REG - Cropper(James) PLC - Full Year Results
23/07/2024 07:00
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RNS Number : 3632X Cropper(James) PLC 23 July 2024
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23 July 2024
James Cropper plc
('James Cropper', the 'Company' or the 'Group')
Full Year Results
Robust response to a challenging trading environment; progress against
strategic objectives
James Cropper plc (AIM: CRPR), the Advanced Materials and Paper &
Packaging group, today announces its audited results for the year ended 30
March 2024.
Headlines
Financial
· Challenging year with Group revenue down 21% at £103.0m (2023:
£129.7m) due to weaker end-market demand and energy surcharges (totalling
£9.0m) in the prior period.
· Adjusted operating profit* of £2.0m (2023: £4.8m) with the impact
of revenue shortfall partly mitigated by falling raw material and energy
prices and cost savings from actions to streamline the business.
· Adjusted profit before tax** of £0.8m (2023: £3.2m), ahead of
revised Board expectations announced on 17 January 2024 despite significant
market challenges impacting performance in the second half.
· Exceptional costs of £5.3m (2023: £1.1m) including restructuring
costs of £2.3m and non-cash asset impairment charge of £4.4m, partly offset
by £1.4m credit from settlement of pensions-related legal claim.
· Loss before tax of £5.3m (2023: profit of £1.3m) after exceptional
costs and IAS 19 pensions charge of £0.8m.
· Net debt of £15.5m, down £1.1m (2023: £16.6m) reflecting increased
focus on cash management.
· Capital expenditure reduced to £3.8m (2023: £5.8m) in response to
market conditions.
· Basic and diluted loss per share of 41.8p (2023: earnings of 5.4p per
share).
· No final dividend proposed, resulting in a total dividend for the
year of 3.0p per share (2023: 6.0p per share).
*Alternative Performance Measure 1 (APM1) "adjusted operating profit" refers
to operating profit before interest and prior to the impact of IAS 19 and
exceptional items.
**Alternative Performance Measure 2 (APM2) "adjusted profit before tax" refers
to profit before tax prior to the impact of IAS 19 and exceptional items.
Operational
· Products increasingly focused on end-markets with strong secular
growth trends: clean energy, lightweighting and sustainability.
· Restructured Paper & Packaging business has a more efficient
operating model and reduced break-even revenue.
· Pricing has been resilient, underpinned by strong customer
relationships with margins supported by lower input costs and productivity
initiatives.
· More rigorous capital investment, cost and cash disciplines applied
across the business.
· Refreshed executive leadership team focused on driving our growth
strategy.
Current trading and outlook
· FY2025 year-to-date trading has been in line with the Board's
expectations.
· Input costs (pulp and energy) have remained high through H1 FY2025.
· Strong opportunity pipeline in Advanced Materials where, despite
slower end-market growth in hydrogen fuel cell in FY2024, the mid-term outlook
for both Energy Solutions and Composite Solutions remains strong.
· Order intake levels in the Paper & Packaging business point to
signs of recovery in FY2025 and the new operating model is delivering improved
margins.
· The Board remains confident that, despite external challenges, the
Group is positioned to drive increased value for shareholders through a return
to growth in the Group's key markets.
· Clear strategic priorities and medium-term targets to capitalise on
market opportunities:
o Targeting mid-to-high single-digit annual revenue growth and an increase
in adjusted operating profit margin to high single digits over the medium
term, driven by:
§ Advanced Materials business growth, including revenues from Energy
Solutions rising to in excess of 15% of Group revenue.
§ Innovation in higher margin technologies across the businesses aligned with
strong end-markets.
§ Leveraging the Group's focus on sustainability and recycling.
§ Further productivity gains through lean continuous improvement.
o Targeting a medium-term increase in return on capital employed to low-to
mid-teens, through greater capital allocation discipline directed largely
towards the hydrogen business to meet anticipated demand.
o Maintaining and strengthening the balance sheet, with a medium-term Net
Debt to EBITDA ratio target of 1-2x.
Commenting on the full year results, James Cropper CEO Steve Adams said:
"After a strong first half that showed continued momentum on the previous
year, difficult market conditions during late 2023 and early 2024 across both
businesses required a concerted effort to protect prices and margins and to
focus on productivity and cost savings.
"This was achieved whilst also concluding the significant restructuring of our
Paper & Packaging business and adopting a completely new continuous
running operating model for the first time.
"Our teams also remained focused on identifying new growth opportunities and
winning new customer projects.
"I am extremely proud of the entire James Cropper team for their commitment to
our business and servicing our many customers around the globe.
"We remain resolute in our focus on driving value for our shareholders through
our accelerated growth strategy. The Advanced Materials business remains
poised to capitalise on the anticipated scale-up in the hydrogen sector
through clarity on national government funding and support programmes for
green hydrogen. Order intake levels in the Paper & Packaging business
point to signs of recovery in FY2025 and our new operating model is already
delivering improved margins. Group Trading in the first quarter of the current
year-to-date is in line with the Board's expectations.
"The foundations have been laid for ongoing productivity and efficiency gains.
Our new James Cropper branding offers the opportunity to connect and build
traction with both new and existing customers, while our commitment to
innovation focuses on developing new high value products and technologies."
Enquiries
James Cropper plc
Steve Adams, CEO
Andrew Goody, CFO
Tel: +44 (0)1539 818 202
Shore Capital - Nominated Adviser and Broker
Daniel Bush, David Coaten, Henry Willcocks, Lucy Bowden
Tel: +44 (0)207 408 4090
Bursor Buchanan - Financial PR
Chris Lane, Charles Ryland, Jamie Hooper, Verity Parker
jamescropper@buchanancomms.co.uk (mailto:jamescropper@buchanancomms.co.uk)
Tel: +44 (0) 207 466 5000
Notes for editors:
James Cropper is a market leader in Advanced Materials and Paper &
Packaging, centred around four market audiences: Energy Solutions, Composite
Solutions, Luxury Packaging and Creative Papers.
A purpose-led business, built upon six generations of the Cropper family,
James Cropper has a 600+ international workforce and an operational reach in
over 50 countries.
Established in 1845, the Group manufactures creative papers, luxury packaging
and advanced materials incorporating pioneering non-wovens and electrochemical
coatings.
James Cropper is a specialist provider of niche solutions tailored to a unique
customer specification, ranging from substrates and components in hydrogen
electrolysis and fuel cells to bespoke colours and textures in paper and
moulded fibre packaging designed to replace single use plastics.
The Group operates across multiple markets from luxury retail to renewable
energy. It is renowned globally for service, capability, pioneering and multi
award-winning commitment to the highest standards of sustainability.
James Cropper's goal is to be operationally net zero by 2030 and to reduce
carbon through its entire supply chain to net zero by 2050.
Chair's Letter
Dear Shareholders
The 2024 financial year was one of significant change for James Cropper.
At the beginning of the year, we announced the Board's strategy to develop a
new business model to accelerate growth in revenue and profitability. This
included better leveraging the breadth and capability of the Group under a
single brand repositioning James Cropper as an advanced materials business,
investing in innovation and systems to drive efficiencies, and combining Paper
and Colourform® into a single Paper & Packaging division which was
further streamlined to reduce operating costs. I am pleased we were able to
make good progress against these strategic objectives and I believe that our
resulting business is better positioned for growth as we move forward.
Despite this progress in repositioning the Group, we announced in January that
some of our most promising growth opportunities, not least those in hydrogen
and fuel cells, are taking longer to bear fruit than previously expected due
to delayed market growth. At the same time, we reported that difficult market
conditions across the Paper & Packaging business were expected to continue
through the second half of the year.
Looking into FY25, we continue to strengthen our relationships with customers
and partners in our Advanced Materials business, where solid foundations have
been laid for future growth. In our Paper & Packaging business, we are
seeing some market recovery with volumes from key customers returning to
previous levels. Furthermore, I am pleased with progress being made across
the Group to grow our technical capability and market share in target
industries. This will enhance our resilience and position us as the preferred
supplier in fast-growing sectors, ranging from sustainable packaging to
hydrogen, carbon capture and other energy transition markets.
Growth will also be supported by the launch of our new James Cropper brand in
July 2024 which will further leverage our technical capabilities and
outstanding reputation for developing innovative products and solutions.
Sustainability
As an organisation, James Cropper continues to innovate in its approach to
sustainable business. Our ambitious decarbonisation plan, which has recently
attracted significant grant funding, progressed during the year with ground
works being completed to enable the construction of a new energy centre and
the completion of our technical design. We also commenced a project to
explore freshwater recycling which will reduce our levels of water abstraction
and increase energy efficiency. Whether through the use of recycled
materials in luxury packaging as an alternative to plastics, or by producing
coatings and technical substrates for use in the hydrogen energy sector, we
continue to redefine our offering with the future in mind.
Board
In the last 12 months, we have been pleased to report some significant
appointments to the Board.
On 27 November 2023, Andrew Goody joined the Board as Chief Financial and
Operating Officer, succeeding Isabelle Maddock who stood down in June 2023.
Andrew has been a valuable addition to the Board and executive team, bringing
significant leadership, financial and business transformation experience.
On 22 July 2024 we announced the appointment of Jon Yeung, who will join the
Board as an independent Non-Executive Director and Audit Committee Chair
following conclusion of our AGM in September 2024. In addition to being a
chartered accountant, Jon brings significant experience in finance and in the
creation of shareholder value through business transformation and growth, and
I look forward to working with him going forwards. At the same time, we
announced that Jim Sharp will step down as a Director and from the Board at
the AGM. On behalf of the Board, I wish to thank Jim for his continued
support and significant contribution.
In addition, on 25 September 2023, Matthew Ratcliffe was appointed into the
new role of General Counsel and Company Secretary, in succession to Jim
Aldridge who stood down as Company Secretary in April 2023.
Each appointment brings fresh perspectives and insight to James Cropper, and I
am delighted by the level of talent we continue to attract. In the year, our
Nomination Committee led an assessment of the skills, capabilities, and
diversity of our Board to ensure that we retain an optimal balance of
operational and commercial knowledge, financial acumen, entrepreneurial
leadership, and independent challenge.
Stakeholder engagement
Stakeholder engagement is an important aspect of our business, and the Board
recognises its responsibilities to promote the success of the Group for the
benefit of its members having regard to the interests of broader
stakeholders.
During the year, I met with some of our largest shareholders to discuss the
business, our present challenges, broader strategy, and my role as Chair.
These meetings provided helpful insight to the views of our investors, which
is an important consideration for the Board, and I am very grateful to those
who took the time to meet and offer feedback. We also look forward to
welcoming shareholders at our forthcoming AGM in September 2024.
Dividend
Given the challenging macroeconomic environment in the second half of the year
and the Group's focus on efficient cash management alongside investment to
support future growth, the Board is not proposing a final dividend for the
year, leaving the total dividend for the year at 3.0 pence per share (FY23:
6.0 pence per share). The Board remains committed to its dividend programme
and will keep under review the potential for resuming dividend payments in due
course.
Outlook
James Cropper is a dynamic business with a passion for innovation. Our
advanced ranges of products and solutions enable us to continually evolve to
meet the needs of tomorrow as we transition to a greener and more sustainable
society.
Whilst growth in Advanced Materials was slower than we expected in the last
year, the mid-term outlook in both Energy Solutions and Composite Solutions
remains strong. Our repositioning of the Paper & Packaging business in the
year has delivered a more streamlined operation which is better placed for
growth in the medium term.
Short term challenges remain, with input costs remaining high and a degree of
political uncertainty, but I am confident that the strength of our offering in
growing markets presents significant opportunities.
I am very proud of our colleagues for the support and dedication shown in a
difficult year and I believe that we have emerged a stronger business. Our
response to significant market challenges in the second half of the year
enabled us to achieve a full-year performance ahead of the Board's revised
expectations following our January 2024 trading update, and this could not
have been achieved without the continued support of our people.
Mark Cropper
Non-Executive Chair
Chief Executive Officer's Review
I am pleased to provide a review of the financial year ended 30 March 2024.
At the outset of the year, we laid out our Group strategy to accelerate growth
in revenue and profitability. This six-point plan has formed the basis for the
decisions and actions we have taken during the year and, despite challenging
market conditions in the second half of the year particularly, I am pleased
that we have made progress towards our strategic goals. James Cropper is now a
significantly more efficient business and is strongly positioned in various
markets that are expected to grow in the years ahead.
GROUP
FY24 FY23
£'000 £'000
Revenue 102,968 129,664
Adjusted EBITDA (APM4) 6,606 9,045
Adjusted Operating Profit (APM 1) 1,977 4,767
Adjusted Profit Before Tax (APM 2) 758 3,195
Trading in the first half of the year showed continued momentum from the
strong finish to the previous financial year. Much work was done to identify
growth opportunities within existing and new markets.
Despite strong trading in the first half, difficult market conditions during
late 2023 and early 2024 across both the Advanced Materials and Paper &
Packaging businesses resulted in a downward revision to the Board's full-year
expectations which was announced on 17 January 2024.
These revised expectations in January were, however, exceeded at the full
year, owing to a strong focus on business development, pricing protection,
operational improvements, and reduced input costs - a great effort from across
all parts of the business against a difficult backdrop.
My sincerest thanks, once again, are extended to all our valued customers for
their continued support and to our talented employees who have been so
committed to serving our customers in the face of such challenging market
conditions.
ADVANCED MATERIALS
FY24 FY23
£'000 £'000
Revenue 34,503 37,187
Adjusted EBITDA (APM4) 9,280 10,714
Adjusted Operating Profit (APM1) 7,715 9,244
The Advanced Materials business performed well in the first half, building on
its work to develop specifications with hydrogen electrolyser OEMs, where its
technical and process capabilities continued to provide differentiation in
this sector. Demand in the hydrogen fuel cell sector also remained buoyant in
the first half, as did the aerospace and automotive sectors within Composite
Solutions.
The second half saw a marked slowdown in hydrogen fuel cell market demand,
driven largely by the sluggish uptake of hydrogen powered passenger cars. This
was partially offset by growth in the electrolyser business albeit at a level
below the Board's original expectations due to delays in major infrastructure
projects. Throughout the year we continued to acquire new customers and
progress trials and develop specifications with key electrolyser OEMs. The
business is well positioned to take advantage of expected growth in this
sector over the medium term.
At the same time, we invested significant effort in enhancing our pipeline of
opportunities through developing closer relationships with customers and
launching a reinvigorated portfolio and market growth plan, all aligned to
selected key focus markets where we see opportunity for growth.
We also established an Advanced Materials Innovation Group, linking together
the technical teams from our Burneside, Launceston and Schenectady sites to
develop and progress innovation roadmaps for each of these key focus markets.
This is part of our focus on technological advancement and the development of
value-adding products and services for existing and new customers.
Continued technical innovation and high service levels contributed to
maintaining margins in the year. Input costs were well managed through
supplier negotiation and a focus on productivity initiatives from operations
teams. In addition, the business has concentrated on accelerated market growth
opportunities in battery technology, aerospace and advanced air mobility
(AAM), EMI shielding, PEM electrolyser, hydrogen fuel cell and carbon capture.
Revenues across the division totalled £34.5m for the year, a reduction of
7.3% (FY23: £37.2m). Adjusted operating profit of £7.7m was £1.5m below
prior year (FY23: £9.2m) due to the drop in revenue.
Looking forward, our aim is to be recognised as true experts and innovators
within our key focus markets, building upon our know-how and strong
relationships with customers and partners, and to selectively invest in the
development of further value-adding solutions to drive growth. As part of the
Group's rebranding exercise, new product portfolios aligned to our key focus
markets have been developed to enable customers to better understand the
technology and solutions we offer.
In support of our commitment to world class execution, we are implementing a
strategy to drive efficiencies and operational excellence and continuing to
invest in the development of our people with a focus on leadership, talent,
and performance.
Our knowhow, capabilities, and strong industry relationships put our Advanced
Materials business in a strong position to capitalise on the significant
market growth expected in the medium and long term and the Board remains
confident in the continued growth prospects for the Advanced Materials
business.
PAPER & PACKAGING
FY24 FY23
Revenue 68,465 92,477
Adjusted EBITDA (APM4) (2,473) (1,537)
Adjusted Operating Loss (APM1) (5,138) (3,904)
Our focus for FY2024 in the Paper & Packaging business was to consolidate
around more profitable and sustainable products and markets, particularly
solutions for luxury packaging, through a streamlining of our portfolio. In
April 2023, we commenced a collective consultation with our Trade Union for a
restructuring of the business around a reduced asset base and a right-sized
workforce, driving productivity and efficiency from continuous operation under
an optimised shift pattern. We also began the integration of our Colourform®
business within the Paper business under one Paper & Packaging business.
The interests of our stakeholders were at the heart of this process, not least
our people, and I am pleased to have seen strong engagement, support, and
resilience throughout. The restructuring activity resulted in a reduction of
15% of our workforce, primarily through voluntary redundancy.
As announced in January 2024, the Paper & Packaging business experienced a
significant downturn in volume during the second half of the year caused by
supply chain destocking, compounded by the impact of high inflation on
consumer confidence. Despite volume pressures, customer retention remained
high with strong relationships at the channel, converter and end-customer
level. Lower input costs, mix improvements and productivity initiatives as
well as maintenance of strong average selling prices helped to protect
margins.
The restructuring activity was completed by the end of December 2023, with
continuous running in production across fewer paper assets and with work
ongoing to optimise the new operating model. Our restructuring activities and
taking cost out of our Paper & Packaging business has driven margin
improvement.
The future project pipeline is encouraging and forward indicators, such as
order intake, point to signs of market recovery in FY2025.
GROUP STRATEGY
Our Group strategy is built around six key pillars, enveloped within a
commitment to a safe working environment, designed to drive value growth for
all our stakeholders:
1. Profitable growth through NEW CUSTOMER ACQUISITION: Targeting secular
growth trends such as clean energy, lightweighting, sustainable packaging and
reduce - re-use - recycle.
2. WORLD CLASS EXECUTION: Long-term investment programme to simplify
processes and systems that will enable smarter access to data and drive
improved productivity and performance. Implementing a lean business programme
across the Group.
3. TECHNOLOGY & INNOVATION: Our Centre for Innovation is driving
decarbonisation of the Group's operations; making ever greater use of
recovered fibres; helping to create technology roadmaps in emerging markets
such as green hydrogen, fuel cells and carbon capture.
4. INSPIRING OUR PEOPLE: Supported by our Code of Ethics and Behaviours
to build a global and diverse workforce. Investing in workplace facilities,
engagement tools and leadership development programmes.
5. LEADERS IN SUSTAINABILITY: Recognising both our responsibility to
reduce and ultimately eliminate emissions through the installation of our Low
Carbon Energy Centre and providing solutions which enable our customers to
transition to sustainable products and energy alternatives.
6. BUILD THE BRAND: Positioning the Group along an exciting spectrum
from heritage to cutting edge that leverages the brand value of the James
Cropper name across all our markets and geographies. Repositioning ourselves
to better serve our target customers and provide a stronger connection to our
Purpose.
EXECUTIVE LEADERSHIP
During the year we made several significant changes to our executive
leadership team to bring enhanced commercial discipline and alignment to our
growth strategy.
In November, Andrew Goody joined the Company as Chief Financial and Operating
Officer, succeeding Isabelle Maddock who stood down in June 2023. Andrew's
focus is to apply his experience and expertise to further enhance our
financial processes, capital allocation and growth strategy.
Matthew Ratcliffe was appointed into the new role of General Counsel and
Company Secretary in September 2023, succeeding Jim Aldridge who stood down as
Company Secretary in May 2023. As a qualified lawyer, Matthew will focus on
enhancing our commercial contractual capability, supporting our teams with
commercial negotiations around supply, development and supplier agreements as
well as bringing rigour to the company secretariat.
Patrick Willink took on the role of Chief Innovation Officer, relinquishing
his leadership of the Colourform® business as we consolidated that operation
together with our Paper business. Reigniting our innovation engine is core to
our purpose and pioneering spirit as we seek to build next generation
technology platforms in both Advanced Materials and Paper & Packaging.
Richard Bracewell stepped into the Paper & Packaging Managing Director
role after having successfully orchestrated the restructuring and
consolidation of that business as Transformation Lead.
Upon the resignation of James Gravestock as Managing Director for our Advanced
Materials Business in January 2024, we have appointed Andy Walton into that
role. Andy joins us from Victrex and has over 30 years of experience in the
chemicals, sustainable solutions, and advanced materials sectors. He has led
multiple global businesses to deliver high performance solutions to OEMs and
Tier 1 suppliers within Aerospace, Automotive, Energy and Industrial end
markets.
I have huge confidence in this strengthened executive team to drive
shareholder value as we build out our plan.
CAPITAL EXPENDITURE
The drop in capital expenditure in the year from £5.8m to £3.8m reflects our
response to the challenging market conditions. In addition, previous
investments in capacity and capability, combined with the restructuring of our
Paper & Packaging business and a concerted effort to forecast demand more
accurately have allowed us to optimise our capacity requirements. Our
operations teams in both businesses have adopted lean manufacturing processes
to drive productivity and more efficient machine utilisation.
We have continued to invest in our hydrogen business to ensure sufficient
capacity to meet anticipated demand and during the year we commenced the first
phase of construction for our new decarbonisation energy centre with site
clearance and groundbreaking for the new foundations.
WORLD CLASS EXECUTION
During the year we have made great strides to improve our cost base as well as
drive productivity and efficiency through the use of lean manufacturing tools
across all parts of the business. Stock reduction programmes, sourcing savings
and outsourcing, such as for pallet making, have all been in focus.
We also appointed Paul Bonnefin as Information Systems Director to strengthen
our systems infrastructure and architecture capability and bring focus to our
ERP requirements assessment.
TECHNOLOGY AND INNOVATION
Pioneering innovation continues to be critical to our growth plan. Our
innovation teams have been working on a number of strategically important
development projects focused on building new opportunities as well as
protecting the Company.
In addition to the work of the Advanced Materials Innovation Group, we have
been focused on the development of technical papers that build on our
expertise of using many different fibres and draws on the experience and
knowledge from all the Group's businesses. We are seeking to push the
boundaries of our fibre knowledge by deriving new sources of fibre through
pioneering work to recover papermaking fibres from waste textiles.
To minimise our impact on the local environment in the Lake District World
Heritage Site, we are striving to clean and re-use the water essential to the
papermaking process, minimising the amount discharged but also reducing the
amount abstracted from the river.
Looking to the longer term, we are seeking to use artificial intelligence and
machine learning to create predictive models that help improve productivity
and efficiency whilst creating a culture of innovation across the Group by
encouraging shared learning and collaboration to create new and unique ideas.
INSPIRING OUR PEOPLE
Our people continue to be critical to the success of our business and never
more so than in the last year. The unprecedented restructuring and alignment
to a new operating model in our Paper & Packaging business was conducted
under a collective agreement with our Trade Union.
A series of meetings were held from April to September 2023 under a dedicated
Transformation Leader and team, culminating in a positive ballot vote for the
changes. The successful outcome was a testament to both sides in upholding our
Values of Forward Thinking, Responsible and Caring and I want to commend our
Trade Union for their commitment to the process.
Further to the implementation of our renewed Code of Ethics and Behaviours
last year, this year we launched a new anonymous ethics hotline via an
independent provider, Safecall. During a period of such change, it was
important to provide the ability for all employees to confidently raise
concerns, should they arise.
We also conducted our third online employee opinion survey in the latter part
of the year to capture the voice of our employees. A slightly lower engagement
score to the previous year reflected a degree of concern and uncertainty over
the external trading environment and internal changes. The Executive team has
built a comprehensive communication and engagement programme that will be
rolled out during FY2025 to enhance confidence, both in our strategy for
future growth but also in bringing stability to our organisation moving
forward.
We are also committed to building the strength and capability of our
leadership population. On the back of our successful in-house LEAP leadership
development programme, we will now be bringing leaders together, Group-wide,
to engage around a revised set of James Cropper Leadership Standards, designed
to reinforce the responsibility of all our leaders to help their teams work
towards a common goal of growth.
LEADERS IN SUSTAINABILITY
We made significant strides towards our net zero carbon ambition during the
year with the commencement of the civil construction work in January 2024 to
clear the site for our new Low Carbon Energy Centre which will house the
proprietary technology required to decarbonise our paper making operations.
We also secured £4.2m in innovation funding from the Industrial Energy
Transformation Fund (IETF) to support the project. Work is still ongoing to
complete the detailed engineering design phase as well as exploring
alternative phasing for the build work to ensure an optimised return on
investment. A number of third parties continue to express interest in our
pioneering capability and we are in discussions on how to accelerate the
deployment and take up of the technology for broader industry benefit.
SAFE WORKING ENVIRONMENT
Our commitment to a safe working environment remains unwavering. This year we
set up a Central Safety Committee which I chair, which is made up of senior
leaders, including the Trade Union, from across the Group. The committee is
tasked with delivering programmes that will move our organisation from being
reactive to proactive and fully engaged in our safety journey.
As a company, despite the rigour in our safety systems and processes our
challenge continues to be one of hearts and minds and behavioural safety. We
have a suite of activities aimed at improvements in this area, including our
recent launch of our Committed to Safety programme and the introduction of our
"10 Golden Rules" campaign.
I am also delighted to have made the appointment of a new Group Head of Health
and Safety. Ross Troughton, who joined us in June 2024, is a pragmatic and
experienced health and safety leader who brings a wealth of industry
experience and who will work directly under me to drive our safety improvement
actions across all locations and functions within the Company.
BUILDING THE BRAND
During the last year we have invested considerable creative time in building
an updated brand position for James Cropper, aligned to our growth strategy.
This refresh recognises we are globally minded but rooted in our communities.
We are inventive and open to change, but proud of where we have come from. We
are forging new materials and possibilities, but still place human values,
knowledge and craft at the heart of what we do. These are the characteristics
and realities of James Cropper that have inspired the evolution of our new
branding, the first example being our new, reformatted annual report.
Our 179 years of expertise, our ability to reinvent ourselves and adapt in the
face of challenges and our proven track record of pioneering and innovation,
together give us real traction with our global customers.
Coming together as one James Cropper company also allows us to harness the
incredible ingenuity of our people and to collaborate in a more disciplined
way to drive synergies and growth.
LOOKING FORWARD WITH CONFIDENCE
The foundations are in place, and we remain committed to delivering against
our six strategic priorities. Uniting our exceptional team worldwide under
one James Cropper company will be transformative and powerful.
Trading in the current year-to-date is in line with the Board's expectations,
and comfortably within the bank covenants reset in June 2024. I am confident
that, despite the external challenges we continue to face, our progress in the
last year will drive increased value for our shareholders through accelerated
growth in our market-focused segments.
Steve Adams
Chief Executive Officer
Chief Financial Officer's Review
RESULTS FOR THE PERIOD
2024 2023
£'000 £'000
Group Revenue 102,968 129,664
Adjusted EBITDA APM4 6,606 9,045
Profit summary
Paper and Packaging Products (5,138) (3,904)
Advanced Materials 7,715 9,244
Other Group expenses (600) (573)
Adjusted operating profit APM1 1,977 4,767
Fair value movement on derivatives - (330)
Net finance costs (excluding IAS 19 impact) (1,219) (1,242)
Adjusted profit before tax APM2 758 3,195
Exceptional costs (5,010) (986)
Exceptional finance costs (262) (109)
Adjusted (loss) / profit before tax after exceptional items APM3 (4,514) 2,100
Net IAS 19 pension adjustments
Net current service charge required 6 (442)
Net interest (753) (345)
Net IAS 19 pension impact (747) (787)
(Loss) / profit before tax (5,261) 1,313
ALTERNATIVE PERFORMANCE MEASURES
The Board uses four alternative performance measures (APMs) to evaluate
business performance. The purpose of these APMs is to highlight underlying
business performance by removing the impact of exceptional gains and losses
and removing IAS 19 pension costs that can vary significantly across reporting
periods.
· APM1 - "Adjusted Operating Profit": Adjusted operating profit refers
to operating profit before interest and prior to the impact of IAS 19 and
exceptional items.
· APM2 - "Adjusted Profit Before Tax": Adjusted profit before tax
refers to profit before tax prior to the impact of IAS 19 and exceptional
items.
· APM3 - "Adjusted (Loss) / Profit Before Tax after Exceptional Items":
Adjusted (loss) / profit before tax refers to profit before tax prior to the
impact of IAS 19.
· APM4 - "Adjusted EBITDA": EBITDA refers to profit before interest,
tax, depreciation and amortisation. Adjusted EBITDA is EBITDA prior to the
impact of IAS 19 and exceptional items.
REVENUE
Group revenue for the financial period of £103.0m was 21% below the prior
period figure of £129.7m, principally due to a weakening of the paper and
packaging market, particularly in the second half of the year.
Revenue in the Paper & Packaging business fell by £24m or 26% in the
period due in part to the unwinding of energy surcharges of £9m in the prior
period combined with weak end-market demand as a result of economic
uncertainty and high inflation, exacerbated by destocking across the onward
supply chain.
Revenue in the Advanced Materials business fell by £2.7m in the period
reflecting a slowdown in the hydrogen fuel cell market with customers scaling
back trials and manufacturing due to weaker end-market demand. The Advanced
Materials business achieved year-on-year revenue growth in the electrolysis
segment where market demand remained more buoyant.
COSTS AND EXPENSES
Material costs fell by £13.8m from £48.6m in the prior period to £34.8m in
the financial period to 30 March 2024, dropping from 37.4% of revenue in the
prior period to 33.8%. The drop in material costs as a percentage of revenue
reflects lower average raw material input prices during the period, lower
volumes and a favourable revenue mix, with higher margin Advanced Materials
revenue increasing to 33.5% of total revenue (prior period: 28.7%).
Energy costs fell by £8.1m from £15.2m in the prior period to £7.1m in the
financial period to 30 March 2024 due to the drop in energy prices and lower
energy usage as a result of reduced production volumes and carbon efficiency
measures.
Employee costs of £34.5m in the financial period to 30 March 2024 were in
line with the prior period but include £1.8m of employee related exceptional
costs in respect of the restructuring of the Paper & Packaging business.
Underlying cost savings from the headcount reductions delivered as part of the
restructuring were able to offset both the exceptional restructuring costs
themselves and the impact of our annual pay award of 7.6%, which reflected the
elevated UK inflation environment in 2023.
Other expenses fell by £6.0m, from £25.5m in the prior period to £19.5m in
the financial period to 30 March 2024 with savings achieved in most areas,
notably distribution, legal, consulting and travel costs. These savings
reflect a combination of lower business activity and targeted cost reduction
programmes.
ADJUSTED EBITDA
Adjusted Group EBITDA (APM4) for the financial period of £6.6m was £2.4m
below the prior period figure of £9.0m. This reflects the £26.7m drop in
revenue in the financial period to 30 March 2024, partly offset by the cost
savings achieved in the year.
The adjusted Group EBITDA margin for the financial period of 6.4% was 0.6
percentage points below the margin of 7.0% achieved in the prior period.
ADJUSTED OPERATING PROFIT
Adjusted Group operating profit (APM1) for the financial period of £2.0m was
£2.8m below the prior period figure of £4.8m, giving an adjusted operating
profit margin for the financial period of 1.9% (prior period: 3.7%).
The Paper & Packaging business recorded an adjusted operating loss of
£5.1m, a £1.2m deterioration against the prior period. The impact on
adjusted operating profit of the drop in revenue was partly offset by a
reduction in pulp prices and energy related costs and by the cost benefits
from streamlining the business.
Adjusted operating profit in the Advanced Materials business fell by £1.5m in
the period to £7.7m due to the drop in revenue and the impact of input price
inflation.
ADJUSTED PROFIT BEFORE TAX
Adjusted Group profit before tax (APM2) for the financial period of £0.8m was
£2.4m below the prior period due to the shortfall in EBITDA, with cost
savings not fully offsetting the drop in revenue.
EXCEPTIONAL COSTS
Exceptional operating costs in the financial period of £5.0m principally
comprised restructuring costs of £2.3m incurred in respect of the
streamlining of the Paper & Packaging business, a non-cash impairment
charge of £4.4m as explained below, a credit of £1.4m from settlement of a
legal claim in respect of the Group's pension arrangements and a credit of
£0.4m based on reassessment of the contingent consideration due in respect of
the acquisition of TFP Hydrogen Limited.
During the period the Group recognised a £4.4m impairment of the carrying
value of the tangible fixed assets in its Paper business, reducing the net
book value of those assets at 30 March 2024 from £16.7m to £12.3m. Whilst
the Board remains confident in the future of the Paper business, it believes
that the reduced fixed asset carrying value better reflects the current
position of the business after three years of pre-tax losses and in light of
the restructuring of the business carried out during the period ended 30 March
2024.
STATEMENT OF FINANCIAL POSITION
2024 2023
£'000 £'000
Non-current assets 41,910 47,122
Total current assets (excluding cash) 34,829 43,667
Total current liabilities (excluding loans and borrowings) (15,570) (21,164)
Non-current liabilities - excluding borrowings (2,772) (4,826)
58,397 64,799
Net IAS 19 pension deficit (17,293) (16,140)
41,104 48,659
Net borrowings (15,537) (16,594)
Equity shareholders' funds 25,567 32,065
Equity shareholders' funds fell by £6.5m during the financial period
primarily due to the £4.0m unadjusted post-tax loss for the period, which
included a non-cash fixed asset impairment charge of £4.4m in the Paper &
Packaging business and exceptional restructuring costs of £2.3m, partly
offset by the £1.4m exceptional pension settlement in the period. The drop
in shareholders' funds in the period also reflects a £1.3m actuarial loss
(net of deferred tax) on the Company's pension schemes and dividends paid of
£0.7m.
The net book value of fixed assets fell by £5.1m across the financial period,
primarily due to the £4.4m impairment of the carrying value of the tangible
fixed assets in the Paper & Packaging business. Capital expenditure of
£3.8m (prior period £5.8m) was scaled back during the period in response to
challenging market conditions and as a result was below the underlying
depreciation charge for the period.
Working capital fell by £2.9m across the financial period due to the drop in
revenue and a focus in the second half of the period on reducing stock levels
in response to market conditions.
Net debt of £15.5m was £1.1m lower than 2023 reflecting increased focus on
cash management.
CASH FLOW
£'000 £'000
Net cash inflow from operating activities 7,170 5,550
Net cash outflow from investing activities (4,315) (6,643)
2,855 (1,093)
Net cash (outflow) / inflow from financing activities (1,483) 622
Net increase/(decrease) in cash and cash equivalents 1,372 (471)
Effects of exchange rate fluctuations on cash held 160 400
Net increase/(decrease) in cash and cash equivalents 1,532 (71)
Opening cash and cash equivalents 7,679 7,750
Closing cash and cash equivalents 9,211 7,679
The net cash inflow from operating activities in the financial period of
£7.2m (prior period £5.6m) primarily comprises:
· Adjusted EBITDA (APM 4) of £6.6m;
· Cash inflow from working capital of £2.9m;
· Net cash outflow on exceptional items of £1.0m, reflecting
restructuring costs less a cash receipt on settlement of a historic pension
legal dispute; and
· Pension deficit reduction payments of £1.4m in line with the
agreement with the Trustee following the triennial actuarial valuation as at
31 March 2022.
The net cash inflow from operating activities was £1.6m above the prior
period despite the drop in Adjusted EBITDA due to an improvement in working
capital and the settlement received on the historic pension legal dispute. The
net cash outflow on investing activities in the financial period of £4.3m
includes capital expenditure of £3.8m (prior period: £5.8m) and contingent
consideration on the TFP Hydrogen Products Limited acquisition of £0.25m.
The net cash outflow from financing activities of £1.5m in the financial
period comprises repayments of £1.9m on the US bank loan and lease
liabilities, £0.9m of cash interest payments and dividends of £0.7m, partly
offset by £2m drawn down on the UK bank loan in the early part of the
financial period.
NET DEBT, FUNDING AND FACILITIES
2024 2023
Net debt at year-end £'000 £'000
UKEF UK bank loan 15,000 13,000
US term loan 4,059 4,531
Less: capitalised transaction fees (145) (134)
Lease liabilities 5,834 6,876
Total Borrowings 24,748 24,273
Less: Cash and cash equivalents (9,211) (7,679)
Net debt 15,537 16,594
Funding availability at year-end 9,211 7,679
Cash and cash equivalents
Overdraft 3,500 3,500
Undrawn facility on UKEF UK bank loan 12,000
Funds available at year end 12,711 23,179
The Group funds its operations from operating cash flow, a UK bank loan, a US
bank loan, lease facilities and also has a £3.5m overdraft facility to
provide additional liquidity.
· The UK bank loan is a £25m facility with HSBC Bank Plc and National
Westminster Bank Plc under the UKEF's Export Development Guarantee scheme. At
30 March 2024 £15m (1 April 2023: £13m) was drawn under this facility. The
amount drawn at 31 March 2025 is repayable in 20 equal quarterly instalments
from June 2025 to March 2030. The interest rate on the facility is SONIA
+1.95%. The floating interest rate cost on the first £15m drawn under the
facility is capped at 1.5% until 31 March 2026.
· The US bank loan is a term facility with HSBC Bank USA at an interest
rate of SOFRA + 2.75%. At 30 March 2024 $5.1m (1 April 2023: $5.6m) was
outstanding under the facility. The facility is being repaid at $150,000 per
quarter, rising to $187,500 per quarter from March 2025 and $225,000 per
quarter from March 2026, with the remaining balance of $3.2m repayable in
December 2026. This facility does not have any financial covenants.
· The Group has a number of lease liabilities that run for terms
between three and five years that are typically secured on the asset they were
used to purchase at various rates of interest. The total amount borrowed on
these facilities at 30 March 2024 was £5.8m of which £1.1m was repayable
within 12 months (1 April 2023: £6.9m borrowed of which £1.3m was repayable
within 12 months).
· The Group has a £3.5m overdraft facility with HSBC Bank Plc that was
renewed in May 2024 and has an annual renewal date of May 2025 and an interest
rate of Bank of England Base Rate plus 1.95%. The facility was undrawn
throughout the year to 30 March 2024.
The UK bank loan has two financial covenants that are measured on the
Company's financial quarter-end dates. Both financial covenants have been
amended for the June, September and December 2024 test dates to provide
additional headroom against potential downside scenarios.
· The ratio of net debt to the last 12 months' EBITDA is required to be
no higher than 3.5. The maximum ratio has been reset to higher levels for the
June 2024, September 2024 and December 2024 test dates, reverting to 3.5 from
the March 2025 test date.
· The ratio of EBITDA to net interest, both calculated by reference to
the 12 months ending on the test date, is required to be no less than 4.0. The
minimum ratio has been reset to lower levels for the June 2024, September 2024
and December 2024 test dates, reverting to 4.0 from the March 2025 test date.
The definition of EBITDA for the purpose of these covenants excludes
exceptional items and all IAS19 pension adjustments.
A further covenant relating to liquidity has been agreed for the period to 31
December 2024, whilst the two financial covenants are at amended levels.
Further drawdowns on the UK bank loan are not permitted during the period that
the two financial covenants are at amended levels.
The Group was in compliance with its banking covenants at 30 March 2024 and
throughout the financial year that ended on that date.
KEY PERFORMANCE INDICATORS
FY22 FY23 FY24 Medium-term
actual actual actual targets
Key Strategic Indicators
Revenue growth % 33.2% 23.6% -20.6% Mid-to-high single digit annual growth
Adjusted operating profit % 4.4% 3.7% 1.9% Rising to high single digits
% sales from Energy Solutions n/a n/a 11.0% Rising to mid-teens
Key Performance Indicators
Adjusted EBITDA % 8.2% 7.0% 6.4% Rising to low double digits
Operating cash flow (£m) 4.0 5.6 7.2 85-95% of Adjusted operating profit
Net debt to EBITDA ratio 1.4 1.8 2.4 Cycle dependent: target range 1-2x
Return on Capital Employed 10.8% 9.8% 4.3% Rising to low-to-mid-teens
The Board has set medium term targets for the Group's Key Strategic and Key
Performance Indicators.
Annual percentage revenue growth is targeted at mid to high single digits over
the medium term, initially driven by recovery in the Paper and Packaging
business and then by growth of Energy Solutions revenue within Advanced
Materials. Energy Solutions revenue is defined as revenue from hydrogen fuel
cell, electrolysis and wider renewable energy applications.
The Group's Adjusted operating profit margin (APM1) is targeted to rise to
high single digits as a percentage of revenue. This underpins the target
improvement in Adjusted EBITDA margin (APM4).
The Group is targeting operating cash flow conversion at 85-95% of Adjusted
operating profit (APM1) based on continued robust control of working capital
and taking account of pension fund deficit reduction payments that are
included in operating cash flow.
The Group's target percentage return on capital employed is in the low to
mid-teens. The Board anticipates it will take time to reach this target as the
business recovers from the challenges of the financial period to 30 March
2024.
The Board's medium-term target is for net debt to be in the range 1.0x to 2.0x
Adjusted EBITDA (APM1), dependent on the market growth cycle and related
capital expenditure plans.
Andrew Goody
Chief Financial and Operations Officer
James Cropper PLC
Group Statement of Comprehensive Income
Note 52 week period to 53 week period to
30 March 2024 1 April 2023
£'000 £'000
Revenue 6 102,968 129,664
Expected credit loss provision 130 134
Other income 1,970 650
Changes in inventories of finished goods and work in progress (2,604) 817
Raw materials and consumables used (34,785) (48,556)
Energy costs (7,130) (15,162)
Employee benefit costs (34,547) (34,459)
Depreciation and amortisation (4,619) (4,278)
Impairment of property, plant and equipment (4,427) -
Write-off of assets on restructuring (469) -
Other expenses (19,514) (25,471)
Operating (loss)/profit 9 (3,027) 3,339
Fair value movement on derivatives - (330)
Interest payable and similar charges (2,234) (1,697)
Interest receivable and similar income - 1
(Loss)/profit before taxation 9 (5,261) 1,313
Tax income/(expense) 1,264 (797)
(Loss)/profit for the period (3,997) 516
(Loss)/earnings per share - basic and diluted (41.8p) 5.4p
Other comprehensive income
(Loss)/profit for the period (3,997) 516
Items that are or may be reclassified to profit or loss
Exchange differences on translation of foreign operations (196) 222
Cash flow hedges - effective portion of changes in fair value (258) 1,040
Cash flow hedges - cost of hedging 109 (355)
Items that will never be reclassified to profit or loss
Retirement benefit liabilities - actuarial losses (1,787) (3,888)
Deferred tax on actuarial losses on retirement benefit liabilities 447 972
Other comprehensive expense for the period (1,685) (2,009)
Total comprehensive expense for the period attributable to equity holders of (5,682) (1,493)
the Company
James Cropper PLC
Statement of Financial Position
Note Group as at Group as at
30 March 2024 1 April 2023
£'000 £'000
Assets
Goodwill 1,264 1,264
Intangible assets 1,210 1,524
Property, plant and equipment 27,667 32,717
Right-of-use assets 6,028 6,765
Other financial assets 341 654
Deferred tax assets 5,400 4,198
Total non-current assets 41,910 47,122
Inventories 15,796 18,304
Trade and other receivables 17,723 24,763
Provision for impairment (513) (643)
Other financial assets 478 428
Cash and cash equivalents 9,211 7,679
Corporation tax 1,345 815
Total current assets 44,040 51,346
Total assets 85,950 98,468
Liabilities
Trade and other payables 15,570 21,106
Other financial liabilities - 58
Loans and borrowings 1,610 1,758
Total current liabilities 17,180 22,922
Long-term borrowings 23,138 22,515
Retirement benefit liabilities 8 17,293 16,140
Contingent consideration on business acquisition - 1,423
Deferred tax liabilities 2,772 3,403
Total non-current liabilities 43,203 43,481
Total liabilities 60,383 66,403
Equity
Share capital 2,389 2,389
Share premium 1,588 1,588
Translation reserve 579 775
Reserve for own shares (1,407) (1,407)
Cash flow hedging reserve 782 1,040
Cost of hedging reserve (246) (355)
Retained earnings 21,882 28,035
Total shareholders' equity 25,567 32,065
Total equity and liabilities 85,950 98,468
James Cropper PLC
Statement of Group Cash Flows
52 week period 53 week period to 1 April
to 30 March
2024 2023
£'000 £'000
Cash flows from operating activities
(Loss)/profit for the period (3,997) 516
Adjustments for:
Tax (income)/expense (1,264) 797
Depreciation and amortisation 4,619 4,278
Impairment of property, plant and equipment 4,427 -
Write-off of assets on restructuring 469 -
Earn out adjustment on contingent consideration on business acquisition (422) 986
Net IAS 19 pension adjustments within profit (6) 442
Past service pension deficit payments (1,381) (1,665)
Foreign exchange differences (40) (136)
Profit on disposal of property, plant and equipment and intangible assets (40) (589)
Interest receivable and similar income - (1)
Interest payable and similar charges 2,234 1,697
Share based payments (152) (59)
Fair value movements on derivatives 330
Changes in working capital:
Decrease / (increase) in inventories 2,352 (696)
Decrease / (increase) in trade and other receivables 6,110 (3,614)
(Decrease) / increase in trade and other payables (5,576) 2,396
Tax (paid) / received (162) 868
Net cash generated from operating activities 7,171 5,550
Cash flows from investing activities
Purchase of intangible assets (965) (1,126)
Purchase of property, plant and equipment (3,220) (5,267)
Proceeds on disposal intangible assets 120 -
Contingent consideration on business acquisition paid (250) (250)
Net cash used in investing activities (4,315) (6,643)
Cash flows from financing activities
Proceeds from issue of new loans 2,000 5,050
Repayment of borrowings (429) (288)
Repayment of lease liabilities (1,449) (1,561)
Interest received - 1
Interest paid (941) (858)
Non-deliverable forward contract payment - (330)
Payments on interest rate cap - (495)
Purchase of own shares - -
Dividends paid to shareholders (664) (897)
Net cash used in financing activities (1,483) 622
Net increase / (decrease) in cash and cash equivalents 1,372 (471)
Effects of exchange rate fluctuations on cash held 160 400
Net increase / (decrease) in cash and cash equivalents 1,532 (71)
Cash and cash equivalents at the start of the period 7,679 7,750
Cash and cash equivalents at the end of the period 9,211 7,679
Cash and cash equivalents consists of cash at bank and in hand.
James Cropper PLC
Statement of Changes in Equity - Group
All figures in £'000 Share capital Share premium Translation reserve Reserve for Own Shares Cost of Hedging reserve Cash flow Hedging reserve Retained earnings
Total
At 26 March 2022 2,389 1,588 553 (1,407) - - 31,391 34,514
- - - - - - 516
Comprehensive income for the period 516
Total other comprehensive expense - - 222 - (355) 1,040
(2,916) (2,009)
Dividends paid - - - - - - (897) (897)
Share based payment charge - - - - - -
(59) (59)
Total contributions by and distributions to owners of the Group - - -
- - - (956) (956)
At 1 April 2023 2,389 1,588 775 (1,407) (355) 1,040 28,035 32,065
- - - - - - (3,997) (3,997)
Comprehensive expense for the period
Total other comprehensive expense - - (196) - 109 (258) (1,340) (1,685)
Dividends paid - - - - - - (664) (664)
Share based payment charge - - - - - - (152) (152)
Total contributions by and distributions to owners of the Group - - - - - - (816) (816)
2,389 1,588 579 (1,407) (246) 782 21,882 25,567
At 30 March 2024
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1 BASIS OF PREPARATION
James Cropper Plc (the Company) is a public limited company incorporated and
domiciled in the United Kingdom and listed on the Alternative Investment
Market (AIM). The condensed consolidated financial statements of the Company
for the 52 weeks ended 30 March 2024, comprise the Company and its
subsidiaries (together referred to as the Group).
Statement of compliance
The condensed consolidated financial statements set out herein do not
constitute the Group's statutory accounts for the 52 weeks ended 30 March
2024, or the 52 weeks ended 1 April 2023 within the meaning of sections 434 of
the Companies Act 2006, but is derived from those accounts.
The audited accounts for the 52 weeks ended 30 March 2024 will be posted to
all shareholders in due course and will be available on the Group's website.
The auditors have reported on those accounts and expressed an unmodified audit
opinion which did not contain a statement under section 498 (2) or (3) of the
Companies Act 2006.
The financial information for the 52 weeks ended 1 April 2023 is derived from
the statutory accounts for that year, which have been delivered to the
Registrar of Companies. The auditors have reported on those accounts and
expressed an unmodified audit opinion which did not contain a statement under
section 498 (2) or (3) of the Companies Act 2006
Selected explanatory notes are included to explain events and transactions
that are significant to an understanding of the changes in financial position
and performance of the Group.
The condensed consolidated financial statements have been prepared in
accordance with UK adopted international accounting standards and with those
parts of the Companies Act 2006 applicable to companies reporting under IFRS.
As required by the Disclosure and Transparency Rules of the Financial Services
Authority, the condensed consolidated set of financial statements have been
prepared applying the accounting policies and presentation that were applied
in the preparation of the Group's published consolidated financial statements
for the 52 week period ended 30 March 2024. They do not include all the
information required for full annual financial statements, and should be read
in conjunction with the consolidated financial statements of the Group for the
52 week period ended 30 March 2024 .
The consolidated financial statements of the Group for the 52 week period
ended 30 March 2024 are available upon request from the Company's registered
office Burneside Mills, Kendal, Cumbria, LA9 6PZ or at www.jamescropper.com
(http://www.jamescropper.com) .
The financial information is presented in Sterling and all values are rounded
to the nearest thousand pounds (£'000) except where otherwise indicated.
Going concern
The Group sets an annual budget and 3-year strategic plan against which
performance is compared, and operates a monthly reporting and quarterly
forecasting cycle, which the Board uses to monitor profitability and liquidity
and ensure the Group has sufficient debt facilities to ensure its ongoing
viability.
The Board believes that an 18-month planning horizon to September 2025, based
on the Board approved annual budget and strategic plan, is an appropriate
period over which to evaluate the Group's ability to continue as a going
concern.
In carrying out this evaluation the Board considered the challenging trading
environment during the second half of the financial period to 30 March 2024
and applied various sensitivities, including modelling a severe but plausible
downside scenario that reduced revenue significantly below the levels assumed
in the budget and strategic plan. The Board also carried out reverse stress
tests to identify the extent to which revenue, profit and cash generation
would have to fall against the base case forecast, in order to cause
challenges to liquidity or bank covenant compliance. Given the market outlook
and trading after the end of the financial period the Board concluded that the
reverse stress test was an implausible scenario.
As part of its risk mitigation strategy the Group has agreed amendments to the
two financial covenants in its UK bank loan for the June, September and
December 2024 test dates to provide additional headroom against potential
downside scenarios.
Based on this evaluation the Directors consider that the Group and company
will have sufficient funds to continue to meet their liabilities as they fall
due for at least 12 months from the date of approval of the financial
statements. Therefore the Directors have adopted the going concern basis in
preparing the financial statements.
Significant accounting policies
The accounting policies applied by the Group in these condensed consolidated
financial statements are the same as those applied by the Group in its
consolidated financial statements as at and for the 52 week period ended 30
March 2024.
2 Accounting estimates and judgements
The preparation of the financial statements requires management to make
judgements, estimates and assumptions that affect the application of
accounting policies and the reported amounts of assets and liabilities, income
and expenses. Actual results may differ from these estimates.
The preparation of financial statements in conformity with IFRS requires the
use of estimates and judgements that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts
of revenue and expenses during the reporting period.
Although these estimates are based on management's best knowledge of the
amount, event or actions, actual results ultimately may differ from those
estimates.
The Group's key sources of significant estimates are as detailed below:
(i) Retirement benefits
IAS 19 Employee Benefits requires the Group to make assumptions including, but
not limited to, rates of inflation, discount rates and life expectancies.
The use of different assumptions, in any of the above calculations, could have
a material effect on the accounting values of the relevant Statement of
Financial Position assets and liabilities which could also result in a change
to the cost of such liabilities as recognised in profit or loss over time.
These assumptions are subject to periodic review. The Group takes specialist
advice and seeks to follow the most appropriate method, applied consistently
from year to year.
(ii) Contingencies
The Group has identified that the historical valuation of the defined benefit
pension obligation did not capture the potential additional liabilities
arising in relation to the normal retirement dates for male and female members
of the Staff Scheme.
An estimate of the additional liability has been included in the financial
statements since year ended 31 March 2019. An allowance of 0.15% of
liabilities has been included in the valuation. If the ultimate impact is
greater or lesser, the difference will be taken as an experience adjustment
through the Other Comprehensive Income in the relevant year.
(iii) Impairment
IAS 36 requires an entity to assess whether there is any indication that an
asset may be impaired. The Group considers that three successive years of
operating losses and the underlying market conditions that have contributed to
those losses are an indication of potential impairment of the fixed assets in
the Paper and Packaging business. Therefore an impairment review was carried
out, which resulted in an impairment of £4.4m being recognised against the
carrying value of the fixed assets in the Paper and Packaging business.
The impairment review required the Group to make assumptions including, but
not limited to, future revenue growth rates and the discount rate to apply to
future cash flows. The use of different assumptions could have a material
effect on the impairment charge included in the Group Statement of
Comprehensive income and the fixed asset carrying value included in the
Statement of Financial Position.
The Group considered various scenarios and market sensitivities in assessing
the future revenue growth rate assumptions to use in the impairment
calculation. The Group took specialist advice to determine the discount rate
to apply to future cash flows.
3 Risks and uncertainties
The Board considers that the principal risks and uncertainties set out in the
20234 Annual Report remain relevant for the current financial year. In
addition the Board has identified a further principal risk around market
growth.
4 Alternative performance measures
The Company uses alternative performance measures to allow users of the
financial statements to gain a clearer understanding of the underlying
performance of the business.
Profit before tax represents the Group's overall performance and financial
position, however it contains significant non-operational items relating to
IAS 19 that the Directors believe make year-on-year comparison of performance
challenging.
Measures used to evaluate business performance are 'Adjusted operating profit'
(operating profit excluding the impact of IAS 19 and exceptional costs), and
'Adjusted profit before tax' (profit before tax excluding the impact of IAS 19
and exceptional costs). The alternative performance measures are reconciled in
note 9.
5 Earnings per share
The calculation of basic earnings per share is based on earnings attributable
to ordinary shareholders divided by the weighted average number of shares in
issue during the year. The calculation of diluted earnings per share is based
on the basic earnings per share adjusted to assume conversion of all dilutive
options.
6 Segmental information
IFRS 8 Operating Segments requires that entities adopt the 'management
approach' to reporting the financial performance of its operating segments.
Management has determined the segments that are reported in a manner
consistent with the internal reporting provided to the chief operating
decision maker, identified as the Executive Committee that makes strategic
decisions. The committee considers the business principally via the four main
operating segments, principally based in the UK:
• James Cropper Paper and Packaging Products (Paper and
Packaging): comprising James Cropper Speciality Papers, a manufacturer of
specialist paper and boards, James Cropper Converting , a converter of paper,
and James Cropper 3D Products (Colourform(TM)), a manufacturer of moulded
fibre products.
• Technical Fibre Products (TFP) - a manufacturer of advanced
materials.
• Group Services - comprises central functions providing services
to the subsidiary companies.
Revenue Adjusted operating profit / (loss)
2024 2023 2024 2023
£'000 £'000 £'000 £'000
Paper and Packaging 68,465 92,477 (5,138) (3,904)
TFP 34,503 37,187 7,715 9,244
Group services and other - - (600) (573)
102,968 129,664 1,977 4,767
7 Dividend
An interim dividend of 3.0p per share was paid in the period. The Board is not
proposing a final dividend, making a total declared dividend for the period of
3.0p per share. (2023: 6.0p per share).
8 Retirement benefit obligations
Movements during the period in the Group's defined benefit pension schemes are
set out below:
2024 2023
£'000 £'000
Net obligation brought forward (16,140) (13,130)
Expense recognised in the income statement (1,181) (1,319)
Contributions paid to the schemes 1,815 2,197
Actuarial (losses) and gains (1,787) (3,888)
Net obligation carried forward (17,293) (16,140)
9 Alternative performance measures
2024 2023
£'000 £'000
Adjusted operating profit 1,977 4,767
Net IAS 19 pension adjustments:
current service costs (428) (974)
future service contributions paid 434 532
Exceptional Items: (5,010) (986)
Operating (loss) / profit (3,027) 3,339
2024 2023
£'000 £'000
Adjusted profit before tax 758 3,195
Net IAS 19 pension adjustments:
current service costs (428) (974)
future service contributions 434 532
paid
finance costs (753) (345)
Exceptional items: (5,272) (1,095)
(Loss) / Profit before tax (5,261) 1,313
10 Exceptional items
2024 2023
£'000 £'000
Restructuring costs 2,309 -
Impairment of property, plant and equipment 4,427 -
Earn-out adjustment on contingent consideration on business acquisition (422) 986
Flood settlement costs 100 -
Pension settlement (income) (1,404)
Exceptional items in operating costs 5,010 986
262 109
Fair value adjustment on contingent consideration
Exceptional items in interest payable and similar charges 262 109
On 19 April 2023 the company announced a major restructuring of the Paper
division. The restructuring involved a reduction in the number of paper
machines in operation from four to three, with two machines anticipated to be
in production at any one time, to better align production capacity and cost
base with market outlook. This led to a redundancy program and a reduction
in overall headcount.
During the year the Group recognised a £4,427k impairment loss in respect of
the fixed assets in the Paper and Packaging business in it's consolidated
financial statements. Further detail is set out in note 2 above.
The company incurred £100k of professional services fees in FY24 to assist
with the correction and alignment of the corporation tax returns with the
accounting treatment of a legacy flood provision, dating back to the
widespread damage Storm Desmond inflicted on the site in 2015.
The company received income of £(1,404)k from the settlement of a
longstanding legal claim concerning Pension equalisation.
A cost of £262k is recognised in interest payable and similar charges to
reflect the unwinding of the discounted present value of the contingent
consideration payable as part of the acquisition of PV3 Technologies Ltd (now
known as TFP Hydrogen Products Ltd) A credit of £(422)k has been booked to
other expenses to adjust the accrued level of contingent consideration to the
final amount due following the conclusion of the earn-out agreement.
The adjustments above are treated as exceptional items as they distort the
underlying operating profitability of the Group and make year on year
comparison of performance challenging.
11 Related parties
There have been no significant changes in the nature of related party
transactions in the period ended April 2024 from that disclosed in the 2023
Annual report.
Statement of Directors' responsibilities
The Directors confirm that these condensed consolidated financial statements
have been prepared in accordance with International Financial Reporting
Standards as adopted by the European Union and that the preliminary report
includes:
(i) An indication of important events that have occurred
during the period and their impact on the condensed set of financial
statements, and a description of the principal risks and uncertainties for the
financial period; and
(ii) Material related party transactions in the period and
any material changes in the related party transactions described in the last
Annual Report.
The Directors of James Cropper Plc are detailed on our Group website
www.jamescropper.com (http://www.jamescropper.com)
Forward-looking statements
Sections of this financial report may contain forward-looking statements with
respect to the Group's plans and expectations relating to its future
performance, results, strategic initiatives, objectives and financial
position, including liquidity and capital resources. These forward-looking
statements are not guarantees of future performance. By their very nature, all
forward-looking statements involve risks and uncertainties because they relate
to events that may or may not occur in the future and are or may be beyond the
Group's control. Accordingly, the Group's actual results and financial
condition may differ materially from those expressed or implied in any
forward-looking statements. Forward-looking statements in this financial
report are current only as of the date on which such statements are made. The
Group undertakes no obligation to update any forward-looking statements, save
in respect of any requirement under applicable law or regulation. Nothing in
this announcement shall be construed as a profit forecast.
Annual General Meeting
The Annual General Meeting will be held on 4 September 2024. The notice of
Annual General Meeting will be issued to shareholders on or around 5 August
2024 together with a copy of the 2024 Annual Report.
Content of this report
The financial information set out above does not constitute the Group's
statutory accounts for the 52 week period ended 30 March 2024 or the 53 week
period ended 1 April 2023 but is derived from those accounts.
Statutory accounts for the 53 week period ended 1 April 2023 have been
delivered to the Registrar of Companies. The auditor, Grant Thornton LLP, has
reported on the 2023 accounts; the report (i) was unqualified, (ii) did not
include a reference to any matters to which the auditor drew attention by way
of emphasis without qualifying their report, and (iii) did not contain a
statement under section 498 (2) or (3) of the Companies Act 2006.
The statutory accounts for the 52 week period ended 30 March 2024 will be
delivered to the Registrar of Companies following the Annual General Meeting.
The auditor, Grant Thornton UK LLP, has reported on these accounts; their
report (i) is unqualified, (ii) does not include a reference to any matters to
which the auditor drew attention by way of emphasis without qualifying their
report, and (iii) does not include a statement under either section 498 (2) or
(3) of the Companies act 2006.
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