Half Yearly Report

RNS Number : 1910T
Coral Products PLC
05 December 2011
 



5 December 2011

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 2011.

 

 

Financial Headlines

 

 

Six months to

31 October

2011

Six months to

31 October

2010

 

 Change

 





Group sales

 £8.66 million

£6.71 million

+29%

Underlying* operating profit

 £115,000

£(319,000)

-

Gross profit

 £1.80 million

£1.22 million

+48%

Gross margin

 20.8%

18.2%

+14%

Underlying* earnings / (loss) per share

 0.34p

(1.76)p 

-

 

* Excludes one-off costs of £443,000 relating to costs of acquisition of Interpack Limited ("Interpack") and move from the Main Market to AIM.

                          

 

Operational Highlights 

 

-           Acquisition of Interpack, a reseller and distributor of a range of plastic container products to the food manufacturing and food packaging sector.

-           Move from Main Market of the London Stock Exchange to AIM.

-           Commencement of reconfiguration of manufacturing facility with additional capacity for food packaging products.

-           Contracts for recycling containers from five additional local authorities.

 

 

Commenting on today's results, Joe Grimmond, Coral's Chairman, said:

 

"I am delighted to report that in the six months to 31 October 2011 we have made excellent progress with our strategic plan of reducing exposure to media packaging by diversifying into new markets.

 

"The acquisition of Interpack in September initiated our strategy to acquire complementary businesses whilst also enabling greater utilisation of the existing manufacturing capacity. This has created exposure to new markets in food packaging products with an experienced sales and marketing team. Our existing facilities are being used to manufacture some of Interpack's products which has created additional margin.

 

"Trading has been strong in media packaging with DVD sales above expectations. In addition in the last three months we have received confirmed orders from a further five local authorities for the supply of recycling containers. This reinforces the Directors' view that Coral's range of containers is increasingly recognised as one of the best in the market."

  

 

 

Enquiries

 

Coral Products plc

Joe Grimmond, Non-Executive Chairman

Warren Ferster, Chief Executive & Managing Director

 

 

Tel: 07703 518 148

Tel: 01942 272 882

Nominated Adviser

Cairn Financial Advisers LLP

Avi Robinson / Tony Rawlinson

 

 

Tel: 020 7148 7900

Broker

XCAP Securities plc

David Lawman / Adrian Kirk

 

 

Tel: 020 7101 7070

 

Bankside Consultants

Richard Pearson

Tel: 020 7367 8888

 

 

 

Chairman's Statement

 

Results

 

The Group's results for the first six months of the year reflect an improved performance in a difficult trading environment for businesses in the UK. Sales in the six months to 31 October 2011 increased by 29% to £8.66 million (six months to 31 October 2010: £6.71 million), which resulted in an underlying operating profit of £115,000 before exceptional items (and an operating loss of £328,000) compared to an operating loss of £319,000 in 2010. Gross margins increased to 20.8% from 18.2% in 2010.

 

The increase in sales and underlying operating profit have resulted from an improved performance in media packaging and recycling products together with the benefit of trading from Interpack since its acquisition, which was completed on 6 September 2011.  

 

Sales for media and recycling have been ahead of forecast whilst turnover in trade mouldings have been in line with the previous year. Margins in difficult market conditions were tight in the first quarter, due to raw material price increases, although margins have improved recently as a consequence of the acquisition of Interpack. Overall this enabled the Group to return an operating profit before exceptional items, such items comprising the costs of completing the acquisition of Interpack and moving the Group's listing from the Main Market to AIM.

  

The Board is not recommending an interim dividend.

 

 

Operations

 

I am delighted to report that in the six months to 31 October 2011 we have made excellent progress with our strategic plan of reducing exposure to media packaging by diversifying into new products. The acquisition of Interpack has exposed the Group to the food packaging products market. Interpack has been successfully integrated within the Group and has already made a significant contribution to these results. Positive reaction from Interpack's customers since its acquisition has necessitated reconfiguration of the Group's manufacturing facility and acquisition of additional tooling, which will increase Coral's manufacturing capacity. This includes an 'in-mould labelling' line which will allow Coral to provide branded or labelled product for the first time. There are inevitable cost outlays with such changes but a significant cost is avoided by the Group being able to use spare machine capacity. These new facilities are expected to be on-stream during the last quarter of the current financial year.

 

The acquisition of Interpack has lowered the Group's reliance on media products and reduced its exposure to markets that, whilst still representing the main form of media format, are in decline. Interpack has only been part of the Group for a short period but the benefits of having sales growth opportunities in markets that are more robust in recessionary times and face less competition are already evident.

 

Media packaging has performed ahead of expectations over the six months with sales increasing by 16% to £6.2 million. In particular, DVD sales were strong, benefitting from demand for the Ecobox and the multi DVD box. CD sales performed reasonably with sales of cases for albums and multi-sets compensating for the decline in maxi-singles cases which have been adversely affected by media downloading.  

 

Recycling sales have continued to make progress with Coral now recognised as a leading supplier to local authorities and distributors. The period has seen sales improve by over 50% to above £1 million. Our range of caddies now includes a 5 litre kitchen caddy in addition to the 7 litre kitchen and 23 litre collection caddies. In the last 3 months Coral has received confirmed orders from five new local authorities with a sales value of around £700,000. This reinforces the Directors view that Coral's range of ergonomically designed recycling containers is increasingly recognised as one of the best in market.

 

In the trade moulding channel, the Group's key customers are reporting increased trading in the run up to the Christmas trading months, which has facilitated an improvement in revenue after a slow start. We expect sales to continue to improve as we continue to win new business and attract more subcontractors.

  

 

Financial Position

 

Interpack was acquired on 6 September 2011 for an initial consideration of £3 million with a deferred consideration of up to a maximum of £1.1 million payable in early 2012 dependent upon profits generated by Interpack in the period to 31 December 2011. The funds for the acquisition and associated costs of the simultaneous move from the Main Market to AIM were provided by a share placing of 18 million shares at 15 pence each, which raised £2.7 million before expenses, a term loan of £1.4 million, provided at up to 2.5% over base of which £600,000 has so far been received, and from Coral's existing bank facilities.

 

The Group has agreed new lending facilities with Barclays. These facilities provide variable funding based on sales financing and the term loan which is repayable over 2 years. The Group has maintained, and expects to continue to maintain, a comfortable headroom margin within these facilities. As a result, the Board believes that the Group has sufficient financing facilities after completion of payments for Interpack.

 

The balance sheet includes goodwill arising on the acquisition of Interpack. A review of this asset has been completed and no impairment loss has been deemed necessary as expected future cash flows support the full value of the asset.

 

 

Outlook

 

The Group's business now has greater focus on growth markets and areas in which sales can be developed. The acquisition of Interpack has resulted in a stronger business which can take advantage of opportunities to grow further.

 

The Group continues to support media packaging whilst it produces substantial sales orders but recognises that there is a limited life to these products and is being adapted accordingly.

 

The Directors expect that the Group will report a much improved performance for the year to 30 April 2012 and be able to announce a final dividend on the back of those results.

 

 

Joe Grimmond                                                                                     

Chairman                                                                                             

5 December 2011

 

 

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the six months to 31 October 2011

  

 


 

 

 

Notes

Six months to

31 October

2011

(unaudited)

£000

Six months to

31 October

2010

(unaudited)

£000

Year to

30 April

2011

(audited)

£000











Revenue

2

   8,658

  6,705

  13,194

Cost of sales


  (6,857)

(5,488)

(10,755)

Gross profit


   1,801

  1,217

    2,439

Operating costs


  (1,686)

(1,536)

   (3,139)

Underlying operating profit/(loss)

for the period

1,3

      115

   (319)

      (700)

Exceptional items

3

    (443)

         -

        -






Loss from operations


    (328)

   (319)

      (700)

Finance income


          1

         -

        -

Finance expense


      (29)

     (35)

       (53)

Loss before taxation


    (356)

   (354)

     (753)

Taxation

4

       -

         -

       -

Total comprehensive loss


    (356)

    (354)

     (753)











Earnings / (loss) per ordinary share

5









Basic (pence)


  (1.39)

(1.76)

(3.74)

Diluted (pence)


(1.38)

(1.76)

(3.74)

Underlying basic (pence)


   0.34

(1.76)

(3.74)

Underlying diluted (pence)


0.34

(1.76)

(3.74)

 

 

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

At 31 October 2011

 

 


 

 Notes

 

31 October

2011

(unaudited)

£000

31 October

2010

(unaudited)

£000

30 April

2011

 (audited)

£000






Non-current assets





Goodwill


   3,868

         -

         -

Other intangible assets


      197

     216

     217

Property, plant and equipment


   3,801

  4,257

  3,994

Rental deposit


        50

     100

       50

Total non-current assets


   7,916

  4,573

  4,261






Current assets





Inventories


   1,431

  1,081

  1,689

Trade and other receivables


   7,021

  4,795

  2,596

Cash and cash equivalents


      379

         -

         5

Total current assets


   8,831

  5,876

  4,290

Total assets


  16,747

10,449

  8,551






Current liabilities





Bank overdrafts and borrowings


 (2,092)

 (1,069)

   (893)

Trade and other payables


 (5,984)

 (3,227)

(1,925)

Income tax payable


    (143)

        -   

        -

Total current liabilities


 (8,219)

 (4,296)

(2,818)






Non-current liabilities





Borrowings


    (570)

     (40)

     (19)

Deferred taxation liability


         -

         -

         -

Total non-current liabilities


    (570)

     (40)

     (19)

Total liabilities


  (8,789)

 (4,336)

(2,837)

Total net assets


   7,958

   6,113

   5,714











Equity





Share capital

6

      381

      201

      201

Share premium


   6,978

   4,558

   4,558

Other reserves


          7

          7

          7

Retained earnings


      592

    1,347

      948

Total equity


   7,958

   6,113

   5,714

 

 

 CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

 

For the six months to 31 October 2011 (unaudited)

 


Share

capital

Share

premium

Other

reserves

Retained

earnings

Total

equity


 £000

 

  £000

£000

 £000

  £000

At 1 May 2011

   201

  4,558

      7

   948

  5,714

Issue of equity

   180

  2,420

      -

       -

  2,600

Total comprehensive income

       -

         -

      -

 (356)

   (356)

At 31 October 2011

   381

  6,978

      7

   592

  7,958

 

 

 

 For the six months to 31 October 2010 (unaudited)

 


Share

capital

Share

premium

Other

reserves

Retained

earnings

Total

equity


 £000

 

  £000

£000

 £000

  £000

At 1 May 2010

   201

4,558

      7

1,701

6,467

Total comprehensive income

       -

       -

      -

  (354)

  (354)

At 31 October 2010

   201

4,558

      7

1,347

6,113

 

 

  

For the twelve months ended 30 April 2011 (audited)

 


Share

capital

Share

premium

Other

reserves

Retained

earnings

Total

equity


 £000

 

  £000

£000

 £000

  £000

At 1 May 2010

   201

4,558

      7

  1,701

6,467

Total comprehensive income

       -

        -

      -

   (753)

 (753)

At 30 April 2011

   201

4,558

      7

    948

5,714

 

 

CONSOLIDATED STATEMENT OF CASH FLOWS

For the six months to 31 October 2011

 

 


 

 

 

 

Notes

Six months to

31 October

2011

(unaudited)

£000

Six months to

31 October

2010

(unaudited)

£000

Year to

30 April

2011

(audited)

£000






Cash flow from operating activities





Cash (utilised in)/generated from operations

7

 (1,122)

   200

   670

Net finance costs


      (28)

   (23)

   (53)

Net cash from operating activities


 (1,150)

   177

   617






Cash flow from investing activities





Purchase of property, plant and equipment


    (256)

  (341)

  (614)

Expenditure on intangible assets


        (9)

    (15)

    (30)

Net cash used in investing activities


    (265)

  (356)

  (644)






Cash flow from financing activities





Issue of equity net of costs


    2,600

        -

       -

New loans including arrangement fee


       628

        -

       -

Purchase of subsidiary net of cash


  (2,561)

        -

       -

Repayment of loans and finance leases


       (77)

  (186)

   (356)

Repayment of rental deposit


          -

        -

       50

Net cash arising from/(used in) financing activities


       590

  (186)

   (306)






Net decrease in cash, cash equivalents

and bank overdrafts

8

     (825)

   (365)

   (333)

Cash, cash equivalents and bank overdrafts at the start of the period


     (848)

   (515)

   (515)

Cash, cash equivalents and bank overdrafts at the end of the period


  (1,673)

   (880)

   (848)

 

 

 

1.         Basis of Preparation

 

These interim financial statements have been prepared using the recognition and measurement principles of International Accounting Standards, International Financial Reporting Standards and Interpretations adopted for use in the European Union (collectively "Adopted IFRS").

 

The principal accounting policies used in preparing these interim financial statements are those expected to apply to the Group's Consolidated Financial Statements for the year ending 30 April 2012 and are unchanged from those disclosed in the Group's Annual Report for the year ended 30 April 2011.

 

a) The financial information for the six months ended 31 October 2011 is unaudited and does not constitute statutory financial statements for those periods.

 

The comparative financial information for the twelve months ended 30 April 2011 has been derived from the audited statutory financial statements for that year. These financial statements were approved by shareholders at the Annual General Meeting and have been delivered to the Registrar of Companies. The Auditors' Report on those financial statements was unqualified, did not include a reference to any matters to which the Auditors drew attention by way of emphasis without qualifying their report and did not include a statement under section 498(2) or 498(3) of the Companies Act 2006.

 

b) Underlying earnings: the Company believes that underlying operating profit and underlying earnings provides 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. It is not intended to be a substitute for, or superior to, IFRS measures of profit. A reconciliation of the statutory measure required by IFRS is disclosed in note 5.

 

 

2.         Revenue

 

All production is based in the United Kingdom. The geographical analysis of revenue is shown below:

 


Six months to

31 October 2011

   (unaudited)

£000

Six months to

31 October 2010

(Unaudited)

£000

Year to

30 April 2011

(Audited)

£000





United Kingdom

     7,975

     5,669

    11,092

Rest of Europe

        683

     1,036

      2,102


     8,658

     6,705

    13,194





Turnover by business activity




Sale and manufacture of plastic products

     8,658

     6,705

     13,194

 

 

3.         Exceptional items

 

The Group incurred exceptional items of £443,000 in relation to costs incurred in the acquisition of Interpack and costs of moving from the Main Market to AIM.

 

 

4.         Taxation

 

The taxation charge for the six months to 31 October 2011 is based on the effective taxation rate, which is estimated will apply to earnings for the year ending 30 April 2012.

 

 

5.         Earnings / (loss) per share

 

Basic earnings per ordinary share are calculated using the weighted average number of ordinary shares in issue during the financial period of 25,613,870 (31 October 2010: 20,135,609 and 30 April 2011: 20,135,609).

 

Diluted earnings per ordinary share are calculated using the weighted average number of ordinary shares in issue during the financial period of 25,759,957 (31 October 2010: 20,135,609 and 30 April 2011: 20,135,609).

 

Underlying earnings per ordinary share are also shown calculated by reference to earnings adjusted for exceptional items. The Directors consider that this gives a useful additional indication of underlying performance.

 

 

 

Six months to

31 October 2011

(Unaudited)

Six months to

31 October 2010

(Unaudited)

Year to

30 April 2011

(Audited)


£000

p

£000

p

£000

p

Basic earnings per ordinary share







Loss for the financial period

 (356)

(1.39)

(354)

(1.76)

   (753)

(3.74)

Exceptional items

  443

 1.73

       -

    -

          -

-

Underlying earnings

    87

 0.34

(354)

(1.76)

   (753)

(3.74)








Diluted earnings per ordinary share







Loss for the financial period

 (356)

(1.38)

(354)

(1.76)

   (753)

(3.74)

Exceptional items

  443

1.72

       -

    -

          -

-

Underlying earnings

    87

0.34

(354)

(1.76)

   (753)

(3.74)

 

  

6.         Share Capital

 

On 6 September 2011, Coral issued 18,000,000 new ordinary shares of 1 penny each by way of a placing at 15 pence per share.

 

Movements in issued share capital

 

 

 

 

 

 

Ordinary shares of

1p each

 

Number

 

In issue at 1 May 2010 and 1 May 2011

  20,135,609

Issued during the period

  18,000,000

In issue at 31 October 2011

  38,135,609

 

 

7.         Net Cash from Operations

 


Six months to

31 October

2011

(Unaudited)

£000

Six months to

31 October

2010

(Unaudited)

£000

Year to 30 April

2011

(audited)

£000





Loss from operations

  (328)

  (326)

  (700)

Depreciation of property, plant and equipment

    449

    710

 1,246

Amortisation of intangible assets

      29

      42

      56

EBITDA*

    150

    426

    602

Decrease/(increase) in inventories

    355

      71

   (537)

Increase in trade and other receivables

(3,451)

(2,404)

   (205)

Decrease in trade, other payables and provisions

  1,824

  2,107

     810

Net cash (utilised in)/generated from operations

(1,122)

     200

     670

 

 

 * EBITDA is defined as profit before interest, taxation, depreciation, amortisation and share-based payments.

 

 

 

8.         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

2011

 (unaudited)

£000

Six months to

31 October

2010

(unaudited)

£000

Year to 30 April

2011

(audited)

 £000





Net decrease in cash and cash equivalents

    (825)

    (365)

 (333)

New loans

    (628)

         -

      -

Repayment of loans

        77

     186

   356

Increase in net debt in the financial period

 (1,376)

   (179)

     23

Opening net debt

    (907)

   (930)

  (930)

Closing net debt

 (2,283)

(1,109)

  (907)

 

 

9.         Business Combinations - Interpack Limited

 

The fair value of the identifiable assets and purchase consideration of Interpack Limited at acquisition has been determined according to IFRS 3 as follows: 

 

 


As at 6 September

2011

 (unaudited)

     £000



Inventories

        97

Trade and other receivables

      974

Cash at bank

      439

Trade and other payables

 (1,140)

Income taxes

    (143)

Total identifiable assets

      227

Goodwill arising at acquisition

3,868

Total purchase consideration

4,095

 

 

 

Analysis of total purchase consideration

 

Amount paid at acquisition date

    3,000

Deferred consideration payable

    1,095


    4,095

 

 

 

10.        Availability of Half Yearly Report

 

Copies of the Half Yearly Report will be made available upon request to members of the public at the Company's registered office, North Florida Road, Haydock Industrial Estate, Haydock, Merseyside, WA11 9TP. The Half Yearly Report can also be viewed on the Group's website at www.coralproducts.com.

 

 

 


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