Airea (LSE:AIEA) — Interim Results

0:01 Good morning, ladies and gentlemen, and welcome to the AIREA PLC investor presentation. Questions are encouraged. They can be submitted at any time via the q and a tab that's just situated on the right hand corner of your screen. Please just simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company can review all questions submitted today and will publish your responses where it's appropriate to do so on the Investor Meet company platform. Before we begin, we would just like to submit the following poll. And if you could give that your kind attention, I'm sure the company would be most grateful. I would now like to hand you over to the executive management team at Medric. Good morning, sir. Good morning. Good morning to everybody. And many thanks for joining the AIREA PLC interim results for the presentation for the last six months ended to the 06/30/2026.

0:49 So by way of introduction, my name is Medric Payne. I'm the chief executive of AIREA PLC, and I joined the business back in August 22 where I've held a number of international results, overlooked roles before with Landmark Group, AlphaTeyn Group, and Kingfisher PLC. And I'm also joined here today by Connors Campbell, our CFO, who will say a few words. Thank you, Metric. And again, many thanks for for joining us this morning. I joined the business in October 2023, actually three years almost to the day. I have more than twenty five years experience in public company environments. Prior to joining AIREA, I was the group financial controller at the Genuine Group PLC, the FTSE two fifty listed business. And prior to that, I had a number of senior positions, including international PLC, including a number of years of head of investor relations.

1:38 So thank you, and I will now hand you back to Medrick who will introduce the business. Thank you, Jonathan. So if we can do a few introductions about AIREA PLC, which was listed on AIMS in 2007. We are, in fact, a UK design led specialist flooring company supplying UK and international markets in the b to b sectors. We design and manufacture very innovative commercial flooring coverings through the brand of Bermitex here in Hossett, which is located in West Yorkshire. The development of our eco friendly products, which were introduced in 2023, is basically our effort to make sure that we have sustainably led principles which align with our commercial offering under the brand of EcoMatters, which you will see in a number of places.

2:27 This is a very important part of our our strategy going forward. This allows us to provide sustainable flooring solutions for architects, specifiers, and contractors who today are demanding not only great solutions in terms of design, but also products that meet the needs with a sustainability angle, which we have to comply to. In order to do such progress, we have placed a major investment into our manufacturing technology throughout the business, but primarily in part of our production line. This has allowed us to improve our operational capacity and basis... Create a basis for our growth into the future. The key markets that AIREA serve through BERMATEX are focused on a number of areas, but primarily in commercial offices, both in The UK and internationally.

3:16 We have also a major legacy in the education sector through schools, universities, libraries, and academic colleges, and also into student accommodation, particularly as they look for budget carpet tiles. This is also true of areas such as hospitality, but also in other areas such as leisure and retail. We also serve across the country and internationally. We do have at AIREA PLC an experienced board of directors. Obviously, you've met both myself and Colas, but I'd like to just cover that we have a chairman with Martin Tugood, who's an experienced commercial director, having held a number of positions with B and Q and also with Carpet Right. And we also have Tanya Ashton, who is our lead, as a nonexecutive director who currently works as head of sustainability for Boots and also works as a as a direct... Nonexecutive director for EP Evans, and that brings, obviously, wealth to our board.

4:10 So I've been covering off the key highlights for the H1 of our current trading year. The first six months, we saw a strong first half performance in sales growth of 10.2% in total sales. This resulted in an increase in our profit, our operating profit to 500,000 from last year's figure. Our earnings per share increased to 57p, and our major investment in the manufacturing facility is now fully operational. Our strong recovery continues in our international markets, primarily, obviously, in The Middle East and also with the Eastern European market as we see demand grow. And finally, our enhancements of our carbon neutral range continues, where we're seeing a wider portfolio of products coming to market and have been very successful in that impact under the EcoMatters banner.

5:03 So I'm going talk a little bit about the business transformation, but just to set some context for those of you who might not realize what we've actually done and achieved. Well, we've invested £6,800,000 into a major review and capacity of our actual current systems, which needed to be invested and brought up to more modern efficiencies. This has now allowed us to change the capacity and ability of the business to meet demand as we go forward. And I'll just cover off some of those points now. So the major investment actually here in OSET has led us to increase our capacity and particularly enhance our quality capabilities, which is very important. And this goes from everything from traceability and our carpet tiles right through to embracing cutting edge artificial intelligence in the imagery in order to improve inspection.

5:57 This technology is really at the cutting edge and I think actually places us amongst the best in class, certainly in The UK and if not worldwide. Our energy is also being really looked at. This new process and new manufacturing facility allows us to relook at our energy, and that's also aligned with our group sustainability objectives in terms of how we utilize renewable energy and less energy to be able to manufacture. The new system also will allow us to respond to customer demand, allowing us to be more flexible and allowing us to reduce our lead times to the market with our products, which will also change our stock figure. We will be expanding into new markets as well, utilizing this technology and a capability to also promote not only the new sustainable products, but also do further innovative product ranges.

6:50 We're about to now enter a period of operational improvement. Obviously, the machines are just going fully live, and we are now transferring over the teams and doing lots of training. As we provide going forward this opportunity and platform, expect to see an enhanced shareholder returns as a result of this major investment. So here at AIREA, we are building a platform for future growth. This also is very important for our people. We are currently training and upskilling our people to this new high-tech in in lots of areas, even down to the packaging. So it's not just the products. It's in many areas as we embrace this technology. This will also allow us to actually capitalize on innovation. We continue, obviously, as I mentioned before, with sustainability, which is core to the way we do business. And to give you an example, we were recently...

7:41 We launched back in May at London at the design. Our first... We were the first to actually go to market with EcoBalance, which is a 100% biogenic recycled yarn based on commercial food waste. And that gives an invitation... An an indication of just how much innovation we are pushing to disrupt the market as a challenger, which is in line with our strategy. We also do things like to actually public publicize our environmental product declarations. We were the first to really do this in detail. This has also created disruption in the market and demonstrates our confidence and our ability to show that we are fully committed to sustainability products. We've also built on our parallel service from the past, our legacy and reputation in the market of being very good on service with our commitment to forty eight hours for normal size orders and have a high level of service which is recognized and continues to be a strength of ours.

8:40 We've expanded on new channels of b two b and distribution networks. This is an area of importance and growth as we look to do more and more own brand or white box to increase the volume and which will also help to make sure that our capacity that we've now increased is being taken up, and that is an exciting opportunity for us. And finally, we continue as a team, both the sales team and the factory, to work to... Work closer together in delivering the group's strategic intent based on the following three pillars of growing the business in all our markets, renewing with our past strengths, and making sure that we are best in class to produce and, obviously, evolve with technology and other sustainability opportunities that we see within our carpet tile sector. So on that note, I'd like to now pass you over to Conif, who will cover off the financial overview.

9:28 Thank you, Mitrak. So with the financial highlights for the first six months of the year, for us, a very pleasing set of results and continues the progress that we've been experiencing over the course of the last couple of years as we've been building this platform for growth. Group revenue at GBP 10,800,000, up 10.2% on last year, which has led to an increase in our operating profit to GBP 500,000 and also our profit before tax up to GBP 200,000, where the prior year, you can see, with a small loss of about GBP 40,000. EBITDA, an increase to 900,000 and delivering net cash position of 0.4, which we're very pleased with considering the level of investment that has gone into the facility over the course of the last few years, not just the 6.8 that metric has referred to, but there has been other areas of improvement.

10:18 And the pension deficit, huge progress in the last twelve months from 4,500,000 to 2,500,000. And that... That's twofold. One, clearly, business has been contributing into the scheme, but also we've we've continued to to thoroughly review the investments that we have within the scheme, and we made several changes over the course of the last twelve months. So we now have investments that are certainly generating a better return. So we're very pleased with this this the progress that we've made here and it's aligned with the recovery plan that we agreed with the pension regulator and the trustees of the scheme back in 2024. So again, strong first half performance, 10.2% growth. UK and Republic Of Ireland, 10.2% ahead.

11:10 And with a strong recovery in our international markets, an increase of 9.9%, And and that includes The Middle East where where we have our Dubai office and showroom, which operates as a strategic hub for the GCC and beyond, in... Including India, and and we'll see some opportunities now in the free trade agreement has been signed back in July. And just a reminder that the the Dubai office is... It's a low cost operation. In relation to volume, the first six months of the year saw a 7.4% increase in volume. So it's not all price driven product mix, but also 7.4% improvement in volumes. Our operating profit increased despite the loss of the other operating income last year. So the older operating income related to rental income we received from an investment property that we held in Greater Manchester, and we divested that property in October 2025.

12:07 And we have a cessation of our nonrecurring costs as the major manufacturing investment is now fully operational, so we were incurring costs as we continued the installation of that facility. So if we move on to the cash flow. So net capital expenditure, 1,100,000 this year compared to 2,500,000 in the previous year and that we expected that reduction. The manufacturing facility was nearing completion. And bearing in mind, these results are as at June 30. We have incurred some additional expenditures through the course of third quarter as part of our commissioning process. Prior working capital was positively impacted by capital expenditure deposits that we had with some of the key manufacturing the suppliers to the new manufacturing facility.

12:57 As I alluded to earlier, we continue to make contributions to the pension scheme, which again is aligned with the recovery plan and the monthly contributions of 62,005 commenced in August 2025. Our full year dividend for the year 2025 increased to 1p, wherein the previous full year, it was not 0.6p. And we have a significantly lower dependency on the supply chain finance that we took out with our bankers back last year in order to fund the investment in the new manufacturing facility. And the final slide for me, the financing position. As you can see, we do have a net cash position of GBP 400,000, beginning with cash and cash equivalents of GBP 700,000.

13:46 Supply chain finance, as you can see, is a million pound lower than the previous year. We have lease liabilities of 0.3, and those lease liabilities will cease in June 2027. And as you can see in the bullet point there, all of our banking facilities were renewed in January 2026, which included the short term funding in Florida trade finance facility to the value of 3,200,000. We will certainly not utilize that. As you can see, it's very, very low compared to the previous year. And we have the uncommitted overdraft facility of £1,000,000. What I would like to say at this stage is over the course of the last couple of years, whilst we've been investing in the facility, we also have taken measures to strengthen our balance sheet. And I think the business is a much healthier balance sheet now.

14:37 And it will it positions us a lot better. As we said, we've been building a platform for growth and it puts us in a much better position to take advantage of opportunities as and when they arise in the market. And that is the final slide for me, and I will now hand back to Mitric. Thank you, Thomas. So in summary, our major manufacturing investment is now fully operational as we move into quarter four and scaling up our production over the coming months to be able to meet our increasing demand. We continue to focus on innovation and product development, which has been underpinning our success over the last few years as we move into a variety of products in following years to come. Sustainability will always remain at the forefront of what we do under the BOOTEX banner, and we will capitalize on the successes and the innovations that we brought to the market so far.

15:30 We have a strong position in The UK and return on The Republic Of Ireland, and we do believe that the growth opportunities internationally will help us to meet some of the volume that we wish to be able to produce as we see also The Middle East bouncing back. I'm also glad to announce that next year will be Vertex's sixtieth anniversary, and I'm pretty sure the team here, as one team, will celebrate enormously next year and make some commercial opportunity to push the brand further given the number of years we've now been serving serving The UK market. We enter now a period of operational improvement to make sure that the investment lands correctly that we get the most out of our manufacturing facility, which we believe leaves us well positioned to deliver sustainable, profitable growth for the future.

16:18 Thank you for listening to our presentation. I believe now we'll go over to the questions. Perfect. Medrick, Conliffe, thank you very much indeed for your presentation this morning. Ladies and gentlemen, please do continue to submit your questions just by using the q and a tab that's situated on the right hand corner of your screen. But just while the team take a few moments to review those questions that have been submitted already, just like to remind you that a recording of this presentation along with a copy of the slides and the published q and a can all be accessed via your investor dashboards. Guys, as you can see there, we have received a number of questions, and thank you to all of those on the call for taking the time to submit their questions. But Medrick, Conniff, at this point, if I may just hand back to you to make your way through the questions to address those where appropriate. And if I pick up from you at the end, that'd be great. Thank you. Yes, of course. Thank you very much, Jake. So the first question that's come in is the average EPS for the last five years is 2p. Turnover is below the level it was ten years ago.

17:11 What do you need to change to make this into a business that can grow shareholder returns? Yes. The the average EPS for the last two years has indeed been been 2p. If you go back to 2026, the business is is very different today to what it was back then. 2016 included almost £8,000,000 of revenue from a business called Ryallux Carpets, which is part of the group. And Ryalux Ryalux, sorry, operated in the residential carpets market, which are fiercely competitive market as you will know. The business was loss making and the decision was taken by previous management in early twenty eighteen to to close that business. So we more than made up for that shortfall.

17:56 And if if you look at turnover growth, if we go back to 2019, which most businesses refer to as probably the last proper reference year, the business has grown by about 10% top line. And as it exited COVID in 2021, we have added 34% to revenue. The first six months of this year, we're very encouraged by the 10.2% growth. So look, in summary, the growth is starting to come through. And with the new manufacturing facility that Metric has spoken about, we do see further opportunities to grow that business. Okay. If I go to the second one, it's probably one for you, Metric. What drove the sales recovery and how much of the growth was volume rather than price?

18:42 So I'm pleased to announce that underneath the sales growth, we saw a increase in volume of about 7.4%, which underlines that we are actually taking market share and and taking more and more product to market. And I think the strength comes from a number of our new lines that we launched, particularly 2324, and we're seeing the impact on the market. So a healthy healthy performance, and that is across all areas of the country as well as international, which also we saw a growth of 9.9%. So a a good overall growth on solid commercial offering. Thank you. Next question. How much further scope is there to improve margins through efficiency versus relying on higher value products?

19:31 Good question. So the the margin is improving, and that's twofold. That's one through good solid cost management, but also a product mix. Look. If you look at pre pre COVID, we were at 12% margin. You know, we would love to return to that, but it all depend on on the on the mix. Mendrick talked earlier about looking at architects and specifiers, which would be at the more premium end of the market, but he also talked about white box and and own label, which is volume. So the the the fixed cost business in this business, we don't we don't expect a significantly increase, so it's it's it's all about volume, but we do expect to stretch the margin. And with the new manufacturing facility, that that would certainly help. Next question.

20:18 After the previous delays, is the new facility genuinely fully operational, and what does scaling up now involve? So, Nick, it's it's probably one for yourself to take that. So, yes, we've had a couple of technical delays, but this is all around the fact that we actually did a bit of scope creep. We discovered that with AI, there was far more to what we first understood. This is also a development that we did with a local British startup. It's taken us a little bit more time to get that perfected. Plus, we've also had a number of commissioning requirements around the facility, particularly on health and safety and making sure that the plant is absolutely perfect. And the other thing is we didn't really wanna go live right in the middle of our busiest period in in summer as a result of that. So we've actually ended up putting into a q three operational stance.

21:07 And we are now ready to go and looking to now transition over smoothly as we also decommission the old machine make some improvements around that as as we pull machines out of the old part. So ready to go. Thank you. Next question. What should we consider normalized level of annual maintenance CapEx once the new facility is fully operational? If we look at this business, certainly for the last four years, by the end of this year, and all of this is in the public domain, the CapEx spend will be close to GBP 10,000,000. So this is after a number of years of underinvestment in the facility, and the previous six years with one or two exceptions were about $3.03 50,000 per annum.

21:54 Normalized capital level, certainly nowhere near what we've been doing over the course of the last four years, and would see normalized certainly just shy shy of a million pound. Our presentation, we have mentioned operational improvement, we will continue to invest and further automate the business. But you will not see we after this year, I've said we're coming out of a period of high capital investments, so we will tail off. And another question, how scalable is the international distribution model? And does the new manufacturing capacity unlock international opportunities that were previously constrained by capacity or economics? You won both yourself. So I think what we've tried to do, first of all, is establish that we are in the market for The UK distribution too.

22:45 As we now move internationally, we do actually have interest. In fact, notably, we're very happy to report that we've had our first inquiries and and business transactions with India for the three... Free trade agreements, which is why... Rather interesting. Obviously, there are big markets out there where we intend to present a British made product through the carpet tile industry. There are markets such as North America, which we're currently not looking at for reasons that the carpet tiles are slightly different sizes to what we actually manufacture in Europe. But certainly in The Middle East, we are seeing demand and are currently talking to distributors. That will help us with our capacity and being able to fulfill orders of a con... Considerable size that previously we would have struggled to as well as making sure that our technology for quality is absolutely brilliant given that Burmitex is a British brand, and we rely on that high standard to be able to promote internationally.

23:43 Thank you. Just a couple more questions. One about the pension. The pension deficit is lower, but how long will the monthly contributions continue? So I mentioned earlier in the presentation, we have agreed a recovery plan with the pensions regulator, the average recovery plan with the TPR tends to be about six years. So we are two years in. We did have two lump sum payments in July 2024 of £300,000 July 2025 of £300,000 and then each month £62,500 and we're on course. It looks like the final question, probably one for yourself, Metric, how is the Dubai showroom performing, and has the Middle East conflict affected operations?

24:30 K. So first of all, as we briefly mentioned before, I think, Connolly, you mentioned that Dubai is where we're located, but in fact, it serves as a showroom for the whole GCC, so the MENA region into India and even markets such as South Africa and Australia. Yes. There were a couple of months where, unfortunately, for everybody, Dubai and The GCC, particularly my... Markets like Kuwait, was difficult to deliver to even though we had orders simply because we couldn't obviously unload products. What we have seen, and and I can vouch this having been recently to Middle East, that we're seeing a bounce back with a number of our customers now wanting to catch up as many projects were delayed but we're coming back online. So we're seeing a a rough of activity coming back to The Middle East. We stay very present through the showroom, so many of the local partners are delighted with us. And we obviously see partners coming in from India to use the Dubai showroom as our platform. So we are delighted so far and see that the reach is working.

25:28 And, obviously, this is our only and and first investment into premises outside of Yorkshire, and we do believe that The Middle East will give us a a very interesting opportunity throughout. Thank you. Okay. I think that's the end of questions. Absolutely, guys. If I may just jump back in there. Thank you very much indeed for addressing all of those questions that came in this morning. And, of course, if there are any further questions that do come through, we'll make these available to you immediately after the presentation has ended just for you to review. But, Metric, perhaps before really now, just looking to redirect those on the call to provide you with their feedback, which I know is particularly important to yourself and the company. If I could please just ask you for a few closing comments just to wrap up with, that would be great. Yes. Thank you, Jane. So first of all, thank you all of us, all of you for today and for listening to our presentation.

26:15 These are actually exciting times for the business, particularly as we promote the Bimitex brand and that we've seen the transformation coming into place and our customers feel that. We are also very excited about next year, which hopefully will be a chance to celebrate what's been achieved over the last three years as we promote the Bematex anniversary and actually promote the brand to our customers even more, particularly with some of our big legacy products like Tivity range. The other part of this policy is we'll be able to operate next year under our new manufacturing facility. That is exciting for the business. There are not many companies that are investing to this level in our sector, and we believe we're in a great position to further enhance our ability, obviously, to create a platform for further profitable growth. So thank you very much, and we look forward to updating you on our progress over the next twelve months. Thank you.

27:08 Perfect. That's great. Medrick, Connelly, thank you once again for updating investors this morning. Could I please ask investors not to close this session as you will now be automatically redirected for the opportunity to provide your feedback in order that the management team can really better understand your views and expectations. This will only take a few moments to complete, but I'm sure it'll be greatly valued by the company. On behalf of the management team, we'd like to thank you for attending today's presentation. That now concludes today's session. So good afternoon to you all.