Coral Products Regulatory News (CRU)

CORAL PRODUCTS PLC

('Coral' or the 'Company' or the 'Group')

FINAL RESULTS

Coral Products PLC, (the "Company" or the "Group") a specialist in the design, manufacture and supply of injection moulded plastic products based in Haydock, Merseyside, announces its audited final results for the year ended 30 April 2017.

KEY FINANCIALS

* Underlying results are reported before separately disclosed items, as shown in note 2. Such underlying results are not intended to be a substitute for, or superior to, IFRS measures of profit.

HEADLINES

· Group revenue increase of 14.5%.

· The fall in underlying operating profits to £1.1m (£1.6m in 2016) related to poor performance at Coral Products Mouldings.

· All of the other subsidiaries have performed in line with or ahead of expectations.

· Underlying EBITDA decreased by 18.3% to £1.9m.

· Purchase of the fixed assets of ICM, allowing bespoke moulding solutions for the automotive industry.

· 90+ new automotive components successfully introduced during March and April 2017 with attendant start-up costs.

· Revenues from non-media products increased to £21.1m (£17.8m in 2016) representing 98% of total revenues (2016: 95%).

· Substantial new business in online totes, bakery trays and automotive components, circa £4.5m for current year.

Commenting on the results, Joe Grimmond, Chairman, said:

"We continue to invest in our Group adding new and improved capacity. This is creating greater sales opportunities and we anticipate significant sales growth over the current financial year. Whilst I was pleased with the increase in revenue up 14.5% to £21.4m (2016: £18.7m), the poor performance of Coral Products Mouldings led to a reduced underlying profit of £1.1m (2016: £1.6m)".

"The Group continues with its strategic progress of increasing focus on value-added and innovative products, particularly in the food container, recycling, telecommunications, rail industry and automotive markets. We successfully introduced 90+ new automotive components in March and April. Our aim continues to be to build a significant plastic moulding business and we remain confident in our ability to make further progress by improving business performance and increasing our market share to drive forward financial results over the medium term".

"We look forward with confidence to an improved performance in the coming year."

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CHAIRMAN'S STATEMENT

We continue to invest in our Group adding new and improved capacity. This is creating greater sales opportunities and we anticipate significant sales growth over the current financial year. Whilst I was pleased with the increase in revenue up 14.5% to £21.4m (2016: £18.7m), the poor performance of Coral Products Mouldings (Haydock) led to a reduced underlying operating profit of £1.1m (2016: £1.6m). (Note that underlying profit is defined in note 2).

For the current year Haydock has gained substantial new business in online totes, bakery trays and automotive. These are expected to bring in circa £4.5m in additional turnover. To support the expected increase in new sales operational improvements at the Haydock plant are being addressed with pace. A new Sage 200 system is currently being integrated to enable better control of raw materials, packaging, inventory and costings. In addition, specific management focus on health and safety, hygiene and engineering processes will enable future proofing making the plant ready to accept further growth opportunities into 2018 and beyond.

Following the Five-Year Plan that was adopted in 2015 the Group has made a number of acquisitions aimed at substantially increasing Group revenue and profitability from our specialist plastic products manufacturing and distribution activities. In June 2015, we acquired certain plant and machinery from Neiman Packaging Limited. This acquisition introduced two new manufacturing processes, injection blow moulding and extrusion blow moulding, enhancing our range of manufacturing capability. In January 2016, we purchased the fixed assets, stock and business of Rotalac Plastics Limited from its administrators. Rotalac provides thermoplastic extrusion and moulding solutions across a number of industries worldwide, including aerospace, medical and automotive and is a leader in shutter system design and manufacture. This addition further enabled the broadening of the Group's product range. In February 2016, the Group acquired Global One-Pak Limited which designs, manufactures and supplies lotion pumps and trigger sprayers to a broad range of customers worldwide, including a number of global brands, across a wide range of markets, including household and garden, automotive, personal care and pet grooming. This business expanded further the market coverage and product range with the supply of a number of high value components. These businesses have all been successfully integrated into the Group and enable us to promote a more diverse range of products and manufacturing methods, the benefits of which are already being seen.

In August 2016, the operations of Tatra Plastics Ltd were relocated from Halifax to the premises of Rotalac Plastic Ltd, at the same time both companies were merged to form Tatra-Rotalac Ltd. In March 2017, the Group acquired the fixed assets of Industrial & Commercial Mouldings Limited (ICM), which specialised in the production of bespoke high quality injection moulded parts for the automotive industry. This acquisition greatly increased the production capacity at the Haydock site as well as allowed the move into the automotive industry. We successfully introduced 90+ automotive components during March and April. This involved substantial initial costs, the benefits of which will flow through in our new financial year.

All of the acquisitions to date have performed in line with or ahead of expectations. Unfortunately, our management and operation systems at Haydock proved inadequate for managing materially higher business volumes and a more diverse product range. Our information system also suffered similar volume related problems. These issues only became apparent in early January 2017 and immediate steps were taken to remedy the shortcomings. The Group Finance Director and Chief Executive Officer both left the business and a new Group Finance Director, Sharon Gramauskas was appointed in February 2017. In February, I assumed the position of Executive Chairman on a temporary basis until a new Chief Operating Officer (non-board member) could be appointed. I am pleased to report that a new Chief Operating Officer, Michael Wood commenced on 14 August 2017 after serving his three-month notice period with a large international plastics manufacturing group. His immediate priority is to maintain and improve upon the steps taken to date and achieve a position of sustainable profitability at our Haydock operation. I will remain Executive Chairman in support of the Chief Operating Officer to ensure all the progress at Haydock since February is maintained.

It is important to note that Interpack, Global One-Pak and Tatra Rotalac all remain substantially profitable, performing in line with or ahead of expectations.

The continuing fall in the relative value of sterling against the dollar and the euro, together with the prevailing uncertainty, could have a negative effect on our business particularly due to the Group purchasing a large proportion of stock items in these currencies. We are taking steps across the Group to mitigate these, particularly in recovering increased input costs because of sterling's decline.

Performance of the Group is monitored principally through adjusted profit measures which exclude £0.4m of underlying items. Such items are set out in note 2 and include the amortisation of intangibles arising on the acquisitions of Global One-Pak and Tatra-Rotalac, acquisition costs, share based payment charges, compensation for loss of office of senior management, release of earn-out provision, reorganisation costs and losses/profits on sale of tangible assets.

The Group has increased net debt by £2.3m in the year and gearing has increased to 40.7% (2016: 23.9%). Due to production constraints, we have increased stock levels of bakery trays and we have also had to build up minimum stock levels for new customers in the automotive industry. Overall the Group reported a net cash outflow of £1.7m.

Following a revaluation of land and buildings in December 2016, a £1.7m mortgage was taken out, this was finalised and drawn down on 18 May 2017. This mortgage was used to repay two current term loans and it also gave £0.3m available cash, which was used to fund the installation of the machinery purchased from the liquidators of ICM Ltd. This new mortgage has been taken out over ten years and gives rise to savings of £0.2m in repayments per annum, providing additional cashflow flexibility.

Results

Group revenue improved for the year to £21.4m (2016: £18.7m). Margins improved slightly to 34.1% (2016: 33.1%). Underlying earnings before interest, tax, depreciation and amortisation for the group remained strong at £1.9m (2016: £2.3m) (see note 2 for the definition of underlying profit measures). Administrative expenses in the Group increased to £5.6m (2016: £4.4m) in line with the increase in Group activity. This resulted in an underlying operating profit of £1.1m (2016: £1.6m), and profit before tax of £0.5m (2016: £0.8m)

Separately disclosed underlying items totalling £0.4m (2016: £0.7m) of which £0.2m relates to the settlement costs for loss of office of former directors. The underlying profit for the financial year before taxation was £1.1m (2016: £1.6m). Earnings per share were 0.55 pence (2016: 1.12 pence), underlying earnings per share were 1.04 pence (2016: 2.20 pence).

Dividends

The board remains committed to its long-term progressive dividend policy, which takes account of the underlying growth in earnings, whilst acknowledging the requirement for continuing investment and short-term fluctuations in profit.

Despite the disappointing second half and the investment in new plant, the Board has given consideration to the outlook for the current year. As a result, the Board has decided to pay a total dividend of 0.7 pence per share in respect of the financial year ended 30 April 2017. Having paid an interim dividend at 0.33 pence per share on 1 March 2017, the final payment of 0.37 pence per share will have an ex-dividend date of 21 September 2017 and a record date of 22 September 2017. This final dividend will be paid on 31 October 2017.

Board Changes

In January 2017 Steve Fletcher left the business after 17 years as Finance Director and the board would like to thank him for his service. Sharon Gramauskas was appointed Finance Director in February 2017. Sharon is a Chartered Management Accountant with over 17 years of experience in Finance. In April 2017 Roberto (Rob) Zandona left the business as Group Chief Executive and at the same time Joe Grimmond became Executive Chairman having previously acted as Non-Executive Chairman. Jonathan Lever retired as non-executive director in April 2017.

Strategy

Our board continuously reviews business performance alongside market conditions to make sure that we take the correct strategic decisions for each of our businesses. The board recognises fully that it has been tasked with delivering enhanced shareholder value in accordance with the strategy that we outlined in 2015. The challenges facing the board relate to managing the continued growth of the Group whilst preserving the strengths of the business.

Acquisition

The purchase of the fixed assets of ICM (Industrial & Commercial Mouldings) Ltd was completed on 21 March 2017. ICM specialised in the production of bespoke high-quality injection moulded parts for the automotive industry.

People

We are reliant on the expertise, professionalism and commitment of our people and thank them for their contribution to the business during a challenging year.

Outlook

The Group continues with its strategic progress of increasing focus on value-added and innovative products, particularly in the food container, automotive, telecommunications and rail industry markets. Our aim continues to be to build a significant plastic moulding business and we remain confident in our ability to make further progress by improving business performance and increasing our market share to drive forward financial results over the medium term.

We look forward with confidence to further progress in the coming year.

Joe GrimmondChairman14 September 2017

Group Income Statement

for the year ended 30 April 2017

Group Statement of Comprehensive Income

for the year ended 30 April 2017

Balance Sheet

as at 30 April 2017

Statement of Changes in Shareholders' Equity

for the year ended 30 April 2017

Cash Flow Statement

for the year ended 30 April 2017

Notes

for the year ended 30 April 2017

1. Basis of preparation

The financial information set out above does not constitute the Group's statutory accounts for the years ended 30 April 2017 or 2016 within the meaning of Section 434 of the Companies Act 2006, but is derived from those accounts. Statutory accounts for 2016 have been delivered to the Registrar of Companies and those for 2017 will be delivered following the company's Annual General Meeting. The auditors' report on the statutory accounts for the year ended 30 April 2017 was unqualified and does not contain statements under s498 (2) or (3) Companies Act 2006.

This financial information has been prepared in accordance with International Financial Reporting Standards ("IFRSs") and International Financial Reporting Interpretations Committee (IFRIC) interpretations as adopted by the European Union and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.

2. Underlying operating profit and separately disclosed items

Underlying profit - the Company believes that underlying profit and underlying earnings provide additional useful information for shareholders. The term underlying earnings is not a defined term under IFRS and may not therefore be comparable with similarly titled profit measurements reported by other companies.

3. Earnings per share

Basic and underlying earnings per share

The basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders for the financial period by the weighted average number of shares in issue during the financial period of 82,614,865 (2016: 66,238,090).

Underlying earnings per share is also shown calculated by reference to earnings before separately disclosed items. The directors consider that this gives a useful indication of underlying performance.

The share options issued in the previous year are non-dilutive (2016: non-dilutive)

4. Dividends

A final dividend for the year ended 30 April 2016 of 0.7p per share was paid on 14 October 2016 to shareholders on the register on 9 September 2016. This dividend amounted to £578,304.

Despite the disappointing second half and the investment in new plant, the Board has given consideration to the outlook for the current year. As a result, the Board has decided to pay a total dividend of 0.7 pence per share in respect of the financial year ended 30 April 2017.

Having paid an interim dividend at 0.33 pence per share on 1 March 2017 (this dividend amounted to £272,628), the final payment of 0.37 pence per share will have an ex-dividend date of 21 September 2017 and a record date of 22 September 2017. This final dividend will be paid on 31 October 2017.

5. Group reconciliation of net cash flow to movement in net debt

6. Post Balance Sheet Event

Although not impacting the year-end balance sheet, we report that following a revaluation of land and buildings, a £1.7m mortgage was finalised and drawn down on 18 May 2017. This mortgage was used to repay two current term loans and also gave rise to £0.3m available cash which was subsequently utilised to fund the installation of the machinery purchased from the liquidators of ICM Ltd. This new mortgage has been taken out over ten years and gives rise to savings of £0.2m in repayments per annum.

7. Publication of Annual Report and Notice of Annual General Meeting

A copy of the 2017 Report & Accounts, together with a notice of the Annual General Meeting to be held in Leverhulme Room One at Haydock Race Track, Newton-le-Willows, Merseyside, WA12 0HQ on 11 October 2017 at 12:00 p.m., will be sent to all shareholders on 18 September 2017. Further copies will be available to the public at the company's registered address at North Florida Road, Haydock Industrial Estate, Haydock, Merseyside WA11 9TP and on the Company's website at www.coralproducts.com.