TIDMFSD
FIELD SYSTEMS DESIGNS HOLDINGS PLC
CHAIRMAN'S STATEMENT
The Board presents the results of Field Systems Designs Holdings plc and its
subsidiaries (FSD) for the year ended 31 May 2020. FSD has undertaken some
tough challenges in the completion of complex projects over the years, however
in those instances we were in control of our own destiny. Today, with the
continuing threat of COVID-19, none of us can predict when we will be back in
charge of our lives as we once knew them, and the return to normality as a
business is equally unpredictable.
Many contracting companies make little or no provision for rainy days, let
alone this current hurricane, however FSD believes the key factor to seeing any
business through tough times is cash in the bank, and so have over many years
taken steps to ensure the group maintained a healthy balance sheet. Business
life has changed, whether working at site, working in the factory, working from
home, working in the office, or held in reserve on furlough, all employees are
making a valuable contribution to ensure our ship's engine continues to take us
forward, and this kind of flexibility is key to maintaining our output, whilst
remaining safe.
It is therefore pleasing to see the sustained operating profits of GBP0.3 million
reflected by the current year's results. Turnover from the water industry was
resilient during the year as the cycle of expenditure under Asset Management
Programme 6 (AMP6) came to a close in April 2020. FSD was fully engaged on
projects from frameworks in the water sector this year and has been refreshing
the pre-qualification process as framework plans by water utilities rolled
forward into AMP7, albeit delayed by the impact of COVID-19 and the tough
stance adopted by OFWAT in challenging their 2020-2025 spend budgets.
FSD is fully committed to assisting water companies, and their Tier 1 framework
contractors chosen under AMP7 to manage their expenditure, although the absence
of any solid expenditure forecasts is making planning ahead for FSD more
complicated than normal. FSD is confident that the quality of its delivered
projects and its well-established business credentials, together with its
pipework fabrication factory, and the reputation of its talented mechanical and
electrical engineering and installation personnel, that have earned FSD its
position on their supply-chain arrangements in the past will again serve us
well this time around. There is little doubt that the 2021 financial year will
be a tough one, however the group is well-positioned with a strong cash balance
and experienced workforce to weather the storm.
D K Bird
Chairman
5 November 2020
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 2020 and the unaudited
group income statement for the year then ended have been extracted from the
Group's 2020 statutory financial statements, which 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 AQSE 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 2020.
OPERATIONAL PERFORMANCE
The Group achieved a turnover of GBP19.8 million for the year to 31 May 2020, a
reduction of 9% on last year, reflecting the continued workflow from the Water
Industry, which is now starting to tail off at the end of the AMP, offset by
the completion of works in the EfW sector.
Turnover was generated as follows: 2020 2019
GBP GBP
Water and Sewerage treatment 17,548,220 17,415,655
Power generation and Energy from Waste 2,267,310 4,328,449
Transport and Tunnel infrastructure 25,667 21,189
---------------
--------------
19,841,197 21,765,293
======= =========
==
Group revenues include transactions with five customers that amount to 10 per
cent or more of the Group's total annual revenues; the total amount of revenues
from those five customers amounts to GBP17.7 million, of which GBP15.7 million
derives from the Water and Sewerage treatment sector and GBP2.0 million derives
from the Power generation and Energy from Waste sector.
Gross profit margins reduced in the year ended 31 May 2020 to 6.3% from 8% last
year. The Group operating profits for the year were GBP341,345 (2019: GBP551,125).
The directors are pleased to report a solid Group profit after tax of GBP317,356
for the year ended 31 May 2020 (2019: GBP423,769)
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 very slightly in the Water Industry in 2020 where 88% of
turnover was derived (2019: 80%). 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 2020 11% of turnover was derived from the Power and EfW sector (2019: 20%).
FSD worked primarily on Energy from Waste projects, undertaking electrical
installation works at Levenseat and Hull on projects nearing completion 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
There continues to be volatility in financial markets, in currency markets and
uncertainty over future actions by governments and businesses as we head for
the new Brexit deadline of 31 December 2020. The directors have reviewed the
implications of the decision to leave the EU and 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, but
that the long-term relationships with our supply chain will aid our business to
remain resilient under the range of most likely scenarios.
COVID-19
The unpredictable nature of the Coronavirus pandemic and the timing of its
cessation has created uncertainty estimating the impact of future events which
is highly challenging at this time. The directors have reviewed the key areas
of risk to the business and the potential negative impact of COVID-19 on the
business which includes determining the likelihood of customers to meet their
debts as they fall due, the impact on supplier's performance and ability to
supply goods, the impact on levels of human resources, and the difficulty in
predicting the level of future order intake.
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.
Health and safety
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.
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. The Group's financial instruments consist primarily
of short-term debtors and creditors. The directors regularly review the Group's
cash position to ensure that facilities exist for continuity of funding and
effective cash management.
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 4.5 (2019: 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 newly transitioned from OHSAS18001 to the new ISO 45001
standard for Occupational Health & Safety. 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 2020 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 zero (2019:0.17). The group
has recently achieved over 1 million man-hours without a reportable incident.
PENSIONS
The Scheme's funding position has improved from a surplus of GBP253,000 at the
start of the year to a surplus of GBP447,000 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 2020 has been maintained at GBPNil, a target
reached in 2017. This is derived from the Company's most recent actuarial
review and reflects market conditions as at 31 May 2020.
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. FSD
are currently in the final stage of regaining the accreditation, 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 updated
to BS ISO 45001:2018 Occupational health and safety management systems (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 FSD have achieved 6 consecutive Gold
awards giving FSD '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 MAKEUK (Formerly EEF), ECA and CITB.
EMPLOYEES
Our employees are fundamental to the success of the Group and we aim to be a
responsible employer in our approach to the provision of training and
remuneration and by making the health, safety and well-being of our employees
one of our primary considerations in the way we do business. We are pleased to
place on record our appreciation of the efforts and expertise demonstrated by
our employees, who continue to make a significant contribution to the Group.
Employee numbers decreased during the year from an average of 180 in 2019 to
163 in 2020, reflecting the reduction in turnover and a change in the mix of
work scope during the year.
CORPORATE GOVERNANCE AND s172 REPORTING
The Group recognises its responsibilities to the people it employs, its
customers and suppliers, its shareholders, the wider community, and the
environment. In accordance with section 172 of the Companies Act 2006 the
directors undertake to act in a way most likely to promote the long-term
success of the Group for the benefit of its stakeholders. The preceding
strategies outlined in this report demonstrate the Group's concern for the
interests of its employees, its primary commitment to health and safety for its
employees, customers, suppliers and the general public, and the instruments it
uses to monitor the quality of its services and customer satisfaction. The
Group has achieved accreditations, monitored externally, which are used to
review the processes it operates to lessen its impact on the community and the
environment. The Board of directors meet quarterly to fulfil their duties and
use bi-annual trading statements to communicate coherently the Group's
performance to its members. Operational duties are delegated to an executive
management team who meet monthly to review our complex business operations and
are charged with maintaining the reputation of the Group for high standards of
business conduct by identifying, evaluating, managing and mitigating the risks
faced by the Group. 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 GBP6.5
million (2019: GBP8.2 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 expired in April 2020 when AMP7 commenced and runs for a further five
years in line with Ofwat's business plan approval programme. Consequently FSD
is engaging in the process of pre-qualification as plans by water utilities for
AMP7 emerge and will continue to be fully involved in these prequalification
processes 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 quantum of new
opportunities was limited this year but 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
5 November 2020
FIELD SYSTEMS DESIGNS HOLDINGS PLC
GROUP INCOME STATEMENT
for the year ended 31 May 2020
2020 2019
GBP GBP
TURNOVER 19,841,197 21,765,293
Cost of sales (18,587,468) (20,005,388)
_______ _______
GROSS PROFIT 1,253,729 1,759,905
Operating expenses (912,384) (1,208,780)
_______ _______
GROUP OPERATING PROFIT 341,345 551,125
Defined benefit scheme settlements and - (8,000)
past service costs
Interest receivable and similar income 15,640 13,300
Interest payable and similar charges (2,528) (3,799)
_______ _______
PROFIT ON ORDINARY
ACTIVITIES BEFORE 354,457 552,626
TAXATION
Taxation (37,101) (128,857)
_______ _______
PROFIT ON ORDINARY
ACTIVITIES AFTER TAXATION
ATTRIBUTABLE TO THE OWNERS OF THE PARENT
COMPANY 317,356 423,769
====== ======
EARNINGS PER
SHARE
Basic 5.9p 7.9p
====== ======
Diluted 5.9p 7.8p
====== ======
All operations are continuing.
FIELD SYSTEMS DESIGNS HOLDINGS PLC
GROUP STATEMENT OF FINANCIAL POSITION
As at 31 May 2020
2020 2019
GBP GBP
FIXED ASSETS
Tangible assets 606,486 680,632
CURRENT ASSETS
Stock - raw materials 83,184 58,257
Debtors 3,741,964 5,343,066
Cash at bank and in hand 5,960,462 4,798,845
________ ________
9,785,610 10,200,168
________ ________
CREDITORS
Amounts falling due within one year 6,141,516 6,886,434
________ ________
NET CURRENT ASSETS 3,644,094 3,313,734
________ ________
TOTAL ASSETS LESS CURRENT
LIABILITIES 4,250,580 3,994,366
CREDITORS
Amounts falling due after more than 36,940 19,082
one year
PROVISIONS FOR LIABILITIES
Deferred taxation 59,000 59,000
Post-employment employee benefits - -
______ _______
NET ASSETS
4,154,640 3,916,284
======= =======
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 3,056,607 2,818,251
________ ________
TOTAL SHAREHOLDERS' FUNDS 4,154,640 3,916,284
======= =======
Approved by the board and signed on behalf of the board and authorised for
issue on 5 November 2020 by:-
Bruce Smith.........................................Director
Nigel Billings.......................................Director
END
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