First Day of Dealings

RNS Number : 6556N

Coral Products PLC

06 September 2011

 

6 September 2011

CORAL PRODUCTS PLC

("Coral" or the "Company")

FIRST DAY OF DEALINGS

The board of Coral (AIM: CRU) is pleased to announce the commencement of dealings in its ordinary shares ("Ordinary Shares") on the AIM market of the London Stock Exchange. 

HIGHLIGHTS

-       Completion of the Company's move from the premium segment of the Official List to AIM

-       Acquisition of Interpack Limited ("Interpack"), a reseller and distributor of plastic containers primarily to the food manufacturing and food packaging sector

-       Successful placing of 12,000,000 new Ordinary Shares to raise £1.8 million (before commissions and expenses)

OVERVIEW

On 30 June 2011, the Company announced its intention to cancel its admission to the premium segment of the Official List and trading on the London Stock Exchange's main market for listed securities ("Cancellation"), for which approval by the Company's shareholders was given at a general meeting of the Company on 18 July 2011, and to apply for admission of the entire issued and to be issued share capital of the Company to trading on AIM ("Admission"). The Company also announced that it was in discussions regarding a potential significant acquisition and fundraising which would, if agreed, be subject to approval by the Company's shareholders in due course. As a result of these discussions, the Company's Ordinary Shares were suspended from trading on 30 June 2011.

On 18 July 2011, the Company announced that shareholders had approved the Cancellation and submitted a request to the UKLA for the Cancellation to become effective on 16 August 2011, which was duly granted.

On 17 August 2011, the Company entered into an acquisition agreement, pursuant to which it conditionally agreed to acquire the entire issued share capital of Interpack for a maximum consideration of £4.1 million (the "Acquisition"), comprising:

-       an initial consideration of £3.0 million, to be satisfied by £2.1 million in cash and £0.9 million by the issue of 6,000,000 new Ordinary Shares at a price of 15 pence per share ("Consideration Shares"); and

-       between £0.5 million and £1.1 million of earnout consideration, payable in cash, dependent on the profits of Interpack in the year ended 31 December 2011, payable on publication of earnout accounts.

On 19 August 2011, the Company entered into a placing agreement, pursuant to which it conditionally raised £1.8 million (before commissions and expenses) by means of a placing of 12,000,000 new Ordinary Shares (the "Placing") which, together with a term loan of £1.4 million, enables the Company to satisfy the cash element of the initial consideration for the Acquisition and provides the Company with general working capital.

The Acquisition and Placing were conditional on the approval of the Company's shareholders, which was sought at a general meeting of the Company on 5 September 2011 ("GM"). All resolutions were duly passed at the GM.

REASONS FOR THE ACQUISITION, THE PLACING AND ADMISSION

Coral is a specialist in the design, manufacture and supply of injection-moulded plastic products, primarily in the media sector. The Company was listed on the main market of the London Stock Exchange from 13 April 1995 until 16 August 2011, during which time it produced fluctuating levels of profitability. In recent years, despite continuing to generate consistent annual revenues of over £12 million and positive cash flow, the Company has posted recurring losses. This is attributable to a decrease in demand for media packaging products, as media downloading has become increasingly popular, and the Company's depreciation charges.

As announced on 22 June 2011 in the Company's preliminary results for the year ended 30 April 2011, the Company has adopted a new strategy which is intended to reduce its reliance on media packaging by increasing sales in new business areas. The strategy comprises organic sales growth and the acquisition of existing complementary businesses in the plastic packaging sector with sales in non-media plastic products.

In line with this strategy, Interpack fits the Company's acquisition profile as it is a profitable sales and distribution company with an experienced sales and marketing team concentrating on, but not exclusive to, food packaging products. The Acquisition results in an enlarged group with sales channels into complementary product areas and allows greater utilisation of the Company's manufacturing facility.

FURTHER DETAILS ON INTERPACK

Interpack was incorporated in 2003 by its three directors who identified a gap in the market for supplying smaller food processors and packagers who were unable to obtain the quality and speed of service they require from major packing manufacturers. Interpack commenced trading in early 2004.

Interpack has enjoyed almost uninterrupted revenue growth since incorporation, generating a compound annual growth rate of 32 per cent. over its 7 full years of trading and continues to widen its customer base significantly year on year. The only decrease in revenues was in 2009, when Interpack's market suffered from the severe economic recession. This did not affect profitability however, as Interpack posted increased profit due to its strategy of targeting sales of higher margin products.

Interpack's growth has been restricted by limited supplier capacity. The Directors see considerable opportunities to expand into new markets if Interpack were able to source the products it requires on appropriate terms from other manufacturers.

Chairman Joe Grimmond commented: "We are delighted to announce the completion of the Company's admission to AIM and the acquisition of Interpack, which we believe will be transformational for the Company. Interpack's proven sales track record added to Coral's technical and manufacturing expertise creates a powerful combination."

Enquiries

Coral Products PLC Warren Ferster, Chief Executive & Managing Director Steve Fletcher, Finance Director & Company Secretary	Tel: [phone]
Nominated Adviser Cairn Financial Advisers LLP Avi Robinson / Tony Rawlinson	Tel: [phone]
Broker XCAP Securities plc Parimal Kumar / David Lawman	Tel: [phone]
Bankside Consultants Richard Pearson	Tel: [phone]

Extracts from the admission document published on 19 August 2011 are included below for information. The full admission document can be downloaded from the Company's website at www.coralproducts.com.

SYNERGIES BETWEEN CORAL AND INTERPACK

The Coral Directors believe that a number of synergies exist between the Company and Interpack (together the "Enlarged Group").

Vertical integration

Interpack is an established seller and distributor of predominantly food packaging products. The Company manufactures plastic products and currently has significant unused production capacity to increase its levels of output. The Company has applied for BRC accreditation for the manufacture of food packaging products, which will broaden its potential customer base in this market, and the Coral Directors expect to increase the Company's manufacturing output at low incremental costs given its present unused capacity. Following the Acquisition, the Enlarged Group will be able to retain in-house the sales margins which would normally be paid by Interpack to manufacturers in respect of products which will be manufactured by the Company.

The Interpack Directors estimate that, due to the capacity constraints of Interpack's suppliers, there is significant unsatisfied demand for its products, which the Coral Directors believe the Company will be able to meet using its underutilised production capacity.

Fast-track exposure to new market opportunity

The Company's strategy of reducing its exposure to media packaging requires diversification into new markets. The acquisition of Interpack will facilitate the Company's exposure to the food packaging products market through Interpack's existing customer network with minimal additional post-Acquisition cost.

Improved marketing and sales team

The Company's key strengths lie in manufacturing and, while it has an experienced sales director in Martin Watson, the Company expects to benefit significantly from a wider exposure of its service offering by virtue of its acquisition of a dedicated sales and distribution function.

CURRENT TRADING AND PROSPECTS FOR THE ENLARGED GROUP

Coral's current trading

The Company announced its preliminary results for the year ended 30 April 2011 on 22 June 2011. Since that date, trading has been in line with management's expectations.

Interpack's current trading

Interpack's trading since 31 December 2010 has seen increased revenues which are in line with management's expectations.

Prospects for the Enlarged Group

The Enlarged Group is expected to benefit from additional sales opportunities derived from Interpack making further use of the Company's unused manufacturing capacity. This is expected to have a positive impact on profits.

In addition, existing tax losses of £2.1 million within the Company are intended to be utilised against future expected profits of the Company.

 

END

 

 

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