Smaller Companies: Sykes pumps up the profits

After the depredations of the last recession, Andrews Sykes, the pumps to air conditioning company, was close to basket case status in 1994. Its shares had reached a low of 47p.

But the company gained a new lease of life after fresh management moved in, spearheaded by chairman Jacques Murray, a French-born businessman, who bought 64 per cent of the company. He was joined by chief executive Eric Hook. Together, they focused on bringing costs under control, and have reached the stage where growth is more reliant on acquisitions and on sophisticated selling of the company's products.

In pumps, for example, where the firm is a strong brand, it has recovered the rights to its brand name in the US after a successful court action in the UK. It is recruiting new distributors for its pumps business in the US, South Africa and Asia. Sales of pumps make up 33 per cent of revenues, and while the UK has yet to recover fully, the business looks set to pick up strongly overseas.

Away from pumps, Andrews Sykes sees cold winters and long hot summers as the ideal weather conditions. As well as air conditioning for sale and hire, it supplies heating, which generates 23 per cent of sales. Management has worked on its customer base to extend hire periods, with good results. A favourable winter created the backdrop for an excellent year, and with low maintenance costs there is strong cash flow.

Portable air conditioning is also booming, with the UK hire fleet doubling in the past two years to 4,000 units. As with heating, the firm is the UK market leader in the hire of portable units. It is also one of the largest installers of split-system air conditioning.

Overall, the business has generated pounds 10m of cash over the past two years, after capital expenditure and acquisitions - enough to leave pounds 1m in the bank at the end of 1996, from borrowings of pounds 17m in 1994 or 267 per cent gearing. The cash is a sound base from which to hunt for further acquisitions.

House broker Charterhouse Tilney estimates that sales can rise to pounds 48m for this year, from pounds 45.3m in 1996, to push profits ahead to pounds 10m from pounds 7.9m. That could produce fully-diluted earnings per share of 38p (31.9p). On that basis the shares, at 565p, trade on a forward p/e of 14.8 times, reducing to 12.9 times in 1998.

While this suggests that the remarkable turnaround of the past few years is fully reflected in the price, management remains ambitious and the group is well placed to expand from its now stable base. Buy.

Start your day with The Independent, sign up for daily news emails
Life and Style
love + sex A new study has revealed the average size - but does that leave men outside the 'normal' range being thought of as 'abnormal'?
Arts and Entertainment
The Palace of Westminster is falling down, according to John Bercow
voices..says Matthew Norman
Steve Bruce and Gus Poyet clash
Graham Norton said Irish broadcaster RTE’s decision to settle was ‘moronic’
Arts and Entertainment
Jake and Dinos Chapman were motivated by revenge to make 'Bring me the Head of Franco Toselli! '
arts + ents Shapero Modern Gallery to show explicit Chapman Brothers film
Arts and Entertainment
Kurt Cobain performing for 'MTV Unplugged' in New York, shortly before his death
music Brett Morgen's 'Cobain: Montage of Heck' debunks many of the myths
ebooksA special investigation by Andy McSmith
Life and Style
Brendan Rodgers
football The Liverpool manager will be the first option after Pep Guardiola
Amazon misled consumers about subscription fees, the ASA has ruled
Arts and Entertainment
Myanna Buring, Julian Rhind-Tutt and Russell Tovey in 'Banished'
TV Jimmy McGovern tackles 18th-century crime and punishment
Arts and Entertainment
Paul Whitehouse as Herbert
arts + ents
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Sales Executive - OTE £40,000

£15000 - £18000 per annum: Recruitment Genius: This is a great opportunity for...

Austen Lloyd: Law Costs HOD - Southampton

£50000 - £60000 per annum + Excellent Salary: Austen Lloyd: An outstanding new...

SThree: Recruitment Resourcer

£20000 - £21000 per annum + uncapped commission: SThree: As a graduate you are...

Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Day In a Page

Syrian conflict is the world's first 'climate change war', say scientists, but it won't be the last one

Climate change key in Syrian conflict

And it will trigger more war in future
How I outwitted the Gestapo

How I outwitted the Gestapo

My life as a Jew in wartime Berlin
The nation's favourite animal revealed

The nation's favourite animal revealed

Women like cuddly creatures whilst men like creepy-crawlies
Is this the way to get young people to vote?

Getting young people to vote

From #VOTESELFISH to Bite the Ballot
Poldark star Heida Reed: 'I don't think a single bodice gets ripped'

Poldark star Heida Reed

'I don't think a single bodice gets ripped'
The difference between America and Israel? There isn’t one

The difference between America and Israel? There isn’t one

Netanyahu knows he can get away with anything in America, says Robert Fisk
Families clubbing together to build their own affordable accommodation

Do It Yourself approach to securing a new house

Community land trusts marking a new trend for taking the initiative away from developers
Head of WWF UK: We didn’t send Cameron to the Arctic to see green ideas freeze

David Nussbaum: We didn’t send Cameron to the Arctic to see green ideas freeze

The head of WWF UK remains sanguine despite the Government’s failure to live up to its pledges on the environment
Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Set in a mythologised 5th-century Britain, ‘The Buried Giant’ is a strange beast
With money, corruption and drugs, this monk fears Buddhism in Thailand is a ‘poisoned fruit’

Money, corruption and drugs

The monk who fears Buddhism in Thailand is a ‘poisoned fruit’
America's first slavery museum established at Django Unchained plantation - 150 years after slavery outlawed

150 years after it was outlawed...

... America's first slavery museum is established in Louisiana
Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

The first 'American Idol' winner on how she manages to remain her own woman – Jane Austen fascination and all
Tony Oursler on exploring our uneasy relationship with technology with his new show

You won't believe your eyes

Tony Oursler's new show explores our uneasy relationship with technology. He's one of a growing number of artists with that preoccupation
Ian Herbert: Peter Moores must go. He should never have been brought back to fail again

Moores must go. He should never have been brought back to fail again

The England coach leaves players to find solutions - which makes you wonder where he adds value, says Ian Herbert
War with Isis: Fears that the looming battle for Mosul will unleash 'a million refugees'

The battle for Mosul will unleash 'a million refugees'

Aid agencies prepare for vast exodus following planned Iraqi offensive against the Isis-held city, reports Patrick Cockburn