Final Results - 53 Weeks to 1 January 2000

Andrews Sykes Group PLC 6 April 2000 Preliminary Results RECORD TRADING YEAR BEFORE EXCEPTIONALS Highlights 53 weeks ended 52 weeks ended 1 January 26 December 2000 1998 £'000 £'000 Turnover 94.673 83.814 EBITDA* 27.238 23.247 Operating profit** 14.744 13.782 Exceptional Items (3.590) 81 Profit before taxation 7.998 12.050 Adjusted diluted earnings per share (pence) 9.16p 9.33p Gearing 98.6% 137.9% * Earnings before interest, taxation, depreciation, amortisation and exceptionals **Operating profit excluding exceptional items and amortisation. Chairman Jacques Gaston Murray reports: * Record trading before exceptionals * Group restructured to focus on UK specialist hire activity, where greatest profits originate. * Unprofitable international operations closed. Cost base reduced. * Second half trading performance improved substantially. * The actions we have taken in 1999 will enable us to continue to grow. * Share repurchase programme and investment in organic growth rather than payment of final dividend. * Further improved performance at start to 2000 Chairman's Statement I am pleased to report that despite significant challenges faced by the Group during 1999, record levels have been achieved in turnover, and after excluding exceptional costs, in gross profit and operating profit. Group turnover has increased by 13.0% to £94.7 million, gross profit has increased by 9.2% to £38.9 million and operating profit has increased by 5.8% to £14.3 million. These improvements reflect a full year contribution from Cox Plant and a 53 week trading period, together with a strong performance in the second half from the traditional core business of the Group. The second half results also reflect the benefits accruing from the management actions and restructuring referred to at the interim stage. In the second half we have restructured our Group to focus on our U.K. specialist hire activity where our greatest profits originate, to reduce our cost base and close our unprofitable international operations. Whilst these actions have resulted in exceptional costs, second half trading performance improved substantially. A clear focus on the Company's hire and rental business across the U.K. and the continuing developments of the local business centres to service specific markets, has been responsible for organic growth and improved margins. The nine year dispute with Sterling Fluid Products Limited with a potential claimed liability in excess of £5 million, was settled during the year. Cox Plant, our major acquisition in 1998, continues to meet our expectations. The debt repayment target agreed with our financiers continues to be actioned through a strong cash flow. Since the acquisition 18 months ago, net 'non- recourse' debt has decreased by £13.9 million from £37.6 million to £23.7 million. Competitive market conditions continue to apply strong pressure on general plant hire rates. However, we have generated stronger operating margins through continued improvement in management systems and controls. Overall, the Group has seen a second half year of achievements, progress and important changes the Group has refocused its operational activities in the U.K. where it is most profitable, terminated its loss making business units and settled the Sterling Fluid Products Limited litigation. The Group Operations Director, John Hall, who took on the role of Interim Chief Executive to head the Group following the departure of Eric Hook on 9 July 1999, has overseen these changes. Robert Stevens, the new Chief Executive, will ensure that we build upon the progress made. He will concentrate on improving Shareholder value by improving both financial and physical utilisation. I take the opportunity to thank all our staff for helping realise the potential we see flowing from this strategy. Despite better underlying trading profits and a progressive dividend policy our share price has declined. In the circumstances, the Board believes that optimisation of shareholder value will be better served by implementing a share repurchase programme and investing in organic growth rather than through the payment of a final dividend. Accordingly the Board has decided that no final dividend should be paid. The Board will request at the next Annual General Meeting, that shareholders vote in favour of a resolution to give authority to purchase up to 10% of the ordinary shares in issue. At such time that the Board considers the interests of shareholders will be best served by the payment of dividends, the dividend policy will be resumed. So far in the early months of 2000 the Group shows improved performance and I believe the actions we have taken in 1999 will enable us to continue to grow. J G Murray Chairman Andrews Sykes Group plc Consolidated profit and loss account For the 53 weeks ended 1 January 2000 53 weeks ended 1 January 2000 ------------------------------------- Ordinary Exceptional Total Items £'000 £'000 £'000 Turnover 94,673 0 94,673 Cost of sales -55,761 -418 -56,179 --------- ------------- ------------ Gross profit 38,912 -418 38,494 Distribution costs -6,603 0 -6,603 Administrative expenses -18,119 -2,217 -20,336 Other operating income 120 0 120 --------- ------------- ------------ Operating profit 14,310 -2,635 11,675 --------- ------------- ------------ EBITDA * 27,238 0 27,238 Depreciation and asset disposals -12,494 0 -12,494 --------- ------------- ------------ Operating profit before exceptional items and goodwill amortisation 14,744 0 14,744 Exceptional items 0 -2,635 -2,635 Amortisation of Goodwill -434 0 -434 --------- ------------- ------------ Operating profit 14,310 -2,635 11,675 --------- ------------- ------------ Share of operating profit of associates 0 0 0 Income from other participating interests 135 0 135 Loss on the termination of overseas operations 0 -955 -955 Net interest payable -2,857 0 -2,857 --------- ------------- ------------ Profit on ordinary activities before taxation 11,588 -3,590 7,998 Tax on profit on ordinary activities -3,511 837 -2,674 --------- ------------- ------------ Profit on ordinary activities after taxation being profit for the financial period 8,077 -2,753 5,324 --------- ------------- Dividends paid and proposed: Equity shares -1,326 Non equity shares -220 Retained profit for the financial period attributable to ordinary ------------ shareholders 3,778 ------------ Basic earnings per ordinary share 5.97 Diluted earnings per share 5.73 Add back: Goodwill amortisation 0.47 Exceptional items 2.96 ------------ Adjusted diluted earnings per share 9.16 ============ Dividends per share: Equity shares 1.44 Non equity shares 3.50 52 weeks ended 26 December 1998 Ordinary Exceptional Total Items £'000 £'000 £'000 Turnover 83,814 0 83,814 Cost of sales -48,178 0 -48,178 ---------- ------------ ------------ Gross profit 35,636 0 35,636 Distribution costs -6,155 0 -6,155 Administrative expenses -16,079 81 -15,998 Other operating income 124 0 124 ---------- ------------ ------------ Operating profit 13,526 81 13,607 ---------- ------------ ------------ EBITDA * 23,247 0 23,247 Depreciation and asset disposals -9,465 0 -9,465 ---------- ------------ ------------ Operating profit before exceptional items and goodwill amortisation 13,782 0 13,782 Exceptional items 0 81 81 Amortisation of Goodwill -256 0 -256 ---------- ------------ ------------ Operating profit 13,526 81 13,607 ---------- ------------ ------------ Share of operating profit of associates 122 0 122 Income from other participating interests 459 0 459 Loss on the termination of overseas Operations 0 0 0 Net interest payable -2,138 0 -2,138 ---------- ------------ ------------ Profit on ordinary activities before taxation 11,969 81 12,050 Tax on profit on ordinary activities -3,785 -25 -3,810 ---------- ------------ ------------ Profit on ordinary activities after taxation being profit for the financial period 8,184 56 8,240 ---------- ------------ Dividends paid and proposed: Equity shares -2,980 Non equity shares -460 Retained profit for the financial period attributable to ordinary ------------ shareholders 4,800 ------------ Basic earnings per ordinary share 9.67 Diluted earnings per share 9.14 Add back: Goodwill amortisation 0.28 Exceptional items -0.09 ------------ Adjusted diluted earnings per share 9.33 ------------ Dividends per share: Equity shares 3.60 Non equity shares 7.00 There were no material acquisitions or discontinued operations during the period. * Earnings before interest, taxation, depreciation, and amortisation excluding exceptional items. Andrews Sykes Group plc Consolidated Balance Sheet As at 1 January 2000 1 January 26 December 2000 1998 £'000 £'000 Fixed assets Intangible assets 7,418 7,852 Tangible assets 35,164 44,125 Investments 622 515 -------------- ---------------- 43,204 52,492 -------------- ---------------- Current assets Stocks 7,829 9,392 Corporation tax 37 0 Other debtors 24,883 24,075 Cash at bank and in hand 3,764 10,171 -------------- ---------------- 36,513 43,638 -------------- ---------------- Creditors: Amounts falling due within one year Loans, overdrafts and finance lease obligations -7,800 -8,863 Other creditors -14,836 -22,640 Deferred consideration 0 -7,100 Corporation tax -1,518 -3,633 -------------- ---------------- -24,154 -42,236 -------------- ---------------- Net current assets 12,359 1,402 -------------- ---------------- Total assets less current liabilities 55,563 53,894 Creditors: Amounts falling due after more than one year Loans and finance lease obligations -24,812 -28,192 Provisions for liabilities and charges -1,493 -1,041 -------------- ---------------- Net assets 29,258 24,661 -------------- ---------------- Capital and reserves Called up share capital 18,443 19,739 Share premium account 10,394 8,168 Revaluation reserve 773 787 Other reserves 280 278 Profit and loss account -642 -4,321 -------------- ---------------- 29,248 24,651 -------------- ---------------- Shareholders' funds Equity 29,248 21,466 Non equity 0 3,185 -------------- ---------------- 29,248 24,651 Minority interests (equity) 10 10 -------------- ---------------- 29,258 24,661 -------------- ---------------- Analysis of net debt including deferred consideration Cash at bank and in hand 3,764 10,171 Deferred consideration 0 -7,100 Total loans, overdrafts and finance lease obligations -32,612 -37,055 -------------- ---------------- Net debt and deferred consideration -28,848 -33,984 -------------- ---------------- As a percentage of shareholders' funds 98.6% 137.9% Andrews Sykes Group plc Consolidated cash flow statement For the 53 weeks ended 1 January 2000 53 weeks 52 weeks ended Ended 1 January 26 December 2000 1998 £'000 £'000 Net cash inflow from operating activities 19,469 21,554 -------------- ---------------- Returns on investments and servicing of finance Loan facility fees 0 -953 Net interest paid -3,222 -1,266 Dividends received 0 459 Preference dividends paid -257 -462 -------------- ---------------- Net cash outflow for returns on investments and servicing of finance -3,479 -2,222 -------------- ---------------- Cash outflow for taxation -4,408 -3,714 -------------- -------------- Capital expenditure Purchase of own shares by ESOP -458 0 Purchase of tangible fixed assets -4,677 -6,266 Sale of tangible fixed assets 1,175 4,023 -------------- -------------- Net cash outflow for capital expenditure -3,960 -2,243 -------------- -------------- Acquisitions Purchase of subsidiary undertakings 0 -45,379 Net cash acquired with subsidiary undertakings 0 359 Payment of deferred consideration on previous acquisitions -6,500 -46 Purchase of interests in associates 0 -156 -------------- -------------- Net cash outflow for acquisitions -6,500 -45,222 -------------- -------------- Equity dividends paid -3,297 -2,541 Cash outflow before the use of liquid -------------- --------------- resources and financing -2,175 34,388 -------------- -------------- Management of liquid resources Movement in bank deposits 575 2,080 -------------- -------------- Financing Issue of ordinary share capital net of issue costs 932 8,276 Loan repayments -9,303 -5,922 New loan draw downs and factoring advances 4,400 37,823 New hire purchase and finance lease agreements 36 277 Capital element of finance lease repayments -176 -186 Purchase of own shares -16 -85 -------------- -------------- Net cash (outflow) / inflow from financing -4,127 40,183 -------------- -------------- (Decrease) / increase in cash in the period -5,727 7,875 -------------- -------------- Andrews Sykes Group plc Notes to the financial statements For the 53 weeks ended 1 January 2000 1. Segmental analysis The Group's turnover may be analysed between the following principal products and activities: 53 weeks 52 weeks Ended Ended 1 January 26 December 2000 1998 £'000 £'000 Product Group: Pumps 22,375 23,389 Heating and ventilation 9,130 9,553 Air conditioning 21,578 22,487 General plant 31,306 19,023 Other 10,284 9,362 -------------- -------------- Total 94,673 83,814 -------------- -------------- Activity: Hire 59,766 47,988 Sales 19,825 23,057 Installation 15,082 12,769 -------------- -------------- Total 94,673 83,814 -------------- -------------- The integrated nature of the Group's operations does not permit a meaningful analysis of net assets by the above product groups or activities. The geographical analysis of the Group's turnover was as follows: By geographical origin By geographical destination 53 weeks 52 weeks 53 weeks 52 weeks ended ended Ended ended 1 January 26 December 1 January 26 December 2000 1998 2000 1998 £'000 £'000 £'000 £'000 United Kingdom 86,907 75,413 85,274 72,474 Rest of Europe 2,678 3,078 3,503 4,155 Middle East and Africa 3,490 4,064 4,197 5,607 The Americas 639 1,073 661 1,149 Rest of World 959 186 1,038 429 ---------- ------------- -------------- -------------- 94,673 83,814 94,673 83,814 ---------- ------------- -------------- -------------- The results can be further analysed by class of business as follows: Profit before exceptionals exceptionals Profit before & goodwill & goodwill Interest Turnover amortisation amortisation And tax £'000 £'000 £'000 £'000 53 weeks ended 1 January 2000: Pumps, heating, ventilation, air conditioning and other 63,367 12,018 -3,604 8,414 General plant 31,306 2,861 -420 2,441 ---------- ---------- ---------- ---------- 94,673 14,879 -4,024 10,855 ---------- ---------- ---------- ---------- 52 weeks ended 26 December 1998: Pumps, heating, ventilation, air conditioning and other 64,791 12,676 1,059 13,735 General plant 19,023 1,687 -1,234 453 ---------- ---------- ---------- ---------- 83,814 14,363 -175 14,188 ---------- ---------- ---------- ---------- Andrews Sykes Group plc Notes to the financial statements For the 53 weeks ended 1 January 2000 The analysis of profit before interest and tax and net assets by geographical origin was as follows: Profit before interest Net assets And tax 53 weeks 52 weeks 53 weeks 52 weeks ended ended ended ended 1 January 26 December 1 January 26 December 2000 1998 2000 1998 £'000 £'000 £'000 £'000 United Kingdom 10,586 12,133 51,224 49,554 Rest of Europe 738 765 5,499 5,130 Middle East and Africa 97 1,214 1,388 836 The Americas -595 50 -220 -289 Rest of World 29 26 57 -9 ---------- ---------- ---------- ---------- 10,855 14,188 57,948 55,222 ---------- ---------- Net debt -28,848 -26,884 Taxation and dividends recoverable / ( payable) 158 -3,677 ---------- ---------- 29,258 24,661 ---------- ---------- 2. Exceptional items 53 weeks 52 weeks ended ended 1 January 26 December 2000 1998 £'000 £'000 Sterling Fluid Products contractual settlement costs -1,440 0 Redundancy and reorganisation -1,014 -989 Abortive acquisition costs -181 -300 Release of bonus provisions 0 1,370 ---------- ---------- -2,635 81 Loss on the termination of overseas operations -955 0 ---------- ---------- -3,590 81 ---------- ---------- Under agreements entered into in 1989, Sterling Fluid Products Limited ('SFP') manufactured Sykes Pumps for the Group. The agreements, which contained a minimum annual purchase obligation, were terminated in 1995 and SFP claimed £4.9 million in settlement plus additional interest and costs. The dispute has been settled out of court with a total payment due to SFP of £3 million and has re-established the exclusive rights which had been granted to SFP by Andrews Sykes' previous management to use the Sykes Pumps name in USA, Iran, Iraq, and the sole right to market Sykes Pumps in those territories. The settlement has given rise to the above exceptional charge after provisions made in previous years and is inclusive of costs. At an Extraordinary General Meeting held on 1 June 1998 the shareholders voted to replace cash bonuses for three directors linked to the Company's share price with equivalent share options. Accordingly, provisions relating to the cash bonuses built up in previous periods were released last year. The loss on the termination of overseas operations arises following the decision to withdraw from both America and Egypt. 3. Reconciliation of operating profit to net cash inflow from operating activities 53 weeks 52 weeks Ended Ended 1 January 26 December 2000 1998 £'000 £'000 Operating profit 11,675 13,607 Amortisation of goodwill 434 256 Depreciation 12,660 9,379 Deficit on revaluation of freehold and long leasehold properties 0 165 Profit on sale of fixed assets -166 -79 Decrease / (increase) in stocks 1,563 -1,807 Increase in debtors -1,625 -911 (Decrease) / increase in creditors and provisions -5,072 944 ---------- ---------- Net cash inflow from operating activities 19,469 21,554 ---------- ---------- Andrews Sykes Group plc Notes to the financial statements For the 53 weeks ended 1 January 2000 4. Reconciliation of net cash flow to movement in net debt 53 weeks 52 weeks ended Ended 1 January 26 December 2000 1998 £'000 £'000 (Decrease)/increase in cash in the period -5,727 7,875 Cash outflow /(inflow) from movement in debt and lease financing 5,043 -31,992 Cash inflow from movement in liquid resources -575 -2,080 ---------- ---------- Change in net debt resulting from cash flows -1,259 -26,197 Finance lease, hire purchase and other financing arrangements acquired with subsidiaries 0 -42 Loan notes issued -600 -700 Translation differences -105 48 ---------- ---------- Movement in period -1,964 -26,891 Opening net (debt) / funds -26,884 7 ---------- ---------- Closing net debt -28,848 -26,884 ---------- ---------- 5. Consolidated statement of total recognised gains and losses 53 weeks 52 weeks ended ended 1 January 26 December 2000 1998 £'000 £'000 Profit for the financial period 5,324 8,240 Currency translation differences on foreign currency net investments -97 49 Surplus on revaluation of freehold and long leasehold properties 0 407 ---------- ---------- Total gains and losses in the period 5,227 8,696 ---------- ---------- 6. Reconciliation of movements in group shareholders' funds 53 weeks 52 weeks ended Ended 1 January 26 December 2000 1998 £'000 £'000 Profit for the financial period 5,324 8,240 Dividends -1,546 -3,440 Other recognised gains and losses -97 49 Proceeds from ordinary shares issued 932 8,276 Consideration on the purchase of own shares -16 -85 Revaluation of freehold and long leasehold 0 407 properties ---------- ---------- Net increase in shareholders' funds 4,597 13,447 Shareholders' funds at the beginning of the period 24,651 11,204 ---------- ---------- Shareholders' funds at the end of the period 29,248 24,651 ---------- ---------- Andrews Sykes Group plc Notes to the financial statements For the 53 weeks ended 1 January 2000 7. Earnings per ordinary share The basic figures have been calculated by reference to the weighted average number of 20 pence ordinary shares in issue during the period of 85,496,779 (1998: 80,457,940). The calculation of the diluted earnings per ordinary share is based on diluted earnings of £5,324,000 (1998: £8,249,000) and on 92,975,902 (1998: 90,228,030) ordinary shares calculated as follows: 53 weeks ended 52 weeks ended 1 January 2000 26 December 1998 Earnings Number of Earnings Number of £'000 Shares £'000 Shares Basic earnings / weighted average number of shares 5,104 85,496,779 7,780 80,457,940 Weighted average number of shares under option 0 4,131,898 0 6,071,497 Number of shares that would have been issued at fair value 0 -2,144,280 0 -3,752,557 Dividend saving / weighted average number of ordinary shares arising from the conversion of the preference shares 220 5,491,505 469 7,451,150 -------- ---------- -------- ---------- Diluted earnings / weighted average number of shares 5,324 92,975,902 8,249 90,228,030 -------- ---------- -------- ---------- Diluted earnings per ordinary share (pence) 5.73p 9.14p ---------- ---------- The adjusted diluted earnings per share excluding goodwill amortisation and exceptional items is based upon the weighted average number of ordinary shares as set out in the table above. The earnings can be reconciled to the diluted earnings as follows: 53 weeks 52 weeks ended Ended 1 January 26 December 2000 1998 £'000 £'000 Diluted earnings 5,324 8,249 Goodwill amortisation 434 256 Net exceptional charge / (credit) 2,753 -81 ---------- ---------- Adjusted diluted earnings 8,511 8,424 ---------- ---------- Adjusted diluted earnings per share (pence) 9.16p 9.33p Andrews Sykes Group plc Notes to the financial statements For the 53 weeks ended 1 January 2000 8. The above financial information has been extracted form the Company's financial statements for the 53 weeks ended 1 January 2000 and the 52 weeks ended 26 December 1998. The financial statements for the 52 weeks ended 26 December 1998 have been filed and those for the 53 weeks ended 1 January 2000 will be filed with the Registrar of Companies. The Company's auditors gave unqualified reports on the accounts for both these periods and reports did not contain a statement under section 237 (2) or (3) of the Companies Act 1985. 9. Copies of the Annual Report and Financial Statements will be circulated to shareholders shortly and will be available from the Registered office of the Company; Premier House, Darlington Street, Wolverhampton, WV1 4JJ. 10. The Company's Annual General Meeting will be held at 12.00 noon on 31 May 2000 at The Grosvenor House Hotel, Park Lane, London, W1A 3AA. For further information please contact: Robert Stevens (Chief Executive) Telephone today 020 7329 0096 Andrews Sykes Group plc Telephone company 01902 328 700 John Goold Shandwick Consultants Ltd Telephone 020 7329 0096

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