REG - Andrews Sykes Group - Preliminary Results 2022
03/05/2023 07:00
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RNS Number : 1758Y Andrews Sykes Group PLC 03 May 2023
3 May 2023
ANDREWS SYKES GROUP PLC
("Andrews Sykes" or "the Company" or "the Group")
Final Results
for the year ended 31 December 2022
Summary of Results
Year ended Year ended
31 December
31 December
2022
2021
£000 £000
Revenue from continuing operations 83,007 75,219
Adjusted EBITDA* from continuing operations 30,616 28,946
Operating profit 21,530 20,074
Profit after tax for the financial period 17,020 15,540
Net cash inflow from operating activities 28,462 23,589
Net funds 25,896 16,509
Total interim, special and final dividends paid 17,292 9,869
(pence) (pence)
Basic earnings per share 40.36 36.85
Interim, special and final dividends paid per share 41.00 23.40
Proposed final dividend per share 14.00 12.50
* Earnings before interest, taxation, depreciation, profit on the sale of
property, plant and equipment and amortisation
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 been robust, with record revenues and profits being
delivered by several of our subsidiaries and we are pleased to report that the
group as a whole has delivered a record level of profitability during 2022. We
are thankful and proud of our team members who have made this possible by
continuing to provide our customers with an essential 24 hour service
offering.
The group has faced many challenges over the past few years, and this year has
been no different with Andrews Sykes not being immune from the well publicised
inflationary pressures that are impacting the UK and European economies.
Fortunately our strong relationships with customers and long standing
relationships with key suppliers, coupled with our highly experienced
management team are allowing us to once again not only navigate our way
through these circumstances, but thrive. We are encouraged by how the business
has consistently adapted to overcome operational issues and take advantage of
new revenue opportunities.
The group was well placed to take advantage of the record summer temperatures
seen this year and our core traditional market of "comfort" cooling had a
stand out year as a result. This year was once again supported by another
strong year for our UK pump hire business, which continues the recent history
of setting record levels of revenue yearly.
Trading momentum has continued into the current year, with overall performance
in the year to date in line with the Board's expectations. The group is
confident in its core markets, its revenues and its profits.
2022 trading summary
The group's revenue for the year ended 31 December 2022 was £83.0 million, an
increase of £7.8 million, or 10.4%, compared with the same period last year.
This increase positively impacted on operating profit which increased by 7.3%,
or £1.5 million, from £20.1 million last year to £21.5 million in the year
under review. Turnover for the second half of the year was up 19.0% on the
first half and reflects the exceptional weather experienced across the UK and
Europe over the summer months.
The increasing interest rates in the UK has enabled the company to generate
increased returns on its cash reserves and has contributed to net finance
costs decreasing from £0.6 million last year to a small net interest income
this year. Profit before taxation was £21.6 million (2021: £19.5 million)
and profit after taxation was £17.0 million (2021: £15.5 million).
The group has reported an increase in the basic earnings per share of 3.51p,
or 9.5%, from 36.85p in 2021 to 40.36p 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 £28.5 million compared with £23.6 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 £1.2m during the year. Capital
expenditure is concentrated on assets with strong returns; in total £4.4
million was invested in the hire fleet this year. In addition, the group
invested a further £0.7 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
The following table splits the results between the first and second half
years:
Turnover Operating profit
£'000 £'000
1st half 2022 37,903 8,489
1st half 2021 35,693 7,955
2nd half 2022 45,104 13,041
2nd half 2021 39,526 12,119
Total 2022 83,007 21,530
Total 2021 75,219 20,074
The above table reflects the continued growth of the business, with second
half revenues being 19.0% up on first half revenues and second half
profitability returning a record £13.0m.
The turnover of our main business segment in the UK increased from £45.2m
last year to £47.2m with operating profit increasing from £15.4m to £16.4m.
This result was supported by an exceptional year for our air conditioning
hire, up 36.2% on 2021, aided by the record temperatures experienced in the UK
during 2022. Pump hire continues to perform strongly with revenues achieving
record levels for the fifth year in a row and are 3.9% higher than 2021.
Our European businesses recorded similar increases in turnover, increasing
from £19.4 million last year to £24.2 million, and operating profit
increasing from £5.2 million to £6.9 million in 2022. Similarly to the UK,
the record temperatures seen in Europe during the summer has been reflected in
increased chiller and air conditioning hire revenues. Our Dutch, Belgian and
Italian subsidiaries each reported record turnover levels during 2022.
The turnover of our hire and sales business in the Middle East has pleasingly
increased from £7.9 million last year to £8.8 million, however operating
profit decreased from £0.3 million to a loss of £0.4 million in the year
under review. The operating climate continues to be tough in the Middle East
with a lack of significant infrastructure projects still depressing turnover
in the pumps division to below what was being generated a few years previous.
The operating loss during 2022 is entirely down to increased expected credit
losses against historic debts which are no longer considered recoverable. The
credit loss charge in 2022 for the Middle East was £1.9m. Management are
confident all historic credit losses are captured in the expected credit loss
provision and that 2023 will see a significantly reduced credit loss and thus
a return to profitability in the Middle East.
Our fixed installation and maintenance business sector in the UK saw a small
increase in turnover from £2.7m to £2.8m and returned an operating profit of
£33,000 this year, a decrease from the £0.2m achieved in 2021 and largely
driven by restructuring costs incurred during the current year.
Central overheads were £1.5 million in the current year compared with £1.1
million in 2021.
Profit for the financial year
Profit before tax was £21.6 million this year compared with £19.5 million
last year; an increase of £2.1 million. This is largely attributable to the
above £1.5 million increase in operating profit with net interest costs also
contributing £0.6 million to increased profit before tax.
Tax charges increased from £4.0 million in 2021 to £4.5 million this year.
The overall effective tax rate increased slightly from 20.3% in 2021 to 21.0%
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 £17.0 million compared with £15.5 million last year.
Defined benefit pension scheme
The increased GILT yields seen in the UK during the year has significantly
enhanced the defined benefit pension scheme surplus after the application of
an asset restriction from £4.0m as at 31 December 2021 to £5.4m at the year
end. During the year the group contributed £1.3 million into the pension
scheme. In line with the agreed schedule of contributions this will decrease
to a contribution of £0.1m during 2023.
Equity dividends
The company paid three dividends during the year. On 17 June 2022, a final
dividend for the year ended 31 December 2021 of 12.50 pence per ordinary share
was paid. This was followed on 4 November by an interim dividend for 2022 of
11.90 pence per ordinary share, and a special dividend of 16.60 pence per
ordinary share. Therefore, during 2022, a total of £17.3 million in cash
dividends has been returned to our ordinary shareholders.
The Board has decided to propose a final dividend of 14.00 pence per share. If
approved at the forthcoming Annual General Meeting, this dividend, which in
total amounts to £5.90 million, will be paid on 16 June 2023 to shareholders
on the register as at 26 May 2023.
Share buybacks
During the year the company repurchased and cancelled 26,314 ordinary shares
at nominal value belonging to untraced shareholders, being shareholders who
had not claimed or cashed any dividend payments from the Company over a period
of at least 12 years. The repurchase, which was undertaken in accordance with
the Company's Articles of Association, only took place after an extensive
shareholder identification and share forfeit notification process by the
Company.
As at 2 May 2023, there remained an outstanding general authority for the
directors to purchase 5,260,138 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 £9.4 million from £16.5 million at 31 December 2021
to £25.9 million at 31 December 2022; this increase is after the cash
distribution of £17.3m in dividend payments during 2022.
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 remaining balance of £3.0 million,
outstanding as at 31 December 2021, was repaid by a final balloon repayment on
30 April 2022. The group now has no external bank loans.
JG Murray
Chairman
2 May 2023
Consolidated Income Statement
for the year ended 31 December 2022
Year ended Year ended
31 December 2022
31 December 2021
£000 £000
Revenue 83,007 75,219
Cost of sales (30,006) (29,001)
Gross profit 53,001 46,218
Distribution costs (14,936) (14,066)
Administrative expenses (14,402) (10,759)
Increase in credit loss provision (2,133) (1,470)
Other operating income - 151
Operating profit 21,530 20,074
Adjusted EBITDA* 30,616 28,946
Depreciation and impairment losses (6,565) (6,628)
Depreciation of right-of-use assets (4,017) (3,111)
Profit on the sale of property, plant and equipment and right-of-use assets 1,496 867
Operating profit 21,530 20,074
Finance income 631 24
Finance costs (610) (599)
Profit before tax 21,551 19,499
Tax expense (4,531) (3,959)
Profit for the period from continuing operations attributable to equity 17,020 15,540
holders of the Parent Company
Earnings per share from continuing operations:
Basic and diluted 40.36p 36.85p
Dividend per equity share paid during the period 41.00p 23.40p
Proposed dividend per equity share 14.00p 12.50p
(*) Earnings before interest, taxation, depreciation, profit on sale of
property, plant and equipment and amortisation.
Consolidated Statement of Comprehensive Total Income
for the year ended 31 December 2022
Year ended Year ended
31 December
31 December
2022
2021
£000 £000
Profit for the period 17,020 15,540
Other comprehensive income
Currency translation differences on foreign currency operations 1,222 (954)
Foreign exchange difference on IFRS 16 adjustments (32) -
Net other comprehensive income/ (expense) that may be reclassified to profit 1,190 (954)
and loss
823 4,430
Re-measurement of defined benefit pension assets and liabilities
Related asset restriction (735) (1,551)
Net other comprehensive income that will not be reclassified to profit and 88 2,879
loss
1,278 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
18,298 17,465
Consolidated Balance Sheet
At 31 December 2022
31 December 31 December
2022
2021
£000 £000
As restated
Non-current assets
Property, plant and equipment 19,361 20,877
Right-of-use assets 9,667 12,423
Deferred tax assets 229 189
Defined benefit pension scheme surplus 5,353 3,989
34,610 37,478
Current assets
Stocks 4,434 5,660
Trade and other receivables 19,535 19,796
Current tax assets 423 -
Other financial assets 16,700 -
Cash and cash equivalents 20,518 32,443
61,610 57,899
Total assets 96,220 95,377
Current liabilities
Trade and other payables (16,695) (13,587)
Current tax liabilities (810) (265)
Bank loans - (3,000)
Right-of-use lease obligations (2,505) (2,602)
(20,010) (19,454)
Non-current liabilities
Right-of-use lease obligations (8,817) (10,332)
Provisions (2,682) (1,971)
(11,499) (12,303)
Total liabilities 31,509 31,757
Net Assets 64,711 63,620
Equity
Called up share capital 421 422
Share premium 13 13
Retained earnings 59,872 59,971
Translation reserve 4,158 2,968
Other reserve 247 246
Total equity 64,711 63,620
Consolidated Cash Flow Statement
for the year ended 31 December 2022
Year ended Year ended
31 December
31 December
2022
2021
£000 £000
Operating activities
Profit for the period 17,020 15,540
Adjustments for:
Tax charge 4,531 3,959
Finance costs 610 599
Finance income (631) (24)
Profit on disposal of plant and equipment and right-of-use assets
(630) (867)
Profit on sale of property (866) -
Depreciation of property, plant and equipment 6,565 6,628
Depreciation and impairment of right-of-use assets 4,017 3,111
Difference between pension contributions paid and amounts recognised in the
Income Statement
(1,152) (1,194)
Increase in inventories (1,206) (635)
Decrease/ (increase) in receivables 1,232 (2,653)
Increase in payables 2,491 2,322
Movement in provisions 711 1,112
Cash generated from continuing operations 33,559 27,898
Interest paid (610) (574)
Corporation tax paid (4,487) (3,735)
Net cash inflow from operating activities 27,596 23,589
Investing activities
Disposal of property, plant and equipment 1,906 1,173
Purchase of property, plant and equipment (2,463) (2,530)
Cash on deposit with greater than three month maturity (16,700) -
Interest received 265 9
Net cash outflow from investing activities (16,992) (1,348)
Financing activities
Loan repayments (3,000) (500)
Capital repayments for right-of-use lease
obligations (2,849) (2,951)
Equity dividends paid (17,292) (9,869)
Equity dividends forfeited 86 -
Net cash outflow from financing activities (23,056) (13,320)
Net increase in cash and cash equivalents (12,452) 8,921
Cash and cash equivalents at the start of the period 32,443 24,012
Effect of foreign exchange rate changes 527 (490)
Cash and cash equivalents at the end of the period 20,518 32,443
Consolidated Statement of Changes in Equity
for the year ended 31 December 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 - - - - - - 15,540 15,540
Other comprehensive income/ (expense) for the period net of tax - - (954) - - - 2,879 1,925
Total comprehensive 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
Profit for the period - - - - - - 17,020 17,020
Other comprehensive income for the period net of tax - - 1,190 - - - 88 1,278
Total comprehensive income - - 1,190 - - - 17,108 18,298
Dividends paid - - - - - - (17,292) (17,292)
Share and dividend forfeiture (1) - - 1 - - 85 85
Total of transactions with shareholders (1) - - 1 - - (17,207) (17,207)
At 31 December 2022 421 13 4,158 159 79 9 59,872 64,711
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 2022 or 31 December
2021 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 repaid in full the £3.0 million bank loan outstanding as at 31
December 2021. 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.
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 2023, and has
extrapolated this forward until the end of May 2024 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 2023 forecasts have been reviewed and approved by the Board.
Whilst profitability and cash flow performance to the end of February 2023 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
variance level seen across any individual product class for 2022 and 2021
actual results versus 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 2023 is forecast
to be adverse to the 31 December 2022 figures. Operating profit is below the
profit for 2022.
• Closing net funds as at the end of May 2024 are forecast to be below
the level reported at 31 December 2022.
Under this reasonable worst-case scenario, the group has sufficient net funds
throughout 2023 and up to the end of May 2024, 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 2022
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 2023 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 2021 have been
delivered to the Registrar of Companies and those for the 12 months ended 31
December 2022 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 Wednesday, 14
June 2023 at Unit 5, Peninsular Park Road, London, SE7 7TZ.
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