Plastics Capital PLC Trading Update (7998D)
May 02 2017 - 1:01AM
UK Regulatory
TIDMPLA
RNS Number : 7998D
Plastics Capital PLC
02 May 2017
2nd May 2017
Plastics Capital plc
("Plastics Capital" or the "Group")
Trading Update
Plastics Capital (AIM: PLA), the niche plastics products group,
is pleased to announce that it expects trading for the financial
year ended 31 March 2017 to be broadly in line with market
expectations.
Organic sales growth for FY16-17 has exceeded expectations
particularly in the Industrial Division, where new business has
contributed strongly. Our mandrels and bearings businesses have
both had record years driven by new business wins that have now
gone into production. Our matrix activities have expanded
internationally, through minority investments in sales and
distribution businesses in the USA ("CCM") and Italy ("Mito"); in
addition, just before the end of the financial year, we also
completed the relocation of our factory in China from Beijing to
Tianjin where costs are significantly lower. In the Films Division,
Flexipol, acquired in November 2014, has continued to perform very
well and Synpac, acquired in July 2016, has performed in line with
expectations at the time the investment was made and is being
integrated into Flexipol's management structure.
Gross margins at constant currency have remained stable and we
have continued to invest in sales, new products and management
resources to drive future sales growth. The impact of currency
movements, particularly post-Brexit, have been substantial with
differing impacts across the Group. For the time being, our export
based business have become significantly more competitive. However,
in aggregate over the financial year, the impact of currency has
been broadly neutral because of the forward contacts we have in
place as part of our hedging policy. The effect our hedging policy
is to delay the impact of currency movements on profits by
approximately two years.
Overall performance has been particularly positive despite the
effect of some restructuring needed at Palagan, one of our three
films businesses, to enable the business to develop suitably in
future years. We have strengthened the senior management team
there, adding two new roles, one in business development and one in
product development. We have also improved the terms and conditions
of the factory staff to enable Palagan to raise productivity,
innovation and quality going forward; in the short term, however,
this has increased production labour costs. Consequently, for
FY16-17, profits at Palagan have deteriorated, although it remains
healthily profitable. We are pleased to report signs of performance
improvement as the financial year ended and as we move into
FY17-18.
Capital expenditure in FY16-17 has been significantly higher
than in prior years as we have added new production capacity and
capabilities in films, bearings and mandrels; our capital
expenditure programme was explained in some detail to shareholders
at the beginning of FY16-17 and we have followed this through
largely as planned. Working capital has been managed efficiently
and net debt finished the year in line with expectations at
approximately GBP16.1 million.
Organic growth remains the key priority and is based on building
and maintaining close working relationships with key accounts and
related product and process innovation. The pipeline of projects
won but not yet in full production is very strong and capacity will
continue to be added as necessary to meet these growth
opportunities. In addition, acquisition opportunities are in our
sights but, as ever, it is difficult to predict whether these will
come to fruition and, if so, over what time scale. Overall, we
believe that the business is well placed to generate significant
shareholder value in the future.
Following the investments made in CCM and Mito, and advice from
our auditors, KPMG, we will be consolidating these companies fully
into the Group's FY16-17 P&L account and Balance Sheet with an
adjustment made through a Non-Controlling Interest so removing that
part of the profit we do not own for CCM and Mito. The conclusion
reached by KPMG is that both these minority investments should be
treated as subsidiaries as we have significant control. The changes
will result in a material increase in reported revenues for
FY16-17, a smaller increase to EBITDA but will not materially
affect reported earnings per share.
Commenting, Faisal Rahmatallah, Executive Chairman, said: "We
are pleased to report strong growth both organically and through
acquisition. Generating sustainable organic growth has been a
challenge in recent prior years but we now see that the investments
that we have made in people, business development, product
development and new capacity have put us onto a stronger growth
trajectory. We can see this continuing as we move into FY17-18 and
hope we can complement this with further acquisitive growth
too."
For further information, please contact:
Plastics Capital plc Tel: 020 7978 0574
Faisal Rahmatallah, Executive
Chairman
Nick Ball, Finance Director
Cenkos Securities Tel: 020 7397 8900
(Nomad and joint broker)
Mark Connelly
Callum Davidson
Allenby Capital Limited Tel: 020 3328 5656
(Joint broker)
David Hart
Katrina Perez
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 five UK based
factories, with a further three factories in Asia. Approximately
40% of its GBP55 million sales are made outside the UK to more than
80 countries.
Further information can be found on www.plasticscapital.com
This information is provided by RNS
The company news service from the London Stock Exchange
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