Robinson warns of higher costs after solid first half

Packaging manufacturer Robinson reported a 5% improvement in first-half revenue on Tuesday, to £17.9m, as its gross margin increased to 23.6% from 19.7% year-on-year, although it warned of a marked increase in operating costs for the full year.

The AIM-traded firm said its operating profit before the amortisation of intangible assets was 100% higher for the six months ended 30 June, at £1.6m, as its profit before tax grew to £1.1m from £0.3m.

Its board declared a second interim dividend of 2.0p per share, and reported a narrowing of net debt to £5.6m, from £6.9m at the end of December, after capital expenditure of £2.1m.

Operationally, Robinson said all of its sites continued to trade safely throughout the Covid-19 pandemic, adding that it installed six new production lines in the UK to increase its efficiency and capacity.

It also refurbished a manufacturing building in Kirkby-in-Ashfield to support its future growth ambitions.

In his statement, however, chairman Alan Raleigh warned shareholders that investments in new equipment and capabilities would lead to sizable growth in its operating costs for the full year.

“We are very happy with this continued progress in the first half, despite the challenging conditions arising from the Covid-19 pandemic,” said chairman Alan Raleigh.

“The main market sectors for which we supply packaging have shown resilience throughout the pandemic, with notable increases in demand for our products used in liquid hand soap, sanitiser and household cleaning.

“All our sites have continued to trade throughout the period, operating in line with local hygiene and social distancing requirements to ensure the safety and wellbeing of our colleagues.”

Raleigh said the majority of Robinson’s sales and administration activities were being “very effectively” carried out by staff working from home.

“Despite the uncertain economic environment, we expect to report mid to high single digit revenue growth in the full year, whilst continuing to drive further efficiencies across all aspects of our operations in order to compete and win in the market.

“We are committed to investing in new production equipment and additional capabilities to grow the business in the second half of 2020, including developing our go-to-market approach and reinforcing our sustainability proposition.”

As a result, operating costs would be “significantly higher” than the same period in 2019, Raleigh warned.

“Notwithstanding this increase and subject to any disruption to trading that may arise from the ongoing pandemic, we expect full year earnings to be slightly higher than last year and remain committed to ongoing delivery of our target of 6-8% return on sales.”

At 0933 BST, shares in Robinson were down 9.09% at 120p.