Coral Products PLC Annual Report 2016

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FY2016 Annual Report · Coral Products PLC

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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

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

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

147

162

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

1,833,333

805,000

72,000

805,000

72,000

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

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Performance Graph
The graph below compares the Group’s total shareholder return performance with the AIM All Share Index for each of the

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