financial news

AIRSPRUNG GROUP PLC
Preliminary Results for the year ended 31 March 2010
Chairman’s Statement

Results and dividend

Airsprung Group sales for the year rose to £46.5 million, a 9% increase on the prior year.  Profit on ordinary activities before tax was £978,000, a strong recovery after last year’s loss of £417,000 and representing a favourable swing of £1.4 million.  The cash position remained positive with a balance of £2.4 million at the year end. 

The directors are pleased to recommend an increased dividend of 0.6p (0.5p) per ordinary share, which will be payable on 13 October 2010 to shareholders on the register at 24 September 2010.

Unfavourable movements in AA rated corporate bond yields resulted in an increased pension deficit of £3.7 million at the year end. The directors recognise that such changes are an inevitable consequence of volatile financial markets.

Sector performance

The board considers that the Group operates in two business sectors, beds and other activities, and this year’s accounts show the performance of each sector.

Beds

In the beds sector, the Group operates in several product markets.  Airsprung Beds mainly supplies major catalogue, multiple and internet retailers with price-competitive ranges of beds and mattresses.  Gainsborough has developed a significant sofa bed business in the department store and independent retailer markets, in addition to its range of deluxe pocket-sprung beds.  Hush and the recent Hush-a-Bye acquisition are building a position in the mid-price range, mainly with independent and family-owned businesses. 

In the year under review, the Group’s bed businesses, all based on freehold sites in Trowbridge, Wiltshire, generated revenues of £38.0 million and profits before tax of £1.5 million.  Airsprung Beds was the major driver of this improvement.  Sales at Airsprung Beds were little changed from the previous year in a challenging marketplace, but it achieved significant reductions in direct and indirect costs, while maintaining its cost ratios on raw materials.  The Gainsborough and Hush businesses achieved increased sales in a difficult market, but at lower gross margins. 

Other activities

The Group has three business activities outside the bed sector.  These are Cavendish Upholstery, Airofreem and Arena.

 Cavendish Upholstery manufactures and distributes upholstered furniture from a freehold site in Chorley in Lancashire.  Cavendish has had a difficult three years, as several of its traditional customers have ceased trading, and the business has therefore lacked critical mass.  Consequently, the management made a decision to change the business model in two respects.  First, it decided to supply a major multiple retail group and, second, it entered into two low-cost partnerships to increase its breadth of offering for its traditional customers.  The result has been substantial sales growth, with increased revenues of well over 50%, and a 70% reduction in losses over the previous year. 

Airofreem supplies internal and external customers with cut foam components.  Despite rising costs for petrochemically derived materials, it increased its net margins during the year as a result of greater operational efficiencies. 

The Group’s graphic design business Arena also serves external as well as internal customers. Arena had a good year and is developing increasing strength in web design.  I would like to congratulate its staff on being the 2009 awards winner in Interiors Monthly for the Best Furniture Website, a project carried out for Airsprung Beds.

Sales for these three businesses, which are recorded under Other activities, rose to £8.4 million, yielding profits before tax of £0.4 million. 

Central charges

Certain Airsprung Group costs, including holding company and pension charges, are not debited to the Group's trading businesses, but are accounted for centrally.  In the year under review, the net central charges were £0.9 million. 

Appreciation

I wish to thank the employees and management of all the Group’s businesses for their continued efforts and loyalty, which have contributed to these results, and not least our CEO Tony Lisanti and our finance director Tean Dallaway.  I am also grateful to my non-executive colleagues John Newman and Stephen Yates for their constructive advice and support in our board and committee meetings.

Strategy

The directors believe that the future for companies such as the Airsprung Group will be enhanced if they develop critical mass with the potential for increased efficiencies and market penetration.  Expansion can be achieved either by acquisition or partnership arrangements, witness the smaller initiatives made by Cavendish last year, or by licensing programmes, as in the USA, or by merger.  During the year, the Group has held exploratory discussions with various parties with such development in mind.  We hope to be able to report further progress on these fronts during the second half year.

Outlook

During the early part of calendar year 2010, many of our customers experienced a slowdown in trading activity.  Sales in the normally buoyant January period were adversely affected by extensive snow throughout the UK.  Many retailers were left with high end-of-season stocks and were unable to re-order at the normal levels for Spring business.  Economic uncertainty prior to the general election campaign further dampened consumer enthusiasm. 

The result of these factors has been that trading in the first quarter of the Group’s current financial year commencing 1 April 2010 has been weaker than expected.  Revenues for the first two months are down on last year and it is likely that profits for the first six months will fall modestly below the level of 2009.  With regard to the second half year, the new Chancellor’s budget statement has now been delivered, but its impacts on consumer spending are not yet clear.  Although VAT is set to rise, it will remain at 17.5% for the first three-quarters of the current financial year, giving retailers and suppliers time to adjust and plan.  Nevertheless, the directors recognise that economic conditions may be challenging for some time.

The board believes the Airsprung Group is well positioned in the marketplace but that vigorous steps will continue to be necessary to secure a satisfactory platform for future progress.  Our management teams are continuing to look for operational and buying efficiencies, and to develop the strategic and market opportunities for the Group and its products.  We are encouraged that, despite the difficult environment, we are continuing to secure new tranches of business and that our expansion plans generally are taking good shape.

Stuart Lyons CBE
Chairman
29 June 2010