FIELD SYSTEMS DESIGNS HOLDINGS PLC - Final Results PR Newswire

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 £25.9 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

                                                            £          £


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 Automation      3,105    134,303

                                                   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 £551,389 (2017: £462,388).

The directors are pleased to report a solid group profit after tax of £494,863 for the year ended 31 May 2018 (2017: £672,123)

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 £83,000 at the start of the year to a surplus of £274,000 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 £Nil, 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 £67,000 (2017: £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 £12.0 million (2017: £13.0 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

     £    £



   


TURNOVER                                  25,896,466 17,214,4
                                                          85

Cost of sales                           (24,176,037) (15,909,
                                                        564)

                                             _______ _______

GROSS PROFIT                               1,720,429 1,304,92
                                                           1

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

                                                       £         £

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 one year       4,742    33,587

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