Airea’s £9m pain as customers abandon luxury goods

LUXURY carpet manufacturer Airea has become yet another victim of cash strapped Britain as it announced losses of £9m.

The Wakefield-based firm, which was formerly known as Sirdar, said that the six months to December 31 had been one of “difficult trading conditions and considerable uncertainty”.

It added: “Sales declined in the period mainly due to the erosion of consumer confidence as a consequence of growing economic uncertainty.”

Airea said that towards the end of the period there had been a similar, although less pronounced, decline in confidence in the commercial sector as a result of tightening credit facilities.

However, it said that the losses had included “significant provisions” for impairement of property, plant and equipment, surplus inventories, onerous leases and goodwill.

“During the period we have invested heavily in new product development, particularly in the residential sector. By the end of the financial year the vast majority of our product range will have been redesigned and relaunched into the market,” it said.

It added that although there was considerable uncertainty about future market conditions, the commercial market was expected to hold up reasonably well with the residential market “flattening out”.

Airea’s confidence isn’t reflected in sales figures so far however. Like-for-like sales in the early part of this year are around 23% below last year.

The firm has already significantly reduced headcount and warned that numbers are expected to fall further as the year progresses.

A cost reduction programme has resulted in making Airea a much leaner manufacturing operation, which was starting to deliver benefits.

“Following a period of unsatisfactory results, our major priority has been to stabilise the residential carpets business and then return it to profitability,” it said.

“We are encouraged by the positive effects of our cost reduction programme and by consumer reaction to our new product launches and as a result of these major changes we believe that this return to profitability can be achieved in the near future. However we remain realistic about the difficulties we are all experiencing as a result of conditions in the global economy.”

Losses for the period December 31, 2008 were £9m compared to an operating profit of £9.9m for the same period the year before.

However, but the period included exceptional operating costs of £4.1m (2007 £0.3m) and a provision for impairment of goodwill of £4.0m (2007 £nil).

The previous second half included an exceptional profit on sale of property of £9.6m.

Loss per share was 18.99p compared to earnings per share of 10.14p.

As announced in December the board is not intending to pay an interim dividend for the current financial year.

Airea specialises in making high-end products for affluent customers including footballers and rock stars.