Coral Products Regulatory News (CRU)

8 Dec 2006 12:10

Coral Products PLC08 December 2006 CORAL PRODUCTS PLC 2006 Interim Results Coral Products PLC, one of Europe's leading manufacturers and suppliers of mediapackaging for DVD and CD, announces interim results for the six months ended 31October 2006. In his statement to shareholders the Chairman, Geoffrey Piper, said: "Trading for the first half of our financial year continued to be severelyaffected by lower margins resulting from higher raw material and energy prices.Sales are now returning to expected levels but competition remains fierce. Theprospect of lower raw material prices in 2007 and the introduction of newproducts should improve results. We are in a strong position to serviceanticipated increases in demand for DVD boxes arising from technologicaladvances." Summary Six months Six months Year ended ended ended 31 October 31 October 30 April 2006 2005 2006 Turnover £ 7.8m £ 9.3m £ 16.4m Pre-tax (loss)/profit £ (833,000) £ 3,000 £ (977,000) EBITDA £354,000 £1,220,000 £1,467,000 (Loss)/earnings per share (2.90)p 0.01p (3.63)p Dividend NIL NIL NIL • DVD box sales continued to increase, albeit at lower prices and margins.• CD case volumes remain at expected levels.• New product lines to extend range of DVD and CD cases.• Reduced margins due to high raw material and energy price increases. Regarding prospects for the current year, Geoffrey Piper added: "We are now seeing some improved levels of trading and anticipate sales of newproducts in 2007." Enquiries: Coral Products PLC Tel: 01942 272 882 Warren Ferster, Managing Director Stephen Fletcher, Finance Director/Company Secretary CHAIRMAN'S STATEMENT Trading for the first half of our financial year continued to be severelyaffected by lower margins resulting from higher raw material and energy prices.Sales are now returning to expected levels but competition remains fierce. Theprospect of lower raw material prices in 2007 and the introduction of newproducts should improve results. We are in a strong position to serviceanticipated increases in demand for DVD boxes arising from technologicaladvances. Raw material prices have continued to increase and this has had an adverseimpact upon margins within a very competitive market. We expect these prices toease next year which should facilitate increases in profitability. Sales of DVD boxes improved during the period, although the rate of growth wasreduced. CD case sales remained at expected levels but margins have beenconstantly eroded. There were negligible sales of other products in this periodalthough this should improve in the second half. We continue to extend our range of DVD products including the addition ofslim-line boxes and cases adapted for children. These complement our existingproducts and enable us to supply customers with a wider product range. After lengthy efforts we have now obtained a supply agreement for a product forthe medical industry. Our continuing aim is to manufacture other new products toreduce our dependency upon media based boxes. Trading Turnover for the six months ended 31 October 2006 was £7.8 million (2005: £9.3million) and the pre-tax loss was £833,000 (2005:profit £3,000). Diluted lossper ordinary share was 2.90p (2005:earnings 0.01p). Interim Dividend No interim dividend has been declared (2005: nil) for the period to 31 October2006. Prospects We are now seeing some improved levels of trading and anticipate sales of newproducts in 2007. The margins attained to date have not been adequate to supportthe business in the long-term but it is expected that these will improve in2007. It will be a slow process to return to satisfactory levels ofprofitability but, with the prospect of better market conditions and additionalproducts, we are confident that the required progress can be achieved. Geoffrey Piper8 December 2006 Income Statement - (unaudited) Notes Half year to Half year to Year tofor the half year to 31 31 October 31 October 30 AprilOctober 2006 2006 2005 2006 £'000 £'000 £'000Continuing operations ----------- ----------- ---------- Revenue (2) 7,785 9,298 16,360Cost of sales (5,846) (6,460) (12,823) -------- -------- ---------Gross profit 1,939 2,838 3,537 Operating expenses (2,703) (2,734) (4,306) -------- -------- --------Operating (loss)/profit (764) 104 (769) Exchange gain on financeleases receivable 16 - 28Interest payable (85) (101) (236) ------ ------- -------(Loss)/profit before taxation (833) 3 (977)Taxation (3) 250 (1) 246 ------ ------- -------Loss/(profit) for thefinancial period (583) 2 (731) ------ ------- ------- Basic (loss)/earnings pershare (4) (2.90)p 0.01p (3.63)p --------- --------- --------Diluted (loss)/earnings pershare (4) (2.90)p 0.01p (3.63)p --------- --------- -------- All activities derive from continuing operations. Statement of Changes in Shareholders' As at As at As atEquity - (unaudited) 31 October 31 October 30 April 2006 2005 2006 £'000 £'000 £'000 -------- -------- --------Equity at start of the period 10,435 11,175 11,242(Loss)/profit for the period (583) 2 (731)Share based payment charge - - (5) --------- --------- ---------Equity at end of the period 9,852 11,177 10,435 --------- --------- --------- Balance Sheet - (unaudited) As at As at As atas at 31 October 2006 31 October 31 October 30 April 2006 2005 2006 £'000 £'000 £'000ASSETS ----------- ----------- -----------Non-current assetsIntangible assets 359 397 383Property, plant and equipment 11,780 13,131 12,560 --------- ---------- ---------Total non-current assets 12,139 13,528 12,943 --------- ---------- --------- Current assetsInventories 1,372 1,814 1,687Trade and other receivables 5,091 6,023 3,308Cash and cash equivalents - - 36Taxation - - 88 ----------- ----------- -----------Total current assets 6,463 7,837 5,119 ----------- ----------- ---------- LIABILITIES Current liabilities Financial liabilities - borrowings 2,139 3,278 1,659Trade and other payables 4,057 4,534 2,859Current tax payable - 128 - --------- ---------- ----------Total current liabilities 6,196 7,940 4,518 --------- ---------- ---------- Non current liabilitiesFinancial liabilities - borrowings 1,450 836 1,774Deferred tax liabilities 1,104 1,412 1,335 ---------- ---------- ----------Total non-current liabilities 2,554 2,248 3,109 ---------- ---------- ---------- Net assets 9,852 11,177 10,435 ---------- ---------- -----------Equity Share capital 201 201 201Share premium 4,558 4,558 4,558Other reserves 27 7 27Retained earnings 5,066 6,411 5,649 ----------- ----------- -----------Total shareholders' equity 9,852 11,177 10,435 ----------- ----------- ----------- Cash Flow Statement - (unaudited) Half year to Half year to Year tofor the half year to 31 October 2006 31 October 31 October 30 April 2006 2005 2006 £'000 £'000 £'000 --------- -------- --------Cash inflow from operating activities(note 5) 86 559 1,922 Interest paid (49) (89) (119)Interest on finance lease rentals (20) - (89)Income taxes received/(paid) 107 - (34) ---------- --------- --------Net cash from operating activities 124 470 2,854 ---------- --------- --------- Cash flows from investing activitiesPurchases of intangible assets - - (9)Proceeds from disposal of plant andequipment - - 40Purchases of property, plant andequipment (316) (1,485) (2,009) ---------- ---------- ---------Net cash used in investing activities (316) (1,485) (1,978) ---------- ---------- ---------Cash flows from financing activitiesNet proceeds from new bank loans 113 895 1,131Proceeds of new asset finance - 942 1,614Repayment of bank loans (212) (73) (485)Finance lease principal payments (444) (600) (1,032) ---------- ---------- ---------Net cash (used in)/generated fromfinancing activities (543) 1,164 1,228 ---------- ---------- --------- Net (decrease)/increase in cash andcash equivalents (735) 149 930 Cash and cash equivalents at start ofperiod (510) (1,440) (1,440) --------- ---------- --------- Cash and cash equivalents at end ofperiod (1,245) (1,291) (510) --------- ---------- --------- Notes to the Interim Financial Statements 1. Basis of preparation This interim report, including comparative data, has been prepared in accordance with International Financial Reporting Standards (IFRS) in issue that are either adopted by the EU and effective at 31 October 2006. The Interim Financial Statements have been prepared in accordance with the listing rules of the Financial Services Authority and do not constitute financial statements as defined in section 240 of the Companies Act 1985. The results for the 6 months ending 31 October 2005 and 2006 are unaudited. The results for the year ended 30 April 2006 have been extracted from the Financial Statements for that period, which were filed with the Registrar of Companies and on which the auditors gave an unqualified report when did not contain a statement under sections 237(2) and (3) of the Companies Act 1985. The principal accounting policies applied in the preparation of this interim report are consistent with those set out in the 2006 Annual Report and Financial Statements. A summary of the company's principal accounting policies is set out below Segmental reporting The Directors consider the Company's operations as one business segment and that it operates in one geographical segment. Revenue recognition Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods and services provided in the normal course of business, net of discounts, VAT and other sales related taxes. Sales of goods are recognised when goods are shipped and title has passed. Leasing Leases are classified as finance leases whenever the terms of the lease transfer substantially all of the risks and rewards of ownership to the lessee. Assets held under finance leases are capitalised as tangible fixed assets in the balance sheet and are depreciated over the useful economic life of the asset. All other leases are classified as operating leases. Rentals payable under operating leases are charged to income on a straight-line basis over the term of the relevant lease. Foreign currencies Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at the dates of the transactions. At each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date. Gains and losses arising on translation are included in the profit and loss account for the period. Employee benefits The company contributes to defined contribution pension schemes and the pension charge represents the amount payable for that period. Taxation Current tax is provided at amounts expected to be paid (or recovered) using the tax rates that have been enacted at the balance sheet date. Deferred tax is provided in full, using the liability method, in temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the Financial Statements. Deferred tax is determined using tax rates that have been enacted by the balance sheet date and are expected to apply when the deferred tax liability is settled. Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. Property, plant and equipment Property, plant and equipment are stated at cost less accumulated depreciation and any recognised impairment losses. Depreciation is charged so as to write off the cost of the assets over their estimated useful lives, using the straight-line method, on the following bases: Moulds - 10-25% Plant and machinery - 10% Fixtures and fittings - 10-33% Freehold land and buildings - 2% The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is recognised as income. Intangible assets Intangible assets comprise licence fees paid in advance for the use of trade marks and technology. Such assets are defined as having finite useful lives and the costs are amortised on a straight-line basis over their estimated useful lives which is the period of the licence. Intangible assets are reviewed for impairment whenever there is an indication that the carrying value may be impaired. Inventories Inventories are stated at the lower of cost and net realisable value. The cost of finished goods manufactured includes appropriate materials, labour and production overhead expenditure. Net realisable value is the estimated selling price less the costs of disposal. Provision is made to write down obsolete or slow-moving inventory to their net realisable value. Cash and cash equivalents Cash and cash equivalents comprise cash and bank balances together with bank overdrafts that are repayable on demand. Derivatives Financial instruments are used to hedge the company's exposure to foreign exchange and interest rate risk. The company uses forward currency contracts and interest rate swaps to reduce exposure and these are stated in the balance sheet at fair value. The fair value of interest rate swaps is the estimated amount that would be paid or received to terminate the derivative. The company does not enter into speculative financial instruments. Share related payments The fair value of equity settled share based payments to employees is determined at the date of grant and is expensed on a straight-line basis over the vesting period based on the Company's estimate of shares or options that will eventually vest. In the case of options granted, fair value is measured by a Black-Scholes pricing model. 2. Revenue All production is based in the United Kingdom. The geographical analysis of revenue is shown below: Half year to Half year to Year to 31 October 31 October 30 April 2006 2005 2006 £'000 £'000 £'000 ----------- ----------- -------- United Kingdom 6,163 7,766 13,345 Rest of Europe 1,622 1,532 3,015 ----------- ----------- ---------- 7,785 9,298 16,360 Turnover by business ----------- ----------- ----------- activity: Media packaging 7,785 9,298 16,360 ----------- ----------- ----------- 3 Taxation The charge or credit for taxation on the (loss)/profit for the period is charged at 30% being the estimated effective rate for the full financial year. 4 (Loss)/earnings per share The calculation of basic (loss)/earnings per share is based on the (loss)/ profit for the period available to shareholders of £(583,000) (2005:profit £2,000) and on 20,135,609 (2005: 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 20,295,787 (2005: 20,295,787). 5 Cash flow from operating activities Half year to Half year to Year to 31 October 31 October 30 April 2006 2005 2006 £'000 £'000 £'000 Operating (loss)/profit for the (764) 104 (769) period Profit on disposal of plant and - - (40) equipment Depreciation of property, plant 1,096 1,097 2,179 and equipment Amortisation of intangible 24 21 57 assets Share based payments - - (5) Decrease in inventories 315 1,042 1,169 (Increase)/decrease in trade and (1,783) (1,689) 1,026 other receivables Increase/(decrease) in trade and 1,198 1,036 (1,695) other payables --------- --------- --------- Cash flow from operating (3,589) (4,114) (3,397) activities --------- --------- -------- 6 Reconciliation of net cash flow to movement in net debt Half year to Half year to Year to 31 October 31 October 30 April 2006 2005 2006 £'000 £'000 £'000 Net (decrease)/increase in cash (735) 149 930 and cash equivalents Net proceeds from issue of new (113) (895) (1,131) bank loans Repayment of bank loans 212 73 485 Proceeds of new asset finance - (942) (1,614) Finance lease principal payments 444 600 1,032 --------- -------- ---------- Movement in net debt for the (192) (1,015) (298) period Net debt at beginning of period (3,397) (3,099) (3,099) --------- --------- -------- Net debt at end of period (3,589) (4,114) (3,397) --------- --------- -------- 7 Interim report The interim report will be posted to all shareholders on 11 December and will be made available on the company's website at www.coralproducts.com and at the company's registered office at North Florida Road, Haydock Industrial Estate, Haydock, Merseyside WA11 9TP. 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