RNS Number:2773J
Airsprung Furniture Group PLC
06 December 2007
AIRSPRUNG FURNITURE GROUP PLC
Interim Report and Accounts September 2007
Chairman's statement
I am pleased to report that the progress reported at the AGM in September has
continued. Sales for the six months ended 30 September 2007 increased by 18% to
#24.9 million (2006: #21.1 million). Profit on ordinary activities before
taxation rose to #419,000 (2006: #347,000), an increase of 21%. Group cash
balances at the half-year end were #2,662,000 (2006: #709,000).
All divisions contributed to this further improvement, with the exception of
Cavendish, our upholstered furniture operation based in Chorley, which continues
to be under pressure due to weakness in its sector. The Group intends to deliver
increasing shareholder value from the Cavendish site by introducing selected bed
manufacturing, foam conversion and distribution operations closer to our markets
in the north of England.
The Group has received outline planning permission for Phase 1 of the proposed
Brick Lane Business Park adjacent to our main manufacturing site in Trowbridge.
The directors are now in a position to review in detail the costs and benefits
of various options for developing the central area of this site.
A report has been received from the pension scheme actuary showing a further
significant reduction in the scheme's deficit from the #6.2 million reported
last year end to #4.4 million at the end of the period. Whilst such valuations
are always liable to fluctuate, steps are being taken to mitigate investment
risk in the light of possible weaknesses in international equity markets.
Subject to trading results continuing to improve, the Group's distributable
reserves are expected to rise within the foreseeable future to a point where
dividend payments can be resumed. As a first step, the board is planning to
redeem the preference shares next year with their full entitlement to accrued
interest.
The uncertainty in financial markets caused a temporary slowdown in sales in the
early autumn, but the Group's competitive position in its core activities is
strong and there are signs that the normal seasonal trading pattern has been
resumed. Although certain raw material prices are now rising, the Group
continues to find efficiencies in both purchasing and manufacturing operations.
Barring unforeseen circumstances, the directors expect the year end results will
be satisfactory.
Stuart Lyons CBE
Chairman
6 December 2007
For further information, please contact:
Tony Lisanti, Chief Executive of Airsprung Furniture Group PLC Tel: 01225 754 411
Mike Coe, Director, Corporate Finance, Blue Oar Securities Plc Tel: 0117 933 0020
Consolidated income statement unaudited
6 months to 6 months to 12 months to
30.09.07 30.09.06 31.03.07
#000 #000 #000
Notes
Revenue 24,911 21,146 45,252
Operating costs (24,454) (20,708) (44,261)
Operating profit before financing 457 438 991
Finance costs 4 (38) (91) (144)
Profit before tax 419 347 847
Income tax (20) - 620
Profit for the period attributable to equity holders of the 399 347 1,467
parent
Basic earnings per share 5 1.7p 1.4p 6.1p
Diluted earnings per share 5 1.6p 1.4p 5.8p
All the above figures relate to continuing operations.
Consolidated balance sheet unaudited
30.09.07 30.09.06 31.03.07
#000 #000 #000
Property, plant and equipment 8,614 8,859 8,689
Deferred tax 600 - 620
Total non-current assets 9,214 8,859 9,309
Inventories 3,909 3,402 3,507
Trade and other receivables 7,879 7,230 7,916
Cash and cash equivalents 2,662 709 1,986
Total current assets 14,450 11,341 13,409
Total assets 23,664 20,200 22,718
Called up share capital 2,389 2,389 2,389
Share premium account 2,348 2,348 2,348
Reserves 3,999 3,978 3,989
Retained earnings/(deficit) 683 (3,313) (1,544)
Total equity 9,419 5,402 7,182
Obligations under finance leases 15 64 22
Shares classed as financial liabilities - 655 655
Pension scheme deficit 4,379 6,902 6,207
Total non-current liabilities 4,394 7,621 6,884
Trade and other payables 9,196 7,177 8,652
Shares classed as financial liabilities 655 - -
Total current liabilities 9,851 7,177 8,652
Total liabilities 14,245 14,798 15,536
Total equity and liabilities 23,664 20,200 22,718
Consolidated cash flow statement unaudited
6 months to 6 months to 12 months to
30.09.07 30.09.06 31.03.07
#000 #000 #000
Profit before tax 419 347 847
Adjustments for:
Depreciation 304 326 643
Interest expense 38 91 144
Contributions to defined benefit pension scheme - (65) (138)
Charge for share based payments 10 10 21
Profit on sale of tangible fixed assets - - (4)
Operating cash flows before movements in working capital 771 709 1,513
(Increase)/decrease in inventories (402) 103 (2)
Decrease/(increase) in receivables 37 (165) (866)
Increase in payables 540 5 1,451
Cash generated from operations 946 652 2,096
Interest paid (9) (11) (22)
Net cash from operating activities 937 641 2,074
Investing activities
Interest received 4 18 36
Proceeds on disposal of property, plant and equipment - - 7
Purchase of property, plant and equipment (229) (23) (173)
Repayment of loan - 97 112
Net cash (outflow)/inflow from investing activities (225) 92 (18)
Financing activities
Payment of finance lease liabilities (36) (50) (96)
Net cash outflow from financing activities (36) (50) (96)
Net increase in cash and cash equivalents 676 683 1,960
Cash and cash equivalents at beginning of period 1,986 26 26
Cash and cash equivalents at end of period 2,662 709 1,986
Consolidated statement of recognised income and expense
6 months to 6 months to 12 months to
30.09.07 30.09.06 31.03.07
#000 #000 #000
Actuarial gain on defined benefit pension scheme 1,828 - 649
Net expense recognised directly in equity 1,828 - 649
Profit for the period 399 347 1,467
Total recognised income and expense for the period 2,227 347 2,116
Notes to the financial statements
1. Basis of preparation
1.1 The interim financial information has not been audited and does not
constitute statutory accounts within the meaning of Section 240 of the Companies
Act 1985. The Group's statutory accounts for the year ended 31 March 2007,
prepared under United Kingdom Generally Accepted Accounting Principles (UK
GAAP), have been delivered to the Registrar of Companies; the report of the
Auditors on these accounts was unqualified and did not contain a statement under
Section 237 (2) or (3) of the Companies Act 1985.
1.2 Prior to 31 March 2007 the Group prepared its audited financial
statements under UK GAAP. For the year ending 31 March 2008 the Group is
required to prepare its annual consolidated financial statements in accordance
with accounting standards adopted for use in the European Union (International
Financial Reporting Standards (IFRS)).
These interim financial statements have been prepared in accordance with the
accounting policies set out below, taking into account the requirements and
options in IFRS 1 'First-time adoption of International Financial Reporting
Standards'. The Group has not adopted the reporting requirements of
International Accounting Standard (IAS) 34 'Interim Financial Reporting'. The
transition date for the Group's application of IFRS is 1 April 2006 and the
comparative figures for 30 September 2006 and 31 March 2007 have been restated
accordingly. Reconciliations of the income statement (previously the profit and
loss account) and the balance sheet from previously reported UK GAAP to IFRS are
shown in note 6.
The interim financial statements have been prepared on the historic
cost basis, except that derivative financial instruments are stated at their
fair value.
2. Accounting policies
The accounting policies which follow set out those policies which
are expected to apply in preparing the financial statements for the year ending
31 March 2008. These policies have been followed in producing these interim
statements.
2.1 Basis of consolidation
The consolidated financial statements incorporate the financial
statements of Airsprung Furniture Group PLC and its subsidiaries.
The Group has elected not to apply IFRS 3 Business Combinations
retrospectively to business combinations prior to the date of transition.
Accordingly the classification of the combination (acquisition,
reverse acquisition or merger) remains unchanged from that used under UK GAAP.
Assets and liabilities are recognised at date of transition as if they would be
recognised under IFRS, and are measured using their UK GAAP carrying amount
immediately post-acquisition as deemed cost under IFRS, unless IFRS requires
fair value measurement.
2.2 Goodwill
Goodwill representing the excess of the cost of acquisition over
the fair value of the Group's share of the identifiable net assets acquired, is
capitalised and reviewed annually for impairment. Goodwill is carried at cost
less accumulated impairment losses. Negative goodwill is recognised immediately
after acquisition in the income statement.
Goodwill written off to reserves prior to date of transition to
IFRS remains in reserves. There is no reinstatement of goodwill that was
amortised prior to transition to IFRS. Goodwill previously written off to
reserves is not written back to profit or loss on subsequent disposal.
2.3 Provisions
Provisions are recognised when the Group has a present obligation
as a result of a past event, and it is probable that the Group will be required
to settle that obligation. Provisions are measured as the directors' best
estimate of the expenditure required to settle the obligation at the balance
sheet date, and are discounted to present value where the effect is material.
2.4 Revenue recognition
Revenue is measured as the fair value of the consideration received
or receivable and represents amounts receivable for goods and services provided
in the normal course of business, net of discounts, allowances and value added
tax.
Sales of goods are recognised on delivery when the risks and
rewards of ownership pass to the customer.
2.5 Foreign currencies
In preparing the financial statements of the individual companies,
transactions in currencies other than the entity's functional currency (foreign
currencies) are recorded at the rates of exchange prevailing on the dates of the
transactions. At each balance sheet date, monetary assets and liabilities that
are denominated in foreign currencies are retranslated at the rates prevailing
on the balance sheet date.
Exchange differences arising on the settlement of monetary items,
and on the retranslation of monetary items, are included in profit or loss for
the period.
In order to hedge its exposure to certain foreign exchange risks,
the Group enters into forward contracts (see below for details of the Group's
accounting policies in respect of such derivative financial instruments).
2.6 Pension costs
The defined benefit scheme previously operated by the Group closed
to future accrual on 31 May 2006. For this scheme the amounts charged to
operating profit are the current service costs and gains and losses on
settlements and curtailments. They are included as part of staff costs. Past
service costs are recognised immediately in the income statement if the benefits
have vested. If the benefits have not vested immediately, the costs are
recognised over the period until vesting occurs. The interest cost and the
expected return on assets are shown as a net amount of other finance costs or
credits.
Actuarial gains and losses are recognised immediately in the
statement of recognised income and expense.
Defined benefit schemes are funded, with the assets of the scheme
held separately from those of the Group, in separate trustee administered funds.
Pension scheme assets are measured at fair value and liabilities are measured on
an actuarial basis using the projected unit method and discounted at a rate
equivalent to the current rate of return on a high quality corporate bond of
equivalent currency and term to the scheme liabilities. The actuarial valuations
are obtained at least triennially and are updated at each balance sheet date.
The resulting defined benefit asset or liability is presented separately on the
face of the balance sheet.
The Group operates a defined contribution pension scheme for
employees. The assets of the scheme are held separately from those of the Group.
The annual contributions payable are charged to the profit and loss account.
2.7 Taxation
Deferred corporation tax is provided, using the liability method,
on all temporary differences at the balance sheet date between the tax bases of
assets and liabilities and their carrying amounts for financial reporting
purposes. Deferred tax liabilities are recognised in respect of all temporary
differences except where the deferred tax liability arises from the initial
recognition of goodwill in business combinations.
Deferred tax assets are recognised for all deductible temporary
differences, carry forward of unused tax assets and tax losses, to the extent
that they are regarded as recoverable. They are regarded as recoverable where,
on the basis of available evidence, there will be suitable taxable profits
against which the future reversal of the underlying temporary differences can be
deducted. The carrying value of the amount of deferred tax assets is reviewed as
at each balance sheet date and reduced to the extent that it is no longer
probable that sufficient taxable profit will be available to allow all, or part,
of the tax asset to be utilised.
Deferred corporation tax assets and liabilities are measured at the
tax rates that are expected to apply to the year when the asset is realised or
the liability is settled, based on the tax rates (and tax laws) that have been
substantively enacted at the balance sheet date.
The effect of the proposals to phase out industrial buildings
allowances from 1 April 2008 onwards would be to decrease the deferred tax asset
and thus the profit and loss by #300,000
2.8 Property, plant and equipment
Property, plant and equipment are held at cost, net of depreciation
less any provision for impairment. Depreciation is provided by the straight line
method at rates calculated to write off the cost of the assets, other than
freehold land, less their estimated residual value over their expected useful
lives:
Freehold land Nil
Freehold buildings 21/2 % per annum
Plant and vehicles 10% to 20% per annum
Computer equipment 331/3 % per annum
2.9 Impairment of tangible and intangible assets excluding goodwill
At each balance sheet date, the Group reviews the carrying amounts
of its tangible and intangible assets to determine whether there is any
indication that those assets have suffered an impairment loss. If any such
indication exists, the recoverable amount of the asset is estimated in order to
determine the extent of the impairment loss.
The recoverable amount is the higher of fair value less costs to
sell and value in use. In assessing value in use, the estimated future cash
flows are discounted to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of money and the risk
specific to the asset for which the estimates of future cash flows have not been
adjusted.
If the recoverable amount of an asset (or cash-generating unit) is
estimated to be less than its carrying amount, the carrying amount of the asset
(cash-generating unit) is reduced to its recoverable amount. An impairment loss
is recognised as an expense immediately.
Where an impairment loss subsequently reverses, the carrying amount
of the asset (cash-generating unit) is increased to the revised estimate of its
recoverable amount, but so that the increased carrying amount does not exceed
the carrying amount that would have been determined had no impairment loss been
recognised for the asset (cash-generating unit) in prior years. A reversal of an
impairment loss is recognised as income immediately.
2.10 Inventories
Inventories are stated at the lower of cost and net realisable
value. Cost on a first-in, first-out basis comprises direct materials and, where
applicable, direct labour costs and those overheads that have been incurred in
bringing the inventories to their present location and condition. Net realisable
value represents the estimated selling price less all estimated costs of
completion and costs to be incurred in marketing, selling and distribution.
2.11 Trade receivables
Trade receivables are measured subsequent to initial recognition at
amortised cost using the effective interest method, less provision for
impairment. Any change in their value through impairment or reversal of
impairment is recognised in the income statement.
Provision against trade receivables is made when there is objective
evidence that the Group will not be able to collect all amounts due to it in
accordance with the original terms of those receivables. The amount of the write
-down is determined as the difference between the asset's carrying amount and
the present value of estimated future cash flows.
2.12 Leased assets
In accordance with IAS 17, the economic ownership of a leased asset
is transferred to the lessee if the lessee bears substantially all the risks and
rewards related to the ownership of the leased asset. The related asset is
recognised at the time of inception of the lease at the fair value of the leased
asset or, if lower, the present value of the minimum lease payments plus
incidental payments, if any, to be borne by the lessee. A corresponding amount
is recognised as a finance leasing liability.
The interest element of leasing payments represents a constant
proportion of the capital balance outstanding and is charged to the income
statement over the period of the lease.
All other leases are regarded as operating leases and the payments
made under them are charged to the income statement on a straight line basis
over the lease term. Lease incentives are spread over the term of the lease.
2.13 Derivative financial instruments
The Group's activities expose it primarily to the financial risks
of changes in foreign currency exchange rates. The Group uses foreign exchange
forward contracts to hedge this exposure. The Group does not use derivative
financial instruments for speculative purposes.
Changes in the fair value of derivative financial instruments that
are designated and effective as hedges of future cash flows are recognised
directly in equity and the ineffective portion is recognised immediately in the
income statement. Amounts deferred in equity are recognised in the income
statement in the same period in which the hedged item affects net profit or
loss.
Changes in the fair value of derivative financial instruments that
do not qualify for hedge accounting are recognised in the income statement as
they arise.
Hedge accounting is discontinued when the hedging instrument
expires or is sold, terminated, or exercised, or no longer qualifies for hedge
accounting. At that time, any cumulative gain or loss on the hedging instrument
recognised in equity is retained in equity until the forecasted transaction
occurs.
2.14 Share-based payments
The Group has applied the requirements of IFRS 2 'Share-based
Payment'. In accordance with the transitional provisions, IFRS 2 has been
applied to all grants of equity instruments that were unvested at 1 April 2006.
The Group issues equity-settled and cash-settled share-based
payments to certain employees (including directors). Equity-settled share-based
payments are measured at fair value (excluding the effect of non market-based
vesting conditions) at the date of grant. The fair value determined at the grant
date of the equity-settled share-based payments is expensed on a straight-line
basis over the vesting period, based on the Group's estimate of shares that will
eventually vest.
Fair value is measured by use of the Black Scholes model. The
expected life used in the model has been adjusted, based on management's best
estimate, for the effects of non-transferability, exercise restrictions, and
behavioural considerations.
2.15 Segmental reporting
Activities are allocated to one business segment being furniture. A
business segment is a group of assets and operations engaged in providing
products or services that are subject to risks and returns that are different
from those of other business segments. A geographical segment is engaged in
providing products or services within a particular economic environment that is
subject to risks and returns which are different from those segments operating
in other economic environments.
3. Geographical segments
The following table provides an analysis of the Group's revenue by
geographical market, irrespective of the origin of the products:
6 months to 6 months to 12 months to
30.09.07 30.09.06 31.03.07
#000 #000 #000
United Kingdom 24,723 20,868 44,702
Rest of the world 188 278 550
24,911 21,146 45,252
4. Finance costs
6 months to 6 months to 12 months to
30.09.07 30.09.06 31.03.07
#000 #000 #000
Interest receivable 4 18 36
Interest paid (9) (11) (22)
Finance charge on shares classed as financial (33) (33) (66)
liabilities
Interest charge on pension scheme liability - (65) (92)
(38) (91) (144)
5. Earnings per share
The earnings per share are calculated on profit after tax of
#399,000 (2006: #347,000) and the weighted average number of ordinary shares of
23,888,698 (2006: 23,888,698) in issue during the period. The share options in
existence during the six months ended 30 September 2007 have a dilutive effect.
The diluted earnings per share are calculated on earnings of #399,000 (2006:
#347,000) and the weighted average number of ordinary shares in issue adjusted
to assume conversion of all dilutive potential ordinary shares which is
25,448,698 (2006: 25,418,698).
6. Explanation of transition to IFRS
As explained in note 1, these are the Group's first interim
financial statements prepared for part of the first year in which financial
statements will be prepared in accordance with International Financial Reporting
Standards (IFRS).
The accounting policies in note 2 have been applied in preparing these interim
financial statements, and in preparing an opening IFRS balance sheet as at 1
April 2006 (the Group's date of transition).
There are no changes to profit, total assets, total equity or total liabilities
as the result of the transition from UK GAAP to IFRS.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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