Half Yearly Report

RNS Number : 9109Z

Andrews Sykes Group PLC

30 September 2009

 



Andrews Sykes Group plc

30 September 2009

Interim Financial Statements for the six months to 30 June 2009

Chairman's Statement

Overview

The group's revenue for the 6 months ended 30 June 2009 was £28.8 million compared with £33.9 million in the first half of 2008, a decrease of 15%. Due to fixed costs, this decrease had a disproportional effect on the normalised operating profit* which fell by nearly 25% from £8.8 million in the first half of last year to £6.6 million in the current period. Although this is naturally disappointing it must be remembered that 2008 was our record year and the consolidated revenue and normalised operating profit for the current period are above the amounts achieved in the first half of 2007 by £1.6 million (6%) and £0.9 million (17%) respectively.

During the challenging current economic environment management is concentrating on cost control, capital spending and reduction in net debt.

Cost reductions have been achieved by efficiency savings. Management has been careful to ensure that the business infrastructure has not been damaged by these savings to continue to provide high quality customer service.

Judicious working capital management has been rewarded by a positive cash flow of £1.3 million which is primarily due to a stock reduction of £1.4 million since the end of the last financial year. The level of net debt has fallen by £4.8 million from £16.9 million at 31 December 2008 to £12.1 million at 30 June 2009.

  Summary of Results

	6 months ended 30 June 2009 £'000	6 months ended 30 June 2008 (as restated *) £'000
Revenue from continuing operations	28,766	33,873
EBITDA** from continuing operations	8,763	10,868
Normalised operating profit ***	6,609	8,808
Profit for the financial period	4,619	6,169
Basic earnings per share	10.43p	13.85p
Net cash inflow from operating activities	7,015	6,172
Net debt	12,070	22,182

*     Foreign exchange losses on inter-company loans of £318,000 have been re-categorised from administration expenses to be consistent with the presentation in the 12 months ended 31 December 2008.

**     Earnings Before Interest, Taxation, Depreciation, Amortisation and non-recurring costs.

***     Operating profit before non-recurring items as reconciled on the consolidated income statement 

Operations review

Our main trading subsidiary in the UK, Andrews Sykes Hire, and our operations in Northern Europe continue to perform satisfactorily albeit below the levels achieved last year. This is primarily due to the current economic environment and the consequent impact on customer spending profiles. Our fixed air conditioning installation business has been particularly affected by this change possibly due to potential customers deferring capital expenditure in these difficult times. Conversely our UK specialist hire divisions continue to perform well as does our operation in the UAE which showed an improvement in operating profit compared with the first half of 2008. 

Prospects

After a short favourable spell of hot weather in the UK and Northern Europe at the end of June and beginning of July, and despite forecasts to the contrary, the summer has been mixed with only average temperatures and rainfall patterns. We therefore expect our all important air conditioning business to return a satisfactory performance.

Our ongoing strategy of moving into non-weather related products and services, particularly those targeted at essential industry sectors, has provided a sound profit base for the current year. Overall, therefore, we currently anticipate the result for the second half of 2009 to be satisfactory but below the record level achieved last year.

JG Murray

Chairman

29 September 2009

* Operating profit before non-recurring items as reconciled on the consolidated income statement

Andrews Sykes Group plc Consolidated Income Statement For the 6 months ended 30 June 2009 (unaudited)
	6 months ended 30 June 2009 £'000		6 months ended 30 June 2008 (as restated**) £'000		12 months ended 31 December 2008 £'000
Continuing operations
Revenue	28,766		33,873		67,394
Cost of sales	(12,766)		(15,552)		(30,523)
Gross profit	16,000		18,321		36,871
Distribution costs	(5,001)		(4,959)		(10,144)
Administrative expenses: - Recurring	(4,390)		(4,554)		(8,803)
- Non-recurring	-		529		559
- Total	(4,390)		(4,025)		(8,244)
Operating profit	6,609		9,337		18,483
EBITDA*	8,763		10,868		22,002
Depreciation	(2,518)		(2,551)		(4,827)
Profit on the sale of plant and equipment	364		491		749
Normalised operating profit	6,609		8,808		17,924
Profit on the sale of property	-		529		559
Operating profit	6,609		9,337		18,483
Finance income	155		476		673
Finance costs	(1,135)		(1,025)		(2,479)
Inter-company foreign exchange gains and losses	873		(318)		(1,300)
Profit before taxation	6,502		8,470		15,377
Taxation	(1,883)		(2,301)		(4,321)
Profit for the financial period	4,619		6,169		11,056
There were no discontinued operations in any of the above periods.
Earnings per share from continuing operations
Basic (pence)	10.43 p		13.85 p		24.85 p
Diluted (pence)	10.43 p		13.85 p		24.85 p
Dividends paid per equity share (pence)	0.00 p		33.60 p		33.60 p

*    Earnings Before Interest, Taxation, Depreciation, Amortisation and non-recurring costs.

**      Foreign exchange losses on inter-company loans of £318,000 have been re-categorised from administration expenses to be consistent with the presentation in the 12 months ended 31 December 2008.

Andrews Sykes Group plc Consolidated Balance Sheet As at 30 June 2009 (unaudited)
	30 June 2009		30 June 2008		31 December 2008
	£'000		£'000		£'000
Non-current assets Property, plant and equipment Lease prepayments Trade investments Deferred tax asset Derivative financial instruments	14,556 86  164   -   -		15,489 93 164 831 100		16,108 90  164  -  -
	14,806		16,677		16,362
Current assets Stocks Trade and other receivables Cash and cash equivalents Assets held for sale	6,561 14,265 17,974  405		5,904   17,447   12,870 405		7,993   17,764   18,233  405
	39,205		36,626		44,395
Current liabilities Trade and other payables Current tax liabilities Bank loans Obligations under finance leases	(7,818)  (1,504)  (6,000) (206)		(11,899)   (1,633)   (5,000)   (252)		(11,833)   (1,371)   (5,000)   (217)
	(15,528)		(18,784)		(18,421)
Net current assets	23,677		17,842		25,974
Total assets less current liabilities	38,483		34,519		42,336
Non-current liabilities Bank loans Obligations under finance leases Retirement benefit obligations Deferred tax liability Derivative financial instruments	(23,000) (770)  (1,026) (340)   (68)		(29,000)   (900)   (432)   -   -		(29,000)   (836)  -  (90)   (108)
	(25,204)		(30,332)		(30,034)
Net assets	13,279		4,187		12,302
Equity Called-up share capital Retained earnings Translation reserve Other reserves	443 10,545   2,056  225		446  2,675 834 222		443   7,127   4,497  225
Surplus attributable to equity holders of the parent	13,269		4,177		12,292
Minority interest	10		10		10
Total Equity	13,279		4,187		12,302

Andrews Sykes Group plc Consolidated Cash Flow Statement For the 6 months ended 30 June 2009 (unaudited)
	6 months ended 30 June 2009 £'000		6 months ended 30 June  2008 (as restated*) £'000		12 months ended 31 December 2008 £'000
Cash flows from operating activities Cash generated from operations Interest paid Net UK corporation tax paid Net withholding tax paid Overseas tax paid	9,288 (1,284) (746)   - (243)		8,139 (846) (802)   (70) (249)		15,573  (2,484)  (1,836)   (3) (661)
Net cash inflow from operating activities	7,015		6,172		10,589
Investing activities Sale of assets held for sale Sale of plant and equipment Purchase of property, plant and equipment Interest received	-   568 (1,549)   118		-  636  (2,458)  405		656  974  (5,082)  808
Net cash outflow from investing activities	(863)		(1,417)		(2,644)
Financing activities Loan repayments New loans raised Finance lease capital repayments Equity dividends paid Purchase of own shares	(5,000) -   (77) - -		(24,000) 34,000 (195)   (14,970)   -		(24,000) 34,000 (308)   (14,970) (259)
Net cash outflow from financing activities	(5,077)		(5,165)		(5,537)
Net increase / (decrease) in cash and cash equivalents	1,075		(410)		2,408
Cash and cash equivalents at beginning of period Effect of foreign exchange rate changes	18,233 (1,334)		13,102  178		13,102   2,723
Cash and cash equivalents at the end of the period	17,974		12,870		18,233

* Foreign exchange losses on inter-company loans of £318,000 have been re-categorised from administration expenses. They are now included within 'effect of foreign exchange rate changes' to be consistent with the presentation in the 12 months ended 31 December 2008.

Reconciliation of net cash flow to movement in net debt in the period

Net increase /(decrease) in cash and cash equivalents	1,075		(410)		2,408
Cash outflow from loan and finance lease repayments	5,077		24,195		24,308
Cash inflow from the increase in loans	-		(34,000)		(34,000)
Non cash movements in respect of finance leases	-		74		(14)
Non cash movements in the fair value of derivative instruments	40		125		(9)
Movement in net debt during the period	6,192		(10,016)		(7,307)
Opening net debt at the beginning of period	(16,928)		(12,344)		(12,344)
Effect of foreign exchange rate changes	(1,334)		178		2,723
Closing net debt at the end of the period	(12,070)		(22,182)		(16,928)

Andrews Sykes Group plc Consolidated Statement Of Recognised Income and Expense For the 6 months ended 30 June 2009 (unaudited)
	6 months ended 30 June 2009 £'000		6 months ended 30 June 2008 £'000		12 months ended 31 December 2008 £'000
Actual return less expected return on pension scheme assets Experience gains and losses arising on plan obligation Changes in demographic and financial assumptions underlying the present value of plan obligations Net pension asset not recognised due to uncertainty over recoverability Release provision re non recognition of pension scheme asset Currency translation differences on foreign currency net investments Deferred tax on items posted directly to equity	(1,444)   -  (499)   -  275   (2,441)  467		(1,759) -   205  - -   560   435		(2,764)   (196)   1,435  (275)   -   4,223  504
Net (expense) / income recognised directly in equity	(3,642)		(559)		2,927
Profit for the period attributable to parent's shareholders	4,619		6,169		11,056
Total recognised income and expense for the period attributable to equity holders of the parent	977		5,610		13,983

  Andrews Sykes Group plc

Notes to the consolidated interim financial statements

For the 6 months ended 30 June 2009 (unaudited)

1. General information

Basis of preparation

These interim financial statements have been prepared in accordance with International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS) as adopted by the European Union and with the Companies Act 2006.

The information for the 12 months ended 31 December 2008 does not constitute the group's statutory accounts for 2008 as defined in Section 434 of the Companies Act 2006. Statutory accounts for 2008 have been delivered to the Registrar of Companies. The Auditor's report on those accounts was unqualified and did not contain statements under Section 498(2) or (3) of the Companies Act 2006. These interim financial statements, which were approved by the Board of Directors on 29 September 2009, have not been audited or reviewed by the auditor.

These interim financial statements have been prepared using the historical cost basis of accounting except for:

i) Properties held at the date of transition to IFRS which are stated at deemed cost;

ii) Assets held for sale which are stated at the lower of fair value less anticipated disposal costs and carrying value and

iii) Derivative financial instruments (including embedded derivatives) which are valued at fair value.

Functional and presentational currency

The financial statements are presented in pounds Sterling because that is the functional currency of the primary economic environment in which the group operates. 

2. Accounting policies

These interim financial statements have been prepared on a consistent basis and in accordance with the accounting policies set out in the group's Annual Report and Financial Statements 2008.

3	Revenue An analysis of the group's revenue is as follows:
		6 months ended 30 June  2009 £'000		6 months ended 30 June  2008 £'000		12 months ended 31 December 2008 £'000
	Continuing operations Hire Sales Installations	22,515  4,437  1,814		26,311  4,926  2,636		51,575 10,904   4,915
	Group consolidated revenue from the sale of goods and  provision of services Finance income  Inter-company foreign exchange gains	155  873		476  -		673   -
	Gross consolidated revenue	29,794		34,349		68,067
4	Taxation
		6 months ended 30 June  2009 £'000		6 months ended 30 June  2008 £'000		12 months ended 31 December 2008 £'000
	Current tax UK corporation tax Adjustments in respect of prior periods	890   (12)		883   -		1,776   (29)
	Overseas tax Adjustments to overseas tax in respect of prior periods	878  288   -		883  410   -		1,747  639   (63)
	Total current tax charge	1,166		1,293		2,323
	Deferred tax Deferred tax on the origination and reversal of temporary differences Adjustments in respect of prior periods	717   -		1,008   -		1,916 82
	Total deferred tax charge	717		1,008		1,998
	Total tax charge for the financial period	1,883		2,301		4,321

4	Taxation (continued) The tax charge for the financial period can be reconciled to the profit before tax per the consolidated income statement multiplied by the standard effective corporation tax rate in the UK of 28% (June 2008 and December 2008: 28.5%) as follows:
		6 months ended 30 June  2009 £'000		6 months ended 30 June  2008 £'000		12 months  ended 31 December 2008 £'000
	Profit before taxation from continuing and total operations	6,502		8,470		15,377
	Tax at the UK effective corporation tax rate of 28% (June 2008 and December 2008: 28.5%) Effects of: Expenses not deductible for tax purposes Capital gain sheltered by capital losses and indexation allowance Effects of different tax rates of subsidiaries operating abroad Effect of change in tax rate to 28% Adjustments to tax charge in respect of previous periods	1,821   43   - 31  -   (12)		2,414   45 (139) (14)  (5)   -		4,382   92  (130) 20  (33)   (10)
	Total tax charge for the financial period	1,883		2,301		4,321

Andrews Sykes Group plc Notes to the consolidated interim financial statements For the 6 months ended 30 June 2009 (unaudited)
5	Earnings per share   Basic earnings per share The basic figures have been calculated by reference to the weighted average number of ordinary shares in issue and the earnings as set out below. There are no discontinued operations in any period.
		6 months ended 30 June 2009
	Basic earnings/weighted average number of shares	Continuing  earnings  £'000 4,619		Number  of shares 44,268,365
	Basic earnings per ordinary share (pence)	10.43p

The total effective tax charge for the financial period represents the best estimate of the weighted average annual effective tax rate expected for the full financial year. In accordance with IAS 12 no account has been taken in these interim financial statements of the 2009 Finance Act that was substantially enacted on 8 July 2009 as this is after the balance sheet date. It is estimated that as a result of this change in tax legislation, deferred tax liabilities on unremitted earnings from overseas undertakings provided as at 30 June 2009 of approximately £1.8 million (31 December 2008: £1.2 million) will be released in the second half year.

		6 months ended 30 June 2008
	Basic earnings/weighted average number of shares	Continuing earnings £'000 6,169		Number of shares 44,552,865
	Basic earnings per ordinary share (pence)	13.85p

	12 months ended 31 December 2008
Basic earnings/weighted average number of shares	Continuing earnings £'000 11,056		Number of shares 44,493,594
Basic earnings per ordinary share (pence)	24.85p

Diluted earnings per share

The calculation of the diluted earnings per ordinary share in the previous periods is based on the profits and shares as set out in the tables below. The options have an antidilutive effect in the current period and therefore there is no change to the basic earnings per share as disclosed above. There are no discontinued operations in any period.

5	Earnings per share (continued)
	Diluted earnings per share (continued)
		6 months ended 30 June 2008
		Continuing earnings  £'000			Number  of shares
	Basic earnings/weighted average number of shares Weighted average number of shares under option Number of shares that would have been issued at fair value to satisfy the above options	6,169			44,552,865  15,000   (11,966)
	Earnings/diluted weighted average number of shares	6,169			44,555,899
	Diluted earnings per ordinary share (pence)	13.85p
		12 months ended 31 December 2008
		Continuing earnings  £'000			Number  of shares
	Basic earnings/weighted average number of shares Weighted average number of shares under option Number of shares that would have been issued at fair value to satisfy the above options	11,056			44,493,594  15,000   (13,602)
	Earnings/diluted weighted average number of shares	11,056			44,494,992
	Diluted earnings per ordinary share (pence)	24.85p
6	Dividend payments
	The directors have not declared any interim dividends in respect of the period under review. The directors declared and paid the following interim dividends in respect of the 12 months ended  31 December 2008 during the six months ended 30 June 2008:
			Pence per  share			£'000
	Interim dividend declared on 26 March 2008 and paid to shareholders on the register as at 4 April 2008 on 18 April 2008		6.50p			2,896
	Interim dividend declared on 24 April 2008 and paid to shareholders on the register as at 2 May 2008 on 16 May 2008		27.10p			12,074
			33.60p			14,970

7	Retirement benefit obligations - Defined benefit pension scheme
	The group closed the UK group defined benefit pension scheme to future accrual as at 29 December 2002. The assets of the defined benefit pension scheme continue to be held in a separate trustee administered fund. The group are making additional contributions to remove the funding deficit in the group pension scheme. These contributions include both one-off and regular monthly payments, currently £125,000 per month, and are agreed in advance with the trustees of the pension scheme. Assumptions used to calculate the scheme deficit  A full actuarial valuation was carried out as at 31 December 2007. A qualified independent actuary has updated the results of this valuation to calculate the deficit as disclosed below. The major assumptions used in this valuation to determine the present value of the scheme's defined benefit obligation were as follows:
		30 June 2009		30 June  2008		31 December 2008
	Rate of increase in pensionable salaries Rate of increase in pensions in payment Discount rate applied to scheme liabilities Inflation assumption	N/A 3.50% 6.20% 3.50%		N/A 4.00% 6.60% 4.10%		N/A 3.00% 6.00% 3.00%
	Assumptions regarding future mortality experience are set based on advice in accordance with published statistics. The current mortality table used is PA92YOBMC+2 at all the above period ends. The assumed average life expectancy in years of a pensioner retiring at the age of 65 given by the above tables is as follows:
		30 June 2009		30 June  2008		31 December 2008
	Male, current age 45 Female, current age 45	21.3 years 24.0 years		21.3 years 24.0 years		21.3 years 24.0 years
	Valuations The fair value of the scheme's assets, which are not intended to be realised in the short-term and may be subject to significant change before they are realised, and the present value of the scheme's liabilities which are derived from cash flow projections over long periods and are inherently uncertain, were as follows:
			30 June 2009 £'000		30 June  2008 £'000	31 December 2008 £'000
	Total fair value of plan assets Present value of defined benefit funded obligation calculated in accordance with stated assumptions		25,981 (27,007)		26,794   (27,226)	26,440  (26,165)
	(Deficit)/surplus in the scheme calculated in accordance with stated assumptions Net pension asset not recognised due to uncertainty over recoverability		(1,026)   -		(432)  -	275   (275)
	Pension liability recognised in the balance sheet		(1,026)		(432)	-

	The movement in the fair value of the scheme's assets over the reporting period are as follows:
		30 June 2009 £'000		30 June  2008 £'000	31 December 2008 £'000
	Fair value of plan assets at the start of the period Expected return on plan assets Actuarial losses recognised in the SORIE Employer contributions - normal Employer contributions - non-recurring  Benefits paid	26,440  662 (1,444)  750   - (427)		25,913 692   (1,759) 750  1,700   (502)	25,913  1,401   (2,764)  1,500  1,700   (1,310)
	Fair value of plan assets at the end of the period	25,981		26,794	26,440
	The movement in the present value of the defined benefit obligation during the period was as follows:
			30 June 2009 £'000	30 June  2008 £'000	31 December 2008 £'000
	Opening present value of defined benefit funded obligation Interest on defined benefit obligation Actuarial (loss) / gain recognised in the SORIE in accordance with stated assumptions Pension asset not recognised due to uncertainty over future recoverability  Release provision re non recognition of pension scheme asset  Benefits paid		(26,440)  (770)  (499)   -  275  427	(27,151)   (782) 205  -  - 502	(27,151)   (1,563)  1,239   (275)   -  1,310
	Closing present value of defined benefit funded obligation		(27,007)	(27,226)	(26,440)
	Amounts recognised in the income statement The amounts (charged) / credited in the income statement were:
			30 June 2009 £'000	30 June  2008 £'000	31 December 2008 £'000
	Expected return on pension scheme assets Interest on pension scheme liabilities		662  (770)	692   (782)	1,401   (1,563)
	Net pension interest charge		(108)	(90)	(162)

7	Retirement benefit obligations - Defined benefit pension scheme (continued) Actuarial gains and losses recognised in the statement of recognised income and expense (SORIE) The amounts (charged) / credited in the SORIE were:
				30 June 2009 £'000		30 June  2008 £'000		31 December 2008 £'000
	Actual return less expected return on scheme assets Experience gains and losses arising on plan obligation Changes in demographic and financial assumptions underlying the present value of plan obligations			(1,444)    -  (499)		(1,759)  - 205		(2,764)   (196)  1,435
	Actuarial loss calculated in accordance with stated assumptions			(1,943)		(1,554)		(1,525)
	Pension asset not recognised due to uncertainty over future recoverability Release provision re non recognition of pension scheme asset			-  275		-  -		(275)  -
	Actuarial loss recognised in the SORIE			(1,668)		(1,554)		(1,800)
	Cumulative actuarial loss recognised in the SORIE			(4,810)		(2,896)		(3,142)
8	Share Capital
				30 June 2009 £'000		30 June  2008 £'000		31 December 2008 £'000
	Issued and fully paid: 44,268,365 ordinary shares of one pence each (June 2008: 44,552,865, December 2008: 44,268,365 ordinary shares of one pence each)			443		446		443
	During the period the company did not buy back any shares for cancellation (June 2008: Nil shares; December 2008 284,500 shares for a total consideration of £258,620). The company has one class of ordinary shares which carry no right to fixed income. At 30 June 2009 cash options to subscribe for ordinary shares under the executive share option scheme were held as follows:
					Number of one pence ordinary shares
	Date of Grant	Date normally exercisable	Subscription price per share		30 June 2009		30 June 2008	31 December 2008
	November 2001	November 2004 to October 2011	89.5 pence		15,000		15,000	15,000

No share options were granted, forfeited or expired during either the current or previous financial periods.

No share options were exercised during the period (June 2008 and December 2008: Nil options).

9	Cash generated from operations
		6 months ended 30 June  2009 £'000		6 months  ended  30 June  2008 (as restated*) £'000		6 months ended  31 December 2008 £'000
	Profit for the period attributable to equity shareholders	4,619		6,169		11,056
	Adjustments for: Taxation charge Finance costs Finance income Profit on the sale of property, plant and equipment Depreciation Excess of normal pension contributions compared with service cost Non-recurring pension contributions	1,883 262   (155)   (364) 2,518   (750)  -		2,301  1,343   (476)   (1,020)  2,551   (750)   (1,700)		4,321 3,779  (673)  (1,308) 4,827  (1,500)  (1,700)
	Cash generated from operations before movements in working capital	8,013		8,418		18,802
	Decrease / (increase) in stocks Decrease / (increase) in trade and other receivables (Decrease) / increase in trade and other payables Decrease in provisions	1,432 3,499  (3,656)  -		(162)   (603) 501 (15)		(2,251)  (1,647)   684   (15)
		9,288		8,139		15,573
	* Foreign exchange losses on inter company loans of £318,000 have been re-categorised from administration expenses.  They are now included within 'effect of foreign exchange rate changes' to be consistent with the presentation in the 12 months ended 31 December 2008.
10	Analysis of net debt
			30 June 2009 £'000		30 June  2008 £'000	31 December 2008 £'000
	Cash and cash equivalents per cash flow statement		17,974		12,870	18,233
	Derivative financial instruments		-		100	-
	Financial assets		-		100	-
	Bank loans Obligations under finance leases Derivative financial instruments		(29,000) (976) (68)		(34,000)  (1,152) -	(34,000) (1,053) (108)
	Financial liabilities		(30,044)		(35,152)	(35,161)
	Net debt		(12,070)		(22,182)	(16,928)
11	Distribution of interim financial statements Following a change in regulations in 2008, the company is no longer required to circulate this half year report to shareholders. This enables us to reduce costs associated with printing and mailing and to minimise the impact of these activities on the environment. A copy of the interim financial statements is available on the company's website, www.andrews-sykes.com

 

END

 

 

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