Synergia Energy Regulatory News (SYN)

Plastics Capital plc

("Plastics Capital", the "Company" or the "Group")

Interim Results for the six months ended 30 September 2010

Plastics Capital plc (AIM: PLA) the niche plastics products manufacturer, today announces its interim results for the six months ended 30 September 2010.

The consolidated financial information has been prepared using International Financial Reporting Standards as adopted by the EU ("IFRS").

Financial highlights

*Based on 27.4m shares currently in issue

Operational highlights

·; Strong turnover growth driven by new business wins;

·; Volumes almost returned to levels before the economic crisis;

·; Improved new business activity helped by global economic recovery;

·; Good profitability in all Group subsidiaries;

·; Geographic expansion continues;

o international sales represent 62% of total

o direct sales presence established in India and China;

Commenting on these results, Faisal Rahmatallah, Executive Chairman, said:

"These results reflect the significant success of the Group in winning new business over the last 18 months as well as recovery since the economic crisis. Cash flow has been strong and bank debt has reduced significantly. We are confident that our continued focus on developing new accounts, new products and on expanding into new territories will lead to excellent organic growth this year and beyond."

Notes to Editors

Plastics Capital is a consolidator of plastics products manufacturers focused on proprietary products for niche markets. The Group has four factories in the UK, one in Thailand and sales offices in the USA, Japan, India and China. Approximately 62 per cent of sales are outside the UK going to over 70 countries worldwide. Production is concentrated in the UK where significant engineering know-how and automation underpins the Group's competitiveness. The Group has approximately 290 employees.

Further information can be found on www.plasticscapital.com

Chairman's Statement

Financial Review

Overall performance is in line with expectations with good profitability in all Group subsidiaries.

Compared to the same period last year, on a statutory accounting basis the Group has:

·; increased revenue by 27% to £16.3 million - 62% of revenue is represented by international sales;

·; increased earnings before interest, tax, depreciation and amortisation (EBITDA), by 30% to £2.7 million;

·; increased profit before tax by 40% to £2.1m; and

·; increased basic earnings per share (EPS) by 45% to 7.0p.

The strong improvement in profitability reflects two key factors: first, excellent volume growth resulting from new business wins and the economic recovery; and second, the absence of exceptional costs that impacted the Group last year in the immediate aftermath of the economic crisis.

The Group benefited in H1 09/10 from a particularly favourable $/£ exchange rate. On a constant $/£ currency basis ($/£1.64), the underlying profitability improvement is extremely strong. Underlying profitability excludes amortisation, exceptionals and unrealised foreign exchange gains/losses and applies a 28% charge for corporation tax. On an underlying basis, the Group has:

·; increased earnings before interest, tax, depreciation and amortisation (EBITDA) by 37% to £2.8m,

·; increased profit before tax by 89% to £1.8m; and

·; increased earnings per share by 85% to 4.6p.

These improvements highlight the excellent progress made over the last twelve months.

Operating cash flow has continued to be strong. EBITDA of £2.7m has converted into operating cash flow of £2.3m, equating to 85% cash conversion over the half year. This high level of cash conversion highlights excellent working capital management over the half year and the relatively low capital intensity of our businesses.

Net bank debt has meanwhile reduced by 19% to £14.3m, benefiting not only from the cash conversion set out above, but also from the weakening of the euro, which has reduced the value of the Group's euro denominated loans. Now less than 2.7 times annual run-rate EBITDA and reducing, the Group's debt is much less significant than it was 12 months ago.

Volume Growth

New customers and the introduction of new products have contributed to a 21% year-on-year volume increase and a 27% increase in turnover. The percentage difference between volume and value of sales is primarily accounted for by the "pass-through" of raw material price increases that have been a feature of the market in the last six months.

The most pleasing and significant driver of the volume growth achieved in H1 10/11 is that 52% of the increase arises from net new business won over the last eighteen months. During the global downturn, the Group's sales resource was strengthened so contributing to 18 major new account wins over the last 18 months. Our sales teams have been significantly expanded and restructured through the recession and this is having a major impact on our ability to generate leads and convert prospects into new customers.

In aggregate, volumes are now almost back to the level that applied to the period before the economic crisis impacted with new business activity being helped by the global economic recovery. For our businesses, the recovery has not been smooth but has displayed quarters of very significant growth followed by quarters where the recovery appears to have stalled.

Raw Materials

The half year under review has seen upward pressure on raw material prices for both the engineering and commodity grades. This has been caused by stock shortages rather than issues relating to the oil price. In general, price increases have been modest and have been contained by effective management and by the fact that raw materials are a relatively small percentage of our cost structure.

The key exception has been polyethylene, which is used by our specialist film packaging business ("Palagan"), and for which prices increased last year and continued to do so at the beginning of the half year before stabilising towards the end of the half year. Margins had deteriorated during the last financial year due to the delay between input price increases being received and sales price increases being implemented. A large part of this margin erosion has now been recovered during H1 10/11 as input prices have stabilised. There is, however some evidence that further input price pressure will apply from now until the year end, which may lead to continued margin pressure in this business.

Currency

Compared to the pre-crisis environment, Sterling has remained relatively weak throughout the half year. Because of our export focus, Sterling's weakness is helpful to the Group's trading. Our key trading exposure is to the US Dollar and our key balance sheet exposure is to the Euro, as approximately 50% of our debt is denominated in Euros.

For the half year under review, the US Dollar achieved an average rate of 1.64 compared to the corresponding prior year, when an average rate of 1.47 prevailed. As indicated above, this reduced the profit improvement for H1 10/11 compared to H1 09/10 by approximately £0.7m. As for the Euro, the currency weakened from 1.12 at the end of March 2010 to 1.15 at the end of September 2010, leading to a £0.3m unrealised gain on our Euro denominated debt.

Our hedging policy remains as set out in the past - we seek to ensure that realised gains/losses made in the businesses during the year from foreign exchange movements are broadly negated by the realised gains/losses on forward contracts and foreign currency loans repaid during the year. This hedging policy enables us to achieve a higher level of predictability of earnings and cash flow, despite currency volatility, at least over a 12-18 month window.

We have hedged forward for the remainder of this financial year and for FY 11/12. For the remainder of this financial year we are hedged at US/£ 1.64, and for FY 11/12 the rate is better at US$/£ 1.51. This will, of course, help next year's profits relative to the current year.

Banking

Our net bank debt decreased to £14.3m at the end of H1 10/11. It has reduced by nearly £6m in the last year and a half, primarily due to strong cash generation. Since the end of the half year under review, we have concluded a sale and leaseback of the property occupied by Palagan, so realising £1.3m in cash. Meanwhile, cash flow has continued to be strong. Working capital management has been very good over the last six months despite the growth in volumes.

Our debt is now reducing to a level at which it will be sensible to consider a refinancing to provide us with terms that are more attractive than those currently in place. This will be explored in coming months.

Current trading and future prospects

Trading continues to improve, albeit more gradually than the past twelve months and it is pleasing to report that our order books are healthy. Many of the new customers won in the first half of the year will take months to reach full volume levels. We therefore expect the volume trends that we have seen over the last twelve months to continue in the near term.

The Thailand factory is progressing well and is now making more than 50% of all bearings and this is increasing. Our first direct Thai customer has been secured and the factory is now serving the west coast of the USA. For our matrix and our mandrels businesses, capacity has been expanded or is in the process of expansion.

As we move into the second half of the year, we continue to focus on the following organic growth themes:

·; Customer development - our businesses have many excellent blue chip customer relationships based on the technical advantages of our products, but frequently only in one customer location or operating unit; the sales development opportunities associated with penetrating more of these locations and/or subsidiaries is absolutely outstanding. Our enlarged and improved sales teams are pursuing this strategy forcefully targeting multinational customers around the world.

·; Territorial expansion - we have established sales offices in India and China with the intention of setting up local subsidiaries; these are markets, where growth rates for the applications into which our products are applied are growing at double digit rates. Our matrix and bearings businesses are leading the way in these areas. Direct sales into other new territories where there is significant potential are also ongoing.

·; New products - all our subsidiaries have opportunities for "near-to-market" product developments that will open up new customers and applications; work is ongoing in all subsidiaries to bring these developments to market as soon as practical.

Acquisition activity has been off the agenda in the last two years, although we can see this is changing. Some vendors with whom we had discussions before the recession have made contact again. The common theme is that they are "examining their options" now that the worst of the recession has passed. It will be difficult to execute any acquisitions unless valuations are realistic and funding options improve. However, it seems likely that funding conditions will gradually improve and valuations will come into line. We believe, therefore, that there is a good possibility that acquisitions will be back on the agenda in the next year or so and, in the meantime, we look forward to continued excellent progress through organic means.

Faisal Rahmatallah

Executive Chairman

Plastics Capital plc

Consolidated Income Statement

for the six months ended 30 September 2010

Plastics Capital plc

Consolidated Income Statement (continued)

for the year ended 31 March 2010

Plastics Capital plc

Consolidated Balance Sheets

Plastics Capital plc

Consolidated Cash Flow Statements

Plastics Capital plc

Consolidated statement of changes in equity

1 Basis of preparation and accounting policies

Basis of preparation

The interim financial information has been prepared on the basis of the recognition and measurement requirements of adopted IFRSs as at 30 September 2010 that are effective (or available for early adoption) as at 31 March 2011. Based on these adopted IFRSs, the directors have applied the accounting policies, as set out below, which they expect to apply to the annual IFRS financial statements for the year ending 31 March 2011.

However, the adopted IFRSs that will be effective (or available for early adoption) in the annual financial statements for the period ending 31 March 2011 are still subject to change and to additional interpretations and therefore cannot be determined with certainty. Accordingly, the accounting policies for that annual period will be determined finally only when the annual financial statements are prepared for the period ending 31 March 2011.

Accounting policies

The accounting policies applied to the Interim Results for six months ended 30 September 2010 are consistent with those of the Company's annual accounts for the year ended 31 March 2010 with the exception of the items noted below:

·; Amendments to IFRS3 - Business Combinations - issued in May'10 and effective for annual periods beginning on or after 1 July 2010

·; Amendments to IAS 27 - Consolidated and Separate Financial Statements - issued in May 2010 and effective for annual periods beginning on or after 1 July 2010

Going concern

The Financial Reporting Council issued "Going Concern and Liquidity Risk: Guidance for Directors of UK Companies" in October 2009 and the Directors have considered this when preparing the financial statements. These have been prepared on a going concern basis and the Directors have taken steps to ensure that they believe the going concern basis of preparation remains appropriate.

2 Reconciliation of financial highlights table to the consolidated income statement

* excluding amortisation, exceptional costs, unrealised foreign exchange translation and unrealised derivative gains/losses

+ based on 27,492,532 ordinary shares in issue

X applying a 28% tax rate

3 Operating segment information

The following summary describes the operations in each of the Group's reportable segments:

·; Printing and Packaging - includes creasing matrix and films

·; Power Transmission - includes hose mandrel and plastic bearings

3 Operating segment information(continued)

Reconciliation of reportable segment revenue

Reconciliation of reportable segment profit

4 Exceptional items

Exceptional costs incurred in the period relate to the write-off of stock on the restructuring / integration of businesses and the restructuring costs associated with moving some production to the Thai factory.

5 Financial income and expenses

The net foreign exchange (gains) represent unrealised (gains) arising on the translation of foreign currency loans back into Sterling.

6 Taxation

The taxation charge is calculated by applying the Directors' best estimate of the annual tax rate for the profit/(loss) for the period.

7 Dividends

The Directors do not recommend the payment of an interim dividend (30 September 2009: nil).

8 Earnings per share

9 Post balance sheet event

On 25 October 2010, Plastics Capital completed on a sale and leaseback agreement with JLW Properties Limited relating to the Group's property at Gilpin Street and Tavistock Street in Dunstable where Palagan, a Group subsidiary which manufactures high strength customised films, is based. The consideration received in cash by the Group was £1.3 million with the Group entering into a 15 year lease, with five yearly rent reviews. The commencing rent will be £120,000 per annum.

10 Accounts

Copies of the interim accounts may be obtained from the Company Secretary at the Registered Office of the Company: St Mary's House, 42 Vicarage Crescent, London, SW11 3LD.