Cropper (J) Regulatory News (CRPR)

20 Nov 2007 07:30

Cropper(James) PLC20 November 2007 Issued by Citigate Dewe Rogerson Ltd, Birmingham Date: Tuesday, 20 November 2007 Embargoed: 7.30am James Cropper PLC 'Specialist Paper Makers' Interim Results for the half-year to 29 September 2007 Half-year to Half-year to Full-year to 29 September 30 September 31 March 2007 2006 2007 Overall turnover up 8% £35.7m £33.0m £69.1m Group profit before taxPrior to net IFRS pension adjustments £1.4m £1.0m £2.5mAfter net IFRS pension adjustments £1.3m £0.8m £2.1m Earnings per share 10.4p 6.4p 16.2p Dividend per share declared 2.2p 1.9p 7.0p Gearing 21% 37% 23% Encouraging growth in turnover by TFP and Speciality Papers TFP acquires US based suppliers of metal-coated carbon fibres for a combinedpurchase consideration of approximately £0.5 million Weakening US$ adversely impacting on margins in TFP and Converting Strong upward trend in pulp and energy costs anticipated in second-half Significant reduction in IAS19 pension deficit Transfer from Main List to AIM successfully completed on 31 August 2007 "TFP's new facility in Cheshire and its US acquisitions strengthen its long-termposition in specialised non-woven insulating and composite markets. Salesperformance by TFP in the current year is encouraging. However profit growthwill not be at the exceptional rate achieved in the previous year". "Given the uncertainties surrounding the recent strong upward trend in forwardquoted energy prices and in rising pulp costs, the outlook for Speciality Papersis difficult to project. It should therefore be anticipated that theprofitability of Speciality Papers will slow during the course of the secondhalf-year as a consequence of the inevitable time lag before these costs can berecovered through increasing prices to customers". "Overall the Group's progress in the first-half has been satisfactory and I ampleased that it has been possible to increase the interim dividend as aconsequence. However, it is too early in the financial year to consider whetheran adjustment to the final dividend would be appropriate". James Cropper, ChairmanEnquiries: Alun Lewis Keith Gabriel Andrew Kitchingman Chief Executive Senior Account Manager Managing Director John Denman Corporate Finance Group Finance Director James Cropper PLC Citigate Dewe Rogerson Brewin Dolphin Investment Banking Telephone: 01539 722002 Telephone: 0121 455 8370 Telephone: 0845 270 8613 www.cropper.com Mobile: 07770 788624 Mobile: 07785 708167 Summary of Results Half-year to Half-year to Full-year to 29 September 30 September 31 March 2007 2006 2007 Profit and loss summary £'000--------------------------------------------------------------------------------Group turnover 35,747 32,965 69,085 Trading operating profit 1,614 1,270 3,071Joint venture (61) (23) (95) -----------------------------------Trading profit before interest 1,553 1,247 2,976Net interest (188) (229) (438) -----------------------------------Trading profit before tax 1,365 1,018 2,538(After future service pensioncontributions paid)--------------------------------------------------------------------------------Net pension adjustments toOperating profit (209) (316) (610)Net interest 109 56 179 -----------------------------------Net pension adjustment before tax (100) (260) (431)-------------------------------------------------------------------------------- Overall Group after pension adjustmentsOperating profit 1,405 954 2,461Joint venture (61) (23) (95) -----------------------------------Profit before interest 1,344 931 2,366Net interest (79) (173) (259) -----------------------------------Profit before tax 1,265 758 2,107 ------------------------------------------------------------------------------------------------------------------- Earnings per share 10.4p 6.4p 16.2p Dividends per share 2.2p 1.9p 7.0p-------------------------------------------------------------------------------- Balance Sheet Summary £'000--------------------------------------------------------------------------------Non-pension assets - excluding cash 46,016 46,388 45,758Non-pension liabilities - excluding borrowings (13,564) (13,103) (13,505) ----------------------------------- 32,452 33,285 32,253Net pension liabilities (2,421) (7,790) (4,306) ----------------------------------- 30,031 25,495 27,947Net borrowings (5,292) (6,944) (5,294) -----------------------------------Equity shareholders' funds 24,739 18,551 22,653 ----------------------------------- Gearing 21% 37% 23% Capital expenditure £'000 1,468 920 2,756-------------------------------------------------------------------------------- STATEMENT BY THE CHAIRMAN, J A CROPPER The Group recorded a profit before tax of £1,265,000 for the period (£1,365,000prior to net IFRS pension adjustments). This compares with a profit before taxof £758,000 for the comparable period last year (£1,018,000 prior to net IFRSpension adjustments). Group turnover was £35.7 million against £33.0 million forthe same period last year, an increase of 8%. The Board has decided to increase the interim dividend from 1.9p per share to2.2p per share. Technical Fibre Products ("TFP")TFP's turnover was up 30% with profits in-line with the comparable period lastyear. Sales to the US market were 29% up on last year in £Sterling terms and 37%in US$ terms. At the average exchange rate for the period, sales to US marketsrepresented approximately 47% of TFP's turnover in £Sterling terms. Theweakening US$, which declined by 11% over the course of the previous year and afurther 6% in the first six months of the current year has had an inevitableimpact on TFP's margins. Sales outside of the USA were ahead by 31%. Significant growth in turnover outside the USA includes sales from TFP's newfacility in Cheshire. This facility, which commenced operations in the finalquarter of the previous financial year, is dedicated to converting insulatingmaterials for TFP's main customer in this market. This is a new revenue streamresulting from the customer outsourcing responsibility for converting operationsto TFP. Although margins for this activity are less than TFP's mainstreambusiness, TFP's position in the European thermal insulation market has beenstrengthened as a consequence. Sales of TFP composite materials containing metal-coated carbon fibres havegrown strongly in recent years, particularly into the US electronic andaerospace industries. These fibres were supplied by Diamond Fiber CompositesInc. and Electro Fiber Technologies LLC ("EFT"), the latter being thejoint-venture company in which TFP had a 50% share. At the end of June 2007 TFPpurchased the business assets of Diamond Fiber Composites Inc. and acquiredcomplete control of EFT. The combined purchase consideration was approximately£0.5 million. These acquisitions provide TFP with control of quality, productdevelopment and security of supply. TFP will thus be able to service thetechnically demanding applications that contain these fibres with greaterconfidence at the increased levels of turnover expected in future years.However, it is anticipated that EFT's losses will continue at a level similar tolast year in the medium term. From July 2007 these losses have been fully borneby TFP. EFT fibres could potentially provide a key functional element relatingto a major US based aerospace development. A loan of US$2,500,000 has been drawn down by TFP to counter-balance the valueof TFP's net assets denominated in US$s, thus creating a currency hedge on TFP'sBalance Sheet. James Cropper Speciality Papers ("Speciality Papers") Profitability in Speciality Papers in the first six months was well ahead of theopening half of last year. Turnover and volume were up 6% and 7% respectivelyagainst the comparable period. This growth built on the pattern developed duringthe previous financial year, with a marked improvement in export sales. Pulp is expected to continue on an upward trend over the rest of the financialyear as a consequence of tight supply. Northern Bleached Softwood Kraft ("NBSK")pulp, the market benchmark priced in US$s, opened the financial year at US$760per tonne and increased progressively in price to US$830 per tonne by the end ofSeptember 2007, an increase of 9% over six months. Market forecasters currentlyproject a further increase to US$850/tonne by the beginning of the 4th quarter. Although the average cost of natural gas in the first-half was 24p/therm,against 34p/therm in the comparable period, current forward market projectionsfor the second half-year have increased significantly. If these projectionsmaterialise the annual cost of gas for the full year will exceed the previousyear's cost by some 20%. James Cropper Converting ("Converting") Converting's overall turnover was up 6% on the comparable period. Sales of US$denominated products in the first six months represented 20% of turnover in £Sterling terms. The 17% decline in the value of the US$ over the past 18 monthshas had a significant impact on the value of Converting's worldwide salesdenominated in US$s. Converting is unable to mitigate this adverse impact as ithas no substantial expenditure denominated in US$ against which to offset thesereceipts. The continuing weakness of the US$ has, for now, outweighed the costbenefits derived from the upgraded laminating line commissioned in the secondhalf of the previous year. The Paper Mill Shop ("TPMS") Sales in the first half were up 6% on the same period last year, however marginwas lower reflecting a change in the product mix. As a consequence the operatingloss was in-line with the comparable period. Depreciation of capital expenditureis accelerated over four years. This has led to the resulting depreciationcharge being a significant proportion of TPMS's operating loss reflecting thenumber of store openings in recent years. As there were no new store openings inthe period, cash out flow has been relatively low. The intention to exit a smallnumber of under performing stores has been temporarily delayed. Encouragingearly progress has been made in developing other aspects of TPMS's recoveryplan. Pensions and International Accounting Standard 19 ("IAS 19") Over the course of the half-year the IAS19 deficit declined by £2,693,000 to£3,459,000 as at 29 September 2007. Actual future service pension contributionspaid in the period by the Group to its two final salary schemes in accordancewith the Actuaries' recommendations, resulting from their latest "on-going"valuations, were £486,000. Under IAS 19 the charge against profit before tax inthe half-year was £586,000, which was £100,000 in excess of the future servicecontributions that were actually required. In addition, contributions totalling£438,000 were paid to the two schemes in respect of their past service deficitsbrought forward. Outlook TFP's new facility in Cheshire and its US acquisitions strengthen its long-termposition in specialised non-woven insulating and composite markets. Salesperformance by TFP in the current year is encouraging. However profit growthwill not be at the exceptional rate achieved in the previous year. Given the uncertainties surrounding the recent strong upward trend in forwardquoted energy prices and in rising pulp costs, the outlook for Speciality Papersis difficult to project. It should therefore be anticipated that theprofitability of Speciality Papers will slow during the course of the secondhalf-year as a consequence of the inevitable time lag before these costs can berecovered through increasing prices to customers. 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 willincur a loss for the full year similar to that of last year. In the second-half gearing will ease upward from 21% at the half-year end ascash outflow increases as a consequence of increased capital expenditure andhigher pulp and energy costs. Overall the Group's progress in the first-half has been satisfactory and I ampleased that it has been possible to increase the interim dividend as aconsequence. However, it is too early in the financial year to consider whetheran adjustment to the final dividend would be appropriate. Consolidated income statement for the half-year to 29 September 2007 Unaudited Half-year to Half-year to Full year to 29 September 30 September 30 March 2007 2006 2007 £'000 £'000 £'000 Continuing operationsTurnover 35,747 32,965 69,085 ------------------------------------- Operating profit 1,405 954 2,461Interest payable and similar charges (298) (386) (783)Interest receivable and similar income 219 213 524Share of loss of joint venture (61) (23) (95) -------------------------------------Profit before tax 1,265 758 2,107Taxation (380) (227) (746) -------------------------------------Profit for the periodattributable to equity holdersof the company 885 531 1,361 ------------------------------------- Earnings per share - basic &diluted 10.4p 6.4p 16.2p ------------------------------------- Dividend declared in theperiod - pence per share 2.2p 1.9p 7.0p ------------------------------------- Consolidated balance sheet as at 29 September 2007 Unaudited 29 September 30 September 30 March 2007 2006 2007 £'000 £'000 £'000AssetsNon-current assetsIntangible assets 1,589 1,287 1,351Property, plant and equipment 21,169 23,080 21,517Financial assetsInvestments in joint ventures - 95 58Deferred tax assets 1,038 3,339 1,846 ----------------------------------------- 23,796 27,801 24,772 -----------------------------------------Current assetsInventories 9,033 8,313 8,366Trade and other receivables 14,210 13,611 14,462Financial assets- Derivative financial instruments 15 2 4Cash and cash equivalents 3,761 3,266 3,730 ---------------------------------------- 27,019 25,192 26,562 ----------------------------------------LiabilitiesCurrent liabilitiesTrade and other payables (8,331) (8,594) (8,544)Financial liabilities- Borrowings (2,242) (2,384) (2,374)- Derivative financial instruments - (3) -Current tax liabilities (1,292) (590) (1,020) ---------------------------------------- (11,865) (11,571) (11,938) ----------------------------------------Net current assets 15,154 13,621 14,624 -----------------------------------------Non-current liabilitiesFinancial liabilities- Borrowings (6,811) (7,826) (6,650)Retirement benefit liabilities (3,459) (11,129) (6,152)Deferred tax liabilities (3,941) (3,916) (3,941) ----------------------------------------- (14,211) (22,871) (16,743) -----------------------------------------Net assets 24,739 18,551 22,653 ----------------------------------------- Shareholders' equityShare capital 2,118 2,090 2,118Share premium 573 454 573Other reserves - 61Retained earnings 22,048 15,946 19,962 -----------------------------------------Total shareholders' equity 24,739 18,551 22,653 ----------------------------------------- Consolidated cash flow statement for the half-year to 29 September 2007 Half-year to Half-year to Full year toUnaudited 29 September 30 September 30 March 2007 2006 2007 £'000 £'000 £'000 Cash flows from operating activitiesProfit before tax 1,265 758 2,107Trading Interest income and expense 188 229 259Depreciation/amortisation 1,627 1,632 3,315Decrease/(increase) inworking capital (638) 575 (393)Other non-cash movements- Share of loss of joint venture 61 23 95- Past service deficit payments (438) (400) (838)- Net IFRS pension adjustments 100 260 431- Profit on disposal of property, plant and equipment - (39)- Share-based payments 7 12 17 ---------------------------------------Cash generated fromoperations 2,172 3,089 4,954 Interest received 95 168 549Interest paid (298) (360) (760)Tax paid - (95) (87) ---------------------------------------Net cash generated fromoperating activities 1,969 2,802 4,656 --------------------------------------- Cash flows from investing activitiesInvestment in joint venture (50) (47) (87)Purchase of intangible assets (355) (73) (254)Purchase of property, plantand equipment (1,113) (847) (2,502)Proceeds from sale ofproperty, plant andequipment - - 1,691 ---------------------------------------Net cash used in investingactivities (1,518) (967) (1,152) --------------------------------------- Cash flows from financing activities Net proceeds from issue ofnew bank loans 1,228 1,000 1,000 Net proceeds from issue ofordinary share capital 147 Repayment of bank loans (1,198) (1,147) (2,333) Dividends paid toshareholders (432) (184) (343) ---------------------------------------Net cash used in financingactivities (402) (331) (1,529) --------------------------------------- Effects of exchange ratechanges (18) - (7) Net increase in cash andcash equivalents in theperiod 31 1,504 1,968 Cash and cash equivalentsat the start of the period 3,730 1,762 1,762 ---------------------------------------Cash and cash equivalentsat the end of the period 3,761 3,266 3,730 --------------------------------------- Cash and cash equivalents consists of:Cash at bank and in hand 3,761 3,266 3,730 --------------------------------------- 3,761 3,266 3,730 --------------------------------------- Consolidated statement of recognised income and expensefor the half-year to 29 September 2007 Unaudited Half-year to Half-year to Full year to 29 September 30 September 30 March 2007 2006 2007 £'000 £'000 £'000 Profit for the period 885 531 1,361 Currency translationdifferences on foreigncurrency investment (22) 1 (18) Retirement benefitliabilities - actuarialgains/(losses) 2,355 (954) 3,756 Deferred tax onactuarial gains/(losses)on retirement benefitliabilities (707) 286 (1,127) --------------------------------------Total recognised(expense)/income for theperiod 2,511 (136) 3,972 -------------------------------------- Consolidated statement of changes in equityfor the half-year to 29 September 2007 Unaudited Half-year to Half-year to Full year to 29 September 30 September 30 March 2007 2006 2007 £'000 £'000 £'000 Opening shareholders' funds 22,653 18,859 18,859 Total recognised(expense)/income for theperiod 2,511 (136) 3,972 Share-based payments 7 12 18 Dividends paid (432) (184) (343) Proceeds from sharesissue 147 --------------------------------------Closing shareholders'funds 24,739 18,551 22,653 ----------- --------------------------- Notes to the Unaudited Interim Results 1 Basis of the preparation of IFRS financial informationThese interim results have been prepared in accordance with the historical costconvention, as modified by the revaluation of land and buildings, and derivativefinancial instruments, and in accordance with International Financial ReportingStandards ("IFRS") as adopted by the European Union (with the exception of IAS34, Interim Financial Reporting) and International Financial ReportingInterpretations Committee ("IFRIC") interpretations and with those parts of theCompanies Act 1985 applicable to companies reporting under IFRS. 2 Interim Statementa) The summarised results for the half-year to 29 September 2007, which have notbeen audited or reviewed, have been prepared in accordance with the accountingpolicies adopted in the accounts for the year ended 31 March 2007. b) The financial information set out above does not constitute statutoryaccounts within the meaning of the Companies Act 1985. The figures for the yearto 31 March 2007 are an extract of the full accounts for that year, which havebeen filed with the Registrar of Companies and on which the auditors gave anunqualified opinion. c) A copy of the interim statement is being sent to all shareholders and isavailable 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 29 September 2007 havebeen calculated on the profit available for distribution and on 8,472,368 (2006:8,359,114) Ordinary Shares, being the weighted average number of shares in issueduring the period. 4 Dividend An interim dividend of 2.2 per Ordinary Share (2006: 1.9p per share) is proposedand will be paid on 11 January 2008 to holders on the register at the close ofbusiness on 14 December 2007. The dividend relating to the year to 31 March 2007was made up of an interim payment of £159,000 (1.9p per share) and a finaldividend of £432,000 (5.1p per share). 5 Pensions 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. The net position, surplus ordeficit, is brought onto the sponsoring company's Balance Sheet such thatReserves are immediately adjusted by the net position reduced by deferred tax.This obviously results in either an increase or decrease in the net asset valueof the sponsoring company. At subsequent period-ends the movement in value fromthe 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 actuarialassumptions. The above items are offset by actual contributions paid by the employer in theperiod. IAS19 deficits are shown below at the corresponding Balance Sheet dates. Half-year to Half-year to Full-year to 29 September 30 September 31 March 2007 2006 2007IAS19 DEFICIT £'000 £'000 £'000 Current Service Charge (695) (822) (1,598)Future service contributions paid 486 506 988 ----------------------------------------Net impact on Operating Profit (209) (316) (610)Finance costs 109 56 179 ----------------------------------------Net impact on Profit and Loss Account (100) (260) (431)Past service deficitcontributions paid 438 400 838Actuarial gains or losses 2,355 (954) 3,756Opening deficit (6,152) (10,315) (10,315) ----------------------------------------Closing deficit (3,459) (11,129) (6,152)Deferred Taxation 1,038 3,339 1,846 ----------------------------------------Net - Deficit (2,421) (7,790) (4,306) ---------------------------------------- It should be noted that the assumptions underlying the IAS 19 valuation arebased on financial conditions at the Balance Sheet date. As market values of thescheme assets and the discount factors applied to the scheme liabilities willfluctuate, this method of valuation will often lead to large variations in the"pension balance" from period to period. Pension liabilities are discounted atthe current rate of return on an AA rated quality corporate bond of equivalentcurrency and term. The actual contributions paid by the Group to its two finalsalary schemes are determined by the actuaries' "on-going" valuation. Theassumptions used by the actuaries for their IAS 19 valuations are moreconservative than those that they used with regard to their "on-going"valuations. An "on-going" valuation takes account of the projected growth in the pensionschemes' assets by asset type over the projected life of the scheme. Thecombined "on-going" deficits as at April 2005 were valued at £6,867,000 prior todeferred tax. 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 £486,000. Half-year to Half-year to Full-year to 29 September 30 September 31 March 2007 2006 2007 £'000 £'000 £'000 Trading profit before tax 1,365 1,018 2,538Current Service Charge (695) (822) (1,598)Future service contributions paid 486 506 988 ---------------------------------------Net impact on Operating Profit (209) (316) (610)Finance costs 109 56 179 ---------------------------------------Net pension adjustment (100) (260) (431)As reported 1,265 758 2,107 This information is provided by RNS The company news service from the London Stock Exchange