Half Yearly Report

RNS Number : 2213W

Cropper(James) PLC

16 November 2010

 



James Cropper PLC

 

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

Half-year results to 25 September 2010

	Half-year to 25 September 2010	Half-year to 26 September 2009	Full-year to 27 March 2010
·      Turnover	£43.5m	£35.9m	£76.2m
·      EBITDA (before net IAS19 pension adjustment)	£2.8m	£3.7m	£6.7m
·      Group profit before tax Before net IAS 19 pension adjustments After net IAS 19 pension adjustments	£1.4m £1.2m	£2.0m £1.7m	£3.3m £2.4m
·      Earnings per share - diluted	14.8p	14.1p	21.1p
·      Dividend per share declared	2.2p	2.2p	7.5p
·      Gearing (after IAS 19 pension deficit)	0%	6%	0%
·      Strong performances from Technical Fibre Products and James Cropper Converting in the first half
·      Small loss in James Cropper Speciality Papers in the period
·      The future of the Group's two defined benefit pension schemes are currently under review
·      Three under performing retail outlets were closed in the first half

"I anticipate that TFP's sales to the aerospace, defence, security and consumer electronics sectors will continue to build strongly over the remainder of the financial year with profits well ahead of last year".

"Given the uncertainties surrounding energy and pulp costs and the time lag associated with implementing price increases, it is likely that Speciality Papers will only record a small profit in the current financial year".

"Converting's improved product mix, together with efficiency gains due from planned investment, should lead to a significant increase in this subsidiary's profitability in the current financial year compared to recent years".

"Overall, we are taking steps on many fronts to strengthen our position as the world economy improves. We are reducing exposure to factors outside our control wherever we can.
Demand for our products is strong and we continue to strengthen our commercial teams and strategies to improve market share and product mix.  Significant investment is required, but gearing is nil and our banks are supportive.   As such I am confident that we can begin to transform the profitability of the Group in the next few years".

Enquiries:
Alun Lewis, Chief Executive	Neil Baldwin, Director - Corporate Finance
John Denman, Group Finance Director	Corporate Advisory & Broking
James Cropper PLC (AIM:CRPR.L)	Brewin Dolphin
Telephone: [phone]	Telephone: [phone]
www.cropper.com

Summary of Results	Half-year to	Half-year to	Full-year to
	25 September	26 September	27 March
	2010	2009	2010
Profit and Loss Summary £'000
Group turnover £'000	43,509	35,892	76,230
Trading profit before interest	1,294	2,113	3,568
Add back: Depreciation	1,532	1,582	3,138
EBITDA (before IAS 19 pension adjustment)	2,826	3,695	6,706
Trading profit before interest	1,294	2,113	3,568
Net interest	128	(80)	(271)
Trading profit before tax	1,422	2,033	3,297
(After future service pension contributions paid)
Net IAS 19 pension adjustments to
Operating profit	(224)	(68)	(255)
Net interest	(6)	(310)	(626)
Net pension adjustment before tax	(230)	(378)	(881)
Overall Group after pension adjustments
Profit before interest	1,070	2,045	3,313
Net interest	122	(390)	(897)
Profit before tax	1,192	1,655	2,416
Earnings per Share - diluted	14.8p	14.1p	21.1p
Dividends per share	2.2p	2.2p	7.5p

Balance Sheet Summary £'000
Non-pension assets - excluding cash	43,010	41,431	43,852
Non-pension liabilities - excluding borrowings	(14,338)	(12,840)	(15,800)
	28,672	28,591	28,052
Net IAS 19 pension deficit (after deferred tax)	(11,965)	(9,298)	(10,210)
	16,707	19,293	17,842
Net cash/(borrowings)	131	(1,026)	(31)
Equity shareholders' funds	16,838	18,267	17,811
Gearing % - before IAS 19 pension deficit	0	4	0
Gearing % - after IAS 19 pension deficit	0	6	0
Capital Expenditure £'000	695	581	1,228

STATEMENT BY THE CHAIRMAN, M A J CROPPER

I am pleased to report that the Group recorded a profit before tax of £1,192,000 for the period (£1,422,000 prior to net IFRS pension adjustments). This compares with a profit before tax of £1,655,000 for the same period last year (£2,033,000 prior to net IFRS pension adjustments).

Group turnover was £43.5 million against £35.9 million for the comparable period, an increase of 21%.

Strong performances from Technical Fibre Products ("TFP") and James Cropper Converting ("Converting") in the first half more than offset the small loss in James Cropper Speciality Papers ("Speciality Papers") in the period.

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

Technical Fibre Products ("TFP")

TFP's order book has increased significantly indicating that the impact of the recession on down stream customers is easing. Overall sales were up 42% against the comparable period.

Sales to the US market increased by 44% over the same period last year in £Sterling terms, despite a 6% weakening in the US$ over the course of the first six months of the current financial year. Sales to the US market accounted for 58% of TFP's sales.

Sales outside of the USA were up by 40%.

James Cropper Speciality Papers ("Speciality Papers")

It was reported at the AGM on 28 July 2010 that the upward movement in pulp prices would adversely impact the profitability of Speciality Papers in the short term. In addition energy costs to date had also been higher than anticipated. These factors have led to Speciality Papers recording a small loss in the six months to 25 September 2010 in spite of turnover being 21% higher.

Northern Bleached Softwood Kraft ("NBSK") pulp has risen by 70% since April 2009, driven by supply constraints and continuing demand from China. By the end of September 2009 the price was US$730/tonne. The current financial year opened with the price at US$880/tonne. Further increases took the price to US$980/tonne by June 2010. Since then the price has remained at this level. Market forecasters believe that the price of pulp has reached a plateau and that the price may start to fall in the last quarter of the current financial year.

Speciality Papers continues to agree further price rises with customers in order to pass on these cost increases.

James Cropper Converting ("Converting")

Converting's turnover and volume increased by 30% and 9% respectively, whilst the average selling price was up 20% against the comparable period. This improvement mainly stems  from a step change in supply into the US retailing sector.

The Paper Mill Shop ("TPMS")

TPMS traded at a loss in the opening six months. 3 under performing outlets were closed in the first half year reducing the number of outlets to 18 at September 2010, compared to 24 twelve months earlier.

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

Further tightening of the underlying actuarial assumptions over the past six months has led to the gross IAS19 deficit increasing by £2,437,000 to £16,617,000 as at 25th September 2010. The net charge against profit in the half year was £230,000 compared with £378,000 in the same period last year and £626,000 for the full year to 27th March 2010.

Cash and borrowings

At 25th September 2010 gross drawn down loans and leases totalled £4.3 million, with £4.4 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 nil%.

Working capital has and will remain under tight control. In the second half borrowing will ease upward as a consequence of increased capital expenditure. Investment will continue to be focused on energy and operating efficiencies. 

Outlook

I anticipate that TFP's sales to the aerospace, defence, security and consumer electronics sectors will continue to build strongly over the remainder of the financial year with profits well ahead of last year.

Given the uncertainties surrounding energy and pulp costs and the time lag associated with implementing price increases, it is likely that Speciality Papers will only record a small profit in the current financial year.

Converting's improved product mix, together with efficiency gains due from planned investment, should lead to a significant increase in this subsidiary's profitability in the current financial year compared to recent years.

Further steps are planned to reduce TPMS's losses in the current year.

The future of the Group's two defined benefit pension schemes are also currently under review.

Overall, we are taking steps on many fronts to strengthen our position as the world economy improves. We are reducing exposure to factors outside our control wherever we can.
Demand for our products is strong and we continue to strengthen our commercial teams and strategies to improve market share and product mix.  Significant investment is required, but gearing is nil and our banks are supportive.   As such I am confident that we can begin to transform the profitability of the Group in the next few years.

Mark Cropper

Chairman

                                                                                                              16 November 2010

 

Un-audited Statement of Comprehensive Income for the period
	Half-year to	Half-year to	Full-year to
	25 September 2010	26 September 2009	27 March 2010
	£'000	£'000	£'000
Continuing operations
Revenue	43,509	35,892	76,230
Operating profit	1,070	2,045	3,313
Finance Costs
Interest payable and similar charges	(56)	(393)	(910)
Interest receivable and similar income	178	3	13
Profit before taxation	1,192	1,655	2,416
Taxation	90	(463)	(608)
Profit for the period	1,282	1,192	1,808
Other comprehensive income:
Foreign currency translation	(4)	(280)	(267)
Retirement benefit liabilities - actuarial losses	(2,622)	(3,505)	(4,849)
Deferred tax on actuarial losses on retirement benefit liabilities	734	981	1,358
Total comprehensive income for the period attributable to equity holders of the Company	(610)	(1,612)	(1,950)
Earnings per share - basic	15.1p	14.1p	21.3p
Earnings per share -diluted	14.8p	14.1p	21.1p
Dividend declared in the period - pence per share	2.2p	2.2p	7.5p

Un -audited Statement of Financial Position as at the end of the period.
	As at	As at	As at
	25 September  2010	26 September 2009	27 March 2010
	£'000	£'000	£'000
Assets
Intangible assets	1,237	1,452	2,096
Property, plant and equipment	16,172	17,964	16,863
Deferred tax assets	1,040	-	189
Total non- current assets	18,449	19,416	19,148
Inventories	11,425	9,997	10,195
Trade and other receivables	14,176	12,018	14,509
Cash and cash equivalents	4,404	5,011	5,050
Total current assets	30,005	27,026	29,754
Total assets	48,454	46,442	48,902
Liabilities
Trade and other payables	10,418	7,876	11,081
Loans and borrowings	1,236	1,232	3,195
Current tax liabilities	308	833	749
Total current liabilities	11,962	9,941	15,025
Long-term borrowings	3,037	4,805	1,886
Retirement benefit liabilities	16,617	12,914	14,180
Deferred tax liabilities	-	515	-
Total non-current liabilities	19,654	18,234	16,066
Total liabilities	31,616	28,175	31,091
Equity
Ordinary share capital	2,118	2,118	2,118
Share premium	573	573	573
Translation reserve	261	126	265
Retained earnings	13,886	15,450	14,855
Total shareholders' equity	16,838	18,267	17,811
Total equity and liabilities	48,454	46,442	48,902

Un-audited Consolidated Statement of Changes in Equity for the period
		Half-year to	Half-year to	Full-year to
		25 September  2010	26 September 2009	27 March 2010
		£'000	£'000	£'000
Opening shareholders' funds		17,811	20,174	20,174
Profit for the period		1,282	1,192	1,808
Exchange differences		(4)	(280)	(267)
Actuarial losses on retirement		(1,888)	(2,524)	(3,491)
Share-based payments		78	44	102
Dividends paid		(441)	(339)	(515)
Closing shareholders' funds		16,838	18,267	17,811

Consolidated cash flow statement for the half-year to 25 September 2010
Unaudited
		Half-year to	Half-year to	Full-year to
		25 September 2010	26 September 2009	27 March 2010
		£'000	£'000	£'000
Cash flows from operating activities
Net profit		1,282	1,655	1,808
Adjustments for:
Tax		(90)	-	608
Depreciation		1,532	1,582	3,138
Net IAS 19 pension adjustments within Statement of		224	378	881
Comprehensive Income
Past service pension deficit payments		(415)	(45)	(626)
Foreign exchange gains on currency borrowings		(89)	(188)	(96)
(Profit)/loss on disposal of property, plant and equipment		(4)	-	28
Net bank interest (income) and expense		(122)	80	270
Share based payments		78	44	102
Changes in working capital:
(Increase)/decrease in inventories		(1,261)	426	227
(Increase)/decrease in trade and other receivables		(271)	316	(1,673)
Increase in trade and other payables		634	723	2,832
Interest received		13	3	14
Interest paid		(42)	(81)	(136)
Tax paid		(437)	(517)	(1,089)
Net cash generated from operating activities		1,032	4,376	6,288
Cash flows from investing activities
Purchase of intangible assets		-	(5)	(15)
Purchase of property, plant and equipment		(695)	(576)	(1,213)
Proceeds from sale of property, plant and equipment		4	-	2
Net cash used in investing activities		(691)	(581)	(1,226)
Cash flows from financing activities
Proceeds from issue of new loans		98	329	329
Repayment of borrowings		(816)	(1,191)	(2,240)
Dividends paid to shareholders		(441)	(339)	(515)
Net cash used in financing activities		(1,159)	(1,201)	(2,426)
Net (decrease)/increase in cash and cash equivalents Effects of exchange rate changes		(818)	2,594	2,636
		172	(219)	(222)
Net (decrease)/increase in cash and cash equivalents		(646)	2,375	2,414
Cash and cash equivalents at the start of the period		5,050	2,636	2,636
Cash and cash equivalents at the end of the period		4,404	5,011	5,050
Cash and cash equivalents consists of:
Cash at bank and in hand		4,404	5,011	5,050

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 1985 applicable to companies reporting under IFRS.

b)      All references to:

1.   "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"

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

3.   "Net IAS 19 pension adjustment" refers to the net impact on profit of the pension schemes' operating costs and finance costs.

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

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

6.   "Reserves" refers to the Statement of changes in Equity.

c)     The Group's policy is to maintain the ability to continue as a going concern, in order to provide returns to the shareholders 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 25 September 2010, which have not been audited or reviewed, have been prepared in accordance with the accounting policies adopted in the accounts for the year ended 27 March 2010.

b)      The financial information set out above does not constitute statutory accounts within the meaning of the Companies Act 1985. The figures for the year to 27 March 2010 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 being sent to all shareholders and is available from the Company's registered office or from our website (www.cropper.com).

3       Earnings per share

Basic and diluted earnings per share for the half year to 25 September 2010 have been calculated by dividing the profits attributable to ordinary shareholders by 8,472,368 (2009: 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 (2009: 2.2p per share) is proposed and will be paid on 14 January 2011 to holders on the register at the close of business on 17 December 2010. The dividend relating to the year ended 27 March 2010 was made up of an interim payment of £183,000 (2.2p per share) and a final dividend payment of £441,000 (5.3p 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
	25 September	26 September	27 March
	2010	2009	2010
IAS19 DEFICIT	£'000	£'000	£'000
Current Service Charge	(604)	(373)	(826)
Future service contributions paid	380	305	571
Net impact on Operating Profit	(224)	(68)	(255)
Finance costs	(6)	(310)	(626)
Net impact on Profit and Loss Account	(230)	(378)	(881)
Past service deficit contributions paid	415	45	626
Actuarial gains or losses	(2,622)	(3,505)	(4,849)
Opening deficit	(14,180)	(9,076)	(9,076)
Closing deficit	(16,617)	(12,914)	(14,180)
Deferred Taxation	4,652	3,616	3,970
Net - Deficit	(11,965)	(9,298)	(10,210)

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
	25 September	26 September	27 March
	2010	2009	2010
Profit before Tax	£'000	£'000	£'000
Trading profit	1,422	2,033	3,297
Net pension adjustment
Current Service Charge	(604)	(373)	(826)
Future service contributions paid	380	305	571
Net impact on Operating Profit	(224)	(68)	(255)
Finance costs	(6)	(310)	(626)
Net impact on Profit before Tax	(230)	(378)	(881)
As reported	1,192	1,655	2,416

 

END

 

 

IR BRBDBUXBBGGU