Colorpak : Appendix 4D 31 December 2015

Microsoft Word - Appendix 4D 31 December 2015 _Final_.docx

Appendix 4D Half Yearly Report

Name of entity ABN

Colorpak Limited 56 107 485 898

Rule 4.2A.3

Current reporting period: Previous corresponding period:

Period ended 31 December 2015 Period ended 31 December 2014

Results for announcement to the market	AUD'000
Revenues from ordinary activities	Down	6.8 %	to	78,466
Profit from ordinary activities after tax attributable to	Down	17.5 %	to	1,356
members (see explanation below)
Net profit for the period attributable to members	Down	17.5 %	to	1,356
Brief explanation of any of the figures reported above necessary to enable the figures to be understood: Refer to commentary on the Financial Performance on page 3. The information in the Half Yearly Report should be read in conjunction with the most recent annual financial report (30 June 2015).

Amount per security	Franked amount per security
Final dividend	Nil cents	Nil cents
Interim dividend	1.25 cents	1.25 cents
Record date for determining entitlements to the interim dividend	14 April 2016
Dividend reinvestment plan	NO The DRP has been suspended and will not be offered for the interim dividend
Net tangible assets per security	2015	2014
	33.9 cents	31.5 cents

Audit Statement: This report is based on the 2016 Half-Year Report of Colorpak Limited which is in the process of being reviewed by the Company's auditor. An unqualified review report is expected.
Entities over which control has been gained during the half year	Nil
Entities over which control has been lost during the half year	Nil
Details of associates	Nil
Details of joint venture entities	Nil

Review and Results of Operations

Financial Performance

Colorpak's six months to 31 December 2015 produced revenues from sale of goods and services of $78,466,000, 6.8% down on the corresponding prior comparable period ("pcp") of $84,181,000. The company's reported Net Profit After Tax (NPAT) was a profit of $1,356,000 (2014: profit of $1,645,000)

The reported result has been adjusted by adding back non-recurring costs of $1,045,000 to determine the underlying

result. The underlying result is reflective of the on-going benefits delivered from productivity improvements and strong cost performance against a backdrop of continuing softness in sales volumes. Taking these matters into account the NPBT for 2015 exceeded the prior year by $34,000. The following table provides these comparisons:

2015	2014
For the six months ended 31 December		$000	$000
Revenues from sale of goods	78,466	84,181
NPBT(1)	NPAT	NPBT(1)	NPAT
Reported result	1,835	1,356	2,616	1,645
Non-recurring costs (2)	1,045	732	230	161
Adjusted Underlying Result	2,880	2,088	2,846	1,806
Notes:

1. NPBT refers to Net Profit Before Tax.

   
   

2. The reported result for 2015 includes costs considered to be non-recurring in nature, and includes restructure costs associated with re-sizing operations to align with expected demand ($704,000), a one-off legal settlement ($250,000) and takeover transaction costs ($91,000) which are expected to continue to be incurred in the second half year. The costs for 2014 relate to redundancy/restructure costs. An analysis of these costs is set-out in note 3 to the financial statements.

   
   

3. The numbers in the above table have been reviewed by the auditors.

EPS has decreased to 1.56 cents per share, down on the prior year's 2.00 cents on the reported result.

Cash Flow and Debt

Cash generation from operations (before non-recurring items) for the half-year was an inflow of $58,000, down $3,759,000 on the pcp.

The company undertook capital expenditure, net of proceeds on disposal of assets, of $737,000 for the half-year, with the total for 2016 expected to be around $2,400,000. Cash from operations for the half included a net increase in core working capital of $4,771,000 which resulted from relatively high inventory holdings driven by a combination of an expectation by customers of a return to normalised seasonal demand and extended lead-times for board deliveries.

Debt, net of cash at bank, increased by $1,542,000 to $32,985,000 since June 2015 as a result of the continuing trend of customers extending payment terms beyond 90 days on contract renewals which was offset by low capital expenditure and the underwritten reinvestment of the company's final dividend in October 2015. The company remains relatively conservatively geared with gearing of 35.1% (debt / debt + equity) and maintains adequate cash reserves and undrawn bank credit limits to meet its expected working capital and capital expenditure requirements for the foreseeable future.

Operating Activities

After a prolonged period of integration the first half of 2016 has been relatively stable. All operations are back to business as usual mode, with the disruptions and distractions of plant and people movements complete.

The Australian dollar retracted strongly against most major currencies in the half, which saw pressure come to bear on raw material input prices which are all fully imported. As a well-known risk beyond the control of the company each of our customer contracts contain provision for full pass through of the cost impacts of such an event. The sales teams have

been busy implementing price increases to customers to mitigate erosion to our margins and to a large extent have been successful.

We would anticipate that the scale of the currency retraction would see some reversal of the importation of fully packed imported goods into Australia/NZ. We have seen some early signs of it towards the later stage of this half and are hopeful if the currency continues to retreat that the trend for more locally produced packaging will ramp up.

The group's safety record continues to be in a strong position. At Regents Park, the team has set a strong benchmark at 2,159 Lost Time Injury days free at the end of December 2015.

During the half year Braeside and Penrose enterprise agreements were successfully renegotiated and ratified. Productivity based increases have been the foundation of the payments which will see staff rewarded by seeking ways to drive efficiency, and reduce spoilage to a greater extent. Wage outcomes have been modest. The Regents Park enterprise agreement is set down for negotiation in the second half.

Productivity in each of our operations is going well post integration as we continue to drive it on to world's best practice; we see more room for improvement. Our Paper cup operations have performed very strongly as the super premium and private label ice cream sector grows consistently without previously experienced seasonal slumps. Of particular note in the half was the securing of an iconic paper cup ice cream brand as part of a contract renegotiation with one of our major food customers.

Our New Zealand operation has witnessed a step up in demand after securing a strategic beverage customer in Auckland, and picking up a number of disgruntled customers from a competitor who was giving protracted lead-times to their customers during a plant move. Our customer pipeline is robust and expectation is that solid sales growth will continue for some time in the NZ division.

Brandpack continues to be the innovation hub that attracts and secures our customers. The technical skill set of the team continues to grow and be recognised as industry leading within the Folding Carton and Flexibles sector. The recent acquisition of The Connection was seamlessly integrated into the existing division in both Melbourne and Sydney bringing greater depth of experience to our team and providing more flexibility to our customers.

Our Flexibles division in Regents Park continues to grow and expand by enhancing its value proposition through the broadening of the businesses capability. The foray into digital printing has also proven to be very successful as the team is sought out to provide our customers with fast turnaround high quality solutions on a multitude of substrates from cartonboard, to self adhesives, to sachet and hard tempered aluminium foil.

Although the Folding Carton market in general remains very competitive, the sales team has delivered some important customer wins to partially offset other market movements. Colorpak has long been the reputational leader of the sector.

An experienced management team of industry experts and a stable workforce has ensured that sound decisions are made and executed in a swift manner. The team is always willing to take the tough decisions to build for a stronger long term.