Production consolidation boosts Airea
Ryalux, Pownall and Burmatex owner Airea has seen operating profits jump after it was able to cut costs after reducing the number of its sites.
The group said operating profits rose by 86% to £2m and EBITDA before exceptional items climbed by 48% to £2.8 in the year to 30 June. It is increasing its dividend by 67% to 1.5p.
Turnover fell from £25.5m to £24.6m as the strength of sterling hit sales to continental Europe.
Consolidating production to two sites in Ossett and Wakefield – four years ago it operated from six sites – ‘not only delivers considerable cost savings, but enhances our operational capability, reducing lead times and thereby improving customer service,’ says Martin Toogood, Airea chairman.
The move cost £1.27m but was offset by a £1.3m pension credit after it completed a Pension Increase Exchange, which allowed pensioners to opt for an income stream more aligned to their personal circumstances and preferences, while at the same time reducing the cost of past service benefits to the scheme. The group’s pension deficit was cut from £7.4m to £6.7m.
‘After a number of years of strengthening sterling, we are now enjoying a more competitive exchange rate, which offers potential opportunities to restore growth in our export business, and improve our competitive position against international competition in the home market. Marginal pricing is however common in many of the markets we serve and it is highly unlikely that our competition will change pricing habits completely despite the additional pressure from currency. Of most concern is the threat of depressed market activity within the construction sector generally which has the potential to overwhelm any price and cost advantages we may enjoy,’ says Toogood.
‘As ever our plans do not assume any help from the market and whilst the board notes the uncertainty arising from the political and economic changes currently taking place, our focus is on exploiting the expanding opportunities that arise from the repositioning of the business over recent years.
‘The site consolidation is now almost complete although we are reviewing our position concerning one of our remaining lease properties, and is delivering cost savings and operational improvements significantly ahead of expectations. New strategic investment in manufacturing technology provides the spring board for extending the product range to new market sectors, and this combined with a lower cost base gives us real cause for optimism for dealing with growing economic uncertainty.’