TIDMAIEA
RNS Number : 8786Z
Airea PLC
23 September 2015
AIREA plc
Preliminary results for the year ended 30th June 2015
Strategic Review
Airea plc is pleased to be able to report that the business has
made substantial progress in the year, delivering an 11% increase
in revenue and a significant improvement in profitability.
Principal activity and strategy
The group remains focused on the manufacture, marketing and
distribution of floor coverings. Our approach to strategy is
uncomplicated; a robust new product development process that
enhances the appeal of our product range to customers whilst
exploiting our manufacturing capability, the strengthening of
routes to market, a continuous improvement of customer service
through the on-going improvement of our operational capability, a
relentless search for efficiency improvements and the maintenance
of strong financial control.
Overview
Airea plc is pleased to be able to report that the business has
made substantial progress in the year, delivering an 11.3% increase
in revenue and a significant improvement in profitability. Sales in
the UK grew by 12.3% and in international markets by 7.5%. This was
largely as a result of the ongoing success of the contract flooring
sector sales, which grew by 15.3%, and continued to benefit from
new product launches and the restructuring of the sales force.
Sales in the domestic market sector also grew, albeit at a more
modest rate.
As in previous years the cost base remains under constant review
and operating margin increased in the year.
A repurchase of shares was completed in the period, funded from
cash flow generated in the year, and contributed to the improvement
in earnings per share. Cash generation increased and the group
continues to operate debt free.
Group results
Revenue for the period was GBP25.5m (2014 restated(1) :
GBP22.9m) reflecting the ongoing strengthening of the product range
and improvement in routes to market. The operating profit before
exceptional items was GBP1,212,000 (2014: GBP721,000). The
exceptional charge of GBP114,000 related to the costs of the share
re-purchase and the final legal costs incurred in respect of the
settlement of the dilapidations dispute reported in the prior
period. The operating profit after exceptional items was
GBP1,098,000 (2014: GBP606,000). After charging other finance costs
relating to the defined benefit pension scheme of GBP448,000 (2014:
GBP276,000), and incorporating the appropriate tax charge, the
profit for the year was GBP581,000 (2014: GBP301,000).
Basic earnings per share were 1.29p (2014: 0.65p), and basic
adjusted earnings per share(2) were 1.50p (2014: 0.90p)
Operating cash flows before movements in working capital and
other payables were GBP1,928,000 (2014: GBP1,483,000). Working
capital increased by GBP375,000 (2014: GBP1,633,000) to support the
increase in revenues. Contributions of GBP400,000 (2014:
GBP375,000) were made to the defined benefit pension scheme in line
with the agreement reached with the trustees based on the 2011
actuarial valuation. Capital expenditure of GBP459,000 (2014:
GBP153,000) was focussed on supporting new product launches and the
ongoing improvement in the flexibility, reliability and
productivity of the manufacturing process. A repurchase of
2,838,102 ordinary shares was completed at a cost of
GBP348,000.
The pension deficit of GBP5.8m as at 30 June 2014 has increased
to a deficit of GBP7.4m as at 30 June 2015. Significant falls in
corporate bond yields have been offset by falls in inflation
expectations and the performance of the plan assets, which
benefitted from the change in investment strategy implemented at
the start of the period. The reason for the worsening of the
position is the experience loss resulting from the use of the 30
June 2014 actuarial valuation data as the starting point for the
calculations rather than the 30 June 2011 valuation results which
underlie previous figures.
Key performance indicators
As part of its internal financial control procedures the board
monitors certain financial ratios. For the year to 30th June 2015
value added per employee (the ratio of revenue less material costs
to average employee numbers) amounted to GBP70,000 (2014
restated(1) : GBP67,000), operating return on sales (the ratio of
operating profit before exceptional items to revenue) was 4.7%
(2014 restated(1) : 3.1%), return on average net operating assets
(the ratio of operating profit before exceptional items to average
operating assets) was 7.1% (2014: 4.2%) and working capital to
sales percentage was 38.2% (2014 restated(1) : 41.0%). The
improvement in the ratios demonstrate the improved productivity of
staff, the control of costs relative to the increase in sales and
the improvement in working capital efficiency as sales
increased.
Principal risks and uncertainties
The Board has responsibility for determining the nature and
extent of the significant risks it is willing to take in achieving
its strategic objectives, and ensuring that risks are managed
effectively across the group. Risks are identified as being
principal based on the likelihood of occurrence and potential
impact on the group. The group's principal risks are identified
below, together with a description of how the group mitigates those
risks.
The key operational risk facing the business continues to be the
competitive nature of the markets for the group's products. To
mitigate this risk the group seeks to improve existing products,
introduce new products and achieve high levels of customer service
and efficiency.
The majority of the group's revenue arises from trade with
flooring contractors and independent retailers. The activity levels
within this customer base are determined by consumer demand created
through a wide range of commercial refurbishment and building
projects and activity in the housing market. The general level of
activity in these underlying markets has the potential to affect
the demand for products supplied by the group. The group mitigates
these factors by closely monitoring sales trends and taking
appropriate action early, along with strengthening the product
range and developing new channels to market, both at home and
abroad, to grow demand across a wider range of markets.
The group operates a defined benefit pension scheme. At present,
in aggregate, there is an actuarial deficit between the value of
the projected liabilities of this scheme and the assets they hold.
The amount of the deficit may be adversely affected by changes in a
number of factors, including investment returns, long-term interest
rate and price inflation expectations, and anticipated members'
longevity. Further increases in the pension scheme deficit may
require the group to increase the amount of cash contributions
payable to the scheme, thereby reducing cash available to meet the
group's other operating, investing and financing requirements.
Following the triennial funding valuation of the group's pension
scheme in 2011, a revised deficit recovery plan was agreed. The
performance of the group's pension scheme and deficit recovery plan
are regularly reviewed by both the group and the trustees of the
scheme, taking actuarial and investment advice as appropriate. The
results of these reviews are discussed with the Board and
appropriate action taken.
Other risks
Raw material costs are a significant constituent of overall
product cost, and are impacted by global commodity markets.
Significant fluctuations in raw material costs can have a material
impact on profitability. The group continuously seeks out
opportunities to develop a robust and competitive supply base,
substitute new materials and closely monitors selling prices and
margins.
The global nature of the group's business means it is exposed to
volatility in currency exchange rates in respect of foreign
currency denominated transactions, the most significant being the
euro. In order to protect itself against currency fluctuations the
group has taken advantage of the opportunity to naturally hedge
euro revenue with euro payments. This is done in combination with
foreign currency bank accounts and forward exchange contracts. No
transactions of a speculative nature are undertaken.
Other risks include the availability of necessary materials,
business interruption and the duty of care to our employees,
customers and the wider public. These risks are managed through the
combination of quality assurance and health and safety procedures,
and insurance cover.
Management and personnel
The improvement in the financial performance of the business is
testament to the flexibility, hard work and commitment of our
staff, we once again thank everyone in the business for their
contribution.
Current trading and future prospects
Whilst competition in the European flooring market remains
undiminished there are clear and growing signs of improvement in
trading conditions in the UK and despite the ongoing strength of
sterling the company continues to grow sales in international
markets.
Ongoing investment in new products, combined with continuous
improvement in manufacturing flexibility and customer service has
positioned the business well to face competitive challenges head
on. It is pleasing to see that the business has started to reap the
benefits of judicious investment in innovation and cost cutting
initiatives with a clear pay-back, and given the debt free
foundation of the business further investment to facilitate growth
is planned for the coming year.
In summary the business is positioned to take advantage of
further growth opportunities and whilst there remain clear causes
for concern in the Eurozone, so far, the business has been able to
grow sales despite currency issues and a general stagnant European
market.
(MORE TO FOLLOW) Dow Jones Newswires
September 23, 2015 02:00 ET (06:00 GMT)
Given the improved performance of the business, combined with a
strong balance sheet and robust cash flow, we are once again able
to support a progressive dividend policy. If approved, a final
dividend of 0.9p per share will be paid on 25th November 2015 to
shareholders on the register at close of business on 30th October
2015 (ex-dividend date of 29th October 2015).
1 Restated due to reclassification of settlement discount as
required by IAS 18, Revenue Recognition
2 Adjusted earnings are earnings adjusted for exceptional
operating costs (net of tax)
Enquiries:
Neil Rylance 01924 266561
Chief Executive Officer
Roger Salt 01924 266561
Group Finance Director
Richard Lindley 0113 388 4789
N+1 Singer
The financial information set out in the announcement does not
constitute the group's statutory accounts for the years ended 30
June 2015 or 30 June 2014. The financial information for the year
ended 30 June 2014 is derived from the statutory accounts for that
year which have been delivered to the Registrar of Companies. The
auditors reported on those accounts; their report was unqualified
and did not include any statement under s498(2) or s498(3) of the
Companies Act 2006. The consolidated balance sheet at 30 June 2015,
the consolidated income statement, the consolidated statement of
comprehensive income, the consolidated cash flow statement and the
consolidated statement of changes in equity for the year then ended
have been extracted from the Group's 2015 statutory financial
statements upon which the auditor's opinion is unqualified and does
not include any statement under s498(2) or s498(3) of the Companies
Act 2006.
The announcement has been agreed with the company's auditor for
release.
Audited Consolidated Income
Statement
Year ended 30th June 2015
2015 2014
Restated
GBP000 GBP000
Revenue 25,538 22,951
Operating costs (24,440) (22,345)
-------------------------------------- -------- --------- ---------
Operating profit before exceptional
items 1,212 721
Exceptional items (114) (115)
-------------------------------------- -------- --------- ---------
Operating profit 1,098 606
Finance income 1 3
Finance costs (449) (279)
--------- ---------
Profit before taxation 650 330
Taxation (69) (29)
--------- ---------
Profit attributable to the
shareholders of the group 581 301
========= =========
Earnings per share (basic 1.29 0.65
and diluted) p p
All amounts relate to continuing
operations
Audited Consolidated Statement
of Comprehensive Income
Year ended 30th June 2015
2015 2014
GBP000 GBP000 GBP000 GBP000
Profit attributable to shareholders
of the group 581 301
Actuarial loss recognised
in the pension scheme (1,635) (189)
Related deferred taxation 267 (73)
---------
(1,368) (262)
--------- -------
Total comprehensive income
attributable to the shareholders
of the group (787) 39
========= =======
Audited Consolidated Balance
Sheet
as at 30th June 2015
2015 2014
GBP000 GBP000 GBP000 GBP000
Non-current assets
Property, plant and equipment 5,333 5,704
Deferred tax asset 1,557 1,323
---------
6,890 7,027
Current assets
Inventories 10,647 10,220
Trade and other receivables 4,412 4,313
Cash and cash equivalents 1,883 1,930
-------- --------
16,942 16,463
---------
Total assets 23,832 23,490
--------- ---------
Current liabilities
Trade and other payables (5,308) (5,121)
Provisions - (115)
-------- --------
(5,308) (5,236)
Non-current liabilities
Pension deficit (7,443) (5,761)
Deferred tax (1) (1)
-------- --------
(7,444) (5,762)
--------- ---------
Total liabilities (12,752) (10,998)
---------
11,080 12,492
========= =========
Equity
Called up share capital 10,851 11,561
Share premium account 504 504
Capital redemption reserve 3,105 2,395
Retained earnings (3,380) (1,968)
---------
11,080 12,492
========= =========
Audited Consolidated Cash
Flow Statement
Year ended 30th June 2015
2015 2014
GBP000 GBP000
Cash flow from operating
activities
Profit for the year 581 301
Tax charged 69 29
Finance costs 448 276
Depreciation 830 877
------- --------
Operating cash flows before
movements in working capital
and other payables 1,928 1,483
Increase in working capital (375) (1,633)
(Decrease)/increase in provisions
for liabilities and charges (115) 115
------- --------
Cash generated from/(used
in) operations 1,438 (35)
Contributions to defined
benefit pension scheme (400) (375)
------- --------
Net cash generated from/(used
in) operations 1,038 (410)
Investing activities
Purchase of property, plant
and equipment (459) (153)
------- --------
Financing activities
Interest (1) -
Share repurchase (348) -
Equity dividends paid (277) (254)
--------
(626) (254)
Net decrease in cash and
cash equivalents (47) (817)
Cash and cash equivalents
at start of the year 1,930 2,747
--------
Cash and cash equivalents
at end of the year 1,883 1,930
======= ========
Audited Consolidated Statement
of Changes in Equity
Year ended 30th June
2015
Share Share Capital Profit Total
capital premium redemption and equity
account reserve loss
account
GBP000 GBP000 GBP000 GBP000 GBP000
At 1st July 2013 11,561 504 2,395 (1,753) 12,707
Profit for the year - - - 301 301
Other comprehensive
income for the year - - - (262) (262)
(MORE TO FOLLOW) Dow Jones Newswires
September 23, 2015 02:00 ET (06:00 GMT)
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