Airea : Year Ended December 2022

ANNUAL REPORT & ACCOUNTS 2022

2AIREAAIREAplc Annualplc AnnualReportReport& Accounts& Accounts2022 2022

Contents

Introduction
About Us	01
Strategic Report
Chairman's Statement	02
Chief Executive Officer's Statement	03
Chief Financial Officer's Review	04
Corporate Governance
Board of Directors	07
Directors' Report	08
Financial Statements
Independent Auditor's Report to the Members of AIREA plc	11
Consolidated Income Statement	15
Consolidated Statement of Comprehensive Income	15
Consolidated Balance Sheet	16
Consolidated Statement of Cash Flows	17
Consolidated Statement of Changes in Equity	18
Notes to the Financial Statements of the Group	19
Company Balance Sheet	43
Company Statement of Changes in Equity	44
Notes to the Financial Statements of the Company	45
Notice of Annual General Meeting	56
Explanatory Notes to the Notice of Annual General Meeting	57
Administrative Notes to the Notice of Annual General Meeting	58

Professional Advisers

Auditor	Solicitors
Crowe U.K. LLP	Squire Patton Boggs
Black Country House,	6 Wellington Place,
Rounds Green Road,	Leeds, LS1 4AP
Oldbury, B69 2DG
	Registrars
Bankers	Link Asset Services
HSBC Bank plc	Northern House,
HSBC House,	Woodsome Park,
1 Bond Court,	Huddersfield, HD8 0LA
Leeds, LS1 2JZ
Nominated advisers
and stockbrokers
Singer Capital Markets
1 Bartholomew Lane,
London, EC2N 2AX

Registered Office

Victoria Mills, The Green,

Ossett, West Yorkshire, WF5 0AN

Registered in England no. 00526657

www.aireaplc.co.uk

AIREA plc Annual Report & Accounts 2022

01

About Us

AIREA plc is a UK design-led specialist flooring company listed on the AIM market of the London Stock Exchange, supplying both UK and international markets. Since 2007, the Group has been focused solely on floor coverings and enjoys a strong and growing brand position within the commercial flooring market.

OUR VALUES

Principles: The Group is committed to success with integrity by building and strengthening its reputation through earning our stakeholders' trust. We commit to the principles of being honest, transparent and accountable for the impact that it has.

Agility: The Group strives for continuous improvement, prioritising what matters and making considered decisions in an efficient and timely manner. There is a constant pursuit of innovation and an innate emphasis to connect new ideas with business realities.

Collaboration: The Group wishes colleagues and stakeholders to understand our origins, current position, and future focus and will work together with purpose and pace to achieve

the key objectives. Through empowerment, mentorship and encouragement, these goals will be a tangible reality.

Excellence: The Group is passionate about its people, its products and continually improving the quality and service delivered to its customers. The ambition is to continuously develop ourselves and help each other to do the same. The Group seeks to maximise the potential of our people through their talent, passion and hard work.

OUR BRANDS

AIREA's core brand Burmatex® is one of the UK's leading designers and manufacturers of commercial carpet tiles and planks.

Burmatex® focuses on the design and creation of sustainable innovative flooring solutions to meet the needs of architects, specifiers and contractors with a continuously developing range to suit the education, leisure, commercial, hospitality and public sectors.

The brand was acquired by AIREA in 1984.

OUR GROWTH

We have an established brand in a stable marketplace with high barriers to entry, and our in-house manufacture, low-cost base and service proposition provide opportunities for growth.

Financial Summary

Group revenue

£18.5m +16.5%

(2021: £15.9m)

Operating profit before valuation gain

£1.7m +25.8%

(2021: £1.3m)

Profit before tax

£1.4m +11.0%

(2021: £1.3m)

Cash and cash equivalents

£5.8m +1.3%

(2021: £5.7m)

Net cash

£2.8m +53.0%

(2021:£1.9m)

Strategic Report

Corporate Governance

Financial Statements

02 AIREA plc Annual Report & Accounts 2022

Strategic Report - Chairman's Statement

Overview

The Group is pleased to report the continued progress from the impacts of the COVID-19 pandemic, where there has been a recovery in demand both in our home and export markets. We do, however, have some key markets that continue to be negatively impacted by the ongoing conflict in Ukraine.

Our continued efforts to enhance our operational and supply chain processes have helped manage the impact of the unprecedented increases in the prices of raw materials, energy and availability of labour. Where possible, increased costs have been mitigated through cost-saving initiatives, consumption reduction actions or increased onward pricing.

The Group continues to maintain its cash reserves and strong balance sheet position to enable us to invest in the future of the business and manage the impact of the continued economic uncertainty and related risks.

"We are optimistic that the Group has been able to minimise our cost pressures and inflationary headwinds in 2022 to ensure margins and profitability are maintained."

PLACEHOLDER

Results

AIREA has delivered good revenue growth in the year following the recovery from the COVID-19 pandemic. Underlying volumes remain below pre-pandemic levels with price increases and sales mix being the major contributory factors of the 16.5% revenue growth. The Group's operating profit margins have been maintained despite the increases in raw materials, labour and energy costs.

Dividends

The Group has been cash generative in the period and plans to continue to invest in the future of the business. We also believe in rewarding our loyal shareholder base and therefore propose a final dividend of £0.2m or 0.5p per share for FY22, also representing the total dividend for the year as no interim dividend was paid (2021: £0.2m or 0.4p per share). The final dividend will be paid on 18th May 2023 to shareholders on the register on 21st April 2023. This proposal is subject to shareholder approval at the Group's Annual General Meeting to be held on 10th May 2023.

Environmental, Social and Governance (ESG) ESG is fundamental to the continued commercial success of AIREA, as evidenced in our values, our actions and our products. We have made excellent progress in 2022 through the launch of our sustainability principles,

• which have been laid
  out to highlight our ongoing commitment in anchoring our business to a sustainable ethos. The Group's focus is, and will continue to be, the promotion of trade responsibility and the active pursuit of achieving a Net Zero business.

We have begun work on the installation of solar panels on the roof of our factory and warehouse as the implementation of this investment is believed to help protect us against energy price volatility, whilst contributing to our sustainable goals.

Our Board

The Board appointed Médéric Payne as Chief Executive Officer and as a member of the Board of Directors on 25th August 2022. Médéric brings his extensive leadership, commercial, supply chain and marketing expertise to the role with a passion for developing people.

The Board's composition continues to evolve based on the required level of skills and experience alongside ensuring the business operates efficiently and is able to react quickly to any issues that may arise.

Our People

We recognise the hard work and dedication of our staff throughout the year and sincerely thank them for the continued contribution they make towards the future of AIREA.

The employee share scheme that was launched in 2019 has lapsed, with none of the 2.8 million shares being held in the employee benefit trust ("EBT") vesting. The scheme has been re-launched to a wider employee pool as the Board recognises the need to retain and reward members of staff for long-term performance. The scheme incentivises employees through nil cost share awards. Awards will vest with beneficiaries over a three-year period ending 31st December 2025 after the achievement of the Group and individual performance conditions.

Outlook

The development of our product ranges is exciting with the launches of new sustainable products and the refresh of existing products with a drive towards sustainability whilst refreshing the colour and design including as appropriate switching to a better more sustainable yarn.

We launched our first carbon neutral range arctic, which has been well received in the market and thus fulfilling the demands of our existing customers.

Even though the Ukrainian conflict has adversely impacted some of our key export markets, the Group has been able to recover in both our UK and export market, along with identifying further export growth opportunities.

We are pleased that cost pressures are beginning to ease and stabilise, however, it should be noted that the cost increases experienced during 2022 will be felt in 2023. In managing these cost pressures, we have taken mitigating actions including the installation of solar panels, increased onward pricing and a continued focus on waste reduction.

Summary

We are optimistic that the Group has been able to minimise our cost pressures and inflationary headwinds in 2022 to ensure margins and profitability are maintained. The Group made significant progress in our ESG ambitions through creating a point of distinction and competitive advantage through the launch of

ourprinciple as this will be the foundation to help drive AIREA shareholder growth for FY23 and beyond.

MARTIN TOOGOOD

INDEPENDENT NON-EXECUTIVE CHAIRMAN 4th April 2023

AIREA plc Annual Report & Accounts 2022

03

Strategic Report - Chief Executive Officer's Statement

Introduction

2022 for AIREA started off with the sad passing of Neil Rylance, former Chief Executive Officer, in March 2022. Whilst the situation may have caused some initial uncertainty, a recruitment process was put in place and I feel privileged to have taken the role in August 2022 to continue the legacy that Neil achieved.

AIREA has faced many price pressures throughout the year, not least the increase in energy prices which triggered a focused response in trying to address the opportunities available in reducing energy usage across our business. We have made progress towards improving our energy efficiency and the Group is looking to explore alternative methods to improve that further. I am confident that the team will rise to those challenges.

The increasing cost pressures have resulted in us passing on some price increases to customers. However, we have sought to do this in keeping with our value of principles in being honest, transparent and providing notice as early as possible of forthcoming price changes.

As noted in the Chairman's statement, demand is beginning to recover to pre-pandemic levels, with further opportunities in our export markets which we have identified as being key areas

of growth.

Products and Planet

Our product offering continues to develop with sustainability, design and quality being key to our success, we have developed our first Carbon neutral range arctic which launched at the beginning of 2023, with more yet to come.

Oursustainability principles were launched as we focus on improving all aspects of the way we impact the environment and society.

Our efforts in this area have been well received in the market, particularly by the specifier and architect communities.

People

2022 saw the launch of our new values across the organisation as part of our transformation project of putting our people at the heart of our business, empowering, encouraging and inspiring them to deliver the products to our customers whilst contributing to protecting our planet. These are the fundamentals for us to succeed as a team, driving sustainable shareholder value.

Summary and Outlook

The results for FY22 have shown AIREA is able to continuously provide a high standard of service to our customers, even in the face of economic challenges. As referred to in the Chairman's statement, we have maintained our margins and stable balance sheet.

The Group has a number of opportunities that we are looking to explore, notably on products that are commercially more sustainable, a more customer-orientated business, new markets and appropriate investment to improve manufacturing capabilities.

We are confident in our commitment to our ESG strategy which will deliver shareholder returns in due course. With our focused strategy, we are building a strong platform for growth within the commercial flooring market and will leverage the value of the Burmatex® brand.

Finally, we would like to thank everyone associated with the AIREA Group for their support during the period.

MÉDÉRIC PAYNE

CHIEF EXECUTIVE OFFICER 4th April 2023

Strategic Report

Corporate Governance

"Our product offering continues to develop with sustainability, design and quality being key to our success, we have developed our first Carbon neutral range arctic which launched at the beginning of 2023, with more yet to come. Our sustainability principles were launched as we focus on improving all aspects of the way we impact the environment and society."

Financial Statements