REG - Andrews Sykes Group - Preliminary results 2021
04/05/2022 07:00
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RNS Number : 1181K Andrews Sykes Group PLC 04 May 2022
4 May 2022
ANDREWS SYKES GROUP PLC
("Andrews Sykes" or "the Company" or "the Group")
Final Results
for the year ended 31 December 2021
Summary of Results
Year ended Year ended
31 December
31 December
2021
2020
£000 £000
Revenue from continuing operations 75,219 67,259
Adjusted EBITDA* from continuing operations 28,946 26,089
Operating profit 20,074 16,386
Profit after tax for the financial period 15,540 13,020
Net cash inflow from operating activities 23,589 22,255
Net funds 16,509 7,672
Total interim and final dividends paid 9,869 19,442
(pence) (pence)
Basic earnings per share 36.85 30.87
Interim and final dividends paid per share 23.40 46.10
Proposed final dividend per share 12.50 11.50
* 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 and outlook
Andrews Sykes' trading has recovered strongly after the unprecedented
challenge posed by the coronavirus pandemic.
We are thankful and proud of our team members who responded as essential
service providers throughout the various stages of the pandemic. The wellbeing
of our employees and business partners has always been of paramount importance
as we adhered to the various local government guidelines which evolved
throughout 2020 and 2021. Our priority of keeping our operations safe for
customers, employees, and business partners has allowed Andrews Sykes to
weather hopefully the worst of the pandemic and still produce strong financial
results for shareholders.
Despite these unprecedented circumstances, we are encouraged how the business
has constantly adapted to overcome operational issues and explore new revenue
opportunities which have arisen through various avenues such as the supporting
of COVID testing and vaccinations stations. The group has also achieved a
rebound in revenues from our core traditional markets of "comfort" cooling and
heating despite various lockdowns and 'stay at home' guidance being in effect
at multiple different times throughout the year.
This year was once again supported by another strong year for our UK pump hire
business, which finished the year 16% up on the previous year's revenue and
continues the recent history of setting record levels of revenue yearly.
The group is confident in its core markets, its revenues and its profits.
2021 trading summary
The group's revenue for the year ended 31 December 2021 was £75.2 million, an
increase of £8.0 million, or 11.8%, compared with the same period last year.
This increase had a more than proportionate impact on operating profit which
increased by 22.5%, or £3.7 million, from £16.4 million last year to £20.1
million in the year under review. This increase reflects a much higher level
of trading across most of our businesses as the effects of the coronavirus
pandemic started to recede. Turnover for the second half of the year was up
10.7% on the first half further underlining the improving market conditions in
which we operate.
Net finance costs were £0.6 million this year compared with £0.6 million
last year. Profit before taxation was £19.5 million (2020: £15.8 million)
and profit after taxation was £15.5 million (2020: £13.0 million).
The group has reported an increase in the basic earnings per share of 5.98p,
or 19.4%, from 30.87p in 2020 to 36.85p in the current year. This is mainly
attributable to the above increase in the group's operating profit.
The group continues to generate strong cash flows. Net cash inflow from
operating activities was £23.6 million compared with £22.3 million last year
reflecting strong cash management.
Cost control, cash and working capital management continue to be priorities
for the group with stocks reduced by £2.4m during the year. Capital
expenditure is concentrated on assets with strong returns; in total £5.0
million was invested in the hire fleet this year. In addition, the group
invested a further £0.4 million in property, plant and equipment. 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
Turnover Operating profit
£'000 £'000
1st half 2021 35,693 7,955
1st half 2020 33,480 7,000
2nd half 2021 39,526 12,119
2nd half 2020 33,779 9,386
Total 2021 75,219 20,074
Total 2020 67,259 16,386
The above table reflects the continued recovery from the coronavirus pandemic,
with second half revenues being 10.7% up on first half revenues and second
half profitability returning to pre-pandemic levels.
The turnover of our main business segment in the UK increased from £38.3m
last year to £45.2m with operating profit increasing from £11.5m to £15.4m.
This result was supported by an exceptional overall year for our pump hire
business and our core markets of heating and air conditioning recovered
strongly from 2020 being 33% and 36% higher in 2021.
Our European businesses recorded similar increases in turnover, increasing
from £16.1 million last year to £19.4 million, and operating profit
increasing from £3.6 million to £5.2 million in 2021. This reflects a strong
rebound in both air conditioning and heater hire revenues following a general
return to work and a cold end to the winter period in mainland Europe. Both
our Dutch and Italian subsidiaries reported record turnover levels in 2021.
The turnover of our hire and sales business in the Middle East decreased from
£10.3 million last year to £7.9 million, and operating profit decreased from
£2.0 million to £0.3 million in the year under review. COVID restrictions
continued to impact HVAC rental division product demand during Ramadan in the
first half of the year and a lack of significant infrastructure projects is
depressing turnover in the pumps division. Whilst turnover in the second half
of the year was below that in the first half, it is encouraging to note that
fourth quarter revenue was 6.7% above third quarter revenue.
Our fixed installation business sector in the UK returned an operating profit
of £0.2 million this year; the same as that achieved in 2020. The market
continues to be fragmented with high levels of price competition.
Central overheads were £1.1 million in the current year compared with £0.8
million in 2020.
Profit for the financial year
Profit before tax was £19.5 million this year compared with £15.8 million
last year; an increase of £3.7 million. This is wholly attributable to the
above £3.7 million increase in operating profit with net interest costs
remaining the same at £0.6 million.
Tax charges increased from £2.8 million in 2020 to £4.0 million this year.
The overall effective tax rate increased slightly from 17.8% in 2020 to 20.3%
this year. A detailed reconciliation of the theoretical corporation tax charge
based on the accounts profit multiplied by 19% and the actual tax charge is
given in note 10 to the consolidated financial statements. Profit for the
financial year was £15.5 million compared with £13.0 million last year.
Defined benefit pension scheme
A formal funding valuation as at 31 December 2020, together with a revised
schedule of contributions and recovery plan, was agreed by the Board with the
pension scheme trustees in March 2021. In accordance with this agreement, the
group paid and will be paying £1.3 million per annum into the pension scheme
in both 2021 and 2022.
Equity dividends
The company paid two dividends during the year. On 18 June 2021, a final
dividend for the year ended 31 December 2020 of 11.50 pence per ordinary share
was paid. This was followed by an interim dividend for 2021 of 11.90 pence per
ordinary share, which was paid on 5 November 2021. Therefore, during 2021, a
total of £9.9 million in cash dividends has been returned to our ordinary
shareholders.
The Board has decided to propose a final dividend of 12.50 pence per share. If
approved at the forthcoming Annual General Meeting, this dividend, which in
total amounts to £5.27 million, will be paid on 17 June 2022 to shareholders
on the register as at 27 May 2022.
Share buybacks
The company did not purchase any of its own ordinary shares for cancellation
during the period under review. In previous years, purchases were made which
enhanced earnings per share and were for the benefit of all shareholders. As
at 3 May 2022, there remained an outstanding general authority for the
directors to purchase 5,271,794 ordinary shares, which was granted at last
year's Annual General Meeting.
The Board believes that it is in the best interests of shareholders to have
this authority in order that market purchases may be made in the right
circumstances if the necessary funds are available. 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.
Net funds
Net funds increased by £8.8 million from £7.7 million at 31 December 2020 to
£16.5 million at 31 December 2021; this increase is after the cash
distribution of £9.9m in dividend payments during 2021.
Bank loan facilities
In April 2017, a bank loan of £5 million was taken out with the group's
bankers, Royal Bank of Scotland. The first four loan repayments of £0.5
million were made in accordance with the bank agreement on 30 April 2018,
2019, 2020 and 2021. The remaining balance of £3.0 million, outstanding as at
31 December 2021, was repaid by a final balloon repayment on 30 April 2022.
JG Murray
Chairman
3 May 2022
Consolidated Income Statement
for the year ended 31 December 2021
Year ended Year ended
31 December 2021
31 December 2020
£000 £000
Revenue 75,219 67,259
Cost of sales (29,001) (28,184)
Gross profit 46,218 39,075
Distribution costs (14,066) (12,136)
Administrative expenses (10,759) (11,693)
Increase in credit loss provision (1,470) (490)
Other operating income 151 1,630
Operating profit 20,074 16,386
Adjusted EBITDA* 28,946 26,089
Depreciation and impairment losses (6,628) (7,183)
Depreciation of right-of-use assets (3,111) (3,014)
Profit on the sale of plant and equipment and right-of-use assets 867 494
Operating profit 20,074 16,386
Finance income 24 116
Finance costs (599) (669)
Profit before tax 19,499 15,833
Tax expense (3,959) (2,813)
Profit for the period from continuing operations attributable to equity 15,540 13,020
holders of the Parent Company
Earnings per share from continuing operations:
Basic and diluted 36.85p 30.87p
Dividend per equity share paid during the period 23.40p 46.10p
Proposed dividend per equity share 12.50p 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 year ended 31 December 2021
Year ended Year ended
31 December
31 December
2021
2020
£000 £000
Profit for the period 15,540 13,020
Other comprehensive income
Currency translation differences on foreign currency operations (954) 527
Net other comprehensive (expense)/ income that may be reclassified to profit (954) 527
and loss
4,430 (1,980)
Re-measurement of defined benefit pension assets and liabilities
Related deferred tax (1,551) 376
Net other comprehensive income/(expense) that will not be reclassified to 2,879 (1,604)
profit and loss
1,925 (1,077)
Other comprehensive income/ (expense) for the period net of tax
Total comprehensive income for the period attributable to equity holders of
the Parent Company
17,465 11,943
Consolidated Balance Sheet
At 31 December 2021
31 December 31 December
2021
2020
£000 £000
Non-current assets
Property, plant and equipment 20,877 22,774
Right-of-use assets 12,423 12,463
Prepayments - 42
Deferred tax assets - 704
Defined benefit pension scheme surplus 6,137 498
39,437 36,481
Current assets
Stocks 5,660 8,048
Trade and other receivables 19,796 17,274
Cash and cash equivalents 32,443 24,012
57,899 49,334
Total assets 97,336 85,815
Current liabilities
Trade and other payables (13,587) (12,290)
Current tax liabilities (265) (1,161)
Bank loans (3,000) (493)
Right-of-use lease obligations (2,602) (2,656)
(19,454) (16,600)
Non-current liabilities
Bank loans - (2,998)
Right-of-use lease obligations (10,332) (10,193)
Deferred tax liability (1,959) -
Provisions (1,971) -
(14,262) (13,191)
Total liabilities 33,716 29,791
Net Assets 63,620 56,024
Equity
Called up share capital 422 422
Share premium 13 13
Retained earnings 59,971 51,421
Translation reserve 2,968 3,922
Other reserve 246 246
Total equity 63,620 56,024
Consolidated Cash Flow Statement
for the year ended 31 December 2021
Year ended Year ended
31 December
31 December
2021
2020
£000 £000
Operating activities
Profit for the period 15,540 13,020
Adjustments for:
Tax charge 3,959 2,813
Finance costs 599 669
Finance income (24) (116)
Profit on disposal of property, plant and equipment and right-of-use assets
(867) (494)
Depreciation of property, plant and equipment 6,628 7,183
Depreciation of right-of-use assets 3,111 3,014
Difference between pension contributions paid and amounts recognised in the
Income Statement
(1,194) (470)
Increase in inventories (635) (2,690)
(Increase)/ decrease in receivables (2,653) 4,099
Increase/ (decrease) in payables 2,322 (762)
Movement in provisions 1,112 -
Cash generated from continuing operations 27,898 26,266
Interest paid (574) (592)
Corporation tax paid (3,735) (3,419)
Net cash inflow from operating activities 23,589 22,255
Investing activities
Disposal of property, plant and equipment 1,173 619
Purchase of property, plant and equipment (2,530) (4,157)
Interest received 9 79
Net cash outflow from investing activities (1,348) (3,459)
Financing activities
Loan repayments (500) (500)
Capital repayments for right-of-use lease
obligations (2,951) (2,832)
Equity dividends paid (9,869) (19,442)
Net cash outflow from financing activities (13,320) (22,774)
Net increase/ (decrease) in cash and cash equivalents 8,921 (3,978)
Cash and cash equivalents at the start of the period 24,012 27,880
Effect of foreign exchange rate changes (490) 110
Cash and cash equivalents at the end of the period 32,443 24,012
Consolidated Statement of Changes in Equity
for the year ended 31 December 2021
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 2019 422 13 3,395 158 79 9 59,447 63,523
Profit for the period - - - - - - 13,020 13,020
Other comprehensive income/ (expense) for the period net of tax - - 527 - - - (1,604) (1,077)
Total comprehensive income - - 527 - - - 11,416 11,943
Dividends paid - - - - - - (19,442) (19,442)
Total of transactions with shareholders - - - - - - (19,442) (19,442)
At 31 December 2020 422 13 3,922 158 79 9 51,421 56,024
Profit for the period - - - - - - 15,540 15,540
Other comprehensive (expense)/ income for the period net of tax - - (954) - - - 2,879 1,925
Total comprehensive (expense)/ income - - (954) - - - 18,419 17,465
Dividends paid - - - - - - (9,869) (9,869)
Total of transactions with shareholders - - - - - - (9,869) (9,869)
At 31 December 2021 422 13 2,968 158 79 9 59,971 63,620
Notes to the Interim Financial statements
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 2021 or 31 December
2020 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 operated throughout the 2021 financial year within its financial
covenants as contained in the bank agreement. We continue to make payments to
our suppliers in accordance with our agreed terms and all fiscal payments to
the UK and overseas government bodies have been and will continue to be made
on time. Post year end the final balloon instalment on the external bank loan
has been made and the loan is now fully repaid.
The directors are required to consider the application of the going concern
concept when approving financial statements. The principal element required to
meet the test is sufficient liquidity for a period from the end of the year
until at least 12 months subsequent to the date of approving the accounts.
Management has prepared a detailed "bottom-up" budget including profit and
loss and cash flow for the financial year ending 31 December 2022, and has
extrapolated this forward until the end of May 2023 in order to form a view of
an expected trading and cash position for the required period. This base level
forecast fully incorporates management's expectations around the continued
recovery of the group and was prepared on a cautiously realistic basis. This
forecast takes into account specific factors relevant in each of our
businesses. These 2022 forecasts have been reviewed and approved by the Board.
Whilst profitability and cash flow performance to the end of February 2022 has
been close to expectation, in order to further assess the company's ability to
continue to trade as a going concern, management have performed an exercise to
assess a reasonable worst-case trading scenario and the impact of this on
profit and cash. For the purposes of the cash forecast, only the below
assumptions have been incorporated into this forecast:
• Normal level of dividends will be maintained during the 12 months
subsequent to the date of approving the accounts;
• No new external funding sought;
• Hire turnover and product sales reduced by 12% versus budget- a
similar variance when comparing 2021 actual results to 2021 budgets;
• All overheads continue at the base forecast level apart from
overtime and commission and repairs and marketing, which are reduced by 5% and
travel costs reduced by 2.5%;
• All current vacancies are filled immediately; and
• Capital expenditure is reduced by 5%.
The above factors have all been reflected in the forecast for the period
ending 12 months subsequent to the date of approving the accounts. The
headline numbers at a group level are as follows:
• Group turnover for the 12 months ending 31 December 2022 is forecast
to be comparable to the 31 December 2021 figures. Operating profit is below
the profit for 2021.
• Closing net funds as at the end of May 2022 are forecast to be below
the level reported at 31 December 2021.
Under this reasonable worst-case scenario, the group has sufficient net funds
throughout 2022 and up to the end of May 2023, to continue to operate as a
going concern.
A final sensitivity analysis was performed in order to assess by how much
group turnover could fall before further external financing would need to be
sought. Under this scenario it was assumed that:
• Capital expenditure falls proportionately to turnover;
• Temporary staff are removed from the group; and
• Various overheads decrease proportionately with turnover.
Given these assumptions, and for modelling purposes only, assuming dividends
are maintained at normal levels, group turnover could fall to below £50
million on an annualised basis without any liquidity concerns. Due to the
level of confidence the Board has in the future trading performance of the
group, this scenario is considered highly unlikely to occur.
The group has considerable financial resources and a wide operational base.
Based on the detailed forecast prepared by management, the Board has a
reasonable expectation that the group has adequate resources to continue to
trade for the foreseeable future even in the reasonable worst-case scenario
identified by the group. Accordingly, the Board continues to adopt the going
concern basis when preparing this Annual Report and Financial Statements.
3 International Financial Reporting Standards (IFRS)
adopted for the first time in 2021
There were no new standards or amendments to standards adopted for the first
time this year that had a material impact on the results of the group. The
prior year comparatives have not been restated for any changes in accounting
policies that were required due to the adoption of new standards this year.
4 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 18 May 2022 following which copies will
be available either from the registered office of the company; St David's
Court, Union Street, Wolverhampton, WV1 3JE; or from the company's website;
www.andrews-sykes.com (http://www.andrews-sykes.com) . The Annual Report and
Financial Statements for the 12 months ended 31 December 2020 have been
delivered to the Registrar of Companies and those for the 12 months ended 31
December 2021 will be filed at Companies House following the company's Annual
General Meeting. The auditor has reported on those financial statements; the
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.
5 Date of Annual General Meeting
The group's Annual General Meeting will be held at 3.00 p.m. on Tuesday, 14
June 2022 at Unit 5, Peninsular Park Road, London, SE7 7TZ. However in the
light of the COVID-19 situation and the measures implemented by the UK
Government which currently impose restrictions on public gatherings, limits
the number of people that can meet indoors and require social distancing
measures to be in place, shareholders will not be permitted to attend this
Annual General Meeting in person but can be represented by the Chairman of the
meeting acting as their proxy. Please see the Notice of Annual General Meeting
that will be distributed with the Annual Report and Financial Statements for
more information and current developments.
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