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

Half Year Results to 24 September 2022

"Decisive actions taken combined with the ongoing investments…has strengthened our long term growth prospects"

* excludes the impact of IAS 19 and exceptional items (per note 8)                                                                                                                

Headlines

·      Group revenues for the half year were up on the prior year (H1 2021) by 23%, driven by new customer wins and existing client growth

·      Demand remains strong, with revenue growth across each of the three divisions

·      Adjusted PBT (excluding IAS 19 impact and exceptional items) at £nil due to energy inflation and raw material price increases

·      Exceptional cost provision of £0.5m for contingent consideration as TFP Hydrogen projections increase

·      Cost of living payments totalling £0.7m paid to support employee health and wellbeing

·      Interim Dividend declared at 2.0p per share (H1 2021: 2.5p)

·      Expectations for FY23 have been reduced with an adjusted PBT of £2.0m against previous market expectations of £5.4m, as announced on 31 October 2022

·      Capital investments in energy saving improvements to paper machines delivering 5-7% annualised reduction in site energy consumption

·      Decarbonisation project investment moving to planning application phase

·      Steve Adams appointed as Chief Executive Officer on 10 August 2022

* excludes the impact of IAS 19 and exceptional items (per note 8) 

* excludes the impact of IAS 19 and exceptional items (per note 8)

Mark Cropper, Chairman, commented: "While short term profitability has been impacted, the decisive actions taken combined with the ongoing investments across the Group has strengthened our long term growth prospects and we fully expect to return to profitability in the next six months."

"This Company is built on a strong heritage of innovation and a relentless focus on quality, which places us in a very strong position as we evolve and create a sustainable future."

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

Enquiries:

Dear Shareholders

The last six months have presented challenges, but I am pleased to report that we have responded well and Group revenues for the half year to 24 September 2022 have increased 23% on the prior year (H1 2021), with all three divisions seeing a rise in demand. The growing cost of energy (increasing 148% on the comparative period) and raw material inflationary headwinds (rising 20% on the comparative period) have resulted in sudden £multi‐million cost increases across the Company, which have negatively impacted profits. As a result, the adjusted profit before tax (excluding exceptional costs and the impact of IAS 19) is £nil for the first half of the current financial year, compared to £2.3m in the prior comparative period.

The Group responded to the impact of these sudden rises with a combination of energy surcharges and price increases but energy prices again spiked, from late July and again in August, with the surcharges unable to keep pace. In the second half of the year, the Group has implemented aggressive pricing actions and, eased by the recently announced Government support on energy prices, the surcharges will remain in place until no longer necessary. Each operating division is projecting volume growth, order books are full and the Company is focused on a range of enabling actions to build a solid foundation for continued future growth and a return to profitability.

Taking into consideration the current unprecedented macro‐economic environment and the cost mitigation actions put in place, management expectations for the FY23 have been reduced with a year‐end adjusted PBT of £2.0m against previous market expectations of adjusted PBT of £5.4m.

James Cropper Paper ("Paper")

The Paper division saw a 23% increase in revenue growth on the previous half year, with new contract wins in luxury packaging and strong customer advocacy with existing brands. As the Group's most energy intensive division, it has been hit the hardest by the current economic climate and in response the division is accelerating realignment of its customer and product portfolio, driving revenue to the more profitable core luxury packaging business. The embossing and varnishing capacity in the Paper division, which provides much needed additional capacity and capability to meet demand in the luxury packaging market, is now installed and commissioned. The swift implementation of customer price rises and increased energy and freight surcharges will mitigate the rising costs seen in the first half of the financial year.

Colourform™ ("Colourform")

Colourform continues to grow, with an 8% half year revenue increase on the comparative period. The business is 100% powered by green electricity and is continuing to disrupt the luxury Packaging sector with award winning innovative and sustainable outer packaging. The design credentials earn the highest recognition - Winners of The Dieline Awards and two D & AD awards - and as part of the strategy to deliver aesthetic beauty alongside functionality, the business is currently exploring significant improvements in design and product quality, as well as exploiting the existing synergies with the luxury packaging focus in the Paper division.

Technical Fibre Products ("TFP")

TFP continues to perform well, with record sales and revenue growth up 25% on the prior half year. TFP Hydrogen is performing ahead of expectations, with applications continuing to drive the highest growth rates. The US electrolyser coating capability is now operational, while the new non-woven coating line is already supplying Global customers.

The sector has not been immune to raw material and energy inflation, which continues to be a challenge, but this has been managed through passing price increases directly to customers. The implementation of a dual sourcing programme, which will increase supply chain resilience, is also progressing well with the majority of critical raw materials identified and tested.

ESG

The rising cost of energy has placed renewed importance on our net zero and decarbonisation programmes. I am pleased to report that energy saving investments on paper machines are already delivering between 5-7% annualised reduction in site energy consumption. The Company is also moving the decarbonisation project investment to planning application and grant funding is being sought to help accelerate implementation. We remain committed to being operationally carbon neutral by 2030.

Pension

Overall, the combined funding position on an IAS19 measure for the combined schemes has decreased over the six month period from a deficit of £13.1million to a deficit of £12.9 million. The decrease has been driven by significant increase in corporate bond yields offset by high inflation and an increase in commutation factors on the works scheme.

Earnings per share and dividend

Basic and fully diluted (loss) / earnings per share decreased to (9.2) pence, compared to 16.2 pence in the prior year comparative period.

The Board has declared an interim dividend of 2.0p per share (2021: 2.5p).

Directorship Change

The appointment of Steve Adams as CEO, as announced on 10 August 2022, creates an opportunity for a division portfolio review, to ensure we deliver on our short and long term goals as we enter a new phase of growth. As an existing Executive Director of the Company and Managing Director of the James Cropper Paper Division, Steve joined the Company in 2017 and is perfectly positioned to oversee this work, which is already underway.

Change of Auditor

The Company is pleased to announce that, following a thorough competitive tender process, it has appointed Grant Thornton UK LLP ("Grant Thornton") as auditor to the Company with immediate effect.

Grant Thornton replaces BDO LLP which has formally resigned as the Company's auditor and has confirmed to the Company that, in accordance with Section 519 of the Companies Act 2006, there are no circumstances in connection with its resignation which it considers need to be brought to the attention of the Company's members or creditors.

Grant Thornton will conduct the audit of the Company's financial statements for the 53 week period ending 1 April 2023 and a proposal to re-appoint Grant Thornton as auditors of the Company will be subject to the approval of shareholders at the next Annual General Meeting of the Company to be held in 2023.

Outlook

With the new electrolyser coating line in the US operational and the new non-woven coating line already servicing clients, TFP is poised for continued growth, as the energy crisis continues to fuel the hydrogen market expansion.

Paper sales remain strong and the outlook is positive, with the customer price increases and energy and freight surcharges mitigating the external cost environment. The embossing and varnishing capacity has been commissioned, supporting a portfolio realignment and driving revenues to the profitable core business of luxury, sustainable packaging. This focus provides a clear and natural synergy with Colourform and we are exploring how we can exploit and capitalise on those synergies, to promote continued future growth and resilience across the Group.

While short term profitability has been impacted, the decisive actions taken, combined with the ongoing investments across the Group, has strengthened our long term growth prospects and we fully expect to return to profitability in the next six months. This Company is built on a strong heritage of innovation and a relentless focus on quality, which places us in a very strong position as we evolve and create a sustainable future.

Mark Cropper

Chairman

Chief Executive's Review 

Our financial results for the period underline the strong customer demand and loyalty across each of the Company divisions, as we continue to navigate a challenging economic climate. The unprecedented inflation and energy costs have impacted overall profits in the short term, and while our long term growth and profitability remains very strong, this presents a natural opportunity to review each of the divisions and their operations. 

Within the Paper division, as well as the significant price increases implemented to counter the impact of energy and raw materials costs increases, the division is right-sizing its product portfolio around a smaller, more profitable core, with luxury packaging at its centre. The division is also looking at a more productive operating model and a re-alignment of its supply chain organisation to drive end to end customer focus.

In Colourform there is now a concentrated effort on project pipeline acceleration in target segments and continued research and development into added-value capabilities such as novel embellishment techniques being scaled up.

TFP is building the organisational capability for future growth, with a continued strong focus on commercial and operational excellence. The hydrogen market continues to be a major area of growth and therefore focus, with new customer specifications gained in both GDL customers (non-woven) and electrolyser customers (coating). As a result of the future projections for TFP Hydrogen exceeding earlier expectations, additional provisions for contingent consideration have been included.

We aim to build on our foundation of pioneering new solutions, market-leading experience and expertise, long-term sustainable focus and a history of know-how and stewardship.  

Our priorities for the mid-term are to increase our focus on new customer acquisition and drive disciplined, profitable growth. Delivering a step change in execution through investment in more capable systems and processes is key to improving response times to our customers.

The rejuvenation of our Technology & Innovation focus through our Innovation Forum is seeking to identify new growth opportunities that sit between our divisions and our pioneering efforts to decarbonise our operations are at the heart of our sustainability goals.

We are investing in our talent and leadership community to help us build modern business practices and ways of working that are efficient, flexible and responsive.

Most importantly, we will build on the strong heritage of James Cropper to position ourselves in a more meaningful way to our customers and the markets we serve.

I am pleased to have been appointed as the Chief Executive Officer at this exciting, but challenging time and remain committed to the work started by my predecessor, Phil Wild, to drive continued sustainable growth and build resilience within the Group.   

Steve Adams

Chief Executive Officer

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