TIDMFSD
FIELD SYSTEMS DESIGNS HOLDINGS
PLC
CHAIRMAN'S STATEMENT
The Board presents the results of Field Systems Designs Holdings plc (FSD) for
the year ended 31 May 2019.
It is pleasing to see the sustained turnover and operating profits reflected by
the current year's results. Turnover from the water industry improved during
the year as the cycle of expenditure under Asset Management Programme 6 (AMP6)
peaked. This activity served to offset the much-reduced sales contribution from
the Energy from Waste sector (EfW). The Group's move to diversify into the EfW
sector has proven a difficult venture due to the contractual stance adopted by
its main customer whose own activities in delivering these complex projects
have proven so troublesome.
The FSD Group was fully engaged on projects from frameworks in the water sector
this year and is now looking ahead to 2020 to refresh the pre-qualification
process as framework plans by water utilities are rolled forward into AMP7. The
Water Services Regulation Authority, (Ofwat) is taking a tough stance on water
companies in its latest periodic review (AMP7), covering the five years to
2025, challenging their budgets as the regulator demands lower bills and
imposes sector-wide targets on leakage, pollution and flooding. Ofwat has
approved the business plans of just a few water companies across England and
Wales and has sent the remainder back to their drawing-boards to revisit their
figures and revise their expenditure proposals. Those companies appealing
against the regulator's tougher stance will see a final ruling in December 2019
and until this point in time their expenditure plans are uncertain.
Whilst FSD is fully committed to assist water companies, and the Tier 1
framework contractors chosen under AMP7 to manage their expenditure, the
absence of any solid expenditure forecasts is making planning ahead for FSD
more complicated than normal. However, FSD is confident that the quality of its
delivered projects and its well-established business credentials that have
earned FSD its position on their supply-chain arrangements in the past,
together with the reputation of its talented engineering and installation
personnel, will serve us well this time around.
The board is positive about the outlook for Group performance over the next
financial year and is well-positioned with a strong cash balance and good
opening order book to maximise the benefits from future opportunities.
D K Bird
Chairman
31 October 2019
PUBLICATION OF NON-STATUTORY ACCOUNTS
The financial information set out in this preliminary announcement does not
constitute statutory accounts as defined in the Companies Act 2006.
The group statement of financial position as at 31 May 2019 and the unaudited
group income statement for the year then ended have been extracted from the
Group's 2019 statutory financial statements upon which the auditors opinion has
not yet been issued.
These financial statements have not yet been delivered to the registrar of
companies.
The directors of Field Systems Designs Holdings plc accept responsibility for
this announcement and confirm compliance with the NEX Exchange Growth Market
rules.
FIELD SYSTEMS DESIGNS HOLDINGS
PLC
STRATEGIC REPORT
The directors present the Strategic Report for Field Systems Designs Holdings
Plc ('the Company') and its subsidiary undertakings (together referred to as
'the Group') for the year ended 31 May 2019.
OPERATIONAL PERFORMANCE
The Group achieved a turnover of GBP21.8 million for the year to 31 May 2019, a
reduction of 16% on last year, reflecting the continued pick-up in work from
the Water Industry offset by the completion of works in the EfW sector with two
major projects now ending.
Turnover was generated as follows: 2019 2018
GBP GBP
Water and Sewerage treatment 17,415,655 12,509,786
Power generation and Energy from Waste 4,328,449 12,752,185
Transport and Tunnel infrastructure 21,189 634,495
--------------- ---------------
21,765,293 25,896,466
========= =========
Gross profit margins improved in the year ended 31 May 2019 to 8% from 6.6%
last year. Gross margins were under downward pressure due to projects suffering
from the tough contractual stance adopted by its customer in the Energy from
Waste sector and have therefore improved as the volumes in this sector have
reduced.
The improved contribution from its reduced turnover left the Group with
operating profits for the year of GBP551,125 (2018: GBP551,389). The directors are
pleased to report a solid Group profit after tax of GBP423,769 for the year ended
31 May 2019 (2018: GBP494,863). The directors do not recommend the payment of a
dividend. (2018: GBPNil)
BUSINESS REVIEW
The Field Systems Designs Group (FSD) focuses on delivering specialist
mechanical and electrical design and installation works.
Water and Sewerage
FSD successfully secured, engineered, managed and installed a volume of
Mechanical and Electrical (M&E) installation projects during the year across
the sector as the Group strives to complete to budget a quality job in a safe
working manner and maintain its reputation as a respected industry specialist.
Sales volumes improved significantly in the Water Industry in 2019 where 80% of
turnover was derived (2018: 48%). The Group undertook a diversity of projects
for a number of different Water Utilities in many regions of the United
Kingdom, working for multiple Tier One contractors under AMP6 frameworks and
supply-chain arrangements.
Power generation and Energy from Waste
In 2019 20% of turnover was derived from the Power and EfW sector (2018: 49%).
FSD worked primarily on Energy from Waste projects, undertaking major
electrical installation works at Levenseat and Hull on projects which use
advanced thermal treatment gasification technology. There was also work
undertaken during the year on generators, and power station outage maintenance
works supporting installations completed in the past.
Transport and Tunnels
Electrical installation works on cable tunnels have their own complexities due
to the additional access, egress and safety issues which FSD carefully manage
with their experienced trained personnel. The Group continues to support such
tunnelling works as they arise, dealing competently with the complications
these projects involve.
Telemetry, Building services, Maintenance, Instrumentation, Controls and
Automation
FSD continues to undertake smaller electrical installation service contracts
across various sectors offering customers timeliness and value for money. An
electrical workshop facility with tooling and equipment enables the Group to
react quickly by producing various in-house components including small isolator
builds, lighting panels and remote monitoring enclosure pre-assemblies.
Mechanical design, fabrication and installation
The pipework fabrication facility owned by the Group gives its mechanical
subsidiary the flexibility to respond to customer's needs promptly when taking
on the mechanical elements of M&E installation contracts, The Group has grown
its client base by creating a reputation for quality in-house mechanical
fabrication and site installation services.
PRINCIPAL RISKS AND UNCERTAINTIES
The board regularly undertakes a review of business risks and uncertainties
confronting the Group and evaluates the significant project risks affecting its
business. The following issues are the principal risks and uncertainties faced
by the Group.
Economic
The Group's business may be affected by market forces beyond its control.
During a downturn all competing companies operating in the same industry
sectors will be impacted by economic and political change that will alter the
volume and value of available work.
Brexit
The people of the UK voted to leave the EU (Brexit) on 23 June 2016 and there
continues to be volatility in financial markets, in currency markets and
uncertainty over future actions by governments and businesses. The Group has
completed a review of the implications of the decision to leave the EU and
assessed scenarios around the ongoing uncertainties as the Brexit deadlines of
March and October 2019 have passed and we head for the third extension to 31
January 2020. While there remains uncertainty about the precise terms of
Brexit, we have considered the impact on our business as part of our risk
management process. The directors believe that the short-term effects are
inflationary, primarily on material pricing due to weaker sterling, but that
the long-term relationships with our supply chain will aid our business to
remain resilient under the range of most likely scenarios.
Cyclical trading
The Group is heavily reliant on the Water industry and its business is affected
by the cyclical nature of the UK market caused by the 5-year Asset Management
Programmes governed by OFWAT. At the beginning and the end of each AMP the
water industry suffers a downturn as all competing companies operating in this
industry are chasing a reduced volume of available work. The Group mitigates
these uncertainties by continually monitoring changes in its market sector, by
focusing its sales efforts on non-water industry work-flows and reviewing
regularly forecasted sales opportunities to ensure that adequate sales volumes
can be secured.
Skilled personnel
The Group is dependent on the quality, attention and diligence of its personnel
across the full spectrum of its skill disciplines. The Group's ability to
attract, retain, train and motivate its skilled management and personnel will
be reflected by business growth, profitability and a reputation for quality
work. The Group offers 'added-value' to its customers by offering a superior
quality of project management, engineering and supervisory resource to
complement its installation services. It is this wealth of knowledge and
experience that sets FSD aside from its competition.
The board reviews personnel issues on a monthly basis and the Safety, Health,
Environment and Quality manager (SHEQ) ensures there is investment in training
programmes for site and management to broaden the competence, knowledge and
experience of its employees. The Group continues to promote the further
training and improvement of staff; benefitting where applicable from the
introduction of the government Apprenticeship Levy.
Health and safety
The Group demands effective and successful management of health and safety
risks by its supply-chain and similar demands are rightly made by its own
customer base. Constant vigilance is paramount and any accident can have
serious consequences. The commitment to enforcing safe working and adherence to
regulation is strong at board level and flows through the organisation through
qualified specialists, continual instruction and training. The Group is
extremely aware of the potential for an 'incident' to damage the Group and
gives constant attention to ensuring that this risk is kept to a minimum. The
board, supported by a highly qualified health and safety specialist, endorses
the importance of vigilant health and safety practices.
Long term contracts - bidding
The majority of Group turnover is from fixed price and target price contracts.
The failure to adequately assess from client's specifications the full scope of
works, the correct pricing of that work and the time required to complete the
work may have serious ramifications on profitability. There are specific risk
management procedures in place to ensure that prices estimated for fixed price
contracts are accurate and to ensure the correct costing of successful bids as
the work progresses. The Tender Approval Procedure (TAP) is a key risk
management tool used to minimise these risks. The TAP completion process
identifies tender project risks, assesses the probability of their occurrence,
their impact if they do occur and actions necessary to manage them down to an
acceptable level. This procedure is used to ensure that commercial and
contractual risks are monitored and managed by the board.
Long term contracts - costing
Fixed price and target price contracts may also be subject to cost and time
overruns, and the costs of additional work undertaken on variations may not be
properly measured or fully recovered from the customer. The Project Summary
Report (PSR) is a key risk management tool used to minimise these risks. The
PSR completion process quantifies the value of project work undertaken after
successful contract award, reviews the potential commercial risks and
highlights any safety, technical, operational and environmental risks. This
tool is used to ensure that commercial and contractual risks are monitored and
managed by the board.
Competitiveness
The Group has a leading market position in sectors such as the water industry,
and has also penetrated other sectors such as tunnelling, the power industry
and energy from waste market to ensure a constant pipeline of enquiries.
Nevertheless in an increasingly competitive environment and with cyclical
volumes, accurate and competitive pricing is key to a successful contract
award. The board constantly monitors the competitiveness of its cost base to
ensure that its pricing remains competitive. Regular benchmarking and framework
submissions also assist this process of review.
Financial instruments
The Group uses financial instruments when required to provide a financing base
for the Group's operations and derivatives are used to hedge against known
commodity price and exchange rate exposures in contractual arrangements secured
by the Group. There may not always be instruments that provide accurate hedging
or readily available markets for such hedges.
Cash flow
The Group has a strong balance sheet and access to additional debt funding, and
trades comfortably within its current working capital. Customers may require
additional project work to be undertaken and the Group may be required to fund
this work for a period of time until the additional costs can be formally
approved and funds received. The Group may also experience an increase in the
level of credit given to customers as a consequence of a change in their
financial status or payment systems. In such circumstances there are short-term
cash-flow consequences which are managed carefully by the finance department
and any consequences mitigated.
KEY PERFORMANCE INDICATORS (KPI's)
The board uses both financial and non-financial (operational) performance
indicators in the analysis and management of the business. The indicators
relate both to financial and contractual performance and to other non-financial
areas, including but not limited to, employees, health and safety, quality
assurance, customer satisfaction and the environment. KPI's are used by the
management to run and monitor the business and many of the trends and results
provide information which is commercially sensitive or is confidential in
nature.
Financial
The main financial KPI used by the board is the measure of gross profit margin
(being the gross project profit contribution as a percentage of turnover), as
overheads can largely be controlled in line with budget, however margins on
contractual activity are key to annual profitability. An overall target margin
is set annually in advance after review of overhead structure and subsequently
represents the average bid margin used in pricing projects. It is designed to
cover Group overheads plus an element of profit. The gross profit margin used
in the annual budgeting process is used to benchmark monthly performance and
provides for a degree of margin erosion due to difficulties in fully recovering
the value of additional works requested by customers. This varies according to
market conditions.
The actual margin experience is reflected in the reported results and a
detailed review is contained within the operational performance reported
earlier in the Strategic Report.
Non-financial
The board measures customer satisfaction using an independent on-line survey
assessment. A rolling 12-month record is kept of customer feedback on project
completion with charitable donations used to encourage participation. Customers
are asked to complete answers to a number of questions regarding the
performance of FSD as a whole and also at site level, on a scale of 1 (poor) to
5 (excellent) including such areas as the focus on Safety and the Environment,
completion of site work to programme, contract financial management and
standard of workmanship. The responses are used by the board as an independent
confirmation of group performance levels and negative feedback is vigorously
followed up and improvement measures implemented. The group targets an average
score of 4.5 and the overall responses have been very close to this target with
an average of 4.2 (2018: 4.2) during the year.
The ongoing independent assessments of the Group's Safety, Quality and
Environmental Standards are key to it maintaining the efficiency of its
operational performance and adherence to high levels of site safety and
environmental awareness. The FSD Group is approved to the Quality Management
Standard ISO 9001:2015, has an environmental management system approved to ISO
14001:2015, and a safety management system approved to OHSAS 18001:2007 and is
in the process of transitioning to ISO 45001. Achilles UVDB, the Utilities
Sector Vendor Database performance assessor, regularly review the Group's
processes for managing and installing electrical services, as well as its fault
resolution procedures. The results of the 2019 Achilles audit were again
excellent, reflecting 100% scores in all 4 areas of the Management System
Evaluation and 100% in all 4 areas of the Onsite Assessment; these assessments
look at areas of health & safety, environment, quality and social corporate
responsibilities.
The Group board has both corporate and personal responsibility to ensure that
its operations are managed in a safe and environmentally controlled manner.
In common with its industry the Group measures its record on Health & Safety
using an annual Accident Frequency Rate (AFR) chart showing lost time accidents
per 100,000 man-hours worked. The AFR is currently 0.17 (2018: Zero).
QUALITY ASSURANCE
FSD is approved to the Quality Management Standard BS EN ISO 9001:2015. The
British Standards Institute (BSI) and Achilles, the Utilities Sector
procurement performance assessor, regularly review the group's processes for
managing and installing electrical services, as well as its fault resolution
procedures. Recent assessments have again been successfully completed with
excellent results from the UVDB Verify audits. The Group is committed to a
strategy that provides its clients with a high-quality service that conforms to
the client's requirements. This strategy includes a strong management
commitment to quality, the recruitment and retention of high calibre,
experienced and well-trained staff, properly documented procedures, processes
and controls, and compliance with all regulatory and legal requirements.
Quality Audits continue to be carried out across group sites on a regular basis
to ensure compliance and to improve the group's activities. The annual
management review meeting assesses the group's performance against targets and
sets new targets.
ENVIRONMENT
FSD has an environmental management system approved to the international
environment standard, ISO 14001:2015. The BSI and Achilles regularly review the
Group's processes for managing its impact on the environment. The Group
achieved its CEMARS (Certified Emissions Measurement and Reduction Scheme)
accreditation in 2010 and now works to the principles of ISO 14064-1:2006 as it
strives to minimise harm to the environment, prevent pollution and use best
practice environment solutions wherever possible to minimise its carbon
foot-print. A risk assessment approach is used to manage environmental matters,
and to identify and assess key environmental hazards arising from business
activities and manage them appropriately.
HEALTH AND SAFETY
A commitment to Health and Safety is the Group's number one priority. Every
Board meeting starts by focusing on preserving high safety standards and
promoting a positive safety culture within the Group, to ensure that our
employees, customers, suppliers and the public are kept safe. FSD has a safety
management system implemented across all sites that has successfully been
approved to the Health and Safety Management System BS OHSAS 18001:2007 and are
currently going through a transition period to update to BS ISO 45001:2018
Occupational health and safety management systems, by late 2019 (the
internationally recognised standard for management of occupational health and
safety risks). The group achieved a ROSPA (Royal Society for the Prevention of
Accidents) Gold award again this year, and as we have achieved 5 consecutive
Gold awards we have now attained a Gold Medal Award status. There is a strong
commitment at Board level, supported by a highly qualified health and safety
specialist, which endorses the importance of vigilant health and safety
practices and the investment in training for site and management to broaden the
competence, knowledge and experience of its employees. This is supported by
expert guidance provided by the EEF, ECA and CITB.
EMPLOYEES
Group employee numbers have decreased from an average of 199 in 2018 to 180 in
2019 reflecting the reduction in turnover and a change in the mix of work scope
during the year.
We are pleased to place on record the appreciation of the efforts and support
given to the Group by its employees, who continue to make a significant
contribution to the Group.
PENSIONS
The Scheme's funding position has reduced slightly from a surplus of GBP274,000
at the start of the year to a surplus of GBP253,000 at the end of the year. The
Group is not recognising the surplus and so the Group's defined benefit pension
scheme funding position as at 31 May 2019 has been maintained at GBPNil, a target
reached in 2017. This is derived from the Group's most recent actuarial review
and reflects market conditions as at 31 May 2019. There was a settlement gain
of GBP39,000 (2018: GBP67,000) released to the profit and loss account during the
year following the payment of a cash equivalent transfer value to deferred
members withdrawing from the defined benefit scheme; this was offset by a
one-off provision of GBP47,000 for the potential cost to the scheme arising from
GMP equalisation.
CORPORATE RESPONSIBILITY
The Group recognises its responsibilities to the people it employs, its
customers and suppliers, its shareholders, the wider community and to the
environment. We are a well-managed, responsible and ethical Group and are
determined to be widely recognised for our quality of installation, the skills
of our people and the seriousness with which we take our corporate
responsibilities.
OUTLOOK
The Group entered the new financial year with an opening order book of GBP8.2
million (2018: GBP12.0 million).
The Group's principal source of revenue historically has been from the Water
Industry and key to its financial success is its continued participation in the
various frameworks being formulated by the Water Utilities in selecting their
preferred supply chain.
The Water Utilities each have their own MEICA frameworks with different
approaches to their mechanism and methodologies of spend. Sales volumes in the
Water Industry have been strong this year however AMP6 runs for five years to
April 2020 when AMP7 will commence and run for a further five years in line
with Ofwat's business plan approval programme. Consequently FSD is looking
ahead to next year to restart the process of pre-qualification as plans by
water utilities for AMP7 begin to emerge.
FSD will continue to be fully involved in the prequalification processes with
the regional Utilities and will strive to secure its position on frameworks and
strategic alliances with water process companies as they roll forward their
arrangements into AMP7.
In the Energy from Waste (EfW) sector volumes have declined during the current
year and this is set to continue next year. FSD have excellent credentials and
are continuing to pursue suitable new EfW opportunities; however a number of
established Engineering, Procurement and Construction (EPC) contractors have
now decided not to pursue further opportunity from the EfW sector and FSD are
finding that onerous commercial conditions of contract are limiting the
remaining available opportunities.
There are other avenues for growth opening up to the Group following recent
investment in the development of a team of specialists who will complement
existing business services by enabling FSD to offer telemetry and process
automation services in both the water and power industries. The momentum for
new opportunities is growing and should receive a boost when new spend budgets
are released under AMP7.
The board continues to react to customer demands and invest in training to keep
quality standards high, whilst pursuing operational efficiencies to best
position the business for the opportunities ahead.
On behalf of the board
Nigel Billings
Managing Director
31 October 2019
FIELD SYSTEMS DESIGNS HOLDINGS PLC
GROUP INCOME STATEMENT
for the year ended 31 May 2019
2019 2018
GBP GBP
TURNOVER 21,765,293 25,896,466
Cost of sales (20,005,388) (24,176,037)
_______ _______
GROSS PROFIT 1,759,905 1,720,429
Operating expenses (1,208,780) (1,169,040)
_______ _______
GROUP OPERATING PROFIT 551,125 551,389
Defined benefit scheme settlements and (8,000) 67,000
past service costs
Interest receivable and similar income 13,300 9,696
Interest payable and similar charges (3,799) (3,552)
_______ _______
PROFIT ON ORDINARY
ACTIVITIES BEFORE 552,626 624,533
TAXATION
Taxation (128,857) (129,670)
_______ _______
PROFIT ON ORDINARY
ACTIVITIES AFTER TAXATION
ATTRIBUTABLE TO THE OWNERS OF THE PARENT
COMPANY 423,769 494,863
====== ======
EARNINGS PER
SHARE
Basic 7.9p 9.2p
====== ======
Diluted 7.8p 9.1p
====== ======
All operations are continuing.
FIELD SYSTEMS DESIGNS HOLDINGS PLC
GROUP STATEMENT OF FINANCIAL POSITION
As at 31 May 2019
2019 2018
GBP GBP
FIXED ASSETS
Tangible assets 680,632 504,133
CURRENT ASSETS
Stock - raw materials 58,257 151,379
Debtors 5,343,066 7,598,742
Cash at bank and in hand 4,798,845 3,972,722
________ ________
10,200,168 11,722,843
________ ________
CREDITORS
Amounts falling due within one year 6,886,434 8,631,719
________ ________
NET CURRENT ASSETS 3,313,734 3,091,124
________ ________
TOTAL ASSETS LESS CURRENT
LIABILITIES 3,994,366 3,595,257
CREDITORS
Amounts falling due after more than 19,082 4,742
one year
PROVISIONS FOR LIABILITIES
Deferred taxation 59,000 39,000
Post-employment employee benefits - -
________ ________
NET ASSETS 3,916,284 3,551,515
======= =======
CAPITAL AND RESERVES
Called up share capital 569,250 569,250
Share premium account 158,750 158,750
Other reserves 370,033 370,033
Profit and loss account 2,818,251 2,453,482
________ ________
TOTAL SHAREHOLDERS' EQUITY 3,916,284 3,551,515
======= =======
Approved by the board and signed on behalf of the board and authorised for
issue on
31 October 2019 by:-
Bruce Smith.........................................Director
Nigel Billings.......................................Director
END
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