Half-year Results
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AIREA plc (AIM: AIEA), the UK design-led specialist flooring company, supplying both the UK and international markets, today announces its interim results for the six months ended 30 June 2024.
Financial summary
- Group revenue decreased by 5.6% to £9.3m (2023: £9.8m)
- Operating profit decreased to £0.2m (2023: £0.8m), heavily impacted by;
o sales slowdown in second quarter
o non-recurring costs associated with new investment
o ongoing strategic investment for future growth
- EBITDA decreased to £0.6m (2023: £1.1m)
- Cash and cash equivalents at £2.8m (2023: £4.9m)
Operational highlights
- Sales performance slightly ahead of market
- Business transformation progressing well, in line with plan
- Major investment in manufacturing facility on track for completion in early 2025
- Review of Group's stockholding policy underway
- Successful launch of new carbon-neutral products
- The Group's sustainability principles eco2matters® fully embedded
Martin Toogood, Non-Executive Chairman of AIREA plc, commented:
"The year started well, with strong demand for our carbon-zero and low-carbon product ranges in the first quarter. The Group then experienced an unforeseen slowdown in the second quarter, with international sales impacted by ongoing economic and geopolitical concerns. UK and ROI sales were less impacted, performing slightly ahead of the overall market trend.
"The Group had an encouraging start to the third quarter, with positive trading in July and August finishing with a strong order book. We anticipate continued improvement in trading during the second half with several new product launches scheduled and the Group is trading in line with the Board's recently revised expectations for the full year.
"The Board remains confident in the Group's long-term prospects as we focus on successfully delivering the investment in our manufacturing facility in early 2025 and the ongoing transformation of the business, positioning it for profitable future growth."
Chief Executive Officer's Statement
Introduction
I am pleased to report the Group's interim results for the six months ended 30 June 2024. Following a strong start to the year, there was an unexpected slowdown in the second quarter. Sales in our international markets were impacted by ongoing economic and geopolitical concerns, including the Middle East. Sales in the UK and ROI delivered a solid performance in challenging market conditions.
We remain focused on successfully delivering the investment in our manufacturing facility in early 2025 and the ongoing transformation of the business.
Results
Revenue for the period was 5.6% down year on year at £9.3m (2023: £9.8m). In the UK and ROI, sales were 0.3% down year on year. International sales were 21.9% behind the prior year.
The weaker than expected performance in the second quarter, due to the uncertainty around the UK general election, impacted operating profit which declined to £0.2m (2023: £0.8m). The Group's operating profit was also impacted by non-recurring costs associated with the major investment and the ongoing strategic investment in resources to deliver more profitable future growth. After charging net finance costs of £0.3m (2023: £0.3m) and tax of £0.1m (2023: £0.1m), the Group reported a loss of £0.2m (2023: profit of £0.5m). Basic earnings per share were (0.56p) (2023: 1.27p).
Operating cash flows before movements in working capital were £0.7m (2023: £1.2m). Working capital movements increased in the period to £1.6m (2023: £0.5m) predominantly due to an increase in inventory as a result of the sales shortfall in the second quarter. Appropriate action is being taken to reduce inventory levels through the course of the second half of the year with the aim of introducing a more efficient and cash generative strategy. Capital expenditure increased to £1.3m (2023: £0.9m) as the major investment in the Group's manufacturing facility commenced.
Net cash (cash less loans and borrowings) decreased to £1.3m (2023: £2.7m). The Group has access to further liquidity of £1.0m via its unutilised overdraft facility (2023: £1.0m). The Group has also taken the decision to divest its investment property, which has a carrying value of £4.1m.
Following the triennial valuation of the defined benefit pension scheme as at 1 July 2023, the Company and the trustees of the pension scheme have agreed in principle to a reasonable and affordable recovery plan to address the scheme's current deficit. At the end of July 2024, the Company made an initial contribution of £0.3m to the scheme.
Current Trading and Outlook
There has been an encouraging start to the third quarter, with positive trading in both July and August coupled with a strong order book. The Group's commitment to innovation and sustainability remains steadfast, with several new product launches scheduled for the second half of the year.
The Group's short term priority is the installation and commissioning of the new equipment at its manufacturing facility, which is pivotal to the transformation of the business. The Group will maintain its focus on cash preservation and will therefore not be proposing an interim dividend at this time (2023: £nil).
The Board anticipates a continued improvement in trading during the second half and the Group is trading in line with the Board's recently revised expectations for the full year.
The Board remains confident in the Group's long-term trading and growth prospects.
Médéric Payne
Chief Executive Officer
Consolidated Income Statement
6 months ended 30 June 2024
| Unaudited 6 months ended 30 June 2024 | Unaudited 6 months ended 30 June 2023 | Audited 12 months ended 31 December 2023 | ||||||
|---|---|---|---|---|---|---|---|---|
| £'000 | £'000 | £'000 | ||||||
| Revenue | 9,276 | 9,825 | 21,102 | |||||
| Operating costs | (9,239) | (9,301) | (19,788) | |||||
| Other operating income | 178 | 312 | 490 | |||||
| Operating profit before valuation gain | 215 | 836 | 1,804 | |||||
| Unrealised valuation gain | - | - | 60 | |||||
| Operating profit | 215 | 836 | 1,864 | |||||
| Finance income | 42 | 39 | 72 | |||||
| Finance costs | (325) | (255) | (523) | |||||
| (Loss)/Profit before taxation | (68) | 620 | 1,413 | |||||
| Taxation | (147) | (130) | (644) | |||||
| (Loss)/Profit attributable to shareholders of the Group | (215) | 490 | 769 | |||||
| Earnings per share (basic and diluted) for the Group | (0.56p) | 1.27p | 1.99p | |||||
| Consolidated Statement of Comprehensive Income | ||||||||
| 6 months ended 30 June 2024 | ||||||||
| Unaudited | Unaudited | Audited | ||||||
| 6 months | 6 months | 12 months | ||||||
| ended | ended | ended | ||||||
| 30 June | 30 June | 31 December | ||||||
| 2024 | 2023 | 2023 | ||||||
| £'000 | £'000 | £'000 | ||||||
| (Loss)/Profit attributable to shareholders of the Group | (215) | 490 | 769 | |||||
| Items that will not be reclassified to profit or loss Actuarial gain/(loss) recognised in the pension scheme | 1,709 | 513 | (3,281) | |||||
| Related deferred taxation | (427) | (128) | 820 | |||||
| 1,282 | 385 | (2,461) | ||||||
| Items that will be reclassified subsequently to profit or loss when specific conditions are met Revaluation of property | - | - | 315 | |||||
| Related deferred taxation | - | - | (79) | |||||
| - | - | 236 | ||||||
| Total other comprehensive income/(loss) | 1,282 | 385 | (2,225) | |||||
| Total comprehensive income/(loss) attributable to shareholders of the Group | 1,067 | 875 | (1,456) | |||||
| Consolidated Balance Sheet | ||||||||
| as at 30 June 2024 | ||||||||
| Unaudited 30 June 2024 | Unaudited 30 June 2023 | Audited 31 December 2023 | ||||||
| £'000 | £'000 | £'000 | ||||||
| Non-current assets | ||||||||
| Property, plant and equipment | 7,429 | 5,976 | 6,379 | |||||
| Intangible assets | 61 | 59 | 65 | |||||
| Investment property | 4,060 | 4,000 | 4,060 | |||||
| Right-of-use asset | 1,053 | 754 | 1,413 | |||||
| Deferred tax asset | 841 | 763 | 895 | |||||
| 13,444 | 11,552 | 12,812 | ||||||
| Current assets | ||||||||
| Inventories | 7,620 | 6,560 | 5,753 | |||||
| Trade and other receivables | 2,565 | 2,871 | 3,156 | |||||
| Cash and cash equivalents | 2,814 | 4,919 | 5,758 | |||||
| 12,999 | 14,350 | 14,667 | ||||||
| Total assets | 26,443 | 25,902 | 27,479 | |||||
| Current liabilities | ||||||||
| Trade and other payables | (3,438) | (3,986) | (3,795) | |||||
| Provisions | - | (74) | - | |||||
| Lease liabilities | (187) | (127) | (183) | |||||
| Loans and borrowings | (742) | (736) | (739) | |||||
| (4,367) | (4,923) | (4,717) | ||||||
| Non-current liabilities | ||||||||
| Deferred tax | (1,653) | (1,144) | (1,439) | |||||
| Pension deficit | (3,509) | (1,000) | (4,972) | |||||
| Lease liabilities | (292) | (140) | (287) | |||||
| Loans and borrowings | (747) | (1,489) | (1,119) | |||||
| (6,201) | (3,773) | (7,817) | ||||||
| Total liabilities | (10,568) | (8,696) | (12,534) | |||||
| Net assets | 15,875 | 17,206 | 14,945 | |||||
| Equity | ||||||||
| Called up share capital | 10,339 | 10,339 | 10,339 | |||||
| Share premium account | 504 | 504 | 504 | |||||
| Own Shares | (1,454) | (1,805) | (1,636) | |||||
| Share-based payment reserve | 225 | --80 | 150 | |||||
| Capital redemption reserve | 3,617 | 3,617 | 3,617 | |||||
| Revaluation reserve | 3,376 | 3,096 | 3,376 | |||||
| Retained earnings | (732) | 1,375 | (1,405) | |||||
| Total equity | 15,875 | 17,206 | 14,945 | |||||
| Consolidated Cash Flow Statement | ||||||||
| 6 months ended 30 June 2024 | ||||||||
| Unaudited 6 months ended 30 June 2024 | Unaudited 6 months ended 30 June 2023 | Audited 12 months ended 31 December 2023 | ||||||
| £'000 | £'000 | £'000 | ||||||
| Cash flow from operating activities | ||||||||
| (Loss)/Profit for the period | (215) | 490 | 769 | |||||
| Depreciation | 221 | 165 | 374 | |||||
| Depreciation of right-of-use assets | 168 | 124 | 279 | |||||
| Amortisation | 18 | 15 | 33 | |||||
| Movement in p rovision | - | (3) | (77) | |||||
| Share-based payment expense | 75 | 80 | 150 | |||||
| Net f inance costs | 283 | 216 | 451 | |||||
| Unrealised valuation gain | - | - | (60) | |||||
| Tax charge | 147 | 130 | 644 | |||||
| Operating cash flows before movements in working capital | 697 | 1,217 | 2,563 | |||||
| (Increase)/decrease in inventory | (1,867) | (665) | 142 | |||||
| Decrease/(increase) in trade and other receivables | 591 | (520) | (807) | |||||
| (Decrease)/increase in trade and other payables | (349) | 670 | 479 | |||||
| Net cash generated from operating activities | (928) | 702 | 2,377 | |||||
| Cash flows from investing activities | ||||||||
| Payments to acquire intangible fixed assets | (14) | (4) | (27) | |||||
| Payments to acquire tangible fixed assets | (1,279) | (868) | (1,166) | |||||
| Net cash used in investing activities | (1,293) | (872) | (1,193) | |||||
| Cash flows from financing activities | ||||||||
| Interest paid on lease liabilities | (14) | (5) | (17) | |||||
| Interest paid on borrowings | (65) | (82) | (160) | |||||
| Interest received | 42 | 39 | 72 | |||||
| Principal paid on lease liabilities | (105) | (66) | (156) | |||||
| Equity dividends paid | (212) | (193) | (193) | |||||
| Repayment of loans | (369) | (366) | (734) | |||||
| Net cash used in financing activities | (723) | (673) | (1,188) | |||||
| Net decrease in cash and cash equivalents | (2,944) | (843) | (4) | |||||
| Cash and cash equivalents at start of the period | 5,758 | 5,762 | 5,762 | |||||
| Cash and cash equivalents at end of the period | 2,814 | 4,919 | 5,758 | |||||
| Consolidated Statement of Changes in Equity | ||||||||
| 6 months ended 30 June 2024 | ||||||||
| Share capital | Share premium account | Own Shares | Share- based payment reserve | Capital redemption reserve | Revaluation reserve | Profit and loss account | Total equity | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| At 1 January 2023 10,339 | 504 | (2,000) | - | 3,617 | 3,096 | 888 | 16,444 | |
| Comprehensive income | ||||||||
| for the year | ||||||||
| Profit for the year - | - | - | - | - | - | 769 | 769 | |
| Remeasurement of the net | ||||||||
| defined benefit liability - | - | - | - | - | - | (2,461) | (2,461) | |
| Revaluation of property - | - | - | - | - | 315 | (79) | 236 | |
| Total comprehensive income for the year - | - | - | - | - | 315 | (1,771) | (1,456) | |
| Contributions by and distributions to owners | ||||||||
| Dividend paid | - - - | - - - (193) | (193) | |||||
| Share-based payment | - - - | 150 - - - | 150 | |||||
| Own share transfer Revaluation reverse transfer | - - 364 - - - | - - - (364) - - (35) 35 | - - | |||||
| Total contributions by and distributions to owners | - | - | 364 | 150 | - | (35) | (522) | (43) |
| At 31 December 2023 | ||||||||
| and 1 January 2024 10,339 | 504 | (1,636) | 150 | 3,617 | 3,376 | (1,405) | 14,945 | |
| Comprehensive income for the period Loss for the period - Remeasurement of the net defined benefit liability - | - - | - - | - - | - - | - - | (215) 1,282 | (215) 1,282 | |
| Total comprehensive income for the period - | - | - | - | - | - | 1,067 | 1,067 | |
| Contributions by and distributions to owners | ||||||||
| Dividend paid - | - | - | - | - | - | (212) | (212) | |
| Share-based payment - | - | - | 75 | - | - | - | 75 | |
| Own shares t ransfer - | - | 182 | - | - | - | (182) | - | |
| Total contributions by and distributions to owners - | - | 182 | 75 | - | - | (394) | (137) | |
| At 30 June 2024 10,339 | 504 | (1,454) | 225 | 3,617 | 3,376 | (732) | 15,875 | |
Notes to the Financial Statements
BASIS OF PREPARATION AND ACCOUNTING POLICIES
The financial information for the six months ended 30 June 2024 and the six months ended 30 June 2023 have not been audited and do not constitute full financial statements within the meaning of Section 434 of the Companies Act 2006.
The financial information relating to the year ended 31 December 2023 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 UK adopted International Accounting Standards 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 UK adopted International Accounting Standards. The accounting policies used are the same as those used in preparing the financial statements for the period ended 31 December 2023. These policies are set out in the annual report and accounts for the period ended 31 December 2023 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 and are also available, along with this announcement, on the company's website at www.aireaplc.co.uk.
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