Coral Products Regulatory News (CRU)

28 Aug 2007 16:25

Coral Products PLC28 August 2007 Released 28/08/2007 CORAL PRODUCTS PLC 2007 Preliminary Results Coral Products PLC, one of Europe's leading manufacturers and suppliers of mediapackaging for DVD and CD, announces its preliminary results for the year ended30 April 2007. Commenting upon the Company's trading Geoffrey Piper, Chairman of Coral, said: "Trading was extremely difficult during the year with demand for media productssuffering from over-capacity throughout the industry. There was, in particular,a marked decline in demand for CD products and, although sales volumes held upfor DVD, the margins were again adversely affected by high raw material prices." Summary Results (unaudited) Year ended Year ended 30 April 2007 30 April 2006 • Turnover £14.3m £16.4m • Operating loss £(2.09)m £(0.77)m • Loss per share - basic (7.43)p (3.63)p • Loss per share - diluted (7.43)p (3.63)p • Total dividend NIL NIL • Net assets per share 44p 52p Regarding prospects for the current year, Mr. Piper added: "Trading remains tough but we are now seeing some results of our efforts todiversify away from media products and we expect that these measures will resultin improvements in the medium term. The media product industry now faces seriousdemand problems and we are, therefore, focusing attention on attaining newbusiness in other product areas." Enquiries: Coral Products PLC Tel: 01942 272 882Warren Ferster, Managing Director Stephen Fletcher, Finance Director CHAIRMAN'S STATEMENT Turnover for the year ended 30 April 2007 amounted to £14.3 million compared to£16.4 million last year. Operating loss for the year was £2,090,000 comparedwith a loss of £769,000 last year. After interest charges of £126,000 (2006:£208,000) the loss before tax was £2,216,000 (2006: loss of £977,000).Shareholders' funds at 30 April 2007 amounted to £8.9 million (2006: £10.4million), namely 44p per share (on an undiluted basis)- (2006: 52p). Dividend Your directors are not recommending any dividend for the year (2006: nil). Trading Trading was extremely difficult during the year with demand for media productssuffering from over-capacity throughout the industry. There was, in particular,a marked decline in demand for CD products and, although sales volumes held upfor DVD, the margins were again adversely affected by high raw material prices. During the year we obtained contracts for trade moulding of household products. Sale and Leaseback of Haydock property Your Board announced on 14 August that the Company has entered into aconditional agreement to sell the freehold interest in the Company's property.The Company will concurrently enter into a lease of the production are and mainwarehouse enabling it to continue to fully operate. The particulars of thiscontract were contained in the Circular to shareholders on 24 August 2007. Under this proposal, the Company will sell the property for cash considerationof £3m of which £250,000 will be held in escrow as a rental deposit for theduration of the Company's occupation of the property. In view of the size of the disposal relative to the market capitalisation of theCompany, the disposal is conditional upon the approval of shareholders whichwill be sought at the Extraordinary Meeting scheduled on 12 September 2007. If the disposal is not approved or does not complete and the sale proceeds arenot received the Board would have to address the Company's financingrequirements in other ways, such as finding an alternative purchaser for theproperty, arranging additional borrowing facilities or seeking new equityinvestment. The Board is confident that alternative purchasers could be found but this couldtake several months during which period the Company would be reliant on thecontinuation of its present facilities and recently accepted invoice discountingfacilities. Cash Flow The recent trading losses have reduced the Company's cash resources andborrowing capacity. This led your Board to consider the Company's ability toservice its debts and finance its working capital requirements. Its financialprojections indicate that the working capital needs of the business could exceedits present facilities by the end of September 2007. Rather than remainingdependent on the continuing availability of bank overdrafts that are repayableon demand, the Company sought alternative finance, resulting in an offer ofInvoice Discounting facilities being accepted. It is the nature of invoice discounting that the facility fluctuates in linewith business activity and the use of such facilities does not give the Companyas much freedom of action to develop into new markets as would be the case if itsold the property and had surplus cash balances to employ as the board sees fit. The decision to sell the property would, if approved, lead to the repayment ofall the Company's bank borrowing and leave it with a cash surplus. At the sametime a leaseback of the production facility and main warehouse will enable it tocontinue its operations. The Company already rents a warehouse facility, whichhas recently been empty, close to the factory and will have enough space tomanage without two storage areas, which will not be leased back. The disposal is expected to generate net cash proceeds of approximately £2.5mafter estimated transaction costs and the retention of a rental deposit. Current Trading and Future Prospects The Directors issued an unaudited trading update to shareholders on 23 March2007, based on management accounts. This stated 'Trading has remained difficultand the improvement we saw towards the end of 2006 has not been maintained in2007. Volumes in media based packaging have reduced and margins have continued to beaffected by discounted selling prices and increases to the cost base.Consequently the trading account for the year to April 2007 will result in aloss. We are presently moving into other markets where we consider the future tobe more predictable.' The media markets continue to be under strain with lower margins resulting frommarket over-capacity. As a result, the Company is developing and seeking out newrelationships in other markets and has a clear strategy for moving forward. Since the publication of the above trading statement in March 2007, raw materialprices (mainly plastics) have continued to rise. However, there are indicationsthat raw material prices may stabilise. The Company has been revising itsselling prices upwards in response to increased raw material prices andanticipates that its customers will accept this. Furthermore the Companyobtained new contracts for storage boxes and has developed a sub-contractingrelationship with a local company both of which are expected to increase itssales. These new operations are at better margins than existing products. Thefuture prospects look somewhat better and the Board expects that by the end ofthis financial year it will have a much better outlook. Trading remains tough but we are now seeing some results of our efforts todiversify away from media products and we expect that these measures will resultin improvements in the medium term. The media product industry now faces seriousdemand problems and we are, therefore, focusing attention on attaining newbusiness in other product areas. Auditors Report We have been informed by the auditors that their Report on the FinancialStatements for the year ended 30th April 2007 is expected to contain a statementof emphasis of matter in respect of the going concern position of the company.This is based solely on the uncertainty over the approval for and completion ofthe disposal and leaseback of the freehold property scheduled for September2007. The audit opinion is not qualified in this respect. Geoffrey Piper Chairman 28 August 2007 MANAGING DIRECTOR'S REVIEW OF OPERATIONS The year to 30th April 2007 was again tough with the media industry continuingto suffer from over-capacity. Raw material prices remained high and we wereunable to increase selling prices in the competitive market without losingtrade. As a consequence, turnover decreased by 13% to £14.3 million and thecompany incurred an operating loss of £2.09m compared to an operating loss of£0.77m last year. We have taken steps to seek out alternative markets and have recently beensuccessful in obtaining substantial work in trade moulding of householdproducts. This business gives us greater margins and has a more favourableoutlook than media products where the CD market, in particular, has sufferedsignificantly in the past 12 months. Furthermore, we already have in place themachinery and expertise to operate in markets for a broad range of productswithout the need to spend on capital equipment or training programmes. We arealso accredited with ISO 9001 and are well placed to seek working partnershipsover trade-moulded products. DVD box sales again increased in volume terms and this market continues to grow,albeit at a slower rate. Sales of our Red Tag security box, which is held underlicence, should further increase as the format continues to become adopted byretailers. CD case sales, however, were significantly lower than both expected levels andthe previous year. This market is now suffering from moves to digitised mediaand has fallen significantly in the past year. Margins were also under pressurefrom continued increases in raw material costs. We are still looking to attractnew business and support our existing customers whilst taking steps to removeour over-capacity in production by converting some machines to new businessareas. Whilst the recent period has undoubtedly been very difficult for both the mediaproduct industry, and ourselves recent developments have enabled us to remainpositive and committed to our future. We realise that these new tradingrelationships will only develop over time but we have had positive feedback fromour new partners and expect demand for our products to continue to rise. Weexpect that trading conditions will also improve slowly in the DVD case marketbut that the reduced volumes for CD will continue at a much slower rate ofdecline than that witnessed most recently. I would like to express my gratitude to our staff and management for theirdedication and effort throughout the year. We have been through a tough periodbut the commitment shown to move the business forward and continue to delivergood quality products in a timely manner has never wavered. Warren Ferster Managing Director 28 August 2007 On 28 August 2007, the directors of Coral Products PLC approved the followingstatements of the unaudited preliminary results of the company for the financialyear ended 30 April 2007. Profit and Loss Accountfor the year ended 30th April 2007 2007 2006 Notes £'000 £'000 (unaudited) (audited)Continuing operationsRevenue 14,291 16,360Cost of sales (12,352) (12,823) ------------------------------------Gross Profit 1,939 3,537 ------------------------------------Operating costsDistribution costs (504) (585)Administrative expenses (3,525) (3,721) ------------------------------------Operating loss (2,090) (769)Interest payable (126) (208)Interest receivable - - ------------------------------------Loss before taxation (2,216) (977)Taxation 3 720 246 ------------------------------------Loss for the financial year (1,496) (731) Loss per shareBasic 4 (7.43)p (3.63)p ------------------------------------Diluted 4 (7.43)p (3.63)p ------------------------------------ Statement of Changes in Shareholders' Equityfor the year ended 30th April 2007 2007 2006 £'000 £'000 (unaudited) (audited) ------------------------------------Opening equity 10,435 11,171 ------------------------------------Loss for the financial year (1,496) (731) ------------------------------------Total recognised expense for the year (1,496) (731)Share based payment charge (15) (5)Changes in equity in the year (1,511) (736) ------------------------------------Closing equity 8,924 10,435 ------------------------------------ Balance Sheetas at 30th April 2007 2007 2006 £'000 £'000 (unaudited) (audited)ASSETSNon-current assetsIntangible assets 339 383Property, plant and equipment 10,831 12,560 ------------------------------------ 11,170 12,943 ------------------------------------Current assetsInventories 1,407 1,687Trade and other receivables 3,303 3,308Cash and cash equivalents - 36Current tax assets 35 88 ------------------------------------ 4,745 5,119 ------------------------------------LIABILITIESCurrent liabilitiesFinancial liabilities - borrowings 2,503 1,659Trade and other payables 2,918 2,859 ------------------------------------ 5,421 4,518 ------------------------------------ Net current (liabilities)/assets (675) 601Non-current liabilitiesFinancial liabilities - borrowings 905 1,774Deferred tax liabilities 665 1,335 ------------------------------------ 1,570 3,109 ------------------------------------NET ASSETS 8,924 10,435 ------------------------------------ SHAREHOLDERS' EQUITYOrdinary shares 201 201Share premium 4,558 4,558Other reserves 12 27Retained earnings 4,153 5,649 ------------------------------------TOTAL SHAREHOLDERS' EQUITY 8,924 10,435 ------------------------------------ Cash Flow Statementfor the year ended 30th April 2007 2007 2006 £'000 £'000 (unaudited) (audited)Cash inflows from operating activitiesOperating loss (2,090) (769)Profit on disposal of property, plant and equipment (43) (40)Depreciation of property, plant and equipment 2,144 2,179Amortisation of intangible assets 50 57Share based payments (15) (5)Decrease in inventories 280 1,169Decrease in trade and other receivables 5 1,026Increase/(decrease) in trade and other payables 59 (1,695) ------------------------------------Cash generated from operations 390 1,922 ------------------------------------Bank and loan interest paid (108) (119)Interest element of finance lease rentals (18) (89)Tax received / (paid) 103 (34) ------------------------------------Net cash from operating activities 367 1,680 ------------------------------------Cash flows from investing activitiesPurchase of property, plant and equipment (421) (2,009)Purchase of intangible assets - (9)Proceeds from disposal of property, plant and equipment 43 40 ------------------------------------Net cash used in investing activities (378) (1,978) ------------------------------------Cash flows from financing activitiesNet proceeds from issue of new bank loans 113 1,131Repayment of bank loans (457) (485)Proceeds of new asset finance - 1,614Finance lease principal payments (724) (1,032) ------------------------------------Net cash (used in)/generated by financing activities (1,068) 1,228 ------------------------------------Net (decrease)/increase in cash and cash equivalents (1,079) 930Cash and cash equivalents at 1st May 2006 (510) (1,440) ------------------------------------Cash and cash equivalents at 30th April 2007 (1,589) (510) ------------------------------------Cash and cash equivalents consist of:Cash at bank - 36Bank overdraft (1,589) (546) ------------------------------------ (1,589) (510) ------------------------------------ Notes to the Financial Statements 1 Basis of Reporting These preliminary results have been prepared on the basis of the accounting policies set out in the Company's 2006 financial statements. The directors have prepared the preliminary statement on a going concern basis. This approach has been taken on the basis that the directors believe that the company is a going concern and that the proposed sale and leaseback of the freehold property is approved as scheduled. The preliminary results for the year ended 30 April 2007 are unaudited. The financial information shown in this report does not amount to full financial statements within the meaning of Section 240 of the Companies Act 1985 (as amended). The comparative figures for the year ended 30 April 2006 do not constitute statutory accounts. The figures have been extracted from the audited accounts for that period which have been delivered to the registrar of companies and on which the auditors issued an unqualified report which did not contain a statement under either section 237 (2) or (3) of the Companies Act 1985. 2 Segmental information The company has identified geographical segments as its primary reporting format. All production is based in the United Kingdom. The geographical analysis of turnover is shown below: 2007 2006 £'000 £'000 Continuing operations UK 11,073 13,345 Rest of Europe 3,218 3,015 ------------------------------------ 14,291 16,360 ------------------------------------ 3 Taxation The charge for taxation on the profit for the financial year is as follows: 2007 2006 £'000 £'000 Continuing operations UK corporation tax at 30% (2006:30%) - - Adjustment in respect of prior years (50) (180) ------------------------------------ Total current tax (50) (180) Deferred tax (670) (66) ------------------------------------ Total taxation credit (720) (246) ------------------------------------ 4 Loss per share The calculation of the loss per share is based on the loss for the period attributable to shareholders of £1,496,000 (2006: loss £731,000) and on 20,135,609 (2006: 20,135,609) ordinary shares, being the weighted average number of ordinary shares in issue and ranking for dividend during the period. Calculation of fully diluted earnings per share is based upon a fully diluted weighted average number of ordinary shares of 20,135,609 (2006: 20,264,719). 5 Directors' interests in shares On 1st February 2007 share options under the Coral Products plc Savings Related Share Option Scheme were cancelled over 56,398 shares granted to Stephen Fletcher. Share options under the Coral Products plc Approved Executive Share Option Scheme were granted to the directors as shown below: --------------------------------------------------------------------------- Date of grant Option price Number of options Exercise date Martin Watson 25/10/2006 20.0p 100,000 25/9/2009 --------------------------------------------------------------------------- Stephen Fletcher 29/11/2006 18.0p 100,000 29/11/2009 --------------------------------------------------------------------------- 6 Reconciliation of net cash flow to movement in net debt 2007 2006 £'000 £'000 Net (decrease)/increase in cash and cash equivalents (1,079) 930 Net proceeds from issue of new bank loans (113) (1,131) Repayment of bank loans 457 485 Proceeds of new asset finance (1,614) - Finance lease principal payments 724 1,032 ------------------------------------ Movement in net debt for the period (298) (11) Net debt at beginning of period (3,397) (3,099) ------------------------------------ Net debt at end of period (3,408) (3,397) ------------------------------------ 7 Annual Report and Accounts The Annual Report and Accounts will be posted to shareholders before 24 September 2007. Copies will be available by writing to the Company Secretary, Coral Products plc, North Florida Rd, Haydock Industrial Estate, Haydock, Merseyside WA11 9TP. (e-mail mail@coralproducts.com). These Reports may also be downloaded or viewed through our web-site at www.coralproducts.com. 8 Annual General Meeting The Annual General Meeting will be held in October 2007. Shareholders will be informed of the exact time and date in the Annual Report and Accounts. This information is provided by RNS The company news service from the London Stock Exchange