FIELD SYSTEMS DESIGNS HOLDINGS PLC - Final Results
Announcement provided byField Systems Designs Holdings plc · FSD
FIELD SYSTEMS DESIGNS HOLDINGS PLC CHAIRMAN'S STATEMENT I am pleased to announce the results of
Field Systems Designs Holdings plcfor the year ended 31 May 2014. Our industries remain tough; it has been some achievement to remain profitable and so these results reflect solid performance in this difficult operating climate. The Water Industry's fifth 5-year build and refurbishment Asset Management Programme (AMP5) running to April 2015has driven volume in the water sector in the current year but is now starting to see a decline. The group's move to diversify into new industries has proved challenging, particularly with International customers given their demanding contractual requirements, and even in those industries where there is proven experience such as the water industry, we have met with more than the usual number of pressures on pricing and valuation. Nevertheless the group continues to promote its recognised position in the Water Industry, where it has established a strong reputation in delivering complex solutions on target, and also to place more focus on the renewables markets as it builds on its considerable prior experience and with a specialist team geared up to deliver in this arena. The pursuance of joint Mechanical and Electrical (M&E) contracts continues with the benefit of an in-house mechanical fabrication and erection capability which gives the group control over its programme commitments. The group remains very cautious about the outlook for performance in 2014/2015, given the current economic climate, but it is still well-positioned with a good opening order book and robust cash position to maximise the benefits from future opportunities. D K Bird Chairman 23 October 2014PUBLICATION 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 31 May 2014and the audited consolidated profit and loss account for the year then ended have been extracted from the Group's 2014 statutory financial statements upon which the auditors opinion is unqualified. Those financial statements have not yet been delivered to the registrar of companies. The directors of Field Systems Designs Holdings plcaccept responsibility for this announcement and confirm compliance with the ICAP Securities & Derivatives Exchangeguidance note relating to the number of directorships held. FIELD SYSTEMS DESIGNS HOLDINGS PLC STRATEGIC REPORT OPERATIONAL PERFORMANCE The group achieved a turnover of £12million for the year to 31 May 2014, a drop from last year, reflecting the slow-down of work in the Water Industry as the end of AMP5 approaches. Turnover was generated as follows: 2014 2013 £ £ Water and Sewerage 10,089,156 11,502,745 Power generation and Energy from Waste 949,060 955,280 Rail, Transport and Tunnels 306,157 31,502 Building services, Maintenance, Security, Instrumentation, Controls and Automation 631,642 1,101,616 __________ __________ 11,976,015 13,591,143 ========== ========== Gross profit margins improved very marginally in the year ended 31 May 2014to 8.6% up from 8.5% last year. Nevertheless gross margins are considerably less than budget as downward pressure on gross profits remains as projects from the Water Industry continue with their associated difficulties in recovering value from additional works as the Water Utilitiesand their Tier One contractors continue to focus on cost following their OFWAT determination. The group achieved a fair operating profit for the year of £187,188 (2013: £ 178,198). In view of the economic climate the directors are pleased to report a solid Group profit after tax of £135,278 for the year ended 31 May 2014(2013: £ 124,498) BUSINESS REVIEW The Field Systems Designs Group(FSD) focuses on delivering specialist mechanical and electrical design and installation works. Water Sales volumes were again dominated by the Water Industry where 84% of turnover in 2014 was derived (2013: 85%). The AMP5 spend in Englandcontinued strongly during the year, but is now declining; water-related works emanated from large-scale treatment works, multi-centre projects, from specialist works on pumping stations and on continued Ultra-Violet water analysis. The company completed the high profile electrical installation for the new Peacehavensewage works for Southern Water and its delivery partner 4D - a consortium of Costain, MWH and Veolia Water. Power In the Power sector 8% of turnover in 2014 was derived (2013: 7%). FSD won new work in the Energy from Waste (EfW) sector where the company continues to build on its success at the Riverside facility in London. There were also numerous works on generators and CHP (combined heat power) units providing instrumentation, electrical engineering and installation services. Other projects included outage works at Hartlepool Nuclear Power Stationand collaborative works as part of its CAF Consortiumon Ferrybridge Energy from Waste Plant. Building services, Maintenance, Security, Instrumentation, Controls and Automation FSD Electrical Services(FSDe) continues to focus on delivering commercial 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 helped to improve turnover during the year. The improvement in financial management of projects also led to better project recoveries. Nevertheless turnover has not yet reached a level at which the company is profitable. FSDe has therefore added a property fit-out specialist to its team and it is expected that this will boost turnover over the next 12 months to a level where the company can return to profit. Mechanical fabrication and installation This year the Group continued to take on Mechanical and Electrical (M&E) installation contracts with its mechanical subsidiary FSD Mech. The company continued to build up its client base and its reputation for quality fabrication and installation services. There were some major pipework fabrication contracts undertaken during the year for projects in the Water industry. The AMP5 spend in Englandreleased works to the FSD Groupsuch as water treatment works, pumping stations and Ultra-Violet water analysis. FSD Mech supported its fellow electrical subsidiaries with mechanical works for mutual customers and enhanced the growing reputation of the Group for delivery of joint Mechanical & Electrical works providing quality, timeliness and value for money. There was also a small but growing exposure to projects outside of water making good use of the fabrication facility to provide mechanical products and pipework. 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, as in 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 UKmarket caused by the 5-year Asset Management Programmes (AMPs) 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 successful 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 SHEQ manager 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. In mitigation 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. 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 came under pressure during 2014 as although gross profit margins improved very marginally in the year to 8.6%, up from 8.5% last year, these margins were less than budget as downward pressure on gross profits remains as projects from the Water Industry continue to experience difficulties in recovering value from additional works. The move to a greater number of projects in the Water Industry led to falling margins as typically recovering costs for extra works is extremely difficult. 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 based on OHSAS 18001:2007. Achilles UVDB, 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. The results of the 2014 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 is currently zero. QUALITY ASSURANCE FSD Groupis 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 company'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 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 Grouphas 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 Grouphas a safety management system implemented across all sites that has successfully been reapproved 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 ROSPA( Royal Society for the Prevention of Accidents) Gold Medal award 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. The Group continues to establish safety initiatives and objectives and these are currently on target with a good safety record. EMPLOYEES Group employee numbers have fallen slightly from an average of 96 in 2013 to 94 in 2014 reflecting a different 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 31 May 2014was £265,600 net of deferred tax, an increase of 8% from £246,400 as at 31 May 2013. This is derived from the Group's most recent FRS17 actuarial review and reflects market conditions as at 31 May 2014. 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 £4.1 million (2013: £5.5 million). The Group is in the main reliant on the fortunes of the Water Industry and it is from this industry that the majority of turnover is derived. The current AMP5 (Asset Management Programme), runs for five years to April 2015; it was slow to start, has progressed strongly over the last three years and is now in decline. Industry investment has traditionally declined in the last and first years of the five year regulatory period, which is why FSD's sales effort remains committed to industries outside of water and towards new technology sectors such as Energy from Waste and Gasification. OFWAT (the water industry regulator) has published details of the methodology it intends to use to assess water companies' business plans for AMP6, which starts in 2015. The methodology relates to water supply and sewerage in Englandand Walesand makes it clear that the water industry's emphasis is shifting from the previous need to meet European Unionwater quality legislation to focusing on value for money for customers. OFWAT requires that water companies should focus on long term outcomes, to encourage innovative ways of working that will deliver services for less money, and with less impact on the environment. This shift in emphasis is leading to water companies looking for different skill sets from their supply chains with expertise that will help them make more of existing assets. Many have already started their Framework processes by appointing delivery teams in preparation for a rapid start when OFWAT signs off their funding. FSD is prepared for this change in approach and longer-term thinking. FSD has the quality and environmental credentials plus the engineering team to ensure that it can offer early involvement in decision making processes and innovative design to consider asset-life-cost implications and more efficient solutions. FSD has started the prequalification processes to secure its position on frameworks and strategic alliances with the water process companies. The Group now offers a turn-key solution with Mechanical and Electrical (M&E) capabilities using joint venture alliances and other working arrangements with like-minded quality partners to offer a full delivery package and enhance 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 and the efficiencies this gives have helped the Group to offer an enhanced design resource to supplement its installation capabilities. The Board continues to react to customer demands and keep standards high, whilst creating operational efficiencies to best position the business for the tougher trading conditions ahead. P J Haines Managing Director 23 October 2014 FIELD SYSTEMS DESIGNS HOLDINGS PLC CONSOLIDATED PROFIT AND LOSS ACCOUNT for the year ended 31 May 20142014 2013 £ £ TURNOVER 11,976,015 13,591,143 Cost of sales (10,949,190) (12,435,990) ___________ ___________ GROSS PROFIT 1,026,825 1,155,153 Net operating expenses (839,637) (976,955) _________ _________ OPERATING PROFIT 187,188 178,198 Interest receivable 594 3,424 Interest payable (30,498) (43,651) _______ _______ PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 157,284 137,971 Taxation (22,006) (13,473) _______ _______ PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION 135,278 124,498 Minority interest - 8,660 _______ _______ PROFIT FOR THE YEAR 135,278 133,158 ====== ====== EARNINGS PER SHARE Basic 2.5p 2.5p ====== ====== Diluted 2.5p 2.5p ====== ====== All operations are continuing. FIELD SYSTEMS DESIGNS HOLDINGS PLC CONSOLIDATED BALANCE SHEET As at 31 May 2014 2014 2013 £ £ FIXED ASSETS Intangible assets - 13,328 Tangible assets 1,706,957 1,818,864 ________ ________ 1,706,957 1,832,192 CURRENT ASSETS Stock - raw materials 31,054 30,174 Debtors 2,755,840 3,941,367 Cash at bank and in hand 916,723 923,279 ________ ________ 3,703,617 4,894,820 ________ ________ CREDITORS Amounts falling due within one year 2,842,353 4,228,968 ________ ________ NET CURRENT ASSETS 861,264 665,852 ________ ________ TOTAL ASSETS LESS CURRENT LIABILITIES 2,568,221 2,498,044 CREDITORS Amounts falling due after more than one 24,939 36,440 year PROVISIONS FOR LIABILITIES Pension obligations 265,600 246,400 Deferred tax - - ________ ________ NET ASSETS 2,277,682 2,215,204 ========= ========= 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 1,179,649 1,117,171 ________ ________ SHAREHOLDERS' FUNDS 2,277,682 2,215,204 Minority interests - - ________ ________ 2,277,682 2,215,204 ========= ========= Approved and authorised for issue on 23 October 2014by:- P J Haines.......................................Director
D F Lower........................................Director
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