REG - Coral Products PLC - Half Yearly Report <Origin Href="QuoteRef">CRU.L</Origin>

Coral ProductsAnnouncement

02/12/2015 07:10

RNS Number : 6455H
Coral Products PLC
02 December 2015
2 December 2015
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 2015.
Financial headlines
Six months to
31 October
2015 
Six months to
31 October
2014 
% change
Group sales *
8.26 million
9.07 million
-8.9%
Gross profit
2.85 million
2.23 million
+27.8%
Gross margin
34.5%
24.6%
Underlying operating profit
817,000
542,000
+50.7%
Profit before taxation
684,000
291,000
+135.1%
Gearing
26.5%
45.0%
Underlying EBITDA
 1,130,000
 817,000
+38.3%
Underlying basic earnings per share
1.06p
0.86p
+23.3%
Proposed interim dividend 
0.3p
0.2p
+50.0%
* Total sales (including inter-group sales) in 2015 were 10.02m, of which inter-group sales were 1.76m (2014: total sales of 10.42m of which inter-group sales were 1.35m).
Operational highlights
- Further increase in percentage of non-media sales rising to 85% (7.02 million) compared to 78% in 2014 (7.08 million).
- Underlying EBITDA increases by 38% to 1.13 million.
- Interpack continues to increase returns and profitability. 
- Tatra improves results and renews contracts with long-term customers.
- Margins have improved and, combined with a reduction in operating costs, underlying operating profit has increased by 51%. 
- Strong net assets have been maintained and gearing has fallen from 44% to 26% over the last six months. 
- Acquisition in June 2015 of assets from Neiman Packaging to manufacture a range of packaging products. This business generated sales in the period of 650,000 with minimal contribution to profit due to integration and start-up costs. The contribution to profit is expected to be positive in the second half.
Commenting on today's results, Joe Grimmond, Coral's Chairman, said:
"I am pleased to report that the Group has continued to make good progress during the first half of this financial year with trading in line with expectations. Underlying profit from operations increased to 817,000 for the first six months and earnings per share rose to 1.06p. This represents a significant improvement and we anticipate this trend to continue in our second half. 
"We have continued to diversify away from media markets to the extent that, in the first half, they represented just 15% of consolidated sales. In June 2015, we purchased certain assets from Neiman Packaging which manufacture a range of packaging products for which new capacity has been added. This business has enabled us to broaden our range of services into extrusion blow moulding and injection blow moulding whilst, at the same time, bringing new customers principally in the health, hygiene and personal care markets. 
"Demand has remained in line with our targets and we have signed long-term contracts with certain of our larger customers in the telecoms and rail markets. Having received final approvals we have commenced production for our agreement to supply a range of totes to a leading national on-line retailer which will have a positive impact on the second half.
"With a good order book and a strong pipeline of opportunities, the Group's performance for the current year to date remains in line with market expectations."
Enquiries
Coral Products plc
Joe Grimmond, Executive Chairman
Tel: 07703 518 148
Nominated Adviser
Cairn Financial Advisers LLP
Tony Rawlinson / Avi Robinson 
Tel: 020 7148 7900
Broker
Daniel Stewart & Company Limited
David Lawman 
Tel: 020 7776 6550
Capital Markets Consultants Limited
Richard Pearson
Tel: 07515 587184
Operating review
Results 
The Group's results for the first six months of the year reflect a further improvement in performance as the business continued its move to new products in markets away from the traditional areas of media and recycling. Reported sales decreased to 8.26 million (six months to 31 October 2014: 9.07 million). Gross margins increased to 34.5% from 24.6% in 2014 which resulted in an underlying profit from operations of 817,000 compared to 542,000 in 2014. Actual group sales including inter-group sales were 10.02 million (2014: 10.42 million) with inter-group sales of 1.76 million (2014: 1.35 million). These results represent significant improvements on our previous six months and the comparable period for last year.
Dividends
It is the board's intention to pay an increased interim dividend of 0.3 pence per share. The ex-dividend date and the record date for the interim dividend will be 21 January 2016 and 22 January 2016 respectively. The interim dividend will be paid on 1 March 2016. This continues to reflect our confidence in the recovery path and improvement this will bring to our results.
Operations 
On 24 June 2015, the Group acquired certain injection moulding, extrusion blow moulding and injection blow moulding plant and machinery from Neiman Packaging Limited. Neiman had used these assets to manufacture a range of packaging products for non-group customers principally in the health, hygiene and personal care markets. The assets were installed as two new production lines at Coral's manufacturing plant at Haydock and the benefits of integration are now resulting in a significant increase in utilisation of the Haydock facility. 
In trade moulding we started production of the specially designed crates for use in on-line delivery centres. This had been further delayed due to final modifications at the customers handling depots but in that last few weeks we have commenced full production and are now ready to meet its operational demand. The expected sales of this will be at least 2 million in the second half and we also seek opportunities to roll-out this product further with the same on-line retail distributor.
Interpack had another successful initial six months in which its sales were maintained at the levels recorded in the previous year whilst margins were improved from its product mix. It has seen benefits from the expansion of its product range manufactured at Haydock and is expecting demand to further improve during the second half of the year. 
Tatra has performed well with improved turnover resulting from continued development of its business with key accounts. A number of its long-term sales contracts were renewed in this period. Margins also benefited from sales of better added value products and from subcontracting production within the Group. New customers have also been sourced and the development of these relationships will bring further benefits to the Group in due course. 
It is pleasing to state that recycling crate and caddy sales have started to improve as local authorities resume their task of increasing waste management by renewing or sourcing large-scale contracts. Whilst there are still the constraints from reduced budgets, which resulted in tighter spending controls, there is more pressure for these authorities to roll-out a system of recycling food waste and continue to improve waste management of other materials.
The improved performance of these areas and introduction of the new business from Neiman products has enabled the Group to maintain its turnover at a comparative level to the previous year despite a decline in media products sales of 1.5 million. As a result, turnover is now set to show an increased level for the full year. A further consequence of this improvement is that we have been able to reduce our dependence on subcontracted production for third party customers. This production, whilst previously enabling our production capacity to be filled, took away control and management of our resources whilst hindering risk management. We now have much greater contribution to Group results from our own products whilst we still appreciate the additional capacity that is generated from subcontracted work.
Media sales have shown a decline for reasons that have been well documented but at least they seem to have reached a level which is maintained to service the requirements of the market. As such we have a constant level of sales forecast and have future orders that take up all of our present production capacity for CD and DVD products. 
Acquisitions and capital expenditure
In June 2015, the Company acquired certain injection moulding, extrusion blow moulding and injection blow moulding plant and machinery from Neiman Packaging Limited for a total consideration of up to 500,000 in cash, comprising an initial consideration of 300,000 and an earn-out consideration of up to 200,000.This plant is used to manufacture a range of packaging products for non-group customers principally in the health, hygiene and personal care markets and was installed in two new production lines at Coral's manufacturing plant at Haydock thereby significantly increasing utilisation of the Haydock facility. 
Total capital expenditure in the first six months, including the expected 500,000 spend on the Neiman assets, was 985,000 (2014:390,000) of which a considerable portion of the balance related to improving the infrastructure at Haydock in order to improve its efficiency and effectiveness. These projects include improving the compressor system and reorganising the factory production lines and capacity.
Financial position and cash flow
Our balance sheet asset position has improved following two share placings in June 2015 and August 2015 of a total of 7,753,330 new ordinary shares to raise, in aggregate, 1.14 million before expenses. Net assets remain strong at 10.5 million (2014: 9.3 million). Underlying EBITDA increased substantially to 1,130,000 (2014: 817,000) and the net cash inflow from operations was 1,316,000 (2014: 891,000). The Group had undrawn banking facilities of 1.5 million at 31 October 2015. 
Asset finance has been extended to support the cash funding requirement of the planned expenditure on new machinery during the second half of the year. As a result, the Group expects to be able to generate surplus funds from operations above its investing and financing requirements. 
Outlook 
We are pleased with the continued improvement in performance of the Group and expect to make further progress during the remainder of the year. The acquisition of the Neiman business has started in the last quarter to improve our sales and production. We are improving our production facilities at Haydock in order to have increased capabilities and a more effective and efficient workplace. There is still more work scheduled to improve production control and monitoring but, despite the difficult conditions facing manufacturing companies, we expect to continue to roll-out improved performance to our key performance indicators.
The Group has a strong balance sheet and good financial position to invest in further acquisitions and businesses which will improve growth and enable better returns for our shareholders. The Board expects to make further progress which should accelerate rapidly as projects and developments mature through the remainder of the 5 year strategic plan.
Joe Grimmond  
Executive Chairman 
2 December 2015
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the six months to 31 October 2015
Notes
Six months to
31 October
2015 
(unaudited)
000
Six months to
31 October
2014 
(unaudited/ restated)
000
Year to
30 April
2015
(audited)
000
Revenue
3
 8,259
 9,070
 17,425
Cost of sales
 (5,410)
 (6,840)
(12,268)
Gross profit
 2,849
 2,230
 5,157
Operating costs
Distribution expenses
 (313)
 (372)
(716)
Administrative expenses before separately disclosed items
 (1,719)
 (1,316)
(3,092)
Underlying operating profit
 
 817
 542
1,349
Separately disclosed items:
Share based payment charge
 (3)
 - 
(12)
Amortisation of intangible assets
 (36)
 (53)
(106)
Acquisition costs
 -
 (106)
(106)
Retirement costs of former directors
 -
 -
(414)
Impairment loss on trade receivables
 -
 -
(336)
 (39)
 (159)
 (974)
Operating profit
 778
 383
 375
Finance expense
 (94)
 (92)
 (184)
Profit before taxation
 684
 291
 191
Taxation 
4
 (73)
 - 
-
Total comprehensive income
 611
 291
 191
Earnings per ordinary share
5
Basic and diluted (pence)
 1.00
 0.55
0.35
Underlying basic (pence)
1.06
0.86
2.12
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
At 31 October 2015
31 October
2015
(unaudited)
000
31 October
2014
(unaudited/ restated)
000
30 April
2015
(audited)
000
Non-current assets
Goodwill 
 4,768
 4,768
4,768
Other intangible assets
 203
 317
 246
Property, plant and equipment
 6,010
 5,564
 5,556
Total non-current assets
 10,981
 10,649
10,570
Current assets
Inventories
 1,456
 1,789
 1,404
Trade and other receivables
3,922
4,866
3,854
Cash and cash equivalents
 55
 -
 67
Total current assets
 5,433
 6,655
 5,325
Total assets
 16,414
 17,304
 15,895
Current liabilities
Bank overdrafts and borrowings
(1,517)
(2,582)
 (2,349)
Trade and other payables
(2,894)
(3,673)
(2,659)
Corporation tax 
(119)
(46)
-
Total current liabilities
(4,530)
(6,301)
(5,008)
Non-current liabilities
Borrowings
 (1,321)
 (1,616)
 (1,704)
Deferred taxation liability
 (62)
 (62)
(62)
Total non-current liabilities
 (1,383)
 (1,678)
 (1,766)
Total liabilities
 (5,913)
 (7,979)
(6,774)
Total net assets
 10,501
 9,325
 9,121
Equity
Share capital
 656
 579
 579
Share premium 
 2,849
 1,862
 1,862
Other reserves
443
443
443
Retained earnings
 6,553
 6,441
 6,237
Total equity 
 10,501
 9,325
 9,121
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
For the six months to 31 October 2015 (unaudited)
Share
capital
Share
premium
Other
reserves
Retained
earnings
Total
equity
000
 000
000
000
 000
At 1 May 2015
 579
1,862
443
 6,237
 9,121
Total comprehensive income
-
-
-
611
611
Issue of share capital
77
987
-
-
1,064
Credit for share based payment
-
-
-
3
3
Dividend paid
 -
 -
 -
 (298)
 (298)
At 31 October 2015
 656
2,849
443
 6,553
 10,501
For the six months to 31 October 2014 (unaudited/restated)
Share
capital
Share
premium
Other 
reserves
Retained
earnings
Total
equity
000
 000
000
000
 000
At 1 May 2014
 419
 409
-
 6,439
 7,267
Total comprehensive income
-
-
-
291
291
Issue of share capital
160
1,453
443
-
2,056
Dividend paid
 -
 -
 (289)
(289)
At 31 October 2015
 579
1,862
443
 6,441
 9,325
For the year ended 30 April 2015 (audited)
Share
capital
Share
premium
Other
reserves
Retained
earnings
Total
equity
000
 000
000
000
 000
At 1 May 2014
 419
409
-
6,439
7,267
Total comprehensive income
-
-
-
191
191
Issue of share capital
160
1,453
443
-
 2,056
Credit for share based payment
-
-
-
12
 12
Dividend paid
-
-
-
(405)
 (405)
At 30 April 2015
 579
1,862
443
 6,237
9,121
CONSOLIDATED STATEMENT OF CASH FLOWS
For the six months to 31 October 2015
Six months to
31 October
2015
(unaudited)
000
Six months to
31 October
2014
(unaudited/
restated)
000
Year to
30 April
2015
(audited)
000
Cash flow from operating activities
Profit for the period after tax
611
291
191
Adjustments for:
Depreciation
306
264
533
Loss/(profit) on disposal of fixed assets
25
 (33)
(33)
Intangibles amortisation
43
 64
136
Share based payment charge
3
 -
12
Interest payable
94
 92 
 184
(Increase)/decrease in inventories
(52)
 411
801
(Increase)/decrease in trade and other receivables
(68)
168
1,108
Increase/(decrease) in trade and other payables
354
 (331)
(1,361)
UK corporation tax paid
-
 (35)
-
Net cash generated from operating activities
1,316 
891
 1,571
Cash flow from investing activities
Acquisition of subsidiary, net of cash
 -
 (1,998)
 (1,998)
Acquisition of property, plant and equipment
(785)
(384)
(440)
Acquisition of intangible assets 
 -
 (6)
 (7)
Proceeds from disposal of fixed assets
-
 43
42
Net cash used in investing activities
 (785)
 (2,345)
 (2,403)
Cash flow from financing activities
Proceeds of issued share capital
1,064
 1,605
1,605
Proceeds of borrowings
200
500
700
Proceeds of new asset finance
33
 237
237
Repayment of director's loan
(200)
 (146)
(146)
Dividend paid to equity holders 
 (298)
 (289)
 (405)
Interest paid
(94)
 (92)
 (184)
Loan repayments
 (197)
(108)
(297)
Finance lease principal payments
 (137)
 (131)
(226)
Net cash used in financing activities
 371
 1,576
1,284
Net increase in cash and cash equivalents
 902
 122
 452
Cash and cash equivalents at the start of the period
 (1,747)
 (2,199)
 (2,199)
Cash and cash equivalents at the end of the period
 (845)
 (2,077)
 (1,747)
1. Basis of preparation
The financial information set out in this Interim Report does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. The Group's statutory financial statements for the year ended 30 April 2015, 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 2015.
The Interim Report has not been audited or reviewed 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 statements as at 30 April 2015 and for the year ended 30 April 2015.
3. Revenue
All production is based in the United Kingdom. The geographical analysis of revenue is shown below:
Six months to
31 October 2015
 (unaudited)
000
Six months to 
31 October 2014
(unaudited)
000
Year to 
30 April 2014
(audited)
000
United Kingdom
 7,991
 8,562
 16,917
Rest of Europe
268 
508 
 508
 8,259
 9,070
 17,425
Turnover by business activity
Sale and manufacture of plastic products
 8,259
 9,070
 17,425
4. Taxation
The taxation charge for the six months to 31 October 2015 is based on the effective taxation rate, which is estimated will apply to earnings for the year ending 30 April 2015.The rate used is below the applicable UK corporation tax rate of 20% due to the utilisation of tax losses in the period.
5. Earnings per share
Underlying and basic earnings per ordinary share are calculated using the weighted average number of ordinary shares in issue during the financial period of 61,118,164 (31 October 2014: 52,495,190 and 30 April 2015: 54,894,513). The earnings used to calculate basic earnings per share are 611,000 (31 October 2014: 291,000 and 30 April 2015: 191,000). The earnings used to calculate underlying earnings per share are 650,000 (31 October 2014: 450,000 and 30 April 2015: 1,165,000).
Six months to
31 October 2015
(unaudited)
Six months to
31 October 2014
(unaudited/
restated)
Year to
30 April 2015
(audited)
000
p
000
p
000
p
Basic and diluted earnings per ordinary share
Profit for the financial period after tax
611
1.00
291
0.55
191
0.35
Underlying earnings per ordinary share
Profit for the financial period after tax
650
1.06
450
0.86
1,165
2.12
6. 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
2015
(unaudited)
000
Six months to
31 October
2014
(unaudited/
restated)
000
Year to 30 April
2015
(audited)
000
Net increase in cash and cash equivalents
 902
 122
452
Decrease/(increase) in bank and other loans
197
 (246)
 (257)
Decrease/(increase) in finance leases
 104 
 (106) 
 (213)
Decrease/(increase) in net debt in the financial period
 1,203
(230)
 (18)
Opening net debt
 (3,986) 
 (3,968) 
 (3,968)
Closing net debt
(2,783)
(4,198)
 (3,986)

This information is provided by RNS
The company news service from the London Stock Exchange
  END
IR BRBDDLBGBGUB