Last checked at 24 Mar 2010 07:00
AIREA plc
Interim results for the six months ended 31st December 2009
Review of Operations
Introduction
As indicated at the time of the AGM, trading conditions in the floor coverings markets in which we operate have remained extremely challenging. It is therefore pleasing to report that the first six months of our current financial year has been one of considerable progress seeing both an improvement in profitability and cash generation.
The Ryalux brand is benefiting from the range renewal programme along with investment in new point of sale and continues to regain its reputation for innovation and design. The success achieved in winning major commercial contracts demonstrates the development of the Burmatex brand within the architect and specification market. Both brands are benefiting from a focussed approach to pricing and despite the adverse market conditions, sales margins have been strengthened. The benefits of the cost reduction programmes carried out last year came through in the period and made a major contribution to the improvement in profitability. We continue to monitor our cash flows closely and have strengthened our cash resources, whilst continuing to invest in new products to generate future growth.
Group results
Sales reduced by 27.6% to £16,679k (2008: £23,040k), and were 6.7% down against the six months ended 30 June 2009. Of the decline circa £4m is directly attributable to the exit from loss making contracts and the withdrawal of products as part of the rationalisation of the domestic product range. The operating profit was £660k (2008: loss £8,978k). This result was after exceptional operating costs of £97k (2008: exceptional operating cost £4,077k and goodwill impairment £4,000k). After excluding these items, the operating result from continuing operations was a profit of £757k (2008: loss £901k).
After accounting for modest levels of finance income and finance costs and incorporating the appropriate tax charge the result for the period was a profit of £362k (2008: loss £8,781k). The earnings per share were 0.78p (2008: loss per share 18.99p). Cash and cash equivalents totalled £4,195k (2008: £3,171k).
Net cash generated from operations in the period amounted to £1,313k (2008: used in operations £2,856k). Working capital reduced by £1,014k (2008: £2,267k) as a result of range rationalisation and the focus on receivables management. Capital expenditure of £613k (2008: £191k) was largely focussed on the range renewal projects. Contributions of £600k (2008: £1,150k) were paid to the defined benefit pension scheme, in line with trustee approval. Due to the timing of the agreement this represents the full contributions for the year.
Management and personnel
Martin Toogood succeeded Tim Vernon as non-executive chairman on 6th November 2009. Tim stepped down from the board after over five years service, and we would like to thank him for his contribution and wish him well for the future.
Current trading and future prospects
Our half year trading statement demonstrates a welcome increase in profitability, following the return to profitability in the second half of the last financial year, set against some of the most difficult market conditions for many years.
As outlined in our last annual report we have largely re-organised our manufacturing footprint in the residential carpet business and more importantly transformed our product portfolio and point of sale estate. To say the least this has been a painful experience as we have had to exit loss making supply contracts and discontinue unprofitable product ranges. This largely explains the decline in residential product sales. However, we have been successful in re-establishing our portfolio in the multiple retail sector with the latest phase of our new ranges being introduced to multiple retail customers this month. This should lead to a stronger trading position in the residential sector as a direct consequence of these activities.
The commercial floor-coverings business, as expected, encountered difficult trading conditions however, the public sector in particular continues to perform well. We are pleased with the progress made by the business in winning new contracts outside our normal more traditional market sectors. In recent months we have successfully secured new contracts to the value of £10m over the next two years, which will progressively come on stream towards the end of this financial year. These contracts should provide a solid platform for growth despite the economic environment.
In summary we look to the future with cautious optimism. Retail footfall in the residential sector continues to be a source of concern and the commercial sector is showing little sign of real market recovery. Nevertheless we now have the products that people wish to buy and the cost base to trade profitably in a very difficult market. Our business plan assumes no real market recovery for some time to come and management attention on cash resources is a very high priority.
The board has concluded that it would be imprudent to pay a dividend at the interim stage, but are committed to review the recommencement of dividends at the end of the financial year.
Enquiries:
| Neil Rylance Chief Executive Officer | 01924 266561 |
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| Andrew Kitchingham Managing Director - Corporate Finance Brewin Dolphin | 0845 213 4730 |
| Consolidated Income Statement |
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| 6 months ended 31st December 2009 |
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| Unaudited | Unaudited | Audited | |
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| 6 months ended | 6 months ended | year ended | |
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| 31st December 2009 | 31st December 2008 | 30th June 2009 | |
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| Note |
| £000 | £000 | £000 | |
| Continuing operations |
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| Revenue |
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| 16,679 | 23,040 | 40,970 | |
| Operating costs |
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| (16,019) | (28,018) | (45,792) | |
| Impairment of goodwill |
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| - | (4,000) | (4,000) | |
| Operating profit/loss after exceptional items |
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| 660 | (8,978) | (8,822) | |
| Analysed between: |
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| Operating profit/(loss) before exceptional items |
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| 757 | (901) | (496) | |
| Exceptional operating costs | 1 |
| (97) | (4,077) | (4,326) | |
| Impairment of goodwill |
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| - | (4,000) | (4,000) | |
| Finance income |
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| 5 | 41 | 97 | |
| Finance costs |
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| (150) | (150) | (340) | |
| Profit/(loss) before taxation |
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| 515 | (9,087) | (9,065) | |
| Taxation |
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| (153) | 363 | 103 | |
| Profit/(loss) from continuing operations |
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| 362 | (8,724) | (8,962) | |
| Loss from discontinued operations |
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| - | (57) | (10) | |
| Profit/(loss) for the year |
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| 362 | (8,781) | (8,972) | |
| Earnings/(loss) per share (basic and diluted) | 3 |
| 0.78p | (18.99)p | (19.40)p | |
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| Earnings/(loss) per share from continuing activities |
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| Basic and diluted | 3 |
| 0.78p | (18.87)p | (19.38)p | |
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| There is no difference between the profit before taxation and the profit for the period stated above and their historical cost equivalents. | ||||||
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| Consolidated statement of comprehensive income |
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| 6 months ended 31st December 2009 |
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| Unaudited | Unaudited | Audited | |
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| 6 months ended | 6 months ended | year ended | |
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| 31st December 2009 | 31st December 2008 | 30th June 2009 | |
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| £000 | £000 | £000 | |
| Profit attributable to shareholders of the group |
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| 362 | (8,781) | (8,972) | |
| Actuarial losses recognised in the pension scheme |
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| - | - | (2,140) | |
| Related deferred taxation |
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| - | - | 599 | |
| Total recognised income and expense relating to the period |
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| 362 | (8,781) | (10,513) | |
| Consolidated Balance Sheet |
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| as at 31st December 2009 |
| Unaudited | Unaudited | Audited |
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| 31st December 2009 | 31st December 2008 | 30th June 2009 |
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| Note | £000 | £000 | £000 |
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| Non-current assets |
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| Property, plant and equipment |
| 8,037 | 7,809 | 7,938 |
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| Deferred tax asset | 4a | 2,024 | 1,260 | 2,217 |
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| Loan notes |
| - | 300 | - |
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| 10,061 | 9,369 | 10,155 |
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| Current assets |
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| Loan notes |
| 150 | - | 150 |
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| Inventories |
| 6,462 | 8,249 | 6,995 |
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| Trade and other receivables |
| 5,082 | 7,198 | 5,622 |
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| Income tax receivable |
| - | 813 | 121 |
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| Cash and cash equivalents |
| 4,195 | 3,171 | 3,242 |
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| 15,889 | 19,431 | 16,130 |
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| Total assets |
| 25,950 | 28,800 | 26,285 |
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| Current liabilities |
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| Trade and other payables |
| (5,300) | (7,107) | (5,391) |
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| Provisions |
| (672) | - | (722) |
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| (5,972) | (7,107) | (6,113) |
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| Non-current liabilities |
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| Provisions |
| (929) | (1,715) | (1,038) |
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| Pension deficit |
| (4,990) | (4,500) | (5,440) |
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| Deferred tax | 4b | (162) | (211) | (159) |
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| (6,081) | (6,426) | (6,637) |
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| Total liabilities |
| (12,053) | (13,533) | (12,750) |
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| 13,897 | 15,267 | 13,535 |
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| Equity |
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| Called up share capital |
| 11,561 | 11,561 | 11,561 |
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| Share premium account |
| 504 | 504 | 504 |
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| Capital redemption reserve |
| 2,395 | 2,395 | 2,395 |
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| Profit and loss account | 5 | (563) | 807 | (925) |
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| 13,897 | 15,267 | 13,535 |
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Consolidated Cash Flow Statement |
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| 6 months ended 31st December 2009 |
| Unaudited | Unaudited | Audited |
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| 6 months ended | 6 months ended | year ended |
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| 31st December 2009 | 31st December 2008 | 30th June 2009 |
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| Note | £000 | £000 | £000 |
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| Operating activities |
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| Cash from/(used in) operations | 6 | 1,313 | (2,856) | (2,401) |
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| Interest received |
| 5 | 19 | 64 |
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| Income tax received |
| 132 | 238 | 435 |
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| 1,450 | (2,599) | (1,902) |
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| Investing activities |
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| Purchase of property, plant and equipment |
| (613) | (191) | (878) |
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| Proceeds on disposal of property, plant and equipment |
| 13 | 638 | 549 |
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| Earn-out payment |
| 103 | - | - |
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| (497) | 447 | (329) |
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| Financing activities |
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| Equity dividends paid |
| - | (740) | (740) |
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| Redemption of loan notes |
| - | - | 150 |
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| - | (740) | (590) |
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| Net increase/(decrease) in cash and cash equivalents |
| 953 | (2,892) | (2,821) |
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| Cash and cash equivalents at start of period |
| 3,242 | 6,063 | 6,063 |
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| Cash and cash equivalents at end of period |
| 4,195 | 3,171 | 3,242 |
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| Consolidated Statement of Changes in Total Equity | | | | ||
| 6 months ended 31st December 2009 | | Unaudited | Unaudited | Audited | |
| | | 6 months ended | 6 months ended | year ended | |
| | | 31st December 2009 | 31st December 2008 | 30th June 2009 | |
| | | £000 | £000 | £000 | |
| Total equity brought forward | | 13,535 | 24,788 | 24,788 | |
| Profit/(loss) for the period | | 362 | (8,781) | (8,972) | |
| Other recognised losses | | - | - | (1,541) | |
| Equity dividends paid | | - | (740) | (740) | |
| Total equity carried forward | | 13,897 | 15,267 | 13,535 | |
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Notes
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| 1 | EXCEPTIONAL OPERATING COSTS |
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| Unaudited | Unaudited | Audited | |||||
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| 6 months ended | 6 months ended | Year ended | |||||
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| 31st December 2009 | 31st December 2008 | 30th June 2009 | |||||
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| £000 | £000 | £000 | |||||
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| Impairment of property, plant and equipment |
| - | 588 | 588 | |||||
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| Provision against inventories |
| 120 | 1,071 | 1,071 | |||||
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| Provision for onerous leases & related costs |
| - | 2,124 | 2,037 | |||||
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| Severance payments & incentives |
| 80 | 252 | 613 | |||||
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| Relocation costs |
| - | 26 | 154 | |||||
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| Provision for bad debts |
| - | 37 | 40 | |||||
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| Legal & professional expenses |
| - | 36 | 10 | |||||
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| Earn-out payment |
| (103) | - | - | |||||
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| 97 | 4,134 | 4,513 | |||||
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| The impairment of property, plant & equipment, the provision against inventories, the provisions for onerous leases and related costs and relocation costs relate to the ongoing reorganisation of the residential carpets business. The severance payments and incentives relate to the steamlining of the operating business and management team. The remainder of the relocation costs and the provision for bad debts relate to the discontinuation of the yarn dyeing operation. The legal & professional expenses relate to the streamlining of the group structure. | |||||||||
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| The earn-out payment relates to Sirdar Spinning Limited. This disposal was disclosed in previous periods. | |||||||||
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| All of the exceptional operating costs related to continuing operations (31st December 2008: £4,077,000, 30th June 2009: £4,326,000 of the exceptional operating costs related to continuing operations and 31st December 2008: £57,000, 30th June 2009: £187,000 related to discontinued operations). | |||||||||
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| 2 | DIVIDENDS |
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| Unaudited | Unaudited | Audited | |||||
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| 6 months ended | 6 months ended | Year ended | |||||
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| 31st December 2009 | 31st December 2008 | 30th June 2009 | |||||
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| £000 | £000 | £000 | |||||
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| Final dividend for the year ended 30th June 2008 |
| - | 740 | 740 | |||||
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| - 1.60p per share |
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| - | 740 | 740 | |||||
| 3 | EARNINGS PER SHARE |
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| (a) Group results |
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| The calculation of basic earnings per share is based on a profit of £362,000 (31st December 2008: loss £8,781,000, 30th June 2009: loss £8,972,000) and on 46,242,455 (31st December 2008: 46,242,455, 30th June 2009: 46,242,455) ordinary shares, being the number in issue during the period. | |||||||||||||
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| Adjusted earnings per share is calculated after excluding exceptional operating costs and impairment of goodwill as set out below. | |||||||||||||
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| Unaudited | Unaudited | Audited |
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| 6 months ended | 6 months ended | Year ended |
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| 31st December 2009 | 31st December 2008 | 30th June 2009 |
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| £000 | pence | £000 | pence | £000 | pence |
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| Earnings/(loss) and basic earnings/(loss) per share | 362 | 0.78 | (8,781) | (18.99) | (8,972) | (19.40) |
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| Exceptional operating costs (net of tax) | 70 | 0.15 | 4,073 | 8.81 | 3,249 | 7.03 |
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| Impairment of goodwill | - | - | 4,000 | 8.65 | 4,000 | 8.65 |
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| Adjusted earnings/(loss) and adjusted earnings/(loss) per share | 432 | 0.93 | (708) | (1.53) | (1,723) | (3.72) |
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| (b) Continuing operations |
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| The calculation of basic earnings per share from continuing operations is based on a profit of £362,000 (31st December 2008: loss £8,724,000, 30th June 2009: loss £8,962,000) and on 46,242,455 (31st December 2008: 46,242,455, 30th June 2009: 46,242,455) ordinary shares. | |||||||||||||
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| Adjusted earnings per share from continuing operations is calculated after excluding the exceptional profit on sale of property, the related movements on deferred tax, exceptional operating costs and impairment of goodwill as set out below. | |||||||||||||
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| Unaudited | Unaudited | Audited |
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| 6 months ended | 6 months ended | Year ended |
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| 31st December 2009 | 31st December 2008 | 30th June 2009 |
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| £000 | pence | £000 | pence | £000 | pence |
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| Earnings/(loss) and basic earnings/(loss) per share | 362 | 0.78 | (8,724) | (18.87) | (8,962) | (19.38) |
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| Exceptional operating costs (net of tax) | 70 | 0.15 | 4,016 | 8.69 | 3,115 | 6.74 |
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| Impairment of goodwill | - | - | 4,000 | 8.65 | 4,000 | 8.65 |
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| Adjusted earnings/(loss) and adjusted earnings/(loss) per share | 432 | 0.93 | (708) | (1.53) | (1,847) | (3.99) |
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| 4 | DEFERRED TAX |
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| Unaudited | Unaudited | Audited | ||||
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| 31st December 2009 | 31st December 2008 | 30th June 2009 | ||||
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| £000 | £000 | £000 | ||||
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| (a) Deferred tax non-current asset |
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| Balance brought forward |
| 2,217 | 1,540 | 1,540 | ||||
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| Movement during the period |
| (193) | (280) | 677 | ||||
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| Amount carried forward |
| 2,024 | 1,260 | 2,217 | ||||
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| The above amounts are in respect of the deferred tax asset relating to the gross pension deficit, and tax losses. |
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| (b) Deferred tax current liability |
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| Balance brought forward |
| 159 | 252 | 252 | ||||
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| Movement during the period |
| 3 | (41) | (93) | ||||
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| Amount carried forward |
| 162 | 211 | 159 | ||||
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| The above amounts are in respect of accelerated capital allowances and other temporary differences |
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| 5 | RETAINED EARNINGS |
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| Unaudited | Unaudited | Audited | ||||
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| 31st December 2009 | 31st December 2008 | 30th June 2009 | ||||
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| £000 | £000 | £000 | ||||
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| Brought forward |
| (925) | 10,328 | 10,328 | ||||
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| Profit/(loss) for the period |
| 362 | (8,781) | (8,972) | ||||
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| Other recognised losses |
| - | - | (1,541) | ||||
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| Equity dividends paid |
| - | (740) | (740) | ||||
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| Carried forward |
| (563) | 807 | (925) | ||||
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| 6 | RECONCILIATION OF PROFIT/(LOSS) FOR THE PERIOD |
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| TO NET CASH FROM/(USED IN) OPERATIONS |
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| Unaudited | Unaudited | Audited | ||
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| 6 months ended | 6 months ended | Year ended | ||
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| 31st December 2009 | 31st December 2008 | 30th June 2009 | ||
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| £000 | £000 | £000 | ||
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| Profit/(loss) for the period |
| 362 | (8,781) | (8,972) | ||
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| Tax charged/(credited) |
| 153 | (363) | (279) | ||
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| Finance costs |
| 145 | 109 | 242 | ||
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| Impairment of property, plant and equipment |
| - | 588 | 588 | ||
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| Impairment of goodwill |
| - | 4,000 | 4,000 | ||
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| Profit on earn-out payment |
| (103) | - | - | ||
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| Depreciation |
| 498 | 523 | 1,146 | ||
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| Loss/(profit) on disposal of property, plant and equipment | 3 | (49) | (25) | |||
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| Decrease in inventories |
| 533 | 2,721 | 3,975 | ||
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| Decrease in receivables |
| 541 | 1,553 | 3,127 | ||
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| (Decrease) in payables |
| (60) | (2,007) | (5,423) | ||
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| (Decrease)/increase in provisions |
| (159) | - | 1,760 | ||
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| Contributions to defined benefit pension scheme |
| (600) | (1,150) | (2,540) | ||
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| Net cash from/(used in) operations |
| 1,313 | (2,856) | (2,401) | ||
| 7 | BASIS OF PREPARATION AND ACCOUNTING POLICIES |
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The financial information for the six months ended 31 December 2009 and 31 December 2008 has not been audited and does not constitute full financial statements within the meaning of Section 434 of the Companies Act 2006. The financial information relating to the year ended 30 June 2009 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. | |||
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| 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 year ended 30th June 2009, other than in respect of the adoption of IAS1 (revised), "Presentation of Financial Statements", which affects only the presentation of primary statements. These policies are set out in the annual report and accounts for the year ended 30th June 2009 which is available on the Company's website at www.aireaplc.co.uk. | |||
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| 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. | |||