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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Airea Plc | LSE:AIEA | London | Ordinary Share | GB0008123027 | ORD 25P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 32.00 | 31.00 | 33.00 | 32.00 | 32.00 | 32.00 | 193 | 08:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Misc Homefurnishings Stores | 18.76M | 1.3M | 0.0313 | 10.22 | 13.23M |
From Apr 2019 to Apr 2024
TIDMAIEA
RNS Number : 0570F
Airea PLC
05 March 2020
Airea plc
Final results for the year ended 31st December 2019
Strategic Report
Airea plc is pleased with the progress the group has made whilst navigating an unpredictable and volatile market environment. During a turbulent political and economic year the group implemented significant operational and supply chain improvements specifically designed to mitigate the impact of any further uncertainty caused by Brexit trade negotiations and better prepare the group for growth opportunities.
Highlights for the year
- Increased year end cash balance to GBP3.0m - Reduction in inventory of GBP1.3m to GBP5.5m - Eradication of costly third party warehousing - Revenues broadly flat; however, the board believes performance ahead of the market - Underlying profit margins increased year on year - Pension deficit reduction of GBP2.2m to GBP1.5m
Principal activity and strategy
The group remains focused on the design, manufacture, marketing and distribution of floor coverings. Our approach to strategy is uncomplicated; to develop products that sell, exploit the strength of our combined manufacturing and distribution operation and deliver robust cash flows to support the ongoing investment in the business and a progressive dividend policy.
Overview
The group has made good operational and strategic progress during the 12 months ended 31st December 2019 whilst faced with tough market conditions in light of the uncertainty stemming from Brexit and the political landscape. This led the group to prioritise cash and strong working capital management to provide the best defence against the uncertainty faced whilst continuing to develop opportunities for growth.
The board and management estimate that the UK market for carpet tiles declined by circa 10% largely due to the economic and political uncertainty referred to above. As a result revenues were broadly flat year on year (International revenue matching the prior year record performance) whilst operating profit was lower as a consequence of inventory reduction, adverse currency movement and investment in sales and design headcount. The expansion of warehousing facilities on the Ossett site during the second half of the year, following the closure of Ryalux operations and the space created through the inventory reduction programme, eliminated the requirement for third party offsite storage which was a significant cost to the group.
The group continued with the planned product line revamp during H1 2019 with the attendant temporary increase in stock this entails and had to invest in further inventory (commenced Q4 2018) as protection against any supply chain disruption caused by Brexit. The success of the product revamp and internal supply chain improvements provided the group with the necessary confidence to significantly reduce inventory in the second half of the year generating significant cash flow benefits.
The group continues to develop new product lines and is optimistic for the impact these will have in the future which, when launched and coupled with our operational improvements, will widen our portfolio and provide opportunities for sales growth in both UK and International markets.
The group's successful investment strategy and management of liabilities in the pension scheme saw the deficit significantly improve from GBP3.7m to GBP1.5m. There continues to be volatility in global equity markets with the scheme's investment strategy constantly under review to mitigate the long term risk as much as possible.
The value of the investment property increased from GBP3.4m to GBP3.6m. The gain is highlighted separately in the income statement.
Group results
Revenue for the year was broadly in line with prior year at GBP19.2m (2018: GBP19.3m). Operating profit before valuation gain decreased to GBP2.2m (2018: GBP3.0m). However, the underlying profit excluding one off costs incurred during the Brexit preparation stock build and subsequent inventory reduction programme (GBP0.4m) was GBP2.6m. The group is more comfortable with the levels of inventory held at the year end and the current expectation is the inventory reduction programme has been completed and such operating profit impact should not arise in the foreseeable future. The remaining decrease was driven by the foreign exchange impact of stronger Sterling against the Euro (GBP0.2m) on the balance sheet at the end of the year and the investment in design and sales head count (GBP0.1m). The prior year continuing operations benefitted from management recharges to discontinued operations which now are absorbed by the continuing operations (GBP0.2m) which would give an underlying operating profit comparative for 2018 of GBP2.8m.
There was an unrealised valuation gain on the investment property of GBP0.2m (2018: GBP0.3m) giving an operating profit after valuation gains of GBP2.4m (2018: GBP3.3m).
Other finance costs relating in the main to the defined benefit pension scheme were GBP0.4m (2018: GBP0.4m). There were no further finance costs relating to GMP equalisation in the defined benefit scheme (2018: GBP0.3m).
There were no additional losses incurred from discontinued operations (2018: GBP1.4m).
After a tax charge of GBP0.4m primarily due to deferred tax on the pension scheme, partial unwinding of the deferred tax asset as brought forward losses are utilised against profits and unrealised valuation gain on the investment property (2018: GBP0.8m credit due to recognition of a deferred tax asset on group losses) profit attributable to shareholders of the group for the year was GBP1.6m (2018: GBP2.0m).
Basic and adjusted earnings per share were 3.97p (2018: 8.21p). Group basic earnings per share were 3.97p (2018: 4.86p).
Operating cash flows before movements in working capital and other payables were GBP2.7m (2018: GBP1.8m). Working capital decreased by GBP0.4m (2018: GBP0.6m) following the inventory reduction programme partially offset by the subsequent impact on trade payables. Contributions of GBP0.4m (2018: GBP0.4m) were made to the defined benefit pension scheme in line with the agreement reached with the trustees based on the 2017 actuarial valuation. Capital expenditure of GBP0.4m (2018: GBP0.4m) related to investment in the Ossett site improving warehouse capacity and machine efficiency.
The group borrowed GBP1.7m during the year and utilised additional cash of GBP0.3m to acquire shares for the Employee Benefit Trust ("EBT) for subsequent use as part of the employee long-term incentive plan. GBP0.4m of the loan was repaid during the year. The loan is unsecured and repayable over three years in equal quarterly instalments.
Dividend payments totalled GBP1.1m with the prior year dividend payment including a special dividend (2018: GBP2.8m total dividend paid of which GBP1.4m related to a special dividend) following the announced closure of the residential carpets business.
Key performance indicators
As part of its internal financial control procedures the board monitors the key financial metrics of revenue, operating profit, gross margin, working capital (debtor and creditor days), inventory turns and cash. These KPI's are reviewed in comparison to previous year and the budget and analysis undertaken to establish trends and variances. For the year ended 31st December 2019, value added per employee amounted to GBP0.1m (2018: GBP0.1m), operating return on sales was 11.3% (2018: 15.7%), return on net operating assets was 13.5% (2018: 18.5%) and working capital to sales percentage was 63.5% (2018: 60.4%).
Principal risks and uncertainties
The board has responsibility for determining the nature and extent of the risks it is willing to take in achieving its strategic objectives and ensuring that risks are managed effectively across the group. The board and the management team meet regularly to discuss the business and the risks that it faces. Risks are identified as being principally based on the likelihood of occurrence and potential impact on the group. The group's principal risks, which remain consistent with the prior year, are identified below, together with a description of how the group mitigates those risks.
The key operational risk facing the business continues to be the competitive nature of the markets for the group's products. To mitigate this risk the group seeks to improve existing products, introduce new products and achieve high levels of customer service and efficiency to attempt to differentiate from the competition.
The majority of the group's revenue arises from trade with flooring contractors and fit out companies. The activity levels within this customer base are determined by consumer demand which is created through a wide range of commercial refurbishment and new build projects. The general level of activity in these underlying markets has the potential to affect the demand for products supplied by the group and is subject to seasonal variations. The group mitigates these factors by closely monitoring sales trends and taking appropriate action early, along with strengthening the product range and developing new channels to market, both at home and abroad, to grow demand across a wider range of markets and negate the impact of seasonality.
The group operates a defined benefit pension scheme. At present, in aggregate, there is an actuarial deficit between the value of the projected liabilities of this scheme and the assets they hold. The amount of the deficit may be adversely affected by changes in a number of factors, including investment returns, long-term interest rate and price inflation expectations and anticipated members' longevity. Further increases in the pension scheme deficit may require the group to increase the amount of cash contributions payable to the scheme, thereby reducing cash available to meet the group's other operating, investing and financing requirements. The performance and risk management of the group's pension scheme and deficit recovery plan are regularly reviewed by both the group and the trustees of the scheme, taking actuarial and investment advice as appropriate. The results of these reviews are discussed with the board and appropriate action taken. Following the triennial funding valuation of the group's pension scheme as at 1st July 2017, a revised deficit recovery plan was agreed. Under the plan the company will continue to make annual contributions of GBP0.4m to allow a gradual reduction in investment risk. The next triennial funding valuation will be 1st July 2020.
Other risks
Raw material costs are a significant constituent of overall product cost and are impacted by global commodity markets. Significant fluctuations in raw material costs can have a material impact on profitability. The group continuously seeks out opportunities to develop a robust and competitive supply base, substitute new materials, agree fixed pricing where possible, source material with improved and shortened lead times and closely monitors selling prices and margins making adjustments when necessary.
The global nature of the group's business means it is exposed to volatility in currency exchange rates in respect of foreign currency denominated transactions, the most significant being the euro. In order to protect itself against currency fluctuations the group has taken advantage of the opportunity to naturally hedge euro revenue with euro payments utilising with foreign currency bank accounts. No transactions of a speculative nature are undertaken. Other risks include the availability of necessary materials, business interruption and the duty of care to our employees, customers and the wider public. These risks are managed through the combination of quality assurance and health and safety procedures and insurance cover.
The short and long-term impact of Brexit continues to be unclear in respect of the degree of its impact on future economic growth in the UK market or on any additional tariffs that may apply to UK businesses trading with the European Union if the trade negotiations during the transition period do not result in an agreed way forward. The group monitors this position and adjusts its forward plans where appropriate particularly in relation to its supply chain and working capital requirements particularly in light of the groups experience when planning for Brexit during 2019. The directors believe that the group's strength in refurbishment markets, its position as a UK manufacturer with a strong presence in the UK market and strategies of developing new sales channels will act to mitigate the impact of adverse changes and continue to provide opportunities for growth.
Management and personnel
We continue to recognise the hard work and dedication our staff have applied during the year and look forward to the contribution they can make going forward in the future of the company.
As part of its ongoing review of our staff incentivisation policy the board recognised the need to retain and reward members of staff for long-term outperformance and has established an employee share scheme. The purpose of the scheme is to incentivise employees through nil cost share awards.
The board created an employee benefit trust ("EBT") managed by independent trustees to operate the scheme and during the year purchased 2.8m shares to be held by the EBT to satisfy any awards under the scheme, thereby ensuring existing shareholders will not be diluted upon exercise. Awards will vest with beneficiaries over a three year period (which can be extended to a fourth year at the directors' discretion) after the achievement of group and individual performance conditions.
Current trading and future prospects
The continued investment in our successful commercial flooring business provides significant opportunities for profitable growth. The group has more flexibility in its ability to operate and continued investment in new products will continue throughout 2020 maintaining our confidence in the future prospects of the business If approved, a final dividend of 1.3p per share will be paid on 20th May 2020 to shareholders on the register at close of business on 14th April 2020, with an ex-dividend date of 9th April 2020.
MARTIN TOOGOOD NEIL RYLANCE
Chairman Chief Executive Officer 4th March 2020
Enquiries:
Neil Rylance 01924 266561
Chief Executive Officer
Paul Stevenson 01924 266561
Group Finance Director
Peter Steel / Ben Farrow 020 7496 3061
N+1 Singer
This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014.
The financial information set out in the announcement does not constitute the group's statutory accounts for the 12 month period ended 31 December 2019 or the 12 month period ended 31 December 2018. The financial information for the 12 month period ended 31 December 2018 is derived from the statutory accounts for that year which have been delivered to the Registrar of Companies. The auditors reported on those accounts; their report was unqualified and did not include any statement under s498(2) or s498(3) of the Companies Act 2006. The consolidated balance sheet at 31 December 2019, the consolidated income statement, the consolidated statement of comprehensive income, the consolidated cash flow statement and the consolidated statement of changes in equity for the 12 month period then ended have been extracted from the Group's 2019 statutory financial statements upon which the auditor's opinion is unqualified and does not include any statement under s498(2) or s498(3) of the Companies Act 2006.
The announcement has been agreed with the company's auditor for release.
Consolidated Income Statement
Year ended 31 December 2019
Hot Features
Premium
Year ended Year ended
31 December 31 December
2019 2018
GBP'000 GBP'000
Continuing Operations
Revenue 19,183 19,260
Operating costs (17,297) (16,536)
Other operating income 280 291
_______ _______
Operating profit before exceptional items 2,166 3,015
Unrealised valuation gain 200 250
--------------------------------------------- ------------ ------------
Operating profit 2,366 3,265
Finance income 6 1
Finance costs (411) (355)
Finance costs relating to GMP Equalisation - (299)
_______ _______
Profit before taxation 1,961 2,612
Taxation (403) 785
_______ _______
Profit attributable to shareholders of the
group from continuing operations 1,558 3,397
_______ _______
Discontinued Operations
Loss attributable to shareholders of the
group from discontinued operations - (1,389)
_______ _______
Profit attributable to shareholders of the
group 1,558 2,008
_______ _______
Consolidated Statement of Comprehensive Income
Year ended 31 December 2019
2019 2019 2018 2018
GBP GBP GBP GBP
Profit attributable
to shareholders of the
group 1,558 2,008
Items that will not
be classified to profit
or loss
Actuarial gain/(loss)
recognised in the pension
scheme 2,172 (1,284)
Related deferred taxation (369) 218
_______ _______
1,803 (1,066)
Items that will be reclassified
subsequently to profit
or loss when specific
conditions are met
(Impairment)/Revaluation
of property (17) 78
Related deferred taxation 3 (13)
_______ _______
(14) 65
_______ _______
Total other comprehensive
income/(loss) 1,789 (1,001)
_______ _______
Total comprehensive
income attributable
to shareholders of the
group 3,347 1,007
_______ _______
Consolidated Balance Sheet
Year ended 31 December 2019
2019 2019 2018 2018
GBP'000 GBP'000 GBP'000 GBP'000
Non-current assets
Property, plant and
equipment 4,229 5,108
Intangible assets 39 95
Investment property 3,600 3,400
Deferred tax asset 847 1,466
Right-of-use-asset 1,233 -
_______ _______
9,948 10,069
Current assets
Inventories 5,461 6,797
Trade and other receivables 2,112 2,330
Cash and cash equivalents 2,957 2,732
_______ _______
10,530 11,859
_______ _______
Total assets 20,478 21,928
_______ _______
Current liabilities
Trade and other payables (2,412) (3,571)
Provisions (320) (320)
Lease liabilities (329) (187)
Loans and borrowings (562) -
_______ _______
(3,623) (4,078)
Non-current liabilities
Deferred tax (457) (305)
Pension deficit (1,472) (3,688)
Lease liabilities (323) (323)
Deferred tax (724) -
_______ _______
(2,976) (4,316)
_______ _______
Total liabilities (6,599) (8,394)
_______ _______
Net assets 13,879 13,534
_______ _______
Equity
Called up share capital 10,339 10,339
Share premium account 504 504
Own shares (1,839) -
Share based payment 85
reserve -
Capital redemption reserve 3,617 3,617
Revaluation reserve 3,048 3,096
Retained earnings (1,875) (4,022)
_______ _______
Total equity 13,879 13,534
_______ _______
Consolidated Cash Flow Statement
Year ended 31 December 2019
Year ended Year ended
31 December 31 December
2019 2018
GBP'000 GBP'000
Cash flows from operating activities
Profit for the year 1,558 2,008
Depreciation 206 372
Depreciation of right-of-use-assets 274 -
Amortisation 65 58
Net finance costs 405 654
Profit on disposal of property, plant and
equipment (12) (291)
Tax charge/(credit) 403 (785)
Unrealised valuation gain (200) (250)
_______ _______
Operating cash flows before movements in
working capital 2,699 1,766
Decrease in inventories 1,336 140
Decrease in trade and other receivables 221 581
Decrease in trade and other payables (1,159) (174)
Increase in provisions for liabilities
and charges - 20
_______ _______
Cash generated from operations 3,097 2,333
Contributions to defined benefit pension
scheme (400) (400)
_______ _______
Net cash generated from operating activities 2,697 1,933
Cash flows from investing activities
Payments to acquire intangible fixed assets (9) (29)
Payments to acquire tangible fixed assets (378) (399)
Receipts from sales of tangible fixed assets 136 513
_______ _______
Net cash (used in)/generated from investing
activities (251) 85
_______ _______
Cash flows from financing activities
Interest paid on lease liabilities (21) (14)
Interest paid on borrowings (34) -
Interest received 6 1
Proceeds from loan 1,700 -
Purchase of own shares by the EBT (2,000) -
Principal paid on lease liabilities (343) (183)
Repayment of loan (448) -
Equity dividends paid (1,081) (2,792)
_______ _______
Net cash used in financing activities (2,221) (2,988)
_______ _______
Net increase/(decrease) in cash and cash
equivalents 225 (970)
Cash and cash equivalents at start of the
year 2,732 3,702
_______ _______
Cash and cash equivalents at end of the
year 2,957 2,732
_______ _______
Consolidated Statement of Changes in Equity
Year ended 31 December 2019
Share Capital
Share premium Own Share redemption Revaluation Retained Total
capital account shares based reserve reserve earnings equity
payment
reserve
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
---------------------------------------------------- ------------ --------------- ----------- --------------- ------------- ----------- ------------
At 1st January 2018 10,339 504 - - 3,617 3,126 (2,267) 15,319
Comprehensive income for
the year
Profit for the year - - - - - - 2,008 2,008
Actuarial loss recognised
on the pension scheme - - - - - - (1,066) (1,066)
Revaluation of property
- - - - - 65 - 65
---------------------------------------------------- ------------ --------------- ----------- --------------- ------------- ----------- ------------
Total comprehensive income
for the year - - - - - 65 942 1,007
Contributions by and
distributions to owners
Dividend paid - - - - - - (2,792) (2,792)
Revaluation Reverse Transfer
- - - - - (95) 95 -
---------------------------------------------------- ------------ --------------- ----------- --------------- ------------- ----------- ------------
Total contributions by and
distributions to owners
- - - - - (95) (2,697) (2,792)
---------------------------------------------------- ------------ --------------- ----------- --------------- ------------- ----------- ------------
At 31st December 2018 10,339 504 - - 3,617 3,096 (4,022) 13,534
Effect of adoption of
IFRS 16 (Note 28) - - - - - - (6) (6)
At 1st January 2019
as restated 10,339 504 - - 3,617 3,096 (4,028) 13,528
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
for the year - - - - - (14) 3,361 3,347
Contributions by and
distributions to owners
Dividend paid - - - - - - (1,081) (1,081)
Purchase of own Shares
by the EBT - - (2,000) - - - - (2,000)
Share based payment - - - 85 - - - 85
Own Shares Transfer - - 161 - - - (161) -
Revaluation Reserve Transfer
- - - - - (34) 34 -
---------------------------------------------------- ------------ --------------- ----------- --------------- ------------- ----------- ------------
Total contributions by and
distributions to owners
- - (1,839) 85 - (34) (1,208) (2,996)
---------------------------------------------------- ------------ --------------- ----------- --------------- ------------- ----------- ------------
At 31st December 2019 10,339 504 (1,839) 85 3,617 3,048 (1,875) 13,879
---------------------------------------------------- ------------ --------------- ----------- --------------- ------------- ----------- ------------
In accordance with Rule 20 of the AIM Rules, Airea confirms that the annual report and accounts for the year ended 31 December 2019 and notice of Annual General Meeting ("AGM") and related proxy form will be available to view on the Company's website at www.aireaplc.co.uk on 6 March 2020 and will be posted to shareholders by 19 March 2020. The AGM will be held at the Waterton Park Hotel, Walton Hall, Walton, Wakefield on 14th May 2020, at 2.00 p.m.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
FR EAEDLESPEEAA
(END) Dow Jones Newswires
March 05, 2020 02:00 ET (07:00 GMT)
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