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RNS Number : 5083N Andrews Sykes Group PLC 08 May 2024
8 May 2024
ANDREWS SYKES GROUP PLC
("Andrews Sykes" or "the Company" or "the Group")
Final Results
for the year ended 31 December 2023
Summary of Results
Year ended Year ended
31 December
31 December
2023
2022
£000 £000
Revenue from continuing operations 78,747 83,007
Adjusted EBITDA* from continuing operations 30,622 30,616
Operating profit 22,737 21,530
Profit after tax for the financial period 17,758 17,020
Net cash inflow from operating activities 24,946 27,596
Net funds 4,570 25,896
Cash and cash equivalents 19,967 20,518
Total interim, special and final dividends paid 35,743 17,292
(pence) (pence)
Basic earnings per share 42.24 40.36
Interim, special and final dividends paid per share 85.30 41.00
Proposed final dividend per share 14.00 14.00
* 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, Group Managing Director
Ian Poole, Group Finance Director and Company Secretary
Houlihan Lokey Advisory Limited (Nominated Advisor) T: +44 (0)20 7389 3355
Tim Richardson
CHAIRMAN'S STATEMENT
Overview and outlook
Andrews Sykes' trading remains robust, with record revenues and profits
continuing to be being delivered by several of our European subsidiaries. We
are pleased to report that the group as a whole has again delivered a record
level of profitability during 2023. 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 current year has not been without its challenges with the well publicised
inflationary pressures and tight labour markets that have been impacting the
UK and European economies also impacting Andrews Sykes. However, our strong
relationships with customers and long standing relationships with key
suppliers, coupled with our highly experienced management team have allowed us
to once again not only navigate our way through these circumstances, but
thrive. This year also saw the group confirm its exit from the French market.
After attempting to turnaround the continuously loss making subsidiary,
management reached the decision that its efforts would be better spent growing
profitable businesses elsewhere and so in late 2023 decided to cease trading
in France. This wind up process will take many months to complete. At the same
time we are pleased to announce the incorporation of our new subsidiary,
Klimamieten AS Gmbh, in Germany and look forward to the development of this
exciting market. We are encouraged by how the business has consistently
adapted to overcome market and operational issues and take advantage of new
revenue opportunities.
The group has continued to develop its relationships with key customers
throughout the UK and Europe which has underpinned the strong results
reported. These key accounts provide a consistent and growing revenue stream.
Whilst turnover is down in the second half of the year as compared to the
prior year, mainly due to revenue opportunities presented by the record summer
temperatures seen last year, the focus on our key accounts means the group has
still produced profit growth despite reporting a lower revenue.
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.
2023 trading summary
The group's revenue for the year ended 31 December 2023 was £78.7 million, a
decrease of £4.3 million, or 5.1%, compared with the same period last year.
Despite this decrease, through careful cost management, operating profit has
increased by 5.6%, or £1.2 million, from £21.5 million last year to £22.7
million in the year under review. Turnover for the second half of the year was
down 11.5%, or £5.2 million, on the corresponding period last year and
reflects the exceptional weather experienced across the UK and Europe over the
summer months in 2022.
The increasing interest rates in the UK and Europe has enabled the company to
generate increased returns on its cash reserves and has contributed to net
finance income increasing from a small net interest income last year to £0.9m
in the current year. Profit before taxation was £23.6 million (2022: £21.6
million) and profit after taxation was £17.8 million (2022: £17.0 million).
The group has reported an increase in the basic earnings per share of 1.88p,
or 4.7%, from 40.36p in 2022 to 42.24p in the current year. This is mainly
attributable to the above increase in the group's operating profit and net
finance income partially offset by increased tax charges.
The group continues to generate strong cash flows. Net cash inflow from
operating activities was £24.9 million compared with £27.6 million last
year.
Cost control, cash generation and working capital management continue to be
priorities for the group with stocks reduced by £2.0m during the year.
Capital expenditure is concentrated on assets with strong returns; in total
£6.3 million was invested in the hire fleet this year. In addition, the group
invested a further £0.3 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 2023 38,843 9,713
1st half 2022 37,903 8,489
2nd half 2023 39,904 13,024
2nd half 2022 45,104 13,041
Total 2023 78,747 22,737
Total 2022 83,007 21,530
The above table reflects the continued progress of the business, with second
half profitability being maintained on £5.2 million lower revenue than the
second half of 2022. First half revenues and profitability in the current year
are both records set for the business.
The turnover of our main business segment in the UK decreased from £47.2m
last year to £44.4m with operating profit decreasing from £16.4m to £15.0m.
This result was reflective of the exceptional prior year for our air
conditioning hire which was aided by the record temperatures experienced in
the UK during 2022. Current year air conditioning hire was down £1.3m or
14.0% on prior year. Pump hire continues to perform strongly with revenues
achieving record levels for the sixth year in a row and are 2.0% higher than
2022.
Our European businesses recorded increases in turnover, increasing from £24.2
million last year to £26.7 million, and operating profit increasing from
£6.9 million to £8.7 million in 2023. Southern Europe in particular was
aided by the record temperatures seen during the summer and has been reflected
in increased chiller and air conditioning hire revenues. Our Dutch, Belgian
and Italian subsidiaries each reported record turnover levels during 2023.
The turnover of our hire and sales business in the Middle East has decreased
from £8.8 million last year to £5.7 million, however operating profit
increased from a loss of £0.4 million to a profit 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 was entirely down to increased
expected credit losses against historic debts which were no longer considered
recoverable. The credit loss charge in 2022 for the Middle East was £1.9
million compared to £0.2 million in the current year. New local management
have been installed during the current year and a turnaround of this business
is underway. It is pleasing that core hire revenues in the second half of the
year are 38.1% up on the first half of the year and in line with that
generated in the previous year. Management are confident of a return to
increasing profitability in the Middle East.
Our fixed installation and maintenance business sector in the UK saw a small
decrease in turnover from £2.8m to £2.1m and returned a small operating loss
of £0.1 million this year, a decrease of £0.1 million from the small
operating profit achieved in 2022. This result was largely driven by labour
availability impacting the ability to service contracts which limited revenue
opportunities and the operating profit of the business.
Central overheads were £1.3 million in the current year compared with £1.5
million in 2022.
Profit for the financial year
Profit before tax was £23.6 million this year compared with £21.6 million
last year; an increase of £2.0 million. This is largely attributable to the
above £1.2 million increase in operating profit with net interest income also
contributing £0.8 million to increased profit before tax.
Tax charges increased from £4.5 million in 2022 to £5.8 million this year.
The overall effective tax rate increased from 21.0% in 2022 to 24.7% this
year, primarily driven by the increase in UK corporation tax from 19% to 25%
from April 2023. Profit for the financial year was £17.8 million compared
with £17.0 million last year.
Defined benefit pension scheme
As reported at the half year, the company has successfully de-risked its
defined benefit scheme by completing a buy-in deal. This transaction, whilst
significantly reducing the defined benefit pension scheme surplus recorded on
the balance sheet, means that future liabilities are fully de-risked and the
company will not be required to contribute significant cash payments into the
pension scheme to fund adverse liability movements. During 2021 and 2022 the
company contributed £2.6m of cash into the defined benefit pension scheme and
£0.1m during 2023. No cash contributions are to be made during 2024. The
defined benefit pension scheme surplus after the application of an asset
restriction has reduced from £5.4m as at 31 December 2022 to £1.6m at the
year end.
Equity dividends
The company paid three dividends during the year. On 16 June 2023, a final
dividend for the year ended 31 December 2022 of 14.00 pence per ordinary share
was paid. This was followed on 3 November 2023 by an interim dividend for 2023
of 11.90 pence per ordinary share, and a special dividend of 59.40 pence per
ordinary share. Therefore, during 2023, a total of £35.7 million in cash
dividends has been returned to our ordinary shareholders.
The Board has decided to propose a final dividend of 14.0 pence per share. If
approved at the forthcoming Annual General Meeting, this dividend, which in
total amounts to £5.9 million, will be paid on 21 June 2024 to shareholders
on the register as at 24 May 2024.
Share buybacks
During the year the company repurchased and cancelled 289,301 ordinary shares
at a price between 510p and 665p per share. The total cash spent on share
buybacks during the year amounted to £1.9 million.
As at 7 May 2024, there remained an outstanding general authority for the
directors to purchase 5,003,203 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 decreased by £21.3 million from £25.9 million at 31 December 2022
to £4.6 million at 31 December 2023; this decrease is after the cash
distribution of £35.7m in dividend payments during 2023. Net funds include
cash and cash equivalents of £20.0 million (2022: £20.5 million), other
financial assets of nil (2022: £16.7 million) less right-of-use lease
obligations of £15.4 million (2022: £11.3 million).
JJ Murray
Executive Chairman
7 May 2024
Consolidated Income Statement
for the year ended 31 December 2023
Year ended Year ended
31 December 2023
31 December 2022
£000 £000
Revenue 78,747 83,007
Cost of sales (27,017) (30,006)
Gross profit 51,730 53,001
Distribution costs (11,451) (14,936)
Administrative expenses (16,583) (14,402)
Increase in credit loss provision (959) (2,133)
Operating profit 22,737 21,530
Adjusted EBITDA* 30,622 30,616
Depreciation and impairment losses (6,002) (6,565)
Depreciation of right-of-use assets (2,814) (4,017)
Profit on the sale of property, plant and equipment and right-of-use assets 931 1,496
Operating profit 22,737 21,530
Finance income 1,618 631
Finance costs (759) (610)
Profit before tax 23,596 21,551
Tax expense (5,838) (4,531)
Profit for the period from continuing operations attributable to equity 17,758 17,020
holders of the Parent Company
Earnings per share from continuing operations:
Basic and diluted 42.24p 40.36p
Dividend per equity share paid during the period 85.30p 41.00p
Proposed dividend per equity share 14.00p 14.00p
(*) 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 2023
Year ended Year ended
31 December
31 December
2023
2022
£000 £000
Profit for the period 17,758 17,020
Other comprehensive income
Currency translation differences on foreign currency operations (436) 1,222
Foreign exchange difference on IFRS 16 adjustments 15 (32)
Net other comprehensive (expense)/ income that may be reclassified to profit (421) 1,190
and loss
(5,988) 823
Re-measurement of defined benefit pension assets and liabilities
Related asset restriction 2,012 (735)
Net other comprehensive (expense)/ income that will not be reclassified to (3,976) 88
profit and loss
(4,397) 1,278
Other comprehensive income for the period net of tax
Total comprehensive income for the period attributable to equity holders of
the Parent Company
13,361 18,298
Consolidated Balance Sheet
At 31 December 2023
Note 31 December 31 December
2023
2022
£000 £000
Non-current assets
Property, plant and equipment 19,344 19,361
Right-of-use assets 13,959 9,667
Deferred tax assets 126 229
Defined benefit pension scheme surplus 1,618 5,353
35,047 34,610
Current assets
Stocks 2,405 4,434
Trade and other receivables 19,251 19,535
Current tax assets 904 423
Other financial assets 4 - 16,700
Cash and cash equivalents 19,967 20,518
42,527 61,610
Total assets 77,574 96,220
Current liabilities
Trade and other payables (17,858) (16,695)
Current tax liabilities (950) (810)
Right-of-use lease obligations (2,429) (2,505)
(21,237) (20,010)
Non-current liabilities
Right-of-use lease obligations (12,968) (8,817)
Provisions (2,903) (2,682)
(15,871) (11,499)
Total liabilities 37,108 31,509
Net Assets 40,466 64,711
Equity
Called up share capital 419 421
Share premium 13 13
Retained earnings 36,048 59,872
Translation reserve 3,737 4,158
Other reserve 249 247
Total equity 40,466 64,711
Consolidated Cash Flow Statement
for the year ended 31 December 2023
Year ended Year ended
31 December
31 December
2023
2022
£000 £000
Operating activities
Profit for the period 17,758 17,020
Adjustments for:
Tax charge 5,838 4,531
Finance costs 759 610
Finance income (1,618) (631)
Profit on disposal of plant and equipment and right-of-use assets (931) (630)
Profit on sale of property - (866)
Depreciation of property, plant and equipment 6,002 6,565
Depreciation and impairment of right-of-use assets 2,814 4,017
Difference between pension contributions paid and amounts recognised in the
Income Statement
147 (1,152)
Increase in inventories (550) (1,206)
Decrease in receivables 41 1,232
Increase in payables 1,289 2,491
Movement in provisions 221 711
Cash generated from continuing operations 31,770 32,693
Interest paid (759) (610)
Corporation tax paid (6,065) (4,487)
Net cash inflow from operating activities 24,946 27,596
Investing activities
Disposal of property, plant and equipment 1,145 1,906
Purchase of property, plant and equipment (4,060) (2,463)
Cash on deposit with greater than three month maturity 16,700 (16,700)
Interest received 1,202 265
Net cash inflow/ (outflow) from investing activities 14,987 (16,992)
Financing activities
Loan repayments - (3,000)
Capital repayments for right-of-use lease
obligations (2,759) (2,849)
Equity dividends paid (35,743) (17,292)
Share repurchase (1,863) 85
Net cash outflow from financing activities (40,365) (23,056)
Net decrease in cash and cash equivalents (432) (12,452)
Cash and cash equivalents at the start of the period 20,518 32,443
Effect of foreign exchange rate changes (119) 527
Cash and cash equivalents at the end of the period 19,967 20,518
Consolidated Statement of Changes in Equity
for the year ended 31 December 2023
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 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
Profit for the period - - - - - - 17,758 17,758
Other comprehensive expense for the period net of tax - - (421) - - - (3,976) (4,397)
Total comprehensive income/ (expense) - - (421) - - - 13,782 13,361
Dividends paid - - - - - - (35,743) (35,743)
Share repurchase (2) - - 2 - - (1,863) (1,863)
Total of transactions with shareholders (2) - - 2 - - (37,606) (37,606)
At 31 December 2023 419 13 3,737 161 79 9 36,048 40,466
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 2023 or 31 December
2022 but it is derived from those financial statements.
2 Going concern
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 2024, and has
extrapolated this forward until the end of May 2025 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 2024 forecasts have been reviewed and approved by the Board.
Whilst profitability and cash flow performance to the end of March 2024 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 13% versus budget- a
variance level seen across any individual product class for 2023 and 2022
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 2024 is forecast
to be adverse to the 31 December 2023 figures. Operating profit is below the
profit for 2023.
• Closing net funds as at the end of May 2025 are forecast to be below
the level reported at 31 December 2023.
Under this reasonable worst-case scenario, the group has sufficient net funds
throughout 2025 and up to the end of May 2025, 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 2023
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 Other financial assets
31 December 31 December
2023
2022
£000 £000
Deposit accounts - 16,700
Deposit accounts comprise bank deposits with a maturity of more than three
months from inception. Of the above deposit amounts, all £16,700,000 in the
prior year has matured.
5 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 24 May 2024 following which copies will
be available either from the registered office of the company; Unit 601 Axcess
10 Business Park, Bentley Road South, Wednesbury, WS10 8LQ; 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
2022 have been delivered to the Registrar of Companies and those for the 12
months ended 31 December 2023 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.
6 Date of Annual General Meeting
The group's Annual General Meeting will be held at 3.00 p.m. on Tuesday, 18
June 2024 at Unit 5, Peninsular Park Road, London, SE7 7TZ.
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