27 September 2022                                                                                                                   

ANDREWS SYKES GROUP PLC

("Andrews Sykes" or "the Company" or "the Group")

Half Year Results

Unaudited results for the six months ended 30 June 2022

Summary of Results

* Earnings before interest, taxation, depreciation, profit on the sale of property, plant and equipment, amortisation and non-recurring items

Enquiries

CHAIRMAN'S STATEMENT

Overview

The Group's revenue for the 6 months ended 30 June 2022 (the "period") was £37.9 million, an increase of £2.2 million compared with the same period in 2021 and a record for the first half year. Operating profit for the period was £8.5 million compared with £8.0 million in 2021, an increase of £0.5 million, reflecting the increased revenue. Overall, net funds increased by £5.2 million from £16.5 million as at 31 December 2021 to £21.7 million as at 30 June 2022.

Operations review

Revenue at Andrews Sykes Hire in the UK continues to grow and improved by 2.1% compared with the same period in 2021. Our businesses in the rest of Europe experienced a very strong increase in revenue, improving 16.8% compared to the same period in 2021. This result was driven by an exceptional performance from our Italian subsidiary, Nolo Climat, with revenues 92.9% up on the same period in 2021 with the early and prolonged high summer temperatures seen in Italy increasing demand in our cooling products. Consequently, the combined operating profit for the UK and European hire businesses in the period was £1.0 million above the level achieved in 2021.

Climat Location in France has continued to struggle with revenues 12.0% lower than the same period in 2021. As a result, the decision has been made to restructure the business in France and restructuring costs, including depot closures and redundancy, of £0.5m have been incurred during the period. We are confident that once completed, the restructuring will right-size the French operation and lead to profitable future growth.

Andrews Air Conditioning and Refrigeration, our UK air conditioning installation business, has traded broadly in line with last year. Whilst revenue increased 3.7% in the period compared to the first six months of 2021, it still remains 33.1% lower than the corresponding period in 2019. Operating profit decreased by £0.1m as compared to first half of 2021 as a continuing struggle to recruit and retain engineers negatively impacted results.

Khansaheb Sykes, our business based in the UAE, has continued to experience a difficult trading environment but pleasingly recorded revenue growth of 5.8% versus the first half of 2021. Despite this revenue increase and a favourable exchange rate between the Dirham and Sterling, operating profit is comparable to the first half of 2021 and continues to be depressed by increased historic bad debt charges.

Profit for the financial period and Earnings per Share

Profit before tax for the period was £8.5 million compared with £7.6 million in the same period last year. This £0.9m increase is attributable to the £0.5 million improvement in operating profit, a net foreign exchange gain on inter-company balances of £0.2 million (2021: loss of £0.1m) due to the weakening of Sterling compared with the Euro, and a net increase of £0.1 million in interest receivable resulting from the full repayment of the £3.0 million loan outstanding as at 31 December 2021 and higher interest received on cash deposits.

The total tax charge for the period increased by £0.7 million to £2.1 million (2021: £1.3 million), an effective tax rate of 24.0% (2021: 17.5%). The increase in the overall effective rate of tax is driven by a lower level of capital allowances claimed in the UK, coupled with higher profits generated in Italy which has a higher tax rate than in the UK.

Profit after tax in the period was £6.5 million (2021: £6.2 million). Basic earnings per share increased by 0.57 pence, or 3.9%, to 15.36 pence (2021: 14.79 pence) reflecting this increase in profit.

Dividends

The final dividend of 12.50 pence per ordinary share for the year ended 31 December 2021 was approved by members at the AGM held on 14 June 2022. Accordingly, on 17 June 2022 the Company made a total dividend payment of £5.27 million which was paid to shareholders on the register as at 27 May 2022.

The board continues to adopt the policy of returning value to shareholders whenever possible. The Group remains profitable, cash generative and financially strong. Accordingly, the board has decided to declare an interim dividend of 11.90 pence per ordinary share which in total amounts to £5.0 million.

In addition to the interim dividend, the board has assessed the company's ongoing cash requirements and has concluded that, as a result of the company's robust cash generation, a portion of the current cash reserves are surplus to the company's requirements. The board has therefore decided to return this surplus capital to Andrews Sykes shareholders by way of a special dividend of 16.60 pence per ordinary share which in total amounts to £7.0 million. Both the interim and special dividends will be paid on 4 November 2022 to shareholders on the register as at 7 October 2022.

Outlook

The second half of the year has started resiliently with record temperatures in the UK and Europe positively impacting demand for the Group's air conditioning units and chillers. This increased summer demand leads management to be optimistic over the full year results. In the longer term, management remains optimistic that the business will continue to improve but are mindful of the current economic climate and the impact that heightened energy prices, inflation and recession risk can pose to the business and customer demand.  

JG Murray

Chairman

27 September 2022

Consolidated Income Statement

for the six months ended 30 June 2022

^* Earnings before interest, taxation, depreciation, profit on sale of property, plant and equipment, amortisation and non-recurring items.

Consolidated Statement of Comprehensive Total Income

for the six months ended 30 June 2022

Consolidated Balance Sheet

At 30 June 2022

 Consolidated Cash Flow Statement

for the six months ended 30 June 2022

Consolidated Statement of Changes in Equity

for the six months ended 30 June 2022

Notes to the Interim Financial statements

1              General information and accounting policies

These interim financial statements have been prepared in accordance with the recognition and measurement principles of international accounting standards in conformity with the requirements of the Companies Act 2006.

The information for the 12 months ended 31 December 2021 does not constitute the Group's statutory accounts for 2021 as defined in Section 434 of the Companies Act 2006. Statutory accounts for 2021 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 27 September 2022, have not been audited or reviewed by the auditors.  

Basis of preparation

The interim financial statement has 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 (i) fair value less anticipated disposal costs and (ii) carrying value;

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

(iv)          Pension scheme assets and liabilities calculated at fair value in accordance with IAS 19

The annual financial statements of the Group are prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with the AIM Rules issued by the London Stock Exchange.

Accounting policies

The principal accounting policies applied in preparing the interim Financial Statements comply with international accounting standards in conformity with the requirements of the Companies Act 2006 and are consistent with the policies set out in the Annual Report and Accounts for the year ended 31 December 2021.

No new standards or interpretations issued since 31 December 2021 have had a material impact on the accounting of the Group.

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              Revenue

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

The geographical analysis of the Group's revenue by destination is not materially different to that by origination.

3              Finance income and costs

4              Income tax expense

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 applying tax rates that have been substantively enacted by the balance sheet date. UK corporation tax has been provided at 19%. In the UK budget on 15 March 2021, the chancellor announced that the rate of corporation tax in the UK will increase from 19% to 25% with effect from 1 April 2023. This increase will increase the amount of corporation tax payable in the UK. Deferred tax has been calculated based on the rates that the directors anticipate will apply when the temporary timing differences are expected to reverse.

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.

Diluted earnings per share

There were no dilutive instruments outstanding as at 30 June 2022 or either of the comparative periods and therefore there is no difference in the basic and diluted earnings per share for any of these periods. There were no discontinued operations in any period.

6              Dividend payments

Dividends declared and paid on ordinary one pence shares during the 6 months ended 30 June 2022 were as follows:

The above dividend was charged against reserves during the 6 months ended 30 June 2022.

On 27 September 2022 the directors declared an interim dividend of 11.90 pence per ordinary share which in total amounts to £5,019,000. In addition, a special dividend of 16.60 pence per ordinary share which in total amounts to £7,001,000 was also declared. These will be both be paid on 4 November 2022 to shareholders on the register as at 7 October 2022 and will be charged against reserves in the second half of 2022.

Dividends declared and paid on ordinary one pence shares during the 6 months ended 30 June 2021 were as follows:

The above dividend was charged against reserves during the 6 months ended 30 June 2021.

Dividends declared and paid on ordinary one pence shares during the 12 months ended 31 December 2021 were as follows:

The above dividends were charged against reserves during the 12 months ended 31 December 2021.

7              Pensions

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. Over recent years the Group has taken steps to manage the ongoing risks associated with its defined benefit liabilities.

As at 30 June 2022 the Group had a net defined benefit pension scheme surplus, calculated in accordance with IAS 19  using the assumptions as set out below, of £9,392,000 (30 June 2021: £3,606,000; 31 December 2021: £6,137,000). The asset has been recognised in the financial statements as the directors are satisfied that it is recoverable in accordance with IFRIC 14.

Following the triennial recalculation of the funding deficit as at 31 December 2019, a revised schedule of contributions and recovery plan was agreed with the pension scheme trustees in March 2021 and was effective from 1 January 2021.  In accordance with this schedule of contributions and recovery plan, the Group will be making regular contributions of £110,000 per month for the period 1 January 2021 to 31 December 2022, and £10,000 per month for the period 1 January 2023 to 31 December 2025 or until a revised schedule of contributions is agreed, if earlier. Consequently, the Group expects to make total contributions to the defined benefit pension scheme of £1,320,000 during 2022.

Assumptions used to calculate the scheme surplus

The IAS 19 figures are based on a number of actuarial assumptions as set out below, which the actuaries have confirmed they consider appropriate. 

The demographic assumptions used for 30 June 2022, were the same as used in 31 December 2021, 30 June 2021 and the last full actuarial valuation performed as at 1 April 2020.

Assumptions regarding future mortality experience are set based on advice in accordance with published statistics. The mortality table used at 30 June 2022, 30 June 2021 and 31 December 2021 is 100% S3PA CMI2020 with a 1.25% per annum long term improvement for both males and females, heavy tables for males and medium tables for females.

Valuation

The defined benefit scheme funding has changed under IAS 19 as follows:

The increase in the pension surplus since December 2021 is mainly due to a decrease in the value of liabilities as a consequence of an increase in bond yields increasing the discount rate.

8              Net funds and movement in financing liabilities

9              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.