Field Systems Designs posted a 10% jump in pre-tax profits for the full-year to May 2011, after benefitting from improved margins as a result of a change in turnover mix, but said it remains “very cautious” given the current economic climate and transition in the water i

Field Systems Designs posted a 10% jump in pre-tax profits for the full-year to May 2011, after benefitting from improved margins as a result of a change in turnover mix, but said it remains “very cautious” given the current economic climate and transition in the water industry.

The electrical engineering firm reported a pre-tax profit from ordinary activities of £443,893 for the year, despite turnover falling by 4% to £12.86 million, as gross margins improved to 10.4% from 9.1%. All divisions showed a drop in turnover except ‘power generation and waste to power’, which reported a 124% climb to £6.94 million. The firm entered the new financial year with a strong opening order book of £5.7 million (2010: £5.6 million). Earnings per share rose from 5.4p to 5.7p.

The balance sheet remained strong, with cash of £1.61 million at the period end, net current assets of £0.58 million and net assets of £1.95 million. No cash flow statement was provided.

Currently trading at 14.5p, Field Systems Designs Holdings is capitalised at £0.8 million. It trades on a historic multiple of just 2.54 times fully diluted earnings, which looks very low for a firm that has a long-track record of profitability and has on the whole posted improved earnings per share since 2002. We also note that the company is currently trading at a 42% discount to net assets and at a 51% discount to net cash. However, potential investors should note that the shares are not known for their liquidity, there having been only three trades in the past five and a half years. In part that is due to the shares being very tightly held. While the shares are very cheap, ahead of tougher trading conditions, we move our stance to “hold”.