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 1^st 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