Interim Results
Cropper(James) PLC
20 November 2007
Issued by Citigate Dewe Rogerson Ltd, Birmingham
Date: Tuesday, 20 November 2007
Embargoed: 7.30am
James Cropper PLC
'Specialist Paper Makers'
Interim Results
for the half-year to 29 September 2007
Half-year to Half-year to Full-year to
29 September 30 September 31 March
2007 2006 2007
Overall turnover up 8% £35.7m £33.0m £69.1m
Group profit before tax
Prior to net IFRS pension adjustments £1.4m £1.0m £2.5m
After net IFRS pension adjustments £1.3m £0.8m £2.1m
Earnings per share 10.4p 6.4p 16.2p
Dividend per share declared 2.2p 1.9p 7.0p
Gearing 21% 37% 23%
Encouraging growth in turnover by TFP and Speciality Papers
TFP acquires US based suppliers of metal-coated carbon fibres for a combined
purchase consideration of approximately £0.5 million
Weakening US$ adversely impacting on margins in TFP and Converting
Strong upward trend in pulp and energy costs anticipated in second-half
Significant reduction in IAS19 pension deficit
Transfer from Main List to AIM successfully completed on 31 August 2007
'TFP's new facility in Cheshire and its US acquisitions strengthen its long-term
position in specialised non-woven insulating and composite markets. Sales
performance by TFP in the current year is encouraging. However profit growth
will not be at the exceptional rate achieved in the previous year'.
'Given the uncertainties surrounding the recent strong upward trend in forward
quoted energy prices and in rising pulp costs, the outlook for Speciality Papers
is difficult to project. It should therefore be anticipated that the
profitability of Speciality Papers will slow during the course of the second
half-year as a consequence of the inevitable time lag before these costs can be
recovered through increasing prices to customers'.
'Overall the Group's progress in the first-half has been satisfactory and I am
pleased that it has been possible to increase the interim dividend as a
consequence. However, it is too early in the financial year to consider whether
an adjustment to the final dividend would be appropriate'.
James Cropper, Chairman
Enquiries:
Alun Lewis Keith Gabriel Andrew Kitchingman
Chief Executive Senior Account Manager Managing Director
John Denman Corporate Finance
Group Finance Director
James Cropper PLC Citigate Dewe Rogerson Brewin Dolphin Investment Banking
Telephone: 01539 722002 Telephone: 0121 455 8370 Telephone: 0845 270 8613
www.cropper.com Mobile: 07770 788624 Mobile: 07785 708167
Summary of Results Half-year to Half-year to Full-year to
29 September 30 September 31 March
2007 2006 2007
Profit and loss summary £'000
--------------------------------------------------------------------------------
Group turnover 35,747 32,965 69,085
Trading operating profit 1,614 1,270 3,071
Joint venture (61) (23) (95)
-----------------------------------
Trading profit before interest 1,553 1,247 2,976
Net interest (188) (229) (438)
-----------------------------------
Trading profit before tax 1,365 1,018 2,538
(After future service pension
contributions paid)
--------------------------------------------------------------------------------
Net pension adjustments to
Operating profit (209) (316) (610)
Net interest 109 56 179
-----------------------------------
Net pension adjustment before tax (100) (260) (431)
--------------------------------------------------------------------------------
Overall Group after pension adjustments
Operating profit 1,405 954 2,461
Joint venture (61) (23) (95)
-----------------------------------
Profit before interest 1,344 931 2,366
Net interest (79) (173) (259)
-----------------------------------
Profit before tax 1,265 758 2,107
-----------------------------------
--------------------------------------------------------------------------------
Earnings per share 10.4p 6.4p 16.2p
Dividends per share 2.2p 1.9p 7.0p
--------------------------------------------------------------------------------
Balance Sheet Summary £'000
--------------------------------------------------------------------------------
Non-pension assets - excluding cash 46,016 46,388 45,758
Non-pension liabilities
- excluding borrowings (13,564) (13,103) (13,505)
-----------------------------------
32,452 33,285 32,253
Net pension liabilities (2,421) (7,790) (4,306)
-----------------------------------
30,031 25,495 27,947
Net borrowings (5,292) (6,944) (5,294)
-----------------------------------
Equity shareholders' funds 24,739 18,551 22,653
-----------------------------------
Gearing 21% 37% 23%
Capital expenditure £'000 1,468 920 2,756
--------------------------------------------------------------------------------
STATEMENT BY THE CHAIRMAN, J A CROPPER
The Group recorded a profit before tax of £1,265,000 for the period (£1,365,000
prior to net IFRS pension adjustments). This compares with a profit before tax
of £758,000 for the comparable period last year (£1,018,000 prior to net IFRS
pension adjustments). Group turnover was £35.7 million against £33.0 million for
the same period last year, an increase of 8%.
The Board has decided to increase the interim dividend from 1.9p per share to
2.2p per share.
Technical Fibre Products ('TFP')
TFP's turnover was up 30% with profits in-line with the comparable period last
year. Sales to the US market were 29% up on last year in £Sterling terms and 37%
in US$ terms. At the average exchange rate for the period, sales to US markets
represented approximately 47% of TFP's turnover in £Sterling terms. The
weakening US$, which declined by 11% over the course of the previous year and a
further 6% in the first six months of the current year has had an inevitable
impact on TFP's margins. Sales outside of the USA were ahead by 31%.
Significant growth in turnover outside the USA includes sales 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. This is a new revenue stream
resulting from the customer outsourcing responsibility for converting operations
to TFP. 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 level similar to
last year 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.
A loan of US$2,500,000 has been drawn down by TFP to counter-balance the value
of TFP's net assets denominated in US$s, thus creating a currency hedge on TFP's
Balance Sheet.
James Cropper Speciality Papers ('Speciality Papers')
Profitability in Speciality Papers in the first six months was well ahead of the
opening half of last year. Turnover and volume were up 6% and 7% respectively
against the comparable period. This growth built on the pattern developed during
the previous financial year, with a marked improvement in export sales.
Pulp is expected to continue on an upward trend over the rest of the financial
year as a consequence of tight supply. 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$830 per tonne by the end of
September 2007, an increase of 9% over six months. Market forecasters currently
project a further increase to US$850/tonne by the beginning of the 4th quarter.
Although the average cost of natural gas in the first-half was 24p/therm,
against 34p/therm in the comparable period, current forward market projections
for the second half-year have increased significantly. If these projections
materialise the annual cost of gas for the full year will exceed the previous
year's cost by some 20%.
James Cropper Converting ('Converting')
Converting's overall turnover was up 6% on the comparable period. Sales of US$
denominated products in the first six months represented 20% of turnover in £
Sterling terms. The 17% decline in the value of the US$ over the past 18 months
has had a significant impact on the value of Converting's worldwide sales
denominated in US$s. Converting is unable to mitigate this adverse impact as it
has no substantial expenditure denominated in US$ against which to offset these
receipts. The continuing weakness of the US$ has, for now, outweighed the cost
benefits derived from the upgraded laminating line commissioned in the second
half of the previous year.
The Paper Mill Shop ('TPMS')
Sales in the first half were up 6% on the same period last year, however margin
was lower reflecting a change in the product mix. As a consequence the operating
loss was in-line with the comparable period. 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 has been relatively low. The intention to exit a small
number of under performing stores has been temporarily delayed. Encouraging
early progress has been made in developing other aspects of TPMS's recovery
plan.
Pensions and International Accounting Standard 19 ('IAS 19')
Over the course of the half-year the IAS19 deficit declined by £2,693,000 to
£3,459,000 as at 29 September 2007. 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 £486,000. Under IAS 19 the charge against profit before tax in
the half-year was £586,000, which was £100,000 in excess of the future service
contributions that were actually required. In addition, contributions totalling
£438,000 were paid to the two schemes in respect of their past service deficits
brought forward.
Outlook
TFP's new facility in Cheshire and its US acquisitions strengthen its long-term
position in specialised non-woven insulating and composite markets. Sales
performance by TFP in the current year is encouraging. However profit growth
will not be at the exceptional rate achieved in the previous year.
Given the uncertainties surrounding the recent strong upward trend in forward
quoted energy prices and in rising pulp costs, the outlook for Speciality Papers
is difficult to project. It should therefore be anticipated that the
profitability of Speciality Papers will slow during the course of the second
half-year as a consequence of the inevitable time lag before these costs can be
recovered through increasing prices to customers.
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.
In the second-half gearing will ease upward from 21% at the half-year end as
cash outflow increases as a consequence of increased capital expenditure and
higher pulp and energy costs.
Overall the Group's progress in the first-half has been satisfactory and I am
pleased that it has been possible to increase the interim dividend as a
consequence. However, it is too early in the financial year to consider whether
an adjustment to the final dividend would be appropriate.
Consolidated income statement for the half-year to 29 September 2007
Unaudited
Half-year to Half-year to Full year to
29 September 30 September 30 March
2007 2006 2007
£'000 £'000 £'000
Continuing operations
Turnover 35,747 32,965 69,085
-------------------------------------
Operating profit 1,405 954 2,461
Interest payable and similar charges (298) (386) (783)
Interest receivable and similar income 219 213 524
Share of loss of joint venture (61) (23) (95)
-------------------------------------
Profit before tax 1,265 758 2,107
Taxation (380) (227) (746)
-------------------------------------
Profit for the period
attributable to equity holders
of the company 885 531 1,361
-------------------------------------
Earnings per share - basic &
diluted 10.4p 6.4p 16.2p
-------------------------------------
Dividend declared in the
period - pence per share 2.2p 1.9p 7.0p
-------------------------------------
Consolidated balance sheet as at 29 September 2007
Unaudited
29 September 30 September 30 March
2007 2006 2007
£'000 £'000 £'000
Assets
Non-current assets
Intangible assets 1,589 1,287 1,351
Property, plant and equipment 21,169 23,080 21,517
Financial assets
Investments in joint ventures - 95 58
Deferred tax assets 1,038 3,339 1,846
-----------------------------------------
23,796 27,801 24,772
-----------------------------------------
Current assets
Inventories 9,033 8,313 8,366
Trade and other receivables 14,210 13,611 14,462
Financial assets
- Derivative financial
instruments 15 2 4
Cash and cash equivalents 3,761 3,266 3,730
----------------------------------------
27,019 25,192 26,562
----------------------------------------
Liabilities
Current liabilities
Trade and other payables (8,331) (8,594) (8,544)
Financial liabilities
- Borrowings (2,242) (2,384) (2,374)
- Derivative financial
instruments - (3) -
Current tax liabilities (1,292) (590) (1,020)
----------------------------------------
(11,865) (11,571) (11,938)
----------------------------------------
Net current assets 15,154 13,621 14,624
-----------------------------------------
Non-current liabilities
Financial liabilities
- Borrowings (6,811) (7,826) (6,650)
Retirement benefit liabilities (3,459) (11,129) (6,152)
Deferred tax liabilities (3,941) (3,916) (3,941)
-----------------------------------------
(14,211) (22,871) (16,743)
-----------------------------------------
Net assets 24,739 18,551 22,653
-----------------------------------------
Shareholders' equity
Share capital 2,118 2,090 2,118
Share premium 573 454 573
Other reserves - 61
Retained earnings 22,048 15,946 19,962
-----------------------------------------
Total shareholders' equity 24,739 18,551 22,653
-----------------------------------------
Consolidated cash flow statement for the half-year to 29 September 2007
Half-year to Half-year to Full year to
Unaudited 29 September 30 September 30 March
2007 2006 2007
£'000 £'000 £'000
Cash flows from operating activities
Profit before tax 1,265 758 2,107
Trading Interest income and expense 188 229 259
Depreciation/amortisation 1,627 1,632 3,315
Decrease/(increase) in
working capital (638) 575 (393)
Other non-cash movements
- Share of loss of joint venture 61 23 95
- Past service deficit payments (438) (400) (838)
- Net IFRS pension adjustments 100 260 431
- Profit on disposal of property, plant and
equipment - (39)
- Share-based payments 7 12 17
---------------------------------------
Cash generated from
operations 2,172 3,089 4,954
Interest received 95 168 549
Interest paid (298) (360) (760)
Tax paid - (95) (87)
---------------------------------------
Net cash generated from
operating activities 1,969 2,802 4,656
---------------------------------------
Cash flows from investing activities
Investment in joint venture (50) (47) (87)
Purchase of intangible assets (355) (73) (254)
Purchase of property, plant
and equipment (1,113) (847) (2,502)
Proceeds from sale of
property, plant and
equipment - - 1,691
---------------------------------------
Net cash used in investing
activities (1,518) (967) (1,152)
---------------------------------------
Cash flows from financing activities
Net proceeds from issue of
new bank loans 1,228 1,000 1,000
Net proceeds from issue of
ordinary share capital 147
Repayment of bank loans (1,198) (1,147) (2,333)
Dividends paid to
shareholders (432) (184) (343)
---------------------------------------
Net cash used in financing
activities (402) (331) (1,529)
---------------------------------------
Effects of exchange rate
changes (18) - (7)
Net increase in cash and
cash equivalents in the
period 31 1,504 1,968
Cash and cash equivalents
at the start of the period 3,730 1,762 1,762
---------------------------------------
Cash and cash equivalents
at the end of the period 3,761 3,266 3,730
---------------------------------------
Cash and cash equivalents consists of:
Cash at bank and in hand 3,761 3,266 3,730
---------------------------------------
3,761 3,266 3,730
---------------------------------------
Consolidated statement of recognised income and expense
for the half-year to 29 September 2007
Unaudited
Half-year to Half-year to Full year to
29 September 30 September 30 March
2007 2006 2007
£'000 £'000 £'000
Profit for the period 885 531 1,361
Currency translation
differences on foreign
currency investment (22) 1 (18)
Retirement benefit
liabilities - actuarial
gains/(losses) 2,355 (954) 3,756
Deferred tax on
actuarial gains/(losses)
on retirement benefit
liabilities (707) 286 (1,127)
--------------------------------------
Total recognised
(expense)/income for the
period 2,511 (136) 3,972
--------------------------------------
Consolidated statement of changes in equity
for the half-year to 29 September 2007
Unaudited
Half-year to Half-year to Full year to
29 September 30 September 30 March
2007 2006 2007
£'000 £'000 £'000
Opening shareholders' funds 22,653 18,859 18,859
Total recognised
(expense)/income for the
period 2,511 (136) 3,972
Share-based payments 7 12 18
Dividends paid (432) (184) (343)
Proceeds from shares
issue 147
--------------------------------------
Closing shareholders'
funds 24,739 18,551 22,653
----------- ---------------------------
Notes to the Unaudited Interim Results
1 Basis of the preparation of IFRS financial information
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.
2 Interim Statement
a) The summarised results for the half-year to 29 September 2007, which have not
been audited or reviewed, have been prepared in accordance with the accounting
policies adopted in the accounts for the year ended 31 March 2007.
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 31 March 2007 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 29 September 2007 have
been calculated on the profit available for distribution and on 8,472,368 (2006:
8,359,114) Ordinary Shares, being the weighted average number of shares in issue
during the period.
4 Dividend
An interim dividend of 2.2 per Ordinary Share (2006: 1.9p per share) is proposed
and will be paid on 11 January 2008 to holders on the register at the close of
business on 14 December 2007. The dividend relating to the year to 31 March 2007
was made up of an interim payment of £159,000 (1.9p per share) and a final
dividend of £432,000 (5.1p 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
29 September 30 September 31 March
2007 2006 2007
IAS19 DEFICIT £'000 £'000 £'000
Current Service Charge (695) (822) (1,598)
Future service contributions paid 486 506 988
----------------------------------------
Net impact on Operating Profit (209) (316) (610)
Finance costs 109 56 179
----------------------------------------
Net impact on Profit and Loss Account (100) (260) (431)
Past service deficit
contributions paid 438 400 838
Actuarial gains or losses 2,355 (954) 3,756
Opening deficit (6,152) (10,315) (10,315)
----------------------------------------
Closing deficit (3,459) (11,129) (6,152)
Deferred Taxation 1,038 3,339 1,846
----------------------------------------
Net - Deficit (2,421) (7,790) (4,306)
----------------------------------------
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.
An 'on-going' valuation takes account of the projected growth in the pension
schemes' assets by asset type over the projected life of the scheme. The
combined 'on-going' deficits as at April 2005 were valued at £6,867,000 prior to
deferred tax.
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 £486,000.
Half-year to Half-year to Full-year to
29 September 30 September 31 March
2007 2006 2007
£'000 £'000 £'000
Trading profit before tax 1,365 1,018 2,538
Current Service Charge (695) (822) (1,598)
Future service contributions paid 486 506 988
---------------------------------------
Net impact on Operating Profit (209) (316) (610)
Finance costs 109 56 179
---------------------------------------
Net pension adjustment (100) (260) (431)
As reported 1,265 758 2,107
This information is provided by RNS
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