Half Yearly Report

RNS Number : 2200Q

Airea PLC

26 February 2016

 

AIREA PLC

Interim report for the six months ended 31 December 2015

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

Chairman's statement

Airea is pleased to report earnings are broadly in line with the corresponding period last year, despite the adverse impact on international sales due to the strength of sterling against the Euro in the first half of the financial year.  

The first half of the current financial year has seen major progress across a number of strategic objectives.  Most significant has been the recently announced consolidation of manufacturing operations from four locations onto two existing sites occupied by the company at Ossett and Wakefield.   The move not only delivers significant cost savings and efficiency improvements, but enhances our operational capability, reducing lead-times and thereby improving customer service. 

Inevitably there have been one-off costs incurred as a consequence of the move, i.e. rationalisation of finished inventories, redundancy payments to staff who were not able to transfer, and the relocation of equipment and inventory.  These exceptional costs have been highlighted in the income statement. 

On-going costs will be significantly reduced going forward.  These include cost savings following the expiry of the lease of one of the properties vacated.  In addition, Airea has agreed to lease to a third party its freehold property in Bury, which is no longer required for group operations as set out above, once it has been fully vacated by the company in the third quarter of this financial year.

The first six months also saw a reduction in the pension deficit arising from the completion of a Pension Increase Exchange exercise.  The initiative allowed pensioners to opt for an income stream more aligned to their personal circumstances and preferences, whilst at the same time reducing the cost of past service benefits to the scheme.  The gain to profit is highlighted as exceptional in the income statement. 

Group results

Revenue for the period was £12.7m (2014 restated: £13.4m).  The operating profit before exceptional items was £730,000 (2014: £700,000).  The exceptional charge of £1.3m related to the costs associated with the consolidation of manufacturing operations, and the exceptional income of £1.3m related to the Pension Increase Exchange.  The operating profit after exceptional items was £759,000 (2014: £700,000).  After charging pension related finance costs of £246,000 (2014:£215,000) and incorporating the appropriate tax charge the net profit for the period was £372,000 (2014: £371,000).  Basic earnings per share were 0.86p (2014: 0.80p).

Operating cash flows before exceptional items and movements in working capital were £1.1m (2014: £1.1m).  The exceptional costs incurred a cash outflow of £0.5m (2014: £0.1m). Working capital decreased by £1.1m (2014: increase £0.4m) due to reductions in inventories.  Contributions to the defined benefit pension scheme were £200,000 (2014: £200,000) in line with the agreement reached with the scheme trustees following the last triennial valuation as at 1^st July 2014.  Capital expenditure of £518,000 (2014: £136,000) was focussed on supporting new product launches. Overall the cash balance increased by £678,000 to £2.6m.  

Outlook

The Board does not detect any fundamental changes in the outlook for the markets that we serve, and competition for business is likely to remain intense.  However, the business enters the second half of the year with a reduced cost base, simplified operation and a healthy new product pipeline.  In line with its recent policy, the board has resolved to determine the level of dividend at the year end, and there will not be a dividend payment at the interim stage.

Martin Toogood

Chairman

26^th February 2016

Enquiries:

Neil Rylance                                                                                                                  01924 266561

Chief Executive Officer

Roger Salt                                                                                                                     01924 266561

Group Finance Director

Richard Lindley                                                                                                              0113 388 4789

N+1 Singer

	Consolidated Income Statement
	6 months ended 31st December 2015
			Unaudited	Unaudited	Audited
			6 months ended	6 months ended	year ended
			31st December	31st December	30th June
				restated
			2015	2014	2015
			£000	£000	£000
	Revenue		12,674	13,379	25,538
	Operating costs		(11,915)	(12,679)	(24,440)
	Operating profit before exceptional items		730	700	1,212
	Exceptional items:
	Pension credit		1,300	-	-
	Restructure of operations		(1,271)	-	-
	Property dispute		-	-	(15)
	Share repurchase expenses		-	-	(99)
	Operating profit		759	700	1,098
	Finance income		-	1	1
	Finance costs		(246)	(215)	(449)
	Profit before taxation		513	486	650
	Taxation		(141)	(115)	(69)
	Profit attributable to shareholders of the group		372	371	581
	Earnings per share (basic and diluted)		0.86p	0.80p	1.29p
	All amounts relate to continuing operations
	Consolidated Statement of Comprehensive Income
	6 months ended 31st December 2015
			Unaudited	Unaudited	Audited
			6 months ended	6 months ended	year ended
			31st December	31st December	30th June
			2015	2014	2015
			£000	£000	£000
	Profit attributable to shareholders of the group		372	371	581
	Actuarial loss recognised in the pension scheme		(218)	-	(1,635)
	Related deferred taxation		44	-	267
	Total comprehensive income attributable to shareholders of the group		198	371	(787)
	Consolidated Balance Sheet
	as at 31st December 2015		Unaudited	Unaudited	Audited
			31st December	31st December	30th June
			2015	2014	2015
			£000	£000	£000
	Non-current assets
	Property, plant and equipment		5,447	5,427	5,333
	Deferred tax asset		1,350	1,288	1,557
			6,797	6,715	6,890
	Current assets
	Inventories		8.313	10,358	10,647
	Trade and other receivables		3,451	3,832	4,412
	Cash and cash equivalents		2,561	1,915	1,883
			14,325	16,105	16,942
	Total assets		21,122	22,820	23,832
	Current liabilities
	Trade and other payables		(3,503)	(4,457)	(5,308)
	Provisions		(325)	-	-
			(3,828)	(4,457)	(5,308)
	Non-current liabilities
	Pension deficit		(6,406)	(5,776)	(7,443)
	Deferred tax		(1)	(1)	(1)
			(6,407)	(5,777)	(7,444)
	Total liabilities		(10,235)	(10,234)	(12,752)
			10,887	12,586	11,080
	Equity
	Called up share capital		10,851	11,561	10,851
	Share premium account		504	504	504
	Capital redemption reserve		3,105	2,395	3,105
	Retained earnings		(3,573)	(1,874)	(3,380)
			10,887	12,586	11,080
	Consolidated Cash Flow Statement
	6 months ended 31st December 2015		Unaudited	Unaudited	Audited
			6 months ended	6 months ended	year ended
			31st December	31st December	30th June
			2015	2014	2015
			£000	£000	£000
	Cash flow from operating activities
	Profit attributable to shareholders of the group		372	371	581
	Tax charged		141	115	69
	Finance costs		246	214	448
	Pension credit		(1,300)	-	-
	Exceptional costs		1,271	-	114
	Depreciation		404	413	830
	Operating cash flows before exceptional items & movements in working capital		1,134	1,113	2,042
	Exceptional costs		(1,271)	-	(114)
	Increase/(decrease) in provisions for liabilities and charges		325	(115)	(115)
	Inventory impairment		468	-	-
	Operating cash flows after exceptional items & movements in working capital		656	998	1,813
	Decrease/(increase) in working capital		1,131	(400)	(375)
	Cash generated from operations		1,787	598	1,438
	Contributions to defined benefit pension scheme		(200)	(200)	(400)
	Net cash generated from operations		1,587	398	1,038
	Investing activities
	Purchase of property, plant and equipment		(518)	(136)	(459)
	Financing activities
	Interest		-	-	(1)
	Share repurchase		-	-	(348)
	Equity dividends paid		(391)	(277)	(277)
			(391)	(277)	(626)
	Net increase/(decrease) in cash and cash equivalents		678	(15)	(47)
	Cash and cash equivalents at start of period		1,883	1,930	1,930
	Cash and cash equivalents at end of period		2,561	1,915	1,883
	Consolidated Statement of Changes in Equity
	6 months ended 31st December 2015
			Share capital	Share premium account	Capital redemption reserve	Retained Earnings	Total equity
			£000	£000	£000	£000	£000
	At 1st July 2014		11,561	504	2,395	(1,968)	12,492
	Profit attributable to shareholders of the group		-	-	-	371	371
	Dividend paid		-	-	-	(277)	(277)
	At 1st January 2015		11,561	504	2,395	(1,874)	12,586
	Profit attributable to shareholders of the group		-	-	-	210	210
	Other comprehensive income for the period		-	-	-	(1,368)	(1,368)
	Share repurchase		(710)	-	710	-	-
	Consideration paid on share repurchase		-	-	-	(348)	(348)
	At 1st July 2015		10,851	504	3,105	(3,380)	11,080
	Profit attributable to shareholders of the group		-	-	-	372	372
	Other comprehensive income for the period		-	-	-	(174)	(174)
	Dividend paid		-	-	-	(391)	(391)
	At 31st December 2015		10,851	504	3,105	(3,573)	10,887
	Note
	BASIS OF PREPARATION AND ACCOUNTING POLICIES
	The financial information for the six month periods ended 31st December 2015 and 31st December 2014 has not been audited and does not constitute full financial statements within the meaning of Section 434 of the Companies Act 2006.  The revenue and operating costs for the six month period ended 31st December 2014 have been restated due to the reclassification of settlement discount as required by IAS 18, Revenue Recognition. The financial information relating to the year ended 30th June 2015 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 year ended 30th June 2015.  These policies are set out in the annual report and accounts for the year ended 30th June 2015. The interim and annual reports, and this announcement are available on the company's website at www.aireaplc.co.uk.

 

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