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Announcement provided by

Field Systems Designs Holdings plc · FSD

31/10/2014 13:06



I am pleased to announce the results of Field Systems Designs Holdings plc for
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 2015 has 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

23 October 2014


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 2014 and 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

Those financial statements have not yet been delivered to the registrar of

The directors of Field Systems Designs Holdings plc accept responsibility for
this announcement and confirm compliance with the ICAP Securities & Derivatives
Exchange guidance note relating to the number of directorships held.




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 2014 to
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 Utilities and 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: £

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: £


The Field Systems Designs Group (FSD) focuses on delivering specialist
mechanical and electrical design and installation works.


Sales volumes were again dominated by the Water Industry where 84% of turnover
in 2014 was derived (2013: 85%). The AMP5 spend in England continued 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
Peacehaven sewage works for Southern Water and its delivery partner 4D - a
consortium of Costain, MWH and Veolia Water.


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 Station and
collaborative works as part of its CAF Consortium on Ferrybridge Energy from
Waste Plant.

Building services, Maintenance, Security, Instrumentation, Controls and

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 England released works to
the FSD Group such 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


The board regularly undertakes a review of business risks and uncertainties
confronting the Group and evaluates the significant project risks affecting its

The following issues are the principal risks and uncertainties faced by the


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 UK market 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.


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.


The board uses both financial and non-financial (operational) performance
indicators in the analysis and management of the business. The indicators
relate both to financial and contractual performance and to other non-financial
areas, including but not limited to, employees, health and safety, quality
assurance, customer satisfaction and the environment.

KPI's are used by the management to run and monitor the business and many of
the trends and results provide information which is commercially sensitive or
is confidential in nature.


The main financial KPI used by the board is the measure of gross profit margin
(being the gross project contribution as a percentage of turnover), as
overheads can largely be controlled in line with budget, however margins on
contractual activity are key to annual profitability.

An overall target margin is set annually in advance after review of overhead
structure and subsequently represents the average bid margin used in pricing
projects. It is designed to cover Group overheads plus an element of profit.
The gross profit margin used in the annual budgeting process is used to
benchmark monthly performance and provides for a degree of margin erosion due
to difficulties in fully recovering the value of additional works requested by
customers. This varies according to market conditions.

The actual margin experience is reflected in the reported results and 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.


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.


FSD Group 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 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.


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.


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 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.


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.


The Group's pension deficit as at 31 May 2014 was £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.


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


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 England
and Wales and makes it clear that the water industry's emphasis is shifting
from the previous need to meet European Union water 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


for the year ended 31 May 2014

                                                2014            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)

                                                    _______         _______

ACTIVITIES BEFORE TAXATION                          157,284         137,971

Taxation                                            (22,006)        (13,473)

                                                    _______         _______

ACTIVITIES AFTER TAXATION                           135,278         124,498

Minority interest                                     -               8,660

                                                    _______         _______

PROFIT FOR THE YEAR                                 135,278         133,158

                                                     ======          ======


Basic                                                 2.5p             2.5p
                                                    ======           ======

Diluted                                               2.5p             2.5p
                                                    ======           ======

All operations are continuing.


As at 31 May 2014

                                                            2014           2013
                                                                £             £


Intangible assets                                              -         13,328
Tangible assets                                        1,706,957      1,818,864

                                                        ________       ________

                                                       1,706,957      1,832,192


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
                                                        ________       ________

Amounts falling due within one year                    2,842,353      4,228,968
                                                        ________       ________

NET CURRENT ASSETS                                       861,264        665,852
                                                        ________       ________

LIABILITIES                                            2,568,221      2,498,044

Amounts falling due after more than one                   24,939         36,440


Pension obligations                                      265,600        246,400
Deferred tax                                                   -              -
                                                        ________       ________

NET ASSETS                                             2,277,682      2,215,204
                                                       =========      =========


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 2014 by:-

P J Haines.......................................Director

D F Lower........................................Director

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