FIELD SYSTEMS DESIGNS HOLDINGS PLC - Annual Financial Report
Announcement provided by
Field Systems Designs Holdings plc · FSD30/10/2015 13:21
FIELD SYSTEMS DESIGNS HOLDINGS PLC
CHAIRMAN’S STATEMENT
I am pleased to announce the results of
Our industries remain tough, consequently it has been some achievement to remain profitable this year and so these results reflect a solid performance in this difficult operating climate.
The Water Industry’s fifth 5-year build and refurbishment Asset Management Programme (AMP5) concluded in
In anticipation of this typical intra-AMP decline in business the group’s move to diversify into new industries has proved challenging, but there has been some success this year with two recent awards in the Energy from Waste sector (EfW). These major projects from two different clients reward the long-term relationship-building in the sector and reflect the confidence that FSD has now built in delivering these complex projects.
The group continues to promote its recognised position in the Water Industry by pursuing new framework agreements under AMP6. 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
FSD now offers the favoured full Mechanical and Electrical (M&E) solution with the benefit of its in-house mechanical fabrication and erection capability which gives the group control over its programme commitments.
The group is positive about the outlook for performance in 2015/2016, as it is well-positioned with a good opening order book to maximise the benefits from future opportunities.
D K Bird
Chairman
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 consolidated balance sheet at
These financial statements have been delivered to the registrar of companies.
The directors of
STRATEGIC REPORT
OPERATIONAL PERFORMANCE
The group achieved a turnover of £14.4million for the year to
Turnover was generated as follows: 2015 2014
GBP GBP
Water and Sewerage 9,257,988 10,089,156
Power generation and Energy from Waste 4,394,156 949,060
Rail, Transport and Tunnels, 54,721 306,157
Building services, Maintenance,
Security, Instrumentation, Controls and Automation 696,250 631,642
_________ _________
14,403,115 11,976,015
======== ========
Gross profit margins fell in the year ended
The group achieved a fair operating profit for the year of £222,287 (2014: £187,188).
In view of the economic climate the directors are pleased to report a solid group profit after tax of £130,361 for the year ended
The directors do not recommend the payment of a dividend.
BUSINESS REVIEW
The
Water
Sales volumes were again dominated by the Water Industry where 64% of turnover in 2015 was derived (2014: 84%).
The AMP5 spend in
Power
The group increased its presence in the Power sector where it derived 31% of turnover in 2015 (2014: 8%).
FSD won further Energy from Waste contracts where the company continues to build on its success at the Riverside facility in
Building services, Maintenance, Security, Instrumentation, Controls and Automation
FSD delivers electrical installation services in the commercial, security, water and rail sectors, building its reputation by offering its growing customer base quality, timeliness and value for money.
The expansion of the range of services to include lighting, power distribution, fire-alarm and security systems has grown turnover. However the addition of property fit-out projects to its range of activities was not successful and has now been ceased.
Mechanical fabrication and installation
This year the group continued to take on M&E installation contracts through its mechanical subsidiary which continues to build up its client base and its reputation for quality fabrication and installation services.
There were some major pipework fabrication and installation contracts undertaken during the year for projects in the Water industry. The AMP5 spend in
Profitability at the division was poor primarily as a result of one particularly badly performing contract undertaken during the year in Jersey. Changes have since been made to deal with the causal factors.
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.
The group is heavily reliant on the Water industry and its business is affected by the cyclical nature of the
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.
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.
Competitiveness
The group has a leading market position in sectors such as the Water Industry, and has also penetrated other sectors such as the rail industry, 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 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 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 overall responses have been very good 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 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 2015 Achilles audit were again excellent, reflecting high scores for both management systems and site evaluation, in the assessed areas of health & safety, environment and quality.
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 (Accident Frequency Rate) is currently zero.
QUALITY ASSURANCE
FSD group is approved to the Quality Management Standard BS EN ISO 9001:2008.
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 company sites on a regular basis to ensure compliance and to improve the company’s activities. The annual management review meeting assesses the group’s performance against targets and sets new targets.
ENVIRONMENT
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 has achieved its CEMARS (Certified Emissions Measurement and Reduction Scheme) accreditation and is now approved to 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 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). The company achieved a
There is 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 (
EMPLOYEES
Group employee numbers have increased slightly from an average of 94 in 2014 to 96 in 2015 reflecting a varied mix of work 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 group's pension deficit as at
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 company 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 £5.7 million (2014: £4.1 million).
The group’s principal source of revenue is from the Water Industry and key to its success during AMP6 (Sixth Asset Management Programme) will be 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.
The first major success in the EfW Incineration sector for FSD was the 65MW Riverside resource recovery facility which was delivered for
The reference site that Riverside gave FSD to endorse its credentials led to the award of the complete electrical infrastructure on the ITI Bentinck modular Gasification project. We are now working for MWH as the main electrical contractor on the Tyseley EfW project in
There are a number of major future works being tendered and negotiated for both Incineration and Gasification technologies in the EfW sector which if secured will boost sales volumes over the next few years.
FSD also has a considerable degree of experience and success with Anaerobic Digestion, Biogas and CHP (Combined Heat & Power) where we have delivered many schemes as a
The ability of the group to more confidently target MEICA turn-key solutions with its in-house M&E capabilities, and using joint venture alliances and other working arrangements to deliver, has enhanced its position in the sector.
The group continues to enhance its personnel’s capabilities through appropriate training to ensure the continued quality of service and maintain the depth of its experience. Accordingly FSD can offer an added-value service to the rail, underground, power, water, waste and tunnelling sectors and differentiate itself from its competition.
The group has improved its specialised engineering techniques by further investment this year, particularly in
The board continues to react to customer demands and keep standards high, whilst creating operational efficiencies to best position the business for the opportunities ahead.
P J Haines
Managing Director
FIELD SYSTEMS DESIGNS HOLDINGS PLC
CONSOLIDATED PROFIT AND LOSS ACCOUNT
for the year ended
2015 2014
GBP GBP
TURNOVER 14,403,115 11,976,015
Cost of sales (13,362,690) (10,949,190)
_______ _______
GROSS PROFIT 1,040,425 1,026,825
Net operating expenses (818,138) (839,637)
_______ _______
OPERATING PROFIT 222,287 187,188
Interest receivable 362 594
Interest payable (15,238) (30,498)
PROFIT ON ORDINARY _______ _______
ACTIVITIES BEFORE TAXATION 207,411 157,284
Taxation (77,050) (22,006)
PROFIT ON ORDINARY _______ _______
ACTIVITIES AFTER TAXATION 130,361 135,278
====== ======
EARNINGS PER SHARE
Basic 2.4p 2.5p
====== ======
Diluted 2.4p 2.5p
====== ======
All operations are continuing.
FIELD SYSTEMS DESIGNS HOLDINGS PLC
CONSOLIDATED BALANCE SHEET
As at
2015 2014
GBP GBP
FIXED ASSETS
Tangible assets 1,740,780 1,706,957
CURRENT ASSETS
Stock – raw materials 39,117 31,054
Debtors 4,893,738 2,755,840
Cash at bank and in hand 1,321,116 916,723
________ ________
6,253,971 3,703,617
________ ________
CREDITORS
Amounts falling due within one year 5,308,365 2,842,353
________ ________
NET CURRENT ASSETS 945,606 861,264
________ ________
TOTAL ASSETS LESS CURRENT
LIABILITIES 2,686,386 2,568,221
CREDITORS
Amounts falling due after more than one year 62,143 24,939
PROVISIONS FOR LIABILITIES
Deferred taxation 17,000 -
Pension obligations 268,000 265,600
________ ________
NET ASSETS 2,339,243 2,277,682
======= =======
CAPITAL AND RESERVES
Share capital 569,250 569,250
Share premium account 158,750 158,750
Other reserves 370,033 370,033
Profit and loss account 1,241,210 1,179,649
________ ________
SHAREHOLDERS’ FUNDS 2,339,243 2,277,682
======= =======
Approved by the board and signed on behalf of the board and authorised for issue on
Bruce Smith.........................................Director
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