REG - Airea PLC - Interim Report
AIREA PLC
(the "Group")
Interim report for the six months ended 30 June 2020
The principal activity of the group is the manufacturing, marketing and distribution of commercial floor coverings.
Chairman's Statement
The group's performance in the six months ended 30th June 2020 was significantly affected by the COVID-19 pandemic and the subsequent nationwide lockdown. The year had started well with Q1 2020 pre-lockdown delivering sales in line with prior year and a 6.6% increase in operating profit.
In our trading update of 26th March 2020, we informed shareholders that we expected a post lockdown decrease in demand. The impact of COVID-19 was at its most significant during April and May with demand reduced by 51% against the prior year; however, we were pleased to see an improvement during June and, although still behind prior year, the reduction had improved to 9%. The group remained open for business throughout the lockdown period and we were able to support our customers whilst also looking to prioritise the well-being of our employees
During this period the group focused on cash and overhead management with all non-critical expenditure halted and our supply chain requirements re-phased to help achieve these priorities. We are pleased we successfully achieved these objectives in preparation for the challenges of H2 2020.
The group was able to take advantage of several of the COVID-19 support packages made available by the UK government and our banking partner including:
− A six year term CBILS loan of £2.75m with no fees, interest and repayments for the initial 12 month period
− Capital repayment holiday for 6 months on existing long-term loan
− Extended overdraft to £1m (not yet utilised)
− Q1 2020 VAT payment deferred
− Furloughed employees during Q2 2020
These actions as well as continued tight credit control and resilient customer cash collection procedures has enabled the group to increase its cash reserves to £6.5m (£3.7m excluding the CBILS loan) (2019: £1.4m) to help mitigate the unprecedented and unpredictable market conditions the group continues to operate within.
Group Results
Revenue for the period was £7.1m (2019: £8.9m). The operating profit was £137,000 (2019: £1,085,000) with underlying product margins in line with the prior year; however, actual operating profit was adversely impacted by the inventory reduction during April and May. Profitability is expected to improve during H2 2020 as inventory levels increase. After charging pension, lease and loan related finance costs of £193,000 (2019: £143,000) and incorporating the appropriate tax credit the net loss for the period was £43,000 (2019: £935,000 profit). Basic loss per share was 0.11p (2019: EPS of 2.26p).
Operating cash flows before exceptional items and movements in working capital were £0.5m (2019: £1.3m). Working capital decreased in the period by £1.0m (2019: £0.8m increase) through reduced manufacturing output whilst employees were furloughed.
Contributions to the defined benefit pension scheme were £0.2m (2019: £0.2m) in line with the agreement reached with the scheme trustees following the last triennial valuation as at 1st July 2017. Capital expenditure of £0.2m (2019: £0.2m) was spent renewing and enhancing manufacturing plant and equipment and supporting new product development.
The pension scheme deficit increased to £4.9m (2019: £3.6m) due to the COVID-19 impact on the equity markets and reduced corporate bond yields that lowered the discount rate used and increased the value placed on the scheme liabilities. The schemes investments are continuously under review and at this stage, there is no expectation that the group's contributions to the scheme will change.
Outlook
Demand, although improving, remains lower than previous years as the impact of COVID-19 continues and therefore it is very difficult for the group to forecast the performance in the second half. However, with strong liquidity and the continued development of new products we believe the group is positioned well to take advantage of any opportunities that arise and is hopeful that the second half should deliver a modest profit whilst carefully managing cash reserves.
At this point, we must make a special reference to the magnificent efforts of all our employees who have worked in very difficult circumstances to support the business and its customers throughout.
Dividend
Given the financial performance of the group and the continued levels of uncertainty in the market and economy the group will continue to prioritise cash to ensure medium to long term stability and therefore will not be proposing an interim dividend (2019: 0.8p).
MARTIN TOOGOOD
Chairman 30th July 2020
Consolidated Income Statement
6 months ended 30th June 2020
Unaudited 6 months ended 30th June
2020
Unaudited 6 months ended 30th June
2019
Audited 12 months
ended 31st December
2019
£000
£000
£000
Revenue
7,100
8,890
19,183
Operating costs
(7,103)
(7,945)
(17,297)
Other operating income
140
140
280
Operating profit before valuation gain
137
1,085
2,166
Unrealised valuation gain
-
-
200
Operating profit
137
1,085
2,366
Finance income
2
3
6
Finance costs
(193)
(143)
(411)
(Loss)/profit before taxation
(54)
945
1,961
Taxation
11
(10)
(403)
(Loss)/profit attributable to shareholders of the group
(43)
935
1,558
(Loss)/earnings per share (basic and diluted) for the group
(0.11p)
2.26p
3.97p
Consolidated Statement of Comprehensive Income
6 months ended 30th June 2020
Unaudited 6 months ended 30th June
Unaudited 6 months ended 30th June
Audited 12 months
ended
31st December
2020
2019
2019
£000
£000
£000
(Loss)/profit attributable to shareholders of the group
(43)
935
1,558
Items that will not be reclassified to profit or loss
Actuarial (loss)/gain recognised in the pension scheme
(3,448)
-
2,172
Related deferred taxation
655
-
(369)
(2,793)
-
1,803
Items that will be reclassified subsequently to profit or loss when specific conditions are met
Revaluation/(impairment) of property
12
-
(17)
Related deferred taxation
(2)
-
3
10
-
(14)
Total other comprehensive (loss)/income
(2,783)
-
1,789
Total comprehensive (loss)/income attributable to shareholders of the group
(2,826)
935
3,347
Consolidated Balance Sheet
as at 30th June 2020
Unaudited 30th June
2020
Unaudited 30th June
2019
Audited 31st December
2019
£000
£000
£000
Non-current assets
Property, plant and equipment
4,282
5,182
4,229
Intangible assets
67
69
39
Investment property
3,600
3,400
3,600
Right-of-use asset
1,126
-
1,233
Deferred tax asset
1,563
1,457
847
10,638
10,108
9,948
Current assets
Inventories
4,728
7,363
5,461
Trade and other receivables
1,915
4,621
2,112
Cash and cash equivalents
6,451
1,436
2,957
13,094
13,420
10,530
Total assets
23,732
23,528
20,478
Current liabilities
Trade and other payables
(2,482)
(3,614)
(2,412)
Provisions
(320)
(320)
(320)
Lease liabilities
(213)
(190)
(329)
Loans and borrowings
(580)
-
(562)
(3,595)
(4,124)
(3,623)
Non-current liabilities
Pension deficit
(4,888)
(3,625)
(1,472)
Deferred tax
(526)
(304)
(457)
Lease liabilities
(297)
(227)
(323)
Loans and borrowings
(3,317)
(1,551)
(724)
(9,028)
(5,707)
(2,976)
Total liabilities
(12,623)
(9,831)
(6,599)
Net assets
11,109
13,697
13,879
Equity
Called up share capital
10,339
10,339
10,339
Share premium account
504
504
504
Own shares
(1,518)
-
(1,839)
Share-based payment reserve
141
-
85
Capital redemption reserve
3,617
3,617
3,617
Revaluation reserve
3,058
3,096
3,048
Retained earnings
(5,032)
(3,859)
(1,875)
Total Equity
11,109
13,697
13,879
Consolidated Cash Flow Statement
6 months ended 30th June 2020
Unaudited 6 months ended 30th June
2020
Unaudited 6 months ended 30th June
2019
Audited 12 months
ended 31st December
2019
£000
£000
£000
Cash flow from operating activities
(Loss)/profit for the period
(43)
935
1,558
Depreciation
114
157
206
Depreciation of right-of-use assets
140
-
274
Amortisation
25
32
65
Net finance costs
191
137
405
Loss on disposal of property, plant and equipment
-
-
(12)
Tax (credit)/charge
(11)
10
403
Share-based payment expense
56
-
-
Unrealised valuation gain
-
-
(200)
Operating cash flows before movements in working capital
472
1,271
2,699
Decrease/(increase) in inventory
733
(566)
1,336
Decrease/(increase) in trade and other receivables
197
(291)
221
Increase/(decrease) in trade and other payables
70
43
(1,159)
Cash generated from operations
1,472
457
3,097
Contributions to defined benefit pension scheme
(200)
(200)
(400)
Net cash generated from operating activities
1,272
257
2,697
Investing activities
Payments to acquire intangible fixed assets
(33)
(6)
(9)
Payments to acquire tangible fixed assets
(156)
(230)
(378)
Receipts from sales of tangible fixed assets
-
-
136
(189)
(236)
(251)
Financing activities
Interest paid on lease liabilities
(8)
(6)
(21)
Interest paid on borrowings
(18)
-
(34)
Interest received
2
3
6
Proceeds from loan
2,750
1,700
1,700
Purchase of own shares by the EBT
-
(2,000)
(2,000)
Principal paid on lease liabilities
(177)
(93)
(343)
Repayment of loan
(138)
(149)
(448)
Equity dividends paid
-
(772)
(1,081)
Net cash used in financing activities
2,411
(1,317)
(2,221)
Net increase/(decrease) in cash and cash equivalents
3,494
(1,296)
225
Cash and cash equivalents at start of the period
2,957
2,732
2,732
Cash and cash equivalents at end of the period
6,451
1,436
2,957
Consolidated Statement of Changes in Equity
6 months ended 30th June 2020
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 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 EBT -
-
(2,000)
-
-
-
-
(2,000)
Share-based payment -
-
-
85
-
-
-
85
Own share 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
and 1st January 2020 10,339
504
(1,839)
85
3,617
3,048
(1,875)
13,879
Comprehensive income for the year
Loss for the year
- - - - - -
(43)
(43)
Actuarial loss recognised
on the pension scheme
- - - - - -
(2,793)
(2,793)
Revaluation of property
- - - - - 10
-
10
Total comprehensive
income for the year -
-
-
-
-
10
(2,836)
(2,826)
Contributions by and
distributions to
owners
Share-based payment -
-
-
56
-
-
-
56
Own Shares Transfer -
-
321
-
-
-
(321)
-
Total contributions by and distributions to
owners -
-
321
56
-
-
(321)
56
At 30th June 2020 10,339
504
(1,518)
141
3,617
3,058
(5,032)
11,109
1. BASIS OF PREPARATION AND ACCOUNTING POLICIES
The financial information for the six months ended 30th June 2020 and the six months ended 30th June 2019 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 2019 does not constitute full financial statements within the meaning of Section 434 of the Companies Act 2006. This information is based on the group's statutory accounts for that period. The statutory accounts were prepared in accordance with International Financial Reporting Standards as adopted by the European Union ("IFRS") and received an unqualified audit report and did not contain statements under Section 498(2) or (3) of the Companies Act 2006. These financial statements have been filed with the Registrar of Companies.
These interim financial statements have been prepared using the recognition and measurement principles of International Financial Reporting Standards as adopted by the European Union ("IFRS"). The accounting policies used are the same as those used in preparing the financial statements for the period ended 31st December 2019. These policies are set out in the annual report and accounts for the period ended 31st December 2019 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.
Enquiries:
Neil Rylance 01924 266561
Chief Executive Officer
Paul Stevenson 01924 266561
Group Finance Director
Peter Steel / Ben Farrow 020 7496 3000
N+1 Singer
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.ENDIR SEMFIUESSEEW
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