Cropper (J) Regulatory News (CRPR)

James Cropper plc

The advanced materials and paper products group, is pleased to announce its

Preliminary Audited Results for the 53 weeks ended 2 April 2016

* Net exceptional costs of £0.77m (2015: nil)

Financial Highlights

o Profit before tax (excluding IAS 19), up 48% to £5.2m

o Sales in TFP up 29% on last year, and up 1% in Paper

o Strong operating profit growth in TFP 117%, modest operating growth in Paper 7%

o Diluted earnings per share 31.8p, up from 20.1p on prior year

o Dividend up 9% to 9.3p (8.5p prior year)

o Papermilldirect online retail business sold for £250,000

Commercial and Operational Highlights

o James Cropper 3D products launches unique capabilities in coloured moulded fibre. Production capabilities now installed

o Innovative and complementary technologies setting TFP apart from competitors

o Production capacity doubled for TFP, production capabilities extended in Paper

o AS9100 global aerospace accreditation gained

o ISO 50001 Energy Management certification achieved

o Research and development expenditure up 38% on prior year

o One of the consequences of Storm Desmond was to defer £712,000 expenditure on a programme of replacement and repair activities until 2016/17

Mark Cropper, Chairman, commented:

"The Group has performed strongly in 2015/16, a testament to the strategies introduced and deployed in the last few years. Although we will be catching up with a number of deferred repair projects in 2016/17, growth will continue to be delivered with further capital investments across all divisions in support of focused market developments and group wide efficiency improvements. These give me confidence that the group will continue to advance for some years to come.

Enquiries:

CHAIRMAN'S LETTER

Dear Shareholders

I am delighted to report another year of strong progress in 2015/16. 

Technical Fibre Products continues to deliver on our long held aspirations for the subsidiary. This year was marked by the commissioning of a new production line at the Burneside facility in the UK with further investments in the USA in particle plating technology. The UK investment doubles our production capacity for non-woven materials providing much needed room for growth. This year's double digit growth would not have been achieved, however, without a significant improvement to the operational efficiencies of existing plant. Both sales growth and operational developments are a credit to the teams involved. A spotlight on Technical Fibre Products will be presented in the Annual Report by TFP's Managing Director Martin Thompson.

In Paper, growth has been sustained in a number of targeted markets of which packaging is one with a number of large global contracts acquired with world leaders in consumer electronics and luxury goods. During the year we have invested in additional capacity in embossing and ream wrapping in response to customer demand.

Investment for growth is a marked feature of the 2015/16 financial year. New subsidiary James Cropper 3D Products ("3DP"), created to provide stand-out sustainable moulded fibre products, made good progress with more expected in the coming year. This initiative resulted directly from the Board's decision to create a new Technology & Innovation Department in early 2014. While it is still early days, we are hopeful that 3DP will provide another growth platform for the Group.

3DP also aligns with a broader theme for the Group: the demand for a growing number of our products is tied to the green or sustainable agenda, from carbon fibre veils for composite aircraft to fully recyclable paper products, themselves with high levels of recycled content. We follow such trends keenly, albeit never losing sight of the importance of more traditional markets and the tailored service we continue to provide them. 

Looking internally, the progress of the Group is also being heightened by a continual drive to transform the way we operate across all functions, from operations to finance and commercial. Developments include revised structures and processes as well as continued investment in training, coaching and development programmes. Such advances, as set out further in the CEO report, are often unsung and can take considerable time to yield benefits, but they are essential and will provide the Group with considerable resilience. 

Ultimately, however, it is our people, at every level, who are making the difference. Nowhere was this more apparent than in our workforce's response to Storm Desmond at the Burneside facility. Hardly a single employee did not contribute to the recovery in some way, and many gave up their Christmas break to get us back on our feet. The turnaround was impressive, although the event was not without consequences. Around £0.7m of site wide repair projects were postponed as maintenance teams focused on recovery; these will be completed in the 2016/17 financial year. Net exceptional cost of £0.77m were incurred in the year as a result of insurance excesses, uninsured losses and the award of a grant to alleviate the impact of the flood. To mitigate future flood risks, the Board has approved £1m of capital investments in 2016/17 to build flood resilience at the Burneside site.

The importance we attach to our people is also why our values matter so much. These help us ensure we provide a safe, rewarding and interesting place to work as well as an environment that attracts the next generation of talent. We continue to monitor and measure our performance against them. 

Diluted Earnings per Share (after the adjustment for IAS 19) increased by 58% to 31.8 pence compared to 20.1 pence in the previous year.

The Board is recommending a final dividend of 7.1 pence per share making a total dividend for the financial year of 9.3 pence, an increase of 9.4% on the prior year.

The other aspects of this year's financial performance are covered in the CEO Report and elsewhere.

A personal highlight for me this year was the celebration we held to mark the opening of our new TFP line and our 170th anniversary. This was held primarily to thank our employees and community at Burneside. We invited the whole village and over 770 people came for tea and a tour. The village bakery provided cakes and the Burneside Ukelele Band kept us entertained. All who came remarked upon the friendly engaging atmosphere they encountered and the evident pride taken in the 'Mill', as we call it in the family.

Today we are so much more than a mill, with over 540 people and operations across the globe. We also work hard to make a positive contribution to the world, near and far. We will never stand still, there is still so much more we aspire to do. 

Outlook

The Group has performed strongly in 2015/16, a testament to the strategies introduced and deployed in the last few years. Although we will be catching up with a number of deferred repair projects in 2016/17, growth will continue to be delivered with further capital investments across all divisions in support of focused market developments and group wide efficiency improvements. These give me confidence that the group will continue to advance for some years to come.

Mark Cropper

Chairman

CHIEF EXECUTIVE'S REVIEW

Profit

I am pleased to report a 61% growth in operating profit before interest to £6.3m in the year to 2 April 2016, compared to £3.9m in the prior year, prior to the impact of IAS 19 pension adjustments and exceptional costs.

Profit before tax, after exceptionals and prior to IAS 19, was £5.2m, up £1.7m on 2015, representing an increase of 48%. Exceptional costs of £0.77m (net) were incurred for the year to 2 April 2016 as a consequence of the impact of Storm Desmond. There were no exceptionals in the prior year.

Profit before tax of £3.9m was up £1.3m on prior year.

Revenue

Group revenue for the financial year was £87.9m, up 6% on the prior year.

Revenue for James Cropper Paper grew by 1% in the year to £69.2m and operating profit by 7% to £2.6m. For Technical Fibre Products revenue grew by 29% in the year to £18.7m and operating profit more than doubled with an increase of 117% to £5.9m.

Research and development

Research and development (R&D) is a fundamental part of our growth strategy, adding to our capability, maintaining our competitiveness and bringing new product lines into our target markets. The Group continues to invest in research and development with expenditure in R&D of £1.8m this year, up 38% on prior year.

Capital expenditure

Capital expenditure during the year was £4.1m (2015: £2.6m). The largest investment was on a new production line in TFP, completed and commissioned in the first half and doubling manufacturing capacity.

Cash and debt

The Group had gross debt of £10.5m at the balance sheet date and cash of £3.2m, giving a net debt of £7.3m (2015: £6.1m). The Group had undrawn overdraft and revolving credit facilities of £5.0m at the balance sheet date and borrowings of £3.9m to be repaid within 12 months. The undrawn facilities and the cash provide funds against which the short term borrowings can be paid, leaving £4.3m of cash available to the Group at the year end. Post year end the Group has secured a second revolving credit facility of £5.0m.

Gearing at the financial year end, after deduction of the IAS 19 pension deficit, was 27% down from 32% on the previous year.

STRATEGY

In 2013 we laid out five strategic platforms for growth that continue to drive progress across all areas of the company.

HIGH PERFORMANCE CULTURE

The capabilities, knowledge and motivation of our people continue to set James Cropper apart - we see this High Performance Culture as the foundation of our continued growth.

Measured improvements

Part of our strategy is to measure our High Performance Culture through an employee survey. This has showed significant improvements since the previous survey two years ago.

Our previous survey recorded above-average levels of employee engagement and provided valuable insight for development. Only two years later, our latest survey showed an 11% increase in engagement spanning all topic areas explored; this is 10% higher than the national average. Insights also demonstrated the positive impact, business-wide, of our senior management restructuring.

92% - "I have the necessary skills and knowledge to do my job well

95% - "I'm prepared to change how I work to improve business effectiveness"

93% - "I know what's expected of me in my job"

80% - "I believe that the company is well led by its senior management team"

85% - "I am fairly treated by my manager"

Continued investment in individuals

Our High Performance Culture is driven by continued investment in individuals at all levels in the company. We are drawing on world-class external training, coaching and development programmes to maximise performance, knowledge and skills - ultimately ensuring that we maintain our competitive edge.

Sales Excellence a permanent focus

James Cropper businesses excel in sales by adding value. Our project-oriented approach provides comprehensive support to clients, in line with the quality of our products. As our programme of training and mentoring continues, I am proud to report that our sales teams are better equipped than ever before to exceed the expectations of our clients around the globe.

SUPERIOR LEVELS OF OPERATIONAL EXCELLENCE

We have continued to advance manufacturing capacity and processes, invested in world-first technical capabilities, extended our commitment to sustainability and achieved accreditations that support a truly competitive position in all our markets.

New potential for TFP, driven by sales growth

This year we have opened a third TFP production line at Burneside Mills. This investment has doubled manufacturing capacity across this business. TFP has had a record year and we anticipate even better results in the future.

Included in the Annual report, there will be a special report by Managing Director of TFP, Martin Thompson, describing other significant operational developments. These include product development on our nano-coating line and the opening of our particle-coating production facilities, as well as our new AS9100 accreditation - an invaluable asset which secures our position as a credible, reliable supplier to the aerospace industries.

Expanding capabilities in Paper

Developments in Paper are driven by our knowledge of the global market, and our technical know-how. We have continued to invest in new technologies, expanding the possibilities for our global paper clients. This year we have made the investment in additional paper embossing capacities enabling us to create entirely unique textures, appearances and finishes for our customers. Developments such as these continue to enhance our position as industry-leaders in bespoke papermaking. New ream-wrapping equipment has enhanced the presentation of stock orders to merchants.

ISO 50001 accreditation underpins our sustainable innovations

Sustainability is at the core of our values. We are a business not only striving to reduce environmental impact through our own responsible manufacture, but also through the products we create, so I am delighted to report our ISO 50001 certification in 2015. This internationally recognised energy-management standard demonstrates our on-going commitment to reducing energy consumption and greenhouse gas emissions. As an operational system, it drives energy efficiency and protects our energy security - we see this as one of many important progressions for our future-focussed Group.

EXISTING MARKET OPPORTUNITIES

Driving organic growth in our core markets is a continued strategic focus, and this year we have seen positive results across the Group.

TFP - Core markets

In TFP we continue to drive expansion in a number of core, profitable markets. Aerospace and Defence represent 30% of TFP sales and, supported by our AS9100 accreditation growth, is strong. Martin Thompson's special report includes a review of exciting new applications for our nonwovens, as well as developments in thermals that confirm our position as thought leaders in technical fibre innovation.  

Paper - Global strategy brings positive results

In Paper, we are driving growth in a number of targeted markets including packaging. This year we have won a number of large global contracts including world-leaders in consumer electronics, luxury gifts and jewellery.

In support for the paper business to focus on the core B2B strategic plans the online retail business, Papermilldirect.com, was sold at the end of March.

Our global position has strengthened on the back of our WOFE (Wholly Owned Foreign Enterprise) in China which enables use of local currency, local communication and transactions. Perhaps most importantly, it enables us to keep complete chain of custody of our materials - supporting the accreditation and credibility of our products throughout the supply chain.

Additionally, we are re-establishing the global presence of certain paper products to align with global trends. One example is our Wall-Ready pre-coated inkjet media range, a cost-effective solution with broad applications in the fast-growing Sign & Display 'print-on-demand' market, as well as Photo Retail.

GAINING ADDITIONAL PROFITABLE MARKET SHARE

Continued research and development has underpinned several new developments this year, where we enter new global markets.

James Cropper 3D Products - The next generation of moulded fibre

In 2014, we created a Technology and Innovation Department, led by our Chief Technology Officer Patrick Willink. The objective was to create a third business within the James Cropper Group - an additional platform for growth. We undertook a rigorous scope of research; analysing global trends and fields of innovation, while exploring the wider potential of our unique capabilities in fibre innovation, colour application, design and global service provision.

James Cropper 3D Products is the result - a business which capitalises on our industry-leading fibre and colour capabilities as well as our stand-out commitment to sustainable innovation. As we launch we are answering a global demand for sustainable packaging that adds real value for brands - a true alternative to plastic.

Paper - Food contact paper is among new developments

James Cropper paper adds value. This year, our new brand of certified food contact paper has launched to add value to the packaging experience for the high-end food and drink sector. Customers will benefit from exceptional and bespoke possibilities in colour, texture, creative finishing and technical performance - all realised at our Burneside Mill.

Also in Paper, the new Porcelain paper range is our smoothest ever paper - the new benchmark for flawless paper manufacture and effortless printing.

TFP - Out of this world

TFP is a business driven by future-focused research and innovation, meaning we are always well placed to explore new market opportunities. Our products support future technologies and renewable energy, reduce fuel consumption in aeroplanes, and provide fire protection in buildings…to mention just a few examples. This year, we are proud to see our nonwovens launch into space in NASA's Jason-3 satellite.

GLOBAL PRESENCE, GLOBAL SERVICE

As a global organisation we work to enhance our position at every level in the business - from sales excellence and service through to brand awareness and establishing thought leadership in our industries. Customer intimacy is a big part of this strategy - through developments in global service, and internationally important trade shows such as Luxepack and JEC, we strive to be close to our customers wherever they are.

Aligned with the best in the world

This year has seen a number of high profile collaborations, which demonstrate our global presence and prove the relevance of our values in important market sectors. Highlighted in the Annual report, you will see the continued exposure of our PaperBridge creative collaboration - which has gone global and was commissioned by Land Rover. You will also find our creative partnership with the UK's high-end retailer, Selfridges, and Manchester's Whitworth gallery - now reopened as one of the most sustainable cultural venues in the UK. Through partnerships such as these we continue to set an example in our industry, and those of our clients.

Recognised thought leaders in sustainable innovation

Our commitment to sustainability speaks to a global audience. In 2016, we gained exposure in national media, and on BBC Radio, when our industry leading Reclaimed Fibre Plant was highlighted as a pioneering solution to the 'coffee cup problem'. Through our manufacturing standards, our sustainable innovations and our proactive approach to real world concerns, we continue to build our global reputation as thought leaders in our industry.

Phil Wild

Chief Executive Officer

JAMES CROPPER PLC

GROUP STATEMENT OF COMPREHENSIVE INCOME

* Includes Business Insurance Income of £750,000 

STATEMENT OF FINANCIAL POSITION

STATEMENT OF CASH FLOWS

For the period ended 2 April 2016 (2015: for the period ended 28 March 2015)

STATEMENT OF CHANGES IN EQUITY

GROUP

All figures in £'000

COMPANY

Notes to Preliminary Results for the 53 week period ended 2 April 2016

· The accounting "year" for the Group is a 53 week period ended 2 April 2016, (2015: 52 week period ended 28 March 2015).

· Both the parent company financial statements and the Group financial statements have been prepared and approved by the directors in accordance with International Financial Reporting Standards as adopted by the EU ("IFRS") and the Companies Act 2006, as applicable to companies reporting under IFRS.

· The financial information set out above does not constitute the statutory accounts for the year ended 2 April 2016. Statutory accounts for 2015 have been delivered to the Registrar of Companies and those for 2016 will be delivered following the Company's Annual General Meeting. The auditor has reported on these accounts, the report was unqualified and did not contain statements under section 498 (2) or (3) of the Companies Act 2006.

· Basic earnings per share have been calculated on the profit after taxation of £2,994,000 (2015: £1,881,000) divided by the weighted average number of Ordinary shares in issue during the period of 9,191,512 (2015: 9,045,719).

· The dividend will, if approved, be paid in cash only on 12 August 2016 to all shareholders on the register on 15 July 2016.

Exceptionals

On the 5th December last year, large areas of northern England were affected by exceptionally high rainfall. This resulted in flooding across Cumbria impacting one of our sites based in Burneside. This site had some areas that were significantly affected, however the response from various teams across our workforce to secure the safety of employees and get production at the Burneside site back up as quickly as possible was exceptional and full production was reinstated more quickly than first expected.

The Group is working closely with our loss adjusters on making good damage to utilities, structures and facilities. Our insurance for this period covered losses to stocks, consequential losses and plant and equipment, with excesses of £15,000 for stocks, and £1 million for consequential losses and plant and equipment. The business is grateful to Cumbria Local Enterprise Partnership and to Cumbria County Council, which has already started to make payments against a total £1 million grant to contribute towards uninsured losses.

Uninsured losses within exceptional costs come to £1.77m in the year, covering £1.01m excess for stock, and for physical damage to property, and £750,000 of other uninsured damaged items, including an estimate from management for ongoing uncertainties at this stage as work with the loss adjusters continues. Also recognised separately within exceptionals is full recognition of the £1m grant as income. Net costs of £765,000 have been recognised separately within exceptionals in the year. It is expected that the claim will be finalised during the latter half of this calendar year.

Managing the potential impact from floods in the future is one aspect of risk management that will be accelerated. The Group's main strategy going forward is to build flood resilience at the Burneside site. The Group Board has approved an additional £1m of capital investment to protect key structures or relocate them away from a flood risk zone. This is a key part of the Group's strategic risk management programme, ensuring best practice for business continuity in protecting a key site, our reputation and our market share.

Pensions

· The Group operates two funded pension schemes providing defined benefits for a decreasing number of its employees. The defined benefit pension schemes are sensitive to a number of key factors: the value of the assets, the discount rate used to calculate the schemes liabilities (based on a premium above gilt yields), the rate of inflation and the mortality assumptions for members of the schemes. Changes in these assumptions will impact the deficit positively or negatively.

· The latest actuarial "on-going" valuations of the Group's pension Schemes at April 2013, determined the combined deficit of the schemes to be £12.7 million. These valuations are conducted on a tri-ennial basis and provide a steady platform to manage the deficit from one valuation to the next. It is the Group's legal responsibility to fund the defined benefit pension scheme deficits. Work has commenced on the next triennial "on-going" valuation set for April 2016. The evaluation of pension liabilities based on the April 2016 "on-going" valuation will lead to the consideration of liability management exercises and a new agreement with the trustees on payments to reduce the deficit Under IAS 19 the pension deficit is likely to be volatile and may in the future be very different from this current year end position. The IAS 19 pension deficit net of Deferred Tax, decreased by £5,101,000 over the year to £6,453,000.

· A reconciliation of the movement in the Statement of Financial Position of Retirement benefit liabilities is shown below:

· The Annual Report and accounts for 2016 will be posted to shareholders on 5 July 2016. The Annual Report will be available on the Company's website (www.cropper.com/financials/) on 28 June 2016, and on request from the Company's registered office, Burneside Mills, Kendal, Cumbria LA9 6PZ from 5 July 2016.

· The Annual General Meeting of the Company will be held at 11.00am on Wednesday 27 July 2016 at the Bryce Institute, Burneside, Kendal, Cumbria.