Interim Results

Cropper(James) PLC 21 November 2006 Issued by Citigate Dewe Rogerson Ltd, Birmingham Date: Tuesday, 21 November 2006 Embargoed: 7.30am James Cropper PLC 'Specialist Paper Makers' Interim Results for the Half year ended 30 September 2006 Half year to Half year to Full year to 30 September 1 October 1 April 2006 2005 2006 Turnover Â£33.0m Â£31.5m Â£64.2m Group profit/(loss) before tax Â£1.0m Â£0.5m Â£0.3m Prior to net IFRS pension adjustments Â£0.8m Â£0.2m (Â£0.1m) After net IFRS pension adjustments Earnings per share 6.4p 1.4p (1.2p) Dividend per share declared 1.9p 1.9p 4.1p Gearing 37% 45% 46% TFP turnover up 26% with profits well ahead. Speciality Papers profitable in first half. Full year gas costs anticipated being at last year's level. 'Despite the recent weakening of the US$, growth at TFP has continued. Turnover was up 26%, with profits well ahead of the comparable period last year. Sales to the US market were 42% up on the first half of the previous year in Â£Sterling terms, with rest of the world sales also ahead by 14%'. 'TFP is expected to perform at levels consistent with the first half for the remainder of the financial year. TFP's conversion of its strong portfolio of new product developments into commercial opportunities, combined with a well-managed cost base, should continue to drive growth and sustain profitability'. 'Although Speciality Papers traded profitably in the first half, outlook remains difficult for the foreseeable future, given the uncertainties surrounding forward quoted energy prices and the upward trend in pulp costs. It should therefore be anticipated, that the profitability of Speciality Papers will deteriorate during the course of the second half-year. Despite these challenging market conditions, the business recovery plan continues to make good progress, with its emphasis on margin growth, improved operational efficiencies and reduced costs and wastage'. 'Given the encouraging developments in TFP and Speciality Papers during the first half, the Board is confident that our on-going plans should return the Group to acceptable levels of profitability in the short to medium term'. J A Cropper, Chairman FULL STATEMENT ATTACHED Enquiries: Alun Lewis, Chief Executive John Denman, Group Finance Director Katie Dale James Cropper PLC Citigate Dewe Rogerson Today: 020 7638 9571 (8.00am - 11.00am) Today: 020 7638 9571 Thereafter: 01539 722002 Thereafter: 0121 455 8370 www.cropper.com Mobile: 07770 788624 -2- --------------------------------------------- Summary of Results Half-year to Half-year to Full-year to 30 September 1 October 1 April 2006 2005 2006 Group turnover Â£'000 32,965 31,459 64,201 --------------------------------------------- Profit and Loss Summary Â£'000 -------------------------------------------------------------------------------------- Trading operating profit 1,270 733 833 Profit on sale of trade investment - - 116 ----------------------------------------- Trading operating profit 1,270 733 949 Joint venture (23) (36) (89) ----------------------------------------- Trading profit before interest 1,247 697 860 Net interest (229) (224) (511) ----------------------------------------- Trading profit before tax 1,018 473 349 ----------------------------------------- (After future service pension contributions paid) -------------------------------------------------------------------------------------- Net pension adjustments to Operating profit (316) (242) (364) Net interest 56 (68) (114) ----------------------------------------- Net pension adjustment before tax (260) (310) (478) ----------------------------------------- -------------------------------------------------------------------------------------- Overall Group after pension adjustments Operating profit 954 491 585 Joint venture (23) (36) (89) ----------------------------------------- Profit before interest 931 455 496 Net interest (173) (292) (625) ----------------------------------------- Profit/(Loss) before tax 758 163 (129) ----------------------------------------- -------------------------------------------------------------------------------------- Earnings/(Losses) per Share 6.4p 1.4p (1.2p) Dividends per Share 1.9p 1.9p 4.1p ----------------------------------------- Balance Sheet Summary Â£'000 Non-pension assets - excluding cash 46,388 47,675 46,825 Non-pension liabilities - excluding borrowings (13,103) (11,921) (12,150) ----------------------------------------- 33,285 35,754 34,675 Net pension liabilities (7,790) (6,372) (7,221) ----------------------------------------- 25,495 29,382 27,454 Net borrowings (6,944) (9,114) (8,595) ----------------------------------------- Equity shareholders' funds 18,551 20,268 18,859 ----------------------------------------- Gearing % 37 45 46 ----------------------------------------- Capital Expenditure Â£'000 920 1,318 2,889 ----------------------------------------- -3- James Cropper PLC Interim Results for the Half year ended 30 September 2006 STATEMENT BY THE CHAIRMAN, J A CROPPER The Group recorded a profit before tax of Â£758,000 for the period (Â£1,018,000 prior to net IFRS pension adjustments). This compares with a profit before tax of Â£163,000 for the first half of the previous year (Â£473,000 prior to net IFRS pension adjustments). Group turnover was Â£33.0 million against Â£31.5 million for the same period last year, an increase of 5%. The Board has declared that the interim dividend will be maintained at 1.9p per share. Technical Fibre Products ('TFP') Despite the recent weakening of the US$, growth at TFP has continued. Turnover was up 26%, with profits well ahead of the comparable period last year. Sales to the US market were 42% up on the first half of the previous year in Â£Sterling terms, with rest of the world sales also ahead by 14%. Global growth of engineered composite materials, combined with the resurgence of commercial aircraft new-builds and the development of new concept military aircraft have been prime drivers responsible for this growth. Much of the material supplied by TFP into the aerospace sector contains metal-coated carbon fibres. The majority of these fibres are supplied by Electro Fiber Technologies LLC, the joint venture company in which TFP has a 50% share. Total sales of composite materials to the US market were up 47%, with sales of fire protection material to the USA increasing by 60% over the same period. James Cropper Speciality Papers ('Speciality Papers') Speciality Papers traded profitability in the first half, with overall sales increasing by 1% over the same period last year. Although UK sales were up 6%, in contrast, sales into mainland Europe were disappointing, with total export sales being down 7%. Further price rises are also in the process of being agreed with customers. The average cost of natural gas in the first-half was 34 pence per therm, an increase of 15% against the same period last year. Forward market projections for the second half-year have reduced in recent months. If these projections materialise, combined with an anticipated fall in consumption, the annual cost of gas for the full year will be held at the previous year's level. The waste heat recovery unit fitted to our CHP plant became operational in October 2006. This investment is expected to reduce gas consumption by up to 5% per annum. It is our intention to reduce energy consumption where possible through more economical use together with other energy saving investments Northern Bleached Softwood Kraft pulp, the market benchmark, started the year at US$645 per tonne and had risen to US$710 per tonne by the end of July 2006, remaining at this level until October 2006. The price moved to US$730 per tonne in November 2006, and it is expected that this price will be maintained for the foreseeable future. Should these predictions prove to be correct, then combined with the recent exchange rate changes in the US$ and Euro, the cost of pulp in the current year would be some 6% higher than last year. The Paper Mill Shop The depressed level of consumer spending across the majority of the retail sector continues to affect The Paper Mill Shop, which incurred a loss in the first-half of the current financial year. Although sales were up 3% on the same period, this was against the background of additional store openings during the second-half of last year. No new store openings are anticipated in the remainder of the current financial year. Brand development will continue through the launch of an Internet offering in the second half-year. continued... -4- James Cropper Converting ('Converting') The performance of Converting has been encouraging, with turnover up 2% on the comparable period. Despite this however, the weakening of the US$ over the period has increased margin pressure on mountboard sales to the USA. The investment and product rationalisation identified in the Annual Report & Accounts 2006 was completed on schedule by the half-year end. This development will lead to significant improvements in capability, output and productivity, which should then result in increased profitability during the second half of the year. Pensions and International Accounting Standard 19 ('IAS 19') 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 Â£506,000. Under IAS 19 the charge against profit in the six-month period was Â£766,000, a difference of Â£260,000 in excess of the future service contributions that were actually required. Outlook TFP is expected to perform at levels consistent with the first half for the remainder of the financial year. TFP's conversion of its strong portfolio of new product developments into commercial opportunities, combined with a well-managed cost base, should continue to drive growth and sustain profitability. Although Speciality Papers traded profitably in the first half, outlook remains difficult for the foreseeable future, given the uncertainties surrounding forward quoted energy prices and the upward trend in pulp costs. It should therefore be anticipated, that the profitability of Speciality Papers will deteriorate during the course of the second half-year. Despite these challenging market conditions, the business recovery plan continues to make good progress, with its emphasis on margin growth, improved operational efficiencies and reduced costs and wastage. 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 small loss in the full year. The impact of the recent weakening of the US$ and â‚¬ against Â£Sterling is expected to have a broadly neutral effect on the Group overall as a consequence of our internal currency hedging policy. Cash outflow will increase in the second half of the financial year, as a consequence of increased capital expenditure and higher pulp and energy costs. Cash management is under firm control. Investment over the next two years will be prioritised on projects that will minimise energy costs, improve efficiencies and reduce our dependence on external waste water treatment. Given the encouraging developments in TFP and Speciality Papers during the first half, the Board is confident that our on-going plans should return the Group to acceptable levels of profitability in the short to medium term. -5- James Cropper PLC Interim Results Consolidated Income Statement for the half-year to 30 September 2006 Unaudited Half year to Half year to Full year to 30 September 2006 1 October 2005 1 April 2006 Â£'000 Â£'000 Â£'000 -------------------------------------------------------------------------------- Continuing operations Turnover 32,965 31,459 64,201 -------------------------------------------- Operating profit 954 491 585 Interest payable and similar charges (386) (318) (888) Interest receivable and similar income 213 26 263 Share of loss of joint venture (23) (36) (89) -------------------------------------------- Profit/(loss) before tax 758 163 (129) Taxation (227) (49) 27 -------------------------------------------- Profit/(loss) for the period attributable to equity holders of the company 531 114 (102) ============================================ Earnings/(losses) per share - basic & diluted 6.4p 1.4p (1.2p) -------------------------------------------- Dividend declared in the period - pence per share 1.9p 1.9p 4.1p -------------------------------------------- -6- James Cropper PLC Interim Results Consolidated Balance Sheet as at 30 September 2006 Unaudited Half year to Half year to Full year to 30 September 2006 1 October 2005 1 April 2006 Â£'000 Â£'000 Â£'000 -------------------------------------------------------------------------------- Assets Non-current assets Intangible assets 1,287 1,231 1,316 Property, plant and equipment 23,080 24,257 23,763 Financial assets - Trade investments - 195 - Investments in joint ventures 95 90 77 Deferred tax assets 3,339 2,731 3,095 --------------------------------------------- 27,801 28,504 28,251 --------------------------------------------- Current assets Inventories 8,313 8,224 8,267 Trade and other receivables 13,611 13,676 13,399 Financial assets - Derivative financial instruments 2 2 2 Cash and cash equivalents 3,266 311 1,762 --------------------------------------------- 25,192 22,213 23,430 --------------------------------------------- Liabilities Current liabilities Trade and other payables (8,594) (7,116) (7,727) Financial liabilities - Borrowings (2,384) (1,981) (2,244) - Derivative financial instruments (3) (13) - Current tax liabilities (590) (643) (465) --------------------------------------------- (11,571) (9,753) (10,436) --------------------------------------------- Net current assets 13,621 12,460 12,994 --------------------------------------------- Non-current liabilities Financial liabilities - Borrowings (7,826) (7,444) (8,113) Retirement benefit liabilities (11,129) (9,103) (10,315) Deferred tax liabilities (3,916) (4,149) (3,958) --------------------------------------------- (22,871) (20,696) (22,386) --------------------------------------------- Net assets 18,551 20,268 18,859 ============================================= Shareholders' equity Share capital 2,090 2,090 2,090 Share premium 454 454 454 Other reserves 61 100 61 Retained earnings 15,946 17,624 16,254 --------------------------------------------- Total shareholders' equity 18,551 20,268 18,859 ============================================= -7- James Cropper PLC Interim Results Consolidated Cash Flow Statement for the half-year to 30 September 2006 Unaudited Half year to Half year to Full year to 30 September 1 October 1 April 2006 2005 2006 Â£'000 Â£'000 Â£'000 --------------------------------------------------------------------------------- Cash flows from operating activities Profit/(loss) before tax 758 163 (129) Interest income and expense 173 292 625 Depreciation/amortisation 1,632 1,735 3,715 Decrease/(increase) in working capital 575 (676) 103 Other non-cash movements - Share of loss of joint venture 23 36 89 - Past service deficit payments (400) (438) (914) - Net IFRS pension adjustments 260 310 478 - Profit on sale of trade investment - - (116) - Share-based payments 12 12 25 ----------------------------------------- Cash generated from operations 3,033 1,434 3,876 Interest received 224 46 262 Interest paid (360) (359) (854) Tax (paid)/received (95) 3 (198) ----------------------------------------- Net cash generated from operating activities 2,802 1,124 3,086 ----------------------------------------- Cash flows from investing activities Investment in joint venture (47) (43) (67) Purchase of intangible assets (73) (113) (206) Purchase of property, plant and equipment (847) (1,205) (2,683) Proceeds from sale of trade investment - - 311 ----------------------------------------- Net cash used in investing activities (967) (1,361) (2,645) ----------------------------------------- Cash flows from financing activities Net proceeds from issue of new bank loan 1,000 2,000 4,000 Finance lease capital payments - (64) (96) Repayment of bank loans (1,147) (807) (1,843) Dividends paid to shareholders (184) (527) (686) ----------------------------------------- Net cash (used in)/provided by financing activities (331) 602 1,375 ----------------------------------------- Net increase in cash and cash equivalents 1,504 365 1,816 in the period Cash and cash equivalents at the start of the period 1,762 (54) (54) ----------------------------------------- Cash and cash equivalents at the end of the period 3,266 311 1,762 ----------------------------------------- Cash and cash equivalents consists of: Cash at bank and in hand 3,266 311 1,762 Overdrafts included in borrowings - - - ----------------------------------------- 3,266 311 1,762 ----------------------------------------- -8- James Cropper PLC Interim Results Consolidated Statement of Recognised Income and Expense for the half-year to 30 September 2006 Unaudited Half year to Half year to Full year to 30 September 1 October 1 April 2006 2005 2006 Â£'000 Â£'000 Â£'000 -------------------------------------------------------------------------------- Profit/(loss) for the period 531 114 (102) Currency translation differences on 1 - 16 foreign currency investment Retirement benefit liabilities - actuarial (losses)/gains (954) 1,476 (44) Deferred tax on actuarial losses/(gains) 286 (443) 13 on retirement benefit liabilities ------------------------------------------- Total recognised (expense)/income for the period (136) 1,147 (117) ------------------------------------------- Consolidated Statement of Changes in Equity for the half-year to 30 September 2006 Unaudited Half year to Half year to Full year to 30 September 1 October 1 April 2006 2005 2006 Â£'000 Â£'000 Â£'000 -------------------------------------------------------------------------------- Opening shareholders' funds 18,859 19,636 19,636 Total recognised (expense)/income for the period (136) 1,147 (117) Share-based payments 12 12 26 Dividends paid (184) (527) (686) -------------------------------------------- Closing shareholders' funds 18,551 20,268 18,859 -------------------------------------------- -9- James Cropper PLC Interim Results 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 30 September 2006, which have not been audited or reviewed, have been prepared in accordance with the accounting policies adopted in the accounts for the year ended 1 April 2006. 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 1 April 2006 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 30 September 2006 have been calculated on the profit available for distribution and on 8,359,114 (2005: 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 Dividend An interim dividend of 1.9p per Ordinary Share (2005: 1.9p per share) is proposed and will be paid on 12 January 2007 to holders on the register at the close of business on 22 December 2006. The dividend relating to the year to 1 April 2006 was made up of an interim payment of Â£159,000 (1.9p per share) and a final dividend of Â£184,000 (2.2p 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. On the introduction of IAS 19 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. Upon valuation at subsequent year-ends the movement in value from the previous valuation is expressed in the following component parts: -10- 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 30 September 1 October 1 April 2006 2005 2006 IAS19 DEFICIT Â£'000 Â£'000 Â£'000 Current Service Charge (822) (766) (1,392) Finance costs 56 (68) (114) Future service contributions paid 506 524 1,028 -------------------------------------------- Net impact on Profit and Loss Account (260) (310) (478) Past service deficit contributions paid 400 438 914 Actuarial gains or losses (954) 1,476 (44) Opening deficit (10,315) (10,707) (10,707) -------------------------------------------- Closing deficit (11,129) (9,103) (10,315) Deferred Taxation @ 30% 3,339 2,731 3,095 -------------------------------------------- Net - Deficit (7,790) (6,372) (7,220) -------------------------------------------- -------------------------------------------------------------------------------- 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 Â£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 Â£506,000. Under IAS 19 the charge against profit in the six-month period was Â£766,000, a difference of Â£260,000 in excess of the future service contributions that were actually required. This is shown in the table below. -11- -------------------------------------------------------------------------------- Half year to Half year to Full year to 30 September 1 October 1 April 2006 2005 2006 Â£'000 Â£'000 Â£'000 Profit before tax as reported 758 163 (129) Current Service Charge (822) (766) (1,392) Finance costs 56 (68) (114) ------------------------------------------------ (766) (834) (1,506) Future service contributions paid 506 524 1,028 ------------------------------------------------ Net pension adjustment (260) (310) (478) ------------------------------------------------ Trading profit before tax 1,018 473 349 ------------------------------------------------ -------------------------------------------------------------------------------- This information is provided by RNS The company news service from the London Stock Exchange

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