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RNS Number : 8968A Andrews Sykes Group PLC 28 September 2022
27 September
2022
ANDREWS SYKES GROUP PLC
("Andrews Sykes" or "the Company" or "the Group")
Half Year Results
Unaudited results for the six months ended 30 June 2022
Summary of Results
Unaudited Unaudited
six months ended
six months ended
30 June
30 June
2022
2021
£000 £000
Revenue from continuing operations 37,903 35,693
EBITDA* from continuing operations 13,181 12,402
Operating profit 8,489 7,955
Profit for the financial period 6,477 6,239
Cash and cash equivalents 34,430 24,717
Net funds 21,741 9,673
(pence) (pence)
Basic earnings per share 15.36 14.79
Interim dividend declared per equity share 11.90 11.90
Special dividend declared per equity share 16.60 -
* Earnings before interest, taxation, depreciation, profit on the sale of
property, plant and equipment, amortisation and non-recurring items
Enquiries
Andrews Sykes Group plc T: +44 (0)1902 328 700
Carl Webb, Managing Director
Ian Poole, Finance Director and Company Secretary
Houlihan Lokey UK Limited (Nominated Advisor) T: +44 (0)20 7484 4040
Tim Richardson
CHAIRMAN'S STATEMENT
Overview
The Group's revenue for the 6 months ended 30 June 2022 (the "period") was
£37.9 million, an increase of £2.2 million compared with the same period in
2021 and a record for the first half year. Operating profit for the period was
£8.5 million compared with £8.0 million in 2021, an increase of £0.5
million, reflecting the increased revenue. Overall, net funds increased by
£5.2 million from £16.5 million as at 31 December 2021 to £21.7 million as
at 30 June 2022.
Operations review
Revenue at Andrews Sykes Hire in the UK continues to grow and improved by 2.1%
compared with the same period in 2021. Our businesses in the rest of Europe
experienced a very strong increase in revenue, improving 16.8% compared to the
same period in 2021. This result was driven by an exceptional performance from
our Italian subsidiary, Nolo Climat, with revenues 92.9% up on the same period
in 2021 with the early and prolonged high summer temperatures seen in Italy
increasing demand in our cooling products. Consequently, the combined
operating profit for the UK and European hire businesses in the period was
£1.0 million above the level achieved in 2021.
Climat Location in France has continued to struggle with revenues 12.0% lower
than the same period in 2021. As a result, the decision has been made to
restructure the business in France and restructuring costs, including depot
closures and redundancy, of £0.5m have been incurred during the period. We
are confident that once completed, the restructuring will right-size the
French operation and lead to profitable future growth.
Andrews Air Conditioning and Refrigeration, our UK air conditioning
installation business, has traded broadly in line with last year. Whilst
revenue increased 3.7% in the period compared to the first six months of 2021,
it still remains 33.1% lower than the corresponding period in 2019. Operating
profit decreased by £0.1m as compared to first half of 2021 as a continuing
struggle to recruit and retain engineers negatively impacted results.
Khansaheb Sykes, our business based in the UAE, has continued to experience a
difficult trading environment but pleasingly recorded revenue growth of 5.8%
versus the first half of 2021. Despite this revenue increase and a favourable
exchange rate between the Dirham and Sterling, operating profit is comparable
to the first half of 2021 and continues to be depressed by increased historic
bad debt charges.
Profit for the financial period and Earnings per Share
Profit before tax for the period was £8.5 million compared with £7.6 million
in the same period last year. This £0.9m increase is attributable to the
£0.5 million improvement in operating profit, a net foreign exchange gain on
inter-company balances of £0.2 million (2021: loss of £0.1m) due to the
weakening of Sterling compared with the Euro, and a net increase of £0.1
million in interest receivable resulting from the full repayment of the £3.0
million loan outstanding as at 31 December 2021 and higher interest received
on cash deposits.
The total tax charge for the period increased by £0.7 million to £2.1
million (2021: £1.3 million), an effective tax rate of 24.0% (2021: 17.5%).
The increase in the overall effective rate of tax is driven by a lower level
of capital allowances claimed in the UK, coupled with higher profits generated
in Italy which has a higher tax rate than in the UK.
Profit after tax in the period was £6.5 million (2021: £6.2 million). Basic
earnings per share increased by 0.57 pence, or 3.9%, to 15.36 pence (2021:
14.79 pence) reflecting this increase in profit.
Dividends
The final dividend of 12.50 pence per ordinary share for the year ended 31
December 2021 was approved by members at the AGM held on 14 June 2022.
Accordingly, on 17 June 2022 the Company made a total dividend payment of
£5.27 million which was paid to shareholders on the register as at 27 May
2022.
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.
In addition to the interim dividend, the board has assessed the company's
ongoing cash requirements and has concluded that, as a result of the company's
robust cash generation, a portion of the current cash reserves are surplus to
the company's requirements. The board has therefore decided to return this
surplus capital to Andrews Sykes shareholders by way of a special dividend of
16.60 pence per ordinary share which in total amounts to £7.0 million. Both
the interim and special dividends will be paid on 4 November 2022 to
shareholders on the register as at 7 October 2022.
Outlook
The second half of the year has started resiliently with record temperatures
in the UK and Europe positively impacting demand for the Group's air
conditioning units and chillers. This increased summer demand leads management
to be optimistic over the full year results. In the longer term, management
remains optimistic that the business will continue to improve but are mindful
of the current economic climate and the impact that heightened energy prices,
inflation and recession risk can pose to the business and customer demand.
JG Murray
Chairman
27 September 2022
Consolidated Income Statement
for the six months ended 30 June 2022
Note Unaudited Unaudited Year ended
six months ended
six months ended
31 December 2021
30 June 2022
30 June 2021
£000 £000 £000
Revenue 2 37,903 35,693 75,219
Cost of sales (15,338) (15,064) (29,001)
Gross profit 22,565 20,629 46,218
Distribution costs (6,846) (6,386) (14,066)
Administrative expenses (7,230) (6,412) (10,759)
Other operating income - 124 151
Operating profit 8,489 7,955 20,074
EBITDA* 13,181 12,402 28,946
Depreciation and impairment losses (3,444) (3,399) (6,628)
Depreciation of right-of-use assets (1,528) (1,622) (3,111)
Profit on the sale of plant and equipment and right-of-use assets 280 574 867
Operating profit 8,489 7,955 20,074
Finance income 3 316 7 24
Finance costs 3 (278) (401) (599)
Profit before tax 8,527 7,561 19,499
Tax expense 4 (2,050) (1,322) (3,959)
Profit for the period from continuing operations attributable to equity 6,477 6,239 15,540
holders of the Parent Company
Earnings per share from continuing operations:
Basic and diluted 5 15.36p 14.79p 36.85p
Dividend per equity share paid during the period 12.50p 11.50p 23.40p
Proposed dividend per equity share 11.90p 11.90p 12.50p
Proposed special dividend per equity share 16.60p - -
(*) 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 2022
Unaudited Unaudited Year ended
six months ended
six months ended
31 December
30 June
30 June
2021
2022
2021
£000 £000 £000
Profit for the period 6,477 6,239 15,540
Other comprehensive income
Currency translation differences on foreign currency operations 926 (640) (954)
Net other comprehensive income/ (expense) that may be reclassified to profit 926 (640) (954)
and loss
2,567 2,476 4,430
Re-measurement of defined benefit pension assets and liabilities
Related deferred tax (898) (619) (1,551)
Net other comprehensive income that will not be reclassified to profit and 1,669 1,857 2,879
loss
2,595 1,217 1,925
Other comprehensive income for the period net of tax
Total comprehensive income for the period attributable to equity holders of
the Parent Company
9,072 7,456 17,465
Consolidated Balance Sheet
At 30 June 2022
Unaudited Unaudited 31 December
30 June
30 June
2021
2022
2021
£000 £000 £000
Non-current assets
Property, plant and equipment 20,091 21,761 20,877
Right-of-use assets 12,125 11,594 12,423
Prepayments - 42 -
Deferred tax assets - 7 -
Defined benefit pension scheme surplus 9,392 3,606 6,137
41,608 37,010 39,437
Current assets
Stocks 5,205 7,821 5,660
Trade and other receivables 18,749 18,584 19,796
Current tax asset - 268 -
Cash and cash equivalents 34,430 24,717 32,443
58,384 51,390 57,899
Current liabilities
Trade and other payables (14,178) (14,726) (13,587)
Current tax liabilities (485) - (265)
Bank loans - (2,995) (3,000)
Right-of-use lease obligations (2,625) (2,539) (2,602)
(17,288) (20,260) (19,454)
Net current assets 41,096 31,130 38,445
Total assets less current liabilities 82,704 68,140 77,882
Non-current liabilities
Right-of-use lease obligations (10,064) (9,510) (10,332)
Deferred tax liability (3,124) - (1,959)
Provisions (2,096) - (1,971)
(15,284) (9,510) (14,262)
Net assets 67,420 58,630 63,620
Equity
Called up share capital 422 422 422
Share premium 13 13 13
Retained earnings 62,845 54,667 59,971
Translation reserve 3,894 3,282 2,968
Other reserve 246 246 246
Total equity 67,420 58,630 63,620
Consolidated Cash Flow Statement
for the six months ended 30 June 2022
Unaudited Unaudited Year ended
six months ended
six months ended
31 December
30 June
30 June
2021
2022
2021
£000 £000 £000
Operating activities
Profit for the period 6,477 6,239 15,540
Adjustments for:
Tax charge 2,050 1,322 3,959
Finance costs 278 401 599
Finance income (316) (7) (24)
Profit on disposal of property, plant and equipment and right-of-use assets
(280) (574) (867)
Depreciation of property, plant and equipment 3,444 3,399 6,628
Depreciation of right-of-use assets 1,528 1,621 3,111
Difference between pension contributions paid and amounts recognised in the
Income Statement
(628) (625) (1,194)
Decrease/ (increase) in inventories 639 65 (635)
Decrease/ (increase) in receivables 1,669 (1,500) (2,653)
Increase in payables 330 2,534 2,322
Movement in provisions 125 - 1,112
Cash generated from continuing operations 15,316 12,875 27,898
Interest paid (278) (284) (574)
Corporation tax paid (1,553) (2,694) (3,735)
Net cash inflow from operating activities 13,485 9,897 23,589
Investing activities
Disposal of property, plant and equipment 302 722 1,173
Purchase of property, plant and equipment (2,380) (2,794) (2,530)
Interest received 256 - 9
Net cash outflow from investing activities (1,822) (2,072) (1,348)
Financing activities
Loan repayments (3,000) (500) (500)
Capital repayments for right-of-use lease
Obligations (1,471) (1,547) (2,951)
Equity dividends paid (5,272) (4,850) (9,869)
Net cash outflow from financing activities (9,743) (6,897) (13,320)
Net increase in cash and cash equivalents 1,920 928 8,921
Cash and cash equivalents at the start of the period 32,443 24,012 24,012
Effect of foreign exchange rate changes 67 (223) (490)
Cash and cash equivalents at the end of the period 34,430 24,717 32,443
Consolidated Statement of Changes in Equity
for the six months ended 30 June 2022
Share capital UAE legal reserve Netherlands capital reserve Retained earnings Attributable to equity holders of the parent
Capital
Share premium Translation reserve redemption reserve
£000 £000 £000 £000 £000 £000 £000 £000
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
Profit for the period - - - - - - 9,301 9,301
Other comprehensive (expense)/ income for the period net of tax - - (314) - - - 1,022 708
Total comprehensive (expense)/ income - - (314) - - - 10,323 10,009
Dividends paid - - - - - - (5,019) (5,019)
Total of transactions with shareholders - - - - - - (5,019) (5,019)
At 31 December 2021 422 13 2,968 158 79 9 59,971 63,620
Profit for the period - - - - - - 6,477 6,477
Other comprehensive income for the period net of tax - - 926 - - - 1,669 2,595
Total comprehensive income - - 926 - - - 8,146 9,072
Dividends paid - - - - - - (5,272) (5,272)
Total of transactions with shareholders - - - - - - (5,272) (5,272)
At 30 June 2022 422 13 3,894 158 79 9 62,845 67,420
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 2021 does not constitute
the Group's statutory accounts for 2021 as defined in Section 434 of the
Companies Act 2006. Statutory accounts for 2021 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 2022, 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 2021.
No new standards or interpretations issued since 31 December 2021 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 Unaudited
six months six months Year ended
ended ended 31 December
30 June 30 June 2021
2022 2021
£000
£000 £000
Continuing operations
Revenue outside the scope of IFRS 15 and recognised as lease income in
accordance with IFRS 16:
Hire 33,772 31,627 67,734
Revenue recognised at a point in time in accordance with IFRS 15:
Sales 2,739 2,709 4,630
Maintenance 665 752 1,368
Installation and sale of units 727 605 1,487
Group consolidated revenue from the sale of goods and provision of services 37,903 35,693 75,219
The geographical analysis of the Group's revenue by origination is:
Unaudited Unaudited
six months six months Year ended
ended ended 31 December
30 June 30 June 2021
2022 2021
£000
£000 £000
United Kingdom 23,225 22,743 47,917
Rest of Europe 10,365 8,874 19,442
Middle East and Africa 4,313 4,076 7,860
37,903 35,693 75,219
The geographical analysis of the Group's revenue by destination is not
materially different to that by origination.
3 Finance income and costs
Unaudited Unaudited Year ended
six months ended
six months ended
31 December
30 June
30 June
2021
2022 2021
Finance income £000 £000 £000
Net interest on net defined benefit pension surplus 60 7 15
Intertest receivable on bank deposit accounts 31 - 9
Inter-company foreign exchange gains 225 - -
316 7 24
Finance costs
Interest charge on bank loans and overdrafts (25) (20) (44)
Interest charge on right-of-use lease obligations (253) (264) (530)
Inter-company foreign exchange losses - (117) (25)
(278) (401) (599)
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 Unaudited
six months ended six months ended Year ended
30 June 30 June 31 December
2022 2021 2021
£000 £000 £000
Current tax
UK corporation tax at 19% (June and December 2021: 19%) 1,139 736 2,253
Adjustments in respect of prior periods - (21) (657)
1,139 715 1,596
Overseas tax 644 530 1,251
Total current tax charge 1,783 1,245 2,847
Deferred tax
Origination and reversal of timing differences 126 386 712
Effect of tax rate change - (309) (97)
Adjustments in respect of prior periods 141 - 497
Total deferred tax charge/ (credit) 267 77 1,112
Total tax charge for the financial period 2,050 1,322 3,959
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 Unaudited
six months ended six months ended Year ended
30 June 30 June 31 December
2022 2021 2021
Weighted average number of ordinary shares 42,174,359 42,174,359 42,174,359
£000 £000 £000
Basic earnings 6,477 6,239 15,540
pence pence pence
Basic earnings per ordinary share 15.36 14.79 36.85
Diluted earnings per share
There were no dilutive instruments outstanding as at 30 June 2022 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 2022 were as follows:
Paid during the six months ended 30 June 2022
Total dividend paid
£000
Pence per share
Final dividend for the year ended 31 December 2021 paid on 17 June 2022 to
members on the register as at 27 May 2022
12.50p 5,272
The above dividend was charged against reserves during the 6 months ended 30
June 2022.
On 27 September 2022 the directors declared an interim dividend of 11.90 pence
per ordinary share which in total amounts to £5,019,000. In addition, a
special dividend of 16.60 pence per ordinary share which in total amounts to
£7,001,000 was also declared. These will be both be paid on 4 November 2022
to shareholders on the register as at 7 October 2022 and will be charged
against reserves in the second half of 2022.
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
Total dividend paid
£000
Pence per share
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.
Dividends declared and paid on ordinary one pence shares during the 12 months
ended 31 December 2021 were as follows:
Paid during the year ended 31 December 2021
Total dividend paid
£000
Pence per share
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
Interim dividend declared on 27 September 2021 and paid on 5 November 2021 to 11.90p 5,019
members on the register as at 8 October 2021
23.40p 9,869
The above dividends were charged against reserves during the 12 months ended
31 December 2021.
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 2022 the Group had a net defined benefit pension scheme surplus,
calculated in accordance with IAS 19 using the assumptions as set out below,
of £9,392,000 (30 June 2021: £3,606,000; 31 December 2021: £6,137,000). 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 2022.
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 30 June 31 December
2022 2021 2021
Rate of increase in pensionable salaries n/a n/a n/a
Rate of increase in pensions in payment 3.2% 3.3% 3.5%
Discount rate 3.8% 1.8% 1.8%
Inflation assumption - RPI 3.2% 3.3% 3.5%
Inflation assumption - CPI 2.6% 2.7% 2.9%
Percentage of members taking maximum tax-free lump sum on retirement
75% 75% 75%
The demographic assumptions used for 30 June 2022, were the same as used in 31
December 2021, 30 June 2021 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
2022, 30 June 2021 and 31 December 2021 is 100% S3PA CMI2020 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:
Unaudited Unaudited
six months to six months to Year to
Funding status 30 June 30 June 31 December
2022 2021 2021
£000 £000 £000
Scheme assets at end of period 40,648 46,958 48,475
Benefit obligations at end of period (31,256) (43,352) (42,338)
Surplus in scheme 9,392 3,606 6,137
The increase in the pension surplus since December 2021 is mainly due to a
decrease in the value of liabilities as a consequence of an increase in bond
yields increasing the discount rate.
8 Net funds and movement in financing liabilities
Unaudited Unaudited
six months ended six months ended Year ended
30 June 30 June 31 December
2022 2021 2021
£000 £000 £000
Cash and cash equivalents per consolidated cashflow statement 34,430 24,717 32,443
Bank loans at the beginning of the period (3,000) (3,491) (3,491)
Loans repaid 3,000 500 500
Other non-cash changes - (4) (9)
Bank loans at the end of the period - (2,995) (3,000)
Right-of-use lease obligations at the beginning of the period (12,934) (12,849) (12,849)
Capital repayments for right-of-use lease obligations 1,472 1,547 2,951
New right-of-use leases entered into during the period (1,204) (963) (3,325)
Non-cash movements re: termination of right-of-use lease obligations 77 36 40
Foreign exchange (100) 180 249
Right-of-use lease obligations at the end of the period (12,689) (12,049) (12,934)
Gross debt (12,689) (15,044) (15,934)
Net funds 21,741 9,673 16,509
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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