TIDMFSD
FIELD SYSTEMS DESIGNS HOLDINGS
PLC
CHAIRMAN'S STATEMENT
The Board presents the results of Field Systems Designs Holdings plc for the
year ended 31 May 2017. It is pleasing to see the improvement in turnover and
net profits reflected by the current year's results. Equally encouraging is
that although turnover from the water industry has been boosted by the
mid-point cycle of expenditure under Asset Management Programme 6 (AMP6) it
represents just two-thirds of overall group turnover. The contribution from the
Energy from Waste sector (EfW) has been solidly maintained and rewards the
sales efforts and investment made in the past. Working in these industries is
still tough; with both contractual and operational complexities; however this
year's result reflects a solid performance.
AMP6 is the water industry's sixth 5-year build and refurbishment programme
running to April 2020. The changed emphasis of AMP6 expenditure on modernising
and improving the water treatment systems in the UK by increasing efficiency is
designed to avoid higher bills for consumers. There has been a shift from the
concept of capex (capital expenditure) which placed emphasis on short term cost
reduction; and opex (operational expenditure) cutting the cost of operations by
reducing wastage and more effective pre-planned maintenance; to totex (total
expenditure) which proposes building upgrades that will last longer and cost
less to run in the long-term.
FSD is fully on board to assist water companies and their Tier 1 framework
contractors chosen under AMP6 to manage their expenditure. FSD has successfully
earned its position on their supply-chain arrangements through complex
pre-qualification tests and has invested in talented engineering and
installation personnel to be able to fully participate at the earliest stages
of project development in decisions that direct efficiencies and cost-saving
measures.
The group's move to diversify into the Energy from Waste sector (EfW) has
proven successful. The group has now successfully completed a multitude of
major EfW contracts for different clients reflecting the confidence that it has
now built in delivering these complex projects.
The board is positive about the outlook for group performance over the next
financial year and is well-positioned with a strong cash balance and good
opening order book to maximise the benefits from future opportunities.
D K Bird
Chairman
31 October 2017
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 2017 and the unaudited
group income statement for the year then ended have been extracted from the
Group's 2017 statutory financial statements upon which the auditors opinion has
not yet been issued.
These financial statements 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 NEX Exchange Growth Market
rules.
FIELD SYSTEMS DESIGNS HOLDINGS
PLC
STRATEGIC REPORT
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 2017.
OPERATIONAL PERFORMANCE
The group achieved a turnover of GBP17.2 million for the year to 31 May 2017, an
increase of 19% on last year, reflecting the pick-up in work from the Water
Industry as project awards from AMP6 grow, and a continuation in work from the
EfW sector.
Turnover was generated as follows: 2017 2016
GBP GBP
Water and Sewerage 10,931,388 8,986,968
Power generation and Energy from Waste 5,597,291 5,328,437
Transport and Tunnels 551,503 14,370
Building services, Maintenance,
Security, Instrumentation, Controls and Automation 134,303 153,949
__________ __________
17,214,485 14,483,724
======= =========
==
Gross profit margins dipped slightly in the year ended 31 May 2017 to 7.6% from
7.8% last year. Gross margins were under downward pressure due to projects
suffering from the tough contractual stances adopted in the Energy from Waste
sector and operating difficulties within the Water Industry. Efforts made to
bring in operational efficiencies have helped to protect gross margins, which
although falling short of tender, have remained relatively constant despite the
strong growth in turnover.
This contribution from operations left the group with operating profits for the
year of GBP462,388 (2016: GBP335,028). The directors are pleased to report a solid
group profit after tax of GBP672,123 for the year ended 31 May 2017 (2016: GBP
307,523)
BUSINESS REVIEW
The Field Systems Designs group (FSD) focuses on delivering specialist
mechanical and electrical design and installation works.
Water and Sewerage
FSD continued to take on Mechanical and Electrical (M&E) installation contracts
across the sector as the group strives to maintain its reputation as a
respected industry specialist.
Sales volumes improved significantly in the Water Industry in 2017 where 64% of
turnover was derived (2016: 62%) with AMP6 well under way since its start in
April 2015. Projects from the Anglian Water framework managed by @One Alliance
started to come through during the year assisting the increase in sales
volumes.
Major projects were completed for Thames Water during 2017 at Mogden,
Basingstoke and Beddington. These projects, together with the long-delayed
project at Lee Valley made up the majority of turnover in the Water sector.
Power generation and Energy from Waste
In 2017 33% of the improved turnover was derived from the Power and EfW sector
(2016: 37%).
FSD worked primarily on Energy from Waste projects using Incineration,
Gasification and Biomass technologies. The group undertook major electrical
installation works at Welland, Levenseat and Hull on projects which use
advanced thermal treatment gasification technology.
There was also work undertaken during the year on generators and outage works
at Hartlepool Nuclear Power Station.
Transport and Tunnels
Electrical installation works undertaken on a London-based deep cable tunnel
boosted turnover in this sector during the year. FSD continues to support
tunnelling works as they arise, dealing competently with the complexities these
projects involve.
Building services, Maintenance, Security, Instrumentation, Controls and
Automation
FSD continues to deliver on smaller electrical installation service contracts
in the commercial, security, and water sectors, building its reputation by
offering its existing customer base quality, timeliness and value for money.
The range of services includes lighting, power distribution, fire-alarm and
security systems.
A small electrical workshop facility with tooling and equipment enables the
group to produce in-house small isolator builds, lighting panel builds and
remote monitoring enclosure pre-assemblies.
Mechanical fabrication and installation
This year the group continued to take on the mechanical elements of M&E
installation contracts through its mechanical subsidiary which continues to
build up its client base and its reputation for quality in-house fabrication
and site installation services.
There were some major pipework fabrication and installation contracts
undertaken during the year for projects under AMP6 such as water treatment
works, pumping stations and CHP units.
Freehold property and investment property disposal
The group has held a freehold interest in commercial office premises in Dorking
for a number of years. This property both housed the head office operations of
the Group and generated rental income from tenants. The property was disposed
of during the year, principally to create greater liquidity as the Group
turnover increases and it embarks on larger projects which may place demands on
working capital. The sale of the property generated a profit on disposal of GBP
76,659, which was released to the group profit and loss account during the
year.
PRINCIPAL RISKS AND UNCERTAINTIES
The board regularly undertakes a review of business risks and uncertainties
confronting the group and evaluates the significant project risks affecting its
business. The following issues are the principal risks and uncertainties faced
by the group.
Economic
The group's business may be affected by market forces beyond its control.
During a downturn all competing companies operating in the same industry
sectors will be impacted by economic and political change that will alter the
volume and value of available work.
Brexit
On 23 June 2016, the people of the UK voted to leave the EU (Brexit); there
continues to be volatility in financial markets, in currency markets and
uncertainty over future actions by governments and businesses. The directors
are considering the long-term impact of Brexit as the implications become
known, however the short-term effects are inflationary primarily on material
pricing as a consequence of weaker sterling. The board is acting on information
that price increases are already being made by suppliers of materials and on
the anticipated consequential effects that this will have on wage and price
inflation generally.
Cyclical trading
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 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 ability to
attract, retain, train and motivate its skilled management and personnel will
be reflected by business growth, profitability and a reputation for quality
work. The group offers 'added-value' to its customers by offering a superior
quality of project management, engineering and supervisory resource to
complement its installation services. It is this wealth of knowledge and
experience that sets FSD aside from its competition.
The board reviews personnel issues on a monthly basis and the Safety, Health,
Environment and Quality manager (SHEQ) ensures there is investment in training
programmes for site and management to broaden the competence, knowledge and
experience of its employees. A number of mechanical and electrical apprentices
were engaged during the year and following the introduction of the
Apprenticeship Levy the group intends to promote further training and
improvement which will be available to all employees.
Health and safety
The group demands effective and successful management of health and safety
risks by its supply-chain and similar demands are rightly made by its own
customer base. Constant vigilance is paramount and any accident can have
serious consequences. The commitment to enforcing safe working and adherence to
regulation is strong at board level and flows through the organisation through
qualified specialists, continual instruction and training. The group is
extremely aware of the potential for an 'incident' to damage the group and
gives constant attention to ensuring that this risk is kept to a minimum. The
board, supported by a highly qualified health and safety specialist, endorses
the importance of vigilant health and safety practices.
Long term contracts - bidding
The majority of group turnover is from fixed price contracts. By definition
failure to adequately assess from client's specifications the full scope of
works, the correct pricing of that work and the time required to complete the
work may have serious ramifications on profitability. There are specific risk
management procedures in place to ensure that prices estimated for fixed price
contracts are accurate and to ensure the correct costing of successful bids as
the work progresses. The Tender Approval Procedure (TAP) is a key risk
management tool used to minimise these risks. The TAP completion process
identifies tender project risks, assesses the probability of their occurrence,
their impact if they do occur and actions necessary to manage them down to an
acceptable level. This procedure is used to ensure that commercial and
contractual risks are monitored and managed by the board.
Long term contracts - costing
Fixed price contracts may also be subject to cost and time overruns, and the
costs of additional work undertaken on variations may not be properly measured
or fully recovered from the customer. The Project Summary Report (PSR) is a key
risk management tool used to minimise these risks. The PSR completion process
quantifies the value of project work undertaken after successful contract
award, reviews the potential commercial risks and highlights any safety,
technical, operational and environmental risks. This tool is used to ensure
that commercial and contractual risks are monitored and managed by the board.
Competitiveness
The group has a leading market position in sectors such as the water industry,
and has also penetrated other sectors such as 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.
Financial instruments
The group uses financial instruments when required to provide a financing base
for the group's operations and derivatives are used to hedge against known
commodity price and exchange rate exposures in contractual arrangements secured
by the group. There may not always be instruments that provide accurate hedging
or readily available markets for such hedges.
Cash flow
The group has a strong balance sheet and access to additional debt funding, and
trades comfortably within its current working capital. Customers may require
additional project work to be undertaken and the group may be required to fund
this work for a period of time until the additional costs can be formally
approved and funds received. The group may also experience an increase in the
level of credit given to customers as a consequence of a change in their
financial status or payment systems. In such circumstances there are short-term
cash-flow consequences which are managed carefully by the finance department
and any consequences mitigated.
KEY PERFORMANCE INDICATORS (KPI's)
The board uses both financial and non-financial (operational) performance
indicators in the analysis and management of the business. The indicators
relate both to financial and contractual performance and to other non-financial
areas, including but not limited to, employees, health and safety, quality
assurance, customer satisfaction and the environment. KPI's are used by the
management to run and monitor the business and many of the trends and results
provide information which is commercially sensitive or is confidential in
nature.
Financial
The main financial KPI used by the board is the measure of gross profit margin
(being the gross project contribution as a percentage of turnover), as
overheads can largely be controlled in line with budget, however margins on
contractual activity are key to annual profitability. An overall target margin
is set annually in advance after review of overhead structure and subsequently
represents the average bid margin used in pricing projects. It is designed to
cover group overheads plus an element of profit. The gross profit margin used
in the annual budgeting process is used to benchmark monthly performance and
provides for a degree of margin erosion due to difficulties in fully recovering
the value of additional works requested by customers. This varies according to
market conditions.
The actual margin experience is reflected in the reported results and a
detailed review is contained within the operational performance reported
earlier in the Strategic Report.
Non-financial
The board measures customer satisfaction using an independent on-line survey
assessment. A rolling 12-month record is kept of customer feedback on project
completion with charitable donations used to encourage participation. Customers
are asked to complete answers to a number of questions regarding group
performance 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 4.3 during the
year.
The ongoing independent assessments of the Group's Safety, Quality and
Environmental Standards are key to it maintaining the efficiency of its
operational performance and adherence to high levels of site safety and
environmental awareness.
The group is approved to the Quality Management Standard ISO 9001:2008, has an
environmental management system approved to ISO 14001:2004, and a safety
management system accredited to OHSAS 18001:2007. Achilles UVDB, the Utilities
Vendor Data Base 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 2017 Achilles audit were again
excellent, reflecting 100% scores in all 4 areas of the management systems and
100% in 3 areas of the site evaluation with one score at 99% in the assessed
areas of health & safety, environment, quality & social corporate
responsibilities.
The Group has once again received a ROSPA (Royal Society for the Prevention of
Accidents) Gold Award in health & Safety.
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 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 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 are currently going
through a transition period to update our Quality Management Standard to BS EN
ISO 9001:2015 by the middle of 2018.
ENVIRONMENT
FSD group has an environmental management system approved to the international
environment standard, ISO 14001:2004. The BSI and Achilles regularly review the
group's processes for managing its impact on the environment. The group
achieved its CEMARS (Certified Emissions Measurement and Reduction Scheme)
accreditation in 2010 and now works to the principles of ISO 14064-1:2006 as it
strives to minimise harm to the environment, prevent pollution and use best
practice environment solutions 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. FSD are currently going through a transition period
to update our International Environment Standard to ISO 14001:2015 by the
middle of 2018.
HEALTH AND SAFETY
A commitment to Health and Safety is the group's number one priority. Every
board meeting starts by focusing on preserving high safety standards and
promoting a positive safety culture within the group, to ensure that our
employees, customers, suppliers and the public are kept safe. FSD group has a
safety management system implemented across all sites that has successfully
been approved to the Health and Safety Management System BS OHSAS 18001:2007,
(the internationally recognised standard for management of occupational health
and safety risks).
There is a strong commitment at board level, supported by a highly qualified
health and safety specialist, endorsing the importance of vigilant health and
safety practices and investment in training for site and management to broaden
the competence, knowledge and experience of its employees. This is supported by
expert guidance provided by the EEF (Engineering Employers' Federation), ECA
(Electrical Contractors Association) and CITB (Construction Industry Training
Board). The group continues to establish safety initiatives and these are
currently on target with a good safety record.
EMPLOYEES
Group employee numbers have increased from an average of 101 in 2016 to 133 in
2017 reflecting the improved turnover and a varied mix of work scope 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 2017 was reduced to Nil, a further
reduction from GBP28,000 as at 31 May 2016. This is derived from the group's most
recent actuarial review and reflects market conditions as at 31 May 2017. There
was a GBP376,000 settlement gain released to the group profit and loss account
during the year following the payment of cash equivalent transfer values to
deferred members withdrawing from the defined benefit scheme,
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 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.
OUTLOOK
The group entered the new financial year with an opening order book of GBP13.0
million (2016: GBP13.0 million).
The group's principal source of revenue is from the Water Industry and key to
its success during AMP6 (Sixth Asset Management Programme) is its continued
participation as part of the various frameworks being formulated by the Water
Utilities selecting their preferred supply chain.
AMP6 runs for five years to April 2020. The Water Utilities have now mostly
concluded their MEICA frameworks with different approaches to their mechanism
and methodologies of spend. Sales volumes in the Water Industry have been
strong this year in line with prior years and the spend is set to continue
until AMP7.
FSD has established a strong reputation in delivering complex solutions on
target and hopes to build on its considerable prior experience by participating
fully with the Water Utilities during this investment phase. FSD continues to
be fully involved in the prequalification processes to secure its position on
frameworks and continues with its pursuit of strategic alliances with water
process companies.
Despite the commitment to gain successful placement on water frameworks, a
degree of FSD's sales effort has been committed to industries outside of water
and towards new technology sectors such as Energy from Waste.
In the Energy from Waste (EfW) sector there is still a substantial gap between
the available waste fuel that is currently being land-filled or exported as
Refuse-Derived Fuel (RDF) and the number of EfW facilities that are under
construction and planned for the future. The large waste management companies,
along with many independents, are investing heavily in new incineration and
gasification projects to close this gap and consequently there is growth
opportunity in this sector.
FSD are currently working on our 10th EfW project, and the recent decision by a
prominent Engineering, Procurement and Construction (EPC) contractor to not
pursue further opportunity from the EfW sector has opened the door to FSD
establishing new relationships with competing EPC contractors who are now
picking up the projects that have become available. FSD have already supported
and bid a number of EfW and open-cycle gas turbine projects with such
contractors and so are confident that as they secure an EPC role then FSD will
be involved at an early stage.
FSD's order intake on Combined Heat and Power (CHP) and generator installations
has now reached GBP3M and on the back on this experience we are attracting new
customers who may also lead FSD into other new market opportunities such as
data centres and NHS installations. We are also in the early stages of engaging
with projects in the food and beverage sector and the early signs are positive.
FSD have some close relationships with established players in the nuclear and
direct data-centre markets and have a good chance of securing new business
opportunities.
The group continues to confidently target other MEICA turn-key solutions with
its in-house M&E capabilities, using joint venture alliances and other working
arrangements to deliver.
The board continues to react to customer demands and invest in training to keep
standards high, whilst creating operational efficiencies to best position the
business for the opportunities ahead.
On behalf of the board
P J Haines
Managing Director
31 October 2017
FIELD SYSTEMS DESIGNS HOLDINGS PLC
GROUP INCOME STATEMENT
for the year ended 31 May 2017
2017 2016
GBP GBP
TURNOVER 17,214,485 14,483,724
Cost of sales (15,909,564) (13,358,007)
_______ _______
GROSS PROFIT 1,304,921 1,125,717
Operating expenses (842,533) (790,689)
_______ _______
GROUP OPERATING PROFIT 462,388 335,028
Defined benefit scheme settlement gain 376,000 -
Gains arising on fair value of investment - 54,000
property
Interest receivable and similar income 8,182 375
Interest payable and similar charges (8,017) (17,746)
_______ _______
PROFIT ON ORDINARY
ACTIVITIES BEFORE 838,553 371,657
TAXATION
Taxation (166,430) (64,134)
_______ _______
PROFIT ON ORDINARY
ACTIVITIES AFTER TAXATION 672,123 307,523
====== ======
EARNINGS PER
SHARE
Basic 12.5p 5.70p
====== ======
Diluted 12.4p 5.69p
====== ======
All operations are continuing.
FIELD SYSTEMS DESIGNS HOLDINGS PLC
GROUP STATEMENT OF FINANCIAL POSITION
As at 31 May 2017
2017 2016
GBP GBP
FIXED ASSETS
Tangible assets 463,394 993,231
Investment property - 756,000
CURRENT ASSETS
Stock 501,117 19,117
Debtors 5,663,174 4,068,750
Cash at bank and in hand 2,705,945 1,512,874
________ ________
8,870,236 5,600,741
________ ________
CREDITORS
Amounts falling due within one year 6,095,391 4,416,980
________ ________
NET CURRENT ASSETS 2,774,845 1,183,761
________ ________
TOTAL ASSETS LESS CURRENT
LIABILITIES 3,238,239 2,932,992
CREDITORS
Amounts falling due after more than 33,587 50,713
one year
PROVISIONS FOR LIABILITIES
Deferred taxation 31,000 7,400
Post-employment employee benefits - 28,000
________ ________
NET ASSETS 3,173,652 2,846,879
======= =======
CAPITAL AND RESERVES
Called up share capital 569,250 569,250
Share premium account 158,750 158,750
Other reserves 370,033 370,033
Profit and loss account 2,075,619 1,748,846
________ ________
TOTAL SHAREHOLDERS' EQUITY 3,173,652 2,846,879
======= =======
Approved by the board and signed on behalf of the board and authorised for
issue on
31 October 2017 by:-
Bruce Smith......................................Director
Philip Haines....................................Director
END
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