FIELD SYSTEMS DESIGNS HOLDINGS PLC - Final Results
Announcement provided byField Systems Designs Holdings plc · FSD
FIELD SYSTEMS DESIGNS HOLDINGS PLC
The Board presents the results of Field Systems Designs Holdings plc and its subsidiaries (FSD) for the year ended 31 May 2021.
Last year we described the arrival of the COVID-19 threat and the uncertainty over when we would be back in charge of our lives as we once knew them, or when we would return to normality as a business. There is little doubt that the 2021 financial year has been a tough one; the absence of sufficient workload for staff across the Group sadly resulted in some job losses, and very disruptive working patterns for other staff, with many furloughed for long periods. Business life changed for a while, whether working on site, working in the factory, working from home, working in the office, or held in reserve on furlough, all employees have made an invaluable contribution.
The operating results for the year were disappointing, but to be expected in the circumstances when turnover fell rapidly to half that of previous levels. The Board has still not properly understood the rationale for why Asset Management Programme 7 (AMP7) never started as it should have in April 2020. The framework plans by water utilities were not rolled forward into AMP7, initially delayed by the impact of COVID-19 and then presumably by the tough stance adopted by OFWAT in challenging their 2020-2025 spend budgets.
Fortunately projects tendered have not been lost, merely delayed, and so 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, will leave us in prime position as normality resumes.
The group is well-positioned with a strong cash balance and has retained the majority of its experienced workforce to react swiftly as the Utility Companies restart projects so desperately needed to keep our population watered and the environment clean.
We expect as the World emerges from the shadow of the coronavirus that business will return and the Board believes that a buoyant period lies ahead as the water industry catches up the ground lost to COVID-19.
D K Bird
30 November 2021
PUBLICATION OF NON-STATUTORY ACCOUNTS
The financial information set out in this preliminary announcement does not constitute statutory accounts as defined in the Companies Act 2006.
The group statement of financial position as at 31 May 2021 and the unaudited group income statement for the year then ended have been extracted from the Group's 2021 statutory financial statements, which have not yet been delivered to the registrar of companies.
The directors of Field Systems Designs Holdings plc accept responsibility for this announcement and confirm compliance with the AQSE Growth Market rules.
FIELD SYSTEMS DESIGNS HOLDINGS PLC
The directors present the Strategic Report for Field Systems Designs Holdings Plc (‘the Company’) and its subsidiary undertakings (together referred to as ‘the Group’) for the year ended 31 May 2021.
The Group achieved a turnover of £10 million for the year to 31 May 2021, a reduction of 50% on last year. These results show significantly reduced turnover and profitability, which reflect the serious impact of COVID-19 on the release of work in the
The Water Industry’s sixth Asset Management Programme (AMP6) came to a close in April 2020, and FSD fully engaged itself in refreshing the pre-qualification process as framework plans by water utilities were rolled forward into AMP7. The impact of COVID-19, and conflicts between water utilities and OFWAT in challenging their 2020-2025 expenditure budgets caused new orders expected by FSD under AMP7 to be severely delayed.
The unexpected fall in turnover has created an excess in labour resources which whilst mitigated by the government furlough scheme still placed a heavy cost burden on the group with no productive output in return. This, together with carrying overheads no longer relative to the volume of business resulted in heavy losses, but also offered an opportunity to refine our procedures and processes in readiness for the busy times ahead.
Gross profit margins from ongoing works fell due to the disruption and additional costs of working under stringent COVID rules, the contractual stance adopted by customers struggling with their own projects creating difficulties for FSD in recovering value from imposed changes, and price competition in winning a share of any remaining projects works.
|Turnover was generated as follows:||2021||2020|
Water and Sewerage treatment
|Power generation and Energy from Waste||2,080,503||2,267,310|
|Transport and Tunnel infrastructure||25,251||25,667|
Group revenues include transactions with four customers that amount to 10 per cent or more of the Group's total annual revenues; the total amount of revenues from those four customers amounts to £4.2 million, of which £2.9 million derives from the Water and Sewerage treatment sector and £1.3 million derives from the Power generation and Energy from Waste sector.
The Group made a gross loss of £(984,604) compared to gross profits last year of £1,253,729. Group operating losses for the year were £(540,338), (2020: profit £341,345) and the consolidated results show a group loss after tax of £(461,780), (2020: profit £317,356)
The Field Systems Designs Group (FSD) focuses on delivering specialist mechanical and electrical design and installation works.
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 in the Water Industry in 2021 provided 79% of group turnover (2020: 88%). The Group undertook a diversity of projects for a number of different Water Utilities in many regions of the
Power generation and Energy from Waste
In 2021 21% of turnover was derived from the Power and EfW sector (2020: 11%). FSD worked primarily on Energy from Waste projects, completing electrical installation works at Levenseat and Hull on projects which use advanced thermal treatment gasification technology. There was also work undertaken during the year on generators, and power station outage maintenance works supporting installations completed in the past.
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 following Brexit on
31 December 2020. The directors have reviewed the implications of the decision to leave the EU and we have considered the impact on our business as part of our risk management process. The directors believe that the short-term effects are inflationary, primarily on material pricing, but that the long-term relationships with our supply chain will aid our business to remain resilient under the range of most likely scenarios.
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 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 resource to complement its installation services.
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 (2020: 4.5) 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 FSD Group is approved to the Quality Management Standard ISO 9001:2015, has an environmental management system approved to ISO 14001:2015, and a safety management system ISO 45001, the standard for Occupational Health & Safety. Achilles UVDB, the Utilities Sector Vendor Database performance assessor, regularly review the Group's processes for managing and installing electrical services, as well as its fault resolution procedures. The results of the 2021 Achilles audit were again excellent, reflecting 100% scores in all 4 areas of the Management System Evaluation and 100% in all 4 areas of the Onsite Assessment; these assessments look at areas of health & safety, environment, quality and social corporate responsibilities.
The Group board has both corporate and personal responsibility to ensure that its operations are managed in a safe and environmentally controlled manner. In common with its industry the Group measures its record on Health & Safety using an annual Accident Frequency Rate (AFR) chart showing lost time accidents per 100,000 man-hours worked. The AFR is currently zero (2020:zero). The group has recently achieved over 1.3 million man-hours without a reportable incident.
The Scheme’s funding position has improved from a surplus of £447,000 at the start of the year to a surplus of £562,000 at the end of the year. The Group is not recognising the surplus and so the Group’s defined benefit pension scheme funding position as at 31 May 2021 has been maintained at £Nil, a target reached in 2017. This is derived from the Group's most recent actuarial review reflecting market conditions at 31 May 2021.
FSD is approved to the Quality Management Standard BS EN ISO 9001:2015. The British Standards Institute (BSI) and Achilles, the Utilities Sector procurement performance assessor, regularly review the group's processes for managing and installing electrical services, as well as its fault resolution procedures. Recent assessments have again been successfully completed with excellent results from the UVDB Verify audits. The Group is committed to a strategy that provides its clients with a high-quality service that conforms to the client’s requirements. This strategy includes a strong management commitment to quality, the recruitment and retention of high calibre, experienced and well-trained staff, properly documented procedures, processes and controls, and compliance with all regulatory and legal requirements. Quality Audits continue to be carried out across group sites on a regular basis to ensure compliance and to improve the group’s activities. The annual management review meeting assesses the group’s performance against targets and sets new targets.
FSD 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 Achilles (Carbon Reduction Certification) accreditation in 2020, 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 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 ROSPA (Royal Society for the Prevention of Accidents) Gold award again this year, and we have achieved 7 consecutive Gold awards giving FSD Gold Medal Award status.
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 MAKEUK, ECA and CITB.
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 163 in 2020 to 146 in 2021, 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. FSD 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’s principal source of revenue historically has been from the Water Industry. Sales volumes in the Water Industry have failed to grow this year as would normally be expected when AMP7 should have been well underway, having commenced in April 2020 and running for a further five years in line with Ofwat’s business plan approval programme until 2025. Despite FSD being fully involved in the prequalification processes with the regional Utilities and confident that it will secure its position on frameworks, the Utilities and water process companies have failed to release any significant quantum of work under AMP7.
Normally this stage of the five-year cycle would be marked by a step-up in investment and engineering activity as capital projects are approved and construction begins. However, with the global Coronavirus crisis coinciding with the start of AMP7, together with some water companies appealing their budget determinations to the Competition and Markets Authority (CMA), the usual cyclical ‘boom and bust’ cycle of AMP investment has mis-fired, with an 18 month hiatus extending the ‘bust’ element of the cycle until late 2021.Early indications are that the AMP7 to AMP8 transition will not create the traditional dip in activity, this being due to programmes being pushed out from the early part of AMP7 creating a potentially busy end to the Asset Management Period.
Despite the excellent credentials FSD has in the Energy from Waste (EfW) sector the construction experience has not been a pleasant one, therefore the company has chosen to be more selective in projects tendered during the current year, which will result is a decline in EfW opportunities. 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.
On behalf of the board
Nigel Billings, Managing Director
30 November 2021
FIELD SYSTEMS DESIGNS HOLDINGS PLC
GROUP INCOME STATEMENT
for the year ended 31 May 2021
|Cost of sales||(10,963,299)||(18,587,468)|
|Other operating income||1,522,127||206,370|
|GROUP OPERATING (LOSS)/PROFIT||(540,338)||341,345|
|Interest receivable and similar income||11,355||15,640|
|Interest payable and similar charges||(4,978)||(2,528)|
|(LOSS)/PROFIT ON ORDINARY|
|(LOSS)/PROFIT ON ORDINARYACTIVITIES AFTER TAXATION ATTRIBUTABLE TO THE OWNERS OF THE PARENT COMPANY||
All operations are continuing.
FIELD SYSTEMS DESIGNS HOLDINGS PLC
GROUP STATEMENT OF FINANCIAL POSITION
As at 31 May 2021
|Stock – raw materials||80,016||83,184|
|Cash at bank and in hand||6,033,376||5,960,462|
|Amounts falling due within one year||5,004,173||6,141,516|
|NET CURRENT ASSETS||3,238,267||3,644,094|
|TOTAL ASSETS LESS CURRENT|
|Amounts falling due after more than one year||10,323||36,940|
|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||2,550,827||3,056,607|
|TOTAL SHAREHOLDERS’ FUNDS||3,648,860||4,154,640|
Approved by the board and signed on behalf of the board and authorised for issue on
30 November 2021 by:-
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