Interim Results

RNS Number : 2486E

Andrews Sykes Group PLC

25 September 2008

 



Andrews Sykes Group plc

Interim Financial Statements for the six months to 30 June 2008

Chairman's Statement

Overview and financial highlights

I am pleased to be able to report that, despite a general economic slowdown in the UK, the group's results for the first half of 2008 show a marked improvement compared with the same period last year. Management continue to show initiative and sound judgement developing markets that are not only less weather dependent than our traditional products and services but are also less reliant on the market sectors most affected by the current UK slowdown.

The group's diverse base of operations predominantly across the UK, Northern Europe and the Middle East together with a low level of imports into the UK from Europe mean that the current weakening of Sterling against, most notably, the Euro has not had a significant impact on the group's profitability in the current period. In addition the group has the benefit of interest rate caps covering the majority of the bank loans which have been effective in protecting it from the increase in the cost of borrowing seen by many over the past months.

The financial highlights of the period compared with the first half of 2007 are as follows:

	2008 £'000	2007 £'000
Revenue	33,873	27,185
EBITDA*	10,550	7,569
Operating profit	9,019	4,731
Profit after tax for the financial period	6,169	2,857
Basic earnings per share	13.85 pence	6.41 pence
Net cash inflow from operating activities	5,854	3,414
Equity dividends paid	14,970	-
Closing net debt	22,182	14,242
* Earnings Before Interest, Taxation, Depreciation, Amortisation, Impairment provisions and exceptional items as reconciled on the face of the income statement

Operations review

Our main UK trading subsidiary, Andrews Sykes Hire, continues to perform well. It continues to develop its business in non seasonal hire markets, particularly through its specialist hire division. Its traditional products have also performed well, especially the pumping division, which has benefited both from the deliberate decision to enter into longer term contracts guaranteeing revenue income as well as unusually wet conditions and the opportunities so provided. 

Our overseas operations in the Middle East and Northern Europe both continue to expand and further develop their market sectors. This is particularly so in the case of the Middle East with management taking full advantage of the level of work currently being undertaken in this region.

Dividend and pension scheme payments

During the current half year two interim dividends were paid that in total amounted to £15 million. Clearance was obtained both from the pensions regulator and the pension scheme trustees and as part of this process a special one-off payment of £1.7 million was made to the pension scheme. Further details of these payments are given in note 6 to these interim financial statements.

Prospects

The summer in the UK and Northern Europe has been very similar to 2007 with disappointing low average temperatures that have done little to stimulate the demand for our air conditioning hire business. Nevertheless management initiatives and the move to less weather related products continue to be effective and we currently anticipate that the second half of 2008 will be in line with last year.

JG Murray

Chairman

24 September 2008

  Andrews Sykes Group plc

Consolidated Income Statement

For the 26 weeks ended 30 June 2008 (unaudited)

	26 weeks   ended   30 June   2008   £'000	26 weeks   ended   30 June   2007 (as restated)**   £'000		52 weeks   ended  29 December   2007   £'000
Continuing operations Revenue Cost of sales	33,873 (15,552)		27,185   (12,696)		57,846 (25,816)
Gross profit	18,321		14,489		32,030
Distribution costs	(4,959)		(4,250)		(9,751)
Administrative expenses  - Normal	(4,872)		(4,574)		(8,095)
- Exceptional	529		(934)		(911)
- Total	(4,343)		(5,508)		(9,006)
Operating profit	9,019		4,731		13,273
EBITDA* Depreciation and impairment losses Profit on the sale of plant and equipment	10,550   (2,551) 491		7,569   (2,255)   351		18,173 (4,463) 474
Normalised operating profit Profit on the sale of property Pension curtailment charge	8,490 529 -		5,665   -   (934)		14,184 - (911)
Operating profit	9,019		4,731		13,273
Income from other participating interests Finance income  Finance costs	- 476   (1,025)		-   430   (860)		209 624   (1,728)
Profit before taxation Taxation	8,470 (2,301)		4,301   (1,444)		12,378 (3,829)
Profit after tax for the financial period	6,169		2,857		8,549
There were no discontinued operations in any of the above periods. Earnings per share from continuing operations Basic (pence) Diluted (pence) Dividends paid per equity share (pence)	13.85p 13.85p 33.60p		. 6.41p 6.41p   -p		19.19p 19.19p   -p

*    Earnings Before Interest, Taxation, Depreciation, Amortisation, Impairment provisions and exceptional costs.

**    Finance income and finance costs have been restated on a consistent basis with the 52 weeks ended 29 December 2007

Andrews Sykes Group plc

Consolidated Balance Sheet

As at 30 June 2008 (unaudited)

	30 June 2008   £'000	30 June 2007   £'000		29 December 2007   £'000
Non-current assets Property, plant and equipment Lease prepayments Trade investments Deferred tax asset Derivative financial instruments	15,489 93    164   831    100		15,340 224   164   2,361   161		15,668 96   164   1,404   13
	16,677		18,250		17,345
Current assets Stocks Trade and other receivables Cash and cash equivalents Assets held for sale	5,904   17,447    12,870   405		5,830   15,318   11,908   -		5,742   16,317   13,102   494
	36,626		33,056		35,655
Current liabilities Trade and other payables Current tax liabilities Bank loans Obligations under finance leases Provisions	(11,899)   (1,633)   (5,000)   (252)   -		(14,436)   (1,343)   (5,000)    (233)   (15)		(11,371)   (1,370)   (5,000)   (415)   (15)
	(18,784)		(21,027)		(18,171)
Net current assets	17,842		12,029		17,484
Total assets less current liabilities	34,519		30,279		34,829
Non-current liabilities Bank loans Obligations under finance leases Retirement benefit obligations Derivative financial instruments	(29,000)   (900)   (432)    -		(20,000)   (1,078)   (2,190)   -		(19,000)   (1,006)   (1,238)   (38)
	(30,332)		(23,268)		(21,282)
Net assets	4,187		7,011		13,547
Equity Share capital Retained earnings Translation reserve Other reserves	446      2,675    834    222		446   6,701   (368)   222		446   12,595   274   222
Surplus attributable to equity holders of the parent	4,177		7,001		13,537
Minority interest	10		10		10
Total equity	4,187		7,011		13,547

Andrews Sykes Group plc

Consolidated Cash Flow Statement

For the 26 weeks ended 30 June 2008 (unaudited)

	26 weeks ended 30 June 2008 £'000	26 weeks ended 30 June 2007 £'000			52 weeks ended 29 December 2007 £'000
Cash flows from operating activities Cash generated from operations Interest paid Net UK corporation tax paid Net withholding tax (paid) / recovered Overseas tax paid	7,821   (846)    (802)   (70)   (249)		5,259   (211)   (1,352)   (69)   (213)		11,211   (1,115)   (2,202)   50   (877)
Net cash inflow from operating activities	5,854		3,414		7,067
Investing activities Dividends received from participating interests (trade investments) Disposal costs paid less consideration received on prior year disposals Sale of property, plant and equipment Purchase of property, plant & equipment Interest received	-   - 636   (2,458)   405		-   295 389   (2,408)   136		209   295 778   (5,346)   440
Net cash outflow from investing activities	(1,417)		(1,588)		(3,624)
Financing activities Loan repayments New loans raised Finance lease capital repayments Equity dividends paid	(24,000)   34,000   (195)     (14,970)		-   -   (69)   -		(1,000)   -   (141)   -
Net cash outflow from financing activities	(5,165)		(69)		(1,141)
Net (decrease) / increase in cash and cash equivalents Cash and cash equivalents at beginning of period Effect of foreign exchange rate changes	(728)   13,102   496		1,757   10,190   (39)		2,302   10,190   610
Cash and cash equivalents at end of period	12,870		11,908		13,102
Reconciliation of net cash flow to movement in net debt in the period Net (decrease) / increase in cash and cash equivalents Cash outflow from loan and finance lease repayments Cash inflow from the increase in loans Non cash movements re finance leases Non cash movements in the fair value of derivative instruments	(728)     24,195     (34,000)   74    125		1,757   69   -   -   138		2,302   1,141   -   (182)   (48)
Movement in net debt during the period Opening net debt at the beginning of period Effect of foreign exchange rate changes	(10,334)   (12,344)   496		1,964   (16,167)   (39)		3,213   (16,167)   610
Closing net debt at the end of period	(22,182)		(14,242)		(12,344)

Andrews Sykes Group plc

Consolidated Statement of Recognised Income and Expense

For the 26 weeks ended 30 June 2008 (unaudited)

	26 weeks   ended   30 June   2008   £'000		26 weeks ended 30 June 2007 £'000		52 weeks   ended  29 December   2007   £'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 Currency translation differences on foreign currency net investments Deferred tax on items posted directly to equity	(1,759)   -   205   560   435		-   -   -   (46)   (11)		154   424   (279)   595   (107)
Net (expense) / income recognised directly in equity Profit for the period attributable to equity shareholders	(559)   6,169		(57)   2,857		787    8,549
Total recognised income and expense for the period attributable to equity holders of the parent	5,610		2,800		9,336

Andrews Sykes Group plc

Notes to the consolidated interim financial statements

For the 26 weeks ended 30 June 2008 (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 1985 to 2006. 

The information for the 52 weeks ended 29 December 2007 does not constitute the group's statutory accounts for 2007 as defined in Section 240 of the Companies Act 1985. Statutory accounts for 2007 have been delivered to the Registrar of Companies. The Auditor's report on those accounts was unqualified and did not contain statements under Section 273(2) or (3) of the Companies Act 1985. These interim financial statements, which were approved by the Board of Directors on 24 September 2008, have not been audited or reviewed by the Auditors.

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 2007.

3     Revenue

An analysis of the group's revenue is as follows:

	26 weeks ended  30 June 2008 £'000	26 weeks ended 30 June 2007 £'000	52 weeks ended 29 December 2007 £'000
Continuing Operations
Hire Sales Installations	26,311 4,926 2,636	19,693 4,084 3,408	43,579 8,043 6,224
Group consolidated revenue from the sale of goods and services Income from other participating interests Finance income	33,873 - 476	27,185 - 430	57,846 209 624
Gross consolidated revenue	34,349	27,615	58,679

4     Pension curtailment charge

	26 weeks  ended  30 June  2008 £'000	26 weeks  ended 30 June  2007 £'000	52 weeks  ended 29 December  2007 £'000
Pension curtailment charge	-	(934)	(911)

Last year every member of the Andrews Sykes Group Defined Benefit Pension Scheme (ASGPS) was given the opportunity of transferring their accrued rights to an independent pension provider of their choice. An incentive equal to 40% of the normally available transfer value was offered and this could either be paid directly to the member, as a cash bonus, or to their new pension provider, via the ASGPS, as an enhanced transfer value (ETV). As well as the presentations made by independent financial advisors, the group paid for independent financial advice to be made available to each member.

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.

	26 weeks to 30 June 2008
	Continuing earnings £'000		Number of shares
Basic earnings/weighted average number of shares	6,169		44,552,865
Basic earnings per ordinary share (pence)	13.85p
	26 weeks to 30 June 2007
	Continuing earnings £'000		Number of shares
Basic earnings/weighted average number of shares	2,857		44,552,715
Basic earnings per ordinary share (pence)	6.41p
	52 weeks to 29 December 2007
	Continuing earnings £'000		Number of shares
Basic earnings/weighted average number of shares	8,549		44,552,790
Basic earnings per ordinary share (pence)	19.19p

Adjusted basic earnings per share excluding profit on sale of property and pension curtailment charge

The basic figures excluding the profit on sale of property and the pension curtailment charge 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.

	26 weeks to 30 June 2008
	Continuing earnings £'000		Number of shares
Basic earnings/weighted average number of shares	6,169		44,552,865
Less profit on the sale of property net of tax	(517)
Adjusted basic earnings/weighted average number of shares	5,652		44,552,865
Adjusted basic earnings per ordinary share (pence) excluding  profit on sale of property	12.69p

Adjusted basic earnings per share excluding profit on sale of property and pension curtailment charge

	26 weeks to 30 June 2007
	Continuing earnings £'000		Number of shares
Basic earnings/weighted average number of shares Add back pension curtailment charge net of tax	2,857 654		44,552,715
Adjusted basic earnings/weighted average number of shares	3,511		44,552,715
Adjusted basic earnings per ordinary share (pence) excluding pension curtailment charge	7.88p

	52 weeks to 29 December 2007
	Continuing earnings £'000		Number of shares
Basic earnings/weighted average number of shares	8,549		44,552,790
Add back pension curtailment charge net of tax	638
Adjusted basic earnings/weighted average number of shares	9,187		44,552,790
Adjusted basic earnings per ordinary share (pence) excluding pension curtailment charge	20.62p

Diluted earnings per share

The calculation of the diluted earnings per ordinary share is based on the profits and shares as set out in the tables below. There are no discontinued operations in any period. The share options have a dilutive effect for the period calculated as follows:

	26 weeks to 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 be issued at fair value to satisfy 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
	26 weeks to 30 June 2007
	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 be issued at fair value to satisfy above options	2,857		44,552,715   15,000   (8,001)
Earnings/diluted weighted average number of shares	2,857		44,559,714
Diluted earnings per ordinary share (pence)	6.41p

	52 weeks to 29 December 2007
	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 be issued at fair value to satisfy above options	8,549		44,552,790   15,000   (8,065)
Earnings/diluted weighted average number of shares	8,549		44,559,725
Diluted earnings per ordinary share (pence)	19.19p

Adjusted diluted earnings per share excluding profit on sale of property and pension curtailment charge

The calculation of the diluted earnings per ordinary share excluding the profit on sale of property and the pension curtailment charge is based on the profits and shares as set out in the table below. There are no discontinued operations in any period. The share options have a dilutive effect for the period calculated as follows:

	26 weeks to 30 June 2008
	Continuing earnings £'000		Number of shares
Basic earnings/weighted average number of shares Less profit on the sale of property net of tax Weighted average number of shares under option Number of shares that would be issued at fair value to satisfy above options	6,169   (517)		44,552,865   15,000   (11,966)
Adjusted earnings/diluted weighted average number of shares	5,652		44,555,899
Adjusted diluted earnings per ordinary share (pence) excluding profit on sale of property	12.69p
	26 weeks to 30 June 2007
	Continuing earnings  £'000		Number of shares
Basic earnings/weighted average number of shares Add back pension curtailment charge net of tax Weighted average number of shares under option Number of shares that would be issued at fair value to satisfy above options	2,857 654		44,552,715   15,000   (8,001)
Adjusted earnings/diluted weighted average number of shares	3,511		44,559,714
Adjusted diluted earnings per ordinary share (pence) excluding pension curtailment charge	7.88p
	52 weeks to 29 December 2007
	Continuing earnings  £'000		Number of shares
Basic earnings/weighted average number of shares Add back pension curtailment charge net of tax Weighted average number of shares under option Number of shares that would be issued at fair value to satisfy above options	8,549 638		44,552,790   15,000   (8,065)
Adjusted earnings/diluted weighted average number of shares	9,187		44,559,725
Adjusted diluted earnings per ordinary share (pence) excluding pension curtailment charge	20.62p

6     Dividend payments and loan restructuring

No interim dividends were declared or paid during either of the previous financial periods.

The directors declared and paid the following interim dividends in respect of the 52 weeks ending 31 December 2008 during the period under review:

	Pence per share 6.50p 27.10p	£'000 2,896 12,074
Interim dividend declared on 26 March 2008 and paid to shareholders on the register as at 4 April 2008 on 18 April 2008
Interim dividend declared on 24 April 2008 and paid to shareholders on the register as at 2 May 2008 on 16 May 2008
	33.60p	14,970

The above interim dividends have been charged against retained earnings during the current period.

Clearance was obtained from the pensions regulator and trustees of the Andrews Sykes Group Defined Benefit Pension Scheme (ASGPS) prior to the payment of the second interim dividend on 16 May 2008. As part of that process it was agreed that a special contribution of £1.7 million would be paid by the company to the ASGPS and this is shown in note 7 below. 

The above dividend and pension scheme payments were mainly financed by net additional bank loans of £10 million comprising new loan draw-downs of £34 million less loan repayments of £24 million. The interest rates and covenants on the new loans are similar to those in the previous agreements and interest rate caps continue to be held to limit the group's exposure to increases in LIBOR.

7     Retirement benefit obligations - Defined benefit pension scheme

The group closed the UK group defined benefit pension scheme to future accrual as at 31 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, £125,000 per month in the period under review, and are agreed in advance with the trustees of the pension scheme.

Assumptions used to calculate the scheme deficit

A full actuarial valuation has been carried out as at 31 December 2007 and this was used as a basis for calculating the deficit as at 29 December 2007. In view of the significant changes in market conditions between the end of December 2007 and 30 June 2008, the valuation has been further updated by a qualified independent actuary to take into account current market conditions.

The major assumptions used in this valuation to determine the present value of the scheme's defined benefit obligation were as follows:

Rate of increase in pensionable salaries Rate of increase in pensions in payment Discount rate applied to scheme liabilities Inflation assumption

30 June 2008 N/A 4.00% 6.60% 4.10%

30 June 2007 N/A 3.00% 5.40% 3.00%

29 December 2007 N/A 3.40% 5.90% 3.40%

Assumptions regarding future mortality experience are set based on advice in accordance with published statistics. The current mortality table used is PA92YOBMC+2 (29 December 2007: PA92YOBMC+2, 30 June 2007: PA92C2020)

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 2008	30 June 2007	29 December 2007
Male, current age 45 Female, current age 45	21.2 years 24.0 years	19.8 years   22.8 years	21.2 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 2008 £'000	30 June 2007 £'000	29 December 2007 £'000
Total fair value of plan assets Present value of defined benefit funded obligation	26,794   (27,226)	24,557   (26,747)	25,913   (27,151)
Deficit in the scheme - pension liability recognised in the balance sheet	(432)	(2,190)	(1,238)

The movements in the fair value of the scheme's assets over the reporting period are as follows:

	30 June 2008 £'000	30 June 2007 £'000	29 December 2007 £'000
Fair value of plan assets at the start of the period Expected return on plan assets Actuarial (losses)/gains recognised in the SORIE Employer contributions - normal Employer contributions - special (note 6) Employer contributions - transfer value exercise Benefits paid Settlements and curtailments	25,913   692   (1,759)   750   1,700   -   (502)   -	33,445   1,050   -   750   -   2,296   (402)   (12,582)	33,445   1,926   154   1,500   -   1,880   (1,269)   (11,723)
Fair value of plan assets at the end of the period	26,794	24,557	25,913

Employer contributions in respect of the transfer value exercise and settlements and curtailments were both estimated at 30 June 2007 and finalised at 29 December 2007.

The movement in the present value of the defined benefit obligation during the period was as follows:

	30 June 2008 £'000	30 June 2007 £'000	29 December   2007   £'000
Present value of defined benefit funded obligation at the beginning of the period Interest on defined benefit obligation Actuarial gain /(loss) recognised in the SORIE Benefits paid Settlements and curtailments	(27,151)   (782)   205   502   -	(40,022)   (1,061)   -   402   13,934	(40,022)   (1,888)   145   1,269   13,345
Present value of defined benefit funded obligation at the end of the period	(27,226)	(26,747)	(27,151)

Amounts recognised in the income statement

The amounts (charged) / credited in the income statement were:

	30 June 2008 £'000	30 June 2007 £'000	29 December 2007 £'000
Expected return on pension scheme assets Interest on pension scheme liabilities	692   (782)	1,050   (1,061)	1,926   (1,888)
Net pension interest (charge) / income Settlements and curtailments	(90)   -	(11)   1,352	38   1,622
	(90)	1,341	1,660

8     Share capital

	30 June 2008 £'000	30 June 2007 £'000	29 December 2007 £'000
Authorised: 1,398,170,943 ordinary shares of one pence each (30 June 2007 and 29 December 2007: 1,398,170,943 ordinary shares of one pence each)	13,982	13,982	13,982
Issued and fully paid: 44,552,865 ordinary shares of one pence each  (30 June 2007 and 29 December 2007: 44,552,865 ordinary shares of one pence each)	446	446	446

During the period the company did not buy back any shares for cancellation (26 weeks ended 30 June 2007: Nil shares).  

The company has one class of ordinary shares which carry no right to fixed income.

At 30 June 2008 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 2008	30 June 2007	29 December 2007
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 (26 weeks ended 30 June 2007: Nil options).

9     Cash generated from operations

	26 weeks ended 30 June 2008 £'000	26 weeks ended 30 June 2007 £'000	52 weeks ended 29 December 2007 £'000
Profit for the period attributable to equity shareholders Adjustments for: Taxation charge Pension curtailment charge Finance costs Finance income Income from other participating interests Profit on the sale of property, plant and equipment Depreciation and amortisation Impairment losses Excess of normal pension contributions compared with service cost Special pension contributions	6,169 2,301 - 1,025 (476) - (1,020) 2,551 - (750) (1,700)	2,857 1,444 934 860 (430) - (351) 2,224 31 (750) (868)	8,549 3,829 911 1,728 (624) (209) (474) 4,432 31 (1,500) (4,279)
Cash generated from operations before movements in working capital Increase in stocks (Increase) / decrease in trade and other receivables Increase in trade and other payables Decrease in provisions	8,100 (162) (603) 501 (15)	5,951 (1,493) 760 50 (9)	12,394 (1,406) (350) 582 (9)
Cash generated from operations	7,821	5,259	11,211

10     Analysis of net debt

	30 June 2008 £'000	30 June 2007 £'000	29 December 2007 £'000
Cash and cash equivalents per cash flow statement	12,870	11,908	13,102
Derivative financial instruments	100	161	13
Financial assets	100	161	13
Bank loans	(34,000)	(25,000)	(24,000)
Obligations under finance leases	(1,152)	(1,311)	(1,421)
Derivative financial instruments	-	-	(38)
Financial liabilities	(35,152)	(26,311)	(25,459)
Net debt	(22,182)	(14,242)	(12,344)

11     Distribution of interim financial statements

Following a change in regulations, 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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