Coral Products Regulatory News (CRU)

22 June 2011

Coral Products PLC ('the Company'), a leading manufacturer of cases for the media packaging market, announces its unaudited results for the year ended 30 April 2011.

Regarding prospects for the current year, Geoffrey Piper, Chairman commented:

"The Board recognises that sales of media packaging are in decline albeit over a period of years. A new three year strategic plan has been recently approved by the Board. This plan aims to reduce the overall percentage of sales of media packaging products by increasing revenue in new business areas. This will involve a twin strategy of organic sales development and acquisition of businesses. Sales growth will focus on recycling and food packaging products as these have been recognised as product areas which can be served by our existing plant, machinery and skills sets. In addition, we will increase our efforts to acquire further trade moulding businesses and are actively looking for targets.''

Enquiries:

Coral Products PLC  Tel 01942 272 882

Warren Ferster, Chief Executive/Managing Director

Stephen Fletcher, Finance Director/Company Secretary

XCAP Securities Tel 020 7101 7070

David Newton

David Lawman

Bankside Consultants Tel 020 7367 8888

Richard Pearson

Revenue for the year ended 30 April 2011 amounted to £13.2 million compared to £12.6 million in 2010. Earnings before interest, taxation, depreciation and amortisation (EBITDA) were £602,000 (2010: £940,000). Operating loss for the year was £700,000 compared with a loss of £621,000 last year. After interest charges of £53,000 (2010: £30,000) the loss before tax was £753,000 (2010: loss of £651,000). Shareholders' funds at 30 April 2011 amounted to £5.7 million (2010: £6.5 million), namely 28.4p per share (2010: 32.1p).

The directors' intention is to pay a dividend, once sufficient profits are available. The directors are not recommending any dividend for the year (2010: nil).

Revenue for the year to 30 April 2011 increased by 5% to £13.2 million.

Turnover of recycling products grew to £1.2m in our first full year in this market. We now have a range of food caddies for indoors and also a kerbside collection caddy in addition to our range of crates. The market for these products is growing as local authorities look to reduce landfill. We have started our new financial year with an increasing order book and look forward to obtaining additional market share.

Turnover of our trade moulded products continued to rise in line with our expectations. The main items continue to be storage boxes but we have also completed toy parts and other household items.

Sales of media products were affected by our inability to offer a new lightweight case until we had the necessary licence in place. This was obtained in August but the delay did result in the loss of several large orders.

Non-media sales are increasing and our objective is to substantially increase our percentage of non media sales by 2014, whilst maintaining our share of the media market. Food packaging products have been recognised as a sector that is growing fast. We are therefore looking for a strategic partner, already established in this field, to assist us in developing new products. We expect to have facilities that comply with the BRC Global Standard for packaging and packaging materials and intend to obtain the necessary certification in our current first half.

We will continue to have limited capital expenditure requirements other than moulds for new business. It is our intention that all new business will be self-financing.

Our core business continues at the moment to be in media packaging products but we are making significant progress in developing new product types and fields of operation which we hope will both improve performance and reduce our inherent business risks.

Balance Sheet and Cash Flow

Net assets, whilst reducing, are still some £5.7m reflecting a strong operational base. There was a small gain in our cash outflow during the year when the cash used to repay finance leases is included. Our cash position is expected to improve with our depreciation expense expected to be much higher than our capital expenditure requirement. We have been able to keep our cash requirements within our existing facilities at all times, despite adverse trading conditions.

Our Strategy

The Board recognises that sales of media packaging are in decline albeit over a period of years. A new three year strategic plan has been recently approved by the Board. This plan aims to reduce the overall percentage of sales of media packaging products by increasing revenue in new business areas. This will involve a twin strategy of organic sales development and acquisition of businesses. Sales growth will focus on recycling and food packaging products as these have been recognised as product areas which can be served by our existing plant, machinery and skills sets. In addition, we will increase our efforts to acquire further trade moulding businesses and are actively looking for targets.

Our Board

We have taken the decision to refresh the Board during 2011. As a consequence, I will be stepping down from the Board at the forthcoming AGM to be replaced as Chairman by Joe Grimmond who joined as a Non-Executive Director in March. Joe has brought a fresh impetus to the Company and his experience and knowledge make him the ideal person to lead the implementation of the new three year strategic plan.

We firmly believe it is for our executives to run the business in pursuit of a clear operational plan set by the Board as a whole and we now have this in place.

Outlook

The Directors issued an interim management statement to shareholders on 3 March 2011. This stated that the company continues to focus on opportunities to grow the business and to progress in marketing and developing new products whilst obtaining supplier recognition in the recycling product markets as a way to improve long term shareholder value. This remains at the forefront of our business strategy. The implementation of our new three year plan has already resulted in our receiving our first letter of intent for our first order in the food packaging sector. This is expected to generate sales of around £700,000 in the first year and further significant sales in subsequent years.

Whilst the economy continues to create a difficult trading environment, we have maintained good service levels and continue to offer quality products for which demand will increase. As a result, we are well positioned for taking advantage of any upturn whilst improving our market share in new products.

Geoffrey Piper

Chairman

22 June 2011

Our Business

Coral Products manufactures a range of moulded plastic goods. Currently it is a leading player in the production of media packaging products and food waste caddies for local authorities. The company also produces crates, principally for recycling products, and operates as a trade moulder for bespoke products.

During this year we have successfully continued towards our goal of increased diversification into manufacturing products outside the media packaging business. Whilst progress has been difficult, largely due to adverse trading conditions, we have nonetheless started to increase our share of the recycling product market and recently been awarded sizeable contracts for 2011.

Our Strategy

The Board has approved a new three year strategic plan with the aim of reducing the extent of media packaging sales by generating more business in new areas. We are committed to concentrate our attention on sales growth in recycling products and food packaging whilst increasing our trade moulding operation. We are already well advanced with this plan and a number of interesting projects are being considered. We will inform shareholders of any developments in these areas as soon as we have news.

Media sales are expected to slowly degrade but as we become stronger in other products areas we still intend to grow our overall turnover. Recent research suggests that physical media in the form of DVDs and CDs will remain the dominant home media format until around 2020 when it is likely to be overtaken by digital distribution. Physical sales are still much greater than video on demand and other electronic formats.

Recycling product sales have gradually increased and we already have a sizeable order book for 2011-12. This market is driven by legislation and policy, which has promoted greater recycling of materials over the disposal onto landfill sites. The Household Waste and Recycling Act 2003 sets out increasingly stringent targets for local authorities on landfill. This is a new business area for us, in which we have had to become familiar with requirements governing tenders and often lengthy lead times. We have achieved revenues of over £1m in our last financial year and this will continue to be driven forward by our sales team. Our strategy is to gain 5% of this market in the UK by 2014.

Consumer home products represent a wide ranging market that our plan has also targeted for growth. The current products we are considering and developing include cleaning products, garden accessories, and water butts.

Food packaging is a sector that is growing quickly and in which we are looking to introduce new products through business with a potential strategic partner already established in this field. In addition to the major users there are many smaller independent packagers who require rapid response to meet changing market demands. Our site is well placed and we are presently upgrading our facility to comply with the BRC Global Standard for packaging and packaging materials. We intend to obtain the necessary certification later this year. The market in which we are actively seeking to play a part is estimated at £150 million per annum and we have a target of attaining 3% by 2014. I am pleased to announce that we have already received a letter of intent in the food packaging sector, which is expected to generate sales of around £700,000 in the first year and further significant sales in subsequent years.

Trade moulding sales have increased to £1.5 million with little resource or sales effort. We are actively seeking an experienced sales engineer with the target of doubling this in the next three years.

Overall these non-media sales are presently only a small percentage of our business, but this will alter over the next three years by which time the media packaging sales are forecast to be 40% of the total.

Performance

Media packaging revenues were affected in the year by delays in obtaining the necessary licence to produce a new lightweight eco-friendly DVD case. Demand for these boxes quickly overtook the traditional case and we took the decision to convert our existing moulds as quickly as possible. Unfortunately we only obtained the necessary licence approval in August 2010 which had a significant impact on sales as we could not fulfil a number of orders. Whilst demand for media packaging products is declining the market is expected to remain robust for several years and we are now geared up to meet the requirements for a lighter weight box.

Sales of recycling products continued to make excellent progress and we are confident that we will continue to see our market share expand for several years. Our products are gaining widespread recognition and appreciation and in the current year we have taken a number of orders for food caddies in particular. This market is new to us and we have made significant efforts in coming to terms with its mode of operation.

Trade moulding revenues were slightly above previous year levels and we are committed to target additional opportunities for sales to utilise our production capacity.

Overall turnover increased by 4% in the year but gross margins declined by 4% due to the impact of raw material price increases resulting from rises in oil prices and the continued weakness in sterling. As we develop a more favourable mix of sales, these margins are expected to improve.

Outlook

We have a new 3 year strategy in place and are confident that we can follow this and improve our performance whilst reducing the inherent risks of our existing business.

Our order book for recycling products is continually increasing and we are set to complete further large contracts. We have redeveloped our DVD case to become more environmentally friendly and overall consider ourselves to be in a stronger position than we have been for a number of years.

Our management team continue to work to maintain our high standards of production whilst developing new products. We are upgrading our facility to comply with the BRC Global Standard for packaging and packaging materials which will add to our existing ISOs 9001 and 14001.

I would like to express my gratitude to our staff and management for their dedication and effort throughout the year.

Warren Ferster

Managing Director

22 June 2011

Financial Review

Income Statement

Revenue for the year ended 30 April 2011 increased by 5% to £13.2m (2010: £12.6m). This was the result of increased sales prices resulting mainly from increased component prices. The second half of the year saw much improved demand before Christmas for media product cases as we gained market share of the new lightweight DVD case. Since the New Year, however, the media packaging markets, in particular, were weak with demand affected by uncertainty in the retail market. Revenues from recycling and trade moulded products increased and this is set to continue. In particular, our food caddy recycling containers performed strongly in their first year.

Gross margins fell to 18.5% (2010: 21.8%) as a result of higher raw material prices and a weak sterling that were difficult to pass on in the prevailing market conditions. EBITDA for the year was a positive £602,000 (2010:£940,000) which continues to reflect the large depreciation expense. Operating costs fell with savings being made from efficiencies, new power contracts and lower depreciation levels. The operating loss for the business increased to £0.7m (2010:£0.62m). This was affected by the loss of several large DVD orders during the peak season due to delays involved in obtaining the licence for manufacturing a new lightweight eco-friendly box. Finance costs increased to £53,000 (2010:£30,000).

Taxation

The rate of tax applied for the year ended 30 April 2011 was 28% (2010: 28%). There was no current tax charge for the year (2010: £nil). We have tax losses brought forward of £2.3m, which are available to be offset against future taxable trading profits.

Cash Flow

There was an overall negative cash flow of £333,000 (2010:£366,000). However, repayments made of £356,000 were made on finance leases during the year. Cash generated from operations was £617,000 whilst cash used to purchase plant and intangibles was £644,000. With the finance leases almost completed and capital expenditure at modest levels we should generate a positive cash flow this year.

Current liquidity

At the year end the Company's net debt was £907,000 (2010: £930,000) and gearing was 16% (2010: 14%). The Company continued to operate an invoice discounting line with funding of 60% of trade debtors and a maximum facility of £1.5m together with a £50,000 overdraft facility. This line carries a discount rate of 2.3% above the bank base rate. Finance lease liabilities of £59,000 are due to expire in October 2012.

Financial Risk

The Company's financial instruments, other than derivatives, comprise cash investments and borrowings. The Company only enters into derivative transactions to mitigate the currency and interest rate risks arising from its operations and sources of finance. It is the Company's policy that no speculative trading in financial instruments should be undertaken.

Key Performance Indicators

The Board uses a range of financial and non-financial indicators to monitor performance in line with its business strategy. These indicators are chosen to assess both current performance and the strength of the Company to sustain and enhance future performance. The financial indicators include sales, operating margins, EBITDA and operating cash flow.

·; Underlying revenue, gross margins and operating profit

Revenue increased slightly whilst the loss was broadly maintained. The operating margin reduced as commodity prices, transport and power costs all increased whilst the markets would not support similar rises in selling prices.

·; Earnings before interest, tax, depreciation and amortisation (EBITDA)

The EBITDA measures the earnings for the Company before the amounts required to replace the cost of fixed assets and financing. The EBITDA for 2011 was £602,000 (2010:£940,000).

·; Operating cash flow

In any business the ability to convert profitability into cash generation is important for future investment and the servicing of borrowings. The operating cash inflow for 2011 was £670,000 compared to £222,000 in 2010.

Stephen Fletcher

Finance Director

22 June 2011

Notes to the Financial Statements