Last checked at 8 Dec 2016 07:00
8 December 2016
CORAL PRODUCTS PLC
("Coral" or the "Group")
HALF YEARLY REPORT
Coral Products plc, a specialist in the design, manufacture and supply of injection moulded plastic products, is pleased to report its half yearly report for the six months ended 31 October 2016.
Financial headlines
| Six months to 31 October 2016 | Six months to 31 October 2015 | % change |
|
|
|
|
Group sales ** | £10.75 million | £8.26 million | +30.1% |
Gross profit | £3.51 million | £2.85 million | +23.2% |
Operating profit | £842,000 | £778,000 | +8.2% |
Underlying operating profit | £1,030,000 | £817,000 | +26.1% |
Underlying operating margin | 33% | 35% |
|
Profit before taxation | £718,000 | £684,000 | +5.0% |
Underlying EBITDA | £1,413,000 | £1,130,000 | +25.0% |
Underlying basic earnings per share | 1.03 | 1.06p | -2.8% |
Proposed interim dividend per share | 0.33p | 0.30p | +10.0% |
\* The financial headlines disclosed as underlying represent the reported metrics excluding separately disclosed items.
** Total sales (including inter-group sales) in 2016 were £12.41m, of which inter-group sales were £1.66m (2015: total sales of £10.02m of which inter-group sales were £1.76m).
Operational and financial highlights
- Half year performance in line with expectations, full year outlook unchanged.
- New long-term business gained for bakery trays.
- Underlying EBITDA increases by 25% to £1.41 million.
- Successful integration of Tatra business into 'TatraRotalac' with much improved facilities in Wythenshawe.
- Margins have remained high and underlying operating profit has increased by 25%.
- Strong net assets position has been maintained.
- Gearing has risen from 24% to 37% as capital investment has increased due to our continued programme of continuous operational improvement and also covering the increased demand.
- Proposed Interim dividend increased from 0.30 pence to 0.33 pence per share. Last year's final dividend payment was increased to 0.70p per share giving a full year payment of 1.0p.
- But for adverse currency movements pre-tax profits would have been 33% higher.
Commenting on today's results, Joe Grimmond, Coral's Chairman, said:
"I am pleased to announce that trading in the first half of the current year shows revenue and profits both substantially ahead of the same period for last year.
Coral Products continues to make good progress in line with our 2015 strategic plan. We have strengthened our position in injection moulding and extruded products whilst at the same time expanding our range of capabilities enhancing our market offering.
Results to date in the current financial year have been in line with the Board's expectations and, in spite of prevailing political uncertainties, we remain confident about the Group's future prospects."
Enquiries
Coral Products plc Joe Grimmond, Chairman Roberto Zandona
| Tel: 01942 272882
|
Nominated Adviser Cairn Financial Advisers LLP Tony Rawlinson / Liam Murray
|
Tel: 020 7213 0880 |
Broker Daniel Stewart & Company Limited David Lawman
|
Tel: 020 7776 6550
|
Capital Markets Consultants Limited Richard Pearson | Tel: 07515 587184 |
Chairman's Statement
Results
I am pleased to announce that trading in the first half of the current year shows revenue and profits both substantially ahead of the same period for last year. Reported revenue increased to £10,752,000 (six months to 31 October 2015: £8,259,000). Group revenue including inter-group sales were £12,410,000 (2015: £10,021,000) with inter-group sales of £1,658,000 (2015: £1,762,000). This incorporated a full period of contribution from the Global One-Pak and Rotalac acquisitions.
Gross margins remained high at 32.7% (2015: 34.5%) resulting in a gross profit of £3,506,000 (2015: £2,849,000) in the six months to 31 October 2016.
There was an increase in operating costs from £2,032,000 to £2,476,000 in the period principally due to the acquisitions together with a £192,000 adverse currency effect resulting from the weaker sterling in the immediate period following Brexit.
Underlying profits for operations increased to £1,030,000 (2015: £817,000), a significant improvement over the same period last year.
Finance costs were up from £94,000 to £124,000 in this period due to increased levels of borrowing.
Separately disclosed expenses of £188,000 (2015: £39,000) comprised the amortisation of intangibles acquired on acquisition of £174,000 (2015: £36,000) and a share based payment charge over employee options of £14,000 (2015: £3,000). Profit after tax after including these items was £663,000 compared with £611,000 in the six month period to 31 October 2015.
Operations
Coral Products Mouldings Ltd, based at our Haydock manufacturing site has added more new efficient equipment and introduced a programme of training to improve the performance of our staff. Our investments have provided tangible benefits, a 750 tonne moulding machine has seen significant scrap reduction, faster cycle times and was instrumental in helping us win a recent piece of business making bakery trays. In the last month we have taken receipt of three new tools which make product for our Interpack business and this has seen output at least quadruple for this product. We take receipt of further tooling for our blow moulded containers during December which will again provide additional volumes where we currently have limited capacity but increasing demand. We have also made significant improvements to the facility with more to come in the new year.
Our crates, caddies and larger container ranges have offered us the greatest opportunity to progress the business with orders from new customers for bakery trays now running alongside our crates for on-line retail and waste recycling. Despite a lull in demand, the expectation is for this to reverse in 2017 as we benefit from the increased sales activity over the last 6 months where we have added more opportunities into the pipeline. The benefits from economies of scale on the larger contracts offered in trade moulding are expected to result in improved efficiencies and performance in the new year. The blow moulding business stabilised during this period. There is planned and ordered investment in the second half in machinery and tooling for production lines that are exposed to higher growth and more predictable markets.
Interpack Ltd, our plastic packaging distribution business has had a strong six months, an increase in the customer base driven by the recruitment of further sales personnel adding to the previous good performance. Supply issues are resolved with our new tooling and we can service our customers from stock particularly from our own in house manufacturing. This puts us in a strong position as the seasonal demand picks up in the new year for our range of products. In addition to the three new tools added in October and November, we are currently looking to add more tooling in the coming months which will broaden our range and increase the percentage of product made by Coral Products Mouldings Ltd.
TatraRotalac Ltd is now formed due to the completed merger of our separate businesses of Tatra Plastics Manufacturing Ltd of Halifax and Rotalac Plastics Ltd of Wythenshawe. The newly merged entity is based at our Wythenshawe facility. The last of the production line moves was completed in September 2016. This gives us 18 extrusion lines under one roof giving opportunities of efficiency and capacity. During the transition there was minimal disruption to customers and continuity of sales numbers. We are yet to realise the full impact of the benefits of the move and look forward to the second half of the year.
Global One-Pak Ltd have worked through a volatile period for imports due to the currency effects post Brexit but have managed to pass on any increases to the customers in the main. However, there has been a time lag in being able to introduce these increases but we should be over this constraint in the second half. We are now looking to manufacture in house, some complimentary products for the Global One-Pak range such as bottles which will provide our customers with a one stop shop in this sector. There is a planned visit to China in February in order to look at the potential for purchasing assembly equipment and tooling which could produce our current range of products, manufactured out of our UK facilities.
We remain focused on our adherence to Health and Safety standards and maintaining the highest level of accreditation to the Quality standards appropriate to the products we supply. We have an on-going agenda to train and develop our employees to the benefit of all of our stakeholders.
Capital expenditure
Total capital expenditure in the first six months was £1,143,000 (2015: £985,000) of which £293,000 was spent on the integrated facilities at Wythenshawe and the balance expended on the continued improvements to the capabilities at Haydock which included a new 750 tonne injection moulding machine specifically for making the larger crates, trays and totes. We expect to continue investing in equipment which offers more automation, increased outputs and scrap reduction, in order to keep pace with our business winning and all of which improves shareholder value.
Financial position
The balance sheet asset position has improved further with our net assets standing at £13,787,000 (2015: £10,501,000). This represents a solid asset platform for developing the business. Reflecting higher cap ex and increased working capital requirements (latter due to increased activity, net debt rose to £5.2m to give a gearing ratio of 37% (24%).
Underlying EBITDA increased substantially to £1,413,000 (2015: £1,130,000). This has given the Group an improved platform to take the business forward with investment.
The Group had undrawn bank facilities of £1.0 million which, together with its asset based finance lines at 31 October 2016, enable it to invest internally or in further acquisitions and businesses for growth which will then enable better returns for our shareholders.
Dividends
It is the board's intention to pay an increased interim dividend of 0.33 pence per share (2015: 0.30p). The ex-dividend date and the record date for the interim dividend will be 19 January 2017 and 20 January 2017 respectively. The interim dividend will be paid on 1 March 2017. This continues to reflect our confidence in the recovery path and improvement this will bring to our results.
Outlook
Coral Products PLC continues to make good progress against our 2015 strategic plan. We have strengthened our position in injection moulding and extruded products whilst at the same time expanding our range of capabilities enhancing our market offering.
Results to date in the current financial year have been in line with the Board's expectations and, in spite of prevailing political uncertainties, we remain confident about the Group's future prospects.
Joe Grimmond
Chairman
8 December 2016
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the six months to 31 October 2016
|
Notes
| Six months to 31 October 2016 (unaudited)
| Six months to 31 October 2015 (unaudited)
| Year to 30 April 2016 (audited)
|
|
| £000 | £000 | £000 |
|
|
|
|
|
Revenue |
3 |
10,752 |
8,259 |
18,714 |
Cost of sales |
|
(7,246) | (5,410) |
(12,512) |
Gross profit |
| 3,506 | 2,849 | 6,202 |
Operating costs |
|
|
|
|
Distribution expenses |
| (427) | (313) | (863) |
Administrative expenses before separately disclosed items |
|
(2,049) |
(1,719) |
(3,690) |
Underlying operating profit |
| 1,030 | 817 | 1,649 |
Non-underlying items: |
|
|
|
|
Share based payment charge |
| (14) | (3) | (28) |
Amortisation of intangible assets |
| (174) | (36) | (118) |
Compensation for loss of office |
| - | - | (30) |
Acquisition costs |
| - | - | (67) |
Retirement costs of former directors |
| - | - | (418) |
Impairment loss on trade receivables |
| - | - | (50) |
Administrative expenses |
|
(2,237) |
(1,758) |
(4,401) |
Operating profit |
| 842 | 778 | 938 |
Finance expense |
| (124) | (94) | (180) |
Profit before taxation |
| 718 | 684 | 758 |
Taxation |
4 |
(55) |
(73) |
(15) |
Profit after taxation and total comprehensive income attributable to shareholders |
| 663 | 611 | 743 |
|
|
|
|
|
|
|
|
|
|
Earnings per ordinary share | 5 |
|
|
|
|
|
|
|
|
Basic and diluted (pence) |
| 0.80 | 1.00 | 1.12 |
Underlying basic (pence) |
| 1.03 | 1.06 | 2.20 |
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
At 31 October 2016
|
| 31 October 2016 (unaudited)
| 31 October 2015 (unaudited)
| 30 April 2016 (audited)
|
|
| £000 | £000 | £000 |
Non-current assets |
|
|
|
|
Goodwill |
| 5,495 | 4,768 | 5,495 |
Other intangible assets |
| 2,214 | 203 | 2,390 |
Property, plant and equipment |
| 7,293 | 6,010 | 6,517 |
Total non-current assets |
| 15,002 | 10,981 | 14,402 |
|
|
|
|
|
Current assets |
|
|
|
|
Inventories |
| 2,716 | 1,456 | 1,843 |
Trade and other receivables |
| 5,283 | 3,922 | 5,279 |
Cash and cash equivalents |
| 214 | 55 | 910 |
Total current assets |
| 8,213 | 5,433 | 8,032 |
Total assets |
| 23,215 | 16,414 | 22,434 |
|
|
|
|
|
Current liabilities |
|
|
|
|
Bank overdrafts and borrowings |
| (3,405) | (1,517) | (2,062) |
Trade and other payables |
| (3,360) | (2,894) | (3,914) |
Corporation tax |
| (233) | (119) | (140) |
Total current liabilities |
| (6,998) | (4,530) | (6,116) |
|
|
|
|
|
Non-current liabilities |
|
|
|
|
Borrowings |
| (1,960) | (1,321) | (2,122) |
Deferred taxation liability |
| (470) | (62) | (508) |
Total non-current liabilities |
| (2,430) | (1,383) | (2,630) |
Total liabilities |
| (9,428) | (5,913) | (8,746) |
Total net assets |
| 13,787 | 10,501 | 13,688 |
|
|
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
Share capital |
| 826 | 656 | 826 |
Share premium |
| 5,288 | 2,849 | 5,288 |
Other reserves |
| 1,061 | 443 | 1,061 |
Retained earnings |
| 6,612 | 6,553 | 6,513 |
Total equity |
| 13,787 | 10,501 | 13,688 |
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
For the six months to 31 October 2016 (unaudited)
| Share capital | Share premium | Other reserves | Retained earnings | Total equity |
| £000
| £000 | £000 | £000 | £000 |
At 1 May 2016 | 826 | 5,288 | 1,061 | 6,513 | 13,688 |
Total comprehensive income | - | - | - | 663 | 663 |
Credit for share based payment | - | - | - | 14 | 14 |
Dividend paid | - | - | - | (578) | (578) |
At 31 October 2016 | 826 | 5,288 | 1,061 | 6,612 | 13,787 |
For the six months to 31 October 2015 (unaudited)
| Share capital | Share premium | Other reserves | Retained earnings | Total equity | |
| £000
| £000 | £000 | £000 | £000 | |
At 1 May 2015 | 579 | 1,862 | 443 | 6,237 | 9,121 | |
Total comprehensive income | - | - | - | 611 | 611 | |
Issue of share capital |
77 |
987 |
- |
- |
1,064 | |
Credit for share based payment |
- |
- |
- |
3 |
3 | |
Dividend paid | - | - |
| (298) | (298) | |
At 31 October 2015 | 656 | 2,849 | 443 | 6,553 | 10,501 | |
For the year ended 30 April 2016 (audited)
| Share capital | Share premium | Other reserves | Retained earnings | Total equity |
| £000
| £000 | £000 | £000 | £000 |
At 1 May 2015 | 579 | 1,862 | 443 | 6,237 | 9,121 |
Total comprehensive income | - | - | - | 743 | 743 |
Issue of share capital | 247 | 3,426 | 618 | - | 4,291 |
Credit for share based payment | - | - | - | 28 | 28 |
Dividend paid | - | - | - | (495) | (495) |
At 30 April 2016 | 826 | 5,288 | 1,061 | 6,513 | 13,688 |
CONSOLIDATED STATEMENT OF CASH FLOWS
For the six months to 31 October 2016
| Six months to 31 October 2016 (unaudited)
| Six months to 31 October 2015 (unaudited)
| Year to 30 April 2016 (audited)
|
| £000 | £000 | £000 |
Cash flow from operating activities |
|
|
|
Profit for the period after tax | 663 | 611 | 743 |
Adjustments for: |
|
|
|
Depreciation | 367 | 306 | 678 |
Loss on disposal of fixed assets | - | 25 | 50 |
Intangibles amortisation | 176 | 43 | 133 |
Share based payment charge | 14 | 3 | 28 |
Taxation charge | 55 | - | 15 |
Interest payable | 124 | 94 | 180 |
Increase in inventories | (873) | (52) | (174) |
(Increase)/decrease in trade and other receivables | (4) | (68) | (455) |
(Decrease)/increase in trade and other payables | (554) | 354 | 658 |
UK corporation tax paid | - | - | (40) |
Net cash generated from operating activities | (32) | 1,316 | 1,816 |
|
|
|
|
Cash flow from investing activities |
|
|
|
Acquisition of subsidiary, net of cash | - | - | (2,402) |
Acquisition of property, plant and equipment | (1,143) | (785) | (1,668) |
Net cash used in investing activities | (1,143) | (785) | (4,070) |
|
|
|
|
Cash flow from financing activities |
|
|
|
Proceeds of issued share capital | - | 1,064 | 3,641 |
New loans raised | - | 200 | 1,150 |
Proceeds of new asset finance | 482 | 33 | 463 |
Repayment of director's loan | - | (200) | (200) |
Dividend paid | (578) | (298) | (495) |
Interest paid | (124) | (94) | (180) |
Repayments of bank borrowings | (204) | (197) | (666) |
Finance lease principal payments | (186) | (137) | (205) |
Net cash used in financing activities | (610) | 371 | 3,508 |
Net (decrease)/increase in cash and cash equivalents | (1,785) | 902 | 1,254 |
Cash and cash equivalents at the start of the period | (493) | (1,747) | (1,747) |
Cash and cash equivalents at the end of the period | (2,278) | (845) | (493) |
1. Basis of preparation
The financial information set out in this Interim Report does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. The Group's statutory financial statements for the year ended 30 April 2016, prepared under IFRS, have been filed with the Registrar of Companies.
The auditor's report on those financial statements was unqualified and did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006.
The interim financial information has been prepared in accordance with the recognition and measurement principles of International Financial Reporting Standards (IFRS) and on the same basis and using the same accounting policies as used in the financial statements for the year ended 30 April 2016.
The Interim Report has not been audited or reviewed in accordance with the International Standard on Review Engagement 2410 issued by the Auditing Practices Board.
2. Significant accounting policies
The accounting policies applied by the Group in these condensed consolidated interim financial statements are the same as those applied by the Group in its consolidated financial statements for the year ended 30 April 2016.
3. Revenue
All production is based in the United Kingdom. The geographical analysis of revenue is shown below:
| Six months to 31 October 2016 (unaudited) £000 | Six months to 31 October 2015 (unaudited) £000 | Year to 30 April 2015 (audited) £000 |
|
|
|
|
United Kingdom | 9,812 | 7,991 | 18,151 |
Rest of Europe | 538 | 268 | 408 |
Rest of the World | 402 | - | 155 |
| 10,752 | 8,259 | 18,714 |
|
|
|
|
Turnover by business activity |
|
|
|
Sale and manufacture of plastic products | 10,752 | 8,259 | 18,714 |
4. Taxation
The taxation charge for the six months to 31 October 2016 is based on the effective taxation rate, which is estimated will apply to earnings for the year ending 30 April 2016.The rate used is below the applicable UK corporation tax rate of 20% due to the utilisation of tax losses in the period.
5. Earnings per share
Basic and underlying earnings per ordinary share are calculated using the weighted average number of ordinary shares in issue during the financial period of 82,614,865 (31 October 2015: 62,118,164 and 30 April 2016: 66,238,090). The earnings used to calculate basic and diluted earnings per share are £663,000 (31 October 2015: £611,000 and 30 April 2016: £743,000). The earnings used to calculate underlying earnings per share are £841,000 (31 October 2015: £650,000 and 30 April 2016: £1,454,000).
| Six months to 31 October 2016 (unaudited)
| Six months to 31 October 2015 (unaudited)
| Year to 30 April 2016 (audited)
| |||
| £000 | p | £000 | p | £000 | p |
Basic and diluted earnings per ordinary share |
|
|
|
|
|
|
Profit for the period after tax | 663 | 0.80 | 611 | 1.00 | 743 | 1.12 |
Underlying earnings per ordinary share |
|
|
|
|
|
|
Underlying profit for the period after tax | 851 | 1.03 | 650 | 1.06 | 1,454 | 2.20 |
6. Reconciliation of net cash flow to movement in net debt
Net debt incorporates the Group's borrowings and bank overdrafts less cash and cash equivalents. A reconciliation of the movement in the net debt is shown below:
| Six months to 31 October 2016 (unaudited)
£000 | Six months to 31 October 2015 (unaudited)
£000 | Year to 30 April 2015 (audited)
£000 |
|
|
|
|
Net (decrease)/increase in cash and cash equivalents | (1,785) | 902 | 1,254 |
Decrease/(increase) in bank and other loans | 204 | 197 | (284) |
(Increase)/decrease in finance leases | (296) | 104 | (258) |
Decrease/(increase) in net debt in the financial period | (1,877) | 1,203 | 712 |
Opening net debt | (3,274) | (3,986) | (3,986) |
Closing net debt | (5,151) | (2,783) | (3,274) |
7. Forward looking statements
This announcement contains unaudited information and forward-looking statements that are based on current expectations or beliefs, as well as assumptions about future events. These forward-looking statements can be identified by the fact that they do not relate only to historical or current facts and undue reliance should not be placed on any such statements because they speak only as at the date of this document and are subject to known and unknown risks and uncertainties and can be affected by other factors that could cause actual results, and Coral's plans and objectives, to differ materially from those expressed or implied in the forward-looking statements. Coral undertakes no obligation to revise or update any forward-looking statement contained within this announcement, regardless of whether those statements are affected as a result of new information, future events or otherwise, save as required by law and regulations.