Interim Results
Coral Products PLC
08 December 2006
CORAL PRODUCTS PLC
2006 Interim Results
Coral Products PLC, one of Europe's leading manufacturers and suppliers of media
packaging for DVD and CD, announces interim results for the six months ended 31
October 2006.
In his statement to shareholders the Chairman, Geoffrey Piper, said:
'Trading for the first half of our financial year continued to be severely
affected by lower margins resulting from higher raw material and energy prices.
Sales are now returning to expected levels but competition remains fierce. The
prospect of lower raw material prices in 2007 and the introduction of new
products should improve results. We are in a strong position to service
anticipated increases in demand for DVD boxes arising from technological
advances.'
Summary
Six months Six months Year
ended ended ended
31 October 31 October 30 April
2006 2005 2006
Turnover £ 7.8m £ 9.3m £ 16.4m
Pre-tax (loss)/profit £ (833,000) £ 3,000 £ (977,000)
EBITDA £354,000 £1,220,000 £1,467,000
(Loss)/earnings per share (2.90)p 0.01p (3.63)p
Dividend NIL NIL NIL
• DVD box sales continued to increase, albeit at lower prices and margins.
• CD case volumes remain at expected levels.
• New product lines to extend range of DVD and CD cases.
• Reduced margins due to high raw material and energy price increases.
Regarding prospects for the current year, Geoffrey Piper added:
'We are now seeing some improved levels of trading and anticipate sales of new
products in 2007.'
Enquiries: Coral Products PLC
Tel: 01942 272 882
Warren Ferster, Managing Director
Stephen Fletcher, Finance Director/Company Secretary
CHAIRMAN'S STATEMENT
Trading for the first half of our financial year continued to be severely
affected by lower margins resulting from higher raw material and energy prices.
Sales are now returning to expected levels but competition remains fierce. The
prospect of lower raw material prices in 2007 and the introduction of new
products should improve results. We are in a strong position to service
anticipated increases in demand for DVD boxes arising from technological
advances.
Raw material prices have continued to increase and this has had an adverse
impact upon margins within a very competitive market. We expect these prices to
ease next year which should facilitate increases in profitability.
Sales of DVD boxes improved during the period, although the rate of growth was
reduced. CD case sales remained at expected levels but margins have been
constantly eroded. There were negligible sales of other products in this period
although this should improve in the second half.
We continue to extend our range of DVD products including the addition of
slim-line boxes and cases adapted for children. These complement our existing
products and enable us to supply customers with a wider product range.
After lengthy efforts we have now obtained a supply agreement for a product for
the medical industry. Our continuing aim is to manufacture other new products to
reduce our dependency upon media based boxes.
Trading
Turnover for the six months ended 31 October 2006 was £7.8 million (2005: £9.3
million) and the pre-tax loss was £833,000 (2005:profit £3,000). Diluted loss
per ordinary share was 2.90p (2005:earnings 0.01p).
Interim Dividend
No interim dividend has been declared (2005: nil) for the period to 31 October
2006.
Prospects
We are now seeing some improved levels of trading and anticipate sales of new
products in 2007. The margins attained to date have not been adequate to support
the business in the long-term but it is expected that these will improve in
2007. It will be a slow process to return to satisfactory levels of
profitability but, with the prospect of better market conditions and additional
products, we are confident that the required progress can be achieved.
Geoffrey Piper
8 December 2006
Income Statement - (unaudited) Notes Half year to Half year to Year to
for the half year to 31 31 October 31 October 30 April
October 2006
2006 2005 2006
£'000 £'000 £'000
Continuing operations ----------- ----------- ----------
Revenue (2) 7,785 9,298 16,360
Cost of sales (5,846) (6,460) (12,823)
-------- -------- ---------
Gross profit 1,939 2,838 3,537
Operating expenses (2,703) (2,734) (4,306)
-------- -------- --------
Operating (loss)/profit (764) 104 (769)
Exchange gain on finance
leases receivable 16 - 28
Interest payable (85) (101) (236)
------ ------- -------
(Loss)/profit before taxation (833) 3 (977)
Taxation (3) 250 (1) 246
------ ------- -------
Loss/(profit) for the
financial period (583) 2 (731)
------ ------- -------
Basic (loss)/earnings per
share (4) (2.90)p 0.01p (3.63)p
--------- --------- --------
Diluted (loss)/earnings per
share (4) (2.90)p 0.01p (3.63)p
--------- --------- --------
All activities derive from continuing operations.
Statement of Changes in Shareholders' As at As at As at
Equity - (unaudited) 31 October 31 October 30 April
2006 2005 2006
£'000 £'000 £'000
-------- -------- --------
Equity at start of the period 10,435 11,175 11,242
(Loss)/profit for the period (583) 2 (731)
Share based payment charge - - (5)
--------- --------- ---------
Equity at end of the period 9,852 11,177 10,435
--------- --------- ---------
Balance Sheet - (unaudited) As at As at As at
as at 31 October 2006 31 October 31 October 30 April
2006 2005 2006
£'000 £'000 £'000
ASSETS ----------- ----------- -----------
Non-current assets
Intangible assets 359 397 383
Property, plant and equipment 11,780 13,131 12,560
--------- ---------- ---------
Total non-current assets 12,139 13,528 12,943
--------- ---------- ---------
Current assets
Inventories 1,372 1,814 1,687
Trade and other receivables 5,091 6,023 3,308
Cash and cash equivalents - - 36
Taxation - - 88
----------- ----------- -----------
Total current assets 6,463 7,837 5,119
----------- ----------- ----------
LIABILITIES
Current liabilities
Financial liabilities - borrowings 2,139 3,278 1,659
Trade and other payables 4,057 4,534 2,859
Current tax payable - 128 -
--------- ---------- ----------
Total current liabilities 6,196 7,940 4,518
--------- ---------- ----------
Non current liabilities
Financial liabilities - borrowings 1,450 836 1,774
Deferred tax liabilities 1,104 1,412 1,335
---------- ---------- ----------
Total non-current liabilities 2,554 2,248 3,109
---------- ---------- ----------
Net assets 9,852 11,177 10,435
---------- ---------- -----------
Equity
Share capital 201 201 201
Share premium 4,558 4,558 4,558
Other reserves 27 7 27
Retained earnings 5,066 6,411 5,649
----------- ----------- -----------
Total shareholders' equity 9,852 11,177 10,435
----------- ----------- -----------
Cash Flow Statement - (unaudited) Half year to Half year to Year to
for the half year to 31 October 2006 31 October 31 October 30 April
2006 2005 2006
£'000 £'000 £'000
--------- -------- --------
Cash inflow from operating activities
(note 5) 86 559 1,922
Interest paid (49) (89) (119)
Interest on finance lease rentals (20) - (89)
Income taxes received/(paid) 107 - (34)
---------- --------- --------
Net cash from operating activities 124 470 2,854
---------- --------- ---------
Cash flows from investing activities
Purchases of intangible assets - - (9)
Proceeds from disposal of plant and
equipment - - 40
Purchases of property, plant and
equipment (316) (1,485) (2,009)
---------- ---------- ---------
Net cash used in investing activities (316) (1,485) (1,978)
---------- ---------- ---------
Cash flows from financing activities
Net proceeds from new bank loans 113 895 1,131
Proceeds of new asset finance - 942 1,614
Repayment of bank loans (212) (73) (485)
Finance lease principal payments (444) (600) (1,032)
---------- ---------- ---------
Net cash (used in)/generated from
financing activities (543) 1,164 1,228
---------- ---------- ---------
Net (decrease)/increase in cash and
cash equivalents (735) 149 930
Cash and cash equivalents at start of
period (510) (1,440) (1,440)
--------- ---------- ---------
Cash and cash equivalents at end of
period (1,245) (1,291) (510)
--------- ---------- ---------
Notes to the Interim Financial Statements
1. Basis of preparation
This interim report, including comparative data, has been prepared in
accordance with International Financial Reporting Standards (IFRS) in issue
that are either adopted by the EU and effective at 31 October 2006. The
Interim Financial Statements have been prepared in accordance with the
listing rules of the Financial Services Authority and do not constitute
financial statements as defined in section 240 of the Companies Act 1985.
The results for the 6 months ending 31 October 2005 and 2006 are unaudited.
The results for the year ended 30 April 2006 have been extracted from the
Financial Statements for that period, which were filed with the Registrar
of Companies and on which the auditors gave an unqualified report when did
not contain a statement under sections 237(2) and (3) of the Companies Act
1985.
The principal accounting policies applied in the preparation of this
interim report are consistent with those set out in the 2006 Annual Report
and Financial Statements. A summary of the company's principal accounting
policies is set out below
Segmental reporting
The Directors consider the Company's operations as one business segment and
that it operates in one geographical segment.
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. Assets held under finance leases are capitalised as tangible fixed
assets in the balance sheet and are depreciated over the useful economic
life of the asset. 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.
Employee benefits
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 which is the period of the licence. 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. Provision is made to write down
obsolete or slow-moving inventory to their net realisable value.
Cash and cash equivalents
Cash and cash equivalents comprise cash and bank balances together with
bank overdrafts that are repayable on demand.
Derivatives
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.
Share related payments
The fair value of equity settled share based payments to employees is
determined at the date of grant and is expensed on a straight-line basis
over the vesting period based on the Company's estimate of shares or
options that will eventually vest. In the case of options granted, fair
value is measured by a Black-Scholes pricing model.
2. Revenue
All production is based in the United Kingdom. The geographical analysis of
revenue is shown below:
Half year to Half year to Year to
31 October 31 October 30 April
2006 2005 2006
£'000 £'000 £'000
----------- ----------- --------
United Kingdom 6,163 7,766 13,345
Rest of Europe 1,622 1,532 3,015
----------- ----------- ----------
7,785 9,298 16,360
Turnover by business ----------- ----------- -----------
activity:
Media packaging 7,785 9,298 16,360
----------- ----------- -----------
3 Taxation
The charge or credit for taxation on the (loss)/profit for the period is
charged at 30% being the estimated effective rate for the full financial
year.
4 (Loss)/earnings per share
The calculation of basic (loss)/earnings per share is based on the (loss)/
profit for the period available to shareholders of £(583,000) (2005:profit
£2,000) and on 20,135,609 (2005: 20,135,609) 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 (2005: 20,295,787).
5 Cash flow from operating activities
Half year to Half year to Year to
31 October 31 October 30 April
2006 2005 2006
£'000 £'000 £'000
Operating (loss)/profit for the (764) 104 (769)
period
Profit on disposal of plant and - - (40)
equipment
Depreciation of property, plant 1,096 1,097 2,179
and equipment
Amortisation of intangible 24 21 57
assets
Share based payments - - (5)
Decrease in inventories 315 1,042 1,169
(Increase)/decrease in trade and (1,783) (1,689) 1,026
other receivables
Increase/(decrease) in trade and 1,198 1,036 (1,695)
other payables
--------- --------- ---------
Cash flow from operating (3,589) (4,114) (3,397)
activities
--------- --------- --------
6 Reconciliation of net cash flow to movement in net debt
Half year to Half year to Year to
31 October 31 October 30 April
2006 2005 2006
£'000 £'000 £'000
Net (decrease)/increase in cash (735) 149 930
and cash equivalents
Net proceeds from issue of new (113) (895) (1,131)
bank loans
Repayment of bank loans 212 73 485
Proceeds of new asset finance - (942) (1,614)
Finance lease principal payments 444 600 1,032
--------- -------- ----------
Movement in net debt for the (192) (1,015) (298)
period
Net debt at beginning of period (3,397) (3,099) (3,099)
--------- --------- --------
Net debt at end of period (3,589) (4,114) (3,397)
--------- --------- --------
7 Interim report
The interim report will be posted to all shareholders on 11 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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