Interim Report

RNS Number : 5207U
Airea PLC
30 July 2020
 

AIREA PLC

(the "Group")

 

Interim report for the six months ended 30 June 2020

 

 

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

 

Chairman's Statement

 

The group's performance in the six months ended 30th June 2020 was significantly affected by the COVID-19 pandemic and the subsequent nationwide lockdown. The year had started well with Q1 2020 pre-lockdown delivering sales in line with prior year and a 6.6% increase in operating profit.

In our trading update of 26th March 2020, we informed shareholders that we expected a post lockdown decrease in demand. The impact of COVID-19 was at its most significant during April and May with demand reduced by 51% against the prior year; however, we were pleased to see an improvement during June and, although still behind prior year, the reduction had improved to 9%. The group remained open for business throughout the lockdown period and we were able to support our customers whilst also looking to prioritise the well-being of our employees

During this period the group focused on cash and overhead management with all non-critical expenditure halted and our supply chain requirements re-phased to help achieve these priorities. We are pleased we successfully achieved these objectives in preparation for the challenges of H2 2020.

The group was able to take advantage of several of the COVID-19 support packages made available by the UK government and our banking partner including:

A six year term CBILS loan of £2.75m with no fees, interest and repayments for the initial 12 month period

Capital repayment holiday for 6 months on existing long-term loan

Extended overdraft to £1m (not yet utilised)

Q1 2020 VAT payment deferred

Furloughed employees during Q2 2020

These actions as well as continued tight credit control and resilient customer cash collection procedures has enabled the group to increase its cash reserves to £6.5m (£3.7m excluding the CBILS loan) (2019: £1.4m) to help mitigate the unprecedented and unpredictable market conditions the group continues to operate within.

 

Group Results

 

Revenue for the period was £7.1m (2019: £8.9m). The operating profit was £137,000 (2019: £1,085,000) with underlying product margins in line with the prior year; however, actual operating profit was adversely impacted by the inventory reduction during April and May. Profitability is expected to improve during H2 2020 as inventory levels increase. After charging pension, lease and loan related finance costs of £193,000 (2019: £143,000) and incorporating the appropriate tax credit the net loss for the period was £43,000 (2019: £935,000 profit). Basic loss per share was 0.11p (2019: EPS of 2.26p).

Operating cash flows before exceptional items and movements in working capital were £0.5m (2019: £1.3m). Working capital decreased in the period by £1.0m (2019: £0.8m increase) through reduced manufacturing output whilst employees were furloughed.

Contributions to the defined benefit pension scheme were £0.2m (2019: £0.2m) in line with the agreement reached with the scheme trustees following the last triennial valuation as at 1st July 2017. Capital expenditure of £0.2m (2019: £0.2m) was spent renewing and enhancing manufacturing plant and equipment and supporting new product development.

The pension scheme deficit increased to £4.9m (2019: £3.6m) due to the COVID-19 impact on the equity markets and reduced corporate bond yields that lowered the discount rate used and increased the value placed on the scheme liabilities. The schemes investments are continuously under review and at this stage, there is no expectation that the group's contributions to the scheme will change.

 

Outlook

Demand, although improving, remains lower than previous years as the impact of COVID-19 continues and therefore it is very difficult for the group to forecast the performance in the second half. However, with strong liquidity and the continued development of new products we believe the group is positioned well to take advantage of any opportunities that arise and is hopeful that the second half should deliver a modest profit whilst carefully managing cash reserves.

At this point, we must make a special reference to the magnificent efforts of all our employees who have worked in very difficult circumstances to support the business and its customers throughout.

Dividend

Given the financial performance of the group and the continued levels of uncertainty in the market and economy the group will continue to prioritise cash to ensure medium to long term stability and therefore will not be proposing an interim dividend (2019: 0.8p).

 

 

MARTIN TOOGOOD

Chairman  30th July 2020


Consolidated Income Statement


6 months ended 30th June 2020


 

Unaudited 6months ended 30thJune

2020

 

Unaudited 6months ended 30thJune

2019


£000

£000

£000

Revenue

7,100

8,890

19,183

Operating costs

(7,103)

(7,945)

(17,297)

Other operating income

140

140

280

Operating profit before valuation gain

137

1,085

2,166

Unrealised valuation gain

-

-

200

Operating profit

137

1,085

2,366

Finance income

2

3

6

Finance costs

(193)

(143)

(411)

(Loss)/profit before taxation

(54)

945

1,961

Taxation

11

(10)

(403)

(Loss)/profit attributable to shareholders of the group

(43)

935

1,558

(Loss)/earnings per share (basic and diluted) for the group

(0.11p)

2.26p

3.97p

 

 

 

 

Consolidated Statement of Comprehensive Income

6 months ended 30th June 2020

 

 


Unaudited 6 months ended 30th June

Unaudited 6 months ended 30th June

Audited 12months

ended

31stDecember

2020

2019

2019

£000

£000

£000

(Loss)/profit attributable to shareholders of the group

(43)

935

1,558

Items that will not be reclassified to profit or loss

Actuarial (loss)/gain recognised in the pension scheme

 

(3,448)

 

-

 

2,172

Related deferred taxation

655

-

(369)


(2,793)

-

1,803

Items that will be reclassified subsequently to profit or loss when specific conditions are met

Revaluation/(impairment) of property

 

 

12

 

 

-

 

 

(17)

Related deferred taxation

(2)

-

3


10

-

(14)

Total other comprehensive (loss)/income

(2,783)

-

1,789

Total comprehensive (loss)/income attributable to shareholders of the group

 

(2,826)

 

935

 

3,347


 

Consolidated Balance Sheet


as at 30th June 2020


 

Unaudited 30thJune

2020

 

Unaudited 30thJune

2019

 

Audited 31st December

2019


£000

£000

£000

Non-current assets




Property, plant and equipment

4,282

5,182

4,229

Intangible assets

67

69

39

Investment property

3,600

3,400

3,600

Right-of-use asset

1,126

-

1,233

Deferred tax asset

1,563

1,457

847


10,638

10,108

9,948

Current assets




Inventories

4,728

7,363

5,461

Trade and other receivables

1,915

4,621

2,112

Cash and cash equivalents

6,451

1,436

2,957


13,094

13,420

10,530

Total assets

23,732

23,528

20,478

Current liabilities




Trade and other payables

(2,482)

(3,614)

(2,412)

Provisions

(320)

(320)

(320)

Lease liabilities

(213)

(190)

(329)

Loans and borrowings

(580)

-

(562)


(3,595)

(4,124)

(3,623)

Non-current liabilities




Pension deficit

(4,888)

(3,625)

(1,472)

Deferred tax

(526)

(304)

(457)

Lease liabilities

(297)

(227)

(323)

Loans and borrowings

(3,317)

(1,551)

(724)


(9,028)

(5,707)

(2,976)

Total liabilities

(12,623)

(9,831)

(6,599)

Net assets

11,109

13,697

13,879

Equity




Called up share capital

10,339

10,339

10,339

Share premium account

504

504

504

Own shares

(1,518)

-

(1,839)

Share-based payment reserve

141

-

85

Capital redemption reserve

3,617

3,617

3,617

Revaluation reserve

3,058

3,096

3,048

Retained earnings

(5,032)

(3,859)

(1,875)

Total Equity

11,109

13,697

13,879


 

Consolidated Cash Flow Statement


6 months ended 30th June 2020


 

Unaudited 6months ended 30thJune

2020

 

Unaudited 6months ended 30thJune

2019

 

Audited 12months

ended 31stDecember

2019


£000

£000

£000

Cash flow from operating activities




(Loss)/profit for the period

(43)

935

1,558

Depreciation

114

157

206

Depreciation of right-of-use assets

140

-

274

Amortisation

25

32

65

Net finance costs

191

137

405

Loss on disposal of property, plant and equipment

-

-

(12)

Tax (credit)/charge

(11)

10

403

Share-based payment expense

56

-

-

Unrealised valuation gain

-

-

(200)

Operating cash flows before movements in working capital

472

1,271

2,699

Decrease/(increase) in inventory

733

(566)

1,336

Decrease/(increase) in trade and other receivables

197

(291)

221

Increase/(decrease) in trade and other payables

70

43

(1,159)

Cash generated from operations

1,472

457

3,097

Contributions to defined benefit pension scheme

(200)

(200)

(400)

Net cash generated from operating activities

1,272

257

2,697

Investing activities




Payments to acquire intangible fixed assets

(33)

(6)

(9)

Payments to acquire tangible fixed assets

(156)

(230)

(378)

Receipts from sales of tangible fixed assets

-

-

136


(189)

(236)

(251)

Financing activities




Interest paid on lease liabilities

(8)

(6)

(21)

Interest paid on borrowings

(18)

-

(34)

Interest received

2

3

6

Proceeds from loan

2,750

1,700

1,700

Purchase of own shares by the EBT

-

(2,000)

(2,000)

Principal paid on lease liabilities

(177)

(93)

(343)

Repayment of loan

(138)

(149)

(448)

Equity dividends paid

-

(772)

(1,081)

Net cash used in financing activities

2,411

(1,317)

(2,221)

Net increase/(decrease) in cash and cash equivalents

3,494

(1,296)

225

Cash and cash equivalents at start of the period

2,957

2,732

2,732

Cash and cash equivalents at end of the period

6,451

1,436

2,957


 

Consolidated Statement of Changes in Equity

6 months ended 30th June 2020

 


 

Share capital

Share premium account

 

Own Shares

Share-based

payment reserve

Capital redemption

reserve

 

Revaluation

reserve

Profit and loss account

 

Total equity


£000

£000

£000

£000

£000

£000

£000

£000

 

At 1st January 2019

10,339

504

-

-

3,617

3,096

(4,028)

13,528

 

Comprehensive income









 

for the year




Profit for the year

-  -  -  -  -  -

1,558

1,558

Actuarial gain recognised




on the pension scheme

-  -  -  -  -  -

1,803

1,803

Impairment of property

-  -  -  -  -  (14)

-

(14)

Total comprehensive




income fortheyear  -

-

-

-

-

(14)

3,361

3,347

Contributions by and








distributions to








owners








Dividendpaid  -

-

-

-

-

-

(1,081)

(1,081)

Purchase of own shares








byEBT  -

-

(2,000)

-

-

-

-

(2,000)

Share-basedpayment  -

-

-

85

-

-

-

85

Ownsharetransfer  -

-

161

-

-

-

(161)

-

Revaluation Reverse








Transfer  -

-

-

-

-

(34)

34

-

Total contributions by and distributions

toowners  -

 

 

-

 

 

(1,839)

 

 

85

 

 

-

 

 

(34)

 

 

(1,208)

 

 

(2,996)

At 31st December 2019

and 1st January 2020   10,339

 

504

 

(1,839)

 

85

 

3,617

 

3,048

 

(1,875)

 

13,879

Comprehensive income for the year




Loss for the year

-  -  -  -  -  -

(43)

(43)

Actuarial loss recognised




on the pension scheme

-  -  -  -  -  -

(2,793)

(2,793)

Revaluation of property

-  -  -  -  -  10

-

10

Total comprehensive




income fortheyear  -

-

-

-

-

10

(2,836)

(2,826)

Contributions by and








distributions to








owners








Share-basedpayment  -

-

-

56

-

-

-

56

OwnSharesTransfer  -

-

321

-

-

-

(321)

-

Total contributions by and distributions to

owners  -

 

 

-

 

 

321

 

 

56

 

 

-

 

 

-

 

 

(321)

 

 

56

At 30thJune2020  10,339

504

(1,518)

141

3,617

3,058

(5,032)

11,109


 

1. BASIS OF PREPARATION AND ACCOUNTING POLICIES

 

The financial information for the six months ended 30th June 2020 and the six months ended 30th June 2019 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 2019 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 2019. These policies are set out in the annual report and accounts for the period ended 31st December 2019 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 

 

Paul Stevenson    01924 266561

Group Finance Director 

 

Peter Steel / Ben Farrow    020 7496 3000

N+1 Singer


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