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% 34.50 32.00 37.00 34.50 34.50 34.50 0.00 08:00:19
Industry Sector Turnover (m) Profit (m) EPS - Basic PE Ratio Market Cap (m)
Household Goods & Home Construction 14.6 0.5 0.0 - 15

Airea PLC Final results for the year ended 31 December 2020

04/03/2021 7:30am

UK Regulatory (RNS & others)

Airea (LSE:AIEA)
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RNS Number : 1584R

Airea PLC

04 March 2021

Airea plc

Final results for the year ended 31st December 2020

Strategic Report

Airea plc is pleased that the group has been able to remain open for business throughout the year navigating its way through the most unpredictable and volatile of years driven by the Covid-19 pandemic and Brexit transition phase. This has caused unprecedented market conditions which have proved to be extremely disruptive. During this turbulent political and economic year the group benefitted from the improved operational and supply chain processes implemented during the previous 12 months enabling the group to navigate and mitigate these challenges and continue to prepare the group for growth opportunities when they arise.

Highlights for the year

-- Increased year-end cash balance from GBP3.0m to GBP6.6m (GBP3.9m excluding CBILS loan of GBP2.75m);

   --      Profitable during the Covid-19 pandemic; 
   --      Underlying gross profit margins (revenue less cost of sales) increased year on year; 
   --      Three new product launches during the year. 

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.


After a strong start in the first quarter the effects of the Covid-19 pandemic and various national and regional lockdowns had a significant impact on the groups ability to trade. Whilst the group remained open for business throughout the year management had to reassess its strategic priorities and made the decision to prioritise cash and working capital to provide the best defence against uncertainty. This did not stop the group looking to the future and continuing to develop new products to provide opportunities for growth.

The group was able to take advantage of the Covid-19 support provided by the UK government and the group's banking partner to help during the period including:

-- A six-year CBILS loan of GBP2.75m with no fees, interest or repayments for the initial 12-month period

   --      Capital repayment holiday for 6 months on existing long-term loan 
   --      Extended overdraft from GBP0.5m to GBP1.0m 
   --      Q1 2020 VAT payment deferred until 2021 
   --      Furloughed employees throughout the year 

All of these initiatives have helped to bolster the financial performance of the group; however, due to the market conditions revenues were below prior year particularly with regards to export sales. This generated a significantly lower operating profit although we are pleased that underlying gross profit margins actually increased year on year.

The group continued to develop new products, although product launches were pushed back to the fourth quarter and early 2021. It is too early to see any benefits of the new product launches on the performance of the group; however, the feedback from customers has been extremely positive and bodes well for their success in 2021 and beyond. There was a small increase in inventory at the year-end due to the manufacture of new product launch stock.

Despite the pension scheme deficit increasing slightly to GBP1.8m from GBP1.5m the group considered its investment strategy a success in limiting the impact the Covid-19 pandemic could have had on the deficit. There continues to be volatility in global equity markets with the scheme's investment strategy constantly under review to mitigate the scheme's long-term risk profile as much as possible.

The value of our investment property increased from GBP3.6m to GBP3.7m. The gain is highlighted separately in the income statement.

Group results

Revenue for the year was significantly below prior year at GBP14.6m (2019: GBP19.2m) as the Covid-19 pandemic had a significant impact on market demand. As a result operating profit before valuation gain decreased to GBP0.7m (2019: GBP2.2m). Underlying gross profit margins increased year on year and the group benefitted from furlough savings (GBP0.5m) which helped to reduce overheads compared to the prior year even after the additional Covid-19 related costs of GBP0.1m safeguarding the employees and site.

There was an unrealised valuation gain on the investment property of GBP0.1m (2019: GBP0.2m) giving an operating profit after valuation gains of GBP0.9m (2019: GBP2.4m).

Other finance costs relating in the main to the defined benefit pension scheme were GBP0.4m (2019: GBP0.4m).

After a tax charge of GBP0.1m primarily due to deferred tax on the pension scheme, partial unwinding of the deferred tax asset as brought forward losses are utilised and unrealised valuation gain on the investment property (2019: GBP0.4m) profit attributable to shareholders of the group for the year was GBP0.4m (2019: GBP1.6m). Earnings per share were 1.00p (2019: 3.97p).

Operating cash flows before movements in working capital and other payables were GBP1.5m (2019: GBP2.7m). Working capital decreased by GBP0.8m (2019: GBP0.4m) following a reduction in trade receivables and increase in trade and other payables. Contributions of GBP0.4m (2019: 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 GBP0.2m (2019: GBP0.4m) related to investment in the Ossett site improving warehouse capacity and machine efficiency.

The group borrowed GBP2.75m under the government Coronavirus Business Interruption Loan Scheme ("CBILS"). This is a 6-year term loan with no fees, interest or repayment due for the initial 12 months. The group took a 6-month capital repayment holiday on the existing long-term loan taken out to acquire shares for the Employee Benefit Trust. GBP0.4m of the loan was repaid during the year. The loan is unsecured and repayable over three years in equal quarterly instalments with five instalments remaining.

No dividend payments were made during the year due to the Covid-19 pandemic (2019: GBP1.1m) and the Board has decided not to declare a final dividend for 2020.

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 2020, operating return on sales was 5.1% (2019: 11.3%), return on net operating assets was 4.0% (2019: 13.5%) and working capital to sales percentage was 63.4% (2019: 36.0%).

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 Covid-19 pandemic presents significant uncertainty for the upcoming financial year with an unknown impact of the virus on the company's performance. However, the group is well placed to mitigate this continued risk by drawing on the experience gained navigating the issues during this year when the group was able to remain open for business and continuing to take advantage of available government support. The group can also point towards its strong balance sheet and cash reserves.

The post Brexit transition export trading conditions present a short-term risk to the group whilst the most optimal and efficient supply route is established to the group's many customers in the European Union. Whilst the export of goods is initially zero rated for UK VAT purposes the differing treatment our customers face in individual countries has made it more difficult for the customer to import goods into their respective countries. We continue to work with our customers to find the best solution to the logistical challenges to ensure continued and smooth trading conditions.

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 that 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 drawn up to 1st July 2020 and completed within the permitted 15-month period.

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 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.

Management and personnel

We continue to recognise the hard work and dedication our staff have applied during this most challenging of years working through the Covid-19 pandemic and uncertainty it has brought to them and their families. We look forward to the contribution they can make going forward in the future of the company.

Current trading and future prospects

The continued investment in our successful commercial flooring business provides significant opportunities for profitable growth; however, the Covid-19 pandemic and nationwide lockdowns continue to suppress market activity on a global basis. We expect this to impact demand for the foreseeable future. The group has flexibility and can adapt to these unprecedented times and will continue to invest in new products throughout 2021 based upon our confidence in the future prospects of the business during and particularly post the Covid-19 pandemic.

   MARTIN TOOGOOD                                    NEIL RYLANCE 

Chairman Chief Executive Officer 4th March 2021


Neil Rylance 01924 266561

Chief Executive Officer

Paul Stevenson 01924 266561

Group Finance Director

Peter Steel 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 2020 or the 12 month period ended 31 December 2019. The financial information for the 12 month period ended 31 December 2019 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 2020, the consolidated income statement, the consolidated statement of comprehensive income, the consolidated cash flow statement, the consolidated statement of changes in equity and the segmental reporting for the 12 month period then ended have been extracted from the Group's 2020 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 2020

                                                 Year ended    Year ended 
                                                31 December   31 December 
                                                       2020          2019 
                                                    GBP'000       GBP'000 
 Continuing Operations 
 Revenue                                             14,554        19,183 
 Operating costs                                   (14,090)      (17,297) 
 Other operating income                                 280           280 
 Operating profit before valuation gain                 744         2,166 
 Unrealised valuation gain                              125           200 
---------------------------------------------  ------------  ------------ 
 Operating profit                                       869         2,366 
 Finance income                                           7             6 
 Finance costs                                        (376)         (411) 
                                                    _______       _______ 
 Profit before taxation                                 500         1,961 
 Taxation                                             (109)         (403) 
                                                    _______       _______ 
 Profit attributable to shareholders of the 
  group                                                 391         1,558 
                                                    _______       _______ 

Consolidated Statement of Comprehensive Income

Year ended 31 December 2020

                                              2020    2020    2019    2019 
                                               GBP     GBP     GBP     GBP 
 Profit attributable to 
  shareholders of the group                            391             1,558 
 Items that will not be 
  classified to profit or 
 Actuarial (loss)/gain recognised 
  in the pension scheme                      (389)           2,172 
 Related deferred taxation                      74           (369) 
                                                     (315)             1,803 
 Items that will be reclassified 
 subsequently to profit 
 or loss when specific conditions 
 are met 
  of property                                   37            (17) 
 Related deferred taxation                     (4)               3 
                                            ------  ------  ------  -------- 
                                                        33              (14) 
 Total other comprehensive 
  (loss)/income                                      (282)             1,789 
   Total comprehensive income 
   attributable to shareholders 
   of the group                                        109             3,347 
                                            ------  ------  ------  -------- 

Consolidated Balance Sheet

Year ended 31 December 2020

                                    2020      2020      2019      2019 
                                 GBP'000   GBP'000   GBP'000   GBP'000 
 Non-current assets 
 Property, plant and 
  equipment                        4,271               4,229 
 Intangible assets                    54                  39 
 Investment property               3,725               3,600 
 Deferred tax asset                  920                 847 
 Right-of-use-asset                1,086               1,233 
                                           _______             _______ 
                                            10,056               9,948 
 Current assets 
 Inventories                       5,622               5,461 
 Trade and other receivables       1,712               2,112 
 Cash and cash equivalents         6,555               2,957 
                                 _______             _______ 
                                            13,889              10,530 
                                           _______             _______ 
 Total assets                               23,945              20,478 
                                           _______             _______ 
 Current liabilities 
 Trade and other payables        (2,895)             (2,412) 
 Provisions                        (465)               (320) 
 Lease liabilities                 (243)               (329) 
 Loans and borrowings            (1,071)               (562) 
                                 _______             _______ 
                                           (4,674)             (3,623) 
 Non-current liabilities 
 Deferred tax                      (609)               (457) 
 Pension deficit                 (1,789)             (1,472) 
 Lease liabilities                 (188)               (323) 
 Loans and borrowings            (2,641)               (724) 
                                 _______             _______ 
                                           (5,227)             (2,976) 
                                           _______             _______ 
 Total liabilities                         (9,901)             (6,599) 
                                           _______             _______ 
 Net assets                                 14,044              13,879 
                                           _______             _______ 
 Called up share capital                    10,339              10,339 
 Share premium account                         504                 504 
 Own shares                                (1,197)             (1,839) 
 Share based payment 
  reserve                                      141                  85 
 Capital redemption reserve                  3,617               3,617 
 Revaluation reserve                         3,014               3,048 
 Retained earnings                         (2,374)             (1,875) 
                                           _______             _______ 
 Total equity                               14,044              13,879 
                                           _______             _______ 

Consolidated Cash Flow Statement

Year ended 31 December 2020

                                                       Year ended    Year ended 
                                                      31 December   31 December 
                                                             2020          2019 
                                                          GBP'000       GBP'000 
 Cash flows from operating activities 
 Profit for the year                                          391         1,558 
 Depreciation                                                 228           206 
 Depreciation of right-of-use-assets                          270           274 
 Amortisation                                                  38            65 
 Movement in provisions                                       145             - 
 Share based payment expense                                   56             - 
 Net finance costs                                            369           405 
 Profit on disposal of property, plant and 
  equipment                                                     -          (12) 
 Tax charge                                                   109           403 
 Unrealised valuation gain                                  (125)         (200) 
                                                          _______       _______ 
                                                          _______       _______ 
 Operating cash flows before movements in 
  working capital                                           1,481         2,699 
 (Increase)/decrease in inventories                         (161)         1,336 
 Decrease in trade and other receivables                      456           221 
 Increase/(decrease) in trade and other 
  payables                                                    467       (1,159) 
                                                          _______       _______ 
                                                          _______       _______ 
 Cash generated from operations                             2,243         3,097 
 Contributions to defined benefit pension 
  scheme                                                    (400)         (400) 
                                                          _______       _______ 
 Net cash generated from operating activities               1,843         2,697 
 Cash flows from investing activities 
 Payments to acquire intangible fixed assets                 (53)           (9) 
 Payments to acquire tangible fixed assets                  (233)         (378) 
 Receipts from sales of tangible fixed assets                   -           136 
                                                          _______       _______ 
                                                          _______       _______ 
 Net cash used in generated from investing 
  activities                                                (286)         (251) 
 Cash flows from financing activities 
 Interest paid on lease liabilities                          (15)          (21) 
 Interest paid on borrowings                                 (33)          (34) 
 Interest received                                              7             6 
 Proceeds from loan                                         2,750         1,700 
 Purchase of own shares by the EBT                              -       (2,000) 
 Principal paid on lease liabilities                        (344)         (343) 
 Repayment of loan                                          (324)         (448) 
 Equity dividends paid                                          -       (1,081) 
                                                          _______       _______ 
 Net cash received/(used) in financing activities           2,041       (2,221) 
                                                          _______       _______ 
 Net increase in cash and cash equivalents                  3,598           225 
 Cash and cash equivalents at start of the 
  year                                                      2,957         2,732 
                                                          _______       _______ 
 Cash and cash equivalents at end of the 
  year                                                      6,555         2,957 
                                                          _______       _______ 

Consolidated Statement of Changes in Equity

Year ended 31 December 2020

                                                             Share                                       Capital 
                                               Share       premium            Share       Share       redemption      Revaluation      Retained         Total 
                                             capital       account            based      Option          reserve          reserve      earnings        equity 
                                              GBP000        GBP000           GBP000      GBP000           GBP000         GBP000          GBP000        GBP000 
----------------------------------------------------  ------------  ---------------  ----------  ---------------  ---------------  ------------  ------------ 
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 
    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 Reverse 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 
At 1st January 2020 
Comprehensive income for 
 the year 
Profit for the year -                                            -                -           -                -                -           391           391 
Actuarial loss recognised 
                             on the pension scheme -             -                -           -                -                -         (315)        (315) 
Impairment of property -                                         -                -           -                -                -            33           33 
----------------------------------------------------  ------------  ---------------  ----------  ---------------  ---------------  ------------  ------------ 
Total comprehensive income 
 for the year -                                                  -                -           -                -          -                 109           109 
Contributions by and 
   distributions to owners 
Dividend paid -                                                  -                -           -                -                -             -             - 
Share based payment -                                            -                -          56                -                -             -            56 
Own Shares Transfer -                                            -          642               -                -                -         (642)             - 
Revaluation Reserve Transfer 
 -                                                               -                -           -                -             (34)            34             - 
----------------------------------------------------  ------------  ---------------  ----------  ---------------  ---------------  ------------  ------------ 
Total contributions by and 
 distributions to owners 
 -                                                               -              642          56                -             (34)         (608)        56 
----------------------------------------------------  ------------  ---------------  ----------  ---------------  ---------------  ------------  ------------ 
At 31st December 2019 10,339                                   504          (1,197)         141            3,617          3,014         (2,374)        14,044 
----------------------------------------------------  ------------  ---------------  ----------  ---------------  ---------------  ------------  ------------ 

In accordance with Rule 20 of the AIM Rules, Airea confirms that the annual report and accounts for the year ended 31 December 2020 and notice of Annual General Meeting ("AGM") and related proxy form will be available to view on the Company's website at on 5 March 2021 and will be posted to shareholders by 19 March 2021. The AGM will be held on 12th May 2021, at 2.00 p.m. at the company's registered office at Victoria Mills, The Green, Ossett, West Yorkshire, WF5 0AN. Due to the ongoing Covid-19 pandemic and government "stay at home" measures this will be a closed meeting; however, shareholders will be able to dial in and listen to the AGM. Further details are set out in the notice of the AGM available within the financial statements which can be viewed on the group's website.

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