FIELD SYSTEMS DESIGNS HOLDINGS PLC - Annual Financial Report
Announcement provided byField Systems Designs Holdings plc · FSD
FIELD SYSTEMS DESIGNS HOLDINGS PLC
The Board presents the results of
Many contracting companies make little or no provision for rainy days, let alone this current hurricane, however FSD believes the key factor to seeing any business through tough times is cash in the bank, and so have over many years taken steps to ensure the group maintained a healthy balance sheet. Business life has changed, whether working at site, working in the factory, working from home, working in the office, or held in reserve on furlough, all employees are making a valuable contribution to ensure our ship’s engine continues to take us forward, and this kind of flexibility is key to maintaining our output, whilst remaining safe.
It is therefore pleasing to see the sustained operating profits of £0.3 million reflected by the current year’s results. Turnover from the water industry was resilient during the year as the cycle of expenditure under Asset Management Programme 6 (AMP6) came to a close in
FSD is fully committed to assisting water companies, and their Tier 1 framework contractors chosen under AMP7 to manage their expenditure, although the absence of any solid expenditure forecasts is making planning ahead for FSD more complicated than normal. FSD is confident that the quality of its delivered projects and its well-established business credentials, together with its pipework fabrication factory, and the reputation of its talented mechanical and electrical engineering and installation personnel, that have earned FSD its position on their supply-chain arrangements in the past will again serve us well this time around. There is little doubt that the 2021 financial year will be a tough one, however the group is well-positioned with a strong cash balance and experienced workforce to weather the storm.
D K Bird
PUBLICATION OF NON-STATUTORY ACCOUNTS
The financial information set out in this preliminary announcement does not constitute statutory accounts as defined in the Companies Act 2006.
The group statement of financial position as at
The directors of
FIELD SYSTEMS DESIGNS HOLDINGS PLC
The directors present the Strategic Report for
The Group achieved a turnover of £19.8 million for the year to
|Turnover was generated as follows:||2020||2019|
Water and Sewerage treatment
|Power generation and Energy from Waste||2,267,310||4,328,449|
|Transport and Tunnel infrastructure||25,667||21,189|
Group revenues include transactions with five customers that amount to 10 per cent or more of the Group's total annual revenues; the total amount of revenues from those five customers amounts to £17.7 million, of which £15.7 million derives from the Water and Sewerage treatment sector and £2.0 million derives from the Power generation and Energy from Waste sector.
Gross profit margins reduced in the year ended
The directors are pleased to report a solid Group profit after tax of £317,356 for the year ended
Water and Sewerage
FSD successfully secured, engineered, managed and installed a volume of Mechanical and Electrical (M&E) installation projects during the year across the sector as the Group strives to complete to budget a quality job in a safe working manner and maintain its reputation as a respected industry specialist.
Sales volumes improved very slightly in the Water Industry in 2020 where 88% of turnover was derived (2019: 80%). The Group undertook a diversity of projects for a number of different
Power generation and Energy from Waste
In 2020 11% of turnover was derived from the Power and EfW sector (2019: 20%). FSD worked primarily on Energy from Waste projects, undertaking electrical installation works at
Transport and Tunnels
Electrical installation works on cable tunnels have their own complexities due to the additional access, egress and safety issues which FSD carefully manage with their experienced trained personnel. The Group continues to support such tunnelling works as they arise, dealing competently with the complications these projects involve.
Telemetry, Building services, Maintenance, Instrumentation, Controls and Automation
FSD continues to undertake smaller electrical installation service contracts across various sectors offering customers timeliness and value for money. An electrical workshop facility with tooling and equipment enables the Group to react quickly by producing various in-house components including small isolator builds, lighting panels and remote monitoring enclosure pre-assemblies.
Mechanical design, fabrication and installation
The pipework fabrication facility owned by the Group gives its mechanical subsidiary the flexibility to respond to customer’s needs promptly when taking on the mechanical elements of M&E installation contracts, The Group has grown its client base by creating a reputation for quality in-house mechanical fabrication and site installation services.
PRINCIPAL RISKS AND UNCERTAINTIES
The board regularly undertakes a review of business risks and uncertainties confronting the Group and evaluates the significant project risks affecting its business. The following issues are the principal risks and uncertainties faced by the Group.
The Group’s business may be affected by market forces beyond its control. During a downturn all competing companies operating in the same industry sectors will be impacted by economic and political change that will alter the volume and value of available work.
There continues to be volatility in financial markets, in currency markets and uncertainty over future actions by governments and businesses as we head for the new Brexit deadline of
The unpredictable nature of the Coronavirus pandemic and the timing of its cessation has created uncertainty estimating the impact of future events which is highly challenging at this time. The directors have reviewed the key areas of risk to the business and the potential negative impact of COVID-19 on the business which includes determining the likelihood of customers to meet their debts as they fall due, the impact on supplier’s performance and ability to supply goods, the impact on levels of human resources, and the difficulty in predicting the level of future order intake.
The Group is heavily reliant on the Water industry and its business is affected by the cyclical nature of the
The Group is dependent on the quality, attention and diligence of its personnel across the full spectrum of its skill disciplines. The Group’s ability to attract, retain, train and motivate its skilled management and personnel will be reflected by business growth, profitability and a reputation for quality work. The Group offers ‘added-value’ to its customers by offering a superior quality of project management, engineering and supervisory resource to complement its installation services. It is this wealth of knowledge and experience that sets FSD aside from its competition.
Health and safety
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.
The Group demands effective and successful management of health and safety risks by its supply-chain and similar demands are rightly made by its own customer base. Constant vigilance is paramount and any accident can have serious consequences. The commitment to enforcing safe working and adherence to regulation is strong at board level and flows through the organisation through qualified specialists, continual instruction and training. The Group is extremely aware of the potential for an ‘incident’ to damage the Group and gives constant attention to ensuring that this risk is kept to a minimum. The board, supported by a highly qualified health and safety specialist, endorses the importance of vigilant health and safety practices.
Long term contracts – bidding
The majority of Group turnover is from fixed price and target price contracts. The failure to adequately assess from client’s specifications the full scope of works, the correct pricing of that work and the time required to complete the work may have serious ramifications on profitability. There are specific risk management procedures in place to ensure that prices estimated for fixed price contracts are accurate and to ensure the correct costing of successful bids as the work progresses. The Tender Approval Procedure (TAP) is a key risk management tool used to minimise these risks. The TAP completion process identifies tender project risks, assesses the probability of their occurrence, their impact if they do occur and actions necessary to manage them down to an acceptable level. This procedure is used to ensure that commercial and contractual risks are monitored and managed by the board.
Long term contracts – costing
Fixed price and target price contracts may also be subject to cost and time overruns, and the costs of additional work undertaken on variations may not be properly measured or fully recovered from the customer. The Project Summary Report (PSR) is a key risk management tool used to minimise these risks. The PSR completion process quantifies the value of project work undertaken after successful contract award, reviews the potential commercial risks and highlights any safety, technical, operational and environmental risks. This tool is used to ensure that commercial and contractual risks are monitored and managed by the board.
The Group has a leading market position in sectors such as the water industry, and has also penetrated other sectors such as tunnelling, the power industry and energy from waste market to ensure a constant pipeline of enquiries. Nevertheless in an increasingly competitive environment and with cyclical volumes, accurate and competitive pricing is key to a successful contract award. The board constantly monitors the competitiveness of its cost base to ensure that its pricing remains competitive. Regular benchmarking and framework submissions also assist this process of review.
The Group uses financial instruments when required to provide a financing base for the Group’s operations. The Group's financial instruments consist primarily of short-term debtors and creditors. The directors regularly review the Group's cash position to ensure that facilities exist for continuity of funding and effective cash management.
The Group has a strong balance sheet and access to additional debt funding, and trades comfortably within its current working capital. Customers may require additional project work to be undertaken and the Group may be required to fund this work for a period of time until the additional costs can be formally approved and funds received. The Group may also experience an increase in the level of credit given to customers as a consequence of a change in their financial status or payment systems. In such circumstances there are short-term cash-flow consequences which are managed carefully by the finance department and any consequences mitigated.
KEY PERFORMANCE INDICATORS (KPI’s)
The board uses both financial and non-financial (operational) performance indicators in the analysis and management of the business. The indicators relate both to financial and contractual performance and to other non-financial areas, including but not limited to, employees, health and safety, quality assurance, customer satisfaction and the environment. KPI’s are used by the management to run and monitor the business and many of the trends and results provide information which is commercially sensitive or is confidential in nature.
The main financial KPI used by the board is the measure of gross profit margin (being the gross project profit contribution as a percentage of turnover), as overheads can largely be controlled in line with budget, however margins on contractual activity are key to annual profitability. An overall target margin is set annually in advance after review of overhead structure and subsequently represents the average bid margin used in pricing projects. It is designed to cover Group overheads plus an element of profit. The gross profit margin used in the annual budgeting process is used to benchmark monthly performance and provides for a degree of margin erosion due to difficulties in fully recovering the value of additional works requested by customers. This varies according to market conditions.
The actual margin experience is reflected in the reported results and a detailed review is contained within the operational performance reported earlier in the Strategic Report.
The board measures customer satisfaction using an independent on-line survey assessment. A rolling 12-month record is kept of customer feedback on project completion with charitable donations used to encourage participation. Customers are asked to complete answers to a number of questions regarding the performance of FSD as a whole and also at site level, on a scale of 1 (poor) to 5 (excellent) including such areas as the focus on Safety and the Environment, completion of site work to programme, contract financial management and standard of workmanship. The responses are used by the board as an independent confirmation of group performance levels and negative feedback is vigorously followed up and improvement measures implemented. The group targets an average score of 4.5 and the overall responses have been very close to this target with an average of 4.5 (2019: 4.2) during the year.
The ongoing independent assessments of the Group’s Safety, Quality and Environmental Standards are key to it maintaining the efficiency of its operational performance and adherence to high levels of site safety and environmental awareness.
The Group board has both corporate and personal responsibility to ensure that its operations are managed in a safe and environmentally controlled manner.
In common with its industry the Group measures its record on Health & Safety using an annual Accident Frequency Rate (AFR) chart showing lost time accidents per 100,000 man-hours worked. The AFR is currently zero (2019:0.17). The group has recently achieved over 1 million man-hours without a reportable incident.
The Scheme’s funding position has improved from a surplus of £253,000 at the start of the year to a surplus of £447,000 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
FSD is approved to the Quality Management Standard BS
FSD has an environmental management system approved to the international environment standard, ISO 14001:2015. The BSI and Achilles regularly review the Group's processes for managing its impact on the environment. The Group achieved its CEMARS (Certified Emissions Measurement and Reduction Scheme) accreditation in 2010 and now works to the principles of ISO 14064-1:2006. FSD are currently in the final stage of regaining the accreditation, as it strives to minimise harm to the environment, prevent pollution and use best practice environment solutions wherever possible to minimise its carbon foot-print. A risk assessment approach is used to manage environmental matters, and to identify and assess key environmental hazards arising from business activities and manage them appropriately.
HEALTH AND SAFETY
A commitment to Health and Safety is the Group’s number one priority. Every Board meeting starts by focusing on preserving high safety standards and promoting a positive safety culture within the Group, to ensure that our employees, customers, suppliers and the public are kept safe. FSD has a safety management system implemented across all sites that has successfully been approved to the Health and Safety Management System BS OHSAS 18001:2007 updated to BS ISO 45001:2018 Occupational health and safety management systems (the internationally recognised standard for management of occupational health and safety risks). The Group achieved a
Our employees are fundamental to the success of the Group and we aim to be a responsible employer in our approach to the provision of training and remuneration and by making the health, safety and well-being of our employees one of our primary considerations in the way we do business. We are pleased to place on record our appreciation of the efforts and expertise demonstrated by our employees, who continue to make a significant contribution to the Group. Employee numbers decreased during the year from an average of 180 in 2019 to 163 in 2020, reflecting the reduction in turnover and a change in the mix of work scope during the year.
CORPORATE GOVERNANCE AND s172 REPORTING
The Group recognises its responsibilities to the people it employs, its customers and suppliers, its shareholders, the wider community, and the environment. In accordance with section 172 of the Companies Act 2006 the directors undertake to act in a way most likely to promote the long-term success of the Group for the benefit of its stakeholders. The preceding strategies outlined in this report demonstrate the Group’s concern for the interests of its employees, its primary commitment to health and safety for its employees, customers, suppliers and the general public, and the instruments it uses to monitor the quality of its services and customer satisfaction. The Group has achieved accreditations, monitored externally, which are used to review the processes it operates to lessen its impact on the community and the environment. The Board of directors meet quarterly to fulfil their duties and use bi-annual trading statements to communicate coherently the Group’s performance to its members. Operational duties are delegated to an executive management team who meet monthly to review our complex business operations and are charged with maintaining the reputation of the Group for high standards of business conduct by identifying, evaluating, managing and mitigating the risks faced by the Group. We are a well-managed, responsible and ethical Group and are determined to be widely recognised for our quality of installation, the skills of our people and the seriousness with which we take our corporate responsibilities.
The Group entered the new financial year with an opening order book of £6.5 million (2019: £8.2 million).
The Group’s principal source of revenue historically has been from the Water Industry and key to its financial success is its continued participation in the various frameworks being formulated by the
In the Energy from Waste (EfW) sector volumes have declined during the current year and this is set to continue next year. FSD have excellent credentials and are continuing to pursue suitable new EfW opportunities; however a number of established Engineering, Procurement and Construction (EPC) contractors have now decided not to pursue further opportunity from the EfW sector and FSD are finding that onerous commercial conditions of contract are limiting the remaining available opportunities.
There are other avenues for growth opening up to the Group following recent investment in the development of a team of specialists who will complement existing business services by enabling FSD to offer telemetry and process automation services in both the water and power industries. The quantum of new opportunities was limited this year but should receive a boost when new spend budgets are released under AMP7.
The board continues to react to customer demands and invest in training to keep quality standards high, whilst pursuing operational efficiencies to best position the business for the opportunities ahead.
On behalf of the board
FIELD SYSTEMS DESIGNS HOLDINGS PLC
GROUP INCOME STATEMENT
for the year ended
|Cost of sales||(18,587,468)||(20,005,388)|
|GROUP OPERATING PROFIT||341,345||551,125|
Defined benefit scheme settlements and
past service costs
|Interest receivable and similar income||15,640||13,300|
|Interest payable and similar charges||(2,528)||(3,799)|
|PROFIT ON ORDINARY|
|PROFIT ON ORDINARY|
|ACTIVITIES AFTER TAXATION
ATTRIBUTABLE TO THE OWNERS OF THE PARENT COMPANY
|EARNINGS PER SHARE|
All operations are continuing.
FIELD SYSTEMS DESIGNS HOLDINGS PLC
GROUP STATEMENT OF FINANCIAL POSITION
|Stock – raw materials||83,184||58,257|
|Cash at bank and in hand||5,960,462||4,798,845|
|Amounts falling due within one year||6,141,516||6,886,434|
|NET CURRENT ASSETS||3,644,094||3,313,734|
|TOTAL ASSETS LESS CURRENT|
|Amounts falling due after more than one year||36,940||19,082|
|PROVISIONS FOR LIABILITIES|
|Post-employment employee benefits||-||-|
|CAPITAL AND RESERVES|
|Called up share capital||569,250||569,250|
|Share premium account||158,750||158,750|
|Profit and loss account||3,056,607||2,818,251|
|TOTAL SHAREHOLDERS’ FUNDS||4,154,640||3,916,284|
Approved by the board and signed on behalf of the board and authorised for issue on
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