Chairman's Statement

In common with many businesses across the Fast-Moving Consumer Goods (FMCG) Supply Chain, Robinson continued to experience very challenging conditions through 2022, as the input price inflation already evident was exacerbated by the Russian invasion of Ukraine in February. Customer demand remained volatile with the effects of inflation and the cost-of-living crisis impacting consumers and creating demand uncertainty.

The Group performed strongly in the first half of the year as the strategic supply partnership with Unilever in Denmark had a substantial positive effect on sales. Our actions to recover cost increases through increased selling prices across the Group largely mitigated the impact of increased input costs on margins. Our strategic choice to build a strong base of high-quality Blue-Chip customers with strong brands or market positions also provided some buffer to the effects of the cost-of-living crisis on sales revenues.

In the second half of the year, sales were under increased pressure as the cost-of-living crisis deepened and customer volumes softened as a result. The difficult economic environment coupled with inflation at 11.5% in the twelve months to December, resulted in customers pruning their portfolio and again delaying innovation projects.

Despite these market challenges, Robinson has won significant new business in the year that confirms our investment in capabilities, our responsive culture and our focus on providing cost-effective supply is providing a competitive advantage.

We have continued to progress our sustainability initiatives in the year and have higher ambitions for the future. We have increased the level of recycled material in our packaging, reduced our use of virgin plastic by more than 10% in advance of our 2025 target, and from 2023 will have successfully phased out non-recyclable polymers and colourants.

In these very difficult times, we would like to pay tribute to our employees for their continued commitment and excellent contribution during the year. We will continue to work hard to provide support to our employees as they face the pressures of the current economic climate and increases in the cost-of-living.

Financial and operating performance

Revenues were 10% higher than 2021, including 9% related to the Schela Plast business which was acquired in February 2021. After adjusting for the acquisition, price changes and foreign exchange, sales volumes in the underlying business are 10% below 2021.

Gross margins of 17% (2021: 17%) were in line with 2021 but remain lower than our historical norm due to the overall weighting of material prices in the sales price, the structurally lower gross margin in Schela Plast and the operational gearing effect of reduced sales volume in the underlying business.

Operating costs excluding exceptional items were 3% higher than in 2021. The effect of the Schela Plast acquisition and inflation were largely offset by cost-saving initiatives, including the restructuring actions taken in the final quarter of 2021 and first quarter of 2022.

Operating profit before amortisation of intangible assets and exceptional items has increased to £2.0m (2021: £1.2m). After taking into account £2.2m profit on disposal from two properties during the year, profit before tax was £2.3m (2021: loss of £0.1m).

Cash generated by operations was £7.6m (2021: £5.4m), benefitting substantially from improved payment terms with suppliers and customers.

Capital investment, financing, and pension

During the year, we invested a net £2.5m in property, plant and equipment, of which £0.3m was related to the relocation of production from Sutton-in-Ashfield to the Kirkby-in-Ashfield site. Property proceeds of £3.5m were received in March and April and deferred consideration of £2.3m was paid to the former owners of Schela Plast in July. With lower working capital, net debt at 31 December 2022 was £9.2m (2021: £13.1m). In March 2023, the Group successfully refinanced a £4.5m commercial mortgage for three years with HSBC Bank UK. With total credit facilities of £19m (2021: £22m), the necessary headroom is available for the Group to operate effectively.

The IAS 19 valuation of our pension plan at 31 December 2022 reported a surplus of £7.0m (2021: £13.2m). This surplus is deemed to be irrecoverable and so is not included in the Group's assets.

In December, the Robinson & Sons' Limited Pension Fund (the "Scheme") completed a buy-in of all the Group's defined benefit pension scheme liabilities. Following completion, the Scheme's liabilities are matched by an insurance policy and the Group no longer bears any investment longevity, inflation or interest rate risk associated with the Scheme. As the Scheme is in surplus, the Group was already benefitting from a contribution holiday and there is no immediate benefit to cashflow.

The Group and the Scheme trustees have long shared an ambition to achieve a buy-out of the liabilities when market conditions allow. The buy-in is the first step towards this goal, with a full buy-out proposed after a data cleanse exercise, which is expected to be completed by the end of 2023. In line with the Trust deed, any surplus remaining in the Scheme after the full buy-out would be used to augment member benefits.

If a surplus remains following completion of a full buy-out, then it is likely that the funds in the pension escrow account, which are c.£3.2m, of which, £2.7m are loaned to the Group on commercial terms, will be returned to the Group. Any funds returned to the Group would be used to reduce net debt.

Property

The Group completed on the sale of two properties in 2022.

In March, a part of the surplus land and buildings in Chesterfield was sold for consideration of £975,000. The proceeds have been received and were used to reduce bank debt.

In April, an operational property in Sutton-in-Ashfield was sold for consideration of £2,475,000. Following the sale, production was relocated to an existing Robinson premises in Kirkby-in-Ashfield. As planned, £600,000 was invested in the relocation project, the proceeds have been received and after the relocation costs, the remaining cash was used to reduce bank debt. This consolidation of sites will provide opportunities to improve operational efficiency in the UK plastics business in 2023 and beyond.

After undertaking a professional independent valuation, the fair value of the surplus properties is now estimated to be £8.1m. The current net book value is £2.8m.

Subject to the necessary planning approvals, we would expect further sales of surplus property, in Chesterfield, to be achieved within the next 12 months. The intention of the Group remains, over time, to realise value from the disposal of surplus properties and to reinvest the proceeds in developing our packaging business.

Dividend

The Board proposes a final dividend of 3.0p per share to be paid on 21 July 2023 to shareholders on the register at the close of business on 7 July 2023. The ordinary shares become ex-dividend on 6 July 2023. This brings the total dividend declared for 2022 to 5.5p (2021: 5.5p).

Outlook

We expect the substantial macroeconomic uncertainty and volatility experienced since the beginning of 2021 to continue throughout 2023.

We are seeing more new business activity with our existing and potential customers, which provides opportunities for growth in 2023 and beyond. We have recently been awarded a significant new contract in Denmark which will require substantial capital expenditure in 2023, funded from existing facilities and will begin to benefit sales and profit from 2024.

As a result of the further cost inflation experienced in 2022, we are seeking substantial price increases from all customers for 2023. Given the ongoing pressure on volumes, input prices and margins, the Board will continue to prioritise the management of costs and cashflow.

Despite the ongoing uncertainty, operating profit[3] in the 2023 financial year is expected to be ahead of 2022 and in line with current expectations. We remain committed in the medium-term to delivering above-market profitable growth and our target of 6-8% adjusted operating margin[4].

Alan Raleigh

Chairman

29 March 2023