statements of the Company and any
experience and current external roles.
formal announcements relating to the
The Committee as a whole has a
Company’s financial performance,
sufficiently wide range of business
including any significant financial
reporting judgements contained in
them;
experience and expertise, including
significant experience and competence
in the sector within which FDM
• review the Company’s internal
operates, such that the Committee can
financial controls and the Company’s
internal control and risk management
effectively fulfil its role.
systems;
There have been no changes in
• ensure compliance with laws,
Committee membership during the
regulations, ethical and other issues,
year. In compliance with the Corporate
and ensure that the Company
Governance Code, the Committee
maintains suitable arrangements for
membership is limited to independent
employees to raise concerns in
Non-Executive Directors of the
confidence;
Company.
• make recommendations to the Board,
and for approval by shareholders, on
Members’ experience is documented on
the appointment, re-appointment and
pages 56 to 59.
removal of the external auditor;
• monitor the external auditor’s
independence and objectivity and the
Meetings
The Committee discharges its
effectiveness of the external audit
process; and
responsibilities through a series of
scheduled meetings during the year.
• implement policy on the engagement
The business of the meetings follows an
of the external auditor to supply
annual agenda planned in advance
The Group’s external auditors,
PricewaterhouseCoopers LLP (“PwC”)
attended three of the four Committee
meetings during 2018, following the
March and July meetings an informal
discussion was held between
Committee members and PwC without
any of the executive management team
being present. The Committee
Chairman also met with PwC on several
occasions outside of the Committee.
The Internal Auditors KPMG LLP
(“KPMG”) attended all four meetings
during the year to discuss plans for their
programme of work and to present their
findings. KPMG attend for the full
duration of each meeting, as the
Committee believes that the
effectiveness of the Internal Audit
function is enhanced by an
understanding of other matters covered
at the meetings, and of the external
audit work being carried out by the PwC.
KPMG and PwC have direct access to the
Committee Chairman at all times
non-audit services.
(subject to adaptation through the year),
through the year.
which incorporates items driven
The Committee sets its own agenda in
primarily by the financial calendar of the
addition to routine matters and those
Group. The Committee met four times
suggested by the main Board.
during the financial year with all
In addition to the meetings of the
Committee, the Chairman and other
members of the Committee met with
members in attendance at all meetings.
other members of the Finance team and
regional operating management
throughout the year.
74
FDM Group (Holdings) plcAnnual Report and Accounts 2018 Audit Committee Report
Activity
Principal activities during the year
The following principal activities have been carried out by the Committee during the financial year:
March 2018
• Reviewed and recommended to the Board the approval of the Preliminary Announcements and the 2017 Annual Report.
This work included: ensuring that the report is fair, balanced and understandable; reviewing the significant judgements
applied in the Annual Report; considering the appropriateness of the ‘going concern’ statement and the viability
statement; and approving the statement of principal risks to the business as set out in the Annual Report
• Received a presentation from PwC on their audit of the financial results for the year ended 31 December 2017, and
reviewed the Auditors’ Report to the Audit Committee
• Reviewed the Internal Audit plan for the three year period from 2018 to 2020, adjusting the plan to reflect the Committee’s
updated priorities
• Reviewed proposals for the effective management of potential contractual risk arising from the new General Data
Protection Regulation
• Carried out an independent evaluation of the Committee’s effectiveness
• Approved the Committee’s agenda for the remainder of 2018
May 2018
• Approved the updated three-year Internal Audit Plan for the period 2018 to 2020
• Received a progress report on the implementation of recommendations from the 2017 Internal Audit programme
• Reviewed and approved a number of updates to the Group’s risk register
• Received a progress report on the project to upgrade the Group’s finance systems
• Reviewed the effectiveness of the external auditors
• Reviewed the Audit Committee’s Terms of Reference
July 2018
• Reviewed PwC’s report to the Committee (interim review for the six months to 30 June 2018)
• Reviewed the Interim Report, including the “going concern” statement, and recommended its approval to the Board
• Reviewed and approved the statement of principal risks and uncertainties set out in the Interim Report
• Received a report on the findings of the Internal Auditors following their review of financial controls
• Received a further update on the finance systems upgrade project
• Discussed arrangements and proposed content for Audit Committee training later in the year
December 2018
• Reviewed PwC’s year-end audit plan and fees for the audit of the 2018 financial results
• Reviewed and updated the Group’s risk register
• Received a report from the Chief Information Officer on steps taken to mitigate risk and enhance compliance and
resilience through improved physical and data security, and upgrades to the Group’s central hardware infrastructure
• Received a report on the findings of the Internal Auditors following their review of commercial contracting processes,
resource management processes and business continuity
• Received updates on corporate reporting and ensured compliance with the latest corporate governance requirements
• Undertook a review of whistle-blowing and anti-bribery policies and procedures
In addition to the work outlined above:
• as a standing item on the agenda of every meeting, the Committee reviews the level of fees incurred with PwC on non-audit
work to ensure compliance with the Group’s policy on non-audit fees; and
• in November 2018 the Committee received a training session from PwC on key developments in areas relevant to the
Committee’s business in the next 12 months.
75
Strategic ReportGovernanceFinancial StatementsFDM Group (Holdings) plcAnnual Report and Accounts 2018 Significant financial reporting items
The Committee pays particular attention to matters it considers important by virtue of their potential impact on the Group’s
results or the level of estimates and judgements involved in their application to the Consolidated Financial Statements. To this
end, the Committee receives regular reports from the Chief Financial Officer and the Group’s external auditors, PwC. The
Committee has considered all significant estimates and judgements identified in note 4 to the Consolidated Financial Statements
on pages 124 and 125, having received drafts of the Annual Report and financial statements in sufficient time ahead of signature
to enable a thorough review, and allow for the opportunity to challenge and discuss the Report’s content.
The main areas of focus during the year are unchanged from 2017 and are set out below:
Area of focus
Steps taken to address each area
Revenue
Revenue in respect of non-receipted timesheets is accrued
at a percentage of the estimated contract value where
The Committee discussed and reviewed revenue
recognition in detail with management and PwC and
remains satisfied that Group accounting policies with
timesheets have not been received at the cut-off date from
regard to revenue recognition have been adhered to and
Mounties or contractors.
that judgements remain appropriate.
There is no material impact on the Group’s results from the
application of the new standard IFRS 15, ‘Revenue from
contracts with customers’ (effective for accounting periods
beginning 1 January 2018).
Share-based payments
For a fourth year, the Company granted awards under the
The Committee received and reviewed a paper containing
the key assumptions and judgements applied in calculating
FDM Performance Share Plan (“the PSP”). Associated with
the share-based payment charge. The Committee is
accounting for the awards are judgements relating to the
satisfied that the assumptions and judgements applied are
number of shares which will vest.
appropriate.
Going concern and viability
The Committee has considered the “Going Concern” basis
assumed within the financial statements and viability
period. The underlying assumptions, the reasonableness of
those assumptions and the headroom/funding facilities
available were considered as part of the Committee’s
The Committee received and reviewed a paper prepared by
the Finance team supporting the adoption of the going
concern basis and the appropriateness of the viability
period. The Committee is satisfied with the judgements in
these areas and that sufficient work was performed to
enable the Committee to conclude on the adoption of the
review. The review also considered the impact of a range of
going concern basis. The Committee reviewed and
sensitivities on the key assumptions.
Impact of new accounting standards
The Committee has considered the impact of new
accounting standards including IFRS 9 ‘Financial
Instruments’, IFRS15 ‘Revenue from contracts with
customers’, and IFRS 16 ‘Leases.’
concurred with the reasonableness of the viability period
included within the viability statement on page 53.
The Committee has reviewed papers prepared by the
Finance team, outlining the impact of new accounting
standards as applied to FDM and is satisfied that the impact
has been appropriately assessed.
There is no material impact from the introduction of IFRS 9
and IFRS 15. The anticipated impact from the introduction
of IFRS 16 from 1 January 2019 is set out in note 5 to the
Consolidated Financial Statements.
76
FDM Group (Holdings) plcAnnual Report and Accounts 2018 Audit Committee Report
Fair, balanced and
understandable
As requested by the Board, the
Internal control and risk
management
The Committee is responsible for
Committee has considered whether, in
monitoring and reviewing the
its opinion, the Annual Report and
effectiveness of the Group’s internal
Accounts 2018 is fair, balanced and
control and risk management systems.
The findings from the reviews were
presented to the Audit Committee
throughout the year and are supported
by related action plans where relevant.
No serious weaknesses were identified
by the Internal Audit reviews carried out
understandable and provides the
Through monitoring the effectiveness of
during the year.
information necessary for shareholders
its internal controls and risk
to assess the Group’s position and
management, the Committee is able to
performance, business model and
maintain a sound understanding of the
strategy. In forming its opinion, the
Group’s trading performance, key
Committee considered the information
judgemental areas and management’s
As the Internal Audit Plan is risk-based,
the Audit Committee considers that the
internal audit process is an effective tool
in the overall context of the Group’s risk
it had received and the discussions that
decision-making processes.
management systems.
have taken place with senior managers
in the business.
The key elements of the Group’s internal
The Chairman of the Audit Committee
control framework and procedures are
also met with the Internal Audit team in
All members of the Committee received
set out on pages 68 and 69.
a full draft of the Annual Report and
Accounts two weeks prior to the
meeting at which it was required to
provide its final opinion. The Committee
reviewed the report to ensure that: it
provided a balanced reflection of the
Group’s performance; the presentation
of adjusting items was relevant and
Internal Audit
The Group’s Internal Audit function is
wholly outsourced. There were two
elements to the Committee’s rationale
in deciding to outsource the Internal
Audit function: first, it is considered that
outsourcing ensures the process is
understandable; all material matters
independent and second, it guarantees
were considered; and there was internal
specialist input when required, taking
consistency and there were linkages
into account international boundaries
advance of every meeting without
management present.
External auditor
PwC is the Group’s current external
auditor, having been appointed in 2013.
The Group is not required under current
EU legislation to conduct a tender
before the year ending 31 December
2023. Any recommendation relating to
the re-appointment of the external
auditors will continue to be the subject
throughout, including the presentation
and the need for technical specialism,
of rigorous review each year.
of the risks and significant judgements.
particularly when reviewing non-
financial areas of the business.
The Committee concluded that in its
opinion the Annual Report and Accounts
A three-year Internal Audit Plan was
2018, taken as a whole, was fair,
approved by the Audit Committee in
balanced, and understandable, and
2017 and refreshed during the year. The
considers that it provides the
Plan is risk based and covers all key
information necessary for shareholders
to assess the Group’s position and
performance, business model and
financial, operational and regulatory
parts of the business. Specifically, in
2018, the following areas were reviewed:
strategy. The Committee made a
commercial contracting processes;
recommendation to the Board to this
resource management processes; and
effect. The Directors’ statement of
responsibilities on a fair, balanced and
understandable annual report is given
on pages 104 and 105.
business continuity. A second review of
the Group’s key controls covering
significant financial processes which are
documented in the Risk Controls Matrix
(“RCM”) was also carried out. These had
previously been reviewed in 2016 but
given the importance of ensuring we
have robust controls over our financial
processes, it is intended that core
financial controls will continue to be
reviewed on a regular basis.
Auditor independence and
objectivity
Both the Committee and the Board keep
the external auditors’ independence
under review. From July 2016, the
Committee has been monitoring the
fees paid to the external auditor for
non-audit work at each Committee
meeting. Any non-audit work which will
result in fees exceeding £5,000 must be
approved in advance by the Chairman of
the Audit Committee. More substantial
work involving fees exceeding £50,000
requires the approval of the Committee
as a whole. The Group receives a formal
statement of independence and
objectivity from PwC each year and
obtains quotes in a competitive tender
for all non-audit work performed.
77
Strategic ReportGovernanceFinancial StatementsFDM Group (Holdings) plcAnnual Report and Accounts 2018 Fees for non-audit work carried out by
PwC as a percentage of audit fees for
Whistleblowing
The Group has in place a whistleblowing
the year ended 31 December 2018 were
policy which enables employees to
22% (2017: 23%). Further disclosure
of the non-audit fees paid during the
report concerns on matters affecting
the Group or their employment, without
year ended 31 December 2018 can be
fear of recrimination.
found in note 7 to the Consolidated
Financial Statements.
The Group continues to engage KPMG,
an independent accounting firm, to
perform internal audit work, tax
The Committee reviewed the Group’s
whistleblowing policy and procedures
in December 2018 and is satisfied that
they remain appropriate. There were
no instances of whistleblowing during
consulting and other assignments to
the year.
further ensure that the independence
and objectivity of the external auditor is
not compromised. This internal audit
function is currently carried out by
KPMG, as referred to above.
External audit partners are rotated
every five years. The current external
audit partner is Jaskamal Sarai, who has
been in the role for four years.
Effectiveness of external
auditor
During the year, the Committee
reviewed the effectiveness and
Anti-bribery and Corruption
policy
The Group has a zero-tolerance policy to
bribery and corruption. The Group’s
Anti-bribery and Corruption policy is
issued to all employees, and training is
provided to all current employees and
new starters to ensure that they
understand the Group’s policy and the
importance of compliance. The
Committee reviewed the effectiveness
of the policy in December 2018 and
concluded that it remains an effective
tool for managing the anti-bribery and
independence of the external auditor,
corruption risks faced by the Group.
using a questionnaire which was
completed by key members of the
Finance team, each member of the
Committee and the Chief Financial
Officer. The questionnaire asked
individuals to rate the performance of
the PwC audit team in the following
areas: knowledge and expertise;
independence and objectivity;
effectiveness of the planning process;
ability to firmly challenge management;
and quality of audit deliverables. The
feedback from the questionnaire was
then used as the basis for a more
wide-ranging discussion at the meeting
Audit Committee
effectiveness
The effectiveness of the Committee in
discharging its duties was considered as
part of the in-depth and independent
evaluation of the entire Board which
took place from May to July 2018. The
process of that evaluation and its
findings are set out in further detail in
the Nomination Committee Report on
pages 81 and 82. The Committee
regularly reviews its terms of reference
and updates them as necessary to
reflect current best practice, and to
held in May 2018 (at which PwC were not
ensure that its approach remains in line
present). Based on the feedback and
with those terms of reference and the
their further discussions, the Committee
Financial Reporting Council’s Guidance
concluded that:
• the overall audit approach,
materiality, threshold and areas of
audit focus were appropriate to the
business; and
• the audit team possessed the
necessary quality, expertise and
experience to provide an independent
and objective audit.
for Audit Committees. The Committee is
satisfied that it continues to be effective
in discharging its duties.
Robin Taylor
Chairman of the Audit Committee
5 March 2019
78
FDM Group (Holdings) plcAnnual Report and Accounts 2018 The Committee will be
monitoring progress with the
implementation of a number of projects
under the Group’s IT strategic plan
79
Strategic ReportGovernanceFinancial StatementsFDM Group (Holdings) plcAnnual Report and Accounts 2018 Nomination
Committee Report
Chairman’s
introduction
I am pleased to present the report of
the Nomination Committee for the year
ended 31 December 2018.
The primary role of the Nomination
Committee is to monitor the
composition, balance and structure of
the Board, and to plan for its
refreshment as appropriate.
The Committee undertook a review of
its effectiveness during 2018 and
concluded that the Committee
continues to operate effectively.
Information on the activities of the
Committee during the year is set out in
this report.
The Board evaluation is a valuable
process that allows the Board to challenge itself
to enhance the effective and efficient conduct of Board
business, for the benefit of FDM and all its stakeholders.
80
FDM Group (Holdings) plcAnnual Report and Accounts 2018 Nomination Committee Report
Committee composition
The Committee is appointed by and
reports to the Board, and comprises the
Chairman, the Chief Executive and all
four of the independent Non-Executive
Directors. The following members
served on the Committee during the
year:
The main responsibilities of the
The Committee engaged Sapphire
Committee are to:
• Review the structure, size and
Partners, an external search
consultancy, to assist with the process.
composition of the Board and its
The Board has previously engaged
Committees including its balance of
Sapphire Partners in relation to the
skills, knowledge, experience and
search for Non-Executive Directors, but
diversity, and make recommendations
they have no other connection with the
to the Board with regard to any
Company. A wide range of internal and
Ivan Martin (Committee Chairman)
changes;
external candidates was assessed
Rod Flavell
Robin Taylor
Peter Whiting
Michelle Senecal de Fonseca
David Lister
Ivan Martin will step down as
Committee Chairman on 5 March 2019
when he retires from the Board, and will
be succeeded as Chairman of the
Committee by David Lister.
Role of the Nomination
Committee
The role of the Committee is
summarised below and detailed in full
in its terms of reference, a copy of which
is available on the Group’s website
(www.fdmgroup.com).
• Lead the process for identifying
against the Board’s criteria for the role,
candidates to fill Board vacancies as
with a thorough process resulting in a
and when they arise, and recommend
shortlist of preferred candidates, which
new appointments to the Board for
was given final consideration by the
approval;
Committee. The Committee
• Consider succession planning for
subsequently made a recommendation
Directors and other senior executives
to the Board, following which David
taking into account the challenges and
Lister will be appointed as Chairman of
opportunities facing the Company,
the Board on 5 March 2019.
and the skills and experience needed
on the Board in the future;
• Keep under review the leadership
needs of the Group, both executive
2018 Board effectiveness
review
Our view is that Board evaluation is a
and non-executive, with a view to
valuable process that provides a regular
ensuring that FDM can continue to
mechanism by which the Board can
compete effectively in the
marketplace;
challenge itself to identify any areas
where its performance can be improved
• Review the results of the Board
to enhance the effective and efficient
performance evaluation process
conduct of Board business, for the
which impact on Board composition;
benefit of FDM and all its stakeholders.
and
• Ensure that Non-Executive Directors
are able to allocate sufficient time to
their work at FDM to allow them to
fulfil their duties.
Appointment of new Board
Chair
In March 2018, after 12 years as
The Code requires that FTSE 250
Companies should arrange for the
evaluation of the Board to be externally
facilitated at least every three years,
and the Board decided to take the first
opportunity to carry out an externally
facilitated evaluation of the Board and
its Committees during 2018 (FDM’s first
year following its entry to the FTSE 250).
Chairman of FDM, Ivan Martin informed
The Nomination Committee led the
the Board that he intended to step
planning and implementation of this
down once the search for a new Board
evaluation on behalf of the Board and,
Chairman had been completed.
after assessing a number of potential
providers, engaged Carrie Coombs and
The Nomination Committee led the
Neil Britten of CK Coombs & Co to carry
search for the new Chair, beginning with
out the work. CK Coombs & Co is a
the preparation of a description of the
specialist consultancy and has no other
role and the capabilities required for it.
connection with FDM.
81
Strategic ReportGovernanceFinancial StatementsFDM Group (Holdings) plcAnnual Report and Accounts 2018 The evaluation was carried out from
• There are effective systems and
• In recognition of the fact that the
May to July 2018, based on:
processes in place to ensure that FDM
Board is now four years into its
• A review of Board agendas, papers,
fully meets its statutory and
transition from a private-equity
minutes, presentations and other key
corporate governance obligations,
backed private company to a
working documents over the previous
and these systems are regularly
premium-listed FTSE 250 company,
16 months (including the previous
reviewed.
and the change in approach which
year’s Board evaluation exercise);
• The breadth of skill and experience
this journey necessarily involves, the
• Individual face to face interviews with
amongst the Board members is
Board intends to keep working to
each Board member, using structured
regularly used positively and
improve further the dynamics of
questions and less formal discussion
effectively, particularly when material
discussions in the Board’s meetings to
to allow a full exploration of individual
business issues are being discussed,
ensure that they remain open and
members’ impressions;
and the Board operates effectively
challenging, that the FDM values and
• Interviews with a number of other
and with unity when unexpected
culture are consciously applied during
stakeholders, including some from
adverse events are encountered.
the Board’s discussions, and that the
within FDM and also external advisors
skills and experience of all Board
who work closely with the Board;
The evaluation also identified areas on
members can be brought to bear on
• Observation of a number of Board
which the Board has been focussing to
all of the Board’s business.
and Committee meetings; and
enhance its effectiveness. The Chairman
• The Board has also reviewed and
• Collection and analysis of 360-degree
has put in place a detailed plan to
enhanced the processes and tools
survey feedback.
implement recommendations arising
which it uses to facilitate its
from the evaluation process, including
management of risk.
In addition to the Board and Committee
evaluation, the review included an
prioritising the following activities:
• The development of a detailed
evaluation of the individual
succession plan for the Board and
performance and effectiveness of each
Director, each Committee Chair, and the
senior management team, including a
talent development plan across the
Board Chairman (the latter being carried
Group to support it, remains a key
out separately by the Senior
priority for the Board where further
Independent Director working with his
and more urgent progress is needed
fellow Non-Executive Directors).
to support the Group’s continuing
growth. As a result of the Committee’s
The results of the evaluation were
recommendations, the Company has
presented to the Board in July 2018 and
summarised in a written report. The
engaged a Chief People Officer to lead
this project on behalf of the Board.
evaluation report concluded that the
Further information is set out later in
Board works effectively in many areas of
its work. In particular:
• The current structure and size of the
this report.
• On completion of the evaluation, the
Board immediately increased the time
Board is appropriate at this stage in
and focus allocated in Board meetings
the Group’s growth, balancing
to future strategy, strategic risk and
continuity and a deep understanding
external factors. By reducing the time
of the FDM operating model with high
spent in Board meetings on routine
levels of expertise relevant to the
operational and reporting issues, the
Company and its sector, markets and
Board can further develop and
customers. The Board’s committees
challenge the Group’s strategic plan
all work effectively and are well-
to make it more robust. I am pleased
established with appropriate
to report that this refreshed approach
composition and regularly-reviewed
has enabled a more wide-ranging
terms of reference.
exploration of the issues under
discussion and is working well to
make our Board meetings more
effective.
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FDM Group (Holdings) plcAnnual Report and Accounts 2018 Nomination Committee Report
Succession planning
A key task of the Committee is to keep
under review the Company’s succession
Independence and
effectiveness
As recommended by the Code,
plans for members of the Board over
excluding myself, all the current
the short, medium and longer term, to
Directors will be standing for re-election
ensure that the Board maintains the
at the AGM in 2019. Having reviewed the
appropriate balance of skills and
independence and contribution of the
experience to carry out its work in the
Directors, the Committee confirms that
most effective way. In particular, when
the performance of each of the
the opportunity arises for refreshment
Directors continues to be effective and
of the Board, the Board bears in mind
each demonstrates commitment to their
the need to ensure that its membership
roles, including independence of
is diverse. This year, the Board adopted
judgement, commitment of time for the
a new Board diversity policy to assist in
Board and (where relevant) Committee
this aim. Further details of the new
meetings and their other duties.
policy are on page 65.
Accordingly, the Committee has
recommended to the Board that all
With this in mind and at the
current Directors of the Company be
recommendation of the Committee, in
proposed for re-election at the
forthcoming AGM.
Ivan Martin
Chairman of the Nomination Committee
5 March 2019
November 2018 the Company appointed
a Chief People Officer, a senior executive
role reporting regularly to the Board.
The new Chief People Officer will
commence a detailed succession
planning exercise for the Board and the
senior management team, beginning
with the Executive Directors. This will be
an in-depth project which will take some
time to complete, and we will be in a
position to provide a further progress
report next year. Another key role of the
Chief People Officer will be to develop a
Group talent management plan to
ensure that the Board and senior
management succession plans are
underpinned by a pipeline of talented
managers with the skills, experience
and deep understanding of the FDM
model to support the Group in its next
phase of growth.
83
Strategic ReportGovernanceFinancial StatementsFDM Group (Holdings) plcAnnual Report and Accounts 2018 Remuneration
Report
Statement from
the Chairman of
the Remuneration
Committee
On behalf of the Board, I am pleased to
present our Remuneration Report for
the year ended 31 December 2018.
Our new Directors’ Remuneration Policy
was approved by shareholders at the
2018 AGM with over 97% of the votes
cast in favour of it, and I was delighted
to see strong shareholder support also
reflected in over 98% of the votes cast at
that meeting being in favour of the 2017
Directors’ Remuneration Report.
The Remuneration Committee has
considered the policy during 2018 and
concluded that it remains appropriate.
Therefore, the policy will continue to
apply in 2019. However, reflecting the
introduction of the new Corporate
Governance Code, we are making some
changes to the way in which we
implement the policy, including the
application of a holding period to the
PSP awards and the enhancement of the
recovery provisions applying to variable
remuneration. We have described these
changes later in this report – our
approach will be formally enshrined in
the policy when we next seek
shareholder approval for it, which we
currently plan to be at the 2021 AGM.
In order to broaden the scope
and benefits of employee share ownership,
which is fundamental to FDM’s culture, we have
adopted an all-employee share plan, which
is offered to employees internationally.
84
FDM Group (Holdings) plcAnnual Report and Accounts 2018 Remuneration Report
We have also included in this report a CEO pay ratio, comparing the remuneration of our CEO to that of the wider workforce.
Although we are not required to include this until we publish our 2019 Directors’ Remuneration Report, we have done so on a
voluntary basis; the detail is set out on page 94.
A “snapshot” summary of our remuneration arrangements is set out below.
Salary and fees
Our approach to Executive Directors’ salaries in 2018 was described in our 2017 Directors’
Remuneration Report, and more information is given below.
The annual fee for the Chairman will increase to £165,000 with effect from 5 March 2019, on
appointment of David Lister as Chairman. In determining the fee for the new Chairman, regard
was had to the level of fees paid for chairing companies of a similar size and complexity. The
additional annual fee payable to the Chair of the Nomination Committee will remain at £5,000
and David Lister will receive that fee when he takes on the Chair of the Nomination Committee
with effect from 5 March 2019, in accordance with the Directors’ Remuneration Policy and in
keeping with the approach taken in respect of the current Chairman. No increases are proposed
to Executive Director salaries or to the fees of the Non-Executive Directors for 2019, and the
salaries and fees that have applied since 1 April 2018 are set out on page 92.
Annual bonus
• 2018: Executive Directors’ earned bonuses of 58% of salary. Further information is given on page 90.
• 2019: Whilst the policy allows for an annual bonus opportunity of 150% of salary, each
Executive Director will be eligible to earn a bonus of up to 100% of salary for 2019.
PSP
• Awards vesting by reference to performance in 2018: Each Executive Director was granted a
PSP award in 2016 over 40,000 shares. Those awards were subject to performance conditions
based on EPS over the three-year period ending 31 December 2018. Reflecting the strong
performance over the three year period, the awards will vest at 100%. Further information is
given on page 87.
• Awards granted in 2018: Each Executive Director was granted an award in 2018 over 18,500 shares
in respect of the performance period 2018 – 2020. Further information is given on page 92.
• 2019: PSP awards will be granted with performance conditions based on growth in EPS.
Further information is given below and on page 93.
• Although the policy only requires the application of a post-vesting “holding period” if awards
are granted in excess of 100% of salary, a two year holding period will apply to awards granted
in 2019 and future years.
Our strategy
Our approach to reward is linked to our strategy. Mountie revenue, profitability and earnings
per share are all key performance indicators – we reflect these in our bonus and PSP
performance metrics.
In addition, Executive Directors’ interests are aligned with shareholders through their
shareholdings and we reflect our commitment to employees by extending share plans widely, as
described below.
Share ownership
Our Directors’ Remuneration Policy approved at the 2018 AGM increased the level of our
shareholding guideline for Executive Directors to 200% of salary.
Our Executive Directors all have significant shareholdings, directly aligning their interests with
those of shareholders. As shown on page 91, each of our Executive Directors holds shares with a
value significantly in excess of our formal shareholding guidelines.
During 2019, the Committee will develop a policy on post-cessation of employment shareholdings
for Executive Directors, having regard to the requirements of the new Corporate Governance Code
and developing market practice in this area. We will report on this guideline in the 2019 Directors’
Remuneration Report, before formally enshrining it in the next directors’ remuneration policy.
Share plan
participation
Reflecting our culture and the importance of employee share ownership, we extend our share
plan awards widely within the Group.
In 2018, as in 2017, PSP awards to Executive Directors were significantly lower than the
maximum permitted under the policy in order to permit larger awards to key individuals below
Board level.
Additionally, the Company has implemented an all-employee share plan to further promote the
employee share ownership culture at FDM.
85
Strategic ReportGovernanceFinancial StatementsFDM Group (Holdings) plcAnnual Report and Accounts 2018 In this report we set out the Remuneration earned by Directors in 2018 and how the policy will operate for 2019. We then set out
an extract of the policy approved at the 2018 AGM; the full approved policy is available on our website. This summary highlights
the key features of our Policy and what have we done this year. We hope shareholders will find this useful. We aim to be clear and
transparent in our approach and we take our responsibility to shareholders seriously. We hope this summary will demonstrate
how we balance appropriate reward with the delivery of value to shareholders, ensuring that Executive Directors’ remuneration
is linked to the achievement of stretching performance measures, without encouraging the taking of unnecessary risk.
The Remuneration Committee
The role of the Committee is to:
• Determine the Company’s remuneration policy for all Directors and the Chairman;
• Review and determine remuneration and incentive packages for each of the Company’s Executive Directors and the first layer
of senior management below the Board;
• Operate the Company’s incentive plans in line with the policy report and various plan rules; and
• Ensure it is kept abreast of issues affecting all aspects of executive remuneration.
Details of the attendance at Committee meetings are set out in the Corporate Governance Report on page 64. The full
Remuneration Committee terms of reference can be found on the Company’s website. Details of the advisors to the Committee
are set out on page 95.
Remuneration in 2018
The remuneration policy approved at the 2018 AGM applied during 2018. The table below summarises the principal decisions in
respect of 2018 in accordance with that policy.
Salary
We explained in the 2017 Directors’ Remuneration Report that we would review the Executive
Directors’ salaries during 2018 in light of the growth in the Company since IPO, recognising that
the average salary increase of the Executive Directors since the Company’s IPO had been less
than that of the wider workforce and that no Executive Director received a salary increase in
2017. Following that review, Executive Directors’ salaries were increased with effect from 1 April
2018 by 10%, below the increase for the UK workforce (excluding Mounties) in 2017 and 2018
combined. There is no current intention to increase Executive Director salaries in 2019.
Bonus
Our Directors’ Remuneration Policy provides for a maximum bonus opportunity of 150% of
salary. Notwithstanding this, the bonus opportunity for 2018 was a maximum of 100% of salary.
As with 2017, the Executive Directors’ bonus opportunity was subject to stretching targets
based on Group pre-tax profit (governing 80% of the opportunity) and Mountie revenue
(governing 20% of the opportunity), directly aligned to our KPIs.
Bonuses earned by the Executive Directors in respect of 2018 were 58% of salary
Further details of the annual bonus outturn are included in the Annual Report on Remuneration
on page 90.
86
FDM Group (Holdings) plcAnnual Report and Accounts 2018 Remuneration Report
PSP vesting by
reference to
performance
in 2018
PSP awards were granted in April 2016. The awards vested at 100%, reflecting the exceptionally
strong performance of the Company over the three-year performance period ending
31 December 2018, as summarised below; further information is given on page 90.
Compound annual
growth in EPS
Vesting
Performance
outcome (compound
annual growth in
adjusted1 EPS)
10% p.a.
25%
Greater than 10% p.a. but
Determined on a straight-
less than 17% p.a.
line basis between 25% and
20%
17% p.a. or greater
100%
100%
In addition to the EPS targets, the extent to which each award vested was subject to the
Committee’s assessment of the overall financial performance of the Company during the
performance period. The Committee considered this performance and concluded that vesting
at 100% was reflective of the overall financial performance of the Company such that vesting at
that level should be approved.
In the single figure of remuneration table on page 89, the full value of the awards is shown. The
award was earned over the three-year period 2016–2018 and the value earned reflects the
significant increase in the share price over that period. We have illustrated below the proportion
of the value which is attributable to the starting value of the award and the proportion
attributable to the growth in the share price.
£224,400 (66%)
£115,600 (34%)
£340,000
50,000
100,000
150,000
200,000
250,000
300,000
350,000
Value attributable to starting share price
Value attributable to growth in value
PSP awards
granted in 2018
In the Directors’ Remuneration Policy approved at the 2018 AGM, we increased the PSP limit
from 100% of salary to 150% of salary. However, the purpose of the increase was to provide
flexibility over the life of the policy and we have not used that additional headroom nor granted
at the previous maximum of 100% of salary. In 2018, each Executive Director was granted an
award over 18,500 shares, representing an award over the following percentages of salary*:
Rod Flavell:
47%
Sheila Flavell: 63%
Mike McLaren:
65%
Andy Brown: 63%
1 The Committee has at its discretion assessed performance outcome based upon adjusted EPS as defined in Note 12 in the Consolidated Financial Statements.
* Calculated by reference to the salary applying with effect from 1 April 2018
87
Strategic ReportGovernanceFinancial StatementsFDM Group (Holdings) plcAnnual Report and Accounts 2018
Remuneration in 2019
The policy approved at the 2018 AGM will continue to apply for 2019 and further information is given in the Annual Report on
Remuneration. In summary, there are no significant changes to the approach to the application of the policy in 2018.
Salary:
Executive Directors’ salaries for 2019 are intended to remain at the levels set with effect from 1 April
2018, as set out on page 92.
Annual Bonus:
Executive Directors’ annual bonus opportunity will continue to be limited to 100% of salary, subject
to the achievement of stretching targets based on PBT and Mountie revenue.
PSP:
PSP awards will be granted at the level of up to 100% of salary.
As in previous years, the awards will be subject to performance conditions based on growth in EPS.
In setting the targets for the PSP awards, the Committee has considered the Company’s continued
growth and maturity, and market conditions. The Committee was mindful of the need to ensure that
the targets reflect an appropriate level of stretch, and having regard to both internal and external
forecasts, the Committee has set the target ranges as 8% to 13%. The Committee regards these
targets ranges as requiring the same level of stretch as the targets for previous awards. Any vesting
will be subject to the Committee’s assessment of the overall financial performance of the Company
over the performance period.
Although the policy only requires the application of a post-vesting “holding period” if awards are
granted to current Executive Directors over shares with a value in excess of 100% of salary, we have
agreed that a two year holding period will apply to the awards granted in 2019 and in future years.
Variable pay:
We have extended the circumstances in which recovery provisions (“malus” and “clawback”) may be
applied to the annual bonus and PSP awards, including as a “trigger” event to these actions material
corporate failure and serious reputational damage.
The Committee recognises the benefits of employee share ownership, which is fundamental to the Company’s culture, and is
reflected in the wide participation in our share incentive plans. In order to broaden the scope and benefits of employee share
ownership the Company has adopted an all-employee share plan which will be offered to employees internationally. This will
enable all employees to purchase shares in the Company and receive additional shares depending on the period of time for
which the purchased shares are retained. This will enable a much broader population of employees to benefit from share
ownership and will act as a tool to aide retention. Whilst this is an all-employee share plan, the Executive Directors will not
participate in it.
Feedback
We always welcome feedback from shareholders on any aspect of our Directors’ remuneration and will continue to monitor our
remuneration policy to ensure it remains aligned to the business strategy and delivery of shareholder value.
Peter Whiting
Chairman of the Remuneration Committee
5 March 2019
88
FDM Group (Holdings) plcAnnual Report and Accounts 2018
Remuneration Report
Annual Report on Remuneration
Audited Section
The Audited Section of this report comprises only the following sections:
• Single figure table;
• Annual bonus for 2018;
• Long term incentives vesting in respect of 2018;
• Directors’ shareholding and share interests;
• Performance Share Plan awards granted in 2018.
Single figure table
The table below details the total remuneration receivable by each Director for the financial years ended 31 December 2018 and
31 December 2017. Where necessary, further explanation of the values provided is included in the notes to the table or the
additional information that follows it in relation to the 2018 annual bonus and the long term incentives vesting in respect of 2018.
Salary
and fees
£000
Benefits
£000
Annual bonus
£000
Long term
incentives
£000
Pension
£000
Total
remuneration
£000
Executive Directors
Rod Flavell
Sheila Flavell
Mike McLaren
Andy Brown
Non-Executive Directors
Ivan Martin
Peter Whiting
Robin Taylor
Michelle Senecal de Fonseca
David Lister
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
395.1
367.5
293.5
273.0
282.2
262.5
293.5
273.0
149.0
131.0
65.5
52.0
56.8
47.0
48.0
42.0
48.0
42.0
20.2
19.6
13.4
13.0
14.7
13.8
13.7
13.3
–
–
–
–
–
–
–
–
–
–
229.5
294.0
170.5
218.4
163.9
210.0
170.5
218.4
–
–
–
–
–
–
–
–
–
–
340.0
443.5
340.0
443.5
340.0
443.5
340.0
443.5
–
–
–
–
–
–
–
–
–
–
10.2
9.5
7.6
7.1
7.3
6.8
7.8
8.2
–
–
–
–
–
–
–
–
–
–
995.0
1,134.1
825.0
955.0
808.1
936.6
825.5
956.4
149.0
131.0
65.5
52.0
56.8
47.0
48.0
42.0
48.0
42.0
The figures in the single figure table above are derived from the following:
Salary and fees
The total salaries and fees paid in respect of the year. The salaries and fees were increased with
effect from 1 April 2018 as described on page 92.
Benefits
Annual bonus
Long term
incentives
Pension
Value of benefits received in the year, comprising private medical insurance and car allowance.
The cash value of the bonuses earned in respect of the year. Bonuses were calculated by
reference to the salary earned in the year, and not solely by reference to the rate of salary
applying with effect from 1 April 2018.
The value of the Executive Directors’ long term incentives vesting by reference to performance
in 2018, calculated as set out below.
The cash value of Company pension contributions paid on behalf of the Executive Directors as
part of the Company’s defined contribution scheme.
89
Strategic ReportGovernanceFinancial StatementsFDM Group (Holdings) plcAnnual Report and Accounts 2018 Annual bonus for 2018
Each Executive Director’s annual bonus opportunity for 2018 was based on an adjusted profit before tax target (governing 80%
of the opportunity) and a Mountie revenue target (governing 20% of the opportunity). The targets set are detailed in the table
below, along with performance against those targets.
While the remuneration policy permits a payment of 20% of the maximum payable upon achieving a threshold level of
performance, the Committee decided not to set such a target concerning adjusted profit before tax and Mountie revenue.
Adjusted profit before tax
Mountie revenue
Threshold
(20% of
maximum
payable)
n/a
n/a
Target
(50% of
maximum
payable)
£51.3m
£235.7m
Stretch
(100% of
maximum
payable)
£53.9m
£240.0m
Actual
performance
£51.3m
£239.0m
Bonus earned
(percentage
of maximum
payable)
50%
88%
Weighting
80%
20%
Accordingly, each Executive Director earned a bonus equal to 58% of their salary in respect of 2018.
Long term incentive awards vesting in respect of 2018
Each Executive Director was granted an award under the Company’s Performance Share Plan on 19 April 2016 over 40,000
shares. Each award was subject to a performance condition based on the compound annual growth in the Company’s Earnings
Per Share1 over the performance period 2016 – 2018 in accordance with the following table.
Compound annual growth
Percentage of the award
in EPS
10% p.a.
that will vest
25%
Greater than 10% p.a. but
Determined on a straight-
Performance outcome
(compound annual
growth in adjusted1 EPS)
Vesting outcome
less than 17% p.a.
line basis between 25% and
20%
100%
17% p.a. or greater
100%
100%
1 The Committee has at its discretion assessed performance outcome based upon adjusted EPS as defined in Note 12 in the Consolidated Financial Statements.
The extent to which the awards vested was subject to the Committee’s assessment of the overall financial performance of the
Company during the performance period. Taking into account the strong growth in EPS and the overall financial performance of
the Company over the three year period, the Committee confirmed that the vesting by reference to the principal EPS
performance condition was appropriate.
In the single figure table on page 89, the value for the PSPs is calculated by multiplying the number of shares in respect of which
each award vested (40,000) by £8.50 (being the closing share price of £8.51 on 5 March 2019, the vesting date, less the exercise
price of £0.01 per share).
Former Directors
During the year, no payments were made to any former Director of the Company or in respect of loss of office.
90
FDM Group (Holdings) plcAnnual Report and Accounts 2018 Remuneration Report
Directors’ shareholding and share interests
The Committee increased its formal shareholding guideline for Executive Directors from 100% of salary to 200% of salary in the
policy approved at the 2018 AGM. The current Executive Directors have shareholdings with values significantly in excess of this
guideline, reflecting the Company’s historic culture of share ownership and entrepreneurialism.
The interests as at 31 December 2018 were as follows:
Executive Directors
Rod Flavell
Sheila Flavell
Mike McLaren
Andy Brown
Non-Executive Directors
Ivan Martin
Robin Taylor
Peter Whiting
Michelle Senecal de Fonseca
David Lister
Ordinary
shares as at
31 December
2018
Number
Ordinary
shares value
as at
31 December
2018
£0001
8,251,255
8,251,254
499,295
4,540,801
61,307
61,307
3,710
33,738
8,000
5,226
10,453
5,459
–
59
39
78
41
–
Value
(x base
salary2)
151.7
204.2
12.8
112.3
0.4
0.7
1.1
0.8
–
1 Calculated based on the closing share price of 743 pence on 31 December 2018.
2 Calculated on base salary and fees at 31 December 2018.
There have been no changes in the Directors’ holdings in the share capital of the Company between 31 December 2018 and the
date the financial statements were approved.
Each Executive Director also holds awards under the Company’s PSP, as follows:
Director
Date of award
Number at 1
January 2018
Granted in
2018
Lapsed
in 2018
Exercised in
2018
Number at
31 December
2018
Rod Flavell
Sheila Flavell
Mike McLaren
Andy Brown
20 April 20151
19 April 2016
19 April 2017
1 June 20183
20 April 20151
19 April 2016
19 April 2017
1 June 20183
20 April 20151
19 April 2016
19 April 2017
1 June 20183
20 April 20151
19 April 2016
19 April 2017
1 June 20183
50,000
40,000
20,000
–
50,000
40,000
20,000
–
50,000
40,000
20,000
–
50,000
40,000
20,000
–
–
–
–
18,500
–
–
–
18,500
–
–
–
18,500
–
–
–
18,500
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
50,000
–
–
–
50,000
–
–
–
50,000
–
–
–
50,000
–
–
–
–
40,000
20,000
18,500
–
40,000
20,000
18,500
–
40,000
20,000
18,500
–
40,000
20,000
18,500
Status
Exercised
Vested2
Unvested
Unvested
Exercised
Vested2
Unvested
Unvested
Exercised
Vested2
Unvested
Unvested
Exercised
Vested2
Unvested
Unvested
1 Each award granted in 2015 was granted as an “Approved PSP” award to take account of potential tax advantages for the participant and Company. Each award
consisted of a PSP award over 40,937 shares, a tax qualifying option over 9,063 shares with an exercise price of £3.31 per share and a “Linked Award” which is
principally to fund the exercise price of the option. Each award was exercised on 8 May 2018 when, taking into account the share price, the Linked Award was exercised
over 2,971 shares and lapsed over the balance of the shares subject to it. As the Linked Award was principally to fund the exercise price of the tax qualifying option,
each award was equivalent to a PSP award over 50,000 shares.
2 The awards granted in 2016 vested on 5 March 2019, as described on page 90.
3 Each award granted in 2018 was granted as an “Approved PSP” award, as with the 2015 awards. Each award consisted of a PSP award over 15,562 shares, a tax qualifying
option over 2,938 shares with an exercise price of £10.21 per share and a “Linked Award” which is principally to fund the exercise price of the option. As the Linked
Award is principally to fund the exercise price of the tax qualifying option, in practice, the award is equivalent to a PSP award over 18,500 shares
91
Strategic ReportGovernanceFinancial StatementsFDM Group (Holdings) plcAnnual Report and Accounts 2018 Performance Share Plan awards granted in 2018
Each Executive Director was granted an award under the Company’s PSP on 1 June 2018 as set out below.
Award1
PSP award
Tax qualifying option
Number of shares
Exercise price per share
Face value of award
15,562
2,938
£0.01
£10.21
£188,885
1 Each award was granted as an “Approved PSP” award to take account of potential tax advantages for the participant and Company. In addition to the PSP award and tax
qualifying option, each Executive Director was granted a “linked Award” under the PSP which is principally to fund the exercise price of the option. If the tax qualifying
option is exercised at a gain, the Linked Award will be exercisable over such number of shares as have a market value at the date of exercise equal to the aggregate
exercise price of the tax qualifying option. If the tax qualifying option is not capable of exercise at a gain and is released, the Linked Award may be exercised in respect
of 2,938 shares, subject to the satisfaction of the applicable performance conditions.
The face value of the award is calculated by multiplying the number of shares subject to the PSP award (18,500) by £10.21 being
the average share price over the three business days preceding the date of grant which was used to determine the exercise price
of the tax qualifying option. As the Linked Award is principally to fund the exercise price of the tax qualifying option, it is not
taken into account for these purposes. In practice, the value of the award is the same as if only a PSP award over 18,500 shares
was awarded.
The awards will vest based on compound annual EPS growth in line with the following schedule:
Compound annual growth in adjusted1 EPS
Percentage of the award that will vest
10% p.a.
Greater than 10% p.a. but less than 15% p.a.
15% p.a. or greater
25%
Determined on a straight-line basis between 25% and 100%
100%
1 The Committee has discretion to adjust EPS for the purposes of the PSP where it considers it appropriate to do so (for example, to reflect a material acquisition and/ or
divestment of a Group business) and to assess performance on a fair and consistent basis from year to year.
The extent to which the awards vest will be subject to the Committee’s assessment of the overall financial performance of the
Company during the performance period. Final levels of vesting may be reduced should the Committee feel that the calculated
levels do not reflect the performance of the Company.
Approach to Directors’ remuneration for 2019
Base salary and fees
As set out on page 85 the annual fee for the Chairman will increase to £165,000 with effect from 5 March 2019, on the appointment
of David Lister to the role. It is not proposed to increase Executive Director salaries or the fees of the Non-Executive Directors for
2019, and the salaries and fees that are intended to apply are those which have applied since 1 April 2018, as set out below.
Rod Flavell (Chief Executive Officer)
Sheila Flavell (Chief Operating Officer)
Mike McLaren (Chief Financial Officer)
Andy Brown (Chief Commercial Officer)
Ivan Martin (Chairman until 5 March 2019)
David Lister (Chairman with effect from 5 March 2019)
Non-Executive Director
Senior Independent Director
Committee Chairman (Audit Committee and Remuneration Committee)
Committee Chairman (Nomination Committee)
Base annual salary
£404,250
£300,300
£288,750
£300,300
Annual fee
£150,000
£165,000
£50,000
£10,000
£10,000
£5,000
Annual bonus for 2019
The maximum annual bonus opportunity for all Executive Directors for 2019 is 100% of salary; 80% of the bonus opportunity will
be dependent on adjusted group profit before tax, with the remaining 20% based on Mountie revenue. The Committee considers
that the details of the 2019 targets are commercially sensitive and they are not disclosed in this report, but will be disclosed in
next year’s report.
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FDM Group (Holdings) plcAnnual Report and Accounts 2018 Remuneration Report
Long Term Incentives for 2019
The Committee proposes to grant awards under the PSP in respect of 2019. In accordance with the Directors’ remuneration
policy, the maximum quantum of award granted to any Executive Director will be up to 100% of salary. The vesting of the awards
will be subject to performance conditions based on compound annual growth in adjusted earnings per share over the three-year
performance period as follows:
Compound annual growth in adjusted1 EPS
Percentage of the award that will vest
8% p.a.
25%
Greater than 8% p.a. but less than 13% p.a.
Determined on a straight-line basis between 25% and 100%
13% p.a. or greater
100%
1 The Committee has discretion to adjust EPS for the purposes of the PSP where it considers it appropriate to do so (for example, to reflect a material acquisition and/ or
divestment of a Group business) and to assess performance on a fair and consistent basis from year to year.
The extent to which the awards vest will be subject to the Committee’s assessment of the overall financial performance of the
Company during the performance period. Final levels of vesting may be reduced should the Committee feel that the calculated
levels do not reflect the performance of the Company.
Although the policy only requires the addition of a post-vesting “holding period” if awards are granted to current Executive
Directors over shares with a value in excess of 100% of salary, we have agreed that a two year holding period will apply to the
awards granted in 2019 and in future years.
Performance graph and historical Chief Executive Officer remuneration outcomes
The graph below shows the Company’s Total Shareholder Return (“TSR”) performance since the date of listing compared to the
FTSE 250 index; the FTSE 250 index was chosen as the Company was a constituent of that index during the year.
400
350
300
250
200
150
100
50
)
0
0
1
o
t
d
e
s
a
b
e
r
(
n
r
u
t
e
R
r
e
d
o
h
e
r
a
h
s
l
l
a
t
o
T
Jun
2014
Sep
2014
Dec
2014
Mar
2015
Jun
2015
Sep
2015
Dec
2015
Mar
2016
Jun
2016
Sep
2016
Dec
2016
Mar
2017
Jun
2017
Sep
2017
Dec
2017
Mar
2018
Jun
2018
Sep
2018
Dec
2018
FDM
FTSE 250
The table below details the total remuneration, annual bonus and LTIP vesting (as a percentage of the maximum opportunity) for
the Chief Executive Officer (“CEO”) for the last nine years. Note that for 2014 this is the remuneration received for the whole of
2014 and so is not directly comparable to the TSR performance chart above, which is for the period from 20 June 2014.
Total remuneration (£000)
Annual bonus as a % of maximum
opportunity
Long Term Incentives as a % of
maximum opportunity
2010
2011
2012
2013
2014
2015
2016
2017
2018
455.2
100%
639.2
100%
686.2
100%
547.7
658.5
668.1
764.5
1,134.1
995.0
68%
55%
82%
100%
80%
58%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
100%
100%
93
Strategic ReportGovernanceFinancial StatementsFDM Group (Holdings) plcAnnual Report and Accounts 2018
Change in CEO remuneration in relation to the wider workforce
The table below shows the percentage change in salary, benefits and annual bonus for the CEO and the wider workforce
between the financial years 2017 and 2018. For these purposes, the wider workforce includes all UK employees excluding
Mounties, and also excludes employees based overseas in order to exclude the effects of fluctuating exchange rates. Mounties
have been excluded from the UK wider workforce numbers to ensure a more meaningful comparison to the CEO’s remuneration
as their remuneration is not subject to the same annual review process as the rest of the UK workforce.
Percentage change
Salary1
Taxable benefits
Annual bonus
CEO
+7.5%
+3.1%
Wider
workforce
+10.7%
0%
–21.9%
+11.7%
1 The CEO’s salary was increased by 10% with effect from 1 April 2018, recognising that the average salary increase of the Executive Directors since the Company’s IPO
had been less than that of the wider workforce and that no Executive Director received a salary increase in 2017. This increase was below the increase for the UK
workforce (excluding Mounties) in 2017 and 2018 combined. Executive Director salaries are not intended to be increased in 2019. The 7.5% increase in the table above
reflects that the increase applied with effect from 1 April 2018.
CEO pay ratio
The following table sets out the ratio of the CEO’s total remuneration in respect of the 2018 financial year (taken from the single
figure table on page 89) to the 25th percentile, 50th percentile i.e. the median) and the 75th percentile full-time equivalent (FTE)
of the Company’s UK employees. Under the Companies (Miscellaneous Reporting) Regulations 2018 the Company will be
required to disclose this information in 2020 respect of the financial year ending 31 December 2019, but is disclosing this year on
a voluntary basis in respect of the financial year ended 31 December 2018. For consistency with the ‘change in CEO remuneration
in relation to the wider workforce’ disclosure, the table below also provides the same ratio in respect of the Company’s UK FTE
employees excluding Mounties. As outlined above, this reflects the fact that Mounties’ remuneration is not subject to the same
annual review process as the rest of the UK workforce.
Total remuneration
in respect of 2018
(salary component of
total remuneration)
Ratio of CEO total
remuneration to
employee total
remuneration
in respect of 2018
Total remuneration
excluding Mounties in
respect of 2018
(salary component of
total remuneration)
Ratio of CEO total
remuneration
to employee total
remuneration
(excluding Mounties)
in respect of 2018
CEO
25th percentile FTE
of UK employees
50th percentile (median) FTE
of UK employees
75th percentile FTE
of UK employees
£995,000
(£395,100)
£23,015
(£19,500)
£24,722
(£19,500)
£32,157
(£23,902)
N/A
43:1
40:1
31:1
£995,000
(£395,100)
£27,627
(£25,838)
£43,596
(£41,349)
£72,100
(£48,500)
N/A
36:1
23:1
14:1
The Company adopted “Option A” in the regulations for the purposes of calculating the pay ratios as it considers this to be the
most accurate method. Remuneration for other employees for the purposes of the calculations was as at 31 December 2018.
In calculating the ratio for all UK employees in the above table, the Company has determined the total FTE remuneration for all
its UK employees for the financial year and has then ranked those employees based on their total FTE remuneration from low to
high. The employees whose remuneration places them at the 25th, 50th (median) and 75th percentile points in this ranking have
then been identified. Mounties were then excluded and the process repeated to calculate the ratio for all UK employees
excluding Mounties.
As this is the Company’s first year of reporting the CEO pay ratio, there are no changes to report against the previous year.
• The Group offers all its employees (including Mounties), who form a large portion of the UK workforce and in many cases are
entering work for the first time) a level of pay and other benefits which reflects the competitive market in which the Group
operates, but which enables the Group to recruit and retain high calibre individuals.
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FDM Group (Holdings) plcAnnual Report and Accounts 2018 Remuneration Report
• The CEO’s remuneration has increased relatively modestly compared to the significant growth in the size and complexity of the
Group over the same period, and the CEO’s salary remains in the lowest quartile when compared with companies in the lower
half of the FTSE 250.
• The Group ‘s culture ensures that percentage increases in the Executive Directors’ salaries remain broadly in line with
increases in remuneration across all employees, as reflected in the disclosure on prior page (Change in CEO Remuneration in
Relation to the Wider Workforce). In addition, as noted above, there is no intention to increase the salaries of any Executive
Director in 2019.
• To focus on the Group’s culture of broad employee equity incentivisation and enable greater participation for employees in the
Group’s share plans the values of long term incentives awarded to the CEO and other Executive Directors have historically
been significantly lower than the maximum permitted by the Directors’ Remuneration Policy.
Spend on pay
The following table sets out the percentage change in dividends paid and the overall expenditure on pay (as a whole across the
organisation).
Total dividends
Overall expenditure on pay
Year ended
31 December
2017
£000
Year ended
31 December
2018
£000
23,976
30,718
142,840
165,477
Percentage
change
28%
16%
Shareholder approval of our Directors’ Remuneration Policy and Directors’ Remuneration Report
At the AGM held on 26 April 2018, both the Directors’ Remuneration Policy and Directors’ Remuneration Report received strong
support from shareholders. The results of the votes are set out below:
Resolution
Approve the Directors’ Remuneration Policy
Approve the Directors’ Remuneration Report
Votes
for
88,367,484
88,771,760
% of
votes for
97.87%
98.95%
Votes
against
1,905,746
926,309
% votes
against
2.11%
1.03%
Votes
withheld
0
575,161
Advisors
During the financial year, the Committee received independent advice from Deloitte LLP, which was appointed by the Committee,
in relation to the Committee’s consideration of matters relating to Directors’ Remuneration. Deloitte LLP was appointed in 2014
following a formal tender process. Fees for advice provided to the Remuneration Committee during the year were £7,100. Fees
were charged on a time and disbursements basis.
Deloitte LLP is a member of the Remuneration Consultants Group and voluntarily operates under its code of conduct in its
dealing with the Remuneration Committee. The Remuneration Committee continued to review the appointment of Deloitte LLP
and is satisfied that all advice received was objective and independent.
Deloitte also provide advice to the Company on the operation of its employee share plans and employee benefit trust.
The Chairman, Chief Executive Officer and other members of the executive management attend the Committee by invitation to
provide input, but no Executive Director or other member of management is present when his or her own remuneration is discussed.
Details of individual attendances by Directors at the Remuneration Committee meetings during 2018 are set out on page 64.
95
Strategic ReportGovernanceFinancial StatementsFDM Group (Holdings) plcAnnual Report and Accounts 2018 Directors’ Remuneration Policy
The Company’s Directors’ Remuneration Policy was approved by shareholders at the AGM held on 26 April 2018. Since we are
not seeking shareholder approval for a revised policy at the 2019 AGM, we have set out below just the “policy tables”, but with
certain date specific references updated. The full policy as approved at the 2018 AGM is available on the Company’s website
at www.fdmgroup.com.
Executive Directors
Purpose and
link to strategy
Operation
Maximum opportunity
Performance
measures
Base salary
Core element of
fixed
remuneration to
reflect the
individual’s role
and experience
as part of a
broadly market
competitive total
remuneration
package, to
enable the Group
to recruit and
maintain the
required skills
and expertise to
enable it to
achieve its
strategy.
Salaries are normally reviewed annually.
Salary levels are determined taking into
account a range of factors, which may
include (but are not limited to):
• Underlying Company performance;
• The size and scope of the Executive
Director’s role and responsibilities;
• The Executive Director’s skill, experience
and performance;
• Salary levels for equivalent roles at other
listed companies of a similar size and/ or
complexity to the Group; and
• Pay and conditions elsewhere in the
Group.
Benefits
To provide
benefits as part
of a broadly
market-
competitive total
remuneration
package.
Executive Directors receive benefits set at
an appropriate level taking into account
total remuneration, market practice, the
benefits provided to other employees in
the Group and individual circumstances.
Benefits provided currently include car
allowances and private health insurance.
Other benefits may be provided based on
individual circumstances. These may
include, for example, relocation expenses
and expatriate allowances.
96
Not applicable.
Not applicable.
Whilst there is no
maximum salary level,
salary increases will
normally be within the
range of increases
awarded to the wider
workforce in percentage of
salary terms.
Salary increases above this
level may be awarded in
appropriate circumstances
including but not limited to:
• Where an Executive
Director has been
promoted or has had a
change in scope or
responsibility;
• To reflect an individual’s
development or
performance in role (e.g.
a newly appointed
Executive Director being
moved to align with the
market over time); or
• Where there has been a
change in the size and/
or complexity of the
business.
Such increases may be
implemented over such
time period as the
Committee deems
appropriate.
Whilst the Committee has
not set an absolute
maximum on the level of
benefits Executive
Directors may receive, the
value of benefits is set at a
level which the Committee
considers to be
appropriately positioned
taking into account relevant
market levels based on the
nature and location of the
role, the level of benefits
provided for other
employees in the Group and
individual circumstances.
FDM Group (Holdings) plcAnnual Report and Accounts 2018 Remuneration Report
Purpose and
link to strategy
Operation
Retirement benefits
Maximum opportunity
Performance
measures
Maximum company
pension contribution (or
cash allowance equivalent)
for existing Executive
Directors of 3% of salary.
However, the Committee
may permit a higher
company pension
contribution (or cash
allowance equivalent) for
any new Executive Director,
of up to 15% of salary.
Maximum bonus
opportunity for Executive
Directors is 150% of base
salary.
To provide an
appropriate level
of retirement
benefit (or cash
allowance
equivalent) as
part of a broadly
market-
competitive total
remuneration
package.
Annual bonus
Rewards
Executive
Directors for
achieving
financial,
strategic and/ or
individual targets
in the relevant
year, to provide
an incentive for
the Group’s
employees to
achieve goals
aligned with the
Group’s strategy.
Executive Directors are eligible to participate
in the Company’s defined contribution
scheme.
In appropriate circumstances, such as where
contributions exceed the annual or lifetime
allowance, Executive Directors may take a
taxable cash supplement instead of
contributions to a pension plan.
Performance measures and targets are
reviewed annually and pay-out levels are
determined by the Committee after the
year end based on performance against the
targets.
The Committee has discretion to amend
the pay-out should any formulaic outcome
not reflect the Committee’s assessment of
overall business performance.
Where a bonus opportunity is offered in
excess of 100% of salary, up to 33% of the
bonus earned will be deferred into an
award of shares, which shall be released
following the end of a two-year deferral
period. No bonus will be deferred where
the deferred amount would otherwise be
below £10,000.
Deferred bonus awards may take the form
of a nil or nominal cost option to acquire
the relevant shares following release, or as
a requirement to invest the after tax
portion of the bonus into shares which
must be retained until release.
The Committee may award dividend
equivalents on deferred amounts to reflect
dividends that would have been paid on the
deferred award shares over the period to
their release; these dividend equivalents
may be paid in cash or shares and may
assume the reinvestment of dividends into
Company shares on such basis as the
Committee determines.
Recovery
Recovery provisions apply as summarised
below the table.
Not applicable.
Performance
measures and targets
are set annually
reflecting the
Company’s strategy
and aligned with key
financial, strategic
and/or individual
targets.
Pay-out of up to 20%
of maximum for
threshold
performance (the
minimum level of
performance
resulting in any
payment), 50% of
maximum for
on-target
performance and full
pay-out for stretch
performance with
straight-line vesting in
between each of the
points.
At least 80% of the
bonus will be
assessed against key
financial performance
measures which may
include revenue,
pre-tax profit or other
key financial
performance metrics
of the Company. The
balance of the bonus
may be assessed
against non-financial
strategic measures
and/ or individual
performance.
97
Strategic ReportGovernanceFinancial StatementsFDM Group (Holdings) plcAnnual Report and Accounts 2018 Purpose and
link to strategy
Operation
Performance Share Plan (“PSP”)
Maximum opportunity
Performance
measures
To incentivise
Executive
Directors over
the longer term,
and to deliver
performance-
related pay, with
a clear line of
sight for
Executives and
direct alignment
with
shareholders’
interests.
Awards under the PSP will typically be
granted as a conditional award or the grant
of a nil or nominal cost option, in either
case vesting subject to the achievement of
specified performance conditions, over a
period of at least three years.
Awards will vest following assessment of
the performance conditions. Other than as
noted below in relation to the existing
Executive Directors, awards will be granted
subject to a holding period of two years
beginning on the vesting date either on the
basis that they will not ordinarily be
released (so that the participant is entitled
to acquire the shares) until the end of that
period or on the basis that the participant
is entitled to acquire shares following the
assessment of the applicable performance
condition but that (other than as regards
sales to cover tax liabilities) the award is
not released (so that the participant is able
to dispose of those shares) until the end of
the holding period.
The holding period will apply to existing
Executive Directors only in respect of any
award with a value at grant (ignoring any
CSOP option granted as part of an APSP
award as discussed below) in excess of
100% of salary.
Awards under the PSP may be granted on
the basis that the number of shares shall be
increased to reflect dividends paid over the
vesting period and/or any holding period; these
dividend equivalents may be paid in cash or
shares and may assume the reinvestment
of dividends into Company shares on such
basis as the Committee determines.
The Committee may at its discretion
structure awards as APSP awards
comprising both an HMRC tax-favoured
option granted under the Company Share
Option Plan (CSOP) and a PSP award. APSP
awards enable an Executive Director and
the Company to benefit from HMRC
tax-favoured option treatment in respect of
part of the award without increasing the
pre-tax value delivered to participants.
APSP awards would be structured as either:
(1) a tax-favoured option and a PSP award,
with the vesting of the PSP award scaled
back to take account of any gain made on
exercise of the tax-favoured option; or (2) a
tax favoured option, PSP award over a
reduced number of shares and separate
PSP award which is to fund the exercise
price of the tax-favoured option.
Other than to enable the grant of APSP
awards, the Company will not grant awards
to Executive Directors under the CSOP.
Recovery
Recovery provisions apply as summarised
on the next page.
The usual maximum award
level under the PSP in
respect of any financial
year for Executive
Directors is awards over
shares with a value of
150% of salary.
The Committee has
discretion to grant awards
under the PSP in respect of
any financial year for
Executive Directors up to a
maximum of 200% of
salary.
The Committee may at its
discretion structure
awards as Approved
Performance Share Plan
(“APSP”) awards as
described in the
“Operation” column.
Reflecting the interaction
between the tax-favoured
option and the PSP award,
the shares subject to the
tax-favoured option are
not taken into account
when assessing these
limits in order to avoid
double counting.
Performance will be
assessed against
challenging
performance targets.
Performance will be
based typically on
financial measures
including, but not
limited to, EPS
growth.
Awards (other than, in
accordance with the
requirements of the
applicable tax
legislation, any
tax-favoured option
granted as part of an
APSP award) will also
be subject to a
financial underpin
such that PSP awards
will only vest if the
Committee is satisfied
with the overall
performance of the
Company.
Performance
measures (and their
weighting where
there is more than
one measure) are
reviewed annually to
maintain
appropriateness and
relevance.
For threshold
performance up to
25% of the award will
vest, rising to 100% of
the award vesting for
maximum
performance,
typically with
straight-line vesting in
between. Below
threshold
performance, the
award will not vest.
Where a tax-favoured
option is granted as
part of an APSP
award, the same
performance
conditions will apply
to the tax-favoured
option as apply to the
PSP award.
98
FDM Group (Holdings) plcAnnual Report and Accounts 2018 Remuneration Report
PSP
At the discretion of the Committee,
unvested awards may be reduced,
cancelled or have further conditions
imposed in certain circumstances
including (but not limited to):
• A material misstatement of the
Company’s audited financial results;
• A material failure of risk management
by the Company or any subsidiary
company within the Group; or
• A material miscalculation of any
performance measure.
For up to three years following the
vesting of an award, the Committee may
require the repayment (which may be
effected by the cancellation or forfeiture
of a vested but unreleased award) of
some or the entire award in the event of
fraud or dishonesty leading to a
material misstatement of financial
results.
Information supporting the
policy table
Explanation of performance
measures chosen
Performance measures for the annual
Operation of the Company’s
share plans
The PSP and any deferred bonus plan
will be operated by the Committee in
accordance with their rules, including
the ability to adjust the number of
bonus and PSP awards which reflect the
shares subject to awards in the event of
Company’s strategy are selected.
a variation of share capital, demerger,
Stretching performance targets are set
delisting, special dividend, rights issue
each year by the Committee taking into
or other event which may, in the opinion
account a number of different factors.
of the Committee, affect the current or
future value of shares.
The annual bonus can be assessed
against financial, strategic and/ or
At the discretion of the Committee,
individual targets determined by the
awards under the PSP and any deferred
Committee with at least 80% subject to
bonus plan may be settled in cash (or
key financial targets. The Committee
granted as a cash award over a notional
considers financial measures like profit
number of shares).
before tax and revenue to be important
performance metrics because they
encourage behaviours that facilitate
profitable growth and the successful
future strategic development of the
business.
Shareholding guidelines
To align the interests of Executive
Directors with those of shareholders,
the Committee has adopted
shareholding guidelines. Executive
Directors are required to retain half of
Long-term performance measures are
any shares acquired under the PSP
chosen by the Committee to provide a
and any deferred bonus award (after
robust and transparent basis on which
sales to cover tax) until such time as
to measure the Company’s performance
their holding has a value equal to 200%
over the longer term and to provide
of salary.
alignment with the business strategy.
They are selected to be aligned with the
Shares subject to PSP awards which
interests of shareholders and to drive
have vested but not been released,
business performance. Currently EPS
shares subject to released PSP awards
growth is considered to be a key
which have not been exercised, and
measure of success as it encapsulates
shares subject to deferred bonus
the outcomes of many of the strategic
awards count towards the guideline on a
drivers of the business, and helps align
net of assumed tax basis.
management incentives with growth in
shareholder value.
The Committee retains the discretion to
Recovery
Annual bonus
For up to three years following the
adjust or set different performance
measures or targets where it considers
it appropriate to do so (for example, to
payment of the non-deferred part of an
annual bonus award, the Committee
may require the repayment of some or
reflect a change in strategy, a material
acquisition and/ or a divestment of a
Group business or a change in prevailing
the entire cash award paid (or may
cancel or reduce any deferred share
award or require the forfeiture of shares
market conditions) and to assess
acquired pursuant to a deferred share
performance on a fair and consistent
award) in the event of fraud or
basis from year to year.
dishonesty leading to a material
misstatement of financial results.
99
Strategic ReportGovernanceFinancial StatementsFDM Group (Holdings) plcAnnual Report and Accounts 2018 Non-Executive Directors
Purpose and link to strategy
Operation
Other items
To enable the Company to attract and
retain Non-Executive Directors of the
required calibre by offering market-
competitive rates.
Non-Executive Directors may be eligible
to be reimbursed travel and subsistence
costs incurred in the performance of
their duties and to receive other benefits
relevant to the performance of their
roles.
The Non-Executive Directors do not
participate in the Company’s annual
bonus, share plans or pension schemes
or other benefit in kind arrangements.
The Chairman is paid a basic Chairman
fee and additional fees for chairmanship
of any Board committees.
Non-Executive Directors receive a basic
fee and additional fees for chairmanship
of any Board committees.
The Chairman’s fee is determined by the
Remuneration Committee and the fees of
the other Non-Executive Directors are
determined by the Board.
Fees are based on the time commitment
and contribution expected for the role
and the level of fees paid to Non-
Executive Directors serving on the board
of similar-sized UK listed companies.
Overall fees paid to Non-Executive
Directors will remain within the limit set
by the Company’s Articles of Association
from time to time.
Approval
This Report was approved by the Board on 5 March 2019 and signed on its behalf by:
Peter Whiting
Chairman of the Remuneration Committee
5 March 2019
100
FDM Group (Holdings) plcAnnual Report and Accounts 2018 Reflecting our culture and
the importance of employee share
ownership, we extend our share plan
awards widely within the Group
101
Strategic ReportGovernanceFinancial StatementsFDM Group (Holdings) plcAnnual Report and Accounts 2018 Directors’ Report
The Directors present the Directors’ Report and audited Consolidated Financial Statements of FDM Group (Holdings) plc for the
year ended 31 December 2018.
Principal activities, business review and future developments
The principal activity of the Group is the provision of professional services focusing principally on Information Technology. The
Strategic Report on pages 2 to 53 provides a review of the Group’s performance during the financial year as well as its future
prospects.
Results and dividends
The Group reported a profit after tax for the year of £37.1 million (2017: £32.0 million). Results for the year are set out in the
Consolidated Income Statement on page 115.
The Directors propose a final dividend of 15.5 pence per share. Subject to shareholder approval, this dividend will be paid on
14 June 2019 to shareholders of record on 24 May 2019. An interim dividend of 14.5 pence per share was declared by the
Directors on 20 July 2018 and was paid on 21 September 2018 to holders of record on 24 August 2018.
Directors
The Directors of the Company who were in office during the year and up to the date of signing the financial statements unless
otherwise stated, were:
Ivan Martin
Roderick Flavell
Sheila Flavell
Michael McLaren
Andrew Brown
Peter Whiting
Robin Taylor
Non-Executive Chairman
Chief Executive Officer
Chief Operating Officer
Chief Financial Officer
Chief Commercial Officer
Non-Executive Director
Non-Executive Director
Michelle Senecal de Fonseca
Non-Executive Director
David Lister
Non-Executive Director
The biographies of the currently serving Directors are provided on pages 56 to 59 of this report.
As announced by the Company on 7 February 2019, Ivan Martin will retire from the Board on 5 March 2019, and will be succeeded
by David Lister as Non-Executive Chairman. The Nomination Committee Report on pages 80 to 83 explains more about the
appointment of the new Chairman.
Director share interests
Details of the interests of Directors in the shares of the Company are provided on page 91 of this report.
Director long term incentive schemes
For the purposes of the UK Listing Authority Listing Rules section 9.8.4C R, details of the Group’s long term incentive schemes are
disclosed in the Remuneration Report starting on page 84. All other information required to be disclosed by Listing Rule section
9.8.4 R is not applicable for the year under review.
Directors’ indemnity and liability insurance
As permitted by the Articles of Association, the Directors have the benefit of an indemnity which is a qualifying third party
indemnity provision as defined by Section 234 of the Companies Act 2006. The indemnity was in force throughout the last
financial year and is currently in force. The Company also purchased and maintained throughout the financial year Directors’ and
Officers’ liability insurance in respect of itself and its Directors.
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FDM Group (Holdings) plcAnnual Report and Accounts 2018 Directors’ Report
Risk management objectives and policies
The Group through its operations is exposed to a number of risks. Details of the Group’s financial risk management objectives
and policies are set out in note 27 to the Consolidated Financial Statements. The principal risks that the Group faces are set out
on pages 46 to 52 of the Strategic Report.
Corporate governance
For details of the Corporate Governance report see pages 62 to 105. The Corporate Responsibility report, on pages 18 to 29
includes information about the Group’s employment policies and greenhouse gas emissions. The Corporate Responsibility report
also includes information on the steps taken by the Group to ensure that slavery and human trafficking are not taking place
within the Group’s business, in line with the Modern Slavery Act 2015.
Branches outside the UK
The Group operates branches in France, Denmark and Spain.
Substantial shareholders
As at 31 December 2018 and as at 25 February 2019, the Company had been advised, in accordance with the Disclosure and
Transparency Rules of the Financial Conduct Authority, of the following notifiable interests (whether directly or indirectly held) in
3% or more of its voting rights:
Substantial shareholder
Standard Life Aberdeen
Roderick Flavell
Sheila Flavell
Columbia Threadneedle Investments
Kames Capital
Majedie Asset Management
Andrew Brown
AXA Investment Managers
Oppenheimer Funds
JP Morgan Chase & Co
Investec Group
Baillie Gifford & Co
As at 31 December 2018
As at 25 February 2019
Direct/
indirect
interest
Indirect
Direct
Direct
Indirect
Direct
Indirect
Direct
Indirect
Indirect
Indirect
Indirect
Indirect
Number of
shares
% of issued
share capital
Number of
shares
% of issued
share capital
9,112,156
8,251,255
8,251,254
5,996,334
5,972,284
4,664,766
4,540,801
4,521,962
4,024,375
4,023,677
3,958,934
3,733,567
8.4%
7.6%
7.6%
5.5%
5.5%
4.3%
4.2%
4.2%
3.7%
3.7%
3.7%
3.5%
9,212,910
8,251,255
8,251,254
6,006,435
5,852,069
4,585,018
4,540,801
4,666,962
4,026,985
3,801,010
4,018,630
3,745,388
8.5%
7.6%
7.6%
5.6%
5.4%
4.2%
4.2%
4.3%
3.7%
3.5%
3.7%
3.5%
Political donations
The Group made no political donations in the year (2017: £nil).
Going concern
The Group’s business activities, together with the factors that are likely to affect its future development, performance and
position are summarised in the Strategic Report. The principal risks, uncertainties and risk management processes are also
described in the Strategic Report.
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 successfully. The Group’s forecasts
and projections show that it will continue to operate with adequate cash resources.
The Directors therefore have a reasonable expectation that the Company and the Group will have adequate resources to
continue in operational existence for the foreseeable future. Accordingly, the Directors continue to adopt the going concern basis
for preparing the financial statements.
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Strategic ReportGovernanceFinancial StatementsFDM Group (Holdings) plcAnnual Report and Accounts 2018 Greenhouse gas emissions
Details of the Group’s compliance with
legislation relating to greenhouse gas
emissions are set out on page 29 in the
Corporate Responsibility report.
Employee information
Information on the Group’s employee
policies is included on pages 20 and 21
in the Corporate Responsibility report.
Information on the Group’s policies in
respect of persons that become
disabled during their employment, and
the training, career development and
promotion of disabled persons, is set
out on page 20 in the Corporate
Responsibility report.
During 2018 the FDM Group Employee
Company law requires the Directors to
Benefit Trust was established to
purchase shares sold by option holders
upon exercise of options under the FDM
prepare financial statements for each
financial year. Under that law the
Directors have prepared the Group and
Performance Share Plan. The Group
Company financial statements in
accounts for its own shares held by the
accordance with International Financial
Trustee of the FDM Group Employee
Reporting Standards (“IFRSs”) as
Benefit Trust as a deduction from
shareholders’ funds.
adopted by the European Union (“EU”).
Under company law the Directors must
not approve the financial statements
Change of control
The Group has agreements in place with
unless they are satisfied that they give a
true and fair view of the state of affairs
certain of its banking customers that
of the Group and the Company and of
give the bank the right to terminate the
the profit or loss of the Group and
contract on a change of control
Company for that period. In preparing
following a takeover bid for the Group.
the financial statements, the Directors
The Group had a Revolving Credit
are required to:
Facility (“RCF”) with HSBC Bank plc,
• select suitable accounting policies and
We use a number of methods to consult
which expired on 14 August 2018 and
then apply them consistently;
our employees regularly so that their
was not renewed.
views can be taken into account in
making decisions that are likely to affect
their interests, and we encourage our
staff to become involved in FDM Group’s
performance through our discretionary
Performance Share Plan and our
all-employee Buy As You Earn share
plan. Further information on these
initiatives to engage with our employees
is set out on page 21 of the Corporate
Responsibility report.
Capital structure
The Group’s capital structure is detailed
in note 20 to the Consolidated Financial
The Group has no agreements with
employees or Directors that provide for
compensation for loss of office or
employment that occurs resulting from
a takeover bid.
The Group knows of no agreements
• state whether applicable IFRSs as
adopted by the EU have been
followed for the group financial
statements and IFRSs as adopted by
the EU have been followed for the
company financial statements,
subject to any material departures
disclosed and explained in the
financial statements;
under which holders of securities in the
• make judgements and accounting
Company may restrict votes or transfers
estimates that are reasonable and
in the Company’s shares.
prudent; and
Post balance sheet events
There have been no significant events to
• prepare the financial statements on
the going concern basis unless it is
inappropriate to presume that the
report since the date of the balance
group and parent company will
Statements. During 2018 the number of
sheet.
continue in business.
ordinary shares in issue increased from
107,517,506 at 1 January 2018 to
108,271,708 at 31 December 2018.
Investment in Own shares
During the AGM held on 26 April 2018,
the shareholders approved that up to
10% of the Company’s shares could be
purchased by the Company and held as
Related party transactions
The Group’s related party transactions
The Directors are also responsible for
safeguarding the assets of the Group
are detailed in note 26 to the
and Company and hence for taking
Consolidated Financial Statements.
reasonable steps for the prevention and
Independent auditor
In accordance with Section 487 of the
detection of fraud and other
irregularities.
Companies Act 2006, a resolution for
The Directors are responsible for
own shares. The authority expires at the
the re-appointment of
conclusion of the Company’s next
Annual General Meeting after the
PricewaterhouseCoopers LLP as auditor
of the Company is to be proposed at the
keeping adequate accounting records
that are sufficient to show and explain
the Group and Company’s transactions
passing of this resolution or, if earlier, at
forthcoming Annual General Meeting.
and disclose with reasonable accuracy
23:59 on 31 May 2019.
Statement of Directors’
responsibilities in respect of
the financial statements
The Directors are responsible for
at any time the financial position of the
Group and Company and enable them
to ensure that the financial statements
and the Directors’ Remuneration Report
comply with the Companies Act 2006
preparing the Annual Report and the
and, as regards the Group financial
financial statements in accordance with
statements, Article 4 of the IAS
applicable law and regulation.
Regulation.
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FDM Group (Holdings) plcAnnual Report and Accounts 2018 Directors’ Report
The Directors are responsible for the maintenance and integrity of the Company’s website. Legislation in the United Kingdom
governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Directors’ confirmations
The Directors consider that the Annual Report and Accounts, taken as a whole, is fair, balanced and understandable and
provides the information necessary for shareholders to assess the Group and Company’s position and performance, business
model and strategy.
Each of the Directors, whose names and functions are listed in the Directors’ Report confirm that, to the best of their knowledge:
• the Company financial statements, which have been prepared in accordance with IFRSs as adopted by the EU, give a true and
fair view of the assets, liabilities, financial position and profit of the Company;
• the Group financial statements, which have been prepared in accordance with IFRSs as adopted by the EU, give a true and fair
view of the assets, liabilities, financial position and profit of the Group; and
• the Strategic Report contained in this Annual Report includes a fair review of the development and performance of the
business and the position of the Group, together with a description of the principal risks and uncertainties that it faces.
In the case of each Director in office at the date the Directors’ Report is approved:
• so far as the Director is aware, there is no relevant audit information of which the Group and Company’s auditors are unaware;
and
• they have taken all the steps that they ought to have taken as a director in order to make themselves aware of any relevant
audit information and to establish that the Group and Company’s auditors are aware of that information.
The Directors’ Report has been approved by the Board of Directors of FDM Group (Holdings) plc on 5 March 2019 and signed on
its behalf by:
Rod Flavell
Chief Executive Officer
5 March 2019
Mike McLaren
Chief Financial Officer
5 March 2019
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Strategic ReportGovernanceFinancial StatementsFDM Group (Holdings) plcAnnual Report and Accounts 2018
106
FDM Group (Holdings) plcAnnual Report and Accounts 2018 Financial
Statements
In this section:
108
Independent auditors’ report to the members of
FDM Group (Holdings) plc
Consolidated Income Statement
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Cash Flows
115
116
117
118
119
120
141
142
143
144
148
Consolidated Statement of Changes in Equity
Notes to the Consolidated Financial Statements
Parent Company Statement of Financial Position
Parent Company Statement of Cash Flows
Parent Company Statement of Changes in Equity
Notes to the Parent Company Financial Statements
Shareholder Information
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Strategic ReportGovernanceFinancial StatementsFDM Group (Holdings) plcAnnual Report and Accounts 2018Notes to the Consolidated Financial Statements
Independent auditors’ report to the
members of FDM Group (Holdings) plc
Report on the audit of the financial statements
Opinion
In our opinion, FDM Group (Holdings) plc’s group financial statements and parent company financial statements (the “financial
statements”):
• give a true and fair view of the state of the group’s and of the parent company’s affairs as at 31 December 2018 and of the
group’s profit and the group’s and the parent company’s cash flows for the year then ended;
• have been properly prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the
European Union and, as regards the parent company’s financial statements, as applied in accordance with the provisions of the
Companies Act 2006; and
• have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards the group financial
statements, Article 4 of the IAS Regulation.
We have audited the financial statements, included within the Annual Report and Accounts (the “Annual Report”), which
comprise: the Consolidated and Parent Company Statements of Financial Position as at 31 December 2018; the Consolidated
Income Statement and Consolidated Statement of Comprehensive Income, the Consolidated and Parent Company Statements of
Cash Flows and the Consolidated and Parent Company Statements of Changes in Equity for the year then ended; and the notes to
the financial statements, which include a description of the significant accounting policies.
Our opinion is consistent with our reporting to the Audit Committee.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our
responsibilities under ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the financial statements section
of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We remained independent of the group in accordance with the ethical requirements that are relevant to our audit of the financial
statements in the UK, which includes the FRC’s Ethical Standard, as applicable to listed public interest entities, and we have
fulfilled our other ethical responsibilities in accordance with these requirements.
To the best of our knowledge and belief, we declare that non-audit services prohibited by the FRC’s Ethical Standard were not
provided to the group or the parent company.
Other than those disclosed in note 7 to the financial statements, we have provided no non-audit services to the group or the
parent company in the period from 1 January 2018 to 31 December 2018.
Our audit approach
Overview
• Overall group materiality: £2,410,000 (2017: £2,180,000), based on 5% of profit before tax.
• Overall parent company materiality: £540,000 (2017: £490,000), based on 1% of total assets.
Materiality
• The group financial statements are a consolidation of 15 reporting units.
• We performed full scope audits of the UK and USA reporting units.
• We audited the revenue, trade and other receivables and cash and cash equivalent balances of
Audit scope
the Canada, Hong Kong and Singapore reporting units.
• We also performed full scope audits of the centralised functions in the UK, comprising the parent
and intermediate holding companies.
Key audit
matters
• Our full scope audits covered 74% of revenue (with a further 19% coverage obtained through our
work on the Canada, Hong Kong and Singapore reporting units) and 87% of profit before tax.
• Revenue recognition in respect of uninvoiced amounts (Group).
• Share option plan expenses (Group and parent).
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FDM Group (Holdings) plcAnnual Report and Accounts 2018 Independent auditors’ report to the members of FDM Group (Holdings) plc
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements.
Capability of the audit in detecting irregularities, including fraud
Based on our understanding of the group and industry, we identified that the principal risks of non-compliance with laws and
regulations related to local employment laws, and we considered the extent to which non-compliance might have a material
effect on the financial statements. We also considered those laws and regulations that have a direct impact on the preparation of
the financial statements such as the Companies Act 2006 and The Listing Rules and Tax Regulation. We evaluated management’s
incentives and opportunities for fraudulent manipulation of the financial statements (including the risk of override of controls),
and determined that the principal risks were related to posting inappropriate journal entries to increase revenue or reduce
expenditure, and management bias in accounting estimates. Audit procedures performed by the engagement team included:
• Our tests included, but were not limited to, discussions with management, internal audit and the group’s legal advisors,
including consideration of known or suspected instances of non-compliance with laws and regulation and fraud;
• Review of any employment disputes or litigation to ensure there were no broader non-compliance issues with employment
laws and regulations
• review of reports from the group’s legal advisors;
• review of the financial statement disclosures to underlying supporting documentation;
• challenging assumptions and judgements made by management in their significant accounting estimates; and
• review of internal audit reports in so far as they related to the financial statements
There are inherent limitations in the audit procedures described above and the further removed non-compliance with laws and
regulations is from the events and transactions reflected in the financial statements, the less likely we would become aware of it.
Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error,
as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of the
financial statements of the current period and include the most significant assessed risks of material misstatement (whether or
not due to fraud) identified by the auditors, including those which had the greatest effect on: the overall audit strategy; the
allocation of resources in the audit; and directing the efforts of the engagement team. These matters, and any comments we
make on the results of our procedures thereon, were addressed in the context of our audit of the financial statements as a
whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. This is not a complete
list of all risks identified by our audit.
Key audit matter
How our audit addressed the key audit matter
Revenue recognition in respect of uninvoiced amounts
(Group)
Refer to note 3.3 (b) to the Consolidated Financial Statements
for the directors’ disclosures of the related accounting policies
and page 76 (‘Significant financial reporting items’) within the
Audit Committee Report.
At the year-end, revenue is accrued for work performed that
has not yet been invoiced. Within this estimate, revenue is
recognised for contracts either where services have been
provided but customer purchase orders have not yet been
finalised, or where consultants’ timesheets have not yet been
approved by the customer or have not been received by the
group.
There is some judgement in the recognition of this revenue, in
that management need to estimate the amount of work
performed by consultants before receipt of approved
timesheets, which could lead to an under or overstatement of
revenue and profit, whether intentionally or in error.
We gained an understanding from management of the key
assumptions underpinning the year end estimates of
uninvoiced sales and compared these assumptions with the
prior year.
We evaluated management’s estimate for uninvoiced
timesheets by comparing a sample of estimated timesheets to
the timesheet submitted post year end. We noted no material
exceptions in our testing.
We substantively tested the year end adjustment for
timesheets received but not invoiced by agreeing to
subsequent cash receipt or customer approval, in order to
identify any inappropriate recognition of revenue, noting no
material exceptions in our testing.
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Strategic ReportGovernanceFinancial StatementsFDM Group (Holdings) plcAnnual Report and Accounts 2018Notes to the Consolidated Financial Statements Key audit matter
How our audit addressed the key audit matter
Share option plan expenses (Group and parent)
Refer to notes 3.3 (o), 4, and 24 to the Consolidated Financial
statements for the directors’ disclosures of the related
accounting policies, judgements and estimates, and page 76
(‘Significant financial reporting items’) within the Audit
Committee Report.
During 2015, the Group implemented a share option plan for
management and senior employees. The assumptions used in
calculating the charge recognised in the income statement are
judgemental and complex, including an estimate of the
number of leavers from the scheme in each period as well as
an estimate of the future growth in adjusted earnings per
share of the group (refer to page 92 (‘Annual Report on
Remuneration’) for details on the share option plan).
These judgements could lead to an under or overstatement of
the share option plan expense, whether intentionally or in error.
We gained an understanding from management of the key
assumptions underpinning the share option valuation model.
We evaluated the assumption made by management for
forecast growth in adjusted earnings per share by comparing
to recent historical performance as well as reviewing budgets
and forecasts approved by the Board of Directors, and found
it to be appropriate.
We evaluated management’s assumption for the number of
leavers from the scheme by comparing to historical leavers
from the scheme, and found it to be appropriate.
We evaluated management’s assumption of the performance
conditions based on compound earnings per share (“EPS”)
growth, assessing the assumed future compound EPS growth
against board approved budgets and managements history of
forecasting.
We evaluated the sensitivity analysis performed by
management to assess the potential impact of changes in key
assumptions, noting that a significant change in the
assumptions would be needed to cause a material error in the
share option plan expense. We concluded that stress testing
these assumptions did not have a material impact on the
income statement charge.
We checked the mathematical integrity of the model, and
found it to be accurate.
We tested a sample of options granted to deeds of grant and
leavers from the scheme to resignation letters, noting no
exceptions in our testing.
We audited the accounting for the vesting of the 2015 share
options and the associated set up of the employee benefit
trust, and found it to be appropriate.
We also considered the disclosures made in note 24 to the
financial statements and determined that they are consistent
with the requirements of relevant accounting standards.
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial
statements as a whole, taking into account the structure of the group and the parent company, the accounting processes and
controls, and the industry in which they operate.
The group is structured by division, with significant reporting units in the UK and USA, and further smaller reporting units in
locations across Europe, Canada, Asia and South Africa. The group financial statements are a consolidation of 15 reporting units,
comprising the group’s operating businesses and centralised functions.
The accounting and financial management for all reporting units is controlled from the UK, so we as the group engagement team
have performed all audit work.
We determined the type of work that needed to be performed at the reporting units to be able to conclude that sufficient
appropriate audit evidence had been obtained as a basis for our opinion on the group financial statements as a whole. Accordingly,
we determined that audits of the complete financial information were required for four reporting units, comprising the UK and
USA trading reporting units and the parent and intermediate holding companies (which contain, amongst other balances, the
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FDM Group (Holdings) plcAnnual Report and Accounts 2018 Independent auditors’ report to the members of FDM Group (Holdings) plc
group’s central costs). We also included in our audit scope the revenue, trade and other receivables and cash and cash equivalents
in Canada, Hong Kong and Singapore, which we performed from the group’s head office in the UK, where the accounting is
administered. To support these procedures we visited the group’s offices in Hong Kong, where we met with local management.
As a result, full scope audit procedures were conducted on reporting units representing 87% of the group’s profit before tax and
74% of revenue, with a further 19% coverage of revenue obtained through our work on the Canada, Hong Kong and Singapore
reporting units.
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality.
These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent
of our audit procedures on the individual financial statement line items and disclosures and in evaluating the effect of
misstatements, both individually and in aggregate on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Overall materiality
£2,410,000 (2017: £2,180,000).
£540,000 (2017: £490,000).
How we determined it
5% of profit before tax
1% of total assets
Group financial statements
Parent company financial statements
Rationale for benchmark applied
Based on the benchmarks used in the
annual report, profit before tax is the
primary measure used by the shareholders
in assessing the performance of the group,
and is a generally accepted auditing
benchmark.
We believe that total assets is the primary
measure used by the shareholders in
assessing the performance of the entity,
and is a generally accepted auditing
benchmark.
For each component in the scope of our group audit, we allocated a materiality that is less than our overall group materiality. The
range of materiality allocated across components was between £540,000 and £2,289,500. Certain components were audited to a
local statutory audit materiality that was also less than our overall group materiality.
We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £120,500
(Group audit) (2017: £109,000) and £27,000 (Parent company audit) (2017: £24,500) as well as misstatements below those
amounts that, in our view, warranted reporting for qualitative reasons.
Going concern
In accordance with ISAs (UK) we report as follows:
Reporting obligation
Outcome
We are required to report if we have anything material to add or draw
attention to in respect of the directors’ statement in the financial statements
about whether the directors considered it appropriate to adopt the going
concern basis of accounting in preparing the financial statements and the
directors’ identification of any material uncertainties to the group’s and the
parent company’s ability to continue as a going concern over a period of at
least twelve months from the date of approval of the financial statements.
We are required to report if the directors’ statement relating to Going
Concern in accordance with Listing Rule 9.8.6R(3) is materially inconsistent
with our knowledge obtained in the audit.
We have nothing material to add or to draw
attention to.
However, because not all future events or
conditions can be predicted, this statement is
not a guarantee as to the group’s and parent
company’s ability to continue as a going
concern. For example, the terms on which the
United Kingdom may withdraw from the
European Union, which is currently due to
occur on 29 March 2019, are not clear, and it is
difficult to evaluate all of the potential
implications on the company’s trade,
customers, suppliers and the wider economy.
We have nothing to report.
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Strategic ReportGovernanceFinancial StatementsFDM Group (Holdings) plcAnnual Report and Accounts 2018Notes to the Consolidated Financial Statements Reporting on other information
The other information comprises all of the information in the Annual Report other than the financial statements and our
auditors’ report thereon. The directors are responsible for the other information. Our opinion on the financial statements does
not cover the other information and, accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly
stated in this report, any form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the
audit, or otherwise appears to be materially misstated. If we identify an apparent material inconsistency or material
misstatement, we are required to perform procedures to conclude whether there is a material misstatement of the financial
statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that
there is a material misstatement of this other information, we are required to report that fact. We have nothing to report based
on these responsibilities.
With respect to the Strategic Report, Directors’ Report and Corporate Governance Statement, we also considered whether the
disclosures required by the UK Companies Act 2006 have been included.
Based on the responsibilities described above and our work undertaken in the course of the audit, the Companies Act 2006
(CA06), ISAs (UK) and the Listing Rules of the Financial Conduct Authority (FCA) require us also to report certain opinions and
matters as described below (required by ISAs (UK) unless otherwise stated).
Strategic Report and Directors’ Report
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic Report and
Directors’ Report for the year ended 31 December 2018 is consistent with the financial statements and has been prepared in
accordance with applicable legal requirements. (CA06)
In light of the knowledge and understanding of the group and parent company and their environment obtained in the course of
the audit, we did not identify any material misstatements in the Strategic Report and Directors’ Report. (CA06)
Corporate Governance Statement
In our opinion, based on the work undertaken in the course of the audit, the information given in the Corporate Governance
Statement (on pages 62 to 70) about internal controls and risk management systems in relation to financial reporting processes
and about share capital structures in compliance with rules 7.2.5 and 7.2.6 of the Disclosure Guidance and Transparency Rules
sourcebook of the FCA (“DTR”) is consistent with the financial statements and has been prepared in accordance with applicable
legal requirements. (CA06)
In light of the knowledge and understanding of the group and parent company and their environment obtained in the course of
the audit, we did not identify any material misstatements in this information. (CA06)
In our opinion, based on the work undertaken in the course of the audit, the information given in the Corporate Governance
Statement (on pages 62 to 70) with respect to the parent company’s corporate governance code and practices and about its
administrative, management and supervisory bodies and their committees complies with rules 7.2.2, 7.2.3 and 7.2.7 of the DTR.
(CA06)
We have nothing to report arising from our responsibility to report if a corporate governance statement has not been prepared
by the parent company. (CA06)
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FDM Group (Holdings) plcAnnual Report and Accounts 2018 Independent auditors’ report to the members of FDM Group (Holdings) plc
The directors’ assessment of the prospects of the group and of the principal risks that would
threaten the solvency or liquidity of the group
We have nothing material to add or draw attention to regarding:
• The directors’ confirmation on pages 46 to 52 of the Annual Report that they have carried out a robust assessment of the
principal risks facing the group, including those that would threaten its business model, future performance, solvency or
liquidity.
• The disclosures in the Annual Report that describe those risks and explain how they are being managed or mitigated.
• The directors’ explanation on page 53 of the Annual Report as to how they have assessed the prospects of the group, over
what period they have done so and why they consider that period to be appropriate, and their statement as to whether they
have a reasonable expectation that the group will be able to continue in operation and meet its liabilities as they fall due over
the period of their assessment, including any related disclosures drawing attention to any necessary qualifications or
assumptions.
We have nothing to report having performed a review of the directors’ statement that they have carried out a robust assessment
of the principal risks facing the group and statement in relation to the longer-term viability of the group. Our review was
substantially less in scope than an audit and only consisted of making inquiries and considering the directors’ process supporting
their statements; checking that the statements are in alignment with the relevant provisions of the UK Corporate Governance
Code (the “Code”); and considering whether the statements are consistent with the knowledge and understanding of the group
and parent company and their environment obtained in the course of the audit. (Listing Rules)
Other Code Provisions
We have nothing to report in respect of our responsibility to report when:
• The statement given by the directors, on page 68, that they consider the Annual Report taken as a whole to be fair, balanced
and understandable, and provides the information necessary for the members to assess the group’s and parent company’s
position and performance, business model and strategy is materially inconsistent with our knowledge of the group and parent
company obtained in the course of performing our audit.
• The section of the Annual Report on page 75 describing the work of the Audit Committee does not appropriately address
matters communicated by us to the Audit Committee.
• The directors’ statement relating to the parent company’s compliance with the Code does not properly disclose a departure
from a relevant provision of the Code specified, under the Listing Rules, for review by the auditors.
Directors’ Remuneration
In our opinion, the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the
Companies Act 2006. (CA06)
Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial statements
As explained more fully in the Statement of Directors’ Responsibilities set out on pages 104 and 105, the directors are
responsible for the preparation of the financial statements in accordance with the applicable framework and for being satisfied
that they give a true and fair view. The directors are also responsible for such internal control as they determine is necessary to
enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s and the parent company’s ability to
continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the group or the parent company or to cease operations, or have no
realistic alternative but to do so.
113
Strategic ReportGovernanceFinancial StatementsFDM Group (Holdings) plcAnnual Report and Accounts 2018Notes to the Consolidated Financial Statements Independent auditors’ report to the members of FDM Group (Holdings) plc
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is
a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or
in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these
financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only for the parent company’s members as a body in accordance
with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, 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.
Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• we have not received all the information and explanations we require for our audit; or
• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been
received from branches not visited by us; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• the parent company financial statements and the part of the Directors’ Remuneration Report to be audited are not in
agreement with the accounting records and returns.
We have no exceptions to report arising from this responsibility.
Appointment
Following the recommendation of the audit committee, we were appointed by the directors on 25 July 2013 to audit the financial
statements for the year ended 31 December 2013 and subsequent financial periods. The period of total uninterrupted
engagement is 6 years, covering the years ended 31 December 2013 to 31 December 2018.
Jaskamal Sarai (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
5 March 2019
114
FDM Group (Holdings) plcAnnual Report and Accounts 2018 Consolidated Income Statement
for the year ended 31 December 2018
Revenue
Cost of sales
Gross profit
Administrative expenses
Operating profit
Finance income
Finance expense
Net finance income/ (expense)
Profit before income tax
Taxation
Profit for the year
Earnings per ordinary share
Basic
Diluted
The results for the year shown above arise from continuing operations.
The notes on pages 120 to 140 are an integral part of these Consolidated Financial Statements.
Note
6
7
10
10
11
Note
12
12
2018
£000
2017
£000
244,910
(125,875)
233,575
(129,323)
119,035
(70,748)
104,252
(60,496)
48,287
43,756
140
(94)
46
29
(130)
(101)
48,333
(11,275)
43,655
(11,643)
37,058
32,012
2018
pence
2017
pence
34.3
33.8
29.8
29.4
115
Strategic ReportGovernanceFinancial StatementsFDM Group (Holdings) plcAnnual Report and Accounts 2018Notes to the Consolidated Financial Statements
Consolidated Statement of
Comprehensive Income
for the year ended 31 December 2018
Profit for the year
Other comprehensive income
Items that may be subsequently reclassified to profit or loss
Exchange differences on retranslation of foreign operations (net of tax)
Total other comprehensive income/ (expense)
Total comprehensive income for the year
The notes on pages 120 to 140 are an integral part of these Consolidated Financial Statements.
2018
£000
2017
£000
37,058
32,012
630
630
(673)
(673)
37,688
31,339
116
FDM Group (Holdings) plcAnnual Report and Accounts 2018
Consolidated Statement
of Financial Position
as at 31 December 2018
Non-current assets
Property, plant and equipment
Intangible assets
Deferred income tax assets
Current assets
Trade and other receivables
Cash and cash equivalents
Total assets
Current liabilities
Trade and other payables
Current income tax liabilities
Total liabilities
Net assets
Equity attributable to owners of the parent
Share capital
Share premium
All other reserves
Retained earnings
Total equity
Note
2018
£000
2017
£000
13
14
16
17
18
19
20
22
6,117
19,409
2,282
4,926
19,471
2,275
27,808
26,672
37,729
33,907
30,716
36,846
71,636
67,562
99,444
94,234
25,907
3,166
26,616
3,239
29,073
29,855
29,073
29,855
70,371
64,379
1,083
8,771
3,221
57,296
1,075
7,873
6,991
48,440
70,371
64,379
The notes on pages 120 to 140 are an integral part of these Consolidated Financial Statements.
The financial statements on pages 115 to 140 were approved by the Board of Directors on 5 March 2019 and were signed on its
behalf by:
Rod Flavell
Chief Executive Officer
5 March 2019
Mike McLaren
Chief Financial Officer
5 March 2019
117
Strategic ReportGovernanceFinancial StatementsFDM Group (Holdings) plcAnnual Report and Accounts 2018Notes to the Consolidated Financial Statements
Consolidated Statement
of Cash Flows
for the year ended 31 December 2018
Cash flows from operating activities
Group profit before tax for the year
Adjustments for:
Depreciation and amortisation
Loss on disposal of non-current assets
Finance income
Finance expense
Share-based payment charge (including associated social security costs)
Increase in trade and other receivables
(Decrease)/ increase in trade and other payables
Cash flows generated from operations
Interest received
Income tax paid
Net cash flow from operating activities
Cash flows from investing activities
Acquisition of property, plant and equipment
Acquisition of intangible assets
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issuance of ordinary shares
Payment for shares bought back
Finance costs paid
Dividends paid
Net cash used in financing activities
Exchange gains/ (losses) on cash and cash equivalents
Net (decrease)/ increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Note
2018
£000
2017
£000
7
10
10
25
21
48,333
43,655
1,619
3
(140)
94
2,972
(7,013)
(950)
1,408
4
(29)
130
3,576
(1,552)
1,088
44,918
140
(11,407)
48,280
29
(13,263)
33,651
35,046
(2,684)
(16)
(1,350)
(18)
(2,700)
(1,368)
8
(3,664)
(94)
(30,718)
–
–
(130)
(23,976)
(34,468)
(24,106)
578
(570)
(2,939)
36,846
9,002
27,844
Cash and cash equivalents at end of year
18
33,907
36,846
The notes on pages 120 to 140 are an integral part of these Consolidated Financial Statements.
118
FDM Group (Holdings) plcAnnual Report and Accounts 2018 Consolidated Statement
of Changes in Equity
for the year ended 31 December 2018
Share
capital
£000
Share
premium
£000
All Other
reserves
(Note 22)
£000
Retained
earnings
£000
Total
equity
£000
Balance at 1 January 2018
1,075
7,873
6,991
48,440
64,379
Profit for the year
Other comprehensive income for the year
Total comprehensive income for the year
Share-based payments (note 24)
Transfer to retained earnings
New share issue
Own shares bought back (note 25)
Dividends (note 21)
Total transactions with owners, recognised directly in equity
–
–
–
–
–
8
–
–
8
–
–
–
–
–
898
–
–
898
–
630
630
37,058
–
37,058
630
37,058
37,688
2,678
(2,516)
–
(4,562)
–
–
2,516
–
–
(30,718)
2,678
–
906
(4,562)
(30,718)
(4,400)
(28,202)
(31,696)
Balance at 31 December 2018
1,083
8,771
3,221
57,296
70,371
Share
capital
£000
Share
premium
£000
All Other
reserves
(Note 22)
£000
Retained
earnings
£000
Total
equity
£000
Balance at 1 January 2017
1,075
7,873
3,986
40,404
53,338
Profit for the year
Other comprehensive expense for the year
Total comprehensive (expense)/ income for the year
Share-based payments (note 24)
Dividends (note 21)
Total transactions with owners, recognised directly in equity
–
–
–
–
–
–
–
–
–
–
–
–
–
(673)
(673)
3,678
–
3,678
32,012
–
32,012
(673)
32,012
31,339
–
(23,976)
3,678
(23,976)
(23,976)
(20,298)
Balance at 31 December 2017
1,075
7,873
6,991
48,440
64,379
The notes on pages 120 to 140 are an integral part of these Consolidated Financial Statements.
119
Strategic ReportGovernanceFinancial StatementsFDM Group (Holdings) plcAnnual Report and Accounts 2018Notes to the Consolidated Financial Statements Notes to the Consolidated
Financial Statements
1 General information
The Group operates in the Recruit, Train and Deploy (“RTD”) sector. The Group’s principal business activities involve recruiting,
training and deploying its own permanent IT and business consultants at client sites.
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.
The Consolidated Financial Statements consolidate those of the Company and its subsidiaries. Subsidiaries and their countries of
incorporation are presented in note 3 to the Parent Company Financial Statements.
The Consolidated Financial Statements present the results for the year ended 31 December 2018. The Consolidated Financial
Statements were approved by Rod Flavell and Mike McLaren on behalf of the Board of Directors on 5 March 2019.
2 Going concern
The Group’s business activities, together with the factors likely to affect its future development, performance and position are
summarised in the Strategic Report. The principal risks and uncertainties and risk management processes are also described in
the Strategic Report.
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 Directors therefore have a reasonable expectation that the Company and the Group will have adequate resources to
continue in operational existence for the foreseeable future. Accordingly the Directors continue to adopt the going concern basis
for preparing the financial statements.
3 Accounting policies
3.1 Basis of preparation
The Consolidated Financial Statements have been prepared in accordance with IFRSs as adopted by the EU, IFRS Interpretations
Committee (“IFRS IC”) interpretations and the Companies Act 2006 as applicable to companies reporting under IFRSs.
The Consolidated Financial Statements have been prepared on a historical cost basis. The Consolidated Financial Statements are
presented in Pounds Sterling and all values are rounded to the nearest thousand (£000), except where otherwise indicated.
The Group’s accounting policies have been applied consistently, except for the impact of the introduction of IFRS 9 ‘Financial
instruments’ and IFRS 15 ‘Revenue from contracts with customers’, which have not had a material impact in the amounts
recognised in the current or prior period, see note 5.
3.2 Basis of consolidation
The Consolidated Financial Statements comprise the financial statements of the Group and its subsidiaries as at 31 December 2018.
Subsidiaries
Subsidiaries are consolidated from the date of their acquisition, being the date on which the Group obtains control, and continue
to be consolidated until the date when such control ceases. The financial statements of the subsidiaries are prepared for the
same reporting period as the Parent Company, using consistent accounting policies. All intra-group balances, transactions,
unrealised gains and losses resulting from intra-group transactions and dividends are eliminated in full.
Details of the subsidiaries owned by the Group are presented in note 3 to the Parent Company Financial Statements. There are
no minority interests in the subsidiaries of the Company.
120
FDM Group (Holdings) plcAnnual Report and Accounts 2018 3.3 Summary of significant accounting policies
a) Business combinations and goodwill
The Group applies the acquisition method to account for business combinations. The consideration transferred for the
acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree
and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability
resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities
assumed in a business combination are measured initially at their fair values at the acquisition date. The Group recognises any
non-controlling interest in the acquiree on an acquisition-by-acquisition basis, either at fair value or at the non-controlling
interest’s proportionate share of the recognised amounts of the acquiree’s identifiable net assets. Acquisition-related costs are
expensed as incurred.
After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment
testing, goodwill acquired in a business combination is, from the acquisition date, allocated to the Group’s cash-generating unit
that is expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned
to that unit.
Where goodwill forms part of a cash-generating unit and part of the operation within that unit is disposed of, the goodwill
associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss
on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation
disposed of and the portion of the cash-generating unit retained.
b) Revenue recognition
Revenue is recognised under IFRS 15 and is measured at the fair value of the consideration received or receivable and excluding
sales taxes.
Rendering of services
Revenue from the provision of IT consultants to third party customers is recognised as follows:
• The revenue is recognised in the period in which the IT consultants perform the work at the contracted rates for each IT
consultant. Revenue is based on timesheets from its IT consultants which are authorised by the Group’s customers detailing
the hours and service provided;
• Revenue in respect of non-receipted timesheets is accrued at the estimated contract value; and
• Volume rebates are accrued in the period in which the revenue is incurred, with the value of the rebate offset against revenue.
They are calculated with regard to the threshold revenue in a contractual period. To the extent they are material, amounts are
disclosed along with any significant judgements made in their estimation.
c) Foreign currency translation
The individual financial statements of each Group entity are presented in the currency of the primary economic environment in
which the company operates (its functional currency). For the purpose of the Consolidated Financial Statements, the results and
financial position of each entity are expressed in Pounds Sterling (£), which is the functional currency of the parent company and
the presentation currency for the Consolidated Financial Statements.
In preparing the financial statements of the individual entities, transactions in currencies other than the entity’s functional
currency (foreign currencies) are recorded at the rate prevailing at the time of the transaction. At the end of each reporting
period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at the end of the reporting
period.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates
as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using
exchange rates at the date when the fair value was determined.
For the purpose of presenting Consolidated Financial Statements, the assets and liabilities of the Group’s foreign operations are
expressed in the Group’s presentation currency using exchange rates prevailing at the end of the reporting period. Income and
expense related items are translated at the average exchange rates for the period. Exchange differences arising are classified as
other comprehensive income and transferred to the Group’s translation reserve.
121
Strategic ReportGovernanceFinancial StatementsFDM Group (Holdings) plcAnnual Report and Accounts 2018Notes to the Consolidated Financial Statements 3 Accounting policies continued
d) Taxes
Current income tax
Current income tax assets and liabilities for the current period are measured at the amount expected to be recovered from or
paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or
substantively enacted at the reporting date in the countries where the Group operates and generates income.
Current income tax relating to items recognised directly in equity is recognised in equity and not in the income statement.
Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax
regulations are subject to interpretation and establishes provisions where appropriate.
Deferred tax
Deferred tax is provided in full, using the liability method, on temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are
not provided for: goodwill not deductible for tax purposes; and the initial recognition of assets or liabilities that affect neither
accounting nor taxable profit. The amount of deferred tax provided is based on the expected manner of realisation or settlement
of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the reporting date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which
the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit
will be realised.
e) Property, plant and equipment
Property, plant and equipment are stated at cost net of accumulated depreciation. Cost includes the original purchase price of
the asset and the costs attributable to bringing the asset to its working condition for its intended use.
Depreciation is charged to the income statement on a straight-line basis over the estimated useful lives of each part of an item of
property, plant and equipment. The estimated useful lives are as follows:
Plant and equipment
Fixtures and fittings
4 years
4 years
Leasehold improvements
Length of lease
The assets’ residual values, useful lives and methods of depreciation are reviewed each financial year end and adjusted if
appropriate.
f) Operating leases
Operating lease payments are recognised in the income statement on a straight-line basis over the term of the lease. Lease
incentives received are recognised in the income statement as part of the total lease expense.
g) Intangible assets
Intangible assets acquired separately are measured on initial recognition at cost. The costs of intangible assets acquired in a
business combination are their fair values as at the date of acquisition.
Software and software licences
The Group holds acquired software and software licences as intangible assets. Acquired software and software licences are
capitalised on the basis of cost and amortised over the estimated useful lives of the software which is estimated to be four years
or the licence term if shorter. The estimated useful life and amortisation method are reviewed at the end of each annual
reporting period and adjusted if appropriate.
122
FDM Group (Holdings) plcAnnual Report and Accounts 2018
Goodwill
Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purposes of
impairment testing, goodwill is allocated to the Group’s cash-generating units.
Goodwill is reviewed annually or when there is an indication of impairment. Impairment of goodwill is determined by assessing
the recoverable amount of the cash-generating unit to which the goodwill relates. Where the recoverable amount of the cash-
generating unit is less than the carrying value of the cash-generating unit to which the goodwill has been allocated, an
impairment loss is recognised. Impairment losses relating to goodwill cannot be reversed in future periods.
h) Trade receivables
Trade receivables are recognised initially at fair value using an expected credit loss model in line with IFRS 9. A provision for
impairment of trade receivables is established based upon objective evidence that the Group will not collect all amounts due
according to the original terms of the receivables. Subsequent assessment is made if there is evidence of a change in
circumstances to the debtor, such as the probability that the debtor will enter bankruptcy or financial reorganisation, or default.
When a trade receivable is uncollectible, it is written off against the allowance account for trade receivables. Subsequent
recoveries of amounts previously written off are credited against administrative expenses in the income statement.
i) Cash and cash equivalents
Cash and cash equivalents comprise cash at banks and on hand and short-term deposits with a maturity of three months or less.
j) Trade and other payables
Trade and other payables represent liabilities for goods and services provided to the Group prior to the end of financial year
which are unpaid. The amounts are unsecured and are usually paid within thirty days of recognition. Trade and other payables
are presented as current liabilities unless payment is not due within twelve months after the reporting period. They are
recognised initially at their fair value and subsequently measured at amortised cost using the effective interest method.
k) Financial instruments
Non-derivative financial instruments
The Group’s non-derivative financial instruments comprise trade receivables, trade payables, cash and cash equivalents and a
revolving credit facility.
The Group does not have any borrowings but borrowing costs paid on the establishment of credit facilities are recognised as an
expense in the income statement over the expected usage period of the facility.
l) Pensions and other post-employment benefits
The Group operates a number of defined contribution pension schemes. The assets of each scheme are held separately from
those of the Group in an independently administered fund. The amount charged to the income statement represents the
contributions payable to the schemes in respect of the accounting period.
m) Provisions
Provisions for legal claims are recognised when the Group has a present legal or constructive obligation as a result of a past
event, it is probable that an outflow of resources will be required to settle the obligation, and the amount can be reliably
estimated. If the effect is material, provisions are determined by discounting the expected, risk adjusted, future cash flows at a
pre-tax risk-free rate. Provisions are measured at management’s best estimate of the expenditure required to settle the Group’s
liability. These estimates are reviewed each year and updated as necessary.
n) Equity
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new ordinary shares or options are
shown in equity as a deduction, net of tax, from the proceeds.
Other reserves represent the cost of equity on settled share-based payments until such share options are exercised or lapse.
The translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of
foreign operations.
123
Strategic ReportGovernanceFinancial StatementsFDM Group (Holdings) plcAnnual Report and Accounts 2018Notes to the Consolidated Financial Statements 3 Accounting policies continued
o) Share-based payments
Employees (including senior executives) of the Group receive remuneration in the form of share-based payments, whereby
employees render services as consideration for equity instruments (equity-settled transactions).
Equity-settled transactions
The cost of equity-settled transactions is recognised, together with a corresponding increase in other reserves in equity, over the
period in which the performance and/ or service conditions are fulfilled. The cumulative expense recognised for equity-settled
transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the
Group’s best estimate of the number of equity instruments that will ultimately vest. The income statement expense or credit for
a period represents the movement in cumulative expense recognised as at the beginning and end of that period and is
recognised in employee benefits expense. The equity-settled transactions are fair valued at the grant date and the expense
recognised over the duration of the vesting period.
No expense is recognised for awards that do not ultimately vest, except for equity-settled transactions for which vesting is
conditional upon a market or non-vesting condition. These are treated as vesting irrespective of whether or not the market or
non-vesting condition is satisfied, provided that all other performance and/ or service conditions are satisfied.
When the terms of an equity-settled transaction award are modified, the minimum expense recognised is the expense as if the
terms had not been modified, if the original terms of the award are met. An additional expense is recognised for any modification
that increases the total fair value of the share-based payment transaction, or is otherwise beneficial to the employee as
measured at the date of modification.
When an equity-settled award is cancelled, it is treated as if it vested on the date of cancellation, and any expense not yet
recognised for the award is recognised immediately. This includes any award where non-vesting conditions within the control of
either the entity or the employee are not met. However, if a new award is substituted for the cancelled award, and designated as
a replacement award on the date that it is granted, the cancelled and new awards are treated as if they were a modification of the
original award, as described in the previous paragraph.
p) Segment reporting
Operating segments are reported in a manner consistent with the internal reporting to the Board of Directors. The Executive
Directors have been identified as the chief operating decision maker.
q) Dividends
Dividends are recognised as a liability in the year in which they are fully authorised, or in the case of interim dividends when paid.
r) Employee Benefit Trust
FDM Group (Holdings) plc has an established Employee Benefit Trust (‘EBT’) to which it is the sponsoring entity. Notwithstanding
the legal duties of the Trustee, the Company considers that it has ‘de facto’ control. The EBT is included in the Parent Company
Financial Statements and the Consolidated Financial Statements.
No gain or loss is recognised in profit or loss or other comprehensive income on the purchase, sale or cancellation of the
Company’s own equity held by the EBT.
For further information, see note 25.
4 Significant accounting estimate
The preparation of the Group’s financial statements requires management to make 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 year. 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 following is considered to be the
Group’s significant estimate:
124
FDM Group (Holdings) plcAnnual Report and Accounts 2018 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. The key assumptions in respect of the share-based payment charges are
set out in note 24.
No individual judgements have been made that have a significant impact on the financial statements.
5 New standards and interpretations
The International Accounting Standards Board (“IASB”) and IFRS IC have issued the following new standards and amendments
which were effective during the year and were adopted by the Group in preparing the financial statements.
The adoption of these amendments has not had a material impact on the Group’s financial statements in the year:
Effective in 2018
New standards
IFRS 9, ‘Financial instruments’
IFRS 15, ‘Revenue from contracts with customers’
Amendments
Amendment to IFRS 2, ‘Share based payments’
Amendment to IAS 40, ‘Investment property’
Amendments to IFRS 4 Amendments regarding implementation of IFRS 9
Effective for
accounting periods
beginning on or after
Endorsed
by the EU
1 January 2018
1 January 2018
1 January 2018
1 January 2018
1 January 2018
Yes
Yes
Yes
Yes
Yes
IFRS 9 advocates an expected loss model in respect of debtor provisioning for determining the basis of providing for bad debt.
The application of the expected loss model has not resulted in a change to the Group’s immaterial provision.
IFRS 15 requires revenue to be apportioned from customer contracts, based on separate performance obligations and to be
recognised upon satisfaction of those performance obligations. FDM recognises revenue at contracted rates when work is
performed i.e. on satisfaction of performance obligations over the term of the client placement. No changes are therefore
required to the Group’s revenue recognition policy in respect of the application of IFRS 15.
The IASB and IFRS IC have issued the following standards and amendments with an effective date of implementation for
accounting periods beginning after the date on which the Group’s financial statements for the current year commenced. 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 does not intend to adopt these
standards before their effective date.
Effective after 31 December 2018
New standards
IFRS 16, ‘Leases'
IFRS 17, ‘Insurance contracts'
Amendments
Amendment to IAS 1 and IAS 8 regarding the definition of materiality
Amendment to IFRS 9, ‘Financial instruments’, on prepayment features with negative compensation
Amendments to IAS 28, ‘Investments in associates’, on long term interests in associates and
joint ventures
Amendments to IAS 19, ‘Employee benefits’, plan amendment, curtailment or settlement
Amendment to IFRS 3, ‘Business combinations’
IFRIC 23, ‘Uncertainty over income tax’
Effective for
accounting periods
beginning on or after
Endorsed
by the EU
1 January 2019
1 January 2021
1 January 2019
1 January 2019
1 January 2019
1 January 2019
1 January 2019
1 January 2019
Yes
No
Yes
Yes
No
No
No
No
125
Strategic ReportGovernanceFinancial StatementsFDM Group (Holdings) plcAnnual Report and Accounts 2018Notes to the Consolidated Financial Statements
5 New standards and interpretations continued
The Directors have carried out an assessment of the likely impact of IFRS 16 ‘Leases’:
Nature of change
IFRS 16 was issued in January 2016. It will result in all leases being recognised on the statement of financial position, as the
distinction between operating and finance leases is removed. Under the new standard, an asset (the right to use the leased item)
and a financial liability to pay rentals are recognised. The only exceptions are short-term and low-value leases.
Impact
The standard will affect the accounting for the Group’s operating leases, as the Group currently does not have any finance leases.
As at the reporting date of 31 December 2018, the Group has non-cancellable operating lease commitments of £27.6 million, see
note 23. The Group has carried out an assessment of the impact of IFRS 16 on its lease portfolio as at 31 December 2018.
Application of the new standard will result in an increase in assets of £13.9 million and liabilities of £15.3 million on the
Consolidated Statement of Financial Position, with the expected impact on net assets of a £1.4 million decrease. The overall net
annual impact on the Income Statement in 2019 will not be material.
Mandatory application date/ date of adoption by the Group
IFRS 16 is mandatory for financial years commencing on or after 1 January 2019, and the Group will adopt the standard from this date.
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 31 December 2018, the Board of Directors consider that the Group is organised on a worldwide basis into four core
geographical operating segments:
(1) UK and Ireland;
(2) North America;
(3) Rest of 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 taxation, assets and liabilities are attributable to the principal activity of the Group, being a
global professional services provider with a focus on IT.
For the year ended 31 December 2018
Revenue
Depreciation and amortisation
Segment operating profit/ (loss)
Finance income*
Finance costs*
Profit/ (loss) before income tax
Total assets
Total liabilities
UK and
Ireland
£000
North
America
£000
EMEA
£000
APAC
£000
Total
£000
130,978
82,119
13,519
18,294
244,910
(824)
34,309
120
(70)
(595)
13,034
156
(5)
34,359
13,185
65,185
22,225
(76)
1,387
2
(12)
1,377
5,074
(124)
(443)
2
(147)
(1,619)
48,287
280
(234)
(588)
48,333
6,960
99,444
(14,375)
(5,696)
(1,252)
(7,750)
(29,073)
* Finance income and finance costs include intercompany interest which is eliminated upon consolidation
126
FDM Group (Holdings) plcAnnual Report and Accounts 2018 Included in total assets on prior page are non-current assets (excluding deferred tax) as follows:
31 December 2018
For the year ended 31 December 2017
Revenue
Depreciation and amortisation
Segment operating profit/ (loss)
Finance income
Finance costs
Profit/ (loss) before income tax
Total assets
Total liabilities
UK and
Ireland
£000
North
America
£000
EMEA
£000
APAC
£000
Total
£000
22,166
2,312
330
718
25,526
UK and
Ireland
£000
North
America
£000
EMEA
£000
APAC
£000
Total
£000
131,479
75,069
13,077
13,950
233,575
(792)
28,694
24
(110)
(447)
14,700
3
(5)
28,608
14,698
(57)
765
1
(10)
756
(112)
(403)
1
(5)
(1,408)
43,756
29
(130)
(407)
43,655
66,565
17,601
4,563
5,505
94,234
(16,426)
(6,253)
(1,534)
(5,642)
(29,855)
Included in total assets above are non-current assets (excluding deferred tax) as follows:
31 December 2017
UK and
Ireland
£000
North
America
£000
22,431
1,322
EMEA
£000
384
APAC
£000
Total
£000
260
24,397
Information about major customers
2018 revenue from each of customer A and B is attributed across all four operating segments. Customer A represents 10% or
more of the Group’s 2018 revenues. Customers A and B each represent 10% or more of the Group’s 2017 revenues.
Revenue from customer A
Revenue from customer B
7 Operating profit
Operating profit for the year has been arrived at after charging/ (crediting):
Hire of property – operating leases
Net foreign exchange differences
Depreciation and amortisation
2018
£000
2017
£000
25,874
23,718
10,953
40,328
2018
£000
4,555
74
2017
£000
3,946
(153)
1,619
1,408
127
Strategic ReportGovernanceFinancial StatementsFDM Group (Holdings) plcAnnual Report and Accounts 2018Notes to the Consolidated Financial Statements 7 Operating profit continued
Auditors’ remuneration
During the year the Group (including its overseas subsidiaries) obtained the following services from the Group’s auditors:
Fees payable to the Group’s auditors for the audit of the Parent Company and Consolidated
Financial Statements
Fees payable to the Group’s auditors for other services:
– The audit of the Group’s subsidiaries
– Audit-related assurance services
2018
£000
70
94
36
200
2017
£000
67
93
36
196
8 Staff numbers and costs
The monthly average number of persons employed by the Group (including Executive Directors) during the year, analysed by
category, was as follows:
IT Consultants
Administration
The aggregate payroll costs of these persons were as follows:
Wages and salaries
Social security costs
Other pension costs
Share-based payments
2018
Number
2017
Number
4,056
561
4,617
3,408
447
3,855
2018
£000
146,848
12,799
3,152
2,707
2017
£000
126,056
11,676
2,431
2,677
165,506
142,840
Retirement benefits
The Group operates a number of defined contribution pension plans. The pension charge for the year represents contributions
payable by the Group to the schemes. The pension contributions payable at 31 December 2018 were £275,000 (2017: £312,000).
There were no prepaid contributions at the end of the financial year (2017: £nil).
9 Directors’ remuneration
Details of the Directors’ (who also represent the key management personnel of the Group) remuneration in respect of the year
ended 31 December 2018 is set out below:
Short term employee benefits
Post-employment benefits
Share-based payments
2018
£000
2,428
33
526
2,987
2017
£000
2,490
32
566
3,088
For further information on Directors’ remuneration, see the audited sections of the Remuneration Report as defined on page 89.
128
FDM Group (Holdings) plcAnnual Report and Accounts 2018 10 Finance income and expense
Bank interest
Finance income
Non utilisation fees on revolving credit facility
Finance fees and charges
Finance expense
11 Taxation
The major components of income tax expense for the years ended 31 December 2018 and 2017 are:
Current income tax:
Current income tax charge
Adjustments in respect of prior periods
Total current tax
Deferred tax:
Relating to origination and reversal of temporary differences
Total deferred tax
Total tax expense reported in the income statement
2018
£000
140
140
2018
£000
(47)
(47)
(94)
2017
£000
29
29
2017
£000
(80)
(50)
(130)
2018
£000
2017
£000
11,820
71
11,891
(616)
(616)
12,619
(474)
12,145
(502)
(502)
11,275
11,643
The standard rate of corporation tax in the UK is 19%. The rate changed from 20% to 19% with effect from 1 April 2017.
Accordingly, the profits for 2018 are taxed at 19% with 2017 taxed at an effective rate of 19.25%. The tax charge for the year is
higher (2017: higher) than the standard rate of corporation tax in the UK. The differences are set out below:
Profit before income tax
Profit multiplied by UK standard rate of corporation tax of 19% (2017: 19.25%)
Effect of different tax rates on overseas earnings
Expenses not deductible for tax purposes
Adjustments in respect of prior periods
Total tax charge
2018
£000
2017
£000
48,333
43,655
9,183
1,732
289
71
8,404
3,267
446
(474)
11,275
11,643
Factors affecting future tax charges
Deferred tax assets and liabilities are measured at the rate that is expected to apply to the period when the asset is realised or
the liability is settled, based on the rates that have been enacted or substantively enacted at the reporting date. Therefore, at
each year end, deferred tax assets and liabilities have been calculated based on the rates that have been substantively enacted
by the reporting date.
In 2015 the UK government announced legislation setting out that the main UK corporation tax rate will be 17% with effect from
1 April 2020. At 31 December 2018 and 31 December 2017, deferred tax assets and liabilities have been calculated based upon
the rate at which the temporary difference is expected to reverse.
129
Strategic ReportGovernanceFinancial StatementsFDM Group (Holdings) plcAnnual Report and Accounts 2018Notes to the Consolidated Financial Statements
12 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 year.
Profit for the year
Average number of ordinary shares in issue (thousands)
Basic earnings per share
2018
2017
£000
37,058
107,978
32,012
107,518
Pence
34.3
29.8
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 and associated deferred tax), by the
weighted average number of ordinary shares in issue during the year.
Profit for the year (basic earnings)
Share-based payment expense (including social security costs) (note 24)
Tax effect of share-based payment expense
Adjusted profit for the year
Average number of ordinary shares in issue (thousands)
Adjusted basic earnings per share
£000
£000
£000
£000
2018
2017
37,058
2,972
(685)
32,012
3,576
(483)
39,345
35,105
107,978
107,518
Pence
36.4
32.6
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.
Profit for the year (basic earnings)
Average number of ordinary shares in issue (thousands)
Adjustment for share options (thousands)
Diluted number of ordinary shares in issue (thousands)
Diluted earnings per share
13 Property, plant and equipment
£000
2018
2017
37,058
107,978
1,594
32,012
107,518
1,465
109,572
108,983
Pence
33.8
29.4
2018
Cost
At 1 January 2018
Additions
Disposals
Effect of movements in foreign exchange
At 31 December 2018
Accumulated depreciation
At 1 January 2018
Depreciation charge for the year
Disposals
Effect of movements in foreign exchange
At 31 December 2018
Net book value at 31 December 2018
130
Leasehold
improvements
£000
Fixtures
and
fittings
£000
Plant and
equipment
£000
Total
£000
9,245
2,684
(2)
109
2,679
904
(2)
38
3,619
12,036
1,713
539
–
23
2,275
1,344
4,319
1,539
–
61
5,919
6,117
5,273
1,606
–
52
6,931
1,699
776
–
24
2,499
4,432
1,293
174
–
19
1,486
907
224
–
14
1,145
341
FDM Group (Holdings) plcAnnual Report and Accounts 2018 2017
Cost
At 1 January 2017
Additions
Disposals
Effect of movements in foreign exchange
At 31 December 2017
Accumulated depreciation
At 1 January 2017
Depreciation charge for the year
Disposals
Effect of movements in foreign exchange
At 31 December 2017
Net book value at 31 December 2017
14 Intangible assets
2018
Cost
At 1 January 2018
Additions
Disposals
Effect of movements in foreign exchange
At 31 December 2018
Accumulated amortisation
At 1 January 2018
Amortisation for the year
Disposals
Effect of movements in foreign exchange
At 31 December 2018
Net book value at 31 December 2018
2017
Cost
At 1 January 2017
Additions
Disposals
Effect of movements in foreign exchange
At 31 December 2017
Accumulated amortisation
At 1 January 2017
Amortisation for the year
Disposals
Effect of movements in foreign exchange
At 31 December 2017
Net book value at 31 December 2017
Leasehold
improvements
£000
Fixtures
and
fittings
£000
Plant and
equipment
£000
4,737
660
(33)
(91)
5,273
1,102
655
(33)
(25)
1,699
3,574
1,277
102
(50)
(36)
1,293
734
247
(50)
(24)
907
386
2,362
588
(221)
(50)
2,679
1,529
429
(218)
(27)
1,713
966
Total
£000
8,376
1,350
(304)
(177)
9,245
3,365
1,331
(301)
(76)
4,319
4,926
Software and
software licences
£000
Goodwill
£000
Total
£000
498
16
–
3
517
349
80
–
1
430
87
19,322
–
–
–
19,820
16
–
3
19,322
19,839
–
–
–
–
–
349
80
–
1
430
19,322
19,409
Software and
software licences
£000
Goodwill
£000
Total
£000
512
18
(27)
(5)
19,322
–
–
–
19,834
18
(27)
(5)
498
19,322
19,820
301
77
(27)
(2)
349
149
–
–
–
–
–
301
77
(27)
(2)
349
19,322
19,471
131
Strategic ReportGovernanceFinancial StatementsFDM Group (Holdings) plcAnnual Report and Accounts 2018Notes to the Consolidated Financial Statements 14 Intangible assets continued
The amortisation charge is recognised in administrative expenses in the income statement. The amortisation period of the
software and software licences is four years. Goodwill is not amortised but is subject to an annual impairment test.
The goodwill has been allocated to cash generating units (“CGUs”) summarised as follows:
Cost and net book value
At 31 December 2018 and 2017
UK and
Ireland
£000
North
America1
£000
EMEA1
£000
APAC
£000
Total
£000
14,843
1,397
3,082
–
19,322
1 In 2017 the goodwill in respect of North America and EMEA was disclosed under the incorrect headings, this has been corrected above.
15 Impairment testing of goodwill
An overview of impairment reviews performed by CGUs is set out below. The recoverable amount of each CGU has been determined
on value in use calculations using cash flow projections from financial budgets and forecasts approved by the Board covering a three
year period from the date of the relevant impairment review. The key assumptions in the projections, for all CGUs, were as follows:
• Revenue and gross margin were based on expected levels of activity under existing major contractual arrangements together
with growth based upon medium term historical growth rates and having regard to expected economic and market conditions
for other customers.
• Administrative expenses were forecast to move in line with expected levels of activity in the CGU.
• The growth rate used to extrapolate the cash flows beyond the three year-forecast period was 2% up to a period of 15 years in total.
The pre-tax discount rates used in the calculations were as follows:
UK and Ireland
North America
EMEA
2018
%
11.36
15.46
11.99
2017
%
10.33
14.04
10.82
As a result of the review the Directors did not identify any impairment for the goodwill in each CGU. In considering sensitivities,
no reasonable change in any of the above key assumptions would cause the recoverable amount to fall below the carrying value
of the CGUs.
16 Deferred income tax assets
Certain deferred tax assets and liabilities have been offset. The following is the analysis of the deferred tax balances (after offset)
for financial reporting purposes:
Non-current:
Non-current temporary differences
Deferred tax asset
2018
£000
2,282
2,282
2017
£000
2,275
2,275
The Directors consider the deferred tax asset is recoverable within two to five years. Deferred tax assets have been recognised in
respect of timing differences associated with share-based payment expenses where it is considered probable that these assets
will be recovered.
132
FDM Group (Holdings) plcAnnual Report and Accounts 2018 Movement in deferred tax during 2018:
Share-based payments
Property, plant and equipment
Other
Movement in deferred tax during 2017:
Share-based payments
Property, plant and equipment
Other
1 January
2018
£000
Recognised
in income
statement
£000
Recognised
in other
reserves
£000
Transferred
to Retained
Earnings
£000
31 December
2018
£000
2,330
(326)
271
2,275
36
67
513
616
(14)
–
–
(14)
(595)
–
–
(595)
1,757
(259)
784
2,282
1 January
2017
£000
Recognised
in income
statement
£000
Recognised
in other
reserves
£000
Transferred
to Retained
Earnings
£000
31 December
2017
£000
846
(474)
400
772
483
148
(129)
502
1,001
–
–
1,001
–
–
–
–
2,330
(326)
271
2,275
The Group has unused tax losses for which no deferred tax asset has been recognised with a potential tax benefit of £437,000,
no asset has been recognised as the losses have been generated in regions where the Group does not expect to generate profits
in the short term. The losses can be carried forward indefinitely.
17 Trade and other receivables
Trade receivables
Other receivables
Prepayments and accrued income
Included within prepayments and accrued income is £6,864,000 of accrued income (2017: £3,401,000).
The trade receivables as at 31 December are aged as follows:
Not overdue
Not more than three months past due
More than three months but not more than six months past due
More than six months but not more than one year past due
Older than one year past due
Provision for impairment
2018
£000
24,990
953
11,786
37,729
2017
£000
23,138
717
6,861
30,716
2018
£000
19,915
4,880
261
103
35
(204)
24,990
2017
£000
15,298
7,696
327
93
11
(287)
23,138
133
Strategic ReportGovernanceFinancial StatementsFDM Group (Holdings) plcAnnual Report and Accounts 2018Notes to the Consolidated Financial Statements 17 Trade and other receivables continued
An analysis of the provision for impairment by the aged receivable category it relates to is set out below:
Not overdue
Not more than three months past due
More than three months but not more than six months past due
More than six months but not more than one year past due
Older than one year past due
The movement in the provision for impairment is as below:
At 1 January
Credit/charge for the year
At 31 December
The carrying amounts of the Group’s trade receivables are denominated in the following currencies:
Pounds Sterling
US Dollar
Canadian Dollar
Euro
Swiss Franc
Hong Kong Dollar
Singapore Dollar
Chinese Renminbi
South African Rand
Australian Dollar
18 Cash and cash equivalents
Cash at bank and in hand
Provision
for
impairment
2018
£000
Provision
for
impairment
2017
£000
–
22
75
77
30
204
2018
£000
287
(83)
204
2018
£000
13,846
4,871
1,494
1,707
79
1,521
924
287
19
242
24,990
–
90
126
60
11
287
2017
£000
176
111
287
2017
£000
12,018
5,255
1,517
2,173
60
811
872
229
60
143
23,138
2018
£000
2017
£000
33,907
36,846
Cash and cash equivalents denominated in currencies other than Pounds Sterling amount to £9,507,000 (2017: £7,827,000),
denominated in US Dollar, Canadian Dollar, Euro, Swiss Franc, Hong Kong Dollar, Singapore Dollar, Chinese Renminbi, South
African Rand and Australian Dollar.
The Group has issued guarantees in favour of Commerzbank for CHF150,000, CRP/ Capstone 14W Property Owner LLC totalling
US$242,399 and Roza 14W LLC for a leasehold property in the USA for US$25,973.
134
FDM Group (Holdings) plcAnnual Report and Accounts 2018 The credit quality of financial assets can be assessed by reference to external credit ratings issued by credit ratings agencies
registered in the European Union. Cash at bank is held with banks with the following ratings:
Cash at bank by credit rating
AA
A
BBB
2018
£000
32,911
518
478
33,907
2017
£000
35,645
1,201
–
36,846
Revolving credit facility
The Group had a £20,000,000 Revolving Credit Facility (“RCF”) with HSBC Bank plc which expired on 14 August 2018 and has not
been renewed. The RCF was secured by way of a debenture on the assets of the Company, Astra 5.0 Limited, FDM Group Limited
and FDM Group Inc.
19 Trade and other payables
Trade payables
Other payables
Other taxes and social security
Accruals and deferred income
2018
£000
1,627
915
7,032
16,333
25,907
2017
£000
1,450
760
6,382
18,024
26,616
Trade and other payables denominated in currencies other than Pounds Sterling amount to £7,565,000 (2017: £8,434,000),
denominated in US Dollar, Canadian Dollar, Euro, Swiss Franc, Hong Kong Dollar, Singapore Dollar, Chinese Renminbi, South
African Rand and Australian Dollar.
20 Share capital
Authorised, called up, allotted and fully paid share capital
Ordinary shares of £0.01 each
At 1 January
New issues
At 31 December
2018
Number of
shares
2018
£000
2017
Number of
shares
107,517,506
754,202
1,075 107,517,506
–
8
108,271,708
1,083 107,517,506
2017
£000
1,075
–
1,075
Ordinary shares
All ordinary shares rank equally for all dividends and distributions that may be declared on such shares. At general meetings of
the Company, each shareholder who is present (in person, by proxy or by representative) is entitled to one vote on a show of
hands and, on a poll, to one vote per share.
During the year 754,202 shares were issued, the difference between market value and par value at issue resulted in an amount of
£898,000 being recognised in share premium with £8,000 being recognised as an increase in issued share capital.
135
Strategic ReportGovernanceFinancial StatementsFDM Group (Holdings) plcAnnual Report and Accounts 2018Notes to the Consolidated Financial Statements
21 Dividends
Dividends paid
Paid to shareholders
2018
2018
£000
2017
£000
30,718
23,976
An interim dividend of 14.5 pence per ordinary share was declared by the Directors on 20 July 2018 and was paid on
21 September 2018 to holders of record on 24 August 2018.
The Board is proposing a final dividend of 15.5 pence per share in respect of the year to 31 December 2018, for approval by
shareholders at the AGM on 25 April 2019.
Subject to shareholder approval the dividend will be paid on 14 June 2019 to shareholders of record on 24 May 2019.
This brings the Company’s total dividend for the year to 30.0 pence per share (2017: 26.0 pence per share). The total ordinary
dividends of 30.0 pence per share will be covered 1.14 times by basic earnings per share.
The Board has adopted a progressive dividend policy; the Group will retain sufficient capital to fund ongoing operating
requirements, maintain an appropriate level of dividend cover and sufficient funds to invest in the Group’s longer term growth.
2017
An interim dividend of 12.0 pence per ordinary share was declared by the Directors on 28 July 2017 and was paid on
22 September 2017 to holders of record on 25 August 2017. The final dividend of 14.0 pence per share in respect of the year to
31 December 2017 was approved shareholders at the AGM on 26 April 2018, the dividend was paid on 15 June 2018 to
shareholders of record on 25 May 2018.
22 All Other Reserves
Balance at 1 January 2018
Other comprehensive income for the year
Total comprehensive income for the year
Share-based payments (note 24)
Transfer to retained earnings
New share issue
Own shares bought back (note 25)
Total transactions with owners, recognised directly in equity
Capital
redemption
reserve
£000
52
–
–
–
–
–
–
–
Own
shares
reserve
£000
–
–
–
–
–
–
(4,562)
(4,562)
Translation
reserve
£000
Other
reserves
£000
791
630
630
–
–
–
–
–
6,148
–
–
2,678
(2,516)
–
–
162
6,310
Balance at 31 December 2018
52
(4,562)
1,421
Balance at 1 January 2017
Other comprehensive expense for the year
Total comprehensive expense for the year
Share-based payments (note 24)
Total transactions with owners, recognised directly in equity
Balance at 31 December 2017
Capital
redemption
reserve
£000
Own
shares
reserve
£000
52
–
–
–
–
52
–
–
–
–
–
–
Translation
reserve
£000
Other
reserves
£000
1,464
2,470
(673)
(673)
–
–
791
–
–
3,678
3,678
6,148
136
Total of
All other
reserves
£000
6,991
630
630
2,678
(2,516)
–
(4,562)
(4,400)
3,221
Total of
All other
reserves
£000
3,986
(673)
(673)
3,678
3,678
6,991
FDM Group (Holdings) plcAnnual Report and Accounts 2018
23 Operating leases
The Group has entered into commercial leases on certain properties. Future minimum payments under non-cancellable
operating leases are as follows:
Less than one year
Between one and five years
More than five years
2018
£000
5,640
15,002
6,936
27,578
2017
£000
4,768
13,812
3,538
22,118
There are no contingent rents, purchase options, escalation clauses or significant restrictions on any of the Group’s operating leases.
24 Share-based payments
Expenses arising from equity settled share-based payment transaction
Deferred tax recognised in other reserves arising from equity settled share-based payment transaction
2018
£000
2,692
(14)
2,678
2017
£000
2,677
1,001
3,678
During the year the share options issued in 2015 vested, of which 754,202 were exercised, and 179,209 linked shares lapsed
(linked shares which were not required to fund the price at date of exercise). The share options exercised were satisfied by the
issue of 754,202 new shares, of which 455,548 were subsequently sold to the FDM Group Employee Benefit Trust, at the market
value at date of exercise. For detail of the shares held in the FDM Group Employee Benefit Trust see note 25. A transfer of
£1,921,000 was made from Other reserves to Retained earnings in respect of the exercise of share options during the period.
As disclosed in the Directors’ Remuneration Report, the Company granted awards on 1 June 2018, in the form of nominal cost options
over ordinary shares in the Company under the FDM 2014 Performance Share Plan (“PSP”). As with the awards made in 2015, 2016
and 2017, the vesting of the awards is subject to the achievement of a three-year performance condition relating to earnings per share.
Awards granted to UK participants have been structured as Approved Performance Share Plan (“APSP”) awards to enable participants
to benefit from UK tax efficiencies. Each APSP award consists of a tax qualifying option under the FDM 2014 Company Share Option
Plan (“CSOP”) over shares with a value of up to £30,000 and a separate award under the PSP for amounts in excess of the HMRC
£30,000 limit. A Linked Award is also provided under the PSP to enable participants to fund the exercise price of the CSOP option.
PSP and CSOP options are exercisable no later than the tenth anniversary of the date of grant.
The table below summarises the outstanding share options:
Outstanding at 1 January
Granted during the year
Forfeited during the year
Exercised during the year
Expired during the year
Outstanding at 31 December
Exercisable at the end of the year
Weighted average remaining contractual life (years)
2018
Weighted
average
exercise
price
2017
Number of
shares
2017
Weighted
average
exercise
price
104p 2,192,690
664,897
267p
(189,772)
76p
–
120p
–
–
159p 2,667,815
–
125p
1.0
n/a
101p
135p
166p
–
–
104p
–
n/a
2018
Number of
shares
2,667,815
767,194
(388,482)
(754,202)
–
2,292,325
8,000
1.0
The weighted average share price at the date of exercise of options exercised during the year ended 31 December 2018 was 999p
(2017; not applicable).
137
Strategic ReportGovernanceFinancial StatementsFDM Group (Holdings) plcAnnual Report and Accounts 2018Notes to the Consolidated Financial Statements
24 Share-based payments continued
The fair values of the PSP and CSOP options made were determined using the Black-Scholes valuation model. The significant
inputs to the model were as follows:
2018
Share price at date of grant
Exercise price
Dividend yield
Expected volatility
Risk free interest rate
Expected life
Fair value at date of grant
2017
Share price at date of grant
Exercise price
Dividend yield
Expected volatility
Risk free interest rate
Expected life
Fair value at date of grant – issue on 19 April 2017
2016
Share price at date of grant
Exercise price
Dividend yield
Expected volatility
Risk free interest rate
Expected life
Fair value at date of grant – issue on 19 April 2016
Fair value at date of grant – issue on 5 September 2016
2015
Share price at date of grant
Exercise price
Dividend yield
Expected volatility
Risk free interest rate
Expected life
Fair value at date of grant – issue on 20 April 2015
Fair value at date of grant – issue on 10 August 2015
PSP
CSOP
1021p
1p
3%
29%
0.94%
4 years
905p
1021p
1021p
3%
29%
0.94%
4 years
179p
PSP
CSOP
724p
1p
3%
28%
0.25%
4 years
641p
724p
724p
3%
28%
0.25%
4 years
115p
PSP
CSOP
561p
1p
3%
33%
0.8%
4 years
497p
557p
561p
561p
3%
33%
0.8%
4 years
113p
127p
PSP
CSOP
331p
1p
4%
31%
1.2%
4 years
281p
388p
331p
331p
4%
31%
1.2%
4 years
56p
125p
The expected volatility reflects the assumption that the historical volatility is indicative of future trends, which may not
necessarily be the actual outcome. As the Company has only a limited history of quoted share price volatility, the expected
volatility has been partly based on the historical volatility of comparator companies.
138
FDM Group (Holdings) plcAnnual Report and Accounts 2018 25 Investment in own shares
During the AGM held on 26 April 2018, the shareholders approved that up to 10% of the Company’s shares could be purchased by
the Company. The authority expires at the conclusion of the Company’s next Annual General Meeting after the passing of this
resolution or, if earlier, at 23:59 on 31 May 2019.
During 2018 the FDM Group Employee Benefit Trust was established to purchase shares sold by option holders upon exercise of
options under the FDM Performance Share Plan. The Group accounts for the Company’s shares held by the Trustee of the FDM
Group Employee Benefit Trust as a deduction from shareholders’ funds.
The administrative costs of running the Trust have been consolidated in the results FDM Group (Holdings) plc.
Number of shares in the Company owned by the EBT
Nominal value of shares held
Cost price of shares held
Prevailing valuation per share at 31 December 2018
Total market value of shares
Minimum number of shares in the Company owned by EBT during the year
Maximum number of shares in the Company owned by EBT during the year
31 December
2018
455,548
£4,555
£4,561,510
£7.43
£3,384,722
–
455,548
26 Related parties
During the year the Group paid rental of £36,000 (2017: £36,000) to Rod Flavell, Chief Executive Officer and Sheila Flavell, Chief
Operating Officer, for rent of a London apartment used for short-term employee accommodation. The rent payable was at
market rate, no balances were outstanding at year end (2017: £nil). At no time during 2018 or 2017 was the apartment used by
any of the Directors.
During the year the Group paid £nil (2017: £16,000) 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 year end (2017: £nil).
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.
The full registered addresses of all subsidiaries of the Parent Company are disclosed on page 145.
27 Financial risk management
The Group manages its capital to ensure the Company and all its subsidiaries will be able to continue as a going concern whilst
maximising the return to shareholders.
The use of financial instruments is managed under policies and procedures approved by the Board. These are designed to reduce
the financial risks faced by the Group and Company, which primarily relate to credit, interest, liquidity, capital management and
foreign currency risks, which arise in the normal course of the Group’s business.
There are no adjustments between the amounts presented in the Statement of Financial Position and the fair values of the
assets and liabilities.
Credit risk
Credit risk is managed on a Group basis and arises from cash and cash equivalents and trade receivables. The Group provides
credit to customers in the normal course of business and the amount that appears in the Consolidated Statement of Financial
Position is net of a provision of £204,000 (2017: £287,000).
139
Strategic ReportGovernanceFinancial StatementsFDM Group (Holdings) plcAnnual Report and Accounts 2018Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements
27 Financial risk management continued
All material trade receivable balances relate to sales transactions with the Group’s blue-chip customer base. At the reporting
date, although the Group had significant balances with key customers, there were no significant concentrations of credit risk. The
maximum exposure to credit risk is represented by the carrying amount of each financial asset.
Credit risk is managed through agreed procedures which include managing and analysing the credit risk for new customers and
managing existing customers. No customers defaulted on debt during the current or prior year, £266,000 of trade receivables at
31 December 2018 is owed from new customers (less than 6 months) (2017: £305,000 owed from new customers).
Interest rate risk
Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in
market interest rates. The Group’s exposure to the risk of changes in market interest rates is limited as the Group had no
borrowings therefore it has limited exposure to interest rate risk. The Group manages its interest rate risk through regular
reviews of its exposure to changes in interest rates.
Liquidity risk
The Group manages liquidity risk by maintaining adequate cash reserves and continuously monitoring forecast and actual cash
flows and where appropriate matches the maturity of financial assets and liabilities.
The Group has no borrowings from third parties at the year end and therefore liquidity risk is not considered a significant risk at
this time due to the Group’s cash balances and undrawn facilities.
Capital management
The Group’s policy is to maintain a strong capital base so as to maintain investor market, creditor, customer and employee
confidence and to sustain future investment and development of the business. The capital structure of the Group consists of
equity attributable to the equity holders of the Group comprising issued share capital, other reserves and retained earnings.
The Board monitors the capital structure on a regular basis and determines the level of annual dividend. The Group is not
exposed to any externally imposed capital requirements.
Foreign currency risk
Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes
in foreign exchange rates. The Group’s exposure to the risk of changes in foreign exchange rates relates primarily to the Group’s
operating activities (when revenue or expense is denominated in a different currency from the Group’s functional currency) and
the Group’s net investments in foreign subsidiaries.
The currencies giving rise to this risk are primarily the US Dollar, Canadian Dollar and Euro. The Group has both cash inflows and
outflows in these currencies that create a natural hedge.
Fair values
There is no significant difference between the carrying amounts shown in the Consolidated Statement of Financial Position and
the fair values of the Group and Company’s financial instruments. For current trade and other receivables or payables with a
remaining life of less than one year, the amortised cost is deemed to reflect the fair value. Assets are held as “loans and
receivables” and that there are no assets or liabilities measured at fair value through profit and loss, no derivatives used for
hedging, available-for-sale or other financial liabilities at amortised cost.
140
FDM Group (Holdings) plcAnnual Report and Accounts 2018 Parent Company Statement
of Financial Position
as at 31 December 2018
Non-current assets
Investments
Current assets
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
Current liabilities
Trade and other payables
Total liabilities
Net assets
Equity attributable to equity holders of the parent
Share capital
Share premium
Capital redemption reserve
Own shares reserve
Other reserves
Retained earnings
Total equity
Note
3
4
5
6
7
2018
£000
5,955
5,955
2017
£000
5,147
5,147
43,633
7
44,474
24
43,640
44,498
49,595
49,645
42
42
74
74
49,553
49,571
1,083
8,771
52
(4,562)
5,955
38,254
1,075
7,873
52
–
5,147
35,424
49,553
49,571
The Parent Company made a profit for the year of £31,627,000 (2017: profit of £29,740,000). In accordance with section 408 of the
Companies Act 2006, the Parent Company’s individual profit and loss account is not included in these financial statements.
The notes on pages 144 to 147 are an integral part of the Parent Company Financial Statements (Registered Company 07078823).
These financial statements on pages 141 to 147 were approved by the Board of Directors on 5 March 2019 and were signed on
its behalf by:
Rod Flavell
Chief Executive Officer
5 March 2019
Mike McLaren
Chief Financial Officer
5 March 2019
141
Strategic ReportGovernanceFinancial StatementsFDM Group (Holdings) plcAnnual Report and Accounts 2018Notes to the Consolidated Financial Statements
Parent Company Statement
of Cash Flows
for the year ended 31 December 2018
Cash flows from operating activities
Company profit before tax for the year
Adjustments for:
Dividends received
Decrease/ (increase) in trade and other receivables
(Decrease)/ increase in trade and other payables
Cash flows generated from operations
Cash flows from investing activities
Dividends received
Recharge for share based payment
Net cash generated from investing activities
Cash flows from financing activities
Proceeds from issuance of new shares
Payments for shares bought back
Dividends paid
Net cash used in financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
The notes on pages 144 to 147 are an integral part of the Parent Company Financial Statements.
Note
2018
£000
2017
£000
31,627
29,740
(32,000)
841
(32)
(30,000)
(5,775)
10
436
(6,025)
10
32,000
1,921
30,000
–
33,921
30,000
906
(4,562)
(30,718)
–
–
(23,976)
(34,374)
(23,976)
(17)
24
7
(1)
25
24
10
5
142
FDM Group (Holdings) plcAnnual Report and Accounts 2018 Parent Company Statement
of Changes in Equity
for the year ended 31 December 2018
Share
capital
£000
Share
premium
£000
Capital
redemption
reserve
£000
Own
shares
reserve
£000
Balance at 1 January 2018
1,075
7,873
52
Profit for the year
Total comprehensive income for the year
Share-based payments (note 3)
Transfer to retained earnings
New share issue
Own shares bought back
Dividends paid
Total transaction with owners,
recognised directly in equity
–
–
–
–
8
–
–
8
–
–
–
–
898
–
–
898
–
–
–
–
–
–
–
–
Other
reserves
£000
Retained
earnings
£000
Total
Equity
£000
5,147
35,424
49,571
–
–
31,627
31,627
31,627
31,627
–
–
–
–
–
–
(4,562)
–
2,729
(1,921)
–
–
–
–
1,921
–
–
(30,718)
2,729
–
906
(4,562)
(30,718)
(4,562)
808
(28,797)
(31,645)
Balance at 31 December 2018
1,083
8,771
52
(4,562)
5,955
38,254
49,553
Share
capital
£000
Share
premium
£000
Capital
redemption
reserve
£000
Own
shares
reserve
£000
Balance at 1 January 2017
1,075
7,873
52
Profit for the year
Total comprehensive income for the year
Dividends paid
Share-based payments (note 3)
Total transaction with owners,
recognised directly in equity
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Balance at 31 December 2017
1,075
7,873
52
–
–
–
–
–
–
–
The notes on pages 144 to 147 are an integral part of the Parent Company Financial Statements.
Other
reserves
£000
Retained
earnings
£000
Total
Equity
£000
2,470
29,660
41,130
–
–
29,740
29,740
29,740
29,740
–
2,677
(23,976)
–
(23,976)
2,677
2,677
(23,976)
(21,299)
5,147
35,424
49,571
143
Strategic ReportGovernanceFinancial StatementsFDM Group (Holdings) plcAnnual Report and Accounts 2018Notes to the Consolidated Financial Statements
Notes to the Parent Company
Financial Statements
1 Going concern
The Directors have a reasonable expectation that with the continued support of other Group companies, the Company will have
adequate resources to continue in operational existence as a holding company for the foreseeable future. Accordingly the
Directors continue to adopt the going concern basis for preparing the financial statements.
2 Accounting policies
The Company financial statements have been prepared in accordance with IFRSs as adopted by the EU and in accordance with
the Companies Act 2006 as applicable to companies using IFRS and in accordance with IFRS IC interpretations.
The Company has taken the exemption under section 408 of the Companies Act 2006 not to present the parent company income
statement. The profit for the year was £31,627,000 (2017: profit of £29,740,000).
The financial information has been prepared on a historical cost basis.
The accounting policies of the Company are the same as those of the Group and have been applied consistently. These are set
out in note 3 in the Notes to the Consolidated Financial Statements, except that the Company has no policy in respect of
consolidation. Investments are carried at historical cost.
Details of the Company’s significant accounting estimates, being the share-based payments, are consistent with those disclosed
in note 4 to the Consolidated Financial Statements on pages 124 and 125.
3 Investments
At 1 January
Additions
Recharge of IFRS2 investment
At 31 December
2018
£000
5,147
2,729
(1,921)
5,955
2017
£000
2,470
2,677
–
5,147
The addition to investments represents the accounting in respect of the costs associated with the PSP, as the awards relate to
employees of its subsidiary undertakings. For further details of the PSP see note 24 to the Consolidated Financial Statements.
The Company holds the following investments in its subsidiaries:
Company
Astra 5.0 Limited
FDM Group Limited
FDM Astra Ireland Limited
FDM Group Inc.
FDM Group Canada Inc.
FDM Group NV
FDM Group GmbH
FDM Switzerland GmbH
FDM Group Luxembourg SA
FDM South Africa (PTY) Limited
FDM Singapore Consulting PTE Limited
FDM Technology (Shanghai) Co. Limited
FDM Group HK Limited
FDM Group Australia Pty Ltd
FDM Group Austria GmbH
FDM Group BV
Country of
incorporation
Class of
share held
Direct/
indirect
Ownership
Ordinary Direct
Great Britain
Ordinary
Great Britain
Ordinary
Ireland
Ordinary
USA
Ordinary
Canada
Ordinary
Belgium
Ordinary
Germany
Ordinary
Switzerland
Ordinary
Luxembourg
Ordinary
South Africa
Ordinary
Singapore
Ordinary
China
Ordinary
Hong Kong
Ordinary
Australia
Austria
Ordinary
The Netherlands Ordinary
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
The total cost of investments in subsidiaries, is £2 (2017: £2). Astra 5.0 Limited acts as an intermediate holding company and provides
human resources and marketing services to the Group. The remaining subsidiaries carry out the principal activity of the Group.
144
FDM Group (Holdings) plcAnnual Report and Accounts 2018 Notes to the Parent Company Financial Statements
The registered address for each subsidiary of the Company as at 31 December 2018 is listed below. The principal place of
business of each company is considered the same as the registered office, with the exception of FDM Group BV which operates
in the Netherlands.
Company
Registered address
Astra 5.0 Limited
FDM Group Limited
FDM Astra Ireland Limited
FDM Group Inc.
FDM Group Canada Inc.
FDM Group NV
FDM Group GmbH
FDM Switzerland GmbH
FDM Group SA
FDM South Africa (PTY) Limited
FDM Singapore Consulting PTE Limited
FDM Technology (Shanghai) Co. Limited
FDM Group HK Limited
FDM Group Australia Pty Ltd
FDM Group Austria GmbH
FDM Group BV
4 Trade and other receivables
Amounts owed by subsidiary undertakings
Prepayments and accrued income
3rd Floor, Cottons Centre, Cottons Lane, London SE1 2QG, UK
3rd Floor, Cottons Centre, Cottons Lane, London SE1 2QG, UK
25-28 North Wall Quay, Dublin 1, Ireland
14 Wall Street, New York, NY 10005, USA
1 Place Ville Marie, 37th Floor, Montreal, QC H3B 3P4, Canada
Rue Medori 99, B-1020 Brussels, Belgium
MainzerLandstrasse 41, 60329 Frankfurt am Main, Germany
Lavaterstrasse 40, Zurich, CH 8002, Switzerland
13 Boulevard Grande-Duchesse Charlotte, L01331 Luxembourg
9 Kinross Street, Germiston South, 1401 South Africa
77 Robinson Road, #13-00 Robinson 77, 068896 Singapore
Room 314, No.437 Zhi Zaoju Road, Huangpu District, Shanghai, China
Suites 406 – 409 Pacific Place, 1 Queen’s Road East, Hong Kong
Rialto South Tower, Level 29, 525 Collins Street, Melbourne, VIC 3000, Australia
Handelskai 92/Gate 2/7A, 1200 Wien, Austria
3rd Floor, Cottons Centre, Cottons Lane, London SE1 2QG, UK
2018
£000
43,616
17
2017
£000
44,463
11
43,633
44,474
All trade and other receivables are receivable in Pounds Sterling and are fully performing. Amounts owed by subsidiary
undertakings are unsecured, non-interest bearing and repayable on demand.
5 Cash and cash equivalents
Cash at bank and in hand
2018
£000
7
2017
£000
24
The Company’s cash is held with a financial institution with a credit rating of AA at the date of signing the financial statements.
6 Trade and other payables
Trade payables
Accruals and deferred income
2018
£000
11
31
42
2017
£000
12
62
74
145
Strategic ReportGovernanceFinancial StatementsFDM Group (Holdings) plcAnnual Report and Accounts 2018Notes to the Consolidated Financial Statements 7 Share capital
Authorised, called up, allotted and fully paid share capital
Ordinary shares of £0.01 each
At 1 January
New issues
At 31 December
2018
Number of
shares
2018
£000
2017
Number of
shares
107,517,506
754,202
1,075 107,517,506
–
8
108,271,708
1,083 107,517,506
2017
£000
1,075
–
1,075
Ordinary shares
All ordinary shares rank equally for all dividends and distributions that may be declared on such shares. At general meetings of
the Company, each shareholder who is present (in person, by proxy or by representative) is entitled to one vote on a show of
hands and, on a poll, to one vote per share.
During the year 754,202 shares were issued, the difference between market value and par value at issue resulted in an amount of
£898,000 being recognised in share premium with £8,000 being recognised as an increase in issued share capital.
8 Related parties
The Company holds inter-company balances with certain of its subsidiary undertakings. The transactions that have taken place
are in relation to inter-company loan repayments/ additions and dividends which are listed below:
Astra 5.0 Limited
FDM Group Limited
FDM Group Inc.
Dividends from
related parties
2018
£000
Amounts owed
by related
parties
2018
£000
Dividends from
related parties
2017
£000
Amounts owed
by related
parties
2017
£000
32,000
–
–
32,000
4,333
39,269
14
43,616
30,000
–
–
30,000
4,340
40,123
–
44,463
9 Financial risk management
The financial risks and uncertainties the Company faces are the same as those of the Group. These are set out on pages 139 and 140.
10 Dividends
Dividends received
Received from subsidiaries
Dividends paid
Paid to shareholders
2018
£000
2017
£000
32,000
30,000
30,718
23,976
An interim dividend of 14.5 pence per ordinary share was declared by the Directors on 20 July 2018 and was paid on
21 September 2018 to holders of record on 24 August 2018.
The Board is proposing a final dividend of 15.5 pence per share in respect of the year to 31 December 2018, for approval by
shareholders at the AGM on 25 April 2019.
Subject to shareholder approval the dividend will be paid on 14 June 2019 to shareholders of record on 24 May 2019.
This brings the Company’s total dividend for the year to 30.0 pence per share (2017: 26.0 pence per share). The total ordinary
dividends of 30.0 pence per share will be covered 1.14 times by basic earnings per share.
The Board has adopted a progressive dividend policy; the Group will retain sufficient capital to fund ongoing operating
requirements, maintain an appropriate level of dividend cover and sufficient funds to invest in the Group’s longer term growth.
146
FDM Group (Holdings) plcAnnual Report and Accounts 2018
Notes to the Parent Company Financial Statements
2017
An interim dividend of 12.0 pence per ordinary share was declared by the Directors on 28 July 2017 and was paid on
22 September 2017 to holders of record on 25 August 2017. The final dividend of 14.0 pence per share in respect of the year to
31 December 2017 was approved shareholders at the AGM on 26 April 2018, the dividend was paid on 15 June 2018 to
shareholders of record on 25 May 2018.
11 Directors’ remuneration
Directors’ remuneration was paid by FDM Group Limited in both the current and prior year and no recharge was made to the
Company. For further details see note 9 to the Consolidated Financial Statements on page 128.
12 Auditors’ remuneration
Auditors’ remuneration of £7,000 was charged in relation to 2018 (2017: £7,000), the fees were paid by FDM Group Limited in both
the current and prior year and no recharge was made to the Company.
13 Employees
The Company had no employees during the current or prior year.
147
Strategic ReportGovernanceFinancial StatementsFDM Group (Holdings) plcAnnual Report and Accounts 2018Notes to the Consolidated Financial Statements Shareholder Information
Directors
Ivan Martin
Roderick Flavell
Sheila Flavell
Michael McLaren
Andrew Brown
Peter Whiting
Robin Taylor
Michelle Senecal de Fonseca
David Lister
Non-Executive Chairman
Chief Executive Officer
Chief Operating Officer
Chief Financial Officer
Chief Commercial Officer
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Company Secretary
Jonathan Mark Heather
Registered office
3rd Floor
Cottons Centre
Cottons Lane
London
SE1 2QG
Independent Auditors
PricewaterhouseCoopers LLP
1 Embankment Place
London
WC2N 6RH
HSBC Bank plc
8 Canada Square
London
E14 5HQ
Link Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU
Investec Bank plc
2 Gresham Street
London
EC2V 7QP
Taylor Wessing LLP
5 New Street Square
London
EC4A 3TW
Bankers
Registrars
Stock brokers (joint)
Legal advisors
148
Stockdale Securities Limited
Beaufort House
15 St. Botolph Street
London
EC3A 7BB
FDM Group (Holdings) plcAnnual Report and Accounts 2018
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FDM Group
3rd Floor, Cottons Centre,
Cottons Lane, London SE1 2QG
Tel:
Fax:
Email: enquiries@fdmgroup.com
+44 (0) 20 3056 8240
+44 (0) 870 757 7634
© FDM Group 2019