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Field Systems Designs Holdings plc 2023 Annual Results
FIELD SYSTEMS DESIGNS HOLDINGS PLC
CHAIRMAN'S STATEMENT
The Board presents the results of Field Systems Designs Holdings plc and its
subsidiaries (FSD) for the year ended
31 May 2023.
I am pleased to report that FSD is finally returning to a more normalised period
of trading. The disruption caused by the COVID-19 virus is behind us; the impact
of Brexit is contained; and although global uncertainties such as the Ukranian
invasion remain of major concern, with its resultant impact on inflation; the
future is looking more positive.
The pandemic was most difficult for FSD due to its effect on our clients' design
and programming for their Asset Management Programme (AMP) and its consequential
impact on our order intake.
The negative media publicity regarding the performance of the Water Industry
continues, and there is mounting public and government pressure to push on with
maintaining their water process infrastructure. Despite the pressure by OFWAT to
resume their 2020-2025 spend budgets the framework expenditure plans by water
utilities were still not being rolled forward into AMP7. However this is set to
change as new orders are now forthcoming from the Water Industry, and there is
more of an urgency in evidence as they seek to make investment decisions before
inflationary pressures overtake them.
The improved current year's Group financial results support the decisions made
by management to retain our core skilled resource base across the Group, and
consequently FSD can still present itself to its industry as a well-established
Mechanical and Electrical contractor fully equipped to offer a high-quality
delivery.
FSD is confident that a high quantum of order intake remains within the Water
industry in which it operates and so it is expected that the quality of our
track record, added to the reputation of our talented mechanical and electrical
personnel leaves us in prime position to benefit from the resumption of a more
normalised investment cycle. The Group is well-positioned with a strong cash
balance and an experienced workforce to support the restart of AMP7 projects now
so needed to protect the environment.
The Board expect business volumes to continue to grow, and whilst there will be
battles ahead with inflation and competition for limited labour resources, there
is now belief that a buoyant trading period lies ahead.
D K Bird
Chairman
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 2023 and the group income
statement for the year then ended have been extracted from the Group's 2023
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.
STRATEGIC REPORT
The directors present the Strategic Report for Field Systems Designs Holdings
Plc and its subsidiary undertakings (together referred to as `the Group') for
the year ended 31 May 2023.
OPERATIONAL PERFORMANCE
The Group achieved a turnover of £13.8 million for the year to 31 May 2023, an
improvement of 70% on last year. These results show significantly improved
turnover and profitability, which reflect the reduced impact of COVID-19 on the
business and an improvement in the inflow of work from the UK Water Industry
AMP7 delivery programme.
The Water Industry's seventh Asset Management Programme (AMP7) commenced in
April 2020, and framework plans by water utilities were rolled forward. The
impact of COVID-19, and conflicts between water utilities and OFWAT in
challenging their 2020-2025 expenditure budgets, caused many new orders expected
by FSD under AMP7 to be delayed for three years, but now order intake and
consequential turnover are improving rapidly.
Turnover was generated as follows: 2023 2022
£ £
Water and Sewage treatment 13,750,687 7,279,719
Power generation and Energy from Waste - 811,190
--------------- ---------------
13,750,687 8,090,909
========= =========
Group revenues include transactions with three customers that amount to 10 per
cent or more of the Group's total annual revenues; the total amount of revenues
from those customers amounts to £7.9million from the Water and Sewage treatment
sector.
Trading conditions normalised this year bouncing back from the COVID-19 era with
underlying gross margins improving in the year to 9.5% from a gross loss last
year.
The Group made a gross profit of £1,307,256 compared to a gross loss last year
of £(1,392,490). Overall these improved operating conditions left the Group with
operating profits for the year of £258,037 (2022: loss £(1,905,277)).
The consolidated results show a group profit after tax of £353,073 (2022:
£(1,818,860)).
BUSINESS REVIEW
The Field Systems Designs Group (FSD) focuses on delivering specialist
mechanical and electrical design and installation works.
FSD successfully secured, engineered, managed and installed a volume of
Mechanical and Electrical (M&E) installation projects during the year across the
water and sewerage 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 2023 provided 100% of group
turnover (2022: 90%). The Group undertook a diversity of projects for a number
of different Water Utilities in many regions of the United Kingdom, working for
multiple Tier One contractors under AMP7 frameworks and supply-chain
arrangements.
In 2023 no turnover was derived from the Power generation sector (2022: 10%)
asthere were no power station outage maintenance works undertaken during the
year.
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 design,
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.
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.
World Markets
The impact on currency markets and businesses following Brexit continue to
impact the business affecting both pricing and ease of supply. Similarly, the
impact of commodity pricing and supply as a consequence of the war in Ukraine
has affected the availability of commodity-derived products. The directors have
reviewed these implications on our business as part of our risk management
process. The short-term effects are inflationary, primarily on material pricing,
and there has been additional care taken over tender pricing and duration of
validity periods. The long-term relationships with our supply chain have aided
our business to remain resilient under these circumstances. We also endeavour to
advise customers to consider carefully the longer lead-times and volatile
material prices as part of their order placement programming strategy.
COVID-19
The unpredictable nature of the Coronavirus pandemic and the timing of its
cessation created uncertainty estimating the impact of future events which was
highly challenging. The directors have reviewed the key areas of risk to the
business and the potential negative impact of the residual effects 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.
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 (AMPs) governed by OFWAT. At the beginning and the end of each AMP
the water industry has historically suffered a downturn as competing companies
are chasing a reduced volume of available work. This was exacerbated recently by
the impact of COVID on client engineering, programming and resourcing. The
mitigation of these uncertainties by continually monitoring changes in the
sector has proved challenging, with accurate sales information proving difficult
to obtain with any reliability.
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.
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.
Competitiveness
The Group has a leading market position in sectors such as the water industry,
and has also historically penetrated other sectors such as tunnelling, the power
industry and energy from waste market. 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. 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.
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 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.
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 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 4.4 (2022: 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 approved to ISO 45001; the standard for Occupational Health &
Safety. FSD has also achieved a BSI-accredited Building Information Modelling
(BIM) Standard BS EN 19650-2:2018.
Achilles UVDB, the Utilities Sector Vendor Database performance assessor,
regularly reviews the Group's processes for managing and installing electrical
services, as well as its fault resolution procedures. The results of the 2023
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 (2022: zero). The group
has recently achieved over 1.92 million man-hours without a reportable incident.
PENSIONS
The FSD pension scheme's funding position, based on the year-end actuarial
review, has reduced from a surplus of £639,000 at the start of the year to a
surplus of £265,000 at the end of the year. The Group is not recognising the
surplus and so the Group's defined benefit pension scheme funding position has
been maintained at zero, a target reached in 2017. The scheme attempted to
secure a buy-in where the assets of the scheme would be used to secure its'
members' benefits with a reputable insurance company, however the valuation
proposed to secure the scheme liabilities was excessively high due to the small
size of the scheme, so the buy-in was not pursued.
QUALITY ASSURANCE
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.
ENVIRONMENT
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. FSD continues to report under the
Toitu carbon footprint reduction programme through Achilles. An absolute
reduction in Category 1 and 2 emissions of 289.90 tCO2e has been achieved
against the base year. A reduction in emissions intensity (for Category 1, 2 and
mandatory Category 3 and 4 emissions) of 0.79 tCO2e/ £M turnover has been
achieved based upon a 4-year rolling average, adjusted for inflation.
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 9 consecutive Gold awards giving FSD
Gold Medal Award status. FSD also gained Constructionline Platinum certification
in 2023. 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.
EMPLOYEES
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 134 in 2022 to 130
in 2023, reflecting a change in the mix of work scope during the year.
Management disseminates information to staff within the bounds of commercial
confidentiality and consults with them at all levels on matters that affect the
progress of the Group and concerns them as employees.
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.
OUTLOOK
The Group's principal source of revenue historically has been from the Water
Industry. Sales volumes in the Water Industry finally started to grow this year
as AMP7 expenditures eventually got underway, the programme having officially
commenced in April 2020 with now only a few years remaining in line with OFWAT's
business plan approval programme until 2025.
FSD has prequalified on frameworks with multiple regional Utilities and their
Tier 1 Contractors, and although slow to start all indications are that the
release of works is now gaining pace.
The delay in releasing projects until this late stage of the five-year cycle has
cost those businesses like FSD that were anticipating an earlier step-up in
investment and engineering activity. However, with the global Coronavirus crisis
now easing, and the pressure from government agencies to solve environment
problems increasing, it is anticipated that the water companies will now
accelerate their expenditure under AMP7 for the remainder of the cycle until
2025. FSD expects to be a benefactor of this rapid growth and the Board look
forward to better performance and trading results ahead.
Looking ahead, we have already secured more than £7.9million of revenue for
2023/24 and have entered the new financial year with good momentum. We
acknowledge the current inflationary pressures in the UK economy and will
continue to focus on maintaining margins from our operations, and mitigating
increases in associated commodity and energy costs, as well as other challenges
in our supply chain.
There are also early indications 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 as it moves into AMP8.
The Board continues to react to customer demands and keep standards high, whilst
creating operational efficiencies from improved turnover, and so leave the Group
in prime condition for the longer-term opportunities ahead.
On behalf of the board
Nigel Billings
Managing Director
FIELD SYSTEMS DESIGNS HOLDINGS PLC
GROUP INCOME STATEMENT
for the year ended 31 May 2023
2023 2022
£ £
TURNOVER 13,750,687 8,090,909
Cost of sales (12,443,431) (9,483,399)
________ _________
GROSS 1,307,256 (1,392,490)
PROFIT/(LOSS)
Administrative (1,049,219) (1,008,939)
expenses
Other - 496,202
operating
income
_______ _________
GROUP 258,037 (1,905,227)
OPERATING
PROFIT/(LOSS)
Interest 31,269 11,460
receivable and
similar income
Interest (2,701) (5,592)
payable and
similar
charges
_______ _________
PROFIT/(LOSS)
ON ORDINARY
ACTIVITIES 286,605 (1,899,359)
BEFORE
TAXATION
Taxation 66,468 80,499
_______ _________
PROFIT/(LOSS)
ON ORDINARY
ACTIVITIES 353,073 (1,818,860)
AFTER TAXATION
ATTRIBUTABLE
TO THE OWNERS
OF THE PARENT
COMPANY
======= =======
Remeasurement
loss arising
on
defined 61,000 (6,000)
benefit
pension scheme
Deferred tax
movement on
remeasurement
arising on (15,000) 1,000
defined
benefit
pension scheme
_______ _______
46,000 (5,000)
_______ _______
TOTAL
COMPREHENSIVE
INCOME
FOR THE YEAR 399,073 (1,823,860)
ATTRIBUTABLE
TO THE OWNERS
OF THE PARENT
COMPANY
====== ========
EARNINGS
PER SHARE
Basic 6.5p (33.7)p
==== ======
Diluted 6.5p (33.6)p
====== ======
All operations are continuing.
FIELD SYSTEMS DESIGNS HOLDINGS PLC
GROUP STATEMENT OF FINANCIAL POSITION
As at 31 May 2023
2023 2022
£ £
FIXED ASSETS
Tangible assets 451,402 369,274
CURRENT ASSETS
Stock - raw materials 66,035 95,083
Debtors 4,158,662 3,081,590
Cash at bank and in 2,262,025 3,163,271
hand
________ ________
6,486,722 6,339,944
________ ________
CREDITORS
Amounts falling due 4,701,925 4,867,073
within one year
________ ________
NET CURRENT ASSETS 1,784,797 1,472,871
________ ________
TOTAL ASSETS LESS
CURRENT
LIABILITIES 2,236,199 1,842,145
CREDITORS
Amounts falling due 12,126 17,145
after more than one
year
________ ________
NET ASSETS 2,224,073 1,825,000
======= =======
CAPITAL AND RESERVES
Called up share 16 569,250 569,250
capital
Share premium account 18 158,750 158,750
Other reserves 18 370,033 370,033
Profit and loss 18 1,126,040 726,967
account
________ ________
TOTAL SHAREHOLDERS' 2,224,073 1,825,000
FUNDS
======= =======
Approved by the board and signed on behalf of the board and authorised for issue
on
5 October 2023 by:-
Bruce Smith.........................................Director
Nigel Billings......................................Director
This information was brought to you by Cision http://news.cision.com
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