REG - Airea PLC - Interim Report
AIREA PLC
(the "Group")
Interim report for the six months ended 30 June 2021
The principal activity of the group is the design, manufacture, marketing and distribution of floor coverings.
Chairman's Statement
The group's performance in the six months ended 30th June 2021 has continued to be impacted by the COVID-19 pandemic and the related lockdown restrictions which continue to suppress activity in our key markets. Our export business has been most severely impacted by lockdown restrictions in target markets and the additional costs of administration and freight following the post Brexit transition period. Availability of labour and raw materials have been a major challenge with unprecedented increases in raw material prices. H1 delivered improved sales and operating profit versus the prior year as demand in the market continued to recover albeit at a slower pace than expected.
Throughout H1 the group has remained open for business and continues to support customers whilst also looking to prioritise the well-being of employees. The board recognises and values the tremendous efforts of our employees throughout the period.
With reference to COVID-19 support packages deferred VAT repayments have commenced, our loan balance repayments have recommenced and the level of furlough support has reduced significantly in the first half.
As at 30th June 2021 our cash reserves were £6.2m (2020: £6.5m), excluding the CBILS loans our cash position was
£3.5m (2020: £3.7m), with further liquidity available of £1.0m via our unutilised overdraft facility (2020: £1.0m unutilised). Our cash reserves and strong balance sheet enable us to manage the impact of the pandemic and related risks.
Group Results
Revenue for the period was £0.3m above the prior year, £7.4m (2020: £7.1m). In the UK our sales were 18.5% ahead of the prior six month comparative period as home sales began to recover. Export sales were down 35.5% compared to the comparative period, largely due to the effect of COVID-19 on all our target export markets and the significant disruption caused by differing interpretations of import regulations post Brexit.
The operating profit was £574,000 (2020: £137,000). Excluding inventory absorption impacts, underlying product margins are broadly in line with prior year, however product margins are facing significant pressure due to significant raw material inflation and our ability to pass on these price increases. After charging pension, lease and loan related finance costs of £114,000 (2020: £193,000) and incorporating the appropriate tax charge the net profit for the period was £440,000 (2020: £43,000 loss). Basic earnings per share were 1.14p (2020:loss 0.11p).
Operating cash flows before movements in working capital were £0.5m (2020: £0.5m). Working capital increased in the period by £0.1m (2020: £1.0m decrease). Contributions to the defined benefit pension scheme were £0.2m (2020: £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 £1.2m (2020: £0.2m) was spent renewing and enhancing manufacturing plant and equipment, with major spend on new equipment to continue to support our new exciting product development programme.
Outlook
The UK sales recovery is expected to continue with a strong order book, however the impact of lifting lockdown restrictions is unknown and so forecasting sales performance in the second half is particularly difficult. Market activity in our European Markets is expected to improve but relatively slowly. Difficulties exporting to Europe are now well documented, with significant increases in cost and additional complexity in exporting to Europe Post-Brexit.
Of greatest concern is the level of raw material price inflation and supply chain tensions putting a strain on the availability of materials and the costs of obtaining them, the increases experienced to date are relentless and unprecedented. Key to our success will be our ability to pass on these price increases and a halt or reversal of current pricing trends.
We have however continued to invest in development of our product range with investment in new equipment and the launches of new products ongoing throughout 2021 based upon our confidence in the future prospects of the business and our secure financial position.
Given the financial performance of the group and the continued levels of uncertainty in the market and wider economy the group will continue to prioritise cash to ensure medium to long-term stability and therefore will not be proposing an interim dividend (2020: nil).
MARTIN TOOGOOD
Chairman 30th July 2021
Consolidated Income Statement
6 months ended 30th June 2021
Unaudited 6 months ended 30th June
2021
Unaudited 6 months ended 30th June
2020
Audited 12 months
ended 31st December
2020
£000
£000
£000
Revenue
7,431
7,100
14,554
Operating costs
(6,997)
(7,103)
(14,090)
Other operating income
140
140
280
Operating profit before valuation gain
574
137
744
Unrealised valuation gain
-
-
125
Operating profit
574
137
869
Finance income
4
2
7
Finance costs
(114)
(193)
(376)
Profit/(loss) before taxation
464
(54)
500
Taxation
(24)
11
(109)
Profit/(loss) attributable to shareholders of the group
440
(43)
391
Earnings per share (basic and diluted) for the group
1.14p
0.11p
1.00p
Consolidated Statement of Comprehensive Income
6 months ended 30th June 2021
Unaudited 6 months ended 30th June
Unaudited 6 months ended 30th June
Audited 12 months
ended
31st December
2021
2020
2020
£000
£000
£000
Profit/(loss) attributable to shareholders of the group
440
(43)
391
Items that will not be reclassified to profit or loss
Actuarial gain/(loss) recognised in the pension scheme
3,997
(3,448)
(389)
Related deferred taxation
(797)
655
74
3,200
(2,793)
(315)
Items that will be reclassified subsequently to profit or loss when specific conditions are met
Revaluation of property
-
12
37
Related deferred taxation
-
(2)
(4)
-
10
33
Total other comprehensive income/(loss)
3,200
(2,783)
(282)
Total comprehensive income/(loss) attributable to shareholders of the group
3,640
(2,826)
109
Consolidated Balance Sheet
as at 30th June 2021
Unaudited 30th June
2021
Unaudited 30th June
2020
Audited 31st December
2020
£000
£000
£000
Non-current assets
Property, plant and equipment
5,279
4,282
4,271
Intangible assets
62
67
54
Investment property
3,725
3,600
3,725
Right-of-use asset
1,011
1,126
1,086
Pension Surplus
2,310
-
-
Deferred tax asset
733
1,563
920
13,120
10,638
10,056
Current assets
Inventories
5,877
4,728
5,622
Trade and other receivables
2,093
1,915
1,712
Cash and cash equivalents
6,226
6,451
6,555
14,196
13,094
13,889
Total assets
27,316
23,732
23,945
Current liabilities
Trade and other payables
(3,679)
(2,482)
(2,895)
Provisions
(138)
(320)
(465)
Lease liabilities
(145)
(213)
(243)
Loans and borrowings
(1,359)
(580)
(1,071)
(5,321)
(3,595)
(4,674)
Non-current liabilities
Pension deficit
-
(4,888)
(1,789)
Deferred tax
(1,206)
(526)
(609)
Lease liabilities
(174)
(297)
(188)
Loans and borrowings
(2,911)
(3,317)
(2,641)
(4,291)
(9,028)
(5,227)
Total liabilities
(9,612)
(12,623)
(9,901)
Net assets
17,704
11,109
14,044
Equity
Called up share capital
10,339
10,339
10,339
Share premium account
504
504
504
Own Shares
(876)
(1,518)
(1,197)
Share-based payment reserve
161
141
141
Capital redemption reserve
3,617
3,617
3,617
Revaluation reserve
3,014
3,058
3,014
Retained earnings
945
(5,032)
(2,374)
Total equity
17,704
11,109
14,044
Consolidated Cash Flow Statement
6 months ended 30th June 2021
Unaudited 6 months ended 30th June
2021
Unaudited 6 months ended 30th June
2020
Audited 12 months
ended 31st December
2020
£000
£000
£000
Cash flow from operating activities
Profit/(loss) for the period
440
(43)
391
Depreciation
123
114
228
Depreciation of right-of-use assets
128
140
270
Amortisation
16
25
38
Movement in Provision
(327)
-
145
Share-based payment expense
20
56
56
Net Finance costs
110
191
369
Tax charge/(credit)
24
(11)
109
Unrealised valuation gain
-
-
(125)
Operating cash flows before movements in working capital
534
472
1,481
(Increase)/decrease in inventory
(255)
733
(161)
(Increase)/decrease in trade and other receivables
(417)
197
456
Increase in trade and other payables
784
70
467
Cash generated from operations
646
1,472
2,243
Contributions to defined benefit pension scheme
(200)
(200)
(400)
Net cash generated from operating activities
446
1,272
1,843
Cash flows from investing activities
Payments to acquire intangible fixed assets
(24)
(33)
(53)
Payments to acquire tangible fixed assets
(1,131)
(156)
(233)
(1,155)
(189)
(286)
Cash flows from financing activities
Interest paid on lease liabilities
(6)
(8)
(15)
Interest paid on borrowings
(11)
(18)
(33)
Interest received
4
2
7
Proceeds from new loans and borrowings
934
2,750
2,750
Principal paid on lease liabilities
(166)
(177)
(344)
Repayment of loans and borrowings
(375)
(138)
(324)
Net cash generated from financing activities
380
2,411
2,041
Net (decrease)/increase in cash and cash equivalents
(329)
3,494
3,598
Cash and cash equivalents at start of the period
6,555
2,957
2,957
Cash and cash equivalents at end of the period
6,226
6,451
6,555
Consolidated Statement of Changes in Equity
6 months ended 30th June 2021
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 2020
10,339
504
(1,839)
85
3,617
3,048
(1,875)
13,879
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 share transfer -
-
642
-
-
-
(642)
-
Revaluation Reverse
Transfer -
-
-
-
-
(34)
34
-
Total contributions by and distributions
to owners -
-
642
56
-
(34)
(608)
56
At 31st December 2020
and 1st January 2021 10,339
504
(1,197)
141
3,617
3,014
(2,374)
14,044
Comprehensive income for the period
Profit for the period
- - - - - -
440
440
Actuarial gain recognised
on the pension scheme
- - - - - -
3,200
3,200
Revaluation of property
-
-
-
-
-
-
-
-
Total comprehensive
income for the period -
-
-
-
-
-
3,640
3,640
Contributions by and
distributions to
owners
Share-based payment -
-
-
20
-
-
-
20
Own Shares Transfer -
-
321
-
-
-
(321)
-
Total contributions by and distributions to
owners -
-
321
20
-
-
(321)
20
At 30th June 2021 10,339
504
(876)
161
3,617
3,014
945
17,704
Notes to the Financial Statements
1. BASIS OF PREPARATION AND ACCOUNTING POLICIES
The financial information for the six months ended 30th June 2021 and the six months ended 30th June 2020 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 2020 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 2020. These policies are set out in the annual report and accounts for the period ended 31st December 2020 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
Ryan Thomas 01924 266561
Group Finance Director
Peter Steel 020 7496 3000
Singer Capital Markets
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