Field Systems Designs Holdings plc Half-year Report
March 01 2022 - 2:00AM
UK Regulatory
TIDMFSD
FIELD SYSTEMS DESIGNS HOLDINGS
PLC
INTERIM RESULTS
The Board of Field Systems Designs Holdings plc (FSD), a specialist
installation and engineering Group providing mechanical and electrical design
and installation services in the water, power, and waste industries, announces
its interim results for the six months to 30 November 2021.
OVERVIEW
The results for the first six months of this financial year show significantly
reduced turnover and profitability compared to the prior period.
The consolidated results for the six months to 30 November 2021 show group
turnover of GBP2.6million; (2020 GBP5.7million) with a group loss after tax of
GBP(1,270,000); (2020 GBP(209,000).
COVID-19 has had a serious impact on the release of work in the UK Water
Industry. The unexpected fall in order intake and turnover due to the pandemic
created an excess in labour resources which placed a cost burden on the group
with no productive output in return. Key personnel were retained in
anticipation of workflows from the Water companies which never materialised.
Two major projects suddenly terminated in October 2021 when its customer NMCN
went into administration. There were considerable costs and disruption to
operations in the demobilisation from sites and the financial impact from
unpaid debts.
These two exceptional events, together with ongoing projects working under the
disruptive and costly stringent COVID safety rules, caused gross profit margins
to fall, and with overheads no longer relative to the volume of business, this
resulted in losses.
The group maintains a healthy balance sheet and the level of cash remains
robust.
COVID-19
The global pandemic has had a major impact on the release of work in the
primary market of the Group being the UK Water Process industry.
The UK water utilities have asset management programmes (AMPs) governed by
OFWAT which run in 5-year cycles where supplier frameworks are created to
deliver their infrastructure and maintenance investment. FSD has established
itself as a key supplier in the industry with membership of multiple frameworks
and preferred supplier agreements.
Unfortunately the timing of the pandemic could not have been worse, as the last
5-year investment programme (AMP6) ended in April 2020, just as the virus hit
the economy. Normally at this stage of the five-year cycle FSD would have
experienced a marked step-up in investment and engineering activity as capital
projects are approved and construction begins. The global Coronavirus crisis
coincided with the start of AMP7 when, under the guidance of OFWAT, water
companies agree their budget determinations with the Competition and Markets
Authority (CMA) which sets out the water- rates companies can charge their
customers over the investment period.
A number of water companies challenged their determination by OFWAT for the
AMP7 investment period, which runs from 2020 to 2025. These challenges together
with concerns over COVID-19 caused UK Water Utilities to cease their new
investment plans to preserve their cash resources, to protect their staff,
thereby ceasing engineering design work, and to delay the start of impending
projects until the outlook for the economy was clearer.
Consequently, the impact on FSD was that the next investment cycle (AMP7) was
effectively delayed two years from April 2020 to March 2022. Our customers held
back placement of new orders so eliminating any quantum of new work to start as
old projects were completed.
CUSTOMER FAILURE
The Group was in contract on two major projects with NMCN, formerly known as
North Midland Construction, and which ceased trading on 4 October 2021 after 75
years in business. One project for Severn Trent Water was at its conclusion
whilst the other for the States of Jersey was in its infancy. FSD was under
intense programme pressure from NMCN on both contracts at that time, with
assurances of their solvency by their relevant project teams. Their sudden
cessation caused considerable disruption to our operations due to the
demobilisation of staff, the redistribution of resources and the loss of
forecast turnover and margin. The unpaid debts amounted to in excess of £
300,000.
OUTLOOK
The expectation is for an improved second half for the May 2022 Financial Year,
as order intake gains momentum in early 2022, followed by a further increase in
turnover for the May 2023 Year-end, and thereafter, as normality returns.
The AMP7 budgetary expenditure targets still need to be spent by the Water
Utilities, albeit now over a shorter time-period, in order to meet their
regulatory obligations and respond to the significant environmental challenges
they face with increased demand for water and the negative impacts of sewage
spills and leakage.
The delayed period of expenditure has created difficulties for FSD, struggling
to sustain its labour resources during a period of low turnover; however there
now approaches an influx of projects as work levels ramp up rapidly while the
water companies strive to catch up on the delay to starting AMP7.
The flipside to this period of stagnation, with a scarcity of project
opportunities, is that fortunately the projects FSD have tendered over this
extended period have not been lost, merely delayed, and so FSD is confident
that it is in prime position as normality resumes to prosper from the growing
workload emerging from the Water sector.
There are clear signs of new AMP7 projects finally being prepared for release,
the order book has been filling since the New Year to pre-COVID levels and with
secured orders of over £7 million the outlook is now positive. The trading
conditions ahead look promising for FSD and having been nominated on frameworks
and allocated a number of key projects the Group now prepares itself for a busy
period of activity as it faces a steep incline in project awards.
The positive public announcements from the main water utilities confirm that
the proposed 2020-2025 budgets remain to be spent. In fact the regulatory
bodies will insist that this is the case as infrastructure investment is so
desperately needed to keep our UK population watered and the environment clean.
FSD has strengthened its management team by a new Board director appointment
and retained the majority of its experienced workforce so as to react swiftly
as the Utility Companies restart projects and expect as we emerge from the
shadow of COVID that business volume will return and that a improved trading
period lies ahead as the water industry catches up the ground lost to COVID-19.
N Billings
Managing Director
28 February 2022
FIELD SYSTEMS DESIGNS HOLDINGS PLC
UNAUDITED COMPREHENSIVE INCOME STATEMENT
for the six months ended 30 November 2021
2021 2020
£'000 £'000
TURNOVER 2,639 5,748
Cost of sales (3,672) (5,492)
_______ _______
GROSS PROFIT (1,033) 256
Net operating expenses (491) (537)
_______ _______
OPERATING LOSS (1,524) (281)
Interest receivable and similar income 7 16
Interest payable and similar charges (1) (2)
_______ _______
LOSS ON ORDINARY
ACTIVITIES BEFORE TAXATION (1,518) (267)
Taxation 248 58
_______ _______
LOSS ON ORDINARY
ACTIVITIES AFTER TAXATION (1,270) (209)
====== ======
Other comprehensive loss - (19)
_______ _______
TOTAL COMPREHENSIVE DEFICIT
FOR THE PERIOD (1,270) (228)
====== ======
EARNINGS PER SHARE
Basic (23.5)p (3.9)p
====== ======
NOTES:
1. The directors of Field Systems Designs Holdings plc accept
responsibility for this announcement.
2. This interim statement has neither been audited, nor reviewed by our
auditors, Shipleys LLP.
FIELD SYSTEMS DESIGNS HOLDINGS PLC
UNAUDITED GROUP STATEMENT OF FINANCIAL POSITION
As at 30 November 2021
2021 2020
£'000 £'000
FIXED ASSETS
Tangible assets 389 502
CURRENT ASSETS
Stock 123 83
Debtors 2,276 3,835
Cash at bank and in hand 3,709 5,599
________ ________
6,108 9,517
________ ________
CREDITORS
Amounts falling due within one year 4,083 6,012
________ ________
NET CURRENT ASSETS 2,025 3,505
________ ________
TOTAL ASSETS LESS CURRENT
LIABILITIES 2,414 4,007
CREDITORS
Amounts falling due after more than one 2 21
year
PROVISION FOR LIABILITIES
Deferred tax 33 59
Post-Employment Employee Benefits - -
________ ________
NET ASSETS 2,379 3,927
======= =======
CAPITAL AND RESERVES
Called up share capital 569 569
Share premium account 159 159
Reserves 1,651 3,199
________ ________
TOTAL SHAREHOLDERS' EQUITY 2,379 3,927
======= =======
END
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