Interim Report
30/07/2020 07:00
RNS Number : 5207U Airea PLC 30 July 2020 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 6months ended 30thJune 2020 | Unaudited 6months ended 30thJune 2019 | Audited 12months ended 31stDecember 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 |
| Unaudited 6 months ended 30th June | Unaudited 6 months ended 30th June | Audited 12months ended 31stDecember | |
| 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 30thJune 2020 | Unaudited 30thJune 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 6months ended 30thJune 2020 | Unaudited 6months ended 30thJune 2019 | Audited 12months ended 31stDecember 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 |
| 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 fortheyear - | - | - | - | - | (14) | 3,361 | 3,347 | ||
| Contributions by and | |||||||||
| distributions to | |||||||||
| owners | |||||||||
| Dividendpaid - | - | - | - | - | - | (1,081) | (1,081) | ||
| Purchase of own shares | |||||||||
| byEBT - | - | (2,000) | - | - | - | - | (2,000) | ||
| Share-basedpayment - | - | - | 85 | - | - | - | 85 | ||
| Ownsharetransfer - | - | 161 | - | - | - | (161) | - | ||
| Revaluation Reverse | |||||||||
| Transfer - | - | - | - | - | (34) | 34 | - | ||
| Total contributions by and distributions toowners - | - | (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 fortheyear - | - | - | - | - | 10 | (2,836) | (2,826) | ||
| Contributions by and | |||||||||
| distributions to | |||||||||
| owners | |||||||||
| Share-basedpayment - | - | - | 56 | - | - | - | 56 | ||
| OwnSharesTransfer - | - | 321 | - | - | - | (321) | - | ||
| Total contributions by and distributions to owners - | - | 321 | 56 | - | - | (321) | 56 | ||
| At 30thJune2020 10,339 | 504 | (1,518) | 141 | 3,617 | 3,058 | (5,032) | 11,109 | ||