RNS Number : 1409N
Andrews Sykes Group PLC
28 September 2021
27 September 2021
ANDREWS SYKES GROUP PLC
("Andrews Sykes" or "the Company" or "the Group")
Half Year Results
Unaudited results for the six months ended 30 June 2021
Summary of Results
Unaudited six months ended 30 June 2021
Unaudited six months ended 30 June 2020
£000
£000
Revenue from continuing operations
35,693
33,480
EBITDA* from continuing operations
12,402
11,781
Operating profit
7,955
7,000
Profit for the financial period
6,239
6,070
Cash and cash equivalents
24,717
32,096
Net funds
9,673
16,770
(pence)
(pence)
Basic earnings per share
14.79
14.39
Special interim dividend declared per equity share
-
23.70
Interim dividend declared per equity share
11.90
11.90
* Earnings before interest, taxation, depreciation, profit on the sale of property, plant and equipment, amortisation and non-recurring items
Enquiries
Andrews Sykes Group plc Carl Webb, Managing Director Ian Poole, Finance Director and Company Secretary
T: +44 (0)1902 328 700
GCA Altium Limited (Nominated Advisor) Tim Richardson
T: +44 (0)20 7484 4040
CHAIRMAN'S STATEMENT
Overview
Andrews Sykes' trading continues to be resilient as sectors in which we trade show ongoing demand, despite the unprecedented challenge in the form of the coronavirus pandemic. We continue to be thankful and proud of our team members as they respond as essential service providers.
The Group's revenue for the 6 months ended 30 June 2021 (the "period") was £35.7 million, an increase of £2.2 million compared with the same period in 2020. Operating profit for the period was £8.0 million compared with £7.0 million in 2020, an increase of £1.0 million, reflecting the increased revenue. Overall, net funds increased by £2.0 million from £7.7m million as at 31 December 2020 to £9.7 million as at 30 June 2021.
Operations review
Our main hire and sales businesses in Europe all reported improved revenues in the period. Revenue at Andrews Sykes Hire in the UK improved by 6.1% compared with the same period in 2020. Our businesses in the rest of Europe experienced a significant rebound in revenue, improving 28.8% compared to the same period in 2020, on the back of reduced covid restrictions and increased business activities. Consequently, the combined operating profit for the UK and European hire businesses in the period was £1.4 million above the level achieved in 2020.
Andrews Air Conditioning and Refrigeration, our UK air conditioning installation business, was particularly affected by the coronavirus pandemic as our engineers were not allowed access to certain customer sites in order to carry out their work. Whilst revenue increased 20.5% in the period compared to the first six months of 2020, it still remains 34.5% lower than the corresponding period in 2019. Tight cost control has meant this business generated a profit of £0.2m in the period as compared to a small loss in the first half of 2020.
Khansaheb Sykes, our business based in the UAE, continued to experience a difficult trading environment during the period due to the coronavirus pandemic and reduced demand during Ramadan. Revenue was 28.2% lower than the first half of 2020 and operating profit decreased by £0.7 million compared with the first half of 2020.
Profit for the financial period and Earnings per Share
Profit before tax for the period was £7.6 million compared with £7.2 million in the same period last year. This £0.4m increase is attributable to the £1.0 million improvement in operating profit, a net foreign exchange loss on inter-company balances of £0.1 million (2020: gain of £0.4m) due to the strengthening of Sterling compared with the Euro and the UAE Dirham, and a net increase of £0.1 million in interest charges.
The total tax charge for the period increased by £0.1 million to £1.3 million (2020: £1.2 million), an effective tax rate of 17.5% (2020: 16.1%), mainly due to the lower profit generated by Khansaheb, on which no tax is payable, increasing the overall effective tax rate.
Profit after tax in the period was £6.2 million (2020: £6.1 million). Basic earnings per share increased by 0.40 pence, or 2.8%, to 14.79 pence (2020: 14.39 pence) reflecting this increase in profit.
Dividends
The final dividend of 11.50 pence per ordinary share for the year ended 31 December 2020 was approved by members at the AGM held on 15 June 2021. Accordingly, on 18 June 2021 the Company made a total dividend payment of £4.85 million which was paid to shareholders on the register as at 28 May 2021.
The board continues to adopt the policy of returning value to shareholders whenever possible. The Group remains profitable, cash generative and financially strong. Accordingly, the board has decided to declare an interim dividend of 11.90 pence per ordinary share which in total amounts to £5.0 million. This will be paid on 5 November 2021 to shareholders on the register as at 8 October 2020. The ordinary shares will go ex-dividend on 7 October 2021.
Outlook
Whilst certain of the Group's business operations continue to be affected by the coronavirus pandemic, for example the performance of Khansaheb remains depressed compared to historical levels, demand in Europe has increased and the pumps business in the UK continues to perform in line with last year's levels and above pre pandemic levels. Management remains optimistic that the business will continue to improve as the economy recovers fully but are mindful that we live in uncertain times and circumstances can change very quickly.
JG Murray
Chairman
27 September 2021
Consolidated Income Statement
for the six months ended 30 June 2021
Note
Unaudited six months ended 30 June 2021
Unaudited six months ended 30 June 2020
Year ended 31 December 2020
£000
£000
£000
Revenue
2
35,693
33,480
67,259
Cost of sales
(15,064)
(14,544)
(28,184)
Gross profit
20,629
18,936
39,075
Distribution costs
(6,386)
(5,541)
(12,136)
Administrative expenses
(6,412)
(7,242)
(12,183)
Other operating income
124
847
1,630
Operating profit
7,955
7,000
16,386
EBITDA*
12,402
11,781
26,089
Depreciation and impairment losses
(3,399)
(3,785)
(7,183)
Depreciation of right-of-use assets
(1,622)
(1,328)
(3,014)
Profit on the sale of plant and equipment and right-of-use assets
574
332
494
Operating profit
7,955
7,000
16,386
Finance income
3
7
511
116
Finance costs
3
(401)
(276)
(669)
Profit before tax
7,561
7,235
15,833
Tax expense
4
(1,322)
(1,165)
(2,813)
Profit for the period from continuing operations attributable to equity holders of the Parent Company
6,239
6,070
13,020
Earnings per share from continuing operations:
Basic and diluted
5
14.79p
14.39p
30.87p
Dividend per equity share paid during the period
11.50p
10.50p
46.10p
Dividend per equity share paid after the period end
-
23.70p
-
Proposed dividend per equity share
11.90p
11.90p
11.50p
* Earnings before interest, taxation, depreciation, profit on sale of property, plant and equipment, amortisation and non-recurring items.
Consolidated Statement of Comprehensive Total Income
for the six months ended 30 June 2021
Unaudited six months ended 30 June 2021
Unaudited six months ended 30 June 2020
Year ended 31 December 2020
£000
£000
£000
Profit for the period
6,239
6,070
13,020
Other comprehensive income
Currency translation differences on foreign currency operations
(640)
1,239
527
Net other comprehensive (expense)/ income that may be reclassified to profit and loss
(640)
1,239
527
Re-measurement of defined benefit pension assets and liabilities
2,476
(2,098)
(1,980)
Related deferred tax
(619)
399
376
Net other comprehensive income/(expense) that will not be reclassified to profit and loss
1,857
(1,699)
(1,604)
Other comprehensive income/ (expense) for the period net of tax
1,217
(460)
(1,077)
Total comprehensive income for the period attributable to equity holders of the Parent Company
7,456
5,610
11,943
Consolidated Balance Sheet
At 30 June 2021
Unaudited 30 June 2021
Unaudited 30 June 2020
31 December 2020
£000
£000
£000
Non-current assets
Property, plant and equipment
21,761
24,092
22,774
Right-of-use assets
11,594
11,506
12,463
Prepayments
42
43
42
Deferred tax assets
7
660
704
Defined benefit pension scheme surplus
3,606
479
498
37,010
36,780
36,481
Current assets
Stocks
7,821
7,353
8,048
Trade and other receivables
18,584
19,126
17,274
Current tax asset
268
187
-
Cash and cash equivalents
24,717
32,096
24,012
51,390
58,762
49,334
Current liabilities
Trade and other payables
(14,726)
(14,882)
(12,290)
Current tax liabilities
-
(630)
(1,161)
Bank loans
(2,995)
(493)
(493)
Right-of-use lease obligations
(2,539)
(2,411)
(2,656)
(20,260)
(18,416)
(16,600)
Net current assets
31,130
40,346
32,734
Total assets less current liabilities
68,140
77,126
69,215
Non-current liabilities
Bank loans
-
(2,994)
(2,998)
Right-of-use lease obligations
(9,510)
(9,427)
(10,193)
(9,510)
(12,421)
(13,191)
Net assets
58,630
64,705
56,024
Equity
Called up share capital
422
422
422
Share premium
13
13
13
Retained earnings
54,667
59,390
51,421
Translation reserve
3,282
4,634
3,922
Other reserve
246
246
246
Total equity
58,630
64,705
56,024
Consolidated Cash Flow Statement
for the six months ended 30 June 2021
Unaudited six months ended 30 June 2021
Unaudited six months ended 30 June 2020
Year ended 31 December 2020
£000
£000
£000
Operating activities
Profit for the period
6,239
6,070
13,020
Adjustments for:
Tax charge
1,322
1,165
2,813
Finance costs
401
276
669
Finance income
(7)
(511)
(116)
Profit on disposal of property, plant and equipment and right-of-use assets
(574)
(332)
(494)
Depreciation of property, plant and equipment
3,399
3,785
7,183
Depreciation of right-of-use assets
1,621
1,328
3,014
Difference between pension contributions paid and amounts recognised in the Income Statement
(625)
(591)
(470)
Decrease/ (increase) in inventories
65
(1,355)
(2,690)
(Increase)/ decrease in receivables
(1,500)
2,942
4,099
Increase/ (decrease) in payables
2,534
1,671
(762)
Cash generated from continuing operations
12,875
14,448
26,266
Interest paid
(284)
(274)
(592)
Corporation tax paid
(2,694)
(2,433)
(3,419)
Net cash inflow from operating activities
9,897
11,741
22,255
Investing activities
Disposal of property, plant and equipment
722
382
619
Purchase of property, plant and equipment
(2,794)
(2,128)
(4,157)
Interest received
-
57
79
Net cash outflow from investing activities
(2,072)
(1,689)
(3,459)
Financing activities
Loan repayments
(500)
(500)
(500)
Capital repayments for right-of-use lease obligations
(1,547)
(1,245)
(2,832)
Equity dividends paid
(4,850)
(4,428)
(19,442)
Net cash outflow from financing activities
(6,897)
(6,173)
(22,774)
Net increase/ (decrease) in cash and cash equivalents
928
3,879
(3,978)
Cash and cash equivalents at the start of the period
24,012
27,880
27,880
Effect of foreign exchange rate changes
(223)
337
110
Cash and cash equivalents at the end of the period
24,717
32,096
24,012
Consolidated Statement of Changes in Equity
for the six months ended 30 June 2021
Share capital
Share premium
Translation reserve
Capital redemption reserve
UAE legal reserve
Netherlands capital reserve
Retained earnings
Attributable to equity holders of the parent
£000
£000
£000
£000
£000
£000
£000
£000
At 31 December 2019
422
13
3,395
158
79
9
59,447
63,523
Profit for the period
-
-
-
-
-
-
6,070
6,070
Other comprehensive income/ (expense) for the period net of tax
-
-
1,239
-
-
-
(1,699)
(460)
Total comprehensive income
-
-
1,239
-
-
-
4,371
5,610
Dividends paid
-
-
-
-
-
-
(4,428)
(4,428)
Total of transactions with shareholders
-
-
-
-
-
-
(4,428)
(4,428)
At 30 June 2020
422
13
4,634
158
79
9
59,390
64,705
Profit for the period
-
-
-
-
-
-
6,950
6,950
Other comprehensive (expense)/ income for the period net of tax
-
-
(712)
-
-
-
95
(617)
Total comprehensive (expense)/ income
-
-
(712)
-
-
-
7,045
6,333
Dividends paid
-
-
-
-
-
-
(15,014)
(15,014)
Total of transactions with shareholders
-
-
-
-
-
-
(15,014)
(15,014)
At 31 December 2020
422
13
3,922
158
79
9
51,421
56,024
Profit for the period
-
-
-
-
-
-
6,239
6,239
Other comprehensive (expense)/ income for the period net of tax
-
-
(640)
-
-
-
1,857
1,217
Total comprehensive (expense)/ income
-
-
(640)
-
-
-
8,096
7,456
Dividends paid
-
-
-
-
-
-
(4,850)
(4,850)
Total of transactions with shareholders
-
-
-
-
-
-
(4,850)
(4,850)
At 30 June 2021
422
13
3,282
158
79
9
54,667
58,630
Notes to the Interim Financial statements
1 General information and accounting policies
These interim financial statements have been prepared in accordance with the recognition and measurement principles of international accounting standards in conformity with the requirements of the Companies Act 2006.
The information for the 12 months ended 31 December 2020 does not constitute the Group's statutory accounts for 2020 as defined in Section 434 of the Companies Act 2006. Statutory accounts for 2020 have been delivered to the Registrar of Companies. The auditor's report on those accounts was unqualified and did not contain statements under Section 498(2) or (3) of the Companies Act 2006. These interim financial statements, which were approved by the Board of Directors on 27 September 2021, have not been audited or reviewed by the auditors.
Basis of preparation
The interim financial statement has been prepared using the historical cost basis of accounting except for:
(i) Properties held at the date of transition to IFRS which are stated at deemed cost;
(ii) Assets held for sale which are stated at the lower of (i) fair value less anticipated disposal costs and (ii) carrying value;
(iii) Derivative financial instruments (including embedded derivatives) which are valued at fair value; and
(iv) Pension scheme assets and liabilities calculated at fair value in accordance with IAS 19
The annual financial statements of the Group are prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with the AIM Rules issued by the London Stock Exchange.
Accounting policies
The principal accounting policies applied in preparing the interim Financial Statements comply with international accounting standards in conformity with the requirements of the Companies Act 2006 and are consistent with the policies set out in the Annual Report and Accounts for the year ended 31 December 2020.
No new standards or interpretations issued since 31 December 2020 have had a material impact on the accounting of the Group.
Functional and presentational currency
The financial statements are presented in pounds Sterling because that is the functional currency of the primary economic environment in which the group operates.
2 Revenue
An analysis of the group's revenue is as follows:
Unaudited six months ended 30 June 2021 £000
Unaudited six months ended 30 June 2020 £000
Year ended 31 December 2020 £000
Continuing operations
Revenue outside the scope of IFRS 15 and recognised as lease income in accordance with IFRS 16:
Hire
31,627
29,185
59,598
Revenue recognised at a point in time in accordance with IFRS 15:
Sales
2,709
3,161
5,162
Maintenance
752
560
1,348
Installation and sale of units
605
574
1,151
Group consolidated revenue from the sale of goods and provision of services
35,693
33,480
67,259
The geographical analysis of the Group's revenue by origination is:
Unaudited six months ended 30 June 2021 £000
Unaudited six months ended 30 June 2020 £000
Year ended 31 December 2020 £000
United Kingdom
22,743
20,903
40,882
Rest of Europe
8,874
6,891
16,077
Middle East and Africa
4,076
5,686
10,300
35,693
33,480
67,259
The geographical analysis of the Group's revenue by destination is not materially different to that by origination.
3 Finance income and costs
Unaudited six months ended 30 June 2021
Unaudited six months ended 30 June 2020
Year ended 31 December 2020
Finance income
£000
£000
£000
Net interest on net defined benefit pension surplus
7
23
45
Intertest receivable on bank deposit accounts
-
61
71
Inter-company foreign exchange gains
-
427
-
7
511
116
Finance costs
Interest charge on bank loans and overdrafts
(20)
(38)
(64)
Interest charge on right-of-use lease obligations
(264)
(238)
(530)
Inter-company foreign exchange losses
(117)
-
(75)
(401)
(276)
(669)
4 Income tax expense
The total effective tax charge for the financial period represents the best estimate of the weighted average annual effective tax rate expected for the full financial year applying tax rates that have been substantively enacted by the balance sheet date. UK corporation tax has been provided at 19%. In the UK budget on 15 March 2021, the chancellor announced that the rate of corporation tax in the UK will increase from 19% to 25% with effect from 1 April 2023. This increase will increase the amount of corporation tax payable in the UK. Deferred tax has been calculated based on the rates that the directors anticipate will apply when the temporary timing differences are expected to reverse.
Unaudited six months ended 30 June 2021
Unaudited six months ended 30 June 2020
Year ended 31 December 2020
£000
£000
£000
Current tax
UK corporation tax at 19% (June and December 2020: 19%)
736
901
2,068
Adjustments in respect of prior periods
(21)
(92)
(207)
715
809
1,861
Overseas tax
530
382
1,023
Adjustments in respect of prior periods
-
(20)
2
Total current tax charge
1,245
1,171
2,886
Deferred tax
Origination and reversal of timing differences
386
(6)
(44)
Effect of tax rate change
(309)
-
-
Adjustments in respect of prior periods
-
-
(29)
Total deferred tax charge/ (credit)
77
(6)
(73)
Total tax charge for the financial period
1,322
1,165
2,813
5 Earnings per share
Basic earnings per share
The basic figures have been calculated by reference to the weighted average number of ordinary shares in issue and the earnings as set out below. There are no discontinued operations in any period.
Unaudited six months ended 30 June 2021
Unaudited six months ended 30 June 2020
Year ended 31 December 2020
Weighted average number of ordinary shares
42,174,359
42,174,359
42,174,359
£000
£000
£000
Basic earnings
6,239
6,070
13,020
pence
pence
pence
Basic earnings per ordinary share
14.79
14.39
30.87
Diluted earnings per share
There were no dilutive instruments outstanding as at 30 June 2021 or either of the comparative periods and therefore there is no difference in the basic and diluted earnings per share for any of these periods. There were no discontinued operations in any period.
6 Dividend payments
Dividends declared and paid on ordinary one pence shares during the 6 months ended 30 June 2021 were as follows:
Paid during the six months ended 30 June 2021
Pence per share
Total dividend paid £000
Final dividend for the year ended 31 December 2020 paid on 18 June 2021 to members on the register as at 28 May 2021
11.50p
4,850
The above dividend was charged against reserves during the 6 months ended 30 June 2021.
On 27 September 2021 the directors declared an interim dividend of 11.90 pence per ordinary share which in total amounts to £5,019,000. This will be paid on 5 November 2021 to shareholders on the register as at 8 October 2021 and will be charged against reserves in the second half of 2021.
Dividends declared and paid on ordinary one pence shares during the 6 months ended 30 June 2020 were as follows:
Paid during the six months ended 30 June 2020
Pence per share
Total dividend paid £000
Final dividend for the year ended 31 December 2019 paid on 19 June 2020 to members on the register as at 29 May 2020
10.50p
4,428
The above dividend was charged against reserves during the 6 months ended 30 June 2020.
On 23 July 2020 the directors declared a special interim dividend of 23.7 pence per ordinary share which in total amounts to £9,995,000. This was paid on 28 August 2020 to shareholders on the register as at 7 August 2020 and was charged against reserves in the second half of 2020.
Dividends declared and paid on ordinary one pence shares during the 12 months ended 31 December 2020 were as follows:
Paid during the year ended 31 December 2020
Pence per share
Total dividend paid £000
Final dividend for the year ended 31 December 2019 paid on 19 June 2020 to members on the register as at 29 May 2020
10.50p
4,428
First interim dividend declared on 23 July 2020 and paid on 28 August 2020 to members on the register as at 7 August 2020
23.70p
9,995
Second interim dividend declared on 29 September 2020 and paid on 6 November 2020 to members on the register as at 9 October 2020
11.90p
5,019
46.10p
19,442
The above dividends were charged against reserves during the 12 months ended 31 December 2020.
7 Pensions
The Group closed the UK Group defined benefit pension scheme to future accrual as at 29 December 2002. The assets of the defined benefit pension scheme continue to be held in a separate trustee administered fund. Over recent years the Group has taken steps to manage the ongoing risks associated with its defined benefit liabilities.
As at 30 June 2021 the Group had a net defined benefit pension scheme surplus, calculated in accordance with IAS 19 using the assumptions as set out below, of £3,606,000 (30 June 2020: £479,000; 31 December 2020: £498,000). The asset has been recognised in the financial statements as the directors are satisfied that it is recoverable in accordance with IFRIC 14.
Following the triennial recalculation of the funding deficit as at 31 December 2019, a revised schedule of contributions and recovery plan was agreed with the pension scheme trustees in March 2021 and was effective from 1 January 2021. In accordance with this schedule of contributions and recovery plan, the Group will be making regular contributions of £110,000 per month for the period 1 January 2021 to 31 December 2022, and £10,000 per month for the period 1 January 2023 to 31 December 2025 or until a revised schedule of contributions is agreed, if earlier. Consequently the Group expects to make total contributions to the defined benefit pension scheme of £1,320,000 during 2021.
Assumptions used to calculate the scheme surplus
The IAS 19 figures are based on a number of actuarial assumptions as set out below, which the actuaries have confirmed they consider appropriate.
30 June 2021
30 June 2020
31 December 2020
Rate of increase in pensionable salaries
n/a
n/a
n/a
Rate of increase in pensions in payment
3.3%
2.9%
2.9%
Discount rate
1.8%
1.4%
1.3%
Inflation assumption - RPI
3.3%
2.9%
2.9%
Inflation assumption - CPI
2.7%
1.9%
2.3%
Percentage of members taking maximum tax-free lump sum on retirement
75%
75%
75%
The demographic assumptions used for 30 June 2021, were the same as used in 31 December 2020, 30 June 2020 and the last full actuarial valuation performed as at 1 April 2020.
Assumptions regarding future mortality experience are set based on advice in accordance with published statistics. The mortality table used at 30 June 2021, 30 June 2020 and 31 December 2020 is 100% S3PA CMI2018 with a 1.25% per annum long term improvement for both males and females, heavy tables for males and medium tables for females.
Valuation
The defined benefit scheme funding has changed under IAS 19 as follows:
Funding status
Unaudited six months to 30 June 2021 £000
Unaudited six months to 30 June 2020 £000
Year to 31 December 2020 £000
Scheme assets at end of period
46,958
43,769
45,018
Benefit obligations at end of period
(43,352)
(43,290)
(44,520)
Surplus in scheme
3,606
479
498
The increase in the pension surplus since December 2020 is mainly due to a decrease in the value of liabilities as a consequence of an increase in bond yields increasing the discount rate and an increase in the scheme assets due to a positive return on scheme assets.
8 Net funds and movement in financing liabilities
Unaudited six months ended 30 June 2021
Unaudited six months ended 30 June 2020
Year ended 31 December 2020
£000
£000
£000
Cash and cash equivalents per consolidated cashflow statement
24,717
32,096
24,012
Bank loans at the beginning of the period
(3,491)
(3,983)
(3,983)
Loans repaid
500
500
500
Other non-cash changes
(4)
(4)
(8)
Bank loans at the end of the period
(2,995)
(3,487)
(3,491)
Right-of-use lease obligations at the beginning of the period
(12,849)
(11,761)
(11,761)
Capital repayments for right-of-use lease obligations
1,547
1,245
2,832
New right-of-use leases entered into during the period
(963)
(1,171)
(3,943)
Non-cash movements re: termination of right-of-use lease obligations
36
160
249
Foreign exchange
180
(312)
(226)
Right-of-use lease obligations at the end of the period
(12,049)
(11,839)
(12,849)
Gross debt
(15,044)
(15,326)
(16,340)
Net funds
9,673
16,770
7,672
9 Distribution of interim financial statements
Following a change in regulations in 2008, the Company is no longer required to circulate this half year report to shareholders. This enables us to reduce costs associated with printing and mailing and to minimise the impact of these activities on the environment. A copy of the interim financial statements is available on the Company's website, www.andrews-sykes.com.
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