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 2018.
It is pleasing to see the improvement in turnover and operating profits
reflected by the current year's results. Turnover from the water industry
during the mid-point cycle of expenditure under Asset Management Programme 6
(AMP6) has been matched by the sales contribution from the Energy from Waste
sector (EfW).
FSD is now fully on board to assist water companies and their Tier 1 framework
contractors chosen under AMP6 to manage their expenditure. FSD has successfully
earned its position on their supply-chain arrangements through complex
pre-qualification tests and has invested in talented engineering and
installation personnel to be able to fully participate at the earliest stages
of project development in decisions that direct efficiencies and cost-saving
measures. FSD is now looking ahead to 2020 to restart the process as plans by
water utilities begin to emerge for AMP7.
The group's move to diversify into the Energy from Waste sector (EfW) has
proven successful. The group is currently completing two major EfW contracts
for one client and seeking to secure new orders as it builds on the confidence
it has built in delivering these complex projects.
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 2018
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 2018 and the unaudited
group income statement for the year then ended have been extracted from the
Group's 2018 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 2018.
OPERATIONAL PERFORMANCE
The group achieved a turnover of GBP25.9 million for the year to 31 May 2018, an
increase of 50% on last year, reflecting the pick-up in work from the Water
Industry as project awards from AMP6 grow, and a continuation of work from the
EfW sector with two major projects both with extended programme durations.
Turnover was generated as follows: 2018 2017
GBP GBP
Water and Sewerage 12,509,786 10,931,388
Power generation and Energy from Waste 12,752,185 5,597,291
Transport and Tunnels 631,390 551,503
Building services, Maintenance,
Security, Instrumentation, Controls and 3,105 134,303
Automation
25,896,466 17,214,485
========= =========
Gross profit margins dipped in the year ended 31 May 2018 to 6.6% from 7.6%
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.
The contribution from its improved turnover left the group with operating
profits for the year of GBP551,389 (2017: GBP462,388).
The directors are pleased to report a solid group profit after tax of GBP494,863
for the year ended 31 May 2018 (2017: GBP672,123)
BUSINESS REVIEW
The Field Systems Designs group (FSD) focuses on delivering specialist
mechanical and electrical design and installation works.
Water and Sewerage
FSD continued to take on Mechanical and Electrical (M&E) installation contracts
during the year across the sector as the group strives to maintain its
reputation as a respected industry specialist.
Sales volumes improved significantly in the Water Industry in 2018 where 48% of
turnover was derived (2017: 64%). 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 2018 49% of the improved turnover was derived from the Power and EfW sector
(2017: 33%). 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 outage works.
Transport and Tunnels
Electrical installation works were completed during the year on a London-based
deep cable tunnel, which maintained Group turnover in this sector. FSD
continues to support tunnelling works as they arise, dealing competently with
the complexities these projects involve.
Building services, Maintenance, Instrumentation, Controls and Automation
FSD continues to offer smaller electrical installation service contracts across
various sectors, building on its reputation by offering its existing customer
base quality, timeliness and value for money. A small electrical workshop
facility with tooling and equipment enables the group to produce in-house small
isolator builds, lighting panel builds and remote monitoring enclosure
pre-assemblies.
Mechanical design, fabrication and installation
This year the group continued to take on the mechanical elements of M&E
installation contracts through its mechanical subsidiary which continues to
build up its client base and its reputation for quality in-house 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
On 23 June 2016, the people of the UK voted to leave the EU (Brexit); there
continues to be volatility in financial markets, in currency markets and
uncertainty over future actions by governments and businesses. The directors
have been considering the long-term impact of Brexit as the implications become
known, however the short-term effects are inflationary, primarily on material
pricing as a consequence of weaker sterling. The board continues to monitor
market information on price increases and react as required on any
consequential effects on wage and price inflation.
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 group
performance 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 (2017:
4.3) 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 Group is approved to the Quality Management
Standard ISO 9001:2008, has an environmental management system approved to ISO
14001:2004, and a safety management system based on OHSAS 18001:2007. 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 2018 Achilles
audit were again excellent, reflecting 100% scores in all 4 areas of the
management systems and 100% in all 4 areas of the site evaluation; these
assessments look at areas of health & safety& safety, environment, quality &
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 group AFR is currently zero.
QUALITY ASSURANCE
FSD is approved to the Quality Management Standard BS EN ISO 9001:2008. 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. FSD have now successfully transitioned to BS EN ISO 9001:
2015; the new Quality Management Standard.
ENVIRONMENT
FSD has an environmental management system approved to the international
environment standard, ISO 14001:2004. 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. FSD have now successfully
transitioned to ISO 14001:2015; the new International Environment Standard.
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 early 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 Medal award again this year. 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 increased from an average of 133 in 2017 to 199 in
2018 reflecting the improved turnover and a varied 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 improved from a surplus of GBP83,000 at the
start of the year to a surplus of GBP274,000 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 2018 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 2018. There was a GBP67,000 (2017: GBP
376,000) settlement gain released to the profit and loss account during the
year following the payment of a cash equivalent transfer value to a deferred
member withdrawing from the defined benefit scheme,
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 GBP12.0
million (2017: GBP13.0 million).
The group's principal source of revenue historically has been from the Water
Industry and key to its success during AMP6 (Sixth Asset Management Programme)
is its continued participation as part of the various frameworks being
formulated by the Water Utilities selecting their preferred supply chain.
AMP6 runs for five years to April 2020. The Water Utilities have now mostly
concluded their MEICA frameworks with different approaches to their mechanism
and methodologies of spend. Sales volumes in the Water Industry have been
strong this year in line with prior years and the spend is set to continue
until AMP7. The early indications from OFWAT are that AMP7 will have a larger
investment programme than AMP6.
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.
In the Energy from Waste (EfW) sector FSD have had a busy year and will
continue to work on major EfW projects into 2019 as it completes its current
order book.
The decision by prominent Engineering, Procurement and Construction (EPC)
contractors to not pursue further opportunity from the EfW sector has created
some uncertainty in the market over future volume expectations. However whilst
continuing to pursue suitable new EfW opportunities, FSD have already executed
some projects derived from EfW legacy works and expect to receive further
enquiries from previous projects completed in the sector.
The group continues to confidently target other MEICA turn-key solutions with
its in-house M&E capabilities, using joint venture alliances and other working
arrangements to deliver the extended scope of works.
The Group have recently invested 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 the water and power industries.
The board continues to react to customer demands and invest in training to keep
standards high, whilst creating operational efficiencies to best position the
business for the opportunities ahead.
On behalf of the board
Nigel Billings
Managing Director
31 October 2018
FIELD SYSTEMS DESIGNS HOLDINGS PLC
GROUP INCOME STATEMENT
for the year ended 31 May 2018
2018 2017
GBP GBP
TURNOVER 25,896,466 17,214,485
Cost of sales (24,176,037) (15,909,564)
_______ _______
GROSS PROFIT 1,720,429 1,304,921
Operating expenses (1,169,040) (842,533)
_______ _______
GROUP OPERATING PROFIT 551,389 462,388
Defined benefit scheme settlement gain 67,000 376,000
Interest receivable and similar income 9,696 8,182
Interest payable and similar charges (3,552) (8,017)
_______ _______
PROFIT ON ORDINARY
ACTIVITIES BEFORE 624,533 838,553
TAXATION
Taxation (129,670) (166,430)
_______ _______
PROFIT ON ORDINARY
ACTIVITIES AFTER TAXATION 494,863 672,123
====== ======
EARNINGS PER
SHARE
Basic 9.2p 12.5p
====== ======
Diluted 9.1p 12.4p
====== ======
All operations are continuing.
FIELD SYSTEMS DESIGNS HOLDINGS PLC
GROUP STATEMENT OF FINANCIAL POSITION
As at 31 May 2018
2018 2017
GBP GBP
FIXED ASSETS
Tangible assets 504,133 463,394
CURRENT ASSETS
Stock - raw materials 151,379 501,117
Debtors 7,598,742 5,663,174
Cash at bank and in hand 3,972,722 2,705,945
________ ________
11,722,843 8,870,236
________ ________
CREDITORS
Amounts falling due within one year 8,631,719 6,095,391
________ ________
NET CURRENT ASSETS 3,091,124 2,774,845
________ ________
TOTAL ASSETS LESS CURRENT
LIABILITIES 3,595,257 3,238,239
CREDITORS
Amounts falling due after more than 4,742 33,587
one year
PROVISIONS FOR LIABILITIES
Deferred taxation 39,000 31,000
Post-employment employee benefits - -
________ ________
NET ASSETS 3,551,515 3,173,652
======= =======
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 2,453,482 2,075,619
________ ________
TOTAL SHAREHOLDERS' EQUITY 3,551,515 3,173,652
======= =======
Approved by the board and signed on behalf of the board and authorised for
issue on
31 October 2018 by:-
Bruce Smith.........................................Director
Nigel Billings.......................................Director
END
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