Preliminary results - year ended 2 April 2011

RNS Number : 2089J

Cropper(James) PLC

28 June 2011

 



Issued by Arbuthnot Securities Limited                                                              Embargoed: 7.00am

Date: Tuesday, 28 June 2011

James Cropper PLC

James Cropper plc (AIM:CRPR.L) the niche specialist paper and materials group, is pleased to announce its

Preliminary Audited Results for the year ended 2nd April 2011

Full year to	2 April	27 March
	2011	2010	Change
	£ms	£ms	%
·      Turnover (inclusive of discontinued operation) o  Group export sales were up 19% and represented 53% of turnover.	86.9	76.2	+14%
·      EBITDA (before IAS19 pension adjustment)	4.7	6.7
·      Group profit before tax (before IAS19 pension adjustment) o  Continuing operations o  Inclusive of discontinued operation	3.4 1.7	3.7 3.3
·      Group profit before tax (after IAS19 pension adjustment) o  Curtailment of DB pension future service benefits reduce IAS 19 deficit by £10.2 million.	11.1	2.4
·      Total Shareholders' Equity o  Overall IAS 19 pension deficit is reduced by £12.8 million to £1.4 million.	27.4	17.8	+54%
·      Earnings per share - continuing operations - diluted o  Before IAS 19 curtailment adjustment o  After IAS 19 curtailment adjustment	33.3 pence 117.4 pence	25.5 pence 25.5 pence
·      Dividend per share declared	7.9 pence	7.5 pence	+5%
·      Gearing (after IAS 19 pension deficit)	6%	Nil
·      Retailing operations discontinued; full provision for all closure and redundancy costs taken in year.
·      TFP profits increase to £2.3 million from £1.3 million; turnover up 32%
·      Speciality Papers profits fall to £0.6 million from £3.4 million; turnover up 16% o  Significant increases in pulp and energy costs in year
·      Converting profits increase to £1.3 million from £0.4 million; turnover up 17%

Mark Cropper, Chairman, said:

"As the end of my first year as chairman nears, I am heartened by our prospects on many levels.  We start the new financial year having taken significant steps to reduce the Group's risk exposure.  Our retailing activities have ceased and our IAS 19 pension deficit has fallen by £12.8 million to £1.4 million primarily as a consequence of curtailing future benefits".

"There are also other good reasons for the growing optimism that I have noticed within the Group.  Demand for our products is growing.  We have a strong competitive position, underpinned by the sale of service and capability as much as materials.  We are more committed than ever to developing the skills of our people and the results of investment in this area are beginning to be felt.  We are carefully recruiting to strengthen teams when the need is demonstrable.  Although challenges lie ahead I am confident that our business prospects are bright".

James Cropper PLC	Arbuthnot Securities Limited
John Denman, Group Finance Director	Andrew Kitchingman
Tel: [phone]	Tel: [phone]
www.cropper.com

Summary of Results	2011	2010	2009	2008	2007
Group turnover £'000
Continuing operations	83,264	70,714	69,129	66,542	63,047
The Paper Mill Shop (discontinued operation)	3,609	5,516	5,674	6,202	6,038
	86,873	76,230	74,803	72,744	69,085
Trading profit before interest	1,665	3,568	1,556	2,365	2,976
Depreciation	3,072	3,138	3,179	3,280	3,315
EBITDA (before IAS 19 pension adjustment)	4,737	6,706	4,735	5,645	6,291
Trading profit before interest
Continuing operations	3,361	3,942	1,944	2,723	3,334
The Paper Mill Shop (discontinued operation)	(1,696)	(374)	(388)	(358)	(358)
	1,665	3,568	1,556	2,365	2,976
Trading activities
Technical Fibre Products	2,289	1,327	2,099	1,426	2,053
Speciality Papers	587	3,437	(310)	1,281	1,435
Converting	1,272	446	406	548	460
The Paper Mill Shop (discontinued operation)	(1,696)	(374)	(388)	(358)	(358)
Other Group expenses	(119)	(393)	(19)	(147)	(86)
Director and employee bonuses	(668)	(875)	(232)	(324)	(433)
Joint venture	-	-	-	(61)	(95)
Trading profit	1,665	3,568	1,556	2,365	2,976
Net interest	29	(271)	(448)	(402)	(438)
Trading profit before tax	1,694	3,297	1,108	1,963	2,538
(After future service pension contributions paid)
Net IAS 19 pension adjustments to
Net current service charge required	(763)	(255)	(476)	(610)	(610)
Exceptional curtailment adjustment	10,158	-	-	-	-
Operating profit	9,395	(255)	(476)	(610)	(610)
Net interest	(3)	(626)	226	227	179
Net pension adjustment before tax	9,392	(881)	(250)	(383)	(431)
Overall Group after pension adjustments
Operating profit	11,060	3,313	1,080	1,816	2,461
Joint venture	-	-	-	(61)	(95)
Profit before interest	11,060	3,313	1,080	1,755	2,366
Net interest	26	(897)	(222)	(175)	(259)
Profit before Tax	11,086	2,416	858	1,580	2,107
Continuing operations	12,812	2,790	1,246	1,938	2,465
The Paper Mill Shop (discontinued operation)	(1,726)	(374)	(388)	(358)	(358)
Profit before Tax	11,086	2,416	858	1,580	2,107
Earnings/(losses) per Share - diluted	117.4p	25.5p	(1.0p)	14.0p	16.2p
Continuing operations after IAS 19
Dividends per Share	7.9p	7.5p	5.1p	7.3p	7.0p
Balance Sheet Summary £'000
Non-pension assets - excluding cash	44,000	43,852	43,753	45,616	45,758
Non-pension liabilities - excluding borrowings	(13,841)	(15,800)	(12,592)	(12,640)	(13,505)
	30,159	28,052	31,161	32,976	32,253
Net IAS 19 pension deficit (after deferred tax)	(1,039)	(10,210)	(6,535)	(1,299)	(4,306)
	29,120	17,842	24,626	31,677	27,947
Net borrowings	(1,711)	(31)	(4,452)	(6,016)	(5,294)
Equity shareholders' funds	27,409	17,811	20,174	25,661	22,653
Gearing %  - after IAS 19 deficit	6%	Nil	22%	23%	23%
Capital Expenditure £'000	2,276	1,228	1,333	2,337	2,756

All references to:

1.     "Trading Profit" refers to profits prior to  interest on borrowings, "Net IAS 19 pension adjustment" and tax.

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

3.     "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.

4.     All referencesto:

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

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

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

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

CHAIRMAN'S REVIEW

During the financial year we took steps to dramatically reduce the threats to the Group posed by its defined benefit pension schemes and retailing activities.

Pension scheme members' future service benefits have been reduced and as a consequence the IAS 19 deficit has fallen by £12,776,000 to £1,404,000 as at 2nd April 2011. IAS 19 requires that any reduction in deficit arising from a curtailment of benefits should be shown on the face of the Statement of Comprehensive Income  ("Profit and Loss Account"). This means that the Group's Profit and Loss Account shows an exceptional credit of £10,158,000 arising from curtailment.

All Paper Mill Shop ("TPMS") retail outlets were closed by 2nd April 2011. Having taken full provision for closure and redundancy costs TPMS incurred a trading loss before tax of £1,726,000 in the financial year ended 2^nd April 2011. This is shown as a discontinued operation on the face of the Profit and Loss Account. 

Prior to the IAS 19 adjustment profit before tax, inclusive of TPMS's losses, was £1,694,000, compared to £3,297,000 in 2009/10. Our continuing operations made a profit before tax of £3,420,000 against £3,675,000 in the previous year.

Group turnover for the financial year was up 14% to £86,873,000. Group export sales were up 19% and represented 53% of turnover. Sales growth in our three manufacturing businesses was export led across new and existing products.

Despite the 8% weakening of the US$ against £Sterling during the year strong profit performances were recorded by Technical Fibre Products and James Cropper Converting. Turnover at James Cropper Speciality Papers grew by 16%.

Diluted Earnings per Share of the continuing operations, before the adjustment for IAS 19 curtailment was 33.3 pence compared to 25.5 pence in the previous year (and 117.4 pence after adjustment for IAS 19 curtailment).

Dividend

In view of the measures taken and the strong performance of our manufacturing businesses the Board has decided to increase the final dividend from 5.3 pence to 5.7 pence per share making a total dividend for the full year of 7.9 pence compared to 7.5 pence in 2009/10.

Technical Fibre Products ("TFP")

TFP's operating profit for the year was £2,289,000 compared to £1,327,000 in 2009/10, with turnover up by 32% on the previous year to £13,152,000.

Strong growth was recorded in the insulation, energy, industrial and electronic sectors. Sales into the USA increased by 37% in £Sterling terms over the course of the financial year and accounted for 54% of TFP's turnover. Sales outside of the USA were up by 26%.

James Cropper Speciality Papers ("Speciality Papers")

Speciality Papers reported an operating profit of £587,000 against £3,437,000 in the previous year.

Turnover grew by £8,660,000 to £61,594,000, a 16% increase. Overall volume was up 8%, with UK and export volumes growing by 3% and 17% respectively.

The price of pulp continued to move upward during the financial year driven by supply constraints and continuing demand from China. Northern Bleached Softwood Kraft ("NBSK") pulp opened at US$880/tonne and closed the year at US$965/tonne, an increase of 10%. The weakening of the US$ against £Sterling during the year dampened the impact of the increasing price of pulp to some extent. Further increases took the price of NBSK to US$1010/tonne by the end of May 2011.

Supply constraints resulting from the harsh winter and geo-political events led to a strengthening in the cost of natural gas prices, with the overall cost of consumption in the year being £3.5 million compared to £2.3 million in the prior 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 operating profit was £1,272,000 compared to £446,000 in the previous year.

Turnover increased by 17% to £12,981,000, with volume down by 2%. Sales denominated in US$s increased by 71% in £Sterling terms over the course of the financial year and accounted for 35% of Converting's turnover. Sales of digital printing grades into the US retail sector contributed significantly to the operating profit. As a proportion of the 2010/11 sales included customer launch stocks, sales of these products in 2011/12 are expected to be lower.

The Paper Mill Shop ("TPMS")

Following four years of losses and despite the best efforts of the TPMS management team to bring this subsidiary back to profitability, the Board of James Cropper PLC took the decision to close and exit all TPMS retail outlets by 2^nd April 2011. Having taken full provision for closure and redundancy costs TPMS incurred an operating loss of £1,696,000 in the financial year.

TPMS's internet business, papermilldirect,  continues to trade but has become a profit centre within James Cropper Speciality Papers Limited focusing increasingly on a paper-based offering.

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

The Group operates two funded pension schemes providing defined benefits for the majority of its full time employees. As from 1^st April 2011 active members' benefits have been reduced such that future increases in pensionable salaries are restricted to RPI up to a maximum of 2% per annum. Therefore the schemes will remain defined benefit schemes but they will no longer be "final salary" schemes. Thus as a consequence of this change to future benefits and other factors, the IAS 19 valuations of these schemes as at 2^nd April 2011 revealed a combined deficit of £1,404,000, compared with £14,180,000 at the previous year end, a decrease of £12,776,000. After allowing for deferred tax on the deficits, shareholders' funds were consequently uplifted by £9,199,000 as at 2^nd April 2011. 

Cash and borrowings

Despite significant exit costs relating to TPMS, the combination of tight control over working capital and modest capital over the year ensured that net borrowings remained negligible. At 2nd April 2011 gross drawn down loans totalled £6.0 million, with £4.3 million held as cash at bank. In addition the Group had un-drawn overdraft facilities of £3.3 million, US$1.4 million and €1.0 million. Gearing at the financial year end, after deduction of the IAS 19 pension deficit, was 6%.

Outlook

As the end of my first year as chairman nears, I am heartened by our prospects on many levels.  We start the new financial year having taken significant steps to reduce the Group's risk exposure.  Our retailing activities have ceased and our IAS 19 pension deficit has fallen by £12.8 million to £1.4 million primarily as a consequence of curtailing future benefits.

There are also other good reasons for the growing optimism that I have noticed within the Group.  Demand for our products is growing.  We have a strong competitive position, underpinned by the sale of service and capability as much as materials.  We are more committed than ever to developing the skills of our people and the results of investment in this area are beginning to be felt.  We are carefully recruiting to strengthen teams when the need is demonstrable.  Although challenges lie ahead I am confident that our business prospects are bright. 

Mark Cropper

Chairman

James Cropper Plc
Audited Statement of Comprehensive Income
	53 week period to	53 week period to	53 week period to		52 week period to
	2 April 2011	2 April 2011	2 April 2011		27 March 2010
	Continuing Operations	Pension Curtailment	Total		* Restated
	£'000	£'000	£'000		£'000
Continuing operations
Revenue	83,264	-	83,264		70,714
Other income	209	-	209		208
Changes in inventories of finished goods and work in progress	1,281	-	1,281		160
Raw materials and consumables used	(40,494)	-	(40,494)		(30,095)
Energy costs	(4,255)	-	(4,255)		(3,035)
Employee benefit costs	(19,596)	-	(19,596)		(18,467)
Depreciation and amortisation	(2,908)	-	(2,908)		(2,966)
Exceptional Pension Credit	-	10,158	10,158		-
Other expenses	(14,903)	-	(14,903)		(12,832)
Operating Profit	2,598	10,158	12,756		3,687
Interest payable and similar charges			(137)		(906)
Interest receivable and similar income			193		13
Profit before taxation			12,812		2,794
Tax expense			(2,598)		(608)
Profit from continuing operations			10,214		2,186
Discontinued operation			(1,726)		(378)
Profit for the period			8,488		1,808
Other comprehensive income
Foreign currency translation			4		(267)
Retirement benefit liabilities - actuarial gains / (losses)			2,388		(4,849)
Deferred tax on actuarial (gains) / losses on retirement benefit liabilities			(621)		1,358
Total comprehensive income for the period attributable to equity holders of the Company			10,259		(1,950)
Earnings  per share - basic			100.2p		21.3p
Earnings  per share -diluted			97.6p		21.1p
Continuing Operations Earnings  per share - basic			120.6p		25.8p
Continuing Operations Earnings  per share -diluted			117.4p		25.5p
Dividend declared in the period - pence per share			7.9p		7.5p

* Restated as The Paper Mill Shop, discloses its result net of tax as a single line item under 'discontinued operation.

James Cropper Plc
Audited Statement of Financial Position
	Group	Group		Company	Company
	As at	As at		As at	As at
	2 April 2011	27 March 2010		2 April 2011	27 March 2010
	£'000	£'000		£'000	£'000
Assets
Intangible assets	1,386	2,096		1,140	1,879
Property, plant and equipment	16,177	16,863		2,137	2,258
Investments in subsidiary undertakings	-	-		7,350	7,350
Deferred tax assets	-	189		-	3,462
Total non- current assets	17,563	19,148		10,627	14,949
Inventories	11,956	10,195		-	-
Trade and other receivables	14,481	14,509		27,540	33,739
Cash and cash equivalents	4,282	5,050		3,001	3,420
Current tax assets	-	-		-	42
Total current assets	30,719	29,754		30,541	37,201
Total assets	48,282	48,902		41,168	52,150
Liabilities
Trade and other payables	10,146	11,081		11,985	18,338
Loans and borrowings	1,426	3,195		1,399	1,525
Current tax liabilities	780	749		-	-
Total current liabilities	12,352	15,025		13,384	19,863
Long-term borrowings	4,567	1,886		2,909	1,886
Retirement benefit liabilities	1,404	14,180		1,404	14,180
Deferred tax liabilities	2,550	-		108	-
Total non-current liabilities	8,521	16,066		4,421	16,066
Total liabilities	20,873	31,091		17,805	35,929
Equity
Share capital	2,118	2,118		2,118	2,118
Share premium	573	573		573	573
Translation reserve	269	265		-	-
Reserve for own shares	(222)	(128)		-	-
Retained earnings	24,671	14,983		20,672	13,530
Total shareholders' equity	27,409	17,811		23,363	16,221
Total equity and liabilities	48,282	48,902		41,168	52,150

Audited Statement of Cash Flows for the period ended 2 April 2011
(2010: for the period ended 27 March 2010)			Group			Company
		2011	2010		2011	2010
		£'000	£'000		£'000	£'000
Cash flows from operating activities
Net Profit		8,488	1,808		5,954	872
Adjustments for:
Tax		2,598	608		2,899	(104)
Depreciation		3,072	3,138		500	505
Net IAS 19 pension adjustments within SCI		(9,392)	881		(9,392)	881
Past service pension deficit payments		(996)	(626)		(996)	(626)
Foreign exchange gain on currency borrowings		(121)	(96)		-	-
Loss on disposal of property, plant and equipment		113	28		-	-
Net bank interest income & expense		(29)	270		(736)	(849)
Share based payments		114	102		114	102
Dividends received from Subsidiary Companies		-	-		(2,500)	(2,700)
Changes in working capital:
(Increase) / decrease in inventories		(1,767)	227		-	-
(Increase) / decrease in trade and other receivables		(26)	(1,673)		294	(1,608)
(Decrease) / increase in trade and other payables		(326)	2,832		(5,224)	6,011
Interest received		197	14		802	1,042
Interest paid		(309)	(136)		(211)	(42)
Tax paid		(444)	(1,089)		(452)	(1,128)
Net cash generated from / (used by) operating activities		1,172	6,288		(8,948)	2,356
Cash flows from investing activities
Purchase of intangible assets		(75)	(15)		-	(15)
Purchases of property, plant and equipment		(2,200)	(1,213)		(80)	(239)
Proceeds from sale of property, plant and equipment		6	2		-	-
Dividends received		-	-		2,500	2,700
Net cash (used in) / generated from investing activities		(2,269)	(1,226)		2,420	2,446
Cash flows from financing activities
Proceeds from issue of new loans		3,153	329		3,000	329
Repayment of borrowings		(2,120)	(2,240)		(2,104)	(2,240)
Issue / (repayment) of inter-company loans		-	-		5,848	(1,000)
Purchase of LTIP investments		(152)	-		-	-
Dividends paid to shareholders		(623)	(515)		(635)	(525)
Net cash (used in) /generated from financing activities		258	(2,426)		6,109	(3,436)
Net (decrease) / increase in cash and cash equivalents		(839)	2,636		(419)	1,366
Effect of exchange rate fluctuations on cash held		71	(222)		-	-
Net (decrease) / increase in cash and cash equivalents		(768)	2,414		(419)	1,366
Cash and cash equivalents at the start of the period		5,050	2,636		3,420	2,054
Cash and cash equivalents at the end of the period		4,282	5,050		3,001	3,420
Cash and cash equivalents consists of:
Cash at bank and in hand		4,282	5,050		3,001	3,420

Audited Statement of Changes in Equity
Group
All figures in £'000	Share capital	Share premium	Translation reserve	Own Shares	Retained earnings	Total
At 28 March 2009	2,118	573	532	(128)	17,079	20,174
Profit for the period	-	-	-	-	1,808	1,808
Exchange differences	-	-	(267)	-	-	(267)
Actuarial losses on retirement benefit liabilities (net of deferred tax)	-	-	-	-	(3,491)	(3,491)
Total other comprehensive income	-	-	(267)	-	(3,491)	(3,758)
Dividends paid	-	-	-	-	(515)	(515)
Share based payment charge	-	-	-	-	102	102
Total contributions by and distributions to owners of the Group	-	-	-	-	(413)	(413)
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

Audited Statement of Changes in Equity
Company
All figures in £'000	Share capital	Share premium	Retained earnings	Total
At 28 March 2009	2,118	573	16,572	19,263
Profit for the period	-	-	872	872
Actuarial losses on retirement benefit liabilities (net of deferred tax)	-	-	(3,491)	(3,491)
Total other comprehensive income	-	-	(3,491)	(3,491)
Dividends paid	-	-	(525)	(525)
Share based payment charge	-	-	102	102
Total contributions by and distributions to owners of the Group	-	-	(423)	(423)
At 27 March 2010	2,118	573	13,530	16,221
Profit for the period	-	-	5,954	5,954
Actuarial gains on retirement benefit liabilities (net of deferred tax)	-	-	1,767	1,767
Total other comprehensive income	-	-	1,767	1,767
Dividends paid	-	-	(635)	(635)
Share based payment charge	-	-	114	114
Distribution of own shares	-	-	(58)	(58)
Total contributions by and distributions to owners of the Group	-	-	(579)	(579)
At 2 April 2011	2,118	573	20,672	23,363

Preliminary Results for the year ended 2 April 2011

1.     Basic profits per share have been calculated on the profit after taxation of £8,488,000 (2010: £1,808,000) divided by the weighted average number of Ordinary shares in issue during the period of 8,472,368 (2010: 8,472,368).

2.     The dividend will, if approved, be paid on 12 August 2011 to all shareholders on the Register on 15 July 2011.

3.     The financial information set out above does not constitute the statutory accounts for the years ended 2 April 2011.  Statutory accounts for 2010 have been delivered to the Registrar of Companies and those for 2011 will be delivered following the Company's Annual General Meeting.  The auditors have reported on these accounts, their reports were unqualified and did not contain statements under section 498 (2) or (3) of the Companies Act 2006.

4.     The Annual Report and Accounts for 2011 will be posted to shareholders on 13 July 2011. They will also be available on the Company's website (www.cropper.com) and on request from the Company's registered office, Burneside Mills, Kendal, Cumbria LA9 6PZ.

5.     The Annual General Meeting of the Company will be held at 11.00am on Wednesday 3 August 2011 at the Bryce Institute, Burneside, Kendal, Cumbria.

 

END

 

 

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