Half-year results to 1 October 2011

RNS Number : 0803S

Cropper(James) PLC

15 November 2011

 



Tuesday, 15 November 2011

James Cropper plc

(the "Company")

the niche specialist paper and materials group, is pleased to announce its

 

Half-year results to 1 October 2011

	Half-year to 1 October 2011	Half-year to 25 September 2010	Full-year to 2 April 2011
Turnover
o  Continuing operations	£43.9m	£41.4m	£83.3m
o  Discontinued operations	-	£2.1m	£3.6m
	£43.9m	£43.5m	£86.9m
EBITDA (before net IAS19 pension adjustment)	£2.5m	£2.8m	£4.7m
Profit before tax
o  Continuing operations	£1.1m	£1.7m	£3.4m
o  Discontinued operations	-	(£0.3m)	(£1.7m)
	£1.1m	£1.4m	£1.7m
o  IAS 19 pension adjustment	£0.3m	(£0.2m)	£9.4m
	£1.4m	£1.2m	£11.1m
Earnings per share - diluted	11.6p	14.8p	97.6p
Dividends per share	2.2p	2.2p	7.9p
Gearing (before IAS 19 pension deficit)	22%	0%	6%
Gearing (after IAS 19 pension deficit)	28%	0%	6%
Capital expenditure	£2.8m	£0.7m	£2.3m
·      Turnover from continuing operations up 6% on comparable period
·      Increased expenditure on major revenue and capital projects

"In the first half, Speciality Papers and Converting traded in line with management expectations, with Speciality Papers well ahead of last year at the interim date".

"The recovery of Speciality Papers is encouraging, illustrating the strength of our balanced portfolio of businesses. However, I am mindful that in past years, sales into the Euro-zone by Speciality Papers have accounted for 30% of this subsidiary's turnover and that in recent months its orders from European customers have been running below this level. The performance of Speciality Papers in the second half is therefore not immune to the unfolding economic events in the Euro-zone".

"As previously reported, the growing concerns of customers in the US relating to resurgent recessionary pressures and Federal austerity measures have been felt in TFP's order book. It must therefore be anticipated that TFP's profits in the full year will be significantly lower than in the previous year".

"As a result of these external factors, the Board expects the Company's full year trading results to be below market expectations."

"The Company opened the current financial year with a strong balance sheet and low borrowings following successful risk reduction policies and cash conservation in recent years. This situation provides me with confidence as we embark on an exciting period of capital investment which aims to strengthen our platform for growth and to mitigate our risk exposure to raw material and energy costs".

Mark Cropper, Chairman

Enquiries:
Alun Lewis, Chief Executive	Andrew Kitchingman, Director, Corporate Finance
John Denman, Group Finance Director
James Cropper PLC (AIM:CRPR.L)	Arbuthnot Securities Limited
Tel: [phone]	Tel: [phone]
www.cropper.com

Summary of Results	Half-year to	Half-year to	Full-year to
	1 October	25 September	2 April
	2011	2010	2011
Group turnover £'000
Continuing operations	43,946	41,404	83,264
Discontinued operation	-	2,105	3,609
	43,946	43,509	86,873
Trading profit	1,260	1,294	1,665
Add back: Depreciation	1,285	1,532	3,072
EBITDA (before IAS 19 pension adjustment)	2,545	2,826	4,737
Trading profit before interest
Continuing operations	1,260	1,611	3,361
Discontinued operations	-	(317)	(1,696)
	1,260	1,294	1,665
Net interest	(130)	128	29
Trading profit before tax	1,130	1,422	1,694
(After future service pension contributions paid)
Net IAS 19 pension adjustments to
Operating profit	(68)	(224)	9,395
Net interest	324	(6)	(3)
Net pension adjustment before tax	256	(230)	9,392
Overall Group after pension adjustments
Profit/(loss) before interest	1,192	1,070	11,060
Net interest	194	122	26
Profit/(loss) before tax	1,386	1,192	11,086
Earnings per Share - diluted	11.6p	14.8p	117.4p
Dividends per share	2.2p	2.2p	7.9p
Balance Sheet Summary £'000
Non-pension assets - excluding cash	46,719	43,010	44,000
Non-pension liabilities - excluding borrowings	(11,913)	(14,338)	(13,841)
	34,806	28,672	30,159
Net IAS 19 pension deficit (after deferred tax)	(6,431)	(11,965)	(1,039)
	28,375	16,707	29,120
Net borrowings	(6,233)	131	(1,711)
Equity shareholders' funds	22,142	16,838	27,409
Gearing % - before IAS 19 deficit	22%	0%	6%
Gearing % - after IAS 19 deficit	28%	0%	6%
Capital Expenditure £'000	2,754	695	2,276

STATEMENT BY THE CHAIRMAN, M A J CROPPER

I am pleased to report that the Group recorded a profit before tax of £1,386,000 in the opening first half year compared with a profit before tax of £1,192,000 for the same period last year.

Group turnover from continuing operations was £43.9 million against £41.4 million for the comparable period, an increase of 6%.

In the first half, Speciality Papers and Converting traded in line with management expectations, with Speciality Papers well ahead of last year at the interim date. However, as previously reported, the growing concerns of customers in the USA relating to resurgent recessionary pressures and Federal austerity measures have been felt in TFP's order book.

During the period the Group embarked upon a series of major revenue and capital projects to improve efficiencies, increase capability and strengthen infrastructure across its three subsidiaries. The cost of these major revenue projects has been expensed against the profits of all three subsidiaries in the first half.

The Board has decided to maintain the interim dividend at 2.2p pence per share.

James Cropper Speciality Papers ("Speciality Papers")

The strong recovery made by Speciality Papers in the final quarter of last year has continued against the background of high pulp and energy costs. Turnover in the first six months was up 3% on the same period last year, despite volume being down 5%.

The price of pulp continued to move upward during the first four months. Northern Bleached Softwood Kraft ("NBSK") pulp opened at US$965 and peaked at US$1020/tonne in July, an increase of 60% since July 2009. By the period end the price of NBSK had fallen to US$950/tonne.

Energy costs have risen by 22% over the same period last year.

Technical Fibre Products ("TFP")

Year to date turnover was down 17% on the same period last year. Sales to the US market decreased by 28% over the same period last year in Sterling terms and fell to 50% of total TFP sales compared to 58% in the comparable period. Sales outside the US in the first half were in line with last year.

James Cropper Converting ("Converting")

Sales of digital printing grades into the US retail sector contributed significantly to the raised level of operating profit in 2010/11. I stated in the Annual Report that as a proportion of the sales of digital printing grades in 2010/11 included customer launch stocks, sales of these products in 2011/12 would be lower. Thus Converting's profit in the current financial year is expected to be below the exceptional result of 2010/11 but ahead of the trend of previous years.

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

During the first half, equity values and bond yields fell significantly to the extent that the overall asset value of the Group's two defined benefit pension schemes declined by 6.0% whilst their liabilities increased by 4.6%. As a consequence, the schemes' combined deficit, net of deferred tax, rose by £5,392,000 to £6,431,000. Although this development is naturally disappointing and hopefully short term, it does emphasise the importance of the steps already taken to curtail benefits.

Cash and borrowings

At 1^st October 2011 net borrowings totalled £6.2 million, compared to £1.7 million at the previous year end. In addition, the Group had un-drawn overdraft facilities of £3.4 million, US$1.0 million and €1.0 million.

The £4.5 million increase in net borrowings was largely attributable to capital expenditure of £2.8 million and a £1.3 million increase in the value of stock.

Gearing at the half-year end, after deduction of the IAS 19 pension deficit, was 28% (before 22%).

Working capital continued to remain under tight control. In the second half, borrowing will ease upward as a consequence of continued capital expenditure.

Outlook

The recovery of Speciality Papers is encouraging, illustrating the strength of our balanced portfolio of businesses. However, I am mindful that in past years sales into the Euro-zone by Speciality Papers have accounted for 30% of this subsidiary's turnover and that in recent months its orders from European customers have been running below this level. The performance of Speciality Papers in the second half is therefore not immune to the unfolding economic events in the Euro-zone.

As previously reported, the growing concerns of customers in the USA relating to resurgent recessionary pressures and Federal austerity measures have been felt in TFP's order book. It must therefore be anticipated that TFP's profits in the full year will be significantly lower than in the previous year.

As a result of these external factors, the Board expects the Company's full year trading results to be below market expectations.

The Company opened the current financial year with a strong balance sheet and low borrowings following successful risk reduction policies and cash conservation in recent years. This situation provides me with confidence as we embark on an exciting period of capital investment which aims to strengthen our platform for growth and to mitigate our risk exposure to raw material and energy costs.

Mark Cropper

Chairman

15 November 2011

Un-audited Statement of Comprehensive Income for the period
		26 weeks to	26 weeks to	53 weeks to
		01 October 2011	25 September 2010	02 April 2011
		£'000	£'000	£'000
Continuing operations
Revenue		43,946	41,404	83,264
Operating profit		1,192	1,387	12,756
Finance Costs
Interest payable and similar charges		(133)	(56)	(137)
Interest receivable and similar income		327	178	193
Profit before taxation		1,386	1,509	12,812
Taxation		(361)	90	(2,598)
Profit for the period from continuing operations		1,025	1,599	10,214
Discontinued operations		-	(317)	(1,726)
Profit for the period		1,025	1,282	8,488
Other comprehensive income:
Foreign currency translation		7	(4)	4
Retirement benefit liabilities - actuarial losses		(8,041)	(2,622)	2,388
Deferred tax on actuarial losses on retirement benefit liabilities		2,109	734	(621)
Total comprehensive income for the period attributable to equity holders of the Company		(4,900)	(610)	10,259
Earnings per share - basic		12.1p	15.1p	100.2p
Earnings per share - diluted		11.6p	14.8p	97.6p
Continuing Operations Earnings per share - basic		12.1p	18.9p	120.6p
Continuing Operations Earnings per share - diluted		11.6p	18.5p	117.4p
Dividend declared in the period - pence per share		2.2p	2.2p	7.9p

Un-audited Statement of Financial Position at
	01 October 2011		25 September 2010	02 April 2011
	£'000		£'000	£'000
Assets
Intangible assets	1,225		1,237	1,386
Property, plant and equipment	17,783		16,172	16,177
Deferred tax assets	2,260		1,040	-
Total non- current assets	21,268		18,449	17,563
Inventories	13,283		11,425	11,956
Trade and other receivables	14,428		14,176	14,481
Cash and cash equivalents	165		4,404	4,282
Current tax assets	-		-	-
Total current assets	27,876		30,005	30,719
Total assets	49,144		48,454	48,282
Liabilities
Trade and other payables	8,271		10,418	10,146
Loans and borrowings	2,159		1,236	1,426
Current tax liabilities	726		308	780
Total current liabilities	11,156		11,962	12,352
Long-term borrowings	4,239		3,037	4,567
Retirement benefit liabilities	8,691		16,617	1,404
Deferred tax liabilities	2,916		-	2,550
Total non-current liabilities	15,846		19,654	8,521
Total liabilities	27,002		31,616	20,873
Equity
Share capital	2,118		2,118	2,118
Share premium	573		573	573
Translation reserve	276		261	269
Reserve for own shares	(222)		-	(222)
Retained earnings	19,397		13,886	24,671
Total shareholders' equity	22,142		16,838	27,409
Total equity and liabilities	49,144		48,454	48,282
Company Registration No:	30226

Un-audited Consolidated Statement of Cash Flows
		26 weeks to		26 weeks to		53 weeks to
		01 October 2011		25 September 2010		02 April 2011
		£'000		£'000		£'000
Cash flows from operating activities
Net Profit		1,025		1,282		8,488
Adjustments for:
Tax		361		(90)		2,598
Depreciation		1,289		1,532		3,072
Net IAS 19 pension adjustments within SCI		(256)		224		(9,392)
Past service pension deficit payments		(498)		(415)		(996)
Foreign exchange loss / (gain) on currency borrowings				(89)		(121)
Foreign exchange differences		58		-		-
Loss / (profit) on disposal of property, plant and equipment		37		(4)		113
Net bank interest expense / (income)		130		(122)		(29)
Share based payments		105		78		114
Changes in working capital:
Increase in inventories		(1,321)		(1,261)		(1,767)
Decrease / (increase) in trade and other receivables		82		(271)		(26)
(Decrease) / increase in trade and other payables		(1,965)		634		(326)
Interest received		3		13		197
Interest paid		(137)		(42)		(309)
Tax paid		(196)		(437)		(444)
Net cash generated from operating activities		(1,283)		1,032		1,172
Cash flows from investing activities
Purchase of intangible assets		-		-		(75)
Purchases of property, plant and equipment		(2,754)		(695)		(2,200)
Proceeds from sale of property, plant and equipment		-		4		6
Net cash (used in) / generated from investing activities		(2,754)		(691)		(2,269)
Cash flows from financing activities
Proceeds from issue of new loans		1,128		98		3,153
Repayment of borrowings		(782)		(816)		(2,120)
Purchase of LTIP investments		-		-		(152)
Dividends paid to shareholders		(474)		(441)		(623)
Net cash (used in) / generated from financing activities		(128)		(1,159)		258
Net increase / (decrease) in cash and cash equivalents		(4,165)		(818)		(839)
Effect of exchange rate fluctuations on cash held		48		172		71
Net increase / (decrease) in cash and cash equivalents		(4,117)		(646)		(768)
Cash and cash equivalents at the start of the period		4,282		5,050		5,050
Cash and cash equivalents at the end of the period		165		4,404		4,282
Cash and cash equivalents consists of:
Cash at bank and in hand		165		4,404		4,282

Statement of Changes in Equity
All figures in £'000	Share capital	Share premium	Translation reserve	Own Shares	Retained earnings	Total
At 27 March 2010	2,118	573	265	(128)	14,983	17,811
Profit for the period	-	-	-	-	8,488	8,488
Exchange differences	-	-	4	-	-	4
Actuarial gains on retirement benefit liabilities (net of deferred tax)	-	-	-	-	1,767	1,767
Total other comprehensive income	-	-	4	-	1,767	1,771
Dividends paid	-	-	-	-	(623)	(623)
Share based payment charge	-	-	-	-	114	114
Distribution of own shares	-	-	-	58	(58)	-
Consideration paid for own shares	-	-	-	(152)	-	(152)
Total contributions by and distributions to owners of the Group	-	-	-	(94)	(567)	(661)
At 2 April 2011	2,118	573	269	(222)	24,671	27,409
Profit for the period	-	-	-	-	1,025	1,025
Exchange differences	-	-	7	-	-	7
Actuarial losses on retirement benefit liabilities (net of deferred tax)	-	-	-	-	(5,932)	(5,932)
Total other comprehensive income	-	-	7	-	(5,932)	(5,925)
Dividends paid	-	-	-	-	(473)	(473)
Share based payment charge	-	-	-	-	106	106
Distribution of own shares	-	-	-	-	-	-
Consideration paid for own shares	-	-	-	-	-	-
Total contributions by and distributions to owners of the Group	-	-	-	-	(367)	(367)
At 1 October 2011	2,118	573	276	(222)	19,397	22,142

Notes to the Unaudited Interim Results

1       Basis of the preparation of IFRS financial information

a)      These interim results have been prepared in accordance with the historical cost convention, as modified by the revaluation of land and buildings, and derivative financial instruments, and in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union (with the exception of IAS 34, Interim Financial Reporting) and International Financial Reporting Interpretations Committee ("IFRIC") interpretations and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.

All references to:

1.   "Profit and Loss Account" refers to the Statement of Comprehensive Income.

"Balance Sheet" refers to the Statement of Financial Position.

Management have chosen to maintain the terminology that readers are familiar with.

2.   "Trading Operating Profit" refers to profits prior to income from joint ventures, other income and expenditure,  interest on borrowings and "Net IAS 19 pension adjustment"

3.   "Trading Profit before Tax" refers to profits prior to "Net IAS 19 pension adjustment".

4.   "Net IAS 19 pension adjustment" in the Profit and Loss Account refer to the net impact on the Profit and Loss Account of the pension schemes' operating costs and finance costs, as described in the IAS 19 section of the Financial Review.

b)      The Group's policy is to maintain the ability to continue as a going concern, in order to provide returns to the shareholder and benefits to other stakeholders. Accordingly the going concern basis has been adopted in preparing these interim results.

2       Interim Statement

a)      The summarised results for the half-year to 2 October 2011, which have not been audited or reviewed, have been prepared in accordance with the accounting policies adopted in the accounts for the 53 week year ended 2 April 2011.

b)      The financial information set out above does not constitute statutory accounts within the meaning of the Companies Act 2006. The figures for the 53 week year ended 2 April 2011 are an extract of the full accounts for that year, which have been filed with the Registrar of Companies and on which the auditors gave an unqualified opinion.

c)      A copy of the interim statement is available on our website (www.cropper.com).

3       Earnings per share

Basic and diluted earnings per share for the half year to 1 October 2011 have been calculated by dividing the profits attributable to ordinary shareholders by 8,472,368 (2010: 8,472,368) ordinary shares, being the weighted average number of ordinary shares during the period.

4       Dividend

An interim dividend of 2.2p per Ordinary Share (2010: 2.2p per share) is proposed and will be paid on 13 January 2012 to holders on the register at the close of business on 16 December 2011. The dividend relating to the 53 week year to 2 April 2011 was made up of an interim payment of £183,000 (2.2p per share) and a final dividend payment of £474,000 (5.7p per share).

5       Pensions

IAS 19 regards a sponsoring company and its pension schemes as a single accounting entity rather than two or more separate legal entities. The actuarial valuation is the starting point for the creation of the IAS 19 accounting entity. The valuation determines the net position of a pension scheme, i.e. the difference between its assets and liabilities. The net position, surplus or deficit, is brought onto the sponsoring company's Balance Sheet such that Reserves are immediately adjusted by the net position reduced by deferred tax. This obviously results in either an increase or decrease in the net asset value of the sponsoring company. At subsequent period-ends the movement in value from the previous valuation is expressed in the following component parts:

Income Statement

Operating costs

Current service charge, being the cost of benefits earned in the current period shown net of employees' contributions.

·              Past service costs, being the costs of benefit improvements.

·              Curtailment and settlement costs.

Finance costs, being the net of

·              Expected return on pension scheme assets.

·              Interest cost on the accrued pension scheme liabilities.

Statement of Recognised Income and Expense

Actuarial gains and losses arising from variances against previous actuarial assumptions.

The above items are offset by actual contributions paid by the employer in the period.

IAS19 deficits are shown below at the corresponding Balance Sheet dates.

	Half-year to	Half-year to	Full-year to
	1 October	25 September	2 April
	2011	2010	2011
IAS19 DEFICIT	£'000	£'000	£'000
Current Service Charge	(438)	(604)	(1,370)
Future service contributions paid	370	380	607
Curtailment	0	0	10,158
Net impact on Operating Profit	(68)	(224)	9,395
Finance costs	324	(6)	(3)
Net impact on Profit and Loss Account	256	(230)	9,392
Past service deficit contributions paid	498	415	996
Actuarial (losses)/gains	(8,041)	(2,622)	2,388
Opening deficit	(1,404)	(14,180)	(14,180)
Closing deficit	(8,691)	(16,617)	(1,404)
Deferred Taxation	2,260	4,652	365
Net - Deficit	(6,431)	(11,965)	(1,039)

It should be noted that the assumptions underlying the IAS 19 valuation are based on financial conditions at the Balance Sheet date. As market values of the scheme assets and the discount factors applied to the scheme liabilities will fluctuate, this method of valuation will often lead to large variations in the "pension balance" from period to period. Pension liabilities are discounted at the current rate of return on an AA rated quality corporate bond of equivalent currency and term. The actual contributions paid by the Group to its two final salary schemes are determined by the actuaries' "on-going" valuation.

	Half-year to	Half-year to	Full-year to
	1 October	25 September	2 April
	2011	2010	2011
Profit before Tax	£'000	£'000	£'000
Trading profit	1,130	1,422	1,694
Net pension adjustment
Current Service Charge	(438)	(604)	(1,370)
Future service contributions paid	370	380	607
Curtailment	0	0	10,158
Net impact on Operating Profit	(68)	(224)	9,395
Finance costs	324	(6)	(3)
Net impact on Profit before Tax	256	(230)	9,392
As reported	1,386	1,192	11,086

END

 

END

 

 

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