Cropper (J) Regulatory News (CRPR)

20 Jun 2006 07:30

Cropper(James) PLC20 June 2006 Issued by Citigate Dewe Rogerson Ltd, BirminghamDate: Tuesday, 20 June 2006Embargoed: 7.30am James Cropper PLC Preliminary Results for the year ended 1 April 2006 Full year to Full year to 1 April 2 April 2006 2005 Turnover £64.2m £64.6m Group profit/(loss) before tax £0.3m £2.4mPrior to net IFRS pension adjustments (£0.1m) £1.6mAfter net IFRS pension adjustments (Losses)/Earnings per share (1.2p) 12.6p Dividend per share 4.1p 8.2p Gearing 46% 43% TFP total sales up 9%; TFP US sales up 16% Paper Mill Shop turnover up 18% with 5 new outlets opened Energy costs increased by 54% over last year "The outlook for Speciality Papers will remain difficult for the foreseeablefuture given the volatile nature of energy markets. Global pulp inventoriescontinue to decline, owing to strong demand and reduced pulp production, mostlyresulting from closures in North America. As a consequence pulp is expected toadvance on an upward trend in the current financial year. It should therefore beanticipated that the profitability of Speciality Papers will deteriorate furtherin the short term". "I am encouraged by the recent improvement in the performance of Technical FibreProducts. An emerging portfolio of new product developments combined with awell-managed cost base provides confidence that this improvement will continuedespite the recent weakening of the US$". "Despite the current slow down in consumer spending across the retail sectordevelopment of The Paper Mill Shop brand will progress through new routes tomarket". "I am very disappointed that it has been necessary to reduce this year's finaldividend payment. In due course management plans, backed by the Board's firmresolve, will return the Group to acceptable levels of profitability, thereforeenabling our progressive dividend policy to be restored". J A Cropper, Chairman FULL STATEMENT ATTACHED Enquiries:Alun Lewis, Chief ExecutiveJohn Denman, Group Finance Director Katie DaleJames Cropper PLC Citigate Dewe RogersonToday: 020 7638 9571 (8.00am - 11.30am) Today: 020 7638 9571Thereafter: 01539 722002 Thereafter: 0121 455 8370www.cropper.com Mobile: 07770 788624 -2- ------------------------------------------------------------Summary of Results IFRS basis UK GAAP basisGroup 5 Year Performance 2006 2005 2005 2004 2003 2002 Group turnover £'000 64,201 64,568 64,568 58,010 56,419 55,835 ------------------------------------------------------------ Profit and Loss Summary £'000--------------------------------------------------------------------------------------Trading activities Paper Division(papermakingand retail) (6) 2,157 2,207 806 1,011 1,064 ConvertingDivision 62 385 389 438 551 1,069 TechnicalFibre Products 777 521 522 506 646 314 ---------------------------------------------------------"On-going"tradingoperatingprofit 833 3,063 3,118 1,750 2,208 2,447 Profit on saleof tradeinvestment 116 --------------------------------------------------------- Trading operatingprofit 949 3,063 3,118 1,750 2,208 2,447 Joint Venture (89) (114) (114) (93) (23) Otherincome/(expenditure) (200) (200) (50) 16 (271) --------------------------------------------------------- Trading profitbeforeinterest 860 2,749 2,804 1,607 2,201 2,176 Net interest (511) (357) (337) (355) (408) (629) --------------------------------------------------------- Trading profitbefore tax 349 2,392 2,467 1,252 1,793 1,547 ---------------------------------------------------------(After future servicepension contributionspaid)--------------------------------------------------------------------------------------Net pension adjustments Operatingprofit (364) (423) (696) (467) 74 (21)Net interest (114) (330) ---------------------------------------------------------Net pensionadjustmentbefore tax (478) (753) (696) (467) 74 (21) -----------------------------------------------------------------------------------------------------------------------------------------------Overall Group afterpension adjustments Operatingprofit 585 2,640 2,422 1,283 2,282 2,426 Joint Venture (89) (114) (114) (93) (23) Other(expenditure)/income (200) (200) (50) 16 (271) ---------------------------------------------------------Profit beforeinterest 496 2,326 2,108 1,140 2,275 2,155 Net interest (625) (687) (337) (355) (408) (629) ---------------------------------------------------------(Loss)/Profitbefore Tax (129) 1,639 1,771 785 1,867 1,526 ----------------------------------------------------------------------------------------------------------------------------------------------- (Losses)/Earningsper Share (1.2p) 12.6p 13.8p 7.6p 15.1p 9.2p Dividends perShare 4.1p 8.2p 8.2p 7.8p 7.5p 7.0p --------------------------------------------------------- Balance Sheet Summary £'000Non-pension Assets - excl.Cash 46,668 47,005 46,155 45,759 43,627 44,190 Non-pensionLiabilities - excl.Borrowings (11,993) (11,524) (12,044) (11,184) (10,376) (10,864) --------------------------------------------------------- 34,675 35,481 34,111 34,575 33,251 33,326Net pension(liabilities)/assets (7,221) (7,495) 831 (73) 394 320 ---------------------------------------------------------- 27,454 27,986 34,942 34,502 33,645 33,646Net Borrowings (8,595) (8,350) (7,404) (7,427) (6,526) (7,164) ----------------------------------------------------------Equityshareholders'funds 18,859 19,636 27,538 27,075 27,119 26,482 ---------------------------------------------------------- Gearing % 46 43 27 27 24 27 ---------------------------------------------------------- CapitalExpenditure£'000 2,889 3,228 3,228 3,101 2,299 2,750 ---------------------------------------------------------- -3- STATEMENT BY THE CHAIRMAN, J A CROPPER I am disappointed to report that the Group recorded a small loss before tax of£129,000 for the year (a profit of £349,000 prior to net IFRS pensionadjustments). This compares with a profit before tax of £1,639,000 for theprevious year (a profit of £2,392,000 prior to net IFRS pension adjustments). In my thirty-five years as Chairman I have never previously experienced a yearduring which the papermaking business has had to absorb such dramatic and rapidincreases in its cost base. At the AGM on 3 August 2005 I drew attention to theadverse impact that the rising cost of energy would have on the profitability ofthe Group and James Cropper Speciality Papers in particular. In fact the Group'scost of energy consumption increased over the previous year by £1,443,000 to£4,139,000, up 54%. In such difficult trading conditions, Speciality Papers didwell to limit its loss to such a low level. Our policy of diversification proved its worth in the year. In contrast to thedifficulties that confronted Speciality Papers, I am pleased to report thatTechnical Fibre Products delivered a significant improvement in profitabilityduring the year. Since 1989 the Group has held a 35% holding in Pacofa S.A., a converting companylocated in northern France. Over recent years the performance of this businesshas been disappointing. This holding was sold during the year giving rise to again of £116,000 compared to the written down value of the investment. Dividends In view of the difficult trading climate, the Board is proposing a finaldividend payment of 2.2p, making a total dividend for the full year of 4.1pcompared to 8.2p in 2005, an overall decrease of 50%. James Cropper Speciality Papers ("Speciality Papers")The operating profit of Speciality Papers fell from £1,787,000 to a loss of£247,000 over the year. Sales were down by 3.6%. The financial results amply demonstrate an extremely difficult year. Subduedmarkets combined with very significant cost increases, particularly in thesecond half, had a dramatic impact on profitability. The scale of cost increasesrelating to energy, effluent charges and pulp, totalling in excess of £2.5mcompared to the previous year, were such that initiatives to mitigate theirimpact were only partially successful during the year. Although price increaseswere achieved, the competitive nature of both UK and export markets limited thefull recovery of the dramatic increase in the cost base. Despite these subdued markets however, steady progress was made in developingnew business opportunities in the UK and export markets. Speciality Papers' prime source of energy is natural gas. Increasing unit costs,driven by falling North Sea production, low UK storage capacity, majordistortions in the European natural gas market and international events, had asignificant impact on profitability in the year. Expenditure on gas totalled£3.2m for the year against £2.0m in the previous year, an increase of 60% withunit costs averaging 50p per therm for the 12 months. The average cost ofnatural gas in the first half was 30p per therm. However prices climbeddramatically during the course of November to peak at an average of 82p pertherm in December 2005. After falling in January and February 2006, prices againclimbed in March 2006 averaging 75p per therm for the month. continued... -4- Although the • was relatively stable against £Sterling throughout the year, theUS$ fluctuated against both currencies. This affected the relative prices ofNorthern Bleached Softwood Kraft ("NBSK") pulp, the market benchmark priced inUS$s and hardwoods priced in •. NBSK opened the financial year at US$645 pertonne and fell to US$585 per tonne by the end of September 2005. Thereafter thecost of NBSK progressively increased to US$630 per tonne at the end of thefinancial year. In the second half of the year a similar pattern emerged for •priced hardwoods. Pulp costs in the year as a whole, were over £0.8m higher thanin the previous 12 months. In recent years, Speciality Papers has been subjected to significant increasesin the cost of waste water treatment by our local water services utilitycompany. OfWat, the UK water regulator, has granted these increases to allow theutility company to raise revenue to fund general investment. The increases,which do not relate to the actual cost of treatment, have been imposed on userson a mandatory basis. The cost of water treatment charges rose by 19% in thefinancial year to £830,000. During the year an automated reel and sheet packaging line was commissioned.This £1,000,000 investment characterises the innovative technical solutionsrequired by the business to maintain flexibility whilst improving throughput,product presentation and productivity. The Paper Mill ShopDespite an impressive growth record over recent years, The Paper Mill Shop wasnot immune to the general slowdown in the retail economy during the course ofthe financial year. Turnover was £6,159,000, up 18% on the previous year, withfive new outlets opened in Mansfield, Hatfield, Portsmouth, Fleetwood andBraintree, taking the number of outlets to 23 across the UK. However operatingprofit was £241,000 compared to £370,000 in the previous year. Like-for-likesales were down by 3.7%. During the course of the previous year warehousing anddistribution activities were relocated to a larger facility in order to managethe expansion of this business. The full year cost effect of this move wastherefore felt in the financial year. Technical Fibre Products ("TFP")Operating profit for the year was £777,000 against £521,000 with turnover up8.7% on the previous year at £6,700,000. TFP's sales in the first six monthswere broadly in line with the same period last year. Sales moved ahead of thecomparable period in the second half year. This reflected growth in sales ofhigher margin products and a modest strengthening of the US$. Sales into the USmarket grew by 16% in £Sterling terms and by 11% in US$ terms. Growth waslargely attributable to composite materials containing metal-coated carbonfibres. The majority of these fibres are now supplied by Electro FiberTechnologies LLC ("EFT"), the joint venture company in which TFP has a 50%share. EFT incurred a small loss in the period. At the average exchange rate forthe year, sales to the US market represented approximately 44% of TFP's turnoverin £Sterling terms. James Cropper Converting ("Converting")Converting's turnover fell by 4.2% to £10,887,000 while operating profitdeclined from £385,000 to £62,000. The strengthening of the US$ eased marginpressure on mountboard sales to the USA by Converting. However sales ofdisplayboard have been lower than the high levels seen last year as a result ofreduced activity in the retail sector. Nevertheless the Division continued tomaintain its position as the leading UK manufacturer of display board. Plannedinvestment and product rationalisation over the coming months will allow thedecommissioning of older equipment with significant increases in capability,output and productivity of the remaining machines. Converting's reported profitis after a deduction of £250,000 relating to accelerated depreciationattributable to equipment due to be decommissioned. continued... -5- Pensions and International Accounting Standard 19 ("IAS 19")Actual future service pension contributions paid in the period by the Group toits two final salary schemes in accordance with the actuaries' recommendations,resulting from their latest "on-going" valuations, were £1,028,000. Under IAS 19the charge against profit in the year was £1,506,000, which was £478,000 inexcess of the future service contributions that were actually required. Inaddition, contributions totalling £914,000 were paid to the two schemes inrespect of their past service deficits brought forward. EnvironmentI am pleased to report that Speciality Papers has recently gained dualcertification to FSC (Forest Stewardship Council) and PEFC (Programme for theEndorsement of Forest Certification) standards. This development enablesSpeciality Papers to satisfy the increasing demand from major customers and endconsumers for creditable certification of the source of fibre used in theproducts they purchase. OutlookThe three manufacturing subsidiaries will continue their drive to grow sales ofhigher margin products, while developing and implementing plans to improveprofitability through operational efficiencies and business optimisation. Cash management is under firm control in order to conserve resources. Investmentover the next two years will be prioritised on projects to minimise energycosts, improve efficiencies and reduce our dependence on external waste watertreatment. The recent weakening of the US$ against £Sterling and the • is expected to havea broadly neutral effect on the Group overall resulting from our internalcurrency matching policy. The outlook for Speciality Papers will remain difficult for the foreseeablefuture given the volatile nature of energy markets. Global pulp inventoriescontinue to decline, owing to strong demand and reduced pulp production, mostlyresulting from closures in North America. As a consequence pulp is expected toadvance on an upward trend in the current financial year. It should therefore beanticipated that the profitability of Speciality Papers will deteriorate furtherin the short term. I am encouraged by the recent improvement in the performance of Technical FibreProducts. An emerging portfolio of new product developments combined with awell-managed cost base provides confidence that this improvement will continuedespite the recent weakening of the US$. I anticipate that Converting will reverse its decline in the coming financialyear. Despite the current slow down in consumer spending across the retail sectordevelopment of The Paper Mill Shop brand will progress through new routes tomarket. I am very disappointed that it has been necessary to reduce this year's finaldividend payment. In due course management plans, backed by the Board's firmresolve, will return the Group to acceptable levels of profitability, thereforeenabling our progressive dividend policy to be restored. -6- James Cropper PLC Preliminary Results Group Profit and Loss Accountfor the period ended 1 April 2006 2006 2005 £'000 £'000-------------------------------------------------------------------------------Continuing operations Turnover 64,201 64,568 Other income 247 235 Changes in inventories of finished goods and work inprogress 210 1 Raw materials and consumables used (27,720) (27,500) Energy costs (4,139) (2,696) Employee benefit costs (16,906) (16,316) Depreciation and amortisation (3,715) (3,498) Other expenses (11,709) (12,154) Profit on sale of trade investment 116 --------------------------------------------------------------------------------Operating profit 585 2,640 Interest expense (888) (823) Interest income 263 136 Share of post tax loss from joint ventures (89) (114) Amounts written off investments - (200)-------------------------------------------------------------------------------(Loss)/profit before tax (129) 1,639 Taxation 27 (584)------------------------------------------------------------------------------- (Loss)/profit for the period attributable to equityholders of the company (102) 1,055------------------------------------------------------------------------------- (Loss)/earnings per share expressed in pence per share- Basic (1.2p) 12.6p- Diluted (1.2p) 12.6p-------------------------------------------------------------------------------Dividends per share expressed in pence per share- 2006 interim dividend paid 1.9p 1.9p- 2006 final dividend proposed 2.2p 6.3p------------------------------------------------------------------------------- -7- James Cropper PLC Preliminary Results Balance Sheets at 1 April 2006 Group Company 2006 2005 2006 2005 £'000 £'000 £'000 £'000Assets Non-current assets Intangible assets 1,316 1,292 1,316 1,292 Property, plant and equipment 23,763 24,613 1,295 1,254 Investment in subsidiaries - - 7,350 7,350 Investments in joint ventures 77 83 - - Financial assets- Trade investments - 195 - 195 Deferred tax assets 3,095 3,212 2,938 3,212-------------------------------------------------------------------------------- 28,251 29,395 12,899 13,303--------------------------------------------------------------------------------Current assets Inventories 8,267 7,663 - - Trade and other receivables 13,399 13,205 28,839 26,830 Financial assets- Derivative financial instruments 2 - 2 - Cash and cash equivalents 1,762 88 1,087 7-------------------------------------------------------------------------------- 23,430 20,956 29,928 26,837--------------------------------------------------------------------------------Liabilities Current liabilities Trade and other payables (7,727) (6,785) (4,516) (1,664) Financial liabilities- Borrowings (2,244) (1,890) (2,244) (3,121)- Derivative financial instruments - (7) - (7) Current tax liabilities (465) (489) (104) (227)-------------------------------------------------------------------------------- (10,436) (9,171) (6,864) (5,019)--------------------------------------------------------------------------------Net current assets 12,994 11,785 23,064 21,818--------------------------------------------------------------------------------Non-current liabilities Financial liabilities- Borrowings (8,113) (6,548) (8,113) (6,548) Retirement benefit liabilities (10,315) (10,707) (10,315) (10,707) Deferred tax liabilities (3,958) (4,289) (401) (621)-------------------------------------------------------------------------------- (22,386) (21,544) (18,829) (17,876)--------------------------------------------------------------------------------Net assets 18,859 19,636 17,134 17,245--------------------------------------------------------------------------------Shareholders' equity Ordinary share capital 2,090 2,090 2,090 2,090 Share premium 454 454 454 454 Translation reserve 10 (6) - - Other reserves 61 100 14 23 Retained earnings 16,244 16,998 14,576 14,678--------------------------------------------------------------------------------Total shareholders' equity 18,859 19,636 17,134 17,245-------------------------------------------------------------------------------- -8- James Cropper PLC Preliminary Results Cash flow statements for the period ended 1 April 2006 Group Company 2006 2005 2006 2005 £'000 £'000 £'000 £'000--------------------------------------------------------------------------------Cash flows from operating activities Cash generated from/(used by)operations 3,876 4,378 393 (950) Interest received 262 125 1,623 1,971 Interest paid (854) (840) (753) (958) Tax (paid)/received (198) 384 (76) 406--------------------------------------------------------------------------------Net cash from operating activities 3,086 4,047 1,187 469--------------------------------------------------------------------------------Cash flow from investing activities Investment in joint venture (67) (85) - - Purchase of intangible assets (206) (277) (206) (277) Purchase of property, plant andequipment (2,683) (2,951) (214) (78) Proceeds from sale of trade investment 311 - 311 - Proceeds from sale of property, plantand equipment - 5 - ---------------------------------------------------------------------------------Net cash used in investing activities (2,645) (3,308) (109) (355)--------------------------------------------------------------------------------Cash flows from financing activities Net proceeds from issue of new bankloan 4,000 1,600 4,000 1,600 Finance lease capital payments (96) (265) - - Repayment of borrowings (1,843) (1,948) (1,843) (1,948) Dividends paid to shareholders (686) (652) (686) (652)--------------------------------------------------------------------------------Net cash generated from/(used in)financing activities 1,375 (1,265) 1,471 (1,000)--------------------------------------------------------------------------------Net increase/(decrease) in cash andcash equivalents 1,816 (526) 2,549 (886) Cash and cash equivalents at the startof the period (54) 472 (1,462) (576)--------------------------------------------------------------------------------Cash and cash equivalents at the endof the period 1,762 (54) 1,087 (1,462)-------------------------------------------------------------------------------- Cash and cash equivalents consists of: Cash at bank and in hand 1,762 88 1,087 7 Overdrafts included in borrowings - (142) - (1,469)-------------------------------------------------------------------------------- 1,762 (54) 1,087 (1,462)-------------------------------------------------------------------------------- -9- James Cropper PLC Preliminary Results Statements of recognised income and expense for the period ended 1 April 2006 Group Company 2006 2005 2006 2005 £'000 £'000 £'000 £'000 (Loss)/profit for the financial period (102) 1,055 580 394 Currency translation differences on foreigncurrency investment 16 (6) - - Retirement benefit liabilities - actuarial(losses)/gains (44) 2,221 (44) 2,221 Deferred tax on actuarial (losses)/gains onretirement benefit liabilities 13 (666) 13 (666)-------------------------------------------------------------------------------Total recognised (expense)/income for theperiod (117) 2,604 549 1,949------------------------------------------------------------------------------- Pensions IAS 19 requires that actuaries calculate the assets and liabilities ofcompanies' pension schemes based on values and interest rates at their annualbalance sheet date. Surpluses or deficits revealed by these valuations areincluded on the sponsoring company's balance sheets, either directly againstReserves or via the Profit and Loss Account. Under IAS 19 pension schemeliabilities are measured on an actuarial basis using the projected unit method.Pension liabilities are discounted at the current rate of return on an AA ratedquality corporate bond of equivalent currency and term. The pension schemeassets are measured at fair value at the Balance Sheet date. The net of thesetwo figures gives the scheme surplus or deficit. As market values of the schemeassets and the discount factors applied to the scheme liabilities willfluctuate, this method of valuation will often lead to large variations in the"pension balance" year on year. IAS 19 regards a sponsoring company and its pension schemes as a singleaccounting entity rather than two or more separate legal entities. The actuarialvaluation is the starting point for the creation of the IAS 19 accountingentity. The valuation determines the net position of a pension scheme, i.e. thedifference between its assets and liabilities. On the introduction of IAS 19 thenet position, surplus or deficit, is brought onto the sponsoring company'sBalance Sheet such that Reserves are immediately adjusted by the net positionreduced by deferred tax. This obviously results in either an increase ordecrease in the net asset value of the sponsoring company. Upon valuation atsubsequent year-ends the movement in value from the previous valuation isexpressed in the following component parts: Profit and Loss AccountOperating 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 Total Recognised Gains and Losses •Actuarial gains and losses arising from variances against previous actuarial assumptions. -10- James Cropper PLCPreliminary Results The above items are offset in the year-to-year movement by actual contributionspaid by the employer in the period. The following table shows the results of theIAS 19 valuations. 2006 2005IAS19 Deficit £'000 £'000Current Service Charge (1,392) (1,551)Finance costs (114) (330)Future service contributions paid 1,028 1,128 -----------------------Net impact on Profit and Loss Account (478) (753)Past service deficit contributions paid 914 1,600Actuarial gains or losses (44) 2,221Opening deficit (10,707) (13,775) -----------------------Closing deficit (10,315) (10,707)Deferred Taxation @ 30% 3,095 3,212 -----------------------Net - Deficit (7,221) (7,495) ----------------------- Actual future service pension contributions paid in the period by the Group toits two final salary schemes in accordance with the actuaries' recommendations,resulting from their latest "on-going" valuations, were £1,028,000. Under IAS 19the charge against profit in the year was £1,506,000, which was £478,000 inexcess of the future service contributions that were actually required. 2006 2005Profit before Tax £'000 £'000 As reported (129) 1,639 Current Service Charge (1,392) (1,551) Finance costs (114) (330) ------------------------ (1,506) (1,881)Future service contributions paid 1,028 1,128 ------------------------Net pension adjustment (478) (753) ------------------------ Trading profit 349 2,392 ------------------------ -11- James Cropper PLC Preliminary Results For the year ended 1 April 2006 1. Basic earnings per share have been calculated on the loss aftertaxation of £102,000 (2005: profit £1,055,000) divided by the weighted averagenumber of Ordinary shares in issue during the period of 8,359,114 (2005:8,359,114). 2. The dividend will, if approved, be paid on 11 August 2006 to allshareholders on the Register on 21 July 2006. 3. The financial information set out above does not constitute thestatutory accounts for the years ended 1 April 2006 and 2 April 2005. Statutoryaccounts for 2005 have been delivered to the Registrar of Companies and thosefor 2006 will be delivered following the Company's Annual General Meeting. Theauditors have reported on these accounts, their reports were unqualified and didnot contain statements under section 237 (2) or (3) of the Companies Act 1985. 4. The Annual Report and Accounts for 2006 will be posted toshareholders by 12 July 2006 and will also be available on request from theCompany's registered office, Burneside Mills, Kendal, Cumbria LA9 6PZ. 5. The Annual General Meeting of the Company will be held at 10.30amon Thursday 3 August 2006 at the Bryce Institute, Burneside, Kendal, Cumbria This information is provided by RNS The company news service from the London Stock Exchange