TIDMAIEA
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 GBP1.8m
to an unrecognised surplus of GBP5.1m. 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 GBP0.4m
per year to
GBPnil (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 GBP3.7m to
GBP4.0m. The gain is highlighted separately in the income
statement.
Group results
Revenue for the year was above prior year at GBP15.9m (2020:
GBP14.6m) 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 GBP1.3m (2020 Restated: GBP0.7m). 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 GBP0.3m (2020: GBP0.5m).
There was an unrealised valuation gain on the investment
property of GBP0.3m (2020: GBP0.1m) giving an operating profit
after valuation gains of GBP1.6m (2020 Restated: GBP0.8m).
Other finance costs relating in the main to the defined benefit
pension scheme were GBP0.3m (2020: GBP0.4m).
After a tax charge of GBP0.2m primarily due to deferred tax on
the property plant equipment and changes in tax rate at which
deferred tax is recognised (2020: GBP0.1m) profit attributable to
shareholders of the group for the year was GBP1.0m (2020: GBP0.3m).
Earnings per share were 2.70p (2020 Restated: 0.89p).
Operating cash flows before movements in working capital and
other payables were GBP1.7m (2020 Restated: GBP1.4m). Working
capital increased by GBP0.3m (2020 Restated: GBP0.7m decrease)
following a increase in inventories, trade and other receivables
and trade and other payables. Contributions of GBP0.4m (2020:
GBP0.4m) 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 GBP1.3m (2020 Restated:
GBP0.2m) related to the group's investment new machinery to help
with the development of new product ranges.
The group had GBP5.7m of cash on hand as at 31st December 2021
(2020: GBP6.6m). In 2020 the group borrowed GBP2.75m under the
government Coronavirus Business Interruption Loan Scheme, as of
31st December 2021 the amount outstanding was GBP2.4m (2020:
GBP2.75m). 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 GBP0.8m
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
GBP1.0m via our unutilised facility (2020:
GBP1.0m 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 GBP0.2m or 0.4p per
share (2020: GBPnil). 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
GBP'000 GBP'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
GBP GBP GBP GBP
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)
Total comprehensive income
attributable to shareholders
of the group 2,395 63
------ ------ ------ --------
Consolidated Balance Sheet
Year ended 31 December 2021
2021 2021 2020 2020
GBP'000 GBP'000 GBP'000 GBP'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
GBP'000 GBP'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 Capital
Share premium Share Share redemption Revaluation Retained Total
capital account based Option reserve reserve earnings equity
payment
reserve
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
---------------------------------------------------- ------------ --------------- ---------- --------------- --------------- ----------- ------------
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 - - - - - - 345 345
Actuarial loss recognised
on the pension scheme - - - - - - (315) (315)
Revaluation of property
- - - - - - 33 33
---------------------------------------------------- ------------ --------------- ---------- --------------- --------------- ----------- ------------
Total comprehensive income
for the year - - - - - - 63 63
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 year - - - - - - 1,042 1,042
Actuarial gain recognised
on the pension scheme - - - - - - 1,219 1,219
Revaluation of property
- - - - - 166 (32) 134
---------------------------------------------------- ------------ --------------- ---------- --------------- --------------- ----------- ------------
Total comprehensive income
for the year - - - - - 166 2,229 2,395
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 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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END
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