CORAL PRODUCTS PLC

("Coral" or the "Group")

Interim Results

Coral Products plc, a specialist in the design, manufacture and supply of plastic products, announces its results for the six months to 31 October 2022.

"Investing in Growth - Organically and via Acquisition"

* 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), see note 7.

Operational and Financial Highlights

Completed Acquisitions

Of the £17.6m in sales, £10.3m came from the acquired businesses:

·      May 2022, Film & Foil Solutions Ltd acquired for £3.0m.

·      May 2022, Alma Products Ltd acquired for £2.5m (including an earn out of up to £1m).

·      September 2022, Manplas Ltd acquired for £300k.

·      October 2022, Ecodeck Ltd acquired for £5.5m (including an earn out of up to £1.15m).

Underlying businesses performing well

·   Organic growth in the 2 larger UK-based businesses, Tatra-Rotalac and Customised Packaging, of a combined 11.1% and an improvement in gross margin.

·   This was offset by Global One Pak which performed in line with management expectations and with improved margins in spite of supply chain challenges which are expected to improve in the last quarter as production moves from China to the UK.

·     Tatra-Rotalac exceeded expectations with both sales and profits significantly ahead of budget.

·     Customised Packaging continues to perform well with focus on driving efficiencies.

Targeted Capex Plan to deliver future growth

·      Committed £2.5m to support future demand for new opportunities

o  New injection moulding machines to create new lines

o  Tooling for specific products and anticipated orders

o Re-configured warehouse space to create 5000 sq. ft of additional manufacturing capacity upgraded to BRC standard

Financial Strength

·    Cash and cash equivalents of £3.8m (2021: £5.5m). Cash and cash equivalents are defined as cash of £3.8m (2021: £4.8m) plus treasury shares of £nil (2021: £0.7m).

·      Strong net assets position.

·      Property has been revalued resulting in an increase of £0.9m to £3.2m

·      Interim dividend of 0.5p declared.

Sustainability Objectives

·      The Group is proud of its focus on sustainability:

o  Adoption of bio-based materials.

o  Increasing move to re-cyclable materials.

o  Supply chain tracking and transparency.

Positive Outlook

·    Benefit from the acquired businesses to continue to come through in the second half of the year with significant opportunities to drive margins through real efficiencies, optimising people, assets and market opportunities.

·      Variable costs well managed across the Group with energy costs fixed.

·      Potential for further M&A subject to meeting "value add" criteria.

·      Overall, well placed going into the second half of the financial year.

Joe Grimmond, Executive Chairman, commented: "These excellent results reflect our ongoing investment in future growth. Our objective is to build a specialist UK plastics business of scale, targeting profitable, high-demand sectors. We aim to drive growth both organically and via acquisitions, whilst maintaining our commitment to sustainable objectives. In the 6-month period to 31 October 2022, we acquired four companies, all of which have performed well and we have committed £2.5m of capex into specific new business projects. At the same time, we remain prudent with a strong balance sheet, backed by freehold assets and cash, and we look to return value to shareholders via dividends and capital growth. And as a result, we are announcing an interim dividend of 0.5p. Like all businesses, we are mindful of the challenging economic environment, nevertheless, we believe Coral is in a good position going forward and we have yet to show the full benefit of our investments to date."

Joe Grimmond, Chairman, and Sharon Tinsley, Finance Director, will provide a live investor presentation relating to the financial results via the Investor Meet Company (IMC) platform on Wednesday, 14 December 2022 at 10:30am GMT.

Investors can sign up for free via: https://www.investormeetcompany.com/coral-products-plc/register-investor

Regulatory Information

The information contained within this announcement is deemed to constitute inside information for the purposes of Article 7 of EU Regulation 596/2014 (Market Abuse Regulations) which is part of UK law by virtue of the European Union (Withdrawal) Act 2018. Upon publication of this announcement, this inside information is now considered to be in the public domain.

Caution regarding 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 Coral's 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 because of new information, future events or otherwise, save as required by law and regulations.

Executive Chairman's Statement

Introduction

I am very pleased to present these results as they reflect our clear progress towards building a specialist UK plastic business of scale. The investments we have made in the period, adding four new plastic businesses, has driven the uplift in sales alongside solid organic growth generated from our existing businesses. Importantly, whilst all four acquisitions have performed to plan, there is significant untapped potential to come. As a management team, we are confident of our ability to add real value to each business, using our extensive knowledge of how to make consistent and attractive returns from the specialist plastics sector. Going into the second half of the financial year, we expect to continue to benefit from the acquisitions and the capital expenditure invested behind new business projects.

Results and Financial Position

Trading in the first half of the current year shows revenue substantially ahead of the same period for last year. Reported revenue was £17,587,000 (2021: £7,103,000), gross margins were 27.1% (2021: 35.7%) resulting in a gross profit of £4,759,000 (2021: £2,534,000). Underlying EBITDA was £1,881,000 (2021: £1,014,000) and underlying operating profits increased to £1,376,000 (2021: £759,000).

The change in gross margin reflects a change in the mix of companies within the Group due to acquisitions whilst gross margins on existing businesses improved. After investing £11,571,000 in new subsidiaries the gearing remains comfortable at 41%. The balance sheet net asset position is strong at £14,881,000 (2021: £12,376,000 net of £693,000 treasury shares). This represents a solid asset platform for developing the business.

Operations

Tatra-Rotalac Ltd

This business, a leading provider of plastic extrusion and injection moulded products for commercial use, has exceeded the board's expectations during the first half of the financial year with sales and profits well above budget. The recent capital expenditure is expected to generate additional improvements to performance in the final quarter of the year.

Global One-Pak Ltd

This business, a leading supplier of lotion pumps, triggers and mist sprayers, is currently being held back due to logistical cost increases in Chinese trading. Performing against a much-reduced sales budget and cost base, Global One Pak has improved gross margin and operating profit.

Performance in the second half of the financial year is expected to improve during the final quarter when production of some caps and enclosures begins in the UK.

Customised Packaging Ltd

This business, a producer of specialised packaging for transportation including crates and cases, continues to perform well. Following the departure of the old management team in the earlier part of the year, focus has been on improving efficiencies within the business. Customised Packaging maintained sales and improved margin and profit.

Film & Foil Solutions Ltd

This business joined the group in May 2022. It is a market leading converter and stockist of flexible packaging film, print lamination film and speciality plastics, paper and aluminium foils. This business came with freehold premises valued at £2.2 million. This acquisition reinforces our focus on niche, specialist operators in the plastics sector.

Alma Products Ltd

This business joined the Group in May 2022. It is a niche specialist and expert in extrusion, thermoforming and container printing serving the food industry, providing formable plastic sheet for Form-Fill-Seal applications, thermoformed and printed plastic food packaging. This business is very well invested in state-of-the-art sheet extrusion, volume vacuum forming and one of the most advanced computer-controlled printing facilities in the industry. This business came with freehold premises valued at £1 million.

Manplas Ltd

This business joined the Group in September 2022. The premises adjoin those of our Tatra Rotalac subsidiary and will enable further development of the Tatra Rotalac business by expanding manufacturing space available without the substantial costs involved in increasing the required power supply. Furthermore, the services provided by Manplas are complementary to those of our Customised Packaging ltd subsidiary also located nearby.

The combined acknowledged expertise of Customised Packaging and Manplas forms what will be a leading provider of customised product protection solutions solving logistical problems across multiple sectors. This is in line with our objective of building a specialist group of businesses which are product and design led.

Ecodeck Ltd

This business joined the Group in October 2022. This business is a natural strategic fit for the group. The plastic grids offer natural synergy with some of Coral's existing products, including manufacturing synergies. There is potential to leverage Ecodeck's ecommerce platform for other group eco-friendly products.

Capital Expenditure

Total capital expenditure committed to in the first six months was £2,500,000 (2021: £375,000) all related to new product opportunities. £854,000 of which has been paid in advance.

Dividends

The board have declared an interim dividend of 0.50 pence per share (2021: 0.50p). The ex-dividend date and the record date for the interim dividend were 10 November 2022 and 11 November 2022 respectively. The interim dividend will be paid on 16 December 2022. This continues to reflect our confidence in the positive performance and profitable results of the Group.

Outlook

I am delighted with the performance of the business in the first half of the financial year. I am pleased to report that the results to date are well ahead of the same period last year, despite the prevailing uncertainties of the Covid-19 pandemic, the war in Ukraine and higher utility costs. With the new acquisitions and the increased capital expenditure in plant and equipment, tooling and premises to meet future forecast demand for new products, we remain confident of the Group's future prospects.

Joe Grimmond

Executive Chairman

12 December 2022

CONSOLIDATED INCOME STATEMENT

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

 For the six months to 31 October 2021 (unaudited)

For the year ended 30 April 2022 (audited)

CONSOLIDATED STATEMENT OF CASH FLOWS

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. 

These interim financial statements are for the six months ended 31 October 2022. They do not include all the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements of the Group for the year ended 30 April 2022.

The Interim Report has not been reviewed by our auditor 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 2022.

3.         Revenue

All production is based in the United Kingdom. The geographical analysis of revenue is shown below:

A breakdown of Group revenues by product group is shown below:

4.         Taxation

The taxation charge for the six months to 31 October 2022 is based on the effective taxation rate, which is estimated will apply to earnings for the year ending 30 April 2023. 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 87,554,854 (31 October 2021: 85,942,534 and 30 April 2022: 81,113,698).

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:

7.         Underlying profit and separately disclosed items

Underlying profit before tax, underlying earnings per share, underlying operating profit, underlying earnings before interest, tax, depreciation and amortisation are defined as being before share based payment charges, amortisation of intangibles recognised on acquisition, acquisition costs, reorganisation costs, compensation for loss of office, impairment of goodwill and impairment loss on trade receivables. Collectively these are referred to as separately disclosed items. In the opinion of the directors the disclosure of these transactions should be reported separately for a better understanding of the underlying trading performance of the Group.

8.         Business Combinations

During the period the Group acquired 100% share capital of the entities below:

·      May 2022, Film & Foil Solutions Ltd acquired for £3.0m.

·     May 2022, Alma Products Ltd acquired for £2.5m (including an earn out of up to £1m) plus the excess cash of £210,000.

·      September 2022, Manplas Ltd acquired for £300k.

·      October 2022, Ecodeck Ltd acquired for £5.5m (including an earn out of up to £1.15m) plus the excess cash of £61,000.

Details of the fair value of identifiable assets and liabilities acquired, purchase consideration and goodwill are as follows:

As of the date of this report the purchase price allocation exercise was not complete therefore all the intangibles have been recognised as goodwill for the purposes of this report.

As part of the acquisition agreement with Ecodeck, if the profit during the year to 31 January 2023 exceeds £1,000,000 then an earn out will be paid equal to £3 for every £1 of profit before tax that exceeds £1,000,000. The maximum earn out will not exceed £1,150,000.

As part of the acquisition agreement with Alma Products, if the EBITDA during the year to 30 April 2023 is equal to £500,000 then an earn out will be paid equal to £1,000,000. If EBITDA is below £500,000 then an earn out will be paid will be equal to £1,000,000 less an amount equal to £5 for each £1 EBITDA is below £500,000. If EBITDA is more than £500,000, an additional earn out will be paid of £2.50 for every £1 by which EBITDA exceeds £500,000. The maximum earn out will not exceed £1,500,000.

Since the acquisition dates, the companies have contributed the below revenues and profit before tax: