Chairman's Statement

The Robinson business experienced very challenging conditions throughout 2021 across input price inflation, customer demand and the ongoing uncertainty resulting from the Covid-19 pandemic.

The first half of the year was dominated by constraints on resin availability and a consequential sharp increase in prices. In the first six months, the market price of resins used by the Group increased on average by 60% and remained high for the full year. The second half saw significant input price inflation across secondary packaging, energy, and transport. In the UK specifically, limited labour availability led to increased costs and impacted production volumes and supply to customers.

Throughout the year, customer demand has been extremely volatile due to a varying pace of recovery from the pandemic and the consequential uncertainty in Fast Moving Consumer Goods (FMCG) markets. The ramp up in demand, normally evident from the beginning of the third quarter, did not begin until mid-September and remained volatile, with an overall reduction in volume for the year as a result. Finally, market conditions have led many of our customers to delay plans for new business projects, instead focusing on reducing costs and preserving cash.

Financial and operating performance

Revenues were 24% higher than 2020, including 21% growth from the acquisition of Schela Plast which completed during the year. After adjusting for the acquisition, price changes and foreign exchange, sales volumes in the underlying business are 5% lower than 2020, which included additional demand due to the Covid-19 pandemic.

Gross margins of 17% (2020: 23%) were severely impacted by structural input cost inflation, across resin, energy, transport and labour costs, exacerbated by high demand volatility and market uncertainty.

Operating costs were 12% higher than 2020, due to the effect of the Schela Plast acquisition in the year. In the underlying business, we were able to offset the impact of investments made in 2020 by reducing other discretionary expenditure. In response to the lower gross margins across the business, we implemented an initial manufacturing site restructuring programme in November, which resulted in £0.2m of exceptional costs and will deliver £0.3m of cost savings annually.

Operating profit before amortisation of intangible assets and exceptional costs has reduced to £1.2m (2020: £2.7m), with a loss before tax of £0.1m (2020: profit of £1.8m).

Cash generated by operations was £5.4m (2020: £6.6m), suffering from lower profitability and the effect of higher resin prices on working capital, partially offset by improved payment terms with customers.

Acquisition of Schela Plast

On 10 February 2021, we completed the acquisition of Schela Plast, a specialist in the design and manufacture of blow moulded containers, based in Denmark. The business experienced a difficult period under its first six months of Robinson ownership due to Covid-19 pandemic induced lockdowns in Scandinavia, material availability issues and significant inflation in input costs. Following the planned implementation of a major new contract with a leading FMCG brand owner, the final quarter of the year showed improvement. Overall, the business made an operating loss of £0.2m in the period to 31 December 2021. With the annual effect of the new contract, we have planned for a substantial increase in revenue and associated profitability in 2022, subject to the current uncertainty driven by the Russian invasion of Ukraine and subsequent sharp increase in energy and polymer prices.

Capital investment, financing, and pension

We are committed to developing and maintaining a competitive manufacturing infrastructure. During the year, we invested a net £3.9m in plant and equipment, of which £1.7m was invested as anticipated as part of the post-acquisition plan at Schela Plast, to replace outdated presses and add additional capacity. This investment was funded by increased borrowings resulting in net debt at 31 December 2021 of £13.1m (2020: £6.9m). In addition, deferred consideration of £2.3m is payable to the former owners of Schela Plast in 2022, and this is provided for in Trade and Other Payables.

To fund the Schela Plast acquisition, new facilities totalling £12m were agreed with HSBC Bank UK in February 2021. With total credit facilities of £22m (2020: £18m), including those acquired with Schela Plast, the necessary headroom is available for the Group to operate effectively.

The IAS 19 valuation of our pension plan at 31 December 2021 reported a surplus of £13.2m (2020: £9.3m). This surplus is deemed to be irrecoverable and so is not included in the Group's assets.

Property

As notified in the 9 December 2021 Trading Statement, we expected to dispose of two plots of land in 2021. We are now pleased to report the sale of the first plot to Norpap Property 2019 Limited ("Norpap"), with exchange of contracts on 23 March 2022 and formal completion expected in the coming weeks. The Property was formerly used by the Group for manufacturing but has been mainly let to an associated company of Norpap for several years. The consideration payable at completion is £975,000 in cash and these monies will be used by the Company to reduce current bank debt. The Property currently attracts annual rental income of £60,000 and the book value was £238,000 at 31 December 2021. Planning approval is required for the second plot, which will result in potential completion at the end of 2022 or in the first half 2023. The gross proceeds are expected to be marginally in excess of £2.4m for the second site which has a book value of less than £0.8m.

In addition, the Company has very recently accepted a non-binding offer to sell an operational property in Sutton-in-Ashfield, with a gross value of £2.5m. The total book value of the property was £1.0m at 31 December 2021. In the event that the sale does proceed, production will be relocated to a recently refurbished building on existing Robinson premises in Kirkby-in-Ashfield. The relocation will require investment of approximately £0.6m and will provide future opportunities to further improve operational efficiency in the UK plastics business.

Subject to the necessary planning approvals, we would expect further sales of surplus property, in Chesterfield, to be achieved in the next 18 months. The intention of the Group remains, over time, to realise the maximum value from the disposal of surplus properties and to reinvest the proceeds in developing our packaging business.

Board

At the June 2021 AGM, Anthony Glossop stood down after 26 years' service as a Non-Executive Director. Guy Robinson stepped down as Finance Director on 1 January 2021 to become the Property Director and subsequently became a Non-Executive Director in June following Anthony's retirement. Mike Cusick was appointed Finance Director on 1 January 2021.

Dividend

The Board proposes a final dividend of 3.0p per share to be paid on 15 July 2022 to shareholders on the register at the close of business on 1 July 2022. The ordinary shares become ex-dividend on 30 June 2022. This brings the total dividend declared for 2021 to 5.5p (2020: 8.5p including the deferred final dividend for 2019).

Our people

On behalf of the Board, I would like to thank all colleagues across the Group for their efforts during a year that saw major challenges and huge uncertainty. I am proud of the many inspiring examples of resilience and commitment demonstrated in the past 12 months and I look forward to working with our high performance, expert, and diverse team in 2022 to deliver sustainable value to our customers and other stakeholders.

Outlook

The substantial uncertainty and volatility experienced in 2021 is likely to continue through 2022, with further inflation in input costs anticipated.

As a result of the inflation already experienced in 2021, we are seeking substantial price increases from all customers, which will support the improvement of margins in 2022. Given the ongoing pressure on input prices, the board will continue to prioritise the management of fixed costs in 2022.

Despite the ongoing uncertainty, profits in the 2022 financial year are expected to be ahead of 2021 and we remain committed in the medium-term to delivering above-market profitable growth and our target of 6-8% adjusted operating margin[1].

Russian invasion of Ukraine

The Russian invasion of Ukraine in recent weeks has created substantial additional market uncertainty. We have a very small sales exposure to Russia and Belarus which we have chosen to stop supplying. This will not have a material effect on the business.

We have seen sharp increases in global oil and energy costs which will flow through to polymer resin and other raw material prices and impact our costs. To the extent that this cannot be passed on to customers through sales price increases, we may see a reduction in profitability. This inflation in input costs may change consumer confidence and impact customer demand, but our current assessment is that we would expect the largely essential nature of our market sectors to make them relatively robust.

It is likely that the consequences of the Russian invasion of Ukraine will remain for some time. Whilst we cannot foresee or fully quantify the impact, we are closely monitoring the situation, we will drive profitability, conserve cash and respond as necessary across our geographical locations.

Alan Raleigh

Chairman

23 March 2022