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
31 December
2022

Year ended
31 December
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

Carl Webb, Managing Director

Ian Poole, Finance Director and Company Secretary


T: +44 (0)1902 328 700

 




Houlihan Lokey UK Limited (Nominated Advisor)

Tim Richardson


T: +44 (0)20 7484 4040







 

 

 

CHAIRMAN'S STATEMENT

 

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.

The following table splits the results between the first and second half years:

 

Turnover

£'000

Operating profit

£'000

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
31 December 2022


Year ended
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 holders of the Parent Company


17,020


15,540



 



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
 31 December
2022


Year ended
31 December
 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 and loss

1,190


(954)

 

Re-measurement of defined benefit pension assets and liabilities

823


4,430

Related asset restriction

 

(735)


(1,551)

Net other comprehensive income that will not be reclassified to profit and loss

88


2,879

 

Other comprehensive income for the period net of tax

 

1,278


1,925

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
2022

 

31 December
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
31 December
2022

 

Year ended
31 December
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

 

 

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 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. 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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