AIREA PLC — Interim / Quarterly Report 2017

Feb 21, 2017

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RNS Number : 3748X

Airea PLC

21 February 2017

AIREA PLC

Interim report for the six months ended 31 December 2016

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 significantly ahead of the corresponding period.

-    Operating profit up 51%

-    Basic earnings per share up 76%

-    EBITDA up 28%

New product launches targeted at the residential market have driven growth in this sector.  On the contract side however, delays in projects led to a slow down in growth and as indicated in the annual report sales in the Euro zone took some time to recover.  Exports grew steadily in the period and we are seeing sales ahead of last year as we enter the second six months of the accounting period.

Investment in new technology during the second half of the last financial year will facilitate the further extension of our product range with several new designs currently being finalised for launch.

The site consolidation exercise is largely complete with discussions concerning our last leasehold operation in Wakefield reaching an advanced stage. The business continues to reap the benefits of shorter lead times, cost synergies and reduced waste. 

Group Results

Revenue for the period was £12.8m (2015: £12.7m).  The operating profit was £1,149,000 (2015: £759,000).   After charging pension related finance costs of £305,000 (2015: £246,000) and incorporating the appropriate tax charge the net profit for the period was £696,000 (2015:  £372,000). Basic earnings per share were 1.51p (2015: 0.86p)

Operating cash flows before exceptional items and movements in working capital were £1.5m (2015: £1.1m).  Working capital increased in the period by £1.2m mainly as a result of timing of payments to trade creditors. Contributions to the defined benefit pension scheme were £200,000 (2015: £200,000) in line with the agreement reached with the scheme trustees following the last triennial valuation as at 1st July 2014.  Capital expenditure of £1,009,000 (2015: £518,000) was made in renewing and enhancing manufacturing plant and equipment. 

The increase in the pension deficit of £579,000 resulted from a deterioration in corporate bond yields.  It is an accounting standards requirement that the reported pension valuation is based on corporate bond yields even though this does not reflect the investment strategy of the plan.  In reality the plan is now largely hedged against interest rate movements and inflation, which, combined with a diversified growth asset base, has produced an improved underlying position.   

Outlook

Recent experience suggests that current exchange rate conditions will, in overall terms, prove to be beneficial for the company but in recent months there has been significant input price pressure resulting from commodity price rises. It is therefore difficult at this point in time to predict the longer term effect on our competitive position. As ever our margins remain the subject of careful management as we look to exploit any advantage.

Of far greater concern is the medium to long term impact of economic uncertainty on market demand.  Our position is not unique of course but there has been a notable increase in volatility in an already cyclical market.

The Board intends to maintain the recent pattern of dividend payments, and taking into consideration the changes in accounting period announced in December, will determine the level of interim dividend on the basis of the twelve month period ended 30 June 2017.  Therefore there will not be a dividend payment at this interim stage.

Martin Toogood

Chairman

20th February 2017  

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 2016
					Unaudited	Unaudited	Audited
					6 months ended	6 months ended	year ended
					31st December	31st December	30th June
					2016	2015	2016
					£000	£000	£000
	Revenue				12,771	12,674	24,577
	Operating costs				(11,622)	(11,915)	(22,535)
	Operating profit before exceptional items				1,149	730	2,013
	Exceptional items:
	Exceptional costs				-	(1,271)	(1,271)
	Pension credit				-	1,300	1,300
	Operating profit				1,149	759	2,042
	Finance income				-	-	-
	Finance costs				(305)	(246)	(651)
	Profit before taxation				844	513	1,391
	Taxation				(148)	(141)	(114)
	Profit attributable to shareholders of the group				696	372	1,277
	Earnings per share (basic and diluted)				1.68p	0.86p	3.01p
	All amounts relate to continuing operations
	Consolidated Statement of Comprehensive Income
	6 months ended 31st December 2016
					Unaudited	Unaudited	Audited
					6 months ended	6 months ended	year ended
					31st December	31st December	30th June
					2016	2015	2016
					£000	£000	£000
	Profit attributable to shareholders of the group				696	372	1,277
	Actuarial loss recognised in the pension scheme				(480)	(218)	(291)
	Related deferred taxation				96	44	(83)
					(384)	(174)	(374)
	Unrealised valuation gain				-	-	3,009
	Related deferred taxation				-	-	(240)
					-	-	2,769
	Total comprehensive income attributable to shareholders of the group				312	198	3,672
	Consolidated Balance Sheet
	as at 31st December 2016				Unaudited	Unaudited	Audited
					31st December	31st December	30th June
					2016	2015	2016
					£000	£000	£000
	Non-current assets
	Property, plant and equipment				6,164	5,447	5,489
	Investment property				2,701	-	2,701
	Deferred tax asset				1,326	1,350	1,264
					10,191	6,797	9,454
	Current assets
	Inventories				9,017	8.313	9,338
	Trade and other receivables				4,076	3,451	4,601
	Cash and cash equivalents				2,499	2,561	3,114
					15,592	14,325	17,053
	Total assets				25,783	21,122	26,507
	Current liabilities
	Trade and other payables				(3,656)	(3,503)	(5,505)
	Provisions				(125)	(325)	(125)
					(3,781)	(3,828)	(5,630)
	Non-current liabilities
	Obligation under finance leases				(854)	-	-
	Pension deficit				(7,264)	(6,406)	(6,685)
	Deferred tax				(241)	(1)	(241)
					(8,359)	(6,407)	(6,926)
	Total liabilities				(12,140)	(10,235)	(12,556)
					13,643	10,887	13,951
	Equity
	Called up share capital				10,339	10,851	10,339
	Share premium account				504	504	504
	Capital redemption reserve				3,617	3,105	3,617
	Revaluation reserve				3,009	-	3,009
	Retained earnings				(3,826)	(3,573)	(3,518)
					13,643	10,887	13,951
	Consolidated Cash Flow Statement
	6 months ended 31st December 2016				Unaudited	Unaudited	Audited
					6 months ended	6 months ended	year ended
					31st December	31st December	30th June
					2016	2015	2016
					£000	£000	£000
	Cash flow from operating activities
	Profit attributable to shareholders of the group				696	372	1,277
	Tax charged				148	141	114
	Finance costs				305	246	651
	Depreciation				334	404	837
	Profit on disposal of property plant and equipment				-	-	(6)
	Pension credit				-	(1,300)	(1,300)
	Inventory impairment				-	468	468
	Operating cash flows before exceptional items & movements in working capital				1,483	331	2,041
	Decrease in inventories				321	1,866	841
	Decrease / (increase) in trade and other receivables				525	961	(189)
	(Decrease) / increase in trade and other payables				(2,015)	(1,696)	232
	Increase in provisions for liabilities and charges				-	325	125
	Cash generated from operations				314	1,787	3,050
	Income tax received				52	-	61
	Contributions to defined benefit pension scheme				(200)	(200)	(400)
	Net cash generated from operations				166	1,587	2,711
	Investing activities
	Purchase of property, plant and equipment				(1,009)	(518)	(704)
	Proceeds on disposal of property, plant and equipment				-	-	25
					(1,009)	(518)	(679)
	Financing activities
	Interest				(6)	-	-
	Obligations under finance leases				854	-	-
	Share repurchase				-	-	(410)
	Equity dividends paid				(620)	(391)	(391)
					228	(391)	(801)
	Net increase/(decrease) in cash and cash equivalents				(615)	678	1,231
	Cash and cash equivalents at start of period				3,114	1,883	1,883
	Cash and cash equivalents at end of period				2,499	2,561	3,114
	Consolidated Statement of Changes in Equity
	6 months ended 31st December 2016
				Share capital		Share premium account	Capital redemption reserve	Revaluation reserve	Profit and loss account	Total equity
				£000		£000	£000	£000	£000	£000
	At 1st July 2015			10,851		504	3,105	-	(3,380)	11,080
	Comprehensive income for the period
	Profit for the period			-		-	-	-	372	372
	Other comprehensive income for the period			-		-	-	-	(174)	(174)
				-		-	-	-	198	198
	Contributions by and distributions to owners
	Dividend Paid			-		-	-	-	(391)	(391)
	At 31st December 2015			10,851		504	3,150	-	(3,573)	10,887
	Comprehensive income for the period
	Profit for the period			-		-	-	-	905	905
	Other comprehensive income for the period			-		-	-	3,009	(440)	2,569
				-		-	-	3,009	465	3,474
	Contributions by and distributions to owners
	Share repurchase			(512)		-	512	-	-	-
	Consideration paid on share purchase			-		-	-	-	(410)	(410)
				(512)		-	512	-	(410)	(410)
	At 30th June 2016			10,339		504	3,617	3,009	(3,518)	13,951
	Comprehensive income for the period
	Profit for the year			-		-	-	-	696	696
	Other comprehensive income for the year			-		-	-	-	(384)	(384)
				-		-	-	-	312	312
	Contributions by and distributions to owners
	Dividend Paid			-		-	-	-	(620)	(620)
	At 31st December 2016			10,339		504	3,617	3,009	(3,826)	13,643
	Note
	BASIS OF PREPARATION AND ACCOUNTING POLICIES
		The financial information for the six month periods ended 31st December 2016 and 31st December 2015 has not been audited and does not constitute full financial statements within the meaning of Section 434 of the Companies Act 2006.   The financial information relating to the year ended 30th June 2016 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 2016.  These policies are set out in the annual report and accounts for the year ended 30th June 2016 which is available on the company's website 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.

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