Final Results

Andrews Sykes Group PLC 26 April 2001 Andrews Sykes Group Preliminary Results 26 April 2001 Preliminary Results Key Points - EBITDA decreased from £27.2 m to £24.1m. - Profit on ordinary activities before tax and exceptional items decreased from £11.6 million to £10.3 million. - Operating cashflow per share before exceptional items (diluted basis) increased from 25.5p to 29.8p. - Cash increased during period by £6.6m. - Gearing (net debt as a proportion of equity funds) reduced from 98.6% to 55.3%. - In excess of £2.5m spent on share buy-back programme to enhance shareholder value. 52 weeks 53 weeks ended ended 30 December 1 January 2000 2000 £'000 £'000 Turnover 86,869 94,673 EBITDA* 24,088 27,238 Profit on ordinary activities before tax and exceptional items 10,283 11,588 Goodwill charges (10,217) (434) Profit on ordinary activities before tax 500 7,998 Operating cash flow per share (diluted basis)** 29.8p 25.5p Adjusted diluted earnings per share 7.81p 9.16p Gearing 55.3% 98.6% * Earnings before interest, taxation, depreciation, exceptional items and goodwill charges. ** Operating cashflow before exceptional items. CHAIRMAN'S STATEMENT The period ended December 2000 proved to be a difficult one for parts of the Group. The full effect of a poor trading year in plant hire and unfavourable summer weather conditions have impacted heavily on the Group's overall trading performance. The ongoing downward pressure on UK general plant hire prices continues to impair the Group's ability to maintain turnover and gross profits at the desired level in this business, with the trading of Cox Plant Limited seeing a further decline in the second half of 2000. This follows the pattern of trading experienced across this sector and is in line with other major competitors in the UK general plant hire business. Consequently a further full and detailed review of Cox Plant Limited has been carried out, which has led the Board to reassess the value of the goodwill carried on the balance sheet. It is the view of the Board that the remaining balance of goodwill of £3.8 million is no longer supportable and this has been written off in full. This brings the total value of goodwill written off in the period in respect of Cox Plant Limited to £6.8 million. As outlined in last year's report we continue with our declared strategy to restructure the Group to focus on UK specialist hire and rental activity, where margins and potential profit growth are considered to be greatest. Further to this aim, a full review of Refrigeration Compressor Remanufacturers Limited, our subsidiary undertaking trading in the remanufacture of compressors, indicated to the Board that it has seen a major decline in its market place, with its margins in serious decline. As a result, the Board believes the goodwill arising on the acquisition of this business can no longer be supported, and the balance of £3.0 million has been written off in the financial statements of the Group. In line with my half year report, the Group has now completed the actions required to close the operations in both Poland and Singapore. The closure costs were not significant and have been fully absorbed in the reported figures. As I have already mentioned, the impact of the factors outlined above has been significant and consequently Group turnover fell by 8.2% to £86.9 million, gross profit before exceptional items reduced by 5.0% to £37.0 million and operating profit before exceptional items fell by 11.5% to £12.7 million. The Group, however, remains cash generative, showing a year on year increase of £ 6.6 million and gearing, being net debt as a proportion of equity funds, reduced from 98.6% to 55.3%. It remains the Board's belief that optimisation of shareholder value will best be served by continuing the current share buy-back programme and 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 12.5% (increase from 10% authorised at the previous Annual General Meeting) of the ordinary shares in issue. At such time that the Board considers the interests of shareholders will best be served by the payment of dividends, the dividend policy will be resumed. Progress to date on the share buyback programme has resulted in 4,556,428 shares being repurchased in the period up to 30 December 2000 at a total cost of £2,550,805 with a further 2,925,000 shares repurchased in January and February 2001 at a cost of £2,278,838. Overall the Group has seen a difficult year of change with emphasis being directed increasingly towards the UK core business streams and, in particular, towards strengthening the Group's market position in all areas where we lead the market. In order to achieve this Robert Stevens, the Chief Executive, has directed attention throughout the year to reshaping the Group, in line with our desire to move further towards providing added value services which build on the Group's solid base of rental and hire. He and his management team will continue to focus on growing our core hire and rental portfolio of businesses in the UK, whist retaining our presence in Holland and UAE where we also have market leadership operating in similar products and services. We are already seeing the benefit of these developments, with trading in the first quarter of 2001 demonstrating growth over 2000 in the core UK Andrews Sykes business. However Cox Plant continues to experience difficulties in trading levels. Overall the group is modestly ahead of last year. J G Murray Chairman 25 April 2001 Andrews Sykes Group plc Consolidated profit and loss account For the 52 weeks ended 30 December 2000 Continuing Continuing 52 weeks ended 30 December 2000 53 weeks ended 1 January 2000 -------------------------------------------------------------- Before Before Exceptional Exceptional Total Exceptional Exceptional Total Items Items Items Items £'000 £'000 £'000 £'000 £'000 £'000 Turnover 86,869 0 86,869 94,673 0 94,673 Cost of sales -49,904 -9,783 -59,687 -55,761 -418 -56,179 ---------- ----------- -------- ---------- ---------- -------- Gross profit 36,965 -9,783 27,182 38,912 -418 38,494 Distribution -6,045 0 -6,045 -6,603 0 -6,603 costs Administrative -18,292 0 -18,292 -18,119 -2,217 -20,336 expenses Other operating 35 0 35 120 0 120 income ---------- ----------- -------- --------- ---------- --------Operating profit 12,663 -9,783 2,880 14,310 -2,635 11,675 ---------- ----------- -------- --------- ---------- --------EBITDA* 24,088 0 24,088 27,238 0 27,238 Depreciation and -10,991 0 -10,991 -12,494 0 -12,494 asset disposals ---------- ----------- -------- --------- ---------- --------Operating profit before exceptional items and goodwill 13,097 0 13,097 14,744 0 14,744 charges Exceptional items 0 0 0 0 -2,635 -2,635 Goodwill charges -434 -9,783 -10,217 -434 0 -434 ---------- ----------- -------- -------- ---------- --------Operating profit 12,663 -9,783 2,880 14,310 -2,635 11,675 ---------- ----------- -------- -------- ---------- --------Income from other 0 0 0 135 0 135 participating interests Loss on the termination of overseas Operations 0 0 0 0 -955 -955 Net interest -2,380 0 -2,380 -2,857 0 -2,857 payable ---------- ----------- -------- -------- ---------- --------Profit/ (loss) on ordinary activities before Taxation 10,283 -9,783 500 11,588 -3,590 7,998 Tax on profit on -3,635 0 -3,635 -3,511 837 -2,674 ordinary activities ---------- ----------- -------- -------- ---------- --------(Loss)/ profit on ordinary activities after Taxation being (loss)/ 6,648 -9,783 -3,135 8,077 -2,753 5,324 profit for the financial period ---------- ----------- -------- -------- Dividends paid and proposed: Equity 0 -1,326 shares Non equity 0 -220 shares Retained (loss) / ------- ---------profit for the financial Period -3,135 3,778 attributable to ordinary shareholders ===== ===== Basic (loss) / -3.48p 5.97p earnings per ordinary share Diluted (loss) / -3.48p 5.73p earnings per share Add back: Goodwill 11.27p 0.47p charges Exceptional items 0.00p 2.96p Negative dilutive effect of share 0.02p 0.00p options Adjusted diluted 7.81p 9.16p earnings per share ===== ===== Dividends per share: Equity shares 0.00p 1.44p Non equity shares 0.00p 3.50p There were no material acquisitions or discontinued operations during either period. * Earnings before interest, taxation, depreciation, and amortisation excluding exceptional items. Andrews Sykes Group plc Consolidated Balance Sheet at 30 December 2000 30 December 1 January 2000 2000 £'000 £'000 Fixed assets Intangible assets: Goodwill 172 7,418 Tangible fixed assets 29,775 35,164 Investments 688 622 ---------------- ----------------- 30,635 43,204 Current assets ---------------- ----------------- Stocks 5,758 7,829 Overseas tax 174 37 Other debtors 20,941 24,883 Cash at bank and in hand 10,423 3,764 --------------- ----------------- 37,296 36,513 --------------- -----------------Creditors: Amounts falling due within one year Loans overdrafts and finance lease -20,213 -7,800 obligations Other creditors -12,422 -14,836 Corporation and overseas tax -2,384 -1,518 ---------------- ----------------- -35,019 -24,154 ---------------- ----------------- Net current assets 2,277 12,359 ---------------- ----------------- Total assets less current liabilities 32,912 55,563 Creditors: Amounts falling due after more than one year Loans and finance lease obligations -5,000 -24,812 Provisions for liabilities and charges -1,160 -1,493 ---------------- ---------------- Net assets 26,752 29,258 ---------------- ----------------- Capital and reserves Called up share capital 17,593 18,443 Share premium account 10,406 10,394 Revaluation reserve 767 773 Other reserves 1,202 280 Profit and loss account -3,226 -642 ---------------- ----------------- Equity shareholders' funds 26,742 29,248 Minority interests (equity) 10 10 ---------------- ----------------- 26,752 29,258 ---------------- ----------------- Analysis of net debt Cash at bank and in hand 10,423 3,764 Total loans, overdrafts and finance -25,213 -32,612 lease obligations ---------------- ----------------- Net debt -14,790 -28,848 ---------------- ----------------- As a percentage of equity shareholders' 55.3% 98.6% funds Andrews Sykes Group plc Consolidated cash flow statement For the 52 weeks ended 30 December 2000 52 weeks 53 weeks ended ended 30 December 1 January 2000 2000 £'000 £'000 Net cash inflow from operating activities 27,018 19,469 -------------- --------------- Returns on investments and servicing of finance Net interest paid -2,145 -3,222 Preference dividends paid 0 -257 -------------- --------------- Net cash outflow for returns on investments -2,145 -3,479 and servicing of finance -------------- ---------------Cash outflow for taxation -2,931 -4,408 -------------- --------------- Capital expenditure Purchase of own shares by ESOP -151 -458 Purchase of tangible fixed assets -7,303 -4,677 Sale of tangible fixed assets 1,966 1,175 -------------- --------------- Net cash outflow for capital expenditure -5,488 -3,960 -------------- --------------- Acquisitions Payment of deferred consideration on 0 -6,500 previous acquisitions -------------- ---------------Net cash outflow for acquisitions 0 -6,500 -------------- ---------------Equity dividends paid 0 -3,297 -------------- ---------------Cash inflow / (outflow) before the use of liquid resources and financing 16,454 -2,175 -------------- ---------------Management of liquid resources Movement in bank deposits -90 575 -------------- ---------------Financing Issue of ordinary share capital net of 73 932 issue costs Loan repayments -7,273 -9,303 New loans drawn down 0 4,400 New hire purchase and finance lease 0 36 agreements Capital element of finance lease repayments -126 -176 Purchase of own shares -2,551 -16 -------------- ---------------Net cash outflow from financing -9,877 -4,127 -------------- ---------------Increase / (decrease) in cash in the period 6,487 -5,727 -------------- --------------- Andrews Sykes Group plc Notes to the financial statements For the 52 weeks ended 30 December 2000 1. Segmental analysis The Group's turnover may be analysed between the following principal products and activities: 52 weeks 53 weeks ended ended 30 1 January December 2000 2000 £'000 £'000 Product Group: Pumps 19,387 22,375 Heating and ventilation 12,836 9,130 Air conditioning 22,904 21,578 General plant and accommodation 28,589 31,306 Other 3,153 10,284 -------- ----------Total 86,869 94,673 --------- ----------Activity: Hire 58,018 59,766 Sales 15,837 19,825 Installation 13,014 15,082 --------- ----------Total 86,869 94,673 --------- ----------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 results can be further analysed by class of business as follows : Turnover Profit Profit / Net before (loss) assets Exceptionals Exceptionals Before & goodwill & goodwill Interest Amortisation amortisation And tax £'000 £'000 £'000 £'000 £'000 52 weeks ended 30 December 2000: Pumps, heating, 58,280 11,997 -2,985 9,012 22,420 ventilation, air conditioning and other General plant and 28,589 1,100 -7,232 -6,132 4,332 accommodation -------- ------------ ------------ -------- --------- 86,869 13,097 -10,217 2,880 26,752 -------- ------------ ----------- --------- ---------53 weeks ended 1 January 2000: Pumps, heating, 63,367 12,018 -3,604 8,414 17,472 ventilation, air conditioning and other General Plant and 31,306 2,861 -420 2,441 11,786 accommodation -------- ------------ ------------ -------- --------- 94,673 14,879 -4,024 10,855 29,258 -------- ------------ ------------ -------- ---------The geographical analysis of the Group's turnover was as follows: By geographical origin By geographical destination 52 weeks 53 weeks 52 weeks 53 weeks ended ended ended ended 30 December 1 January 30 December 1 January 2000 2000 2000 2000 £'000 £'000 £'000 £'000 United Kingdom 82,203 86,907 80,865 85,274 Rest of Europe 1,849 2,678 2,575 3,503 Middle East and Africa 2,532 3,490 2,865 4,197 The Americas 0 639 281 661 Rest of World 285 959 283 1,038 ---------- ---------- --------- ------------ 86,869 94,673 86,869 94,673 ---------- ---------- --------- ------------ Andrews Sykes Group plc Notes to the financial statements For the 52 weeks ended 30 December 2000 The analysis of profit before interest and tax and net assets by geographical origin was as follows: Profit before interest Net Net and tax assets assets 52 weeks 53 weeks 52 weeks 53 weeks ended ended ended ended 30 December 1 January 30 1 December January 2000 2000 2000 2000 £'000 £'000 £'000 £'000 United Kingdom 2,813 10,586 35,360 51,224 Rest of Europe 240 738 5,171 5,499 Middle East and Africa 213 97 1,541 1,388 The Americas 88 595 0 220 Rest of World 298 29 0 57 ----------- ---------- -------- --------- 2,880 10,855 42,072 57,948 ----------- ---------- Net debt 14,790 28,848 Taxation and dividends (payable) / 530 158 recoverable ------- ---------- 26,752 29,258 ------- ---------- 2. Exceptional items 52 weeks 53 weeks ended ended 30 1 December January 2000 2000 £'000 £'000 Goodwill impairment (note 3) 9,783 0 SFP contractual settlement costs 0 1,440 Redundancy and reorganisation 0 1,014 Abortive acquisition costs 0 181 -------- --------- 9,783 2,635 Loss on the termination of overseas 0 955 operations -------- --------- 9,783 3,590 -------- --------- 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 was settled out of court last year with a total payment due to SFP of £3 million. The settlement gave rise to the above exceptional charge last year after provisions made in previous periods and was inclusive of costs. The loss on the termination of overseas operations arose following the decision to withdraw from both America and Egypt last year. Andrews Sykes Group plc Notes to the financial statements For the 52 weeks ended 30 December 2000 52 weeks 53 weeks 3. Amortisation of goodwill ended ended 30 December 1 January 2000 2000 £'000 £'000 Amortisation of goodwill attributable to Cox Plant Limited: Annual goodwill amortisation charge -420 -420 Charge arising from impairment review -6,812 0 -------------- -------------- -7,232 -420 Amortisation of goodwill attributable to -14 -14 other subsidiary undertakings Pre FRS 10 goodwill: Provision against goodwill previously -2,971 0 written off to reserves -------------- -------------- -10,217 -434 ============== =========== During the period and in accordance with FRS 11: Impairment of fixed assets and goodwill, the directors have performed an impairment review of the carrying value of the goodwill attributable to Cox Plant Limited at 30 December 2000. Having due regard to the results of Cox Plant Limited during the period and the early part of 2001 the directors considered the cashflows for the business discounted at a rate of 10%. Accordingly, full provision has been made against the balance of goodwill as at 30 December 2000. The directors consider that the goodwill arising on the acquisition of Refrigeration Compressor Remanufacturers Limited has suffered a permanent diminution in value and the value of the goodwill arising on acquisition of £ 2,971,000, which was previously charged directly to reserves in accordance with SSAP 22: Accounting for goodwill, can no longer be supported. The full amount has been credited back to reserves and charged to the current period profit and loss account in accordance with the Group's stated accounting policy. 4. Reconciliation of operating profit to net cash inflow from operating activities 52 weeks 53 weeks ended ended 30 December 1 January 2000 2000 £'000 £'000 Operating profit 2,880 11,675 Amortisation and impairment of goodwill 10,217 434 Depreciation 11,120 12,660 Provision against investments 85 0 Profit on sale of tangible fixed assets -129 -166 Decrease in stocks 2,071 1,563 Decrease / (increase) in debtors 3,760 -1,625 Decrease in creditors and provisions -2,986 -5,072 -------------- -------------- Net cash inflow from operating activities 27,018 19,469 -------------- -------------- Andrews Sykes Group plc Notes to the financial statements For the 52 weeks ended 30 December 2000 5. Reconciliation of net cash flow to movement in net debt 52 weeks 53 weeks ended ended 30 December 1 January 2000 2000 £'000 £'000 Increase / (decrease) in cash in the period 6,487 -5,727 Cash outflow from movement in debt and 7,399 5,043 lease financing Cash outflow / (inflow) from movement in 90 -575 liquid resources -------------- ---------------Change in net debt resulting from cash 13,976 -1,259 flows Loan notes issued 0 -600 Translation differences 82 -105 -------------- --------------- Movement in period 14,058 -1,964 Opening net debt -28,848 -26,884 -------------- ---------------Closing net debt -14,790 -28,848 -------------- ---------------6. Consolidated statement of total recognised gains and losses 52 weeks 53 weeks ended ended 30 December 1 January 2000 2000 £'000 £'000 (Loss) / profit for the financial period -3,135 5,324 Currency translation differences on foreign 136 -97 currency net investments ------------- ---------------Total gains and losses in the period -2,999 5,227 ------------- --------------- 7. Reconciliation of movement in Group shareholders' funds 52 weeks 53 weeks ended ended 30 December 1 January 2000 2000 £'000 £'000 (Loss) / profit for the financial period -3,135 5,324 Dividends 0 -1,546 Other recognised gains and losses 136 -97 Proceeds from ordinary shares issued 73 932 Consideration on the purchase of own shares -2,551 -16 Goodwill previously written off to reserves 2,971 0 expensed in the year -------------- --------------- Net (decrease) / increase in shareholders' -2,506 4,597 funds Shareholders' funds at the beginning of the 29,248 24,651 period --------------- --------------Shareholders' funds at the end of the 26,742 29,248 period ---------------------- ------- Andrews Sykes Group plc Notes to the financial statements For the 52 weeks ended 30 December 2000 8. Earnings per ordinary share. The basic figures have been calculated by reference to the weighted average number of ordinary 20 pence shares in issue during the period of 90,156,589 (53 weeks ended 1 January 2000: 85,496,779). The calculation of the diluted earnings per ordinary share is based on a diluted loss of £3,135,000 (53 weeks ended 1 January 2000: profit of £5,324,000) and on 90,690,403 (53 weeks ended 1 January 2000: 92,975,902) ordinary shares. The share options have a negative dilutive effect for the period ended 30 December 2000 calculated as follows: 52 weeks ended 53 weeks ended 30 December 2000 1 January 2000 Losses Number Earnings Number of of £000 shares £000 shares Basic (loss) / earnings / weighted average number of Shares -3,135 90,156,589 5,104 85,496,779 Weighted average number of 0 995,000 0 4,131,898 shares under option Number of shares that would have been issued at fair value 0 -461,186 0 -2,144,280 Dividend saving / weighted average number of ordinary shares arising from the conversion of the preference shares 0 0 220 5,491,505 Diluted (loss) / earnings / -------- ---------- ----- ---------- weighted average number of shares -3,135 90,690,403 5,324 92,975,902 -------- ---------- ----- --------- Diluted (loss) / earnings per -3.46p 5.73p ordinary share (pence) ---------- --------- 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: 52 weeks 53 weeks ended Ended 30 December 1 January 2000 2000 £'000 £'000 Diluted (losses) / earnings -3,135 5,324 Goodwill charges 10,217 434 Net exceptional charges 0 2,753 -------------- -------------- Adjusted diluted earnings 7,082 8,511 -------------- -------------- Adjusted diluted earnings per share (pence) 7.81p 9.16p -------------- -------------- The above figures have been disclosed to demonstrate maintainable earnings. Andrews Sykes Group plc Notes to the financial statements For the 52 weeks ended 30 December 2000 9. Basis of preparation Cox Plant Limited is a significant subsidiary of Andrews Sykes Group plc and the financial statements of that company have been prepared and consolidated into the financial statements of Andrews Sykes Group on a going concern basis. Cox Plant Limited has credit facilities which are non-recourse to the rest of the Group and are only secured on the assets of Cox Plant Limited and Accommodation Hire Limited. These are made available to Cox Plant Limited subject to that company meeting a number of performance criteria. During the period ended 30 December 2000 certain of these criteria were not achieved and hence the company is technically in breach of its covenants and the loans of £ 19,750,000 are repayable on demand and have therefore been reclassified as falling due within one year. Whilst the bank has formally waived the breach of covenants in respect of the period and has indicated in discussions with Group management that it does not intend to demand repayment of any of the borrowings, formal confirmation of the ongoing availability of facilities and revised performance criteria have yet to be issued for the next 12 months. The bank has indicated that it intends to confirm facilities and criteria following receipt of the results for the first quarter of 2001 and confirmation is therefore not available at the date of approval of the financial statements of the Group. Based on the cash flow projections of Cox Plant Limited that are currently available the directors consider that the company will be able to meet the loan repayments as they fall due together with all normal operating expenses to be incurred over the next 12 months from the date of approval of the financial statements of the Group. Accordingly the financial statements of the Group have been prepared on a going concern basis and do not include any adjustments to the assets and liabilities of Cox Plant Limited that are consolidated into these financial statements and that would result if the facilities were withdrawn from Cox Plant Limited. Such adjustments would include revision of the carrying values of balance sheet assets, the requirement for further provision for additional liabilities that may arise and balance sheet reclassifications for fixed assets. 10. The above financial information has been extracted from the Company's financial statements for the 52 weeks ended 30 December 2000 and the 53 weeks ended 1 January 2000. The financial statements for the 53 weeks ended 1 January 2000 have been filed and those for the 52 weeks ended 30 December 2000 will be filed with the Registrar of Companies. The Company's auditors gave unqualified reports on the accounts for both these periods and the reports did not contain a statement under section 237 (2) or (3) of the Companies Act 1985. 11. 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 12. The Company's Annual General Meeting will be held at 10.30 a.m. on 14 June 2001 at The Grosvenor House Hotel, Park Lane, London, W1A 3AA For further information please contact: Robert Stevens (Chief Executive) Telephone 01483 505 551 Andrews Sykes Group plc Issued by: John Goold Weber Shandwick Worldwide Telephone 020 7329 0096

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