Cropper (J) Regulatory News (CRPR)

James Cropper PLC

James Cropper plc the niche specialist paper and materials group, is pleased to announce its

Half-year results to 25 September 2010

"I anticipate that TFP's sales to the aerospace, defence, security and consumer electronics sectors will continue to build strongly over the remainder of the financial year with profits well ahead of last year".

"Given the uncertainties surrounding energy and pulp costs and the time lag associated with implementing price increases, it is likely that Speciality Papers will only record a small profit in the current financial year".

"Converting's improved product mix, together with efficiency gains due from planned investment, should lead to a significant increase in this subsidiary's profitability in the current financial year compared to recent years".

"Overall, we are taking steps on many fronts to strengthen our position as the world economy improves. We are reducing exposure to factors outside our control wherever we can.Demand for our products is strong and we continue to strengthen our commercial teams and strategies to improve market share and product mix. Significant investment is required, but gearing is nil and our banks are supportive. As such I am confident that we can begin to transform the profitability of the Group in the next few years".

STATEMENT BY THE CHAIRMAN, M A J CROPPER

I am pleased to report that the Group recorded a profit before tax of £1,192,000 for the period (£1,422,000 prior to net IFRS pension adjustments). This compares with a profit before tax of £1,655,000 for the same period last year (£2,033,000 prior to net IFRS pension adjustments).

Group turnover was £43.5 million against £35.9 million for the comparable period, an increase of 21%.

Strong performances from Technical Fibre Products ("TFP") and James Cropper Converting ("Converting") in the first half more than offset the small loss in James Cropper Speciality Papers ("Speciality Papers") in the period.

The Board has decided to maintain the interim dividend at 2.2p pence per share.

Technical Fibre Products ("TFP")

TFP's order book has increased significantly indicating that the impact of the recession on down stream customers is easing. Overall sales were up 42% against the comparable period.

Sales to the US market increased by 44% over the same period last year in £Sterling terms, despite a 6% weakening in the US$ over the course of the first six months of the current financial year. Sales to the US market accounted for 58% of TFP's sales.

Sales outside of the USA were up by 40%.

James Cropper Speciality Papers ("Speciality Papers")

It was reported at the AGM on 28 July 2010 that the upward movement in pulp prices would adversely impact the profitability of Speciality Papers in the short term. In addition energy costs to date had also been higher than anticipated. These factors have led to Speciality Papers recording a small loss in the six months to 25 September 2010 in spite of turnover being 21% higher.

Northern Bleached Softwood Kraft ("NBSK") pulp has risen by 70% since April 2009, driven by supply constraints and continuing demand from China. By the end of September 2009 the price was US$730/tonne. The current financial year opened with the price at US$880/tonne. Further increases took the price to US$980/tonne by June 2010. Since then the price has remained at this level. Market forecasters believe that the price of pulp has reached a plateau and that the price may start to fall in the last quarter of the current financial year.

Speciality Papers continues to agree further price rises with customers in order to pass on these cost increases.

James Cropper Converting ("Converting")

Converting's turnover and volume increased by 30% and 9% respectively, whilst the average selling price was up 20% against the comparable period. This improvement mainly stems from a step change in supply into the US retailing sector.

The Paper Mill Shop ("TPMS")

TPMS traded at a loss in the opening six months. 3 under performing outlets were closed in the first half year reducing the number of outlets to 18 at September 2010, compared to 24 twelve months earlier.

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

Further tightening of the underlying actuarial assumptions over the past six months has led to the gross IAS19 deficit increasing by £2,437,000 to £16,617,000 as at 25th September 2010. The net charge against profit in the half year was £230,000 compared with £378,000 in the same period last year and £626,000 for the full year to 27th March 2010.

Cash and borrowings

At 25th September 2010 gross drawn down loans and leases totalled £4.3 million, with £4.4 million held as cash at bank. In addition the Group had un-drawn overdraft facilities of £3.4 million, US$1.0 million and €1.0 million.

Gearing at the half year end, after deduction of the IAS 19 pension deficit, was nil%.

Working capital has and will remain under tight control. In the second half borrowing will ease upward as a consequence of increased capital expenditure. Investment will continue to be focused on energy and operating efficiencies. 

Outlook

I anticipate that TFP's sales to the aerospace, defence, security and consumer electronics sectors will continue to build strongly over the remainder of the financial year with profits well ahead of last year.

Given the uncertainties surrounding energy and pulp costs and the time lag associated with implementing price increases, it is likely that Speciality Papers will only record a small profit in the current financial year.

Converting's improved product mix, together with efficiency gains due from planned investment, should lead to a significant increase in this subsidiary's profitability in the current financial year compared to recent years.

Further steps are planned to reduce TPMS's losses in the current year.

The future of the Group's two defined benefit pension schemes are also currently under review.

Overall, we are taking steps on many fronts to strengthen our position as the world economy improves. We are reducing exposure to factors outside our control wherever we can.Demand for our products is strong and we continue to strengthen our commercial teams and strategies to improve market share and product mix. Significant investment is required, but gearing is nil and our banks are supportive. As such I am confident that we can begin to transform the profitability of the Group in the next few years.

Mark Cropper

Chairman

16 November 2010

Notes to the Unaudited 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 1985 applicable to companies reporting under IFRS.

b) All references to:

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

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

3. "Net IAS 19 pension adjustment" refers to the net impact on profit of the pension schemes' operating costs and finance costs.

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

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

6. "Reserves" refers to the Statement of changes in Equity.

c) The Group's policy is to maintain the ability to continue as a going concern, in order to provide returns to the shareholders 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 25 September 2010, 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 2010.

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 27 March 2010 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 25 September 2010 have been calculated by dividing the profits attributable to ordinary shareholders by 8,472,368 (2009: 8,472,368) Ordinary Shares, being the weighted average number of Ordinary Shares during the period.

4 Dividend

An interim dividend of 2.2p per Ordinary Share (2009: 2.2p per share) is proposed and will be paid on 14 January 2011 to holders on the register at the close of business on 17 December 2010. The dividend relating to the year ended 27 March 2010 was made up of an interim payment of £183,000 (2.2p per share) and a final dividend payment of £441,000 (5.3p 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. 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.

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.

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.