James Cropper plc ('CRPR', the 'Company' or the 'Group'), the leading advanced materials and paper products group is pleased to announce its

Preliminary results for the 52 weeks ended 26 March 2022

Revenue achieves new high, entering new financial year with a strong order book projection.

Highlights

·      Revenues up by 33% and higher than pre-pandemic levels, with growth in all divisions.

·      Profit before tax up by 62%.

·      TFP Hydrogen performing better than expectations. TFP revenue up by 27%.

·      Colourform achieves a positive EBITDA and 19% revenue growth.

·      Paper impacted with substantial energy costs with 37% revenue growth but a loss before tax.

·      New loan facility of £25m under UK Export Finance to support sustainable strategic growth plans.

·      Investment expenditure doubled to £6.7m, to support growth plans.

·      Return to dividend payments with a proposed 7.5p final dividend, making a total of 10.0p per share (2021: nil pence per share).

·      The Group board strengthened with two new NEDs and appointment of TFP Managing Director complete.

Mark Cropper, Chairman, commented:

"The green agenda represents a significant growth opportunity for all our divisions."

"Looking forward the outlook remains positive across the Group."

 "Our mantra since the earliest days of the Covid crisis has been to "emerge stronger" and I am confident that this has truly been the case".

Enquiries:

The Annual General Meeting of the Company will be held at 11.00am on Wednesday 27 July 2022 at the Bryce Institute, Burneside, Cumbria.

The IAS 19 pension adjustments are explained in detail in the Financial Review section of the Annual Report. The total amount excluded from the IAS pension Charge is £914k (2021: £802k). The adjustment, which we refer to in these accounts as the "IAS 19 impact" represents the difference between the pension charge as calculated under IAS 19 and the cash contributions for the current service cost only as determined by the latest triennial valuation. The Directors consider that the adjusted pension charge better reflects the actual pension costs for ongoing service compared to the IAS 19 charge. This adjustment is made internally when we assess performance and is also used in the EBITDA and EPS targets used in management incentive schemes

The IAS 19 pension adjustment to the income statement of £914k (2021: £802k) comprises:

Chairman's Letter

Dear Shareholders

The year to 26 March 2022 has been yet again another long and memorable year for the Company and all those associated with it.  The challenges have continued with the tail end of the pandemic, not so long ago joined by the onset of the Ukraine war. Both have led to dramatic rises in input costs, in particular in relation to energy. I am pleased to report the Group has responded with mitigating actions at every step and as a result our revenues are back to pre-pandemic levels, profits have risen and demand remains high across all divisions.

The result has been driven in part by the record performance of the TFP division, which has seen strong organic sales and the successful integration of the newly rebranded TFP Hydrogen subsidiary, following the acquisition of PV3 Technologies Limited ("PV3") in January 2021.

In financial terms, the Group reports a profit before tax of £2.8m for the period. This was up by 62% versus the prior period with Group turnover rising by 33%, split between Paper (+37%), TFP (+27%), and Colourform (+19%).

This year has also seen several changes at Board level. James Gravestock was appointed Managing Director of the TFP division and an Executive Director of the Group, following the departure of Martin Thompson. On behalf of the Board, I would like to welcome James and to thank Martin for his significant contribution over the past 18 years, not least his part in the significant and sustained growth of the TFP division.

There were also significant changes on the non-executive side of the board.  Our Senior Independent Director Dr Andrew Hosty stepped down during the year and I would also like to thank him for his valuable contributions in recent years.

Following on from this the Board chose to appoint two new non-executive directors in November: Sarah Miles, CEO of Feelunique.com, a market leader in cosmetics and beauty e-commerce, and Martin Court, Chief Commercial Officer of Victrex plc, the FTSE 250 advanced materials group. In April 2022 Martin assumed the role of Senior Independent Director. They both bring with them a wealth of commercial experience and I am delighted they chose to join us at an exciting moment in our growth journey.

Turning to other themes, our growth and product development strategies are also ever more aligned with helping our customers and consumers reduce their environmental impact, whether via greener papers and packaging or the advanced materials TFP has developed for a wide range of renewable energy.

Colourform continues to grow, with some highly creative innovative packaging products launched in the luxury beauty and premium alcoholic beverage markets. The division has generated a positive EBITDA for the first time as it continues to grow towards sustainable profitability. 

The growth of our new subsidiary TFP Hydrogen has exceeded expectations in the year. This adds to the strong position TFP has built up over many years as a maker of materials and components for both fuel cells and hydrogen electrolysers.  This sector is fast gaining traction as a key element of the global transition away from fossil fuels. Furthermore TFP is on track to shift the majority of its sales to applications supporting the Global Net Zero Carbon emissions movement within the next five years; helping us as a business to safeguard and protect the future of our planet.

Closer to home, we also continue to address our own impacts. During the year we have progressed our programme to deliver significant decarbonisation by 2030 and the Paper division's ambition to source 50% of its fibre from waste by 2025.  We are also taking further steps, not least via our ESG sub-committee, to better monitor and measure and ESG targets and further evolve policies and programmes that align with our Purpose and Values. 

The Board is recommending a final dividend of 7.5 pence per share, making a total dividend for the year of 10.0 pence per share. A final dividend has not been paid since 2019 owing to the pandemic.  Earnings per share have fallen by 13% to 14.2 pence.

I would like to thank our Board and all of our employees for the resilience they have shown during what have been very challenging months and years.  Our mantra since the earliest days of the Covid crisis has been to "emerge stronger" and I am confident that this has truly been the case. 

Outlook

Looking forward, the outlook remains positive across the Group as we enter the new financial year with a record order book. While there are short term challenges in the Paper division due to external factors, we have put in place measures to mitigate these and plans are well underway to transition all of the divisions away from natural gas. The geopolitical climate has cemented and accelerated Government support for cleaner and greener hydrogen energy and TFP has the power to help facilitate this energy transition, by reducing costs and improving accessibility. Overall the green agenda represents a significant growth opportunity for all our divisions.  Colourform will continue to grow year-on-year and Paper's strategy to enrich margins will also be significantly underpinned by its environmental initiatives.

Mark Cropper

Chairman

20 June 2022

Chief Executive's Review

I am pleased to report our financial results for the period, which yet again underline the continued resilience of the Group as we successfully navigated two unprecedented events - the end of the Covid pandemic, which saw resource and supply chain challenges, and the Ukraine War, which sparked an energy crisis and has compounded global inflation.

The Group has experienced strong demand throughout the period and across all divisions, with over 30% sales growth in the current year to 26th March 2022, which is ahead of previous market expectations.

Profit in 2021 included £2.9m of Covid-19 related government grants. No grants were included in 2022, demonstrating a strong underlying Adjusted profit before tax improvement from £1.1m (excluding grants) in 2021 to £4.0m in 2022.

While all of the divisions have felt the impact of these events in some way, the Paper division was significantly affected, as it is, by far, our most energy-intensive division. The division is accountable for 88% of the Group's energy expenditure, with costs in the period 70% higher than the pre-Covid period ending March 2020. Up to the end of the period, the Group had negotiated a fixed price contract for a significant proportion of the energy purchased, mitigating the impact of the crisis in the short term. Once this agreement ended in Q4, the division was exposed to the higher energy prices, which has impacted Group results in the current period (as announced on 23 March 2022).

As with all energy intensive businesses, the Paper division continues to incur higher than average energy costs, however, fixed prices for Q1 in the current period and an energy surcharge to all customers of the division are mitigating the impact over the medium term. The Paper division saw a strong recovery following the impact of Covid, with revenues at 93% of pre-pandemic levels and excellent customer retention rates. Programmes are well in advance to transition all Group divisions away from natural gas dependence.

The TFP division has had a record year for revenue, including better than expected results for the recently acquired TFP Hydrogen subsidiary, resulting in a full earn out payment for year one of the earn out period, and an increase in provisions for the future earn out expectations. Revenues were up on the previous period by 27%, surpassing the previous highest turnover by more than £4m, and higher than the pre-Covid period by 18%. Estimates suggest hydrogen could eventually account for 18% of primary energy, underlining TFP's role as an exciting and key growth area for the Group.

The Colourform division continues to grow with revenues up by 19% on the previous period and 31% higher than the pre-Covid period. The division has also shown positive EBITDA. With pioneering, award-winning products and high profile brand partnerships secured for the short to medium term and energy security from being powered by 100% renewable energy, Colourform is projected to continue to grow year on year.

Revenue, Operating Profit and Capital Expenditure

Group revenue for the financial period was £104.9m, up 33% on the prior period (2021: £78.8m), with profits before tax of £2.8m, an increase of 62% on the prior period (2021: £1.7m). Earnings per share have risen 13% to 14.2p per share (2021: 16.4p per share).

Revenue for the Paper division rose by 37% in the period to £70.4m generating an operating loss of £2.4m compared to an operating loss of £0.4m in the prior period, for reasons previously disclosed. Revenue for the TFP division rose by 27% in the period to £31.2m generating an operating profit of £8.7m, compared to an operating profit of £6.9m in the prior period. Revenue for Colourform grew by 19% in the period to £3.4m, generating an operating loss of £0.8m, compared to an operating loss of £1.4m in the prior period.

Capital investments during the period amounted to £6.8m compared to £3.1m in the prior period.

The Group has completed a £25m financing deal with NatWest Bank and HSBC Bank, supported by UK Export Finance. The funding will be used to invest in additional investments to support our strategic growth plans and support our ESG commitments including decarbonisation.

Group Strategy

Our company's Purpose (Pioneering Materials to Safeguard our Future) and Values (Forward Thinking, Responsible and Caring), provide our guiding principles for our growth strategies across each business.

Our main markets within each business include:

While operating under the Group's combined Purpose and Values, each business division acts independently, focusing on niche markets and growth areas:

TFP

TFP is accelerating sales, particularly in clean energy, and building global capacity.

Case study: TFP sales into clean energy, such as wind and hydrogen markets, have grown by 75%, from £5.7m to £10.0m in the past 12 months. The division has also achieved a 70% reduction in the volume of waste generated, compared to 2015.

Paper

Paper is growing its market share in luxury packaging and focusing on delivering improved margins.

Case Study: A key innovation of Paper is creating value from waste. As well as increasing the level of upcycled material, such as coffee cups, into luxury paper, the division has launched Rydal Apparel, which is a 100% recycled packaging product, incorporating 20% used denim fabrics.

Colourform

Colourform has diversified its client base, by evolving from a sustainable alternative to plastic packaging to delivering sustainable, highly designed, point of sale outer packaging.

Case Study: The energy used to operate our Colourform factory is now 100% powered by green electricity, most of which is from community owned solar panels within our facility generating 1 megawatt - the UK's largest roof mounted PV system.

Ethical Markets

As each business is focused on growing ethical and environmental markets, we have undertaken a thorough ethical markets review of our current business and its supply chain, which has resulted in exiting some markets.

Through an in-depth analysis of our upstream supply chain, we discovered a small number of products in what we would classify unethical markets. We have now appropriately exited these over the period and are building our market pipelines aligned to our values.

Investing in Future Growth

Group investments in the year have doubled year on year, to £6.8m (2021: £3.1m). In the year the additional production line in TFP became operational, adding 50% additional capacity for non-woven materials. In addition, TFP's acquisition of PV3 , rebranded TFP Hydrogen, was completed and provides catalyse coating capability for hydrogen PEM electrolysers. A new TFP Hydrogen coating line was started last year at our USA manufacturing facility, which will be operational later this year and ready to serve the USA hydrogen market.

Paper's luxury packaging products require unique embossing and sustainable coatings and, to support market share growth, we began to create additional manufacturing capability last year and established a new dedicated manufacturing cell. This increased capacity and capability will be operational later this financial year. As Colourform is focusing more attention to outer finished sustainable packaging, there have been investments in both product design capability and decorative product finishing.

Our People

At James Cropper we have a strong company culture, which is reflected in the Purpose and Values we have set out and continue to build on and embed into the entire Group. We have also updated our Code of Ethics, to create clear, guiding principles that dictate how we engage with our clients, our suppliers, and our colleagues. We will be supporting and embedding these ethics across the Group, with further education and training during in the current period.

To demonstrate our commitment to improving the health and wellbeing of our teams, our employee survey has been improved to provide more targeted and clearer feedback on areas that are working well and can be replicated across the Group, and areas in need of improvement.

Over 5% of our employees are starting their first career journey with James Cropper, including four graduates and 27 apprentices. This, together with working alongside local schools and colleges on STEM career awareness, helps to encourage the next generation into our business, bringing with them innovation and ideas as well as securing our future talent pipeline for the Group.

To support our strategic ESG ambitions our long-term incentive programme for senior leaders now incorporates additional non-financial measures, focusing on ESG improvements.

I would like to take the opportunity to thank all the James Cropper employees for their hard work during the year, they have showed tremendous commitment and flexibility, and to demonstrate our thanks, we have awarded an extra day's holiday to all employees.

The UK has a long history of being at the forefront of the science and technology revolution - inventing some of the world's best technology, which we still use to this day. At James Cropper we combine over 177 years of experience with world leading innovation and pioneering manufacturing technology, which together can help to safeguard the future of our planet.

Phil Wild

Chief Executive Officer

20 June 2022

From the Chief Financial Officer's Review:

Cash flow

In the period the Group's net cash inflow was £985k (2021: outflow £2,199k). Investment expenditure commenced in the latter half of the prior year and continued into this period to enable growth through an increase in capacity and capability. Cash invested in working capital to support the return to normal operations also increased. Lease and borrowing facilities increased in the year to support all activities.

Funding and facilities

The Group funds its operations and investments from operating cash flow and from borrowings and leases. The Group has a core banking facility in the UK and further loan support in the USA, along with some lease arrangements, all with high street banks.

The Group has a core £25m banking facility under UKEF's Export Development Guarantee scheme which is aimed at enabling additional bank liquidity to support exporters. This finance arrangement is available for general corporate purposes and will be used to support strategic growth and innovation, capital expenditure and decarbonisation programmes. The facility has an availability period of 3 years and an overall tenor of 8 years, repayments are on a straight line basis from years 4 to 8. The Group's key financial covenants are EBITDA: Interest 4x, and the Net Debt: EBITDA 3.5x. A £4m CLBIL was taken out in Oct 2020 as a safety net during the covid pandemic, this has been repaid in full. The Group is in compliance with all its banking covenants at the period end.

Cash and cash equivalents increased from £6,765k to £7,750k in the year. Long term borrowings (falling due after more than a year) also increased by £12,761k to £18,727k. The expiry profile of existing borrowings is detailed in note 19.3 to the financial statements of the annual report. The Group is in compliance with all its banking covenants at the period end. Undrawn facilities comprise of unused overdraft facilities of £3,500k plus the total unused credit facilities of £17,000k, this means a total of £20,500k remains unutilised at the year-end date. Having taken account of current borrowings to be paid within 12 months of the balance sheet date the Group has £26,655k available to the Group beyond 12 months.

Net debt

The Group incorporates £3,949k (2021: £3,771k) of right-of-use leases in its 2022 borrowings figure. The Groups banking arrangements monitor net debt excluding 1FRS 16. On this basis net debt has increased over the year from £3,731k to £8,623k, an increase of £4,892k largely supporting the capital and working capital requirements of each business as the Group emerges stronger from the pandemic.   Net debt including Right of use lease liabilities is £12,572k, an increase of £5,070k on the prior period.

Going concern

The Directors carry out a review of the Group's financial position for the period up to 12 months after the date of signing the audit report, providing a comprehensive review of revenue, expenditure and cash flows taking into account specific business risks, requirements and latest economic forecasts. These inform the Group's cash and debt requirements.  The Group's financial position, cash flows, liquidity and borrowing facilities are described in the financial statements.  At 26 March 2022, James Cropper had £17m of undrawn committed facilities. The principal loan arrangements are described in note 18 of the financial statements. The Group has £7.75m of cash available to support its short term needs.

The Group's 12 month forecast period from the date of signing the audit report has been tested for plausible downsides scenarios including further expected effects of the pandemic, hampered market growth, increasing carbon cost and commodity prices.  In the event that a scenario partly or fully takes place the Group has various options available to maintain liquidity and continue operations. We have assessed the combined impact of these scenarios on the Group's key financial metrics of EBITDA, net debt and net debt to underlying EBITDA. The Group remains within its key financial covenant which is its net debt to underlying EBITDA ratio must not exceed 3.5 times. The break-even calculation indicates that EBITDA would need to fall 85% before triggering the covenant. The Board is satisfied that the Group will be able to respond to such scenarios through various means which may include a reduced or deferred capital expenditure programme to ensure that the Group continues to meet its ongoing obligations.

The Board is satisfied that the Group will have sufficient liquidity to meet its needs over the 12 month forecast period from the date of signing the audit report. The Directors have a reasonable expectation that the Group remains a going concern over the forecast period.

The Board is satisfied it has sufficient cash resources to meet its obligations as they fall due throughout this duration and the Board has a reasonable expectation that the Company and the Group has adequate resources to continue in operational existence for the foreseeable future.

CONSOLIDATED INCOME STATEMENT

OTHER COMPREHENSIVE INCOME

STATEMENT OF FINANCIAL POSITION

The Parent Company reported a profit for the period ended 26 March 2022 of £4,554k (2021: £4,072k).

STATEMENT OF CASH FLOWS

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY