ANDREWS SYKES GROUP PLC

Quarterly Report • Sep 27, 2019

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RNS Number : 8748N

Andrews Sykes Group PLC

27 September 2019

Andrews Sykes Group plc

Interim Financial Statements 2019

Andrews Sykes Group plc ("Andrews Sykes" or the "Company" or the "Group") announces unaudited results for the six months ended 30 June 2019.

Summary of results

for the six months ended 30 June 2019

	(Unaudited)
	6 months ended  30 June 2019		6 months ended  30 June 2018
	£'000		£'000
Revenue from continuing operations	34,974		37,815
EBITDA* from continuing operations	11,435		12,429
Operating profit	6,918		9,280
Profit for the financial period	5,449		7,528
Basic earnings per share (pence)	12.92p		17.82p
Interim dividends declared per equity share (pence)	11.90p		11.90p
Cash and cash equivalents	23,770		21,489

* Earnings Before Interest, Taxation, Depreciation, profit on the sale of property, plant and equipment, Amortisation and non-recurring items.

Enquires 

Andrews Skyes Group plc	+44 (0) 1902 328 700
Andy Phillips (CFO)
Mark Calderbank (Company Secretary)
GCA Altium (Nominated Adviser)	+44 (0) 20 7484 4040
Tim Richardson

Chairman's Statement

Overview

The group result for the first half of 2019 was below that of the previous year, the winter period was much milder than 2018, meaning that there was less opportunities for our heating and boiler hire products. The first 6 months of 2019 were also drier than the previous year and this had an adverse impact on our pump hire business. Overall, the group's revenue for the six months ended 30 June 2019 was £35.0 million, a decrease of £2.8 million when compared with the same period last year. As a consequence the operating profit decreased by £2.4 million from £9.3 million in the first half of 2018 to £6.9 million for the six months ended 30 June 2019.

The group continues to be profitable and cash generative. Cash generated from operations was £7.5 million (2018: £7.6 million) after negative working capital movements of £3.9 million (2018: £4.8 million). As a result of adopting the accounting requirements of the new leasing standard, IFRS 16, existing lease commitments at 1 January 2019 of £11.4 million were recognised on the balance sheet. This is the major reason why net funds decreased by £15.0 million from £23.3 million as at 31 December 2018 to £8.3 million as at 30 June 2019 A further £1.1 million of lease obligations were recognised due to new leases being entered into during the period. Other significant cash outflows during the period include paying the 2018 final dividend of £5.0 million, net capital expenditure of £2.4 million and UK and overseas corporation tax payments of £2.5 million.

Management continue to safeguard the operational structure of the business. Cash spent on new plant and equipment, primarily hire fleet assets, amounted to £2.8 million and a further £1.4 million from stock was also added to the hire fleet. We have continued our policy of pursuing organic growth within our market sectors and start up costs of the new businesses discussed in previous Strategic Reports continue to be expensed as incurred. Continuing investment in both our existing core businesses and the ongoing development of new operations and income streams will ensure that we remain in a strong position and will safeguard profitability into the future.

Operations review

The shortfall came from our main hire and sales business segment throughout the UK and Europe. The UK hire business experienced a drop in total revenue of 11.7%, a major part of the shortfall came from fuel sales, which reduced by 40% compared to the previous year.

Our operations across the Benelux region experienced a drop in revenue of 9% and our newer business in France also traded slightly below last year's level. Only Italy and Switzerland, of our European hire businesses, traded ahead of the previous year.

Andrews Air Conditioning and Refrigeration, our UK air conditioning installation business, produced a positive result that was ahead of last year for the first half.

Khansaheb Sykes, our business based in the UAE, had a stronger start to the year following a difficult start to 2018. The operating profit of Khansaheb Sykes has increased from £1.01 million to £1.37 million in the first half of the year.

Profit for the financial period and Earnings per Share

Profit before tax was £6.8 million (2018: £9.3 million) mainly due to the above £2.4 million decrease in operating profit.

The total tax charge has decreased by £0.5 million from £1.8 million for the six months ended 30 June 2018 to £1.3 million for the current six month period. The effective tax rate remained unchanged from June 2018 at 19.4% for the six months ended 30 June 2019. This is slightly higher than the standard effective UK corporation tax rate of 19% which is mainly due to non-tax deductible expenses and the effect of a change in the rate of future corporation tax reducing the amount recognised for the deferred tax asset. A reconciliation of the theoretical corporation tax charge based on the accounts profit multiplied by the UK annualised corporation tax rate of 19% and the actual tax charge is given in note 4 of these interim financial statements.

Profit after tax was £5.5 million (2018: £7.5 million), a decrease of £2.0 million (2018: increase of £0.9 million) compared with the same period last year. The basic earnings per share decreased by 4.90 pence, or 27.50%, from 17.82 pence for the first half of 2018 to 12.92 pence for the period under review reflecting the decrease in profit discussed above.

Impact of the adoption of the new accounting standard on leases

The group has adopted IFRS 16, which establishes principles for the recognition, measurement, presentation and disclosures of leases, with effect from 1 January 2019.

The group has recognised a right-of-use asset and a lease liability of £11.4 million in respect of existing operating leases of properties, plant machinery and equipment as at 1 January 2019.  The nature of expenses related to these leases has changed because the group reversed operating lease payments of £1.2 million but recognised a £1.1 million depreciation charge for right-of-use assets and an interest expense of £0.15 million on the lease liabilities. Therefore EBITDA was improved by £1.2 million and operating profit by £0.1 million. Overall profit before tax was reduced by £0.05 million primarily due to the effect of charging more interest at the beginning of the lease term.

There was also a significant impact on the group's net funds as a result of the adoption of IFRS 16 as at 1 January 2019. Net funds were reduced by £11.4 million as a result of recognising lease obligations that correspond with the capitalised right of use asset as at the date of transition and by a net further £0.1 million as a result of applying IFRS 16 to new leases entered into in the current period. There has been no change to the group's contractual cash flows as a result of this change in accounting policy.

Dividends

The final dividend of 11.90 pence per ordinary share for the year ended 31 December 2018 was approved by members at the AGM held on 18 June 2019. Accordingly on 21 June 2019 the Company made a total dividend payment of £5,019,000 which was paid to shareholders on the register as at 31 May 2019.

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 for 2019 of 11.90 pence per share which in total amounts to £5,019,000. This will be paid on 8 November 2019 to shareholders on the register as at 11 October 2019. The shares will go ex-dividend on 10 October 2019.

Outlook

Trading in the third quarter has started slightly more positively. In the UK the Pump hire revenue has shown a steady improvement and air conditioning hire revenue in mainland Europe has been strong, this has been driven by some extreme temperatures across the region, however the UK has not reached the very high levels we saw during the long hot summer of 2018. Once again activity in the Middle East has remained consistent through the summer period.

The board has continued to invest in the business, with new depot openings during the year and further hire fleet investments. This will ensure that the business can optimise any weather driven opportunities whilst at the same time growing the geographic coverage organically.

JG Murray Chairman	26 September 2019

Consolidated income statement

for the 6 months ended 30 June 2019 (unaudited)

	6 months ended 30 June 2019 £'000		6 months ended 30 June 2018 £'000		12 months ended      31 December                    2018                  £'000
Continuing operations
Revenue	34,974		37,815		78,563
Cost of sales	(15,535)		(16,256)		(31,908)
Gross profit	19,439		21,559		46,655
Distribution costs	(5,762)		(5,987)		(12,073)
Administrative expenses	(6,759)		(6,292)		(13,901)
Operating profit	6,918		9,280		20,681
EBITDA*	11,435		12,429		26,737
Depreciation and impairment losses	(3,697)		(3,399)		(6,666)
Depreciation of right-of-use assets	(1,098)		-		-
Profit on the sale of plant and equipment	278		250		610
Operating profit	6,918		9,280		20,681
Finance income	61		60		125
Finance costs	(46)		(47)		(97)
Interest charge on right-of-use leases	(157)		-		-
Intercompany foreign exchange gains and losses	(16)		52		336
Profit before taxation	6,760		9,345		21,045
Taxation	(1,311)		(1,817)		(3,999)
Profit for the financial period	5,449		7,528		17,046
There were no discontinued operations in either of the above periods
Earnings per share from continuing operations
Basic and diluted (pence)	12.92p		17.82p		40.39p
Dividends paid during the period per equity share (pence)	11.90p		11.90p		23.80p
Proposed dividend per equity share (pence)	11.90p		11.90p		11.90p

* Earnings Before Interest, Taxation, Depreciation, profit on the sale of property, plant and equipment, Amortisation and non-

recurring items.

Consolidated balance sheet

as at 30 June 2019 (unaudited)

	30 June              2019		30 June 2018		31 December 2018
	£'000		£'000		£'000
Non-current assets
Property, plant and equipment	24,046		23,186		23,651
Right-of-use assets	11,387		-		-
Lease prepayments	44		46		45
Deferred tax asset	435		176		677
Retirement benefit pension surplus	1,286		3,354		1,356
	37,198		26,762		25,729
Current assets
Stocks	5,969		5,807		5,083
Trade and other receivables	20,115		20,100		19,994
Overseas tax (denominated in Euros)	278		47		-
Cash and cash equivalents	23,770		21,489		27,862
	50,132		47,443		52,939
Current liabilities
Trade and other payables	(11,444)		(12,598)		(12,889)
Current tax liabilities	(1,104)		(1,624)		(1,858)
Overseas tax (denominated in euros)	-		-		(436)
Bank loans	(493)		(493)		(493)
Obligations under right-of-use leases	(2,141)		-		-
Obligations under finance leases	-		(26)		(5)
	(15,182)		(14,741)		(15,681)
Net current assets	34,950		32,702		37,258
Total assets less current liabilities	72,148		59,464		62,987
Non-current liabilities
Bank loans	(3,487)		(3,979)		(3,983)
Obligations under right-of-use leases	(9,320)		-		-
	(12,807)		(3,979)		(3,983)
Net assets	59,341		55,485		59,004
Equity
Called-up share capital	422		422		422
Share premium	13		13		13
Retained earnings	54,363		50,789		54,013
Translation reserve	4,297		4,005		4,300
Other reserves	246		246		246
Surplus attributable to equity holders of the parent	59,341		55,475		58,994
Non-controlling interest	-		10		10
Total equity	59,341		55,485		59,004

Consolidated cash flow statement

for the six months ended 30 June 2019 (unaudited)

	6 months ended 30 June 2019 £'000		6 months ended 30 June 2018 £'000		12 months ended      31 December                    2018                  £'000
Cash flows from operating activities
Cash generated from operations	7,530		7,600		22,888
Interest paid	(201)		(42)		(88)
Net UK corporation tax paid	(1,300)		(946)		(2,236)
Overseas tax paid	(1,233)		(1,052)		(1,454)
Net cash inflow from operating activities	4,796		5,560		19,110
Investing activities
Sale of property, plant and equipment	382		472		944
Purchase of property, plant and equipment	(2,812)		(4,031)		(7,142)
Interest received	43		16		41
Net cash outflow from investing activities	(2,387)		(3,543)		(6,157)
Financing activities
Loan repayments	(500)		(500)		(500)
Capital repayments for right-of-use lease obligations	(1,025)		-		-
Finance lease capital repayments	(5)		(24)		(45)
Equity dividends paid	(5,019)		(5,029)		(10,048)
Purchase of own shares	-		(438)		(438)
Net cash outflow from financing activities	(6,549)		(5,991)		(11,031)
Net (decrease) / increase in cash and cash equivalents	(4,140)		(3,974)		1,922
Cash and cash equivalents at the beginning of the period	27,862		25,311		25,311
Effect of foreign exchange rate changes	48		152		629
Cash and cash equivalents at end of the period	23,770		21,489		27,862
Reconciliation of net cash flow to movement in net funds in the period
Net (decrease)/increase in cash and cash equivalents	(4,140)		(3,974)		1,922
Net cash outflow from the decrease in debt	1,530		524		545
Non-cash movements re new right-of-use assets	(1,134)		-		-
Non-cash movements re costs of raising loan finance	(4)		(4)		(8)
(Decrease)/increase in net funds during the period	(3,748)		(3,454)		2,459
Opening net funds at the beginning of period	23,381		20,293		20,293
Transitional adjustment for right-of-use assets at start of period	(11,363)		-		-
Effect of foreign exchange rate changes on right-of-use leases	11		-		-
Effect of foreign exchange rate changes	48		152		629
Closing net funds at the end of period	8,329		16,991		23,381

Consolidated statement of comprehensive total income (CSOCTI)

for the six months ended 30 June 2019 (unaudited)

	6 months ended 30 June 2019 £'000		6 months ended 30 June 2018 £'000		12 months ended      31 December                    2018                  £'000
Profit for the financial period	5,449		7,528		17,046
Other comprehensive income:
Items that may be reclassified to profit and loss:
Currency translation differences on foreign currency net investments	(2)		110		405
Items that will never be reclassified to profit and loss:
Remeasurement of defined benefit liabilities and assets	(96)		(75)		(1,649)
Related deferred tax	16		14		313
Other comprehensive income for the period net of tax	(82)		49		(931)
Total comprehensive income for the period	5,367		7,577		16,115

Notes to the consolidated interim financial statements

for the six months ended 30 June 2019 (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 2006.

The information for the 12 months ended 31 December 2018 does not constitute the group's statutory accounts for 2018 as defined in Section 434 of the Companies Act 2006. Statutory accounts for 2018 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 26 September 2019, have not been audited or reviewed by the auditors.

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.

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

With the exception of the adoption of IFRS 16 on 1 January 2019, 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 2018.

IFRS 16 introduced a single, on-balance-sheet lease accounting model for lessees. A lessee recognises a right-of-use asset representing its right to use the underlying asset and a lease liability representing its obligation to make lease payments. The group adopted IFRS 16 on 1 January 2019 and applied the Standard's modified retrospective approach. Under this approach the cumulative effect of initially applying IFRS 16 is recognised as an adjustment to assets and liabilities at the date of initial application. Comparative information is not restated. Management has decided to make use of the practical expedient not to perform a full review of existing leases, bringing onto the balance sheet the net present value of the remaining outstanding lease obligations as at the date of transition as both an asset and liability, and has also applied IFRS 16 to new or modified contracts. There are recognition exemptions for short-term leases and leases of low-value items and the group has decided to make use of the short-term leases exemptions.

The group has recognised a right-of-use asset and a lease liability for its operating leases of properties, plant machinery and equipment, other than those that fall within the above recognition exemption.  The nature of expenses related to these leases has changed because the group has recognised a depreciation charge for right-of-use assets and an interest expense, charged within finance costs, on the lease liabilities. The assets are depreciated on a straight-line basis over the remaining life of the lease and the interest expense is calculated in order to give a constant rate of return on the outstanding capital liability. Previously, the group recognised operating lease expenses on a straight-line basis over the term of the lease as a reduction in operating profit, and recognised assets and liabilities only to the extent that there was a timing difference between actual lease payments and the expense recognised.

As at 1 January 2019, the date of transition to IFRS 16, the group recognised additional right-of-use assets and liabilities of £11.4 million. An additional £1.1 million of new leases were capitalised and a depreciation expense of £1.1 million was recognised in the period. EBITDA was improved by approximately £1.2 million due to the removal of operating lease payments of this amount that would have been charged in accordance with the previous standards, and operating profit for the current period was improved by approximately £0.1 million. Overall profit before tax was reduced by approximately £0.05 million primarily due to the effect of charging more interest at the beginning of the lease term.

There was a significant impact on the group's net funds as a result of the adoption of IFRS 16 as at 1 January 2019. Net funds were reduced by £11.4 million as a result of capitalising existing lease obligations as at the date of transition and by a further £0.1 million as a result of applying IFRS 16 to new leases entered into in the current period. There has been no change to the group's repayment obligations or commitments as a result of this change in accounting policy.

There was no impact for the group's finance leases. IFRS 16 did not make any significant changes to the accounting for lessors, and therefore there were no changes for leases where the group acts as a lessor.

3       Revenue

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

	6 months ended 30 June 2019 £'000		6 months ended 30 June 2018 £'000		12 months ended      31 December                    2018                  £'000
Continuing operations
Hire	30,042		32,847		67,813
Sales	2,863		3,152		6,817
Maintenance	957		936		1,791
Installations	1,112		880		2,142
Group consolidated revenue from the sale of goods and provision of services	34,974		37,815		78,563

The geographical analysis of the group's revenue by origination is:

	6 months ended 30 June 2019 £'000		6 months ended 30 June 2018 £'000		12 months ended      31 December                    2018                  £'000
United Kingdom	20,886		23,993		49,092
Rest of Europe	8,147		8,664		18,202
Middle East and Africa	5,941		5,158		11,269
	34,974		37,815		78,563

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

4       Taxation

	6 months ended 30 June 2019 £'000		6 months ended 30 June 2018 £'000		12 months ended   31 December               2018   £'000
Current tax
UK corporation tax at 19% (30 June 2018 and 31 December 2018: 19%)	731		1,252		2,807
Adjustments in respect of prior periods	(185)		-		(32)
	546		1,252		2,775
Overseas tax	508		618		1,444
Adjustments to overseas tax in respect of prior periods	(1)		7		42
Total current tax charge	1,053		1,877		4,261
Deferred tax
Deferred tax on the origination and reversal of temporary differences	73		(60)		(260)
Adjustments in respect of prior periods	185		-		(2)
Total deferred tax charge /(credit)	258		(60)		(262)
Total tax charge for the financial period attributable to continuing operations	1,311		1,817		3,999

The tax charge for the financial period can be reconciled to the profit before tax per the income statement multiplied by the effective standard annualised corporation tax rate in the UK of 19% (30 June 2018 and 31 December 2018: 19%) as follows:

	6 months ended 30 June 2019 £'000		6 months ended 30 June 2018 £'000		12 months ended      31 December                    2018                  £'000
Profit before taxation from continuing and total operations	6,760		9,345		21,045
Tax at the UK effective annualised corporation tax rate of 19%   (30 June 2018 and 31 December 2018: 19%)	1,284		1,776		3,999
Effects of:
Expenses not deductible for tax purposes	72		50		114
Utilisation of overseas trading losses	(12)		(24)		(44)
Effects of different tax rates of subsidiaries operating abroad	(110)		(22)		(78)
Overseas tax losses not recognised	29		30		-
Effect of change in rate of corporation tax	49		-		-
Adjustments to tax charge in respect of previous periods	(1)		7		8
Total tax charge for the financial period	1,311		1,817		3,999

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. Accordingly UK corporation tax has been provided at 19%; the rate of 19% for the tax year ending 31 March 2020 having been substantially enacted in October 2015. UK deferred tax has been provided at 17% (30 June 2018 and 31 December 2018:  19%) being the rate substantially enacted at the balance sheet date at which the timing differences are expected to substantially 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.

	6 months ended 30 June 2019
	Continuing earnings		Number of Shares
	£'000
Basic earnings/weighted average number of shares	5,449		42,174,359
Basic earnings per ordinary share (pence)	12.92p

	6 months ended 30 June 2018
	Continuing Earnings		Number of Shares
	£'000
Basic earnings/weighted average number of shares	7,528		42,251,117
Basic earnings per ordinary share (pence)	17.82p

	12 months ended 31 December 2018
	Continuing Earnings		Number of Shares
	£'000
Basic earnings/weighted average number of shares	17,046		42,207,255
Basic earnings per ordinary share (pence)	40.39p

Diluted earnings per share

There were no dilutive instruments outstanding at 30 June 2019 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 2019 were as follows:

	Paid during the 6 months ended 30 June 2019
	Pence per share		Total dividend paid
			£'000
Final dividend for the year ended 31 December 2018 paid to members on the register as at 31 May 2019 on 21 June 2019	11.90p		5,019

The above dividend was charged against reserves during the 6 months ended 30 June 2019.

On 26 September 2019 the directors declared an interim dividend of 11.90 pence per ordinary share which in total amounts to £5,019,000. This will be paid on 8 November 2019 to shareholders on the register as at 11 October 2019 and will be charged against reserves in the second half of 2019.

Dividends declared and paid on ordinary one pence shares during the 6 months ended 30 June 2018 were as follows:

	Paid during the 6 months ended 30 June 2018
	Pence per share		Total dividend paid
			£'000
Final dividend for the year ended 31 December 2017 paid to members on the register as at 1 June 2018 on 25 June 2018.	11.90p		5,029

The above dividend was charged against reserves during the 6 months ended 30 June 2018.

Dividends declared and paid on ordinary one pence shares during the 6 months ended 31 December 2018 were as follows:

	Paid during the 12 months ended 31 December 2018
	Pence per share		Total dividend paid
			£'000
Final dividend for the year ended 31 December 2017 paid to members on the register as at 1 June 2018 on 25 June 2018	11.90p		5,029
Interim dividend declared on 27 September 2018 and paid to shareholders on the register as at 12 October 2018 on 9 November 2018	11.90p		5019
	23.80p		10,048

The above dividends were charged against reserves during the 12 months ended 31 December 2018.

7       Retirement benefit obligations - Defined benefit pension scheme

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.

As at 30 June 2019 the group had a net defined benefit pension scheme surplus, calculated in accordance with IAS 19 (revised) using the assumptions as set out below, of £1,286,000 (30 June 2018: £3,354,000; 31 December 2018: £1,356,000). 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 2016, a revised schedule of contributions and recovery plan was agreed with the pension scheme trustees in October 2017.  In accordance with this schedule of contributions, which was backdated to be effective from 1 January 2017, the group made additional contributions during 2017 to remove the funding deficit in the group scheme calculated as at 31 December 2016 of £710,000 and this was eliminated by 31 December 2017.

The next formal triennial funding valuation is due as at 31 December 2019. The group currently expects to make pension contributions of £120,000 during 2019 in accordance with the current schedule of contributions of which £60,000 was paid in the first half year.

Assumptions used to calculate the scheme surplus

A qualified independent actuary has updated the results of the December 2016 (30 June 2018 and 31 December 2018: December 2016) full actuarial valuation to calculate the surplus as disclosed below:

The major assumptions used to determine the present value of the scheme's defined benefit obligation were:

	30 June 2019 %	30 June 2018 %	31 December 2018 %
Rate of increase in pensionable salaries Rate of increase in pensions in payment Discount rate applied to scheme liabilities Inflation assumption - RPI Inflation assumption - CPI Percentage of members taking maximum tax free lump sum on retirement	N/A 3.20 2.20 3.20 2.20 75	N/A 3.10 2.60 3.10 2.10 75	N/A 3.20 2.80 3.20 2.20 75

From 1 January 2011, the government amended the basis for statutory increases to deferred pensions and pensions in payment. Such increases are now based on inflation measured by the Consumer Price Index (CPI) rather than the Retail Price Index (RPI). Having reviewed the scheme rules and considered the impact of the change on this pension scheme, the directors consider that future increases to (i) all deferred pensions and (ii) Guaranteed Minimum Pensions accrued between 6 April 1988 and 5 April 1997 and currently in payment will be based on CPI rather than RPI. Accordingly, this assumption was adopted as at 31 December 2010 and subsequently.

Assumptions regarding future mortality experience are set based on advice in accordance with published statistics. The mortality table used at 30 June 2019 is 110% S2NA CMI2017 (30 June 2018: 110% S2NA CMI2016; 31 December 2018: 110% S2NA CMI2017) with a 1.25% per annum long term improvement for both males and females (30 June 2018 and 31 December 2018: 1.25% males and females).

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 2019	30 June 2018	31 December 2018
Male, current age 45 Female, current age 45	22.8 years 24.9 years	22.9 years 25.0 years	22.8 years 24.9 years
Male, current age 65	21.4 years	21.5 years	21.4 years
Female, current age 65	23.4 years	23.5 years	23.4 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 2019 £'000		30 June 2018 £'000		31 December                   2018  £'000
Total fair value of plan assets	44,060		43,968		41,036
Present value of defined benefit funded obligation calculated in accordance with stated assumptions	(42,774)		(40,614)		(39,680)
Surplus in the scheme calculated in accordance with stated assumptions recognised in the balance sheet	1,286		3,354		1,356

The movement in the fair value of the scheme's assets during the period was as follows: 

	30 June  2019   £'000		30 June  2018   £'000		31 December  2018 £'000
Fair value of plan assets at the start of the period	41,036		45,657		45,657
Interest income on pension scheme assets	562		551		1,103
Actual return less interest income on pension scheme assets	3,343		(671)		(2,645)
Employer contributions	60		60		120
Benefits paid	(888)		(1,592)		(3,068)
Administration expenses charged in the income statement	(53)		(37)		(131)
Fair value of plan assets at the end of the period	44,060		43,968		41,036

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

	30 June 2019		30 June 2018		31 December 2018
	£'000		£'000		£'000
Present value of defined benefit funded at the beginning of the period	(39,680)		(42,293)		(42,293)
Interest on defined benefit obligation	(543)		(509)		(1,019)
Actuarial /(loss) / gain recognised in the CSOCTI calculated in    accordance with stated assumptions	(3,439)		596		996
Benefits paid	888		1,592		3,068
Past service cost - GMP equalisation	-		-		(432)
Closing present value of defined benefit funded obligation calculated in accordance with stated assumptions	(42,774)		(40,614)		(39,680)

Amounts recognised in the income statement

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

	30 June                  2019		30 June               2018		31 December                2018
	£'000		£'000		£'000
Interest income on pension scheme assets	562		551		1,103
Interest expense on pension scheme liabilities	(543)		(509)		(1,019)
Net pension interest credit included within finance income	19		42		84
Scheme administration expenses and GMP equalisation	(53)		(37)		(563)
Net pension  (charge) / credit in the income statement	(34)		5		(479)

7       Retirement benefit obligations - defined benefit pension scheme (continued)

Actuarial gains and losses recognised in the consolidated statement of comprehensive total income (CSOCTI)

The amounts (charged) / credited in the CSOCTI were:

	30 June                  2019		30 June                2018		31 December                2018
	£'000		£'000		£'000
Actual return less interest income on pension scheme assets	3,343		(671)		(2,645)
Experience gains and losses arising on plan obligation	-		-		(412)
Changes in demographic and financial assumptions underlying the present value of plan obligations	(3,439)		596		1,408
Actuarial (loss) calculated in accordance with stated assumptions recognised in the CSOCTI	(96)		(75)		(1,649)

8       Called up share capital

	30 June  2019		30 June  2018		31 December  2018
	£'000		£'000		£'000
Issued and fully paid:
42,174,359 ordinary shares of one pence each (30 June 2018 and 31 December 2018: 42,174,359 ordinary shares of one pence each)	422		422		422

During the period the Company did not buy back any shares for cancellation (June 2018 and December 2018: 87,723 shares bought back for a total consideration of £437,689).

The Company did not issue any shares in the period or either of the comparative periods. No share options were granted, forfeited or expired during the periods and there were no share options outstanding at any period end.

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

9       Cash generated from operations

	6 months ended 30 June 2019		6 months ended 30 June 2018		12 months ended 31 December 2018
	£'000		£'000
Profit for the period attributable to equity shareholders	5,449		7,528		17,046
Adjustments for:
Taxation charge	1,311		1,817		3,999
Finance costs	46		47		97
Finance income	(61)		(60)		(125)
Interest charge on right-of-use leases	157		-		-
Inter-company foreign exchange gains and losses	16		(52)		(336)
Profit on the sale of property, plant and equipment	(278)		(250)		(610)
Depreciation	3,697		3,399		6,666
Depreciation of right-of-use assets	1,098		-		-
EBITDA*	11,435		12,429		26,737
Excess of pension contributions compared with service and administration expenses including GMP equalisation	(7)		(23)		443
Workings capital movements:
Stocks	(2,324)		(2,799)		(2,682)
Trade and other receivables	(120)		(2,245)		(2,139)
Trade and other payables	(1,454)		238		529
Cash generated from operations	7,530		7,600		22,888

* Earnings Before Interest, Taxation, Depreciation, profit on the sale of property, plant and equipment, Amortisation and non-recurring items.

10     Analysis of net funds and movement in financing liabilities

	30 June  2019		30 June 2018		31 December  2018
	£'000		£'000		£'000
Cash and cash equivalents per consolidated cash flow statement	23,770		21,489		27,862
Bank loans:
At the beginning of the period	(4,476)		(4,968)		(4,968)
Loans repaid	500		500		500
Loans drawn down			-		-
Other non-cash changes	(4)		(4)		(8)
At the of the period	(3,980)		(4,472)		(4,476)
Finance lease liabilities:
At the beginning of the period	(5)		(50)		(50)
Leases repaid	5		24		45
At the end of the period	-		(26)		(5)
Right-of-use lease obligations:
At the beginning of the period	-		-		-
Transitional adjustment for obligations at start of period	(11,363)		-		-
Leases repaid	1,025		-		-
Leases drawn down	(1,134)		-		-
Foreign exchange	11		-		-
At the of the period	(11,461)		-		-
Gross debt	(15,441)		(4,498)		(4,481)
Net funds	8,329		16,991		23,381

11     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.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

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