cru12 Feb 2012 19:17
The acquisition of Interpack in September has transformed the prospects of Coral Products (CRU) - helping the AIM counter record an underlying profit in the first half.
Following the appointment of serial entreprenuer Joe Grimmond as chairman, Coral boosted its size by buying Interpack, which is a reseller of plastic container products. Traditionally the business was sourcing its supply from factories in Poland and Sweden, but is now using Coral in Haydock for a chunk of its orders.
It has picked up £3m of new business, which is being manufactured with the help of new state of the art production equipment. The core Coral business specialises in media packaging, supplying CD and DVD boxes, as well as other plastic containers. Within three years the plan is to shift its sales to a much wider audience.
Coral has secured £700,000 of new orders with five local authorities, largely driven by demand for new recycling caddies for waste. Recently launched products include a 5 litre unit, to complement 7 and 23 litre boxes. Even in media products things are looking up - buoyed by increased DVD sales, and new business in multi-DVD boxes.
In the six months to October, sales increased 29% to £8.7m, as the underlying operating profit came in at £115,000 (2010: £319,000). The cost of the Interpack deal, coupled with a move from the main market to AIM led to an exceptional charge of £443,000, but this will not be repeated in the second-half.
Brokers point to 2012 sales of £18.7m, adjusted pre-tax profits of £670,000 and EPS fo 1.9p, there is even hope of a 0.5p dividend. Grimmond argues 'we are a very cash generative business, so expect to pay down our debt relatively quickly.' Coral is in rude health, with scope for more acquisitions (there are 550 injection moulding companies in the UK alone) and a yield on the horizon, the shares are cheap.
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