Airea plc
(the "Company")
Interim report for the six months ended 30th June 2022
The principal activity of the group is the design, manufacture, marketing and distribution of floor coverings.
Chairman's Statement
The six months ended 30th June 2022 continued to see recovery from the impacts of the COVID-19 pandemic, which had suppressed activity in our key markets. H1 delivered improved sales and operating profit versus the prior year as demand in both our home and export markets continued to recover.
We remain focused on our operational and supply chain processes, which enable us to navigate the challenges from the current economic environment and the Ukrainian conflict both of which continue to put a strain on the availability of labour and raw materials.
The launches of our new products into the market continues with a noted increase in the sales of these products and the continuing specification of our product in the medium and premium sectors.
Net cash (cash less loans and borrowings) increased by £0.3m in the 6 month period to £2.5m as at 30th June 2022 from £2.2m as at 31 December 2021. We continue to have further liquidity available of £1.0m via our unutilised overdraft facility (2021: £1.0m unutilised). Our cash reserves and strong balance sheet enable us to manage the impact of the current economic environment and support our ongoing product development.
Group Results
Revenue for the period was £8.6m, £1.2m above the prior year (2021: £7.4m). In the UK our sales were 7.5% ahead of the prior six month comparative period as home sales recovered to pre-pandemic levels. Export sales were up 45.5% compared to the comparative period, despite the recovery to date export sales are 26% down on the pre-pandemic levels with the general economic environment continuing to impact trading overseas.
The operating profit was £756,000 (2021: £574,000). Excluding inventory absorption impacts, underlying product margins have come under some pressure versus prior year due to significant raw material inflation. After charging pension, lease and loan related interest costs of £108,000 (2021: £114,000) and incorporating the appropriate tax charge the net profit for the period was £611,000 (2021: £440,000). Basic earnings per share were 1.58p (2021: 1.14p).
Operating cash flows before movements in working capital were £0.8m (2021: £0.5m). Working capital remained relatively stable in the period in spite of the increased prices of raw materials. Contributions to the defined benefit pension scheme were £nil (2021: £0.2m) in line with the agreement reached with the scheme trustees following the last triennial valuation as at 1st July 2020. There was capital expenditure of £0.2m on small enhancements to plant and equipment following the major spend in the previous year (2021: £1.2m).
Update on CEO Replacement
The selection process for our new CEO continues, we have made good progress and expect to be in a position to make an announcement in the coming months.
Outlook
The development of our product ranges continues with the launches of new products and the refresh of existing products planned for the second half of the year. Our order book and sales of new products continue to grow as we strengthen our portfolio of products.
Recovery of our UK market has been pleasing with recovery in export sales expected to continue, however it must be noted that the Ukrainian conflict has adversely impacted some of our key export markets.
We have experienced unprecedented pressure on costs over the last 18 months and we have taken numerous actions to mitigate the impact on profitability. Those cost pressures and managing them will continue to be challenging over the remainder of this year and into the future.
Given the continued levels of uncertainty in the market and the wider economy the group will continue to prioritise the preservation of cash. We will therefore not be proposing an interim dividend at this time (2021: nil). We were pleased to have been in a position to declare and pay a final dividend following the 2021 results and we cautiously expect to be in the position to do similar once our 2022 results are finalised.
MARTIN TOOGOOD
Chairman 28th July 2022
Enquiries:
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| Ryan Thomas | via 01924 266 561 |
| Group Finance Director |
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| Peter Steel / Daniel Dearden-Williams | 020 7496 3000 |
| Singer Capital Markets |
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| Consolidated Income Statement | | ||
| 6 months ended 30th June 2022 | |||
| |
Unaudited 6 months ended 30th June 2022 |
Unaudited 6 months ended 30th June 2021 |
Audited 12 months ended 31st December 2021 |
| | £000 | £000 | £000 |
| Revenue | 8,551 | 7,431 | 15,865 |
| Operating costs | (7,935) | (6,997) | (14,832) |
| Other operating income | 140 | 140 | 280 |
| Operating profit before valuation gain | 756 | 574 | 1,313 |
| Unrealised valuation gain | - | - | 275 |
| Operating profit | 756 | 574 | 1,588 |
| Finance income | 8 | 4 | 8 |
| Finance costs | (108) | (114) | (305) |
| Profit before taxation | 656 | 464 | 1,291 |
| Taxation | (45) | (24) | (249) |
| Profit attributable to shareholders of the group | 611 | 440 | 1,042 |
| Earnings per share (basic and diluted) for the group | 1.58p | 1.14p | 2.70p |
Consolidated Statement of Comprehensive Income
6 months ended 30th June 2022
| | Unaudited | Unaudited | Audited |
| 6 months | 6 months | 12 months | |
| ended | ended | ended | |
| 30th June | 30th June | 31st December | |
| 2022 | 2021 | 2021 | |
| £000 | £000 | £000 | |
| Profit attributable to shareholders of the group | 611 | 440 | 1,042 |
| Items that will not be reclassified to profit or loss Actuarial gain recognised in the pension scheme |
35 |
1,687 |
1,599 |
| Related deferred taxation | (7) | (358) | (380) |
| | 28 | 1,329 | 1,219 |
| Items that will be reclassified subsequently to profit or loss when specific conditions are met Revaluation of property |
- |
- |
166 |
| Related deferred taxation | - | - | (32) |
| | - | - | 134 |
| Total other comprehensive income | 28 | 1,329 | 1,353 |
| Total comprehensive income attributable to shareholders of the group |
639 |
1,769 |
2,395 |
| Consolidated Balance Sheet | | ||
| as at 30th June 2022 | |||
| |
Unaudited 30th June 2022 |
Unaudited 30th June 2021 |
Audited 31st December 2021 |
| | £000 | £000 | £000 |
| Non-current assets | | | |
| Property, plant and equipment | 5,307 | 5,279 | 5,305 |
| Intangible assets | 51 | 62 | 55 |
| Investment property | 4,000 | 3,725 | 4,000 |
| Right-of-use asset | 943 | 1,011 | 972 |
| Deferred tax asset | 682 | 733 | 720 |
| | 10,983 | 10,810 | 11,052 |
| Current assets | | | |
| Inventories | 6,132 | 5,877 | 6,150 |
| Trade and other receivables | 2,370 | 2,093 | 1,887 |
| Cash and cash equivalents | 5,450 | 6,226 | 5,688 |
| | 13,952 | 14,196 | 13,725 |
| Total assets | 24,935 | 25,006 | 24,777 |
| Current liabilities | | | |
| Trade and other payables | (3,683) | (3,679) | (3,258) |
| Provisions | (175) | (138) | (245) |
| Lease liabilities | (124) | (145) | (124) |
| Loans and borrowings | (731) | (1,359) | (935) |
| | (4,713) | (5,321) | (4,562) |
| Non-current liabilities | | | |
| Deferred tax | (1,047) | (767) | (1,031) |
| Lease liabilities | (212) | (174) | (183) |
| Loans and borrowings | (2,226) | (2,911) | (2,592) |
| | (3,485) | (3,852) | (3,806) |
| Total liabilities | (8,198) | (9,173) | (8,368) |
| Net assets | 16,737 | 15,833 | 16,409 |
| Equity | | | |
| Called up share capital | 10,339 | 10,339 | 10,339 |
| Share premium account | 504 | 504 | 504 |
| Own Shares | (2,000) | (876) | (555) |
| Share-based payment reserve | - | 161 | 157 |
| Capital redemption reserve | 3,617 | 3,617 | 3,617 |
| Revaluation reserve | 3,150 | 3,014 | 3,150 |
| Retained earnings | 1,127 | (926) | (803) |
| Total equity | 16,737 | 15,833 | 16,409 |
| Consolidated Cash Flow Statement | | ||
| 6 months ended 30th June 2022 | |||
| |
Unaudited 6 months ended 30th June 2022 |
Unaudited 6 months ended 30th June 2021 |
Audited 12 months ended 31st December 2021 |
| | £000 | £000 | £000 |
| Cash flow from operating activities | | | |
| Profit for the period | 611 | 440 | 1,042 |
| Depreciation | 165 | 123 | 276 |
| Depreciation of right-of-use assets | 126 | 128 | 250 |
| Amortisation | 14 | 16 | 30 |
| Movement in Provision | (70) | (327) | (220) |
| Share-based payment (credit)/expenses | (157) | 20 | 16 |
| Net Finance costs | 100 | 110 | 297 |
| Profit on disposal of property, plant and equipment | (77) | - | - |
| Tax charge | 45 | 24 | 249 |
| Unrealised valuation gain | - | - | (275) |
| Operating cash flows before movements in working capital | 757 | 534 | 1,665 |
| Decrease/(increase) in inventory | 18 | (255) | (528) |
| Increase in trade and other receivables | (483) | (417) | (152) |
| Increase in trade and other payables | 425 | 784 | 347 |
| Cash generated from operations | 717 | 646 | 1,332 |
| Contributions to defined benefit pension scheme | - | (200) | (400) |
| Net cash generated from operating activities | 717 | 446 | 932 |
| Cash flows from investing activities | | | |
| Payments to acquire intangible fixed assets | (10) | (24) | (31) |
| Payments to acquire tangible fixed assets | (167) | (1,131) | (1,236) |
| Receipts from sales of tangible fixed assets | 77 | - | - |
| | (100) | (1,155) | (1,267) |
| Cash flows from financing activities | | | |
| Interest paid on lease liabilities | (4) | (6) | (12) |
| Interest paid on borrowings | (69) | (11) | (83) |
| Interest received | 8 | 4 | 8 |
| Proceeds from asset financing | - | 934 | 934 |
| Principal paid on lease liabilities | (67) | (166) | (260) |
| Repayment of loans and borrowings | (569) | (375) | (1,119) |
| Equity dividends paid | (154) | - | - |
| Net cash generated from financing activities | (855) | 380 | (532) |
| Net decrease in cash and cash equivalents | (238) | (329) | (867) |
| Cash and cash equivalents at start of the period | 5,688 | 6,555 | 6,555 |
| Cash and cash equivalents at end of the period | 5,450 | 6,226 | 5,688 |
Consolidated Statement of Changes in Equity
6 months ended 30th June 2022
|
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 2021 10,339 | 504 | (1,197) | 141 | 3,617 | 3,014 | (2,420) | 13,998 |
| Comprehensive income | | | | | | | |
| for the year | | | | | | | |
| Profit for the year - | - | - | - | - | - | 1,042 | 1,042 |
| Actuarial loss recognised | | | | | | | |
| on the pension scheme - | - | - | - | - | - | 1,219 | 1,219 |
| Revaluation of property - | - | - | - | - | 166 | (32) | 134 |
| Total comprehensive income for the year - |
- |
- |
- |
- |
166 |
2,229 |
2,395 |
Contributions by and distributions to owners
| Dividend paid | - - - | - - - - | - | |||||
| Share-based payment | - - - | 16 - - - | 16 | |||||
| Own share transfer Revaluation Reverse Transfer | - - 642
- - - | - - - (642)
- - (30) 30 | -
- | |||||
| Total contributions by and distributions to owners |
- |
- |
642 |
16 |
- |
(30) |
(612) |
16 |
| At 31st December 2021 | | | | | | | | |
| and 1st January 2022 10,339 | 504 | (555) | 157 | 3,617 | 3,150 | (803) | 16,409 | |
| Comprehensive income for the period Profit for the period - Actuarial gain recognised on the pension scheme - |
-
- |
-
- |
-
- |
-
- |
-
- |
611
28 |
611
28 | |
| Revaluation of property - | - | - | - | - | - | - | - | |
| Total comprehensive income for the period - |
- |
- |
- |
- |
- |
639 |
639 | |
| Contributions by and distributions to owners | | | | | | | | |
| Dividend paid - | - | - | - | - | - | (154) | (154) | |
| Share-based payment - | - | - | (157) | - | - | - | (157) | |
| Own Shares Transfer - | - | (1,445) | - | - | - | 1,445 | - | |
| Total contributions by and distributions to owners - |
- |
(1,445) |
(157) |
- |
- |
1,291 |
(311) | |
| At 30th June 2022 10,339 | 504 | (2,000) | - | 3,617 | 3,150 | 1,127 | 16,737 | |
Notes to the Financial Statements
1. BASIS OF PREPARATION AND ACCOUNTING POLICIES
The financial information for the six months ended 30th June 2022 and the six months ended 30th June 2021 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 2021 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 UK adopted International Accounting Standards 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 UK adopted International Accounting Standards. The accounting policies used are the same as those used in preparing the financial statements for the period ended 31st December 2021. These policies are set out in the annual report and accounts for the period ended 31st December 2021 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.
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