A
N
N
U
A
L
R
E
P
O
R
T
A
N
D
A
C
C
O
U
N
T
S
2
0
1
7
A NN UA L RE POR T AND AC COU NTS 2 017
MANUFACTURINGLOCATIONR & DSALES OFFICEPARTNERS121113141595431876101 BURNESIDE, UK - HEAD OFFICE2 PARIS, FRANCE3 FRANKFURT, GERMANY 4 DUBAI 5 INDIA 6 SHANGHAI, PRC 7 GUANGZHOU, PRC 8 HONG KONG, PRC 9 MALAYSIA 10 AUSTRALIA 11 SOUTH AFRICA 12 BRAZIL 13 PHILADELPHIA, USA 14 SCHENECTADY, USA15 CREWE, UK 2GLOBAL LOCATIONS “
WE HAVE BUILT
ON PRIOR SUCCESSES
AND ARE BEGINNING
TO DELIVER A LEVEL
OF POTENTIAL WE
HAVE FELT POSSIBLE
FOR SO LONG.
”
1
1
2
3
4
2
5
6
7
8
1. Papermaking process
2. TFP UK laboratory
3. Eye testing colour range
4. Paper mill rollers
5. Yellow paper in production
6. Inspecting carbon fibre strands
7. Red paper pulp tests
8. Maurice Tsang, General Manager in Asia
3
1
2
3
8
5
6
7
1. The TFP team at Schenectady
2. JC3DP tooling - moulded demonstrator
3. Directors Isabelle Maddock and Steve Adams
4. James Cropper Paper - converting
5. Mill Race
6. Louise Dawson and Josh Holland
7. Anthony Abbott testing in the TFP lab
8. TFP production
4
4
5
6
1. JC3DP moulded packaging
2. Bespoke Emboss Roller
3. Steven Baines inspecting tooling
4. Yellow dye ready to blend with pulp
5. TFP machine under spotlights
6. Matthew Miller, Bruce Barnes and Jim Ellwood - JC3DP
2
3
4
6
1
5
7
“
UNDERSTANDING THE FUTURE
NEEDS OF OUR CUSTOMERS,
SHAREHOLDERS, SUPPLIERS
AND EMPLOYEES IS VITAL FOR
DELIVERING SUCCESS ACROSS
THE JAMES CROPPER GROUP.
ENSURING OUR VALUES,
PRINCIPLES AND SKILL SETS
ARE CALIBRATED TO THOSE
NEEDS IS A KEY FOUNDATIONAL
REQUIREMENT.
THE BETTER THE CALIBRATION,
THE GREATER PROBABILITY
WE HAVE OF REALISING OUR
BUSINESS ASPIRATIONS.
DAVE WATSON
CHIEF OPERATIONS OFFICER
”
OUR VALUES
TRUST, DIGNITY AND RESPECT
SUCCESSFUL CUSTOMERS
PROFITABILITY
CONTINUOUS LEARNING
MOTIVATED WORKFORCE
SAFETY AT WORK
COMMUNITY FOCUS
SUSTAINABILITY
Martin Allen completed his Apprenticeship as an Electrical Engineer, successfully
transitioning from a Blenderman. Martin was awarded Apprentice of the Year
by Training 2000, the organisation who delivered his training.
Steven Baines, whose father Ian also works in maintenance, joined after leaving
school. In 2017 he completed the third year of his Mechanical Engineering
Apprenticeship and received the Further Education Award from Training 2000.
8
9
Introduction
CONTENTS
STRATEGIC REPORT
FINANCIAL HIGHLIGHTS
FINANCIAL SUMMARY
CHAIRMAN’S LETTER
CHIEF EXECUTIVE’S REVIEW
FINANCIAL REVIEW
RISK MANAGEMENT
TFP TECHNICAL HIGHLIGHTS
GOVERNANCE
DIRECTORS’ DETAILS
CORPORATE GOVERNANCE STATEMENT
REPORT OF THE REMUNERATION COMMITTEE
DIRECTORS’ REPORT
JC3DP: PACKAGING FOR THE FUTURE
FINANCIAL STATEMENTS
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
INDEPENDENT AUDITOR’S REPORT
15
16
17
18
20
23
32
38
49
50
52
55
60
63
65
66
67
GROUP STATEMENT OF COMPREHENSIVE INCOME 68
STATEMENT OF FINANCIAL POSITION
STATEMENT OF CASH FLOWS
STATEMENT OF CHANGES IN EQUITY
NOTES TO THE FINANCIAL STATEMENTS
SHAREHOLDER INFORMATION
NOTICE OF ANNUAL GENERAL MEETING
69
70
71
73
100
101
MARK STARRS, MASTER COLOUR BLENDER
Over decades, Mark has worked directly with brands and customers to deliver
bespoke colour across a wide range of paper applications with outstanding
quality and carefully ensured consistency. The knowledge and technical ability
held in our Colour Lab is second to none. We are able to innovate with colour
in a way that pushes the boundaries of creativity and technical performance
enabling new innovation in pulp-based products.
10
11
Directors’ Insight
Directors’ Insight
DIRECTORS’ INSIGHT
10 YEARS OF INSIGHT
Isabelle Maddock – Group Finance Director
“I SEE INDIVIDUALS WHO FOCUS ON QUALITY…
WHO ARE MOTIVATED AND ABLE TO TACKLE
PROBLEMS AND DRIVE IMPROVEMENTS
BEYOND THEIR IMMEDIATE REMIT.”
You’ve been with James Cropper
PLC for 10 years. Tell us a bit
about your journey in the
business to where you are now.
its subsidiaries over the long term.
Success, for me is about creating value
for the company, its stakeholders and
wider society.
I have held a variety of professional
finance roles across a number of sectors.
I started off in manufacturing, before
gaining experience of other sectors:
software, retail, facilities management,
and publishing. I was looking to return
and build my career in manufacturing
when I joined James Cropper.
James Cropper stood out as an
established manufacturer with
an innovative outlook. I applied
speculatively and found an opportunity
that fitted, (Financial Controller in 2006)
where I could expand my own skill set
while focusing on business growth.
I love manufacturing - it is interesting
and rewarding. It is all about
transforming raw materials into real
tangible parts and products that
satisfy a need. I love the broad scope
of activities that span a manufacturing
environment - from research, design
and innovation to supply and
procurement, machining, processing
and adding value to manufacturing
to packing and distribution, customer
service, and providing solutions that
satisfy our customers.
I joined the Group Board in 2014.
As Finance Director I am directly
responsible for Finance, Company
Secretarial and Information Systems.
I am responsible for promoting the
overall success of the Group and each of
My role has changed significantly
since I started as Financial Controller.
I guide teams, set direction, facilitate
projects, carry out safety audits,
provide technical expertise, drive
development initiatives, collaborate
on change management, find solutions,
manage risks, plan funding, break
down roadblocks, implement coaching
and development plans and prepare
for the mid to long term needs of the
Group. I and my teams engage
extensively across the businesses
and with external organisations and
stakeholders to provide clear direction
as to who we are and how we operate,
with an eye to the future.
After 10 years, what excites you
now – what makes James
Cropper PLC unique?
The emphasis at James Cropper is
on being ahead of the curve – and that’s
exciting for everyone in the business.
We provide solutions in materials
science and fibre technology that
keep us at the cutting edge – making
superior products, and offering
superior service.
This shows in the culture of our people.
I see individuals who are able to focus
on quality – of an interaction, a service
or a manufactured product - and who
are motivated and able to tackle
problems and drive improvements
beyond their immediate remit.
Value is created through our people.
Cultural evolutions in our group have
shown that we continually recognise
the importance of individual and team
development and the communication
of strategy. This is a continuous
collaborative process and relies on
having a shared vision of how we work
together all along the supply chain. It is
important that everyone understands
their ability to add value – and when
they do the results are exciting.
What are you most proud
of in recent years?
We recently set out to increase
employee share ownership by
enhancing our share-based profit-
sharing system. We are able to provide
shares as a profit reward. Increasing
employee ownership aligns employee
interests with those of the company.
We all share in what we make and
the success which that brings.
I am proud that we created
the Technology and Innovation
Directorate in 2014. We take a strong
long term view, and remain confident
that this investment, through all it
will deliver, is worthwhile and in
the Company’s interest.
Within my own areas I see Finance
and Information Systems engaging
more and more as business partners
across the Group. These positive
interactions and contributions drive
awareness, interesting collaborations
and outstanding performance, creating
a better and exciting business for
the future.
A FRESH PERSPECTIVE
Steve Adams – Recently appointed Managing Director of James Cropper Paper
“I SEE THE ABILITY TO BE AT THE FOREFRONT
OF MODERN PAPERMAKING.”
You’ve recently been appointed
to lead James Cropper Paper.
What drew you to be part of
this business?
Having spent thirty years working in a
very corporate environment, what I saw
at James Cropper was the opportunity
to join a vibrant and energetic business
with huge potential for profitable
growth – also one where I could be
instrumental in directly charting a
course to unlock that potential.
We have set out an aggressive growth
plan that will require process
discipline, innovation and execution,
whilst retaining the strong values and
culture that exist within the paper
business – the former being an area
where I believe I can make a difference
and the latter being a key part of the
reason I wanted to join James Cropper.
To be located in one of the most
beautiful parts of the country is an
added bonus.
What do you see as the most
exciting opportunities in Paper
right now?
We have some amazing capabilities across
our papermaking and converting facilities
- from tailor made, bespoke quantities
of deep coloured paper, to textures,
appearances and finishes. We also have a
unique recycled fibre capability.
vigour to our new product introduction
process, we are at the forefront of modern
papermaking.
We are represented around the world
by a growing team of James Cropper
employees and partners, and our
ever-strengthened marketing engine
is spreading awareness of our high
quality solutions far and wide. I am
genuinely excited by the potential for
this business in our key markets, such
as luxury packaging and digital print.
As you’ve discovered the people,
and skills at the heart of this
business – what stands out to you?
What makes our workforce unique?
As a business that has the founder’s
name in the title and with Mark
Cropper, a sixth generation family
member as Chairman, it is hard to escape
the familial nature of the company.
But that carries over into the business
too, with whole families and generations
of family working in the Mill. I believe
this brings a special culture to the place.
It represents longevity, stability and
pride. And it has to mean this is a good
place to work.
There is also a huge amount of
experience and skill amongst the people
that I meet across the organisation,
mixed with pride and enthusiasm for
the company and its products.
By harnessing our deep experience
and creativity from over 170 years of
papermaking, channelling the unique
innovation culture that exists across the
Group’s businesses, and bringing renewed
The key to our future success is to
harness this spirit (to bottle it, if
we could!) and translate it into the
experience our customers get when
they invest in the James Cropper brand.
Burneside Mills has been James
Cropper’s home for over 170
years. What impact has our local
area and community had on you
in the time you’ve been here?
In experiencing this local area, I have
been most struck by two significant
factors. Firstly, a huge respect and care
for the environment and countryside.
Secondly, an intensely social and kind
culture – a powerful sense of community.
I don’t know if the latter is borne out
of the rural nature of this area and the
importance of making the most of time
together, but it is certainly notable.
These elements spill over to the mood I
feel within James Cropper. All employees
hold a genuine respect for each other, and
a long history of respect and care for the
Mill’s local environment.
These are just a couple of the stand
out features that make this an enviable
place to work.
Your vision and aims for
the coming years?
I want James Cropper Paper to become
renowned by customers the world
over as a leading manufacturer of
iconic, luxurious and high quality
bespoke paper. A manufacturer that
is recognised for the innovation, pride
and care that we invest in our products.
I see my role as creating a paper
business that has the leadership,
capability and confidence to be the
best in the world at what it does.
12
13
BESPOKE, LUXURY, MARKET DRIVEN
STRATEGIC REPORT
Strategic Report
DOLCELICIOUS ELEVATES THE FOOD PACKAGING EXPERIENCE
STRATEGIC REPORT
FINANCIAL HIGHLIGHTS
FINANCIAL SUMMARY
CHAIRMAN’S LETTER
CHIEF EXECUTIVE’S REVIEW
FINANCIAL REVIEW
RISK MANAGEMENT
TFP TECHNICAL HIGHLIGHTS
15
16
17
18
20
23
32
38
“
LUXURY FOOD IS
A MULTISENSORY
EXPERIENCE AND
PACKAGING IS KEY. OUR
DOLCELICIOUS RANGE
PUTS FOOD CONTACT
PAPER AT THE
HEART OF THAT
EXPERIENCE.
”
We launched Dolcelicious – an
innovative range of coloured papers
designed to meet increasing demand for
luxury packaging paper that’s ready-
certified for food contact use.
Dolcelicious has secured exclusive
distribution in major markets this
year – targeting valuable customers
in luxury food sectors including
premium confectionery, artisan
bakery, tea and coffee.
Customers are responding with
excitement to this new food packaging
opportunity - which draws on our
unique expertise in bespoke colour,
texture and technical performance.
Dolcelicious enables brands to use
certified, high performance food
contact paper in bold and creative
ways - enhancing brand uniqueness
and complementing the very highest
quality products.
14
15
Strategic Report - Financial Highlights
Strategic Report - Financial Summary
FINANCIAL HIGHLIGHTS
FINANCIAL SUMMARY
REVENUE BY REGION
SUMMARY OF RESULTS
UK
Europe
Americas
Asia
Other
10%
20%
30%
40%
50% 60%
2017
£’000
2016
£’000
2015
£’000
2014
£’000
2013
£’000
Revenue
92,363
87,920
83,052
84,518
79,241
Adjusted operating profit
(excluding IAS 19 impact & exceptionals)
6,869
6,264
3,899
2,545
2,535
Adjusted profit before tax
(excluding IAS 19 impact)
Impact of IAS 19
Profit before tax
Earnings per share - diluted
6,566
(926 )
5,640
50.0p
5,173
(1,305 )
3,868
31.8p
3,494
(919 )
2,575
20.1p
2,088
(775 )
1,313
15.0p
2,052
(806 )
1,246
10.0p
5.6
BALANCE SHEET SUMMARY
TOTAL REVENUE
£92.4m
92.4
87.9
83.1
84.5
79.2
ADJUSTED PROFIT BEFORE TAX
(excluding IAS 19 Pension adjustments)
£6.6m
6.6
5.2
50.0
3.5
2.1
2.1
DILUTED EPS
50.0p
31.8
20.1
15.0
10.0
NET DEBT (ii)
£7.4m
7.4
7.3
6.1
10.3
9.3
2017
2016
2015
2014
2013
2017
2016
2015
2014
2013
2017
2016
2015
2014
2013
2017
2016
2015
2014
2013
2017
2016
2015
2014
2013
2017
2016
2015
2014
2013
2017
2016
2015
2014
2013
2017
2016
2015
2014
2013
PROFIT BEFORE TAX
£5.6m
3.9
2.6
1.3
1.2
GEARING (i)
(excluding IAS 19 pension adjustment)
20%
20
20
22
35
33
CAPITAL EXPENDITURE
£5.3m
5.3
2.6
3.0
4.1
4.1
2017
£’000
2016
£’000
2015
£’000
2014
£’000
2013
£’000
Non-pension assets – excluding cash
63,374
57,470
50,810
51,093
48,426
Non-pension liabilities – excluding borrowings
(18,503 )
(17,019 )
(14,289 )
(11,230 )
(10,831 )
Net IAS 19 pension deficit (after deferred tax)
(15,620 )
(6,453 )
(11,554 )
44,871
40,451
36,521
29,251
33,998
24,967
39,863
(9,312 )
30,551
Net borrowings
(7,364 )
(7,305 )
(6,105 )
(10,277 )
Equity shareholders’ funds
21,887
26,693
18,862
20,274
Gearing % - before IAS 19 deficit
Gearing % - after IAS 19 deficit
Capital expenditure £’000
20%
34%
5,315
22%
27%
4,086
20%
32%
2,619
35%
51%
2,958
37,595
(7,972 )
29,623
(9,286 )
20,337
33%
46%
4,072
Non GAAP Measures:
(i) The IAS 19 pension adjustments are explained in detail in the Financial Review section, pages 23 - 31. The total amount
excluded from the IAS pension charged is £926,000 (2016: £1,305,000). The adjustment, which we refer to in these accounts
as “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.
(ii) We also exclude exceptional items from certain internal profit measures and in setting management incentive scheme targets.
These items, which by there nature are material items which are not expected to recur, are excluded in order to provide a
clearer picture of the underlying performance of the Group.
Non GAAP Measures:
(i) Gearing is calculated as the proportion of net debt to Total Shareholders’ Equity, excluding the IAS19 Pension deficit.
(ii) Net debt, and net borrowings, are calculated as total loans and borrowings less cash and cash equivalents.
16
17
Strategic Report - Chairman’s Letter
Strategic Report - Chairman’s Letter
CHAIRMAN’S LETTER
power generation as well as – in time – the automotive
sector. Meanwhile, the F35 Joint Strike Fighter programme
continues to grow in line with expectations, as does the
composites transport market.
Paper made good progress in the year in margin growth
and with some revenue improvements. As previously, this
has been underpinned by focusing on core markets such
as packaging and digital imaging as well as ensuring
we maintain excellent relationships with key accounts.
Another important development in Paper during the year
was the appointment of Steve Adams as Managing Director
of this £70m+ division. Steve joined the Group and Board
from 3M where he notched up over 30 years of highly
relevant commercial and general management experience.
The Board felt it was important to provide Paper with its
own dedicated leader, the role having been undertaken
by the CEO for many years. This change allows Phil Wild
to give greater support across the Group on business
growth strategies.
Our businesses have also benefitted significantly in the year
from operational improvements spearheaded by COO Dave
Watson and team. There are many positive performance
indicators of progress in operations, ranging from improved
delivery metrics to lower process losses, all of which have
contributed to this year’s good performance.
Safety statistics, the most important measure of all, also
continue on a positive trend. While we remain determined
to reduce our lost time accident levels to zero, it was
encouraging to see them halve to four in the financial year
and the severity rating fall by 90%. In line with this, we
were recently awarded the RoSPA gold award for safety
performance for the third year running.
Last and not least, our new business unit James Cropper
3D Products (3DP) had an eventful year. There was
significant investment in production equipment, now fully
commissioned, and the business is seeing strong interest
in its unique range of coloured moulded pulp, designed to
replace plastics in a range of industries. It is envisaged the
business will be cash generative this year with strong growth
potential for many years thereafter.
Another key event in the year, albeit outside the Group,
was Brexit. The vote was not the result the Company
was seeking but it has not led to any changes in our
investment programmes or other strategies. To date the
prime impact has been weaker £ Sterling which has led to
modest currency gains for the Group owing to more than
50 percent of our turnover being exported. Nevertheless,
the Board is monitoring the potential risks very carefully.
Brexit has been an agenda item reviewed at every Board
meeting since the vote and scenario planning is underway.
One crucial factor could be the government’s Industrial
Strategy. We have responded to consultations on this
directly and via membership organisations such as the CBI
and Confederation of Paper Industries and await further
developments with some anticipation.
The year saw another notable exit with the retirement of
Non-Executive Director Doug Mitchell, who stepped down
at the end of the financial year. Doug has played a critical
role in the turnaround of the Group’s fortune in the last five
years. I would like to extend him our profound thanks for
his careful counsel and the transformation this has catalysed.
Basic earnings per share has increased by 54% to 50.5p per
share with diluted earnings per share increasing by 57% to
50.0p per share.
The Board is recommending a final dividend of 9.3 pence per
share, making a total dividend for the financial period of 11.8
pence per share, an increase of 27% on the prior period.
DIVIDEND PER SHARE 2017
2017
2016
2015
2014
2013
11.8p
9.3p
8.5p
7.9p
7.9p
OUTLOOK
I feel this year has represented something of a watershed
for the Group. We have built on prior successes and are
beginning to deliver a level of potential we have felt possible
for so long. An important element of this has been lifting
margins (and related measures such as cashflow or EBITDA)
to a level that is stronger and more reliable, albeit still with
room for improvement. I am also hopeful our vision and
values are underpinning a business that is sustainable in every
sense of the word: not only as represented in our products
and materials, but also in terms of our people at all levels.
A recent upshot of this is that the Board now feels more able
to turn its attention to the longer term, looking at strategies
to ensure growth beyond the customary three years. It is
too early to say much more, but owing to our determination
to remain independent, organic growth centred on an
outstanding culture of innovation is likely to feature strongly.
Mark Cropper
Chairman
26 June 2017
Dear Shareholders,
I am very pleased to report that 2016/17 has seen another year
of sustained growth in line with our aspirations for the Group.
This is a direct result of our strategic plans introduced in
recent years executed with the utmost care and attention
under the leadership of CEO Phil Wild and his team.
The progress of the Group is also testament to the
contribution provided by each and every one of our
employees. The value in the business, as noted previously
and within this report, truly comes from its people and
I wish to thank them all. Accordingly, I was delighted
that there was strong support for a revised (and uplifted)
profit related bonus scheme for employees. This took
effect from 1 April 2017 and will see our employee
share ownership grow in the coming years.
Turning to our divisions in turn, TFP, led by Martin
Thompson, demonstrated continued growth in revenue.
However, owing to extra costs – predominantly associated
with investment in additional capacity for growth in future
years – profits were only marginally ahead of the prior
year. TFP’s market position continues to look strong. It has
seen an upsurge in fuel cell activity, where it enjoys a good
position, and this should be sustained within stationary
18
19
Strategic Report - Chief Executive’s Review
Strategic Report - Chief Executive’s Review
CHIEF EXECUTIVE’S REVIEW
KEY PERFOMANCE INDICATORS
BUSINESS MODEL
REVENUE
(2016: £87.9m)
£92.4m +5%
ADJUSTED OPERATING PROFIT
(excluding IAS 19 impact & exceptional items)
(2016: £6.3m)
£6.9m +10%
ADJUSTED PROFIT BEFORE TAX
(after exceptional items but before IAS19 impact)
(2016: £5.2m)
£6.6m +27%
PROFIT BEFORE TAX
(2016: £3.9m)
NET BORROWINGS
(2016: £7.3m)
£5.6m +46%
£7.4m +1%
DILUTED EARNINGS PER SHARE
(2016: 31.8p)
50.0p +57%
FULL YEAR DIVIDEND PER SHARE 11.8p +27%
(2016: 9.3p)
BUILDING TODAY’S BUSINESS TO CREATE TOMORROW’S
Our five strategic platforms remain steadfast and prominent as we continue to progress our growth strategy across
the James Cropper Group. Most importantly, it is clear that our strategy is delivering: Following a record profit year last
year, this year we again report record profits for James Cropper PLC. As we move forward our expectation is that we will
build on this success.
• Building a high performance culture
• Growing in new profitable markets
• Delivering superior levels of operational excellence
• Building customer intimacy and brand presence
• Growing in existing markets
WORKING WITH CLEAR FOCUS
This has been a year of refining our focus in terms of our core business, our core capabilities and our unique potential for
diversification. James Cropper PLC holds three core pillars of capability, and we have worked hard to understand and define
these throughout our businesses. The purpose of this is to steer and fine-tune our investments and developments –
maximising the impact of everything we do.
PROFIT
I am pleased to report a 10% growth
in adjusted operating profit, prior to the
impact of IAS 19 pension adjustments
and exceptional costs, a profit of £6.9m
in the year to 1 April 2017, compared
to £6.3m in the prior year.
Adjusted profit before tax
(after exceptionals and prior to IAS
19) was £6.6m, up £1.4m on 2016,
representing an increase of 27%.
Profit before tax of £5.6m, up £1.7m,
or 46% on the prior year.
REVENUE AND
OPERATING PROFIT
Group revenue for the financial year
was £92.4m, up 5% on the prior year.
Revenue for James Cropper Paper
grew by 3% in the year to £71.0m and
operating profit by 24% to £3.2m.
Revenue for Technical Fibre Products
grew by 14% in the year to £21.3m
and operating profit up 1% at £5.9m
RESEARCH AND
DEVELOPMENT
Research and development is a
fundamental part of our growth
strategy, adding to our capability,
maintaining our competitiveness and
bringing new product lines into our
target markets. The Group continues
to invest in research and development
with expenditure in R & D of £1.4m
this year, of which £0.5m has been
capitalised in respect of 3DP.
CAPITAL EXPENDITURE
Capital expenditure during the year
was £5.3m (2016:£4.1m).
CASH AND DEBT
The Group had gross debt of £9.3m
at the balance sheet date and cash
of £1.9m, giving a net debt of £7.4m
(2016: £7.3m). The Group had undrawn
overdraft and revolving credit facilities
of £7.8m, as at 1 April 2017, and
borrowings of £1.6m to be repaid
within 12 months.
The undrawn facilities and the cash
provide funds against which the short
term borrowings can be paid, leaving
£8.1m of funds available to the Group
at the year end.
Gearing at the financial year end, after
deduction of the IAS 19 pension deficit,
was 34% up from 27% on the previous
year. Gearing, excluding the impact
of IAS19, was 20% down from 22%
on the previous year.
APPROVAL OF
STRATEGIC REPORT
In accordance with Section 414
(D) of the Companies Act 2006
(Strategic Report and Directors’
Report) Regulations 2013, the
Company has prepared a Strategic
Report. The Strategic Report in its
entirety has been approved by the
Board of Directors.
EXPERTS IN FIBRE INNOVATION
EXPERTS IN COLOUR
Our in-depth understanding of ‘fibre
science’ enables us to push the
boundaries of performance and
creativity across wide-ranging sectors.
For example, TFP have developed a
range of products that improve
fracture-toughness by 400% for
composite materials.
We lead the paper and fibre industry in
colour choice, quality, consistency and
technical performance. For example,
James Cropper 3D Products provides
the widest range of coloured, moulded
fibre products available in the global
market today.
STRENGTH THROUGH
SUSTAINABILITY
Sustainable manufacturing and supply
chain, sustainable products, sustainable
success. For example, we upcycle 0.5
billion consumable coffee cups a year
to create high quality, beautiful
packaging papers.
WORKING WITH LONG TERM VISION
Clear focus has driven new investment
in technical capabilities and leadership
skills – in order to strengthen our
core business. This can be observed
with our apprenticeship schemes,
partnerships with leading universities
for technical and leadership best
practice and our internal leadership
programmes.
By leveraging the capabilities of our
employees we have been able to spread
experience and skills throughout the
group in a way that creates new
opportunity for innovation and
diversification. An example of this is
the creation of light weight damage
resistant aerospace fuel pipes with the
potential to save 26 tonnes of fuel for
each aircraft per year.
We look to embrace technically
challenging innovations, where we
have a unique ability to create new
value and enter new markets with
confidence. This synergy of our core
capabilities and new diversifications
gives us the competitive edge that
will continue to shape our future.
20
21
22Strategic Report - Chief Executives ReviewSHAPING THE FUTURE James Cropper 3D Products combines the highest levels of expertise in pulp-based manufacture and colour blending. We are unique in our ability to bring together these levels of expertise within our business – creating something that’s simply not possible to achieve in the same way elsewhere. This is how we have addressed a major challenge in the packaging industry, and are meeting global demand for a new generation of renewable, recyclable, moulded fibre packaging that enables brands to reduce their environmental impact without creative compromise. CARBON FOOTPRINT (Climate Change)kg CO2 eqJames Cropper 3D Products Moulded Paper PackagingSource: Independent Thinkstep completed in 20179067.54522.50LESS THAN HALFTHE IMPACTEquivalent PET (plastic) product KNOWING WHO WE ARE It is striking how everything we do today resonates so clearly with the values that have driven James Cropper PLC for over 170 years. This respect for our heritage is important. James Cropper has always been a forward-thinking business with a commitment to people, skills and innovation. As the world changes we continue to thrive on our strengths while also finding new relevance for our expertise. A business with such long heritage brings a deep social responsibility, one that we are proud to embrace both locally, and globally. We value people and we go above and beyond to ensure fair and ethical employment in all our territories. We value natural resources not only in our local environment, but globally as we remain committed to ethical sourcing of raw materials and innovation with recycled fibres. We value our communities providing support for local education, infrastructure and local charities.Going above and beyond has always been the James Cropper way and always will be.STRENGTHENING CORE BUSINESSJAMES CROPPER 3D PRODUCTSJames Cropper 3D Products demonstrates synergy between our core strengths and the focus of our diversifications – as we respond to global demand for sustainable innovation in product packaging, delivering a product with less than 50% carbon footprint of its plastic alternative. COLOUR - Creative freedom in sustainable packaging FIBRE - Progress in technical performance SUSTAINABILITY - Renewable, recyclable and biodegradable 23FINANCIAL REVIEWPROFIT SUMMARYAdjusted Profit before tax, prior to the impact of IAS 19, has seen growth with a 27% increase on prior year to £6,566,000 (2016: £5,173,000). The application of IAS 19 “Employee Benefits” and the impact on profits is explained in chart 3 and in the pension section of this report. After IAS 19 the Group’s Statement of Comprehensive Income reports a Profit before tax of £5,640,000 which is 46% up on prior year (2016: £3,868,000).TABLE 1 - PROFIT SUMMARY 2017 2016 CHANGE CHANGE £’000 £’000 £’000 %Paper Products 3,209 2,592 617 24% Technical Fibre Products 5,940 5,904 36 1%3D Products (3DP) (426 ) (438 ) 12 -3%Other Group expenses (1,854 ) (1,794 ) (60 ) -3%Adjusted Operating Profit prior to IAS 19 and exceptionals 6,869 6,264 605 10%Net interest prior to IAS 19 finance costs (283 ) (326 ) 43 -13%Adjusted Profit before tax prior to IAS 19 and exceptionals 6,586 5,938 648 11%Exceptional items (20 ) (765) 745 -99%Adjusted Profit before tax prior to IAS 19 6,566 5,173 1,393 27%Net IAS 19 pension adjustments Net current service charge required (661 ) (839 ) 178 -21%Net interest (265 ) (466 ) 201 -43%Net IAS 19 pension adjustment before tax (926 ) (1,305 ) 379 -29%Profit before tax 5,640 3,868 1,772 46%The Group operates 3 separate divisions; Paper, Technical Fibre Products (TFP) and James Cropper 3D Products (3DP), a start-up business established in 2016.The Paper division is a custom speciality papermaker and converter manufacturing exclusively in Great Britain. We are renowned globally for expertise in the low volume tailor made manufacture of high quality, uncoated, coloured papers. Success this year has come from a focus on key market sectors including digital imaging and the packaging sector where our papers provide unique aesthetics and functionality which adds value to our customers’ products and brands. Paper has operating profits of £3,209,000 (2016: £2,592,000), up 24% on prior year. Technical Fibre Products (TFP) develops and manufactures high performance non-woven materials at manufacturing locations in Great Britain and the USA. TFP tailors its production to meet specific performance requirements and its non-wovens find applications in a variety of sectors such as advanced composites (including aerospace & automotive), fire protection, thermal insulation, and power storage. In the prior year TFP commissioned a new production line at the Burneside facility in the UK which doubled UK production capacity in non-woven materials and also invested in nano-particle plating technology and a metal coated fibre line in the USA. During the year TFP increased resource to support these lines and undertook successful product validation in the UK ensuring materials can be manufactured to the equivalent specification, standards, quality andStrategic Report - Financial ReviewPhil WildChief Executive Officer26 June 2017FOCUSING ON CORE CAPABILITIES SYNERGY IN DIVERSIFICATION Strategic Report - Financial Review
Strategic Report - Financial Review
assurance on the newly installed line. By the end of the year sales from the new UK production line contributed 9% of total
revenues. Notwithstanding additional labour, energy, materials and depreciation costs in the year, TFP has grown sales and
is marginally up on prior year with operating profits of £5,940,000 (2016: £5,904,000).
3D Products (3DP) is a new business that diversifies the James Cropper Group whilst leveraging its existing technical strengths.
3DP operates as a separate business unit to the other businesses and produces moulded fibre (paper) packaging parts in a wide
range of colours, providing a genuinely sustainable alternative to plastic packaging delivering high quality products in vibrant
colours which are fully recyclable, compostable and biodegradable. The scale-up phase in the year to 1 April 2017 saw the
implementation and commissioning of thermoforming production lines, product development, prototyping capability and
production tooling solutions. By the end of the year 3DP’s presence and reputation has grown, receiving uncanvassed interest.
Whilst 3DP traded in the year the majority of activity has been in customer led projects developing products, many of which
are close to commercialisation. After the capitalisation of £458,000 of development costs under IAS 38 “Intangible Assets”,
3DP made a loss in the year of £426,000.
Net costs of £765,000 were recognised separately as exceptional costs in the prior year; in 2017 the comparative amount is only £20,000.
The IAS 19 “Employee Benefits” standards have been applied to employee benefit costs and to interest charges and are further
explained in the pensions section of this report. The IAS 19 impact for the year end 1 April 2017 is £926,000 (2016: £1,305,000).
REVENUES
TABLE 2 - REVENUE SUMMARY
Paper Products
Technical Fibre Products
3D Products
Revenue
2017
£’000
71,024
21,332
7
2016
£’000
CHANGE
£’000
CHANGE
%
69,182
18,738
-
1,842
2,594
-
92,363
87,920
4,443
3%
14%
-
5%
Group revenues have increased to £92,363,000 (in a 52 week year) from £87,920,000 in 2016 (a 53 week year), this is a 5%
increase. The weakness of sterling during the year has driven some of the revenue growth in Europe and the US, and markets
have experienced a small decline in the UK. 54% of Group revenues come from export sales (2016: 51%).
Paper’s revenue growth of 3% has been achieved in European markets with marginal growth experienced in the American and
Asia markets. TFP’s exceptional revenue growth of 14% has been achieved across all export markets with American markets
contributing over 60% of all sales in the year (2016: 58%).
EXPENSES
Table 4 captures key expenses down to operating profit, excluding exceptional costs.
TABLE 4 - EXPENSES
Raw materials and consumables used
Energy costs
Employee benefit costs (Table 12)
Depreciation and amortisation
Other expenses
Other income and changes in inventory
Total Expenses
2017
£’000
2016
£’000
CHANGE
£’000
CHANGE
%
(34,793 )
(35,795 )
(4,501 )
(4,519 )
(26,238 )
(25,155 )
(2,297 )
(2,306 )
(18,468 )
(16,996 )
142
3,276
(86,155 )
(81,495 )
1,002
18
(1,083 )
9
(1,472 )
(3,134 )
(4,660 )
-2.8%
-0.4%
4.3%
-0.4%
8.7%
-95.7%
5.7%
Table 4 shows expenses to be 5.7% up on prior year, however the prior year recognises a £1,000,000 grant within other income.
Excluding the prior year grant receipt, costs are up £3,660,000 and 4.5%.
Raw materials and consumables, have been impacted in sterling terms due to the weakness of the pound. Pulp is a major
commodity for the Paper business and prices in currency were subdued during the year. Other materials and consumables
including chemicals, dyes and metals were used in line with production volumes. Gas prices are affected by global supply
and demand and price can be subject to significant fluctuations, however the Group mitigated its exposure to energy costs by
securing a purchase forward price contract that provided the Group with a degree of certainty during the year and energy costs
overall remained on a par with prior year.
Employee benefit costs rose by 4.3% over the year. During the year the average number of full time equivalent employees
increased by 6 to 524. Additional employment costs also arose as a consequence of government reforms where in April 2016 the
‘contracting out status” was removed and employers, who previously paid a lower national insurance rate, now pay an additional
3.4% in national insurance contributions on defined benefit pension scheme members. A further employment cost for future
years is the apprenticeship levy which the Group expects to add a further £100,000 a year. Employment costs of £26,238,000
incorporate a charge under IAS 19 “employee benefits” and these are further explained in the pension narrative of this report and
can be seen in table 12.
Other expenses covers a range of activities including, but not exclusively freight and distribution charges, development and
training programs, marketing activities, general repairs and maintenance and site running costs. In the prior year a program of
expenditure on replacement and repair activities at the Burneside site was deferred to be picked up in 2017. In 2017 this program
was followed through and major repair projects are up £1,100,000 on prior year.
CURRENCY
TABLE 3 - CURRENCY
Opening rate 2 April 2016 v. £
Closing rate 1 April 2017 v. £
Exchange rate movement
Strengthen / (Weaken) v. £
US$
1.4132
1.2465
11.80%
€
1.2417
1.1686
5.89%
EBITDA
The Group monitors EBITDA where EBITDA is operating profit before interest, tax, depreciation and amortisation and prior
to the impact of IAS 19 “employee benefits” on profits and any exceptional items. It provides an indication of cash generated
from the Group’s operations.
Table 3 compares the opening and closing exchange rates for the financial year. On 23 June 2016 the British people voted to
leave the European Union and the value of the pound dropped steeply against the Euro and the Dollar. Whilst over half of the
Group’s sales are exports, Euros are used to purchase Euro priced pulp and other Euro priced raw materials and Dollar receipts
are used to fund the purchase of Dollar priced pulp. Potential exposure to foreign currency surpluses or deficits are dealt with via
foreign currency trades during the year using forward selling or forward purchasing contracts. No forward contracts are in place
at the year end.
TABLE 5 - EBITDA
Adjusted Operating Profit before IAS 19 impact
and exceptionals
Depreciation and amortisation
2017
£’000
2016
£’000
CHANGE
£’000
CHANGE
%
6,869
6,264
2,297
2,306
605
(9 )
596
10%
0%
7%
EBITDA prior to IAS 19 and exceptionals
9,166
8,570
The Group achieved a 7% increase in EBITDA, £9,166,000 compared to £8,570,000 in the prior year comparative - both Paper and TFP
continue to be strongly cash generative.
24
25
Strategic Report - Financial Review
Strategic Report - Financial Review
THE IMPACT OF IAS 19 ON OPERATING PROFIT AND PROFIT BEFORE TAX
The Group’s profit before tax is based on the adjustments required to incorporate IAS 19, these adjustments are within operating costs
and finance costs as described in detail in the pensions section of this report. The IAS 19 impact for the year ended 1 April 2017 is £926,000
(2016: £1,305,000).
TAX
The Group’s total tax charge for the year is £910,000 (2016: £874,000), a tax rate of 16% on profit before tax. The effective rate is lower than
the standard rate of corporation tax in the UK (20%) mainly as a result of non-taxable income, rate changes and the treatment of deferred
tax assets at the rate of 17%, the rate substantially enacted at the balance sheet date.
BALANCE SHEET
TABLE 6 - BALANCE SHEET
Non-pension assets - excluding cash
Non-pension liabilities - excluding borrowings
Net IAS 19 pension deficit (after deferred tax)
Net borrowings
Equity shareholders’ funds
Gearing % - before IAS 19 deficit
Gearing % - after IAS 19 deficit
Capital Expenditure £’000
2017
£’000
2016
£’000
63,374
57,470
(18,503 )
(17,019 )
44,871
(15,620 )
29,251
(7,364 )
21,887
20%
34%
5,315
40,451
(6,453 )
33,998
(7,305 )
26,693
22%
27%
4,086
Table 6 shows a decrease in shareholders’ funds after taking into account the net IAS 19 pension deficit of £15,620,000 (2016:
£6,453,000). Non-pension assets have increased from £57,470,000 to £63,374,000 driven from the value of trade receivables
echoing trade levels at the end of the year and capital investments in the year totalling £5,315,000. Capital investments have
been made in all 3 divisions, and on flood mitigation and protection projects, however the largest investments this year were
in 3D Products on the thermoforming machines. Non-pension liabilities have increased by £1,484,000 due to trade payables.
With an EBITDA of £9,166,000 (2016: £8,570,000) the Group’s leverage ratio (Net debt/EBITDA) remains strong at 0.8,
(2016 leverage ratio of 0.9).
TABLE 7 - NET PENSION DEFICIT
Retirement benefit liabilities
Deferred tax asset
Net Pension Deficit
2017
£’000
2016
£’000
CHANGE
£’000
(18,820 )
(7,870 )
(10,950 )
3,200
(15,620 )
1,417
(6,453 )
1,783
(9,167 )
Table 7 shows the overall IAS 19 pension deficit which increased by £10,950,000 to £18,820,000 at the year end. After offsetting a
deferred tax asset of £3,200,000 the IAS 19 pension deficit, net of deferred tax decreased by £9,167,000 over the year to £15,620,000.
A greater analysis of IAS 19 on pensions is provided within the pensions section of this report.
PROFIT SUMMARY
TABLE 8 - FUNDING
Cash and cash equivalents
Borrowings: repayable within one year
Borrowings: non-current
Borrowings: repayable within one year
Borrowings: non-current
Facilities drawn down
Undrawn facilities
Cash and cash equivalents
Undrawn facilities
Net debt
Facilities
Funds available at year end
Borrowings: repayable within one year
Funds available in excess of one year
2017
£’000
1,921
(1,570 )
(7,715 )
(7,364 )
1,570
7,715
9,285
7,751
17,036
1,921
7,751
9,672
(1,570 )
8,102
2016
£’000
CHANGE
£’000
3,186
(3,886 )
(6,605 )
(7,305 )
3,886
6,605
10,491
5,013
15,504
3,186
5,013
8,199
(3,886 )
4,313
(1,265 )
2,316
(1,110 )
(59 )
(2,316 )
1,110
(1,206 )
2,738
1,532
(1,265 )
2,738
1,473
2,316
3,789
Table 8 provides an overview of the Group’s funding position where we can see that net debt has remained on a par with
prior year. The Group secured a second revolving credit facility in the year. Revolving credit facilities provide the Group with
optional draw down at short notice, repayment flexibility, reduced margins and facilities on an unsecured basis. Total revolving
credit facilities, from two supporting banks, amount to £10,500,000, of which £6,407,000 is drawn down at year end. Long term
borrowings (falling due after more than a year) increased by £1,110,000 to £7,715,000 whilst cash and cash equivalents moved
down from £3,186,000 to £1,921,000 in the year. The undrawn facilities comprises the unused overdraft facilities of £3,658,000
plus the unused total revolving credit facilities of £4,093,000.
TABLE 9 - CASH
EBITDA (excluding IAS 19 impact and exceptionals)
Pension deficit payments
Increase in working capital
Other
Net cash generated from operations
Capital expenditure
Dividends
(Decrease) / increase in loans
Other
Increase / (decrease) in cash
Opening cash
Closing cash
2017
£’000
2016
£’000
9,166
(1,362 )
(76 )
(1,012 )
6,716
(5,315 )
(881 )
(1,665 )
(120 )
(1,265 )
3,186
1,921
8,570
(1,323 )
(2,112 )
(1,417 )
3,718
(4,086 )
(772 )
1,506
99
465
2,721
3,186
Table 9 shows the key inflows and outflows of cash in the year and the impact on cash and cash equivalents. In the year the Group’s
net cash outflow was £1,265,000 (2016: inflow £465,000). Cash and cash equivalents moved down from £3,186,000 to £1,921,000 in
the year. EBITDA has increased from £8,570,000 to £9,166,000. The Group aims to control working capital whilst growing revenues
and during the year working capital investment increased by £76,000 whilst revenues increased by £4,443,000. Past service deficit
payments of £1,362,000 continue to be made in accordance with the agreed schedule of contributions. Capital expenditure in the year
was £5,315,000 (2016: £4,086,000). Available cash reserves have been used to repay short term debt. The closing cash position for the
Group is £1,921,000 (2016: £3,186,000).
26
27
Strategic Report - Pensions
PENSIONS
Strategic Report - Pensions
The Group operates three pension schemes. An increasing number of employees, now close to 60%, have defined contribution
personal payment plans, where the retirement benefits are determined by the value of funds arising from contributions paid
in respect of each employee. The Group also operates two defined benefit plans which require contributions to be made into
separately administered funds and the benefits are based on employee’s pensionable salary and length of service. The Group,
or the Company, makes contributions into employees’ personal pension plans and the defined benefit schemes.
DEFINED BENEFIT SCHEMES : “ON-GOING” VALUATION
The Group operates two funded pension schemes providing defined benefits for a decreasing number of its employees; the James
Cropper PLC Pension Scheme (the “Staff Scheme”) and the James Cropper PLC Works Pension Plan (the “Works Scheme”).
The latest actuarial “on-going” valuations of the Group’s pension Schemes at April 2016 determined the combined deficit of the
schemes to be £15.8 million.
Table 10 compares the “ongoing” valuations as at April 2016 and the previous valuations as at April 2013. The defined benefit
pension schemes are sensitive to a number of key factors: the value of the assets, the discount rate used to calculate the schemes
liabilities (based on a premium above gilt yields), the expected rate of inflation in the future and the mortality assumptions for
members of the schemes. Changes in these assumptions will impact the deficit positively or negatively. With updated assump-
tions and a lower discount rate of 3.55% (April 2013 4.45%) the funding level has closed by only 0.17% over the 3 years and
the combined deficit for the Group to manage has increased by £3.1m.
The April 2016 “on-going” valuation resulted in liability management and a new agreement with the trustees on payments
to reduce the deficit.
TABLE 10 - COMPARISON OF TRIENNIAL “ON-GOING” VALUATIONS
TRIENNIAL “ON-GOING” VALUATION 2016
Discount Rate
Assets
Liabilities
Deficit
Funding level - %
TRIENNIAL “ON-GOING” VALUATION 2013
Discount Rate
Assets
Liabilities
Deficit
Funding level - %
CHANGE FROM 2013 TO 2016 TRIENNIAL
“ON-GOING” VALUATION
Discount Rate
Assets
Liabilities
Increase in deficit
Funding level - %
28
STAFF
SCHEME
£’000
3.55%
44,401
WORKS
SCHEME
£’000
3.55%
47,901
TOTAL
3.55%
92,302
(48,079 )
(60,045 )
(108,124 )
(3,678 )
92.4%
(12,144 )
(15,822 )
79.8%
85.4%
STAFF
SCHEME
£’000
4.45%
35,255
WORKS
SCHEME
£’000
4.45%
37,815
(38,837 )
(46,925 )
(3,582 )
90.8%
(9,110 )
80.6%
STAFF
SCHEME
£’000
WORKS
SCHEME
£’000
TOTAL
4.45%
73,070
(85,762 )
(12,692 )
85.2%
TOTAL
-0.90%
-0.90%
-0.90%
9,146
(9,242 )
10,086
19,232
(13,120)
(22,362 )
(96 )
(3,034 )
1.57%
-0.81%
(3,130 )
0.17%
PENSIONS
The Schemes were closed to new members in the year 2000 in order to contain the Group’s exposure to rising pension costs and to
safeguard the accrued benefits to existing members. Future annual increases in pensionable pay were capped at a maximum of 2%
from 1st April 2011, and starting in April 2014 employee contributions were increased. From 1 July 2017 the staff scheme rate of
pensionable accrual will be reduced from 1/60th to 1/75th for each future year of pensionable service. For both the staff and the
works scheme increases in pension once it is in payment will be in line with the annual increase in the Consumer Price Index, these
actions protect the Group’s exposure to future costs.
THE ON-GOING VALUATIONS ARE USED BY THE GROUP TO MANAGE PENSIONS
It is the Group’s legal responsibility to fund the defined benefit pension scheme deficits. The IAS 19 year end valuations requires
the Group’s actuaries to make a number of assumptions on a different basis to the on-going valuations, frequently resulting in wide
fluctuations and large variations in the “pension balance” year on year. The ongoing valuations are carried out every three years and
provide the Group with a steady platform to manage the deficit from one valuation to the next and to agree a funding plan. To this
end it is the on-going valuations which the Group monitors and tracks in order to manage pensions, rather than the IAS19 valuations.
THE “ON-GOING” VALUATION PAYMENT PLANS
Under the renewed payment plans represented in chart 1, the Group has agreed to pay contributions of £1.3m per annum to reduce
the past service deficits and a further £0.1m per annum to meet pension protection levy payments, a total of £1.4m each year. These
have an impact on both cash and the deficit and are recognised on the Statement of Financial Position (SFP). The Group reached an
agreement with the Trustees on a schedule of annual cash contributions to eliminate the deficit as follows:
THE STAFF SCHEME
The actuarial valuation revealed a deficit of £3.7m. The Group has agreed
that it will aim to eliminate the deficit over a period of 3 years and 7 months
from 1 July 2017 by the payment of annual contributions of £470,000 in
respect of the deficit. The Company will also meet the expenses of the
Scheme and the levies paid to the Pension Protection Fund.
THE WORKS SCHEME
The actuarial valuation showed a deficit of £12.1m. The Group has
agreed that it will aim to eliminate the deficit over a period of 9 years
from 5 April 2017 by the payment of annual contributions of £810,000
in respect of the deficit. These payments will increase as the staff
scheme deficit is eliminated. The Company will also meet the expenses
of the Scheme and the levies paid to the Pension Protection Fund.
CHART 1 – THE ON-GOING VALUATION
PAYMENT
£m
1.4
STAFF WORKS
1.2
1.0
0.8
0.6
0.4
0.2
0
7
1
0
2
8
1
0
2
9
1
0
2
0
2
0
2
1
2
0
2
2
2
0
2
3
2
0
2
4
2
0
2
5
2
0
2
DEFINED BENEFIT SCHEMES: IAS 19 “EMPLOYEE BENEFITS”
IAS 19 requires the Group’s actuaries to make a number of assumptions including, rates of inflation, discount rates and
current and future life expectancies, based on values and market conditions at the date of the Statement of Financial Position.
Discount rates for IAS 19 are based on corporate bond yields, whereas the discount rate used for the triennial on-going
valuations was based on a premium above gilt yields. The use of assumptions can have a material effect on the accounting
values of the relevant assets and liabilities recognised on the Group’s Statement of Financial Position (SFP), and which in
turn have an effect on the cost of such liabilities as recognised in the Statement of Comprehensive Income (SOCI).
29
Strategic Report - Pensions
Strategic Report - Pensions
As market values of the scheme assets and the discount factors applied to the scheme liabilities will fluctuate, this method of
valuation will often lead to large variations in the “pension balance” year on year. The actuarial gains and losses arising from
variances against previous actuarial assumptions are passed through to the Statement of Financial Position with corresponding
movements in Reserves. Specific movements are offset by actual contributions paid by the employer in the period.
Table 11 shows the overall value of the schemes’ assets which have increased by 12% over the period. The schemes liabilities
increased by 22%. The IAS19 valuations of these schemes as at 1 April 2017 reveal a combined deficit of £18.8m compared with
£7.9m at the previous year end, an increase of £10.9m.
TABLE 11 - IAS 19 PENSION VALUATION 2017
STAFF WORKS
SCHEME
SCHEME
BOTH SCHEMES
TOTAL
2017
TOTAL
2016
CHANGE
%
Discount Rate
2.70%
2.70%
2.70%
3.55%
£’000
£’000
£’000
£’000
Assets
52,194
53,638
105,832
94,271
Liabilities
(56,225 )
(68,427 )
(124,652 )
(102, 141 )
12%
22%
(Deficit) / Surplus
(4,031 )
(14,789 )
(18,820 )
(7,870 )
139%
Funding Level - %
93%
78%
85%
92%
The increase in the schemes overall deficit is principally
caused by the decrease in the discount rate to 2.70%
(3.55% at 2 April 2016), this is fixed by reference to
corporate bond yields which show a significant decline
compared to the prior year position.
Under IAS 19 the pension deficit is likely to be volatile
and may in the future be very different from this current
year end position. An indication of the potential variability
of the scheme deficits under IAS 19 is set out in chart 2.
The Group’s IAS 19 deficit has fluctuated markedly since
2005. The large declines in the combined deficit in 2008
and 2011 were as a result of significant reductions in future
service benefits introduced in April of those years.
The discount rate of 2.7% on 1 April 2017 is the lowest rate
that the schemes have ever experienced.
CHART 2 - THE RELATIONSHIP BETWEEN THE SCHEME
DISCOUNT RATES AND THE IAS 19 PENSION DEFICIT.
5
0
0
2
6
0
0
2
7
0
0
2
8
0
0
2
9
0
0
2
0
1
0
2
1
1
0
2
2
1
0
2
3
1
0
2
4
1
0
2
5
1
0
2
6
1
0
2
7
1
0
2
£0m
£5m
£10m
£15m
£20m
8.0%
7.0%
6.0%
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%
IAS 19 Pension Deficit (£m)
Discount Rates
IMPACT ON PROFIT
The Group is required to report the impact of IAS 19 on pensions. Profit before taxation is based on the adjustments required to
incorporate IAS 19 “Employee Benefits”. The methodology set out under IAS 19 to calculate the pension scheme deficit is very
different from those used with regard to their “on-going” valuations. Upon valuation at subsequent year-ends the movement in
value from the previous valuation is expressed in the following component parts:
MOVEMENTS WHICH AFFECT PROFIT
OPERATING COSTS:
• Current service charge, being the cost of benefits earned
in the current period shown net of employees’
contributions.
• Past service costs, being the costs of benefit improvements.
• Curtailment and settlement costs.
FINANCE COSTS, BEING THE NET OF:
• Expected return on pension scheme assets
• Interest cost on the accrued pension scheme liabilities
IAS 19 IMPACT ON OPERATING COSTS UNDER “EMPLOYEE BENEFITS COSTS”
The cost of providing pension benefits is included within Operating Profit on the Statement of Comprehensive Income. The
costs include the costs for the defined contribution schemes, personal pension plans, defined benefit schemes, life assurance and
government pension protection levies. For internal reporting purposes we adjust the pension charge calculated under IAS 19
to reflect the service cost implicit in the triennial valuations. This IAS 19 impact is £661,000 (2016 £839,000). Actual future
service pension contributions paid in the period by the Group to its two final salary schemes in accordance with the actuaries’
recommendations, resulting from their 2013 “on-going” valuations, were £529,000 (2016: £524,000). Under IAS 19 the total
charge against Operating Profit in the year was £1,190,000 (2016: £1,363,000).
TABLE 12 - AN ANALYSIS OF EMPLOYMENT COSTS PRIOR
TO IAS19 AND AFTER IAS 19
Wages and salaries
Social security costs
Pension costs - future service pension contributions paid
Other pension costs
Chargeable against operating profit prior to IAS 19
Wages and salaries
Social security costs
Pension costs - IAS19 impact on Operating Profit
Other pension costs
2017
£’000
21,991
2,180
529
877
25,577
21,991
2,180
1,190
877
2016
£’000
CHANGE
£’000
21,105
1,886
524
801
24,316
21,105
1,886
1,363
801
886
294
5
76
1,261
886
294
173
76
Chargeable against operating profit after IAS 19
26,238
25,155
1,083
Table 12 analyses employment costs of £25,577,000 charged against Operating Profit prior to IAS 19 and captures employment
costs of £26,238,000 after IAS 19. Overall pension costs after IAS 19 have decreased by £97,000 to £2,067,000 in 2017.
IAS 19 IMPACT ON FINANCE COSTS
IAS 19 TOTAL IMPACT ON PROFIT
The income from plan assets allowed for in the interest cost
is based on the discount rate, this impacts the costs shown
in the Statement of Comprehensive Income. A charge of
£265,000 is charged to the Statement of Comprehensive
Income this year (2016: £466,000).
The Group’s Profit Before Tax is based on the adjustments
required to incorporate IAS 19, these adjustments are within
operating costs and finance costs as shown.
The total IAS 19 impact for the year end 1 April 2017
is £926,000 (2016: £1,305,000).
Chart 3 sets out the impact of IAS 19 on Profit before tax in the last 2 years. The Group’s Adjusted Profit Before Tax prior to
IAS 19 adjustments is £6,566,000 (2016:£5,173,000), after IAS 19 is £5,640,000 (2016 £3,868,000).
Chart 3 presents the Group’s Adjusted Profit Before Tax prior to IAS 19 and shows the IAS 19 adjustments to profit required to
report profit before tax for the Statement of Comprehensive Income.
CHART 3 – IMPACT OF IAS 19 ON PROFIT BEFORE TAX
8,000
6,000
0
0
0
£
4,000
2,000
6,566
661
265
5,640
5,173
839
466
3,868
1 April 2017 PBT
prior to IAS 19
IAS19 impact on
operating costs
IAS19 impact on
Finance costs
1 April 2017
SCI PBT
2 April 2016 PBT
prior to IAS 19
IAS19 impact on
operating costs
IAS19 impact on
Finance costs
2 April 2016
SCI PBT
30
31
Strategic Report - Risk Management
Strategic Report - Risk Management
RISK MANAGEMENT
Effective management of risk is within the overall
responsibility of the Board and is key to ensuring good
governance and to achieving the Group’s strategy. The Board
has ownership of the risk management strategy and coordinates
activity across the Group. There is an ongoing process for
identifying, evaluating and managing significant risks faced by
the Group, which has been in place for the year under review
and up to the date of approval of this Annual Report.
The Group manages risk by a combination of insurance and
self-insurance. Self-insurance refers to actions taken internally
or in conjunction with other third parties. High risks in
financial and operational areas are normally more dependent
on insurance, however our flood resilience programme for the
Burneside site is testimony to a self-insurance approach which
provides protection to a key site. Risks in commercial and
personnel areas, because of their nature, are more likely to be
managed by self-insurance.
Each subsidiary company has a strategy and within that a
process for highlighting the key risk areas of their business,
and explaining the control measures and risk exposure. It then
takes appropriate steps to manage the risk exposure taking into
consideration the likelihood, impact and cost/benefit of each
of the risks.
The Group’s Audit Committee monitors and reviews the
effectiveness of the Group’s financial accounting process
and system of internal controls. In addition, the Board has
departmental teams with risk management briefs. These
include:
• Health & Safety
• Insurance
• Human Resources
• Pensions
• Environment
• Treasury
• Purchasing
• Information Systems
PRINCIPAL RISKS
The principal risks and uncertainties that may adversely impact the performance of the Group are set out in the table on the following
pages, along with the steps taken to address these. Each risk should be considered independently. Other factors could adversely affect
group performance and so the risks and uncertainties tabled should not be considered a complete set of potential risks.
EMPLOYEE SAFETY
RISK DESCRIPTION AND IMPACT
MITIGATION
Employee safety is paramount and the Group embraces the
ethos that nothing we do is worth getting hurt for.
It is essential that the Group operates a process of continuous
improvement in maintaining high standards of safety. The
risk of safe working practices being out of date or behavioural
standards falling could result in a serious accident.
If an incident were to arise where an unsafe practice was found
to be taking place, this could potentially result in an employee
getting seriously hurt, the interruption of operations, financial
penalties and reputational damage.
The Group has an extensive Health & Safety programme
built around the ISO18001 framework which is proactively
driven across every division. This is further supplemented with
engagement from the Executive team and senior management
in our proactive Workplace Standards Inspections initiative,
where time is taken to review, grade and promote a safe
working environment with employees at all levels across the
organisation. Our dedication to continuously improving
occupational health and safety has been recognised on 3
consecutive years as RoSPA (Royal Society For the Prevention
of Accidents) has accredited the James Cropper Group with a
Gold Award for 2014, 2015 and 2016.
Looking forward, the James Cropper Group remains fully
committed to continuously improving its rigorous health and
safety management system as it strives to deliver world class
standards of safety. With this in mind, the James Cropper
Group participates in external benchmarking and best practice
set across the paper industry and is a proactive committee
member of PABIAC (Paper And Board Industry Advisory
Committee), a tripartite strategic health and safety delivery
partnership for the paper, board and recovered paper industries,
Health & Safety Executive (HSE) and union representatives.
ENVIRONMENTAL SUSTAINABILITY
RISK DESCRIPTION AND IMPACT
MITIGATION
Environmental sustainability is at the heart of what we do
at James Cropper and the way we operate safeguarding
against environmental incidents is key. Should a material
environmental incident occur at a James Cropper site this
could result in material financial costs and reputational
damage that undermines our commercial position as an
environmentally responsible provider of sustainable products.
The Group has detailed processes in place around the
ISO 14001 framework which is proactively driven across
every division to ensure as a minimum we comply with all
environmental rules and regulations.
Looking forward, in addition the Group will continue
to proactively engage with the Environment Agency and
interested parties and seeks to enhance the way organisations
can work together on environmental matters, controls and
governance.
ENVIRONMENTAL FLOODING
RISK DESCRIPTION AND IMPACT
MITIGATION
The risk that a flood on one of the Group’s operational sites
causes significant business interruption, cost and disruption
to business, with consequences on customer confidence, cash,
insurance and business continuity.
Accounting for flood risk through transfer to insurance
and ensuring effective crisis management practice in a flood
response situation is one aspect of risk management that will
continue.
The Group’s main strategy is to build flood resilience and
to minimise the impact of a future flood, enabling prompt
operational recovery in the event of a flood. The Group is
investing over £1m on a programme of works designed to
protect key elements of plant and equipment and to remove
material storage out of the flood risk zone.
The Group is also working closely with the Environmental
Agency to support local flood avoidance schemes.
ENVIRONMENTAL TAXATION
RISK DESCRIPTION AND IMPACT
MITIGATION
As part of its energy strategy the Group considers
diversification away from gas to alternative fuels and this also
includes consideration of investments into sustainable energy
saving solutions including technologies to reduce emissions or
technologies which do not emit CO2 whilst generating energy.
In order to comply with EUETS phase 3 the Group will
meet its mandatory requirement to purchase 24,000 tonnes of
CO2 a year. The Group actively considers forward contracts
to manage its costs in this area. At the year end March 2017
forward carbon emission purchase commitments are in place to
December 2018, these provide the Group with some certainty
over the future cost of emissions.
EUETS is a mandatory scheme for greenhouse gas emission
allowance trading introduced by the EU to tackle emissions
of carbon dioxide and other greenhouse gases from a number
of specific industrial activities. The Group’s combustion
facilities became subject to this scheme as from 1st January
2008 under Phase 2. Phase 3 of the scheme is now underway
and the Group’s annual allowances have been reduced to an
average of 16,000 tonnes of CO2 per annum (phase 2: 41,000
tonnes) resulting in an average of 24,000 tonnes of CO2 to be
purchased on the EU Emissions Trading Scheme.
RISK ON PRICE
Prices are presently low due to over-supply in the market and
this keeps the cost of carbon emissions low. The risk is that the
over-supply will be addressed by the EU and the actions taken
will have a significant impact on prices. The likely result is
that the current single figure prices rise significantly and create
an increasing financial burden on the Group. Accounting for
flood risk through transfer to insurance and ensuring effective
crisis management practise in a flood response situation is one
aspect of risk management that will continue.
32
33
Strategic Report - Risk Management
Strategic Report - Risk Management
ENERGY MANAGEMENT AND ENERGY TAXATION RISKS
RISK DESCRIPTION AND IMPACT
MITIGATION
ENERGY PRICE VOLATILITY
RISK DESCRIPTION AND IMPACT
MITIGATION
Risk on Energy Intensive Industries (EIIs).
The European Commission (EC) has recognised that
EUETS could easily cause EIIs to move operations outside
the European Economic Area or to close. The EC has created a
special category, “Industries at risk of carbon leakage”, to afford
some shelter from the tax for those companies most at risk.
Industries in this category receive beneficial treatment
through Phase 3 of EUETS in that they do not have their free
allowances reduced on a sliding scale throughout the Phase, as
will happen with non-EIIs.
The Group benefits from this concession as the paper sector
is a carbon leakage sector. The risk is that in 2019 shelter from
EUETS is removed prior to phase 4 of EUETS. Should the EC
remove the carbon leakage status given to the paper industry
the Group will face ever increasing costs of emissions, making
operations unaffordable and it would be uncompetitive to stay
within the EU. Following Brexit it remains to be seen whether
the UK will opt to stay within the EUETS scheme or to leave it.
Risk that the Carbon Price Floor exemptions are
withdrawn.
The Carbon Price Floor is part of the government’s Electricity
Market Reform package. It is a combination of the EUETS
European Union Allowance (EUA) price and a top-up amount
that, when added to the EUA price, forms the “Floor” price
of carbon that HM Government has set. This levy is a UK
“green” tax on the generation of electricity. From 1st April
2013 the Group has been subject to the Carbon Price Floor.
HM Government announced changes to legislation that will
largely exempt the Group from the Carbon Price Floor from
2015 onwards, due to its operation of an energy efficient
Combined Heat and Power (CHP) plant. The risk to the
Group that government support could be withdrawn making
the cost of manufacture rise and placing James Cropper at a
distinct disadvantage to its EU competitors as well as those in
the rest of the world. Added to this is that from 2019 onwards,
HM Government will remove the freeze currently on the
Carbon Price Floor and commence annual increases in line
with inflation.
Risk that planned Climate Change Levy (CCL) increases
result in an additional tax burden for the Company.
HM Government is to rationalise energy taxation by
terminating the Carbon Reduction Commitment Energy
Efficiency Scheme (CRC) at the end of 2018/19 and by
increasing the CCL rates on gas and electricity to offset
revenue losses. CCL is charged for all businesses per kWh
of electricity of gas that they use.
The Group’s energy strategy considers investments into
technologies which reduce emissions or technologies which
do not emit CO2 whilst generating energy. Until a suitable
investment opportunity is found, the Group will continue to
operate within the existing framework and be subject to EC
regulation in this area as it develops.
James Cropper PLC is a member of the Confederation of
Paper Industries (CPI) an organisation which works on behalf
of the UK’s paper-based industries. The CPI lobbies HM
Government alongside other UK intensive energy users to
protect UK industry and manufacturing from carbon leakage.
In 2016, the Company has qualified for compensation for the
indirect cost of EUETS and Carbon Price Support (CPS) and
also for the indirect cost of the renewables obligation and small
scale feed-in tariff; and will continue to apply for compensation
whilst this support is available from the Government. A new
scheme for partial compensation for the indirect costs of
Contracts for Difference (CfD) has recently been announced
by the Department for Business, Energy & Industrial Strategy
(BEIS) and the Company will be applying for that. The CPI
also addresses issues that impact UK manufacturers such as
the Carbon Price Floor and is a leading trade association that
monitors proposals to tax carbon and represents industries
which are threatened by new taxes.
The Group evaluates operational energy efficient
improvements on a continuous basis and is keen to recognise
and adopt energy reduction measures. James Cropper
is pleased to have obtained ISO 50001 accreditation in
November 2015, an international standard recognising the
best energy management practices. This is an alternative
route to compliance with the Energy Savings Opportunities
Scheme (ESOS) a mandatory initiative for large UK enterprises
requiring regular 4–yearly audits of energy use. The Group
opted to take the ISO 50001 route as it presents a better way
than ESOS for making energy savings, using, as it does, a
continual improvement process.
The Company is signatory to a Climate Change Agreement
(CCA) with HM Government. In return for discounts on
CCL charged for electricity and gas, the Company undertakes
to reduce kWh electricity use/tonne of saleable product in line
with targets agreed with HM Government, or to pay a penalty
if targets are not met. Generally speaking, penalty payments
are outweighed by the CCL benefit. It is intended by HM
Government that the projected rises in CCL rates to offset
CRC losses for HM Government will be revenue neutral for
CCA signatories, as CCL discount rates will be adjusted to
achieve financial neutrality. Protection afforded by the CCA
runs until 2023. For the CCA, the CPI performs an excellent
service on the Company’s behalf as programme administrator,
placed between the Company and HM Government.
Gas prices are affected by global supply and demand and
price can be subject to significant fluctuations. Factors that
influence these include natural disasters, climate, political
instability, conflicts, economic conditions, shale gas reserves
and actions by major oil and gas exporting countries. Price
fluctuations can affect our business assumptions, margins and
investment decisions.
The Group aims to mitigate its exposure to energy costs by a
combination of strategically considering diversification away
from gas to alternative fuels, investing in sustainable energy
saving solutions and securing long term purchase forward
prices. At the time of this report, forward purchase contracts
are in place to secure prices for 12 months. This provides the
Group with a degree of certainty over next year.
FIRE
RISK DESCRIPTION AND IMPACT
MITIGATION
The Group recognises the importance of protecting
employees, contractors, visitors and members of the public
from any fire related risks whilst on site. This includes the
maintenance and protection of buildings, equipment, raw
materials and associated services without which manufacturing
operations could be affected.
James Cropper adheres to their legal and moral responsibilities
with regard to fire by carrying out the following:
•
Fire risk assessments to identify and prioritise hazards
and necessary control measures.
• Developing and implementing appropriate arrangements
and procedures based on the risk assessment findings.
•
•
•
•
Identifying and allocating necessary resources.
Providing and maintaining any identified and required
fire prevention measures.
Providing appropriate information, instructions
supervision and training.
Ensuring fire safety responsibilities are designated and
made known to all employees.
PENSION
RISK DESCRIPTION AND IMPACT
MITIGATION
The Group operates 2 defined benefit pension schemes which
are in deficit. Actuarial deficits are sensitive to a number of
key factors: the value of the assets, the discount rate used to
calculate the schemes liabilities (based on corporate bond
yields), the rate of inflation and the mortality assumptions for
members of the schemes. Changes in these assumptions could
mean that the deficit increases further.
The April 2016 triennial valuation concluded a combined
deficit of the schemes to be £15.8m.
The Group’s strategy is to ensure the profitable and sustainable
growth of the Group, to protect pensions earned, to ensure
future obligations do not overburden the Company and to
monitor opportunities in the economic environment which
may be favourable to the closing deficit.
Closure of schemes and benefit reductions
Membership of the Schemes was closed to new members in
2000. Future annual increases in pensionable pay were reduced
to a cap of 2% as from 1 April 2011. In April 2014 increases
in employee contributions were phased in. The future service
accrual rates have reduced to 1/75th on the staff scheme
from July 2017. During 2017 CPI has been adopted as the
inflationary measure for all future service pension pay-outs.
Deficit reduction contributions
A renewed deficit reduction contribution plan has been agreed
with the trustees and equates to payments of £1.4m (including
PPF levies) per year across both schemes.
Investment strategy
The Group agrees an investment strategy with the trustees
taking account of risk.
34
35
Strategic Report - Risk Management
Strategic Report - Risk Management
COMMODITY PRICE VOLATILITY
BREXIT
RISK DESCRIPTION AND IMPACT
MITIGATION
RISK DESCRIPTION AND IMPACT
MITIGATION
One of the Group’s divisions is subject to virgin pulp price
risk. Virgin pulp prices are affected by global supply and
demand and price can be subject to significant fluctuations.
Factors that influence these include natural disasters, climate,
political instability, conflicts, economic conditions and actions
by major pulp producers.
The Paper division aims to recover costs via market price
increases typically a few months following a pulp price
increase. In the event that competitor behaviours and global
economic factors mean that the Group is unable to recover
further price increases the profitability of the Group would be
reduced. Pulp substitution from recycled coffee cups or post-
consumer waste passed through our Reclaimed Fibre plant
mitigates some of the impact of virgin pulp costs.
The Paper division’s ability to effectively grow profitable sales
offering value-add products and services plus the introduction
of new innovative products provides some additional buffer
against price sensitivity.
Diversification and success of the divisions offers the Group
greater long term stability.
EXCHANGE RATE VOLATILITY
RISK DESCRIPTION AND IMPACT
MITIGATION
The Group operates on a global basis, and earns revenues,
incurs costs and makes investments in a number of currencies;
the 3 major operating currencies are Sterling, Euro and Dollar.
The Group’s financial results are reported in Sterling. Volatile
exchange rates could have a significant impact on the Group’s
results.
The Group matches receipts and payments in the same foreign
currency due in the same period. The Group’s treasury
function seeks to hedge anticipated unmatched cash flows
using financial instruments. No transactions for this purpose
have been entered into at the year ending 1 April 2017.
The Group prepares consolidated financial statements
for reporting purposes, the consolidation process entails
translating the financial statements of foreign subsidiaries
from foreign to domestic currency. A Dollar hedge is in
place to mitigate the impact of translation exposure with the
subsidiaries based in the USA.
FALL IN DEMAND
RISK DESCRIPTION AND IMPACT
MITIGATION
The profitability of the Group is sensitive to economic
slowdown in non UK markets. A 5% reduction in sales in any
one division could result in a fall in operating profits if not
mitigated by a cost reduction programme or growth in other
areas.
The global expansion of the Group helps to mitigate economic
risks and plans are being deployed to grow our market
presence and diversify product ranges and geographical
markets. The Group will continue to build on existing skills,
and the skills development of sales executives, recruitment of
experienced sales and planning professionals also assist the
effective deployment of these diversification plans.
The Group’s new division, James Cropper 3DP brings greater
resilience over time.
The risk that in March 2019 the UK has no deal with Europe,
or reaches a deal on terms comparatively unfavourable to
today’s trading environment. An exit with no deal could
introduce tariffs, border controls and economic disruption.
Brexit scenarios present the Executive team with a better
understanding of the risks and opportunities that the Group
can directly focus on. The Group’s growth strategy includes
a focus on exports in regions outside of the EU. In addition,
the Group works with representative organisations lobbying
government to influence an industrial strategy and other
effective measures that will protect and stimulate
manufacturing growth across the UK.
INFORMATION SECURITY, CYBER RISK & DATA PROTECTION
RISK DESCRIPTION AND IMPACT
MITIGATION
The risk that a quantifiable breach will occur and not be
detected in a timely manner with potential impact on company
performance, the consequences of which may be fines, business
disruption or reputational damage.
The Organisation is committed to a robust implementation
of information security management. It aims to ensure the
confidentiality, integrity and availability of information, in
all its forms, plus ongoing education on risk identification,
expected behaviours and sustainable controls. This enables us
to effectively protect, detect, mitigate, respond to, and recover
from information security risks and incidents. During 2018 this
will also encompass compliance measures for the upcoming
introduction of GDPR (General Data Protection Regulations)
in May 2018.
On behalf of the Board.
Isabelle Maddock
Group Finance Director
26 June 2017
36
37
Technical Fibre ProductsTECHNICAL FIBRE PRODUCTS TECHNICAL HIGHLIGHTSINTERLAMINARFRACTURE TOUGHNESSThe ability for a composite material to resist cracking is one of the most important properties in structural applications, such as aerospace. TFP has developed a range of lightweight thermoplastic products that slows the growth of cracks in a composite structure. These materials offer significant increases in fracture toughness (by up to 400%) in a repeatable process. We are working with major aerospace companies and composite manufacturers to establish qualified materials, as these structural components are increasingly being manufactured from composite materials.THE COMPOSITE SOLUTION FOR AIRCRAFT FUEL SYSTEMS In collaboration with Tods Aerospace, Element Materials Technology and ENL Ltd, TFP has developed a lightweight and damage resistant composite fuel pipe which can be used safely in aircraft fuel systems. These composite pipes are designed to replace the current metallic equivalent potentially reducing the weight of each aircraft by up to 200 kg, achieving an estimated fuel saving of up to 26 tonnes per aircraft per annum! Work on this long term project is well underway and has the support of at least one aerospace prime.INVESTMENT IN R&D FACILITIES TO SUPPORT GROWTHWe pride ourselves in working closely with customers to create and develop bespoke solutions using our in-house laboratories.This year we replaced our two existing laboratories with one larger purpose built area which, together with brand new high quality equipment ,will enhance the product development process. We have also built new meeting and conference facilities to further improve customer experience. These investments are timely and important and are necessary steps in supporting our growth in a range of technology driven markets. PREVENTING GALVANIC CORROSION IN COMPOSITES Dielectric nonwovens from TFP can be used to prevent galvanic corrosion, a common and destructive problem when aluminium or other metals come into contact with carbon fibre in a composite structure.Our nonwoven can prevent this by providing an extremely uniform, lightweight barrier between the two materials to isolate them, stopping an electrochemical reaction occurring.‘Open mode’- A vertical tensile load is applied to a pre-cracked double cantilever beam sample.‘In-plane shear mode’-A bending moment is applied, causing delamination propagation by shear stress.TFP JOINS THE COMPOSITE INSTITUTETFP is now a member of the Institute for Advanced Composites Manufacturing Innovation (IACMI), an organisation that aims to benefit the nation’s energy and economic security by sharing existing resources and co-investing to accelerate development and commercial deployment of advanced composites. This affiliation highlights our continued commitment on growing business in this area.38Technical Fibre ProductsWHAT DOES THIS MEAN FOR TFP?Over the years, TFP has made considerable investments in R&D, equipment and people, which has allowed us to build expertise and capability in the production of gas diffusion layer (GDL) substrate material – the heart of a fuel cell. The recent growth in stationary fuel cells has been reflected in growing sales of GDL substrates from TFP to a number of customers in Europe and the USA. R&D and supply chain activity is currently strong in this sector and this has been reflected in sales growth for TFP.The next wave will be for fuel cell powered cars. At least 10 automotive manufacturers have either started producing fuel cell powered cars, or announced plans to do so. At this point, manufacturers are more interested in demonstrating proof of concept and understanding how a supply chain would work than in generating a financial return. Our market intelligence is that we should expect to see fuel cell powered cars being produced in significant volumes sometime between 2020 and 2025. Although we can’t yet be certain that there is a place in this market for TFP, we are working hard to ensure that we are as well placed as we can be by participating in long term development projects with the key players.THE POWER OF CHEMISTRYA fuel cell is an electrochemical device that combines hydrogen fuel and oxygen to produce electricity, heat and water. If you can use both the electricity and the heat, they can be up to 85% efficient in converting hydrogen to energy. By comparison, the best internal combustion engines are less than 40% efficient. The fuel cell itself has no moving parts, making it a quiet and reliable source of power. Unlike batteries, fuel cells continuously generate electricity as long as a source of fuel is supplied.There are many different types of fuel cells in use or in development but we can divide them conveniently into two groups;FUEL CELL STRUCTURE WITH A GAS DIFFUSION LAYER (TFP MATERIAL)HYDROGENHYDROGEN IONSEXCESS HYDROGENWATEROXYGENANODE (TFP MATERIAL)CATHODE(TFP MATERIAL)ELECTRICITY FLOWELECTROLYTESTATIONARY fuel cells are used for primary and backup power for commercial, industrial and residential buildings and in remote or inaccessible areas.TRANSPORT fuel cells are used to power fuel cell vehicles including forklifts, cars, buses, boats and submarines.39 Technical Fibre Products
Our People Set us Apart
RISING STARS
THE NEXT GENERATION OF
GRADUATES MAKING THEIR MARK
Recent years have seen more exciting and innovative
developments than at any other time in the history of
James Cropper with reclaimed fibres, technical 3D moulded
pulp and advanced non-wovens all located on the same site
as traditional papermaking.
As new markets are cultivated and new, technically advanced
production methods developed, so these new ways of working
invariably require fresh thinking and innovative approaches.
Technical graduates Joanne Storey, Edward Kileff and Tom
Prosser have already made impressive contributions in their
respective departments.
Supporting New Product Introduction (NPI), Joanne studied
as a Scientific Apprentice in Research & Development at the
National Nuclear Laboratory Ltd. Her role at James Cropper
is in integrated business planning and providing technical
support to the converting division.
After studying at the University of Hull, Tom’s career with
James Cropper started back in 2013 as a Sales Administrator.
Today his role is that of Quality Systems Graduate, establishing
Product Quality Evaluation (PQE) and Management Review
for ISO 9001. Tom has also been instrumental in improving
our product specific approval system.
Edward graduated from Lancaster University with a Degree
in Environmental Biology and Masters in Environmental
Management and Consultancy. Since joining James Cropper
in September 2016 he has worked extensively in Process
Capability, establishing our Web Imaging System (WIS)
in papermaking, identifying cost improvements and
establishing Overall Equipment Effectiveness (OEE).
The philosophy of the Group has always been to identify,
encourage and develop the talent that will stand us in good
stead for the challenges ahead. Every one of the workforce
at James Cropper has a tangible and direct effect on overall
output; our new graduates are no exception, playing their
part in established high performing teams and integrating
into key operational systems.
TFP In-house metal plating and chopping capability for carbon fibre
Clockwise from top:
Edward Kileff and Joanne Storey
Tom Prosser
40
41
Our People Set us Apart
Our People Set us Apart
CELEBRATING PRIDE IN OUR WORK
1
2
3
4
5
6
7
9
8
10
11
SAFETY IMPROVEMENT
SUPPORT FOR COLLEAGUES
COMMUNITY FOCUSED
CUSTOMER SERVICE
TAKING PRIDE
WINNER
1. WAYNE HEAP
(Dryerman - PM3)
WINNER
3. RICHARD COTTAM
(Systems Developer)
WINNER
5. ADRIAN GIBSON
(Environment Manager)
Wayne has designed and implemented
a number of improvements on
Papermaking Machine 4. One example
was to clean and maintain the Biomaster
Dosing equipment and then to set this
up to be able to run ‘Impress’ chemistry.
This has resulted in greater control of
the materials and reduced the need for
manual handling by the operators to
run the machine.
COMMENDATION
2. MIKE MAWSON
(Raw Materials Operator)
Extremely enthusiastic and positive,
Mike is constantly proactive and
forward thinking with regards to how
he can improve working conditions for
himself and his colleagues. This included
improving housekeeping in the Pulp
Shed whilst the cladding replacement
work was being undertaken and
providing constructive feedback for the
new Baler House Door project.
Richard has been undertaking work
for TFP to improve their costing
activity, with the results enabling TFP’s
ambitious growth plans by producing
cost control information and improved
procedures on the shop floor. Richard
is very conscientious and doesn’t think
twice about going the extra mile in
order to meet ‘optimistic’ deadlines,
and always offers advice and support to
achieve the best solutions.
COMMENDATION
4. BRIDGET WEDDERBURN
(TFP Materials Specialist)
Bridget has a vast amount of knowledge
and is always happy to share this with
her colleagues, always happy to go out
of her way to help anyone in the team
or the wider TFP group.
A key point of contact to supporting
local improvements within the
community, Adrian works with
Burneside Parish Council and local
residents. Examples include removing
the trees from the riverbank, making
repairs to the local playground and
cutting trees at Gowan Lea. Adrian is a
great ambassador for the company.
COMMENDATION
6. TIM WALLING
(Blender Operator)
Whilst on holiday in Portugal last year
Tim noticed that a young boy had got
into difficulty swimming in the ocean.
Without a thought for his own safety,
Tim swam out and rescued the boy, an
act of quick thinking and selfless heroism
for which one family will be eternally
thankful.
WINNER
7. JAMIE BARTLE
(Inside Sales Executive)
WINNER
9. BRIAN STEPHENSON
(Pulper Operator PM1)
Helpful, committed, bright and always
customer focused, nothing is too much
work for Jamie. During recent changes
in the sales team, Jamie has become an
unsung hero, coping admirably with
challenging workloads and he deserves
full credit and recognition for his abilities
and unquestionable commitment.
INNOVATION AND CREATIVITY
WINNER
8. GARY POSTLETHWAITE
(Blender Operator)
Always looking for cost saving ideas in
his role, in 2016 Gary came up with the
idea of using NC black broke in our
deepest black product. It is estimated
this change will save the company
around £60,000 per annum.
The ‘go to’ man in the Stock Preparation
Department, Brian is very conscientious,
passionate and professional. He is seen as
a role model for new employees and is a
huge asset to the shift, taking great pride
in every aspect of his role and meticulous
in his approach to any task.
COMMENDATION
10. STEVE ATKINSON
(Production Planner)
Always so helpful and happy, Steve
goes out of his way to help the Raw
Materials Team and communicates
changes every day so we can plan
accordingly. Schedule and material
changes may cause extra work, Steve
always has a smile on his face. Generous
with his time (and his biscuits!),
colleagues say they “couldn’t do
their job without Steve”.
TEAM AWARD
WINNERS
CAROL LAWRENCE,
KATH KITCHEN, KAREN WINTER
AND DIANE MCROBBIE
(Canteen Team)
The Monday after the floods of 2015,
Karen and Diane cleaned the kitchen
to provide a breakfast service as normal
and serve extra people as the Company
worked through the aftermath of the
floods. In 2016 the Canteen ran short-
staffed for several months, however their
workload never decreased and excellent
service and quality was maintained.
COMMENDATION
11. LYNDON MONTGOMERY,
MARK SHEPHERD, STEVE
ATKINSON, DAVE NICHOLSON
AND MARK LOWTHER
(Broke Team)
Briefed to reduce raw material costs
by replacing pulp with broke whilst
retaining high quality. This team effort
has already delivered significant savings
and was the start of the process now
being successfully continued.
42
43
Our People Set us Apart
Our People Set us Apart
COMMITMENT TO COMMUNITY AND COMPANY
ADRIAN GIBSON –
SHORING UP OUR
RESPONSIBILITIES TO
PEOPLE AND PLACE
The devastating floods affected much of our local community
in late 2015 and the effects are still evident across the region.
The image above, for example, illustrates this point: the centre
of this Burneside bridge is no longer supported after the central
pillar’s foundations were washed away.
Adrian responded urgently (not to mention out-of-hours and
in the middle of the night) to a breach of the River Kent’s banks
further downstream. His swift intervention ensured damage
was minimised and, although just a temporary emergency
measure, the reinforcements have withstood whatever the
elements have thrown our way ever since.
Clockwise from top left:
Training 2000 Award Winners Martin Allen and Steven Baines
Olivia Notturni and Anna Lowery, Internal Sales;
Kim Sutherland, Marketing Coordinator;
Steve Robinson, No.3 Machine Operator, TFP.
44
45
Our People Set us Apart
Sustainability
55 YEARS OF EXPERIENCE SHARED
SUSTAINABILITY AT THE HEART
OF EVERYTHING WE DO
Sustainability is a core value at James Cropper and also an area of expertise. We are continually deploying and developing our
sustainability strategy as it represents a long-term vision that will secure the future of our businesses and respond to a global
need that is shared by our internal and external stakeholders.
RISING TO GLOBAL CHALLENGES
RESOURCES
We direct expertise to innovations that make a real difference
in the world. From a continued focus on our cellulose fibre
recycling facility, to non-woven carbon fibre innovation that
reduces fossil fuel consumption in the automotive and
aerospace industry.
COMMUNITY
We make real investments to reduce the amount of resources
we consume, to minimise waste and capture the full value of
all fibre resources we use both in manufacturing, and in the
end use of the products we create.
RESPONDING TO GLOBAL DEMAND
FOR SUSTAINABLE PRODUCTS
We work to improve the lives of those we interact with and
focus on forging strong relationships, not only with our
employees but with local communities who live alongside
our facilities. These activities range from supporting local
charities to providing materials and education to local schools.
By engaging our skilled workforce in our sustainability
plans, and through excellent relationships with merchants,
environmental experts and end-users of our products,
we create new innovations that reduce environmental
impact while supporting the growth of our businesses.
Bruce and Jim share 55 years of experience at the cutting
edge of papermaking and colour blending, gained right here
at James Cropper PLC. Today, James Cropper 3D Products
provides a new focus for this unique partnership of skills.
Bruce Barnes joined James Cropper in 1978. In the 35 years
since, he’s played a role in every aspect of colour blending
and helped shape the unique colour expertise we are so proud
of today.
Jim Ellwood joined James Cropper in 1997, and in the 20
years since has developed an incredible understanding of
all our papermaking processes and machinery improving
performance and even providing training in recent years.
Today, James Cropper 3D Products has brought these two
unique experts together. Sharing a wealth of experience in
coloured papermaking, Bruce and Jim are playing a pivotal
role as we now innovate to shape the future of moulded fibre
packaging creating entirely new processes and solving new
technical challenges. Together they have even overseen the
production of James Cropper 3D Products’ custom-build
production line.
“ YOU COULD SAY WE’RE MOULDING OUR SKILLS
TO CREATE SOMETHING NEW. WE SHARE 55
YEARS OF EXPERIENCE BETWEEN US, SO IT’S
VERY REWARDING TO WORK TOGETHER AND
LEARN FROM EACH OTHER IN THIS WAY.”
BRUCE BARNES
“ WE’RE FOCUSING ON AN ENTIRELY NEW
INNOVATION THAT’S ONLY POSSIBLE BECAUSE
OF THE WORK PEOPLE HAVE DONE HERE OVER
DECADES. WE LOVE A CHALLENGE AND THIS
ONE’S SPECIAL BECAUSE IT USES ALL THAT
KNOWLEDGE AND SKILL.”
JIM ELLWOOD
A SUSTAINABLE FUTURE
WITH OUR EMPLOYEES:
We engage all our people in environmental sustainability,
from small steps like turning off computer monitors,
installing PIR sensors, and deploying environmental
training. We also invest in long-term personal development,
retraining and enhancing skills required to work in a rapidly
evolving innovation business.
ZERO TO LANDFILL:
We reuse and recycle resources where possible. What the Mill
can’t recycle is collected by Cumbria Waste and of this, 87%
is recycled and 13% is used as refuse derived fuel. We’re also
working on zero discharge of hazardous chemicals (ZDHC)
programme with fashion retailers in support of the 2020
Roadmap to Zero Initiative. Our Coffee Cup recycling
centre is a zero to waste innovation.
CARING FOR OUR SURROUNDING
ENVIRONMENT:
SUSTAINING AN INNOVATION CULTURE
IN DESIGN AND PROCESSES (RCF)
As a high user of water, we focus on maximising return of
clean safe water to the catchment. 7% is embodied in the
product but over 90% is recycled and returned clean to the
river Kent which is a site of special scientific interest (SSSI)
which supports flourishing rare whiteclawed crayfish and
fresh water mussel population. These are both signifiers of
water purity, and also attract wild otters.
As market leaders in recycled fibre innovation, James
Cropper Paper have heavily invested in a dedicated reclaimed
fibre plant, specialising in retrieving fibre from single-use
cup waste and using it to produce paper. The plastic from the
cup is used to manufacturing furniture and flooring with the
remaining minerals used for fertiliser. We view the coffee
cup market as an urban forest, and are working with major
UK waste management companies and coffee retailers.
46
47
48Sustainability“”MUCH OF THE FUTURE GROWTH OF JAMES CROPPER IS CLOSELY TIED TO THE GREEN AGENDA, FROM DISPLACING PLASTICS IN PACKAGING TO HELPING MAKE AIRCRAFT LIGHTERALWAYS SUSTAINABLE:James Cropper have embraced Lean Six Sigma methodology to streamline and optimise process of materials, waste and energy, internal process efficiency and transparency. We’re committed to ISO50001 energy management standards encompassing a highly efficient combined heat & energy plant, investment on hydro and solar energy, and heat exchange and recovery systems in processing. GovernanceGOVERNANCE 49DIRECTORS’ DETAILS 50CORPORATE GOVERNANCE STATEMENT 52REPORT OF THE REMUNERATION COMMITTEE 55DIRECTORS’ REPORT 60JC3DP: PACKAGING FOR THE FUTURE 63 GOVERNANCE49 Governance - Director’s Details
Governance - Director’s Details
BOARD OF DIRECTORS
MARK CROPPER MA
Chairman
PHIL WILD BEng (Hons)
Chief Executive Officer
ISABELLE MADDOCK BSC FCMA
Group Finance Director
Mark joined the Group and the
Board in 2006, becoming Chairman
in 2010, the sixth generation of the
Cropper family to hold this position.
He was educated at Edinburgh
University, following which he
pursued a career in environmental
finance. He is a director of
Ellergreen Hydro Ltd, a small hydro
developer, and also of Community
Energy Cumbria Ltd and Burneside
Community Energy Ltd.
Phil joined the group and the
Board as Chief Executive in 2012.
A graduate of Loughborough
University and the London Business
School, he previously worked for
3M where he held directorships and
roles covering EMEA, industrial,
healthcare, automotive and security
market sectors.
Isabelle is a Fellow of the
Chartered Institute of Management
Accountants with over 25 years’
experience in finance across
a variety of sectors including
manufacturing, software, retail,
facilities management and publishing
before joining the Company in 2006.
Isabelle joined the Board as Group
Finance Director in 2014.
MARTIN THOMPSON MBA
Managing Director
Technical Fibre Products
Prior to joining the Group, Martin
held a variety of roles covering
Business Systems, Technical and
Operations Management. Martin
joined the Group in 2003. He was
appointed Managing Director of
Technical Fibre Products Ltd in 2013
and appointed to the Board in 2013.
DAVID WILKS LLB (Hons)
Non-Executive Director
JIM SHARP MA
Non-Executive Director
A Director of Wilks & Partners,
a management consultancy company
he founded, David joined the Board
in April 2004. He has extensive
manufacturing operations experience
with H J Heinz and United Biscuits,
and was a Director of ER Consultants.
Jim joined the Board in 2009.
A Partner in Sirius Equity LLP,
which he co-founded in 2008, Jim
is a non-executive director of The
Brunner Investment Trust PLC and
feelunique.com. He began his career
in financial services with J Henry
Schroder & Co in 1992 where he was
a director until 2002, and has since
held senior roles with a number of
private equity backed businesses.
COMPANY SECRETARY
HONORARY PRESIDENT
DAVE WATSON BEng (Hons)
Chief Operations Officer
PATRICK WILLINK BSC, MBA
Chief Technology Officer
STEVE ADAMS BA (Hons)
Managing Director Paper Division
Educated at Sunderland University
and London Business School,
Dave has over 30 years’ experience
in industrial, automotive,
pharmaceutical and secure documents
and systems markets. Dave joined
the Group and Board in 2014.
Educated at Newcastle University
and Imperial College, London,
Patrick joined the Group in 1990
and the Board in 1998. In 2014 he
became Chief Technology Officer of
the Group and was also appointed
President of the Confederation of
Paper Industries Ltd later that year.
Steve joined the Group and Board
on 1 January 2017 following 30 years
with 3M in various directorships
and roles both in the UK and
Europe covering display, traffic &
vehicle safety, telecommunications,
electronics and energy markets.
JIM ALDRIDGE FCA
Company Secretary
Jim joined the Group as Finance
Manager for Technical Fibre
Products Ltd in 2006. He was
appointed Head of Corporate
Finance in 2013 until November
2015, when he was appointed
Company Secretary.
SIR JAMES CROPPER KCVO, BA
Honorary President
Sir James resigned from the Board in
2013 after 47 years of distinguished
service within the Company.
Sir James was appointed the first
Honorary President of James
Cropper PLC in 2013. Sir James was
HM Lord-Lieutenant of Cumbria
from 1994 until 2012.
49
50
Governance - Corporate Governance Statement
Governance - Corporate Governance Statement
CORPORATE GOVERNANCE STATEMENT
CHAIRMAN’S INTRODUCTION
TO CORPORATE GOVERNANCE
I am pleased to introduce the Corporate Governance Report
for the year ended 1 April 2017. This report includes my
statement and the Corporate Governance Report.
As a Board, we remain committed to maintaining high
standards of corporate governance. The Directors place a
significant emphasis on ensuring that the Group has the
appropriate governance structures in place. We acknowledge
the importance of the principles set out in the UK Corporate
Governance Code 2014, and intend to apply this code as far
as we consider appropriate given the size of the Company.
As a guiding principle, we aim to demonstrate best practice
in governance matters regardless of whether this is beyond
regulatory requirement. This approach is closely aligned to
upholding our strong values, not least acting with integrity.
BOARD RESPONSIBILITY
AND STRATEGIC DIRECTION
The Board acknowledges its collective responsibility
for ensuring the long-term success of the Group by
demonstrating strong leadership, setting strategy and
business models, managing performance and ensuring the
necessary resources are in place to deliver. It also holds itself
accountable for looking after the needs of all its stakeholders,
including employees, pensioners, shareholders and the
broader community and environment.
Both I and the Non-Executive Directors are fully supportive
of the strategic direction being taken by the executive team.
The future direction is reported in our Strategic Report on
pages 20 to 37.
SUB–COMMITTEES
There are four sub-committees reporting to the Board:
• Executive Committee
• Remuneration Committee
• Audit Committee
• Nomination Committee
All committees continue to exercise their duties in
compliance with all relevant legislation, regulation and
guidance. During the year the Remuneration Committee
undertook a complete review of pay and rewards for the
Executive team ensuring the policy enables the Group
to attract and retain individuals with the right skills and
calibre to achieve our strategic goals. The Nomination
Committee were also active in the search for and subsequent
appointment of a Managing Director for the Paper division.
Steve Adams joined the Board on 1 January.
All sub-committees continue to be supported by both
internal and, where relevant, external advisers to ensure
their duties are satisfactory and professionally fulfilled.
STAKEHOLDER ENGAGEMENT
The Board is keen to ensure ongoing and effective
communication with all stakeholders.
Mark Cropper
Chairman
26 June 2017
GOVERNANCE STATEMENT
BOARD COMMITTEES
The Company’s shares are listed on AIM and are subject to the
AIM Rules of the London Stock Exchange and consequently
we are not required to comply with the provisions or report
in accordance with the UK Corporate Governance Code 2014
(“Code”). However, the Board is committed to the principles of
good corporate governance covering leadership, effectiveness,
accountability, remuneration and shareholder relations.
The Board have adopted the Code as far as is practicable
and appropriate for a public company of the Group’s size
and nature.
ROLE OF THE BOARD
The Board has delegated specific authority to the
Audit Committee, Remuneration Committee and
Nomination Committee.
Jim Sharp is the Chairman of the Audit Committee which
also comprises the other Non-Executive Directors. The Audit
Committee has the primary responsibility for monitoring the
quality of internal controls, ensuring that the financial
performance of the Group is properly measured and reported
on and reviewing reports from the Group’s auditors relating
to the Group’s accounting and internal controls. The Audit
Committee meets at least three times a year.
The role of the Board is to establish the vision and strategy for
the Group, to deliver shareholder value and be responsible for
the long-term success of the Company. Individual members
of the Board have equal responsibility for the overall
stewardship, management and performance of the Group and
for the approval of its long-term objectives and strategic plans.
Mark Cropper is the Chairman of the Nomination
Committee which also comprises the other Non-Executive
Directors. The Nomination Committee will identify and
nominate, for approval by the Board, candidates to fill Board
vacancies as and when they arise. The Nomination
Committee will meet as and when required.
DIVISION OF RESPONSIBILITIES
There is a clear division of responsibilities between the role
of the Chairman and that of the Chief Executive Officer of
the Company. The primary responsibility of the Chairman is
to lead and manage the Board and that of the Chief Executive
is to manage the business of the Group.
THE CHAIRMAN
Mark Cropper is the Chairman. He is responsible for leading
and managing the Board and ensuring its effectiveness in all
aspects of its role. He works closely with the Chief Executive
on developing Group strategy and provides general advice
and support.
THE CHIEF EXECUTIVE OFFICER
Phil Wild is the Company’s Chief Executive. His principle
responsibility is to manage the Group’s business and to lead
the Executive Committee in delivering the Company’s
strategic and operational objectives.
THE NON-EXECUTIVE DIRECTORS
Two of the Non-Executive Directors, including the Chairman,
although deemed not to be independent under the Code, are
considered by the Board to be independent in both character
and judgment and provide unequivocal counsel and advice to
the Board.
THE OPERATION OF THE BOARD
The Board has the authority for ensuring that the Group is
appropriately managed and achieves the strategic objectives
it sets. To achieve this, the Board reserves certain matters for
its own determination including matters relating to Group
strategy, approval of interim and annual financial results,
dividend policy, major capital expenditure, budgets,
monitoring performance, treasury policy, risk management,
corporate governance and the effectiveness of its internal
control systems. The Board performs its responsibilities
through an annual programme of meetings and by
continuous monitoring of the performance of the Group.
David Wilks is the Chairman of the Remuneration
Committee which also comprises the other Non-Executive
Directors. The Remuneration Committee reviews the
performance of the Executive Directors and determines their
terms and conditions of service, including their remuneration
and the grant of options. The Remuneration Committee will
meet at least twice a year.
BOARD AND COMMITTEE MEETINGS
The Board meet on a formal basis regularly. Members are
supplied with financial and operational information in good
time for review in advance of meetings.
All Directors have access to the advice and services of the
Company Secretary. The Board approves the appointment
and removal of the Company Secretary. The Non-Executive
Directors are able to contact the Executive Directors,
Company Secretary or Senior Managers at any time for
further information.
EFFECTIVENESS
BOARD COMPOSITION
A strong feature of the Board’s effectiveness in delivering the
strategy is our inclusive and open style of management and a
free flow of information between the executive and Non-
Executive Directors. The size of our Board encourages
individuals to discuss matters openly and freely and to make
a personal contribution through the exercise of their
personal skills and experience. No individual or group of
individuals dominate the Board’s decision making process.
All Directors communicate with each other on a regular
basis and contact with senior executives within the Group is
sought and encouraged.
DIVERSITY
Vacancies on the Board are filled following a rigorous
evaluation of candidates who possess the required balance of
skills, knowledge and experience, using recruitment
consultants where appropriate. The process for the
51
52
Governance - Corporate Governance Statement
Governance - Report of the Remuneration Committee
REPORT OF THE REMUNERATION COMMITTEE
appointment of Non-Executive Directors is managed by the
Nomination Committee. The Company recognises the
importance of diversity at Board level and the Board comprises
individuals with a wide range of skills and experience from a
variety of business backgrounds. Our current female
representation on the Board is 11%.
APPOINTMENT OF NON-EXECUTIVE
DIRECTORS
Non-Executive Directors are appointed to the Board
following a formal, rigorous and transparent process,
involving external recruitment agencies, to select individuals
who have a depth and breadth of relevant experience, thus
ensuring that the selected candidates will be capable of
making an effective and relevant contribution to the Board.
The process for the appointment of Non-Executive Directors
is managed by the Nomination Committee.
TERMS OF APPOINTMENT AND TIME
COMMITMENT
All Non-Executive Directors are employed on contracts of one
month’s notice by either side. All Non-Executive Directors are
expected to devote such time as is necessary for the proper
performance of their duties. Directors are expected to attend
all Board meetings and committee meetings of which they are
members and any additional meetings as required.
INDUCTION & PROFESSIONAL
DEVELOPMENT
New Directors are given a formal induction process including
details of how the Board and Committees operate, meetings
with Senior Management and information on Group strategy,
products and performance. Training and development needs
of Directors are reviewed regularly. The Directors are kept
appraised of developments in legal, regulatory and financial
matters affecting the Group from the Company Secretary,
the Chief Executive, the Finance Director and the Group’s
external auditors and advisers.
PROFESSIONAL ADVICE
All Directors have access to the advice and services of the
Company Secretary. The Board has also established a formal
procedure whereby Directors, wishing to do so in the furtherance
of their duties, may take independent professional advice, if
necessary, at the Group’s expense. All Directors are aware of their
responsibility to regularly update their skills and knowledge.
BOARD AND COMMITTEE EVALUATION
The performance evaluation of the Board, its Committees
and Directors is undertaken by the Chairman annually and
implemented in collaboration with the Committee Chairmen.
ELECTION AND RE-ELECTION
OF DIRECTORS
At each Annual General meeting the shareholders shall vote on
resolutions to both elect any Director who has been appointed
since the last Annual General Meeting and also re-elect any
Director who has not been appointed, elected or re-elected at
one of the two previous Annual General Meetings. Any
Non-Executive Directors with service greater than nine years
are subject to re-election at each Annual General Meeting.
RISK MANAGEMENT
The Group’s corporate objective is to maximise long-term
shareholder value. In doing so, the Directors recognise that
creating value is a reward for taking and accepting risk. The
Directors consider risk management to be crucial to the Group’s
success and give a high priority to ensuring that adequate
systems are in place to evaluate and limit risk exposure.
INTERNAL CONTROL
The Board are responsible for the Group’s system of internal
control and for reviewing its effectiveness. In the context of
the Group’s business any such system can only reasonably be
expected to manage rather than eliminate risks arising from
its operations. It can therefore only provide reasonable and
not absolute assurance against material loss or misstatement.
GOING CONCERN
In carrying out their duties in respect of going concern, the
Directors carry out a review of the Group’s financial
position and cash flow forecasts for the foreseeable future.
These are based on a comprehensive review of revenue,
expenditure and cash flows, taking into account specific
business risks and the current economic environment.
RELATIONS WITH SHAREHOLDERS
The Board appreciates that effective communication with the
Company’s shareholders and the investment community as a
whole is a key objective. The Chairman’s Letter, the Chief
Executive’s Review and the Strategic Report and Financial
Review, together with the information in the Annual Report
of the Group, provide a detailed review of the business. The
Executive Directors have overall responsibility for ensuring
effective communication and the Company maintains a
regular dialogue with its shareholders, mainly in the periods
following the announcement of the interim and final results,
but also at other times during the year. The Board encourages
the participation of shareholders at its Annual General
Meeting, notice of which is included in the Annual Report.
The Company’s website (www.cropper.com) is regularly
updated and provides additional information on the Group.
ANNUAL GENERAL MEETING
At every AGM, Directors provide updates on the progress of the
business and insights into different areas of the business, and
allows the opportunity for questions on this or any of the
resolutions before the meeting. The Company proposes separate
resolution for each issue and specifically relating to the Reports
and Accounts. The Company ensures all proxy votes are counted
and indicates the level of proxies on each resolution along with
the abstentions after it has been dealt with on a show of hands.
After the meeting, shareholders have the opportunity to talk
informally to the Board and raise any further questions or issues
they may have.
Jim Aldridge, Company Secretary, 26 June 2017
STATEMENT FROM THE CHAIRMAN
OF THE REMUNERATION COMMITTEE
I am pleased to introduce the Directors’ Remuneration
Report for the year ended 1 April 2017. This report includes
my statement, the Annual Remuneration Report and sets out
our forward-looking directors’ remuneration policy.
BUSINESS CONTEXT AND REMUNERATION
COMMITTEE DECISIONS ON REMUNERATION
It is our intention that the remuneration policy reflects and is
aligned with the Company’s long-term strategy and supports
the achievement of the strategic objectives.
During the year, the Remuneration Committee reviewed and
updated the fixed levels of remuneration, the annual bonus
scheme and the long term incentive scheme. Further details
on these are set out in the Remuneration Policy section of
this report.
The remainder of this report is split into the following
two sections:
•
•
Annual Report on Remuneration providing details
of the payments made to directors in the year ended
1 April 2017.
Directors’ Remuneration Policy setting out the
Company’s forward looking remuneration policy.
The Directors acknowledge the importance of the principles
set out in the UK Corporate Governance Code 2014 and
intend to apply this code as far as we consider appropriate
given the size of the Company. As part of this, we have
chosen to include information in this report which goes
beyond what we are required to disclose, as we believe this is
important to our stakeholders.
OUR DIRECTORS’ REMUNERATION POLICY
We have adopted a remuneration policy designed to attract
and retain individuals with the talent, experience and
leadership skills required to enable us to achieve our strategic
objectives.
We believe that this, in turn, will help stimulate sustainable
value creation over the long term.
Our policy is set out in the following pages, with a summary
of key principles provided below:
•
•
Fixed levels of remuneration are set at an appropriate
level for each individual. In setting these levels, the
Remuneration Committee takes into account the
levels of fixed remuneration for similar positions
with comparable status, responsibility and skills.
This will ensure that we can attract and retain the
right individuals needed to grow the Company.
Recognising our strategic objectives and the need to
deliver progressive returns for our shareholders, the
Executive Directors are eligible to participate in an
Annual Bonus Scheme and a Long Term Incentive
Plan (LTIP).
David Wilks
Chairman of the Remuneration Committee
26 June 2017
53
54
Governance - Report of the Remuneration Committee
Governance - Report of the Remuneration Committee
ANNUAL REMUNERATION REPORT 2017
REMUNERATION POLICY
DETAILS OF DIRECTORS’ REMUNERATION
REMUNERATION COMMITTEE
The Remuneration Committee comprises the following members:
• David Wilks
• Mark Cropper
Jim Sharp
•
Doug Mitchell retired at the end of March and his position
will be filled when another Non-Executive Director is
appointed to the Board.
The Remuneration Committee has responsibility for setting
the remuneration policy for all Executive Directors and
the Chairman of the Board, including pension rights and
any compensation payments. This includes reviewing the
performance of the Executive Directors and determining
their terms and conditions of service, their remuneration and
the grant of any options, having due regard to the interests of
the shareholders.
The remuneration of senior management is discussed by the
Chairman of the Remuneration Committee and the Chief
Executive and their recommendations endorsed by the
Remuneration Committee.
No director can take part in the decision of their own salary
or rewards.
In setting the remuneration policy, the Remuneration
Committee takes into account the objective to attract, retain
and motivate executive management of the calibre required
to run the Company successfully. Our remuneration policy
is closely aligned with our long term strategic goals and our
approach to risk management.
The Remuneration Committee also recognises that
a significant proportion of remuneration should be
structured so as to link rewards to corporate and individual
performance and be designed to promote the long-term
success of the Company.
The Remuneration Committee meets at least twice a year
and otherwise as required.
The Remuneration Committee will periodically review
the policy to confirm that our remuneration framework
continues to support the delivery of our business objectives.
In developing this policy, the Remuneration Committee
takes into account the best interests of the business and the
agreed terms and conditions of employment for each director
of the Company. Our overall remuneration philosophy aims:
•
•
•
To recognise the importance of ensuring that
employees of the Group are effectively and
appropriately rewarded.
To operate a remuneration policy that is a mix of
fixed and variable pay. Variable pay is both short
term and long term.
To align directors’ interests with those of the
Company.
• To have a pay for performance approach.
•
To provide a market competitive level of
remuneration to enable the company to attract and
retain high level individuals, to support the ongoing
success of the Company.
SERVICE CONTRACTS
EXECUTIVE DIRECTOR
NOTICE PERIOD
P I Wild
I M Maddock
M Thompson
K D Watson
P J Willink
S A Adams
6 months
6 months
12 months
6 months
12 months
6 months
M A J Cropper is employed on a contract of 12 months
notice. The other Non-Executive Directors are employed
on contracts of one month’s notice by either side.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL SHAREHOLDER RETURN (TSR)
TOTAL SHAREHOLDER RETURN
0
0
1
o
t
d
e
s
a
b
e
R
1200
900
600
300
0
04/07
04/08
04/09
04/10
04/11
04/12
04/13
04/14
04/15
04/16
04/17
James Cropper
FTSE AIM All Share
FTSE All Share
To enable shareholders to assess the
Company’s performance against the
London Stock Exchange, the cumulative
TSR for the period ended 1 April 2017
is shown in the graph (left). The FTSE
All Share is deemed to be the most
appropriate comparison in terms of
performance. TSR is the total return to
shareholders in terms of capital growth
and dividends reinvested.
The following table brings together the various elements of remuneration of each director for the financial period ended 1 April 2017.
SALARY
AND FEES
BENEFITS
ANNUAL
BONUS
PENSION
COST
TOTAL
2017
2016
£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000
2016 2017
2016
2016
2016
2017
2017
2017
EXECUTIVE
M A J Cropper
P I Wild
I M Maddock
M Thompson
K D Watson
P J Willink
S A Adams
(appointed January 2017)
NON-EXECUTIVE
D Mitchell
J E Sharp
D R Wilks
75
184
110
127
129
118
73
174
103
113
115
103
10
34
21
27
22
23
38
-
5
22
27
29
22
27
29
-
-
-
8
51
20
25
21
22
-
-
-
-
-
42
27
30
30
27
8
-
-
-
-
39
23
28
26
23
-
-
-
-
5
10
7
3
6
3
11
7
7
7
19
17
-
-
-
-
-
-
-
-
90
270
165
187
187
187
84
275
153
173
169
165
51
-
22
27
29
22
27
29
859
759
142
147
164
139
50
52
1,215
1,097
LONG TERM INCENTIVE PLAN
Under the Plan, awards to acquire ordinary shares in the Company can be made to Executive Directors and employees of
the Company and its subsidiaries selected by the Remuneration Committee.
Awards made during the financial year to 1 April 2017 under the Plan to Executive Directors were as follows:
NUMBER
AT
2 APRIL
2016
NUMBER
GRANTED
IN PERIOD
MID-MARKET
PRICE (£) OF
OPTIONS
AWARDED
NUMBER
EXERCISED
IN PERIOD
OPTIONS
LAPSED
IN PERIOD
NUMBER
AT
1 APRIL
2017
P I Wild
M A J Cropper
P J Willink
I M Maddock
M Thompson
K D Watson
72,190
15,339
24,913
15,743
26,117
17,909
14,932
£9.543
-
-
6,025
6,811
6,811
-
-
£9.543
£9.543
£9.543
32,796
4,673
10,978
1,808
11,601
2,252
-
-
-
-
-
-
54,326
10,666
13,935
19,960
21,327
22,468
55
56
Governance - Report of the Remuneration Committee
Governance - Report of the Remuneration Committee
CASH-SETTLED OPTIONS UNDER THE LTIP
Conditional cash awards (“Cash Awards”) grant participating employees a conditional right to be paid a cash amount based
on the proceeds of the sale of a specified number of Ordinary Shares following vesting of the award. Under the LTIP Plan,
Conditional Cash awards were granted to the following Executive Directors:
OPTIONS
AT
2 APRIL
2016
NUMBER
GRANTED
IN PERIOD
MID-MARKET
PRICE (£) OF
OPTIONS
AWARDED
OPTIONS
EXERCISED
IN PERIOD
OPTIONS
LAPSED
IN PERIOD
OPTIONS
AT
1 APRIL
2017
M A J Cropper
P J Willink
-
-
3,781
6,025
£9.543
£9.543
-
-
-
-
3,781
6,025
SAYE OPTIONS
The details of the SAYE options that are open to the Executive Directors at 1 April 2017 are as follows:
Date of SAYE
Term of Option
Executive Director
I M Maddock
Grant
5.25 years
01 September 2013
Exercise price £1.9952 per share
No. of shares
Total Share Options available as at 1 April 2017
4,360
4,360
REMUNERATION POLICY SUMMARY
PURPOSE AND LINK TO STRATEGY OPERATION
BASE SALARY
To reflect market value of the role
and individual’s performance and
contribution and enable the Group to
recruit and retain directors of sufficient
calibre required to support achievement
of both short and long-term goals.
NON-EXECUTIVE
DIRECTORS’ SALARIES
To attract and retain the right individuals
required to support the achievement of
both short and long-term goals.
The salary of each Executive Director will be reviewed annually by the
Remuneration Committee without any obligation to increase such salary.
Base salaries are benchmarked against companies of a comparable size with a
targeted approach of median positioning against the market, subject to satisfactory
performance.
There may be reviews and changes to base salary during the year if considered
appropriate by the Remuneration Committee.
The Remuneration Committee will take account of relevant comparator group data
as well as pay increases awarded to other employees within the Company.
Salaries for Non-Executive Directors are based on market practice and are reviewed
by the Board each year.
The maximum aggregate amount of salaries that the Company may pay to all the
Directors who do not hold executive office for their services is £200,000 per annum,
or such larger amount as the Company may by ordinary resolution decide.
BENEFITS
To attract and retain the right
individuals and level of talent required
to support achievement of both short
and long term goals.
Each Executive Director is awarded a benefit allowance which allows individuals to
select from a range of personal benefits including, but not limited to, private medical
insurance and a company car. Any unused monetary sum is paid to the individual
at the end of the tax year via the PAYE system.
The benefit allowance is reviewed periodically by the Remuneration Committee.
PENSION
To attract and retain the right
individuals and level of talent required
to support achievement of both short
and long term goals.
The Chief Executive and the Chairman are members of the Company’s defined
contribution scheme. Other Executive Directors are either members of the
Company’s defined benefit scheme or the Company’s defined contribution scheme.
Non-Executive Directors are not in any of the Company pension schemes.
The annual cost borne by the Company is shown in the Directors’ Remuneration table.
LONG TERM INCENTIVE
PLAN (LTIP)
To incentivise the delivery of key
performance measures over the
long term.
To retain key executives and increase
their share ownership in the Company,
aligning their interests with those
of shareholders.
Under the plan, awards to acquire ordinary shares in the Company, or cash
equivalent, can be made to executive directors and other employees within
the group, as selected by the Remuneration Committee.
The number of options that can be awarded to any participant in a financial year
under the Plan, determined by reference to the Company’s 20 day average mid-
market share price at the time of the award, is limited to a maximum of 75%
of the participant’s base salary.
The LTIP awards are subject to the achievement of certain performance conditions
as set out below.
CONDITIONS FOR LTIP AWARDS
EARNINGS PER SHARE CONDITIONS (FOR AWARDS GRANTED AFTER MARCH 2016)
•
•
•
Awards will vest in full on the third anniversary of the granting of the award, provided the growth in the Company’s
earnings per share, adjusted for IFRS pension adjustments and exceptional items over that period, exceeds the increase in the
retail price index (“RPI”) plus 20% per annum;
Awards will vest proportionally between 25% and 100% on the third anniversary of the granting of the award, provided the
adjusted earnings per share over that period equate to or exceed the increase in RPI plus 6% but less than 20%per annum;
Awards will lapse on the third anniversary of the granting of the award if the growth in the Company’s adjusted earnings per
share does not equate to at least the increase in RPI plus 6% per annum.
EARNINGS PER SHARE CONDITIONS (FOR AWARDS GRANTED BEFORE MARCH 2016)
•
•
•
Awards will vest in full on the third anniversary of the granting of the award, provided the growth in the Company’s
earnings per share, adjusted for IFRS pension adjustments and exceptional items over that period, exceeds the increase in
the retail price index (“RPI”) plus 10% per annum;
Awards will vest proportionally between 10% and 100% on the third anniversary of the granting of the award, provided the
adjusted earnings per share over that period equate to or exceed the increase in RPI plus 2.5% but less than 10% per annum;
Awards will lapse on the third anniversary of the granting of the award if the growth in the Company’s adjusted earnings per
share does not equate to at least the increase in RPI plus 2.5%per annum.
EBITDA TARGET CONDITIONS (FOR AWARDS GRANTED BEFORE MARCH 2016)
•
•
•
•
Awards will vest in full on the third anniversary of the granting of the award if the third year EBITDA target as set out in the
Company’s 3 year business plan, for the year the award was granted, has been met or exceeded;
Awards will vest at 30% on the third anniversary of the granting of the award if at least 95% but less than 100% of the third year
EBITDA target as set out in the Company’s 3 year business plan, for the year the award was granted, has been met or exceeded;
Awards will vest at 20% on the third anniversary of the granting of the award if at least 90% but less than 95% of the third year
EBITDA target as set out in the Company’s 3 year business plan, for the year the award was granted, has been met or exceeded;
Awards will lapse on the third anniversary of the granting of the award if less than 90% of the third year EBITDA target as
set out in the Company’s 3 year business plan, for the year the award was granted, has been achieved.
EBITDA
For the purposes of the LTIP award, EBITDA is defined as:
Operating Profit before interest, tax, depreciation and amortisation and excluding IFRS pension adjustments and exceptional items.
57
58
Governance - Directors’ Report
Governance - Directors’ Report
DIRECTORS’ REPORT
The Directors present their Annual Report and the audited financial statements of James Cropper Group for the 52 weeks
ended 1 April 2017.
PRINCIPAL ACTIVITIES
CORPORATE GOVERNANCE
The principal activity of the Group comprises the
manufacture of specialist paper and advanced materials.
There have not been any significant changes in the Group’s
principal activities in the year under review. The Directors
are not aware, at the date of this report, of any likely major
changes in the Group’s activities in the next year.
REVIEW OF BUSINESS AND FUTURE
DEVELOPMENTS
The Chairman’s Letter on pages 18 and 19, the Strategic
Report on pages 20 to 37 and the Financial Review on pages
23 to 37, report on the performance of the Group for the year
ended 1 April 2017 and its prospects for the future.
The Chairman’s Statement, the Strategic Report and this
report have been prepared solely to provide additional
information to shareholders to assess the Company’s
strategies and the potential for those strategies to succeed.
These statements are made by the Directors in good faith
based on the information available to them up to the time
of their approval of this report and such statements should
be treated with caution due to the inherent uncertainties,
including both economic and business risk factors,
underlying any such forward looking information.
THE BOARD
The Directors who served during the year under review were:
Mark Cropper
Phil Wild
Steve Adams (appointed 1 January 2017)
Isabelle Maddock
Martin Thompson
Dave Watson
Patrick Willink
Doug Mitchell (resigned 31 March 2017)
Jim Sharp
David Wilks
Details of the Director’s remuneration are shown in the
Report of the Remuneration Committee on pages 55 to 59.
Details of the Directors’ interests in the share capital of the
Company are set out below. The biographies of the Directors
as at the date of this report are on pages 50 to 51.
RESULTS AND DIVIDENDS
The results for the year are shown in the Statement
of Comprehensive Income on page 68.
An interim dividend of 2.5p per ordinary share was paid
on 13 January 2017. The Directors are recommending a final
dividend of 9.3p per ordinary share, subject to approval
at the Annual General Meeting of the Company, making
the total dividend for the year 11.8p (2016:9.3p) per share.
Full details of dividends in respect of the year ended
1 April 2017 are given in note 7 of the financial statements.
A report on Corporate Governance is set out on pages
52 to 54, and forms part of this report by reference.
HEALTH & SAFETY
The Group is committed to providing a safe working
environment for all employees. Group policies are reviewed
regularly to ensure that policies relating to training, risk
assessment and accident management are appropriate.
Health & safety issues are reported at each Board
meeting and Executive Committee meeting.
CHARITABLE AND POLITICAL
DONATIONS
It is the Group’s policy not to make any donations to,
or incur expenditure on behalf of political parties, other
political organisations or independent election candidates
and the Board does not intend to change this policy.
Donations totalling £16,000 (2016:£9,000) were made
for various local charitable purposes.
EMPLOYEE INVOLVEMENT AND POLICY
REGARDING DISABLED PERSONS
The Group’s employees are its most important asset.
The Group operates an equal opportunities policy that aims
to treat individuals fairly and not to discriminate in any way.
Regular consultative meetings are held with the trade
union representatives to advise them on all aspects of
Group developments. Communications with all employees
continues through monthly and bi-annual briefings on
performance, safety and any other relevant developments.
It is the Group’s policy to give equal opportunity when
considering applications from disabled persons where the job
requirements are considered to be within their ability. In the
event of employees becoming disabled, every effort is made to
ensure that their employment with the Group continues and
that appropriate training is arranged. It is the policy of the
Group that the training, career development and promotion
of a disabled person should, as far as practicable, be identical
to that of a person who does not suffer from a disability.
ENVIRONMENTAL POLICY
James Cropper Group recognises the importance of its
environmental responsibilities and designs and implements
policies to reduce any damage that might be caused by the
Group’s activities. Initiatives designed to minimise the
Group’s impact on the environment include safe disposal
of waste, recycling and reducing energy consumption.
SHARE CAPITAL
Full details of the authorised and issued share capital
of the Company are set out in note 19 to the consolidated
financial statements.
AUTHORITY TO ALLOT SHARES
A resolution will be proposed to renew an existing authority
which expires at the Annual General Meeting to give the
Directors authority to exercise the powers of the Company
to allot unissued shares.
DIRECTORS POWER TO DISAPPLY
PRE-EMPTION RIGHTS
A resolution will be proposed at the Annual General
Meeting which disapplies statutory pre-emption rights
on the allotment of shares by empowering the Directors
to allot shares for cash without offering them to existing
shareholders first.
GOING CONCERN
The Chairman’s Letter and the Chief Executive’s Review
on pages 18 to 22, outline the business activities of the
Group along with the factors which may affect its future
development and performance. The Financial Review
discusses the Group’s financial position, along with
details of its cash flow and liquidity. Note 16 to the
financial statements sets out the Group’s financial risks
and the management of those risks.
Having prepared management forecasts and made appropriate
enquiries, the Directors are satisfied that the Group has
adequate resources for the foreseeable future. Accordingly,
they have continued to adopt the going concern basis in
preparing the Group and Company financial statements.
DISCLOSURE OF INFORMATION
TO THE AUDITOR
KPMG LLP has expressed its willingness to continue
in office. Its appointment and authority for the Directors
to agree its remuneration will be proposed at the Annual
General Meeting. Each of the Directors as at the date of
approval of this Annual report confirms that:
•
•
So far as the Director is aware there is no relevant
audit information of which the Company’s Auditor
is unaware; and
The Director has taken all steps he/she ought to
have taken as a Director in order to make himself/
herself aware of any relevant audit information and
to establish that the Company’s Auditor is aware of
that information.
ANNUAL GENERAL MEETING
Your attention is drawn to the Notice of Annual General
Meeting on pages 101 to 103 which sets out the resolutions
to be proposed at the forthcoming Annual General Meeting.
The meeting will be held at The Bryce Institute, Burneside,
Kendal, Cumbria LA9 6PZ on Wednesday 26 July 2017
at 11am.
SUBSTANTIAL INTERESTS
Shareholdings in excess of 3% of the issued capital at 3 June 2017 were as follows:
NAME OF SHAREHOLDING
NUMBER
OF SHARES
%
HOLDING
NOTE NO.
BELOW
Cropper Family - Beneficial and Non Beneficial Interests
Willink Family – Beneficial and Non Beneficial Interests
Acland Family – Beneficial Interests
Total
Miton Asset Management Limited
DW Pension Fund Ltd
3,033,012
525,678
52,386
3,611,076
478,931
430,000
32.0
5.6
0.6
38.1
5.1
4.5
1
Notes on Shareholding Table:
1. The Cropper, Willink and Acland families are related and are deemed to be acting in concert with a total holding
of 38.1% holding in the Company.
59
60
Governance - Directors’ Report
James Cropper 3D Products
JAMES CROPPER 3D PRODUCTS:
PACK AGING FOR THE FUTURE
DETAILS OF DIRECTORS’ INTERESTS
The interests in the shares of the Company of those Directors serving at 1 April 2017 were as follows:
AT 1 APRIL 2017
AT 2 APRIL 2016
ORDINARY
SHARES
OPTIONS ON
ORDINARY
SHARES
ORDINARY
SHARES
OPTIONS ON
ORDINARY
SHARES
DIRECTOR
INTEREST
M A J Cropper
Beneficial
Non-beneficial
1,267,376
559,571
P I Wild
Beneficial
6,136
I M Maddock
Beneficial
S A Adams
Beneficial
8,244
1,000
M Thompson
Beneficial
23,708
K D Watson
Beneficial
2,025
P J Willink
D R Wilks
J E Sharp
Beneficial
Non-beneficial
51,112
1,132,408
Beneficial
Non-beneficial
Beneficial
Non-beneficial
9,465
92,575
7,950
92,575
10,666
-
54,326
19,960
-
21,327
22,468
13,935
-
-
-
-
-
1,229,593
559,571
7,142
9,071
-
39,932
1,223
50,210
1,132,408
9,465
96,958
7,950
96,958
15,339
-
76,700
20,103
-
26,117
17,909
25,815
-
-
-
-
-
Any material related party transactions between the Directors
and the Company are set out in note 24 to the consolidated
financial statements. Further information relating to the
interests of the Directors regarding options on ordinary
shares is given in the Report of the Remuneration Committee
on page 55 to 59. Non-beneficial interests include shares held
jointly as trustee with other Directors.
There have been no other material changes between
the year-end and 26 June 2017.
Approved by the Board of Directors on 26 June 2017
and were signed on its behalf by
Mark Cropper, Chairman.
Matthew Miller, Business Director of James Cropper 3D
Products, reflects on the first year of growth and responding
to global demand for sustainable packaging innovation.
“Since the public launch of our sustainable moulded paper
packaging at Packaging Innovations 2016, James Cropper
3D Products has gone from strength to strength throughout
a pivotal year. Since the year end, we have won new contracts
in sectors ranging from the leading high street cosmetic brands
to those selling consumer electronics. We have continued to
strengthen our technical capability, expanded our production
capacity to meet demand, and accelerated our investment in
people as well as drawing on the multitude of unique skills and
experience held within James Cropper PLC. It is only through
this wealth of experience that we are able to address one of the
biggest challenges in the packaging industry today providing
better, more sustainable packaging solutions that reflect our
customers’ brand values and enable them to create unique
packaging experiences fit for the future.”
CREATING IMPACT AT
PACKAGING INNOVATIONS 2016
“We created a buzz at Packaging Innovations 2016,
held at London’s Olympia, which marked the official
public launch of James Cropper 3D Products. It was an
ideal platform to introduce our innovations to many of
the world’s discerning, forward-thinking brands as well
as the packaging media.”
“We built valuable relationships with new customers and
generated a flurry of media interest. Soon after the show,
Packaging News paid a special visit to Burneside Mills
to learn about our products and discover our unique
capabilities in bespoke colour and form.”
61
62
63James Cropper 3D ProductsFUTURE FOCUSED - CIRCULAR ECONOMY THINKING“There’s a growing pressure on brands to embrace circular economy thinking in their packaging design. This means not only using renewable materials and committing to responsible, lower impact manufacture, but also creating packaging that is easier for consumers to recycle.”“At James Cropper 3D Products, our mission is to help brands do this without losing the excitement and quality of experience that outstanding packaging provides. We know that compromise isn’t an option, sustainable packaging has to ‘do it all’. Our credibility and unique skill in delivering bespoke packaging solutions for global brands, is key. We believe in helping brands use packaging creatively, and we continually innovate to make sure they can do that, sustainably.”• BESPOKE COLOUR Our unique expertise in colour means we can offer customers new creative freedom with perfect colour matching and guaranteed consistency. • BESPOKE FORM Our customers can get creative with shape and structural performance thanks to our design-engineered approach. • NATURAL STRENGTH Drawing on our unique ability to innovate with renewable fibres, we are enhancing packaging performance with uniform wall thickness and improved integrity.• RETENTION FEATURES Protection and presentation are crucial in packaging design. Our moulding capabilities deliver this performance without the need for complex mixed materials. • QUALITY, BESPOKE FINISH We offer bespoke surface finishes alongside bespoke colour and form. From a warm natural touch to a pure smooth finish, or even a customised texture, using meshing or embossing. All using renewable fibres.• PRECISION EMBOSSING A powerful new opportunity to accentuate brand identity, convey brand messages or add texture as part of a unique packaging design and consumer experience.Financial StatementsFINANCIAL STATEMENTSFINANCIAL STATEMENTS 65STATEMENT OF DIRECTORS’ RESPONSIBILITIES 66INDEPENDENT AUDITOR’S REPORT 67GROUP STATEMENT OF COMPREHENSIVE INCOME 68STATEMENT OF FINANCIAL POSITION 69STATEMENT OF CASH FLOWS 70STATEMENT OF CHANGES IN EQUITY 71NOTES TO THE FINANCIAL STATEMENTS 73SHAREHOLDER INFORMATION 100NOTICE OF ANNUAL GENERAL MEETING 10165 STATEMENT OF DIRECTORS’ RESPONSIBILITIES
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF JAMES CROPPER PLC
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the parent
company’s transactions and disclose with reasonable accuracy
at any time the financial position of the parent company and
enable them to ensure that its financial statements comply with
the Companies Act 2006. They have general responsibility for
taking such steps as are reasonably open to them to safeguard
the assets of the group and to prevent and detect fraud and
other irregularities.
The Directors are responsible for the maintenance and
integrity of the corporate and financial information included
on the company’s website. Legislation in the UK governing
the preparation and dissemination of financial statements
may differ from legislation in other jurisdictions.
The Directors are responsible for preparing the Annual
Report, Strategic Report, the Directors’ Report and the
group and parent company financial statements in
accordance with applicable law and regulations.
Company law requires the Directors to prepare group
and parent financial statements for each financial year.
As required by the AIM Rules of the London Stock
Exchange they are required to prepare the group financial
statements in accordance with IFRSs as adopted by the
EU and applicable law.
Under company law the Directors must not approve the
financial statements unless they are satisfied that they give
a true and fair view of the state of affairs of the group and
parent company and of their profit or loss for that period.
In preparing each of the group and parent company
financial statements, the Directors are required to:
• select suitable accounting policies and then apply
them consistently;
• make judgements and estimates that are reasonable
and prudent;
• for the group financial statements, state whether they
have been prepared in accordance with IFRSs as adopted
by the EU; and
• for the parent company financial statements, state whether
applicable UK Accounting Standards have been followed,
subject to any material departures disclosed and explained
in the financial statements; and
• prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the group and the
parent company will continue in business.
We have audited the financial statements of James Cropper
PLC for the 52 weeks ended 1 April 2017 set out on pages
68 to 99. The financial reporting framework that has been
applied in the preparation of the group and parent financial
statements is applicable law and International Financial
Reporting Standards (IFRSs) as adopted by the EU.
This report is made solely to the company’s members,
as a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken
so that we might state to the company’s members those
matters we are required to state to them in an auditor’s report
and for no other purpose. To the fullest extent permitted by
law, we do not accept or assume responsibility to anyone other
than the company and the company’s members, as a body,
for our audit work, or for the opinions we have formed.
Respective responsibilities of directors and auditor
As explained more fully in the Directors’ Responsibilities
Statement set out on page 66, the directors are responsible
for the preparation of the financial statements and for being
satisfied that they give a true and fair view. Our responsibility
is to audit, and express an opinion on, the financial statements
in accordance with applicable law and International Standards
on Auditing (UK and Ireland). Those standards require us to
comply with the Auditing Practices Board’s Ethical Standards
for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements
is provided on the Financial Reporting Council’s website at
www.frc.org.uk/auditscopeukprivate.
Opinion on financial statements
In our opinion:
Opinion on other matters prescribed by the Companies
Act 2006
In our opinion, the information given in the Strategic Report
and the Directors’ Report for the financial year is consistent
with the financial statements.
Based solely on the work required to be undertaken in
the course of the audit of the financial statements and
from reading the Strategic Report and Directors’ Report:
• we have not identified material misstatements in
those reports; and
• in our opinion, those reports have been prepared
in accordance with the Companies Act 2006.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters
where the Companies Act 2006 requires us to report to
you if, in our opinion:
• adequate accounting records have not been kept by the
parent company, or returns adequate for our audit have
not been received from branches not visited by us; or
• the parent company financial statements are not in
agreement with the accounting records and returns; or
• certain disclosures of directors’ remuneration specified
by law are not made; or
• we have not received all the information and explanations
we require for our audit.
• the financial statements give a true and fair view of the
state of the group’s and of the parent company’s affairs
as at 1 April 2017 and of the group’s profit for the year
then ended;
Nick Plumb (Senior Statutory Auditor)
for and on behalf of KPMG LLP,
Chartered Accountants
• the group and parent financial statements have been
properly prepared in accordance with IFRSs as adopted
by the EU;
1 St Peter’s Square,
Manchester
M2 3AE
• the financial statements have been prepared in accordance
26 June 2017
with the requirements of the Companies Act 2006.
66
67
Financial Statements
Financial Statements
JAMES CROPPER PLC
GROUP STATEMENT OF COMPREHENSIVE INCOME
JAMES CROPPER PLC
STATEMENT OF FINANCIAL POSITION
52 week
period to
1 April
2017
Continuing
Operations
£’000
Note
53 week
period to
2 April
2016
Continuing
Operations
£’000
53 week
period to
2 April
2016
Exceptional
Items
£’000
53 week
period to
2 April
2016
Total
£’000
2
20
4
2
3
3
4
5
6
6
92,363
322
(180 )
(34,793 )
(4,501 )
(26,238 )
(2,297 )
(18,468 )
(20 )
6,188
(548 )
-
5,640
(910 )
4,730
50.5p
50.0p
87,920
505
1,771
(35,795 )
(4,519 )
(25,155 )
(2,306 )
(16,996 )
-
1,000
87,920
1,505
-
-
-
-
-
-
1,771
(35,795 )
(4,519 )
(25,155 )
(2,306 )
(16,996 )
-
(1,765 )
(1,765 )
5,425
(793 )
1
4,633
(724 )
3,909
(765 )
-
-
(765 )
(150 )
(915 )
4,660
(793 )
1
3,868
(874 )
2,994
32.6p
31.8p
Continuing operations
Revenue
Other income
Changes in inventories of finished
goods and work in progress
Raw materials and consumables used
Energy costs
Employee benefit costs
Depreciation and amortisation
Other expenses
Provisions for uninsured risks and losses*
Operating Profit
Interest payable and similar charges
Interest receivable and similar income
Profit before taxation
Tax expense
Profit for the period
Earnings per share - basic
Earnings per share - diluted
OTHER COMPREHENSIVE INCOME
Profit for the period
4,730
3,909
(915 )
2,994
Items that are or may be reclassified to profit or loss
Foreign currency translation
Loss on interest rate hedge
Items that will never be reclassified to profit or loss
224
(9 )
114
-
Retirement benefit liabilities – actuarial (losses) / gains
17
(11,386 )
6,554
Deferred tax on actuarial losses / (gains)
on retirement benefit liabilities
Income tax on other comprehensive income
Other comprehensive (expense) / income for the year
Total comprehensive (expense) / income for the period
attributable to equity holders of the Company
18
5
1,847
-
(9,324 )
(1,488 )
77
5,257
-
-
-
-
-
-
114
-
6,554
(1,488 )
77
5,257
Assets
Intangible assets
Property, plant and equipment
Investments in subsidiary undertakings
Deferred tax assets
Total non- current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Current tax assets
Total current assets
Total assets
Liabilities
Trade and other payables
Other financial liabilities
Loans and borrowings
Current tax liabilities
Total current liabilities
Long-term borrowings
Retirement benefit liabilities
Total non-current liabilities
Total liabilities
Equity
Share capital
Share premium
Translation reserve
Reserve for own shares
Retained earnings
Total shareholders’ equity
Note
8
9
10
18
11
12
13
14
15
15
17
19
Group
As at
1 April
2017
£’000
569
26,572
-
2,270
29,411
14,097
23,066
1,921
-
Group
As at
2 April
2016
£’000
123
23,650
-
78
Company
As at
1 April
2017
£’000
Company
As at
2 April
2016
£’000
69
1,942
7,350
3,733
54
1,752
7,350
1,609
23,851
13,094
10,765
14,102
19,595
3,186
-
-
-
45,191
38,792
526
463
642
261
39,084
36,883
46,180
39,695
68,495
60,734
59,274
50,460
18,493
9
1,570
1
20,073
7,715
18,820
26,535
15,067
-
3,886
613
19,566
6,605
7,870
14,475
19,470
18,075
9
79
-
-
74
-
19,558
18,149
6,427
18,820
25,247
4,094
7,870
11,964
46,608
34,041
44,805
30,113
2,367
1,472
602
(853 )
18,299
21,887
2,306
1,079
378
(343 )
23,273
26,693
2,367
1,472
-
-
10,630
14,469
2,306
1,079
-
-
16,962
20,347
(4,594 )
9,166
(915 )
8,251
The financial statements on pages 68 to 99 were approved by the Board of Directors on 26 June 2017 and were signed on its behalf by:
Total equity and liabilities
68,495
60,734
59,274
50,460
* The exceptional items relate to additional income/costs arising as a consequence of the flood following the aftermath
of Storm Desmond in December 2015.
M A J Cropper
Chairman
Company Registration No: 30226
The accompanying notes form part of the financial statements
The accompanying notes form part of the financial statements
68
69
Financial Statements
Financial Statements
JAMES CROPPER PLC
STATEMENT OF CASH FLOWS
For the period ended 1 April 2017 (2016: for the period ended 2 April 2016)
Cash flows from operating activities
Net profit
Adjustments for:
Tax
Depreciation and amortisation
Net IAS 19 pension adjustments within SCI
Past service pension deficit payments
Foreign exchange differences
Loss on disposal of property, plant and equipment
Net bank interest income & expense
Share based payments
Dividends received from Subsidiary Companies
Changes in working capital:
Decrease / (increase) in inventories
(Increase) in trade and other receivables
Increase in trade and other payables
Interest received
Interest paid
Tax paid
Net cash generated from / (used by) operating activities
Cash flows from investing activities
Purchase of intangible assets
Purchases of property, plant and equipment
Proceeds from sale of property, plant and equipment
Dividends received
Cash flows from financing activities
Proceeds from issue of ordinary shares
Proceeds from issue of new loans
Repayment of borrowings
Issue of inter-company loans
Purchase of LTIP investments
Dividends paid to shareholders
Net cash (used in) / generated from financing activities
Net (decrease) / increase in cash and cash equivalents
Effect of exchange rate fluctuations on cash held
Net (decrease) / increase in cash and cash equivalents
Cash and cash equivalents at the start of the period
Cash and cash equivalents at the end of the period
Cash and cash equivalents consists of:
Cash at bank and in hand
910
2,297
926
(1,362 )
84
14
282
283
-
105
(4,113 )
3,932
2
(293 )
(1,081 )
6,716
(486 )
(4,828 )
4
-
Group
2017
£’000
Group
2016
£’000
Company Company
2016
£’000
2017
£’000
4,730
2,994
3,370
438
874
2,306
1,305
(1,323 )
(166 )
-
326
274
-
(1,021 )
(3,861 )
2,770
2
(333 )
(429 )
326
120
926
(1,362 )
78
-
(648 )
283
(7 )
196
1,305
(1,323 )
(65 )
-
(847 )
274
(6,000 )
(3,500 )
-
(2,661 )
2,094
720
(73 )
-
(2,819 )
4,723
914
(66 )
(1,081 )
(429 )
3,718
(3,908 )
(1,206 )
(133 )
(3,953 )
-
-
454
2,450
(4,115 )
-
(510 )
(881 )
(2,602 )
(1,196 )
(69 )
(1,265 )
3,186
1,921
59
4,790
(3,284 )
-
(74 )
(772 )
719
351
114
465
2,721
3,186
(28 )
(286 )
-
6,000
5,686
454
2,270
(68 )
(3,602 )
-
(881 )
(125 )
(125 )
-
3,500
3,250
59
4,000
(2,075 )
(4,574 )
-
(772 )
(1,827 )
(3,362 )
(49 )
(67 )
(1,318 )
57
(116 )
(1,261 )
642
526
1,903
642
1,921
3,186
526
642
Net cash (used in) / generated from investing activities
(5,310 )
(4,086 )
JAMES CROPPER PLC
STATEMENT OF CHANGES IN EQUITY
GROUP
All figures in £’000
Share
capital
Share
premium
Translation
reserve
Own
Shares
Retained
earnings
Total
28 March 2015
Profit for the period
Exchange differences
2,292
1,034
264
(269 )
15,541
18,862
-
-
-
-
-
114
-
2,994
2,994
-
-
114
Actuarial gains on retirement
benefit liabilities (net of deferred tax)
-
-
-
-
5,066
5,066
Other comprehensive income tax
-
-
-
-
77
77
Total other comprehensive income
-
-
114
Dividends paid
-
-
-
-
-
5,143
(772 )
Share based payment charge
-
-
-
-
274
Tax on share options
-
-
-
-
135
5,257
(772 )
274
135
Proceeds from issue of ordinary shares
14
45
-
-
- 59
Distribution of own shares
Consideration paid for own shares
-
-
-
-
-
-
42
(116 )
(42 )
-
-
(116 )
Total contributions by and
distributions to owners of the Group
At 2 April 2016
Profit for the period
Exchange differences
Actuarial losses on retirement
benefit liabilities (net of deferred tax)
Loss on interest rate hedge
Total other comprehensive income
Dividends paid
Share based payment charge
Tax on share options
Proceeds from issue of ordinary shares
Distribution of own shares
-
-
-
-
-
-
-
-
61
-
14
45
-
(74 )
(405 )
(420 )
2,306
1,079
-
-
-
-
-
-
-
-
393
-
-
393
378
-
224
-
-
224
-
-
-
-
-
-
-
(343 )
23,273
26,693
-
-
-
-
-
-
-
-
-
192
(702 )
(510 )
(853 )
4,730
-
4,730
224
(9,539 )
(9,539 )
(9 )
(9 )
(9,548 )
(9,324 )
(881 )
283
634
-
(192 )
-
(881 )
283
634
454
-
(702 )
(156 )
(212 )
18,299
21,887
Consideration paid for own shares
-
Total contributions by and
distributions to owners of the Group
At 1 April 2017
61
2,367
1,472
602
The accompanying notes form part of the financial statements
The accompanying notes form part of the financial statements
70
71
Financial Statements
Notes to the Financial Statements
JAMES CROPPER PLC
STATEMENT OF CHANGES IN EQUITY
COMPANY
All figures in £’000
At 28 March 2015
Profit for the period
Actuarial gains on retirement benefit liabilities (net of deferred tax)
Other comprehensive income tax
Total other comprehensive income
Dividends paid
Share based payment charge
Tax on share options
Proceeds from issue of ordinary shares
Distribution of own shares
Total contributions by and distributions to owners of the Group
At 2 April 2016
Profit for the period
Loss on interest rate hedge
Actuarial loss on retirement benefit liabilities (net of deferred tax)
Total other comprehensive income
Dividends paid
Share based payment charge
Tax on share options
Proceeds from issue of ordinary shares
Distribution of own shares
Total contributions by and distributions to owners of the Group
Share
Share
capital premium
Retained
earnings
Total
2,292
1,034
11,786
15,112
-
-
-
-
-
-
-
14
-
14
-
-
-
-
-
-
-
45
-
45
438
5,066
77
5,143
(772 )
274
135
-
(42 )
438
5,066
77
5,143
(772 )
274
135
59
(42 )
(405 )
(346)
2,306
1,079
16,962
20,347
-
-
-
-
-
-
-
61
-
61
-
-
-
-
-
-
-
393
-
393
3,370
3,370
(9 )
(9 )
(9,539 )
(9,539 )
(9,548 )
(9,548 )
(881 )
283
636
-
(192 )
(154 )
(881 )
283
636
454
(192 )
300
At 1 April 2017
2,367
1,472
10,630
14,469
1. ACCOUNTING POLICIES
The principal accounting policies adopted in the preparation
of these financial statements are set out below. These policies
have been consistently applied to all the years presented,
unless otherwise stated.
Statement of compliance
The consolidated financial statements of the Company
have been prepared in accordance with International
Financial Reporting Standards (“IFRS”) as adopted in
the EU, International Financial Reporting Interpretations
Committee (“IFRIC”) interpretations and with those
parts of the Companies Act 2006 applicable to companies
reporting under IFRS.
Basis of preparation
The accounting “year” for the Group is a 52 week accounting
period ending 1 April 2017, (2016: 53 week accounting period
ended 2 April 2016).
The consolidated financial statements have been prepared
on a going concern basis under the historical cost convention
except for the revaluation of certain financial instruments to
fair value. The financial statements are presented in Pounds
Sterling, being the currency of the primary economic
environment in which the Group operates. All values are
rounded to the nearest thousand pounds, except where
otherwise indicated. On publishing the parent company
financial statements here together with the Group financial
statements, the Company is taking advantage of the exemption
in s408 of the Companies Act 2006 not to present its
individual Statement of Comprehensive Income and related
notes that form a part of these approved financial statements.
Use of estimates and judgements
The preparation of financial statements in conformity with
generally accepted accounting principles 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 revenues 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 following policies and accompanying notes are where
the assumptions and judgements made by management could
have an impact on the Group’s consolidated financial
statements. Only Note 17, retirement benefits, is considered
to be a significant estimate.
Note 9 Property, plant and equipment
It is the Group’s policy to depreciate categories within
property, plant and equipment on a straight line basis over
their estimated useful lives. A key element of this policy is
the estimate of the useful life applied to each category of
asset which in turn determines the annual depreciation
charge. Variations in asset lives could affect Group profit
through an increase or decrease in the depreciation charge.
Note 11 Inventories
In the course of normal trading activities management uses
its judgement to establish the net realisable value of its
stocks. Provisions are established for obsolete or slow
moving stocks, based on past practice, current conditions
and aged inventory facts available to management.
Note 12 Trade receivables
In estimating the collectability of trade receivables
judgement is required and the policies in regard to
credit risk are further described in note 16.2.
Note 17 Retirement benefits
Assumptions used in the calculation of the Group’s defined
benefit pension liabilities have the biggest impact on these
financial statements and are detailed in Note 17. The most
significant estimate in actuarial assumptions would be the
determination of a discount figure to use in the calculation
of liabilities. There is a range of acceptable methods for
determining the discount rate and the Company takes
specialist advise and seeks to follow the most appropriate
method, applied consistently from year to year.
Impairment of assets
At each reporting date, the Group assesses whether there
is any indication that an asset may be impaired. Where an
indicator of impairment exists, the Group makes an estimate
of recoverable amount. Where the carrying value of an asset
exceeds its recoverable amount the asset is written down to
its recoverable amount. Recoverable amount is the higher of
fair value less costs to sell and value in use and is deemed for
an individual asset. If the asset does not generate cash flows
that are largely independent of those from other assets or
groups of assets, the recoverable amount of the cash
generating unit to which the asset belongs is determined.
Discount rates reflecting the asset specific risks and the time
value of money are used for the value in use calculation.
Basis of consolidation
The financial statements of the Group consolidate the
accounts of the Company and those of its subsidiary
undertakings. No subsidiaries are excluded from
consolidation. The results and cash flows of subsidiary
undertakings acquired are included from the effective date
of acquisition. Intragroup balances and any unrealised income
and expenses arising from intra-group transactions are
eliminated in preparing the consolidated financial statements.
Subsidiaries are entities controlled by the Group. Control
exists when the Group has the power, directly or indirectly,
to govern the financial and operating policies of an entity
so as to obtain benefits from its activities. The financial
statements of subsidiaries are included in the consolidated
financial statements from the date that control commences
until the date that control ceases.
Revenue recognition
Revenue is recognised when the significant risks and rewards
of ownership have been transferred to the customer. For the
majority of customers this is when delivery has been made
or specifically when title has passed, the point at which title
passes varying in accordance with the terms and conditions
of trade. Revenue is recognised when the amount of the
The accompanying notes form part of the financial statements
72
73
Notes to the Financial Statements
Notes to the Financial Statements
revenue and related costs can be measured reliably and the
collectability of the related receivables is reasonably assured.
Revenue is measured at the fair value of the amount received
or receivable which is arrived at after deducting trade rebates,
customer returns and value added tax. Shipping and handling
costs, such as freight to our customers’ destination are
included in cost of sales. These costs, when included in the
sales price charged for our products are recognised in net sales.
Operating segments
IFRS 8 Operating Segments has been adopted by the Group
and requires that entities reflect 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. Operating segments are those components of the
Group that are engaged in providing a group of related
products that are subject to risks and returns that are different
to other operating segments. Geographical areas are
components where the eventual product destination is in a
particular geographic environment which is subject to risks
and returns that are different from other such areas. Costs are
allocated to segments based on the segment to which they
relate. Central costs are recharged on an appropriate basis.
Management responsibility and reporting for the two paper
subsidiaries has been merged into one operating segment
referred to as Paper products in order to achieve greater
customer and operational synergies.
Foreign currencies
Transactions in foreign currencies are translated at the
foreign exchange rate ruling at the date of the transaction.
Monetary assets and liabilities denominated in foreign
currencies at the Statement of Financial Position date are
translated at the foreign exchange rate ruling at that date.
Foreign exchange differences arising on translation are
recognised in the Statement of Comprehensive Income.
Non-monetary assets and liabilities that are measured in
terms of historical cost in a foreign currency are translated
using the exchange rate at the date of the transaction.
The assets and liabilities of foreign operations are translated
at foreign exchange rates ruling at the Statement of Financial
Position date. The revenues and expenses of foreign
operations are translated at an average rate for the period
where this rate approximates to the foreign exchange rates
ruling at the dates of the transactions. Exchange differences
arising from translation of foreign operations are taken
directly to the translation reserve; they are released into
the Statement of Comprehensive Income upon disposal.
The portion of gain or loss on foreign currency borrowings
that are used to hedge a net investment in a foreign operation,
that is determined to be an effective hedge, is included
as a movement in the cumulative translation reserve.
On subsequent disposal such gains or losses will form part of
the profit/loss on disposal within the Statement of
Comprehensive Income. Any ineffective portion is recognised
immediately in the Statement of Comprehensive Income.
Research and development
Research expenditure is recognised as an expense as
incurred. Costs incurred on development projects (relating
to the design and testing of new or improved products) are
recognised as intangible assets when the IAS 38 conditions
are met. Other development expenditures are recognised as
an expense as incurred. Development costs with a finite
useful life that have been capitalised are amortised from the
commencement of the commercial production of the product
on a straight-line basis over the period of its expected
benefit, not exceeding 5 years.
Retirement benefits
The Group operates various pension schemes.
The schemes are generally funded through payments to
trustee-administered funds, determined by periodic actuarial
valuations. The Group has both defined benefit and defined
contribution plans. A defined benefit plan is a pension plan
that defines an amount of pension benefit that an employee
will receive on retirement. A defined contribution plan is a
pension plan under which the Group pays fixed contributions.
The liability recognised in the Statement of Financial
Position in respect of defined benefit pension plans is
the present value of the defined benefit obligation at the
Statement of Financial Position date less the fair value of plan
assets. The defined benefit obligation is calculated annually
by independent actuaries using the projected unit credit
method. The present value of the defined benefit obligation
is determined by discounting the estimated future cash flows
using interest rates of high-quality corporate bonds that are
denominated in the currency in which the benefits will be
paid, and that have terms to maturity approximating to the
terms of the related pension liability.
Actuarial gains and losses arising from experience
adjustments and changes in actuarial assumptions are
recognised in the period in which they occur outside of
Statement of Comprehensive Income in the Statement
of Changes in Equity.
Past service costs are recognised immediately in income,
unless the changes to the pension plan are conditional on the
employees remaining in service for a specified period of time
(the vesting period). In this case, the past-service costs are
amortised on a straight-line basis over the vesting period.
For defined contribution plans, the Group pays agreed
contributions to the schemes. The Group has no further
payment obligations once the contributions have been paid.
The contributions are recognised as an employee benefit
expense when they are due.
Share based payments
Options granted to employees are recognised as employee
expenses based on fair value at grant date, with a
corresponding increase in equity, over the period in which
the employees become unconditionally entitled to the
options. The fair value of the options granted is measured
using an option valuation model, taking into account the
terms and conditions upon which the options were granted.
The amount recognised as an expense is adjusted to reflect
the actual number of share options that vest except where
forfeiture is due only to share prices not achieving the
threshold for vesting.
The group has a wholly owned subsidiary EBT Limited,
which is a trustee of an Employee Benefit Trust in favour of
former, current and future employees of James Cropper PLC
and its subsidiaries. Its purpose is to acquire market shares in
James Cropper PLC, with the intention that these should be
made available to such employees on such terms or basis as
the trustee of the Employee Trust so decides, and includes
the granting of awards under a long term incentive plan.
Intangible fixed assets
Intangible assets are stated at cost less accumulated
amortisation and accumulated impairments losses, if any.
The following useful lives have been determined for
intangible assets.
Trade secrets such as processes or unique recipes
10 years
Computer software
Emission Allowances
3 – 10 years
0 – 1 year
(refer to note below on Emissions trading scheme for policy)
Property plant and equipment
Property, plant and equipment are stated at cost less
accumulated depreciation. Depreciation is provided on all
property, plant and equipment, other than freehold land, at
rates calculated to write off the cost less residual value of
each asset evenly over its expected useful life, as follows:
Freehold land and buildings
Plant and machinery
14 – 40 years
4 – 20 years
Residual values and useful lives are reviewed annually.
Inventories
Inventories are stated at the lower of cost and net realisable
value. The cost of finished goods and work in progress
comprises design costs, raw materials, direct labour, other
direct costs and related production overheads (based on
normal operating capacity). It excludes borrowing costs.
Net realisable value is the estimated selling price in the
ordinary course of business, less applicable variable selling
expenses. Engineering spares are included within inventories.
Emissions trading scheme
The Group’s power generation facilities became subject to
the European Union Emission Trading Scheme (“EUETS”)
as from 1 January 2008. The Group is permitted to emit an
average of 16,000 tonnes of carbon dioxide per calendar year
up to the year ended 31 Dec 2020. Credits for this quantum are
issued to the Group free of charge by HM Government.
The Group has adopted an accounting policy which recognises
the emission allowances as an intangible asset and an associated
liability. The intangible asset is valued at the market price on
the date of issue. The liability is valued at the market price on
the date of issue up to the level of allocated allowances held.
Should emissions exceed the annual allowance any excess of
liability above the level of the allowances held is valued at the
market price ruling at the Statement of Financial Position date
and charged against operating profit. Unutilised allowances
are maintained against a potential future shortfall.
When allowances are utilised both the intangible asset and
liability are amortised to the Statement of Comprehensive
Income. Up until the 31 December 2012 the Group’s emissions
were in line with its permitted EUETS allowance and hence
there was no impact on profit. After entering phase 3 of the
EUETS annual emissions in a calendar year are now expected
to exceed allowances received and the impact is taken to the
SCI under “Other expenses”. At 1 April 2017 the intangible
asset was valued at £30,000 (2016 £20,000) and the associated
liability at £30,000 (2016 £20,000). The liability is categorised
under current liabilities.
Grants
Capital grants are credited to a deferral account and released
to income over the expected useful lives of the relevant assets.
Grants of a revenue nature are credited to the Statement of
Comprehensive Income in the period to which they relate.
Leasing
Leases are classified as finance leases at inception where
substantially all of the risks and rewards of ownership are
transferred to the Group. Assets classified as finance leases
are capitalised on the Statement of Financial Position and are
depreciated over the expected useful life of the asset. The
interest element of the rental obligation is charged to the
Statement of Comprehensive Income over the period of the
lease and represents a constant proportion of the balance of
capital repayments outstanding. Operating lease payments
are charged to the Statement of Comprehensive Income in
the appropriate period.
Taxation
Tax on the Statement of Comprehensive Income for the year
comprises current and deferred tax. Tax is recognised in the
Statement of Comprehensive Income, according to the
accounting treatment of the related transaction.
Deferred tax is provided on temporary differences between
the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for taxation
purposes. The following temporary differences are not
provided for: the initial recognition of goodwill; the initial
recognition of assets or liabilities that affect neither accounting
nor taxable profit other than in a business combination, and
differences relating to investments in subsidiaries to the extent
that they will probably not reverse in the foreseeable future.
The amount of deferred tax provided is based on the expected
manner of realisation or settlement of the carrying amount of
assets and liabilities, using tax rates enacted or substantively
enacted at the Statement of Financial Position date.
A deferred tax asset is recognised only to the extent that it is
probable that future taxable profits will be available against
which the asset can be utilised.
74
75
Notes to the Financial Statements
Notes to the Financial Statements
Research & development tax credit
Borrowing costs
2. SEGMENTAL REPORTING
Research and development expenditure credit (RDEC) is
recognised within other operating income.
Financial instruments
The Group uses derivative financial instruments, principally
interest rate swaps, to reduce its exposure to interest rate
movements. Derivative financial instruments are recognised
as assets and liabilities measured at their fair values at the
balance sheet date. Changes in their fair values are
recognised in the income statement. However, where
derivatives qualify for hedge accounting, recognition of
any resultant gain or loss depends on the nature of the
items being hedged.
Loans and receivables are non-derivative financial assets with
fixed or determinable payments that are not quoted in an active
market. They arise when the Group provides money, goods or
services directly to a debtor with no intention of trading the
receivable. They are included in current assets, except those
with maturities greater than twelve months after the Statement
of Financial Position date, which are classified as non-current
assets. Loans and receivables are included within trade and
other receivables in the Statement of Financial Position.
The fair value of financial instruments traded in active
markets is based on quoted market prices at the Statement
of Financial Position date.
Hedge Accounting
Cash flow hedge:
Where a derivative financial instrument is designated as a
hedge of the variability in cash flows of a recognised asset or
liability the effective part of any gain or loss on the derivative
financial instrument is recognised in other comprehensive
income. Any ineffective portion of the hedge is recognised
immediately in the income statement. Hedging relationships
are classified as cash flow hedges where the hedging instrument
hedges exposure to variability in cash flows that is attributable
either to a particular risk associated with a recognised asset or
liability such as interest payments or variable rate debt.
Investments
Trade investments are stated at cost less any impairment
in value.
The Group’s share of the profit is included in the Statement
of Comprehensive Income on the equity accounting basis.
Cash and cash equivalents
Cash and cash equivalents includes cash in hand, deposits held
at call with banks, other short-term highly liquid investments
with original maturities of three months or less, and bank
overdrafts. Bank overdrafts are shown as borrowings within
current liabilities on the Statement of Financial Position. Bank
overdrafts that are repayable on demand and form an integral
part of the Group’s cash management are included as a
component of cash and cash equivalents for the purpose
only of the Statement of Cash Flows.
Borrowings are recognised initially at fair value, net of
transaction costs incurred. Borrowings are subsequently stated
at amortised cost; any difference between the proceeds (net of
transaction costs) and the redemption value is recognised in the
Statement of Comprehensive Income over the period of the
borrowings using the effective interest method.
Interest
Interest is recognised in the Statement of Comprehensive
Income on an accruals basis using the effective interest method.
Trade receivables
Trade receivables are recorded at their initial fair value after
appropriate revision of impairment.
Trade payables
Trade payables are stated at their fair value.
Capital Management
Group and Company’s capital includes share capital, reserves
and retained earnings. The Group and Company’s policy is
to maintain the ability to continue as a going concern, in
order to provide returns to the shareholder and benefits to
other stakeholders. The Group, and Company, invest in
financial assets that will provide an adequate level of return
to the shareholder commensurate with the level of risk.
The Group and Company manages the capital structure
and adjusts this in light of the changes in the economic
conditions and risk associated with the underlying assets.
In order to maintain or adjust the capital structure, the
Group and Company may adjust the amount of any dividend
paid to the shareholder, return capital to the shareholder,
issues new shares, or sell assets to reduce debt. Details of
borrowings can be seen in note 15 and shareholdings can be
referred to in note 19. The Group, and Company, are not
subject to any externally imposed capital requirements.
There have been no material changes in the management
of capital during the period.
New standards and interpretation not applied
Recently issued accounting standards that are relevant to
the Group but have not yet been adopted are outlined below:
IFRS 16 ‘Leases’ is effective from 1 January 2019.
The adoption of this standard removes the distinction
between operating and finance leases and will result in all
operating leases, above a de minimis level, being capitalised
with the associated assets and liabilities being included in
the Statement of Financial Position. Given the effective
date of the standard, the Group have not yet evaluated
the full impact.
The Group does not consider that any other standards,
amendments or interpretations issued by the IASB, but
not yet applicable, will have a significant impact on the
financial statements.
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 Products: comprising:
• JC Speciality Papers – relates to James Cropper Speciality Papers a manufacturer of specialist paper and boards.
• JC Converting – relates to James Cropper Converting - a converter of paper.
• James Cropper 3D Products – a manufacturer of moulded fibre products.
• Technical Fibre Products – a manufacturer of advanced materials.
• Group Services – comprises central functions providing services to the subsidiary companies.
“Eliminations” refers to the elimination of inter-segment revenues, profits and investments. “Trading Operating Profit before
Interest” refers to profits prior to other income and expenditure and the IAS 19 pension adjustment. The “IAS 19 pension
adjustment” refers to the impact on operating profits of the pension schemes’ operating costs, as described in the IAS 19
section of the Financial Review. “Interest Expense” incorporates the IAS 19 pension impact of the pension schemes’ finance
costs, as described in the IAS 19 section of the Financial Review. Inter segment transactions are performed in the normal
course of business and at arm’s length.
Operating Segments
Period Ended 1 April 2017
Revenue
External
Segment Profit
Adjusted Operating Profit
Before IAS 19
IAS 19 Pension
Adjustments To Profit
Operating Profit
Interest Expense
Profit Before Tax
Tax on profit for period
Profit for the period
Total Assets
Total Liabilities
James
Cropper
Paper
Products
£’000
James
Cropper Technical
Fibre
Products
£’000
3D
Products
£’000
Group
Continuing
Services Others Eliminations Operations
£’000
£’000
£’000
£’000
71,024
71,024
7
7
21,332
21,332
-
-
-
-
-
-
92,363
92,363
3,209
(426 )
5,940
(2,026 )
178
(26 )
6,849
-
-
-
(661 )
-
3,209
(426 )
5,940
(2,687 )
178
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(26 )
-
-
-
-
(661 )
6,188
(548 )
5,640
(910 )
4,730
60,741
3,700
46,735
59,274
2,501
(104,456 )
68,495
(49,584 )
(4,613 )
(41,298 )
(44,805 )
(675 )
94,367
(46,608 )
76
77
Notes to the Financial Statements
Notes to the Financial Statements
Operating Segments
Period Ended 2 April 2016
Revenue
External
Business Income
Insurance Note (1)
Segment Profit
Adjusted Operating Profit
Before IAS 19
IAS 19 Pension
Adjustments To Profit
Operating Profit
Interest Expense
Interest Income
Profit Before Tax
Tax on profit for period
Profit for the period
Total Assets
Total Liabilities
James
Cropper
Paper
Products
£’000
James
Cropper Technical
Fibre
Products
£’000
3D
Products
£’000
Group
Continuing
Services Others Eliminations Operations
£’000
£’000
£’000
£’000
69,182
-
69,182
-
-
-
17,988
750
18,738
-
-
-
2,592
(438 )
5,904
(2,608 )
-
-
-
(839 )
2,592
(438 )
5,904
(3,447 )
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
87,170
-
750
-
87,920
49
-
49
-
-
-
-
-
5,499
(839 )
4,660
(793 )
1
3,868
(874 )
2,994
52,295
2,739
37,745
50,460
1,990
(84,495 )
60,734
(41,390 )
(3,099 )
(34,037 )
(30,113 )
(343 )
74,941
(34,041 )
The group’s country of domicile is the UK. Revenue from external customers is based on the customer’s location.
Non – current assets are based on the location of the assets and exclude financial assets, deferred tax assets and
post-employment benefit net assets.
Revenues from external customers
Non – current assets
UK
Europe
Asia
The Americas
Australasia
Africa
Total
Note:
2017
£’000
2016
£’000
42,044 42,852
20,152
17,781
7,083
6,510
21,019 18,244
1,600
1,220
465
563
2017
£’000
2016
£’000
23,402
21,224
-
-
-
-
2,958
2,627
-
-
-
-
92,363
87,170
26,360
23,851
(1) Business Income Insurance covers the loss of income that the business suffered after Storm Desmond.
It is designed to put the business in the same financial position it would have been in if no loss had occurred.
3. FINANCE COSTS
Interest expense
Interest payable on bank borrowings
Interest payable on finance leases
Net interest on defined benefit obligations
Total interest expense
Interest income
Other interest received
Total interest income
Finance costs – net
4. PROFIT BEFORE TAXATION
The following items have been charged / (credited) in arriving at profit before taxation:
Staff costs
Depreciation of property, plant and equipment
- owned assets
- leased assets
- amortisation of intangibles
Loss on disposal of fixed assets
Other operating lease rentals payable
- plant & machinery
Repairs and maintenance expenditure on
property, plant and equipment
Research & development tax credits
Government grants received
Research and development expenditure
Exceptional income – grant awarded
to alleviate impact of flood
Exceptional costs – provisions for uninsured losses and risks
Sale of PMD online business
Foreign exchange differences
Trade receivables impairment
2017
£’000
2016
£’000
190
93
265
548
-
-
548
2017
£’000
26,238
1,850
394
53
14
161
5,630
(139 )
(29 )
918
-
20
(90 )
(123 )
22
188
139
466
793
1
1
792
2016
£’000
25,155
1,753
381
172
-
163
4,540
(130 )
(73 )
1,765
(1,000 )
1,765
(250 )
(247 )
162
Government grants relate to assistance received for research projects and the development of new technology
The exceptional items relate to additional income/costs arising as a consequence of the flood that impacted the Group
following the aftermath of Storm Desmond in December 2015.
78
79
Notes to the Financial Statements
Notes to the Financial Statements
Services Provided by the Group’s Auditor and network firms
During the year the group obtained the following services from the group’s auditor at costs as detailed below:
Audit Services
- Fees payable to the company’s auditor for the audit of parent company and consolidated accounts
18
18
2017
£’000
2016
£’000
Other services
- Remuneration payable to the company’s auditor for the auditing of subsidiary accounts and associates
of the company pursuant to legislation (including that of countries and territories outside Great Britain)
- Fees in respect of pension matters
- Fees in respect of other assurance services
- Fees in respect of other tax advisory services
- Fees in respect of other services
5. TAXATION
Analysis of charge in the period
Current tax
Adjustments in respect of prior period current tax
Total current tax
Deferred tax
Adjustments in respect of prior period deferred tax
Effects of changes in tax rate
Total deferred tax
Tax per income statement
Tax on items charged to equity
Note
18
50
-
2
8
-
78
2017
£’000
986
24
1,010
1
(4 )
(97 )
(100 )
910
53
25
-
8
10
114
2016
£’000
1,098
33
1,131
(60 )
(3 )
(194 )
(257 )
874
Deferred tax on actuarial (losses) / gains on retirement benefit liabilities
Deferred tax on share options
Income tax charged to OCI
1,847
(1,488 )
634
-
135
77
The tax for the period is lower (2016: higher) than the standard rate of corporation tax in the UK of 20% (2016: 20%).
The differences are explained below:
Profit before tax
2017
£’000
2016
£’000
5,640
3,868
Profit on ordinary activities multiplied by rate of corporation tax in the UK of 20% (2016: 20%)
1,128
773
Effects of:
Adjustments to tax in respect of prior period
Effects of other tax rates
Overseas tax
Expenses not deductible for tax purposes
Income not taxable
Amounts not recognised
Other
Total tax charge for the period
20
(97 )
5
16
(66 )
(99 )
3
25
(194 )
107
214
(52 )
-
1
910
874
6. EARNINGS PER SHARE
Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average
number of shares outstanding during the year.
For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion
of all dilutive potential ordinary shares. The Group has one class of dilutive potential ordinary shares - those share options
granted to employees where the exercise price is less than the average market price of the company’s ordinary shares during
the year. Reconciliations of the earnings and weighted average number of shares used in the calculations are set out below.
2017
2016
Weighted
average
number Amount
Earnings of shares per share
pence
£’000
‘000
Weighted
average
number Amount
Earnings of shares per share
pence
£’000
‘000
Basic EPS
Earnings attributable to
ordinary shareholders
4,730
9,373
Effect of dilutive securities – options
-
77
Diluted EPS
4,730
9,450
50.5
-
50.0
2,994
-
9,191
222
2,994
9,413
32.6
-
31.8
7. DIVIDENDS
Final paid for the period ended 2 April 2016 / period ended 28 March 2015
Interim paid for the period ended 1 April 2017 / period ended 2 April 2016
Final dividend payment paid pence per share for the period ended
2 April 2016 / period ended 28 March 2015
Interim dividend payment paid pence per share for the period ended
1 April 2017 / period ended 2 April 2016
2017
£’000
648
233
2016
£’000
571
201
7.1 p
6.3 p
2.5 p
2.2 p
In addition, the directors are proposing a final dividend in respect of the financial period ended 1 April 2017 of 9.3p per
share (2016: 7.1p per share) which will absorb an estimated £864,000 (2016: £648,000) of shareholders’ funds. If approved
by members at the Annual General Meeting, it will be paid on 11 August 2017 to shareholders who are on the register of
members at 14 July 2017. There are no tax implications in respect of this proposed dividend.
The proposed dividend is not accounted for until it is formally approved at the Annual General Meeting.
80
81
Notes to the Financial Statements
Notes to the Financial Statements
8. INTANGIBLE ASSETS
9. PROPERTY PLANT AND EQUIPMENT
Group
Trade
Computer Development
Costs
£’000
Software
£'000
Emission
Secrets Allowances
£'000
£'000
Total
Computer
Company
Emission
£'000
Software Allowances Total
£'000
£'000
£'000
Group
Cost
Freehold
land &
buildings machinery
£’000
£’000
Plant & Assets under
construction
£’000
Total
£’000
-
457
-
-
3
307
2,978
7,194
115
601
3,794
29
2,978
6,772
115
144
-
3
-
-
-
Brought forward at 2 April 2016
Additions at cost
Disposals
Effects of movements in foreign exchange
11,129
-
-
-
80,222
4,046
(35 )
357
-
91,351
782
4,828
-
-
(35 )
357
457
310
3,093
7,798
3,823
3,093
6,916
At 1 April 2017
11,129
84,590
782
96,501
Cost
At 2 April 2016
Additions
Effects of movements
in foreign exchange
At 1 April 2017
Aggregate amortisation
At 2 April 2016
Charge for Period
At 1 April 2017
Net book value
at 1 April 2017
Net book value
at 2 April 2016
3,909
29
-
3,938
3,823
40
3,863
75
86
-
-
-
290
13
303
2,958
105
7,071
158
3,063
7,229
457
7
30
569
-
17
20
123
3,760
24
3,784
39
34
2,958
105
6,718
129
3,063
6,847
30
20
69
54
Group
Trade
Computer Development
Costs
£’000
Software
£'000
Emission
Secrets Allowances
£'000
£'000
Total
Computer
Company
Emission
£'000
Software Allowances Total
£'000
£'000
£'000
Cost
At 28 March 2015
Additions
At 2 April 2016
Aggregate amortisation
At 28 March 2015
Charge for Period
At 2 April 2016
Net book value
at 2 April 2016
Net book value
at 28 March 2015
3,872
37
3,909
3,685
138
3,823
86
187
-
-
-
-
-
-
-
-
307
-
307
256
34
290
17
51
2,882
96
7,061
133
2,978
7,194
2,823
135
6,764
307
2,958
7,071
20
123
59
297
3,764
30
3,794
3,639
121
3,760
34
125
2,882
96
6,646
126
2,978
6,772
2,823
135
6,462
256
2,958
6,718
20
54
59
184
The computer software capitalised principally relates to the ongoing development of the Group's Enterprise Resource
Planning and Financial systems. There is a separate Enterprise Resource Planning system for the Technical Fibre Products
Business segment and the remaining amortisation period of this asset at the period end is 4 years.
The trade secrets relate to certain recipes and know how acquired within the TFP division. The remaining amortisation
period of the assets at the period end is 1 year.
The Emission Allowances relate to the allowances received through the European Emissions Trading Scheme (EUETS) and
are valued at market value at the date of initial recognition. The allocated allowances are held throughout each compliance
period and are used to meet the Group’s emissions obligations.
Accumulated Depreciation
Brought forward at 2 April 2016
Charge for Period
Disposals
At 1 April 2017
Net book value at 1 April 2017
Net book value at 2 April 2016
Cost
Brought forward at 28 March 2015
Additions at cost
Disposals
Effects of movements in foreign exchange
At 2 April 2016
Accumulated Depreciation
Brought forward at 28 March 2015
Charge for Period
Disposals
At 2 April 2016
Net book value at 2 April 2016
Net book value at 28 March 2015
6,532
227
-
61,169
2,018
(17 )
6,759
63,170
-
-
-
-
67,701
2,245
(17 )
69,929
4,370
4,597
21,420
19,053
782
26,572
-
23,650
Freehold
land &
buildings machinery
£’000
£’000
Plant & Assets under
construction
£’000
11,138
-
(9 )
-
77,857
3,954
(1,712 )
123
11,129
80,222
6,285
256
(9 )
6,532
4,597
4,853
61,003
1,878
(1,712 )
61,169
19,053
16,854
-
-
-
-
-
-
-
-
-
-
-
Total
£’000
88,995
3,954
(1,721 )
123
91,351
67,288
2,134
(1,721 )
67,701
23,650
21,707
82
83
Notes to the Financial Statements
Notes to the Financial Statements
Assets held under finance leases, capitalised and included in tangible fixed assets:
Net book value at 2 April 2016
Additions in period
Reclassification to assets owned
Depreciation in period
Net book value at 1 April 2017
Company
Cost
Brought forward at 2 April 2016
Additions at cost
At 1 April 2017
Accumulated Depreciation
Brought forward at 2 April 2016
Charge for Period
At 1 April 2017
Net book value at 1 April 2017
Net book value at 2 April 2016
Cost
Brought forward at 28 March 2015
Additions at cost
Disposals
At 2 April 2016
Accumulated Depreciation
Brought forward at 28 March 2015
Charge for Period
Disposals
At 2 April 2016
Net book value at 2 April 2016
Net book value at 28 March 2015
2016
£’000
5,031
30
(62 )
(381 )
4,618
Company
2017
£’000
2016
£’000
350
373
-
-
(23 )
327
Group
2017
£’000
4,618
180
-
(394 )
4,404
Freehold
land &
1,663
-
1,663
423
21
444
1,219
1,240
Freehold
land &
buildings machinery
£’000
£’000
Plant & Assets under
construction
£’000
2,103
139
2,242
1,591
75
1,666
576
512
-
147
147
-
-
-
147
-
buildings machinery
£’000
£’000
Plant & Assets under
construction
£’000
1,663
-
-
1,663
393
30
-
423
1,240
1,270
1,985
125
(7 )
2,103
1,552
46
(7 )
1,591
512
433
-
-
-
-
-
-
-
-
-
-
-
-
(23 )
350
Total
£’000
3,766
286
4,052
2,014
96
2,110
1,942
1,752
Total
£’000
3,648
125
(7 )
3,766
1,945
76
(7 )
2,014
1,752
1,703
10. INVESTMENTS
Investments in subsidiary undertakings
At 1 April 2017 and 2 April 2016
Group
2017
£’000
-
2016
£’000
-
Company
2017
£’000
7,350
2016
£’000
7,350
Investments in subsidiary undertakings are stated at cost. A list of principal subsidiary undertakings is given below:
Company Name
Country of
incorporation
Registered % holding of
ordinary
shares
office
(see below)
James Cropper Speciality Papers Limited
England
(i)
James Cropper (Guangzhou) Trading Co Limited
China
(iii)
James Cropper Converting Limited
James Cropper 3D Products Limited
England
England
Technical Fibre Products Limited
England
Tech Fibers Inc
Technical Fibre Products Inc
Metal Coated Fibers Inc
Electro Fiber Technologies LLC
James Cropper EBT Limited
Melmore Limited
James Cropper Paper Limited ***
The Paper Mill Shop Company Limited
USA
USA
USA
USA
England
England
England
England
(i)
(i)
(i)
(ii)
(ii)
(ii)
(ii)
(i)
(i)
(i)
(i)
Nature of business
Manufacturer of specialist
paper and board
Sales and marketing
organisation
Paper converter
Manufacturer of moulded
fibre products
Manufacturer of
advanced materials
Holding company
100
100
100
100
100
100
100 Sales and marketing organisation
100
100
100
100
100
100
Manufacturer of metal
coated carbon fibres
Manufacturer of metal
coated fibres
Trustee of an employee
benefit trust
Dormant company
Dormant company
Dormant company
*** Company name was changed from “Papermilldirect.com Limited” to “James Cropper Paper Limited” during the year.
(i) Burneside Mills, Kendal, Cumbria, LA9 6PZ, England.
(ii) 679 Mariaville Road, Schenectady, NY 12306, USA.
(iii) Level 54 Guangzhou IFC, 5 Zhujiang Road West, Zhujiang New Town, 510623, China.
11. INVENTORIES
Materials
Work in progress
Finished goods
Group
2017
£’000
7,654
1,928
4,515
2016
£’000
7,479
2,004
4,619
14,097
14,102
Inventories are stated after a provision for impairment of £504,000 (2016: £232,000). The cost of inventories recognised
as expenses and included in cost of sales for the year ended 1 April 2017 was £64,309,000 (2016: £63,446,000).
The Company does not have inventories.
84
85
Notes to the Financial Statements
Notes to the Financial Statements
12. TRADE AND OTHER RECEIVABLES
15. BORROWINGS
Trade receivables
Less: Provision for impairment of receivables
Trade receivables –net
Amounts owed by group undertakings
Other receivables
Prepayments
Group
2017
£’000
15,913
(97 )
15,816
-
6,115
1,135
23,066
Company
2017
£’000
-
-
-
42,346
2,124
721
45,191
2016
£’000
14,956
(80 )
14,876
-
3,024
1,695
19,595
2016
£’000
-
-
-
36,005
2,270
517
38,792
Management believe there is no further credit risk provision required in excess of normal provision for doubtful receivables.
13. TRADE AND OTHER PAYABLES
Trade payables
Amounts owed to group undertakings
Other tax and social security payable
Other payables
Accruals
14. OTHER FINANCIAL LIABILITIES
Group and Company
Interest rate swap
Group
2017
£’000
5,901
-
553
4,460
7,579
2016
£’000
3,807
-
525
3,501
7,234
18,493
15,067
2017
£’000
2016
£’000
9
-
Company
2017
£’000
2,295
13,881
144
621
2,529
19,470
2016
£’000
1,126
11,739
133
3,495
1,582
18,075
The group uses an interest rate swap to hedge the risk associated with interest rate increases against
a proportion of its existing borrowings.
The gain arising in the Income Statement on fair value hedging instruments was £nil (2016: £nil).
Current
Bank loans and overdrafts due within one year or on demand:
Unsecured bank loans
Secured finance lease
Non-current loans
Unsecured bank loans
Secured finance lease
Group
2017
£’000
2016
£’000
Company
2017
£’000
2016
£’000
Note
791
779
16.3
1,570
6,423
1,292
7,715
16.3
3,042
844
3,886
4,708
1,897
6,605
-
79
79
-
74
74
6,406
4,000
21
94
6,427
4,094
Bank loans bear interest at rates between 1.5% and 3.0% above 30 day LIBOR rates.
The future minimum lease payments under finance leases held, together with the value of principal are as follows:
Minimum
lease payments
2017
£’000
Interest Principal
2017
£‘000
2017
£‘000
Minimum
lease payments
2016
£’000
Interest Principal
2016
£‘000
2016
£‘000
843
64
779
939
95
844
1,301
41
49
1,252
1 40
84
21
5
-
79
21
1,995
-
84
98
98
-
10
4
1,897
-
74
94
Group
Within one year
Greater than one year
and less than five years
Greater than 5 years
Company
Within one year
Greater than one year
and less than five years
16. FINANCIAL INSTRUMENTS AND RISK
The Group has exposure to the following risks from its use of financial instruments:
• Credit risk
• Liquidity risk
• Currency risk
• Interest rate risk
This note presents information about the fair value of the Group’s financial instruments, the Group’s exposure to each of
the risks noted and the Group’s objectives, policies and processes for measuring and managing risk. The Board has overall
responsibility of the risk management strategy and coordinates activity across the Group. This responsibility is discussed
further in the Directors’ report.
Exposure to the financial risks noted, arise in the normal course of the Group’s business.
86
87
Notes to the Financial Statements
Notes to the Financial Statements
16.1 CATEGORIES OF FINANCIAL ASSETS AND LIABILITIES AND FAIR VALUES
The fair values of the financial assets and liabilities of the Group together with their book values are as follows:
Group
Financial assets
Current
Trade receivables
Cash and cash equivalents
Financial liabilities
Current
Trade payables
Derivatives (Interest rate swap)
Short term borrowings
Non-current
Long term borrowings
Company
Financial assets
Current
Cash and cash equivalents
Non-current
Book value
2017
£’000
Fair value
2017
£’000
Book value
2016
£’000
Fair value
2016
£’000
Note
12
13
14
15
15,913
1,921
17,834
5,901
9
1,570
7,480
15,816
1,921
17,737
5,901
9
1,570
7,480
14,956
3,186
18,142
14,876
3,186
18,062
3,807
-
3,886
7,693
3,807
-
3,886
7,693
15
7,715
7,715
6,605
6,605
Book value
2017
£’000
Fair value
2017
£’000
Book value
2016
£’000
Fair value
2016
£’000
Note
526
526
526
526
642
642
642
642
Investments in subsidiary undertakings
10
7,350
7,350
7,350
7,350
Financial liabilities
Current
Trade payables
Interest rate swap
Short term borrowings
Non-current
Long term borrowings
13
15
2,295
2,295
1,126
1,126
9
79
9
79
-
74
-
74
2,383
2,383
1,200
1,200
15
6,427
6,427
4,094
4,094
The fair values are stated at the reporting date and may be different from the amounts which will be actually paid or received
on settlement of the instruments. The fair values are based on book values as the directors do not consider that there is a
material difference between the book values and the fair values.
The table below analyses financial instruments carried at fair value, by valuation method.
Level 2: other techniques for which all inputs which have significant effect on the recorded fair value are observable, either
directly or indirectly:
Financial Liabilities
Derivatives (Interest rate swap)
16.2 CREDIT RISK
2017
Level 2
£’000
9
Total
£’000
9
2016
Level 2
£’000
-
Total
£’000
-
Credit risk is the risk of financial loss to the Group if a customer or counterparty fails to meet its contractual obligations.
Credit risk arising from the Group’s normal commercial activities are controlled by individual business units operating in
accordance with Group policies and procedures. Exposure to credit risk arises from the potential of a customer defaulting
on their invoiced sales. Some of the Group’s businesses have credit insurance in place. For uninsured customers, the financial
strength and credit worthiness of the customer is assessed from a variety of internal and external information, and specific
credit risk controls that match the risk profile of those customers are applied.
Trade receivables recorded by business held at the 1 April 2017 were:
JC Speciality Papers
JC Converting
JC 3D Products
Technical Fibre Products
The Company does not have trade receivables.
The ageing of trade receivables at the reporting date was:
Not past due
Past due 0-30 days
Past due 31 -60 days
Less impairment
2017
£’000
9,474
1,919
24
4,399
15,816
2017
£’000
14,113
1,800
-
15,913
(97 )
15,816
2016
£’000
9,946
1,739
-
3,191
14,876
2016
£’000
12,761
1,786
409
14,956
(80 )
14,876
At the end of each reporting period a review of the provision for bad and doubtful debts is performed. It is an assessment
of the potential amount of trade debtors which may not be paid by customers after the balance sheet date. This amount is
calculated by reference to the age, status and risk of each receivable.
Provision for doubtful debts.
Group
Balance at start of period
Increased during the period
Utilised during the period
Balance at end of period
2017
£’000
80
22
(5 )
97
2016
£’000
68
162
(150 )
80
Included in the outstanding trade receivables balance are debtors with an overdue amount of £1,703,000 (2016: £2,115,000)
that the Group has not provided for. The directors believe that these amounts are still considered recoverable from customers
for whom there is no recent history of default.
88
89
Notes to the Financial Statements
Notes to the Financial Statements
16.3 LIQUIDITY RISK
The Group’s expiry profile of the drawn down facilities is as follows:
Liquidity risk is the risk that the Group will not have sufficient funds to meet liabilities. The Group’s policy is to maintain
a mix of short, medium and long term borrowings with a number of banks. Short term flexibility is achieved through over-
draft facilities. In addition, it is the Group’s policy to maintain undrawn committed borrowing facilities in order to provide
flexibility in the management of liquidity.
Current and non- current financial liabilities
The maturity profile of the carrying amount of the current and non-current financial liabilities, at 1 April 2017, was as follows:
Group
In less than one year
In more than one year
but not more than two years
In more than two years but
not more than five years
In more than five years
Company
In less than one year
In more than one year
but not more than two years
In more than two years but
not more than five years
Finance
lease Financial
Debt obligations derivatives
2017
2017
2017
£'000
£'000
£’000
791
10
6,413
-
779
704
548
40
7,214
2,071
9
-
-
-
9
Finance
lease Financial
Debt obligations derivatives
2017
2017
2017
£’000
£’000
£’000
-
-
6,406
6,406
79
21
-
100
9
-
-
9
Finance
lease
Debt obligations
2016
2016
£'000
£'000
Total
2016
£'000
3,042
844
3,886
Total
2017
£'000
1,579
714
690
756
1,446
6,961
40
9,294
Total
2017
£’000
88
21
6,406
6,515
4,018
-
7,750
1,141
5,159
-
-
2,741
10,491
Finance
lease
Debt obligations
2016
2016
£’000
£’000
Total
2016
£’000
74
80
74
80
14
4,014
168
4,168
-
-
4,000
4,000
Trade payables
Trade payables at the reporting date was:
Trade payables at the reporting date was
Total contractual cash flows
Group
2017
£’000
5,901
5,901
2016
£’000
3,807
3,807
Company
2017
£’000
2,295
2,295
2016
£’000
1,126
1,126
Borrowing facilities
The Group has the following undrawn committed borrowing facilities available at 1 April 2017:
Expiring within one year (renewable annually)
3,658
3,513
Group
at 1 April 2017
Floating rate
£’000
Group
at 2 April 2016
Floating rate
£’000
June 2016
December 2017
August 2019
November 2019
May 2020
June 2021
Group
1 April 2017
£’000
Company
2 April 2016
£’000
1 April 2017 2 April 2016
£’000
£’000
-
781
17
10
4,000
2,406
7,214
2,123
1,592
22
13
-
-
-
-
-
-
-
-
4,000
-
7,750
4,000
2,406
6,406
4,000
-
4,000
16.4 CURRENCY RISK
The Group publishes its consolidated financial statements in sterling but also conducts business in foreign currencies.
As a result it is subject to foreign currency exchange risk arising from exchange rate movements which will be reflected
in the Group’s transaction costs or in the underlying foreign currency assets of its foreign operations. The Group has
operations in the US. The Group is exposed to foreign exchange risks primarily with respect to US Dollars and the Euro.
Where possible, the Group maintains a policy of balancing sales and purchases denominated in foreign currencies.
Where an imbalance remains, the group has also entered into certain forward exchange contracts. No material contracts
were outstanding at the year end. The management of foreign currency is described in further detail in the Financial Review.
Represented below is the net exposure to foreign currencies, reported in pounds sterling, and arising from all Group
activities, as at 1 April 2017.
Trade Receivables
Cash and cash equivalents
Trade Payables
Unsecured current loans
Finance lease current
Unsecured non-current loans
Finance lease non-current
USD
£’000
10,676
232
(2,177 )
(781 )
-
(2,407 )
-
Euro
£’000
2,759
21
(682 )
-
-
-
-
RMB
£’000
-
115
(1 )
-
-
-
-
GBP
£’000
2,381
1,553
Total
£’000
15,816
1,921
(3,041 )
(5,901 )
(10 )
(779 )
(4,016 )
(1,292 )
(791 )
(779 )
(6,423 )
(1,292 )
Net exposure
5,543
2,098
114
(5,204 )
2,551
At the 2 April 2016 the Group’s exposure to foreign currency risk was as follows:
Trade Receivables
Cash and cash equivalents
Trade Payables
Unsecured current loans
Finance lease current
Unsecured non-current loans
Finance lease non-current
USD
£’000
4,745
1,220
(336 )
(3,033 )
-
(682 )
-
Euro
£’000
2,444
35
(809 )
-
-
-
-
RMB
£’000
-
173
(3 )
-
-
-
-
GBP
£’000
7,687
1,758
(2,659 )
(8 )
(845 )
(4,026 )
(1,897 )
Total
£’000
14,876
3,186
(3,807 )
(3,041 )
(845)
(4,708 )
(1,897 )
Net exposure
1,914
1,670
170
10
3,764
This represents the net exposure to foreign currencies, reported in pounds Sterling, and arising from all Group activities
90
91
Notes to the Financial Statements
Notes to the Financial Statements
At the 1 April 2017 the Company’s exposure to foreign currency risk was as follows:
Cash and cash equivalents
Trade Payables
Finance lease current
Unsecured non- current loans
Finance lease non -current
Net exposure
USD
£’000
Euro
£’000
9
-
-
(2,406 )
-
(2,397 )
8
(14 )
-
-
-
(5 )
At the 2 April 2016 the Company’s exposure to foreign currency risk was as follows:
USD
£’000
Euro
£’000
Cash and cash equivalents
Trade Payables
Finance lease current
Unsecured non- current loans
Finance lease non -current
Net exposure
40
(2 )
-
-
-
38
21
(2 )
-
-
-
GBP
£’000
509
Total
£’000
526
(2,281 )
(2,295 )
(79 )
(79 )
(4,000 )
(6,406 )
(21 )
(21 )
(5,872 )
(8,275 )
GBP
£’000
581
Total
£’000
642
(1,122 )
(1,126 )
(74 )
(74 )
(4,000 )
(4,000 )
(94 )
(94 )
Interest bearing liabilities - floating
Borrowings
Interest rate swap
Finance lease
Interest bearing liabilities - fixed
Borrowings
Finance lease
Group
2017
£’000
7,189
9
1,364
8,562
25
707
732
2016
£’000
7,714
-
1,846
9,560
35
896
931
Company
2017
£’000
2016
£’000
6,407
4,000
9
-
-
-
6,416
4,000
-
100
100
-
168
168
Interest bearing liabilities
9,294
10,491
6,516
4,168
The effective interest rates at the balance sheet date were as follows:
2017
%
1.3
3.5
2016
%
1.5
3.7
19
(4,709 )
(4,652 )
Bank overdraft
Borrowings
A one percent strengthening of the pound against the Euro and the US Dollar at 1 April 2017 would have had the following
impact on equity and profit by the amounts shown below.
Group
1April 2017
1 April 2017
2 April 2016
2 April 2016
Equity
£’000
SCI
£’000
Company
Equity
£’000
SCI
£’000
USD
Euro
USD
Euro
(47 )
(21 )
(19 )
(17 )
(84 )
(21 )
(44 )
(16 )
1 April 2017 USD
1 April 2017 Euro
2 April 2016 USD
2 April 2016 Euro
30
-
-
-
-
-
-
-
This sensitivity analysis is indicative only and it should be noted that the Group’s exposure to such market rate changes is
continually changing. The calculations assume all other variables, in particular interest rates, remain constant.
16.5 INTEREST RATE RISK
Interest rate risk derives from the Group’s exposure to changes in value of an asset or liability or future cash flow through
changes in interest rates. The group finances its operations through a mixture of retained profits and bank borrowings.
The group borrows in the desired currencies at fixed or floating rates of interest. As part of the Group’s interest rate
management strategy the Company entered into two interest rate swaps which mature in May 2020 (GBP) and June 2021
(USD). Under the swaps the maximum base rates the group will pay on bank borrowings of up to £3m is 0.66% and $3m is
1.99%. The exposure is measured on variable rate debt and instruments. The net exposure to interest rates at the Statement
of Financial Position date can be summarised as follows:
The sensitivity analysis below assumes a 100 basis point change in interest rates from their levels at the reporting date,
with all other variables held constant. A 1% rise in interest rates would result in an additional £86,000 for the Group
and £64,000 for the Company in interest expense being incurred per year. The impact of a decrease in rates would be
an identical reduction in the annual charge.
Group
1 April 2017
2 April 2016
SCI
£’000
86
96
17. RETIREMENT BENEFITS
Company
1 April 2017
2 April 2016
SCI
£’000
64
40
The Group operates a number of pension schemes. Two of these schemes, the James Cropper PLC Works Pension Plan
(“Works Scheme”) and the James Cropper PLC Pension Scheme (“Staff Scheme”) are funded schemes of the defined
benefit type. The Group also operates a defined contribution scheme and makes contributions to personal pension plans
for its employees in the USA.
Pension costs for the defined contribution scheme and personal pension contributions are as follows:
Defined contribution schemes
Personal Pension contributions
Group
2017
£’000
542
43
2016
£’000
508
29
Other pension costs totalled £292,000 (2016: £265,000) and represent life assurance charges and government pension
protection fund levies.
Defined benefit plans
With effect from 1 April 2011 active members’ benefits were reduced such that future increases in pensionable salaries were
restricted to a cap of 2% per annum. As from 1 April 2017 (Works Scheme) and 1 July 2017 (Staff Scheme) increases in pen-
sion once it is in-payment will be in line with the annual increase in CPI. The impact of this change in assumption in the year
92
93
Notes to the Financial Statements
Notes to the Financial Statements
is a credit to Other Comprehensive Income of £1.6m. The Staff and Works Scheme remain defined benefit schemes but are
no longer “final salary” schemes. The most recent actuarial valuations of the Staff Scheme and the Works Scheme have been
updated to 1 April 2017 by qualified independent actuaries. The major assumptions used by the actuary for each scheme were
as noted below. The expected return on plan assets is calculated by using a weighted average across each category of asset:
Staff Scheme
2017
%
2016
%
Works Scheme
2017
%
2016
%
RPI Inflation assumption
CPI Inflation assumption
Rate of increase in pensionable salaries
Discount rate
Pension increases for in-payment benefits capped at 5%, with a 3% floor
-
2.25
1.90
2.70
3.50
Pension increases for in-payment benefits capped at 2.5%, with a 0% floor
2.20
2.90
1.90
1.90
3.55
3.30
1.90
-
2.25
1.90
2.70
3.20
1.90
2.90
1.90
1.90
3.55
3.30
1.90
In respect of mortality for the Works members the assumptions adopted at 1 April 2017 are 145% of the S2PXA series table,
with future improvements in line with the CMI core 2016 projection model with long-term trend improvements of 1.25% pa.
For the Staff members the S2PXA series table with a 95% rating has been used, with future improvements in line with the
CMI core 2016 projection model with long term trend improvements of 1.25% pa. The different tables and methods applied
to each Scheme reflect the different characteristics of the members within these Schemes. The long-term expected rate of
return on cash is determined by reference to bank base rates at the SFP dates. The long-term expected return on bonds is
determined by reference to UK long dated government and corporate bond yields at the SFP date. The long-term expected
rate of return on equities is based on the rate of return on bonds with an allowance for out-performance. The method adopted
for determining the discount rate has been selected as the most appropriate following specialist advise and the discount rate
has been calculated based on a yield curve as an appropriate duration to the schemes’ liabilities. A decrease in the discount
rate by 0.25% would increase the defined benefit obligations by 4.5%.
The amounts recognised in the Statement of Financial Position are determined as follows:
2017
£’000
2016
£’000
2015
£’000
2014
£’000
2013
£’000
Defined benefit obligation (DBO)
(124,652 )
(102,141 )
(106,788 )
(85,482 )
(85,112 )
Fair value of assets (FVA)
105,832
94,271
92,346
73,842
74,759
Net liability recognised in the SFP
(18,820 )
(7,870 )
(14,442 )
(11,640 )
(10,353 )
The fair value of the plan assets comprises the following categories of asset in the stated proportions:
Equities
Annuities
Cash
Real Liability Strategy
Nominal Liability Strategy
Staff Scheme
2016
%
2017
%
Works Scheme
2016
%
2017
%
62.2
61.7
73.8
72.6
3.9
0.4
9.8
3.8
0.5
9.4
-
0.1
3.8
-
0.9
3.7
23.7
24.6
22.3
22.8
The pension plan assets do not include any investments in the shares of the Company (2016: nil).
Apart from the annuities and cash, the assets of the schemes are held in an unquoted investment fund managed by
the schemes’ fiduciary manager and comprising combinations of the above assets. Within those funds, the indirect
equity exposures are predominantly quoted. The assets in the Liability Strategy captions holdings of cash and swaps,
designed to match the sensitivity of the schemes to movements in long term interest rates and inflation expectations.
The amounts recognised in the Statement of Comprehensive Income are as follows:
Total included within employee benefit costs - current service cost
Interest Income on plan assets
Interest cost on the defined benefit obligation
Total included within interest
Total
Analysis of the movement in the Statement of Financial Position liability
At 2 April 2016 / 28 March 2015
Total expense as above
Contributions paid
Actuarial (losses)/gains recognised in SCI
At 1 April 2017 / 2 April 2016
2017
£’000
1,190
(3,326 )
3,591
265
1,455
2017
£’000
(7,870 )
(1,455 )
1,891
(11,386 )
2016
£’000
1,363
(3,042 )
3,508
466
1,829
2016
£’000
(14,442 )
(1,829 )
1,847
6,554
(18,820 )
(7,870 )
The actual return on plan assets was £12,831,000 (2016: £2,418,000). The Company expects to pay £826,000 (2016: £836,000)
in contributions to the Staff Scheme and £1,093,000 (2016: £1,055,000) in contributions to the Works Scheme in the next
financial period. The minimum funding requirement does not give rise to an additional liability under IFRIC 14.
The cumulative amount of losses recognised in the Statement of Comprehensive Income, since the adoption of IAS 19, are
£20,075,000 (2016: £8,689,000).
2017
Works Scheme
2017
Staff Scheme
2016
Assets DBO Assets DBO Assets DBO Assets DBO
£’000
£’000 £’000
Staff Scheme Works Scheme
2017
2016
£’000 £’000
£’000 £’000
£’000
2017
2016
2016
At 2 April 2016 / 28 March 2015
Interest Income on plan assets
Current service costs
Benefits paid
Contributions by plan participants
Employer contributions
Interest cost on the DBO
Return on plan assets
47,926 (55,766 )
-
1,690
(651 )
(94 )
(2,047 ) 2,047
(359 )
-
(1,961 )
4,749 (11,737 )
359
1,055
-
46,345 (46,375 )
-
(410 )
1,524
(180 )
-
(1,630 )
(9,154 )
1,636
(35 )
(1,524 )
180
836
-
4,756
47,075 (58,443 )
-
1,552
(754 )
(104 )
(1,466 ) 1,466
(329 )
-
(1,922 )
4,216
329
1,025
-
(485 )
45,271 (48,345 )
-
(472 )
1,228
(162 )
-
(1,586 )
2,962
1,490
(33 )
(1,228 )
162
822
-
(139 )
At 1 April 2017 / 2 April 2016
53,638 (68,427 )
52,194 (56,225 )
47,926 (55,766 )
46,345 (46,375 )
Experience adjustments
Arising on plan assets
Percentage of scheme assets
Arising on plan liabilities
Percentage of scheme liabilities
2017
£’000
9,505
8.98%
(20,891 )
(16.76% )
2016
£’000
(624 )
(0.66% )
7,178
7.03%
2015
£’000
15,591
16.88%
(18,836 )
(17.64% )
2014
£’000
(3,830 )
(5.19% )
2013
£’000
1,855
2.48%
2,621
(143 )
3.07%
(0.17% )
94
95
Notes to the Financial Statements
Notes to the Financial Statements
18. DEFERRED TAXATION
The movement on the deferred tax account is shown below:
At 2 April 2016 / 28 March 2015
Deferred tax on actuarial (losses) / gains on retirement liabilities
Deferred tax on share options recognised in OCI
SCI credit
At 1 April 2017 / 2 April 2016
Group
2017
£’000
78
1,847
245
100
2,270
2016
£’000
1,174
(1,488 )
135
257
78
Company
2017
£’000
1,609
1,847
245
32
2016
£’000
2,878
(1,488 )
135
84
3,733
1,609
Deferred tax assets have been recognised in respect of all temporary differences giving rise to deferred tax assets because it is
probable that these assets will be recovered. No deferred tax is recognised on the unremitted earnings of overseas subsidiaries.
Deferred tax liabilities
At 2 April 2016
SCI credit
Deferred tax on share options recognised in SOCIE
At 1 April 2017
Deferred tax assets
At 2 April 2016
SCI Charge
Deferred tax on actuarial losses on retirement liabilities
At 1 April 2017
Accelerated
capital
allowances
£’000
(1,786 )
16
-
(1,770 )
Other
£’000
447
148
245
840
Pension
£’000
1,417
(64 )
1,847
3,200
Net deferred tax asset
19. SHARE CAPITAL
Group and Company
Issued and fully paid
At 2 April 2016
Issued during the period
At 1 April 2017
Potential issue of ordinary shares
Number of
ordinary shares
9,225,842
240,524
9,466,366
Total
£’000
(1,339 )
164
245
(930 )
Total
£’000
1,417
(64 )
1,847
3,200
Total
£’000
2,270
£’000
2,306
61
2,367
Under the Group’s long-term incentive plan for executive directors and senior executives, such individuals hold rights over
ordinary shares that may result in the issue of up to 151,685 ordinary shares of 25p by 2019 (2016: 172,211 ordinary shares of
25p by 2018). There were 64,108 share options exercised in the period (2016: 40,594). Further information on directors share
options can be seen in the Remuneration Committee Report.
Options at Options granted Options exercised
in the period
in the period
2 April 2016
Options lapsed
in the period
Options at 1
April 2017
Share options
172,211
43,582
64,108
-
151,685
The amount of gains made by Directors on 64,108 share options exercised in the year totalled £617,938. The Statement of
Comprehensive Income includes LTIP charges of £223,957 for the year in relation to Directors.
The Save As You Earn (SAYE) schemes were introduced in September 2013 and run for either a three or five year period.
Options were valued using a Black-Scholes option pricing model. The fair value per option and assumptions used in the
calculation are as follows: -
Fair value per option
Date of grant
Exercise Price
Market Price at date of grant
Volatility
Net dividend yield
Term of option
Risk free rate of interest
Sep-13
3 year scheme
Sep-13
5 year scheme
57p
71p
01 September 2013
01 September 2013
199.52p
313.5p
26%
2%
199.52p
313.5p
26%
2%
3.25 years
5.25 years
0.8%
1.5%
During the period 223,270 options were exercised (2016: 43,076 options were exercised).
The amount of gains made by Directors on the exercise of 5,412 share options exercised under the SAYE Scheme in the year
amounted to £38,925.
20. EMPLOYEES AND DIRECTORS
Staff costs during the period
Wages and salaries
Social Security costs
Pension costs (note 17)
Group
2017
£’000
21,991
2,180
2,067
2016
£’000
21,105
1,886
2,164
26,238
25,155
Company
2017
£’000
3,667
438
851
4,956
2016
£’000
3,550
317
1,033
4,900
The average monthly number of people (including executive directors) employed in the Group during the year,
analysed by division was as follows:
James Cropper Paper Products
James Cropper 3D Products
Technical Fibre Products
James Cropper PLC
Full Time Equivalent
2016
Number
2017
Number
Headcount
2016
Number
2017
Number
359
4
102
59
524
362
-
99
57
518
365
5
104
79
553
372
-
101
73
546
Details of the remuneration of Directors, who are also considered to be the key management personnel as per IAS 24, are
provided in the Report of the Remuneration Committee on page 57.
96
97
Notes to the Financial Statements
Notes to the Financial Statements
The Company also has the following transactions with related entities:
2017
James Cropper Speciality Papers Limited
James Cropper Converting Limited
James Cropper 3D Products Limited
Technical Fibre Products Limited
James Cropper EBT Limited
2016
James Cropper Speciality Papers Limited
James Cropper Converting Limited
James Cropper 3D Products Limited
Technical Fibre Products Limited
James Cropper EBT Limited
Management
charges
£’000
Receivable /
(Payable)
£’000
Loans and net
intercompany
funding
£’000
5,328
(50 )
72
1,301
-
6,651
2,318
74
220
1,213
-
3,826
5
9,939
3,187
10,834
675
24,640
Management
charges
£’000
Receivable /
(Payable)
£’000
Loans and net
intercompany
funding
£’000
4,143
656
-
942
-
5,741
1,333
71
151
1,377
-
2,932
5,143
9,184
1,022
5,641
343
21,333
21. COMMITMENTS UNDER OPERATING LEASES
Group
Commitments under non-cancellable
operating leases expiring:
Within one year
Later than one year and less than five years
After five years
Company
Commitments under non-cancellable
operating leases expiring:
Later than one year and less than five years
After five years
2017
Property
£’000
2017
Plant & machinery
£’000
2016
Property
£’000
2016
Plant & machinery
£’000
5
1,255
591
1,851
-
438
-
438
10
313
1,724
2,047
-
524
-
524
2017
Property
£’000
2017
Plant & machinery
£’000
2016
Property
£’000
2016
Plant & machinery
£’000
199
591
790
438
-
438
291
665
956
524
-
524
22. CAPITAL COMMITMENTS
Contracts placed for future capital expenditure not
provided in the financial statements
23. CONTINGENT LIABILITIES
2017
£’000
Group
2016
£’000
Company
2016
£’000
2017
£’000
466
1,270
34
12
There were no contingent liabilities at the period end for the Group. The Company is included in a cross guarantee between
itself and its subsidiaries.
24. RELATED PARTY TRANSACTIONS
Group
The Group has taken advantage of the exemption not to disclose intra-group transactions that are eliminated on consolidation.
Company
The Company pays £40,000 (2016: £40,000) annually to Sir James Cropper for the use of reservoirs to supply water to
the factory premises. The contract is based on a twenty year repairing lease with rent reviews every five years. The rent is
negotiated through independent advisers representing each party. The Company paid £nil (2016: £918) to Ellergreen Hydro,
a company in which M A J Cropper is Managing Director, in the period for a maintenance project. The Company paid
£12,345 (2016: £16,407) to Ellergreen Estate (trading name of the J A Cropper (1989) Settlement), a trust of which
M A J Cropper is a beneficiary, for imports of electricity from the hydro-electric plant owned and operated by the Trust.
The Company has rented the roof space of one of the buildings to Burneside Community Energy Ltd, who have installed
solar panels. The Company is importing the electricity generated by the solar panels and paid £11,136 (2016: £nil)
to Burneside Community Energy Ltd. M A J Cropper is a director of Burneside Community Energy Ltd.
98
99
Shareholder Information
Notice of Annual General Meeting
2016 - 2017 SHAREHOLDER INFORMATION
Reporting
Interim Results announced and sent to Ordinary Shareholders
Final results announced
Annual Report issued by
15 November 2016
27 June 2017
4 July 2017
Annual General Meeting - at Bryce Institute, Burneside, Kendal, Wednesday 26 July 2017 at 11.00am.
Dividends on Ordinary Shares
Interim dividend paid on 13 January 2017 to Ordinary Shareholders registered on 16 December 2016.
Final dividend to be paid on 11 August 2017 to Ordinary Shareholders registered on 14 July 2017.
Bankers and Advisers
Bankers
Lloyds Bank plc
HSBC Bank plc
Svenska Handelsbanken AB (publ)
Barclays Bank plc
Independent Auditor
KPMG LLP, Manchester
Tax Advisers
PriceWaterhouseCoopers LLP, Manchester
NOMAD & Stockbrokers
Stockdale Securities Limited, London
Corporate Lawyers
Bond Dickinson, Newcastle upon Tyne
DWF LLP, Manchester
Registrars
Capita Asset Services, Beckenham
Pension Adviser
Willis Towers Watson, Manchester
James Cropper PLC
Telephone. +44 (0)1539 722002
Email. info@cropper.com
Burneside Mills
Kendal, Cumbria LA9 6PZ
Great Britain
www.cropper.com
Company Registration No: 30226
NOTICE OF ANNUAL GENERAL MEETING
NOTICE IS HEREBY GIVEN that the 128th Annual
General Meeting of the Company will be held at The
Bryce Institute, Burneside, Kendal, Cumbria LA9 6PZ on
Wednesday 26 July 2017 at 11 am to consider and, if thought
fit, pass Resolutions 1 to 10 inclusive as ordinary resolutions
and Resolution 11 as a special resolution. The Chairman of
the Company will act as Chairman of the Meeting other than
Resolution 3 which will be chaired by another Director of
the Company.
Resolution 1
To receive and consider the Company’s annual accounts for
the 52 weeks ended 1 April 2017 together with the Directors’
Report and the Auditors Report on those accounts.
Resolution 2
To declare a final dividend for the year ended 1 April 2017 of
9.3 pence for each Ordinary Share payable on 11 August 2017
to all Ordinary Shareholders on the register of the Company
at close of business on 14 July 2017.
Resolution 3
To re- elect Mark A J Cropper as a Director of the Company.
Resolution 4
To re-elect David Wilks as a Director of the Company.
Resolution 5
To re-elect Karl D Watson as a Director of the Company.
Resolution 6
To re-elect Stephen A Adams as a Director of the Company,
who was appointed by the Board since the last AGM.
Resolution 7
To reappoint KPMG LLP as Auditors of the Company to
hold office until the conclusion of the next Annual General
Meeting of the Company.
Resolution 8
To authorise the Directors to determine the remuneration of
the Auditors of the Company.
Resolution 9
To consider and approve the Report of the Remuneration
Committee for the 52 weeks ended 1 April 2017.
Resolution 10
THAT the Directors be and they are hereby generally and
unconditionally authorised in accordance with section 551
of the Companies Act 2006 to exercise all the powers of the
Company to allot shares in the Company and to grant rights
to subscribe for, or to convert any security into, shares in the
Company up to an aggregate nominal amount of £133,409
provided that this authority shall expire at the end of the
next Annual General Meeting of the Company or, if earlier,
15 months from the date of this Resolution, save that the
Company shall be entitled to make offers or agreements
before the expiry of such authority which would or might
require shares to be allotted or such rights to be granted after
such expiry and the Directors shall be entitled to allot shares
and grant rights pursuant to any such offer or agreement
as if this authority had not expired; and all unexercised
authorities previously granted to the Directors to allot
shares and grant rights be and are hereby revoked.
Resolution 11
THAT the Directors be and they are hereby empowered
pursuant to section 570 and section 573 of the Companies
Act 2006 to allot equity securities (within the meaning of
section 560 of that Act) for cash pursuant to the authority
conferred by Resolution 10 above or by way of a sale of
treasury shares as if section 561(1) of that Act did not apply
to any such allotment provided that this power shall be
limited to:
(a) the allotment of equity securities in connection with an
offer of securities in favour of the holders of Ordinary
Shares on the register of members at such record dates as
the Directors may determine where the equity securities
respectively attributable to the interests of the Ordinary
Shareholders are proportionate (as nearly as may be
practicable) to the respective numbers of Ordinary Shares
held by them on any such record dates, subject to such
exclusions or other arrangements as the Directors may
deem necessary or expedient to deal with treasury shares,
fractional entitlements or legal or practical problems
arising under the laws of any overseas territory or the
requirements of any regulatory body or stock exchange
or by virtue of Ordinary Shares being represented by
depositary receipts or any other matter; and
(b) the allotment (otherwise than pursuant to sub-paragraph
(a) of this Resolution 11) to any person or persons of
equity securities up to an aggregate nominal amount
of £133,409, and shall expire upon the expiry of the
general authority conferred by Resolution 10 above,
save that the Company shall be entitled to make offers or
agreements before the expiry of such power which would
or might require equity securities to be allotted after
such expiry and the Directors shall be entitled to allot
equity securities pursuant to any such offer or agreement
as if the power conferred hereby had not expired.
BY ORDER OF THE BOARD
Jim Aldridge
Company Secretary
4 July 2017
Registered Office:
Burneside Mills
Kendal
Cumbria LA9 6PZ
100
101
Notice of Annual General Meeting
Notice of Annual General Meeting
Total Voting Rights
As at 9.00 am on the Latest Practicable Date, being the
last practicable day prior to the publication of this notice,
the Company’s issued share capital comprised 9,466,366
Ordinary Shares of 25 pence each. Each ordinary share
carries the right to one vote at a general meeting of the
Company and, therefore, the total number of voting rights
in the Company as at 9.00 am on the Latest Practicable Date,
being the last practicable date prior to the publication of this
notice is 9,466,366.
Directors’ contracts
Copies of the contracts of service for Directors and a
statement of Directors’ interests are available for inspection
during normal business hours at the registered office of
the Company and they may be inspected at the place of the
Annual General Meeting for at least 15 minutes prior to the
meeting and at the meeting.
Notes:
Proxies
To be entitled to attend and vote, whether in person or
by proxy, at the AGM, members must be registered in the
Register of Members of the Company at close of business on
24 July 2017 (or, if the meeting is adjourned, at 6.00 pm on
the date which is two days prior to the adjourned meeting).
Changes to entries on the Register of Members after this
time shall be disregarded in determining the rights of
persons to attend or vote (and the number of votes they may
cast) at the AGM or adjourned meeting.
A member entitled to attend and vote at the meeting
convened by the above notice is entitled to appoint another
person as their proxy to exercise all or any of their rights to
attend and to speak and vote at a meeting of the Company.
Any such member may appoint more than one proxy
provided that each proxy is appointed to exercise the rights
attached to a different share or shares held by such member.
You may not appoint more than one proxy to exercise rights
attached to any one share. To appoint more than one proxy,
please photocopy the form of proxy and indicate in the box
next to the proxy’s name the number of shares in relation to
which he or she is authorised to act as your proxy. Please also
indicate by ticking the box provided if the proxy instruction
is one of multiple instructions being given. All forms must be
signed and should be returned together in the same envelope.
A proxy need not be a member of the Company. Your proxy
could be the Chairman, another Director of the Company
or another person who has agreed to attend to represent you.
Your proxy must vote as you instruct and must attend the
meeting for your vote to be counted. Appointing a proxy
will not prevent a shareholder from attending in person and
voting at the meeting. If you wish your proxy to speak on
your behalf at the meeting you will need to appoint your
own choice of proxy (not the Chairman of the meeting) and
give your instructions directly to that person.
A form of appointment of proxy is enclosed. Details of
how to appoint a proxy are set out in the notes to the proxy
form. If you return more than one valid proxy appointment
in respect of the same share for use at the same meeting
and in respect of the same matter, that received last by the
registrar before the latest time for the receipt of proxies shall
be treated as replacing or revoking the other or others as
regards to that share.
The form of proxy includes a vote withheld option. Please
note that a vote withheld is not a vote in law and will not be
counted in the calculation of the proportion of votes for and
against any particular Resolution.
The appointment of a proxy and the original or duly certified
copy of the power of attorney or other authority (if any)
under which it is signed or authenticated should be deposited
with the Company’s registrar at the address shown on the
proxy form not later than 11.00 am on 24 July 2017 or 48
hours before the time for holding any adjourned meeting.
The deadline for receipt of proxy appointments (see above)
also applies in relation to amended instructions.
CREST members who wish to appoint a proxy or proxies by
utilising the CREST electronic proxy appointment service
may do so by utilising the procedures described in the
CREST Manual on the Euroclear website (www.euroclear.
com/CREST). CREST Personal Members or other CREST
sponsored members, and those CREST members who have
appointed a voting service provider(s), should refer to their
CREST sponsor or voting service provider(s), who will
be able to take the appropriate action on their behalf. In
order for a proxy appointment made by means of CREST
to be valid, the appropriate CREST message (a “CREST
Proxy Instruction”) must be properly authenticated in
accordance with Euroclear UK & Ireland Limited’s (EUI)
specifications and must contain the information required
for such instructions, as described in the CREST Manual.
The message regardless of whether it constitutes the
appointment of a proxy or an amendment to the instruction
given to a previously appointed proxy must, in order to
be valid, be transmitted so as to be received by the issuer’s
agent (ID RA10) by the latest time(s) for receipt of proxy
appointments specified in the notice of meeting. For this
purpose, the time of receipt will be taken to be the time (as
determined by the timestamp applied to the message by the
CREST Applications Host) from which the issuer’s agent
is able to retrieve the message by enquiry to CREST in the
manner prescribed by CREST. The Company may treat as
invalid a CREST Proxy Instruction in the circumstances
set out in regulation 35(5)(a) of the Uncertificated Securities
Regulations 2001.
CREST members and, where applicable, their CREST
sponsors or voting service providers should note that EUI
does not make available special procedures in CREST
for any particular messages. Normal system timings and
limitations will therefore apply in relation to the input
of CREST Proxy Instructions. It is the responsibility of
the CREST member concerned to take (or, if the CREST
member is a CREST personal member or sponsored member
or has appointed a voting service provider(s), to procure that
his CREST sponsor or voting service provider(s) take(s))
such action as shall be necessary to ensure that a message
is transmitted by means of the CREST system by any
particular time. In this connection, CREST members and,
where applicable, their CREST sponsors or voting service
providers are referred, in particular, to those sections of
the CREST Manual concerning practical limitations of the
CREST system and timings.
Corporate representatives
A member of the Company which is a corporation may
authorise a person or persons to act as its representative(s)
at the AGM. In accordance with the provisions of the
Companies Act 2006, each such representative may exercise
(on behalf of the corporation) the same powers as the
corporation could exercise if it were an individual member of
the Company, provided that they do not do so in relation to
the same shares.
102
103
ANNUAL REPORT PRODUCTION
All the paper used in this report has been made in England by James Cropper PLC.
Cover
COCOA. Powder Plum. 300gsm. Grasscloth Emboss.
COCOA. Shell. 300gsm. Basket Weave Emboss.
Endpaper
WIBALIN.® Natural Petal . 115gsm.*
Inner pages
ZEN.® Pure White. 120gsm.**
Dyers Broom. 135gsm.
Financial Statements
VANGUARD. Jade. 120gsm.
Design
Plain Creative Ltd
Photography
Pantling Studio
James Cropper Archives
Steven Barber Photography
Print
Dixons Printing Company Ltd
* Wibalin is a registered trademark of Winter and Co, used with permission. All rights reserved.
** Zen is a registered trademark of G . F Smith, used with permission. All rights reserved.
104