Plastics Capital finishes year as expected

Niche plastics products group Plastics Capital expects trading for the financial year ended 31 March to be “broadly in line” with market expectations, it announced on Wednesday.

The AIM-traded firm said it expected to announce its results for the year in the week commencing 2 July.

As it had highlighted in its announcement on 1 March, the financial year finished with both sales and profits a little weaker than expected.

For the year overall, however, i experienced a year of “exceptionally strong”, primarily organic, sales growth, particularly in its films businesses.

Flexipol also had another record year, the board confirmed, while, Palagan continued to recover from a weak 2017 financial year and Synpac performed “well”.

As production between those businesses was increasingly being shared, the firm said it had decided to bring them together under a single management team.

That would enable Plastics Capital to utilise capacity in the most efficient way possible, it explained, as well as to improve margins across the division.

Sales performance in the industrial division reportedly remained mixed, with strong growth in mandrels, satisfactory performance in the matrix area and weak, though improving, sales in the bearings business.

During the year, Plastics Capital said it had successfully established mandrel production in the US, and rationalised matrix production at CCM and Mito back to its main creasing matrix factory in Wellingborough.

From the beginning of the current year,, the bearings business had suffered from some delays in the ramp-up of two large projects for major multinational customers, but the firm said it recently saw “some improvement” to the situation, and was also starting to benefit from further new business coming on stream.

The bearings business had a high degree of operating leverage, and so the impact of demand variability in that business had a significant impact on group profits.

The board said it was hopeful that would turn in its favour during the current financial year.

As it had previously told shareholders, the company was continuing to invest “heavily” to add capacity and capabilities to support double-digit revenue growth, and while this was being achieved, the reinvestment would continue to impact on depreciation, interest costs and cash flow.

Also during the year, Plastics Capital added to its investment in CCM in West Virginia where it was now 49% shareholders, and had paid the deferred consideration on Synpac which was acquired in 2016.

The board said its priority remained allocation of capital towards organic and related acquisitive growth.

Net debt finished the year in line with expectations at £14.7m, which was approximately £1.5m lower than the prior year.

The equity subscription of £3.5m, net of expenses made in June was said to have contributed effectively to the maintenance of an appropriate capital structure during the course of the year.

“We are pleased to report exceptionally strong organic growth, said chairman Faisal Rahmatallah.

“Generating sustainable organic growth has been a challenge in recent prior years but after two consecutive years of strong growth we can see that the investments that we continue to make in people, business development, product development and new capacity are making a sustainable difference.

“We can see this continuing as we move into the current financial year.”