Last checked at 17 Aug 2018 07:00
AIREA PLC
Interim report for the six months ended 30 June 2018
The principal activity of the group is the manufacturing, marketing and distribution of commercial floor coverings.
Chairman's Statement
The six months ending 30 June 2018 was another period of strategic progress. Following the completion of the closure of the residential carpets business, we are now in a position to focus on our ongoing commercial operation, which delivered an encouraging advance in financial performance:
- Sales up 13%
- Profit attributable to shareholders up 31%
- Basic earnings per share from continuing operations up 10.0%
- Interim dividend maintained
Following the closure of Ryalux the business is positioned to generate improved shareholder returns. To illustrate this; in the 6 months ended 30 June 2018 the business generated profit after tax of £1.3m on a continuing basis (i.e. excluding Ryalux) in the 6 months ended 30 June 2017 the business (including Ryalux) generated profit after tax of £0.7m.
Strong growth in the order book and increased sales both in the UK and internationally was largely driven by the success of new product introductions. The launch of further new products is transforming our offer in the medium and premium price sectors and our sales force has a growing portfolio of attractive complementary products to grow our share within this market sector.
Our international sales grew by 30% in the period, driven by the new products, increased penetration of existing markets and the ongoing development of the distribution network.
Group Results
Continuing operations:
Comparative financial results for the six months to 30 June 2017 and the eighteen months ended 31 December 2017 have been restated to take account of the closure of the residential carpets business1. Revenue for the period was £9.1m (2017: £8.1m). The operating profit was £1,481,000 (2017: £1,457,000). After charging pension related finance costs of £158,000 (2017: £309,000) and incorporating the appropriate tax charge the net profit for the period was £1,314,000 (2017: £1,194,000). Basic earnings per share for the continuing operation were 3.18p (2017: 2.89p).
Operating cash flows before exceptional items and movements in working capital were £1.7m (2017: £1.6m). Working capital increased in the period by £0.4m (2017: £1.2m) mainly as a result of the timing of stock build. Contributions to the defined benefit pension scheme were £200,000 (2017: £200,000) in line with the agreement reached with the scheme trustees following the last triennial valuation as at 1 July 2017. Capital expenditure of £61,000 (2017: £233,000) was made in renewing and enhancing manufacturing plant and equipment and supporting product launches.
Discontinued operation
Running and closure costs net of tax amounted to £359,000. The disposal of inventory, collection of trade receivables and settlement of outstanding payables resulted in a cash inflow of £1,135,000 giving an overall net modest outflow of cash for the residential carpets business of £93,000 in the period. As indicated in the last annual report, over the total period of run down and closure, there was significant cash generation, which was returned to shareholders as part of the special dividend paid on 23 May 2018.
Board Changes
I am pleased to welcome Paul Stevenson to the board following his recently announced appointment as Group Finance Director and Company Secretary. He takes over from Roger Salt who is retiring. We would like to extend our thanks to Roger for his hard work and dedication over the last 14 years.
Outlook
We are pleased by the progress we have made in driving sales growth in the ongoing commercial flooring operation with a strengthening portfolio of products. Sales growth in our markets requires hard work and commitment over a sustained period of time, and we remain determined to build on the progress made. Uncertainties remain, including the outcome of Brexit negotiations; however, as a UK manufacturer with a strengthening position in the UK and internationally, we are well placed to mitigate risks and take advantage of growth opportunities.
Given the ongoing progress in the financial performance of the group and a robust cash flow we are able to maintain the policy introduced last year of paying an interim dividend. The board is please to declare an interim dividend of 1.75p (2017: 1.75p) to be paid on the 25 October 2018 to shareholders on the register at close of business on 21 September 2018. The ex dividend date is 20 September 2018.
Martin Toogood
17 August 2018
Chairman
1 The unaudited results for the six months ended 30 June 2017 and the audited results for the eighteen months ended 31 December 2017 have been restated to reclassify the residential carpets business as discontinued. Details of the discontinued operation are included in note 2.
Consolidated Income Statement |
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6 months ended 30 June 2018 |
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| Unaudited |
| (Restated) unaudited |
| (Restated) Audited |
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| 6 months ended | 6 months ended |
| 18 months ended |
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| 30 June |
| 30 June |
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| 31 December |
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| 2018 |
| 2017 |
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| 2017 |
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| £000 |
| £000 |
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| £000 |
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CONTINUING OPERATIONS |
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Revenue |
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| 9,132 |
| 8,073 |
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| 26,890 |
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Operating costs |
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| (7,651) |
| (6,616) |
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| (22,658) |
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Operating profit before exceptional items |
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| 1,481 |
| 1,457 |
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| 4,255 |
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Exceptional items: |
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Exceptional costs |
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| - |
| - |
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| (472) |
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Unrealised valuation gain |
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| - |
| - |
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| 449 |
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Operating profit |
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| 1,481 |
| 1,457 |
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| 4,232 |
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Finance costs |
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| (158) |
| (309) |
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| (932) |
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Profit before taxation |
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| 1,323 |
| 1,148 |
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| 3,300 |
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Taxation |
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| (9) |
| 46 |
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| 186 |
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Profit attributable to shareholders of the group from continuing operations | 1,314 |
| 1,194 |
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| 3,486 |
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DISCONTINUED OPERATIONS |
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Loss attributable to shareholders of the group from discontinued operations | (359) |
| (467) |
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| (4,856) |
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Profit / (loss) attributable to shareholders of the group for the period | 955 |
| 727 |
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| (1,370) |
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Earnings/(loss) per share (basic and diluted) |
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| 2.31 p |
| 1.76 p |
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| (3.31)p |
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Earnings per share (basic and diluted) from continuing operations | 3.18 p |
| 2.89 p |
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| 8.43 p |
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Loss per share (basic and diluted) from discontinued operations | (0.87)p |
| (1.13)p |
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| (11.74)p |
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Consolidated Statement of Comprehensive Income |
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6 months ended 30 June 2018 |
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| Unaudited |
| (Restated) unaudited |
| (Restated) Audited |
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| 6 months ended | 6 months ended |
| 18 months ended |
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| 30 June |
| 30 June |
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| 31 December |
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| 2018 |
| 2017 |
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| 2017 |
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| £000 |
| £000 |
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| £000 |
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Profit / (loss) attributable to shareholders of the group |
| 955 |
| 727 |
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| (1,370) |
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Actuarial gain recognised in the pension scheme |
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| - |
| 401 |
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| 4,827 |
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Related deferred taxation |
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| - |
| (80) |
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| (862) |
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| - |
| 321 |
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| 3,965 |
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Unrealised valuation gain |
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| 39 |
| - |
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| 117 |
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Total comprehensive income attributable to shareholders of the group | 994 |
| 1,048 |
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| 2,712 |
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The unaudited results for the six months ended 30 June 2017 and the audited results for the eighteen months ended 31 December 2017 have been restated to reclassify the residential carpets business as discontinued. Details of the discontinued operation are included in note 2. |
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Consolidated Balance Sheet |
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as at 30 June 2018 |
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| Unaudited |
| Unaudited |
| Audited | ||||||
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| 30 June |
| 30 June |
| 30 December | ||||||
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| 2018 |
| 2017 |
| 2017 | ||||||
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| £000 |
| £000 |
| £000 | ||||||
Non-current assets |
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Property, plant and equipment |
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| 5,107 |
| 6,101 |
| 5,294 | ||||||
Intangible assets |
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| 114 |
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| 124 | ||||||
Investment property |
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| 3,150 |
| 2,701 |
| 3,150 | ||||||
Deferred tax asset |
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| 1,415 |
| 1,281 |
| 389 | ||||||
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| 9,786 |
| 10,083 |
| 8,957 | ||||||
Current assets |
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Inventories |
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| 6,918 |
| 11,146 |
| 6,937 | ||||||
Trade and other receivables |
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| 2,870 |
| 4,704 |
| 2,893 | ||||||
Cash and cash equivalents |
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| 2,448 |
| 2,302 |
| 3,702 | ||||||
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| 12,236 |
| 18,152 |
| 13,532 | ||||||
Total assets |
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| 22,022 |
| 28,235 |
| 22,489 | ||||||
Current liabilities |
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Trade and other payables |
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| (4,793) |
| (5,574) |
| (4,045) | ||||||
Obligations under finance leases |
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| (185) |
| - |
| (183) | ||||||
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| (4,978) |
| (5,574) |
| (4,228) | ||||||
Non-current liabilities |
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Pension deficit |
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| (2,114) |
| (6,962) |
| (2,164) | ||||||
Deferred tax |
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| (268) |
| (241) |
| (268) | ||||||
Obligation under finance leases |
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| (417) |
| (767) |
| (510) | ||||||
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| (2,799) |
| (7,970) |
| (2,942) | ||||||
Total liabilities |
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| (7,777) |
| (13,544) |
| (7,170) | ||||||
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| 14,245 |
| 14,691 |
| 15,319 | ||||||
Equity |
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Called up share capital |
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| 10,339 |
| 10,339 |
| 10,339 | ||||||
Share premium account |
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| 504 |
| 504 |
| 504 | ||||||
Capital redemption reserve |
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| 3,617 |
| 3,617 |
| 3,617 | ||||||
Revaluation reserve |
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| 3,165 |
| 3,009 |
| 3,126 | ||||||
Retained earnings |
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| (3,380) |
| (2,778) |
| (2,267) | ||||||
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| 14,245 |
| 14,691 |
| 15,319 | ||||||
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Consolidated Cash Flow Statement |
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6 months ended 30 June 2018 |
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| Unaudited |
| Unaudited |
| Audited |
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| 6 months ended |
| 6 months ended |
| 18 months ended |
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| 30 June |
| 30 June |
| 31 December |
|
| 2018 |
| 2017 |
| 2017 |
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| £000 |
| £000 |
| £000 |
Cash flow from continuing operations |
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Profit for the period |
| 1,314 |
| 1,194 |
| 3,486 |
Depreciation of tangible fixed assets |
| 155 |
| 103 |
| 291 |
Amortisation of other intangible fixed assets |
| 28 |
| - |
| 39 |
Finance costs |
| 158 |
| 309 |
| 932 |
Taxation |
| 9 |
| (46) |
| (225) |
Unrealised valuation gain |
| - |
| - |
| (449) |
Operating cash flows before movements in working capital | 1,664 |
| 1,560 |
| 4,074 | |
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Increase in inventories |
| (762) |
| (1,866) |
| (138) |
(Increase) / decrease in trade and other receivables | (607) |
| (821) |
| 1,046 | |
Increase / (decrease) in trade and other payables |
| 972 |
| 1,517 |
| (874) |
Cash generated from operations |
| 1,267 |
| 390 |
| 4,108 |
Income tax received |
| - |
| - |
| 143 |
Contributions to defined benefit pension scheme |
| (200) |
| (200) |
| (600) |
Net cash generated from operating activities in continuing operations | 1,067 |
| 190 |
| 3,651 | |
Net cash used in operating activities in discontinued operations | (93) |
| (19) |
| (900) | |
Net cash generated from operating activities |
| 974 |
| 171 |
| 2,751 |
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Investing activities |
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Payments to acquire tangible fixed assets |
| (43) |
| (233) |
| (334) |
Payments to acquire intangible fixed assets |
| (18) |
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| (163) |
Net cash used by investing activities on continuing operations | (61) |
| (233) |
| (497) | |
Net cash used by investing activities on discontinuing operations | - |
| (38) |
| (58) | |
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| (61) |
| (271) |
| (555) |
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Financing activities |
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Interest |
| (8) |
| (10) |
| (26) |
Obligations under finance leases |
| (91) |
| (87) |
| (238) |
Equity dividends paid |
| (2,068) |
| - |
| (1,344) |
Net cash used in financing activities in continuing operations | (2,167) |
| (97) |
| (1,608) | |
Net cash used in financing activities in discontinued operations | - |
| - |
| - | |
Net cash used in financing activities |
| (2,167) |
| (97) |
| (1,608) |
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Net (decrease) / increase in cash and cash equivalents | (1,254) |
| (197) |
| 588 | |
Cash and cash equivalents at start of the period |
| 3,702 |
| 2,499 |
| 3,114 |
Cash and cash equivalents at end of the period |
| 2,448 |
| 2,302 |
| 3,702 |
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Consolidated Statement of Changes in Equity |
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6 months ended 30 June 2018 |
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| Share capital | Share premium account | Capital redemption reserve | Revaluation reserve | Profit and loss account | Total equity |
| £000 | £000 | £000 | £000 | £000 | £000 |
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At 1st July 2016 | 10,339 | 504 | 3,617 | 3,009 | (3,518) | 13,951 |
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Comprehensive income for the period |
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Loss for the period | - | - | - | - | (1,370) | (1,370) |
Other comprehensive income for the period | - | - | - | 117 | 3,965 | 4,082 |
Total comprehensive income for the year | - | - | - | 117 | 2,595 | 2,712 |
Contributions by and distributions to owners |
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Dividend paid | - | - | - | - | (1,344) | (1,344) |
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At 31st December 2017 and 1st January 2018 | 10,339 | 504 | 3,617 | 3,126 | (2,267) | 15,319 |
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Comprehensive income for the period |
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Profit for the period | - | - | - | - | 955 | 955 |
Other comprehensive income for the period | - | - | - | 39 | - | 39 |
Total comprehensive income for the year | - | - | - | 39 | 955 | 994 |
Contributions by and distributions to owners |
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Dividend paid | - | - | - | - | (2,068) | (2,068) |
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At 30th June 2018 | 10,339 | 504 | 3,617 | 3,165 | (3,380) | 14,245 |
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2 | DISCONTINUED OPERATIONS |
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| It was announced in the last annual report that the company had entered into a process concerning the closure of the residential carpets business. This process has now been completed. The analysis of the result of the discontinued business that has been included in the consolidated income statement including a deferred tax benefit following the closure of the residential carpets business is as follows: | |||||
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| Unaudited |
| Unaudited |
| Audited |
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| 6 months ended |
| 6 months ended |
| 18 months ended |
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| 30 June |
| 30 June |
| 31 December |
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| 2018 |
| 2017 |
| 2017 |
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| £000 |
| £000 |
| £000 |
| Discontinued operations |
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| Revenue | 920 |
| 3,196 |
| 9,859 |
| Operating costs | (2,313) |
| (3,681) |
| (14,669) |
| Loss before taxation | (1,393) |
| (485) |
| (4,810) |
| Taxation | 1,034 |
| 18 |
| (46) |
| Loss attributable to shareholders of the group from discontinued operations | (359) |
| (467) |
| (4,856) |