Last checked at 17 Jun 2009 12:05
Andrews Sykes Group plc ("the group")
Preliminary Results for the 12 months ended 31 December 2008
SUMMARY OF RESULTS
| 12 months ended 31 December 2008 £'000 | 12 months ended 29 December 2007* £'000 | |
| Revenue from continuing operations | 67,394 | 57,846 |
| EBITDA** from continuing operations | 22,002 | 18,588 |
| Normalised operating profit*** | 17,924 | 14,599 |
| Profit for the financial period | 11,056 | 8,549 |
| Basic earnings per share from continuing operations | 24.85p | 19.19p |
| Dividend paid per equity share | 33.60p | - |
| Net cash inflow from operating activities | 10,589 | 7,482 |
| Total dividends paid | 14,970 | - |
| Net Debt | 16,928 | 12,344 |
* Foreign exchange differences on inter-company loans have been re-categorised from administration expenses to finance costs
** Earnings Before Interest, Taxation, Depreciation, profit on the sale of fixed assets, Amortisation, impairment charges and non-recurring costs as reconciled on the consolidated income statement.
*** Normalised operating profit, being operating profit before non-recurring items as reconciled in the consolidated income statement.
Chairman's Statement
Overview and financial highlights
The group achieved a normalised operating profit (operating profit before non-recurring items as reconciled on the consolidated income statement) of £17.9 million for 2008 which compares with £14.6 million last year, an increase of over 22%. This is another record for the group, beating the previous best of £15.7 million in 2006 by £2.2 million. This is an extremely creditable performance and management must be congratulated on this achievement.
This result highlights the fact that the group is now less weather dependent than ever before. It has been our strategy for some time to move away from this dependency and our group now has a diverse range of income streams thereby providing a solid base of revenue underpinning the business. This, combined with our ongoing strict cost control policy, ensures that we are able to deliver satisfactory results even in the face of less than favourable climatic conditions.
Our main trading subsidiary, Andrews Sykes Hire had a very successful year producing a record operating profit result despite a difficult summer period. It continues to expand its business in non-seasonal hire markets, particularly through its specialist hire division. It has continued to expand its presence in niche markets and these non-traditional businesses operate without undue influence from seasonal weather patterns.
We continue to support and develop our traditional business roots. The pumping division once again provided strong growth throughout the year with new contracts being signed with major national contractors and non-construction related end users. We will continue to invest more in this business, as well as in our profitable air conditioning and heating hire divisions, in order that we are well placed to satisfy our customers' demands whenever they arise.
Our operation based in the UAE, Khansaheb Sykes LLC, produced an operating profit in excess of 20 million UAE Dirhams, more than four times the level achieved in 2007. Applying the 2008 exchange rates, this equates to approximately £2.9 million and is therefore a significant contribution to the group's overall performance. This performance is largely due to new local management that took charge during 2007 and the subsequent development of the business that took place under their charge.
Our operations in Northern Europe also performed well with our subsidiary in The Netherlands achieving an operating profit of €2.9 million, an increase of 11.3% compared with 2007. This was also a new record for this company.
The only disappointment was our air conditioning installation business in the UK, Andrews Air Conditioning and Refrigeration, that reported a small operating loss for the year. However, management are taking the opportunity to reduce costs and streamline the business making it ready to take advantage of any upturns in the market when they arise.
In summary 2008 was a very good year for the group and we are in a strong position to face the challenges that 2009 will inevitably present.
Dividend and pension scheme payments
During the first half of the year two interim dividends were paid that in total amounted to £15 million. Clearance was obtained from both the pensions regulator and the pension scheme trustees and as part of this process a special one-off payment of £1.7 million was made to the pension scheme. These payments were in part funded by an increase in borrowings of £10 million.
Net Debt
Mainly due to the above dividend and pension scheme payments, net debt has increased by £4.6 million from £12.3 million to £16.9 million this year. This is after the following significant cash outflows:
£m
Equity dividends 15.0
Capital expenditure net of disposal proceeds 4.1
Regular and non-recurring pension scheme payments 3.2
Corporation tax payments 2.5
Interest payments 2.5
Total 27.3
This reflects the strong cash generating ability of the group.
Share buyback programme
The board continues to believe that shareholder value will be optimised by the purchase, where appropriate, of our own shares. During the year under review the company purchased 284,500 of its own one pence ordinary shares for cancellation at a cost of £258,620. This purchase enhanced earnings per share. At the forthcoming AGM, the board will request that shareholders vote in favour of a resolution to renew the authority to purchase up to 12.5% of the ordinary shares in issue.
Outlook
The group's continuing strategy of investing in its traditional core products and services, the increase in non-seasonal business and investment in new technically advanced and environmentally friendly products proved to be successful in 2008 and will therefore be continued into 2009.
The board believes that 2009 will be a difficult year as the worldwide economic downturn continues to depress the markets within which the group operates. However, the group is financially strong, it is continuing to generate both good levels of profits and positive cash flows and therefore it will be well placed to take advantage of any upturns in the market, whenever that might be.
J G Murray
Chairman
17 June 2009
Consolidated Income Statement
For the 12 months ended 31 December 2008
| 12 months ended 31 December 2008 £'000 | 12 months ended 29 December 2007* £'000 | ||
| Continuing operations | |||
| Revenue | 67,394 | 57,846 | |
| Cost of sales | (30,523) | (25,816) | |
| Gross profit | 36,871 | 32,030 | |
| Distribution costs | (10,144) | (9,751) | |
| Administrative expenses - Recurring - Non-recurring | (8,803) 559 | (7,680) (911) | |
| - Total | (8,244) | (8,591) | |
| Operating profit | 18,483 | 13,688 | |
| EBITDA** Depreciation and impairment losses Profit on the sale of plant and equipment | 22,002 (4,827) 749 | 18,588 (4,463) 474 | |
| Normalised operating profit Profit on the sale of property Pension curtailment charge | 17,924 559 - | 14,599 - (911) | |
| Operating profit | 18,483 | 13,688 | |
| Income from other participating interests | - | 209 | |
| Finance income | 673 | 624 | |
| Finance costs | (3,779) | (2,143) | |
| Profit before taxation | 15,377 | 12,378 | |
| Taxation | (4,321) | (3,829) | |
| Profit for the financial period | 11,056 | 8,549 | |
| There were no discounted operations in either of the above periods. | |||
| Earnings per share from continuing and total operations | |||
| Basic (pence) | 24.85p | 19.19p | |
| Diluted (pence) | 24.85p | 19.19p | |
| Dividends paid per equity share (pence) | 33.60p | 0.00p | |
* Foreign exchange differences on inter-company loans have been re-categorised from administration expenses to finance costs
** Earnings Before Interest, Taxation, Depreciation, profit on the sale of fixed assets, Amortisation and impairment provisions and non-recurring costs.
Consolidated Balance Sheet
As at 31 December 2008
| 31 December 2008 | 29 December 2007 | ||||||
| £'000 | £'000 | £'000 | £'000 | ||||
| Non-current assets | |||||||
| Goodwill | - | - | |||||
| Property, plant and equipment | 16,108 | 15,668 | |||||
| Lease prepayments | 90 | 96 | |||||
| Trade investments | 164 | 164 | |||||
| Deferred tax asset | - | 1,404 | |||||
| Derivative financial instruments | - | 13 | |||||
| 16,362 | 17,345 | ||||||
| Current assets | |||||||
| Stocks | 7,993 | 5,742 | |||||
| Trade and other receivables | 17,764 | 16,317 | |||||
| Cash and cash equivalents | 18,233 | 13,102 | |||||
| Assets held for sale | 405 | 494 | |||||
| 44,395 | 35,655 | ||||||
| Current liabilities | |||||||
| Trade and other payables | (11,833) | (11,371) | |||||
| Current tax liabilities | (1,371) | (1,370) | |||||
| Bank loans | (5,000) | (5,000) | |||||
| Obligations under finance leases | (217) | (415) | |||||
| Provisions | - | (15) | |||||
| (18,421) | (18,171) | ||||||
| Net current assets | 25,974 | 17,484 | |||||
| Total assets less current liabilities | 42,336 | 34,829 | |||||
| Non-current liabilities | |||||||
| Bank loans | (29,000) | (19,000) | |||||
| Obligations under finance leases | (836) | (1,006) | |||||
| Retirement benefit obligations | - | (1,238) | |||||
| Deferred tax liability | (90) | - | |||||
| Derivative financial instruments | (108) | (38) | |||||
| (30,034) | (21,282) | ||||||
| Net assets | 12,302 | 13,547 | |||||
| Equity | |||||||
| Called-up share capital | 443 | 446 | |||||
| Retained earnings | 7,127 | 12,595 | |||||
| Translation reserve | 4,497 | 274 | |||||
| Other reserves | 225 | 222 | |||||
| Surplus attributable to equity holders of the parent | 12,292 | 13,537 | |||||
| Minority interest | 10 | 10 | |||||
| Total equity | 12,302 | 13,547 | |||||
Consolidated Cash Flow Statement
For the 12 months ended 31 December 2008
| 12 months ended 31 December 2008 £'000 | 12 months ended 29 December 2007* £'000 | ||
| Cash flows from operating activities | |||
| Cash generated from operations | 15,573 | 11,626 | |
| Interest paid | (2,484) | (1,115) | |
| Net UK corporation tax paid | (1,836) | (2,202) | |
| Withholding tax (paid) / recovered | (3) | 50 | |
| Overseas tax paid | (661) | (877) | |
| Net cash flow from operating activities | 10,589 | 7,482 | |
| Investing activities | |||
| Dividends received from participating interests (trade investments) | - | 209 | |
| Disposal costs paid less consideration received on prior year disposals | - | 295 | |
| Sale of assets held for sale | 656 | - | |
| Sale of plant and equipment | 974 | 778 | |
| Purchase of property, plant and equipment | (5,082) | (5,346) | |
| Interest received | 808 | 440 | |
| Net cash flow from investing activities | (2,644) | (3,624) | |
| Financing activities | |||
| Loan repayments | (24,000) | (1,000) | |
| New loans raised | 34,000 | - | |
| Finance lease capital repayments | (308) | (141) | |
| Equity dividends paid | (14,970) | - | |
| Purchase of own shares | (259) | - | |
| Net cash flow from financing activities | (5,537) | (1,141) | |
| Net increase in cash and cash equivalents | 2,408 | 2,717 | |
| Cash and cash equivalents at the beginning of the year | 13,102 | 10,190 | |
| Effect of foreign exchange rate changes | 2,723 | 195 | |
| Cash and cash equivalents at end of the year | 18,233 | 13,102 | |
| Reconciliation of net cash flow to movement in net debt in the period | |||
| Net increase in cash and cash equivalents | 2,408 | 2,717 | |
| Cash outflow from the decrease in debt | 24,308 | 1,141 | |
| Cash inflow from the increase in loans | (34,000) | - | |
| Non cash movements in respect of new finance leases | (14) | (182) | |
| Non cash movements in the fair value of derivative instruments | (9) | (48) | |
| Movement in net debt during the period | (7,307) | 3,628 | |
| Opening net debt at the beginning of the year | (12,344) | (16,167) | |
| Effect of foreign exchange rate changes | 2,723 | 195 | |
| Closing net debt at the end of the year | (16,928) | (12,344) | |
* Foreign exchange differences on inter-company loans amounting to £415,000 have been re-categorised to finance costs and are now included within 'effect of foreign exchange rate changes' to be consistent with the presentation in the current period.
Consolidated Statement of Recognised Income and Expense
For the 12 months ended 31 December 2008
| 12 months ended 31 December 2008 £'000 | 12 months ended 29 December 2007 £'000 | ||
| Actual return less expected return on pension scheme assets | (2,764) | 154 | |
| Experience gains and losses arising on plan obligation | (196) | 424 | |
| Changes in demographic and financial assumptions underlying the present value of plan obligations | 1,435 | (279) | |
| Net pension asset not recognised due to uncertainty over future recoverability | (275) | - | |
| Currency translation differences on foreign currency net investments | 4,223 | 595 | |
| Deferred tax on items posted directly to equity | 504 | (107) | |
| Net income recognised directly in equity | 2,927 | 787 | |
| Profit for the period attributable to parent's shareholders | 11,056 | 8,549 | |
| Total recognised income and expense for the period attributable to equity holders of the parent | 13,983 | 9,336 | |
Movements on share capital and reserves
For the 12 months ended 31 December 2008
| Share capital £'000 | Retained earnings £'000 | Translation reserve £'000 | Other reserves £'000 | Total £'000 | ||
| At 31 December 2006 | 446 | 3,854 | (321) | 222 | 4,201 | |
| Total recognised income and expense | - | 8,741 | 595 | - | 9,336 | |
| At 29 December 2007 | 446 | 12,595 | 274 | 222 | 13,537 | |
| Total recognised income and expense | - | 9,760 | 4,223 | - | 13,983 | |
| Purchase of own shares | (3) | (258) | - | 3 | (258) | |
| Dividends paid | - | (14,970) | - | - | (14,970) | |
| At 31 December 2008 | 443 | 7,127 | 4,497 | 225 | 12,292 |
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 2008 or 29 December 2007, but 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 £34 million and has, with the exception of the guarantor covenant discussed below, 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 which has been confirmed as being appropriate as at 31 December 2008 by the bank.
At the year end the group did breach the guarantor group covenant which specifies that 80% of turnover and operating profit must be generated by the guarantor group, which excludes our overseas operations in the UAE and The Netherlands. This was primarily due to the extremely good performance of our business in the UAE, as discussed in the operations review. The bank have, however, waived the breach and subsequent to the year end, the Netherlands operations have been included within the guarantor group for covenant purposes.
In addition to the loans the group has substantial cash resources which at 31 December 2008 amounted to £18.2 million. Profit and cash flow projections for 2009 and the first half of 2010, 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. In addition the group has an agreed unused overdraft facility of £2 million. The group's forecasts and projections, taking account of reasonably possible changes in trading performance, and the measures reasonably available to the group, 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 together with a diverse base of operations across different geographical areas and industries. 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, they continue to adopt the going concern basis in preparing the 2008 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 the end of June 2009 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 29 December 2007 have been delivered to the Registrar of Companies and those for the 12 months ended 31 December 2008 will be filed at Companies House following the company's annual general meeting. The auditors have reported on those accounts; their reports were unqualified, did not draw attention any matters by way of emphasis without qualifying their report and did not contain statements under s237(2) or (3) Companies Act 1985.
4. Date of Annual General Meeting
The group's Annual General Meeting will be held at 10.30 a.m. on Thursday 30th July 2009 at Floor 5, 10 Bruton Street, London, W1J 6PX.