REG - Airea PLC - Final Results for the year ended 31 December 2021
12/04/2022 07:00
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RNS Number : 0306I Airea PLC 12 April 2022
Airea plc
Final results for the year ended 31st December 2021
Strategic Report
Neil Rylance
It is impossible to review 2021 without referring to the untimely death of
Neil Rylance in March 2022. Neil had been the CEO of Airea plc for 13 years.
Those shareholders who have supported the company during his tenure will
understand, first hand, the impact of Neil's contribution to this Company's
success. Without his focus, tenacity, and deep understanding of the sector we
would not be the profitable business we are today.
It is easy to forget the changes that Airea has undergone, when we see the
stable, profitable business we have today. Neil led the programme of change
and, had the patience, foresight, and dogged determination, to follow these
challenges to a successful conclusion. He did this with a Liverpudlian wit, a
no-nonsense approach and an unswerving self-belief. Neil led from the front
and was able to attract like-minded executives whom he mentored to assist in
shouldering the burden of change for the better. He has left us with a
platform for growth. He has also left a management team who are capable of
delivering on that promise. In Neil's memory we must do so, because Neil is a
man who is not easy to forget.
The search for Neil's successor has begun.
Highlights for the year
− Recovery in revenue; however, not yet at pre-pandemic levels.
− Continued profitability during the COVID-19 pandemic.
− Underlying gross profit margins (revenue less cost of sales) increased
year on year.
− Utilising our new equipment to enable the launch of a further three
products during the year.
− Improvement in pension funding position.
The board is pleased with the group's resilience in the face of the challenges
of the COVID-19 pandemic and its impact on all aspects of our business. We
continue to focus on improving our operational and supply chain processes
which are imperative when facing the uncertainty regarding labour and raw
material availability and the unprecedented increases in raw material prices.
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.
Overview
The group's performance during the 12 months ended 31st December 2021 has
continued to be impacted by the COVID-19 pandemic and the related lockdown
restrictions. Access to our export business was most severely impacted by the
lockdown restrictions coupled with the additional complications trading
overseas following the post Brexit transition period.
We continue to maintain our cash reserves and strong balance sheet position to
enable us manage the impact of the continued uncertainty in the economy and
the related risks on the business.
The group increased the level of inventory on hand to help mitigate against
the supply chain tensions which continue to put a strain on the availability
of materials and the costs of obtaining them.
Our investment in the development of our product range continues with launches
of new products into the market throughout 2021, supported by our new
equipment, which is now fully operational. Feedback from customers has been
extremely positive and the specification of our products bodes well for our
continued success. The new product lines resulted in an increase in inventory
at the year-end due to putting new product lines into stock.
The defined benefit pension scheme deficit reduced from £1.8m to an
unrecognised surplus of £5.1m. The surplus has been restricted from being
recognised as an asset on the balance sheet due to the group not having an
unconditional right to a refund. The group contributions to the scheme have
been reduced from £0.4m per year to
£nil (for the financial year 2022) based on the latest agreed schedule of
contributions between the group and the scheme's trustees. 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 £3.7m to £4.0m. The gain
is highlighted separately in the income statement.
Group results
Revenue for the year was above prior year at £15.9m (2020: £14.6m) with home
sales recovering, however the COVID-19 pandemic continued to reduce our access
to export markets and constrained growth. Operating profit before valuation
gain nevertheless increased to £1.3m (2020 Restated: £0.7m). Underlying
gross profit margins increased year on year due to the increased level of
sales and the group also continued to benefit from furlough savings of £0.3m
(2020: £0.5m).
There was an unrealised valuation gain on the investment property of £0.3m
(2020: £0.1m) giving an operating profit after valuation gains of £1.6m
(2020 Restated: £0.8m).
Other finance costs relating in the main to the defined benefit pension scheme
were £0.3m (2020: £0.4m).
After a tax charge of £0.2m primarily due to deferred tax on the property
plant equipment and changes in tax rate at which deferred tax is recognised
(2020: £0.1m) profit attributable to shareholders of the group for the year
was £1.0m (2020: £0.3m). Earnings per share were 2.70p (2020 Restated:
0.89p).
Operating cash flows before movements in working capital and other payables
were £1.7m (2020 Restated: £1.4m). Working capital increased by £0.3m (2020
Restated: £0.7m decrease) following a increase in inventories, trade and
other receivables and trade and other payables. Contributions of £0.4m (2020:
£0.4m) 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 £1.3m (2020 Restated: £0.2m) related to the group's
investment new machinery to help with the development of new product ranges.
The group had £5.7m of cash on hand as at 31st December 2021 (2020: £6.6m).
In 2020 the group borrowed £2.75m under the government Coronavirus Business
Interruption Loan Scheme, as of 31st December 2021 the amount outstanding was
£2.4m (2020: £2.75m). Following the six-month capital repayment holiday, the
group recommenced repayments on the existing long-term loan taken out to
acquire shares for the Employee Benefit Trust, with £0.8m of the loan repaid
during the year. This loan is unsecured and repayable over three years in
equal quarterly instalments with two instalments remaining. The group has
access to further liquidity of £1.0m via our unutilised facility (2020:
£1.0m unutilised).
We continue to preserve cash to protect against unforeseen circumstances in
these difficult times. However, as an appreciation of our shareholder support
and patience, through these exacting trading periods, we propose a total
dividend of £0.2m or 0.4p per share (2020: £nil). This proposal is subject
to shareholder approval.
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 2021,
operating profit return on sales was 8.3% (2020: 4.8%), return on net
operating assets was 6.7% (2020: 3.8%) and working capital to sales percentage
was 57.7% (2020: 63.5%).
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 current unrest in Ukraine presents significant uncertainty for the
upcoming financial year with an unknown impact of the conflict, particularly
on international sales performance and on the costs and availability of raw
materials and their impact on the group's performance. However, the group is
well placed to mitigate these risks through its diversified sales base and by
drawing on the experience gained navigating similar supply chain issues during
the past 2 years when the group was able to remain open for business.
Most 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 and the
economic environment. 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 help negate the impact of
seasonality.
The group operates a defined benefit pension scheme. At present, in aggregate,
there is an actuarial surplus between the value of the projected liabilities
of this scheme and the assets they hold. This actuarial surplus has been fully
provided for and not recognised due to the group not having an unconditional
right to the funds. The amount of the assets and liabilities may be adversely
affected by changes in several factors, including investment returns,
long-term interest rate and price inflation expectations and anticipated
members' longevity. Adverse changes in the pension scheme position may require
the group to recommence cash contributions 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 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 2020, a revised deficit recovery plan was agreed. Under
the plan the company are not required to make any annual contributions and to
continue a strategy of gradual reduction in investment risk. The next
triennial funding valuation will be due up to 1st July 2023.
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 adjusting 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 the continued challenges of 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 current
economic environment and the Ukrainian conflict continue to put global raw
material prices and supply chains under pressure. The group has flexibility
and can continue to adapt to these unprecedented times and will continue to
invest in new products throughout 2022 based upon our confidence in the
prospects of the business.
MARTIN
TOOGOOD
RYAN THOMAS
Chairman
Group Finance
Director
12(th) April 2022
Enquiries:
Ryan
Thomas
01924 266561
Group Finance Director
Peter Steel
020 7496 3061
Singer Capital Markets
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 2021 or
the 12 month period ended 31 December 2020. The financial information for
the 12 month period ended 31 December 2020 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 2021, 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 2021 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 2021
Year ended Year ended
31 December 31 December
2021 2020
£'000 £'000
Continuing Operations
Revenue 15,865 14,554
Operating costs (14,832) (14,136)
Other operating income 280 280
Operating profit before valuation gain 1,313 698
Unrealised valuation gain 275 125
Operating profit 1,588 823
Finance income 8 7
Finance costs (305) (376)
_______ _______
Profit before taxation 1,291 454
Taxation (249) (109)
_______ _______
Profit attributable to shareholders of the group 1,042 345
_______ _______
Consolidated Statement of Comprehensive Income
Year ended 31 December 2021
2021 2021 2020 2020
£ £ £ £
Profit attributable to shareholders of the group 1,042 345
Items that will not be classified to profit or loss
Actuarial gain/(loss) recognised in the pension scheme 1,599 (389)
Related deferred taxation (380) 74
Revaluation of property 166 37
Related deferred taxation (32) (4)
Total other comprehensive income/(loss) 1,353 (282)
2,395 63
Total comprehensive income attributable to shareholders of the group
Consolidated Balance Sheet
Year ended 31 December 2021
2021 2021 2020 2020
£'000 £'000 £'000 £'000
Non-current assets
Property, plant and equipment 5,305 4,202
Intangible assets 55 54
Investment property 4,000 3,725
Deferred tax asset 720 920
Right-of-use-asset 972 1,086
_______ _______
11,052 9,987
Current assets
Inventories 6,150 5,622
Trade and other receivables 1,887 1,735
Cash and cash equivalents 5,688 6,555
_______ _______
13,725 13,912
_______ _______
Total assets 24,777 23,899
_______ _______
Current liabilities
Trade and other payables (3,258) (2,895)
Provisions (245) (465)
Lease liabilities (124) (243)
Loans and borrowings (935) (1,071)
_______ _______
(4,562) (4,674)
Non-current liabilities
Deferred tax (1,031) (609)
Pension deficit - (1,789)
Lease liabilities (183) (188)
Loans and borrowings (2,592) (2,641)
_______ _______
(3,806) (5,227)
_______ _______
Total liabilities (8,368) (9,901)
_______ _______
Net assets 16,409 13,998
_______ _______
Equity
Called up share capital 10,339 10,339
Share premium account 504 504
Own shares (555) (1,197)
Share based payment reserve 157 141
Capital redemption reserve 3,617 3,617
Revaluation reserve 3,150 3,014
Retained earnings (803) (2,420)
_______ _______
Total equity 16,409 13,998
_______ _______
Consolidated Cash Flow Statement
Year ended 31 December 2021
Year ended Year ended
31 December 31 December
2021 2020
£'000 £'000
Cash flows from operating activities
Profit for the year 1,042 345
Depreciation 276 228
Depreciation of right-of-use-assets 250 270
Amortisation 30 38
Movement in provisions (220) 145
Share based payment expense 16 56
Net finance costs 297 369
Tax charge 249 109
Unrealised valuation gain (275) (125)
_______ _______
_______ _______
Operating cash flows before movements in working capital 1,665 1,435
Increase in inventories (528) (161)
(Increase)/decrease in trade and other receivables (152) 433
Increase in trade and other payables 347 467
_______ _______
_______ _______
Cash generated from operations 1,332 2,174
Contributions to defined benefit pension scheme (400) (400)
_______ _______
Net cash generated from operating activities 932 1,774
Cash flows from investing activities
Payments to acquire intangible fixed assets (31) (53)
Payments to acquire tangible fixed assets (1,236) (164)
_______ _______
_______ _______
Net cash used in generated from investing activities (1,267) (217)
Cash flows from financing activities
Interest paid on lease liabilities (12) (15)
Interest paid on borrowings (83) (33)
Interest received 8 7
Proceeds from loan and borrowings - 2,750
Proceeds from asset financing 934 -
Principal paid on lease liabilities (260) (344)
Repayment of loans (1,119) (324)
_______ _______
Net cash (used)/received in financing activities (532) 2,041
_______ _______
Net (decrease)/increase in cash and cash equivalents (867) 3,598
Cash and cash equivalents at start of the year 6,555 2,957
_______ _______
Cash and cash equivalents at end of the year 5,688 6,555
_______ _______
Consolidated Statement of Changes in Equity
Year ended 31 December 2021
Share premium account Capital redemption
Share capital Share based payment reserve Share Option reserve Revaluation Retained earnings Total equity
reserve
£000 £000 £000 £000 £000 £000 £000 £000
At 1st January 2020 504 (1,839) 85 3,617 3,048 (1,875) 13,879
10,339
Comprehensive income for
the year
Profit for the - - - - - 345 345
year
-
Actuarial loss recognised
on the pension scheme - - - - - - (315) (315)
Revaluation of property - - - - - 33 33
-
Total comprehensive income
for the - - - - - 63 63
year
-
Contributions by and
distributions to owners
Share based payment - - 56 - - - 56
-
Own Shares Transfer - 642 - - - (642) -
-
Revaluation Reverse Transfer - - - - - (34) 34 -
Total contributions by and distributions to
owners
- - 642 56 - (34) (608) 56
At 31st December 2020 10,339 504 (1,197) 141 3,617 3,014 (2,420) 13,998
At 1st January 2021
Comprehensive income for the year
Profit for the - - - - - 1,042 1,042
year
-
Actuarial gain recognised
on the pension scheme - - - - - - 1,219 1,219
Revaluation of property - - - - 166 (32) 134
-
Total comprehensive income
for the - - - - 166 2,229 2,395
year
-
Contributions by and
distributions to owners
Share based payment - - 16 - - - 16
-
Own Shares Transfer - 642 - - - (642) -
-
Revaluation Reserve Transfer - - - - - (30) 30 -
Total contributions by and distributions to
owners
- - 642 16 - (30) (612) 16
At 31st December 2021 10,339 504 (555) 157 3,617 3,150 (803) 16,409
In accordance with Rule 20 of the AIM Rules, Airea confirms that the annual
report and accounts for the year ended 31 December 2021 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 (http://www.aireaplc.co.uk/) on
12 April 2022 and will be posted to shareholders by 21 April 2022. The AGM
will be held on 17th May 2022, at 2.00 p.m. at the Cedar Court Hotel
(Huddersfield), Lindley Moor Road, Ainley Top, Huddersfield, HD3 3RH. 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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