Coral Products PLC
Annual Report 2016

Plain-text annual report

A N N UA L R E P O R T A N D ACCO U NT S 2016 Contents Business Overview Chairman’s Statement Strategic Report Directors and Advisers Directors’ Report Directors’ Remuneration Report Independent Auditor’s Report to the Members of Coral Products PLC Group Income Statement Group Statement of Comprehensive Income Balance Sheets Statement of Changes in Shareholders’ Equity Cash Flow Statements Notes to the Financial Statements Five Year Record (unaudited) Notice of the Annual General Meeting Financial Calendar and Shareholder Information 1 4 7 11 12 17 20 21 21 22 23 24 25 50 51 54 Financial Highlights Revenue Underlying earnings before interest, tax and amortisation Underlying operating profit Underlying profit before taxation Underlying earnings per share Net assets per ordinary share Gearing 2016 £18.7m £2.3m £1.6m £1.5m 2.2p 16.6p 23.9% 2015 £17.4m £1.9m £1.3m £1.2m 2.1p 15.8p 43.7% Business Overview Who we are Coral Products is a manufacturer of plastic injection and extrusion moulded products and a reseller and distributor of a range of food packaging and household products. The Group has operations in the UK with manufacturing facilities in Haydock, Merseyside, and Wythenshawe, Greater Manchester and distribution facility in Hyde, Greater Manchester. The Group presently employs 170 people. The Group develops and manufactures a range of high quality products for a wide variety of customers, mainly associated with the food catering industry and waste disposal services. It enjoys strong positions in the markets and geographical areas in which it operates. In addition the Group offers a trade moulding service whereby it manufactures high quality products for leading UK companies. By developing innovative packaging and recycling products, providing excellent customer service and through its hard working employees, Coral Products continues to restructure its markets to be in a position to create growth and value for its shareholders. What we do Injection moulding is used to produce products requiring fairly complex design, strength and durability. The products range in size and the process employed produces different product characteristics for specific applications required by the differing markets. For our trade moulding partners we offer experienced employees who can deliver solutions to customer requirements. Our manufacturing facility has 30 moulding machines covering most size requirements and works throughout the week giving more attainable volume needs. Our markets are being chosen because they offer a wide range of plastic products and end use capabilities. The compound annual growth rate for global rigid plastic packaging alone is forecast to increase by around 5% over the next five years. Overview The Company was listed on the main market of the LSE from April 1995 to August 2011 during which time it produced fluctuating levels of profitability. Initially the Company focused on serving the VHS market with a range of video cassette cases which was later complemented by the production of plastic housewares manufactured for supermarkets’ own label ranges. The early success led to its stock market float in 1995 and funds raised were invested into CD case production facilities. In 2000 the Company commenced production of DVD cases. In recent years media packaging has been in decline due primarily to weak demand as a result of an increase in media downloading. In response to this decline, the Company has sought to diversify its product portfolio and in 2009 it launched a range of solutions for domestic recycled waste collection in the form of kerbside recycling boxes, food waste caddies and associated accessories. The Company has also built up a good reputation as a trade moulder working with its customers for solutions and offering a 24 hour 7 days a week production service. The Group has further diversified itself via acquisitions – in 2011 the Group acquired Interpack Limited, principally operating in food packaging, and in 2014 Tatra Plastics Manufacturing Limited, specialists in PVC and plastic injection moulding and extrusion. A number of acquisitions have been completed in the current year as described on page 4. 1p a g e o n e Business Overview continued Strategy We aim to grow and develop our positions within our chosen product markets and geographical areas in the rigid plastic packaging and waste recycling industry by maintaining strong long-term relationships with our customers and developing high quality, innovative products that meet customer needs. With our trade moulding partners, we aim to develop the relationship and work together to produce a partnership resulting in long-term reliability of production, development and flexibility as the need arises. In order to deliver long-term sustainable profit growth, there are four key drivers to our strategy which support a focused sales approach: Quality – we have an excellent reputation for delivering quality products but we are not complacent. We invest continuously in new machinery, robotics and moulds in order to maintain a strong position and keep market share. Our quality control and assurance processes are regularly reviewed and developed to ensure that our customers receive quality products each time. Cost control – we continually investigate prices to improve our financial efficiency and deliver the best returns for shareholders. This may lead to dual supply sources to ensure key costs are minimised. We recognise also the efficiencies and effectiveness that results from new machinery in reducing our carbon footprint as well as the positive effect on reducing the cost of power absorption. Culture – we continually look to promote a well-motivated workforce by attracting and motivating talented people to drive our business forward and foster a culture of responsibility, accountability and openness. Health and safety – this is the main priority in the business and we have strived to implement an environment where safety is paramount. We continuously train and re-train our staff to ensure that we operate best health and safety practices throughout the organisation. We also have adopted a strategy of seeking acquisitions where we feel we can add value from synergies or investment to grow our markets and ultimately enhance shareholder value. Strategic Plan In March 2015 the Group adopted a five year plan aimed at substantially increasing Group revenue and profitability from our specialist plastic products manufacturing and distribution facilities. In July 2015, the Group took the initial step along this plan when it acquired certain assets from Neiman Packaging Limited. A further asset acquisition was completed in January 2016, from Rotalac Limited, and in February 2016 the Group acquired 100% of the equity of Global One-Pak Holdings Limited. These acquisitions are further described on page 4. Business Model We look to create and grow markets for rigid plastic containers through technical innovation and design creation through internal advances and acquisition. We recognise that for many products plastic is a better container solution for handling goods and gives greater functionality, economy and a cleaner environment. p a g e t w o 2 Business Overview continued Social, Community and Human Rights Issues The Group endeavours to impact positively on the communities in which it operates. In particular, raw materials are purchased from established companies which have high reputations within the plastics industry. The Group’s ethical and social accountability statement details the standards of behaviour which are regarded as acceptable. Provision of a safe, clean working environment, free from discrimination, is an essential right of all the employees. In order to gain accreditation under the BRC Packaging Materials Standard on production of food containers, the premises, working practices and materials had to meet required standards of compliance. These are regularly audited to ensure the Group continues to adopt good manufacturing practices in order to develop and manufacture safe, legal packaging materials. The Group is also often audited by its customers to assess compliance with minimum acceptable standards. 3p a g e t h r e e Chairman’s Statement Trading It is pleasing to record a further year of progress for the Group with revenue up by 7% to £18.7m and underlying operating profit up by 22% to £1.6m. I am pleased that we are both delivering increased profits to our shareholders and putting in place the levels of investment and planning needed to secure Coral’s long term future as a leading player in our chosen markets. Following the Five Year Plan that was adopted in 2015 the Group made a number of acquisitions this year aimed at substantially increasing Group revenue and profitability from our specialist plastic products manufacturing and distribution activities. In June 2015, we took our first step along this plan when we acquired certain plant and machinery from Neiman Packaging Limited (‘Neiman’). This acquisition introduces two new manufacturing processes, injection blow moulding and extrusion blow moulding, enhancing our range of manufacturing capability. This was followed in January 2016 with the purchase of the fixed assets, stock and business of Rotalac Plastics Limited (‘Rotalac’) from its administrators. Rotalac provides thermoplastic extrusion and moulding solutions across a number of industries worldwide, including aerospace, medical and automotive and is a leader in shutter system design and manufacture. This addition further enabled the broadening of the Group’s product range. Finally, in February 2016 the Group acquired Global One-Pak Holdings Limited (‘GOP’) which designs, manufactures and supplies lotion pumps and trigger sprayers to a broad range of customers worldwide, including a number of global brands, across a wide range of markets, including household and garden, automotive, personal care and pet grooming. This business expanded further the market coverage and product range with the supply of a number of high added value components. These businesses have all been successfully integrated into the Group and enable us to promote a more diverse range of products and manufacturing methods the benefits of which are already being seen. Two of our subsidiaries at Interpack Limited (‘Interpack’) and Tatra Plastics Manufacturing Limited (‘Tatra’) had further years of improvement with continued improvements to profit and contribution. Interpack’s turnover stayed roughly constant but its margins were improved from weaker overseas currencies whilst it also benefitted from reduced overheads following the closure of its Dunstable site with all operations moved to Haydock. Food container sales continue to improve as the markets grow for foodstuffs to be contained within hygienic, tamper-proof packaging and this looks set to continue further. Tatra continued to report both significant increases in both turnover and profit as demand from key suppliers of infrastructure and communications increased. The Company relocated from Halifax to Wythenshawe in July 2016 and, combined with the existing Rotalac business already in situ there, is confidently expected to maintain this progression and further increase its contribution to Group performance. Tatra has been renamed Tatra Rotalac Limited post year end, with the acquired Rotalac trade hived into the now combined entity in Wythenshawe. At our freehold manufacturing site at Haydock within the subsidiary Coral Products (Mouldings) Limited (‘Mouldings’) we have made substantial investment in infrastructure, plant capacity and management control. The improvement in operational efficiency, whilst slower than anticipated, is nevertheless marked. We continue to improve this facility and believe this will benefit our renewed sales drive at Haydock. Sales of on-line totes and recycling crates contributed £2.4m (£1.2m in 2015) which helped to offset the further fall in media sales of £0.9m in 2016 (down from £2.9m in 2015). We are delighted to announce the receipt of a letter of intent from our customer for a further supply of up to 300,000 totes for a new on-line fulfilment centre with delivery late 2016 through 2018. Trade moulding sales were below expectations with revenue falling to £1.2m from £2.9m in 2015. There remained challenging market conditions as local authorities continued not to commit resources in the present atmosphere of austerity. Waste management will continue to be a significant area of future spending and we are determined to offer products and partnerships that will assist in its management. The significant fall in the relative value of sterling against the dollar and the euro since the beginning of the year, together with the prevailing uncertainty, could have a negative effect on our business. We are taking steps across the Group to mitigate these. 4p a g e f o u r Chairman’s Statement continued Performance of the Group is monitored principally through adjusted profit measures which exclude £0.7m of underlying items. Such items include the costs for the reorganisation involved in merging the two businesses of Tatra and Rotalac during 2016, together with the expenses in rationalising and improving the site at Haydock. In addition, acquisition costs and amortisation of intangibles arising on acquisition, written-off under accounting practices, are also treated as underlying, as are share based payment charges, compensation for loss of office of senior management, and losses on sale of tangible assets. The Group has reduced net debt by £0.7m in the year and gearing has decreased to 23.9%. Given the continued pressure on raw material prices and credit availability we continued to focus on minimising our inventory and reducing our debtor days. Overall the Group was able to report a net cash inflow of £1.3m. Results Group revenue improved for the year to £18.7m (2015: £17.4m). Gross margin showed a significant increase to 33.1% (2015: 29.6%) resulting from the continued addition of better added value products along with decreases in the cost of raw materials. Underlying earnings before interest, tax, depreciation and amortisation for the Group remained strong at £2.3m (2015: £1.9m). Administrative expenses in the Group increased to £4.4m (2015: £4.1m) in line with the increase in Group activity. This resulted in an underlying operating profit of £1.6m (2015: £1.3m). Separately disclosed underlying items totalled £0.7m (2015: £1.0m) of which £0.4m resulted from the reorganisation costs of Haydock and Wythenshawe to improve the facilities and rationalise the businesses. Finance costs amounted to £0.2m (2015: £0.2m). The underlying profit for the financial year before taxation was £1.5m (2015: £1.2m). Earnings per share were 1.12 pence (2015: 0.35 pence), underlying earnings per share were 2.20 pence (2015: 2.12 pence). Net debt at 30 April 2016 was £3.3m (2015: £4.0m) giving reduced gearing of 23.9% (2015: 43.7 %). Interest cover before underlying costs was 9.2 times (2015: 7.3 times). Net assets per share were 16.6p (2015: 15.8p). Dividends The board remains committed to its long-term progressive dividend policy, which takes account of the underlying growth in earnings, whilst acknowledging the requirement for continuing investment and short-term fluctuations in profit. Having considered the results for the year, the outlook for the new financial year and the ongoing requirements of the business, the board has recommended the total dividend be increased to 1.0 pence per share. The final payment of 0.7 pence per share will have an ex-dividend date of 8 September 2016 and record date of 9 September 2016. This final dividend will be paid on 14 October 2016. Board Changes In June 2016 Roberto (Rob) Zandona was appointed as Group Chief Executive and at the same time Joe Grimmond became Non-executive Chairman having previously acted as executive Chairman. Rob has over 35 years of experience in the manufacturing and project moulding sectors. 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 in accordance with the strategy that we outlined in March 2015. The challenges facing the board relate to managing the continued growth of the Group whilst preserving the strengths of the business. 5p a g e f i v e Chairman’s Statement continued People We are reliant on the expertise, professionalism and commitment of our people and their contribution to the business during a challenging year. Outlook The Group continues with its strategic progress of increasing focus on value-added and innovative products, particularly in the food container, telecommunications and rail industry markets. Our aim continues to be to build a significant plastic moulding business and we remain confident in our ability to make further progress by improving business performance and increasing our market share to drive forward financial results over the medium term We look forward with confidence to further progress in the coming year. Joe Grimmond Chairman 25 August 2016 6p a g e s i x Strategic Report Review of the Business The Group is required to produce a Strategic Report complying with the requirements of The Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013. An overview of the Group’s strategy and business model is set out on pages 1 to 3, and together with the Chairman’s Statement on pages 4 to 6 form part of this Group’s Strategic Report. This incorporates a review of the Group’s activities, its business performance and developments during the year as well as an indication of likely future developments. In July 2015 the Group purchased certain fixed assets from Neiman Packaging Limited, enhancing the Group’s injection blow moulding and extrusion moulding capability. In January 2016 the Group purchased the fixed assets, stock and business from the administrators of Rotalac Plastics Limited which provides bespoke thermoplastic extrusion and moulding solutions across a number of industries worldwide. In February 2016 the Group then completed the purchase of Global One-Pak Holdings Limited (GOP) which specialises in the design, manufacture and supply of lotion pumps and trigger sprayers. The Board regarded this acquisition as further development of its strategy and commitment to identify growth opportunities in new markets. Our business model is designed to bridge the gap between reliable, quality assured products made with regulated materials and our customers’ requirements. Key to the success of our business model is our experience and knowledge of the materials and processes we handle and our ability to service customer demands with product innovation. Financial Review Income Statement Group revenues for the year ended 30 April 2016 were £1.3m higher at £18.7m (2015: £17.4m). Of this, food container sales remained at £7.0m (2015: £7.0m) whilst sales for Tatra increased to £5.5m (2015: £3.4m). The Group has continued to expand its processes in order to be able to attract more business growth from sales in areas of market growth. Gross margins increased to 33.1% (2015: 29.6%) due to a better mix of sales and resulted in a gross profit of £6.2m (2015: £5.2m). Underlying operating profit increased by 22% to £1.6m (2015: £1.3m) and underlying earnings before interest, tax, depreciation and amortisation increased to £2.3m (2015: £1.9m). Net financing costs remained similar at £0.2m (2015: £0.2m) despite additional borrowing to fund acquisitions and asset purchases. Separately recorded, underlying costs of £0.7m (2015: £1.0m) resulted from acquisition costs, intangibles amortisation and reorganisation costs, as well as share based payment charges, compensation for loss of office of senior management, and loss on disposal of tangible assets. Profit before tax was £0.8m (2015: £0.2m). The total dividend for the year is to be increased to 1.0p (2015: 0.7p) resulting in dividend cover on underlying operating profit of 2.5 times earnings for the year (2015: 2.4 times). Basic underlying earnings per share for the year increased to 1.12 pence (2015: 0.35 pence). Balance Sheet Total shareholders’ equity increased by £4.6m to £13.7m (2015: £9.1m), with net assets per share increasing to 16.6 pence (2015: 15.8 pence). 7p a g e s e v e n Strategic Report continued Cash Flow Operating cash flows before movements in working capital were £1.8m (2015: £1.0m). The Group’s net debt decreased to £3.3m (2015: £4.0m) with the level of gearing falling from 43.7% to 23.9%. The Group has a mix of secured borrowing facilities totalling £2.4m in addition to £1.8m of term loans. The term loans are repayable over 4 - 10 years with £0.4m payable over the next financial year. The borrowing facilities are held with Barclays Bank plc and the Group continues to enjoy a positive relationship with its bank and has recently agreed a further renewal to cover the period to June 2017. Borrowing facilities are monitored against the Group’s forecast requirements and the Group mitigates financial risk by staggering the maturity of borrowings and by maintaining undrawn committed facilities. Treasury Policies The Group operates a conservative set of treasury policies to ensure that no unnecessary risks are taken with the Group’s assets. No investments other than cash are currently permitted. Where appropriate, there may be balances held in euros, but only as part of the Group’s overall hedging activity. The Group can be affected by movements in exchange rates due to raw material prices being established in foreign currencies and on its export sales. The Group is affected by movements between Sterling and Euro but has the ability to hedge any exposure on its sales by purchasing raw materials in Euros. Thus it is able to mitigate partly its currency risks. Cash deposits and financial transactions give rise to credit risk in the event that counterparties fail to perform under the contract. The Group regularly monitors the credit ratings of its counterparties and controls the amount of credit risk by adhering to limits set by the board. The Group maintains debtor levels within the insured limits unless it has strong grounds for allowing increases. As a consequence of these controls, the probability of material loss is considered to be at an acceptable level. Key Performance Indicators (KPIs) KPIs have been set at Group level to allow the Board and shareholders to monitor the Group as a whole, as well as the operating businesses within the Group. The Group has financial KPIs which it monitors on a regular basis at Board level and, where relevant, at operational executive management meetings as follows: Group revenue Gross margin Growth in underlying profit before tax Growth in underlying earnings per share Underlying earnings before interest, tax and depreciation Underlying operating profit Gearing 2016 2015 £18,714,000 £17,425,000 33.1% 29.6% £304,000 £659,000 0.08p 0.91p £2,342,000 £1,912,000 £1,649,000 £1,349,000 23.9% 43.7% In addition, the Board monitors a number of non-financial indicators including customer satisfaction, product quality, employee attraction and retention, number of reportable accidents and energy footprint. 8p a g e e i g h t Strategic Report continued Risks and uncertainties The Group has provided in the notes to the accounts details of various risks and uncertainties it faces, which include: • Movements in commodity prices often caused by supply constraints or demand management. • Loss of a key individual. • Foreign exchange risk, particularly with regard to the Euro, as many of the Group’s materials are purchased in Euros. • Credit risk in ensuring payments from customers are received in full and on a timely basis. • Legislative and regulatory risk as new requirements are being imposed on plastics businesses and in industry. The Group has taken appropriate steps to manage and control these risks, which include: • Ensuring that current market prices are confirmed with industry price monitors and that purchases are based upon a well-researched understanding of the various grades and their capabilities for operational uses. • The Group’s future performance depends heavily on its ability to retain and attract the services of suitable personnel. The Group holds service contracts for its directors and senior management and periodically reviews performance, expectations and employment conditions. • The implementation of a foreign exchange risk policy. • Agreement of appropriate payment terms with customers including, where necessary, payment in advance. • Taking a pro-active and leading role in ensuring that the Group’s systems and procedures are adapted to ensure compliance with new or changing legislation or regulatory requirements. The Group regularly reviews its commercial insurance programme and maintains an appropriate and adequate portfolio of insurance policies in line with the nature, size and complexity of the business. The Group also continues to have in place a team of Board members whose on-going responsibility is to assess the issues which the Group would face should it experience a major and unforeseen disaster and to put in place clear actions to continue to operate successfully in such an event. Diversity Appointments within the Group are made on merit according to the balance of skills and experience offered by prospective candidates. Whilst acknowledging the benefits of diversity, individual appointments are made irrespective of personal characteristics such as race, disability, gender, sexual orientation, religion or age. As a predominantly manufacturing Group, few women apply for positions within the production areas. However, women are well represented in other areas of the business and account for 10% of the Group workforce as at 30 April 2016. Position Group Directors Senior Managers Other Employees Total Employees Male Female Total 5 10 147 162 - 6 11 17 5 16 158 179 9p a g e n i n e Strategic Report continued Social, Community and Human Rights The Group endeavours to impact positively on the communities in which it operates. In particular the Group purchases raw materials from trusted suppliers who it recognises as obtaining the products through trusted, fair and sustainable methods. Ethical concerns and human rights issues have always played an important role in the Company philosophy and the Group’s ethical and social accountability statement details the standards of behaviour which are regarded as acceptable. Provision of a safe, clean working environment, free from discrimination, coercion and harassment is a basic right of all employees, which Coral Products expects as a minimum standard of its business partners. The Group is often audited by its customers to assess compliance with minimum acceptable standards, including ethical and human rights considerations. UK Referendum on EU Membership The referendum on the UK’s membership of the EU on 23 June 2016 increases economic uncertainty. The Group actively monitors and considers the economic situation to ensure it is well prepared for all eventualities once the full effect of the referendum result is known. The Group is currently reviewing steps to mitigate the movement in exchange rates, as described on page 4. Going concern After making enquiries, the Directors have formed a judgement, at the time of approving the financial statements, that there is a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason, the directors continue to adopt the going concern bases in preparing the financial statements. This strategic report was approved by the board on 25 August 2016. Stephen Fletcher Finance Director 10p a g e t e n Directors and Advisers Non-executive Directors David Low, Non-executive David was appointed in September 2015. He has over 25 years of Registered Office North Florida Road Haydock Industrial Estate Haydock Merseyside WA11 9TP UK Registered Number: 02429784 experience in investment management and management consultancy. He was a director of Manroy plc until July 2015 when it was sold to FN Herstal SA for £16m. He is a shareholder in several private companies involved in Auditor BDO LLP sport and leisure, vending and telemetry services, brewing and retail estate. 3 Hardman Street Joe Grimmond, Chairman Joe was appointed in March 2011. He was previously Chief Executive of James Dickie plc and Chairman of Widney plc. Joe was appointed as non- executive Chairman at the AGM in 2011 and in December 2015, become Executive Chairman. In June 2016 he became non-executive Chairman Spinningfields Manchester M3 3AT Solicitors Continuum Corporate Lawyers LLP following the appointment of Roberto Zandona. Mr Grimmond is a Fellow of 3 Temple Row West the Association of Accounting Technicians. Executive Directors Roberto Zandona, Chief Executivae Rob was appointed in May 2016. He was previously Managing Director of plastics manufacturing plants in Germany, France and the UK for the Lindal Group, a 240 million Euro turnover business. He has 36 years experience in manufacturing and senior management experience in companies including Plessey/GEC, McKechnie and Consort Medical PLC (Bespak). He has held numerous Directorships across Europe successfully growing businesses and has a strong network of previous suppliers and customers serving diverse sectors like industrial products, telecoms, medical and personal care. He is a qualified engineer and also has an MBA. Stephen Fletcher MA, FCA, Finance Director and Company Secretary Stephen is a Chartered Accountant and responsible for all aspects of the finance function, together with the Company’s IT systems, and has certain purchasing responsibilities. He joined the Company in September 2002 after holding a similar position with Worthington Group plc. He was also appointed Company Secretary in October 2006. Paul Freud, Corporate Development Director Paul was appointed in July 2015. He is responsible for directing the business development activities and driving new sales growth by seeking market opportunities or acquisitions. Paul has over 20 years of management and leadership experience in manufacturing industry. He has been Managing Director and Chairman of Tatra Plastics Manufacturing Limited, where he is responsible for developing new and innovative product ranges for blue chip companies, including solutions for fibre optic broadband installations and rail infrastructure. Birmingham B2 5NY Bankers Barclays Bank PLC 1st Foor 3 Hardman Street Spinningfields Manchester M3 3HF Registrar Share Registrars Limited The Courtyard 17 West Street Farnham, Surrey GU9 7DR Broker Daniel Stewart & Company plc 33 Creechurch Lane London EC3A 5EB Nominated Adviser Cairn Financial Advisers LLP 61 Cheapside London EC2V 6AX PR Adviser Capital M Consultants 1 Royal Exchange Avenue London EC3V 3LT 11p a g e e l e v e n Directors’ Report The Directors present their annual report and the audited financial statements for the year ended 30 April 2016. Results and Dividends The results for the year are set out on page 21. This shows a Group profit after taxation of £0.7m (2015: £0.2m). A dividend of 0.5p per share in respect of the year ended 30 April 2015 was paid on 30 October 2015. The amount of this dividend was £298,058. An interim dividend of 0.3p (2015: 0.2p) amounting to £196,845 was paid on 1 March 2016. A final dividend of 0.7p (2015: 0.5p) per share is recommended in respect of the year ended 30 April 2016 to be paid on 21 October 2016 to shareholders on the register at the close of business on 27 July 2016. This has not been included within creditors as it was not approved before the year end. A review of the Group’s activities for the year end and its future prospects is set out in the Chairman’s Statement and Strategic Report. Principal Activity The principal activity of the Company and its subsidiaries is the manufacture of plastic injection moulded products and the reseller and distributor of a range of food packaging products. The Group also operates as a trade moulder for other UK Companies. It has been in operation since 1990, became a fully listed plc in 1995 and moved to the AIM market in 2011. Directors The current directors of the Company are given on page 11. During the year, the following changes in directors took place: Roberto Zandona was appointed as Chief Executive in June 2016. This will be confirmed at the forthcoming AGM. In accordance with the Articles of Association, Joe Grimmond and David Low are the directors retiring by rotation and offering themselves for re-election at the AGM. Directors’ Interests in the Shares of the Company The beneficial interests of the Directors in the shares of the Company were as follows: Joe Grimmond Paul Freud David Low Stephen Fletcher Ordinary shares of 1p each 30 April 2016 Number Ordinary shares of 1p each 30 April 2015 Number 5,173,337 5,173,337 1,833,333 1,833,333 805,000 72,000 805,000 72,000 7,883,670 7,883,670 No other shareholdings listed above have changed between the year end date and the date of this report. 12p a g e t w e l v e Directors’ Report continued Substantial Interests As at 14 July 2016, the Company had been made aware of the following interests of over 3% (other than the holdings of directors listed above) in the ordinary shares of the Company: Miton Group PLC JIM Nominees Ltd Discretionary Unit Fund Managers Ltd Mr Thomas Anderson Stuart Ferster Warren Ferster Number of shares % of share capital 16,515,555 19.99 4,500,000 4,480,000 4,321,500 3,398,367 3,143,181 5.45 5.42 5.23 4.11 3.80 Share Capital At the 2015 Annual General Meeting, the Company was granted authority to purchase up to a maximum of 15% of its own shares. The authority expires at the conclusion of the forthcoming Annual General Meeting at which a special resolution will be proposed to renew the authority for a further year. Any shares purchased in accordance with this authority will be subsequently cancelled. The Board of Directors The Board’s role is to provide entrepreneurial leadership of the Group within a framework of prudent and effective controls which enable risk to be assessed and managed. The Board reviews the Group’s strategic objectives and looks to ensure that the necessary resources are in place to achieve these objectives. The Board also sets the Group’s values and standards and manages the business in a manner to meet its obligations to shareholders. Remuneration Committee The Remuneration Committee comprises Joe Grimmond (chairman) and David Low. The Committee is responsible for determining the Group’s policy for the remuneration of the executive directors. It also considers the compensation commitments of its directors in the event of early termination of their service contracts. Audit Committee The Audit Committee is chaired by David Low. The executive directors may be requested to attend. The Audit Committee meets at the year-end and the external auditor attends this meeting and have direct access to the non-executive directors for independent decisions. The Audit Committee may examine any matters relating to the financial affairs and risk issues affecting the Group which includes reviewing the accounts, announcements, internal controls, accounting policies, and appointment of the external auditor. 13p a g e t h i r t e e n Directors’ Report continued Statement of Directors’ Responsibilities The Directors are responsible for preparing the Strategic Report, the Directors’ Report and the financial statements in accordance with applicable law and regulations Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the Group and Parent Company financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. Under Company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and the Company and of the profit or loss of the Group for that period. The directors are also required to prepare financial statements in accordance with the rules of the London Stock Exchange for companies trading securities on the Alternative Investment Market. In preparing these financial statements, the directors are required to: • select suitable accounting policies and then apply them consistently; • make judgements and estimates that are reasonable and prudent; • state whether they have been prepared in accordance with IFRSs as adopted by the European Union, subject to any material departures disclosed and explained in the financial statements; • prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group will continue in business. The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that its financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. Website publication The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that its financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. Environment and Sustainability The key risk facing the Group in this area relates to reducing the environmental impact of the business with a focus on reducing waste and energy usage. A number of operational changes have been implemented to reduce our environmental impact. Product Safety The quality and safety of the products is of the highest importance and any failure in standards would significantly affect the confidence of our customers. There are stringent controls in place to ensure product safety and integrity. Product performance is monitored regularly to ensure compliance with standards. Insurance The Group has in place a Directors and Officers liability insurance policy that provides appropriate cover in respect of legal action brought against its directors. 14p a g e f o u r t e e n Directors’ Report continued Creditor Payment Policy The policy of the Group is to agree the terms of payment with suppliers when agreeing the conditions of supply of goods and services. Suppliers are made aware of the terms of payment and payments are made in accordance with terms agreed between the two parties. The number of days purchases in trade creditors at the year end amounted to 49 days (2015: 47 days). Shareholder Relations The importance of maintaining good relations with individual and institutional investors is recognised by the Board. This includes meetings on a regular basis between the executive directors and institutional and private investors at relevant times. The Company encourages shareholder attendance at the Annual General Meeting, at which the Chairman and Board of Directors are available to answer any questions on the previous year’s results and on current year trading. Health and Safety It is Group policy to protect the health and safety of its employees and any other parties involved in its business operations. Systems are in place to define and eliminate health and safety risks. Corporate Social Responsibility and Governance The Group is committed to responsible business practices, good corporate governance and sound risk management. Employment and Human Rights The Group is an equal opportunities employer and applies employment policies which are fair and equitable. Appointments, training and career development are determined solely by application of job criteria, personal ability and competence regardless of gender, race, disability, age, sexual orientation or religious or political beliefs. Where suitable opportunities exist, full and fair consideration is given to the possibility of employing a disabled person. Where an employee becomes disabled whilst in employment, every effort is made to find continuing employment. Policies are in place which aim to deter acts of harassment and discrimination and any breach of either of these policies is met with zero tolerance. Auditor In accordance with Section 489 of the Companies Act 2006 a resolution will be proposed at the Annual General Meeting that BDO LLP be re-appointed as auditor. Disclosure of Information to Auditor Each of the persons who is a director at the date of approval of this report confirms that: • so far as the director is aware, there is no relevant information of which the Group’s auditor is unaware; • the director has taken all steps that he or she ought to have taken as a director in order to make himself or herself aware of any relevant audit information and to establish that the Group’s auditor is aware of that information. This confirmation is given and should be interpreted in accordance with the provisions of Section 418 of the Companies Act 2006. 15p a g e f i f t e e n Directors’ Report continued Post Balance Sheet Events There have been no significant events affecting the Company since the year end. Annual General Meeting The AGM will be held on Wednesday 28 September 2016 at Southmoor Road, Roundthorn Industrial Estate, Wythenshawe, Manchester M23 9DU. The Notice of Meeting is contained on pages 51 to 52 of this report. At the meeting, resolutions will be prepared to receive the audited accounts and approve the Remuneration Report, to elect directors and to re-appoint BDO LLP as auditor. In addition, shareholders will be asked to renew both the general authority of the directors to issue shares and to authorise the directors to issue shares without applying the statutory pre-emption rights. The directors have no present intention of exercising the authority if granted, but consider it will be commercially useful to have the authority should they need to allot shares for any purpose in the future. By order of the Board S G Fletcher Company Secretary 25 August 2016 16p a g e s i x t e e n Directors’ Remuneration Report Introduction Although not required to do so by the AIM rules, the directors have decided to provide certain directors’ remuneration disclosures. A resolution to approve the report will be proposed at the Annual General Meeting. The auditor reports to the shareholders on the “auditable part” of the Directors’ remuneration report and to state whether in their opinion that part of the report has been properly prepared in accordance with Section 420 of the Companies Act 2006. The report has therefore been divided into separate sections for audited and unaudited information. Unaudited information Remuneration Committee The Group has established a Remuneration Committee which is constituted in accordance with the recommendations of the Combined Code. The remuneration committee now comprises Joe Grimmond (Chairman) and David Low. The performance measurement of the executive directors and the determination of their annual remuneration package are undertaken by the Committee. The remuneration of the non-executive directors is determined by the Board. No director plays a part in any discussions about his own remuneration. Remuneration Policy Executive remuneration packages are designed to attract, motivate and retain directors of the high calibre needed to progress and develop the Company and to reward them for enhancing value to shareholders. There are three main elements of the remuneration package for executive directors: • Basic annual salary and benefits • Pension contributions • Share options Basic Salary An executive director’s basic salary is determined by the Remuneration Committee prior to the beginning of each year and when an individual changes position or responsibility. In deciding appropriate levels, the Committee considers the Group as a whole and by reference to other companies in the media and manufacturing sectors. Basic salaries were reviewed in June 2015. The Group has a policy of allowing contracts of service to be no more than one year in duration. Executive directors’ contracts of service which include details of remuneration will be available for inspection at the Annual General Meeting. In addition to basic salary, the executive directors receive pension contributions and certain benefits-in-kind, principally medical insurance. Pension Contributions The executive directors have individual pension arrangements in the form of personal pension plans. The Group makes a contribution at a rate of 8% of basic salary towards funding each director’s pension plan. Performance Bonus There is no performance bonus in place however, the remuneration committee is empowered to make awards for special circumstances if appropriate. During the year Joe Grimmond was awarded a bonus of £50,000 on completion of the purchase of GOP and related share placing. Share Options The Company adopted an Enterprise Management Incentives share option scheme in December 2015. It issued 1,650,000 options to subscribe for new ordinary shares in the Company at an exercise price of 16p per share. These options will be exercisable at any time between the second and the tenth anniversary of the issue date. 17p a g e s e v e n t e e n Directors’ Remuneration Report continued ! (8C5:42C6NKA35C94823O2C4& Performance Graph The graph below compares the Group’s total shareholder return performance with the AIM All Share Index for each of the !"#$%#&'() & '5CT2CK93:5&RC9O>& [.'!5*/8.!A'C9+!6908/*'$!3.'!F*9#81$!393/C!$./*'.9C<'*!*'3#*&!8'*B9*0/&6'!+%3.!3.'!=?@!=CC!2./*'!?&<'T!B9*!'/6.!9B!3.'!8/$3!B%)'! I'/*$Q!! past five years. (8C5:42C6N&!234C9:46& [.'! -908/&I1$! 89C%6I! %$! 3./3! 'T'6#3%)'! <%*'639*$! $.9#CE,V! f#CI!>E,M! 2'83'0A'*!>EE>! July 2015 ! 79A'*39!j/&<9&/!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! D/#C!K*'#E,4Q! [.'! &9&c'T'6#3%)'! <%*'639*! ./$! $8'6%B%6! 3'*0$! 9B! '&5/5'0'&3! /&MSEEEQ! ) =&(%$'()%#4"231$%"#) (8C5:42C6NKA35C94823& [.'!393/C!/09#&3$!8/%E,M! [93/C! O1EEE! 2015 Total £’000 ! 391 JU,! ,U! 370 J:E! 4! 784 :P4! 19 4 ! ! Emoluments ! G09C#0'&3$! Pension contributions - defined contribution scheme D'&$%9&!69&3*%A#3%9&$!c!<'B%&'

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