Chairmans Statement
Overview and financial highlights
The group achieved an adjusted operating profit* of £14.2 million for 2007 which compares with £15.3 million in 2006, our record year.
Therefore although these profits are lower than 2006 I still
consider that this is an extremely good performance,
particularly considering we did not experience the very hot
and favourable conditions of the summer of 2006 which
contributed to a £2 million decrease in revenue to £57.8
million.
More importantly, this result highlights the fact that the group
is now less weather dependent than ever before. It has been
our strategy for some time to move away from this
dependency and our group now has a diverse range of income
streams thereby providing a solid base of revenue
underpinning the business. This, combined with our ongoing
strict cost control policy, ensures that we are able to deliver
satisfactory results even in the face of less than favourable
climatic conditions.
Our main trading subsidiary, Andrews Sykes Hire, continues to
perform well. It continues to expand its business in nonseasonal
hire markets, particularly through its specialist hire
division. It has continued to expand its presence in niche
markets and these non-traditional businesses operate without
undue influence from seasonal weather patterns.
We have, of course, continued to support our traditional
business roots. The pumping division performed extremely
well in 2007, taking advantage of the opportunities presented.
We will invest more in this business, as well as in our
profitable air conditioning and heating divisions, in order that
we are well placed to satisfy our customers’ demands
whenever they arise. A more detailed review of this year’s
performance is given in the Operations Review and Financial
Review within the Directors’ Report.
Pension curtailment offer
As I reported at the half year, an offer was made to all deferred
members of our defined benefit pension scheme giving them
the opportunity to transfer their accrued rights to an
alternative pension provider.
The offer, which was substantially completed in 2007, has
resulted in a reduction of the pension scheme deficit of
£3.5 million, a charge to the income statement of £0.9 million
and a cash outflow of £4.3 million. This was mainly financed by
an agreed reduction in the July 2007 loan repayment from
£5 million to £1 million.
Net debt
Net debt has been reduced by £3.9 million from £16.2 million
to £12.3 million this year despite the following significant cash
outflows:
Capital expenditure net of disposal proceeds |
4.6 |
Pension curtailment offer |
4.3 |
Corporation tax payments |
3.0 |
Regular defined benefit pension scheme payments |
1.5 |
| |
13.4 |
This reflects the strong cash generating ability of the group.
Share buyback programme
The board continues to believe that shareholder value will be
optimised by the purchase, where appropriate, of our own
shares. Consequently at the forthcoming AGM, the board will
request that shareholders vote in favour of a resolution to
renew the authority to purchase up to 12.5% of the ordinary
shares in issue.
Subsequent events
Recognising the fact that no interim or final dividends were
declared or paid during either the current or previous
financial period, I am pleased to report that the board has
announced two interim dividends for the 2008 financial year
amounting to approximately £15.0 million since the year-end.
This continues the board’s policy of returning value to
shareholders wherever possible.
Prior to the payment of the above dividends the company
consulted with the Andrews Sykes Defined Benefit Pension
Scheme trustees and the pension regulator and agreed to pay
an additional one-off contribution of £1.7million into the
scheme as well as maintaining the regular monthly payment
of £125,000.
The above payments will be mainly financed by additional
borrowings of £10 million.
Outlook
The group’s continuing strategy of investing in its traditional
core products and services, the increase in non-seasonal
business and investment in new technically advanced and
environmentally friendly products proved to be successful in
2007 and will therefore be continued into 2008.
Overall trading in the first quarter of 2008 was in line
with expectations.
