Interim Results

Andrews Sykes Group PLC 27 September 2001 Andrews Sykes Group PLC Interim Results Description Andrews Sykes Group plc, the UK's leading provider of specialist hire solutions, pumps, cooling, heating and ventilation equipment, announces its interim results for the six months ended 30 June 2001. Financial Highlights * Group operating profit before goodwill amortisation increased by £244,000 to £6,818,000 * Profit on ordinary activities before tax and exceptional goodwill impairment charges increased by £857,000 to £6,023,000 * Profit on ordinary activities before tax £6.0 million (first half of 2000 £ 5.2 million, before exceptional goodwill impairment charge of £3 million) * Adjusted diluted earnings per share increased by 24.6% to 4.91 pence * Continued reduction in gearing Commenting on the results, Mr Murray, Chairman of Andrews Sykes Group plc, said: 'The strategy outlined to investors last year of refocusing the group on the UK specialist hire and rental markets has started to prove successful. We intend to maintain this focus, as further benefits should become apparent in the long term'. For further information please contact: RJ Stevens Andrews Sykes Group plc Tel: 07714 064025 John Wade / James Gordon Weber Shandwick Worldwide Tel: 0207 329 0096 Andrews Sykes Group plc Chairman's statement Dear shareholder, I am pleased to be able to report that our Group has achieved commendable trading results for the first half of the 2001 financial year. The salient features of the results for the six months ended 30 June 2001 compared with the first half of 2000 are as follows: * Group operating profit before goodwill amortisation increased by £244,000 to £6,818,000 * Profit on ordinary activities before tax and exceptional goodwill impairment charges increased by £857,000 to £6,023,000 * Profit on ordinary activities before tax £6.0 million (first half of 2000 £ 5.2 million, before exceptional goodwill impairment charge of £3 million) * Adjusted diluted earnings per share increased by 24.6% to 4.91 pence * Continued reduction in gearing Financial review The financial highlights indicate that the strategy outlined in last year's annual report to refocus the Group on UK specialist hire and rental activity is proving to be successful. Excluding our general plant and accommodation business, profit before goodwill amortisation increased by £813,000 to £ 6,513,000, an increase of 14.3% over what was already a very satisfactory performance last year. Unfortunately, as I indicated in my last report to you, the UK general plant market continues to be depressed which has impaired the Group's ability to achieve satisfactory levels of turnover and profitability in its general plant and accommodation business. Turnover in the six months ended 30 June 2001 fell by £1.7 million to £13.1 million and consequently, despite the implementation of significant cost reduction measures by management, profit before goodwill amortisation fell by £569,000 to £305,000. Nevertheless this business remains cash generative achieving an EBITDA of £3.2 million in the period under review. At 30 December 2000 Cox Plant Limited and its subsidiary, Accommodation Hire Limited, were technically in breach of their banking covenants and consequently their bank loans were treated as being repayable on demand and included within current liabilities. The banking covenants have now been renewed at an achievable level. Based on current cash flow projections, in the opinion of the Board, Cox Plant Limited will have sufficient resources to be able to meet its forthcoming loan repayments and accordingly the loans have been reclassified in accordance with the agreed repayment profile. This has helped to increase current net assets from £2.3 million at 30 December 2000 to £6.1 million at 30 June 2001. Share buy back programme and Earnings Per Share (EPS) The Board continues to believe that shareholder value will be optimised by a judicious purchase of our own shares, coupled with investment in organic growth. Consequently the policy outlined in last year's annual report will continue. During the first half of 2001 the company has purchased 10,340,000 shares for cancellation, of which 4,100,000 were purchased under the authority granted at the last Annual General Meeting, at a total cost of £8,439,000. As a consequence of both an improvement in the Group's profit after tax and the reduced number of shares in issue, the adjusted diluted earnings per ordinary share increased by 24.6% from 3.94 pence for the first half of 2000 to 4.91 pence for the six months ended 30 June 2001. Based on the number of shares in issue at 30 June 2001 the adjusted diluted EPS would have been 5.35 pence for the first half of 2001. Changes in directors and advisors The Operations Director, John Hall, will be retiring from the main Board at the end of February 2002. John was appointed Operations Director of our main UK subsidiary company in June 1990 and he became a main Board Director in December 1994. I should like to thank John for his valuable contribution to the group over the years and to wish him well in his retirement. Succession plans are currently being implemented and further details of these will be included in the year end annual report. Andre Chudnoff tendered his resignation as a director of the company on 25 September 2001. Richard Pollard ACA, 38, Finance Director of Nu-Swift Group, and Company Secretary of London Securities plc, was appointed a non-executive director of the company today. The Board have appointed Deloitte & Touche as the Group's auditors for 2001 and their independent review report is included within this interim report. A resolution for their re-appointment as auditors will be proposed at the next Annual General Meeting. Prospects The improvement in the weather at the end of June continued into July thereby giving a boost to our weather dependent air conditioning business. There is, however, no improvement in the general plant market and as a result the outlook for the second half remains cautious. J G Murray Chairman 26 September 2001 Andrews Sykes Group plc Group Profit and Loss Account For the 26 weeks ended 30 June 2001 26 weeks to 26 weeks to 52 weeks to 30 June 1 July 30 December 2001 2000 2000 Restated Total Total Total £'000 £'000 £'000 Turnover 42,185 43,864 86,869 Cost of Sales before goodwill (23,460) (25,434) (49,470) amortisation and impairment charges Annual goodwill amortisation (22) (217) (434) charge Exceptional goodwill impairment 0 (3,000) (9,783) charges ------------- ------------- ------------- Cost of sales (23,482) (28,651) (59,687) ------------- ------------- ------------- Gross profit 18,703 15,213 27,182 Distribution costs (2,905) (3,056) (6,045) Administrative expenses (9,002) (8,800) (18,257) ------------- ------------- ------------- Operating profit 6,796 3,357 2,880 EBITDA * 11,708 11,943 24,088 Depreciation and asset disposals (4,890) (5,369) (10,991) ------------- ------------- ------------- Operating profit before 6,818 6,574 13,097 amortisation of goodwill Amortisation of goodwill as set (22) (3,217) (10,217) out in note 3 ------------- ------------- ------------- Operating profit 6,796 3,357 2,880 ======== ======== ======== Net interest payable (773) (1,191) (2,380) ------------- ------------- ------------- Profit on ordinary activities 6,023 2,166 500 before tax Tax on profit on ordinary (1,878) (1,753) (3,635) activities ------------- ------------- ------------- Profit / (loss) on ordinary activities after taxation being retained profit / (loss) 4,145 413 (3,135) for the financial period ======== ======== ======== Basic earnings / (loss) per 4.88p 0.45p (3.48)p ordinary share Diluted earnings / (loss) per 4.88p 0.45p (3.48)p ordinary share Negative dilutive effect of share 0.00p 0.00p 0.02p options Amortisation of goodwill 0.03p 3.49p 11.27p ------------- ------------- ------------- Adjusted diluted earnings per 4.91p 3.94p 7.81p ordinary share ======== ======== ======== All the above results derive from continuing operations. The results for the 26 weeks ended 1 July 2000 have been restated to reclassify net operating expenses of £15,073,000 as £3,217,000 goodwill amortisation within cost of sales, £8,800,000 administrative expenses and £3,056,000 distribution costs to ensure comparatibility of corresponding amounts. This presentation is consistent with both last year's annual accounts and the current period's interim report. * Earnings Before Interest, Taxation, Depreciation and Amortisation excluding exceptional items. Andrews Sykes Group plc Consolidated Balance Sheet As at 30 June 2001 30 June 1 July 30 December 2001 2000 2000 £'000 £'000 £'000 Fixed assets Intangible assets 150 4,201 172 Tangible assets 26,867 32,252 29,775 Investments 623 773 688 ------------- ------------- ------------- 27,640 37,226 30,635 Current assets ------------- ------------- ------------- Stocks 5,423 6,950 5,758 Debtors 21,718 22,960 21,115 Cash at bank and in hand 10,519 6,848 10,423 ------------- ------------- ------------- 37,660 36,758 37,296 Creditors falling due within one year Loans and overdrafts (12,800) (6,700) (20,150) Other creditors and provisions (15,743) (11,742) (12,485) Corporation tax (3,026) (2,382) (2,384) ------------- ------------- ------------- Net current assets 6,091 15,934 2,277 ------------- ------------- ------------- Total assets less current liabilities 33,731 53,160 32,912 Creditors falling due after more than one year Loans (9,900) (22,300) (5,000) Other creditors and provisions (943) (1,446) (1,160) Corporation tax (245) (515) 0 ------------- ------------- ------------- Net assets 22,643 28,899 26,752 ------------- ------------- ------------- Capital and reserves Called up share capital 15,650 18,129 17,593 Share premium account 10,421 10,399 10,406 Revaluation reserve 765 770 767 Other reserves 3,275 601 1,202 Profit and loss account (7,478) (1,010) (3,226) ------------- ------------- ------------- Equity shareholders' funds 22,633 28,889 26,742 ------------- ------------- ------------- 22,633 28,889 26,742 Minority interests (equity) 10 10 10 ------------- ------------- ------------- 22,643 28,899 26,752 ------------- ------------- ------------- Analysis of net debt Cash at bank and in hand 10,519 6,848 10,423 Total loans, overdrafts and finance (22,704) (29,126) (25,213) lease obligations ------------- ------------- ------------- Net debt (12,185) (22,278) (14,790) ------------- ------------- ------------- Net debt as a percentage of 53.8% 77.1% 55.3% shareholders' funds Andrews Sykes Group plc Consolidated cash flow statement For the 26 weeks ended 30 June 2001 26 weeks to 26 weeks to 52 weeks to 30 June 1 July 30 December 2001 2000 2000 Total Total Total £'000 £'000 £'000 Net cash inflow from operating 11,362 11,607 27,018 activities ------------- ------------- ------------- Returns on investments and servicing of finance Net interest paid (727) (1,108) (2,140) Interest element of finance lease 0 (4) (5) payments ------------- ------------- ------------- Net cash outflow for returns on (727) (1,112) (2,145) investments and servicing of finance ------------- ------------- ------------- Cash outflow for taxation (1,261) (442) (2,931) ------------- ------------- ------------- Capital expenditure Purchase of tangible fixed assets (2,959) (3,413) (7,303) Purchase of shares held in ESOP 0 (151) (151) Sale of tangible fixed assets 855 884 1,966 Sale of shares held in ESOP 65 0 0 ------------- ------------- ------------- Net cash outflow for capital (2,039) (2,680) (5,488) expenditure ------------- ------------- ------------- Cash inflow before the use of liquid 7,335 7,373 16,454 resources and financing ------------- ------------- ------------- Management of liquid resources Movement in bank deposits (8,559) 189 (90) ------------- ------------- ------------- Financing Issue of ordinary share capital net 140 6 73 of issue costs Loan repayments (2,450) (3,423) (7,273) Net capital element of finance lease (59) (63) (126) payments Purchase of own shares (4,916) (876) (2,551) ------------- ------------- ------------- Net cash outflow from financing (7,285) (4,356) (9,877) ------------- ------------- ------------- (8,509) 3,206 6,487 (Decrease) / increase in cash in the ------------- ------------- ------------- period Andrews Sykes Group plc Notes to the accounts For the 26 weeks ended 30 June 2001 1. The interim report for the 26 weeks ended 30 June 2001 was approved by the Board on 26 September 2001. The financial information contained in this interim report does not constitute statutory accounts for the Group for the relevant periods. The interim report is unaudited but has been reviewed by the auditors. The results for the 52 weeks ended 30 December 2000 have been extracted from the audited financial statements that have been filed with the Registrar of Companies. The report of the auditors was unqualified and did not contain a statement under section 237(2) or (3) of the Companies Act 1985. The financial information has been prepared in accordance with the accounting policies adopted within the financial statements for the year ended 30 December 2000, as amended for the adoption of FRS 18: Accounting Policies, which has no impact on the current or prior periods. 2. Segmental analysis The Group's turnover may be analysed between the following principal products and activities: 26 weeks to 26 weeks to 52 weeks to 30 June 1 July 30 December 2001 2000 2000 Total Total Total £'000 £'000 £'000 Product group: Pumps 10,368 9,896 19,387 Heating and ventilation 5,626 5,266 9,002 Air-conditioning 7,709 9,153 22,904 General plant and accommodation 13,109 14,799 28,589 Other 5,373 4,750 6,987 ------------- ------------- ------------- Total 42,185 43,864 86,869 ------------- ------------- ------------- Activity: Hire 29,590 29,956 58,018 Sales 8,092 7,877 15,837 Installation 4,503 6,031 13,014 ------------- ------------- ------------- Total 42,185 43,864 86,869 The geographical analysis of the Group's turnover by origin was as follows: 26 weeks to 26 weeks to 52 weeks to 30 30 June 1 July December 2001 2000 2000 Total Total Total £'000 £'000 £'000 United Kingdom 39,911 41,590 82,203 Rest of Europe 902 851 1,849 Middle East and Africa 1,372 1,283 2,532 Rest of World 0 140 285 ------------- ------------- ------- 42,185 43,864 86,869 ------------- ------------- ------- Andrews Sykes Group plc Notes to the accounts For the 26 weeks ended 30 June 2001 The results can be further analysed by class of business : Profit Goodwill Group Before charges operating Turnover goodwill set profit Net assets charges out in note 3 £'000 £'000 £'000 £'000 £'000 26 weeks ended 30 June 2001: Pumps, 29,076 6,513 (7) 6,506 18,286 heating, ventilation, air-conditioning & other General 13,109 305 (15) 290 4,357 plant and accommodation ---------- ----------- ----------- ----------- ----------- 42,185 6,818 (22) 6,796 22,643 ---------- ----------- ----------- ----------- ----------- 26 weeks ended 1 July 2000: Pumps, 29,065 5,700 (7) 5,693 20,619 heating, ventilation, air-conditioning & other General 14,799 874 (3,210) (2,336) 8,280 plant and accommodation ---------- ----------- ----------- ----------- ----------- 43,864 6,574 (3,217) 3,357 28,899 ---------- ----------- ----------- ----------- ----------- 52 weeks ended 30 December 2000: Pumps, 58,280 11,997 (2,985) 9,012 22,420 heating, ventilation, air-conditioning & other General 28,589 1,100 (7,232) (6,132) 4,332 plant and accommodation ---------- ----------- ----------- ----------- ----------- 86,869 13,097 (10,217) 2,880 26,752 ---------- ----------- ----------- ----------- ----------- 3. Goodwill charges 26 weeks 26 weeks 52 weeks to to to 30 June 1 July 30 December 2001 2000 2000 Total Total Total £'000 £'000 £'000 Annual goodwill (22) (217) (434) amortisation charge Exceptional goodwill 0 (3,000) (6,812) impairment charges Provision against 0 0 (2,971) goodwill previously written off to reserves ----------- ----------- ----------- (22) (3,217) (10,217) ----------- ----------- ----------- During the previous financial year, and in accordance with FRS11: Impairment of fixed assets and goodwill, the directors performed impairment reviews of the carrying value of goodwill attributable to Cox Plant Limited at both 1 July 2000 and 30 December 2000. The above impairment charges arose having taken due regard of the results both during the period and in the early part of 2001 together with the cashflows of the business discounted at a rate of 10%. Last years accounts include a provision of £2,971,000 in respect of the goodwill that arose on the acquisition of Refrigeration Compressor Remanufacturers Limited as the directors considered that the goodwill had suffered a permanent diminution in value. The goodwill had previously been charged directly to reserves in accordance with SSAP 22: Accounting for Goodwill and therefore the full amount was credited back to reserves and charged to last year's profit and loss account in accordance with the Group's stated accounting policy. Both the amortisation of and provision against goodwill are not allowable items when computing the Company's taxable profits. Therefore this resulted in a high effective tax rate in both the 26 weeks ended 1 July 2000 and the 52 weeks ended 30 December 2000. Andrews Sykes Group plc Notes to the accounts For the 26 weeks ended 30 June 2001 4. Reconciliation of operating profit to net cash inflow from operating activities 26 weeks to 26 weeks to 52 weeks to 30 June 1 July 30 December 2001 2000 2000 Total Total Total £'000 £'000 £'000 Operating profit 6,796 3,357 2,880 Amortisation of goodwill as set out 22 3,217 10,217 in note 3 Depreciation 5,241 5,797 11,120 Provision against investments 0 0 85 Profit on sale of fixed assets (351) (428) (129) Decrease in stocks 335 879 2,071 (Increase) / decrease in debtors (430) 1,993 3,760 Decrease in creditors and provisions (251) (3,208) (2,986) ------------- ------------- ------------- Net cash inflow from operating 11,362 11,607 27,018 activities ======== ======== ======== 5. Earnings per share The basic figures have been calculated by reference to the weighted average number of 20p ordinary shares in issue during the period of 84,925,445 (26 weeks ended 1 July 2000: 91,449,890). The earnings are the Group's profit after taxation. The calculation of the diluted earnings per ordinary share is based on diluted earnings of £4,145,000 (26 weeks ended 1 July 2000: £413,000) and on 85,017,432 (26 weeks ended 1 July 2000: 92,231,636) ordinary shares calculated as follows: 26 weeks to 26 weeks to 30 June 2001 1 July 2000 ----------------------------------------------------- Earnings No. of shares Earnings No. of shares £'000 £'000 Basic earnings 4,145 84,925,445 413 91,449,890 /weighted average number of shares Weighted average 245,000 1,245,000 number of shares under option Number of shares that would have been issued at fair value (153,013) (463,254) ----------------------------------------------------- Diluted earnings 4,145 85,017,432 413 92,231,636 /weighted average number of shares ---------------------------------------------------- Diluted earnings 4.88p 0.45p per ordinary share (pence) The adjusted 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: 26 weeks to 26 weeks to 30 June 1 July 2001 2000 Total Total £'000 £'000 Diluted earnings 4,145 413 Goodwill amortisation 22 3,217 --------------- --------------- Adjusted diluted earnings 4,167 3,630 --------------- --------------- Adjusted diluted earnings per ordinary share 4.91p 3.94p (pence) 6. Consolidated statement of total recognised gains and losses 26 weeks to 26 weeks to 52 weeks to 30 June 1 July 30 December 2001 2000 2000 Total Total Total £'000 £'000 £'000 Profit for the financial period 4,145 413 (3,135) Currency translation 45 98 136 differences on foreign currency net investments --------------- --------------- --------------- Total gains and losses in the 4,190 511 (2,999) period ========= ========= ========= Andrews Sykes Group plc Notes to the accounts For the 26 weeks ended 30 June 2001 7. Reconciliation of movements in group shareholders' funds 26 weeks to 26 weeks to 52 weeks to 30 June 1 July 30 December 2001 2000 2000 Total Total Total £'000 £'000 £'000 Profit for the financial period 4,145 413 (3,135) Other recognised gains and 45 98 136 losses Proceeds from ordinary shares 140 6 73 issued Cancellation of own shares (8,439) (876) (2,551) under the share buy back scheme Goodwill previously written off 0 0 2,971 to reserves expensed in the year ------------- --------------- --------------- Net decrease in shareholders' (4,109) (359) (2,506) funds Shareholders' funds at the 26,742 29,248 29,248 beginning of the period --------------- --------------- --------------- 22,633 28,889 26,742 Shareholders' funds at the end --------------- --------------- --------------- of the period 8. A copy of this statement will be posted to all shareholders and is available from the Company's registered office at Premier House, Darlington Street, Wolverhampton, WV1 4JJ. Deloitte & Touche Colmore Gate 2 Colmore Row Birmingham B3 2BN Independent review report from Deloitte & Touche to Andrews Sykes Group plc Introduction We have been instructed by the company to review the financial information for the six months ended 30 June 2001 which comprise the consolidated profit and loss account, balance sheet, cash flow statement and notes 1 to 8. We have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information. Directors' responsibilities The interim report, including the financial information contained therein, is the responsibility of, and has been approved by the directors. The directors are responsible for preparing the interim report in accordance with the Listing Rules of the Financial Services Authority which require that the accounting policies and presentation applied to the interim figures should be consistent with those applied in preparing the preceding annual accounts except where any changes, and the reasons for them, are disclosed. Review work performed We conducted our review in accordance with the guidance contained in Bulletin 1999/4 issued by the Auditing Practices Board for use in the United Kingdom. A review consists principally of making enquiries of group management and applying analytical procedures to the financial information and underlying financial data and based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit performed in accordance with United Kingdom Auditing Standards and therefore provides a lower level of assurance than an audit. Accordingly we do not express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modification that should be made to the financial information as presented for the six months ended 30 June 2001. Deloitte & Touche Chartered Accountants 26 September 2001

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