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21 Feb 2017 07:00
AIREA PLC
Interim report for the six months ended 31 December 2016
The principal activity of the group is the manufacturing, marketing and distribution of floor coverings.
Chairman's Statement
Airea is pleased to report earnings are significantly ahead of the corresponding period.
- Operating profit up 51%
- Basic earnings per share up 76%
- EBITDA up 28%
New product launches targeted at the residential market have driven growth in this sector. On the contract side however, delays in projects led to a slow down in growth and as indicated in the annual report sales in the Euro zone took some time to recover. Exports grew steadily in the period and we are seeing sales ahead of last year as we enter the second six months of the accounting period.
Investment in new technology during the second half of the last financial year will facilitate the further extension of our product range with several new designs currently being finalised for launch.
The site consolidation exercise is largely complete with discussions concerning our last leasehold operation in Wakefield reaching an advanced stage. The business continues to reap the benefits of shorter lead times, cost synergies and reduced waste.
Group Results
Revenue for the period was £12.8m (2015: £12.7m). The operating profit was £1,149,000 (2015: £759,000). After charging pension related finance costs of £305,000 (2015: £246,000) and incorporating the appropriate tax charge the net profit for the period was £696,000 (2015: £372,000). Basic earnings per share were 1.51p (2015: 0.86p)
Operating cash flows before exceptional items and movements in working capital were £1.5m (2015: £1.1m). Working capital increased in the period by £1.2m mainly as a result of timing of payments to trade creditors. Contributions to the defined benefit pension scheme were £200,000 (2015: £200,000) in line with the agreement reached with the scheme trustees following the last triennial valuation as at 1st July 2014. Capital expenditure of £1,009,000 (2015: £518,000) was made in renewing and enhancing manufacturing plant and equipment.
The increase in the pension deficit of £579,000 resulted from a deterioration in corporate bond yields. It is an accounting standards requirement that the reported pension valuation is based on corporate bond yields even though this does not reflect the investment strategy of the plan. In reality the plan is now largely hedged against interest rate movements and inflation, which, combined with a diversified growth asset base, has produced an improved underlying position.
Outlook
Recent experience suggests that current exchange rate conditions will, in overall terms, prove to be beneficial for the company but in recent months there has been significant input price pressure resulting from commodity price rises. It is therefore difficult at this point in time to predict the longer term effect on our competitive position. As ever our margins remain the subject of careful management as we look to exploit any advantage.
Of far greater concern is the medium to long term impact of economic uncertainty on market demand. Our position is not unique of course but there has been a notable increase in volatility in an already cyclical market.
The Board intends to maintain the recent pattern of dividend payments, and taking into consideration the changes in accounting period announced in December, will determine the level of interim dividend on the basis of the twelve month period ended 30 June 2017. Therefore there will not be a dividend payment at this interim stage.
Martin Toogood
Chairman
20th February 2017
Enquiries:
Neil Rylance 01924 266561
Chief Executive Officer
Roger Salt 01924 266561
Group Finance Director
Richard Lindley 0113 388 4789
N+1 Singer
Consolidated Income Statement | ||||||||||||
6 months ended 31st December 2016 | ||||||||||||
Unaudited | Unaudited | Audited | ||||||||||
6 months ended | 6 months ended | year ended | ||||||||||
31st December | 31st December | 30th June | ||||||||||
2016 | 2015 | 2016 | ||||||||||
£000 | £000 | £000 | ||||||||||
Revenue | 12,771 | 12,674 | 24,577 | |||||||||
Operating costs | (11,622) | (11,915) | (22,535) | |||||||||
Operating profit before exceptional items | 1,149 | 730 | 2,013 | |||||||||
Exceptional items: | ||||||||||||
Exceptional costs | - | (1,271) | (1,271) | |||||||||
Pension credit | - | 1,300 | 1,300 | |||||||||
Operating profit | 1,149 | 759 | 2,042 | |||||||||
Finance income | - | - | - | |||||||||
Finance costs | (305) | (246) | (651) | |||||||||
Profit before taxation | 844 | 513 | 1,391 | |||||||||
Taxation | (148) | (141) | (114) | |||||||||
Profit attributable to shareholders of the group | 696 | 372 | 1,277 | |||||||||
Earnings per share (basic and diluted) | 1.68p | 0.86p | 3.01p | |||||||||
All amounts relate to continuing operations | ||||||||||||
Consolidated Statement of Comprehensive Income | ||||||||||||
6 months ended 31st December 2016 | ||||||||||||
Unaudited | Unaudited | Audited | ||||||||||
6 months ended | 6 months ended | year ended | ||||||||||
31st December | 31st December | 30th June | ||||||||||
2016 | 2015 | 2016 | ||||||||||
£000 | £000 | £000 | ||||||||||
Profit attributable to shareholders of the group | 696 | 372 | 1,277 | |||||||||
Actuarial loss recognised in the pension scheme | (480) | (218) | (291) | |||||||||
Related deferred taxation | 96 | 44 | (83) | |||||||||
(384) | (174) | (374) | ||||||||||
Unrealised valuation gain | - | - | 3,009 | |||||||||
Related deferred taxation | - | - | (240) | |||||||||
- | - | 2,769 | ||||||||||
Total comprehensive income attributable to shareholders of the group | 312 | 198 | 3,672 | |||||||||
Consolidated Balance Sheet | ||||||||||||
as at 31st December 2016 | Unaudited | Unaudited | Audited | |||||||||
31st December | 31st December | 30th June | ||||||||||
2016 | 2015 | 2016 | ||||||||||
£000 | £000 | £000 | ||||||||||
Non-current assets | ||||||||||||
Property, plant and equipment | 6,164 | 5,447 | 5,489 | |||||||||
Investment property | 2,701 | - | 2,701 | |||||||||
Deferred tax asset | 1,326 | 1,350 | 1,264 | |||||||||
10,191 | 6,797 | 9,454 | ||||||||||
Current assets | ||||||||||||
Inventories | 9,017 | 8.313 | 9,338 | |||||||||
Trade and other receivables | 4,076 | 3,451 | 4,601 | |||||||||
Cash and cash equivalents | 2,499 | 2,561 | 3,114 | |||||||||
15,592 | 14,325 | 17,053 | ||||||||||
Total assets | 25,783 | 21,122 | 26,507 | |||||||||
Current liabilities | ||||||||||||
Trade and other payables | (3,656) | (3,503) | (5,505) | |||||||||
Provisions | (125) | (325) | (125) | |||||||||
(3,781) | (3,828) | (5,630) | ||||||||||
Non-current liabilities | ||||||||||||
Obligation under finance leases | (854) | - | - | |||||||||
Pension deficit | (7,264) | (6,406) | (6,685) | |||||||||
Deferred tax | (241) | (1) | (241) | |||||||||
(8,359) | (6,407) | (6,926) | ||||||||||
Total liabilities | (12,140) | (10,235) | (12,556) | |||||||||
13,643 | 10,887 | 13,951 | ||||||||||
Equity | ||||||||||||
Called up share capital | 10,339 | 10,851 | 10,339 | |||||||||
Share premium account | 504 | 504 | 504 | |||||||||
Capital redemption reserve | 3,617 | 3,105 | 3,617 | |||||||||
Revaluation reserve | 3,009 | - | 3,009 | |||||||||
Retained earnings | (3,826) | (3,573) | (3,518) | |||||||||
13,643 | 10,887 | 13,951 | ||||||||||
Consolidated Cash Flow Statement | ||||||||||||
6 months ended 31st December 2016 | Unaudited | Unaudited | Audited | |||||||||
6 months ended | 6 months ended | year ended | ||||||||||
31st December | 31st December | 30th June | ||||||||||
2016 | 2015 | 2016 | ||||||||||
£000 | £000 | £000 | ||||||||||
Cash flow from operating activities | ||||||||||||
Profit attributable to shareholders of the group | 696 | 372 | 1,277 | |||||||||
Tax charged | 148 | 141 | 114 | |||||||||
Finance costs | 305 | 246 | 651 | |||||||||
Depreciation | 334 | 404 | 837 | |||||||||
Profit on disposal of property plant and equipment | - | - | (6) | |||||||||
Pension credit | - | (1,300) | (1,300) | |||||||||
Inventory impairment | - | 468 | 468 | |||||||||
Operating cash flows before exceptional items & movements in working capital | 1,483 | 331 | 2,041 | |||||||||
Decrease in inventories | 321 | 1,866 | 841 | |||||||||
Decrease / (increase) in trade and other receivables | 525 | 961 | (189) | |||||||||
(Decrease) / increase in trade and other payables | (2,015) | (1,696) | 232 | |||||||||
Increase in provisions for liabilities and charges | - | 325 | 125 | |||||||||
Cash generated from operations | 314 | 1,787 | 3,050 | |||||||||
Income tax received | 52 | - | 61 | |||||||||
Contributions to defined benefit pension scheme | (200) | (200) | (400) | |||||||||
Net cash generated from operations | 166 | 1,587 | 2,711 | |||||||||
Investing activities | ||||||||||||
Purchase of property, plant and equipment | (1,009) | (518) | (704) | |||||||||
Proceeds on disposal of property, plant and equipment | - | - | 25 | |||||||||
(1,009) | (518) | (679) | ||||||||||
Financing activities | ||||||||||||
Interest | (6) | - | - | |||||||||
Obligations under finance leases | 854 | - | - | |||||||||
Share repurchase | - | - | (410) | |||||||||
Equity dividends paid | (620) | (391) | (391) | |||||||||
228 | (391) | (801) | ||||||||||
Net increase/(decrease) in cash and cash equivalents | (615) | 678 | 1,231 | |||||||||
Cash and cash equivalents at start of period | 3,114 | 1,883 | 1,883 | |||||||||
Cash and cash equivalents at end of period | 2,499 | 2,561 | 3,114 | |||||||||
Consolidated Statement of Changes in Equity | ||||||||||||
6 months ended 31st December 2016 | ||||||||||||
Share capital | Share premium account | Capital redemption reserve | Revaluation reserve | Profit and loss account | Total equity | |||||||
£000 | £000 | £000 | £000 | £000 | £000 | |||||||
At 1st July 2015 | 10,851 | 504 | 3,105 | - | (3,380) | 11,080 | ||||||
Comprehensive income for the period | ||||||||||||
Profit for the period | - | - | - | - | 372 | 372 | ||||||
Other comprehensive income for the period | - | - | - | - | (174) | (174) | ||||||
- | - | - | - | 198 | 198 | |||||||
Contributions by and distributions to owners | ||||||||||||
Dividend Paid | - | - | - | - | (391) | (391) | ||||||
At 31st December 2015 | 10,851 | 504 | 3,150 | - | (3,573) | 10,887 | ||||||
Comprehensive income for the period | ||||||||||||
Profit for the period | - | - | - | - | 905 | 905 | ||||||
Other comprehensive income for the period | - | - | - | 3,009 | (440) | 2,569 | ||||||
- | - | - | 3,009 | 465 | 3,474 | |||||||
Contributions by and distributions to owners | ||||||||||||
Share repurchase | (512) | - | 512 | - | - | - | ||||||
Consideration paid on share purchase | - | - | - | - | (410) | (410) | ||||||
(512) | - | 512 | - | (410) | (410) | |||||||
At 30th June 2016 | 10,339 | 504 | 3,617 | 3,009 | (3,518) | 13,951 | ||||||
Comprehensive income for the period | ||||||||||||
Profit for the year | - | - | - | - | 696 | 696 | ||||||
Other comprehensive income for the year | - | - | - | - | (384) | (384) | ||||||
- | - | - | - | 312 | 312 | |||||||
Contributions by and distributions to owners | ||||||||||||
Dividend Paid | - | - | - | - | (620) | (620) | ||||||
At 31st December 2016 | 10,339 | 504 | 3,617 | 3,009 | (3,826) | 13,643 | ||||||
Note | ||||||||||||
BASIS OF PREPARATION AND ACCOUNTING POLICIES | ||||||||||||
The financial information for the six month periods ended 31st December 2016 and 31st December 2015 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 30th June 2016 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 year ended 30th June 2016. These policies are set out in the annual report and accounts for the year ended 30th June 2016 which is available on the company's website 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. |
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