Interim Results
Cropper(James) PLC
16 November 2004
Issued by Citigate Dewe Rogerson Ltd, Birmingham
Date: Tuesday, 16 November 2004
Embargoed: 7.30am
James Cropper PLC
'Specialist Paper Makers'
Interim Results
for the 26 weeks ended 25 September 2004
Half year to Half year to Full year to
September 2004 September 2003 March 2004
Turnover £30.2m £27.6m £56.6m
Group profit before tax £0.8m £0.1m £0.8m
Earnings per share 6.8p 0.8p 7.6p
Dividend per share 1.9p 1.9p 7.8p
Gearing 20% 29% 27%
All Divisions traded profitably
Sales of Speciality Papers up 9% on same period last year
Paper Mill Shop opened 3 new outlets, taking chain to 14
Building of TFP's R&D facilities under way
Gas costs projected to increase by 65% over last year
'I am pleased to report that the recovery of the Group in the second half of
last year has continued. The Group recorded a profit before tax of £811,000 for
the first half of the current financial year compared to £95,000 in the first
half of the previous year. The improvement was sales led'.
'The growth in Group turnover is very encouraging and reflects our efforts to
develop new products and markets and new routes to markets. TFP's sales in the
US market continue to grow and early indications suggest that our plans to grow
sales in James Cropper Speciality Papers are being achieved'
'The Paper Mill Shop will continue to expand, extending our strategy of related
business diversification'.
'Inevitably the unprecedented rise in the cost of natural gas will dampen
profitability in the second half, particularly that of James Cropper Speciality
Papers'.
'Despite the impact of high energy costs on profitability in the second half and
in the absence of unforeseen circumstances, it is the Board's intention to
maintain the level of the full year dividend reflecting both the confidence we
have in the future prospects of the Group and the strength of the balance
sheet'.
J A Cropper, Chairman
FULL STATEMENT ATTACHED
Enquiries:
Alun Lewis, Chief Executive
John Denman, Group Finance Director Alan Cooke
James Cropper PLC Citigate Dewe Rogerson
Today: 020 7282 8000 (8.00am - 11.00am) Today: 020 7282 8000
Thereafter: 01539 722002 Thereafter: 0121 455 8370
www.cropper.com Mobile: 07767 771533
-----------------
-2-
James Cropper PLC
Interim Results
for the 26 weeks ended 25 September 2004
STATEMENT BY THE CHAIRMAN, J A CROPPER
I am pleased to report that the recovery of the Group in the second half of last
year has continued. The Group recorded a profit before tax of £811,000 for the
first half of the current financial year compared to £95,000 in the first half
of the previous year. The improvement was sales led. Group turnover was £30.2
million against £27.6 million for the same period last year, up 10%. All
Divisions traded profitably.
The interim dividend will be maintained at 1.9p per share.
Paper Division
Sales by James Cropper Speciality Papers increased by 9% overall on the first
half of last year. Activity was up in packaging, business and industrial paper
sectors, with growth in the UK, the USA and China. The cost of Northern Softwood
Bleached Kraft pulp, the market benchmark, fell from its first quarter peak of
US$680 per tonne to US$620 by the end of the second quarter. It is currently
anticipated that there will be a further decrease in the cost of pulp in the
third quarter. With US$ and Euro exchange rates relatively stable over the past
six months, there was little distortion to margins as a consequence of currency
movements. I highlighted earlier in the year the recent escalation in the price
of crude oil, natural gas and wholesale electricity. These will have a
significant impact on energy costs in the current year, particularly during the
winter months. The average cost of natural gas in the first half was 22 pence
per therm, against 17 pence per therm in the same period last year. In the
second half of the previous year the average cost of natural gas was 25 pence
per therm. Forward market projections suggest that the cost in the second half
of the current year will be substantially higher.
Three new Paper Mill Shop outlets were opened in the first six months in
Spalding, Antrim and Ashford. In order to manage the expansion of this business,
warehousing and distribution activities were relocated to a larger facility in
the autumn. Further store openings are anticipated in the second half.
Technical Fibre Products ('TFP')
TFP's sales in the first six months were broadly in line with the same period
last year in £sterling terms. At the current exchange rate, sales to the US
market represent approximately 40% of TFP's turnover. The decline in the value
of the US$ over the two periods disguises progress in the US market where US$
sales were 23% higher in the first half of the current year compared with the
previous period.
The growth in the US market was largely attributable to composite materials
containing metal-coated carbon fibres. As reported last year, niche
opportunities for highly conductive metal-coated carbon fibre materials have
grown steadily in recent years. Applications include the use of these materials
in electronic, medical and flexible heating devices. Significant growth
potential will also emerge in electromagnetic interference shielding and
communication signal management systems. During the past six months several of
TFP's key customers have approved the specifications of the initial batches of
metal-coated carbon fibre materials manufactured by Electro Fiber Technologies
LLC ('EFT'), the joint venture company in which TFP has a 50% share. Once
approved by TFP customers, EFT materials will replace those supplied to TFP by
third parties. The primary objective of EFT is to provide TFP with control of
quality and security of supply. EFT is expected to make a loss for the full year
in line with that of the previous year.
continued...
-3-
The Board has recently approved the construction of a dedicated research and
development facility to support new product development. Earlier in the year the
Department of Trade and Industry awarded funds to assist research and
development by TFP, Johnson Matthey and other UK companies to ensure that the UK
becomes a world centre for fuel cell technology.
Converting Division
James Cropper Converting is trading at last year's levels with profitability
continuing to be affected by competitive pressure on display board prices and
the impact of the weaker US$ on sales of mount board to the USA.
The development of the digital imaging product range has progressed. Resources
have been committed to enable the introduction of a full range of papers and
boards to be marketed in parallel to the trade and the general public, the
latter through a dedicated website, www.papermilldirect.com. This range will be
launched in the second half.
Outlook
In recent years the Group has had to absorb increases in overheads that were
largely outside its control. These have included increases in pension
contributions, National Insurance contributions, insurance premiums, effluent
treatment charges and the cost of regulatory compliance. The growth in Group
turnover is therefore very encouraging and reflects our efforts to develop new
products and markets and new routes to markets. TFP's sales in the US market
continue to grow and early indications suggest that our plans to grow sales in
James Cropper Speciality Papers are being achieved. Growth in the USA and other
non-European export markets is an important element of our overall strategy. To
mitigate the impact of the weak US$ on our growing US$ revenues we continue to
optimise our internal hedging strategy in order to lower exposure. As a
consequence we have switched the purchase of certain supplies to US$s from
Euros. This will reduce the adverse impact on profitability of the weak US$. The
annualised effect of these changes will be felt in the current financial year.
The Paper Mill Shop will continue to expand, extending our strategy of related
business diversification.
Increasing energy costs, driven by major distortions in the European natural gas
market and international events, are affecting all manufacturing based
industries. Inevitably the unprecedented rise in the cost of natural gas will
dampen profitability in the second half, particularly that of James Cropper
Speciality Papers.
Improved trading and relatively low capital expenditure resulted in gearing
falling to 20% at the end of the half-year. Cash outflow will increase in the
second half as a consequence of increased capital expenditure, special pension
contributions and higher energy costs.
In an increasingly competitive and uncertain world, our portfolio of niche
businesses, built on strong materials technology and technical expertise, places
the Group in a good position to develop and exploit future opportunities.
Despite the impact of high energy costs on profitability in the second half and
in the absence of unforeseen circumstances, it is the Board's intention to
maintain the level of the full year dividend reflecting both the confidence we
have in the future prospects of the Group and the strength of the balance sheet.
-4-
James Cropper PLC
Group Profit and Loss Account for the 26 Weeks ended 25 September 2004
Half year to Half year to Full year to
September 2004 September 2003 March 2004
£'000 £'000 £'000
Turnover - continuing
operations 30,229 27,553 56,565
----------- ----------- ---------
Operating profit - continuing
operations 1,074 300 1,283
Share of operating loss in
joint venture (59) (38) (93)
----------- ----------- ---------
Total operating profit 1,015 262 1,190
Amounts written off investments - - (50)
Net interest payable and
similar charges (204) (167) (355)
----------- ----------- ---------
Profit on ordinary activities
before taxation 811 95 785
Taxation (243) (29) (154)
----------- ----------- ---------
Profit on ordinary activities
after taxation 568 66 631
Dividend (159) (159) (652)
----------- ----------- ---------
Retained profit/(loss) for the
period 409 (93) (21)
----------- ----------- ---------
Earnings per share - basic and
diluted (Note 3) 6.8p 0.8p 7.6p
----------- ----------- ---------
Dividend pence per share (Note
4) 1.9p 1.9p 7.8p
----------- ----------- ---------
-5-
James Cropper PLC
Group Balance Sheet as at 25 September 2004
Half year to Half year to Full year to
September 2004 September 2003 March 2004
£'000 £'000 £'000
Tangible assets 25,422 25,989 25,836
Investments 395 445 395
Investments in joint venture:
Share of gross assets 120 134 129
Share of gross liabilities (3) (5) (11)
----------- ----------- ---------
Fixed assets 25,934 26,563 26,349
----------- ----------- ---------
Stocks 7,391 6,389 7,166
Debtors 11,629 11,910 12,507
Cash at bank and in hand 2,216 659 1,240
----------- ----------- ---------
Current assets 21,236 18,958 20,913
Creditors (amounts falling due
within 1 year) (9,708) (8,603) (9,409)
----------- ----------- ---------
Net current assets 11,528 10,355 11,504
----------- ----------- ---------
Total assets less current
liabilities 37,462 36,918 37,853
Creditors (amounts falling due
after more than 1 year) (5,789) (5,737) (6,589)
Deferred taxation (4,189) (4,155) (4,189)
----------- ----------- ---------
Net assets 27,484 27,026 27,075
----------- ----------- ---------
Called up share capital 2,090 2,090 2,090
Share premium account 454 454 454
Revaluation reserve 138 177 138
Profit and loss account 24,802 24,305 24,393
----------- ----------- ---------
Capital and reserves 27,484 27,026 27,075
----------- ----------- ---------
-6-
James Cropper PLC
Group Cash Flow Statement for the 26 weeks ended 25 September 2004
Half year to Half year to Full year to
September 2004 September 2003 March 2004
£'000 £'000 £'000
Operating profit 1,074 300 1,283
Depreciation charges 1,573 1,685 3,067
Loss on fixed asset disposals - - 22
Increase in stocks (225) (591) (1,368)
Decrease/(increase) in debtors 878 (125) (494)
Increase/(decrease) in
creditors 571 (78) 1,047
----------- ----------- ---------
Cash flow from operating
activities 3,871 1,191 3,557
Interest received 44 22 46
Interest paid (239) (163) (394)
Tax paid (29) (103) (316)
Purchase of tangible fixed
assets (1,159) (1,850) (3,101)
Proceeds from disposal of
tangible fixed assets - 2 2
Investment in joint venture (58) - (68)
Equity dividends paid (493) (468) (627)
----------- ----------- ---------
Net cash inflow/(outflow)
before financing 1,937 (1,369) (901)
Financing
New debt due beyond 1 year - 2,000 4,000
Repayment of bank loans (954) (649) (1,461)
----------- ----------- ---------
Increase/(decrease) in cash in
period 983 (18) 1,638
----------- ----------- ---------
Reconciliation of net cash flow to movement in net debt
£'000 £'000 £'000
Increase/(decrease) in cash for the period 983 (18) 1,638
Decrease/(increase) in debt and finance leases 954 (1,351) (2,539)
----------- ----------- ---------
Movement in net debt in the period 1,937 (1,369) (901)
Net debt at start of period (7,427) (6,526) (6,526)
----------- ----------- ---------
Net debt at end of period (5,490) (7,895) (7,427)
----------- ----------- ---------
-7-
James Cropper PLC
Notes
1. The summarised results for the half year ended 25 September 2004, 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 2004.
2. 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 2004 are an extract from the full accounts for that year which have
been filed with the Registrar of Companies and on which the auditors gave an
unqualified opinion.
3. Basic and diluted earnings per share for the six months ended 25 September
2004 has been calculated on the profit available for distribution and on
8,359,114 (2003: 8,359,114) Ordinary Shares, being the weighted average number
of shares in issue during the period. None of the potential Ordinary Shares are
dilutive.
4. The interim dividend of 1.9p per Ordinary Share (2003: 1.9p per share) is
proposed and will be paid on 14 January 2005 to holders on the register at the
close of business on 24 December 2004. The dividend for the year to 27 March
2004 was made up of an interim payment of £159,000 (1.9p per share) and a
proposed final dividend of £493,000 (5.9p per share).
5. The above information is being sent to all shareholders and is available from
the Company's registered office or from our website (www.cropper.com).
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