Interim Results
Coral Products PLC
09 December 2005
CORAL PRODUCTS PLC
2005 Interim Results
Coral Products PLC, one of Europe's leading manufacturers and suppliers of media
packaging for DVD, Video and CD, announces interim results for the six months
ended 31 October 2005.
In his statement to shareholders, Chairman Sir David Rowe-Ham said:
'Trading for the first half of our financial year continued to suffer from the
effects of reduced sales, higher material prices, and increased energy costs.
The industry moved away from Video much faster than could have been foreseen and
we have had to devote considerable resources in adapting to this change. We are
now in a much stronger position where we can service anticipated increases in
demand for DVD boxes.'
'Sales for DVD boxes increased significantly during the period, albeit at lower
margins, and there was also a further increase in CD case sales.'
Summary
Six months Six months
ended ended
31 October 31 October
2005 2004
Turnover £ 9.3m £ 10.0m
Pre-tax profits £ 3,000 £ 560,000
Earnings per share 0.01p 1.93p
Interim dividend NIL 0.70p
* DVD box sales continued to increase significantly, albeit at lower
margins.
* CD case sales recover.
* New product lines to extend range of DVD and CD cases.
* Reduced margins due to high raw material price increases.
* Costs of energy supplies rise.
Regarding prospects for the current year, Sir David added:
'We do not expect trading to improve substantially in the second half of the
year, however, we are seeing signs of gradual improvement. We are now set to
take advantage of further growth in the DVD market and, as conditions for the
industry improve, we are confident we will share in that progress.'
Enquiries: Coral Products PLC Tel: 01942 272 882
Warren Ferster, Managing Director
Stephen Fletcher, Finance Director
CHAIRMAN'S STATEMENT
Trading for the first half of our financial year continued to suffer from the
effects of reduced sales, higher material prices and increased energy costs. The
industry moved away from Video much faster than could have been foreseen and we
have had to devote considerable resources in adapting to this change. We are now
in a much stronger position where we can service the anticipated increases in
demand for DVD boxes and renewed interest in CD sales.
Raw material prices increased throughout the period as a result of increased
world-wide demand and reduced production output. There have recently been
indications that the peaks have been reached and raw material prices are
expected to ease in 2006.
Sales for DVD boxes increased significantly during the period, albeit at lower
margins, and there was also a further increase in CD case sales. Overall
turnover, however, fell due to a large reduction in demand for Video box sales
and photo-finishing box sales.
We are extending our range of both DVD and CD cases in the near future by adding
multiple product cases. This will improve margins and enable us to meet the
requirements of more customers. By the end of our financial year we will have
completed our capital projects and will have converted a substantial part of our
production from Video sales to DVD. We now have sufficient capacity to meet
increases in demand.
Trading
Turnover for the six months ended 31 October 2005 was £9.3 million (2004: £10.0
million) and pre-tax profits decreased to £3,000 (2004: £556,000). Diluted
earnings per share were 0.01p (2004: 1.93p).
Interim Dividend
No interim dividend has been declared (2004: 0.70p) for the period to 31 October
2005.
Prospects
We do not expect trading to improve substantially in the second half of the
year, however, we are seeing signs of gradual improvement. We are now set to
take advantage of further growth in the DVD market and, as conditions for the
industry improve, we are confident we will share in that progress.
IFRS
The financial information within this interim report is presented in accordance
with International Financial Reporting Standards. The comparative information
for the year to 30 April 2004 and the half year to 31 October 2004 has been
restated under these standards. There were no material adjustments to the
company's accounts.
Sir David Rowe-Ham
9 December 2005
Profit and Loss Account -
(unaudited) Notes Half year to Half year to Year to
for the half year to 31 31 October 31 October 30 April
October 2005 2005 2004 2005
£'000 £'000 £'000
----------- ----------- -----------
Revenue (2) 9,298 10,014 18,732
Cost of sales (6,460) (6,613) (13,856)
--------- -------- -------
Gross profit 2,838 3,401 4,876
---------- --------- -------
Operating expenses (2,734) (2,741) (4,641)
---------- --------- -------
Operating profit before
exceptionals 104 660 753
Exceptional costs - - (518)
---------- --------- -------
Operating profit 104 660 235
Interest receivable - - 12
Interest payable (101) (104) (206)
------ ------- -------
Profit on ordinary
activities 3 556 41
before tax
Tax on profit on ordinary
activities (3) (1) (167) 26
------ ------- -------
Profit for the period
attributable to shareholders 2 389 67
------ ------- -------
Basic earnings per share (4) 0.01p 1.93p 0.33p
--------- --------- --------
Diluted earnings per share (4) 0.01p 1.93p 0.33p
--------- --------- --------
All activities derive from continuing operations.
Balance Sheet - (unaudited) As at As at As at
as at 31 October 2005 31 October 31 October 30 April
2005 2004 2005
£'000 £'000 £'000
----------- ----------- -----------
Non-current assets
Intangible assets 397 - 418
Property, plant and equipment 13,131 13,923 12,743
--------- ---------- ---------
Total non-current assets 13,528 13,923 13,161
--------- ---------- ---------
Current assets
Inventories 1,814 2,493 2,856
Trade and other receivables 6,023 6,053 4,334
Cash and cash equivalents - - -
----------- ----------- -----------
Total current assets 7,837 8,546 7,190
----------- ----------- ----------
Total assets 21,365 22,469 20,351
------------ ----------- ----------
Current liabilities
Financial liabilities - borrowings 3,278 3,288 2,512
Trade and other payables 4,534 5,597 4,539
Current tax payable 128 110 126
--------- ---------- ----------
Total current liabilities 7,940 8,995 7,177
--------- ---------- ----------
Non current liabilities
Financial liabilities - borrowings 836 430 587
Deferred tax liabilities 1,412 1,548 1,412
---------- ---------- ----------
Total non-current liabilities 2,248 1,978 1,999
---------- ---------- ----------
Net assets 11,177 11,496 11,175
---------- ---------- -----------
Equity
Share capital 201 201 201
Share premium 4,558 4,557 4,558
Capital redemption reserve 7 7 7
Retained earnings 6,411 6,731 6,409
----------- ----------- -----------
Total equity 11,177 11,496 11,175
----------- ----------- -----------
Statement of Changes in Shareholders' As at As at As at
Equity - (unaudited) 31 October 31 October 30 April
2005 2004 2005
£'000 £'000 £'000
-------- -------- --------
Equity at start of the period 11,175 11,242 11,242
Profit for the period 2 389 67
Dividends - (141) (141)
Proceeds of shares issued - 6 7
--------- --------- ---------
Equity at end of the period 11,177 11,496 11,175
--------- --------- ---------
Statement of Recognised Income and Expense As at As at As at
- (unaudited) 31 October 31 October 30 April
2005 2004 2005
£'000 £'000 £'000
-------- -------- --------
Profit for the period 2 389 67
-------- -------- ---------
Total recognised income and expense
attributable to shareholders 2 389 67
--------- -------- ---------
Cash Flow Statement - (unaudited) Half year to Half year to Year to
for the half year to 31 October 31 October 31 October 30 April
2005 2005 2004 2005
£'000 £'000 £'000
--------- -------- --------
Cash flow from operating
activities
Operating profit for the period 104 660 235
Adjustments for:
Depreciation of property, plant
and equipment 1,097 1,123 2,663
Amortisation of intangible
assets 21 - 2
Operating cash flows before
movements in working capital ----------- ----------- ----------
1,222 1,783 2,900
Decrease in inventories 1,042 626 263
Increase in trade and other
receivables (1,689) (2,375) (656)
(Decrease)/increase in trade and
other payables (16) 1,036 657
----------- ---------- ---------
Cash generated from operations 559 1,070 3,164
Interest paid (89) (99) (216)
Income taxes paid/(received) - 344 (94)
---------- --------- --------
Net cash from operating
activities 470 1,315 2,854
---------- --------- ---------
Cash flows from investing
activities
Purchases of intangible assets - - (420)
Purchases of property, plant and
equipment (1,485) (1,078) (1,438)
---------- ---------- ---------
Net cash used in investing
activities (1,485) (1,078) (1,858)
---------- ---------- ---------
Cash flows from financing
activities
Proceeds from issue of share
capital - 6 7
Net proceeds from bank loans 895 - -
Proceeds of new asset finance 942 490 790
Repayment of loans (73) (74) (160)
Repayment of capital element of
finance leases (600) (559) (1,180)
Dividend paid - (463) (604)
---------- ---------- ---------
Net cash generated/(used in)
financing activities 1,164 (600) (1,147)
---------- ---------- ---------
Net increase/(decrease) in cash
and cash equivalents 149 (363) (151)
Cash and cash equivalents at
start of period (1,440) (1,289) (1,289)
--------- ---------- ---------
Cash and cash equivalents at end
of period (1,291) (1,652) (1,440)
--------- ---------- ---------
Notes to the Interim Financial Statements
1. Basis of preparation
From 2005 the company will prepare its accounts in accordance with
International Financial Reporting Standards ('IFRS') as adapted for use in
the European Union.
The company's first IFRS based results are its interim results for the six
months ending 30 April 2005. As a result, the comparative amounts included
in these Interim Financial Statements have been prepared under IFRS. These
preliminary IFRS statements will form the basis of the comparative
information in the company's first IFRS Annual Report. The company has
applied IFRS1 in preparing these statements. The date of transition was 1
May 2004 and the company prepared its opening balance sheet at that date.
IFRS are subject to continuing review and amendment by the International
Accounting Standards Board ('IASB') and endorsement by the European
Commission and therefore are subject to change. As a result, the company has
used its best endeavours in making assumptions about those IFRS expected to
be available for adoption when the first IFRS Annual Report is prepared for
the year ending 30 April 2006.
The Interim Financial Statements have been prepared on the historic cost
basis, except that derivative financial instruments are stated at their fair
value. As permitted under IFRS1 the company has elected not to apply IAS 32
and IAS 39 regarding presentation and treatment of financial instruments
prior to 30 April 2005.
The financial information shown for the year ended 30 April 2005 does not
constitute statutory accounts within the meaning of section 240 of the
Companies Act 1985. The company's financial statements prepared under UK
GAAP for that year have been delivered to the Registrar of Companies. The
report of the auditors on those financial statements was unqualified and
did not contain a statement under either section 237(2) or (3) of the
Companies Act 1985.
The principal accounting policies applied in preparing the Interim Financial
Statements are set out below:
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. 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.
Pensions
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.
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.
Cash and cash equivalents
Cash and cash equivalents comprise cash and bank balances together with bank
overdrafts that are repayable on demand.
Financial instruments
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.
2. Segmental information
The company's reporting format is geographical. All production is based in
the United Kingdom. The geographical analysis of turnover is shown below:
Half year to Half year to Year to
31 October 31 October 30 April
2005 2004 2005
£'000 £'000 £'000
----------- ----------- --------
United Kingdom 7,766 8,593 16,142
Rest of Europe 1,532 1,421 2,590
----------- ----------- ----------
9,298 10,014 18,732
Turnover by business activity: ----------- ----------- -----------
Media packaging 9,298 10,014 18,732
----------- ----------- -----------
3 Taxation
The charge for taxation on the profit for the period is charged at 30% being
the estimated effective rate for the full financial year.
4 Earnings per share
The calculation of basic earnings per share is based on the profit for the
period available to shareholders of £2,000 (2004: £389,000) and on
20,135,609 (2004: 20,119,472) 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
(2004: 20,153,832).
5 Reconciliation of net cash flow to movement in net debt
Half year to Half year to 31 Year to
31 October 31 October 30 April
2005 2005 2005
£'000 £'000 £'000
Net increase/(decrease) in cash 149 (363) (151)
and cash equivalents
Net cash flow from debt and lease (1,164) 143 550
financing
--------- -------- ---------
Change in net debt resulting from (1,015) (220) 399
cash flows
Net debt at beginning of period (3,099) (3,498) (3,498)
--------- --------- --------
Net debt at end of period (4,114) (3,718) (3,099)
--------- --------- --------
6 Explanation of transition to IFRS
The policies set out below have been consistently applied to all the periods
presented except for those relating to the classification and measurement of
financial instruments. The company has made use of the exemption available
under IFRS to apply IAS 32 and IAS 39 from 1 May 2005.
The significant IFRS accounting policies that have been considered by the
company are the following:
IFRS 2 Share-based payments
In accordance with IFRS 2 the company has reflected a change reflecting the
fair value of outstanding share options granted to employees since 7
November 2002. The fair value was assessed but the resulting adjustment was
not significant.
IAS 1 Presentation of financial statements
IAS 1 requires all assets and liabilities to be split between current and
non-current portions. The company has examined each asset class and has
concluded that no adjustment is necessary.
IAS12 Income taxes
IAS 12 requires entities to calculate deferred taxation based on temporary
differences, which are defined as the difference between carrying values and
their tax base. The company already provides for deferred taxation on all
taxable temporary differences.
IAS 17 Leases
Under IAS 17 a lease is classified as a finance lease if it transfers
substantially all the risks and rewards of ownership to the lessee. Assets
held under finance leases and the related lease obligations are recorded in
the balance sheet at the lower of the fair value and the present value of
the minimum lease payments at inception of the leases.
The company has considered its leases and no adjustment was necessary.
IAS 19 Employee benefits
IAS 19 requires accrual to be made for accrued holiday entitlement when
there is an obligation to pay. The company already makes an accrual for
this expense under UK GAAP and therefore no adjustment was necessary.
The company does not operate a defined benefit pension scheme.
IAS 39 Financial instruments
IAS 39 covers the recognition, measurement and derecognition of financial
instruments, in addition to rules on hedge accounting. The company has
elected not to apply IAS 39 prior to 30 April 2005. The company has not
identified any significant adjustments that would be required under IAS 39.
7 Interim report
The interim report will be posted to all shareholders on 14 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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