Chairman's Statement

Market conditions remained difficult in 2023 with persistent high inflation and sharp increases in central bank interest rates across our countries of operation. The continuing cost-of-living crisis has impacted consumer buying habits and consequentially created volatility and uncertainty in customer demand.

Performance in the first half of the year was impacted by lower sales volumes. Demand notably reduced across the premium products in our customers' portfolio because of inflation and the cost-of-living crisis. In addition to this general trend, a large UK customer experienced issues after making supply chain changes, which caused a substantial in-year reduction in sales with them.

Our strong customer relationships allowed us to increase sales prices to recover the majority of input cost increases and therefore protect gross margins, however, those increases were not sufficient to cover all the fixed operating cost increases.

In the second half of the year, plastics sales volumes recovered as large new projects came on stream. With a strong pipeline of further projects, we believe we have now passed the worst of the downturn.

To secure competitive operating costs, we implemented a restructuring program in June which, together with increased sales volumes, helped to increase underlying profits in the second half.

We suffered flooding at our Chesterfield site in October and despite the substantial efforts of our employees, some damage was caused to facilities, materials and equipment. The flood halted production in our Paperbox business and impacted premises that are let to tenants whilst the clean-up and reinstatement of production equipment were carried out.

We have made important progress on raising our level of recycled material content in recent years, but at 18% in 2023, we have not yet achieved our target of 30%. Our pipeline of new projects will support a further increase in this ratio and, excluding products for food, where there is restrictive legislation, we expect to achieve our goal in 2024.

We would like to thank our employees for their continued commitment and excellent contribution during the year, with a special mention for those in the Paperbox business that have expertly dealt with the aftermath of a serious flood event.

Financial and operating performance

Revenues were 2% lower than 2022. After adjusting for price changes and foreign exchange, sales volumes were 6% lower than 2022.

Gross margins of 19% (2022: 17%) were 2% above 2022, despite the operational gearing effect of 6% lower sales volumes and continued inflation in input costs.

Operating costs excluding exceptional items were 10% higher than in 2022. The restructuring program implemented in June resulted in exceptional costs of c.£0.4m and annual savings of c.£0.7m, of which £0.4m benefited 2023.

Operating profit before amortisation of intangible assets and exceptional items has increased to £2.2m (2022: £2.0m). After £0.7m restructuring and rationalisation costs and £0.1m of uninsured costs related to the flood in Chesterfield, loss before tax was £0.7m (2022: profit £2.3m). Income of £3.3m from the return of the escrow account funds has gone through the statement of comprehensive income.

Finance costs increased to £0.8m (2022: £0.5m) as a result of the sharp increases in market interest rates across our countries of operation, partially offset by the lower net debt during the year.

Cash generated by operations was £5.0m (2022: £7.6m). Working capital inflows normalised after a very strong year in 2022, which included improved payment terms with suppliers and customers.

Capital investment, financing, and pension

During the year, we invested a net £4.0m in property, plant and equipment, of which £2.3m was related to a previously communicated large new project in Denmark. Surplus property sales proceeds of £0.7m were received in May and £3.3m was received from the return of the pension escrow account in August. Consequently, net debt at 31 December 2023 was £6.3m (2022: £9.2m). With total credit facilities of £15m (2022: £19m), the necessary headroom is available for the Group to operate effectively.

The IAS 19 valuation of our pension plan at 31 December 2023 reported a surplus of £3.6m (2022: £7.0m). This surplus is not recoverable and so is not included in the Group's assets.

In December 2022, the Robinson & Sons' Limited Pension Fund (the "Scheme") completed a buy-in of all the Group's defined benefit pension scheme liabilities with a plan to complete a full buy-out within 12 months. A data cleanse exercise was completed, the administration and payroll functions were handed over to Legal and General Assurance Society Limited ("L&G") from 1 August 2023 and a final balancing payment of £0.1m, was made by L&G to the Scheme on 19 February 2024, completing the buy-in process. The surplus remaining in the Scheme, currently £3.6m, will be used to augment member benefits. We are pleased that this important buy-in transaction has de-risked the Group's defined benefit pension obligations and we expect the final buy-out to be completed shortly.

Non-cash exceptional costs of £0.3m were incurred in 2023, including the costs of enhancing the benefits of active members and the expenses of moving towards buy-out. These costs are payable by the Scheme but accounted for in the Company under IAS19.

During the year, the Company reached agreement with the trustees of the Scheme for the funds held in the pension escrow account, totalling c.£3.3m, to be returned to the Group of which, £2.7m was already loaned to the Company. These funds have been received and used to reduce net indebtedness.

CEO position

Dr Helene Roberts resigned as CEO and a Director of the Company on 1 September 2023, at which point Sara Halton assumed responsibility as the Interim CEO for a transitional period whilst the Board conducts a search for a new CEO. We thank Helene again for her enormous contribution to the business.

The selection process for the new CEO is underway, and the Directors expect to make an announcement on the appointment of a permanent CEO in due course.

Property

We have continued to progress our surplus property disposal agenda during the year, with movement on two sites.

In May, the Group completed on the sale of part of the Walton Works surplus property, known as "Mill Lane". Consideration of £0.7m was received in cash and used to reduce bank debt.

In August, the Group exchanged contracts for the sale of a further c.1.3 acres of the Walton Works surplus property. Completion is subject to satisfactory planning approval and is currently expected to take up to 18 months. The consideration payable on completion would be £1.5m in cash, with estimated Group costs of £0.4m. The net proceeds of £1.1m would be used by the Group to reduce current bank debt or to invest in the listed Walton Mill buildings to enhance their saleability.

Based on professional independent valuations and including the property transaction which is not yet completed, the Directors estimate that the current market value of the remaining surplus properties held by the Group is approximately £7.4m.

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

Dividend

The Board proposes a final dividend of 3.0p per share to be paid on 21 June 2024 to shareholders on the register at the close of business on 7 June 2024. The ordinary shares become ex-dividend on 6 June 2024. This brings the total dividend declared for 2023 to 5.5p (2022: 5.5p).

Outlook

Following improved momentum in the second half of 2023, and reflecting the effect of new customer projects and the full year impact of cost savings, the Company expects revenue, and operating profit (before amortisation of intangible assets and any exceptional items), for the 2024 financial year to be ahead of 2023. We remain committed in the medium-term to delivering above-market profitable growth and our target of 6-8% adjusted operating margin*.

Alan Raleigh

Chairman

21 March 2024

*Operating profit margin before exceptional items and amortisation of intangible assets