Baptism of fire for new Coral Products chief executive with profit warning in first month

The new chief executive of plastics manufacturer Coral Products has ended his first month at the Wythenshawe-based listed company with a profit warning to the stock market this morning and a scrapping of plans to pay a dividend to shareholders.

Describing a “challenging trading period during December 2023 and January 2024”, Lance Burn, who joined the business on 2 January 2024, said a reduction in customer orders means revenues will be approximately 10% below last year’s £35.2 million with EBITDA margins also negatively impacted.

“Accordingly, the Group now anticipates that profitability in FY2024 and, to a lesser extent, FY2025 will be below both management and market expectations,” a statement said.

Burn said: “I am confident that Coral is well-placed to navigate the current economic challenges whilst actively planning and supporting future growth opportunities. The fundamentals of the business are as I anticipated before I joined and the customer caution that has been a recent feature is not unique to us. Critically, our customers remain with us and we will use this moment as an opportunity to reset the business with a strong platform for long-term growth.”

The company has deferred purchases of inventory, and is using up existing stock to save costs, but insists Coral has maintained market share and continues to win new customers. The market statement described “a short-lived situation” and is expecting pipeline orders to begin to recover, starting from February 2024.

In December 2023, while the business was under the control of executive chairman Joe Grimmond, the company recorded revenues of £17.2m in the six months to October 31, 2023, a 2.27% fall on the previous year’s sales, and a small decline in pre-tax profits of 6.6% from £894,000 to £836,000.

Burn said he is optimistic that the benefits from the Coral’s diversification strategy and ongoing investment in machinery, new products and channel launches over the last 12 months have still to be fully realised and expects that these sales to contribute to a better result in 2025. 

Burn suspended the dividend payment and will undertake a comprehensive review of the business. 

He has also identified restructuring measures and synergies with the potential to generate material savings related to businesses acquired over the last two years.

Coral’s share price tumbled by more than 25% in early trading this morning, hitting 12p per share, compared with a closing price of 16.50p last night and an opening price of 14.54p this morning.

The movement gives the company a market capitalistion of around £11m.