FIELD SYSTEMS DESIGNS HOLDINGS PLC
The Board presents the results of
AMP6 is the water industry’s sixth 5-year build and refurbishment programme running to
FSD is 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.
The group’s move to diversify into the Energy from Waste sector (EfW) has proven successful. The group has now successfully completed a multitude of major EfW contracts for different clients reflecting the confidence that it has now 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
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
These financial statements have not yet been delivered to the registrar of companies.
The directors of
FIELD SYSTEMS DESIGNS HOLDINGS PLC
The directors present the Strategic Report for
The group achieved a turnover of £17.2 million for the year to
Turnover was generated as follows: 2017 2016 £ £ Water and Sewerage 10,931,388 8,986,968 Power generation and Energy from Waste 5,597,291 5,328,437 Transport and Tunnels 551,503 14,370 Building services, Maintenance, Security, Instrumentation, Controls and Automation 134,303 153,949 __________ __________ 17,214,485 14,483,724 ========= =========
Gross profit margins dipped slightly in the year ended
This contribution from operations left the group with operating profits for the year of £462,388 (2016: £335,028). The directors are pleased to report a solid group profit after tax of £672,123 for the year ended
Water and Sewerage
FSD continued to take on Mechanical and Electrical (M&E) installation contracts 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 2017 where 64% of turnover was derived (2016: 62%) with AMP6 well under way since its start in
Major projects were completed for
Power generation and Energy from Waste
In 2017 33% of the improved turnover was derived from the Power and EfW sector (2016: 37%).
FSD worked primarily on Energy from Waste projects using Incineration, Gasification and Biomass technologies. The group undertook major electrical installation works at Welland,
There was also work undertaken during the year on generators and outage works at
Transport and Tunnels
Electrical installation works undertaken on a
Building services, Maintenance, Security, Instrumentation, Controls and Automation
FSD continues to deliver on smaller electrical installation service contracts in the commercial, security, and water sectors, building its reputation by offering its existing customer base quality, timeliness and value for money. The range of services includes lighting, power distribution, fire-alarm and security systems.
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 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.
There were some major pipework fabrication and installation contracts undertaken during the year for projects under AMP6 such as water treatment works, pumping stations and CHP units.
Freehold property and investment property disposal
The group has held a freehold interest in commercial office premises in Dorking for a number of years. This property both housed the head office operations of the Group and generated rental income from tenants. The property was disposed of during the year, principally to create greater liquidity as the Group turnover increases and it embarks on larger projects which may place demands on working capital. The sale of the property generated a profit on disposal of £76,659, which was released to the group profit and loss account during the year.
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.
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.
The group is heavily reliant on the Water industry and its business is affected by the cyclical nature of the
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. A number of mechanical and electrical apprentices were engaged during the year and following the introduction of the Apprenticeship Levy the group intends to promote further training and improvement which will be available to all employees.
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 contracts. By definition 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 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.
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.
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.
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.
The main financial KPI used by the board is the measure of gross profit margin (being the gross project 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.
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 4.3 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 accredited to OHSAS 18001:2007. Achilles UVDB, the Utilities Vendor Data Base 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 2017 Achilles audit were again excellent, reflecting 100% scores in all 4 areas of the management systems and 100% in 3 areas of the site evaluation with one score at 99% in the assessed areas of health & safety, environment, quality & social corporate responsibilities.
The Group has once again received a
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.
The group targets a year on year decline in the AFR, which charts the number of lost time accidents per 100,000 man hours worked.
The group AFR is currently zero.
FSD group is approved to the Quality Management Standard BS
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 are currently going through a transition period to update our Quality Management Standard to BS
FSD group 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 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 are currently going through a transition period to update our International Environment Standard to ISO 14001:2015 by the middle of 2018.
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 group 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, (the internationally recognised standard for management of occupational health and safety risks).
There is a strong commitment at board level, supported by a highly qualified health and safety specialist, endorsing the importance of vigilant health and safety practices and 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 (
Group employee numbers have increased from an average of 101 in 2016 to 133 in 2017 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.
The group's pension deficit as at
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.
The group entered the new financial year with an opening order book of £13.0 million (2016: £13.0 million).
The group’s principal source of revenue is 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
AMP6 runs for five years to
FSD has established a strong reputation in delivering complex solutions on target and hopes to build on its considerable prior experience by participating fully with the
Despite the commitment to gain successful placement on water frameworks, a degree of FSD’s sales effort has been committed to industries outside of water and towards new technology sectors such as Energy from Waste.
In the Energy from Waste (EfW) sector there is still a substantial gap between the available waste fuel that is currently being land-filled or exported as Refuse-Derived Fuel (RDF) and the number of EfW facilities that are under construction and planned for the future. The large waste management companies, along with many independents, are investing heavily in new incineration and gasification projects to close this gap and consequently there is growth opportunity in this sector.
FSD are currently working on our 10th EfW project, and the recent decision by a prominent Engineering, Procurement and Construction (EPC) contractor to not pursue further opportunity from the EfW sector has opened the door to FSD establishing new relationships with competing EPC contractors who are now picking up the projects that have become available. FSD have already supported and bid a number of EfW and open-cycle gas turbine projects with such contractors and so are confident that as they secure an EPC role then FSD will be involved at an early stage.
FSD’s order intake on Combined Heat and Power (CHP) and generator installations has now reached £3M and on the back on this experience we are attracting new customers who may also lead FSD into other new market opportunities such as data centres and
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 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
P J Haines
FIELD SYSTEMS DESIGNS HOLDINGS PLC
GROUP INCOME STATEMENT
for the year ended
2017 2016 £ £ TURNOVER 17,214,485 14,483,7 24 Cost of sales (15,909,564) (13,358, 007) _______ _______ GROSS PROFIT 1,304,921 1,125,71 7 Operating expenses (842,533) (790,689 ) _______ _______ GROUP OPERATING PROFIT 462,388 335,028 Defined benefit scheme settlement gain 376,000 - Gains arising on fair value of investment property - 54,000 Interest receivable and similar income 8,182 375 Interest payable and similar charges (8,017) (17,746) _______ _______ PROFIT ON ORDINARY ACTIVITIES BEFORE 838,553 371,657 TAXATION Taxation (166,430) (64,134) _______ _______ PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION 672,123 307,523 ====== ====== EARNINGS PER SHARE Basic 12.5p 5.70p ====== ====== Diluted 12.4p 5.69p ====== ======
All operations are continuing.
GROUP STATEMENT OF FINANCIAL POSITION
2017 2016 £ £ FIXED ASSETS Tangible assets 463,394 993,231 Investment property - 756,000 CURRENT ASSETS Stock 501,117 19,117 Debtors 5,663,174 4,068,750 Cash at bank and in hand 2,705,945 1,512,874 ________ ________ 8,870,236 5,600,741 ________ ________ CREDITORS Amounts falling due within one year 6,095,391 4,416,980 ________ ________ NET CURRENT ASSETS 2,774,845 1,183,761 ________ ________ TOTAL ASSETS LESS CURRENT LIABILITIES 3,238,239 2,932,992 CREDITORS Amounts falling due after more than one year 33,587 50,713 PROVISIONS FOR LIABILITIES Deferred taxation 31,000 7,400 Post-employment employee benefits - 28,000 ________ ________ NET ASSETS 3,173,652 2,846,879 ======= ======= 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 2,075,619 1,748,846 ________ ________ TOTAL SHAREHOLDERS’ EQUITY 3,173,652 2,846,879 ======= =======
Approved by the board and signed on behalf of the board and authorised for issue on