Cropper (J) Regulatory News (CRPR)

11 November 2014

James Cropper plc

(the "Company")

Half -year results to 27 September 2014

· Sales in TFP up 10% on comparable period, down 7% in paper.

· EBITDA up 23% on comparable period to £2.7m.

· Trading profit up 100% on prior year comparable period.

· The new executive team are all in place and focused on delivering the growth plans.

· Merger of the two paper businesses is extending commercial reach.

· Creation of Group Operations function is delivering efficiencies across manufacturing platforms

· New product introductions have been greeted favourably.

· The investment in TFP's 3rd manufacturing line is underway.

· The Technology and Innovation directorate is making good progress with creating diversification opportunities.

It is anticipated that the Group will continue to operate in line with the Board's expectations and our ambitions beyond the immediate future remain significant. I am very pleased with the changes we have made to our team and organisational structure in recent months and years. This is allowing us to better exploit the Group's growth potential and as such I am confident that we are on track to deliver improved returns in the future.

Mark Cropper, Chairman

STATEMENT BY THE CHAIRMAN, M A J CROPPER

Group revenue for the half year was down 5% on the comparable period at £40.1 million. A lower volume of sales in the first half of the year has been mitigated by lower input costs and enhanced product mix.

Prior to the IAS19 pension adjustment the Group has grown trading profit to £1,200,000 against £600,000 last year. The profits before tax after IAS19 pension adjustment has risen to £800,000 from £200,000 at the comparable period last year.

The increase in profitability is largely due to lower input costs, reduced production costs (helped by the newly combined operations team) and an improved product mix. Merging the two paper businesses has generated a greater number of commercial opportunities. The new management team in Technical Fibre Products is delivering growth in sales which includes newly developed products and additional geographical markets.

Technical Fibre Products ("TFP")

TFP's first half sales were up 10% overall on last year and the improved profitability is in line with management expectations. There has been a strong programme of commercial activities focused on increasing market awareness and promoting new product developments. We have seen sales grow in defence, energy and consumer electronics markets. We made our first sales into China and for a specific programme here in the UK in the wind turbine industry.

Work has started on a third manufacturing line at Burneside, which will double capacity for our specialist non-woven materials. This investment is a key step, not just to support growth within our existing customer base, but also to create the capacity to support our ambitious growth plans over coming years.

James Cropper ("James Cropper Paper Products")

James Cropper sales in the opening half were down 7% on the comparable period. This reduction includes the planned exit of low margin declining businesses and dips in some key account demand cycles. Profits relative to the comparable period are holding up.

Production efficiencies, product mix enhancements, and lower input costs, together combined to more than offset lower sale volumes. Gas prices in the UK proved favourable to us in the first half of this year. Northern Bleached Softwood Kraft ("NBSK") prices rose in the period and have been dampened by exchange rates. Pulp substitution by fibre produced from the reclaimed fibre plant continues to mitigate the impact of pulp volatility.

Earlier in the year we took the decision to exit from some non-strategic, unprofitable display board business and the financial results include some one-off costs incurred in making this change.

The new commercial team is shifting focus to higher margin products and markets. A tangible example of this is the "Khora" digital inkjet product, a printable canvas that folds to form instant wall art. This builds on the success of our highly popular inkjet board range. Khora was launched at the recent Photokina imaging fair in Cologne, and was well received as a true innovation in this sector, which will compete strongly against the existing block canvas market.

We recently launched 5 new branded ranges at the Packaging Innovations trade event in London. One of these is our new Coffee range, a range of papers that demonstrates the highest standards in sustainable, luxury paper production. This utilises materials from our pioneering reclaimed fibre facility, which was the first in the world to be able to recycle coffee cups. Papers in the Coffee range comprise of 50% reclaimed fibres (RCF) that were once 'single use' coffee cups, offering customers an opportunity to embrace responsible values alongside product and brand values.

Cash and borrowings

At 27 September 2014 gross drawn down loans and leases totalled £9.8 million, with £1.6 million held as cash at bank. The Group has un-drawn overdraft facilities of £3.5 million, US$1.0 million and €1.0 million.

Gearing at the half year end, after deduction of the IAS 19 pension deficit, was 42% (28% prior to IAS 19).

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

The Group operates two funded pension schemes providing defined benefits for just over 40% of its employees. The IAS19 valuations of these schemes as at 27 Sept 2014 revealed a combined deficit of £12,415,000, compared with £11,640,000 at 29 March 2014, an increase of £775,000. The primary reason for the increase in the schemes' liabilities is the discount rate of 4.10% used at Sept 2014 compared to 4.50% at March 2014.

In April 2011, future increases in pensionable pay were capped at a maximum of 2% per annum. At this time the combined deficit, net of deferred tax, was £1,039,000. At September 2014 this has increased by £8,893,000 to a combined deficit, net of deferred tax of £9,932,000. This deterioration is largely due to the negative impact of low yields on corporate bonds, driven by low interest rates.

In accordance with IAS 19 the expected return on assets is restricted to the discount rate used for valuing liabilities. This does not therefore reflect our expectations of actual asset performance. In previous years it was possible to take credit for the expected return on plan assets in excess of the discount rate. The result of this change is to increase the cost shown in the Profit and Loss Account, with a corresponding decrease in losses recognised in Other Comprehensive Income. The net adverse impact of IAS 19 on profit for the six months is £439,000, compared to £346,000 for the comparable period. Finance costs were £253,000 compared to £233,000 adverse in the comparable period.

Outlook

The new commercial team in James Cropper Paper are focused on improving the product mix and driving targeted growth areas. This includes a re-focus on export markets and increasing our presence in the luxury packaging and food packaging markets. Combining the two sales teams gives greater scope to cross sell a wider range of products to a bigger target market. The development of a range of branded and stocked items will generate stable returns over the medium term. The outlook in the short term faces headwinds from the slow European economies, but the actions in place will deliver improved results over the coming period.

Strong sales in the first half and a robust order book going into the second half leaves TFP well placed to deliver on expectations for the full year.

It is anticipated that the Group will continue to operate in line with the Board's expectations and our ambitions beyond the immediate future remain significant. I am very pleased with the changes we have made to our team and organisational structure in recent months and years. This is allowing us to better exploit the Group's growth potential and as such I am confident that we are on track to deliver improved returns in the future.

Mark Cropper

Chairman

11 November 2014

Notes to the Un-audited Interim Results

1. Basis of the preparation of IFRS financial information

a. 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 2006 applicable to companies reporting under IFRS.

Management has chosen to maintain the terminology that readers are familiar with, all references to:

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

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

iii. "Trading Profit" refers to profits prior to income from joint ventures, other income and expenditure, interest on borrowings and "Net IAS 19 pension adjustment"

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

v. EBITDA refers to Earnings before interest, tax, depreciation and amortisation.

vi. "Net IAS 19 pension adjustment" in the Profit and Loss Account refer to the net impact on the Profit and Loss Account of the pension schemes' operating costs and finance costs.

b. The Group's policy is to maintain the ability to continue as a going concern, in order to provide returns to the shareholder and benefits to other stakeholders. Accordingly the going concern basis has been adopted in preparing these interim results.

2. Interim Statement

a. The summarised results for the half-year to 27 September 2014, which have not been audited or reviewed, have been prepared in accordance with the accounting policies adopted in the accounts for the 52 week year ended 29 March 2014.

b. The financial information set out above does not constitute statutory accounts within the meaning of the Companies Act 2006. The figures for the 52 week year ended 29 March 2014 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 available on our website (www.cropper.com).

3. Earnings per share

Basic earnings per share for the half year to 27 September 2014 have been calculated by dividing the profits attributable to ordinary shareholders by 8,973,980 (2013: 8,872,629) ordinary shares, being the weighted average number of ordinary shares during the period.

4. Dividend

A net interim dividend of 2.2p per Ordinary Share (2013: 2.2p per share) is proposed and will be paid on 9 January 2015 to holders on the register at the close of business on 12 December 2014. The dividend relating to the 52 week year to 29 March 2014 was made up of an interim payment of £196,000 (2.2p per share) and a final dividend payment of £508,000 (5.7p per share). The dividend is payable in cash. Shareholders have the opportunity to elect to reinvest their cash dividend and purchase existing shares in the Company through a Dividend Reinvestment Plan.

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. 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. At subsequent period-ends the movement in value from the previous valuation is expressed in the following component parts:

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.