Half Yearly Report

RNS Number : 0656J

Airea PLC

24 March 2010

 



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 6^th 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
Andrew Kitchingham Managing Director - Corporate Finance Brewin Dolphin	0845 213 4730

Consolidated Income Statement
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
	Note		£000		£000	£000
Continuing operations
Revenue			16,679		23,040	40,970
Operating costs			(16,019)		(28,018)	(45,792)
Impairment of goodwill			-		(4,000)	(4,000)
Operating profit/loss after exceptional items			660		(8,978)	(8,822)
Analysed between:
Operating profit/(loss) before exceptional items			757		(901)	(496)
Exceptional operating costs	1		(97)		(4,077)	(4,326)
Impairment of goodwill			-		(4,000)	(4,000)
Finance income			5		41	97
Finance costs			(150)		(150)	(340)
Profit/(loss) before taxation			515		(9,087)	(9,065)
Taxation			(153)		363	103
Profit/(loss) from continuing operations			362		(8,724)	(8,962)
Loss from discontinued operations			-		(57)	(10)
Profit/(loss) for the year			362		(8,781)	(8,972)
Earnings/(loss) per share (basic and diluted)	3		0.78p		(18.99)p	(19.40)p
Earnings/(loss) per share from continuing activities
Basic and diluted	3		0.78p		(18.87)p	(19.38)p
There is no difference between the profit before taxation and the profit for the period stated above and their historical cost equivalents.
Consolidated statement of comprehensive income
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
Profit attributable to shareholders of the group				362	(8,781)	(8,972)
Actuarial losses recognised in the pension scheme				-	-	(2,140)
Related deferred taxation				-	-	599
Total recognised income and expense relating to the period				362	(8,781)	(10,513)

Consolidated Balance Sheet
as at 31st December 2009					Unaudited			Unaudited			Audited
					31st December 2009			31st December 2008			30th June 2009
		Note			£000			£000			£000
Non-current assets
Property, plant and equipment					8,037			7,809			7,938
Deferred tax asset		4a			2,024			1,260			2,217
Loan notes					-			300			-
					10,061			9,369			10,155
Current assets
Loan notes					150			-			150
Inventories					6,462			8,249			6,995
Trade and other receivables					5,082			7,198			5,622
Income tax receivable					-			813			121
Cash and cash equivalents					4,195			3,171			3,242
					15,889			19,431			16,130
Total assets					25,950			28,800			26,285
Current liabilities
Trade and other payables					(5,300)			(7,107)			(5,391)
Provisions					(672)			-			(722)
					(5,972)			(7,107)			(6,113)
Non-current liabilities
Provisions					(929)			(1,715)			(1,038)
Pension deficit					(4,990)			(4,500)			(5,440)
Deferred tax		4b			(162)			(211)			(159)
					(6,081)			(6,426)			(6,637)
Total liabilities					(12,053)			(13,533)			(12,750)
					13,897			15,267			13,535
Equity
Called up share capital					11,561			11,561			11,561
Share premium account					504			504			504
Capital redemption reserve					2,395			2,395			2,395
Profit and loss account		5			(563)			807			(925)
					13,897			15,267			13,535
Consolidated Cash Flow Statement
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
			Note	£000				£000		£000
Operating activities
Cash from/(used in) operations			6			1,313	(2,856)				(2,401)
Interest received						5	19				64
Income tax received						132	238				435
						1,450	(2,599)				(1,902)
Investing activities
Purchase of property, plant and equipment						(613)	(191)				(878)
Proceeds on disposal of property, plant and equipment						13	638				549
Earn-out payment						103	-				-
						(497)	447				(329)
Financing activities
Equity dividends paid						-	(740)				(740)
Redemption of loan notes						-	-				150
						-	(740)				(590)
Net increase/(decrease) in cash and cash equivalents						953	(2,892)				(2,821)
Cash and cash equivalents at start of period						3,242	6,063				6,063
Cash and cash equivalents at end of period						4,195	3,171				3,242

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

Notes

1	EXCEPTIONAL OPERATING COSTS
					Unaudited		Unaudited		Audited
					6 months ended		6 months ended		Year ended
					31st December 2009		31st December 2008		30th June 2009
					£000		£000		£000
	Impairment of property, plant and equipment				-		588		588
	Provision against inventories				120		1,071		1,071
	Provision for onerous leases & related costs				-		2,124		2,037
	Severance payments & incentives				80		252		613
	Relocation costs				-		26		154
	Provision for bad debts				-		37		40
	Legal & professional expenses				-		36		10
	Earn-out payment				(103)		-		-
					97		4,134		4,513
	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.
	The earn-out payment relates to Sirdar Spinning Limited.  This disposal was disclosed in previous periods.
	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).
2	DIVIDENDS
					Unaudited		Unaudited		Audited
					6 months ended		6 months ended		Year ended
					31st December 2009		31st December 2008		30th June 2009
					£000		£000		£000
	Final dividend for the year ended 30th June 2008				-		740		740
	- 1.60p per share
					-		740		740

3	EARNINGS PER SHARE
	(a) Group results
	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.
	Adjusted earnings per share is calculated after excluding exceptional operating costs and impairment of goodwill as set out below.
		Unaudited					Unaudited					Audited
		6 months ended					6 months ended					Year ended
		31st December 2009					31st December 2008					30th June 2009
		£000			pence		£000			pence		£000	pence
	Earnings/(loss) and basic earnings/(loss) per share	362			0.78		(8,781)			(18.99)		(8,972)	(19.40)
	Exceptional operating costs (net of tax)	70			0.15		4,073			8.81		3,249	7.03
	Impairment of goodwill	-			-		4,000			8.65		4,000	8.65
	Adjusted earnings/(loss) and adjusted earnings/(loss) per share	432			0.93		(708)			(1.53)		(1,723)	(3.72)
	(b) Continuing operations
	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.
	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.
			Unaudited			Unaudited					Audited
			6 months ended			6 months ended					Year ended
			31st December 2009			31st December 2008					30th June 2009
			£000	pence		£000			pence		£000		pence
	Earnings/(loss) and basic earnings/(loss) per share		362	0.78		(8,724)			(18.87)		(8,962)		(19.38)
	Exceptional operating costs (net of tax)		70	0.15		4,016			8.69		3,115		6.74
	Impairment of goodwill		-	-		4,000			8.65		4,000		8.65
	Adjusted earnings/(loss) and adjusted earnings/(loss) per share		432	0.93		(708)			(1.53)		(1,847)		(3.99)

4	DEFERRED TAX
			Unaudited		Unaudited			Audited
			31st December 2009		31st December 2008			30th June 2009
			£000		£000			£000
	(a) Deferred tax non-current asset
	Balance brought forward		2,217		1,540			1,540
	Movement during the period		(193)		(280)			677
	Amount carried forward		2,024		1,260			2,217
	The above amounts are in respect of the deferred tax asset relating to the gross pension deficit, and tax losses.
	(b) Deferred tax current liability
	Balance brought forward		159		252			252
	Movement during the period		3		(41)			(93)
	Amount carried forward		162		211			159
	The above amounts are in respect of accelerated capital allowances and other temporary differences
5	RETAINED EARNINGS
			Unaudited			Unaudited		Audited
			31st December 2009			31st December 2008		30th June 2009
			£000			£000		£000
	Brought forward		(925)			10,328		10,328
	Profit/(loss) for the period		362			(8,781)		(8,972)
	Other recognised losses		-			-		(1,541)
	Equity dividends paid		-			(740)		(740)
	Carried forward		(563)			807		(925)

6	RECONCILIATION OF PROFIT/(LOSS) FOR THE PERIOD
	TO NET CASH FROM/(USED IN) OPERATIONS
			Unaudited		Unaudited		Audited
			6 months ended		6 months ended		Year ended
			31st December 2009		31st December 2008		30th June 2009
			£000		£000		£000
	Profit/(loss) for the period		362		(8,781)		(8,972)
	Tax charged/(credited)		153		(363)		(279)
	Finance costs		145		109		242
	Impairment of property, plant and equipment		-		588		588
	Impairment of goodwill		-		4,000		4,000
	Profit on earn-out payment		(103)		-		-
	Depreciation		498		523		1,146
	Loss/(profit) on disposal of property, plant and equipment		3		(49)		(25)
	Decrease in inventories		533		2,721		3,975
	Decrease in receivables		541		1,553		3,127
	(Decrease) in payables		(60)		(2,007)		(5,423)
	(Decrease)/increase in provisions		(159)		-		1,760
	Contributions to defined benefit pension scheme		(600)		(1,150)		(2,540)
	Net cash from/(used in) operations		1,313		(2,856)		(2,401)

7	BASIS OF PREPARATION AND ACCOUNTING POLICIES
	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.
	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.
	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.

 

END

 

 

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