Chilly economy cools down air conditioning group

FULL year revenue and profits declined at Wolverhampton-based air conditioning group Andrew Sykes as the mild weather impacted business.

The group’s revenue for the year ended December 31, 2011 was £53.8m, a fall of £2.1m, or 3.8%, compared with the same period last year. The decrease had a virtually direct impact on normalised operating profit which fell by £2m from £13.9m last year to £11.9m in the year under review.

However, the decline in trading was more than offset by the non-recurring profit of £3.1m on the sale of one of its depots in London. Consequently the basic earnings per share increased by 11.8% from 24.19p last year to 27.05p this year.

The group said it continued to generate strong cash flows, with net cash inflow from operating activities standing at £11.6m which, mainly due to the decline in normalised operating profit, was down by £2.3m compared with last year.

Nevertheless, net funds increased from £4.9m last year to £10.4m at year-end 2011. This despite, shareholder related cash outflows of £3.9m on dividends and the purchase of its own shares.

External bank borrowings have been reduced by £6m from £20m at the start of the year to £14m by the year-end.

It said cost control, cash and working capital management continued to be priorities for the business.

In total working capital has been reduced for the third year running, this time by £0.5m. Capital expenditure on the hire fleet has increased from £2.2m in 2010 to £4.1m this year and the group purchased a freehold property for £2.7m to replace the one sold during the year.

“These actions will ensure that the group’s infrastructure and revenue generating assets are sufficient to support future growth and profitability. Hire fleet utilisation, condition and availability continue to be the subjects of management focus,” it said.

The second half of the year is normally significantly more profitable than the first but 2011 proved to be an exception with an H1 turnover of £27.7m compared with £26.1m in H2. The situation has been blamed on tough trading conditioning in the UK and Northern Europe mainly as a result of unhelpful weather conditions but also the current economic climate.

Jacques Gaston Murray, chairman of Andrew Sykes, said: “The group continues to face challenges in all of its geographical markets but our business remains strong, cash generative and well developed with positive net funds. The board is therefore optimistic for further success in 2012.”