TIDMFSD
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 2022. I wholeheartedly hope that
we have at last seen the back of any further disruption caused by the COVID-19
virus and can now plan to the future with certainty, and despite the residue of
economic and social disruption caused by the pandemic, and the new negative
consequences of the Ukranian invasion, we will be able to return to normality
as a business. There is little doubt that the 2022 financial year has again
been most difficult for FSD due to the pandemic's effect on our clients' design
and programming for their Asset Management Programme (AMP) and its
consequential impact on order placement.
There has been much negative media publicity regarding the performance of the
Water Industry due to the delay in maintaining their water process
infrastructure. The framework expenditure plans by water utilities were not
rolled forward into AMP7 as planned; initially due to being delayed by the
impact of COVID-19 and then due to shortages in resources, despite the pressure
by OFWAT to resume their 2020-2025 spend budgets.
As a well-established Mechanical and Electrical contractor in the industry
retaining our skilled resource base across the Group was essential; and having
received assurances regarding the success of our tender proposals and given
expectations for a heightened level of order intake, FSD elected to retain its
operatives to ensure our reputation for high quality delivery was upheld. Our
client base was unable to fulfil its order placement program as predicted, this
resulted in an absence of sufficient workload and had a considerable impact on
the productivity of our operatives with the obvious financial burden this
imposed. The operating results for the year were extremely disappointing,
although not surprising given the circumstances, when turnover fell rapidly to
less than half of what would normally be expected at this stage of the AMP
cycle.
FSD is confident that the quantum of order intake remains within the principal
industry in which it operates. The expectation remains that the quality of our
track record, added to the reputation of our talented mechanical and electrical
personnel will leave us in prime position as normality resumes. The group is
well-positioned with a strong cash balance and has retained an experienced
workforce to react swiftly as the Utility Companies restart projects now so
needed to keep our population watered and the environment clean. We expect that
business volumes will now return and a buoyant period lies ahead as the water
industry catches up the lost ground.
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 2022 and the group
income statement for the year then ended have been extracted from the Group's
2022 statutory financial statements, which have 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 ('the Company') and its subsidiary undertakings (together referred to as
'the Group') for the year ended 31 May 2022.
OPERATIONAL PERFORMANCE
The Group achieved a turnover of £8 million for the year to 31 May 2022, a
reduction of 19% on last year. These results show significantly reduced
turnover and profitability, which reflect the serious continued impact of
COVID-19 on the release of work in the UK Water Industry.
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 partially mitigated by the government furlough scheme which ended
in September 2021, 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.
Turnover was generated as follows: 2022 2021
£ £
Water and Sewerage treatment 7,279,719 7,872,941
Power generation and Energy from Waste 811,190 2,105,754
--------------- ---------------
8,090,909 9,978,695
========= =========
Group revenues include transactions with six customers that amount to 10 per
cent or more of the Group's total annual revenues; the total amount of revenues
from those six customers amounts to £5.3million, of which £4.8million derives
from the Water and Sewerage treatment sector and £0.5million derives from the
Power generation and Energy from Waste sector.
The Group made a gross loss of £(1,392,490) compared to a gross loss last year
of £(984,604). Group operating losses for the year were £(1,905,227), (2021: £
(540,338) reflecting the cessation of support from the government furlough
scheme. The consolidated results show a group loss after tax of £(1,818,860),
(2021: £(461,780)).
BUSINESS REVIEW
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 2022 provided 90% of group turnover
(2021: 79%). 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.
Power generation and Energy from Waste
In 2022 10% of turnover was derived from the Power and EfW sector (2021: 21%).
FSD worked primarily on power station outage maintenance works.
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.
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.
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.
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 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.
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 has been exacerbated 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 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. 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 4.5 (2021: 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 2022 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 (2021: zero). The group has
recently achieved over 1.65 million man-hours without a reportable incident.
PENSIONS
The FSD pension scheme's funding position, based on the year-end actuarial
review, has improved from a surplus of £562,000 at the start of the year to a
surplus of £639,000 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 is preparing for
a 'buy-in' where the assets of the scheme would be used to secure its' members'
benefits with a reputable insurance company.
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.
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 8 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.
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 146 in 2021 to
134 in 2022, reflecting the reduction in turnover and 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 company 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 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
prequalified on frameworks with multiple regional Utilities and their Tier 1
Contractors, the release of any significant quantum of work during early 2022
has been slow, but 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 £9million of revenue for 2022/23 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.
All 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 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 best position the
Group 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 2022
2022 2021
£ £
TURNOVER 8,090,909 9,978,695
Cost of sales (9,483,399) (10,963,299)
_______ _______
GROSS LOSS (1,392,490) (984,604)
Administrative expenses (1,008,939) (1,077,861)
Other operating income 496,202 1,522,127
_______ _______
GROUP OPERATING LOSS (1,905,227) (540,338)
Interest receivable and similar income 11,460 11,355
Interest payable and similar charges (5,592) (4,978)
_______ _______
LOSS ON ORDINARY
ACTIVITIES BEFORE (1,899,359) (533,961)
TAXATION
Taxation (80,499) (72,181)
_______ _______
LOSS ON ORDINARY
ACTIVITIES AFTER TAXATION
ATTRIBUTABLE TO THE OWNERS OF THE PARENT
COMPANY (1,818,860) (461,780)
======= ======
Remeasurement loss arising on
defined benefit pension scheme (6,000) (54,000)
Deferred tax movement on remeasurement
arising on defined benefit pension scheme 1,000 10,000
_______ _______
(5,000) (44,000)
_______ _______
TOTAL COMPREHENSIVE DEFICIT
FOR THE YEAR ATTRIBUTABLE TO THE OWNERS OF
THE PARENT COMPANY (1,823,860) (505,780)
====== ======
EARNINGS
PER SHARE
Basic (33.7)p (8.6)p
====== ======
Diluted (33.6)p (8.5)p
====== ======
All operations are continuing.
FIELD SYSTEMS DESIGNS HOLDINGS PLC
GROUP STATEMENT OF FINANCIAL POSITION
As at 31 May 2022
2022 2021
£ £
FIXED ASSETS
Tangible assets 369,274 453,916
CURRENT ASSETS
Stock - raw materials 95,083 80,016
Debtors 3,081,590 2,129,048
Cash at bank and in hand 3,163,271 6,033,376
________ ________
6,339,944 8,242,440
________ ________
CREDITORS
Amounts falling due within one year 4,867,073 5,004,173
________ ________
NET CURRENT ASSETS 1,472,871 3,238,267
________ ________
TOTAL ASSETS LESS CURRENT
LIABILITIES 1,842,145 3,692,183
CREDITORS
Amounts falling due after more than 17,145 10,323
one year
PROVISIONS FOR LIABILITIES
Deferred taxation - 33,000
Post-employment employee benefits - -
____ _ _ ____ _ _
NET ASSETS 1,825,000 3,648,860
======= =======
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 726,967 2,550,827
________ ________
TOTAL SHAREHOLDERS' FUNDS 1,825,000 3,648,860
======= =======
Approved by the board and signed on behalf of the board and authorised for
issue on
30 November 2022 by:-
Bruce Smith.........................................Director
Nigel Billings......................................Director
END
(END) Dow Jones Newswires
November 30, 2022 02:00 ET (07:00 GMT)
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