Half-year results to 29 September 2012

RNS Number : 9402Q

Cropper(James) PLC

13 November 2012

 



James Cropper plc ("James Cropper" or the "Group")

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

Half-year results to 29 September 2012

	Half-year to 29 September 2012	Half-year to 1 October 2011	Full-year to 31 March 2012
·      Turnover	£39.0m	£39.6m	£78.2m
·      EBITDA (before net IAS19 pension adjustment)	£2.9m	£2.5m	£3.9m
·      Profit before tax
o  Trading profit after interest	£1.2m	£1.1m	£0.9m
o  IAS 19 pension adjustment	(£0.2m)	£0.3m	£0.1m
	£1.0m	£1.4m	£1.0m
·      Earnings per share - diluted	8.9p	11.6p	9.5p
·      Dividends per share	2.2p	2.2p	7.9p
·      Gearing (before IAS 19 pension deficit)	30%	22%	23%
·      Gearing (after IAS 19 pension deficit)	45%	28%	30%
·      Capital expenditure	£1.2m	£2.8m	£5.9m
·      TFP overall sales up 12% with sales to the USA up 19%
·      Converting overall sales up 21%
·      Speciality Papers overall sales down 7%

"The recovery of TFP and Converting in the first six months is very pleasing and is expected to be sustained in the second half.

"I anticipate that we will make further gains in Speciality Papers' home market in the second half to offset reduced sales into continental Europe. Recent investments and the completion of the restructuring process will also impact favourably on the profitability of Speciality Papers from the beginning of the next financial year.

"The Government's conditional decision to provide support from the Regional Growth Fund for our proposed steam raising plant is great news for the Group. Subject to the Government's due diligence criteria being satisfied, an agreed grant offer of £3.1 million is expected early in the new financial year. The plant, once operational, would reduce our energy related costs by an estimated £1.0 million per annum and our CO₂ emissions by at least 10%.

"Despite the troubled economic climate it is very clear to me that I can be confident that there are many opportunities to build upon our global strengths and thus make James Cropper PLC a more profitable enterprise in the future. The Board expects the Company's full year trading results to be in line with market expectations."

Mark Cropper, Chairman

Enquiries:
John Denman, Group Finance Director	Richard Baty, Paul Gillam
James Cropper PLC (AIM:CRPR.L)	Westhouse Securities Limited
Telephone: [phone]	Telephone: [phone]
www.cropper.com	www.westhousesecurities.com

Summary of Results	Half-year to	Half-year to	Full-year to
	29 September	1 October	31 March
	2012	2011	2012
Profit and Loss Summary £'000
Group turnover £'000	39,037	39,586	78,223
Trading profit	1,449	1,260	1,207
Add back: Depreciation	1,406	1,285	2,675
EBITDA (before IAS 19 pension adjustment)	2,855	2,545	3,882
Trading profit before interest	1,449	1,260	1,207
Net interest	(264)	(130)	(364)
Trading profit before tax	1,185	1,130	843
(After future service pension contributions paid)
Net IAS 19 pension adjustments to
Operating profit	(245)	(68)	(539)
Net interest	89	324	667
Net pension adjustment before tax	(156)	256	128
Overall Group after pension adjustments
Profit before interest	1,204	1,192	668
Net interest	(175)	194	303
Profit before tax	1,029	1,386	971
Earnings per Share - diluted	8.9p	11.6p	9.5p
Dividends per share	2.2p	2.2p	7.9p
Balance Sheet Summary £'000
Non-pension assets - excluding cash	47,202	46,719	46,278
Non-pension liabilities - excluding borrowings	(10,903)	(11,913)	(11,956)
	36,299	34,806	34,322
Net IAS 19 pension deficit (after deferred tax)	(9,013)	(6,431)	(5,850)
	27,286	28,375	28,472
Net borrowings	(8,477)	(6,233)	(6,505)
Equity shareholders' funds	18,809	22,142	21,967
Gearing % - before IAS 19 deficit	30%	22%	23%
Gearing % - after IAS 19 deficit	45%	28%	30%
Capital Expenditure £'000	1,219	2,754	5,934

STATEMENT BY THE CHAIRMAN, M A J CROPPER

In the first six months the Group recorded a profit before tax (but after IAS19 pension adjustment) of £1,029,000 compared with £1,386,000 for the same period last year.

Prior to the IAS19 pension adjustment, profit before tax was £1,185,000, just ahead of last year.

Group turnover was £39.0 million against £39.6 million for the comparable period, a decrease of 1%.

Dividend

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

Technical Fibre Products ("TFP")

TFP opened the year strongly, most notably in the Aerospace, Defence and Energy sectors. Overall sales were up 12% on the comparable period last year with sales into the USA up 19%.

As the first step in consolidating our US facilities, the Cincinnati operation was closed in April 2012 and has now been relocated to our new facility in Schenectady, New York State.

James Cropper Speciality Papers ("Speciality Papers")

In Speciality Papers total sales in the opening half were down 7% on the comparable period. Export sales value declined by 17% whilst UK sales were in line with last year. Overall volume was down 7% with export volumes down 15% and UK volumes down 3%. The economic uncertainty, which led to the loss of confidence amongst customers in many export paper markets in the second half of last year, shows no immediate sign of lifting. We have been successful in winning business in new areas in the UK market which has helped to fill the capacity gap.

The cost of Northern Bleached Softwood Kraft ("NBSK") pulp opened at US$840/tonne and fell to US$770/tonne at the close of the period but is now on a rising trend.

Energy costs were in line with the same period last year and are now also on a rising trend.

James Cropper Converting ("Converting")

Converting traded ahead of the first half of last year. Sales were up 21% primarily due to a recovery in sales into the lower margin Sign & Display sector.

People

Our plans to reduce the size of the Group's UK workforce by 8% during the course of 2012 are on-track. Once completed these plans will result in cost savings of approximately £1.0 million on an annualised basis from 2013/14 onwards, with savings of approximately £0.3 million in 2012/13. A full provision relating to redundancy costs of £0.8 million was recognised in the previous financial year.

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

During the first half bond yields fell significantly to the extent that the overall liabilities of the Group's two defined benefit pension schemes increased by 4.8%. Over the six months the asset value of the schemes declined by 0.3%. As a result the schemes' combined deficit, net of deferred tax, rose by £3,163,000 to £9,013,000 since the previous year end. Since 1 April 2011 future increases in pensionable pay have been capped at a maximum of 2% per annum. The next "on-going" valuation, which sets the funding rate, will take place as at 1 April 2013. This will initiate a further review of these schemes.

Investment

We continue to progress our programme of investment to enhance our capacities and capabilities and to improve energy and raw material efficiencies. Total expenditure in the full year is anticipated to be in the region of £3.5 million.

As announced on 23 October 2012 the Government has selected the Group's proposed steam raising plant for support from the Regional Growth Fund ("RGF"). The RGF grant is conditional upon the Group's proposal satisfying the Government's due diligence process and compliance with EU State Aid rules. If this process is successful a grant of up to £3.1 million would contribute to the capital investment of approximately £7.0 million at the Group's site in Kendal, Cumbria. Assuming that the due diligence process has been satisfied and that the project is approved by the Board it is anticipated that the steam raising plant would be operational by late 2014. If the project were to proceed no expenditure is anticipated in the current financial year. When operational, the steam raising plant would significantly reduce the Group's energy costs, CO₂ emissions and rising environmental taxes. It is estimated that the savings for the Group would exceed £1.0 million per annum by 2015. The plant would consume a mixture of solid recovered fuel produced from municipal waste and the Group's own paper-making effluent residues. 

Cash and borrowings

At 29 September 2012 gross drawn down loans and leases totalled £11.5 million, with £3.0 million held as cash at bank. In addition the Group had un-drawn overdraft facilities of £3.4 million, US$1.0 million and €1.0 million.

Gearing at the half year end, after deduction of the IAS 19 pension deficit, was 45% (before 30%).

Working capital continued to remain under tight control. In the second half gearing will ease upward as a consequence of increased expenditure on major revenue and capital projects.

Outlook

The recovery of TFP and Converting in the first six months is very pleasing and is expected to be sustained in the second half.

I anticipate that we will make further gains in Speciality Papers' home market in the second half to offset reduced sales into continental Europe. Recent investments and the completion of the restructuring process will also impact favourably on the profitability of Speciality Papers from the beginning of the next financial year.

The Government's conditional decision to provide support from the Regional Growth Fund for our proposed steam raising plant is great news for the Group. Subject to the Government's due diligence criteria being satisfied, an agreed grant offer of £3.1 million is expected early in the new financial year. The plant once operational would reduce our energy related costs by an estimated £1.0 million per annum and our CO₂ emissions by at least 10%.

Despite the troubled economic climate it is very clear to me that I can be confident that there are many opportunities to build upon our global strengths and thus make James Cropper PLC a more profitable enterprise in the future. The Board expects the Company's full year trading results to be in line with market expectations.

Mark Cropper

Chairman

                                                                                                                                13 November 2012

Un-audited Statement of Comprehensive Income for the period
		26 weeks to	26 weeks to	52 weeks to
		29-September-12	01-October-11	31-March-12
		£'000	£'000	£'000
Continuing operations
Revenue		39,037	39,586	78,223
Operating profit		1,204	1,192	668
Finance Costs
Interest payable and similar charges		(264)	(133)	(369)
Interest receivable and similar income		89	327	672
Profit before taxation		1,029	1,386	971
Taxation		(248)	(361)	(134)
Profit for the period from continuing operations		781	1,025	837
Other comprehensive income:
Foreign currency translation		(32)	7	4
Retirement benefit liabilities - actuarial losses		(4,373)	(8,041)	(7,418)
Deferred tax on actuarial losses on retirement benefit liabilities		1,006	2,109	1,483
Income tax on other comprehensive income		-	-	292
Total comprehensive income for the period attributable to equity holders of the company		(2,618)	(4,900)	(4,802)
Earnings per share - basic		9.2p	12.1p	9.9p
Earnings per share -diluted		8.9p	11.6p	9.5p
Continuing Operations Earnings per share - basic		9.2p	12.1p	9.9p
Continuing Operations Earnings per share - diluted		8.9p	11.6p	9.5p
Dividend declared in the period - pence per share		2.2p	2.2p	7.9p

Un-audited Statement of Financial Position at
	29-September-12		01-October-11	31-March-12
	£'000		£'000	£'000
Assets
Intangible assets	775		1,225	943
Property, plant and equipment	19,714		17,783	19,748
Deferred tax assets	95		-	-
Total non- current assets	20,584		19,008	20,691
Inventories	12,734		13,283	12,361
Trade and other receivables	13,979		14,428	13,198
Cash and cash equivalents	3,022		165	5,438
Current tax assets			-	28
Total current assets	29,735		27,876	31,025
Total assets	50,319		46,884	51,716
Liabilities
Trade and other payables	8,211		8,271	9,328
Other financial liabilities	41		-	30
Loans and borrowings	3,823		2,159	2,069
Current tax liabilities	54		726	-
Total current liabilities	12,129		11,156	11,427
Long-term borrowings	7,676		4,239	9,874
Retirement benefit liabilities	11,705		8,691	7,698
Deferred tax liabilities	-		656	750
Total non-current liabilities	19,381		13,586	18,322
Total liabilities	31,510		24,742	29,749
Equity
Share capital	2,119		2,118	2,119
Share premium	575		573	575
Translation reserve	241		276	273
Reserve for own shares	(102)		(222)	(226)
Retained earnings	15,976		19,397	19,226
Total shareholders' equity	18,809		22,142	21,967
Total equity and liabilities	50,319		46,884	51,716

Un-audited Consolidated Statement of Cash Flows
		26 weeks to		26 weeks to		52 weeks to
		29-September-12		01-October-11		31-March-12
		£'000		£'000		£'000
Cash flows from operating activities
Net Profit		781		1,025		837
Adjustments for:
Tax		248		361		134
Depreciation		1,406		1,289		2,675
Net IAS 19 pension adjustments within SCI		156		(256)		(128)
Past service pension deficit payments		(522)		(498)		(996)
Foreign exchange differences		32		58		196
Loss / (profit) on disposal of property, plant and equipment		-		37		(2)
Net bank interest expense		265		130		364
Share based payments		55		105		145
Changes in working capital:
Increase in inventories		(374)		(1,321)		(406)
(Increase) / decrease in trade and other receivables		(783)		82		1,181
Decrease in trade and other payables		(1,123)		(1,965)		(657)
Interest received		-		3		5
Interest paid		(272)		(137)		(355)
Tax paid		(4)		(196)		(965)
Net cash (used in) / generated from operating activities		(135)		(1,283)		2,028
Cash flows from investing activities
Purchase of intangible assets		-		-		(14)
Purchases of property, plant and equipment		(1,219)		(2,754)		(5,920)
Proceeds from sale of property, plant and equipment		-		-		6
Net cash used in investing activities		(1,219)		(2,754)		(5,928)
Cash flows from financing activities
Proceeds from issue of ordinary shares		-		-		3
Proceeds from issue of new loans		688		1,128		7,609
Repayment of borrowings		(1,111)		(782)		(1,636)
Purchase of LTIP investments		(112)		-		(131)
Dividends paid to shareholders		(483)		(474)		(657)
Net cash (used in) / generated from financing activities		(1,018)		(128)		5,188
Net (decrease) / increase in cash and cash equivalents		(2,372)		(4,165)		1,288
Effect of exchange rate fluctuations on cash held		(44)		48		(132)
Net (decrease) / increase in cash and cash equivalents		(2,416)		(4,117)		1,156
Cash and cash equivalents at the start of the period		5,438		4,282		4,282
Cash and cash equivalents at the end of the period		3,022		165		5,438
Cash and cash equivalents consists of:
Cash at bank and in hand		3,022		165		5,438

Statement of Changes in Equity
All figures in £'000	Share capital	Share premium	Translation reserve	Own Shares	Retained earnings	Total
At 2 April 2011	2,118	573	269	(222)	24,671	27,409
Profit for the period	-	-	-	-	837	837
Exchange differences	-	-	4	-	-	4
Actuarial losses on retirement benefit liabilities (net of deferred tax)	-	-	-	-	(5,643)	(5,643)
Total other comprehensive income	-	-	4	-	(5,643)	(5,639)
Dividends paid	-	-	-	-	(657)	(657)
Share based payment charge	-	-	-	-	145	145
Distribution of own shares	-	-	-	127	(127)	-
Proceeds from issue of ordinary shares	1	2	-	-	-	3
Consideration paid for own shares	-	-	-	(131)	-	(131)
Total contributions by and distributions to owners of the Group	1	2	-	(4)	(639)	(640)
At 31 March 2012	2,119	575	273	(226)	19,226	21,967
Profit for the period	-	-	-	-	781	781
Exchange differences	-	-	(32)	-	-	(32)
Actuarial losses on retirement benefit liabilities (net of deferred tax)	-	-	-	-	(3,367)	(3,367)
Total other comprehensive income	-	-	(32)	-	(3,367)	(3,399)
Dividends paid	-	-	-	-	(483)	(483)
Share based payment charge	-	-	-	-	55	55
Distribution of own shares	-	-	-	236	(236)	-
Consideration paid for own shares	-	-	-	(112)	-	(112)
Total contributions by and distributions to owners of the Group	-	-	-	124	(664)	(540)
At 29 September 2012	2,119	575	241	(102)	15,976	18,809

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 29 September 2012, which have not been audited or reviewed, have been prepared in accordance with the accounting policies adopted in the accounts for the 52 week year ended 31 March 2012.

b)        The financial information set out above does not constitute statutory accounts within the meaning of the Companies Act 2006. The figures for the 52 week year ended 31 March 2012 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 29 September 2012 have been calculated by dividing the profits attributable to ordinary shareholders by 8,475,667 (2011: 8,472,368) ordinary shares, being the weighted average number of ordinary shares during the period.

4          Dividend

A net interim dividend of 2.2p per Ordinary Share (2011: 2.2p per share) is proposed and will be paid on 11 January 2013 to holders on the register at the close of business on 14 December 2012. The dividend relating to the 52 week year to 31 March 2012 was made up of an interim payment of £183,000 (2.2p per share) and a final dividend payment of £477,000 (5.7p per share). The dividend is payable in cash only.

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
	29 September	1 October	31 March
	2012	2011	2012
IAS19 DEFICIT	£'000	£'000	£'000
Current Service Charge	(623)	(438)	(1,300)
Future service contributions paid	378	370	761
Net impact on Operating Profit	(245)	(68)	(539)
Finance costs	89	324	667
Net impact on Profit and Loss Account	(156)	256	128
Past service deficit contributions paid	522	498	996
Actuarial gains or losses	(4,373)	(8,041)	(7,418)
Opening deficit	(7,698)	(1,404)	(1,404)
Closing deficit	(11,705)	(8,691)	(7,698)
Deferred Taxation	2,692	2,260	1,848
Net - Deficit	(9,013)	(6,431)	(5,850)

 

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
	29 September	1 October	31 March
	2012	2011	2012
Profit before Tax	£'000	£'000	£'000
Trading profit	1,185	1,130	843
Net pension adjustment
Current Service Charge	(623)	(438)	(1,300)
Future service contributions paid	378	370	761
Net impact on Operating Profit	(245)	(68)	(539)
Finance costs	89	324	667
Net impact on Profit before Tax	(156)	256	128
As reported	1,029	1,386	971

 

END

 

 

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