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DJ Field Systems Designs Holdings plc Annual Financial Report

 
TIDMFSD 
 
FIELD SYSTEMS DESIGNS HOLDINGS PLC 
 
 
CHAIRMAN'S STATEMENT 
 
I am pleased to announce the results of Field Systems Designs Holdings plc 
(FSD) for the year ended 31 May 2016. 
 
Finally Asset Management Programme (AMP6) in the Water industry has arrived and 
the group's investment in the Energy from Waste sector (EfW) has generated real 
growth. Working in these industries is still tough; with both contractual and 
operational complexities; however this year's results reflect a solid 
performance. 
 
The Water Industry's sixth 5-year build and refurbishment Asset Management 
Programme (AMP6) running to April 2020 has now commenced. There was a delayed 
start to AMP6 with slow release of work, however residue works from the 
tail-off from AMP5 helped to maintain volumes in the water sector in the 
current year. 
 
The group's move to diversify into the Energy from Waste sector (EfW) has 
proven successful. These major projects from different clients have rewarded 
the long-term relationship -building in the sector and reflect the confidence 
that FSD has now built in delivering these complex projects. 
 
The group continues to promote its recognised position in the Water Industry by 
pursuing new framework agreements under AMP6. 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 their next investment phase. 
 
FSD now offers the favoured full Mechanical and Electrical (M&E) solution with 
the benefit of its in-house mechanical fabrication and erection capability 
which gives the group control over its programme commitments. 
 
The group is positive about the outlook for performance in 2017/2018, as it is 
well-positioned with a good opening order book to maximise the benefits from 
future opportunities. 
 
D K Bird 
 
Chairman 
 
31 October 2016 
 
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 2016 and the group 
income statement for the year then ended have been extracted from the Group's 
unaudited 2016 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 ICAP Securities & Derivatives 
Exchange guidance note relating to the number of directorships held. 
 
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 2016. 
 
OPERATIONAL PERFORMANCE 
 
The group achieved a turnover of GBP14.5million for the year to 31 May 2016, an 
increase of 1% on last year, reflecting the slow-down of work in the Water 
Industry as the end of AMP5 approached, but a significant increase in work from 
the EfW sector. 
 
Turnover was generated as follows:                  2016         2015 
 
                                                     GBP              GBP 
 
Water and Sewerage                                 8,986,968     9,257,988 
 
Power generation and Energy from Waste             5,328,437     4,394,156 
 
Rail, Transport and Tunnels                           14,370        54,721 
 
Building services, Maintenance, 
 
Security, Instrumentation, Controls and              153,949       696,250 
Automation 
 
                                                  14,483,724    14,403,115 
 
                                                   =========     ========= 
 
Gross profit margins improved slightly in the year ended 31 May 2016 to 7.8% 
from 7.2% last year. However gross margins remain less than budget as downward 
pressure on gross profits remains as projects suffer from tough contractual 
stances from the Energy from Waste sector and operating difficulties have 
arisen with the Water Industry Tier One contractors as new project teams are 
being formed as AMP6 starts to grow. 
 
The group achieved a fair operating profit for the year of GBP335,028 (2015: GBP 
238,038). In view of the economic climate the directors are pleased to report a 
solid group profit after tax of GBP307,523 for the year ended 31 May 2016 (2015: 
GBP204,112) 
 
BUSINESS REVIEW 
 
The Field Systems Designs group (FSD) focuses on delivering specialist 
mechanical and electrical design and installation works. 
 
Water and Sewerage 
 
Sales volumes were again dominated by the Water Industry where 62% of turnover 
in 2016 was derived (2015: 64%). 
 
AMP5 in theory ceased in April 2015, however some residual projects were still 
completed during the year. Crossness Sewage Treatment Works (STW) was finished 
and work faces on long-term delayed projects such as Lee Valley were finally 
released for construction. 
 
Early projects were released under AMP6 and the experience, patience and 
expertise of its operatives were put to the test in working under a new regime 
of working practices by its new Tier One customers. 
 
Power generation and Energy from Waste 
 
The group increased its presence in the Power sector where it derived 37% of 
turnover in 2016 (2015: 31%). 
 
FSD won further Energy from Waste contracts from new customers where the group 
continues to build on its previous success in the sector. Additional projects 
were secured in the sector, using Incineration, Gasification and Biomass 
technologies. 
 
The Tyseley and Welland projects use advanced thermal treatment gasification 
technology. The Greatmoor project uses mass-burn incineration chain grate 
technology. Levenseat and Hull projects use advanced thermal treatment 
gasification technology. 
 
There were also works on generators and Combined Heat & Power (CHP) units 
providing instrumentation, electrical engineering and installation services; 
and outage works at Hartlepool Nuclear Power Station. 
 
Rail, Transport and Tunnels 
 
FSD continues to deliver minor electrical installation services in the 
transportation industries supporting mainly the underground sector. 
 
Building services, Maintenance, Security, Instrumentation, Controls and 
Automation 
 
FSD continues to deliver electrical installation services in the commercial, 
security, water and rail 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 
has grown turnover. 
 
Mechanical fabrication and installation 
 
This year the group continued to take on M&E installation contracts through its 
mechanical subsidiary which continues to build up its client base and its 
reputation for quality fabrication and installation services. 
 
There were some major pipework fabrication and installation contracts 
undertaken during the year for projects in the Water industry. The AMP6 spend 
in England released works to the FSD group such as water treatment works, 
pumping stations and CHP units. 
 
Profitability at the division was poor primarily as a result of difficulties 
with early projects released under AMP6 and extra costs in dealing with a new 
regime of working practices by its new Tier One customers could not be 
recovered. 
 
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 has 
consequently been 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, 

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DJ Field Systems Designs Holdings plc Annual -2-

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. 
 
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 the rail industry, 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 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 overall responses have been very good 
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 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 2016 Achilles audit were again 
excellent, reflecting 100% scores for both management systems and site 
evaluation, in the assessed areas of health & safety, environment, quality & 
social corporate responsibilities. 
 
The Group has once again received a ROSPA 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, shown below, 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 company'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 company sites on a regular 
basis to ensure compliance and to improve the company's activities. The annual 
management review meeting assesses the group's performance against targets and 
sets new targets. 
 
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 has 
achieved its CEMARS (Certified Emissions Measurement and Reduction Scheme) 
accreditation and is now approved to ISO 14064-1:2006 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 

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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). The company achieved a ROSPA (Royal 
Society for the Prevention of Accidents) Gold Medal award this year. 
 
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 slightly from an average of 96 in 2015 to 
101 in 2016 reflecting a varied mix of work 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 2016 was GBP22,400 net of deferred tax, 
a reduction of 92% from GBP268,000 as at 31 May 2015. This is derived from the 
group's most recent actuarial review and reflects market conditions as at 31 
May 2016. 
 
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 company 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 (2015: GBP5.7 million). 
 
The group's principal source of revenue is from the Water Industry and key to 
its success during AMP6 (Sixth Asset Management Programme) will be its 
continued participation as part of the various frameworks being formulated by 
the Water Utilities to select its preferred supply chain. 
 
AMP6 runs for five years to April 2020. Some Water Utilities have concluded 
their MEICA frameworks whereas others are still formulating their approach. 
Consequently sales volumes in the Water Industry have been slow to start which 
is consistent with prior years. However the signs are now clear that the spend 
is about to come through and the mid period of AMP6 should prove a busy one. 
 
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 their next investment phase. FSD has been 
fully involved in the prequalification processes to secure its position on 
frameworks and has been pursuing 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. 
 
We have built on our mass burn incineration success in the Energy from Waste 
sector by developing new relationships with EPC contractors in the advanced 
thermal treatment gasification sector which is attracting large investment. We 
are partnering on large EC&I projects (Electrical, Control and Instrumentation) 
and have secured Hull and Levenseat on this basis. 
 
Some customers have formed Joint Ventures in this sector which is attracting a 
great deal of energy from waste pipeline for both current and future 
opportunity. While there has been some project uncertainty created by the 
government funding incentive of CFD (Contracts for Difference), projects are 
still progressing and are bankable on gate-fee alone. We now have an 
established pipeline of Energy from Waste opportunity which evidences our 
investment in this sector for organic growth and when CFD has been re-invented, 
the pipeline will be broadened. 
 
We are also developing our combined heat and power (CHP) business and 
attracting new customers for large gas and diesel engine installation projects 
which offer other market opportunity entries outside of our core sectors of 
water and EfW. 
 
With 11.5GW of generating capacity shut down over the past few years as a 
result of the 2015 large combustion plant directive, we are now also seeing 
enquiries landing for biomass conversion and both open and combined cycle gas 
turbine opportunity. 
 
The ability of the group to confidently target MEICA turn-key solutions with 
its in-house M&E capabilities, using joint venture alliances and other working 
arrangements to deliver, has secured new projects for both Incineration and 
Gasification technologies in the EfW sector boosting sales volumes over the 
next few years and deepening the order book. Future potential works being 
pursued include a large biomass project, an open cycle gas turbine, a biogas 
direct grid injection and larger scale anaerobic digestion. 
 
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 2016 
 
FIELD SYSTEMS DESIGNS HOLDINGS PLC 
 
 
GROUP INCOME STATEMENT 
 
for the year ended 31 May 2016 
 
                                      Notes      2016           2015 
 
                                                  GBP              GBP 
 
TURNOVER                                    14,483,724     14,403,115 
 
Cost of sales                               (13,358,007)   (13,362,690) 
 
                                            _______        _______ 
 
GROSS PROFIT                                1,125,717      1,040,425 
 
Operating expenses                          (790,689)      (802,387) 
 
                                            _______        _______ 
 
GROUP OPERATING PROFIT                      335,028        238,038 
 
Gains arising on fair value of 
investment property                         54,000         54,000 
 
Interest receivable and similar             375            362 
income 
 
Interest payable and similar charges        (17,746)       (15,238) 
 
                                            _______        _______ 
 
PROFIT ON ORDINARY 
 
ACTIVITIES BEFORE TAXATION                  371,657        277,162 
 
Taxation                                    (64,134)       (73,050) 
 
                                            _______        _______ 
 
PROFIT ON ORDINARY 
 
ACTIVITIES AFTER TAXATION                   307,523        204,112 
 
                                            ======         ====== 
 
EARNINGS PER SHARE 
 
Basic                                       5.70p          3.78p 
 
                                            ======         ====== 
 
Diluted                                     5.69p          3.77p 
 
                                            ======         ====== 
 
All operations are continuing. 
 
FIELD SYSTEMS DESIGNS HOLDINGS PLC 
 
GROUP STATEMENT OF FINANCIAL POSITION 
 
As at 31 May 2016 
 
                                                   2016         2015 
 
                                                    GBP             GBP 
 
FIXED ASSETS 
 
Tangible assets                                     993,231     1,045,893 
 
Investment property                                 756,000       702,000 
 
CURRENT ASSETS 
 
Stock - raw materials                                19,117        39,117 
 
Debtors                                           4,068,750     4,893,738 
 
Cash at bank and in hand                          1,512,874     1,321,116 
 
                                                   ________      ________ 
 
                                                  5,600,741     6,253,971 
 
                                                   ________      ________ 
 
CREDITORS 
 
Amounts falling due within one year               4,416,980     5,308,365 
 
                                                   ________      ________ 
 
NET CURRENT ASSETS                                1,183,761       945,606 
 
                                                   ________      ________ 
 
TOTAL ASSETS LESS CURRENT 
 
LIABILITIES                                       2,932,992     2,693,499 
 
CREDITORS 
 
Amounts falling due after more than                  50,713        62,143 
one year 
 
PROVISIONS FOR LIABILITIES 
 
Deferred taxation                                     7,400      (67,000) 
 
Post-employment employee benefits                    28,000       335,000 
 
                                                   ________      ________ 
 
NET ASSETS                                        2,846,879     2,363,356 
 
                                                    =======       ======= 
 
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                           1,748,846     1,265,323 
 
                                                   ________      ________ 
 
TOTAL SHAREHOLDERS' EQUITY                        2,846,879     2,363,356 
 
                                                    =======       ======= 
 
Approved by the board and signed on behalf of the board and authorised for 
issue on 
 
31 October 2016 by:- 
 
Bruce Smith......................................Director 
 
Philip Haines....................................Director 
 
 
 
END 
 

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