Half Year Trading Update

'Unprecedented inflationary headwinds impact the half year; the Group continues to prepare for growth'

In advance of its interim results announcement due on 15 November 2022, James Cropper plc ('CRPR', the 'Company' or the 'Group'), the leading advanced materials and paper products group, today issues an update on trading for the half year ended 24 September 2022.

Financial performance

As announced at the Annual General Meeting on 27 July 2022, the Group experienced a strong start to its financial year, with revenues in Q1 2022 up 36% on the prior year (Q1 2021), with demand across all three divisions ahead of the prior-year quarter. Revenues for the half year were up on the prior year (H1 2021) by 26%, with demand remaining strong across all divisions.

As a direct result of continued wholesale gas price rises, the Group's energy costs have increased by 148% versus prior year. The impact of inflationary pressures had been mitigated in the first part of the year by the application of energy surcharges but energy prices again spiked from late July and again in August. At the same time raw materials (which represent a larger proportion of overall costs) have been subject to unprecedented inflationary headwinds, rising 20% over the same period. The Group has responded to the £multi-million impact of these sudden rises with a combination of energy surcharges and price increases but the time to implement these has nevertheless resulted in margins temporarily being squeezed, especially so in Paper.

The net result has been that the Group has achieved a break even position for the first half of the year.

The second half of the year shows a recovery through aggressive pricing actions and surcharges, supported by the recently announced Government support on energy prices. Each division is projecting volume growth over the second half. Order books are full and the Company is focused on a range of enabling actions to build a solid foundation for continued future growth.

As a result of the current unprecedented macro-economic environment, management expectations for FY23 have been reduced with a year-end adjusted PBT of £2.0m against previous market expectations of adjusted PBT of £5.4m.

Investment to support growth

The embossing and varnishing capacity in the Paper division, providing additional capability to meet demand in the luxury packaging market, is now installed and commissioned. Additional coating capacity for TFP Hydrogen in the USA is now operational. The Group remains committed to decarbonisation and our plans for this have moved into the detailed design stage, with site arrangements under review to facilitate the construction of a new energy centre. We expect the design work to be completed as scheduled this financial year.

Outlook

Mark Cropper, Chairman of James Cropper, said: "The uncertainty and unprecedented inflationary pressures from rising raw material and energy costs have forced us to revise our profit expectations, despite each division showing strong demand and growth in sales. The Paper division has been hit the hardest due to being an intensive energy business, but is successfully mitigating the impact with price increases and increased energy surcharges."

"TFP has had higher revenues for the first half albeit with growth not materialising as quickly as expected. The new hydrogen coating line in the USA is now commissioned and ready to support growth in the North American hydrogen market."

"The Colourform division continues to maintain a strong pipeline of sales and the division's eye-catching and eco-friendly packaging designs have received further international accolades."

"Overall, despite the short term setback in profitability, growth prospects for the Group as a whole remain significant in the coming years."

James Cropper Group - Purpose: Pioneering Materials to Safeguard our Future and Values: Forward Thinking, Responsible and Caring.

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