REG - Coral Products PLC - Half-year Report

Coral ProductsAnnouncement

29/11/2018 07:05

RNS Number : 8250I
Coral Products PLC
29 November 2018
 


CORAL PRODUCTS PLC
("Coral" or the "Group")
 
HALF YEARLY REPORT
 
Coral Products plc, a specialist in the design, manufacture and supply of plastic products, is pleased to report its half yearly report for the six months ended 31 October 2018.
 
 




Financial headlines
 
 


Six months to
31 October
2018


Six months to
31 October
2017


% change




 


 


 


 




Group sales


 £13.08 million


 £11.91 million


+9.8%




Gross profit


 £5.04 million


 £4.04 million


+24.8%




Underlying operating margin*


 38.5%


 33.9%


+13.5%




Underlying operating profit (excluding finance expenses)*


 £1,009,000


 £371,000


+172.0%




Reported profit/(loss) before taxation


 £582,000


 £ (7,000)


+8,414.3%




Underlying EBITDA*


   £1,747,000


   £982,000


+77.9%




Underlying basic earnings per share*


 0.87p


 0.23p


+278.3%




Proposed interim dividend per share


0.25p


0.0p


 




 
*The financial headlines disclosed as underlying represent the reported metrics excluding separately disclosed items (being share based payment charges, amortisation of intangible assets and other one-off costs in each period).
 
Operational and financial highlights 
 
-            All metrics show substantial improvement.
 
-            Strong net assets position has been maintained.
 
-            Interim dividend of 0.25p proposed.
 
-            Additional sales resource recruited at Interpack to support growth aspirations in the business.
 
-           Re-organisation and turn-around of the Haydock manufacturing facility continued, with positive site profits in all of the six months of this financial year.
 
-           The commitment to the Group's 360-degree re-cycling supply initiative has been realised by the purchase of a state-of-the-art plastic recycling system. The system will be installed in December 2018 and commissioned in January 2019 with contribution expected before the end of the current financial period.
 
-        Capital investment programme continued across the Group with investment in state-of-the-art injection moulding machines, blow moulding capacity and extruding capability. This will reduce operating costs, improve capacity and technical availability as well as open up new areas of business.
 
-           New chilled cooling water system installed in Haydock, saving water and cost whilst eliminating future likely HSHE (health, safety, hygiene and environmental) issues.
 
-          New product development partnership with Rotite already resulted in two new products being developed, with tools being ordered for introduction during 2019/20. In addition, some current products have benefited from design changes making for cost savings. Our customers have shown high interest in these new and improved products.
 
-            Extension to the on-line tote supply gained for the rest of this financial period.
 
 
 
Commenting on today's results, Joe Grimmond, Coral's Chairman, said:
"Trading in the first half of the current year shows a substantial improvement of all our financial headlines.
We are delighted with the performance of the business in the first half. The main feature of the results is the excellent turnaround of Coral Products (Mouldings) into profit and we are optimistic that this trend will continue. This improvement reflects the huge amount of effort put in by the Coral team. We have increased investment in business development, new products, production capacity and employee capabilities. These investments have strengthened our position in injection moulding, blow moulding and plastic extrusion, whilst at the same time expanding the range of plastic services we supply.
 
I am pleased to report that results to date are well ahead of the same period last year and that, in spite of the prevailing uncertainties of Brexit we remain confident of the Groups future prospects."
 
 
 
Enquiries
 




Coral Products plc
Joe Grimmond, Non-Executive Chairman
Mick Wood, CEO
 


Tel: 01942 272 882
 




Nominated Adviser
Cairn Financial Advisers LLP
Tony Rawlinson / Liam Murray
 


 
Tel: 020 7213 0880




Broker
Daniel Stewart & Company Limited
David Lawman
Richard Potts
 


 
Tel: 020 7776 6550
 




Capital Markets Consultants Limited
Richard Pearson


Tel: 07515 587 184




 
 
 
 
 
 
 
 Chairman's Statement
 
 
Results and Financial Position
 
Trading in the first half of the current year shows revenue and gross profits both substantially ahead of the same period for last year. Reported revenue increased to £13,077,000 (six months to 31 October 2017: £11,911,000).
 
As a result of the re-organisation and cost reduction action taken in January 2018, gross margins have substantially increased to 38.5% (2017: 33.9%) resulting in a gross profit of £5,039,000 (2017: £4,037,000) in the six months to 31 October 2018.
 
Underlying EBITDA has improved substantially on last year at £1,747,000 (2017: £982,000).
 
Underlying profits for operations increased to £1,009,000 (2017: 371,000), a significant improvement over the same period last year.
 
Separately disclosed expenses of £222,000 (2017: £196,000) comprised the amortisation of intangibles acquired on acquisition and share based payment charges over employee options.
 
Finance costs were up from £182,000 to £205,000 in this period due to the increased levels of borrowing needed to fund capital expenditure.
 
Profit after tax after including all these items was £500,000 compared to a loss of £7,000 over the same period last year.
 
The balance sheet net asset position remains strong at £13,749,000 (2017: £13,493,000). This represents a solid asset platform for developing the business.
 
The Group's net debt has decreased to £6,868,000 (2017: £7,110,000). The Group has undrawn bank facilities of £1.9 million which, together with its asset-based finance lines at 31 October 2018, enable it to invest internally or in further acquisitions and businesses for growth which will then enable better returns for our shareholders.
Operations
Tatra-Rotalac Ltd
New extrusion technology and capacity has been introduced allowing both current products to be competitively produced and, as importantly, giving the business a technology boost that allows more technically advanced products to be made. A full business overview has taken place and subsequent actions are being addressed urgently to enable the business to realise its potential. The extra costs we have incurred to boost future performance have impacted on the current period resulting in a loss and we are below our budget expectations but I am confident that the actions being taken will support the business growth aspirations of the company via its existing customer base and with the introduction of new customers in light of the new technically advanced extrusion equipment now in the operation.
Interpack Ltd
Sales, Gross and Net profit exceeded expectations and were well ahead of the same period last year. New European suppliers have been sourced to supplement the range of products offered for sale whilst new capacity released by the introduction of new ice cream tools at Coral Products (Mouldings) will give further growth opportunities.
Global One-Pak Ltd
Sales, Gross profit and Net profit are substantially ahead of expectations for the current financial period albeit below the same period last year. New products using high levels of plastic recyclate are being developed to supplement the current successful portfolio. It is expected that the Global One-Pak's strong financial performance will continue through the second half of this financial period.
Coral Products (Mouldings) Ltd
We are delighted with the turnaround in Coral Products (Mouldings) in the period. Sales, Gross and Net profit are substantially ahead of the comparative previous year financial period albeit below budget but as announced, with a healthy pipeline in place we are optimistic about the overall performance for the year.
The Operational & Sales turnaround actions taken over the previous eleven months have been successful with the subsidiary achieving a profit every month since January 2018. Improvement work in logistics and material purchasing is now bearing fruit with all actions completed in this area expected prior to the end of this financial period.
Improving the machine capabilities of the subsidiary has meant some capital expenditure has been incurred. The new injection moulders and blow moulders have enabled the business to advance technically whilst improving the manufacturing cost base.
A new recycling plant has been developed and purchased. This plant will be installed in December 2018 with commissioning expected to be completed by the end of January 2019. The interest from our customer base in this plant, its capabilities and our 360-degree approach to recycling has been extremely encouraging. Aimed, in the first instance, at the UK Council and local authority recycling arms our novel approach has put Coral at the forefront of the decision makers. Encouragingly the plant has received the first batch of crates to be recycled from a local Council in anticipation of the plant being operational. In addition, there are also local agreements to take waste crates, caddies and bins at a further five councils and this is expected to exponentially increase during the coming months. This recycling plant is expected to be profit enhancing during this current financial period.
Capital expenditure
Total capital expenditure in the first six months was £810,000 (2017: £1,277,000) of which £244,000 (2017: £201,000) was spent at Tatra-Rotalac, Wythenshawe and the balance expended on the continued improvements to the capabilities at Coral Mouldings, Haydock which included two fully electric machines and three blow moulding machines.
Dividends
It is the board's intention to pay an interim dividend of 0.25p pence per share (2017: 0.00p). The ex-dividend date and the record date for the interim dividend will be 14 February 2019 and 15 February 2019 respectively. The interim dividend will be paid on 28 March 2019. This continues to reflect our confidence in the recovery path and improvement this will bring to our results.
 
Outlook
 
We are delighted with the performance of the business in the first half. The main feature of the results is the excellent turnaround of Coral Products (Mouldings) into profit and we are optimistic that this trend will continue. This improvement reflects the huge amount of effort put in by the Coral team. We have increased investment in business development, new products, production capacity and employee capabilities. These investments have strengthened our position in injection moulding, blow moulding and plastic extrusion, whilst at the same time expanding the range of plastic services we supply.
Results to date in the current financial year have been excellent. The return to profitability of Coral Products (Mouldings) along with the continued financial performance of Interpack and Global One-Pak has enabled the Group to return to profitability. It is expected that actions currently underway will bring Tatra-Rotalac back to profitability prior to the end of this financial year.
The exciting new plastic recycling plant will give the business an edge when operational with interest in it already evident by both existing customers and prospective customers alike.
Brexit
As the current outcome of Brexit is still undecided the business continues as normal with focus on operational cost control. This is reflected in our significantly improved gross margin.
Discussions with customers and suppliers are on-going with reference to holding finished goods and raw material supply. Agreements for the months leading up to the 29th March have been made with various major suppliers to the Group, and customers of the Group, to mitigate any shortages that may or may not happen.
We are confident that whilst the next 12 months will be challenging, Coral will remain in a good position to deal with the aftermath of Brexit.
 
Joe Grimmond                                                                                                                           
Non-Executive Chairman                                                                                                            
29 November 2018
 
 
 
 
 
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the six months to 31 October 2018
  
 




 


 
 
 
Notes
 


Six months to
31 October
2018
(unaudited)
 
£000


Six months to
31 October
2017
(unaudited)
 
£000


Year to
30 April
2018
(audited)
 
£000




 


 


 


 


 




 


 


 


 


 




Revenue


3


 13,077


        11,911


        23,405




Cost of sales


 


 (8,038)


        (7,874)


(15,302)




Gross profit


 


 5,039


         4,037


    8,103




Operating costs


 


 


 


 




Distribution expenses


 


(575)


          (546)


 (1,256)




Administrative expenses before separately disclosed items


 


(3,455)


        (3,120)


(5,968)




Underlying operating profit


              


 1,009


         371


879




Separately disclosed items:


 


 


 


 




Share based payment charge


 


 (78)


            (8)     


(50)




Amortisation of intangible assets


 


(144)


           (174)


(348)




Compensation for loss of office


 


 -


           (14)


       -




Reorganisation costs


 


 -


           -


(481)




Impairment loss on trade receivables


 


 -


           -


(186)




 


 


(222)


          (196)


      (1,065)




Operating profit/(loss)


 


 787


          175


      (186)




Finance expense


 


(205)


           (182)


       (311)




Profit/(loss) before taxation


 


  582


           (7)


     (497)




Taxation


4


  (82)


             -


127




Total comprehensive income/(loss)


 


 500


             (7)


     (370)




 


 


 


 


 




 


 


 


 


 




Earnings per ordinary share


5


 


 


 




 


 


 


 


 




Basic and diluted (pence)


 


  0.61


  0.00


(0.45)




Underlying basic (pence)


 


0.87


0.23


0.84




 
 
 
 
 
 
 
 
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
At 31 October 2018
  




 


 
 
 


31 October
2018
(unaudited)
 
£000


31 October
2017
(unaudited)
 
£000


30 April
2018
 (audited)
 
£000




 


 


 


 


 




Non-current assets


 


 


 


 




Goodwill


 


   5,495


   5,495


 5,495




Other intangible assets


 


 1,546


      1,864


   1,690




Property, plant and equipment


 


   9,314


   9,111


  9,299




Total non-current assets


 


   16,355


   16,470


 16,484




 


 


 


 


 




Current assets


 


 


 


 




Inventories


 


   3,278


   3,162


  2,864




Trade and other receivables


 


6,005


5,172


5,452




Cash and cash equivalents


 


   727


 464


  471




Total current assets


 


   10,010


   8,798


  8,787




Total assets


 


  26,365


  25,268


  25,271




 


 


 


 


 




Current liabilities


 


 


 


 




Bank overdrafts and borrowings


 


 (4,518)


 (4,199)


   (5,939)




Trade and other payables


 


(4,554)


(3,657)


(3,909)




Corporation tax


 


 (51)


 (82)


-




Total current liabilities


 


 (9,123)


 (7,938)


(9,848)




 


 


 


 


 




Non-current liabilities


 


 


 


 




Borrowings


 


  (3,077)


    (3,375)


     (1,843)




Deferred taxation liability


 


 (416)


         (462)


 (409)




Total non-current liabilities


 


 (3,493)


    (3,837)


     (2,252)




Total liabilities


 


  (12,616)


  (11,775)


(12,100)




Total net assets


 


 13,749


   13,493


         13,171




 


 


 


 


 




 


 


 


 


 




Equity


 


 


 


 




Share capital


 


   826


     826


      826




Share premium


 


 5,288


  5,288


   5,288




Other reserves


 


1,567


1,567


1,567




Retained earnings


 


  6,068


      5,812


     5,490




Total equity


 


 13,749


   13,493


   13,171




 
 
 
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
 
For the six months to 31 October 2018 (unaudited)
 




 


Share
capital


Share
premium


Other
reserves


Retained
earnings


Total
equity




 


 £000
 


  £000


£000


 £000


  £000




At 1 May 2018


  826


5,288


1,567


   5,490


  13,171




Total comprehensive income


-


-


-


500


500




Credit for share based payment


-


-


-


78


78




Dividend paid


 -


  -


  -


-


-




At 31 October 2018


 826


 5,288


1,567


 6,068


13,749



 
 
 
 
 
 
 



 
 
 
 For the six months to 31 October 2017 (unaudited)
 




 


Share
capital


Share
premium


Other
reserves


Retained
earnings


Total
equity




 


 £000
 


  £000


£000


 £000


  £000




At 1 May 2017


  826


 5,288


       1,567


   6,116


  13,797




Total comprehensive income


-


-


-


(6)


(6)




Credit for share based payment


-


               -  


-


8


               8




Dividend paid


       -


         -


 


         (306)


 (306)




At 31 October 2017


   826


 5,288


       1,567


   5,812


  13,493



 
 
 
 
 
 
 
 
 



  
 
For the year ended 30 April 2018 (audited)
 




 


Share
capital


Share
premium


Other
reserves


Retained
earnings


Total
equity




 


 £000
 


  £000


£000


 £000


  £000




At 1 May 2017


   826


5,288


1,567


6,116


13,797




Total comprehensive loss


-


-


-


(370)


(370)




Credit for share based payment


-


-


-


50


            50




Dividend paid


-


-


-


(306)


        (306)




At 30 April 2018


   826


5,288


1,567


    5,490


13,171




 
 
 
 
 
 
 
 
 
CONSOLIDATED STATEMENT OF CASH FLOWS
For the six months to 31 October 2018




 


 
 
 
 
 


Six months to
31 October
2018
(unaudited)
               £000


Six months to
31 October
2017
(unaudited)
               £000


Year to
30 April
2018
(audited)
        £000




Cash flow from operating activities             


 


 


 


 




Profit/(loss) for the period after tax


 


500


39


(370)




Adjustments for:


 


 


 


 




Depreciation


 


738


611


1,212




Loss on disposal of fixed assets


 


3


                      -


17




Intangibles amortisation


 


144


                  174


348




Share based payment charge


 


78


                    8


50




Taxation charge


 


 82    


                   8


 (127)




Interest payable


 


 205


                  182


   311




(Increase)/decrease in inventories


 


(414)


               (279)


18




(Increase)/decrease in trade and other receivables


 


(553)


                 357


77




Increase/(decrease) in trade and other payables


 


645


               (803)


(549)




UK corporation tax paid


 


-


                      -


46




Net cash generated/(used) from operating activities


 


1,428


297


   1,033




 


 


 


 


 




Cash flow from investing activities


 


 


 


 




Proceeds from disposal of property, plant and equipment


 


-


13


(5)




Acquisition of property, plant and equipment


 


(180)


(1,265)


(907)




Net cash used in investing activities


 


(180)


    (1,252)


  (912)




 


 


 


 


 




Cash flow from financing activities


 


 


 


 




Proceeds of new asset finance


 


-


          1,291


500




Dividend paid


 


 -


      (306)


    (306)




Interest paid


 


(205)


  (182)


       (311)




Repayments of bank borrowings


 


 (75)


(65)


(1,601)




Finance lease principal payments


 


(539)


               (501)


(899)




Repayment of bank term loans


 


-


(1,462)


-




New bank loans raised


 


-


1,743


1,743




Movements on invoice discounting facility


 


(173)


228


551




Net cash generated/(used) in financing activities


 


(992)


       746


 (323)




 
Net increase/(decrease) in cash and cash equivalents


 


 256


    (209)


  (202)




Cash and cash equivalents at the start of the period


 


471


     673


   673




Cash and cash equivalents at the end of the period


 


  727


  464


   471




 
 
1.         Basis of preparation
 
The financial information set out in this Interim Report does not constitute statutory accounts as defined in Section 435 of the Companies Act 2006.  The Group's statutory financial statements for the year ended 30 April 2018, prepared under IFRS, have been filed with the Registrar of Companies. 
 
The auditor's report on those financial statements was unqualified and did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006.
 
The interim financial information has been prepared in accordance with the recognition and measurement principles of International Financial Reporting Standards (IFRS) and on the same basis and using the same accounting policies as used in the financial statements for the year ended 30 April 2018.
 
The Interim Report has not been audited in accordance with the International Standard on Review Engagement 2410 issued by the Auditing Practices Board.
 
 
2.         Significant accounting policies
 
The accounting policies applied by the Group in these condensed consolidated interim financial statements are the same as those applied by the Group in its consolidated financial statements for the year ended 30 April 2018.
 
In respect of the new accounting standards, the Directors have reviewed and adopted the requirements of IFRS 9 and IFRS 15, which became effective for the year ended 30 April 2019. The Directors are currently reviewing the impact of IFRS 16 which will become effective for the year ended 30 April 2020. At this point it is not practicable for the Directors to provide a reasonable estimate of the effect of IFRS 16 as their detailed review of this standard is ongoing.
 
 
3.         Revenue
 
All production is based in the United Kingdom. The geographical analysis of revenue is shown below:
 




 


Six months to
31 October 2018
   (unaudited)
£000


Six months to
31 October 2017
(unaudited)
£000


Year to
30 April 2018
(audited)
£000




 


 


 


 




United Kingdom


 12,283


     10,764


    21,068




Rest of Europe


710


967


      1,326




Rest of the World


84


180


1,011




 


 13,077


     11,911


    23,405




 


 


 


 




Turnover by business activity


 


 


 




Sale and manufacture of plastic products


 13,077


     11,911


     23,405




 
 
 
4.         Taxation
 
The taxation charge for the six months to 31 October 2018 is based on the effective taxation rate, which is estimated will apply to earnings for the year ending 30 April 2019. The rate used is below the applicable UK corporation tax rate of 19% due to the utilisation of tax losses in the period.
 
 
5.         Earnings per share
 
Basic and underlying earnings per ordinary share are calculated using the weighted average number of ordinary shares in issue during the financial period of 82,614,865 (31 October 2017: 82,614,865 and 30 April 2018: 82,614,865).
 




 
 


Six months to
31 October 2018
(unaudited)
 


Six months to
31 October 2017
(unaudited)
 


Year to
30 April
2018
(audited)
 




 


£000


p


£000


p


£000


p




Basic and diluted earnings per ordinary share


 


 


 


 


 


 




Profit/(loss) for the period after tax


 500


0.61


(7)


0.00


(370)


(0.45)




 
 
Underlying earnings per ordinary share


 


 


 


 


 


 




Underlying profit for the period after tax


 722


0.87


189


0.23


695


0.84




 
 
6.         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
2018
 (unaudited)
 
£000


Six months to
31 October
2017
(unaudited)
 
£000


Year to    30 April
2018
(audited)
 
 £000




 


 


 


 




Net increase/(decrease) in cash and cash equivalents


 256


   (437)


(753)




Decrease/(increase) in bank and other loans


248


  (212)


(142)




Increase in finance leases


(61)


(851)


(806)




Movement in net debt in the financial period


  443


(1,500)


(1,701)




Net debt at beginning of period


(7,311)


    (5,610)


(5,610)




Net debt at end of period


 (6,868)


 (7,110)


  (7,311)



 
 
 
 
 



 
  
 
 
7.         Forward looking statements
 
This announcement contains unaudited information and forward-looking statements that are based on current expectations or beliefs, as well as assumptions about future events. These forward-looking statements can be identified by the fact that they do not relate only to historical or current facts and undue reliance should not be placed on any such statement because they speak only as at the date of this document and are subject to known and unknown risks and uncertainties and can be affected by other factors that could cause actual results, and Corals plans and objectives, to differ materially from those expressed or implied in the forward-looking statements. Coral undertakes no obligation to revise or update any forward-looking statement contained within this announcement, regardless of whether those statements are affected as a result of new information, future events or otherwise, save as required by law and regulations.
 
This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014 (MAR).
 




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