Final Results

RNS Number : 2984X

Cropper(James) PLC

24 June 2008

 



Issued by Citigate Dewe Rogerson Ltd, Birmingham                                                                                              Embargoed: 7.30am

Date: Tuesday, 24 June 2008    

James Cropper PLC

Preliminary Audited Results for the year ended 29 March 2008

	Full year to 29 March 2008	Full year to 31 March 2007	Change
Turnover	£72.7m	£69.1m	+12%
Group profit before tax Prior to net IFRS pension adjustments After net IFRS pension adjustments	£2.0m £1.6m	£2.5m £2.1m	-23% -25%
Earnings per share	14.0p	16.2p	-14%
Dividend per share	7.3p	7.0p	+4%
Gearing	23%	23%	-
Technical Fibre Products ('TFP') Turnover up 12% Supply chain for key markets strengthened by two US acquisitions in year
James Cropper Speciality Papers ('Speciality Papers') Turnover up 5% Energy costs up £0.6m; pulp costs up £1.3m
James Cropper Converting ('Converting') Turnover up 6%

'Although sales growth was sustained across all four subsidiaries during the year, maintaining margins proved to be difficult, especially in our core paper-making business, which posted a good result against a background of rapidly escalating energy and pulp costs.  The overall impact on the Group of currency exchange rate movements was broadly neutral. Gearing remained low at 23%, in line with last year'. 

'TFP's operating profit for the year was £1,426,000 compared to £2,053,000 in 2007, with turnover improving overall by 12% on the previous year to £10,125,000. TFP's performance in 2007 was exceptional by any measure being driven by significant sales of very high margin product in the final quarter of that year. Profit in 2008 was 83% higher than the level achieved in 2006, despite further weakening of the US$ and the acquisition of two new US based manufacturing companies'. 

'Speciality Papers reported an operating profit of £1,281,000 against £1,435,000 in the previous year. Turnover was £48,342,000, up 5% with volume growing by 4% over the year. Despite this significant growth in sales profitability was adversely affected by upward pressure from pulp and energy costs'.

'In the medium to long term, the Board is confident in the Group's ability to exploit its competitive positions in its respective niches through the excellence of its products and customer service. This confidence is demonstrated by the continued increase in the dividend. Nonetheless, in light of the current adverse market conditions and high energy and pulp costs, the Board believes it is realistic to expect a challenging trading period over the short term'.

J A Cropper, Chairman

Enquiries:
John Denman Group Finance Director	Keith Gabriel Senior Account Manager	Andrew Kitchingman Managing Director, Corporate Finance
James Cropper PLC	Citigate Dewe Rogerson	Brewin Dolphin Investment Banking
Tel: [phone] (Today)	Tel: [phone] (Today)
Tel: [phone] (Thereafter)	Tel: [phone] (Thereafter)	Tel: [phone]
www.cropper.com	Mobile: [phone]	Mobile: [phone]

Summary of Results	IFRS basis				UK GAAP basis
Group 5 Year Performance	2008	2007	2006	2005	2005	2004
Group turnover £'000	72,744	69,085	64,201	64,568	64,568	58,010
Profit and Loss Summary £'000
Trading activities
Technical Fibre Products	1,426	2,053	777	521	522	506
Speciality Papers	1,281	1,435	(247)	1,787	1,826	549
Converting	548	460	62	385	389	438
The Paper Mill Shop	(358)	(358)	241	370	381	257
Other Group expenses	(147)	(86)	-	-	-	-
	2,750	3,504	833	3,063	3,118	1,750
Director and employee bonuses	(324)	(433)	-	-	-	-
'On-going' trading operating profit	2,426	3,071	833	3,063	3,118	1,750
Profit on sale of trade investment	-	-	116	-	-	-
Trading operating profit	2,426	3,071	949	3,063	3,118	1,750
Joint venture	(61)	(95)	(89)	(114)	(114)	(93)
Other expenditure	-	-	-	(200)	(200)	(50)
Trading profit before interest	2,365	2,976	860	2,749	2,804	1,607
Net interest	(402)	(438)	(511)	(357)	(337)	(355)
Trading profit before tax	1,963	2,538	349	2,392	2,467	1,252
(After future service pension contributions paid)
Net pension adjustments to
Operating profit	(610)	(610)	(364)	(423)	(696)	(467)
Net interest	227	179	(114)	(330)	-	-
Net pension adjustment before tax	(383)	(431)	(478)	(753)	(696)	(467)
Overall Group after pension adjustments
Operating profit	1,816	2,461	585	2,640	2,422	1,283
Joint venture	(61)	(95)	(89)	(114)	(114)	(93)
Other expenditure	-	-	-	(200)	(200)	(50)
Profit before interest	1,755	2,366	496	2,326	2,108	1,140
Net interest	(175)	(259)	(625)	(687)	(337)	(355)
Profit/(Loss) before Tax	1,580	2,107	(129)	1,639	1,771	785
Earnings/(Losses) per Share	14.0p	16.2p	(1.2p)	12.6p	13.8p	7.6p
Dividends per Share	7.3p	7.0p	4.1p	8.2p	8.2p	7.8p
Balance Sheet Summary £'000
Non-pension assets - excluding cash	45,616	45,758	46,668	47,005	46,155	45,759
Non-pension liabilities - excluding borrowings	(12,640)	(13,505)	(11,993)	(11,524)	(12,044)	(11,184)
	32,976	32,253	34,675	35,481	34,111	34,575
Net pension (liabilities)/assets	(1,299)	(4,306)	(7,221)	(7,495)	831	(73)
	31,677	27,947	27,454	27,986	34,942	34,502
Net borrowings	(6,016)	(5,294)	(8,595)	(8,350)	(7,404)	(7,427)
Equity shareholders' funds	25,661	22,653	18,859	19,636	27,538	27,075
Gearing %	23	23	46	43	27	27

CHAIRMAN'S REVIEW

The Group recorded a profit before tax of £1,580,000 for the year (a profit of £1,963,000 prior to net IFRS pension adjustments). This compares with a profit before tax of £2,107,000 in 2007 (a profit of £2,538,000 prior to net IFRS pension adjustments). Turnover was up 5% to £72,744,000.

Although sales growth was sustained across all four subsidiaries during the year, maintaining margins proved to be difficult, especially in our core paper-making business, which posted a good result against a background of rapidly escalating energy and pulp costs.  The overall impact on the Group of currency exchange rate movements was broadly neutral. Gearing remained low at 23%, in line with last year. 

Dividends

The Board is proposing a final dividend payment of 5.1p, making a total dividend for the full year of 7.3p compared to 7.0p in 2007, an overall increase of 4.3% on the previous year. 

AIM

At an Extraordinary General Meeting held on 1st August 2007 shareholders agreed to move the trading of the Company's issued share capital from the Official List of the UK Listing Authority to the Alternative Investment Market ('AIM') of the London Stock Exchange plc. The transfer to AIM duly took place on 31st August 2007. 

Technical Fibre Products ('TFP')

TFP's operating profit for the year was £1,426,000 compared to £2,053,000 in 2007, with turnover improving overall by 12% on the previous year to £10,125,000. TFP's performance in 2007 was exceptional by any measure being driven by significant sales of very high margin product in the final quarter of that year. Profit in 2008 was 83% higher than the level achieved in 2006, despite further weakening of the US$ and the acquisition of two new US based manufacturing companies. 

Sales into the North American market grew by 7% in £Sterling terms and by 13% in US$ terms. Growth in demand of engineered composite materials was the prime drivers behind this increase. At the average exchange rate for the year, sales to the North American market represented approximately 46% of TFP's turnover in £Sterling terms. Sales to 'Rest of the World' were ahead by 17%, with sales of composite and insulating materials leading the way. There was significant growth in turnover from TFP's new facility in Cheshire. This facility, which commenced operations in the final quarter of the previous financial year, is dedicated to converting insulating materials for TFP's main customer in this market. Although margins for this activity are less than TFP's mainstream business, TFP's position in the European thermal insulation market has been strengthened as a consequence.

Sales of TFP composite materials containing metal-coated carbon fibres have grown strongly in recent years, particularly into the US electronic and aerospace industries. These fibres were supplied by Diamond Fiber Composites Inc. and Electro Fiber Technologies LLC ('EFT'), the latter being the joint-venture company in which TFP had a 50% share. At the end of June 2007 TFP purchased the business assets of Diamond Fiber Composites Inc. and acquired complete control of EFT. The combined purchase consideration was approximately £0.5 million. These acquisitions provide TFP with control of quality, product development and security of supply. TFP will thus be able to service the technically demanding applications that contain these fibres with greater confidence at the increased levels of turnover expected in future years. However, it is anticipated that EFT's losses will continue at a similar level in the medium term. From July 2007 these losses have been fully borne by TFP. EFT fibres could potentially provide a key functional element relating to a major US based aerospace development.

James Cropper Speciality Papers ('Speciality Papers')

Speciality Papers reported an operating profit of £1,281,000 against £1,435,000 in the previous year. Turnover was £48,342,000, up 5% with volume growing by 4% over the year. Despite this significant growth in sales profitability was adversely affected by upward pressure from pulp and energy costs.

Northern Bleached Softwood Kraft ('NBSK') pulp, the market benchmark priced in US$s, opened the financial year at US$760 per tonne and increased progressively in price to US$880 per tonne by the end of the financial year, up 16% over the year. The € price of hardwoods increased by 5% but given the 14% strengthening of the € against £Sterling in the period the impact was much more significant. Overall pulp costs in the year were £1.3m higher than in the previous 12 months.

Although the average cost of natural gas in the first-half was 24p/therm, against 34p/therm in the comparable period, costs in the second-half averaged 50p/therm against 28p/therm in the previous year. Overall the cost of gas was up 26% for the full year at £2.8m, some £0.6m higher.

Given the competitive nature of both UK and export markets it was not possible to fully recover these dramatic cost escalations through increased selling prices within the time span of the financial year. During the year further significant progress was made with regard to the reduction of the cost base through greater energy efficiency, improved productivity and lower wastage.  

James Cropper Converting ('Converting')

Converting's operating profit was £548,000 compared to £460,000 in the previous year, with turnover increasing by 6% to £11,856,000. 

Sales of US$ denominated products grew by 14% in £Sterling terms and by 21% in US$ terms in the year and represented 19% of turnover in £Sterling terms. The decline in the value of the US$ over the year had a significant impact on the value of Converting's margins. The continuing weakness of the US$ outweighed the cost benefits derived from the upgraded laminating line commissioned in the previous year. 

The Paper Mill Shop ('TPMS')

Turnover was £6,202,000, up 3% on the previous year. However margin was lower reflecting a change in the product mix. As a consequence the operating loss was in-line with the previous year at £358,000. 

Depreciation of capital expenditure is accelerated over four years. This has led to the resulting depreciation charge being a significant proportion of TPMS's operating loss reflecting the number of store openings in recent years. As there were no new store openings in the period cash out flow was relatively low. 

Pensions and International Accounting Standard 19 ('IAS 19')

The Group operates two funded pension schemes providing defined benefits for the majority of its full time employees. In order to comply with the strictures of IAS 19 a discount rate of 6.55% has had to be used to reflect the current high rate of return on corporate bonds resulting from the dramatic fall in the value of corporate bonds as a consequence of the 'credit crunch'. This aberration has produced IAS 19 deficits for both Schemes smaller in comparison with the concurrent 'on-going' valuations, which are based upon more realistic projections of long-term returns. The IAS 19 results are thus misleading. 

Outlook

The outlook for TFP's profit growth is encouraging. Its new facilities in Cheshire and the USA strengthen its long-term position in specialised non-woven insulating and composite markets. 

Given the uncertainties surrounding the general economic down turn and continued high energy and pulp costs, the outlook for Speciality Papers is difficult to project. It should therefore be anticipated that the subsidiary's profitability in the current financial year could be significantly less than that achieved in the year ended 29th March 2008. 

As regards The Paper Mill Shop it is intended to exit a small number of under performing stores as their leases expire unless it is more economic to do so earlier. Other cost rationalisation actions and aspects of TPMS's recovery plan are also being progressed.

The overall impact on the Group of fluctuating currency exchange rates will remain broadly neutral as a consequence of our internal currency matching policy.  

Gearing at the year-end was low and working capital remains closely controlled. Investment over the coming year will continue to be focused on energy and operating efficiencies. 

In the medium to long term, the Board is confident in the Group's ability to exploit its competitive positions in its respective niches through the excellence of its products and customer service. This confidence is demonstrated by the continued increase in the dividend. Nonetheless, in light of the current adverse market conditions and high energy and pulp costs, the Board believes it is realistic to expect a challenging trading period over the short term.

James Cropper

Chairman

James Cropper PLC
Preliminary Results
Audited Group Profit and Loss Account
for the period ended 29 March 2008
				2008		2007
				£'000		£'000
Continuing operations
Turnover				72,744		69,085
Other income				157		195
Changes in inventories of finished goods and work in progress				212		(87)
Raw materials and consumables used				(32,703)		(30,425)
Energy costs				(3,531)		(2,833)
Employee benefit costs				(18,285)		(17,269)
Depreciation and amortisation				(3,280)		(3,315)
Other expenses				(13,498)		(12,890)
Operating profit				1,816		2,461
Interest expense				(942)		(783)
Interest income				767		524
Share of post tax loss from joint venture				(61)		(95)
				1,580		2,107
Taxation				(390)		(746)
Profit for the period attributable to equity holders of the company				1,190		1,361
Earnings per share expressed in pence per share
-Basic				14p		16.2p
-Diluted				14p		16.2p
Dividends per share expressed in pence per share
-2008 interim dividend paid				2.2p		1.9p
-2008 final dividend proposed				5.1p		5.1p

	James Cropper PLC
	Preliminary Results
	Audited Balance Sheets as at 29 March 2009
					Group				Company
					2008		2007		2008		2007
					£'000		£'000		£'000		£'000
	Assets
	Non-current assets
	Intangible assets				1,572		1,351		1,333		1,351
	Property, plant and equipment				20,308		21,517		923		1,080
	Investments in subsidiary undertakings				-		-		7,350		7,350
	Investments in joint ventures				-		58		-		-
	Deferred tax assets				505		1,846		505		1,846
					22,385		24,772		10,111		11,627
	Current assets
	Inventories				9,640		8,366		-		-
	Trade and other receivables				14,096		14,462		28,237		26,500
	Financial assets
	-Derivative financial instruments				-		4		-		4
	Cash and cash equivalents				1,917		3,730		-		422
	Current tax assets				-		-		-		67
					25,653		26,562		28,237		26,993
	Liabilities
	Current liabilities
	Trade and other payables				(8,124)		(8,544)		(2,765)		(3,173)
	Financial liabilities
	-Borrowings				(2,170)		(2,374)		(5,986)		(2,374)
	Current tax liabilities				(720)		(1,020)		-		-
					(11,014)		(11,938)		(8,751)		(5,547)
	Net current assets				14,639		14,624		19,486		21,446
	Non-current liabilities
	Financial liabilities
	-Borrowings				(5,763)		(6,650)		(4,504)		(6,650)
	Retirement benefit liabilities				(1,804)		(6,152)		(1,804)		(6,152)
	Deferred tax liabilities				(3,796)		(3,941)		(486)		(584)
					(11,363)		(16,743)		(6,794)		(13,386)
	Net assets				25,661		22,653		22,803		19,687
	Shareholders' equity
	Ordinary share capital				2,118		2,118		2,118		2,118
	Share premium				573		573		573		573
	Translation reserve				22		(8)		-		-
	Other reserves				-		-		-		-
	Retained earnings				22,948		19,970		20,112		16,996
	Total shareholders' equity				25,661		22,653		22,803		19,687

	James Cropper PLC
	Preliminary Results
	Audited Cash flow statements for the period ended 29 March 2008

				Group				Company

			2008		2007		2008		2007
			£'000		£'000		£'000		£'000
	Cash flows from operating activities
	Cash generated from/(used by) operating activities		3,443		5,133		(3,808)		(824)
	Interest received		493		370		1,833		1,822
	Interest paid		(854)		(760)		(720)		(740)
	Tax paid		(649)		(87)		(648)		-
	Net cash generated from/(used by) operating activities		2,433		4,656		(3,343)		258
	Cash flows from investing activities
	Investment in joint venture		(50)		(87)		-		-
	Acquisition of subsidiaries (net of cash acquired)		(550)		-		-		-
	Purchase of intangible assets		(213)		(254)		(213)		(254)
	Purchases of property, plant and equipment		(1,574)		(2,502)		(133)		-
	Proceeds from sale of property, plant and equipment		196		1,691		185		10
	Dividends received		-		-		1,600		850
	Purchase of LTIP Investments		(368)		-		-		-
	Net cash (used in)/generated from investing activities		(2,559)		(1,152)		1,439		606
	Cash flows from financing activities
	Net proceeds from issue of new bank loan		1,259		1,000		-		1,000
	Net proceeds from issue of Ordinary Share Capital		-		147		-		147
	Repayment of borrowings		(2,349)		(2,333)		(1,717)		(2,333)
	Dividends paid to shareholders		(618)		(343)		(618)		(343)
	Net cash used in financing activities		(1,708)		(1,529)		(2,335)		(1,529)
	Effect of exchange rate changes		21		(7)		-		-
	Net (decrease)/ increase in cash and cash equivalents		(1,813)		1,968		(4,239)		(665)
	Cash and cash equivalents at the start of the period		3,730		1,762		422		1,087
	Cash and cash equivalents at the end of the period		1,917		3,730		(3,817)		422
	Cash and cash equivalents consists of:
	Cash at bank and in hand		1,917		3,730		(3,817)		422

James Cropper PLC

Preliminary Results

Audited Statements of Recognised Income and Expense for the period ended 29 March 2008
				Group						Company
				2008		2007				2008		2007
				£'000		£'000				£'000		£'000
Profit for the financial period				1,190		1,361				951		102
Currency translation differences on foreign currency investment				21		(18)				-		-
Retirement benefit liabilities - actuarial gains				3,855		3,756				3,855		3,756
Deferred tax on actuarial gains on retirement benefit liabilities				(1,157)		(1,127)				(1,157)		(1,127)
Total recognised income for the period				3,909		3,972				3,649		2,731

  James Cropper PLC

Preliminary Results

For the year ended 29 March 2008

1. Basic earnings per share have been calculated on the profit after taxation of £1,190,000 (2007: profit £1,361,000) divided by the weighted average number of Ordinary shares in issue during the period of 8,472,368 (2007: 8,376,198).

2. The dividend will, if approved, be paid on 15 August 2008 to all shareholders on the Register on 18      July 2008.
   
3. The financial information set out above does not constitute the statutory accounts for the years ended 29 March 2008 and 31 March 2007. Statutory accounts for 2007 have been delivered to the Registrar of Companies and those for 2008 will be delivered following the Company's Annual General Meeting. The auditors have reported on these accounts, their reports were unqualified and did not contain statements under section 237 (2) or (3) of the Companies Act 1985.
   
4. The Annual Report and Accounts for 2008 will be posted to shareholders on 7 July 2008 and will also be available on request from the Company's registered office, Burneside Mills, Kendal, Cumbria LA9 6PZ.
   
5. The Annual General Meeting of the Company will be held at 10.30am on Wednesday 30 July 2008 at the Bryce Institute, Burneside, Kendal, Cumbria.

 

END

 

 

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