Final Results

RNS Number : 8320H

Coral Products PLC

08 December 2020

 

8 December 2020   

CORAL PRODUCTS PLC

('Coral' or the 'Company' or the 'Group')

Coral Products PLC, (the "Company" or the "Group") a specialist in the design, manufacture and supply of injection moulded plastic products based in Haydock, Merseyside, announces its audited final results for the year ended 30 April 2020.

KEY FINANCIALS

	2020	2019
	£	£
Group revenue	22,321,000	24,733,000
Underlying operating profit *	401,000	1,018,000
Goodwill impairment	(350,000)	-
Separately disclosed non-cash items (excluding goodwill impairment)	(291,000)	(360,000)
Operating (loss)/profit	(382,000)	479,000
Gross Margin	35.8%	35.9%
(Loss)/profit for the year before taxation	(821,000)	41,000
Underlying EBITDA *	2,114,000	2,479,000
Underlying earnings per share (see note 3) *	(0.05)p	0.75p
Dividend paid per share	0.00p	0.25p

* Underlying results are reported before separately disclosed items, as shown in note 2. Such underlying results are not intended to be a substitute for, or superior to, IFRS measures of profit.

HEADLINES

Covid-19 headlines

· The fall in Group revenues is entirely due to Covid-19, sales during the second half of the year were expected to be higher than 2019 due to the introduction of the MBRS project and the new upgraded ice cream tools, both of which were delayed due to the pandemic.

· Global One-Pak's sales were hit particularly hard due to running out of stock as all stock is manufactured in China and delivery after Chinese New Year did not resume until May 2020 with deliveries getting to GOP in June 2020.

· Underlying operating profit decreased to £0.4m (2019: £1.0m) and underlying EBITDA decreased to £2.1m (2019: £2.5m).

· Multi box recycling system (MBRS). The tooling of this had been delayed due to the pandemic. The tools arrived onsite in September 2020 with production commencing in November 2020.

·     New improved food packaging. The tooling was ready to go for this summer period but due to the lockdowns very little production of ice cream tubs has occurred during this financial period.

· Flame retardant plastic moulded roof tiles for the construction industry. This has been put on hold by the customer due to the pandemic.

Other headlines

· Gross margin remained static at 35.8% (2019: 35.9%).

· We still remain a supplier of choice for a major on-line tote retailer with a further extension to supply into 2021/22.

· Continuing to build on being a major supplier of recycling crates and caddies into UK councils and local authorities.

· End of line automation installed in blow moulding to reduce labour resources.

· Recycling of post-industrial plastic waste increasing contribution.

· Maximising current assets across manufacturing.

· Strong net assets position of £12.1m as at the year-end (2019: £12.9m).

The Company's audit report contained a qualification in relation to the carrying value of the Company's inventory as the audit evidence available to the auditor was limited because, given the global COVID-19 pandemic, no inventory count was undertaken and the auditor did not observe the physical inventory as at 30 April 2020.  Further details can be found in note 1 below.

Commenting on the results, Joe Grimmond, Chairman, said:

"This current trading period has been one of the most difficult I've ever experienced, with Brexit, the United States - China trading wars, the general election and the covid-19 pandemic.  The net effect of all these culminated in a steep reduction in sales in the second half from our budgeted expectations. This fall in sales has resulted in a loss in contribution for the period. Revenue was £22.3m (2019: £24.7m) and underlying operating profit £0.4m (2019: £1.0m), the gross margin of 35.8% (2019: 35.9%) was maintained which was as a result of the direct and indirect cost reduction measures taken across the Group".

"The second half of the year was forecasted to have much higher sales than the first half. This was expected from the long-awaited multi-box recycling system (MBRS) project and the general uptake in sales that occurs in the final quarter onwards. The tooling for the MBRS was severely delayed and with the lockdown the usual uptake did not occur and we had invested quite heavily in improved tooling last year to meet demand which the lockdown disrupted. Global One-Pak was hit particularly hard due to the pandemic as supplies almost dried up".

"The Group has reported a loss before taxation for the financial year of £0.8m (2019: £0.04m profit), this is after non cash amortisation of £0.3m (2019: £0.3) and goodwill impairment of £0.4m (2019: £nil). Across the Group, finance costs have remained static at £0.4m (2019: £0.4m) and depreciation at £1.7m (2019: £1.5m)".

"Whilst we have confidence in our development strategy and the prospects of the Group, the very real uncertainties over Brexit and the coronavirus pandemic are a cause for concern."

"The Group continues with its strategic progress of increasing focus on value-added and innovative products, particularly in the food container, recycling, telecommunications, rail industry, home delivery totes and blow moulding areas. Our aim is to build a significant plastic moulding business with a bias towards using recycled materials produced by our recycling unit installed in Haydock. The current year will benefit from the Coral Mouldings and Tatra-Rotalac cost reductions and new business".

"Our Group is facing a crisis that is unprecedented, but we believe that our balance sheet and margins mean that we can mitigate the effects. The crisis will pass at some point. At that time, it will be the work we do to move the business forward that will determine our future success. So, our priorities being clear: (1) to do all we can to keep our workplaces as safe as possible for staff, (2) secure the cash resources of the business and (3) continue to develop our product ranges throughout the next financial period".

" We have enjoyed a strong start to our current financial year and we look forward to a satisfactory outturn for the year given the prevailing conditions. "

For further information, please contact:

Coral Products plc Michael (Mick) Wood, Chief Executive Officer	Tel: [phone]
Nominated Adviser & Broker Cairn Financial Advisers LLP Liam Murray/Sandy Jamieson/Ludovico Lazzaretti David Lawman (Corporate Broking)	Tel: [phone]
Capital Markets Consultants Richard Pearson	Tel: [phone]

This announcement contains inside information for the purpose of Article 7 of the EU Regulation 596/2014.
 

CHAIRMAN'S STATEMENT

Coronavirus - Summary of Impact Assessment

As might be expected I will begin with a summary of the risks that the coronavirus pandemic poses to the business and the actions we are taking to mitigate the effects. We cannot predict how widespread the virus will become, how long the pandemic will last and what the medium to long term effect of this pandemic will be.

Our priority is to do all we can to keep our workplaces as safe as possible for staff, ensuring that we follow all government guidelines. We have planned our business to be flexible, in all areas, to meet fluctuating levels of demand. We have robust financial controls that will ensure we maintain our working capital requirements whilst meeting all our agreed parameters with our financial partners.

We are taking measures to control costs and conserve cash within the business which include the delay of capital expenditure, the potential sale and leaseback of the land and building at the Haydock site and the suspension of dividend payments.

We reacted quickly to the crisis and as early as mid-March 2020 negotiated capital repayment holidays and a CBIL loan of £1 million pounds, this was received on 13 May 2020, with a six-month capital payment holiday and 12 months interest free from the Groups existing bank Barclays. We had invested heavily in new capacity in the last 3 years and this investment will enable us to greatly reduce capital expenditure over the next 2 financial periods.

Our manufacturing sites at Haydock and Wythenshawe were deemed as key suppliers during the first wave of the pandemic allowing both sites to continue manufacturing throughout.

There will be many challenges to our working practices as the pandemic develops and we are putting plans in place to protect our most vulnerable employees, comply with differing levels of Government restrictions and cope with illness throughout the business. In particular, we have adapted our technology for greater home working and seeking to segregate critical operational teams so as to keep all our vital operations and projects on track.

The actions taken by your board give us confidence that we will come through this current crisis and will be in a position to take advantage of any economic upturn.

Trading

This current trading period has been one of the most difficult I've ever experienced, with Brexit, the United States - China trading wars, the general election and the covid-19 pandemic.  The net effect of all these culminated in a steep reduction in sales in the second half from our budgeted expectations. This fall in sales has resulted in a loss in contribution for the period. Revenue was £22.3m (2019: £24.7m) and underlying operating profit £0.4m (2019: £1.0m), the gross margin of 35.8% (2019: 35.9%) was maintained which was as a result of the direct and indirect cost reduction measures taken across the Group.

The second half of the year was forecasted to have much higher sales than the first half. This was expected from the long-awaited multi-box recycling system (MBRS) project and the general uptake in sales that occurs in the final quarter onwards. The tooling for the MBRS was severely delayed and with the lockdown the usual uptake did not occur and we had invested quite heavily in improved tooling last year to meet demand which the lockdown disrupted. Global One-Pak was hit particularly hard due to the pandemic as supplies almost dried up.

The Group has continued with its strategic progress of increasing focus on value-added and innovative products. The focus is to build a significant plastic moulding business with a bias towards using recycled materials and with the new Recycling unit now installed and operational at Haydock, we remain confident in our ability to do so.

The Group has reported a loss before taxation for the financial year of £0.8m (2019: £0.04m profit), this is after non cash amortisation of £0.3m (2019: £0.3) and goodwill impairment of £0.4m (2019: £nil). Across the Group, finance costs have remained static at £0.4m (2019: £0.4m) and depreciation at £1.7m (2019: £1.5m).

Interpack's profit before tax is £0.4m (2019: £0.7m), Global One-Pak's £0.1m (2019: £0.2m) and Tatra-Rotalac's £0.1m (2019: £0.2m loss). The delay in the launch of the MBRS and drop in sales following the pandemic at Coral Products (Mouldings) has resulted in a loss of £0.8m (2019: £0.4m loss). These results are before amortisation of intangibles arising on consolidation of £0.3m (2019: £0.3m) and the goodwill impairment of Tatra Rotalac of £0.4m (2019: £nil).

Performance of the Group is monitored principally through adjusted profit measures which exclude £0.8m of adjusted items (2019: £0.5m). Such items include the amortisation of intangibles arising on the acquisitions of Global One-Pak and Tatra-Rotalac, due-diligence costs, share based payment charges, compensation for loss of office of senior management, reorganisation costs and goodwill impairment.

Dividends

The Board remains committed to its long-term progressive dividend policy, which takes account of the underlying growth, whilst acknowledging the requirement for continuing investment and short-term fluctuations in profit.

Due to the uncertainty surrounding UK Brexit and the Coronavirus pandemic the Board believe it is prudent to suspend dividend payments in the short term. Therefore, the Board will not be recommending the payment of a dividend for this financial period.

Board Changes

There were no board changes during the year.

Chairman's Corporate Governance Statement

As Non-executive Chairman of the board, my role is to set the strategy for the company, monitor the ongoing performance of the companies within the Group to ensure that they are meeting our requirements and also identify potential acquisition targets.

In addition, my role also encompasses overseeing the functioning of the board and its effectiveness and ensuring sound corporate governance practices are followed.

All the Directors of Coral believe strongly in the importance of good corporate governance for the creation of shareholder value over the medium to long-term and to engender trust and support amongst the Group's wider stakeholders.

I work with key executives throughout the organisation to instil good corporate governance practices in accordance with the Code.

In accordance with the changes to AIM Rule 26 the Company is now applying the revised QCA Corporate Governance Code published earlier in 2018.

The board monitors our corporate governance practices and will always implement improvements which further enhance performance and/or benefit stakeholders.

Strategy

Our Board continuously reviews business performance alongside market conditions to make sure that we take the correct strategic decisions for each of our businesses. The Board recognises fully that it has been tasked with delivering enhanced shareholder value. The challenges facing the Board relate to managing the continued growth of the Group through the uncertainty and timelines surrounding UK Brexit and the coronavirus pandemic.

People

We are reliant on the expertise, professionalism and commitment of our people and thank them for their continued contribution to the business during a challenging year.

Future Developments

The following projects were delayed due to the coronavirus pandemic. We expect these to now be introduced during the latter part of the current financial year:

· The multi box recycling system (MBRS).

· Conservatory and outbuildings rooftiles.

Outlook

Whilst we have confidence in our development strategy and the prospects of the Group, the very real uncertainties over Brexit and the coronavirus pandemic are a cause for concern.

The Group continues with its strategic progress of increasing focus on value-added and innovative products, particularly in the food container, recycling, telecommunications, rail industry, home delivery totes and blow moulding areas. Our aim is to build a significant plastic moulding business with a bias towards using recycled materials produced by our recycling unit installed in Haydock. The current year will benefit from the Coral Mouldings and Tatra-Rotalac cost reductions and new business.

Our Group is facing a crisis that is unprecedented, but we believe that our balance sheet and margins mean that we can mitigate the effects. The crisis will pass at some point. At that time, it will be the work we do to move the business forward that will determine our future success. So, our priorities being clear: (1) to do all we can to keep our workplaces as safe as possible for staff, (2) secure the cash resources of the business and (3) continue to develop our product ranges throughout the next financial period.

We have enjoyed a strong start to our current financial year and we look forward to a satisfactory outturn for the year given the prevailing conditions.

Joe Grimmond
Chairman
8 December 2020
 

Group Income Statement

for the year ended 30 April 2020

				2020 £'000	2019 £'000
Revenue				22,321	24,733
Cost of sales				(14,329)	(15,861)
Gross profit				7,992	8,872
Operating costs
Distribution expenses				(1,296)	(1,246)
Administrative expenses before impairment and separately disclosed items				(6,295)	(6,608)
Other separately disclosed items				(433)	(539)
Goodwill impairment				(350)	-
Administrative expenses				(7,078)	(7,147)
Operating (loss)/profit				(382)	479
Finance costs				(439)	(438)
(Loss)/profit for the financial year before taxation				(821)	41
Taxation				-	43
(Loss)/profit for the financial year attributable to the equity holders of the parent				(821)	84
Earnings per share attributable to the equity holders of the parent
Basic and diluted (loss)/profit per ordinary share				(0.99)p	0.10p

Group Statement of Comprehensive Income

for the year ended 30 April 2020

				2020 £'000	2019 £'000
(Loss)/profit for the financial year				(821)	84
Total other comprehensive income				-	-
Total comprehensive (loss)/income for the year attributable to equity holders of the parent				(821)	84

 

Balance Sheet

as at 30 April 2020

		As at 30 April 2020 £'000	As at 30 April 2019 £'000
ASSETS
Non-current assets
Goodwill		5,145	5,495
Other intangible assets		1,124	1,401
Property, plant and equipment		2,790	9,411
Right of use assets		4,365	-
Total non-current assets		13,424	16,307
Current assets
Inventories		3,368	3,505
Trade and other receivables		4,931	5,521
Cash and cash equivalents		453	-
Total current assets		8,752	9,026
Assets held for sale		2,520	-
LIABILITIES
Current liabilities
Term loan		-	150
Other borrowings		2,978	4,800
Lease liabilities		1,191	-
Trade and other payables		3,749	3,834
Total current liabilities		7,918	8,784
Liabilities on assets held for sale		1,765	-
Net current assets		1,589	242
Non-current liabilities
Term loan		-	1,303
Other borrowings		-	1,965
Lease liabilities		2,509	-
Deferred tax		398	368
Total non-current liabilities		2,907	3,636
NET ASSETS		12,106	12,913
SHAREHOLDERS' EQUITY
Share capital		826	826
Share premium		5,288	5,288
Other reserves		1,567	1,567
Retained earnings		4,425	5,232
TOTAL SHAREHOLDERS' EQUITY		12,106	12,913

 

Statement of Changes in Shareholders' Equity

for the year ended 30 April 2020

			Called Up Share Capital £'000	Share Premium Reserve £'000	Other Reserves £'000	Retained Earnings £'000	Total Equity £'000
Group
At 1 May 2018			826	5,288	1,567	5,490	13,171
Profit for the year			-	-	-	84	84
Other comprehensive income			-	-	-	-	-
Total comprehensive income			-	-	-	84	84
Contributions by and distributions to owners
Credit to equity for equity settled share-based payments			-	-	-	71	71
Dividend paid			-	-	-	(413)	(413)
At 1 May 2019			826	5,288	1,567	5,232	12,913
Loss for the year			-	-	-	(821)	(821)
Total comprehensive loss			-	-	-	(821)	(821)
Contributions by and distributions to owners
Credit to equity for equity settled share-based payments			-	-	-	14	14
Dividend paid			-	-	-	-	-
At 30 April 2020			826	5,288	1,567	4,425	12,106

Cash Flow Statement

for the year ended 30 April 2020

			Group
			2020 £'000	2019 £'000
Cash flows from operating activities
(Loss)/profit for the year			(821)	84
Adjustments for:
Depreciation of property, plant and equipment			1,032	1,461
Depreciation on right of use assets under IFRS16			681	-
(Profit)/loss on disposal of tangible assets			-	(23)
Goodwill impairment			350	-
Amortisation of intangible assets			277	289
Share based payment charge			14	71
Interest payable			439	438
Taxation charge/(credit)			-	(43)
Operating cash flows before movements in working capital			1,972	2,277
Decrease/(increase) in inventories			137	(641)
Decrease/(increase) in trade and other receivables			563	(69)
(Decrease)/increase in trade and other payables			(87)	(75)
Cash generated by operations			2,585	1,492
UK corporation tax received			-	2
Net cash generated from operating activities			2,585	1,494
Cash flows from investing activities
Proceeds from disposal of property, plant and equipment			-	33
Acquisition of property, plant and equipment			(322)	(690)
Net cash used in investing activities			(322)	(657)
Cash flows from financing activities
New bank loans raised			500	-
Dividends paid			-	(413)
New lease liabilities			58	350
Interest paid on borrowings			(135)	(438)
Interest paid on lease liabilities			(304)	-
Repayments of bank borrowings			(188)	(151)
Repayments of obligations under lease liabilities			(1,180)	(801)
Movements on invoice discounting facility			(534)	118
Net cash used in financing activities			(1,783)	(1,335)
Net increase/(decrease) in cash and cash equivalents			480	(498)
Cash and cash equivalents at 1 May			(27)	471
Cash and cash equivalents at 30 April			453	(27)

 

Notes

for the year ended 30 April 2020

1.  Basis of preparation

The financial information set out above does not constitute the Group's statutory accounts for the years ended 30 April 2020 or 2019 within the meaning of Section 434 of the Companies Act 2006, but is derived from those accounts. Statutory accounts for 2019 have been delivered to the Registrar of Companies and those for 2020 will be delivered following the company's Annual General Meeting. The auditors' report on the statutory accounts for the year ended 30 April 2019 was unqualified, did not draw attention to any matters by way of emphasis, and did not contain statements under s498 (2) or s498 (3) of the Companies Act 2006. The auditor's report on the statutory accounts for the year ended 30 April 2020 was qualified with respect to inventory having a carrying value of £3,368,000 as the audit evidence available was limited because, given the global COVID-19 pandemic, no inventory count was undertaken and the auditor did not observe the physical inventory as at 30 April 2020. In respect solely of the limitation relating to inventory, the auditor did not obtain all the information and explanations considered necessary for the purpose of the audit and were unable to determine whether adequate accounting records had been kept by the parent company.

This financial information has been prepared in accordance with International Financial Reporting Standards ("IFRSs") and International Financial Reporting Interpretations Committee (IFRIC) interpretations as adopted by the European Union and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.

2. Underlying operating profit and separately disclosed items

Underlying profit - the Company believes that underlying profit and underlying earnings provide 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.

	2020 £'000	2019 £'000
Operating (loss)/profit	(382)	479
Separately disclosed items within administrative expenses
Share based payment charge	14	71
Amortisation of intangible assets (customer relationships and brands)	277	289
Reorganisation costs	142	179
Goodwill impairment	350	-
Total separately disclosed items	783	539
Underlying operating profit	401	1,018
Depreciation	1,713	1,461
Underlying EBITDA	2,114	2,479
Separately disclosed items (excluding amortisation and impairment)	(156)	(250)
EBITDA	1,958	2,229

 

3. Earnings per share

Basic and underlying earnings per share

The basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders for the financial period by the weighted average number of shares in issue during the financial period of 82,614,865 (2019: 82,614,865).

Underlying earnings per share is also shown calculated by reference to earnings before separately disclosed items. The directors consider that this gives a useful indication of underlying performance.

	2020		2019
	£'000	EPS (p)	£'000	EPS (p)
(Loss)/profit for the financial period	(821)	(0.99)	84	0.10
Separately disclosed items (note 2)	783		539
Underlying (loss)/profit for the period	(38)	(0.05)	623	0.75

4. Dividends

A dividend for the year ended 30 April 2019 of 0.25p per share was paid on 28 March 2019. This dividend amounted to £206,537.

Due to the effects the coronavirus pandemic is having on the business; the Board will not be recommending a payment of a final dividend payment for the year ended 30 April 2020.

5. Group reconciliation of net cash flow to movement in net debt

	2020 £'000	2019 £'000
Net increase/(decrease) in cash and cash equivalents	480	(498)
Decrease/(increase) on invoice discounting facility	534	(118)
(Increase)/decrease in bank loans and other loans	(312)	151
(Decrease)/increase in lease liabilities	(475)	(441)
Movement in net debt for the period	227	(906)
Net debt at beginning of period	(8,217)	(7,311)
Net debt at end of period	(7,990)	(8,217)

6. Post Balance Sheet Event

A coronavirus business interruption loan (CBIL) of £1 million was received from Barclays Bank on 13 May 2020. This is on a 3-year term interest free for the first 12 months and repayment holiday for the first 6 months. The interest rate is 4.61% over base. The only covenant in place is that capital expenditure cannot be higher than £400,000 and during the term of the loan no dividend payments can be made.

The invoice factoring facility with Barclays was reviewed in June 2020 and renewed for a further twelve months.

7.  Publication of Annual Report

A copy of the 2020 Report & Accounts will be sent to all shareholders on or before 18 December 2020. Further copies will be available to the public at the company's registered address at North Florida Road, Haydock Industrial Estate, Haydock, Merseyside WA11 9TP and on the Company's website at www.coralproducts.com.

8.  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). The Directors of the Group take responsibility for this announcement.

 

END

 

 

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