Last checked at 2 May 2012 07:00
Andrews Sykes Group plc
Summary of results
For the 12 months ended 31 December 2011
12 months ended 31 December 2011 £'000 | 12 months ended 31 December 2010 £'000 | ||
Revenue from continuing operations | 53,838 | 55,951 | |
Normalised EBITDA* from continuing operations | 15,387 | 17,721 | |
Normalised operating profit** | 11,882 | 13,942 | |
Profit on the sale of property | 3,113 | 164 | |
Profit after tax for the financial period | 11,566 | 10,562 | |
Basic earnings per share from total operations (pence) | 27.05p | 24.19p | |
Dividend paid per equity share (pence) | 6.60p | 11.10p | |
Net cash inflow from operating activities | 11,606 | 13,863 | |
Total dividends paid | 2,818 | 4,800 | |
Net funds | 10,365 | 4,905 | |
*Earnings Before Interest, Taxation, Depreciation, profit on sale of property, plant and equipment, Amortisation and non-
recurringitems as reconciled on the consolidated income statement.
** Normalised operating profit, being operating profit before non-recurring items as reconciled on the consolidated income statement.
For further information, please contact:
Andrews Sykes Group plc
KE Ford 01902 328700
N+1 Brewin
Sandy Fraser/ Joe Stroud 0845 213 4730
Andrews Sykes Group plc
Chairman's Statement
For the 12 months ended 31 December 2011
Overview and financial highlights
The group's revenue for the year ended 31 December 2011 was £53.8 million, a decrease of £2.1 million, or 3.8%, compared with the same period last year. This decrease had a virtually direct impact on normalised operating profit* which fell by £2.0 million from £13.9 million last year to £11.9 million in the year under review. This decline in trading was, however, more than offset by the non-recurring profit of £3.1 million on the sale of our freehold property in Gallions Road, London. Consequently the basic earnings per share increased by 11.8% from 24.19p last year to 27.05p this year.
The group continues to generate strong cash flows. Net cash inflow from operating activities was £11.6 million which, mainly due to the decline in normalised operating profit*, was down by £2.3 million compared with last year. Nevertheless, net funds increased from £4.9 million last year to £10.4 million at 31 December 2011 despite shareholder related cash outflows of £3.9 million on dividends and the purchase of own shares. External bank borrowings have been reduced by £6 million from £20 million at the start of the year to £14 million by the year-end.
Cost control, cash and working capital management continue to be priorities for the group. In total working capital has been reduced for the third year running, this time by £0.5 million. Capital expenditure on the hire fleet has been increased from £2.2 million in 2010 to £4.1 million this year and the group purchased a freehold property for £2.7 million to replace the property sold during the year. These actions will ensure that the group's infrastructure and revenue generating assets are sufficient to support future growth and profitability. Hire fleet utilisation, condition and availability continue to be the subjects of management focus.
Operating performance
The second half year is normally significantly more profitable than the first but 2011 proved to be an exception. The following table splits the results between the first and second half years:
Turnover | NormalisedOperating profit* | |
£'000 | £'000 | |
1st half 2011 | 27,717 | 5,930 |
1st half 2010 | 27,573 | 6,816 |
2nd half 2011 | 26,121 | 5,952 |
2nd half 2010 | 28,378 | 7,126 |
Total 2011 | 53,838 | 11,882 |
Total 2010 | 55,951 | 13,942 |
Our main hire and sales business in the UK and Northern Europe has faced challenging trading conditions throughout 2011 mainly as a result of unhelpful weather conditions but also due to the current economic conditions.
Trading in the first half remained flat and profit was adversely affected by the temperate weather at the end of the 2010/11 winter which resulted in an early end to the heating season. This was followed by another mild summer that failed to stimulate demand for our all important air conditioning products. Unlike last year, the start of the 2011/12 winter was also mild which did not allow our heating division to compensate for the under-performance of the air conditioning business. The last 18 months have also been unusually dry resulting in the drought conditions recently announced for some parts of the UK. Overall the operating profit, excluding profit on the sale of property, of this business segment fell from £13.8 million last year to £12.0 million this year, this being the main reason for the decline in the group's normalised operating profit* in the current period.
In the light of the above factors I consider that management's performance has been creditable ensuring that the group produced another satisfactory trading performance. This clearly demonstrates our ability to return acceptable profit levels even in times of unfavourable external influence and is due, in part, to the continuing development of non-weather dependent niche markets which continue to benefit the performance of our specialist hire divisions. We will continue to invest in and develop these businesses as well as our traditional core products and services.
Our hire and sales business in the Middle East returned an operating profit of £0.6 million this year compared with £0.7 million in 2010 on similar turnover levels. Although the profit is lower than last year there are now some initial signs of improved trading conditions in Abu Dhabi although the economic conditions in Dubai remain challenging.
The UK fixed installation business continued to improve its trading performance, the segment profit increased by £0.1 million to £0.3 million this year and we look forward to further improvements again next year.
A more detailed review of this year's operating performance is given in the Operations Review within the Directors' report in the 2011 Annual Report and Financial Statements.
Profit on the sale of property
During the year the group sold the freehold of one of its main UK depots, based in Gallions Road, London, to a property developer. Gross proceeds were £3.7 million resulting in a profit on disposal of £3.1 million and this has been disclosed as a separate non-recurring item on the face of the income statement.
Although the group was not actively looking for a sale, management took advantage of a unique opportunity to realise a significant profit and cash flow advantage for the benefit of shareholders. The group purchased a replacement freehold property locally in Peninsular Way for £2.7 million and expect the relocation to the new premises to be completed by the end of the first half of 2012. Part of the net cash inflow of £1 million will be spent on capital improvements in 2012 following which the group will have a much improved and enlarged operating base from which to serve its customers in London and the South East of England.
Profit for the financial year and earnings per share (EPS)
Profit after tax increased by £1 million from £10.6 million last year to £11.6 million this year and basic EPS increased by 11.8% from 24.19p last year to 27.05p this year. However this was significantly influenced by the above profit on sale of property of £3.1 million. The adjusted basic EPS, excluding the profit on the sale of property, would have been 20.24p in 2011, a decrease of 15% compared with the equivalent figure last year of 23.81p.
A more detailed review of the profit for the financial year is given in the Operations and Financial Review within the Directors' Report in the 2011 Annual Report and Financial Statements.Defined benefit pension scheme
During March 2012 the December 2010 funding valuation was agreed by management with the pension scheme trustees and accordingly revised "Schedule of Contributions" and "Recovery plan" have now been put into place. These provide that the group will make additional contributions, including an expense allowance, to the pension scheme of £840,000 in 2012, £960,000 in 2013, £1,080,000 in 2014 and £840,000 per annum thereafter until 31 December 2018, or until the funding shortfall has been eliminated if sooner, subject to review at the next actuarial funding valuation due as at 31 December 2013.
Net funds
At 31 December 2011 the group had net funds of £10.4 million compared with £4.9 million last year, an increase of £5.5 million despite a dividend of £2.8 million and cash outflows on share buybacks of £1.1 million.
Equity dividends paid
The company declared an interim dividend of £2.8 million on 8 November 2011 and this was paid on 1 December 2011. The Board continues the policy of returning value to shareholders whenever possible and accordingly the decision regarding an interim dividend for 2012 will be taken later in the year in the light of profitability and available cash resources.
Share buyback programme
During the current year the company purchased 442,216 ordinary shares for cancellation for a total consideration of £945,000 of which £11,000 (2010: £187,000) remained unpaid at the year-end. So far during 2012 the company has purchased a further 426,506 ordinary shares for cancellation for a total consideration of £815,000. These purchases enhanced earnings per share and were for the benefit of all shareholders.
As previously reported, the directors intend to continue to actively pursue the buyback programme provided the necessary funds are available. Shares will only be bought back for cancellation provided they enhance earnings per share. Any shareholder who is considering taking advantage of the share buyback programme is invited, after taking the appropriate independent financial advice, to contact their stockbroker, bank manager, solicitor, accountant or other independent financial advisor authorised under the Financial Services and Markets Act 2000, in order to contact N+1 Brewin who are operating the buyback programme on behalf of the company. Accordingly at the next Annual General Meeting shareholders will be asked to vote in favour of a resolution to renew the general authority to make market purchases of up to 12.5% of the ordinary share capital in issue.Outlook
The group's policy of reducing its reliance on its traditional core products and services together with the increase in non-seasonal business and investment in new technically advanced and environmentally friendly products will be continued into 2012.
The group continues to face challenges in all of its geographical markets but our business remains strong, cash generative and well developed with positive net funds. The Board is therefore optimistic for further success in 2012.
JG Murray
Chairman
1 May 2012
* Operating profit before non-recurring items as reconciled on the Consolidated Income Statement
Andrews Sykes Group plc
Consolidated Income Statement
For the 12 months ended 31 December 2011
12 months ended 31 December 2011 £'000 | 12 months ended 31 December 2010 £'000 | ||
Continuing operations | |||
Revenue | 53,838 | 55,951 | |
Cost of sales | (23,873) | (24,015) | |
Gross profit | 29,965 | 31,936 | |
Distribution costs | (9,317) | (9,219) | |
Administration expenses - Recurring - Non-recurring | (8,766) 3,113 | (8,775) 164 | |
Total administrative expenses | (5,653) | (8,611) | |
Operating profit | 14,995 | 14,106 | |
Normalised EBITDA* | 15,387 | 17,721 | |
Depreciation and impairment losses | (3,911) | (4,239) | |
Profit on the sale of plant and equipment | 406 | 460 | |
Normalised operating profit | 11,882 | 13,942 | |
Profit on the sale of property | 3,113 | 164 | |
Operating profit | 14,995 | 14,106 | |
Income from participating interests | - | 400 | |
Finance income | 1,850 | 2,012 | |
Finance costs | (1,942) | (2,144) | |
Profit before taxation | 14,903 | 14,374 | |
Taxation | (3,337) | (3,812) | |
Profit for the financial period attributable to equity holders of the parent | 11,566 | 10,562 | |
There were no discontinued operations in either of the above periods | |||
Earnings per share from continuing and total operations | |||
Basic (pence) | 27.05p | 24.19p | |
Diluted (pence) | 27.05p | 24.18p | |
Dividends paid per equity share (pence) | 6.60p | 11.10p | |
*Earnings Before interest, Taxation, Depreciation, profit on the sale of property, plant and equipment, Amortisation and non-
recurringitems.
Andrews Sykes Group plc
Consolidated Statement of Comprehensive Total Income
For the 12 months ended 31 December 2011
12 months ended 31 December 2011 £'000 | 12 months ended 31 December 2010 £'000 | ||
Profit for the financial period | 11,566 | 10,562 | |
Other comprehensive income: | |||
Currency translation differences on foreign currency net investments | (184) | (99) | |
Defined benefit plan actuarial gains and losses | (559) | 1,964 | |
Deferred tax on other comprehensive income | 184 | (530) | |
Other comprehensive (charges) / income for the period net of tax | (559) | 1,335 | |
Total comprehensive income for the period | 11,007 | 11,897 | |
Andrews Sykes Group plc
Consolidated Balance Sheet
As at 31 December 2011
31 December 2011 | 31 December 2010 | ||||||
£'000 | £'000 | £'000 | £'000 | ||||
Non-current assets | |||||||
Property, plant and equipment | 14,486 | 11,817 | |||||
Lease prepayments | 57 | 58 | |||||
Trade investments | 164 | 164 | |||||
Deferred tax asset | 760 | 721 | |||||
Retirement benefit pension surplus | 1,629 | 1,990 | |||||
17,096 | 14,750 | ||||||
Current assets | |||||||
Stocks | 3,561 | 4,032 | |||||
Trade and other receivables | 14,775 | 15,917 | |||||
Overseas tax (denominated in Euros) | 19 | - | |||||
Cash and cash equivalents | 24,986 | 25,709 | |||||
43,341 | 45,658 | ||||||
Current liabilities | |||||||
Trade and other payables | (9,696) | (10,143) | |||||
Current tax liabilities | (1,689) | (2,274) | |||||
Bank loans | (6,000) | (6,000) | |||||
Obligations under finance leases | (203) | (203) | |||||
Provisions | (13) | (13) | |||||
Derivative financial instruments | - | (7) | |||||
(17,601) | (18,640) | ||||||
Net current assets | 25,740 | 27,018 | |||||
Total assets less current liabilities | 42,836 | 41,768 | |||||
Non-current liabilities | |||||||
Bank loans | (8,000) | (14,000) | |||||
Obligations under finance leases | (395) | (553) | |||||
Provisions | (34) | (47) | |||||
Derivative financial instruments | (23) | (41) | |||||
(8,452) | (14,641) | ||||||
Net assets | 34,384 | 27,127 | |||||
Equity | |||||||
Called-up share capital | 427 | 431 | |||||
Share premium | 13 | - | |||||
Retained earnings | 31,035 | 23,607 | |||||
Translation reserve | 2,658 | 2,842 | |||||
Other reserves | 241 | 237 | |||||
Surplus attributable to equity holders of the parent | 34,374 | 27,117 | |||||
Minority interest | 10 | 10 | |||||
Total equity | 34,384 | 27,127 | |||||
Andrews Sykes Group plc
Consolidated Cash Flow Statement
For the 12 months ended 31 December 2011
12 months ended 31 December 2011 £'000 | 12 months ended 31 December 2010 £'000 | ||
Cash flows from operating activities | |||
Cash generated from operations | 15,766 | 17,763 | |
Interest paid | (385) | (503) | |
Net UK corporation tax paid | (3,191) | (2,113) | |
Withholding tax paid | - | (119) | |
Overseas tax paid | (584) | (1,165) | |
Net cash flow from operating activities | 11,606 | 13,863 | |
Investing activities | |||
Dividends received from participating interests (trade investments) | - | 400 | |
Movements in ring fenced bank deposit accounts | - | 9,000 | |
Sales of assets held for sale | - | 390 | |
Sale of plant and equipment | 4,221 | 643 | |
Purchase of property, plant and equipment | (6,582) | (1,745) | |
Interest received | 311 | 168 | |
Net cash flow from investing activities | (2,050) | 8,856 | |
Financing activities | |||
Loan repayments | (6,000) | (9,000) | |
Finance lease capital repayments | (158) | (263) | |
Equity dividends paid | (2,818) | (4,800) | |
Purchase of own shares | (1,121) | (1,184) | |
Issue of new shares | 13 | - | |
Net cash flow from financing activities | (10,084) | (15,247) | |
Net (decrease) / increase in cash and cash equivalents | (528) | 7,472 | |
Cash and cash equivalents at the beginning of the period | 25,709 | 18,150 | |
Effect of foreign exchange rate changes | (195) | 87 | |
Cash and cash equivalents at end of the period | 24,986 | 25,709 | |
Reconciliation of net cash flow to movement in net funds in the period | |||
Net (decrease) / increase in cash and cash equivalents | (528) | 7,472 | |
Cash outflow from the decrease in debt | 6,158 | 9,263 | |
Movements in ring fenced bank deposit accounts | - | (9,000) | |
Non-cash movements in respect of new finance leases | - | (116) | |
Non-cash movements in the fair value of derivative instruments | 25 | 7 | |
Movement in net funds / (debt) during the period | 5,655 | 7,626 | |
Opening net funds / (debt) at the beginning of the period | 4,905 | (2,808) | |
Effect of foreign exchange rate changes | (195) | 87 | |
Closing net funds at the end of the period | 10,365 | 4,905 | |
Andrews Sykes Group plc
Consolidated Statement of Changes in Equity
For the 12 months ended 31 December 2011
Attributable to equity holders of the parent company | Minority interest | Total equity | ||||||
Share capital £'000 | Share premium £'000 | Retained earnings £'000 | Translation reserve £'000 | Other reserves £'000 | Total
£'000 |
£'000 |
£'000 | |
At 31 December 2009 | 443 | - | 17,828 | 2,895 | 225 | 21,391 | 10 | 21,401 |
Profit for the financial period | - | - | 10,562 | - | - | 10,562 | - | 10,562 |
Other comprehensive income / (charges): | ||||||||
Transfer on closure of overseas subsidiary | - | - | (46) | 46 | - | - | - | - |
Currency translation differences on foreign currency net investments | - | - | - | (99) | - | (99) | - | (99) |
Defined benefit plan actuarial gains and losses net of tax | - | - | 1,434 | - | - | 1,434 | - | 1,434 |
Total other comprehensive income / (charges) | - | - | 1,388 | (53) | - | 1,335 | - | 1,335 |
Transactions with owners recorded directly in equity: | ||||||||
Purchase of own shares | (12) | - | (1,371) | - | 12 | (1,371) | - | (1,371) |
Dividends paid | - | - | (4,800) | - | - | (4,800) | - | (4,800) |
Total transactions with owners | (12) | - | (6,171) | - | 12 | (6,171) | - | (6,171) |
At 31 December 2010 | 431 | - | 23,607 | 2,842 | 237 | 27,117 | 10 | 27,127 |
Profit for the financial period | - | - | 11,566 | - | - | 11,566 | - | 11,566 |
Other comprehensive charges: | ||||||||
Currency translation differences on foreign currency net investments | - | - | - | (184) | - | (184) | - | (184) |
Defined benefit plan actuarial gains and losses net of tax | - | - | (375) | - | - | (375) | - | (375) |
Total other comprehensive charges | - | - | (375) | (184) | - | (559) | - | (559) |
Transactions with owners recorded directly in equity: | ||||||||
Purchase of own shares | (4) | - | (945) | - | 4 | (945) | - | (945) |
Issue of shares | - | 13 | - | - | - | 13 | - | 13 |
Dividends paid | - | - | (2,818) | - | - | (2,818) | - | (2,818) |
Total transactions with owners | (4) | 13 | (3,763) | - | 4 | (3,750) | - | (3,750) |
At 31 December 2011 | 427 | 13 | 31,035 | 2,658 | 241 | 34,374 | 10 | 34,384 |
Notes
1. Basis of preparation
Whilst the information included in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards (IFRSs), this announcement does not itself contain sufficient information to comply with IFRSs. Therefore the financial information set out above does not constitute the company's financial statements for the 12 months ended 31 December 2011 or 31 December 2010 but it is derived from those financial statements.
2. Going concern
The Board remains satisfied with the group's funding and liquidity position. The group has external bank loans of £14 million and has operated both throughout the period under review and subsequently within its financial covenants. Consequently the loans have been analysed between current and non-current liabilities in accordance with the agreed repayment profile.
The group has substantial cash resources which at 31 December 2011 amounted to £25.0 million. Net funds at 31 December 2011 were £10.4 million. Profit and cash flow projections for 2012 and 2013, which have been prepared on a conservative basis taking into account reasonably possible changes in trading performance, indicate that the group will be profitable and generate positive cash flows after loan repayments. These forecasts and projections indicate that the group should be able to operate within the current bank facility and associated covenants.
The Board considers that the group has considerable financial resources and a wide operational base. As a consequence, the Board believes that the group is well placed to manage its business risks successfully, as demonstrated by the current year's result, despite the current uncertain economic outlook.
After making enquiries, the Board has a reasonable expectation that the group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, the Board continues to adopt the going concern basis when preparing this Annual Report and Financial Statements and this preliminary announcement.
3. Distribution of Annual Report and Financial Statements
The group expects to distribute copies of the full Annual Report and Financial Statements that comply with IFRSs by 16 May 2012 following which copies will be available either from the registered office of the company; Premier House, Darlington Street, Wolverhampton, WV1 4JJ; or from the company's website; www.andrews-sykes.com. The Annual Report and Financial Statements for the 12 months ended 31 December 2010 have been delivered to the Registrar of Companies and those for the 12 months ended 31 December 2011 will be filed at Companies House following the company's Annual General Meeting. The auditors have reported on those financial statements; their report was unqualified, did not draw attention to any matters by way of emphasis without qualifying their report and did not contain details of any matters on which they are required to report by exception.
4. Date of Annual General Meeting
The group's Annual General Meeting will be held at 10.30 a.m. on Tuesday 12th June 2012 at Floor 5, 10 Bruton Street, London, W1J 6PX.