Final Results
Coral Products PLC
28 August 2007
Released 28/08/2007
CORAL PRODUCTS PLC
2007 Preliminary Results
Coral Products PLC, one of Europe's leading manufacturers and suppliers of media
packaging for DVD and CD, announces its preliminary results for the year ended
30 April 2007.
Commenting upon the Company's trading Geoffrey Piper, Chairman of Coral, said:
'Trading was extremely difficult during the year with demand for media products
suffering from over-capacity throughout the industry. There was, in particular,
a marked decline in demand for CD products and, although sales volumes held up
for DVD, the margins were again adversely affected by high raw material prices.'
Summary Results (unaudited)
Year ended Year ended
30 April 2007 30 April 2006
• Turnover £14.3m £16.4m
• Operating loss £(2.09)m £(0.77)m
• Loss per share - basic (7.43)p (3.63)p
• Loss per share - diluted (7.43)p (3.63)p
• Total dividend NIL NIL
• Net assets per share 44p 52p
Regarding prospects for the current year, Mr. Piper added:
'Trading remains tough but we are now seeing some results of our efforts to
diversify away from media products and we expect that these measures will result
in improvements in the medium term. The media product industry now faces serious
demand problems and we are, therefore, focusing attention on attaining new
business in other product areas.'
Enquiries:
Coral Products PLC Tel: 01942 272 882
Warren Ferster, Managing Director
Stephen Fletcher, Finance Director
CHAIRMAN'S STATEMENT
Turnover for the year ended 30 April 2007 amounted to £14.3 million compared to
£16.4 million last year. Operating loss for the year was £2,090,000 compared
with a loss of £769,000 last year. After interest charges of £126,000 (2006:
£208,000) the loss before tax was £2,216,000 (2006: loss of £977,000).
Shareholders' funds at 30 April 2007 amounted to £8.9 million (2006: £10.4
million), namely 44p per share (on an undiluted basis)- (2006: 52p).
Dividend
Your directors are not recommending any dividend for the year (2006: nil).
Trading
Trading was extremely difficult during the year with demand for media products
suffering from over-capacity throughout the industry. There was, in particular,
a marked decline in demand for CD products and, although sales volumes held up
for DVD, the margins were again adversely affected by high raw material prices.
During the year we obtained contracts for trade moulding of household products.
Sale and Leaseback of Haydock property
Your Board announced on 14 August that the Company has entered into a
conditional agreement to sell the freehold interest in the Company's property.
The Company will concurrently enter into a lease of the production are and main
warehouse enabling it to continue to fully operate. The particulars of this
contract were contained in the Circular to shareholders on 24 August 2007.
Under this proposal, the Company will sell the property for cash consideration
of £3m of which £250,000 will be held in escrow as a rental deposit for the
duration of the Company's occupation of the property.
In view of the size of the disposal relative to the market capitalisation of the
Company, the disposal is conditional upon the approval of shareholders which
will be sought at the Extraordinary Meeting scheduled on 12 September 2007.
If the disposal is not approved or does not complete and the sale proceeds are
not received the Board would have to address the Company's financing
requirements in other ways, such as finding an alternative purchaser for the
property, arranging additional borrowing facilities or seeking new equity
investment.
The Board is confident that alternative purchasers could be found but this could
take several months during which period the Company would be reliant on the
continuation of its present facilities and recently accepted invoice discounting
facilities.
Cash Flow
The recent trading losses have reduced the Company's cash resources and
borrowing capacity. This led your Board to consider the Company's ability to
service its debts and finance its working capital requirements. Its financial
projections indicate that the working capital needs of the business could exceed
its present facilities by the end of September 2007. Rather than remaining
dependent on the continuing availability of bank overdrafts that are repayable
on demand, the Company sought alternative finance, resulting in an offer of
Invoice Discounting facilities being accepted.
It is the nature of invoice discounting that the facility fluctuates in line
with business activity and the use of such facilities does not give the Company
as much freedom of action to develop into new markets as would be the case if it
sold the property and had surplus cash balances to employ as the board sees fit.
The decision to sell the property would, if approved, lead to the repayment of
all the Company's bank borrowing and leave it with a cash surplus. At the same
time a leaseback of the production facility and main warehouse will enable it to
continue its operations. The Company already rents a warehouse facility, which
has recently been empty, close to the factory and will have enough space to
manage without two storage areas, which will not be leased back.
The disposal is expected to generate net cash proceeds of approximately £2.5m
after estimated transaction costs and the retention of a rental deposit.
Current Trading and Future Prospects
The Directors issued an unaudited trading update to shareholders on 23 March
2007, based on management accounts. This stated 'Trading has remained difficult
and the improvement we saw towards the end of 2006 has not been maintained in
2007.
Volumes in media based packaging have reduced and margins have continued to be
affected by discounted selling prices and increases to the cost base.
Consequently the trading account for the year to April 2007 will result in a
loss. We are presently moving into other markets where we consider the future to
be more predictable.'
The media markets continue to be under strain with lower margins resulting from
market over-capacity. As a result, the Company is developing and seeking out new
relationships in other markets and has a clear strategy for moving forward.
Since the publication of the above trading statement in March 2007, raw material
prices (mainly plastics) have continued to rise. However, there are indications
that raw material prices may stabilise. The Company has been revising its
selling prices upwards in response to increased raw material prices and
anticipates that its customers will accept this. Furthermore the Company
obtained new contracts for storage boxes and has developed a sub-contracting
relationship with a local company both of which are expected to increase its
sales. These new operations are at better margins than existing products. The
future prospects look somewhat better and the Board expects that by the end of
this financial year it will have a much better outlook.
Trading remains tough but we are now seeing some results of our efforts to
diversify away from media products and we expect that these measures will result
in improvements in the medium term. The media product industry now faces serious
demand problems and we are, therefore, focusing attention on attaining new
business in other product areas.
Auditors Report
We have been informed by the auditors that their Report on the Financial
Statements for the year ended 30th April 2007 is expected to contain a statement
of emphasis of matter in respect of the going concern position of the company.
This is based solely on the uncertainty over the approval for and completion of
the disposal and leaseback of the freehold property scheduled for September
2007. The audit opinion is not qualified in this respect.
Geoffrey Piper
Chairman
28 August 2007
MANAGING DIRECTOR'S REVIEW OF OPERATIONS
The year to 30th April 2007 was again tough with the media industry continuing
to suffer from over-capacity. Raw material prices remained high and we were
unable to increase selling prices in the competitive market without losing
trade. As a consequence, turnover decreased by 13% to £14.3 million and the
company incurred an operating loss of £2.09m compared to an operating loss of
£0.77m last year.
We have taken steps to seek out alternative markets and have recently been
successful in obtaining substantial work in trade moulding of household
products. This business gives us greater margins and has a more favourable
outlook than media products where the CD market, in particular, has suffered
significantly in the past 12 months. Furthermore, we already have in place the
machinery and expertise to operate in markets for a broad range of products
without the need to spend on capital equipment or training programmes. We are
also accredited with ISO 9001 and are well placed to seek working partnerships
over trade-moulded products.
DVD box sales again increased in volume terms and this market continues to grow,
albeit at a slower rate. Sales of our Red Tag security box, which is held under
licence, should further increase as the format continues to become adopted by
retailers.
CD case sales, however, were significantly lower than both expected levels and
the previous year. This market is now suffering from moves to digitised media
and has fallen significantly in the past year. Margins were also under pressure
from continued increases in raw material costs. We are still looking to attract
new business and support our existing customers whilst taking steps to remove
our over-capacity in production by converting some machines to new business
areas.
Whilst the recent period has undoubtedly been very difficult for both the media
product industry, and ourselves recent developments have enabled us to remain
positive and committed to our future. We realise that these new trading
relationships will only develop over time but we have had positive feedback from
our new partners and expect demand for our products to continue to rise. We
expect that trading conditions will also improve slowly in the DVD case market
but that the reduced volumes for CD will continue at a much slower rate of
decline than that witnessed most recently.
I would like to express my gratitude to our staff and management for their
dedication and effort throughout the year. We have been through a tough period
but the commitment shown to move the business forward and continue to deliver
good quality products in a timely manner has never wavered.
Warren Ferster
Managing Director
28 August 2007
On 28 August 2007, the directors of Coral Products PLC approved the following
statements of the unaudited preliminary results of the company for the financial
year ended 30 April 2007.
Profit and Loss Account
for the year ended 30th April 2007
2007 2006
Notes £'000 £'000
(unaudited) (audited)
Continuing operations
Revenue 14,291 16,360
Cost of sales (12,352) (12,823)
------------------------------------
Gross Profit 1,939 3,537
------------------------------------
Operating costs
Distribution costs (504) (585)
Administrative expenses (3,525) (3,721)
------------------------------------
Operating loss (2,090) (769)
Interest payable (126) (208)
Interest receivable - -
------------------------------------
Loss before taxation (2,216) (977)
Taxation 3 720 246
------------------------------------
Loss for the financial year (1,496) (731)
Loss per share
Basic 4 (7.43)p (3.63)p
------------------------------------
Diluted 4 (7.43)p (3.63)p
------------------------------------
Statement of Changes in Shareholders' Equity
for the year ended 30th April 2007
2007 2006
£'000 £'000
(unaudited) (audited)
------------------------------------
Opening equity 10,435 11,171
------------------------------------
Loss for the financial year (1,496) (731)
------------------------------------
Total recognised expense for the year (1,496) (731)
Share based payment charge (15) (5)
Changes in equity in the year (1,511) (736)
------------------------------------
Closing equity 8,924 10,435
------------------------------------
Balance Sheet
as at 30th April 2007
2007 2006
£'000 £'000
(unaudited) (audited)
ASSETS
Non-current assets
Intangible assets 339 383
Property, plant and equipment 10,831 12,560
------------------------------------
11,170 12,943
------------------------------------
Current assets
Inventories 1,407 1,687
Trade and other receivables 3,303 3,308
Cash and cash equivalents - 36
Current tax assets 35 88
------------------------------------
4,745 5,119
------------------------------------
LIABILITIES
Current liabilities
Financial liabilities - borrowings 2,503 1,659
Trade and other payables 2,918 2,859
------------------------------------
5,421 4,518
------------------------------------
Net current (liabilities)/assets (675) 601
Non-current liabilities
Financial liabilities - borrowings 905 1,774
Deferred tax liabilities 665 1,335
------------------------------------
1,570 3,109
------------------------------------
NET ASSETS 8,924 10,435
------------------------------------
SHAREHOLDERS' EQUITY
Ordinary shares 201 201
Share premium 4,558 4,558
Other reserves 12 27
Retained earnings 4,153 5,649
------------------------------------
TOTAL SHAREHOLDERS' EQUITY 8,924 10,435
------------------------------------
Cash Flow Statement
for the year ended 30th April 2007
2007 2006
£'000 £'000
(unaudited) (audited)
Cash inflows from operating activities
Operating loss (2,090) (769)
Profit on disposal of property, plant and equipment (43) (40)
Depreciation of property, plant and equipment 2,144 2,179
Amortisation of intangible assets 50 57
Share based payments (15) (5)
Decrease in inventories 280 1,169
Decrease in trade and other receivables 5 1,026
Increase/(decrease) in trade and other payables 59 (1,695)
------------------------------------
Cash generated from operations 390 1,922
------------------------------------
Bank and loan interest paid (108) (119)
Interest element of finance lease rentals (18) (89)
Tax received / (paid) 103 (34)
------------------------------------
Net cash from operating activities 367 1,680
------------------------------------
Cash flows from investing activities
Purchase of property, plant and equipment (421) (2,009)
Purchase of intangible assets - (9)
Proceeds from disposal of property, plant and equipment 43 40
------------------------------------
Net cash used in investing activities (378) (1,978)
------------------------------------
Cash flows from financing activities
Net proceeds from issue of new bank loans 113 1,131
Repayment of bank loans (457) (485)
Proceeds of new asset finance - 1,614
Finance lease principal payments (724) (1,032)
------------------------------------
Net cash (used in)/generated by financing activities (1,068) 1,228
------------------------------------
Net (decrease)/increase in cash and cash equivalents (1,079) 930
Cash and cash equivalents at 1st May 2006 (510) (1,440)
------------------------------------
Cash and cash equivalents at 30th April 2007 (1,589) (510)
------------------------------------
Cash and cash equivalents consist of:
Cash at bank - 36
Bank overdraft (1,589) (546)
------------------------------------
(1,589) (510)
------------------------------------
Notes to the Financial Statements
1 Basis of Reporting
These preliminary results have been prepared on the basis of the accounting
policies set out in the Company's 2006 financial statements. The directors
have prepared the preliminary statement on a going concern basis. This
approach has been taken on the basis that the directors believe that the
company is a going concern and that the proposed sale and leaseback of the
freehold property is approved as scheduled.
The preliminary results for the year ended 30 April 2007 are unaudited.
The financial information shown in this report does not amount to full
financial statements within the meaning of Section 240 of the Companies Act
1985 (as amended).
The comparative figures for the year ended 30 April 2006 do not constitute
statutory accounts. The figures have been extracted from the audited
accounts for that period which have been delivered to the registrar of
companies and on which the auditors issued an unqualified report which did
not contain a statement under either section 237 (2) or (3) of the
Companies Act 1985.
2 Segmental information
The company has identified geographical segments as its primary reporting
format. All production is based in the United Kingdom. The geographical
analysis of turnover is shown below:
2007 2006
£'000 £'000
Continuing operations
UK 11,073 13,345
Rest of Europe 3,218 3,015
------------------------------------
14,291 16,360
------------------------------------
3 Taxation
The charge for taxation on the profit for the financial year is as follows:
2007 2006
£'000 £'000
Continuing operations
UK corporation tax at 30% (2006:30%) - -
Adjustment in respect of prior years (50) (180)
------------------------------------
Total current tax (50) (180)
Deferred tax (670) (66)
------------------------------------
Total taxation credit (720) (246)
------------------------------------
4 Loss per share
The calculation of the loss per share is based on the loss for the period
attributable to shareholders of £1,496,000 (2006: loss £731,000) and on
20,135,609 (2006: 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 20,135,609
(2006: 20,264,719).
5 Directors' interests in shares
On 1st February 2007 share options under the Coral Products plc Savings
Related Share Option Scheme were cancelled over 56,398 shares granted to
Stephen Fletcher. Share options under the Coral Products plc Approved
Executive Share Option Scheme were granted to the directors as shown below:
---------------------------------------------------------------------------
Date of grant Option price Number of options Exercise date
Martin Watson 25/10/2006 20.0p 100,000 25/9/2009
---------------------------------------------------------------------------
Stephen Fletcher 29/11/2006 18.0p 100,000 29/11/2009
---------------------------------------------------------------------------
6 Reconciliation of net cash flow to movement in net debt
2007 2006
£'000 £'000
Net (decrease)/increase in cash and cash equivalents (1,079) 930
Net proceeds from issue of new bank loans (113) (1,131)
Repayment of bank loans 457 485
Proceeds of new asset finance (1,614) -
Finance lease principal payments 724 1,032
------------------------------------
Movement in net debt for the period (298) (11)
Net debt at beginning of period (3,397) (3,099)
------------------------------------
Net debt at end of period (3,408) (3,397)
------------------------------------
7 Annual Report and Accounts
The Annual Report and Accounts will be posted to shareholders before
24 September 2007. Copies will be available by writing to the Company
Secretary, Coral Products plc, North Florida Rd, Haydock Industrial Estate,
Haydock, Merseyside WA11 9TP. (e-mail mail@coralproducts.com).
These Reports may also be downloaded or viewed through our web-site at
www.coralproducts.com.
8 Annual General Meeting
The Annual General Meeting will be held in October 2007. Shareholders will
be informed of the exact time and date in the Annual Report and Accounts.
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