FIELD SYSTEMS DESIGNS HOLDINGS PLC
The Board presents the results of
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.
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
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 £21.8 million for the year to
Turnover was generated as follows: 2019 2018 £ £ 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
The improved contribution from its reduced turnover left the Group with operating profits for the year of £551,125 (2018: £551,389). The directors are pleased to report a solid Group profit after tax of £423,769 for the year ended
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
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
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.
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 people of the
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. 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.
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 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.
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
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).
FSD is approved to the Quality Management Standard BS
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 (
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.
The Scheme’s funding position has reduced slightly from a surplus of £274,000 at the start of the year to a surplus of £253,000 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
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 £8.2 million (2018: £12.0 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
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
FIELD SYSTEMS DESIGNS HOLDINGS PLC
GROUP INCOME STATEMENT
for the year ended
2019 2018 £ £
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.
GROUP STATEMENT OF FINANCIAL POSITION
2019 2018 £ £ 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 one year 19,082 4,742 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