TIDMPLA
RNS Number : 1626T
Plastics Capital PLC
02 July 2018
2nd July 2018
Plastics Capital plc
("Plastics Capital", the "Company" or the "Group")
Results for the year ended 31 March 2018
Plastics Capital plc (AIM: PLA), the niche plastics products
manufacturer, announces its audited results for the year ended 31
March 2018, which are in line with consensus market
expectations.
Financial highlights
Year ended Year ended
31 March 31 March 2017
2018 GBP000 %
GBP000 Change
Revenue 76,726 65,785 16.6%
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Adjusted EBITDA* 7,032 6,900 1.9%
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Adjusted Profit before tax*+ 4,185 4,348 -3.7%
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Adjusted EPS (p)* 9.5p 11.5p -17.4%
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DPS (p) 0.00p 1.46p na
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* excluding amortisation of intangibles and deal fees,
exceptional costs, unrealised foreign exchange translation
derivative losses and share-based incentive scheme charges
+ also excludes non-controlling interests
Financial highlights
-- GBP3.54 million, net of expenses, raised in June 2017 through
a placing with institutional investors
-- Allocation of internally generated cash flow increased towards organic growth
Operational highlights
-- Strong like-for-like organic revenue growth - 13.0% annually
-- Record year for Films Division; like-for-like increase in sales 27% and EBITDA* 26%
-- Films Division now combined under one management structure
-- Record year for mandrel business; sales up 24%, EBITDA* up 17%
-- US mandrel factory established and production commenced
-- Matrix business increases stake in CCM in USA to 51%
-- US and Italian matrix production relocated and consolidated to UK
-- Production in China also relocated and harmonised with UK
-- Bearings business converts new business worth GBP17.7m of lifetime sales
-- GBP1.7 million invested in capacity expansion projects
Commenting on these results, Faisal Rahmatallah, Chairman,
said:
"FY2018 has been an outstanding year for organic growth,
particularly in our films businesses. To capitalise on this, we
have recruited and trained new staff, invested in new facilities
and equipment, and raised equity capital to make sure that we have
scope for further growth as we move into the next financial year.
As a result, our operating profit margin has reduced somewhat
during the year but we consider this to be a sensible trade-off for
the creation of long term shareholder value.
We continue to have a number of exciting projects that we will
be investing in as the current financial year progresses. We
believe these projects will help us to deliver good growth over the
next few years and we anticipate that this year will be another
year of good progress."
Plastics Capital plc Tel: 020 7978 0574
Faisal Rahmatallah, Chairman
Nick Ball, Finance Director
Cenkos Securities (Nomad and Tel: 020 7397 8900
Joint Broker)
Mark Connelly
Callum Davidson
Allenby Capital Limited (Joint Tel: 020 3002 2074
Broker)
David Hart
Notes to Editors
Plastics Capital is a niche manufacturer of specialist plastic
products. Applications for these products vary widely and examples
include:
-- Packaging for the food manufacturing and distribution - films, sacks and pouches
-- Steering columns and instrument control knobs in the
automotive industry - plastic ball bearings
-- Hydraulic and industrial rubber hose manufacture - various types of plastic mandrel
-- Cardboard box manufacture - plastic creasing matrices
Plastics Capital's business model is based on understanding
customers' problems in depth, and then developing and mass
producing proprietary, technical solutions for these problems.
The business operates through two divisions, Films and
Industrial, and has the majority of its production in six UK based
factories, with a further two factories in Asia and one in the
United States of America. Approximately 50 per cent. of its GBP77
million sales are made outside the UK to more than 80
countries.
Further information can be found on www.plasticscapital.com
Chairman's Statement
Review of FY2018
Financial Performance
FY2018 has been a year of record organic revenue growth. Sales
have increased 16.6% overall, of which:
-- 3.4% was due to acquisitions completed part of the way through the prior year,
-- 0.2% was due to exchange rate fluctuation, and
-- 13.0% was due to organic revenue growth.
Profitability, measured in terms of EBITDA* to sales ("EBITDA*
margin"), has not followed revenue growth largely due to business
mix. We generate higher EBITDA* margins in our Industrial Division
than our Films Division, and this year revenue growth has been
strongest in the Films Division, which has therefore reduced the
overall EBITDA* margin down from 10.5% to 9.2%. In addition, our
bearings business which has high operational gearing has had a poor
year and this has also affected the overall EBITDA* margin
negatively.
In terms of organic revenue growth, the Films Division has led
the way with 23.2% year-on-year growth. We successfully developed
and converted a number of important key accounts during the year.
This is driven primarily by having superior products and providing
superior service, but we have also benefitted from having added a
large amount of new extrusion and conversion capacity in the last
two years, and the failure mid-year of a competitor in certain of
our sectors.
The EBITDA* margin in the Films Division was unchanged overall
year-to-year in spite of fluctuations in raw material prices.
Meanwhile, during the year the Films Division recruited and trained
26 new members of staff representing circa 23% of our production
workforce. We have also installed and commissioned machinery that
has expanded capacity by 24% of the prior year total. The
management effort and time required to accomplish all this, whilst
customer demand is very strong, is considerable and reflects very
favourably on our teams involved
In terms of revenue growth, in the Industrial Division, we
achieved a 6.5% increase year-on-year of which 2.3% was due to
organic growth, 3.7% was due to acquisitions carried out in the
prior year and 0.5% was due to foreign exchange.
Of our three Industrial businesses:
-- The mandrel business performed strongest achieving 22.2%
organic revenue growth at constant foreign exchange rates. This
followed prior year organic growth of 40%. This business has
expanded 70% in two years, adding capacity, recruiting and training
staff and setting up manufacturing in West Virginia, USA. The
EBITDA* margin slightly reduced as costs have been incurred ahead
of sales but overall the management team in this business has done
an excellent job to keep up with demand growth.
-- Our matrix business increased sales 11.4% on the prior year,
although organic growth only contributed 1.5% of this; acquisitions
accounted for 9.6% and foreign exchange rate movements for 0.3% of
the remainder. The EBITDA* margin in this business was negatively
affected by the full year impact of the acquisitions of CCM and
Mito which are primarily distribution businesses, which have
intrinsically lower profitability, and by product mix.
* All references to EBITDA are adjusted measures
"EBITDA" is stated before LTIP charges and exceptional costs
See page 13 (Financial Review) for reconciliations of (i)
presented non-GAAP measures to the GAAP measures including adjusted
EBITDA, (ii) net debt; and (iii) organic sales growth.
"Adjusted" means excluding amortisation, exceptional costs,
unrealised foreign exchange derivative and loan gains / losses, and
LTIP charges
"like-for-like" means comparison between years applying a
constant exchange rate (i.e. applying the same foreign exchange
rates to both years) and assuming no impact from acquisitions
"pro-forma" means comparison between years assuming no impact
from acquisitions
-- The bearings business had a disappointing year with sales
down 4%, after the 20.5% like-for-like increase in sales enjoyed in
the prior year. The reduction in sales was largely attributable to
two major projects for key accounts that encountered delays after
strong sales in the prior year. Some of this was due to
supply-chain pipeline filling in the prior year, and some due to
unexpected difficulties that our key accounts experienced in the
sales ramp up of these new products. Because we had geared up for
growth, the EBITDA* margin for this business fell
significantly.
Overall therefore, Group EBITDA* only increased by 1.9% during
the year as strong performance in the Films Division was negated by
weak performance in our bearings business, which dragged down the
Industrial Division.
Depreciation increased GBP0.4 million or 23.2% on the prior year
because of increased capital expenditure during FY2017 and FY2018.
Interest costs increased GBP0.1 million or 7.6% due to a higher
average debt level, and a higher lending margin. Our tax charge has
increased as we now exceed 500 employees, which is the limit for
attaining the maximum benefit from the government's R&D tax
credit scheme. As a result, adjusted EPS decreased by 2.0p or 17.4%
over the prior year.
Exceptional costs of GBP1.5 million arose due to certain
adjustments to the value of CCM's property, plant and equipment,
inventory and liabilities recorded at the date of acquisition and
restructuring of certain manufacturing facilities within the
Industrials Division.
Working capital was 11.9% of sales at year end, down from 12.6%
in the prior year, benefitting from the shorter working capital
cycle in our faster growing Films Division. In May 2017 we raised
GBP3.74 million (GBP3.54 million, net of expenses) through the
placing of 3,194,445 new ordinary shares at 117 pence per share, a
discount of 4.5% to the prevailing price. Overall net debt at the
end of the year was GBP15.1 million, which was a reduction of
GBP1.2m over the financial year. Net debt leverage was 2.1x, which
was slightly above the range we target over the long run of 1.5-2x.
Interest cover remained comfortable at 11.7x.
New Business Performance
Revenue from new business entering production over the last year
was GBP3.9 million up from GBP2.2 million in FY2017. We have seen
new business entering production in our specialist sacks and
mandrels businesses in particular. Lost business in the year was
low, accounting for less than 1% of turnover, reflecting very high
levels of customer satisfaction and therefore retention across the
Group.
Although our bearings business had a difficult year in terms of
invoiced sales, project conversions were strong at nearly GBP18
million of lifetime sales. We have reassessed the future value of
the two projects that have caused the sales shortfall in FY2018 for
the bearings business, which has reduced the annual sales value of
the pipeline of projects that have been converted but not yet
reached full production by GBP0.3 million. Together with the new
business converted in FY2018 this pipeline now amounts to GBP5.2
million. The pipeline was GBP5.5 million at the end of FY2017 and
so remains strong; we expect this pipeline to take 3-5 years to
come through.
Acquisitions and Investments
No new acquisitions or investments were made in FY2018. However,
investment expenditure continued on the three acquisitions we have
most recently completed.
In July 2017, we paid GBP0.31 million deferred consideration for
Synpac, which was acquired in July 2016 for GBP3.1 million of which
10% was deferred for 12 months. Sustainable EBITDA* was estimated
at the time to be GBP0.6 million. Synpac which operationally has
become part of Flexipol has enjoyed strong growth since its
acquisition and has exceeded our expectations. Further development
is underway.
We increased our stake in CCM, based in West Virginia, from 10%
to 51% at a cost of GBP0.92 million. The remaining 49% will be
bought after three years with the amount payable in total depending
on performance in the meantime. CCM's performance has been a little
disappointing since our first investment, but there is time to
improve this before our investment is complete. We are, however,
very pleased with the manufacturing rationalisation steps that have
taken place to bring matrix production back to the UK and replace
it with mandrel production in West Virginia.
We also transferred the manufacturing assets of Mito, which was
acquired in FY2017, from Italy to Wellingborough. This went very
smoothly and production of Mito's excellent range of matrix
products is now part of C&T's overall offering to its worldwide
distributors.
Banking
We have made various minor changes to our facilities with
Barclays to accommodate the investments being made across our
businesses. Barclays have been good business partners helping us to
manage growth and the risks associated with this. Current
facilities are GBP21 million in total and extend to June 2021. The
cost of borrowing over the year averaged approximately 350bps over
LIBOR and will reduce as leverage decreases.
Capital Allocation
In my report last year, I articulated four areas for investment
during FY2018, as follows:
-- Customer specific projects - in FY2017 our bearings business
won a significant project requiring two new injection moulding
machines estimated to amount to GBP0.3 million. This expenditure
was incurred in FY2018 as planned with a slight saving. The project
is now up and running as forecast.
-- Capacity expansion - GBP1.8 million was invested in capacity
expansion during the year, which was GBP0.3 million more than
anticipated, reflecting the strong growth we have achieved during
the year. In the Films Division:
o We upgraded four extrusion lines at Palagan and one at
Flexipol.
o We also added a new conversion machine at Flexipol.
In the Industrial Division:
o We added two new extrusion lines for our mandrels business and
expanded into premises adjacent to our existing factory;
additionally, in the US, we installed two new mandrel extrusion
lines.
o Two injection moulding machines were added at the bearings
business in anticipation of growing demand.
o We added a new extrusion line to our Chinese matrix operations
and capacity in the UK matrix operations to incorporate Mito's
matrix business.
-- New product introduction - GBP0.7 million was invested as
planned during FY2018 in product and capability development, with
the two thirds going to the Films Division where the opportunities
for new products and capabilities are closer to
commercialisation.
-- Corporate - as discussed above, we invested GBP1.2 million in
increasing our stake in CCM to 51% and in discharging the deferred
consideration on Synpac. Further expenditure was incurred in
restructuring manufacturing operations between Mito, CCM and
C&T in Wellingborough as well as between Bell and CCM. GBP0.2
million of this has been taken to exceptional items. We therefore
underspent in this area by GBP0.4 million compared to expectation
at the same time last year.
In total, therefore we have spent approximately GBP4.1 million
in these investment areas compared to the GBP4.3 million estimated
12 months ago. In addition, maintenance capital expenditure
amounted to GBP0.9 million compared to the GBP1.0 million we
estimated a year ago. An additional GBP0.8 million further expense
was incurred on one-offs to restructure and relocate matrix
operations from the USA and Italy to the UK, to set up mandrel
production in the USA, restructure the production team at Palagan
and for the costs associated with the investments we have made in
FY2018. This amounts to a total of GBP5.8 million invested during
the year and was funded by free cash flow (before maintenance
capex) of GBP3.5 million, and an equity raise of GBP3.5 million,
with the balance reducing net debt by GBP1.2 million.
Strategy & Growth
Plastic Waste
There has been considerable publicity about the need to reduce
plastic waste, particularly in our oceans. This has given many
people, including us, pause for thought. Most of this concern has
centred around single-use consumer plastics such as plastic
bottles, carrier bags, straws and the like. None of our products
fall into this category as they are either components or
consumables supplied to other businesses early in the supply chains
of finished products. Consequently, we believe that this is an
issue which we must respond to but not one which materially
threatens our business. So, we have reassessed our approaches to
plastic waste in all our businesses and have developed strategies
for increasing recycling and reusability in each. Certain of these
initiatives are to increase internal recycling of our own waste,
whilst others are to assist our customers to achieve higher levels
of recycling with the products we supply. The latter particularly
offers many technical challenges but we believe that over time
significant improvements will be made, many of which will offer us
opportunity for product differentiation and added value.
Key Initiatives
In early FY2016 we launched a five-year plan with the target of
doubling EBITDA* over the subsequent five years. This strategic
goal links to the LTIP Growth Share awards announced on 2 October
2015 for the senior executive teams across the Group's
subsidiaries. We are behind our target but with good potential to
catch up and to achieve it.
Within the five-year plan, we have a number of strategic
initiatives that are continuously monitored and reviewed every six
months by the Board. As we move forward some initiatives are
completed, some evolve into new areas while others are brought
forward, approved and incorporated into our strategy. Our goal is
to manage our businesses dynamically towards achieving our long-
term objectives and not to fall into the trap of rigidly managing
to a strategic plan.
The most important initiatives within the latest plan in terms
of impact over the five-year period to 2020 are:
-- In our Films Division - expanding sales of specialist sacks,
liners and pouches. This initiative has received considerable
additional resource over the last two years and is achieving strong
sales growth supported by efficient operational performance. We
have added to the product range and plan to continue to invest to
develop the range further.
-- Developing new bearings projects with major OEMs and bringing
already won business successfully into production. This initiative
has had mixed results to date. We have converted many new projects
into won business over the last three years, sufficient to drive
strong growth in the next few years. However, we have had some
setbacks in bringing previously won business into production at the
expected rates. In particular, two projects with large OEMs, one
for ATMs and the other for domestic appliances have not yet
achieved the sales levels that were forecast by our customers. We
have reassessed these projects in terms of what we now believe they
will deliver and incorporated all recently won business into our
pipeline of business that is won, but not yet into full production.
This now stands at GBP5.2 million of annualised sales value, all of
which should come through over the next three to five years. This
is GBP0.3m lower than compared to twelve months ago. However,
further excellent project opportunities with key accounts are in
the pipeline for conversion. The initiative hinges on key account
management and development, as well as clever design engineering
and technical support.
-- Developing new business in mandrels globally through the
provision of in-depth technical service and product customization.
This initiative is progressing well. We have achieved considerable
growth over the last two years through new customers, particularly
in North America. We need to continue to develop superior technical
solutions for our customers generally and find ways to expand sales
in the Asia Pacific region, particularly China.
-- Forward integration and product range diversification in
matrix. This initiative is on track in terms of sales growth but
not, so far, in terms of profitability. The businesses we have
invested in, such as CCM and Mito, have intrinsically lower profit
margins than our manufacturing businesses. Although this is in
their nature, we believe that because our acquisition strategy
involved deferred contingent payments over a number of years there
is a high degree of "self-correction" with respect to the
investment returns that will be achieved on these investments.
Nevertheless, we are targeting margin improvements in this area,
some of which we hope will come from new products that have been
introduced this year.
Obviously, any programme of initiatives, such as those listed
above, has risks associated to their achievement. For example, we
routinely face the possibility of customer inflicted delays and
unforeseen technical difficulties, notwithstanding the management
processes we have put in place to avoid or mitigate such issues.
Attrition (i.e. customer losses) is also a factor that we have
considered and made allowances for, but this allowance could be
insufficient. Finally, the most unpredictable and impactful risk is
what happens in the global economy. Our working assumptions over
the long term are for slow growth (c.2-3% annually) and that
current exchange rates remain broadly unchanged. We believe that
both these assumptions are reasonable but they may prove to be
incorrect, particularly over short periods.
Capital Allocation - Looking Ahead
The investment pipeline during FY2019 supports our growth
strategy and can be set out under the same headings as above:
-- Customer specific projects - With the investments made over
recent years and having had a weaker than expected year in FY2018,
our bearings business has sufficient capacity to cope with its
anticipated growth over the next twelve months. Our other
businesses do not invest for specific customer specific
projects.
-- Capacity - We need to continue to add capacity, particularly
in the Films Division, as we continue to win and develop new
business. We would also like to manufacture certain films we
currently purchase and convert because we do not have sufficient
extrusion capacity. Finally, we would also like to make some
investments to increase the interchangeability of production
between our factories in Dunstable (Palagan) and Haslingden
(Flexipol) to improve efficiencies. There is also some investment
needed to conclude the expansion of mandrel production we have made
over the last two years. In total about GBP1.8 million is earmarked
for these areas during FY2019.
-- New Products - Some of the capacity improvement investment
described above will bring improved processing capabilities, so
enabling the introduction of new products, such as "superstrong"
films, or sacks with barrier properties. We have allocated GBP1.1
million expenditure to enable new products to be developed and
introduced during FY2019 and beyond.
-- Corporate - No corporate investments are in the pipeline for
the current year. We are not due to increase our stakes in CCM or
Mito during the current financial year. Other interesting
opportunities are some way off being consummated. We are, however,
establishing a 50/50 joint venture for matrix and consumables sales
in the Shanghai region with a local Chinese partner, which may
require some investment. GBP0.1 million start-up costs are
expected.
The total capital required, if all these expenditures come
through as anticipated, would be approximately GBP3.0 million.
Added to this, in FY2019 we expect a further GBP1.0 million of
replacement and/or efficiency improvement capital expenditure. All
of this expenditure can be accommodated by the cash flow we expect
to generate during the year and our current debt facilities leaving
some financial flexibility for other contingencies.
Dividend
We have considered whether to reintroduce dividend payments but
given the strong organic growth we are achieving and the potential
for making further investments for acquisitive and/or organic
growth, we believe it would be unwise to do so at the present time.
This will be kept under review.
Outlook
Trading in Q1 FY2019 has been relatively good, making up for
weak momentum at the end of FY2018. The bearings business has not
suffered the same disappointing start to the year as in FY2018,
although there is still some way to go for us to be satisfied that
the right momentum is being achieved in this business.
In the Films Division, since production capacity between our
businesses was increasingly being shared, we have decided to bring
them together under one management team. This will enable us to
utilise capacity in the most efficient way possible and to improve
margins across the division.
We will see also some improvement to margins as losses, that we
have incurred over the last two years, from currency hedges taken
out pre-Brexit, fall away.
Finally, and most importantly, we have spent some considerable
time across the entire Group endeavouring to articulate the "core
values" of Plastics Capital; a one-page version of these is
included at the front of this annual report and can be found on our
website. This started with the entire senior management team of
some 40 people and has now extended through the entire
organisation. We believe these values, which are already held
strongly throughout the organisation will enable day-to-day
decisions and activities to be undertaken in the right way for the
long-term health of the business and its stakeholders as we
continue to grow.
The Board wishes to extend its sincere thanks to the Group's
employees, who have responded to new challenges extremely well. It
has been a very busy year and a huge amount of hard work has been
put in by all. I am pleased to report that we continue to be highly
profitable and cash generative as a Group and that we are now on a
growth track. We look forward to another year of good progress in
FY2019.
Faisal Rahmatallah
Chairman
Operational Review
2018 2017
GBP000 GBP000
Industrial Division 34,464 32,472
Films Division 42,262 33,313
Turnover per consolidated income statement 76,726 65,785
======= =======
Industrial Division
Bell Plastics ("Bell") had another record year of sales growth,
having achieved 24% growth over the prior year, driven by strong
demand and winning new customers for hose mandrels in Europe and
the USA. Sales growth in North America exceeded 60% and the
business there is now underpinned by a mandrel manufacturing
capability based in our Martinsburg facility in West Virginia which
came on stream at the end of the financial year.
In addition to the mandrel capacity installed in the USA, we
added a further 20% mandrel capacity into the UK, to improve lead
times and to facilitate growth going forward. We also invested
considerable time and effort in a programme to improve output by
reducing unplanned machine downtime and by increasing running
speed. There is now sufficient capacity for Bell's foreseeable
future demand over the next two years.
The growth achieved has necessitated steps being taken to
enlarge and strengthen our operational team. We have added 30% new
production staff, all of whom have required training in Bell's
bespoke production technology. We expect to continue to strengthen
the operational management structure over the next year in order to
consolidate the improvements made.
New product development is an important factor of Bell's future
growth plans. Two important products were developed and added to
the portfolio; a new mandrel material which improves our customers'
hose manufacturing process, notably around mandrel ejection. The
second product, a new abrasion resistant film, Ultra XLPE, has been
developed to help improve hydraulic and industrial hose abrasion
resistance, whilst enabling hose cost reduction. Importantly, Ultra
XLPE has shown significant promise for improving the anti-abrasion
performance of rubber materials in other applications, notably for
conveyor and transmission belts. A patent application for this
product has been filed.
Bell's strategy is based on continuing support for existing and
new customers to assist them to improve their products and
manufacturing processes. The USA market will be a particular focus,
supported by the mandrel manufacturing facility there, and so will
Asia be through local warehousing. Ultra XLPE film is being
introduced to existing and new customers in the core hose market
and the significant potential in rubber belt applications will
continue to be explored.
BNL (UK) Limited ("BNL"), which manufactures plastic ball
bearings and related assemblies, had a disappointing year with
product sales down 2.8% on the previous year (4.3% at constant
exchange rates). In the first half of FY2018, the business suffered
from delays in the ramp-up of two large projects for major
multi-national customers. The final quarter of the year saw volumes
and turnover increase within these key accounts, moving closer to
expectation. It is also worthy of note that the slightly
disappointing result followed a year of outstanding growth in
FY16-17 and the three-year cumulative annual growth rate remains
above 11%.
New business wins in the year were again healthy, with newly
converted projects expected to deliver over GBP17.7 million in
lifetime sales; a third consecutive year when conversion of
projects has been significantly ahead of current annual turnover.
Project wins were spread broadly across our geographic markets but
were strongest within Europe and Asia. The most significant new
business was again with a UK based manufacturer within the domestic
appliance sector. This second significant project win with this
customer illustrates the improvement in the business's approach to
Key Account Management as a result of previous investments in the
management team.
It is pleasing to report that our business in Japan provided a
significant contribution to new business conversions during the
year; a turnaround in this key market. A wider spread of key
accounts within the Asian region is being sought to ensure less
dependency on any one customer/sector in the future.
The newly converted business pipeline remains healthy, with
projects won but not yet in full production (or not at full
production rate) at just over GBP4.6 million. This business is
expected to flow through over the next three to four years. In
addition, the future business pipeline of projects nearing
conversion remains very healthy.
Growth in the second half of the year saw ongoing investment in
capacity to meet the needs of customers. Installations of two
further injection moulding cells represented an uplift in capacity
of 5%. In addition, as part of the overall operational excellence
strategy, a "Lean Manufacturing" initiative was introduced with a
formal continuous improvement process and the roll out of various
Lean tools. It is expected that the combination of investment in
capacity and minimisation of waste should support the anticipated
growth in the coming year without further major capital
investment.
Previous investment in a "catalogue range" of standard bearings
has proven valuable. Whilst sales through third-party distribution
remain slower than originally planned, the presentation of this
standard range within existing Key Accounts is gaining traction.
Several customers had these standard bearings in their test cycles
at the end of the financial year; a key target for the coming year
is to convert these opportunities into ongoing supply.
Further progress was also made on our Knowledge Transfer
Partnership (KTP) with Bradford University. Improvements in product
capability have been proven within our state of the art test
facilities and the final quarter of the year saw the first
presentations of this capability to several key accounts. These
investments in R&D will enable new products to be introduced to
work at significantly higher temperatures, loads and speeds,
widening the envelope of addressable applications. This progress
has re-emphasised BNL's technical expertise in this niche market,
ensuring that we continue to be recognised as the global technology
leader for bespoke polymer bearing solutions.
C&T International ("C&T"), the world's largest
manufacturer of creasing matrix, increased turnover 11.4% chiefly
through full year contributions from acquisitions made in the prior
year. Thanks to investments made in recent years, we have
manufacturing operations in UK and China, and sales and
distribution businesses in the UK, USA, Italy, India and China. We
also have an enviable network of distributors with whom we have
long term relationships and who operate in over 80 countries
throughout the world.
In the UK, we have continued to build market share through our
direct technical sales approach and by gradually broadening the
range of die supply products to both box convertors and die makers.
We strengthened our UK sales team during the year, leading to
further sales growth, particularly in the North of England,
Scotland and Ireland.
In China, our move from Beijing to a new factory in Tianjin has,
after some initial teething problems, reached the quality and
service standards needed, and has allowed us to achieve significant
cost savings thanks to the new factory layout and more efficient
use of labour. At the beginning of FY2019 we established a new
joint venture with a highly regarded local partner to strengthen
our sales and distribution effort in the Shanghai region and we
anticipate volume growth within this territory throughout the
year.
In the US and Italy, we have increased our shareholding in CCM
and Mito respectively and have spent much time with the local
management teams to improve the sales and profitability of these
companies. A key strategy has been the centralisation of all
manufacturing to our UK facility to allow CCM and Mito to focus on
sales development. A significant improvement has been made to the
financial performance of these companies in H2 and we anticipate
continued progress in FY2019.
Product innovation is a key element of C&T International's
growth plans and we launched the new Speedpin and Kingpin products
to considerable acclaim in our industry during FY2018. Both these
products bring important production cost savings to the box
convertor by reducing machine downtime and improving throughput.
Initially launched in the UK, we will also be launching these new
products in Europe and overseas in Q1 of FY2019.
C&T's future growth will come from continual improvement of
its technical sales service, further broadening of its product
range and forward integration in key territories through
acquisition or joint ventures.
Films Division
Flexipol Group ("Flexipol") has had a record year with revenue
up 26.4% as the business took full advantage of industry capacity
constraints created by the demise of a significant competitor in
August 2017. Thirteen new key accounts, that is customers with
annual sales of more than GBP0.1 million per annum, were converted
during the year, which is also a record.
New capacity, which was installed during the early part of
FY2018, enabled Flexipol to react quickly to this situation winning
considerable amounts of new business which has been converted to
strong, long term trading relationships with selected new
customers. The level of revenue growth mentioned above which mainly
occurred in just eight months of the year put very heavy demands on
the operational side of the business. A total of 26 new staff were
recruited during the year, all of who needed training and
development to work to our operating standards.
Toward the latter part of the financial year, it became
necessary to work closely with Palagan to ensure that overall
demand for both businesses could be met from the two factories to
the extent considered optimal. Harmonisation of operating and
logistics standards has been necessary, and there will be an
increasing need for this moving forward. By combining the strengths
of the two businesses under one management structure, it is
expected that the businesses will learn for one another and improve
substantially.
Sales activities have been extended into Australia and New
Zealand, a process which started by following one of our key
accounts with operations in that region. Flexipol have been
successful in converting several major blue-chip food companies in
this region who have been interested in gradually moving away from
paper sack packaging to speciality polythene sack alternatives.
Towards the end of the financial year, we invested in a high
quality eight colour printing press enabling Flexipol to move into
market sectors which it was previously unable to supply. Going
forward, further investment in extrusion and conversion capacity
will ensure that this growth opportunity can be maximised.
Synpac has also had a very strong year with top line sales
increasing by 19.6%, mainly due to the enthusiasm and commitment of
the dedicated sales team. The strong Euro has been detrimental to
Synpac's margins as its products are made from barrier films
generally bought in from European suppliers. Nevertheless, Synpac
has contributed well with profitability in line with expectations.
Going forward, new product development work utilising Flexipol's
barrier film capability will help Synpac to differentiate its
product range as well as grow and increase gross profit
margins.
Palagan Limited ("Palagan") recovered well from a decline in
sales in FY2017; both volume and revenue were up by 15% and 18%
respectively. Some of this increase was due to work transfer from
Flexipol in the wake of Flexipol's surge in volume during H2
FY2018. However, on its own account Palagan also did well to build
sales with new business wins and new products contributing
approximately GBP0.8 million of sales. An internal sales team was
introduced last year to handle much of the day-to-day account
management and this has enabled the external sales team to increase
its focus on winning new customers.
The workforce and operational management team has been
transformed during the year following the senior management changes
made in the prior year. The factory is making improvements in all
areas - people, equipment and systems. Productivity has increased
by 20%, scrap has reduced, and quality has been maintained at high
standards. The business is now being positioned to manufacture
higher value-added products, which are gradually being
introduced.
Palagan's growth is being supported by a GBP1m investment in
five new bespoke bag making machines which will improve output
further and enable the manufacture of higher value-added products
and very high strength products. The first two of these machines
have already been largely installed, with the other three due to be
installed in H2 FY2019.
Palagan is the centre of the Group's drive to increase internal
recycling; equipment has recently been installed there from
Flexipol to carry this out for the Films Division. 9% of what the
Group produces is scrap and the majority of this created in the
Films Division and has in the past gone to recyclers. This will
change over the next two years as the Group's target is to reach
50% internal recycling this year and the following year (i.e.
FY2020) to reach 80%. It is a key part of the programme that the
Group is developing to reduce waste and improve recycling.
Financial Review
2018 2017 Change
GBP000 GBP000 %
Revenue 76,726 65,785 16.6%
-------------------------------------- ------- ------ ------
Gross profit 24,088 21,129 14.0%
-------------------------------------- ------- ------ ------
Operating profit 3,369 3,303 2.0%
-------------------------------------- ------- ------ ------
Add back: Depreciation 2,119 1,720
Add back: Amortisation 1,118 805
Add back: LTIP charge 94 165
Add back: Exceptional administrative
costs 1,452 907
Less: Foreign exchange non-cash
realised gain (1,120) -
Adjusted EBITDA 7,032 6,900 1.9%
-------------------------------------- ------- ------ ------
Profit before tax 2,762 766
Add back: Amortisation of intangible
assets 1,118 805
Add back: Amortisation and write
off of capitalised deal fees 89 568
Add back: LTIP charge 94 165
Add back: Exceptional costs 1,452 907
Add back: Unrealised foreign
exchange & derivative (gain)/loss (263) 1,244
Less: Foreign exchange non-cash
realised gain (1,120) -
Add back: Non-Controlling interests
charge / (credit) 353 (107)
Less: Non-controlling interest's
exceptional charge (300)
Adjusted Profit before tax* 4,185 4,348 -3.7%
-------------------------------------- ------- ------ ------
Current year tax charge+ (525) (227)
Adjusted Profit after tax* 3,660 4,121 -11.2%
-------------------------------------- ------- ------ ------
Basic adjusted EPS*+ 9.5p 11.5p -17.4%
-------------------------------------- ------- ------ ------
Basic EPS 5.7p 1.5p 280.0%
-------------------------------------- ------- ------ ------
Capital expenditure 3,705 3,499 -5,9%
-------------------------------------- ------- ------ ------
Net debt 15,125 16,322 7.3%
-------------------------------------- ------- ------ ------
* excluding amortisation of intangibles and deal fees,
exceptional costs, unrealised foreign exchange translation
derivative gains and losses and share-based incentive scheme
charges and non-controlling interests
+ applying an underlying tax charge of 13% (2017: underlying tax
charge of 6.5%) and based on weighted average shares in issue in
the year. The underlying tax charge for 2018 excludes deferred tax,
overseas tax and any prior year adjustments which management
believe is a truer representation of the tax attributable to the
2018 Adjusted profit.
Revenue
Revenue for the year was GBP76.7 million which was an increase
of 16.6% from GBP65.8 million in 2017. On a like-for-like basis
(i.e. adjusting for the Synpac, CCM and Mito acquisitions and at
constant exchange rates i.e. applying the same foreign exchange
rates to both years), revenue increased by approximately 13%.
Alternative Performance Measure: Organic Revenue GBP000 Change
Growth reconciliation on Prior
year
%
Actual Revenue 2017 65,785
------- ----------
Synpac acquisition (acquired July 2016) 1,211
------- ----------
CCM acquisition (acquired May 2016) 356
------- ----------
Mito acquisition (acquired December 2016) 670
------- ----------
Proforma Revenue 2017 68,022 3.4%
------- ----------
Foreign Exchange impact 152
------- ----------
Proforma and Constant Foreign Exchange Revenue
2017 68,174 0.2%
------- ----------
Organic revenue 8,552
------- ----------
Actual Revenue 2018 76,726 13.0%
------- ----------
Gross profit
Gross profit was GBP24.1 million (margin: 31.4%) in 2018 against
GBP21.1 million (margin: 32.1%) in 2017. After adjusting for the
foreign exchange non-cash realised gain of GBP1.1 million, the
gross profit margin decreased primarily due to the impact of
business mix as a higher proportion of sales related to the Films
Division and the investments in CCM and Mito, which are lower
margin businesses.
Exceptional costs
Exceptional costs incurred and included in administrative
expenses in the year predominantly relate to:
-- redundancy and restructuring costs associated with the Palagan production team;
-- professional and legal costs associated with the acquisitions
of Channel Creasing Matrix ("CCM") and Mito;
-- business-wide restructuring of production operations within the Industrial Divisions; and
-- an exercise undertaken in 2017-18 to assess the fair value of
assets and liabilities on the opening balance sheet of CCM,
following Plastics Capital initial 10% investment as at May'16.
This highlighted certain adjustments to the value of property,
plant & equipment, inventory and liabilities recorded at the
date of acquisition. The impact has been recorded as an exceptional
charge of GBP0.6 million in the 2018 consolidated income
statement.
It is anticipated that this adjustment to CCM's net assets, as
recorded at the date of acquisition, will be taken into account in
the agreement of the final purchase price to be paid for the
remaining 49% in CCM in 2021.
Profitability
EBITDA before LTIP charge, exceptional costs and non-cash
realised gains was GBP7.0 million which is 1.9% higher than in
2017.
Profit before taxation of GBP2.8 million compares with the prior
year equivalent of GBP0.8 million, which is an increase of
261%.
Adjusted profit before taxation (excluding amortisation of
intangibles and deal fees, exceptional costs, unrealised foreign
exchange translation derivative losses and share-based incentive
scheme charges) of GBP4.2 million compares with the prior year
equivalent of GBP4.3 million, which is a decrease of 3.7%.
Taxation
The Group's tax charge for the year was GBP0.9 million which
compares with a tax charge of GBP0.2 million in 2017.
Earnings per share
Basic earnings per share were 5.7p compared to 1.5p in 2017.
Capital expenditure
Capital expenditure was GBP3.7 million in 2018 which compares
with GBP3.5 million in 2017. As in the previous year, significant
investment has been made to increase capacity and capabilities
across the Group for future growth. Specific capital expenditure in
the year included:
-- additional capacity in the Films division through upgrades of
existing extrusion lines, a new conversion line and print
press;
-- adding new extrusion lines at Bell Plastics to meet increased
demands from existing and new customers; and
-- adding new injection moulding machines for a new bearings
project and further investment in tooling.
Cash flow
In the year, cash generated from operations amounted to GBP4.5
million (2017: GBP6.2 million). There was a decrease in cash and
cash equivalents of GBP0.5 million in the year (2017: increase of
GBP0.2 million).
Equity
On 31st May 2017, the Company undertook a share placing to raise
approximately GBP3.74 million, before expenses, by way of issuing
3,194,445 new ordinary shares at GBP1.17 per share.
The net proceeds of the placing (approximately GBP3.54 million),
were applied towards the increase of the Company's stake in the CCM
and to invest in further growth capital expenditure to increase
capacity to satisfy increasing demand for the Group's products and
thereby accelerate organic growth.
On 3rd October 2017, Andrew Walker, Non-Executive Director,
exercised options over 50,000 ordinary shares of 1p each in the
Company at an exercise price of GBP1.00 per new Ordinary Share
pursuant to the Options Agreement dated 27 November 2007. Following
Admission on 9 October 2017, the total number of shares in the
Company was 38,995,151.
Net debt
Net debt at the year-end was GBP15.1 million (2017: GBP16.3
million), a decrease during the year of GBP1.2 million as debt. As
at 31 March 2018 net debt leverage was approximately 2.1x based on
the current EBITDA of the Group.
2018 2017
Alternative Performance Measure: Net debt reconciliation GBP000 GBP000
Cash and cash equivalents (4,854) (4,914)
-------- --------
Current Liabilities: Interest bearing loans
and borrowings 7,206 6,199
-------- --------
Non-current Liabilities: Interest bearing loans
and borrowings 12,771 15,037
-------- --------
Net Debt 15,123 16,322
-------- --------
Consolidated Income Statement
for year ended 31 March 2018
Note 2018 2018 2018 2018 2017 2017 2017 2017
Before
Before foreign
foreign exchange
exchange Foreign impact
impact exchange on Foreign
on derivatives impact derivatives exchange
and on and loans impact
loans derivatives & on
& exceptional and Exceptional exceptional derivatives Exceptional
items loans items Total items and loans items Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Revenue 76,726 - - 76,726 65,785 - - 65,785
Cost of
sales 3 (53,146) 508 - (52,638) (43,703) (953) - (44,656)
Gross profit 23,580 508 - 24,088 22,082 (953) - 21,129
Distribution
expenses (3,542) - - (3,542) (3,100) - - (3,100)
Administration
expenses 3 (15,727) - (1,452) (17,179) (13,852) - (907) (14,759)
Other income 2 - - 2 33 - - 33
Operating
profit 4,313 508 (1,452) 3,369 5,163 (953) (907) 3,303
4
Finance /
credit/(expense) 5 (870) 263 - (607) (1,293) (1,244) - (2,537)
Net financing
costs (870) 263 - (607) (1,293) (1,244) - (2,537)
Profit/(loss)
before
tax 3,443 771 (1,452) 2,762 3,870 (2,197) (907) 766
Tax charge (945) - - (945) (227) - - (227)
Profit
for the
year 2,498 771 (1,452) 1,817 3,643 (2,197) (907) 539
Attributable
to:
Equity
holders
of the
Parent 2,551 771 (1,152) 2,170 3,536 (2,197) (907) 432
Non-controlling
interest (53) - (300) (353) 107 - - 107
-------------------------------- ------------ ------------ --------- ------------ ------------ ------------ ---------
Profit
for the
year 2,498 771 (1,452) 1,817 3,643 (2,197) (907) 539
Basic earnings
per share
attributable
to equity
shareholders
of the
Company 8 5.7p 1.5p
Diluted
earnings
per share
attributable
to equity
shareholders
of the
Company 8 5.6p 1.5p
Consolidated Statement of Comprehensive Income
for year ended 31 March 2018
2018 2017
GBP000 GBP000
Profit for the year 1,817 539
Other comprehensive income
Items that may be reclassified subsequently
to profit or loss:
Foreign currency translation differences
for foreign currency operations (267) 607
Total comprehensive income 1,550 1,146
Total recognised income and expense
for the year is attributable to:
Equity holders of the parent 1,903 1,039
Non-controlling interest (353) 107
Consolidated Statement of Changes in Shareholders' Equity
for year ended 31 March 2018
Share Share Translation Reverse Retained Total Non- Total
Capital Premium Reserve Acquisition earnings parent Controlling equity
GBP000 GBP000 GBP000 Reserve GBP000 equity interest GBP000
GBP000 GBP000 GBP000
Balance at 31 March
2016 353 20,951 639 2,640 1,740 26,323 - 26,323
--------- --------- ------------ ------------- ---------- -------- ------------- --------
Total recognised
income
and expense for
the year - - 607 - 539 1,146 (107) 1,039
--------- --------- ------------ ------------- ---------- -------- ------------- --------
Elimination of
non-controlling
interest - - - - - - (182) (182)
--------- --------- ------------ ------------- ---------- -------- ------------- --------
Issue of share
capital 4 445 - - (449) - - -
--------- --------- ------------ ------------- ---------- -------- ------------- --------
Dividends paid - - - - (1,110) (1,110) - (1,110)
--------- --------- ------------ ------------- ---------- -------- ------------- --------
LTIP charge - - - - 165 165 - 165
--------- --------- ------------ ------------- ---------- -------- ------------- --------
Settlement of LTIP
2011 - - - - (394) (394) - (394)
--------- --------- ------------ ------------- ---------- -------- ------------- --------
Balance at 31 March
2017 357 21,396 1,246 2,640 491 26,130 (289) 25,841
--------- --------- ------------ ------------- ---------- -------- ------------- --------
Share Share Translation Reverse Retained Total Non- Total
Capital Premium Reserve Acquisition earnings parent Controlling equity
GBP000 GBP000 GBP000 Reserve GBP000 equity interest GBP000
GBP000 GBP000 GBP000
--------- --------- ------------ ------------- ---------- -------- ------------- --------
Balance at 31 March
2017 357 21,396 1,246 2,640 491 26,130 (289) 25,841
--------- --------- ------------ ------------- ---------- -------- ------------- --------
Total recognised
income
and expense for
the year - - (267) - 2,170 1,903 (353) 1,550
--------- --------- ------------ ------------- ---------- -------- ------------- --------
Transactions with
non-controlling
interest - - - - (584) (584) 643 59
--------- --------- ------------ ------------- ---------- -------- ------------- --------
Issue of share
capital 32 3,564 - - - 3,596 - 3,596
--------- --------- ------------ ------------- ---------- -------- ------------- --------
LTIP charge - - - - 94 94 - 94
--------- --------- ------------ ------------- ---------- -------- ------------- --------
Balance at 31 March
2018 389 24,960 979 2,640 2,171 31,139 1 31,140
--------- --------- ------------ ------------- ---------- -------- ------------- --------
Transactions with non-controlling interests
-- The GBP584,000 parent equity transactions comprise the
purchase of additional equity interest in CCM from the NCI upon
exercise of a call option of GBP897,000 (see note 32) less the
associated reduction in NCI share of CCM from 90% to 49% of
GBP313,000.
-- The GBP643,000 transactions with NCI include:
-- an adjustment to the NCI share of intangible assets
(GBP1,141,000 - see note 7) and associated deferred tax
(GBP178,000) which was in relation to a prior year acquisition (net
GBP956,000).
-- net of the associated reduction in NCI share of GBP313,000 noted above.
Consolidated Balance Sheet
at 31 March 2018
Note 2018 2017
GBP000 GBP000
Non-current assets
Property, plant and equipment 12,444 11,057
Intangible assets 6 26,989 26,376
39,433 37,433
Current assets
Inventories 8,656 6,657
Trade and other receivables 16,979 15,482
Other financial assets 421 -
Cash and cash equivalents 4,854 4,914
30,910 27,053
Total assets 70,343 64,486
Current liabilities
Interest-bearing loans and
borrowings 7,206 6,199
Trade and other payables 16,949 14,502
Corporation tax liability 922 448
25,077 21,149
Non-current liabilities
Interest-bearing loans and
borrowings 12,771 15,037
Other financial liabilities - 1,277
Deferred tax liabilities 1,355 1,182
14,126 17,496
Total liabilities 39,203 38,645
Net assets 31,140 25,841
Equity attributable to equity
holders of the parent
Share capital 7 389 357
Share premium 24,960 21,396
Translation reserve 979 1,246
Reverse acquisition reserve 2,640 2,640
Retained earnings 2,171 491
Total parent equity 31,139 26,130
Non-controlling interest 1 (289)
Total equity 31,140 25,841
Consolidated Cash Flow Statement
for year ended 31 March 2018
2018 2017
GBP000 GBP000
Profit after tax for the year 1,817 539
Adjustments for:
Income tax charge/(credit) 945 227
Depreciation and amortisation 3,237 2,525
Financial expense 607 2,537
Foreign exchange non-cash realised
gain (1,120) -
Loss/(gain) on disposal of plant,
property and equipment 125 (18)
LTIP charge 94 165
Changes in working capital
(Increase) in trade and other
receivables (1,497) (2,020)
(Increase) in inventories (1,998) (796)
Increase in trade and other payables 2,284 3,080
Cash generated from operations 4,494 6,239
Interest paid (780) (725)
Income tax paid (566) (474)
Net cash inflow from operating
activities 3,148 5,040
Cash flows from investing activities
Acquisition of subsidiary and
fees (net of cash acquired) (1,207) (4,095)
Acquisition of property, plant
and equipment (3,705) (3,499)
Development expenditure capitalised (496) (539)
Proceeds from disposal of property,
plant and equipment - 26
Dividend received 2 15
Net cash (outflow) from investing
activities (5,406) (8,092)
Cash flows from financing activities
Net proceeds from new loan 572 5,512
Issue of share capital 3,546 -
Repayment of borrowings and fees (2,393) (1,131)
Dividends paid - (1,110)
Net cash inflow from financing
activities 1,725 3,271
(Decrease)/increase in net cash
and overdraft (533) 219
Net cash at 1 April 4,914 5,488
Overdraft at 1 April (4,511) (5,304)
Net cash and overdraft at 31 March (130) 403
Notes
1 Financial information
The financial information set out above does not constitute the
Company's statutory accounts for the years ended 31 March 2018 or
2017. Statutory accounts for 2017 have been delivered to the
Registrar of Companies, and those for 2018 will be delivered in due
course. The auditor has reported on those accounts; their reports
were (i) unqualified, (ii) did not include a reference to any
matters to which the auditors drew attention by way of emphasis
without qualifying their report and (iii) did not contain a
statement under section 498 (2) or (3) of the Companies Act 2006 in
respect of the accounts for 2018.
Going concern
The Financial Reporting Council issued "Guidance on the Going
Concern Basis of Accounting and Reporting on Solvency and Liquidity
Risks - Guidance for directors of companies that do not apply The
UK Corporate Code" in April 2016 and the Directors have considered
this when preparing the financial statements. These have been
prepared on a going concern basis and the Directors have taken
steps to ensure that they believe the going concern basis of
preparation remains appropriate. The Group has banking arrangements
with Barclays until June 2021 which include an overdraft facility,
revolving credit facility, senior loans and asset finance. These
facilities together with the strong cash generation of the business
are felt adequate to provide the Group with the necessary
headroom.
The Directors have considered the position of the trading
companies in the Group to ensure that these companies are in a
position to meet their obligations as they fall due.
There are not believed to be any contingent liabilities which
could result in a significant impact on the business if they were
to crystallise.
Accounting estimates and judgements
The Company makes estimates and assumptions regarding the
future. Estimates and judgements are continually evaluated based on
historical experience and other factors, including expectations of
future events that are believed to be reasonable under the
circumstances. In the future, actual experience may differ from
these estimates and assumptions. The estimates and assumptions that
have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities or to the financial
statements in general within the next financial year are discussed
below:
Intangible assets
Intangible assets are recognised on business combinations if
they are separable from the acquired entity or give rise to other
contractual/legal rights. The amounts ascribed to such intangible
assets are arrived at by using appropriate valuation
techniques.
Acquired intangible assets recognised by the Group have a finite
useful life and are carried at cost, less accumulated amortisation
and impairment losses. Their useful economic lives and the methods
used to determine the cost of intangible assets acquired in a
business combination are as follows:
Intangible asset Useful economic life Valuation method
Trademarks and brands 5 - 20 years Relief from royalty
Intellectual property rights 7 years Replacement cost
Distributor and customer relationships 7 - 15 years Excess
earnings
Technology 5 - 7 years Relief from royalty
Goodwill
The Group is required to test, on an annual basis, whether
goodwill has suffered any impairment. Goodwill is assigned by the
Company to its cash-generating units, the allocation of which is a
judgement based on the knowledge of the business. The recoverable
amount is determined based on value in use calculations. The use of
this method requires the estimation of future cash flows, growth
rates and the choice of a discount rate based on knowledge of the
cost of capital in order to calculate the present value of the cash
flows. Actual outcomes may vary.
Notes (continued)
Inventory
Inventories are stated at the lower of cost and net realisable
value.
In determining the cost of raw materials, consumables and goods
purchased for resale, the weighted average purchase price is used.
For work in progress and finished goods, cost is taken as
production cost, which includes an appropriate proportion of
attributable overheads.
Exceptional costs, foreign exchange costs and presentation of
the financial statements
The Group is required to make judgements in determining its
policy for the disclosure and presentation of exceptional costs and
foreign exchange costs. These judgements are made in order to
facilitate the understanding of the performance of the Group.
2 Accounting policies
Plastics Capital plc (the "Company") is a public company
incorporated in England and Wales, with subsidiary undertakings in
the UK, Italy, Japan, Thailand, India, China and the United States
of America.
The Group financial statements consolidate those of the Company
and its subsidiaries (together referred to as the "Group"). The
Group financial statements have been prepared and approved by the
directors in accordance with International Financial Reporting
Standards as adopted by the EU ("Adopted IFRSs"). The accounting
policies have been applied consistently to all periods presented in
these Group financial statements.
3 Exceptional items
Administrative expenses
2018 2017
GBP000 GBP000
Redundancy and restructuring
costs (i) 192 79
Professional and legal costs
(ii) 278 314
Factory relocations and
set-ups (iii) 362 395
Restatement of CCM's opening
balance sheet (iv) 620
Other - 119
1,452 907
Exceptional costs incurred and included in administrative
expenses in the year relate to:
(i) redundancy and restructuring costs associated with the
Palagan production team (and in the prior year costs in other
subsidiaries);
(ii) professional and legal costs associated with the
acquisitions of CCM and Mito (and CCM, Mito and Synpac in the prior
year);
(iii) business wide restructuring within the Industrial
Divisions (and relocation of two Chinese factories in the prior
year); and
(iv) an exercise was undertaken in 2017-18 to assess the fair
value of assets and liabilities on the opening balance sheet of
CCM, following Plastics Capital initial 10% investment in May 2016.
This highlighted certain adjustments to the value of property,
plant & equipment, inventory and liabilities recorded at the
date of acquisition. The impact has been recorded as an exceptional
charge of GBP0.6 million in the 2018 consolidated income statement
- if this exercise had occurred within 12 months then the opening
balance sheet would have been restated.
It is anticipated that this adjustment to CCM's net assets, as
recorded at the date of acquisition, will be taken into account in
the agreement of the final purchase price to be paid for the
remaining 49% in CCM in 2021.
Notes (continued)
4 Finance expense / (credit) (excluding foreign exchange)
2018 2017
GBP000 GBP000
Bank interest 789 725
Interest received (8) -
Write off of bank arrangement fees - 208
Amortisation of bank arrangement fees 89 360
Financial expenses 870 1,293
5 Finance (credit) / expense included within foreign exchange costs
2018 2017
GBP000 GBP000
Net foreign exchange loss 315 382
Unrealised (gains) / losses on derivatives
used to manage foreign exchange risk (578) 862
(263) 1,244
6 Intangibles
Goodwill Technology Intellectual Distributor Trademarks Development Total
GBP000 GBP000 Property & customer and brands Costs GBP000
Rights Relationships GBP000 GBP000
GBP000 GBP000
Cost
--------- ----------- ------------- --------------- ------------ ------------ --------
Balance at 31 March
2016 18,458 3,146 1,175 8,691 2,007 1,423 34,900
--------- ----------- ------------- --------------- ------------ ------------ --------
Acquisitions 1,739 - - 1,670 437 - 3,846
--------- ----------- ------------- --------------- ------------ ------------ --------
Additions - - - - - 539 539
--------- ----------- ------------- --------------- ------------ ------------ --------
Balance at 31 March
2017 20,197 3,146 1,175 10,361 2,444 1,962 39,285
--------- ----------- ------------- --------------- ------------ ------------ --------
Additions - - 94 982 159 496 1,731
--------- ----------- ------------- --------------- ------------ ------------ --------
Balance at 31 March
2018 20,197 3,146 1,269 11,343 2,603 2,458 41,016
--------- ----------- ------------- --------------- ------------ ------------ --------
Amortisation &
impairment
--------- ----------- ------------- --------------- ------------ ------------ --------
Balance at 31 March
2016 313 2,848 1,175 5,336 1,807 625 12,104
--------- ----------- ------------- --------------- ------------ ------------ --------
Amortisation for
the year - 52 - 427 93 233 805
--------- ----------- ------------- --------------- ------------ ------------ --------
Balance at 31 March
2017 313 2,900 1,175 5,763 1,900 858 12,909
--------- ----------- ------------- --------------- ------------ ------------ --------
Amortisation for
the year - 52 3 612 137 314 1,118
--------- ----------- ------------- --------------- ------------ ------------ --------
Balance at 31 March
2018 313 2,952 1,178 6,375 2,037 1,172 14,027
--------- ----------- ------------- --------------- ------------ ------------ --------
At 31 March 2018 19,884 194 91 4,968 566 1,286 26,989
--------- ----------- ------------- --------------- ------------ ------------ --------
At 31 March 2017 19,884 246 - 4,598 544 1,104 26,376
--------- ----------- ------------- --------------- ------------ ------------ --------
Additions to distributor and customer relationships of
GBP982,000 and trademarks and brands of GBP159,000 relate to an
adjustment in respect of a prior year acquisition. Additions to
distributor and customer relationships of GBP982,000 and trademarks
and brands of GBP159,000 relate to an adjustment in respect of a
prior year acquisition. The additions to intangible assets in the
prior year accounted for the Group's ownership percentage of
intangibles rather than 100% of the fair value of the intangible
asset. This adjustment increases the value of intangible assets
with a corresponding credit entry to NCI. This adjustment has been
treated as a current year item, on the basis that the net
adjustment to intangible assets and NCI is has no overall material
impact on the prior year reported numbers.
Notes (continued)
Discount Discount
factor 2018 factor 2017
Goodwill is allocated to the following cash generating units
("CGU"): % GBP000 % GBP000
Bell Plastics 10.3 4,529 10.3 4,529
BNL Group 10.5 1,178 10.5 1,178
C&T International 11.3 9,042 11.3 9,042
Palagan 11.6 3,563 11.6 3,563
Flexipol Group 11.6 1,572 11.6 1,572
19,884 19,884
Management have performed impairment reviews on the carrying
value of goodwill as at 31 March 2018. For the purpose of
impairment testing goodwill is allocated to each CGU which
represent the lowest level within the Group at which goodwill is
monitored for internal management purposes. The carrying amounts of
goodwill for each CGU are as above. Value in use was determined by
discounting the future cash flows generated from the continuing use
of the unit.
The calculation of the value in use was based on the following
key assumptions:
-- Cash flow projections covering a four-year period to 31 March
2022 - the projections are based on the budget for 2019. This has
been prepared using a bottom-up approach for each subsidiary with
sales and gross margins determined on a product by product basis.
Sales growth rate assumptions, based on sensitised historic growth
rates, have been applied to all CGUs as follows:
o Bell Plastics - 5%
o BNL Group - 4%
o C&T International - 4%
o Palagan - 5%
o Flexipol Group - 6%
o After the fourth year then a sales growth rate of 3% has been
applied in perpetuity.
-- The above discount factors have been applied in determining the recoverable amounts.
-- Management have performed a sensitivity analysis and, in most
CGUs, a reasonable possible change in key assumptions would not
lead to an impairment. The following changes to discount rates
would lead to an impairment:
o Bell Plastics - 15.4%
o BNL Group - 14.2%
o C&T International - 12.0%
o Palagan - 14.0%
o Flexipol Group - 22%
Sales growth would have to reduce below zero in all CGUs to
cause an impairment other than in C&T International where sales
growth of <2.5% would lead to an impairment.
7 Capital and reserves
Share capital
Ordinary shares of 1p each
In thousands of shares 2018 2017
In issue at 1 April 35,751 35,345
Shares issued during the
year 3,244 406
In issue at 31 March -
fully paid 38,995 35,751
Notes (continued)
2018 2017
GBP000 GBP000
Allotted, called up and fully paid
38,995,151 (2017: 35,750,706) ordinary
shares of 1p each 389 357
389 357
On 26 May 2017, the Company undertook a Placing to raise GBP3.74
million, before expenses, by way of a Placing of 3,194,445 new
Ordinary Shares at GBP1.17 per Placing Share. Following Admission
of the Placing Shares on 31 May 2017, the total number of shares in
the Company was 38,945,151.
On 3 October 2017, Andrew Walker, Non-Executive Director,
exercised options over 50,000 ordinary shares of 1p each in the
Company at an exercise price of GBP1.00 per new Ordinary Share
pursuant to the Options Agreement dated 27 November 2007. Following
Admission on 9 October 2017, the total number of shares in the
Company was 38,995,151.
The following describes the nature and purpose of each reserve
within owners' equity:
Reserve Description and purpose
Share premium Amount subscribed for share capital in excess
of nominal value
Retained earnings Cumulative net gains and losses recognised in
the consolidated income statement
Translation reserve The translation reserve comprises all foreign
exchange differences arising from the translation
of the financial statements of foreign operations
Reverse acquisition Arises on the reverse acquisition accounting
reserve applied to the share for share exchange of Plastics
Capital Trading Limited by the Company
8 Earnings per share
2018 2017
GBP000 GBP000
Numerator
Earnings used in basic and diluted
EPS
Profit for the year attributable
to the equity holders of the parent 2,170 539
Adjusted Earnings used in adjusted
EPS (see Financial Review) 3,660 4,121
Earnings used in adjusted EPS have been based on the adjusted
profit before tax as detailed in the Financial Review section
on page 13. To this has been applied the actual corporation
tax charge to calculate the adjusted profit after tax.
Denominator
Weighted average number of shares
used in basic and EPS * 37,922,211 34,957,994
Weighted average number of shares
used in diluted EPS *+ 39,043,589 36,632,457
* - excludes shares held by Plastics Capital (Trustee) Limited
for the LTIP. Treasury shares are not counted under IAS33.
+ - includes effects of share option schemes
Notes (continued)
Earnings per share
2018 2017
pence pence
Basic 5.7p 1.5p
Diluted 5.6p 1.5p
Adjusted 9.5p 11.5p
9 Annual General Meeting
It is intended that the Annual General Meeting ("AGM") will take
place at Plastics Capital, Room 1.1, London Heliport, Bridges Court
Road, London, SW11 3BE at 2.00pm on Monday 30 July 2018. Notice of
the AGM will be sent to shareholders with the financial
statements.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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