Half Yearly Report

RNS Number : 6187C

Cropper(James) PLC

17 November 2009

 



James Cropper plc

Half-year to 26 September 2009

Key Results

	Half-year to 26 September 2009	Half-year to 27 September 2008	Full-year to 28 March 2009
Turnover	£35.9m	£37.7m	£74.8m
EBITDA (before net IAS 19 pension adjustment)	£3.7m	£1.7m	£4.7m
Group profit/(loss) before tax Before net IAS 19 pension adjustments After net IAS 19 pension adjustments	£2.0m £1.7m	(£0.2m) (£0.3m)	£1.1m £0.9m
Earnings/(losses) per share	14.1p	(2.9p)	(1.1p)
Dividend per share declared	2.2p	1.1p	5.1p
Gearing (after IAS 19 pension deficit)	6%	37%	22%
Speciality Papers' turnover down 2% on the comparable period
Price of pulp now rising having earlier fallen from the high levels of last year
Technical Fibre Products' turnover down 17% on the comparable period.

"In view of the Group's continuing recovery the Board has decided to increase the interim dividend from 1.1 pence to 2.2 pence per share thus returning it to its 2007 level". 

"Speciality Papers traded strongly in the first six months of the financial year continuing the recovery that began in the second half of the previous financial year". 

"It is anticipated that Speciality Papers' second half turnover and volume will be down slightly on the first six months. In addition the rising cost of pulp will also dampen profitability. Winter energy costs by contrast are expected to be significantly lower than the previous year". 

"TFP's order book is down considerably and this is likely to remain the case until at least the fourth quarter as a consequence of recessionary pressures on customers' inventories and markets. Not-withstanding current trading, I am encouraged that TFP is well positioned to service aerospace, security and energy sectors, all of which are of strategic long-term importance to the business". 

"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".  

"The down-turn in the global economy continues to create a challenging trading climate for the Group. However our forward plans and strong cash position give me confidence that the Group will be able to capitalise on opportunities in the medium to long-term when favourable conditions return".

Enquiries:
Alun Lewis, Chief Executive	Andrew Kitchingman,
John Denman, Group Finance Director	Managing Director, Corporate Finance
James Cropper PLC	Brewin Dolphin Investment Banking
Telephone: [phone]	Telephone: [phone]
www.cropper.com	Mobile: [phone]

Summary of Results	Half-year to	Half-year to	Full-year to
	26 September	27 September	28 March
	2009	2008	2009
Profit and Loss Summary £'000
Group turnover £'000	35,892	37,677	74,803
Trading profit before interest	2,113	54	1,556
Add back: Depreciation	1,582	1,616	3,179
EBITDA (before IAS 19 pension adjustment)	3,695	1,670	4,735
Trading profit before interest	2,113	54	1,556
Net interest	(80)	(235)	(448)
Trading (loss)/profit before tax	2,033	(181)	1,108
(After future service pension contributions paid)
Net IAS 19 pension adjustments to
Operating profit	(68)	(186)	(476)
Net interest	(310)	106	226
Net pension adjustment before tax	(378)	(80)	(250)
Overall Group after pension adjustments
Profit/(loss) before interest	2,045	(132)	1,080
Net interest	(390)	(129)	(222)
Profit/(loss) before tax	1,655	(261)	858
Earnings/(Losses) per Share	14.1p	(2.9p)	(1.0p)
Dividends per share	2.2p	1.1p	5.1p
Balance Sheet Summary £'000
Non-pension assets - excluding cash	41,431	46,604	43,753
Non-pension liabilities - excluding borrowings	(12,840)	(13,328)	(12,592)
	28,591	33,276	31,161
Net IAS 19 pension deficit (after deferred tax)	(9,298)	(7,185)	(6,535)
	19,293	26,091	24,626
Net borrowings	(1,026)	(7,113)	(4,452)
Equity shareholders' funds	18,267	18,978	20,174
Gearing % - before IAS 19 deficit	4%	27%	17%
Gearing % - after IAS 19 deficit	6%	37%	22%
Capital Expenditure £'000	581	743	1,333

  STATEMENT BY THE CHAIRMAN, J A CROPPER

I am pleased to report that the Group recorded a profit before tax of £1,655,000 for the period (£2,045,000 prior to net IFRS pension adjustments). This compares with a loss before tax of £261,000 for the same period last year. 

Group turnover was £35.9 million against £37.7 million for the comparable period, a decrease of 5%.

In view of the Group's continuing recovery the Board has decided to increase the interim dividend from 1.1 pence to 2.2 pence per share thus returning it to its 2007 level. 

James Cropper Speciality Papers ("Speciality Papers")

Speciality Papers traded strongly in the first six months of the financial year continuing the recovery that began in the second half of the previous financial year. 

Turnover and volume were down by 2% and 8% respectively, whilst the average selling price was up 6% against the comparable period. 

Profitability has benefited from a reduction in the cost of gas and pulp from the exceptional high levels of twelve months ago. However the price of pulp has been on a rising trend since the end of the previous financial year. Northern Bleached Softwood Kraft ("NBSK") pulp opened the new financial year at US$580/tonne. By the end of the first half the price was US$730/tonne. Some analysts currently forecast that the price of NBSK will continue to rise for the remainder of the financial year to peak towards US$850/tonne. 

Technical Fibre Products ("TFP")

I indicated in my AGM statement of 29th July 2009 that sales by TFP in the first half of the financial year would be depressed as a consequence of re-structuring at a major customer and de-stocking by others as a consequence of reduced economic activity. This indeed proved to be the case resulting in TFP's turnover in the first six months being down 17% on the same period last year. 

Sales to the US market were 21% down on last year in US$ terms and 2% down on last year in £Sterling terms. The US$ weakened by 12% over the course of the first six months of the current year thus depressing margins in the period. 

Sales outside of the USA were down by 30%, with composite and insulating sectors being particularly affected.

James Cropper Converting ("Converting")

Converting's turnover was down 4% on the comparable period. This resulted from subdued activity in mount-board and display-board markets.

The Paper Mill Shop ("TPMS")

TPMS traded at a loss in the opening six months. Sales were up 1% on the same period last year. 

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

Substantial changes in financial markets over the first six months had a considerable impact on the IAS 19 valuation at the period end. Although equities increased significantly, this was not great enough to offset the adverse impact of the fall in bond rates from 6.7% to 5.6%. As a consequence of these changes the gross IAS 19 deficit increased by £3,838,000 over the six months to £12,914,000 as at 26th September 2009. The net charge against profit in the half year was £378,000 compared with £80,000 in the same period last year and £250,000 for the full year to 28th March 2009. 

These results once again demonstrate the volatility introduced to company results by this accounting standard. 

Cash and borrowings

At 26th September 2009 gross drawn down loans totalled £6.0 million, with £5.0 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 6%.

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

It is anticipated that Speciality Papers' second half turnover and volume will be down slightly on the first six months. In addition the rising cost of pulp will also dampen profitability. Winter energy costs by contrast are expected to be significantly lower than the previous year. 

TFP's order book is down considerably and this is likely to remain the case until at least the fourth quarter as a consequence of recessionary pressures on customers' inventories and markets. Not-withstanding current trading, I am encouraged that TFP is well positioned to service aerospace, security and energy sectors, all of which are of strategic long-term importance to the business. 

As with all retailers, the pre-Christmas period is vital to The Paper Mill Shop. Given the prevailing trading climate it is expected that the subsidiary will incur a loss for the full year similar to that of last year. It remains the intention to exit a small number of under performing stores as their leases expire unless it is more economic to do so earlier. 

The down-turn in the global economy continues to create a challenging trading climate for the Group. However our forward plans and strong cash position give me confidence that the Group will be able to capitalise on opportunities in the medium to long-term when favourable conditions return.

Chairman

17th November 2009

Un-audited Statement of Comprehensive Income for the period
	Half-year to	Half-year to	Full-year to
	26 September 2009	27 September 2008	28 March 2009
	£'000	£'000	£'000
Continuing operations
Revenue	35,892	37,677	74,803
Operating profit/(loss)	2,045	(132)	1,080
Finance Costs
Interest payable and similar charges	(393)	(269)	(493)
Interest receivable and similar income	3	140	271
Profit/(loss) before taxation	1,655	(261)	858
Tax expense	(463)	13	(945)
Profit/(loss) for the period	1,192	(248)	(87)
Other comprehensive income:
Foreign currency translation	(280)	85	546
Retirement benefit liabilities - actuarial (losses)/gains	(3,505)	(8,561)	(7,734)
Deferred tax on actuarial (losses)/gains on retirement benefit liabilities	981	2,397	2,166
Total comprehensive income for the period attributable to equity holders of the Company	(1,612)	(6,327)	(5,109)
Earnings/(losses) per share - basic	14.1p	(2.9p)	(1.0p)
Earnings/(losses) per share -diluted	14.1p	(2.9p)	(1.0p)
Dividend declared in the period - pence per share	2.2p	1.1p	5.1p

Un-audited Statement of Financial Position as at the end of the period.
	As at	As at	As at
	26 September 2009	27 September 2008	28 March  2009
	£'000	£'000	£'000
Assets
Intangible assets	1,452	1,598	2,012
Property, plant and equipment	17,964	19,409	18,483
Deferred tax assets	3,616	2,795	2,541
Total non- current assets	23,032	23,802	23,036
Inventories	9,997	10,129	10,422
Trade and other receivables	12,018	15,468	12,836
Cash and cash equivalents	5,011	1,229	2,636
Total current assets	27,026	26,826	25,894
Total assets	50,058	50,628	48,930
Liabilities
Trade and other payables	7,876	9,149	7,662
Loans and borrowings	1,232	2,490	2,134
Current tax liabilities	833	370	801
Total current liabilities	9,941	12,009	10,597
Long-term borrowings	4,805	5,852	4,954
Retirement benefit liabilities	12,914	9,980	9,076
Deferred tax liabilities	4,131	3,809	4,129
Total non-current liabilities	21,850	19,641	18,159
Total liabilities	31,791	31,650	28,756
Equity
Share capital	2,118	2,118	2,118
Share premium	573	573	573
Translation reserve	252	112	532
Retained earnings	15,324	16,175	16,951
Total shareholders' equity	18,267	18,978	20,174
Total equity and liabilities	50,058	50,628	48,930

Un-audited Consolidated Statement of Changes in Equity for the period
	Half-year to	Half-year to	Full-year to
	26 September 2009	27 September 2008	28 March  2009
	£'000	£'000	£'000
Opening shareholders' funds	20,174	25,661	25,661
Profit/(loss) for the period	1,192	(248)	(87)
Exchange differences	(280)	85	546
Actuarial (losses)/gains on retirement	(2,524)	(6,164)	(5,568)
Share-based payments	44	78	147
Dividends paid	(339)	(434)	(525)
Closing shareholders' funds	18,267	18,978	20,174

Un-audited Consolidated Cash Flow Statement for the half-year to 26 September 2009
	Half-year to	Half-year to	Full-year to
	26 September 2009	27 September 2008	28 March  2009
	£'000	£'000	£'000
Cash flows from operating activities
Profit/(loss) before tax	1,655	(261)	858
Trading Interest income and expense	80	235	448
Depreciation/amortisation	1,582	1,616	3,179
Decrease/(increase) in working capital	1,465	(867)	(232)
Other non-cash movements
- Foreign exchange losses/(gains) on currency borrowings	(188)	-	506
- Past service deficit payments	(45)	(465)	(712)
- Net IFRS pension adjustments	378	80	250
- Profit on disposal of property, plant and equipment	-	-	9
- Share-based payments	44	78	147
Cash generated from operations	4,971	416	4,453
Interest received	3	38	45
Interest paid	(81)	(258)	(514)
Tax paid	(517)	(226)	(406)
Net cash generated from operating activities	4,376	(30)	3,578
Cash flows from investing activities
Purchase of intangible assets	(5)	(133)	(262)
Purchase of property, plant and equipment	(576)	(610)	(1,071)
Proceeds from sale of property, plant and equipment	-	-	5
Net cash used in investing activities	(581)	(743)	(1,328)
Cash flows from financing activities
Net proceeds from issue of new loans	329	1,392	1,392
Repayment of borrowings	(1,191)	(985)	(2,744)
Dividends paid to shareholders	(339)	(434)	(525)
Net cash used in financing activities	(1,201)	(27)	(1,877)
Net increase/(decrease) in cash and cash equivalents	2,594	(800)	373
Effects of exchange rate changes	(219)	112	346
Net increase/(decrease) in cash and cash equivalents in the period	2,375	(688)	719
Cash and cash equivalents at the start of the period	2,636	1,917	1,917
Cash and cash equivalents at the end of the period	5,011	1,229	2,636
Cash and cash equivalents consists of:
Cash at bank and in hand	5,011	1,229	2,636

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)    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 26 September 2009, which have not been audited or reviewed, have been prepared in accordance with the accounting policies adopted in the accounts for the year ended 28 March 2009. In addition, IAS 1 Presentation of Financial Statements (revised) has been applied, with a resulting impact on the presentation of the summarised results with no change to the balances reported.

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 28 March 2009 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 26 September 2009 have been calculated by dividing the profits attributable to ordinary shareholders by 8,472,368 (2008: 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 (2008: 1.1p per share) is proposed and will be paid on 15 January 2010 to holders on the register at the close of business on 18 December 2009. The dividend relating to the year to 28 March 2009 was made up of an interim payment of £93,000 (1.1p per share) and a final dividend payment of £339,000 (4.0p 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.

IAS 19 deficits are shown below at the corresponding Balance Sheet dates.

	Half-year to	Half-year to	Full-year to
	26 September	27 September	28 March
	2009	2008	2009
	£'000	£'000	£'000
Current Service Charge	(373)	(641)	(1,300)
Future service contributions paid	305	455	824
Net impact on Operating Profit	(68)	(186)	(476)
Finance costs	(310)	106	226
Net impact on Profit and Loss Account	(378)	(80)	(250)
Past service deficit contributions paid	45	465	712
Actuarial gains or losses	(3,505)	(8,561)	(7,734)
Opening deficit	(9,076)	(1,804)	(1,804)
Closing deficit	(12,914)	(9,980)	(9,076)
Deferred Taxation	3,616	2,795	2,541
Net - Deficit	(9,298)	(7,185)	(6,535)

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. The assumptions used by the actuaries for their IAS 19 valuations are more conservative than those that they used with regard to their "on-going" valuations. 

Actual future service pension contributions paid in the period by the Group to its two final salary schemes in accordance with the actuaries' recommendations, resulting from their latest "on-going" valuations, were £305,000. 

	Half-year to	Half-year to	Full-year to
	26 September	27 September	28 March
	2009	2008	2009
Profit before Tax	£'000	£'000	£'000
Trading profit/(loss)	2,033	(181)	1,108
Net pension adjustment
Current Service Charge	(373)	(641)	(1,300)
Future service contributions paid	305	455	824
Net impact on Operating Profit	(68)	(186)	(476)
Finance costs	(310)	106	226
Net impact on Profit before Tax	(378)	(80)	(250)
As reported	1,655	(261)	858

 

END

 

 

IR GCBDBSBBGGCR