Robinson plc                                                         

Half-year Report

Interim Results for the six months ended 30 June 2023

Robinson plc ("Robinson" the "Company" or the "Group" stock code: RBN), the custom manufacturer of plastic and paperboard packaging based in Chesterfield, announces its interim results for the six months ended 30 June 2023.

Financial

·    Revenue down 4.3% to £24.3m (2022: £25.4m)

·    Gross margin in line with the prior year at 18% (H1 2022: 18%)

·    Operating profit before exceptional items and amortisation of intangible assets reduced to £0.5m (2022: £1.5m)

·    Exceptional costs of £0.5m (2022: profit of £2.0m) - included profit on sale of properties of £2.1m in 2022

·    Loss before tax of £0.9m (2022: profit of £2.8m)

·    Interim dividend of 2.5p per share announced (2022: 2.5p)

·    Net debt of £9.0m (31/12/2022: £9.2m), after capital expenditure of £1.1m and proceeds on sale of property of £0.7m

Operational

·    Good progress on transition to Interim CEO

·    Restructuring program implemented in June, with exceptional costs of c.£0.4m and annual savings of c.£0.7m, of which £0.4m will benefit 2023

·    Sale of part of surplus property in Chesterfield completed in May with proceeds of £0.7m

·    Pension escrow account funds returned to the Company on 14 August 2023

·    Conditional contract signed to sell 1.3 acres of Walton Works property on 11 August 2023

Alan Raleigh, Chairman, commented:

"The results for the first half of 2023 reflect the current very challenging macroeconomic conditions, which we expect to continue for the rest of 2023. Despite these conditions, we are now seeing more new business activity with existing and potential new customers, which provides opportunities for additional sales in 2023 and beyond.

We are progressing well with the previously announced major project in Denmark, with production equipment now installed in our factory and product trials underway; this investment is expected to begin to benefit sales and profit from 2024.

The demand slowdown that we anticipated has supressed volumes and resulted in lower than desired sales and earnings in the first half of 2023, however, we expect higher sales volumes due to recent business wins and seasonality, and the benefit of the restructuring program actioned in June, to lead to an improved result in the second half of the year. Based on trading in the first half and our anticipated pipeline, we expect adjusted¹ operating profit in the 2023 financial year to be marginally ahead of 2022 and in line with current expectations.

We continue to progress our surplus property disposal agenda, which along with the buy-out of the defined benefit pension scheme and return of the escrow funds will reduce indebtedness and result in a simpler and more streamlined organisation which is able to compete and win in a volatile marketplace.

We remain committed in the medium-term to delivering above-market profitable growth and our target of 6-8% adjusted¹ operating margin."

About Robinson:

Being a purpose-led business, Robinson specialises in custom packaging with technical and value-added solutions for food and consumer product hygiene, safety, protection, and convenience; going above and beyond to create a sustainable future for our people and our planet. Its main activity is in injection and blow moulded plastic packaging and rigid paperboard luxury packaging, operating within the food and beverage, homecare, personal care and beauty, and luxury gift sectors. Robinson provides products and services to major players in the fast-moving consumer goods market including Procter & Gamble, Reckitt Benckiser, SC Johnson and Unilever.

Headquartered in Chesterfield, UK, Robinson has plants in the UK, Poland and Denmark. Robinson was formerly a family business with its origins dating back to 1839, currently employing nearly 400 people. The Group also has a substantial property portfolio with development potential.

Chairman's Statement

Dear Shareholders

The results for the first half of 2023 reflect the very challenging circumstances we are continuing to experience across our operations due to the ongoing macroeconomic uncertainty and volatility.

We noted 12 months ago that sales volumes would come under further pressure during the second half of 2022 due to the effect of inflation, the cost-of-living crisis, the de-listing of some products by our customers and certain of our customers continuing to prioritise existing business over innovation projects, a characteristic which started during the pandemic. As we expected, these factors and other challenges have manifested in lower sales in the current period.

Sales in the first half of the year are 4% below the comparative period in 2022, which includes a sales volume reduction of 12%. Of the Group volume reduction, 5% relates to a single UK customer that made supply chain changes during the period and is experiencing issues which have impacted our business with them. As well as the issues with this specific customer, demand has noticeably reduced across the premium products in our portfolio due to inflation and the cost-of-living crisis.

As demand has softened, we have stepped up sales activity and as a result we now have a portfolio of opportunities close to completion, which if converted would comprise more than 10% of annual sales and partially mitigate the softness in demand for our current customers' portfolio of products. We are prioritising the management and execution of the previously announced capital investment project in our Denmark operation, which we expect will benefit sales and profit in 2024.

In response to the significant cost inflation experienced in 2022, we were successful in passing on inflationary cost increases to customers and gross margins were 18% (H1 2022: 18%). Margins are under pressure, primarily due to the operational gearing effect of 12% lower sales volumes and continued inflation in input costs.

Operating costs in the first half were £4.0m (2022: £3.2m). The increase of £0.8m includes:

·    £0.2m of new roles brought into the business to improve our operational capabilities and support our efforts to grow sales volumes, including the major new project in Denmark.

·    £0.2m of inflation in wages and salaries in response to double digit market inflation and substantial mandatory minimum wage increases across our three countries of operation.

·    £0.1m related to property and insurance as the costs of maintaining, repairing and rebuilding premises have escalated, and the insurance market has hardened since the previous renewal.

·    £0.1m due to the movement in foreign exchange rates.

Whilst most of these cost increases were anticipated, our efforts to increase sales prices to recover the inflation were insufficient to cover these operating cost increases. As a result of these inflationary pressures, we implemented a restructuring program in June, which resulted in exceptional costs of c.£0.4m and annual savings of c.£0.7m, of which £0.4m will benefit 2023.

Operating profit before exceptional items and amortisation of intangible assets reduced by £1.0m versus the same period last year, to £0.5m. This is in line with the six-month period to 31 December 2022, where operating profit before exceptional items and amortisation of intangible assets was also £0.5m.

Including the exceptional items, the Group made a loss before tax of £0.9m (2022: profit before tax £2.8m).

Defined benefit pension scheme

In December 2022, the Scheme completed a buy-in of all the Group's defined benefit pension scheme liabilities with a plan to complete a full buy-out during 2023, following a data cleanse exercise. The administration and payroll functions were handed over to Legal and General Assurance Society Limited from 1 August 2023 and the data cleanse is ongoing, with completion expected before the end of the year.

The Company announced on 14 August 2023 that it had reached agreement with the trustees of the Scheme for the funds held in the pension escrow account, totalling c.£3.3m, to be returned to the Group (of which, £2.7m was already loaned to the Company). The Group will recognise an exceptional profit of c.£3.3m in its income statement for the 12 months to 31 December 2023.

Property

As previously announced, part of the Walton Works surplus property in Chesterfield, known as "Mill Lane", was sold on 30 May 2023. The consideration of £700,000 was received in cash and used to reduce bank debt.

On 11 August 2023, the Company also exchanged contracts for the sale of c.1.3 acres of the Walton Works surplus property. Completion is subject to conditions, notably including satisfactory planning approval, and is expected to take around 12-18 months. The consideration payable on completion would be £1,500,000 in cash, with estimated Company costs of £400,000. The net proceeds of £1,100,000 would be used by the Company to reduce current bank debt.

Including this property transaction, which is not yet completed, the Directors estimate that the current market value of the remaining surplus properties held by the Group is approximately £7,400,000.

We would expect further sales of surplus property in Chesterfield to be achieved in the next 12 months. The intention of the Group remains, over time, to realise value from the disposal of surplus properties and to reinvest the proceeds in developing our packaging business.

Net debt and capital expenditure

Net debt has decreased to £9.0m (31/12/2022: £9.2m) including capital expenditure of £1.1m (2022: £1.1m) and the receipt of £0.7m proceeds on sale of surplus property in the period. With total credit facilities of £18.1m at 30 June 2023, the Group considers it has sufficient headroom for the foreseeable future.

The return of the funds in the pension escrow account reduced net debt by a further c.£3.3m on 14 August 2023.

Dividend

Despite the short-term market challenges we face, the Board has confidence in the medium-term prospects for the business and therefore announces that it intends to pay an interim dividend of 2.5p per share to be paid on 13 October 2023 to shareholders on the register at 22 September 2023 (record date). The ordinary shares ex-dividend date is 21 September 2023.

The current intention of the Board is to pay a total dividend of 5.5p (2022: 5.5p) per share for the year ending 31 December 2023.

CEO position

A previously announced, Dr Helene Roberts will resign as CEO and a Director of the Company on 1 September 2023, at which point Sara Halton will assume responsibility as the Interim CEO for a transitional period whilst the Board conducts a search for a new CEO. We thank Helene for her enormous contribution to the business.

Outlook

Despite the ongoing challenging macroeconomic conditions, we are now seeing more new business activity with existing and potential new customers, which provides opportunities for additional sales in 2023 and beyond.

We are progressing well with the previously announced major project in Denmark, with production equipment now installed in our factory and product trials underway; this investment is expected to begin to benefit sales and profit from 2024.

The demand slowdown that we anticipated has supressed volumes and resulted in lower than desired sales and earnings in the first half of 2023, however, we expect higher sales volumes due to recent business wins and seasonality, and the benefit of the restructuring program actioned in June, to lead to an improved result in the second half of the year. Based on trading in the first half and our anticipated pipeline, we expect adjusted¹ operating profit in the 2023 financial year to be marginally ahead of 2022 and in line with current expectations.

We continue to progress our surplus property disposal agenda, which along with the buy-out of the defined benefit pension scheme and return of the escrow funds will reduce indebtedness and result in a simpler and more streamlined organisation which is able to compete and win in a volatile marketplace.

We remain committed in the medium-term to delivering above-market profitable growth and our target of 6-8% adjusted¹ operating margin.

Alan Raleigh

Chairman

17 August 2023

1.   before amortisation of intangible assets and exceptional items