01“”JAMES CROPPER’S LONG TERM SUCCESS ULTIMATELY DEPENDS ON DEEP AND ENDURING PARTNERSHIPS WITH OUR PEOPLE, CUSTOMERS, SUPPLIERS, COMMUNITY AND BEYOND. 1. Steven Gill, CupcyclingTM Operative 2. Procurement Team, Raw Materials 3. ColourformTM packaging produced for Lush 4. Mark James, TFP Research Specialist 5. Trevor Atkinson, Cutter Operator with Isabelle Maddock, Finance Director 6. No.3 Machine, TFP 7. Emma Matthews, TFP Materials Scientist 8. Paper reels in the high bay warehouse9. ColourformTM apprentices. Left - Mike Gardner, middle - Amos Aschilean, back right - Stephen Hull, front right - Matthew Lowther 0302163589724 04Introduction051. Colour laboratory 2. Operatives, No.4 Papermaking Machine 3. Sample analysis, TFP labs 4. ColourformTM productionCONTENTSSTRATEGIC REPORT 05FINANCIAL HIGHLIGHTS 06FINANCIAL SUMMARY 07CHAIRMAN’S LETTER 08 CHIEF EXECUTIVE’S REVIEW 10FINANCE DIRECTOR’S REVIEW 13THE PENSION REPORT 17RISK MANAGEMENT 20CREATING VALUE FROM WASTE 28TECHNICAL FIBRE PRODUCTS 30JAMES CROPPER 3D PRODUCTS 36JAMES CROPPER PAPER 40OUR VALUES 46SUSTAINABILITY AND PEOPLE 48GOVERNANCE 57BOARD OF DIRECTORS CORPORATE GOVERNANCE STATEMENT REPORT OF THE REMUNERATION COMMITTEE DIRECTORS’ REPORT FINANCIAL STATEMENTS 73STATEMENT OF DIRECTORS’ RESPONSIBILITIES INDEPENDENT AUDITOR’S REPORT GROUP STATEMENT OF COMPREHENSIVE INCOME 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 4312 Strategic Report - Financial Highlights
Strategic Report - Financial Summary
FINANCIAL HIGHLIGHTS
FINANCIAL SUMMARY
REVENUE BY REGION
SUMMARY OF RESULTS
TOTAL REVENUE
£96.3m
96.3
92.4
87.9
83.1
84.5
2018
2017
2016
2015
2014
UK
Europe
Americas
Asia
Other
10%
20%
30%
40%
50% 60%
ADJUSTED PROFIT BEFORE TAX (i)
(excluding IAS 19 Pension adjustments)
PROFIT BEFORE TAX (iv)
£5.8m
£4.5m
5.8
6.6
5.2
3.5
2.1
DILUTED EPS (iv)
43.0p
43
49
31.8
20.1
15.0
NET DEBT (iii)
£4.8m
4.8
7.4
7.3
6.1
10.3
2018
2017
2016
2015
2014
2018
2017
2016
2015
2014
2018
2017
2016
2015
2014
4.5
5.5
3.9
2.6
1.3
GEARING (ii)
(excluding IAS 19 pension adjustment)
12%
12
20
20
22
35
CAPITAL EXPENDITURE
£1.9m
1.9
5.3
4.1
2.6
3.0
2018
2017
2016
2015
2014
2018
2017
2016
2015
2014
2018
2017
2016
2015
2014
2018
2017
2016
2015
2014
(i) Adjusted profit before tax equates to profit before tax excluding the IAS 19 impact
(ii) Gearing is calculated as the proportion of net debt to Total Shareholders’ Equity, excluding the IAS 19 Pension deficit.
(iii) Net debt, and net borrowings, are calculated as total loans and borrowings less cash and cash equivalents.
(iv) The figures for 2017 have been restated following a prior year adjustment resulting from changes to the valuation
of the pension scheme liabilities. Details can be found in note 25 on page 109.
RESTATED
2017
£’000
2018
£’000
2016
£’000
2015
£’000
2014
£’000
Revenue
96,312
92,363
87,920
83,052
84,518
Adjusted operating profit
(excluding IAS 19 impact & exceptionals)
6,133
6,849
6,264
3,899
2,545
Adjusted profit before tax
(excluding IAS 19 impact)
Impact of IAS 19
Profit before tax
Earnings per share - diluted
5,825
6,566
5,173
(1,284 )
(1,025 )
(1,305 )
4,541
43.0p
5,541
49.0p
3,868
31.8p
3,494
(919 )
2,575
20.1p
2,088
(775 )
1,313
15.0p
BALANCE SHEET SUMMARY
Non-pension assets – excluding cash
2018
£’000
59,899
RESTATED
2017
£’000
64,304
2016
£’000
57,470
2015
£’000
50,810
2014
£’000
51,093
Non-pension liabilities – excluding borrowings
(15,585 )
(19,433 )
(17,019 )
(14,289 )
(11,230 )
Net IAS 19 pension deficit (after deferred tax)
(16,162 )
(18,421 )
(6,453 )
(11,554 )
44,314
44,871
40,451
36,521
28,152
26,450
33,998
24,967
39,863
(9,312 )
30,551
Net borrowings
(4,806)
(7,364 )
(7,305 )
(6,105 )
(10,277 )
Equity shareholders’ funds
23,346
19,086
26,693
18,862
20,274
Gearing % - before IAS 19 deficit
Gearing % - after IAS 19 deficit
Capital expenditure £’000
12%
21%
1,935
20%
39%
5,315
22%
27%
4,086
20%
32%
2,619
35%
51%
2,958
Non GAAP Measures:
(i) The IAS 19 pension adjustments are explained in detail in the Financial Review section, page 13. The total amount excluded
from the IAS pension charge is £1,284,000 (2017 restated: £1,025,000). The adjustment, which we refer to in these accounts
as the “IAS 19 impact” represents the difference between the pension charge as calculated under IAS 19 and the cash
contributions for the current service cost only as determined by the latest triennial valuation. The Directors consider that
the adjusted pension charge better reflects the actual pension costs for ongoing service compared to the IAS 19 charge.
This adjustment is made internally when we assess performance and is also used in the EBITDA and EPS targets used in
management incentive schemes. EBITDA is defined as “operating profit before interest, tax, depreciation and amortisation”.
(ii) We also exclude exceptional items from certain internal profit measures and in setting management incentive scheme targets.
Items which, by their nature, are material items that are not expected to recur, are excluded in order to provide a clearer
picture of the underlying performance of the Group.
(iii) The figures for 2017 have been restated following a prior year adjustment resulting from changes to the valuation
of the pension scheme liabilities. Details can be found in note 25 on page 109.
06
07
Strategic Report - Chairman’s Letter
Strategic Report - Chairman’s Letter
CHAIRMAN’S LETTER
Dear Shareholders,
This year has been a year of contrasts for the Group.
While we have continued to strengthen in numerous ways,
as outlined in this report, we have been unable to sustain
the upwards profits trajectory of recent years. This is primarily
owing to dramatically rising pulp costs within our paper division,
as well as increased losses incurred within our start-up business,
James Cropper 3D Products Limited (“3DP”).
Nevertheless, there is plenty to be positive about. The net
impact of the headwinds faced were significantly lessened
under the careful stewardship of CEO Phil Wild and his team,
and across all divisions our ambitions remain undiminished.
Our financial position under the leadership of Finance
Director Isabelle Maddock also remains strong. Cash
generation from operations was only very slightly lower than
the prior year, and with strong working capital controls we
were able to continue investment in 3DP. Borrowings are
presently low giving us sufficient headroom within our
financial covenants to fund future investments.
This year TFP has led the way in both revenue and profit
growth, the latter jumping by 25 percent. This followed
a marginal performance improvement in the prior year and
was a welcome uplift given our significant investment in
doubling production capacity in 2015. Orders for the third
UK production line are growing in step with our ambitions
and, as outlined by Managing Director Martin Thompson
on page 31, further capacity is likely to be required by 2020.
Aerospace and defence were behind much of the growth
experienced this year, albeit outshone by demand for fuel
cell materials which has doubled for the second year in a row.
The fuel cell industry is in its infancy in most markets and
accordingly has excellent growth prospects.
In the Paper division profits more than halved in 2017-18
owing to significant rises in the price of pulp, as noted above.
It was not possible to recover these in the year though the
impact was significantly mitigated by commercial and
operational improvements. Mix and margin continue to be
enhanced, helped by good demand for our products from
customers new and old. Efficiency and productivity
improvements continue apace and we see scope for many
more. This year was noteworthy for process waste being cut
to its lowest ever level.
Recycling has also featured highly in Paper’s most public
highlight of the year, the launch and ongoing publicity around
the CupCycling™ initiative. Not least this attracted the
attention of HRH The Prince of Wales and his Business in the
Community responsible business network, the latter arranging
a “Seeing is Believing” tour and waste summit to coincide
with his visit to the mill in March.
Whilst we have operated our coffee cup recycling plant for
some years, this project to upcycle used coffee cups into paper
and packaging products (including the G . F Smith papers
used in this annual report) brings the story full circle. It has
raised James Cropper’s profile greatly and is leading to many
new lines of enquiry. At the outset of the year we could not
have imagined how much prominence coffee cups were to
gain in the national consciousness.
The similar attention being shone on single use plastics has also
proved very timely for 3DP’s Colourform™ moulded fibre
range, specifically designed as a recyclable and attractive
alternative to plastic. This was launched in September 2017
and we were greatly honoured that HRH The Prince of Wales
officially opened the plant on his visit. The business was not cash
positive this year as hoped but we remain as convinced by its
long term potential and will continue to invest in pursuit of this.
This is but one example of the Board’s longer term initiatives
I referred to in last year’s report. It is also indicative of the
strength of the Group that we continue to grow our Technology
& Innovation department under CTO Patrick Willink in order
to explore several other avenues of future potential.
DIVIDEND PER SHARE 2018
2018
2017
2016
2015
2014
13.5p
11.8p
9.3p
8.5p
7.9p
OUTLOOK
As already noted, and intimated by the recommended final
dividend increase, the Board and I continue to be excited
about the prospects of the Group. We recognise there are
significant challenges in recovering the margins lost in Paper
to pulp costs and that continued research, innovation and
investment will be vital to maintaining our position and
creating future value.
This year I have been heartened by the growing recognition
the Group is receiving for our sustainable products, and the
integrity of our operations and employees. The latter matters
most of all. Indeed more than ever we are dedicating time and
investment to ensure all who work for James Cropper are
given the skills, know-how, accountability and awareness of
our ambitions to have successful long term careers within the
Group. These in turn, I hope, will ensure we can continue to
expand for many years to come.
Within these we are mindful that innovation need not
necessarily be technological but can also take many other
forms, be they commercial, financial or otherwise.
It is also central to our approach that we take an external
view. On this note we are delighted to be welcoming
Dr Andrew Hosty this year as a Non-Executive Director.
Andrew will be joining the Board on 1 August, and brings a
wealth of relevant experience and acumen to the Group, not
least gained within Morgan Advanced Materials plc where he
served as COO and most recently as Founding CEO of the
Sir Henry Royce Institute for Advanced Materials.
As well as new and external ways of thinking, another core
tenet that is central to our prospects is that of partnership.
This is not new. For generations we have prized our
relationships with stakeholders, be they customers,
suppliers, banks and advisers, shareholders or employees.
Indeed, we measure the longevity of these by the decade.
What is changing, however, is the depth and scale of many.
In recent years more and more of our growth has been
underpinned by close collaborations with global corporations
in sectors ranging from luxury retail to aerospace. All value
us for our creativity and agility, often beyond what is possible
within very large organisations, and we value them for the
challenge and magnitude of potential they bring us.
Many we can’t talk about, but a few related stories are told
in the ensuing pages, including our programme with Selfridges,
McDonalds and Veolia which recently won a global supply
chain award for Best Collaborative Effort.
DIVIDEND PER SHARE
The Board is recommending a final dividend of 11.0 pence
per share, making a total dividend for the financial period
of 13.5 pence per share, an increase of 14%.
Basic earnings per share in the period fell by 12% to 43.3
pence per share with diluted earnings per share falling by
12% to 43.0 pence per share.
Mark Cropper
Chairman
25 June 2018
08
09
Strategic Report - Chief Executive’s Review
Strategic Report - Chief Executive’s Review
CHIEF EXECUTIVE’S REVIEW
REVENUE
(2017: £92.4m)
ADJUSTED OPERATING
PROFIT
(excluding IAS 19 impact) (2017: £6.9m)
ADJUSTED PROFIT
BEFORE TAX
(excluding IAS 19 impact) (2017: £6.6m)
PROFIT BEFORE TAX
(2017 restated: £5.5m)
NET BORROWINGS
(2017: £7.4m)
DILUTED EARNINGS
PER SHARE
(2017 restated: 49.0p)
FULL YEAR DIVIDEND
PER SHARE
(2017: 11.8p)
£96.3m +4%
£6.1m
-10%
£5.8m
-11%
£4.5m
-18%
£4.8m -35%
43.0p
-12%
13.5p +14%
KEY PERFORMANCE INDICATORS
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 £2.6m in the
period, compared to £1.4m in the prior period.
CAPITAL EXPENDITURE
Capital expenditure during the period was £1.9m (2017: £5.3m).
CASH AND DEBT
The Group had gross debt of £10.4m at the balance sheet date
and cash of £5.6m, giving a net debt of £4.8m (2017: £7.4m).
The Group had un-drawn overdraft and revolving credit
facilities of £8.9m at the balance sheet date 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 £12.9m of funds available
to the Group at the period end.
Gearing at the financial period end, after deduction of the
IAS 19 pension deficit, was 21%, down from 39% (restated)
on the previous period. Gearing, excluding the impact of
IAS 19, was 12% down from 20% on the previous period.
In the period we have observed a significant increase in pulp
price impacting the Paper division. The full period impact
of the higher pulp price on the Group’s pre-tax profits was
approximately £3.5m. In response the Group implemented
interim cost savings and together with the trading strength of
the Technical Fibre Products Division (“TFP”), the headwind
created from the pulp price increase was mitigated by over £2.0m.
At the start of the period the Group’s expectation for
Profit before tax (excluding IAS 19) was £7.2m. This was
subsequently revised following the significant movement
on pulp price, to £5.7m. The final result taking into account
the headwinds and mitigation actions was just ahead
of our latest forecast at £5.8m.
The underlying performance of the Paper division remains
healthy with improving operating margins and additional
interest shown following the media interest in our
Cupcycling™ brands. TFP have had a successful period
with strong growth in revenues and operating profits.
James Cropper 3DP (“3DP”) has seen slow growth
in revenue but increasing interest in Colourform™
as a sustainable alternative to plastic packaging.
Group profit before tax was £4.5m, compared to £5.5m
in the prior period (restated).
REVENUE AND OPERATING PROFIT
Group revenue for the financial period was £96.3m, up 4%
on the prior period. Revenue for James Cropper Paper grew
by 0.3% in the period to £71.2m with operating profit lower
by 54% to £1.5m. Revenue for Technical Fibre Products
grew by 17% in the year to £24.9m and operating profit
up 25% at £7.4m.
CORE PRINCIPLES SUPPORTING OUR GROWTH STRATEGY
While we’ve long believed that ‘no man is an island’, this year is testimony that the same is true for businesses. James Cropper
owes its 173 year history of success to the partnerships it has fostered with customers, suppliers and the local community.
It is this collaborative attitude which allows us to claim a 40 year partnership with picture framing experts Arqadia,
100 years working alongside pulp supplier UPM Kaukas, and creating new partnerships with brands such as CCM Hockey
and Lush Fresh Handmade Cosmetics.
The highlights of the Group’s performance this year have been supported by partnerships; but they have also been driven
by our collaborative approach to people, innovation and sustainability.
PEOPLE
INNOVATION
When it comes to recruiting our people, we have a clear
strategy: we look for the absolute best. As a Group with
global reach and ambition, a fantastic heritage and a focus on
world-class innovation, diversity and equality are not just nice
to haves, they are an essential part of securing the future of
our business. That’s why, outside of ability and shared values
there are no barriers to joining the James Cropper team.
We see the relationship we have with each of our people as a
partnership. I believe this approach underpins our low staff
turnover and outstanding record for long-term service.
The result is a wealth of knowledge and skills staying in the
business that are fundamental to our capacity for growth.
Our commitment to building a culture with no obstacles
to progression is reflected in the productivity we see every
day, as well as our world-class products and service. Our
investment of hundreds of thousands of pounds in training is
essential to this output and we’re proud that five per cent of
our staff are currently active in apprenticeships.
This year, the spotlight on James Cropper’s position as an
innovator has been particularly bright. Recognition from both
inside and outside of the industry has come in the form of
award wins, media profile and even a Royal visit.
Over the course of the year, our CupCycling™ facility began
upcycling used coffee cups into premium paper products
in a supply-chain partnership with McDonalds, Costa and
Selfridges to name a few. Our 3D Products business has
evolved from producing the inlays for packaging to providing
full packaging solutions that are 100% plastic-free, broadening
opportunities significantly. In addition, Technical Fibre
Products has worked with clients to develop composite fuel
pipes designed to replace metallic equivalents, saving weight
and therefore fuel consumption for the aerospace industry.
Additionally TFP are developing a range of new applications
using nano coating technologies.
Carving new avenues for growth through innovation is
part of the James Cropper legacy, but it is not accidental.
Each business has its own dedicated Research and Development
team and we invest around £2m annually across our businesses.
Fifteen per cent of our workforce is fully dedicated to R&D
activities and a large proportion hold roles with part-time
responsibility for driving innovation.
10
11
Strategic Report - Chief Executives Review
Strategic Report - Finance Director’s Review
FINANCE DIRECTOR’S REVIEW
REVENUE AND TRADING PROFITS
Group adjusted profit before tax (excluding IAS 19 impact),
fell by 11% on the prior period to £5,825,000 (2017: Restated
£6,566,000). Higher operating costs experienced in Paper,
coming largely from increased pulp prices, have been partially
offset by an improved mix and raised average selling prices in
the Paper division, accompanied by a strong performance in
TFP and interim cost savings in Paper and across the Group.
After taking into account the headwinds and mitigation actions,
this is the second best performing year in the Group’s recent 10
year history. Group profit before tax for the period fell by 18%
on the prior period to £4,541,000 (2017: Restated £5,541,000).
RESTATED
2018
£’000
2017
£’000
CHANGE
£’000
CHANGE
%
1,468
7,449
(1,639 )
(1,145 )
6,133
(308 )
5,825
3,209
5,940
(426 )
(1,874 )
6,849
(283 )
6,566
(695 )
(589 )
(661 )
(364 )
(1,284 )
(1,025 )
(1,741 )
1,509
1,213
(729 )
716
(25)
(741)
(34)
(225)
(259)
-54%
25%
-285%
39%
-10%
-9%
-11%
5%
62%
25%
PROFIT SUMMARY
Paper Products
Technical Fibre Products
3D Products
Other Group expenses
Adjusted operating profit
Net interest (excluding IAS 19 impact)
Adjusted profit before tax
Net IAS 19 pension adjustments
Net current service charge required*
Net interest
Net IAS 19 pension impact
Profit before tax
4,541
5,541
(1,000)
-18%
*Net current service charge required is the difference between the current service cost (£1,285,000) less normal contributions (£590,000)
ALTERNATIVE PERFORMANCE MEASURES – ADJUSTED OPERATING PROFIT
AND ADJUSTED PROFIT BEFORE TAX
James Cropper uses alternative performance measures to allow users of the financial statements to gain a clearer understanding
of the underlying performance of the business.
Total reported profit before tax represents the Group’s overall performance and financial position, however it contains significant
non-operational items relating to IAS 19 that the directors believe obscure an understanding of the key performance trend.
Measures used to evaluate business performance are “Adjusted operating profit (Operating profit excluding the impact of IAS 19)” and
“Adjusted Profit before Tax (Profit before tax excluding the impact of IAS 19)”. Both are used in the profit summary table shown here.
The Group’s total reported profit before tax is based on the adjustments required for IAS 19, which are further described in
the pensions section of this report. The IAS 19 pension impact on profits for the period ended 31 March 2018 is £1,284,000
(2017: Restated £1,025,000).
REVENUES
REVENUE SUMMARY
Paper Products
Technical Fibre Products
3D Products
Revenue
2018
£’000
71,237
24,909
166
2017
£’000
CHANGE
£’000
CHANGE
%
71,024
21,332
7
213
3,577
159
3,949
0.3%
17%
2,271%
4%
96,312
92,363
13
SUSTAINABILITY
Sustainability is no longer a word used to describe an
intention or idea of the future. Consumers and investors
want to see the businesses they engage with taking tangible
steps towards sustainable practice. For those who cannot
find a solution to sustainability challenges, key stakeholders
will start to walk with their feet towards the businesses
who can.
The culture of sustainability runs deep at James Cropper
but working with our people, suppliers and community to
ensure we continue to do better every day is key. Whether
it’s the use of renewable energy or investing in innovative
processes to meet recycling challenges, we are always
making change, and the last year is a tribute to this.
Most notably, James Cropper was highlighted as an example
of best practice when Business in the Community, founded
by The Prince of Wales, chose to hold a summit at our mill.
There, a group of cross sector leaders met in the spirit of
collaboration to discuss some of the key challenges and
opportunities related to bringing waste back into value
chains. Our processes and products were used as inspiration,
notably our used coffee cup recycling and our capability
to create beautiful plastic-free packaging.
However, the work is never done. We continue to study
our own practice through formal life-cycle analysis across
the business. This examines the provenance of the materials
we use, how they get to us, the manufacturing process,
and whether our products can be recycled or contribute
to a value stream at the end of their lifespan.
Our activities across innovation, sustainability and
investment in our people provides a solid foundation
and vehicle for long-term commercial success. These core
principles will remain at the heart of our growth strategy
for the years ahead.
Phil Wild
Chief Executive Officer
25 June 2018
12
Strategic Report - Finance Director’s Review
Strategic Report - Finance Director’s Review
Group revenues are £96,312,000, a 4% increase from £92,363,000 in 2017. 55% of Group revenues come from export sales
(2017: 54%), with strong growth coming from US markets.
3DP is acknowledging a longer than anticipated cycle time to switch from plastic to moulded fibre packaging, which resulted in
lower than anticipated sales in the period. Overall the Paper market remained flat as our strategy to change mix continues and
with some customers delaying projects or switching to alternative lower quality solutions rather than take on the increased prices
being forced through due to pulp prices. Despite the weakness of the US Dollar which impacted revenues, TFP experienced top
line growth with revenues up by 17% with progress experienced across all market areas.
DIVISIONAL PERFORMANCE
The Group operates three separate trading divisions; Paper, Technical Fibre Products (‘TFP’) and James Cropper 3D Products
(‘3DP’) which is a business recently established in 2016. Each business and its related performance in the period is described here.
PAPER
The Paper division is a custom speciality papermaker and converter manufacturing exclusively in Great Britain. We are globally
renowned for expertise in the low volume tailor made manufacture of high value, uncoated, textured, coloured papers. We pride
ourselves in the personal relationships, strength of strategic partnerships and in the number of productive collaborations that
create sustainable value for our customers. CupCycling™ (recycling of used paper coffee cups) was launched in the year and its
success comes from productive collaborations between supply chain partners and environmentally conscious brands. The major
challenge this year has come from the extended rise in pulp prices, the full year impact being circa £3.5m. A combination of price
increases, cutting back on expenditure and selective investment has helped to mitigate this impact. Paper has operating profits of
£1,468,000 (2017: £3,209,000), down 54% on prior period.
TFP
Technical Fibre Products develops and manufactures high performance non-woven and other advanced materials at manufacturing
locations in Great Britain and the USA. TFP offers not just a diverse product range, but the capability to research, develop and
tailor materials to meet specific performance requirements. A key part of our ethos is to work in partnership with our global
customer base to develop solutions for their specific technically demanding challenges. TFP has grown its revenues,
and profitability is 25% up on prior period with operating profits of £7,449,000 (2017: £5,940,000).
3DP
James Cropper 3D Products is a recently added business producing moulded fibre (paper) packaging parts in a wide range
of colours, providing an alternative to single use plastic packaging. Colourform™ is the core product range from 3DP, and it
represents a viable and high quality alternative to plastic packaging, being fully recyclable, compostable and biodegradable.
Project origination is a lengthy process incorporating design, prototyping and production tooling manufacture. Conversion of
projects from plastic to pulp has been slow, however early adopters of pulp solutions are now on-board and the business was
running all production lines at the end of the period. During the period the business has reduced the origination costs and time
involved in prototyping, by developing a unique “studio prototyping” service. Customers now experience a more rapid response
time and service as their ideas are turned into reality. Key focus is on managing the pipeline of customer projects from concept to
commercialisation. Recent media coverage on CupCycling™ and Colourform™ has led to an increase in projects. 3DP made a
loss in the period of £1,639,000 (2017: £426,000).
CURRENCY
Opening rate March 2017 v. £
Closing rate March 2018 v. £
Exchange rate movement
(Weaken) / Strengthen v. £
US$
1.2465
1.4075
(12.92%)
€
1.1686
1.1403
2.42%
This table compares the opening and closing exchange rates for the financial period. The value of the Pound Sterling dropped
moderately against the Euro, having experienced a significant weakening in the prior period. The Pound Sterling strengthened
against the US Dollar. Currency movements had a net negative impact on operating profit versus the comparable prior period,
driven mainly by a weaker US Dollar relative to the Pound Sterling.
55% of the Group’s sales are exports bringing in US Dollars and Euros to the Group. Euros are used to purchase Euro priced
pulp and other Euro priced raw materials and US Dollar receipts are used to fund the purchase of US Dollar priced pulp.
Potential exposure to foreign currency surpluses or deficits are dealt with via foreign currency trades using forward selling
or forward purchasing contracts. No material contracts are in place at the period end.
ALTERNATIVE PERFORMANCE MEASURES
EBITDA (EARNINGS BEFORE INTEREST, TAX, DEPRECIATION AND AMORTISATION)
The Group monitors EBITDA where EBITDA is defined as “operating profit before interest, tax, depreciation and amortisation”.
Adjusted EBITDA is EBITDA excluding the impact of IAS 19. It provides an indication of cash generated from the Group’s operations.
ADJUSTED EBITDA (EXCLUDING THE IMPACT OF IAS 19)
Adjusted operating profit (excluding the impact of IAS 19)
Depreciation and amortisation
2018
£’000
6,133
2,678
2017
£’000
CHANGE
£’000
CHANGE
%
6,849
2,297
(716)
381
-10%
17%
Adjusted EBITDA (excluding the impact of IAS 19)
8,811
9,166
(355)
-4%
The Group’s Adjusted operating profit decreased by 10% year on year and the Group’s depreciation costs were 17% higher
than in the prior period. 3DP is not yet generating cash however both Paper and TFP continue to be strongly cash generative.
The group delivered an Adjusted EBITDA of £8,811,000 (2017: £9,166,000).
TAX
The Group’s total tax charge for the period is £451,000 (2017: £910,000) an effective tax rate of 10% on profit before tax.
The effective rate is lower than the standard rate of corporation tax in the UK (19%) as a result of a retrospective claim for
Research and Development (“R&D”) tax relief and a current year claim for RDEC (R&D Expenditure Credit). Investing in
research, innovation and development is a key part of our growth strategy and an effective way to stimulate and advance our
manufacturing capabilities.
STATEMENT OF FINANCIAL POSITION (SFP)
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
RESTATED
2017
£’000
2018
£’000
59,899
(15,585 )
44,314
(16,162 )
28,152
(4,806 )
23,346
12%
21%
1,935
64,304
(19,433 )
44,871
(18,421 )
26,450
(7,364 )
19,086
20%
39%
5,315
Non-pension assets have decreased from £64,304,000 to £59,899,000 driven by a reduced level of capital investment this year,
tight control over stock levels and trade receivables. There was moderate capital investment across all divisions this year with
spend continuing on site resilience, IT and energy infrastructure projects. Non-pension liabilities have decreased by £3,848,000
largely due to balances on trade payables. The Net IAS 19 pension deficit has reduced by £2,259,000. Shareholders’ funds show
an overall increase of £4,260,000 to £23,346,000.
SFP IAS 19 PENSION
Retirement benefit liabilities
Deferred tax asset
Net IAS 19 pension deficit
RESTATED
2017
£’000
CHANGE
£’000
2018
£’000
(19,472)
3,310
(22,194 )
3,773
2,722
(463 )
2,259
(16,162 )
(18,421 )
The Group has a net deficit on its defined benefit retirement schemes of £16,162,000 (2017: Restated £18,421,000). The deficit at
31 March 2018 includes a past service reserve of £3,315,000 (2017: Restated £3,374,000) in relation to potential liabilities arising
from the normal retirement dates for male and female members of the Staff Scheme. The reduction in deficit during the period
is principally attributable to the discount rate and mortality assumptions. A full retirement benefit disclosure is provided in note
18 to the financial statements and a greater analysis of IAS 19 on pensions is provided within the pensions section of this report.
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CASH FLOW
Adjusted EBITDA (excluding IAS 19 impact)
Pension deficit payments
Increase in working capital
Other
Net cash generated from operations
Capital expenditure
Dividends paid
Increase / (decrease) in loans
Other
Increase / (decrease) in cash
Opening cash
Closing cash
2018
£’000
8,811
(1,413 )
(436 )
(1,444 )
5,518
(1,935 )
(1,097 )
1,650
(500 )
3,636
1,921
5,557
2017
£’000
9,166
(1,362 )
(76 )
(1,012 )
6,716
(5,315 )
(881 )
(1,665 )
(120 )
(1,265 )
3,186
1,921
In the period the Group’s net cash inflow was £3,636,000 (2017: outflow £1,265,000). Cash through Adjusted EBITDA delivered
£8,811,000. Past service deficit payments of £1,413,000 are made in accordance with the agreed schedule of contributions. The
Group controls working capital appropriately to support growing revenues and during the year working capital investment
increased by £436,000 whilst revenues grew by £3,949,000. Capital expenditure in the period was £1,935,000 (2017: £5,315,000).
Available cash reserves have grown and the closing cash position for the Group is £5,557,000 (2017: £1,921,000).
FUNDING, FACILITIES AND NET DEBT
Cash and cash equivalents
Borrowings: repayable within one year
Borrowings: non-current
Net debt
Borrowings: repayable within one year
Borrowings: non-current
Facilities drawn down
Undrawn facilities
Facilities
Cash and cash equivalents
Undrawn facilities
Funds available at year end
Borrowings: repayable within one year
Funds available in excess of one year
2018
£’000
5,557
(1,600 )
(8,763 )
(4,806 )
1,600
8,763
10,363
8,944
19,307
5,557
8,944
14,501
(1,600 )
12,901
2017
£’000
CHANGE
£’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
3,636
(30)
(1,048 )
2,558
30
1,048
1,078
1,193
2,271
3,636
1,193
4,829
(30 )
4,799
The Group funds its operations and investments from operating cash flow and from borrowings and finance leases.
During the period net debt reduced by £2,558,000 to £4,806,000.
The Group has two revolving credit facilities secured with different high street banks. 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 £5,243,000 is drawn down at the
period end. Long term borrowings (falling due after more than a year) increased by £1,048,000 to £8,763,000 whilst cash and
cash equivalents increased from £1,921,000 to £5,557,000 in the period. Undrawn facilities comprise of unused overdraft facilities
of £3,687,000 plus the total unused revolving credit facilities of £5,257,000. Having taken account of current borrowings to
be paid within 12 months of the balance sheet date the Group has £12,901,000 available to the Group beyond 12 months.
Current availability of finance is good and the Group expects to be able to re-finance, or renew funding on favourable terms.
Further details can be found in note 17.3 in the notes to the financial statements.
THE PENSION REPORT
ADJUSTED OPERATING PROFIT PRIOR TO THE IMPACT OF IAS 19 IS AN ALTERNATIVE PERFORMANCE
MEASURE. (REFER TO DEFINITION ON PAGE 13).
James Cropper uses alternative performance measures to allow users of the financial statements to gain a clearer understanding
of the underlying performance of the business. Total reported Profit before tax represents the Group’s overall performance and
financial position, however it contains significant non-operational items relating to IAS 19 that the Directors believe obscure an
understanding of the key business performance trend. A measure used internally to evaluate business performance is “Adjusted
operating profit” (see definition on page 13).
It is the on-going triennial valuations which the Group monitors and tracks in order to manage pensions, rather than the
annual IAS 19 valuations. The IAS 19 period end valuations require 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 year on year.
As an indication of the variable impact of IAS 19 on profits this chart sets out the impact for the last 10 years.
TOTAL IMPACT OF IAS 19 ON PROFIT £’000
The high point in 2012 under IAS 19 resulted in an additional
£128,000 being added to reported profits.
The lowest point in 2016 resulted in a £1,305,000 reduction
to reported profits under IAS 19.
350
0
350
(700)
(1,050)
(1,400)
2007
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
THE IAS 19 IMPACT ON PROFITS
The Group’s total reported profit before tax is based on the adjustments required for IAS 19, and these adjustments fall
within operating costs and finance costs. The total charge against profits for the period ended 31 March 2018 is £1,284,000
(2017: Restated £1,025,000). Operating costs and finance costs are further described below.
OPERATING COSTS
The cost of providing pension benefits is included within “employee benefits costs” in the Statement of Comprehensive
Income. These costs include; the costs for the defined contribution schemes, personal pension plans, defined benefit schemes,
life assurance and government pension protection levies. These costs also include an excess charge of £695,000 (2017: £661,000)
determined by IAS 19 which is over and above the future service contributions for the defined benefit schemes.
Under IAS 19 valuation movements are based on assumptions at the start of the period and those operating costs affecting
“employee benefit costs” consist of;
• 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 changes.
• Curtailment and settlement costs.
• Any government pension protection levies paid over the period.
ANALYSIS OF EMPLOYMENT COSTS
Wages and salaries
Social security costs
Pension costs - future service pension contributions paid
Other pension costs
2018
£’000
22,819
2,282
590
928
2017
£’000
CHANGE
£’000
21,991
2,180
529
877
(828)
(102)
(61)
(51)
Employee benefit costs prior to IAS 19
26,619
25,577
(1,042)
Additional pension cost recognised under IAS 19
695
661
(34)
Employee benefit costs after IAS 19
27,314
26,238
(1,076)
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FINANCE COSTS
Finance costs which affect profit, consist of the net of:
• Interest income on pension scheme assets
• Interest cost on the accrued pension scheme liabilities
THE STATEMENT OF FINANCIAL POSITION IAS 19 DEFICIT
The Group has a net deficit on its defined benefit retirement schemes of £19.5m (2017: Restated £22.2m). Full retirement benefit
disclosure is provided in note 18 to the financial statements.
The methodology set out under IAS 19 is just one of a number of ways of calculating the deficit at a point in time. Under IAS
19 the deficit is likely to be volatile and may, in the future, be very different from the 31 March 2018 position. 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 period end date. 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 which
reflects the investment strategy of the scheme. 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).
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. A past service
reserve of £3,315,000 (2017: Restated £3,374,000) has been adjusted for on the valuation to capture an estimate of the potential
additional liabilities arising from an issue which has arisen in relation to the normal retirement dates for male and female
members of the Staff Scheme (See note 25).
The table below shows the overall value of the schemes’ assets which have increased by 1% over the period. The schemes
liabilities increased by 2%. The IAS 19 valuations of these schemes as at 31 March 2018 reveal a combined deficit of £19.5m
compared with £22.2m (restated) at the previous period end, a decrease of £2.7m.
IAS 19 PENSION VALUATION 2018
BOTH SCHEMES
RESTATED
STAFF WORKS
SCHEME
SCHEME
TOTAL
2018
TOTAL
2017
CHANGE
%
Discount Rate
2.80%
2.80%
2.70%
2.70%
£’000
£’000
£’000
£’000
Assets
52,152
54,455
106,607
105,832
Liabilities
(58,560 )
(67,519 )
(126,079 )
(128,026 )
Deficit
6,408
13,064
19,472
22,194
Funding Level - %
89%
81%
85%
83%
1%
2%
12%
2%
The combined decrease in the schemes overall deficit is principally caused by two factors; an increase in the discount rate of 0.1%
to 2.8% (2017: 2.7%), this is fixed by reference to corporate bond yields with longer maturities, and the adoption of the latest
mortality assumptions which has resulted in an overall reduction of liabilities.
Under IAS 19 the pension deficit is likely to be volatile and may in the future be very different from this current period
end position. The chart below provides an indication of the variability of pension deficit under IAS 19.
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 benefits for active members introduced
in April of those years.
SCHEME DISCOUNT RATES AND PENSION
DEFICIT UNDER IAS 19
0.0
(7.5)
(15.0)
(22.5)
(30.0)
2005
2007
2009
2011
2013
2015
2017
7%
5.3%
3.5%
1.8%
0.0%
IAS 19 Pension Deficit (£m)
Discount Rates
DEFINED BENEFIT SCHEMES THE TRIENNIAL “ON-GOING” VALUATION
The Group operates two funded pension schemes providing defined benefits for a number of its employees; the James Cropper
PLC Pension Scheme (the “Staff Scheme”) and the James Cropper PLC Works Pension Plan (the “Works Scheme”).
UK legislation requires the Scheme Trustees to carry out actuarial funding valuations at least every three years and to target full
funding over an appropriate time period, taking into account the current circumstances of the Group schemes, and the current
circumstances of the Group, on a basis that prudently reflects the risks to which the Group scheme is exposed (the “Technical
Provision” basis). The triennial ongoing valuations provide the Group with a steady platform to manage the deficit from one
valuation to the next and to agree a funding plan.
The most recent funding valuations were carried out at April 2016 and these determined the combined deficit of the schemes to be £15.8m.
THE APRIL 2016 TRIENNIAL “ON-GOING” VALUATIONS
Discount Rate
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%
Assets
Liabilities
Deficit
Funding level - %
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.
Following the April 2016 “on-going” valuation a deficit recovery plan was agreed with the Trustees which included
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.
*The UK Pension Protection Fund provides insurance for pension plans whose employer becomes insolvent, the cost of this
insurance is met by levies on defined benefit plans and these create an additional cash obligation on the employer.
Further details on the agreements are set out below:
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
4 ½ years by the payment of annual contributions of £470,000 in respect of the deficit. The Group 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 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 Group will also meet the expenses of the Scheme and the levies paid to the Pension
Protection Fund.
PENSION RISK MANAGEMENT
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 was 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, for future benefits accrued, will be in line with the annual increase
in the Consumer Price Index, these actions protect the Group’s exposure to future costs.
PENSION SCHEME INVESTMENT STRATEGY
The Group agrees an investment strategy with the Trustees taking account of risk. In April 2018 (after the March 2018 year-end)
a new investment strategy was introduced with the aim to significantly reduce risk whilst maintaining a similar level of overall
return and protecting asset values. The revised investment strategies aim to more closely align movements in each of the Scheme’s
assets to their liabilities.
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Strategic Report - Finance Director’s Review
RISK MANAGEMENT
VIABILITY
The Board believes that the three years to March 2021 is an appropriate period over which a reasonable expectation of the
Group’s longer term viability can be evaluated. The Group’s current financial position, along with its strategy and plans for
the next three years, mark the end of the Group’s formal mid-term planning horizon. The Board believes that given the principal
risks described in this report, the period beyond three years becomes increasingly less predictable.
The Group’s budget and plan has been tested for severe but plausible downside scenarios linked to the Group’s principal risks,
these include a weaker demand for product, the potential impact of exchange rate fluctuations and increasing pulp prices.
The Board is satisfied that the Group will be able to respond to such circumstances through various means which may include
a reduced capital expenditure programme to ensure that the Group can continue to meet its ongoing obligations. The Board is
satisfied that the Group will have sufficient liquidity to meet its needs over the planning horizon. In the scenarios evaluated the
Group remains within its two key financial covenants; its net debt to a rolling 12-month EBITDA ratio must not exceed 3.5 times,
it’s rolling 12-month EBITDA must always exceed interest payable by 4 times.
Current availability of finance is good and the Group expects to be able to re-finance, or renew funding on favourable terms.
Taking into account the principal risks and the results of the downside scenario assessments, the directors have a reasonable
expectation that the Group remains viable over the period of assessment.
RISK MANAGEMENT
The Board has overall responsibility for risk management which is key to ensuring good governance and to achieving the
Group’s strategy. The Board coordinates activity across the Group ensuring risk management remains relevant to each business,
the Group as a whole and that it is responsive to changing business conditions. 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 is 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 selected self-insurance activities can provide key protection. 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. Each subsidiary takes appropriate steps to manage their risk exposure taking
into consideration the likelihood, impact and cost/benefit of each of the risks. The Executive Committee takes a number of
Group level risk management briefs these include: Health and Safety, Environment, Insurance, Treasury, Gas purchasing,
Brexit, Pensions, Human Resources and 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, this report only addresses the Group’s most significant 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.
If an incident were to arise this could potentially result in
harm to employees, contractors, property, lost production
time, financial penalties, restitution costs, and harm to the
Group’s reputation.
We have a goal of zero lost time accidents and aim to
continuously advance our safety mind-set, programmes,
behaviours and culture to achieve this. The Group has an
extensive Health & Safety programme built around the ISO
18001 framework which is proactively driven across every
division. We continually monitor incidents, improvement
suggestions and close calls and actively build on learnings
across the Group.
The Executive and senior management teams drive our
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 four consecutive years as
RoSPA (Royal Society For the Prevention of Accidents) has
accredited the James Cropper Group with a Gold Award for
2014, 2015, 2016 and 2017.
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. The 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. Our operations are water and energy intensive,
and are subject to a wide range of international, national and
local environmental laws and regulations. The requirements of
legislation, our customers and the expectations of our broader
stakeholders are all key to ensuring we operate to safeguard
against environmental incidents.
As a minimum the Group complies with all environmental
rules and regulations and we have detailed processes in place
around the ISO 14001 framework which is proactively driven
across every division to ensure compliance.
The Group engages with the Environment Agency and
interested parties to enhance the way organisations can work
together on environmental matters, controls and governance.
Should a material environmental incident occur at a James
Cropper site this could result in financial penalties, the cost
of clean-up and restoration activities, adverse reputational
damage and an adverse effect on profitability.
The Group prides itself on securing pulp from responsibly
managed and accredited sources. In collaboration with external
stakeholders we are promoting the adoption of circular
economies, converting waste into beautiful packaging.
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Strategic Report - Finance Director’s Review
ENVIRONMENTAL TAXATION - EUETS
RISK DESCRIPTION AND IMPACT
MITIGATION
ENVIRONMENTAL FLOODING
RISK DESCRIPTION AND IMPACT
MITIGATION
The EU Emissions Trading scheme (‘EUETS’) is Europe’s
key tool for reducing greenhouse gas emissions. The EUETS
is now in its third phase and the key change is to reduce the
Group’s annual allowance to an average of 15,000 tonnes of
CO2 per annum (phase 2: 41,000 tonnes) resulting in around
25,000 tonnes of CO2 to be purchased each year.
Risk on price
Carbon emission prices have been low due to over-supply in
the market, there is a risk that actions will be taken to address
the markets over supply and this will have a significant effect
on prices and an adverse effect on profitability.
The Group monitors its electricity usage, carbon emissions
levels and the use of renewable energy. As we operate a
gas-fired combined heat and power system (‘CHP’) we have
high levels of electricity self-sufficiency. As part of its energy
strategy the Group considers diversification away from gas
to alternative fuels, this 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 actively
considers forward contracts to manage and secure its shortfall in
CO2 allowance and its costs in this area. If emissions are reduced,
or allowances not fully used, the Group can keep the spare
allowances to cover its future needs. At the period end March
2018 a forward carbon emission purchase commitment is in place
to December 2018, providing some certainty over future cost.
ENERGY TAXATION
RISK DESCRIPTION AND IMPACT
MITIGATION
The Group faces a number of taxation and regulatory
environment risks in the ever changing UK energy
regulatory landscape, these are;
• The risk of an implementation of Ofgems’ Total
Charging Review that adds increased cost and charges
to on-site generated electricity.
• The risk that our “Energy Intensive Industry (‘EII’) at
risk of carbon leakage” status is removed by the EU or
no longer applicable under UK Brexit.
• The risk that carbon price floor exemptions are withdrawn.
• The risk of increasing Climate Change levy (‘CCL’) rates
on gas and electricity.
All of the above risks place James Cropper at a distinct
disadvantage to its EU competitors, and the Group will
face ever increasing costs of energy taxes making operations
unaffordable, creating an adverse impact on profitability
with the risk of operations moving outside of the UK
to remain competitive.
The Group’s energy strategy is to consider investments
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, which is at present subject to
EC regulation in this area, albeit this may change under Brexit.
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 manufacturing from carbon leakage. The
CPI performs an excellent service on the Group’s behalf as
programme administrator placed between the Group and HM
Government to monitor the CCL levies under the Climate
Change Agreement. The CPI also addresses issues that impact
UK manufacturers such as the Carbon Price Floor, Ofgems
Total Charging Review and is a leading trade association that
monitors proposals to tax carbon and represents industries
which are threatened by new taxes or changes to the existing
compensation structures.
The Group evaluates operational energy efficient improvements
on a continuous basis and is keen to recognise and adopt
energy reduction measures. James Cropper obtained ISO
50001 accreditation in November 2015 an international
standard recognising the best energy management practices and
a continual improvement process. James Cropper through ISO
50001 is in compliance with the Energy Savings Opportunities
Scheme (‘ESOS’) a mandatory initiative for large UK
enterprises requiring regular 4–yearly audits of energy use.
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.
Ensuring effective crisis management in a flood response
situation is part of our risk management. Flood risk is covered
through insurance, albeit the Group’s main aim is to build
protection on site and not rely on insurance.
The Group has invested in flood resilience capital projects
which aim to; minimise the impact of a future flood and enable
prompt operational recovery in the event of a flood.
The Group is also working closely with the Environmental
Agency to support local flood avoidance schemes.
ENERGY PRICE VOLATILITY
RISK DESCRIPTION AND IMPACT
MITIGATION
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.
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.
Price fluctuations on key input costs which cannot be passed
onto customers in all cases can affect our business assumptions,
margins and investment decisions.
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.
A large fire incident could cause harm to people and the
business, resulting in safety incidents, property damage, loss of
production and reputational damage.
James Cropper adheres to their legal and moral responsibilities
with regard to fire including the following:
• Fire risk assessments to identify and prioritise hazards
and necessary control measures.
• Maintaining and protecting buildings, equipment, raw
materials and associated services across manufacturing
operations.
• Developing and implementing new arrangements and
procedures based on the risk assessment findings and fire
prevention measures.
• Providing information, instructions supervision and training.
• Ensuring fire safety responsibilities are designated
and made known to all employees.
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Strategic Report - Finance Director’s Review
Strategic Report - Finance Director’s Review
PULP PRICE VOLATILITY AND AVAILABILITY
RISK DESCRIPTION AND IMPACT
MITIGATION
PENSION
RISK DESCRIPTION AND IMPACT
MITIGATION
One of the Group’s divisions is subject to unexpected and
prolonged price volatility of pulp and the availability of other
specific fibre grades.
Price is subject to global supply and demand and factors that
influence these include natural disasters, climate, political
instability, conflicts, economic conditions and actions by major
pulp producers.
Price fluctuations on key input costs which cannot be passed
onto customers in all cases can affect our business assumptions,
margins and investment decisions. 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.
The Board regularly received updates on pulp and fibre risk
and price trends.
The Paper division aims to maximise the recovery of paper
price changes through timely commercial negotiations and
recover costs via market price increases typically a few months
following a pulp price increase.
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 will
continue to leverage its reclaimed fibre technology plant and
seek to work collaboratively with the waste fibre supply chain
to secure grades that are suitable for re-use. The Paper division
is also looking to qualify alternative sources of fibre to reduce
its reliance on virgin fibre from trees and waste grade material.
Diversification and success of all 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 three major operating currencies are Pound Sterling, Euro
and US Dollar. The Group’s financial results are reported in
Pound 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 uses a variety of swaps and forward options to
hedge anticipated unmatched cash flows.
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 US 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 its UK, European and US markets. A 5%
reduction in sales in any 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. 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, and the recruitment of
experienced sales and planning professionals to effectively deploy
these diversification plans. This included the deployment of
regional sales roles, and agents in overseas markets.
The Group’s new division, James Cropper 3DP will bring
increased market and geographic diversification.
Discretionary spend controls will be implemented to mitigate
seasonal and small levels of demand decline.
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.
The April 2016 triennial valuation concluded a combined
deficit of the schemes to be £15.8m.
Changes in these assumptions could mean that the deficit
increases further.
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 Group 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 the Consumer Price Index 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.
ATTRACTION AND RETENTION OF KEY SKILLS AND TALENT
RISK DESCRIPTION AND IMPACT
MITIGATION
The Group’s success is through the people that make it happen.
The risk that the Group may fail to attract, recruit, retain,
develop and grow our own skilled and committed workforce.
Failure to access the right skills and engagement critical to
support performance and growth has the potential to delay
delivery on our strategic objectives.
Our culture embraces diversity, strives for equality and seeks to
create opportunities for the global workforce, and this plays a
key role in empowering and inspiring our people. Our aim is to
create a healthy balance between attracting high calibre recruits
and developing our existing talent.
We drive training and development programmes for the needs
of the organisation at all levels. Programme requirements are
identified via regular reviews of business exposures, career path
development, succession planning and performance reviews.
External organisations, and consultants are routinely engaged to
support programmes and apprenticeship levy training is taken
when appropriate to requirements.
We conduct performance and development reviews twice-yearly
for more than 200 staff employees, achieving 100% completion
rates. The Group listens to feedback gained from employee
surveys conducted every 2 years.
Performance related bonus schemes are in place across the
business, providing an opportunity for employees to take shares
in James Cropper Plc.
The executive team routinely evaluate supporting initiatives that
make our Group a great place to work, these include; policy
updates, phased retirement support, being a foster friendly
employer and providing medical care benefits.
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25
Strategic Report - Finance Director’s Review
BREXIT
RISK DESCRIPTION AND IMPACT
MITIGATION
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.
There is little clarity on the likely shape of future relationships
between the UK and the EU. Brexit scenarios can present the
Executive team with a better understanding of the risks and
opportunities that the Group can directly focus on.
The additonal risk that European bodies are not replaced
with a British regulatory regime.
The Group works with representative organisations assisting
UK manufacturing companies to understand and prepare for the
Brexit outcomes. The Group works with organisations lobbying
government to drive effective measures that will protect and
stimulate manufacturing growth across the UK which is an
important part of providing the UK with resilience.
INFORMATION SECURITY, CYBER RISK AND DATA PROTECTION
RISK DESCRIPTION AND IMPACT
MITIGATION
Our divisions are dependent on the availability of IT services.
Cybercrime attempts are on the increase and are more and
more sophisticated, the consequences of a successful attack
includes regulatory sanctions and fines, financial loss and
a denial of service. An extended interruption, via a cyber
breach will interrupt our IT services and may result in a
prolonged plant shutdown and an inability to meet customer
requirements, a reduction in profits and reputational damage.
The organisation is committed to information security
management and implements a robust IT security programme.
We organise an extensive training and awareness programme for
all our users including risk identification and expected behaviours
and conduct.
We utilise external providers to conduct threat assessments and
review our security landscape.
We aim to ensure the confidentiality, integrity and availability
of information in all its forms, plus ongoing sustainable controls.
This enables us to effectively protect, detect, mitigate, respond to,
and recover from information security risks and incidents.
This programme also encompasses measures for compliance
with the introduction of GDPR (General Data Protection
Regulations) in May 2018.
On behalf of the Board.
Isabelle Maddock
Group Finance Director
25 June 2018
26
27
The Prince of Wales Royal Visit - Business in the Community
The Prince of Wales Royal Visit - Business in the Community
CREATING VALUE FROM WASTE
BUSINESS IN THE COMMUNITY
“
THERE NEEDS TO BE A
CHANGE IN MINDSET IN
HOW WE HANDLE WASTE
AND SOURCE MATERIALS
FOR OUR PRODUCTS AND
PACKAGING, AND WE HAVE
A RESPONSIBILITY TO DO
SOMETHING DIFFERENT.
TO ACHIEVE THIS,
GOVERNMENT AND
BUSINESS NEED TO COME
TOGETHER TO LEAD BY
EXAMPLE. THIS INCLUDES
SHOWCASING BUSINESSES
LIKE JAMES CROPPER,
BRINGING WASTE BACK
INTO VALUE CHAINS
AND UNPICKING THE
CHALLENGES THAT LIE
IN THE WAY OF CREATING
CHANGE AT SCALE.
Gudrun Cartwright, Environment
Director at Business in the Community
”
SEEING IS BELIEVING
In March, The Prince of Wales learned how master papermaker James Cropper
turns paper fibre including single-use coffee cups into plastic-free packaging.
As well as visiting James Cropper’s new COLOURFORM™ production unit,
The Prince of Wales also joined a Seeing is Believing, Business in the Community
roundtable to discuss and learn what more businesses can do to create value from waste.
The group of cross sector experts and leaders met to discuss some of the key
challenges and opportunities related to bringing waste back into value chains.
The move is part of the Business in the Community’s ambition to create a
collaborative plan to tackle the UK’s growing waste problem, which will be
brought to life at a significant summit later in 2018.
Gudrun Cartwright, Environment Director at Business in the Community said:
“There needs to be a change in mindset in how we handle waste and source materials
for our products and packaging, and we have a responsibility to do something
different. To achieve this, government and business need to come together to lead by
example. This includes showcasing businesses like James Cropper, bringing waste
back into value chains and unpicking the challenges that lie in the way of creating
change at scale.”
James Cropper’s plastic-free packaging launch builds on the papermaker’s unique
CupCycling™ technology - the world’s first process dedicated to upcycling
disposable coffee cups. The cups are saved from landfill and incineration, and turned
instead into beautiful papers and consumer packaging such as COLOURFORMTM.
28
29
Technical Fibre ProductsTechnical Fibre ProductsTECHNICAL FIBRE PRODUCTS LTDOver my five years in this business, the global TFP team has seen sales of advanced materials almost double and profits multiplied by a factor of 5.7. Our products are sold into a wide range of applications and markets, ensuring that we are never overly reliant on any one part of our business. Today, we have healthy positions in aerospace, defence, thermal insulation, fire protection and fuel cells.Despite some issues such as trade disputes and some industry challenges in scale up, there is definitely a sense of optimism in the aerospace industry. We can see this in the form of investments by our customers in both R&D and increasing capacity. While the development of growth in widebody aircraft is less clear, Morgan Stanley (April 2018) has estimated approximately 10% narrowbody delivery growth annually over the next five years.In 2017, Lockheed Martin delivered 66 F-35 fighter aircraft. This year will see production and deliveries of 91 aircraft. Subject to completion of key operational tests by May 2019 (albeit a year late), production of this advanced aircraft will rise to 160 per year by 2023 (Investor’s Business Daily, April 2018). TFP is also engaged in some interesting R&D on a number of defence projects that will leverage some of our most state of the art technology in future years.One of our most exciting and dynamic markets currently is for fuel cells. TFP has a strong position in this sector and we provide carbon nonwovens which are used in fuel cells as a substrate for the Gas Diffusion Layer (‘GDL’), a critical component of the Membrane Electrode Assembly (‘MEA’) – the heart of a fuel cell. TFP is one of a limited number of companies that has the know-how and capacity to service this market, which includes static fuel cells, fuel cells for buses and increasingly, automotive.Finally, I would like to take this opportunity to announce that the team in TFP has formally started a project that will see us invest in a fourth nonwoven machine installed at our Burneside, Kendal site. We expect the machine to be commissioned by late 2020. This is a necessary step to support projected demand.Martin Thompson, Managing Director.Technical Fibre Products Ltd31DIVISIONAL REPORT Technical Fibre Products
Technical Fibre Products
F35 LIGHTNING II
NONWOVENS AT THE CUTTING EDGE OF TECHNOLOGY
FUEL CELLS
ENABLING EMERGING TECHNOLOGIES
Many applications for TFP’s nonwovens are at the cutting
edge of technology and none more so than our role in the
F-35 Lightning II stealth fighter.
The technology in these fighter jets is so advanced that they
have been heralded as the most advanced and dynamic fighter
aircraft in the RAF’s 100 year history. This has no doubt
influenced the RAF’s decision to reform the legendary 617
squadron on their 75th anniversary to fly the new jets.
617 squadron was famous for its vital role in destroying
German dams in the Ruhr Valley during World War II,
where they employed the state of the art ‘bouncing bomb’
developed by Barnes Wallis, earning the squadron of Lancaster
Bombers the nickname ‘The Dambusters’.
617 squadron is therefore associated with being at the
forefront of defence technology, and it is very fitting that
the squadron has been reformed to operate the UK’s fleet
of F-35 Lightnings; highlighting both the revolutionary nature
of these new aircraft and the crucial role that they will play in
national defence.
James Cropper PLC is involved every year in remembering
those who lost their lives defending the UK by manufacturing
the paper for the Royal British Legion poppies. And now
TFP’s nonwovens, as part of the F-35, will play an active role
in protecting the pilots who will fly these next generation
aircraft to defend the UK in the future.
TFP’s advanced nonwovens play an important role in enabling emerging technologies; fuel cells are a prime example of this.
We have been developing gas diffusion layer (‘GDL’) materials for over a decade, building the capability and expertise to meet
the forecast growth in fuel cell production.
It is only in recent years that the potential in fuel cells has been fully recognised, the latest figures from the KPMG automotive
executive survey put fuel cells ahead of battery electric vehicles (‘BEVs’) as the number one key trend until 2025 and concluded
that there will not be a single solitary drivetrain technology in the future; predicting the split below by 2040.
PREDICTION OF TECHNOLOGY 2040
BATTERY ELECTRIC VEHICLES (BEVS)
26%
FUEL CELL ELECTRIC VEHICLES (FCEVS) 25%
INTERNAL COMBUSTION ENGINES (ICEs) 25%
HYBRIDS
24%
At present over 6500 FCEVs have been sold and it is predicted
that large scale production of these will start between 2025
and 2030. All very positive.
The potential for fuel cells extends far beyond just FCEVs
though. Individual fuel cells are compiled to form stacks,
which can be combined into larger systems. This means that
fuel cell systems vary in both size and power, ranging from
small portable systems for charging a phone to large scale
installations that provide electricity for high energy demand
applications such as schools & hospitals. Our materials are
primarily used in the latter at present, but we are working
with key players in the industry to tap into the potential in
portable fuel cells and FCEVs.
SO, WHAT IS A FUEL CELL?
A fuel cell is an electrochemical device that combines
hydrogen (or hydrogen-rich) fuel and oxygen to produce
electricity, heat and water. It is much cleaner and more
efficient than a conventional engine as it does so without
burning the fuel, essentially more of the fuel is converted
into electricity and less into heat.
Further research is underway to establish efficient
ways of producing hydrogen and to build suitable
infrastructure for delivery.
HOW ARE TFP’S MATERIALS USED?
TFP’s carbon nonwoven is widely utilised in fuel cells as a substrate for the GDL, a critical component of the Membrane
Electrode Assembly (‘MEA’). The GDL forms the basis of both the anode and cathode, and is responsible for water
management, providing structural support to the assembly and controlling the transport of reactants, electricity and heat.
WHAT’S THE ADVANTAGE?
Fuel cells offer a number of benefits compared to batteries
or ICEs such as:
•
•
High levels of efficiency. If both the electricity and heat
generated can be utilised, a fuel cell can be considered
up to 85% efficient in converting hydrogen to energy.
By comparison, the best ICEs are less than 40% efficient.
Fuel cells are very quiet in operation and have fewer
moving parts than traditional generators. This makes
them more reliable and simpler to maintain.
•
The only by-product of a hydrogen fuel cell is water,
eliminating the pollutants associated with burning fossil
fuels. In addition, the fact that they don’t use oil or gas as
fuel also reduces economic dependence on these resources,
creating greater energy security.
•
Unlike batteries, fuel cells do not need to be periodically
recharged. They continue to produce electricity for
as long as fuel is provided.
32
33
Technical Fibre Products
Technical Fibre Products
AEROSPACE DEVELOPMENTS
THE NEXT GENERATION OF AEROSPACE MATERIALS
TFP APPLICATION DIVERSITY
FROM HOCKEY STICKS TO FALSE LEGS!
TFP’s nonwovens are used extensively as part of composite
structures in aerospace applications, and through this
are present on most commercial aircraft in operation.
Our materials are already qualified for long term use in
a number of different programmes in applications such
as adhesive carriers and processing aids to support fragile
materials. However, the extended development and
qualification times associated with the aerospace industry
means that it is essential to be involved already with the next
generation of projects. These are focussed on increasing
production efficiency without compromising performance.
The vast majority of aero composites use thermoset resins
which must be cured to achieve the necessary mechanical
properties. Curing has historically been carried out in an
autoclave which, due to the high temperatures and pressures
used, adds significant cost and processing time to part
production. A lot of research is underway to streamline
production, reducing cycle time and cost, and one of the
means to achieve this is out of autoclave (‘OOA’) curing.
TFP have been working closely with a number of OEMs
and Tier 1 suppliers to overcome the technical challenges
associated with this processing route, as well as developing
materials to improve the properties of the finished composite
part. An example of the latter is our range of lightweight
thermoplastic veils which aid composite toughening, when
incorporated between layers of reinforcement these veils can
increase the composites resistance to cracking by up to 400%.
The details of our long term aerospace projects are, for the
most part, strictly confidential. However, the results generated
by this collaborative and forward-looking approach put the
company in a strong position to continue future growth
in this market sector.
We have touched upon some of the key markets for TFP; fuel cells, aerospace and defence, but it is also interesting to highlight
the ever increasing diversity in the applications for our nonwovens. Existing applications for our products include satellites,
defibrillators, laptops and sports cars, and we can now add performance hockey sticks and prosthetics to the list for 2017/18.
TFP NONWOVENS AT THE OLYMPICS
CCM Hockey, one of the largest ice hockey equipment
manufacturers in the world, recently started using our
lightweight glass veil to enhance the composite fabrication
of their ice hockey sticks. The next generation sticks have
been engineered to deliver industry leading performance
and strength, and were used in this year’s Winter Olympics.
The project is not just a success story in terms of technical
benefit; though our nonwovens do simultaneously increase
manufacturing efficiency and provide a superior aesthetic
finish. It also demonstrates the benefit to our partnership
approach; with CCM’s product development in Canada
and manufacturing in China, it has been a transglobal
project involving the Sales Teams in the UK and USA
as well as Technology and Manufacturing in Burneside.
It’s not the first time our materials have been used to
enhance the fabrication and performance of advanced
sporting goods. Previous examples include bicycle frames,
skis and snowboards, tennis racquets, archery materials
and fishing rods.
PROSTHETICS
Another new use for TFP’s carbon veil
is in prosthetics. The veil is incorporated
into a composite laminate called
Pro-Comp which can then be formed
into complex shapes that exhibit good
strength. The laminate has a variety of
potential uses, but the key application
to date is in creating false limbs, such
as the leg opposite.
This is just one interesting example from
a range of diverse end uses for TFP’s
materials. It is also typifies the approach
we take in working with both the
inventor of a new technology and the
companies in the wider supply chain
in developing a solution.
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35
3737James Cropper 3D ProductsIn a year when the spotlight has been vigorously thrown onto the issue of single-use plastics, ColourformTM has never been more relevant. Indeed James Cropper 3D Products and ColourformTM have seen significant development and significant demand.Colourform’s appeal has been further strengthened by a unique partnership with James Cropper Paper and its CupCyclingTM facility. Not only do we provide plastic-free packaging with the premium appeal that discerning consumers expect; we can create it using fibre from upcycled coffee cups. This unique combination has been of enormous interest to our customers and we are approached frequently as a result.With a very strong and active project pipeline interest is high however we are realising the commercialisation of projects is longer than anticipated. Nevertheless, our close work and relationships with our clients turns them into our advocates.Recently, I was honoured to share a stage with Floral Street Founder Michelle Feeney at the Packaging Innovations exhibition in Birmingham, where ColourformTM was positioned as a truly viable alternative to plastic packaging. We were also delighted to see ColourformTM featured prominently at the Lush Showcase event in London.Successfully moving from a start-up business to a fully integrated subsidiary of James Cropper PLC has also characterised the year. We draw upon the core strengths of the group in the same way as the other subsidiaries, but have continued to strengthen our team in areas that are unique to ColourformTM.Colourform’s creation was the result of the foresight of the Technology and Innovation department; identifying a need for, and commercialising attractive, colourful, fully recyclable plastic-free packaging before David Attenborough’s Blue Planet highlighted the need for change to consumers and brands. Introducing ColourformTM ahead of the curve has given us a significant advantage over those only now seeking to develop plastic-free packaging solutions, however in the same vein as we were conceived, we continually look for ways to innovate and strengthen our offering.As part of our ambition to create a centre of technical excellence, we have continued to invest heavily in growing our in-house capabilities. During the year, we sourced and installed equipment that will allow us to manufacture tooling on-site, increasing the speed and flexibility with which we can respond to customer needs. We have also continued to invest in people, with four apprentices in production and new talent in product design, tooling design, process development and marketing. This, coupled with the group expertise in fibre and colour means we are uniquely qualified to partner customers seeking to make the change to sustainable packaging.It has been thanks to our people, partners and customers that we have created a strong platform for growth. Over the coming year, I am confident that we will see the wealth of enthusiasm and interest that exists in ColourformTM convert into sales.Matthew Miller, Business Director, James Cropper 3D Products LtdJames Cropper 3D ProductsJAMES CROPPER 3D PRODUCTSDIVISIONAL REPORT James Cropper 3D Products
James Cropper 3D Products
FLORAL STREET
RECYCLABLE, COMPOSTABLE, BEAUTIFUL
LUSH
GLOBAL COSMETICS WITH A TWIST
Floral Street, a new and exciting perfume brand, set out to
change fine fragrance packaging. No cello-wrap, no printed
card, just a beautiful, sustainable box – the new luxury.
Like us, Floral Street’s passion is sustainability
and challenging the status quo.
BRIEF
Floral Street presented us with a fantastic conceptual idea,
loaded with a technical and creative challenge. They wanted
to change the way perfume is presented by challenging lavish
over-packaging with an environmentally-friendly alternative.
The brand required a complete packaging solution including
lid, base and interchangeable inserts for various bottle sizes;
all with a beautiful yet industrial aesthetic.
The brief also required the result to be fully recyclable.
Because COLOURFORM™ is made from natural wood
fibres, consumers can recycle the full pack with household
paper; made simpler by our monomaterial application.
RESULTS
Our design team worked closely with Floral Street designers
to capture their vision and requirements. The complexity the
product range required was then tackled by the expertise of
the COLOURFORM™ team.
The outcome is a beautifully modern pack, helping Floral
Street customers carry their favourite fragrance home
in sustainable, recyclable and reusable packaging.
• An entire packaging solution made from one material
• A colour matched and blended uniquely for Floral Street
• Interchangeable inserts to display the full range
• Precision embossing to represent the brand, describe
the product and help customers recycle
• A unique COLOURFORM™ finish to reflect a natural
and simple approach
• 100% recyclable, compostable and biodegradable
• 100% COLOURFORM™ natural fibres from renewable,
well-managed forests – always FSC® and PEFC®
certified, Elemental Chlorine-Free (ECF®)
or Totally Chlorine Free (TCF®)
LUSH, the global cosmetics brand with over 900 stores around the world, has always been passionate about reducing the
environmental impact of product packaging. The brand has applied this way of thinking to product innovation, creating its famous
bath bombs and solid shampoo bars that can be sold ‘naked’ or packaging free. However, sometimes practical demands or the need
to enhance the retail experience for customers make packaging essential. LUSH use at least 90% recycled content in their packaging,
and like us, they want to ‘leave no trace’ and stick to packaging materials that can be easily re-used, recycled or composted.
BRIEF
LUSH came to us with a unique packaging requirement,
and a fantastic creative opportunity.
The task was to create a standalone COLOURFORMTM
box that would hold a selection of solid bath oil balls.
The packaging piece would enable customers to choose
their own selection of bath oils, carry them home and
then re-use their box on their next visit to the LUSH store.
It’s a great concept for gifts, and to help consumers enjoy
more of their favourite LUSH products.
RESULTS
• As a result of our collaborative design process,
we created a truly special piece of packaging
• A tactile COLOURFORM™ outer finish
to reflect LUSH’s look and feel
• A smooth COLOURFORM™ inner finish
• Elegant simplicity with natural
hinges and clasp closure
• Bespoke colour and precision embossing
to celebrate the LUSH brand
• 100% recycled content from coffee cups
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39
for contact with oily products
• 100% recyclable and compostable
Having completed my first full financial year as Managing Director, I am proud to reflect on the progress that has been made in navigating towards our strategic target of value growth. It has been a true testament to the foundational work delivered by the team, that focus has remained on achieving targets despite a challenging and rapidly evolving external environment. Internally, we have been focussed on improving efficiency, productivity and quality through a unified approach across the operational and commercial functions. The business leadership team has embraced integrated business planning as the methodology and tool to support a much more cohesive and collaborative way of working across the business. I am encouraged by the energy from all of our employees in forging a single paper business and I look forward to the opportunities this new approach will bring.Externally, we have been targeting value growth in higher value segments, identifying opportunities to upsell and challenging existing lower value commodities. We continue to be successful growing our packaging business with luxury brands, but we recognise that this is an increasingly crowded and competitive sector. Combined with additional pressures on raw material costs, we are therefore increasingly looking to grow our business in other premium speciality paper sectors, particularly those of a more technical nature. An important part of our consolidation and focus has been bringing the technical and product marketing operations under the leadership of Marketing Director, Richard Bracewell. This will allow us to accelerate the creation of new high performance products and deliver winning customer value propositions. Profitability was also challenged by the continued rising cost of raw materials, most notably, pulp. Looking at the scale and length of time over which prices have increased, we can safely assume that this could become the new normal. To this end, the work we have done to change the landscape, specifically investing in our recycling capabilities, is now starting to show fruit. This year was significant for our CupCycling™ facility. We moved from a single focus on recycling the offcuts from coffee cup producers, to upcycling used coffee cups as well. This, coupled with the attention thrown on the issue by government and global media has resulted in a groundswell of interest from the general public and, crucially, brands. Extensive media coverage of the single-use plastic issue has put the spotlight on our facility and increased the level of awareness and activity from the public and industry alike. So much so that we even received a single cup in the post from a coffee-lover keen to ensure their morning latte didn’t leave a mark on the planet. This demonstrates that an enthusiasm for recycling is very much present among consumers. Consequently, brands have quickly recognised the importance of this and are keen to include the use of our certified CupCycling™ marque within their campaigns as it is seen to hold value in the hearts and minds of customers, and has given us renewed impetus in the premium goods sector for the year ahead. Our facility is all about ‘upcycling’. While ‘recycling’ infers a loss of value at each iteration, the upcycling process builds value, turning waste into something beautiful. This report is printed on high quality paper that contains coffee cups; it is a shining example of our work.One of the most valuable lessons from this financial year has been understanding how to build a supply chain to support CupCycling™. Creating a robust infrastructure in partnership with retailers and waste management firms has been a real triumph and places us in a positive position to exploit the strong demand we are seeing for recycled content. Our efforts in this area have been widely regarded and commended on a global scale, most recently at Luxe Pack New York where James Cropper won the In Green Best Initiative Award. James Cropper has been profiled by the New York Times, Financial Times, and BBC to name a few and has even been used as inspiration for The Prince of Wales’ Business in the Community summit. Our continuous vigour in providing sustainable solutions is driven not only by the obvious commercial opportunity, but also by deep rooted values of stewardship which have been at the heart of the James Cropper business for over 170 years. For these reasons we will continue to invest in sustainable capabilities for the long-term. Looking to the next financial year, I am optimistic that we know how to succeed.Steve Adams, Managing Director, James Cropper Paper.JAMES CROPPER PAPERJames Cropper Paper41James Cropper PaperDIVISIONAL REPORT James Cropper Paper
James Cropper Paper
CUPCYCLING TM
WASTE THAT’S GOOD ON PAPER
Veolia, before being delivered to the
James Cropper mill. There the cups are
upcycled into the vivid yellow paper
used to make the iconic Selfridges
shopping bag.
Chris Brant, director of retail projects
and FM at Selfridges, said: “With our
partners James Cropper and Veolia, we
can take coffee cups, a waste product of
ours and transform it into our yellow
kraft bag, thereby closing the loop on
that particular waste stream. Not only
that, but the bags can still be recycled
for years to come. We’re proud to be the
first retailer to upcycle our cups in this
way. Our customers are becoming ever
more aware of global waste issues and
our customers appreciate the story
behind the bag.”
Gavin Graveson, Chief Operating
Officer, public and commercial at
Veolia UK said: “This is a great example
to show how coffee cups are being
reused as part of the circular economy.
I’d like to take this opportunity to
further encourage a mass collaboration
between designers, manufacturers,
vendors and consumers as we all have
a part to play in making all of our
packaging more environmentally
friendly and ensuring our resources
are kept in the loop for longer.”
Since September 2017 alone, James
Cropper’s CupCycling facility has
recycled 20 million cups. But the
potential to do more is significant;
James Cropper has the capacity to save
500 million cups from landfill each year.
Costa, another James Cropper partner,
became the first coffee chain in the UK
to commit to recycling the same volume
of cups as it puts into the market.
The scheme pays waste collectors
to collect coffee cups and send them
to specialist facilities such as the
recycling plant at James Cropper.
“
WITH OUR PARTNERS
JAMES CROPPER
AND VEOLIA, WE
CAN TAKE COFFEE
CUPS, A WASTE
PRODUCT OF OURS
AND TRANSFORM IT
INTO OUR YELLOW
KRAFT BAG, THEREBY
CLOSING THE LOOP
ON THAT PARTICULAR
WASTE STREAM. NOT
ONLY THAT, BUT THE
BAGS CAN STILL BE
RECYCLED FOR YEARS
TO COME.
Chris Brant, Retail Projects
Director and FM, Selfridges
”
The partnerships established this
year to tackle the issue of single-use
coffee cups, are a shining example
of collaboration at its best.
It is estimated that 2.5 billion paper
cups are used in the UK each year.
Until recently, these were unable
to be recycled due to their polyethylene
lining, ending up in landfill instead.
Recognising value in the high quality
fibre used to create paper cups, James
Cropper was inspired to convert this
enormous waste stream into a value
stream instead.
The mill developed the technology
to separate the paper fibre from the
polyethylene lining, producing a material
that is virtually indistinguishable from
fresh fibre, and can be used to create
paper products of the highest quality.
James Cropper’s CupCycling™
facility was officially opened by
HM the Queen in 2013, and was the
world’s first process dedicated to
upcycling disposable coffee cups.
However, this year saw a significant step
forward; the facility moved from
exclusively recycling the offcuts from
coffee cup producers, to also upcycling
the used coffee cups themselves.
That step has been significant,
made possible only through a
collaborative effort.
A neat example is James Cropper’s
relationship with Selfridges. Working
closely with the retailer and waste
management company Veolia, they have
collectively created a completely unique
closed-loop recycling solution.
Once used, disposable cups from the food
hall and offices on Oxford Street are
‘tipped, flipped and stacked’. They are
then checked for quality and baled by
environmental solutions provider
CupCycling marque
42
43
James Cropper Paper
James Cropper Paper
ARQADIA
PUTTING SHARED VALUES IN THE FRAME
The greatest partnerships are built
on shared values. Boasting a 40 year
relationship, it’s their hunger for progress,
focus on solutions and uncompromising
approach to customer service which have
unified Arqadia and James Cropper since
the beginning.
Arqadia offers the most comprehensive
range of picture frames, mountboard,
glass and accessories in the market,
and has worked with James Cropper
from the day the business was founded.
Attracted to its artisanal approach and
expertise in colour, Arqadia (then called
Arquati) challenged the papermaker to
create a small range of mountboard in
20 colours. James Cropper had never
made mountboard before.
Fast-forward 40 years and that range
has grown to include over 300 colours
and styles. Arqadia’s prudence in looking
for a partner to create the best long-term
solution was successful, and demonstrates
it values-first approach.
The business is now part of the Berkshire
Hathaway company Larson Juhl,
selling James Cropper specialist
“
THERE IS NO OTHER
MILL IN THE COUNTRY
THAT OFFERS THIS
LEVEL OF SERVICE.
”
Pauline Hutchinson,
Arqadia Marketing Manager,
mountboard and archival grade boards
throughout North America, Europe,
Australasia and Asia.
Pauline Hutchinson, Arqadia Marketing
Manager, who boasts nearly 40 years’
service herself, comments, “The two
businesses are solutions focussed.
We were once tasked with creating
mount boards in a specific football
team’s colour.
The technicians at James Cropper’s
colour lab expertly matched and
produced the mountboard with no
question. There is no other mill in the
country that offers this level of service.”
Today, Arqadia focusses on quality of
service as much as the quality of product
with investment in next day delivery, a
dedicated call centre and representatives
available worldwide. The business also
takes a progressive approach to operating
in a mature market. Continually
exploring new avenues for growth, it is
now forming partnerships within the
interior design market.
Pauline Hutchinson, adds, “The picture
on the wall is often the final thing that
people think about. We are working with
interior designers commissioned for
pubs, hotels and even cruise-liners to
consider the contribution those framed
pictures will make to the overall aesthetic
at the start of the creative process.”
Arqadia has a proud history as an
industry influencer. Just 20 years ago,
there were no real market standards.
Arqadia representatives contributed
to the meeting where those first
standards were set, and have been
actively involved in aligning global
markets ever since. James Cropper sits
alongside Arqadia on the technical
standards committee at the Fine Art
Trade Guild (FATG).
James Cropper and Arqadia have created
a partnership with significant commercial
benefits on each side. By continuing to
put shared values in the frame, they can
look forward to working together for
another 40 years.
44
45
Dominic Paul, Managing Director,
Costa Coffee said: “Without technology
like James Cropper’s CupCycling™,
Costa would not have been able to
accelerate our cup recycling scheme,
allowing us to commit to recycling the
same volume of cups we put on to the
market each year by 2020. Our
partnership with James Cropper not
only helps dispel the myth that coffee
cups can’t be recycled but will help
provide an immediate solution to
increasing the volume of takeaway
coffee cups being recycled in the UK,
producing a wide range of high quality
paper products.”
With the last year so full of progress for
the James Cropper CupCycling facility,
a visit from HRH The Prince of Wales
and Secretary of State for Environment,
Food and Rural Affairs, Michael Gove
was the cherry on the top.
Recognised as a leader in innovating for
a better world, James Cropper’s sights
are firmly set on the opportunities to
grow volumes while deepening the
partnerships that are in place with
businesses also committed to change.
WITHOUT
TECHNOLOGY LIKE
JAMES CROPPER’S
CUPCYCLING™,
COSTA WOULD
NOT HAVE BEEN
ABLE TO ACCELERATE
OUR CUP RECYCLING
SCHEME, ALLOWING
US TO COMMIT
TO RECYCLING
THE SAME
VOLUME OF CUPS
WE PUT ON TO
THE MARKET EACH
YEAR BY 2020.
”
Dominic Paul,
Managing Director,
Costa Coffee
“
“
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
Chief Operations Officer, Dave Watson and the ColourForm™ team,
Matt Lowther, Amos Aschilean, Steve Hull and Mike Gardner.
46
47
Sustainability and people
Sustainability and people
SUSTAINABILITY AND PEOPLE ARE AT
THE HEART OF EVERYTHING WE DO
Sustainability is a core value at James Cropper. We consider it part of our DNA,
attracting investment and driving innovation to help to give us a competitive edge
and help secure the future of the business.
No longer a ‘niche issue’, our customers are increasingly seeking high performance
products with a purpose they, and their customers, can connect with a belief that
their business can be a force for good.
By continuously developing our strategy, James Cropper ensures a strong culture of
responsible business is embedded throughout the Group in order that, as we grow,
we make a positive impact on those we interact with and rise to global challenges.
The Sustainable Development Goals (‘SDGs’) are internationally recognised as a
focus for creating a fairer, healthier and more prosperous planet, in an inclusive way,
whilst securing future economic growth. At James Cropper we are using these goals
to guide our responsibility activities so that they are aligned to wider societal needs.
The following are a few examples of activities by James Cropper as an organisation
over the past 12 months to illustrate how we put a number of the SDGs into practice.
GOOD HEALTH AND WELL-BEING
We’ve always been about people, so it stands to reason that
our sustainability programme is all about people too. James
Cropper values the health and well-being of every person we
come in contact with; employees, contractors, customers and
communities, and as an organisation believing “nothing we do
is worth getting hurt for” during our service delivery.
As standard we provide all of our employees with healthcare
insurance plans that contribute towards everyday healthcare
bills and offer a wide range of other well-being benefits.
James Cropper PLC stands by an absolute commitment
to upholding a high level of workplace health and safety
in all aspects of our operations, something which has been
a fundamental and enduring value of the business for
generations.
Our commitment to operational health and safety has been
recognised with the RoSPA Gold Award, an achievement
which recognises the high standards of workplace care and
well-being that we aim to achieve each and every day.
ROSPA GOLD MEDAL AWARD
The Royal Society for the Prevention
of Accidents (RoSPA) celebrated its
centenary last year and their patron,
HM the Queen, graciously granted them
permission to hold a celebratory party
at Buckingham Palace in May 2017, with
James Cropper represented by Chris
Harris and Anthony Bowness.
As a recipient of the RoSPA Gold
Medal Award for four years in a row,
representatives from James Cropper’s
health and safety team were amongst the
carefully selected guests to the Royal
Garden Party in recognition of the
Group’s proactive approach and great
commitment to safety.
Chris Harris and
Anthony Bowness
Bradley Ireland, Callum Smith,
Debbie Ingram, Bob Wilkinson and Paul Close
Lucy Wilson,
TFP Customer Service Apprentice
Shane Lambert and Shaun Sorrenson,
Papermaking Apprentices
QUALITY EDUCATION
We’ve always appreciated that our people are at the heart
of what we do and through the generations have striven to
build teams where everyone has the opportunity to reach
their potential.
James Cropper is committed to investing in long-term
personal development, re-training and enhancing the skills
required to work in a rapidly evolving innovation business,
with an eye firmly on the future.
Introducing and nurturing talent into our industry, our
apprentice programme supports people to develop the skills
and capabilities for their role in the workplace.
The programme receives a massive amount of interest
and applications from quality candidates as a result of
our mentorship work with local schools and colleges and
partnerships with leading universities for technical and
leadership best practice.
Everyone in our business benefits from our vision for
leadership which not only delivers results but creates a
rewarding environment for all our employees.
We have actively supported the creation of a dedicated new
apprenticeship for the UK paper industry, approved by the
UK government in 2016.
“I first started working at James Cropper PLC in a
part-time role, providing administration support to the
payroll department. I recently had the opportunity to
begin an Accountancy Apprenticeship supported by
James Cropper PLC.
“I joined James Cropper PLC as a Business Administration
Apprentice in 2008 and completed my NVQ Level 2 and 3.
In 2009 I started working as a trainee within the sales team and
the business supported my decision to pursue a Business and
Management degree via distance learning.
This means I can continue my current role while studying
for an Advanced Diploma in AAT at Kendal College –
an opportunity that will enable me to progress from
working in administration to an accountancy-based role.”
Since graduating I’ve been promoted to another great role,
this time in marketing. As a Market Sector Manager, I develop
our strategy for the packaging sector, providing direction and
support to our sales team.”
Kerry Wilson, Accountancy Apprentice
Stefan Pryor, Market Sector Manager
48
49
Sustainability and people
Sustainability and people
GENDER EQUALITY
James Cropper is a responsible and responsive business, which
believes gender is not a factor in capability or potential.
We never assess anyone’s suitability for a role based on their
gender, and we never will. We are confident that men and
women are paid equally in equivalent roles across the business.
Overall, the gender pay gap measured across the James
Cropper PLC Group falls well below the national average.
We are committed to evaluate and understand any reasons
for gender pay differences in our businesses, to ensure they
are not the result of any limitations in recruitment or career
progression for either gender.
There are no barriers to joining James Cropper PLC, and no
barriers to progressing a rewarding career within the Group.
Further information can be found at:
www.cropper.com/our-people/gender-pay.php
AFFORDABLE AND CLEAN ENERGY
James Cropper is an active investor in low-carbon energy
solutions and is committed to ISO 50001 energy management
standards encompassing a highly efficient combined heat and
power plant, investment on hydro and solar energy, and heat
exchange and recovery systems in processing.
The hydroelectric facility and solar array, installed with
Burneside Community Energy (‘BCE’), generates clean, green
electricity in a way that doesn’t compromise the area’s unique
ecology or landscape. These two installations will reduce CO2
emissions by a total of 3.59 million kg over the next 20 years.
Funds generated from the BCE project make a meaningful
contribution to our local community by helping to combat fuel
poverty, supporting youth and school initiatives, community
services and conservation of the environment and built heritage
of Burneside village.
LED LIGHTING AND ELECTRIC
VEHICLE CHARGING
Energy saving LED lighting was installed in all four
papermachine areas at the Burneside Mill. Extended lifespan of
the lighting means less working at height. The lights operate at a
lower temperature and produce better colour rendition resulting
in standardisation of lighting across the four machines.
The Group actively promotes the use of plug-in electric vehicles
and has installed charging stations for the use of employees and
authorised guests to help support this commitment.
Employees wishing to use the charging stations may purchase
an annual permit to contribute to the Group’s electricity costs.
For 2018, the fee has been set at £21.34 with the figure being
reviewed annually.
“I began my career at James Cropper PLC in July 2011 after
completing a university degree. The role I took on was Colour
Technician. I was provided with on the job training in the
technical department focusing on colour within the mill and
lab matches for customers. I progressed in this role and then
became a Technical Specialist in Paper.
“I started at James Cropper PLC in 1988 and, after 10 years
working in production, the Group supported my studies for
an HNC in Business with Finance which led to an opportunity
with the finance team. Since then, I have completed my
accountancy qualifications and currently work as Finance
Manager for the Paper division.
My speciality is still in the art and science of colour but I’m
now also part of a team who provide technical support for
our converting division, including across complex processes
such as lamination and coating.”
I am a big supporter of the Group developing its own talent
whilst at the same time, recognising the benefits of best practice
and wider experience that new recruits from outside the
organisation can bring.”
Alison Rigg, Technical Specialist
Steve Atkinson, Finance Manager
CLEAN WATER AND SANITATION
The use of water is an integral part of the manufacturing
process in all James Cropper business divisions.
Water for production is drawn from the fast-flowing
River Kent, and carefully managed in partnership with the
Environment Agency.
The river is classed as a Site of Special Scientific Interest as it
supports a flourishing population of rare white-clawed crayfish
and fresh water mussels, both species being a signifier of
water purity. Our focus is on efficiency in water usage and on
maximising return of clean safe water to the catchment.
Typicallly, 5%-7% of water usage is embodied in the product
itself, water is continually recycled as part of the production
process and waste water is sent directly to our local waste water
treatment facility.
WATER ABSTRACTION
The volume of water utilised from the River Kent in 2017/2018
was 1,753,658m3, a decrease by over 3,000m3 on the previous
year. This translates as 34.1m3 per gross production tonne.
RESPONSIBLE CONSUMPTION & PRODUCTION
The tide of public opinion against single use packaging has
been increasing, and the ‘take-make-dispose’ approach seen
in many industries has been making the headlines for all the
wrong reasons.
As a Group, James Cropper has been attempting to embed the
circular economy into our supply chains to ensure that we re-
enter our sustainably sourced materials into production when
and where possible.
Our commitment is not only to using renewable materials
and low impact manufacturing processes, but also creating
high quality products that are easier to recycle.
As market leaders in recycled fibre innovation, we have
heavily invested in a dedicated CupCyclingTM plant, and are
working closely with waste management companies and coffee
retailers to retrieve fibre from single-use cup waste to make
beautiful papers and ColourformTM plastic-free packaging.
James Cropper paper products are inherently recyclable and,
in reality, paper has a very high recycling rate compared to
materials such as plastics.
Along with developing solutions for the aerospace industry,
TFP’s advanced materials are having a positive impact across
transport with ‘light-weighting’ helping increase efficiency
and reduce emissions.
TFP is also taking a lead in recycling carbon fibre waste
produced by aircraft manufacturers and thereby further
reducing the environmental footprint of this industry.
Since 2007, we have operated a de-watering plant that allows us
to dry our waste ‘sludge’, which is certified to be of agricultural
benefit and supplied to local farms as a fertiliser.
However, this is not representative of our water usage, as 91.4%
of the water abstracted by James Cropper at the Burneside site
is returned to the catchment via United Utilities.
Post manufacture waste awaiting processing
Matt Lowther and Amos Aschilean inspect
ColourformTM packaging on the production line
50
51
Sustainability and people
Sustainability and people
DECENT WORK & ECONOMIC GROWTH
By engaging everyone with our sustainability plans, we
always operate in a way that provides diverse and rewarding
employment, with excellent career and personal development
opportunities.
In-line with SDG targets, James Cropper PLC is committed
to safeguarding jobs and creating new roles including
re-training and up-skilling of employees. Our culture
continues to be one which encourages entrepreneurship,
creativity and innovation throughout the organisation.
The aspiration of decent work and economic growth is a
thread which runs through our organisation’s values (page 47).
SUSTAINABLE CITIES & COMMUNITIES
Our commitment extends beyond ensuring economic
sustainability and employment. James Cropper undertakes
activities to support the local built environment, along with
financial and in-kind contributions made through requests
from the local community.
Repairing a gate at the nearby park means that parents can let
their children play in safety. Cutting back overgrown trees
adjacent to Burneside Youth Club benefited the adjacent
retirement home, with residents afforded more natural light.
Since the start of the 2017/18 academic year, we have helped
get students at the Queen Katherine School in Kendal
out of their classrooms to spend time helping others
in their community.
The green-fingered students rolled up their sleeves to plant
flowers and shrubs in the Stonecross Nursing Home garden
for residents to enjoy.
Our Community Support Committee regularly receives
requests from schools, charities and organisations seeking
support from James Cropper PLC for activities which will
benefit the local communities. Over the past 5 years, the
Group has made monetary and material donations to the value
of £134,000.
Causes and charities who have received support include the
Great North Air Ambulance, St Mary’s Hospice, the Calvert
Trust, Kendal Parish Church, Westmorland Association
Football League and Kendal Community Foundation
Flood Relief.
Adrian Gibson, Environment Manager,
oversaw repairs at Burneside playground
LIFE ON LAND
Working exclusively with responsible suppliers enables us to
carefully select raw materials which minimise environmental
impact, whether in manufacture or product life.
Our products are compliant with REACH legislation, we
do not use any raw materials composed of or containing any
Substances of Very High Concern (‘SVHC’).
Wood pulp remains our primary raw material, sourced from
responsibly managed forestry certified* to FSC® and PEFC®
standards. These certifications provide assurance of sustainable
land use practices and biodiversity. An increasing proportion of
our fibre input is recycled, including certified post-consumer
waste (PCW) from our CupCyclingTM plant, with quantities
set to grow in the future.
James Cropper is also working on zero discharge of hazardous
chemicals (‘ZDHC’) programme with fashion retailers in
support of the 2020 Roadmap to Zero Initiative.
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 (‘RDF’).
Jonny Brennan, Ryan Carradus and Scott Clement
RAW MATERIALS FIBRE SOURCE
% FSC Mix
% PEFC
% FSC
Controlled Wood
% PCW
(Post Consumer Waste)
% RCF
(Reclaimed Fibre)
3
1
/
2
1
0
2
4
1
/
3
1
0
2
5
1
/
4
1
0
2
6
1
/
5
1
0
2
7
1
/
6
1
0
2
*Forest Stewardship Council (FSC®); Programme for the
Endorsement of Forest Certification (PEFC®)
PARTNERSHIPS FOR THE GOALS
As a business aligned with delivering the ambitions of the
Paris Agreement and the SDGs, we recognise that this cannot
be achieved in isolation.
Collaboration is key to drive change in this area, and we
believe there is a growing willingness to collaborate to
improve supply chain sustainability.
With our CupCyclingTM development in particular, we have
first-hand experience of the impact that joined-up leverage
can have when organisations work together cohesively
towards a common goal.
Our work in this area was recognised recently as
winners of several high profile awards, including
for Supply Chain Collaboration at the 2018 Sedex
(Supplier Ethical Data Exchange) Awards.
Our excellent relationships with our supply chain,
environmental experts and end-users of our fibre
products, has enabled innovation of new products
which have global reach, and which reduce
environmental impact whilst also driving profitability.
From Left: Sustainability Award 2018, Food Packaging Association
Best In Green Initiative 2018, Luxe Pack New York
Best Collaborative Effort, Sedex Awards 2018
Green/Sustainable Manufacturer 2018, North West Business Insider
LAKE DISTRICT POUND
The Lake District Pound (‘LDP’) was officially launched
on 1 May 2018 in a bid to improve the experience of visitors,
drive trade to local businesses and raise money for two
local charities, Cumbria Community Foundation and
the Lake District Foundation.
People will be able to exchange their sterling for
Lake District Pounds at a variety of outlets, including most
Post Offices, and then spend these in more than 200 locally-
owned businesses.
The Lake District Pound is a fun and innovative way of
helping people gain a deeper appreciation of just how special
and individual the Lake District is, while at the same time
contributing to the future of our landscapes and communities.
James Cropper has supported the project with supply of paper
for the currency wallet, LDP ‘passport’ together with the
exquisitely produced ‘Lake District Pound Storybook 2018’
telling the story of the LDP and the 2018 designs.
52
53
Our People Set Us Apart
Our People Set Us Apart
CELEBRATING PRIDE IN OUR WORK
The annual Pride Awards reaffirm our values and celebrate outstanding achievement and commitment across the James Cropper
Group, with employees invited to nominate others whom they consider worthy of recognition. The accompanying text is taken
directly from the nominations and reflects the contribution made by teams or individuals to the business and their colleagues.
1
10
2
4
3
10
5
8
6
7
9
SAFETY IMPROVEMENT
INNOVATION AND CREATIVITY
COMMUNITY FOCUSSED
CUSTOMER SERVICE
TAKING PRIDE
WINNER
WINNER
WINNER
1. PAUL CLOSE & COLIN MILLER
(Cutter Operators)
2. TONY PEOPLES
(TFP Operative)
3. PAULA BUTLER
(Finance Administrator)
The finishing department have been
at the forefront of the site’s efforts to
improve workplace organisation and
their housekeeping standards. One of
the key drivers behind this has been the
drive and enthusiasm of the shift Safety
Actions Teams (‘SAT’).
Paul and Colin form part of the Green
Shift SAT team and together have
implemented the idea of improving the
signage and standards of the roadway
through this area of the site.
Not only have they reduced risk of
truck incidents by creating essential
standards of how trucks should be
operated in specific areas throughout
finishing, they have also worked
diligently in improving the overall way
in which their workplace is designed.
Tony’s design of a new packing bench is
helping solve a problem with the manual
handling of a heavy product, affecting
the TFP finishing team. The design of
the new bench reduces the amount of
lifting required, therefore reducing the
risk of injury to members of the team
whilst making packing quicker and
much easier.
Paula is always so enthusiastic about her
work and encouraging her colleagues to
socialise. As a member of the Croppers
Social club, Paula dedicates time to
organising many events over the year.
Paula takes responsibility for much of
the organising, promoting and financial
arrangements for social events.
COMMENDATION
4. QUEST TEAM
COMMENDATION
PAUL BLAIR
(TFP Machine Operator)
Joanne Storey, Edward Kileff and
Tom Prosser ran the Quest road-
show which was attended by over
400 employees and generated 208
improvement ideas for improving
quality in our end products. The team
had clearly thought about the best way
to communicate their message and this
showed in their creativity.
Paul has volunteered his time over a
number of years to help at the boxing
club in Kendal. Attending the club as his
shift pattern allows, he takes great pride
in helping the young people find their
confidence and self-esteem through
the sport. We admire Paul for taking
the time to help provide a great
community service.
WINNER
WINNER
5. KARL COOKSON
(Technical Support Manager)
7. DAVID ATKINSON
(Machine Operator, No.4 Machine)
TEAM AWARD
WINNERS
9. QUALITY TEAM
Highly committed to our Group, Karl
will often go above and beyond to ensure
core services are maintained either from
unplanned events or potential business
threatening situations. During one
significant power outage, Karl was on
site all night to manually restart systems
and services including more than 100
different servers.
There is no one at Croppers who takes
more pride in his job than David.
Passionate about PM4 and dedicated to
both the Group and papermaking, he
provides great motivation to the team
and happily passes on his extensive
knowledge to his colleagues. Quality
focussed with a positive attitude, David
is an excellent role model to others.
Grant McDougall, Ian Park, Tom
Prosser, Mark Cook and Colin Roberts,
a collaboration from across the Group,
the five people have improved our
quality systems in-line with the new and
more rigorous ISO 9001, 2015 standards.
The team made such great progress they
obtained the BSI recommendation to
upgrade one year early!
COMMENDATION
COMMENDATION
COMMENDATION
6. PROCUREMENT TEAM
– RAW MATERIALS
8. JULIE TOMLINSON
(Marketing Communications Manager)
10. CLEANING TEAM
Andrea Ripley, Mandy Bond, Aime
Knipe, Kaylee Thexton and Sam
Crewdson. This small yet highly
effective team work extremely hard to
deliver for the business. They’re not
afraid of early starts and late finishes,
and will come in out-of-hours to ensure
they don’t let their colleagues down.
A real unsung hero, whether creating our
exhibition stands, producing marketing
materials or writing fantastic copy, Julie
takes pride in making sure every detail is
perfect. So often ‘under the radar’, you
can be sure that when James Cropper is
making great headlines, Julie has had a
hand in it!
Rob Hart, Donna Stewart,
Ann McKnight, Carol-Anne Preston,
Ian Cook, Polly Wilkinson, Nicola
Moore and John Ireland. An incredibly
hard-working team, thorough in their
work and even through all the changes
to the site over recent years they have
ensured the facilities are always clean.
54
55
SUPPORT FOR COLLEAGUES
WINNER
11. JOHN YOUDE
(Shift Team Leader)
John will always make time to provide
support for colleagues and provides a
valuable ‘bridge’ between papermachine
crews and finishing, enabling both
to have a better understanding of
production processes, any issues they
may have and the impact on quality.
Always cheerful, John makes the
operations office a pleasant place
to be when he is on shift!
COMMENDATION
12. MARIA LA TORRE
(Senior Materials Specialist, TFP Inc.)
When Maria sees that something needs
doing, she gets it done and never assumes
it’s someone else’s job. She has taken on
a lot of extra responsibility above and
beyond her original remit including
developing a manual for export control
procedures and a supervisory role for
safety management systems.
Our People Set Us Apart
10
11
12
10
It’s a wonderful smile that’s universally
recognised across the organisation and
by many of our customers, but one
which we’re having to say farewell to.
Geoff Leech, Art & Framing Director,
retires in the summer of 2018 after an
impressive 41 years of service at James
Cropper and a career in the paper
manufacturing industry that commenced
at the age of just 16.
Geoff joined us in 1977 as an
administrator in the export team and
represented the Group across the world
to develop new markets and build strong
customer relationships.
Always one to rise to a challenge, Geoff
and his team have delivered numerous
technical innovations for clients.
Recipient of numerous accolades, Geoff
has also helped shape the industry and
was instrumental in developing the Fine
Art Trade Guild Mountboard Standards.
We thank Geoff for his commitment and
lasting contributions both to the Group
and the papermaking industry.
56
Governance
GOVERNANCE
STRATEGIC REPORT
05
FINANCIAL HIGHLIGHTS
FINANCIAL SUMMARY
CHAIRMAN’S LETTER
CHIEF EXECUTIVE’S REVIEW
FINANCE DIRECTOR’S REVIEW
THE PENSION REPORT
RISK MANAGEMENT
CREATING VALUE FROM WASTE
TECHNICAL FIBRE PRODUCTS
JAMES CROPPER 3D PRODUCTS
JAMES CROPPER PAPER
OUR VALUES
SUSTAINABILITY AND PEOPLE
GOVERNANCE
BOARD OF DIRECTORS
CORPORATE GOVERNANCE STATEMENT
REPORT OF THE REMUNERATION COMMITTEE
DIRECTORS’ REPORT
57
58
60
64
70
FINANCIAL STATEMENTS
73
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
INDEPENDENT AUDITOR’S REPORT
GROUP STATEMENT OF
COMPREHENSIVE INCOME
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
57
Governance - Director’s Details
Governance - Director’s Details
BOARD OF DIRECTORS
MARK CROPPER MA
Chairman
PHIL WILD BEng (Hons)
Chief Executive Officer
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 MADDOCK BSC, FCMA
Group Finance Director
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.
58
59
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 period ended 31 March 2018. 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 2016, and intend to apply this code as
far as we consider appropriate given the size of the Group.
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.
SUB–COMMITTEES
There are five sub-committees reporting to the Board:
• Executive Committee
• Remuneration Committee
• Audit Committee
• Nomination Committee
• Pensions 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 a Non-Executive Director.
Following the search, an appointment is expected in August.
All sub-committees continue to be supported by both
internal and, where relevant, external advisers to ensure
their duties are satisfactorily and professionally fulfilled.
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 06 to 26.
STAKEHOLDER ENGAGEMENT
The Board is keen to ensure ongoing and effective
communication with all stakeholders.
Mark Cropper
Chairman
25 June 2018
GOVERNANCE STATEMENT
The Company’s shares are listed on AIM and are subject
to the AIM Rules of the London Stock Exchange and
consequently are not required to comply with the provisions
or report in accordance with the UK Corporate Governance
Code 2016 (“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 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 Group. 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.
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 Group. 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 principal
responsibility is to manage the Group’s business and to lead
the Executive Committee in delivering the Group’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 judgement and provide unequivocal
counsel and advice to the Board. The appointment of a
new Non-Executive Director to the Board will bring
greater independence, counsel and advice.
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.
BOARD COMMITTEES
The Board has delegated specific authority to the Audit
Committee, Nomination Committee, Remuneration
Committee and Pension 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.
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.
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.
Isabelle Maddock is the chairperson of the Pension
Committee which also comprises Mark Cropper, Jim Sharp
and Patrick Willink. The Pension Committee has the
primary responsibility for reviewing and approving the
objectives of the James Cropper Plc Pension Schemes on
all material matters of importance. It monitors performance
of the Schemes and considers recommendations and reports
from management in relation to policy and strategy
concerning pensions and investment matters. The Pension
Committee meets as and when required throughout the 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.
60
61
Governance - Corporate Governance Statement
Governance - Corporate Governance Statement
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
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%.
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.
APPOINTMENT OF NON-EXECUTIVE DIRECTORS
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.
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 AND 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.
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 Statement,
the Chief Executive’s Statement 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,
25 June 2018
62
63
Governance - Report of the Remuneration Committee
Governance - Report of the Remuneration Committee
REPORT OF THE REMUNERATION COMMITTEE
STATEMENT FROM THE CHAIRMAN
OF THE REMUNERATION COMMITTEE
I am pleased to introduce the Directors’ Remuneration
Report for the period ended 31 March 2018. 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 Group’s long-term strategy and supports
the achievement of the strategic objectives.
During the period, 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 period
ended 31 March 2018.
•
Directors’ Remuneration Policy setting out the
Group’s forward looking remuneration policy.
David Wilks
Chairman of the Remuneration Committee
25 June 2018
The Directors acknowledge the importance of the principles
set out in the UK Corporate Governance Code 2016 and
intend to apply this code as far as we consider appropriate
given the size of the Group. 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 Group.
•
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’).
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 Group 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 Group.
The Remuneration Committee meets at least
twice a year and otherwise as required.
•
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 Group.
• To have a pay for performance approach.
•
To provide a market competitive level of remuneration
to enable the Group to attract and retain high level
individuals, to support the ongoing success of the Group.
ANNUAL REMUNERATION REPORT 2018
REMUNERATION COMMITTEE
The Remuneration Committee comprises the
following members:
• David Wilks
• Mark Cropper
• Jim Sharp
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.
REMUNERATION POLICY
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 Group. Our overall remuneration philosophy aims:
•
To recognise the importance of ensuring
that employees of the Group are effectively
and appropriately rewarded.
SERVICE CONTRACTS
EXECUTIVE DIRECTOR
NOTICE PERIOD
M A J Cropper
P I Wild
I M Maddock
M Thompson
K D Watson
P J Willink
S A Adams
12 months
6 months
6 months
12 months
6 months
12 months
6 months
Non-Executive Directors are employed on contracts
of one month’s notice by either side.
64
65
Governance - Report of the Remuneration Committee
Governance - Report of the Remuneration Committee
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL SHAREHOLDER RETURN (‘TSR’)
LONG TERM INCENTIVE PLAN
To enable shareholders to assess the Company’s performance against the London Stock Exchange, the cumulative TSR
for the period ended 31 March 2018 is shown in the graph below. 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.
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 period to 31 March 2018 under the Plan to Executive Directors were as follows:
TOTAL SHAREHOLDER RETURN
James Cropper
FTSE AIM All Share
FTSE All Share
d
e
s
a
b
e
R
1600
1400
1200
1000
800
600
400
200
0
03/08
03/09
03/10
03/11
03/12
03/13
03/14
03/15
03/16
03/17
03/18
DETAILS OF DIRECTORS’ REMUNERATION
The following table brings together the various elements of remuneration of each director for the financial period ended 31 March 2018.
SALARY
AND FEES
BENEFITS
ANNUAL
BONUS
PENSION
COST
TOTAL
2018
2017
£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000
2017 2018
2018
2018
2018
2017
2017
2017
EXECUTIVE
M A J Cropper
P I Wild
I M Maddock
M Thompson
K D Watson
P J Willink
76
194
125
132
132
118
75
184
110
127
129
118
10
35
23
27
22
18
10
34
21
27
22
23
S A Adams
(appointed January 2017)
153
38
21
5
NON-EXECUTIVE
D Mitchell
(retired 31 March 2017)
J E Sharp
D R Wilks
-
28
30
22
27
29
-
-
-
-
-
-
1
10
6
16
6
6
7
-
-
-
-
42
27
30
30
27
5
10
7
8
6
5
10
7
3
6
16
19
92
249
161
183
166
158
90
270
165
187
187
187
8
-
-
181
51
-
-
-
-
-
-
-
-
-
-
28
30
22
27
29
988
859
156
142
52
164
52
50
1,248
1,215
NUMBER
AT
1 APRIL
2017
NUMBER
GRANTED
IN PERIOD
MID-MARKET
PRICE (£) OF
OPTIONS
AWARDED
NUMBER
EXERCISED
IN PERIOD
OPTIONS
LAPSED
IN PERIOD
NUMBER
AT
31 MARCH
2018
10,666
54,326
-
19,960
21,327
22,468
13,935
-
8,571
4,511
3,459
3,910
3,910
-
-
£16.950
£16.950
£16.950
£16.950
£16.950
-
4,818
17,794
-
7,868
7,868
8,832
7,868
1,204
4,448
-
-
-
-
-
4,644
40,655
4,511
15,551
17,369
17,546
6,067
M A J Cropper
P I Wild
S A Adams
I M Maddock
M Thompson
K D Watson
P J Willink
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
1 APRIL
2017
NUMBER
GRANTED
IN PERIOD
MID-MARKET
PRICE (£) OF
OPTIONS
AWARDED
OPTIONS
EXERCISED
IN PERIOD
OPTIONS
LAPSED
IN PERIOD
OPTIONS
AT
31 MARCH
2018
M A J Cropper
P J Willink
3,781
6,025
2,170
3,459
£16.950
£16.950
-
-
-
-
5,951
9,484
SAYE OPTIONS
The details of the SAYE options that are open to the Executive Directors at 31 March 2018 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 31 March 2018
4,360
4,360
66
67
Governance - Report of the Remuneration Committee
Governance - Report of the Remuneration Committee
REMUNERATION POLICY SUMMARY
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.
PURPOSE AND
LINK TO STRATEGY
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.
OPERATION
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.
NON-EXECUTIVE
DIRECTORS’ SALARIES
Salaries for Non-Executive Directors are based on market practice and are reviewed
by the Board each year.
To attract and retain the right individuals
required to support the achievement of
both short and long-term goals.
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.
ANNUAL EXECUTIVE
BONUS PLAN
To reward the delivery of the Group’s
annual financial and strategic goals.
The annual bonus award will depend on the level of performance delivered
against specific targets measured against three categories:
• Up to 10% of base salary on achieving budgeted earnings;
• Up to 10% of base salary for year on year improvement in earnings.
• Up to 5% of base salary on achieving working capital targets.
The Executive Directors are eligible to participate in the Employee Group Bonus
Scheme, with any award made under this scheme deducted from the award made
under the Annual Executive Bonus Plan.
The Annual Executive Bonus Plan is reviewed periodically by the
Remuneration Committee.
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.
68
69
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 31 March 2018.
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 08 to 09, the Strategic
Report on pages 06 to 26 and the Financial Review on pages
13 to 26, report on the performance of the Group for the
period ended 31 March 2018 and its prospects for the future.
The Chairman’s Letter, the Strategic Report and
this report have been prepared solely to provide additional
information to shareholders to assess the Group’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
Isabelle Maddock
Martin Thompson
Dave Watson
Patrick Willink
Jim Sharp
David Wilks
Details of the Director’s remuneration are shown in the
Report of the Remuneration Committee on pages 64 to 69.
Details of the Directors’ interests in the share capital of the
Company are set out on page 72. The biographies of the
Directors as at the date of this report are on pages 58 to 59.
RESULTS AND DIVIDENDS
The results for the period are shown in the Statement
of Comprehensive Income on page 78.
An interim dividend of 2.5p per ordinary share was paid
on 12 January 2018. The Directors are recommending a final
dividend of 11.0p per ordinary share, subject to approval at
the Annual General Meeting of the Company, making the
total dividend for the year 13.5p (2017: 11.8p) per share.
Full details of dividends in respect of the year ended 31
March 2018 are given in note 7 of the financial statements.
A report on Corporate Governance is set out on pages
60 to 63, 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 (2017:£16,000)
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 20 to the consolidated
financial statements.
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.
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 08 to 12, outline the business activities of the
Group along with the factors which may affect its future
development and performance. The Financial Review on
pages 13 to 26 discusses the Group’s financial position, along
with details of its cash flow and liquidity. Note 17 to the
financial statements sets out the Group’s financial risks and
the management of those risks.
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 112 to 115 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 25 July 2018
at 11.00 am.
SUBSTANTIAL INTERESTS
Shareholdings in excess of 3% of the issued capital at 2 June 2018 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
Liontrust Asset Management Ltd
Miton Asset Management Limited
Polar Capital LLP
3,015,405
527,607
52,386
3,595,398
588,672
468,931
435,211
31.8
5.6
0.6
37.9
6.2
4.9
4.6
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 37.9% in the Company.
70
71
Governance - Directors’ Report
DETAILS OF DIRECTORS’ INTERESTS
The interests in the shares of the Company of those Directors serving at 31 March 2018 were as follows:
AT 31 MARCH 2018
AT 1 APRIL 2017
ORDINARY
SHARES
OPTIONS ON
ORDINARY
SHARES
ORDINARY
SHARES
OPTIONS ON
ORDINARY
SHARES
DIRECTOR
INTEREST
M A J Cropper
Beneficial
Non-beneficial
1,747,849
559,571
P I Wild
Beneficial
12,273
S A Adams
Beneficial
I M Maddock
Beneficial
M Thompson
Beneficial
K D Watson
Beneficial
1,020
11,032
26,524
4,047
P J Willink
J E Sharp
D R Wilks
Beneficial
Non-beneficial
55,046
1,132,408
Beneficial
Non-beneficial
Beneficial
Non-beneficial
7,950
75,328
7,825
75,825
4,644
-
40,655
4,511
19,911
17,369
17,546
6,067
-
-
-
-
-
1,267,376
559,571
6,136
1,000
8,244
23,708
2,025
51,112
1,132,408
7,950
92,575
9,465
92,575
10,666
-
54,326
-
19,960
21,327
22,468
13,935
-
-
-
-
-
Any material related party transactions between the Directors and the Company are set out in note 26 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 67. Non-beneficial interests include shares held jointly as trustee with
other Directors.
There have been no other material changes between the period end and 25 June 2018.
Approved by the Board of Directors on 25 June 2018 and were signed on its behalf by
Mark Cropper,
Chairman.
72
Financial Statements
FINANCIAL STATEMENTS
STRATEGIC REPORT
05
FINANCIAL HIGHLIGHTS
FINANCIAL SUMMARY
CHAIRMAN’S LETTER
CHIEF EXECUTIVE’S REVIEW
FINANCE DIRECTOR’S REVIEW
THE PENSION REPORT
RISK MANAGEMENT
CREATING VALUE FROM WASTE
TECHNICAL FIBRE PRODUCTS
JAMES CROPPER 3D PRODUCTS
JAMES CROPPER PAPER
OUR VALUES
SUSTAINABILITY AND PEOPLE
GOVERNANCE
BOARD OF DIRECTORS
57
CORPORATE GOVERNANCE STATEMENT
REPORT OF THE REMUNERATION COMMITTEE
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
73
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
INDEPENDENT AUDITOR’S REPORT
GROUP STATEMENT OF COMPREHENSIVE INCOME
STATEMENT OF FINANCIAL POSITION
STATEMENT OF CASH FLOWS
STATEMENT OF CHANGES IN EQUITY
NOTES TO THE FINANCIAL STATEMENTS
SHAREHOLDER INFORMATION
74
75
78
79
80
81
83
111
NOTICE OF ANNUAL GENERAL MEETING
112
73
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF JAMES CROPPER PLC
The Directors are responsible for preparing the Annual
Report and the group and parent company financial statements
in accordance with applicable law and regulations.
• assess the group and parent company’s ability to continue
as a going concern, disclosing, as applicable, matters related
to going concern; and
Company law requires the Directors to prepare group and
parent company 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 International Financial Reporting Standards
as adopted by the European Union (IFRSs as adopted by the
EU) and applicable law and have elected to prepare the parent
company financial statements in accordance with UK
accounting standards and applicable law (UK Generally
Accepted Accounting Practice), including FRS 101
Reduced Disclosure Framework.
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,
relevant, reliable and prudent;
• for the group financial statements, state whether they
have been prepared in accordance with IFRSs as adopted
by the EU;
• for the parent company financial statement, state whether
applicable UK Accounting Standards have been followed,
subject to any material departures disclosed and explained
in the financial statements;
• use the going concern basis of accounting unless they
either intend to liquidate the group or the parent company
or to cease operations, or have no realistic alternative but
to do so.
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 are responsible for such
internal control as they determine is necessary to enable the
preparation of financial statements that are free from material
misstatement, whether due to fraud or error, and 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.
Under applicable law and regulations, the directors are also
responsible for preparing a Strategic Report and a Directors’
Report that complies with that law and those regulations.
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.
1. OUR OPINION IS UNMODIFIED
We have audited the financial statements of James Cropper Plc
(“the Company”) for the period ended 31 March 2018 which
comprise the Group Statement of Comprehensive Income,
the Group and Company Statement of Financial Position,
the Group Statement of Cash Flows, the Company Statement
of Cash Flows, the Group Statement of Changes in Equity,
the Company Statement of Changes in Equity, and the
related notes, including the accounting policies in note 1.
In our opinion:
• 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 31 March 2018 and of the Group’s profit
for the period then ended;
• the Group financial statements have been properly
prepared in accordance with International Financial
Reporting Standards as adopted by the European Union;
• the parent Company financial statements have been
properly prepared in accordance with UK accounting
standards, including FRS 101 Reduced Disclosure
Framework; and
• the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (“ISAs (UK)”) and applicable
law. Our responsibilities are described below. We have fulfilled
our ethical responsibilities under, and are independent of the
Group in accordance with, UK ethical requirements including
the FRC Ethical Standard as applied to listed entities.
We believe that the audit evidence we have obtained
is a sufficient and appropriate basis for our opinion.
2. KEY AUDIT MATTERS: OUR
ASSESSMENT OF RISKS OF
MATERIAL MISSTATEMENT
Key audit matters are those matters that, in our professional
judgment, were of most significance in the audit of the
financial statements and include the most significant assessed
risks of material misstatement (whether or not due to fraud)
identified by us, including those which had the greatest effect
on: the overall audit strategy; the allocation of resources in
the audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit
of the financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion
on these matters. In arriving at our audit opinion above,
the key audit matter, was as follows:
Group pension obligation (Group pension obligation (before
deducting scheme assets) £126.1m, 2017 restated £128.0m)
Refer to page 86 (accounting policy) and page 104
(financial disclosure).
The risk: subjective valuation (risk vs 2017: ▲)
The Group operates two defined benefit pension schemes.
The calculations involved are complex in nature and small
changes in the assumptions and estimates used to calculate
the Group’s pension obligation (before deducting scheme
assets) could have a significant effect on the Group’s net
pension deficit.
Our procedures included:
• Benchmarking assumptions and our sector experience:
we challenged, with the support of our actuarial
specialists, the key assumptions applied, being the
discount rate, inflation rate and mortality/life expectancy,
against externally derived data. With the support of
our pension specialists, we also assessed the assumptions
within the computation of the additional liability which
has been recorded in relation to the normal retirement
dates for male and female members of the Staff Scheme.
This is further discussed in notes 18 and 25.
• Tests of detail: we tested the underlying information
provided to the Group’s actuary, by vouching a sample
of balances to supporting documentation and developing
expectations based on our knowledge of the scheme.
• Assessing transparency: we considered the adequacy
of the Group’s disclosures in comparison to accounting
standards and assessed the disclosure of the sensitivity
of the deficit to key assumptions.
3. OUR APPLICATION OF MATERIALITY
AND AN OVERVIEW OF THE SCOPE OF
OUR AUDIT
Materiality for the Group financial statements as a whole was
set at £218,500 (2017: £330,000), determined with reference to
a benchmark of Group profit before tax, of which it represents
4.8% (2017: 5.9%).
Materiality for the parent company financial statements
as a whole was set at £168,500 (2017: £329,999), based on
component materiality. This is lower than the materiality
we would otherwise have determined with reference to a
benchmark of Parent Company gross assets, of which it
represents 0.27% (2017: 0.56%).
We agreed to report to the Audit Committee any corrected or
uncorrected misstatements exceeding £10,925 (2017: £16,500),
in addition to other identified misstatements that warrant
reporting on qualitative grounds.
Of the Group’s 14 (2017: 14) reporting components, we
subjected 5 (2017: 6) to audits for Group reporting purposes.
For the residual components, we performed analysis at an
aggregated group level to re-examine our assessment that there
were no significant risks of material misstatement within these.
74
75
Audit for Group reporting purposes
Total 2017/18
Total 2016/17
Number of
components
Group
revenue %
Group profit and Group total
losses before tax % assets %
5
5
6
87%
87%
88%
97%
97%
97%
94%
94%
92%
The Group team performed the work over all components, including the audit of the parent company. Component materialities
ranged from £88,000 to £168,500, having regard to the mix of size and risk profile of the Group across the components.
4. WE HAVE NOTHING TO
REPORT ON GOING CONCERN
We are required to report to you if we have concluded that the
use of the going concern basis of accounting is inappropriate
or there is an undisclosed material uncertainty that may cast
significant doubt over the use of that basis for a period of at
least twelve months from the date of approval of the financial
statements. We have nothing to report in these respects.
5. WE HAVE NOTHING TO REPORT
ON THE OTHER INFORMATION IN
THE ANNUAL REPORT
The directors are responsible for the other information
presented in the Annual Report together with the financial
statements. Our opinion on the financial statements does
not cover the other information and, accordingly, we do not
express an audit opinion or, except as explicitly stated below,
any form of assurance conclusion thereon.
Our responsibility is to read the other information and,
in doing so, consider whether, based on our financial
statements audit work, the information therein is materially
misstated or inconsistent with the financial statements or
our audit knowledge. Based solely on that work we have not
identified material misstatements in the other information.
Strategic report and directors’ report
Based solely on our work on the other information:
• we have not identified material misstatements
in the strategic report and the directors’ report;
• in our opinion the information given in those
reports for the financial year is consistent with
the financial statements; and
• in our opinion those reports have been prepared
in accordance with the Companies Act 2006.
6. WE HAVE NOTHING TO REPORT
ON THE OTHER MATTERS ON WHICH
WE ARE REQUIRED TO REPORT
BY EXCEPTION
Under the Companies Act 2006, we are required 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.
We have nothing to report in these respects.
7. RESPECTIVE RESPONSIBILITIES
Directors’ responsibilities
As explained more fully in their statement set out on page 74,
the directors are responsible for: the preparation of the
financial statements including being satisfied that they give a
true and fair view; such internal control as they determine is
necessary to enable the preparation of financial statements that
are free from material misstatement, whether due to fraud or
error; assessing the Group and parent Company’s ability to
continue as a going concern, disclosing, as applicable, matters
related to going concern; and using the going concern basis of
accounting unless they either intend to liquidate the Group
or the parent Company or to cease operations, or have no
realistic alternative but to do so.
Auditor’s responsibilities
Our objectives are to obtain reasonable assurance about
whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to
issue our opinion in an auditor’s report. Reasonable assurance
is a high level of assurance, but does not guarantee that an
audit conducted in accordance with ISAs (UK) will always
detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if,
individually or in aggregate, they could reasonably be
expected to influence the economic decisions of users
taken on the basis of the financial statements.
A fuller description of our responsibilities is provided on the
FRC’s website at www.frc.org.uk/auditorsresponsibilities.
8. THE PURPOSE OF OUR AUDIT
WORK AND TO WHOM WE OWE
OUR RESPONSIBILITIES
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, for this report, or for the opinions
we have formed.
Nicola Quayle (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
1 St Peter’s Square
Manchester
M2 3AE
25 June 2018
76
77
Financial Statements
Financial Statements
JAMES CROPPER PLC
GROUP STATEMENT OF COMPREHENSIVE INCOME
JAMES CROPPER PLC
STATEMENT OF FINANCIAL POSITION
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
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
Note
2
21
4
2
3
3
4
5
6
6
OTHER COMPREHENSIVE INCOME
Profit for the period
Items that are or may be reclassified to profit or loss
Foreign currency translation
Cash flow hedges - effective portion of changes in fair value
Items that will never be reclassified to profit or loss
Retirement benefit liabilities – actuarial gains / (losses)
18
Deferred tax on actuarial (gains) / losses
on retirement benefit liabilities
Income tax on other comprehensive income
19
Other comprehensive income / (expense) for the year
Total comprehensive income for the period
attributable to equity holders of the Company
52 week period to
31 March 2018
£’000
Restated
52 week period to
1 April 2017
£’000
96,312
346
767
(40,661 )
(4,021 )
(27,314 )
(2,678 )
(17,313 )
5,438
(908 )
11
4,541
(451 )
4,090
43.3p
43.0p
4,090
(82 )
57
2,593
(441 )
91
2,218
6,308
92,363
322
(180 )
(34,793 )
(4,501 )
(26,238 )
(2,297 )
(18,488 )
6,188
(647 )
-
5,541
(910 )
4,631
49.4p
49.0p
4,631
224
(9 )
(11,878 )
2,019
-
(9,644 )
(5,013 )
Group
As at
31 March
2018
£’000
Restated
Group
As at
1 April
2017
£’000
Restated
Company Company
As at
1 April
2017
£’000
As at
31 March
2018
£’000
Note
8
9
10
19
11
12
13
14
15
16
16
18
20
496
25,113
-
2,053
27,662
14,854
18,522
47
5,557
867
569
26,572
-
2,843
29,984
14,097
23,066
-
1,921
-
112
1,732
7,350
3,649
69
1,942
7,350
3,453
12,843
12,814
-
-
45,651
45,191
47
3,004
530
-
526
463
39,847
39,084
49,232
46,180
67,509
69,068
62,075
58,994
14,328
-
1,600
-
18,493
9
1,570
1
21,823
19,470
-
43
-
9
79
-
15,928
20,073
21,866
19,558
8,763
19,472
28,235
7,715
22,194
29,909
4,070
19,472
6,427
22,194
23,542
28,621
44,163
49,982
45,408
48,179
2,370
1,472
520
(1,445 )
20,429
23,346
2,367
1,472
602
(853 )
15,498
19,086
2,370
1,472
-
(1,445 )
14,270
2,367
1,472
-
(853 )
7,829
16,667
10,815
Assets
Intangible assets
Property, plant and equipment
Investments in subsidiary undertakings
Deferred tax assets
Total non-current assets
Inventories
Trade and other receivables
Other financial assets
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
Total equity and liabilities
67,509
69,068
62,075
58,994
The financial statements on pages 78 to 110 were approved by the Board of Directors on 25 June 2018 and were signed on its behalf by:
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
78
79
Financial Statements
Financial Statements
JAMES CROPPER PLC
STATEMENT OF CASH FLOWS
For the period ended 31 March 2018 (2017: for the period ended 1 April 2017)
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
(Profit) / 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:
(Increase) / decrease in inventories
Decrease / (increase) in trade and other receivables
(Decrease) / 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 generated from / (used in) financing activities
Net increase / (decrease) in cash and cash equivalents
Effect of exchange rate fluctuations on cash held
Net increase / (decrease) 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
Group
2018
£’000
Restated
Group
2017
£’000
Restated
Company Company
2017
£’000
2018
£’000
4,090
4,631
5,422
3,271
451
2,678
1,284
(1,413 )
(626 )
(11 )
308
341
-
(807 )
4,400
(4,029 )
11
(320 )
(839 )
5,518
(41 )
(1,894 )
12
-
910
2,297
1,025
(1,362 )
84
14
282
283
-
105
(4,113 )
3,932
2
(293 )
(1,081 )
6,716
(486 )
(4,828 )
4
-
3
4,220
(2,570 )
-
(441 )
(1,097 )
115
3,710
(74 )
3,636
1,921
5,557
454
2,450
(4,115 )
-
(510 )
(881 )
(2,602 )
(1,196 )
(69 )
(1,265 )
3,186
1,921
200
161
1,284
(1,413 )
142
-
(554 )
341
326
120
1,025
(1,362 )
78
-
(648 )
283
(7,500 )
(6,000 )
- -
(1,954 )
2,314
631
(79 )
(839 )
(2,661 )
2,094
720
(73 )
(1,081 )
(1,844 )
(3,908 )
(22 )
(73 )
-
7,500
7,405
3
131
(118 )
(28 )
(286 )
-
6,000
5,686
454
2,270
(68 )
(1,451 )
(3,602 )
(441 )
(1,097 )
-
(881 )
(2,973 )
(1,827 )
2,588
(110 )
2,478
526
3,004
(49 )
(67 )
(116 )
642
526
5,557
1,921
3,004
526
Net cash (used in) / generated from investing activities
(1,923 )
(5,310 )
JAMES CROPPER PLC
STATEMENT OF CHANGES IN EQUITY
GROUP
All figures in £’000
Share
capital
Share
premium
Translation
reserve
Own
Shares
Retained
earnings
2 April 2016 as previously stated
Prior year adjustment (note 25)
2 April 2016 as restated
Profit for the period
Exchange differences
Actuarial losses on retirement
benefit liabilities (net of deferred tax)
2,306
-
2,306
-
-
1,079
-
1,079
-
-
378
-
378
-
224
(343 )
-
(343 )
-
Total
26,693
(2,389 )
23,273
(2,389 )
20,884
24,304
4,631
4,631
-
-
224
-
-
-
-
(9,852 )
(9,852 )
Loss on cash flow hedges
-
-
-
-
(9 )
(9 )
Total other comprehensive income
-
-
224
Dividends paid
-
-
-
-
-
(9,861 )
(9,637 )
(881 )
Share based payment charge
-
-
-
-
283
Tax on share options
-
-
-
-
634
(881 )
283
634
Proceeds from issue of ordinary shares
61
393
-
-
- 454
Distribution of own shares
Consideration paid for own shares
-
-
-
-
-
-
192
(702 )
(192 )
-
-
(702)
Total contributions by and
distributions to owners of the Group
61
393
- (510 )
(156 )
(212)
At 1 April 2017 restated
2,367
1,472
Profit for the period
Exchange differences
Actuarial gains on retirement
benefit liabilities (net of deferred tax)
Gain on cash flow hedges
Total other comprehensive income
Dividends paid
Share based payment charge
Tax on share options
Tax on other comprehensive income
Proceeds from issue of ordinary shares
Distribution of own shares
-
-
-
-
-
-
-
-
-
3
-
Consideration paid for own shares
-
Total contributions by and
distributions to owners of the Group
3
-
-
-
-
-
-
-
-
-
-
-
-
-
602
-
(82 )
-
-
(82 )
-
-
-
-
-
-
-
-
(853 )
15,498
19,086
-
-
-
-
-
-
-
-
-
-
324
(916 )
4,090
4,090
-
(82 )
2,152
2,152
57
57
2,209
2,127
(1,097 )
(1,097 )
341
(201 )
91
-
(324 )
(178 )
341
(201 )
91
3
-
(1,094 )
(592 )
(1,368 )
(1,957)
At 31 March 2018
2,370
1,472
520
(1,445 )
20,429
23,346
The accompanying notes form part of the financial statements
The accompanying notes form part of the financial statements
80
81
Financial Statements
Notes to the Financial Statements
JAMES CROPPER PLC
STATEMENT OF CHANGES IN EQUITY
COMPANY
All figures in £’000
Share
Share
capital premium
Own
Shares
Retained
earnings
2 April 2016 as previously stated
Prior year adjustment (note 25)
At 2 April 2016 restated
Profit for the period
Actuarial losses on retirement
benefit liabilities (net of deferred tax)
Loss on cash flow hedges
Total other comprehensive income
Dividends paid
Share based payment charge
Tax on share options
Proceeds from issue of ordinary shares
Distribution of own shares
Consideration paid for own shares
2,306
-
1,079
-
2,306
1,079
-
-
-
-
-
-
-
61
-
-
-
-
-
-
-
-
-
393
-
-
Total contributions by and distributions to owners of the Group
61
393
-
-
-
-
-
-
-
-
-
-
-
-
(853 )
(853 )
At 1 April 2017 restated
Profit for the period
Gain on cash flow hedges
Actuarial gains on retirement
benefit liabilities (net of deferred tax)
Total other comprehensive income
Dividends paid
Share based payment charge
Tax on share options
Tax on other comprehensive income
Proceeds from issue of ordinary shares
Distribution of own shares
Consideration paid for own shares
Total contributions by and distributions to owners of the Group
2,367
1,472
(853 )
-
-
-
-
-
-
-
-
3
-
-
3
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
324
(916 )
(592 )
Total
20,347
(2,389 )
16,962
(2,389 )
14,573
17,958
3,271
3,271
(9,852 )
(9,852 )
(9 )
(9 )
(9,861 )
(9,861 )
(881 )
283
636
-
(192 )
-
(154 )
(881)
283
636
454
(192 )
(853 )
(553 )
7,829
5,422
57
10,815
5,422
57
2,152
2,152
2,209
2,209
(1,097 )
(1,097 )
341
(201 )
91
-
(324 )
-
341
(201 )
91
3
-
(916 )
(1,190 )
(1,779 )
At 31 March 2018
2,370
1,472
(1,445 )
14,270
16,667
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
These financial statements are consolidated financial
statements for the Group consisting of James Cropper PLC,
a company registered in the UK, and all its subsidiaries.
The consolidated financial statements 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.
The financial statements of the parent company have been
prepared in accordance with Financial Reporting Standard
101 Reduced Disclosure Framework (“FRS 101”).
Basis of preparation
The accounting “year” for the Group is a 52 week accounting
period ending 31 March 2018, (2017: 52 week accounting
period ended 1 April 2017).
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.
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 intragroup 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.
(a) Revenue recognition
Revenue comprises the fair value of the sale of goods, net of
value added tax and other sales taxes, rebates and discounts
and after eliminating sales within the Group.
Revenue from the sale of goods is recognised when:
• the Group has transferred the significant risks
and rewards of ownership to the buyer;
• all significant performance obligations have been met;
• the Group retains neither continuing managerial
involvement nor effective control over the goods sold;
• it is probable that the economic benefits associated
with the transaction will flow to the Group; and
• the amount of revenue can be measured reliably.
This is typically 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.
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.
(b) 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.
(c) Emission quotas
The Group participates in phase III of the EU Emissions
Trading Scheme. 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. Un-utilised 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.
The accompanying notes form part of the financial statements
82
83
Notes to the Financial Statements
Notes to the Financial Statements
(d) Foreign currencies
The consolidated financial statements are presented in
Pounds Sterling, which is the Group’s presentational currency.
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.
(e) 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
(f) Property plant and equipment
Property, plant and equipment are stated at cost less
accumulated depreciation and impairment losses.
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.
(g) 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.
(h) 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.
(i) Research & development tax credit
Research and development expenditure credit (RDEC)
is recognised within other operating income.
(j) 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.
(k) 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.
(l) 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.
(m) 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.
(n) Trade receivables
Trade receivables are recorded at their initial fair value
after appropriate revision of impairment.
(o) Trade payables
(s) Borrowing costs
Trade payables are stated at their fair value. Trade payables
are subsequently stated at amortised cost using the effective
interest method.
(p) Derivative Financial instruments
The Group uses derivative financial instruments, principally
interest rate and currency swaps, to reduce its exposure to
interest rate and currency movements. Derivative financial
instruments are recognised as assets and liabilities measured
at their fair values at the period end date. Changes in their
fair values are recognised in the Statement of Comprehensive
Income. 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.
(q) 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.
Hedges of net investment in a foreign entity:
The effective portion of the gain or loss on the hedging
instrument is recognised directly in equity, while the
ineffective portion is recognised in the income statement.
Amounts taken to equity are transferred to the income
statement when the foreign entity is sold.
(r) 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.
(t) Interest
Interest is recognised in the Statement of Comprehensive
Income on an accruals basis using the effective interest method.
(u) 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. The Trust’s 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.
(v) 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 16 and shareholdings can be referred to in note
20. 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.
(w) Taxation
Tax on the Statement of Comprehensive Income for the period
comprises current and deferred tax. Tax is recognised in the
Statement of Comprehensive Income, according to the
accounting treatment of the related transaction.
84
85
Notes to the Financial Statements
Notes to the Financial Statements
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.
(x) 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.
(y) Non-GAAP performance measures
In the reporting of financial information, the Group has
adopted certain non-GAAP measures of historical or future
financial performance, position or cash flows other than those
defined or specified under International Financial Reporting
Standards (IFRSs).
Non-GAAP measures are either not defined by IFRS or
are adjusted IFRS figures, and therefore may not be directly
comparable with other companies’ reported non-GAAP
measures, including those in the Group’s industry.
Where non-GAAP measures have been used, it is the belief
of the Group that such measures help provide a clearer
understanding of the underlying performance.
Non-GAAP measures should be considered in addition to,
and are not intended to be a substitute for, or superior to,
IFRS measures.
(z) 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 Group’s key sources of significant estimates are as
detailed below:
(i) Retirement benefits
IAS 19 Employee Benefits (Revised 2011) requires the Group
to make assumptions including, but not limited to, rates of
inflation, discount rates and life expectancies. The use of
different assumptions, in any of the above calculations, could
have a material effect on the accounting values of the relevant
Statement of Financial Position assets and liabilities which
could also result in a change to the cost of such liabilities as
recognised in profit or loss over time. These assumptions are
subject to periodic review. The Group takes specialist advice
and seeks to follow the most appropriate method, applied
consistently from year to year. See note 18 for additional
information.
(ii) Contingencies
The Group have identified that the historical valuation of
the defined benefit pension obligation did not capture the
potential additional liabilities arising in relation to the
normal retirement dates for male and female members
of the Staff Scheme. An estimate of the additional liability
has been included in this year’s financial statements with
a prior year adjustment also included. Please refer to note
25 for further details.
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 15 Revenue from contracts with customers establishes
a comprehensive framework for determining whether, how
much and when revenue is recognised. It replaces existing
revenue recognition guidance, including IAS 18 Revenue,
IAS 11 Construction Contracts and IFRIC 13 Customer
Loyalty Programmes. A full impact assessment will be carried
out before implementation, but the anticipated impact on the
Group is not expected to be material.
IFRS 9 Financial instruments concerns the classification
and measurement of financial assets and financial liabilities,
the de-recognition of financial instruments and hedge
accounting. A full impact assessment will be carried out
before implementation, but the anticipated impact on the
Group is not expected to be material.
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.
2. SEGMENTAL REPORTING
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 ('Paper'): 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 ('3DP') – a manufacturer of moulded fibre products.
• Technical Fibre Products ('TFP') – a manufacturer of advanced materials.
• Group Services – comprises central functions providing services to the subsidiary companies.
“Eliminations” refers to the elimination of inter-segment revenues, profits and investments. 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 31 March 2018
Revenue
External
Segment profit
Adjusted operating profit
before IAS 19
IAS 19 Pension
adjustments to 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
3D
Fibre Group
Continuing
Products Products Services Eliminations Operations
£’000
£’000
£’000
£’000
£’000
71,237
71,237
166
24,909
166
24,909
-
-
1,468
(1,639 )
7,449
(1,148 )
-
-
-
(695 )
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3
-
3
-
-
-
-
-
96,312
96,312
6,133
(695 )
5,438
(908 )
11
4,541
(451)
4,090
69,603
3,557
42,378
62,075
(110,104 )
67,509
(59,908)
(6,438 )
(34,944 )
(45,408 )
102,535
(44,163 )
Operating profit / (loss)
1,468
(1,639 )
7,449
(1,843 )
86
87
Notes to the Financial Statements
Notes to the Financial Statements
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 / (loss)
Interest expense restated
Interest income
Profit before tax restated
Tax on profit for period
Profit for the period restated
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
-
3,209
-
-
-
-
-
-
(426 )
-
-
-
-
-
-
(661 )
5,940
-
(2,687 )
-
-
-
-
-
-
-
-
-
-
178
-
-
-
-
-
-
(26 )
-
-
-
-
-
(661 )
6,188
(647 )
-
5,541
(910 )
4,631
Total assets restated
60,741
3,700
46,735
58,994
2,501
(103,603 )
69,068
Total liabilities restated
(49,584 )
(4,613 )
(41,298 )
(48,179 )
(675 )
94,367
(49,982)
The group’s country of domicile is the UK. Revenue from external customers is based on the customer’s location and arises
entirely from the sale of goods. Non – current assets are based on the location of the assets and exclude financial assets,
deferred tax assets and post-employment benefit net assets.
UK
Europe
Asia
The Americas
Australasia
Africa
Total
Revenues from external customers
Non – current assets
2018
£’000
2017
£’000
42,963
42,044
20,470
20,152
7,632
7,083
23,153
21,019
1,709
1,600
385
465
2018
£’000
2017
£’000
23,184
24,183
-
-
-
-
2,425
2,958
-
-
-
-
96,312
92,363
25,609
27,141
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
Interest receivable on bank borrowings
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
Amortisation of intangibles
(Profit) / loss on disposal of fixed assets
- owned assets
- leased 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
Sale of PMD online business
Foreign exchange differences
Trade receivables impairment
2018
£’000
Restated
2017
£’000
244
75
589
908
11
11
897
2018
£’000
27,314
2,001
523
154
(11 )
149
4,020
(254 )
(19 )
2,604
-
624
24
190
93
364
647
-
-
647
2017
£’000
26,238
1,851
394
53
14
161
5,630
(139 )
(29 )
918
(90 )
(123 )
22
Government grants relate to assistance received for research projects and the development of new technology.
88
89
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
23
18
2018
£’000
2017
£’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 other assurance services
- Fees in respect of other tax advisory services
5. TAXATION
Analysis of charge in the period
Continuing operations
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 Statement of Comprehensive Income
Tax on items charged to equity
Deferred tax on actuarial (losses) / gains on retirement benefit liabilities
Deferred tax on share options
Income tax charged to OCI
Note
19
55
1
8
87
50
2
8
78
Restated
2017
£’000
2018
£’000
932
(610 )
322
(13 )
143
(1 )
129
451
(441 )
(220 )
91
986
24
1,010
1
(4 )
(97 )
(100 )
910
2,019
245
-
The tax for the period is lower (2017: lower) than the standard rate of corporation tax in the UK of 19% (2017: 20%).
The differences are explained below:
Restated
Profit before tax
Profit on ordinary activities multiplied by rate of corporation tax in the UK of 19% (2017: 20%)
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
2018
£’000
4,541
846
(467 )
(1 )
10
28
-
35
-
451
2017
£’000
5,541
1,108
20
(97 )
5
16
(66 )
(79 )
3
910
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 period.
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 period. Reconciliations of the earnings and weighted average number of shares used in the calculations are set out below.
2018
2017
Weighted
average
number Amount
Earnings of shares per share
pence
£’000
‘000
Weighted
average Restated
Restated
number Amount
Earnings of shares per share
pence
£’000
‘000
Basic EPS
Earnings attributable to
ordinary shareholders
4,090
9,449
Effect of dilutive securities – options
-
67
Diluted EPS
4,090
9,516
43.3
-
43.0
4,631
9,373
-
77
4,631
9,450
49.4
-
49.0
7. DIVIDENDS
Final paid for the period ended 1 April 2017 / period ended 2 April 2016
Interim paid for the period ended 31 March 2018 / period ended 1 April 2017
Final dividend payment paid pence per share for the period ended
1 April 2017 / period ended 2 April 2016
Interim dividend payment paid pence per share for the period ended
31 March 2018 / period ended 1 April 2017
2018
£’000
864
233
2017
£’000
648
233
9.3 p
7.1 p
2.5 p
2.5 p
In addition, the directors are proposing a final dividend in respect of the financial period ended 31 March 2018 of 11.0p per
share (2017: 9.3p per share) which will absorb an estimated £1,027,000 (2017: £864,000) of shareholders’ funds. If approved
by members at the Annual General Meeting, it will be paid on 10 August 2018 to shareholders who are on the register of
members at 6 July 2018. 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.
90
91
Notes to the Financial Statements
Notes to the Financial Statements
8. INTANGIBLE ASSETS
9. PROPERTY PLANT AND EQUIPMENT
Computer Development
costs
£’000
software
£'000
Group
trade
secrets
£'000
Emission
allowances
£'000
Total
£'000
Computer
software
£'000
Company
emission
allowances Total
£'000
£'000
Group
Cost
Freehold
land &
buildings machinery
£’000
£’000
Plant & Assets under
construction
£’000
Total
£’000
Cost
At 1 April 2017
Additions
At 31 March 2018
Aggregate amortisation
At 1 April 2017
Charge for Period
At 31 March 2018
Net book value
at 31 March 2018
Net book value
at 1 April 2017
3,938
41
3,979
3,863
32
3,895
84
75
457
-
457
-
115
115
342
457
310
-
310
303
7
310
-
7
3,093
7,798
133
174
3,226
7,972
3,063
93
7,229
247
3,156
7,476
70
496
30
569
3,823
22
3,845
3,784
19
3,803
42
39
3,093
6,916
133
155
3,226
7,071
3,063
93
6,847
112
3,156
6,959
70
112
30
69
Computer Development
costs
£’000
software
£’000
Group
trade
secrets
£’000
Emission
allowances
£’000
Total
£’000
Computer
software
£’000
Company
emission
allowances Total
£’000
£’000
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
307
2,978
7,194
115
601
3,794
29
2,978
6,772
115
144
-
457
-
-
3
-
3
-
-
-
457
310
3,093
7,798
3,823
3,093
6,916
-
-
-
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
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 3 years.
The trade secrets relate to certain recipes and know how acquired within the TFP division.
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.
Brought forward at 1 April 2017
11,129
84,590
Transfers
Additions at cost
Disposals
Effects of movements in foreign exchange
1
24
-
-
278
1,870
(163 )
(324 )
At 31 March 2018
11,154
86,251
Accumulated Depreciation
Brought forward at 1 April 2017
Charge for Period
Disposals
At 31 March 2018
Net book value at 31 March 2018
Net book value at 1 April 2017
782
(279 )
96,501
-
-
1,894
(50 3)
-
-
-
-
-
-
(666 )
(324 )
97,405
69,929
2,524
(161 )
72,292
6,759
226
-
63,170
2,298
(161 )
6,985
65,307
4,169
4,370
20,944
21,420
-
25,113
782
26,572
Freehold
land &
buildings machinery
£’000
£’000
Plant & Assets under
construction
£’000
Total
£’000
Cost
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
At 1 April 2017
11,129
84,590
782
96,501
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
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
92
93
Notes to the Financial Statements
Notes to the Financial Statements
Assets held under finance leases, capitalised and included in property, plant and equipment:
Brought forward at 1 April 2017
1,663
2,242
Net book value at 1 April 2017 / 2 April 2016
Additions in period
Reclassification to assets owned
Depreciation in period
Net book value at 31 March 2018 / 1 April 2017
Company
Cost
Transfers
Additions at cost
Disposals
At 31 March 2018
Accumulated Depreciation
Brought forward at 1 April 2017
Charge for Period
At 31 March 2018
Net book value at 31 March 2018
Net book value at 1 April 2017
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
2017
£’000
4,618
180
-
(394 )
4,404
Company
2018
£’000
327
131
-
(64 )
394
Group
2018
£’000
4,404
1,229
(377 )
(523 )
4,733
Freehold
land &
444
21
465
1,198
1,219
Freehold
land &
2017
£’000
350
-
-
(23 )
327
Total
£’000
4,052
6
67
2,110
142
2,252
1,732
1,942
Total
£’000
3,766
286
4,052
2,014
96
2,110
1,942
1,752
buildings machinery
£’000
£’000
Plant & Assets under
construction
£’000
-
-
-
12
67
-
147
(6)
-
(141 )
(141 )
1,663
2,321
-
3,984
1,666
121
1,787
534
576
-
-
-
-
147
buildings machinery
£’000
£’000
Plant & Assets under
construction
£’000
1,663
-
1,663
423
21
444
1,219
1,240
2,103
139
2,242
1,591
75
1,666
576
512
-
147
147
-
-
-
147
-
10. INVESTMENTS
Investments in subsidiary undertakings
At 31 March 2018 and 1 April 2017
Group
2018
£’000
-
2017
£’000
-
Company
2018
£’000
7,350
2017
£’000
7,350
Investments in subsidiary undertakings are stated at cost. A list of 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
Dormant company
Dormant company
Dormant company
Dormant company
(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
2018
£’000
7,669
3,221
3,964
2017
£’000
7,654
1,928
4,515
14,854
14,097
Inventories are stated after a provision for impairment of £610,000 (2017: £504,000). The cost of inventories recognised
as expenses and included in cost of sales for the year ended 31 March 2018 was £71,647,000 (2017: £64,309,000).
The Company does not have inventories.
94
95
Notes to the Financial Statements
Notes to the Financial Statements
12. TRADE AND OTHER RECEIVABLES
16. BORROWINGS
Trade receivables
Less: Provision for impairment of receivables
Trade receivables – net
Amounts owed by group undertakings
Other receivables
Prepayments
Group
2018
£’000
16,926
(121 )
16,805
-
635
1,082
18,522
Company
2018
£’000
-
-
-
44,488
613
550
45,651
2017
£’000
15,913
(97 )
15,816
-
6,115
1,135
23,066
2017
£’000
-
-
-
42,346
2,124
721
45,191
Management believe there is no further credit risk provision required in excess of normal provision for doubtful receivables.
13. OTHER FINANCIAL ASSETS
Group and Company
Interest rate swaps used for hedging
Foreign exchange rate swaps for hedging
2018
£’000
44
3
47
2017
£’000
-
-
-
The gain arising in the Statement of Comprehensive Income on fair value hedging instruments was £nil (2017: £nil).
14. TRADE AND OTHER PAYABLES
Trade payables
Amounts owed to group undertakings
Other tax and social security payable
Other payables
Accruals
Group
2018
£’000
5,381
-
612
146
8,189
2017
£’000
5,901
-
553
4,460
7,579
14,328
18,493
Company
2018
£’000
1,589
18,013
155
229
1,837
21,823
2017
£’000
2,295
13,881
144
621
2,529
19,470
15. OTHER FINANCIAL LIABILITIES
Group and Company
2018
£’000
2017
£’000
Interest rate swaps used for hedging
-
9
The gain arising in the Statement of Comprehensive Income on fair value hedging instruments was £nil (2017: £nil).
Current
Bank loans and overdrafts due within one year or on demand:
Unsecured bank loans
Secured finance leases
Non-current loans
Unsecured bank loans
Secured finance leases
Group
2018
£’000
2017
£’000
Company
2018
£’000
2017
£’000
Note
720
880
17.3
1,600
7,203
1,560
8,763
17.3
791
779
1,570
6,423
1,292
7,715
-
43
43
-
79
79
4,000
6,406
70
21
4,070
6,427
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:
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
Minimum
lease payments
2018
£’000
Interest Principal
2018
£‘000
2018
£‘000
Minimum
lease payments
2017
£’000
Interest Principal
2017
£‘000
2017
£‘000
936
1,455
177
2,568
45
72
117
56
71
1
880
1,384
176
128
2,440
2
2
4
43
70
113
843
64
779
1,301
41
2,185
84
21
105
49
1,252
1 40
114
2,071
5
-
5
79
21
100
17. 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.
96
97
Notes to the Financial Statements
Notes to the Financial Statements
17.1 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:
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:
Group
Financial assets
Current
Trade receivables
Derivatives
Cash and cash equivalents
Financial liabilities
Current
Trade payables
Derivatives
Short term borrowings
Non-current
Long term borrowings
Company
Financial assets
Current
Cash and cash equivalents
Non-current
Book value
2018
£’000
Fair value
2018
£’000
Book value
2017
£’000
Fair value
2017
£’000
Note
12
13
14
15
16
16,926
47
5,557
22,530
5,381
-
1,600
6,981
16,805
47
5,557
22,409
5,381
-
1,600
6,981
15,913
15,816
-
1,921
17,834
5,901
9
1,570
7,480
-
1,921
17,737
5,901
9
1,570
7,480
16
8,763
8,763
7,715
7,715
Book value
2018
£’000
Fair value
2018
£’000
Book value
2017
£’000
Fair value
2017
£’000
Note
3,004
3,004
3,004
3,004
526
526
526
526
Investments in subsidiary undertakings
10
7,350
7,350
7,350
7,350
Financial liabilities
Current
Trade payables
Derivatives
Short term borrowings
Non-current
Long term borrowings
14
16
1,589
1,589
2,295
2,295
-
43
-
43
9
79
9
79
1,632
1,632
2,383
2,383
16
4,070
4,070
6,427
6,427
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.
Financial Assets
Derivatives
Financial Liabilities
Derivatives
17.2 CREDIT RISK
2018
Level 2
£’000
47
2018
Level 2
£’000
-
Total
£’000
47
Total
£’000
-
2017
Level 2
£’000
-
2017
Level 2
£’000
9
Total
£’000
-
Total
£’000
9
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 un-insured 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 31 March 2018 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
Past due over 60 days
Less impairment
2018
£’000
10,628
1,598
29
4,671
16,926
2018
£’000
13,955
2,602
207
162
16,926
(121 )
16,805
2017
£’000
9,545
1,919
24
4,425
15,913
2017
£’000
14,113
1,888
(27 )
(61 )
15,913
(97 )
15,816
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.
98
99
Notes to the Financial Statements
Notes to the Financial Statements
Provision for doubtful debts.
Group
Balance at start of period
Increased during the period
Utilised during the period
Balance at end of period
2018
£’000
97
24
-
121
2017
£’000
80
22
(5 )
97
Included in the outstanding trade receivables balance are debtors with an overdue amount of £2,850,000 (2017: £1,703,000)
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.
17.3 LIQUIDITY RISK
Liquidity risk is the risk that the Group will not have sufficient funds to meet it’s 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 overdraft 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 31 March 2018, was as follows:
Trade payables
Trade payables at the reporting date were:
Trade payables
Total contractual cash flows
Group
2018
£’000
5,381
5,381
2017
£’000
5,901
5,901
Company
2018
£’000
1,589
1,589
2017
£’000
2,295
2,295
Borrowing facilities
The Group has the following undrawn committed borrowing facilities available at 31 March 2018:
Group
at 31 March 2018
Floating rate
£’000
Group
at 1 April 2017
Floating rate
£’000
Expiring within one year (renewable annually)
3,687
3,658
The Group’s expiry profile of the drawn down facilities is as follows:
Group
31 March 2018
£’000
Company
1 April 2017
£’000
31 March 2018 1 April 2017
£’000
£’000
Total
2018
£'000
1,600
791
1,402
10
7,185
176
6,413
-
Finance
lease Financial
Debt obligations derivatives
2017
2017
2017
£’000
£'000
£'000
779
704
548
40
9
-
-
-
9
10,363
7,214
2,071
Finance
lease Financial
Debt obligations derivatives
2017
2017
2017
£’000
£’000
£’000
-
-
79
21
-
100
9
-
-
9
Total
2018
£’000
43
66
4,004
6,406
4,113
6,406
Group
Finance
lease Financial
Debt obligations derivatives
2018
2018
2018
£'000
£'000
£’000
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
720
716
6,487
-
880
686
698
176
7,923
2,440
-
-
-
-
-
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
2018
2018
2018
£’000
£’000
£’000
-
-
4,000
4,000
43
66
4
113
-
-
-
-
100
Total
2017
£'000
1,579
714
6,961
40
9,294
Total
2017
£’000
88
21
6,406
6,515
December 2017
August 2019
November 2019
May 2020
June 2021
December 2021
-
10
6
4,000
1,243
2,664
7,923
781
17
10
-
-
-
4,000
4,000
2,406
-
7,214
-
-
4,000
6,406
-
-
-
4,000
2,406
-
17.4 CURRENCY RISK
The Group publishes its consolidated financial statements in Pounds 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 31 March 2018.
Trade Receivables
Cash and cash equivalents
Trade Payables
Unsecured current loans
Finance lease current
Unsecured non-current loans
Finance lease non-current
Net exposure
Euro
£’000
3,081
(2,518 )
(1,021 )
-
-
-
-
RMB
£’000
-
55
-
-
-
-
-
GBP
£’000
7,555
5,767
(2,943 )
(10 )
(880 )
(4,006 )
(1,560 )
Total
£’000
16,805
5,557
(5,381 )
(2,674 )
(880 )
(5,249 )
(1,560 )
(458 )
55
3,923
6,618
USD
£’000
6,169
2,253
(1,417 )
(2,664 )
-
(1,243 )
-
3,098
101
Notes to the Financial Statements
Notes to the Financial Statements
At the 1 April 2017 the Group’s exposure to foreign currency risk was as follows:
17.5 INTEREST RATE RISK
Net exposure
5,543
2,098
114
(5,204 )
2,551
Interest bearing liabilities - floating
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 )
This represents the net exposure to foreign currencies, reported in Pounds Sterling, and arising from all Group activities.
At the 31 March 2018 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
267
-
-
-
-
Euro
£’000
(2,642 )
(37 )
-
-
-
GBP
£’000
5,379
(1,552 )
(43 )
Total
£’000
3,004
(1,589 )
(43 )
(4,000 )
(4,000 )
(70 )
(70 )
267
(2,679 )
(286 )
(2,698 )
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 )
-
-
-
(6 )
GBP
£’000
509
Total
£’000
526
(2,281 )
(2,295 )
(79 )
(79 )
(4,000 )
(6,406 )
(21 )
(21 )
(5,872 )
(8,275 )
A one percent strengthening of the Pound Sterling against the Euro and the US Dollar at 31 March 2018 would have had the
following impact on equity and profit by the amounts shown below:
Group
31March 2018
USD
31 March 2018
Euro
1April 2017
1 April 2017
USD
Euro
Equity
£’000
SCI
£’000
(31 )
5
(47 )
(21 )
(47 )
(20 )
(84 )
(21 )
Company
31 March 2018
31 March 2018
1 April 2017
1 April 2017
Equity
£’000
SCI
£’000
(3 )
27
30
-
-
-
-
-
USD
Euro
USD
Euro
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.
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:
Borrowings
Interest rate swap
Finance lease
Interest bearing liabilities - fixed
Borrowings
Finance lease
Group
2018
£’000
7,908
-
883
8,791
15
1,557
1,572
2017
£’000
7,189
9
1,364
8,562
25
707
732
Company
2018
£’000
2017
£’000
4,000
6,406
-
-
9
-
4,000
6,415
-
113
113
-
100
100
Interest bearing liabilities
10,363
9,294
4,113
6,515
The effective interest rates at the balance sheet date were as follows:
Bank overdraft
Borrowings
2018
%
1.5
2.9
2017
%
1.3
3.5
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 £88,000 for the Group and £52,000 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
31 March 2018
1 April 2017
SCI
£’000
88
86
Company
31 March 2018
1 April 2017
SCI
£’000
52
64
102
103
Notes to the Financial Statements
Notes to the Financial Statements
18. RETIREMENT BENEFITS
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
2018
£’000
585
41
2017
£’000
542
43
Other pension costs totalled £224,000 (2017: £292,000) 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 pension
once it is in-payment will be in line with the annual increase in CPI. The Staff and Works Schemes will remain defined benefit
schemes but they will no longer be “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
2018
%
2017
%
Works Scheme
2018
%
2017
%
CPI Inflation assumption
RPI Inflation assumption
Rate of increase in pensionable salaries
Discount rate
Pension increases for in-payment benefits capped at 5%, with a 3% floor
2.15
3.25
1.90
2.80
3.50
Pension increases for in-payment benefits capped at 2.5%, with a 0% floor
2.15
2.25
3.35
1.90
2.70
3.50
2.20
2.15
3.25
1.90
2.80
3.15
1.85
2.25
3.35
1.90
2.70
3.20
1.90
In respect of mortality for the Works members the assumptions adopted at 31 March 2018 are 145% of the S2PXA series
table, with future improvements in line with the CMI core 2017 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 2017 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 advice and the discount rate
has been calculated based on a yield curve at 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% for the Staff Scheme and 5.2% for the Works Scheme.
The Group have identified that the historical valuation of the defined benefit pension obligation did not capture the potential
additional liabilities arising in relation to the normal retirement dates for male and female members of the Staff Scheme.
As a result, the comparative figures have been restated to reflect the estimated correct balance. For further details, refer to
note 25.
The amounts recognised in the Statement of Financial Position are determined as follows:
2018
£’000
Restated
2017
£’000
Restated
2016
£’000
2015*
£’000
2014*
£’000
Defined benefit obligation ('DBO')
(126,079 )
(128,026 )
(104,924 )
(106,788 )
(85,482 )
Fair value of assets ('FVA')
106,607
105,832
94,271
92,346
73,842
Net liability recognised in the SFP
(19,472 )
(22,194 )
(10,653 )
(14,442 )
(11,640 )
*These balances have not been restated. For 2017 and 2016 restatements please refer to note 25.
The fair value of the plan assets comprises the following categories of asset in the stated proportions:
Managed Growth
Annuities
Cash
Matching Assets
Staff Scheme
2017
%
2018
%
61.4
3.7
0.2
34.7
62.2
3.9
0.4
33.5
Works Scheme
2017
%
2018
%
68.7
-
0.4
30.9
73.7
-
0.1
26.2
The pension plan assets do not include any investments in the shares of the Company (2017: 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 Matching Assets 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 1 April 2017 / 2 April 2016
Total expense as above
Contributions paid
Actuarial gains / (losses) recognised in SCI
At 31 March 2018 / 1 April 2017
Restated
2017
£’000
2018
£’000
1,285
1,190
(2,846 )
3,435
589
1,874
(3,326 )
3,690
364
1,554
2018
£’000
Restated
2017
£’000
(22,194 )
(10,653 )
(1,874 )
2,003
2,593
(1,554 )
1,891
(11,878 )
(19,472 )
(22,194 )
The actual return on plan assets was £1,685,000 (2017: £12,831,000). The Company expects to pay £649,000 (2017: £688,000)
in contributions to the Staff Scheme and £1,669,000 (2017: £1,315,000) 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 £18,735,000 (2017: £20,567,000).
104
105
Notes to the Financial Statements
Notes to the Financial Statements
Works Scheme
Staff Scheme Works Scheme
Staff Scheme
2018
Restated
2017
Assets DBO Assets DBO Assets DBO Assets DBO
£’000
£’000 £’000
£’000 £’000
£’000 £’000
£’000
2017
2017
2017
2018
2018
2018
At 1 April 2017 / 2 April 2016
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
1,447
(84 )
53,638 (68,427 )
-
(789 )
(1,722 ) 1,722
(339 )
-
(1,840 )
2,154
339
1,315
-
(478 )
52,194 (59,599 )
1,399
-
(380 )
(32 )
1,575
(1,575 )
(161 )
161
688
-
(1,595 )
-
(683 ) 1,600
47,926 (55,766 )
-
1,690
(651 )
(94 )
(2,047 ) 2,047
(359 )
-
(1,961 )
4,749 (11,737 )
359
1,055
-
46,345 (49,158 )
-
(410 )
1,524
(180 )
-
(1,729 )
(9,646 )
1,636
(35 )
(1,524 )
180
836
-
4,756
At 31 March 2018 / 1 April 2017
54,455 (67,519 )
52,152 (58,560 )
53,638 (68,427 )
52,194 (59,599 )
Experience adjustments
Arising on plan assets
Percentage of scheme assets
Arising on plan liabilities
Percentage of scheme liabilities
2018
£’000
(1,161 )
(1.09% )
Restated
2017
£’000
9,505
8.98%
Restated
2016
£’000
2015
£’000
2014
£’000
(624 )
15,591
(3,830 )
(0.66% )
16.88%
(5.19% )
3,754
(21,383 )
2.98%
(16.70% )
7,178
6.84%
(18,836 )
(17.64% )
2,621
3.07%
19. DEFERRED TAXATION
The movement on the deferred tax account is shown below:
At 1 April 2017 / 2 April 2016
Deferred tax on actuarial gains on retirement liabilities
Deferred tax on share options recognised in OCI
SCI (charge) / credit
Group
Company
Restated
2017
£’000
2018
£’000
Restated
2017
£’000
2018
£’000
2,843
(441 )
(220 )
(129 )
479
2,019
245
100
3,453
(441 )
(220 )
857
1,157
2,019
245
32
At 31 March 2018 / 1 April 2017
2,053
2,843
3,649
3,453
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 un-remitted earnings of overseas subsidiaries.
Deferred tax liabilities
At 1 April 2017
SCI credit
Deferred tax on share options recognised in SOCIE
At 31 March 2018
Accelerated
capital
allowances
£’000
(1,770 )
(3 )
-
(1,773 )
Other
£’000
840
(104 )
(220 )
Total
£’000
(930 )
(107 )
(220 )
516
(1,257 )
Deferred tax assets
At 1 April 2017 restated
SCI charge
Deferred tax on actuarial gains on retirement liabilities
At 31 March 2018
Net deferred tax asset at 31 March 2018
20. SHARE CAPITAL
Group and Company
Issued and fully paid
At 1 April 2017
Issued during the period
At 31 March 2018
Potential issue of ordinary shares
Pension
£’000
3,773
(22 )
(441 )
3,310
Number of
ordinary shares
9,466,366
12,686
9,479,052
Total
£’000
3,773
(22 )
(441 )
3,310
Total
£’000
2,053
£’000
2,367
3
2,370
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 119,780 ordinary shares of 25p by 2020 (2017: 151,685 ordinary shares of
25p by 2019). There were 55,048 share options exercised in the period (2017: 64,108). 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
1 April 2017
Options lapsed
in the period
Options at
31 March 2018
Share options
151,685
30,105
(55,048 )
(6,962 )
119,780
The amount of gains made by Directors on 55,048 share options exercised in the year totalled £966,092 (2017: 64,108 share
options with gains of £617,938). The Statement of Comprehensive Income includes LTIP charges of £275,942 for the year in
relation to Directors (2017: £223,957).
The Save As You Earn ('SAYE') scheme was introduced in September 2013 and runs for a 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
5 year scheme
71p
01 September 2013
199.52p
313.5p
26%
2%
5.25 years
1.5%
106
107
During the period no options were exercised (2017: 223,270 options were exercised).
The amount of gains made by Directors on the exercise of nil share options exercised under the SAYE Scheme in the year
amounted to £nil (2017: 5,412 share options with gains of £38,925).
Notes to the Financial Statements
Notes to the Financial Statements
21. EMPLOYEES AND DIRECTORS
Staff costs during the period
Wages and salaries
Social security costs
Pension costs (note 18)
Group
2018
£’000
22,819
2,282
2,213
2017
£’000
21,991
2,180
2,067
Company
2018
£’000
3,602
507
881
2017
£’000
3,667
438
851
27,314
26,238
4,990
4,956
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
2018
Number
2017
Number
Headcount
2018
Number
2017
Number
365
10
106
60
541
359
4
102
59
524
370
11
108
79
568
365
5
104
79
553
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 64.
22. 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
2018
Property
£’000
2018
Plant & machinery
£’000
2017
Property
£’000
2017
Plant & machinery
£’000
28
833
523
1,384
-
518
-
518
5
1,255
591
1,851
-
438
-
438
2018
Property
£’000
2018
Plant & machinery
£’000
2017
Property
£’000
2017
Plant & machinery
£’000
115
523
638
518
-
518
199
591
790
438
-
438
23. CAPITAL COMMITMENTS
Contracts placed for future capital expenditure
not provided in the financial statements
24. CONTINGENT LIABILITIES
Group
2018
£’000
2017
£’000
Company
2018
£’000
2017
£’000
1,302
466
5
34
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. The maximum liability outstanding at the period end is £2,664,000 (2017: £781,000).
25. PRIOR YEAR ADJUSTMENT
The Group (and Company) have identified that the historical valuation of the defined benefit pension obligation did not
capture the potential additional liabilities arising in relation to the normal retirement dates for male and female members
of the James Cropper Plc Staff Pension Scheme (“Staff Scheme”). As a result, the comparative figures in these financial
statements have been restated to reflect the estimated correct balance.
The effect of the restatement is that the prior year profit for the period for both the Group and the Company has been
reduced by £99,000 as a result of the increased interest payable. Other comprehensive income is reduced by £320,000 due to
the increase in actuarial losses of £492,000, offset by the increase in the associated deferred tax of £172,000. The retirement
benefit liability is increased by £3,374,000 and the associated deferred tax asset is also increased by £573,000, resulting in a
reduction in net assets of £2,801,000.
26. 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 paid £40,000 (2017: £40,000) 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 £5,298 (2017: £nil) to Ellergreen Hydro,
a company in which M A J Cropper is Managing Director, in the period for maintenance work. The Company paid £18,934
(2017: £12,345) 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 £6,032 (2017: £11,136) to Burneside
Community Energy Ltd. M A J Cropper is a Director of Burneside Community Energy Ltd.
108
109
Notes to the Financial Statements
Shareholder Information
The Company also has the following transactions with related entities:
2018
James Cropper Speciality Papers Limited
James Cropper Converting Limited
James Cropper 3D Products Limited
Technical Fibre Products Limited
2017
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
5,447
(27 )
178
1,454
7,052
1,504
39
55
333
1,931
(3,181 )
13,879
4,258
9,590
24,546
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
-
3,825
5
9,939
3,187
10,834
675
24,640
2017 - 2018 SHAREHOLDER INFORMATION
Reporting
Interim Results announced and sent to Ordinary Shareholders
Final results announced
Annual Report issued by
14 November 2017
26 June 2018
3 July 2018
Annual General Meeting - at Bryce Institute, Burneside, Kendal, Wednesday 25 July 2018 at 11.00am.
Dividends on Ordinary Shares
Interim dividend paid on 12 January 2018 to Ordinary Shareholders registered on 1 December 2017.
Final dividend to be paid on 10 August 2018 to Ordinary Shareholders registered on 6 July 2018.
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
DWF LLP, Manchester
Bond Dickinson, Newcastle upon Tyne
Registrars
Link Asset Services, Beckenham
Pension Adviser
Willis Towers Watson, Manchester
James Cropper PLC
Telephone. +44 (0)1539 722 002
Email. info@cropper.com
Burneside Mills
Kendal, Cumbria LA9 6PZ
Great Britain
www.cropper.com
Company Registration No: 30226
110
111
Notice of Annual General Meeting
Notice of Annual General Meeting
NOTICE OF ANNUAL GENERAL MEETING
NOTICE IS HEREBY GIVEN that the 129th Annual
General Meeting of the Company will be held at The Bryce
Institute, Burneside, Kendal, Cumbria LA9 6PZ on
Wednesday 25 July 2018 at 11.00 am to consider and,
if thought fit, pass Resolutions 1 to 10 inclusive as ordinary
resolutions and Resolutions 11 and 12 as special resolutions.
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 31 March 2018 together with the
Directors’ Report and the Auditors Report on those
accounts.
Resolution 2
To declare a final dividend for the year ended 31 March 2018
of 11.0 pence for each Ordinary Share payable on 10 August
2018 to all Ordinary Shareholders on the register of the
Company at close of business on 06 July 2018.
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 Isabelle Maddock as a Director of the Company.
Resolution 6
To re-elect Patrick Willink as a Director of the Company.
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 31 March 2018.
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 £130,237
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 £130,237,
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.
Resolution 12
To consider and approve the following amendment to
the Articles of Association; namely to delete clause 22.7
“The qualification of a Director shall be the holding alone
and not jointly with any other person of not fewer than
1,000 ordinary shares of 25p each in the company”
and clause 23.17 “(not being already qualified) he does
not obtain his qualification within two months after his
appointment, or at any time thereafter cease to hold his
qualification and so that a Director vacating office under
this provision shall be incapable of being re-appointed a
Director until he shall have obtained his qualification”
and insert a new clause 22.7 “It is a requirement of
the Company that all Directors shall hold a minimum
number of shares in the Company, alone and not jointly,
in accordance with the terms of their service contract”
BY ORDER OF THE BOARD
Jim Aldridge
Company Secretary
3 July 2018
Registered Office:
Burneside Mills
Kendal
Cumbria LA9 6PZ
112
113
Corporate representatives
9. 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.
Total Voting Rights
10. 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 9,479,052
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 9,479,052.
Directors’ contracts
11. 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
1. 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 23 July 2018 (or, if the meeting is adjourned, at close of
business 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.
2. 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.
3. 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.
4. 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.
5. 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.
6. 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, Link Asset Services
at PXS, 34 Beckenham Road, Beckenham, BR3 4TU not
later than 11.00 am on 23 July 2018 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.
7. 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.
8. 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.
114
115
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