TIDMAIEA

RNS Number : 9882G

Airea PLC

30 July 2021

AIREA PLC

(the "Group")

Interim report for t he six months ended 30 June 2021

The principal activity of the group is the design, manufacture, marketing and distribution of floor coverings.

Chairman's Statement

The group's performance in the six months ended 30th June 2021 has continued to be impacted by the COVID-19 pandemic and the related lockdown restrictions which continue to suppress activity in our key markets. Our export business has been most severely impacted by lockdown restrictions in target markets and the additional costs of administration and freight following the post Brexit transition period. Availability of labour and raw materials have been a major challenge with unprecedented increases in raw material prices. H1 delivered improved sales and operating profit versus the prior year as demand in the market continued to recover albeit at a slower pace than expected.

Throughout H1 the group has remained open for business and continues to support customers whilst also looking to prioritise the well-being of employees. The board recognises and values the tremendous efforts of our employees throughout the period.

With reference to COVID-19 support packages deferred VAT repayments have commenced, our loan balance repayments have recommenced and the level of furlough support has reduced significantly in the first half.

As at 30th June 2021 our cash reserves were GBP6.2m (2020: GBP6.5m), excluding the CBILS loans our cash position was

GBP3.5m (2020: GBP3.7m), with further liquidity available of GBP1.0m via our unutilised overdraft facility (2020: GBP1.0m unutilised). Our cash reserves and strong balance sheet enable us to manage the impact of the pandemic and related risks.

Group Results

Revenue for the period was GBP0.3m above the prior year, GBP7.4m (2020: GBP7.1m). In the UK our sales were 18.5% ahead of the prior six month comparative period as home sales began to recover. Export sales were down 35.5% compared to the comparative period, largely due to the effect of COVID-19 on all our target export markets and the significant disruption caused by differing interpretations of import regulations post Brexit.

The operating profit was GBP574,000 (2020: GBP137,000). Excluding inventory absorption impacts, underlying product margins are broadly in line with prior year, however product margins are facing significant pressure due to significant raw material inflation and our ability to pass on these price increases. After charging pension, lease and loan related finance costs of GBP114,000 (2020: GBP193,000) and incorporating the appropriate tax charge the net profit for the period was GBP440,000 (2020: GBP43,000 loss). Basic earnings per share were 1.14p (2020:loss 0.11p).

Operating cash flows before movements in working capital were GBP0.5m (2020: GBP0.5m). Working capital increased in the period by GBP0.1m (2020: GBP1.0m decrease). Contributions to the defined benefit pension scheme were GBP0.2m (2020: GBP0.2m) in line with the agreement reached with the scheme trustees following the last triennial valuation as at 1st July 2017. Capital expenditure of GBP1.2m (2020: GBP0.2m) was spent renewing and enhancing manufacturing plant and equipment, with major spend on new equipment to continue to support our new exciting product development programme.

Outlook

The UK sales recovery is expected to continue with a strong order book, however the impact of lifting lockdown restrictions is unknown and so forecasting sales performance in the second half is particularly difficult. Market activity in our European Markets is expected to improve but relatively slowly. Difficulties exporting to Europe are now well documented, with significant increases in cost and additional complexity in exporting to Europe Post-Brexit.

Of greatest concern is the level of raw material price inflation and supply chain tensions putting a strain on the availability of materials and the costs of obtaining them, the increases experienced to date are relentless and unprecedented. Key to our success will be our ability to pass on these price increases and a halt or reversal of current pricing trends.

We have however continued to invest in development of our product range with investment in new equipment and the launches of new products ongoing throughout 2021 based upon our confidence in the future prospects of the business and our secure financial position.

Given the financial performance of the group and the continued levels of uncertainty in the market and wider economy the group will continue to prioritise cash to ensure medium to long-term stability and therefore will not be proposing an interim dividend (2020: nil).

MARTIN TOOGOOD

Chairman 30th July 2021

 
 Consolidated Income Statement 
 6 months ended 30th June 2021 
 
                                                              Unaudited 6        Unaudited                Audited 
                                                             months ended         6 months              12 months 
                                                                30th June            ended             ended 31st 
                                                                     2021        30th June               December 
                                                                                      2020                   2020 
                                                                   GBP000           GBP000                 GBP000 
--------------------------------------------  ---------------------------  ---------------  --------------------- 
 Revenue                                                            7,431        7,100                     14,554 
 Operating costs                                                  (6,997)          (7,103)               (14,090) 
 Other operating income                                               140              140                    280 
--------------------------------------------  ---------------------------  ---------------  --------------------- 
 Operating profit before valuation 
  gain                                                                574              137                    744 
 Unrealised valuation gain                                              -                -                    125 
--------------------------------------------  ---------------------------  ---------------  --------------------- 
 Operating profit                                                     574              137                    869 
 Finance income                                                         4                2                      7 
 Finance costs                                                      (114)            (193)                  (376) 
--------------------------------------------  ---------------------------  ---------------  --------------------- 
 Profit/(loss) before taxation                                        464             (54)                    500 
 Taxation                                                            (24)               11                  (109) 
--------------------------------------------  ---------------------------  ---------------  --------------------- 
 Profit/(loss) attributable to shareholders 
  of the group                                                        440             (43)                    391 
--------------------------------------------  ---------------------------  ---------------  --------------------- 
 Earnings per share (basic and diluted) 
  for the group                                                     1.14p        0.11p                      1.00p 
 
          Consolidated   Statement of Comprehensive Income 

6 months ended 30th June 2021

 
                                                          Unaudited       Unaudited                Audited 
                                                           6 months        6 months              12 months 
                                                         ended 30th           ended                  ended 
                                                               June       30th June          31st December 
--------------------------------------------- 
                                                               2021            2020                   2020 
--------------------------------------------- 
                                                             GBP000          GBP000                 GBP000 
---------------------------------------------  --------------------  --------------  --------------------- 
Profit/(loss) attributable to shareholders 
 of the group                                                   440            (43)                    391 
Items that will not be reclassified 
 to profit or loss 
 Actuarial gain/(loss) recognised in 
 the pension scheme                                           3,997         (3,448)                  (389) 
Related deferred taxation                                     (797)             655                     74 
---------------------------------------------  --------------------  --------------  --------------------- 
                                                              3,200         (2,793)                  (315) 
---------------------------------------------  --------------------  --------------  --------------------- 
Items that will be reclassified subsequently 
 to profit or loss when specific conditions 
 are met 
 Revaluation of property                                          -              12                     37 
Related deferred taxation                                         -             (2)                    (4) 
---------------------------------------------  --------------------  --------------  --------------------- 
                                                                  -              10                     33 
---------------------------------------------  --------------------  --------------  --------------------- 
Total other comprehensive income/(loss)                       3,200         (2,783)                  (282) 
---------------------------------------------  --------------------  --------------  --------------------- 
Total comprehensive income/(loss) 
 attributable to shareholders of the 
 group                                                        3,640         (2,826)                    109 
---------------------------------------------  --------------------  --------------  --------------------- 
 
 
Consolidated Balance Sheet 
as at 30th June 2021 
 
                                                    Unaudited 30th        Unaudited                  Audited 
                                                              June        30th June            31st December 
                                                              2021             2020                     2020 
                                                            GBP000           GBP000                   GBP000 
------------------------------  ----------------------------------  ---------------  ----------------------- 
Non-current assets 
Property, plant and equipment                                5,279        4,282                        4,271 
Intangible assets                                               62               67                       54 
Investment property                                          3,725        3,600                        3,725 
Right-of-use asset                                           1,011        1,126                        1,086 
Pension Surplus                                              2,310                -                        - 
Deferred tax asset                                             733        1,563                          920 
------------------------------  ----------------------------------  ---------------  ----------------------- 
                                                            13,120      10,638                        10,056 
Current assets 
Inventories                                                  5,877        4,728                        5,622 
Trade and other receivables                                  2,093        1,915                        1,712 
Cash and cash equivalents                                    6,226        6,451                        6,555 
------------------------------  ----------------------------------  ---------------  ----------------------- 
                                                            14,196      13,094                        13,889 
------------------------------  ----------------------------------  ---------------  ----------------------- 
Total assets                                                27,316      23,732                        23,945 
------------------------------  ----------------------------------  ---------------  ----------------------- 
Current liabilities 
Trade and other payables                                   (3,679)          (2,482)                  (2,895) 
Provisions                                                   (138)            (320)                    (465) 
Lease liabilities                                            (145)            (213)                    (243) 
Loans and borrowings                                       (1,359)            (580)                  (1,071) 
------------------------------  ----------------------------------  ---------------  ----------------------- 
                                                           (5,321)          (3,595)                  (4,674) 
Non-current liabilities 
Pension deficit                                                  -          (4,888)                  (1,789) 
Deferred tax                                               (1,206)            (526)                    (609) 
Lease liabilities                                            (174)            (297)                    (188) 
Loans and borrowings                                       (2,911)          (3,317)                  (2,641) 
------------------------------  ----------------------------------  ---------------  ----------------------- 
                                                           (4,291)          (9,028)                  (5,227) 
------------------------------  ----------------------------------  ---------------  ----------------------- 
Total liabilities                                          (9,612)         (12,623)                  (9,901) 
------------------------------  ----------------------------------  ---------------  ----------------------- 
Net assets                                                  17,704      11,109                        14,044 
------------------------------  ----------------------------------  ---------------  ----------------------- 
Equity 
Called up share capital                                     10,339      10,339                        10,339 
Share premium account                                          504              504                      504 
Own Shares                                                   (876)          (1,518)                  (1,197) 
Share-based payment reserve                                    161              141                      141 
Capital redemption reserve                                   3,617        3,617                        3,617 
Revaluation reserve                                          3,014        3,058                        3,014 
Retained earnings                                              945          (5,032)                  (2,374) 
------------------------------  ----------------------------------  ---------------  ----------------------- 
Total equity                                                17,704      11,109                        14,044 
------------------------------  ----------------------------------  ---------------  ----------------------- 
 
 
Consolidated Cash Flow Statement 
6 months ended 30(th) June 2021 
 
                                                        Unaudited        Unaudited                  Audited 
                                                         6 months         6 months                12 months 
                                                     ended 30(th)            ended             ended 31(st) 
                                                             June           30(th)                 December 
                                                             2021             June                     2020 
                                                                              2020 
                                                           GBP000           GBP000                   GBP000 
---------------------------------------  ------------------------  ---------------  ----------------------- 
Cash flow from operating activities 
Profit/(loss) for the period                                  440             (43)                      391 
Depreciation                                                  123              114                      228 
Depreciation of right-of-use assets                           128              140                      270 
Amortisation                                                   16               25                       38 
Movement in Provision                                       (327)                -                      145 
Share-based payment expense                                    20               56                       56 
Net Finance costs                                             110              191                      369 
Tax charge/(credit)                                            24             (11)                      109 
Unrealised valuation gain                                       -                -                    (125) 
---------------------------------------  ------------------------  ---------------  ----------------------- 
Operating cash flows before movements 
 in working capital                                           534              472                    1,481 
(Increase)/decrease in inventory                            (255)              733                    (161) 
(Increase)/decrease in trade and 
 other receivables                                          (417)              197                      456 
Increase in trade and other payables                          784               70                      467 
---------------------------------------  ------------------------  ---------------  ----------------------- 
Cash generated from operations                                646        1,472                        2,243 
Contributions to defined benefit 
 pension scheme                                             (200)            (200)                    (400) 
---------------------------------------  ------------------------  ---------------  ----------------------- 
Net cash generated from operating 
 activities                                                   446        1,272                        1,843 
---------------------------------------  ------------------------  ---------------  ----------------------- 
Cash flows from investing activities 
Payments to acquire intangible fixed 
 assets                                                      (24)             (33)                     (53) 
Payments to acquire tangible fixed 
 assets                                                   (1,131)            (156)                    (233) 
                                                          (1,155)            (189)                    (286) 
---------------------------------------  ------------------------  ---------------  ----------------------- 
Cash flows from financing activities 
Interest paid on lease liabilities                            (6)              (8)                     (15) 
Interest paid on borrowings                                  (11)             (18)                     (33) 
Interest received                                               4                2                        7 
Proceeds from new loans and borrowings                        934        2,750                        2,750 
Principal paid on lease liabilities                         (166)            (177)                    (344) 
Repayment of loans and borrowings                           (375)            (138)                    (324) 
Net cash generated from financing 
 activities                                                   380        2,411                        2,041 
---------------------------------------  ------------------------  ---------------  ----------------------- 
Net (decrease)/increase in cash and 
 cash equivalents                                           (329)        3,494                        3,598 
Cash and cash equivalents at start 
 of the period                                              6,555        2,957                        2,957 
---------------------------------------  ------------------------  ---------------  ----------------------- 
Cash and cash equivalents at end 
 of the period                                              6,226        6,451                        6,555 
---------------------------------------  ------------------------  ---------------  ----------------------- 
 

Consolidated Statement of Changes in Equity

6 months ended 30th June 2021

 
                                   Share                       Share-based       Capital                        Profit 
                     Share         premium         Own          payment          redemption    Revaluation      and            Total 
                     capital       account         Shares       reserve          reserve           reserve      loss           equity 
                                                                                                                account 
-------------- 
                      GBP000        GBP000       GBP000             GBP000           GBP000         GBP000       GBP000        GBP000 
--------------  ------------  ------------  -------------  ---------------  ---------------  -------------  -----------  ------------ 
At 1st January 
 2020                 10,339           504        (1,839)               85            3,617       3,048         (1,875)        13,879 
Comprehensive 
 income 
   for the 
   year 
Profit for the 
 year                   - - - - - -                                                                              391           391 
Actuarial loss 
 recognised 
on the pension 
        scheme          - - - - - -                                                                               (315)       (315) 
Impairment of 
 property               - - - - - -                                                                                33           33 
--------------  ------------------------------------------------------------------------------------------  -----------  -------------- 
Total 
comprehensive 
   income for the year 
    -                                    -              -                -                -              -       109              109 
Contributions by and 
   distributions to 
   owners 
Dividend paid -                          -              -                -                -              -            -             - 
Share-based payment 
 -                                       -              -               56                -              -            -            56 
Own share transfer 
 -                                       -        642                    -                -              -        (642)             - 
Revaluation Reverse 
   Transfer -                            -              -                -                -           (34)         34               - 
----------------------------  ------------  -------------  ---------------  ---------------  -------------  -----------  ------------ 
   Total contributions 
    by and distributions 
    to owners -                          -          642                 56                -           (34)        (608)            56 
----------------------------  ------------  -------------  ---------------  ---------------  -------------  -----------  ------------ 
   At 31st December 2020 
    and 1st January 2021 
    10,339                             504        (1,197)              141            3,617         3,014       (2,374)        14,044 
----------------------------  ------------  -------------  ---------------  ---------------  -------------  -----------  ------------ 
Comprehensive 
income for the 
period 
Profit for the 
 period                 - - - - - -                                                                              440           440 
Actuarial gain 
 recognised 
on the pension 
        scheme          - - - - - -                                                                               3,200     3,200 
Revaluation of             -             -              -                -                -              -            -             - 
 property 
--------------  ------------  ------------  -------------  ---------------  ---------------  -------------  -----------  ------------ 
Total 
comprehensive 
   income for the period 
    -                                    -              -                -                -              -     3,640            3,640 
Contributions by and 
   distributions to 
   owners 
Share-based payment 
 -                                       -              -               20                -              -            -            20 
Own Shares Transfer 
 -                                       -        321                    -                -              -        (321)             - 
----------------------------  ------------  -------------  ---------------  ---------------  -------------  -----------  ------------ 
   Total contributions 
    by and distributions 
    to 
    owners -                             -          321                 20                -              -        (321)            20 
----------------------------  ------------  -------------  ---------------  ---------------  -------------  -----------  ------------ 
At 30th June 2021 
 10,339                                504          (876)              161            3,617       3,014          945           17,704 
----------------------------  ------------  -------------  ---------------  ---------------  -------------  -----------  ------------ 
 

Notes to the Financial Statements

1. BASIS OF PREPARATION AND ACCOUNTING POLICIES

The financial information for the six months ended 30th June 2021 and the six months ended 30th June 2020 have not been audited and do not constitute full financial statements within the meaning of Section 434 of the Companies Act 2006.

The financial information relating to the year ended 31st December 2020 does not constitute full financial statements within the meaning of Section 434 of the Companies Act 2006. This information is based on the group's

statutory accounts for that period. The statutory accounts were prepared in accordance with International Financial Reporting Standards as adopted by the European Union ("IFRS") and received an unqualified audit report and did not contain statements under Section 498(2) or (3) of the Companies Act 2006. These financial statements have been filed with the Registrar of Companies.

These interim financial statements have been prepared using the recognition and measurement principles of International Financial Reporting Standards as adopted by the European Union ("IFRS"). The accounting policies used are the same as those used in preparing the financial statements for the period ended 31st December 2020. These policies are set out in the annual report and accounts for the period ended 31st December 2020 which is available on the company's website at www.aireaplc.co.uk.

Further copies of this report are available from the Company Secretary at the registered office at Victoria Mills, The Green, Ossett, Wakefield, West Yorkshire WF5 0AN and are also available, along with this announcement, on the company's website at www.aireaplc.co.uk.

Enquiries:

   Neil Rylance    01924 266561 

Chief Executive Officer

   Ryan Thomas     01924 266561 

Group Finance Director

   Peter Steel     020 7496 3000 

Singer Capital Markets

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