AIREA 5 September 2013
I thought now might be a reasonable time to have a quick look at flooring specialist AIREA, not least as the share price has it seems eventually stirred.
The company, for anyone not familiar, is behind the well known brand names of Burmatex and Rylalux which basically cover most markets within their field.
Although for a number of reasons this one falls in the more speculative category, there are various factors that do appeal to me.
Firstly though, I covered the stock back in JUNE of this year (link below for those interested) when the shares sat at just below 10p.
No great shakes since then, although the shares have as I suggest at the opener nudged up closing at 11.5p today, on small volume.
First the negatives for me, which I believe highlights the speculative nature from an investment perspective.
With a market cap of just £4.8m AIREA will not feature on many peoples radar and the spread, like many of these smaller company’s can be pretty off putting,
at the moment it is 10.75p to sell - 12p to Buy.
Add to that, the familiar woe of a pension deficit, along with some tough years of trading, a recession and cheap import's then the speculative nature looks apparent.
It is also worth taking on board that the company under its previous name stepped down from the main market to AIM which can be interpreted as a lack of ambition or growth potential to say the least, although that isn't always the case as costs come into the equation.
That said, there does seem to be rather a lot discounted here, which is why I have a small interest and I shall be keen to see the Preliminary results which are due later this month.
I will try not to totally repeat what is in the earlier article, but rather add that for me at least, AIREA could be over the worst and if that is indeed the case, the anticipated final dividend by Broker Milkstone which would imply a yield of around 4.5% may well put a floor under the share price and give a platform for possible longer term recovery.
Those holding majority stakes appear to include family members of previous parts of the old business (SIRDAR) along with what is interesting for me,
Lowland Investment Company, which sits on 8.9% and would seem adept at knowing its way around the smaller sector rather well.
On the trading front, the last Interim announcement at least seemed more upbeat than for some time, with pre-tax profits rising 74% while the board added that it was well placed to make further progress.
With consumer confidence gradually returning and construction activity notably turned up, I would hope that the company’s own fortunes have continued to head in the right direction.
Flooring, whether it be vinyl’s, carpets or carpet tiles, retail or commercial is in my experience one of the last to recover in the cyclical cycle.
But, cost cuts, tighter management controls, along with boosting its presence in other territories has thus far assisted in paving the way in turning the company from a protracted downward spiral, so any recovery upside nearer to home would also be welcome.