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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 0.0% 31.00 30.00 32.00 31.00 31.00 31.00 200 01:00:00
Industry Sector Turnover (m) Profit (m) EPS - Basic PE Ratio Market Cap (m)
Household Goods & Home Construction 19.3 2.6 8.2 3.8 13

Airea PLC Final results for the year ended 31 December 2019

05/03/2020 7:00am

UK Regulatory (RNS & others)


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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

 
 
                                                 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

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