Coral Products Share Discussion Threads

[topvest] 02/2/2015 21:48

They did have a significant capex programme in H2 so it's not surprising they have a small shortfall with a £400k short term hit on top of paying off the former directors no doubt. We will have to wait and see but I'm hopeful that they can recover this. At £5m it's not exactly on a premium rating. The final dividend will depend on H2 and future prospects I guess, so best case is 0.5p but maybe it will only be 0.2p this year. They need to conserve cash if it is tight as there is value for the future here if they can now at last start making some progress.

[temelco] 02/2/2015 12:52

True, but we will just have to wait and see

[clocktower] 02/2/2015 12:22

No time is a good time to take such a loss temelco but I grant it was better than if they had embarked on another acquisition (that they had made sounds about doing) bearing in mind that it is now clear that the finiancial position is weaker than expected. I previously though the management were proving doubters of their methods wrong but we are now seeing that there are serious weak areas, and it may take a long time (if ever)to put it on the right track.

[temelco] 02/2/2015 11:57

I said the timing of the loss - not the loss itself

[clocktower] 02/2/2015 11:21

Far from just bad luck temelco - the loss of this scale was due to taking your eye off the ball and allowing a medi company this amount of credit when you have made it clear that you know the industry is in decline.

[temelco] 02/2/2015 10:09

I'd be prepared to give them the benefit of the doubt. There is no question they have made the necessary changes and I agree with Charo it was just bad luck the timing of the loss.
But the Market Cap now reflects too much downside in my view.

[clocktower] 02/2/2015 09:52

charo, you say he has risked his own capital - not much risk when it is secured on company property that is at the heart of the business. Maybe the cash was needed urgently that would not have allowed other avenues you speak of to be secured in time.

[charo] 02/2/2015 09:36

Topvest,good analysis.20 years of bad practice at haydock to be dealt with.Obviously with effective board control until sept 2014 fersters could sit and draw salaries whilst haydock festered underneath them.JG quietly making profitable acquisitions ,securing freehold asset and slowly changed board .October he had out manouvered the fersters and initiated the operational review which encouraged the board other than fersters to effect the change.
Really bad luck that the vdc collapse,which was probably inevitable giving way online media is growing,happened just at the point changes were being made.
However jg had already written off the bulk of media assets ,the media business was already discounted going forward.
The 300k cash loss plus as you point out around 100k vat not repayable for 6 months left a short term cash shortfall.
Some would have taken advantage of this to place shares at a discount,benefitting only those in the placing.JG has accepted the responsibility protected the bulk of shareholders and risked his own capital.

[clocktower] 02/2/2015 09:28

I think it is a bit more concerning in view of the statement made on 5th Jan that included the following profit situation:-

"On 8 December 2014, Coral reported a profit before tax for the 6 months ended 31 October 2014 of GBP450,000. Group management accounts for the 7 months to 30 November 2014 reported a profit of GBP546,000 before this write off. Net assets at 31 October 2014 were GBP9.9 million."

So one assumes Dec and Jan would be much the same in respect of trading profit, so with the reduction in loss I see no reason for a three year loan if everything is as rosy as some may think.

In addition there is no further news about the container order, and that suggests it may also be in trouble. Very concerning bearing in mind the security being provided to the Chairman.

I can see the share price falling further yet.

[topvest] 02/2/2015 09:19

Yes, I think that most of the hard work has been done already. Media gone, freehold purchased, 2 directors moved on, 2 profitable acquisitions etc. etc. They just need to make the Haydock site profitable which looks achievable with an industry professional and deliver the contracts they have efficiently, whilst reducing costs. Hopefully the share price will improve and they can do another acquisition to complete the transformation. They do have a couple of supportive shareholders in Miton and Rights & Issues investment trust, although their patience is no doubt being tested.
Presumably the loss of cash flow has tested them in the short term. One of the issues is that the VAT (£100,000) or so is not recoverable for 6+ months I suspect.

[playful] 02/2/2015 09:09

Interesting buying opportunity here especially as I think they will in all likelihood turn this around and it wouldn’t take too much effort.

[topvest] 02/2/2015 07:57

Well good news and bad in this. Exceptional loss reduced slightly to £300k but partly this is due to the tax impact. £300k is not the end of the world.

Looks like this has caused them a short-term funding gap given this happened when they were ramping capital expenditure; shows confidence that the Chairman is bridging the gap and £200k is not a big number. It does show that they need to avoid any other big problems for the next year or so.

Be nice to get a positive update next - hopefully not just wishful thinking.

Hopeful that this is on the brink of turning the corner with media sales pretty much gone for good. We have, of course, had a few false dawns but they really have been running uphill with the media business constantly impacting the good things they have been doing elsewhere.

[rohkap] 11/1/2015 17:11

never a dull moment with this stock! Management seem to have taken eye of the ball with this and delay to crate contract perhaps distracted with acquisitions. Acquisitions off the agenda now. Obviously a one off hit from the write-off plus lost business in 2H'15 and out both from VDC and the other replicators (as management wont want a repeat). Difficult to quantify that but there will be an earnings impact. In terms of dividend, I would bite the bullet and pay it. To not pay it would signal that long term damage has been inflicted, shares get clobbered and you can forget about M&A for a long time (as who would subscribe at a placing now). Best to pay it, get the crate contract up and running, shares move back up and perhaps look to acquire again in 2016. One more acquisition is required to offset dead media business but remaining businesses need to be on steady footing first.

[topvest] 05/1/2015 20:48

Well I'm still optimistic despite all the disappointments - call me an optimist, but hopefully some realism as well. I think they already wrote-off all the media assets, as a number of us commented that was overly prudent at the time, so there may just be a handful of redundancies if they don't re-deploy.

They have also lost two expensive directors which will help the cost base although I suspect there is a pay-off charge for their 12 month contracts which will maybe cost an incremental £0.1-0.15m this year with savings of £0.2m or so next year onwards.

Certainly, there could be some more exceptionals to clear the decks, but it's the underlying numbers that people will focus on.... as long as things are looking better of course. Looks like a pretty horrible set of numbers this year then. Probably close to break-even after exceptionals and £1m or so PBT before exceptionals.

Lets face it they have been in a sector that has gone from £15m per annum of sales to £2-3m in a few years. They have done all the right things to successfully diversify the business to avoid the otherwise inevitable insolvency. So, I think management deserve some praise as turning this business around has never been easy, particularly against a monumental headwind. With new management coming in they are very well placed to prosper. They won't have many more chances though. They need to deliver. I definitely invested too early, but there was a reasonable margin of safety so am not too much out of pocket, even after today. Buying now or in the Spring would probably have been better now that the technical obsolescence part of the business has worked it's way through. Not without risk, but there is hopefully light at the end of the tunnel this time!

[clocktower] 05/1/2015 17:56

Topvest, consider that they might be forced to made reductions in staff that worked in the media division, and this could add to costs plus there might be further write off's as the whole division has been a problem for some time. I cannot understand how they allowed this company to owe them so much, knowing there have been huge reductions in sales of these products over a number of years. It raises serious questions about the quality of the management - maybe a new CFO is required.

Even if the container business is cleared, the chance of growth is pretty limited, more likely imo to see a reduction in turnover during 2015. Cuts by local authorities - election year - supermarkets cutting spending - the list of woes goes on for CRU. The only bright side is the slide in oil prices but how long will that last?

[topvest] 05/1/2015 16:57

I think they will want to maintain it if all is well when we get to the Summer. The annual dividend is only £0.25m. I suspect that depends on H2 though and no more mishaps.

Overall, I suppose it's not the end of the world. Recovery will be delayed to next year. Yet again! Following this year-end though, I think that has to be the end of media related excuses. Next year we should see an improvement as there is nothing else to go wrong in this obsolete side of the business which has been causing them all the problems.

The container situation will hopefully work out but will impact next year's results and not this year by the sounds of things. It's not the most technically demanding of projects. Even this company should not screw that up.

With management changes working their way through I'm still optimistic that we are close to better days but mildly irritated by the good news one minute, bad news the next cycle of announcements since the Interpack deal.

This is clearly a relatively high risk value play given it's market cap. is below the 17-18p book value. Looks like we will be in the 10-12p range again until we get some good news. If all goes well it will be worth 15-20p in a year's time.

Out of interest, what are their input prices doing? Are they oil price related in any way as that might help them a tad on gross margins.

[clocktower] 05/1/2015 16:14

Better not to see a dividend imo, better to keep the cash, if there is any that is, in case there are other problems. The container situation has not been well handled from a PR view as this could further undermine the share price as I expect a considerable amount of tooling has taken place to meet the possible demand, if it comes to Zero then what?

[topvest] 05/1/2015 15:06

At least they made c£100k in November. Full year results probably looking at £1m+ or so, before exceptional items, less the £0.5m loss. A positive update on the container contract would help.

[topvest] 05/1/2015 14:53

They should be due 20% back on the VAT or c£100k - they don't seem to have mentioned that so presume the numbers take that into account. It pretty much wipes out the H1 profit. Best we can hope for is a 0.3p final dividend if the outlook is positive.

[topvest] 05/1/2015 14:49

Yes, bad news indeed. Always seems to be 2 steps forward 2 steps back with Coral. I suppose you could rightly say that the 2 steps back have always been associated with their media business which is now pretty much finished.

They went bust after Xmas which is probably a cyclically high debtors point and maximises the hit. Looks like the dividend will be no more than 0.5p again. Oh well, maybe next year they will start to deliver...at last!

[clocktower] 05/1/2015 14:33

Not much luck here with todays RNS. How they came to have a debtor of over £400k knowning that the sales of these products were already under duresss is beyond belief. The directors have questions to answer - are there other debtors that could put further pressure on the company if they too were placed in admistration? In addition,there are still serious concerns with the £8m order that seems to have suffered delays.

I think the share price has further to fall, and fortunatly as you can see from my previous posts I had resevations sometime ago and delighted that I am currently not holding this stock. DYOR no advice intended.

[temelco] 05/1/2015 14:28

Wow that's a bummer!