The last couple of years have seen quite a fundamental change in this Wythenshawe, Manchester-based group’s profile.
Strategically it has acquired four new subsidiaries this year, at a cost of some £11.3m plus earn-outs.
But then change has been a way of life for £16m capitalised Coral Products (LON:CRU).
The interim results for the six months to end October clearly identify that the group has been investing in growth, both organically and through acquisition.
The big change is now on its way.
The business today
From its base in 1989, when it was serving the VHS market with a wide range of video cassette cases, the company listed in 1995 and switched to AIM in 2011.
Today Coral Products is a manufacturer and distributor of plastic products supplied into a diverse range of sectors. As a group of seven companies, it has extensive capabilities within profile, tube and sheet extrusion, injection moulding, vacuum forming, butt fusion, mirror welding, fabrication, and assembly.
The seven subsidiaries
Tatra Rotalac is a leading plastic extrusions manufacturer providing custom extrusions, PVC profiles and injection mouldings for the building, telecoms, aerospace and rail sectors.
Global One Pak is a leading provider of own designed lotion pumps, closures and trigger sprayers, supplier to many well-known brands like Tesco, Asda-Walmart, M&S, and WD40.
Customised Packaging specialises in the manufacturing of plastic products using thermoforming and sheet extrusion technology.
Film & Foil Solutions is one of the UK’s largest converters and stockists of flexible film packaging films, print lamination films and speciality plastics, paper and aluminium foils.
Alma Products specialises in extrusion, thermoforming and container printing.
Manplas provides a custom manufacturing service for the production of vacuum-formed components and sheet plastic parts.
Ecodeck recycles 10,000 tonnes of waste plastic per annum into sustainable and environmentally eco-friendlygarden and landscape construction products.
Ready to attract institutional investors
With some 97.6m shares in issue, Executive Chairman Jo Grimmond holds 7.66% of the equity, while other directors hold 6.78%.
Professional investors include Lombard International Assurance (5.71%), Diverse Income Trust (2.90%), Peter Gyllenhammar AB (2.80%), and Rights & Issues Investment Trust (2.38%).
Two private investors have notable holdings – John Wright (5.84%) and Ian Hillman (5.76%).
As this group builds up, I would expect it to become more attractive to smaller company fund managers.
The interims
The half-time results reported that the group’s sales had risen 147.9% to £17.6m, while its reported pre-tax profits put on 75.3% to £894,000. Its underlying EBITDA was 85.5% better at £1.88m, with underlying earnings put on 44.4% to 1.17p per share. The interim dividend was unaltered at 0.50p per share.
As part of its capital expenditure programme the group has committed £2.5m for new injection moulding machines, specific tooling and it has reconfigured some 5,000 sq.ft of warehouse space into extra manufacturing capacity.
Group property has been revalued to £3.2m, while net cash at the interim stage was £3.8m, showing an overall strong net asset position.
The group has fixed energy costs until 2025, while margin improvements should be seen in the second half.
Executive Chairman Joe Grimmond stated that: “These excellent results reflect our ongoing investment in future growth. Our objective is to build a specialist UK plastics business of scale, targeting profitable, high-demand sectors. We aim to drive growth both organically and via acquisitions, whilst maintaining our commitment to sustainable objectives……Like all businesses, we are mindful of the challenging economic environment, nevertheless, we believe Coral is in a good position going forward and we have yet to show the full benefit of our investments to date.”
Analyst Opinion – ‘fair value’ 21.6p a share
Edward Stacey at Cenkos Securities rates the group’s shares as a Buy.
His estimates for the current year to end April are for revenues of £34.6m (£14.4m), with adjusted pre-tax profits of £1.7m (£1.3m), lifting earnings up to 2.1p (1.5p) and a dividend of 1.2p (1.1p) per share.
For the coming year he sees £41.9m sales, £2.3m profits, 2.5p earnings and 1.3p of dividend per share.
Conclusion – I see them touching 25p in 2023
After speaking to boss Jo Grimmond at length on these figures I am convinced that he has ‘shaped’ up his group very well to grow over the next few years.
As investor interest builds up gradually ‘smallco funds’ will get aboard, taking the equity up to considerably more flexible ratings.
The shares, now at just 17.5p, are clearly heading higher, with 25p being an easy level at which to aim in 2023.