ANNUAL REPOR T AND ACC OUNT S 201 9
WE CREATE SOME OF THE WORLD’S MOST
DISTINCTIVE AND TECHNICALLY ADVANCED
PAPER PRODUCTS, USING MATERIALS FROM
COTTON AND WOOD TO CARBON FIBRE.
WE SUPPORT INDUSTRIES FROM PACKAGING
TO DIGITAL IMAGING AND AEROSPACE WITH
PRODUCTS THAT ARE AT THE CUTTING
EDGE OF PERFORMANCE.
14
13
1
15
3
2
12
11
4
5
6
7
8
9
10
Introduction
33
Introduction
2
5
3
6
2
3
1
1. ColourformTM Operative, Mark Gardner
2. TFP Technology Manager,
Dr Mandy Clement
3. Quality Graduate in Paper, Tom Prosser
4. Paper Finishing, Georgia Kennedy
5. TFP Customer Services, Lucy Wilson
6. Paperchase’s Conscious Living Collection
notebooks using CupCyclingTM papers
4
Introduction
CONTENTS
STRATEGIC REPORT
05
06
07
08
10
13
17
21
28
32
36
40
42
48
50
54
57
FINANCIAL HIGHLIGHTS
FINANCIAL SUMMARY
CHAIRMAN’S LETTER
CHIEF EXECUTIVE’S REVIEW
FINANCE DIRECTOR’S REVIEW
THE PENSION REPORT
RISK MANAGEMENT
TECHNICAL FIBRE PRODUCTS
COLOURFORM
JAMES CROPPER PAPER
OUR VALUES
SUSTAINABILITY
PRIDE EXCELLENCE AWARDS
PEOPLE
LIVERY
GOVERNANCE
BOARD OF DIRECTORS
CORPORATE GOVERNANCE STATEMENT
REPORT OF THE AUDIT COMMITTEE
REPORT OF THE REMUNERATION COMMITTEE
QCA PRINCIPLES
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
5
1
3
1. TFP Materials Scientist, Emma Matthews
2. Burneside Community Energy LTD rooftop solar project
3. Year Book of Type
4. Head of Health, Safety, Environment & Paper Quality,
Kate Rowling with Guillotine Operator, Alan Henderson
5. Sample analysis, TFP labs
4
4
2
5
Strategic Report - Financial Highlights
Strategic Report - Financial Summary
FINANCIAL HIGHLIGHTS
FINANCIAL SUMMARY
TOTAL REVENUE
£101.1m
GEOGRAPHICAL %
SEGMENTATION OF REGION
SUMMARY OF RESULTS
2019
2018
2017
2016
2015
2019
2018
2017
2016
2015
2019
2018
2017
2016
2015
2019
2018
2017
2016
2015
101.1
96.3
92.4
87.9
83.1
ADJUSTED PROFIT BEFORE TAX (iii)
(excluding IAS 19 Pension adjustments)
£4.0m
4.0
3.5
5.8
6.6
5.2
DILUTED EPS
24.3p
24.3
31.8
20.1
43.0
49.0
NET BORROWINGS (ii)
£8.6m
8.6
4.8
7.4
7.3
6.1
2019
2018
2017
2016
2015
2019
2018
2017
2016
2015
2019
2018
2017
2016
2015
2019
2018
2017
2016
2015
UK
Europe
Americas
Asia
Other
10%
20%
30%
40%
50% 60%
PROFIT BEFORE TAX
£2.6m
2.6
2.6
4.5
5.5
3.9
GEARING (i)
(excluding IAS 19 pension adjustment)
21%
12
CAPITAL EXPENDITURE
£5.2m
1.9
4.1
2.6
21
20
20
22
5.2
5.3
(i) Gearing is calculated as the proportion of net borrowings to Total Shareholders’ Equity, excluding the IAS 19 Pension deficit.
(ii) Net borrowings, are calculated as total loans and borrowings less cash and cash equivalents.
(iii) Adjusted profit before tax equates to profit before tax excluding the IAS 19 impact.
Revenue
Adjusted operating profit
(excluding IAS 19 impact)
Adjusted profit before tax
(excluding IAS 19 impact)
Impact of IAS 19
Profit before tax
2019
£’000
2018
£’000
2017
£’000
2016
£’000
2015
£’000
101,095
96,312
92,363
87,920
83,052
4,262
6,133
6,849
6,264
3,899
3,962
(1,386 )
2,576
5,825
(1,284 )
4,541
6,566
(1,025 )
5,541
5,173
(1,305 )
3,868
3,494
(919 )
2,575
Earnings per share - diluted
24.3 p
43.0 p
49.0 p
31.8 p
20.1 p
STATEMENT OF FINANCIAL POSITION
2019
£’000
2018
£’000
2017
£’000
2016
£’000
2015
£’000
Non-pension assets – excluding cash
64,871
59,899
64,304
57,470
50,810
Non-pension liabilities – excluding borrowings
(16,236 )
(15,585 )
(19,433 )
(17,019 )
(14,289 )
Net IAS 19 pension deficit (after deferred tax)
(18,798 )
(16,192 )
(18,421 )
(6,453 )
(11,554 )
48,635
44,314
44,871
40,451
36,521
Net borrowings
Equity shareholders’ funds
Gearing % - before IAS 19 deficit
Gearing % - after IAS 19 deficit
Capital expenditure £’000
29,837
28,152
26,450
33,998
24,967
(8,561 )
(4,806 )
(7,364 )
(7,305 )
(6,105 )
21,276
23,346
19,086
26,693
18,862
21 %
40 %
12 %
21 %
20 %
39 %
22 %
27 %
20 %
32 %
5,229
1,935
5,315
4,086
2,619
(i) The IAS 19 pension adjustments are explained in detail in the Financial Review section, pages 13 to 19. The total amount excluded from the
IAS pension Charge is £1,386,000 (2018: £1,284,000). 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.
(ii) The IAS 19 pension adjustment £1,386,000 (2018: £1,284,000) comprises:
Current service charge
Normal contributions
Interest charge
IAS 19 pension adjustment
Period ended 30 March 2019
£’000
Period ended 31 March 2018
£’000
1,423
(569 )
532
1,386
1,285
(590 )
589
1,284
Further details can be found on page 19 (The IAS 19 impact on profits).
6
7
Strategic Report - Chairman’s Letter
Strategic Report - Chairman’s Letter
A positive sense of the progress of the Group
can also be gained from a walk around our
Burneside site, home to the majority of
operations. In the last year we have increased
3DP capacity by 50% and commenced
construction of a new TFP machine house,
the most significant addition to our operations
in 25 years. Both have required reorganisation
of other areas, furthering the overall level
of activity. There are also more mundane
indicators, such as growth in parking provision
and a fleet of new trucks in our distinctive
green livery. Burneside truly feels like a place
on the move.
Rather harder to gauge are all the internal
changes in hand, both commercial and
operational. Based on the numerous plans in
place, I am confident Paper will be restored
to profitability in the current financial year
and advance thereafter. As well as working
carefully with our long term customers to
recover margin, Paper is also winning
new contracts at improved margins, not
least to meet the retail packaging needs of
global brands.
Our sustainability credentials are helping in
this regard, not least our CupCyclingTM papers.
Coffee cup waste continues to grow as a source
of fibre, and greater use is forecast, supported
by internal investment as well as initiatives led
by retailers and waste management companies.
Nevertheless, we continue to see great
potential, not least in the beauty and cosmetics
market. The target is for the business to be cash
flow neutral in the current financial year and it
will grow to become a significant division for
the Group.
TFP continues to advance in aerospace and
automotive fuel cell markets with new major
contracts agreed and research into lightweight
solutions and emerging technologies high on
the agenda. We continue to invest in our US
and UK research facilities, enhancing TFP’s
global reputation for quality and technical
expertise, and its unique ability to understand,
interpret and deliver on customer needs. TFP is
well positioned to continue to grow robustly.
DIVIDEND PER SHARE
The Board is recommending a final dividend
of 11.0 pence per share, bringing the total
dividend for the financial period of 13.5 pence
per share.
Basic earnings per share in the period fell
by 44% to 24.3 pence per share with diluted
earnings per share falling by 43% to 24.3
pence per share.
The recommendation to maintain the
dividend directly reflects the confidence the
Board continues to have in the company’s
prospects in the coming years.
DIVIDEND PER SHARE 2019
2019
2018
2017
2016
2015
13.5p
13.5p
11.8p
9.3p
8.5p
3DP did not grow as quickly as hoped in the
year, owing to the timing of its first significant
contracts, but the business is now moving
rapidly beyond proof of concept. While the
business is bringing exceptional quality and
colour to market, transitioning customers from
existing packaging options (not least plastic) is
taking longer than anticipated.
OUTLOOK
For all the headwinds of the last two years,
not to mention the uncertainty surrounding
Brexit, I am pleased to say our long-term
aspirations are undiminished. With an eye to
the long-term, we believe we can be the best
in the world at what we do and have kept
investment and related recruitment plans on
track, in support of this, the latter closely tied
to apprenticeship and graduate programmes.
There is also much more we can do.
Our most valuable asset is our people.
Everyone matters in this business and we
will only truly succeed if we support each
other – and the communities that sustain us –
every day. Our work over the last year
on the importance of mental health is but
one example of this. We have much more
to do but our people show us the way.
As I witnessed at our annual Pride Awards
earlier this year, every thought and idea,
however small, can make a difference.
Likewise, albeit on a different note, we will
only secure our future as a business if we
balance our outputs with the impacts that
we – together with the rest of mankind
– are having on our planet. We are justly
proud of the contribution made by initiatives
such as ColourformTM and CupCyclingTM.
However, if we are to truly respond to the
emergency represented by climate change
and declining biodiversity we must do much,
much more.
Overall, as we enter our 175th year, I feel
the business is not getting older so much as
younger. That our brightest prospects are
ahead of us is also suggested by the sustained
growth of R&D investment in recent years.
The Board and I are ambitious for our culture
of innovation to become even more embedded
within each business and function across the
Group as it is this, that will ultimately ensure
our long-term success, whether in relation
to our products, people or planet. I remain
confident that we are deploying and evolving
the right strategies in this regard and this will
ensure sustained - and sustainable - growth
for the long-term.
MARK CROPPER
CHAIRMAN
24 JUNE 2019
CHAIRMAN’S LET TER
Dear Shareholders,
This has been another challenging year for the
Group, with profit before tax falling by 43%
to £2.6m. As detailed in the Finance Director’s
review (p.13), the dominant headwind has
continued to be pulp cost increases.
For the second year in succession these have
outstripped market expectations, increasing
cost pressures on our Paper business by over
£6.5m over two years. It has been impossible
to pass all of this on within the timeframes,
resulting in a loss for Paper of £2m in the
current period. In addition, Group profits have
also been weakened by operating losses within
James Cropper 3D Products Ltd (“3DP”),
incurred as we scale up our investment to meet
anticipated demand for this new subsidiary.
Nevertheless, the strength of the Group
remains strong with record revenues, product
mix improvements delivering good underlying
performance, investment on the increase
and sound EBITDA levels providing clear
headroom against our covenants.
I am particularly pleased to report increased
profits within Technical Fibre Products
Ltd (“TFP”), operating profits growing by
almost 20% to £8.8m, another record for this
subsidiary. This was underpinned by revenue
growth of 6.3% which itself was spread across
all products and markets.
Coupled with positive revenue growth of 4.3%
for Paper, Group turnover exceeded £100m for
the first time. Positively, the growing demand
for our products continues to become more
global. Exports edged upwards to 56.3% in
the current period, although this only tells part
of the story: the growth of many of our UK
customers has also been export driven, further
shielding us from any potential Brexit related
weakness in our domestic market.
“ AS WE ENTER OUR
175 TH YEAR, I FEEL
THE BUSINESS
IS NOT GET TING
OLDER SO MUCH
AS YOUNGER .”
This is just a start, our Technology &
Innovation department is leading a forensic
investigation of other sources of waste and
related technologies that will hopefully – in
time – reduce our reliance on pulp as well
as our overall environmental impact.
Our footprint will also shortly be lessened
by the second rooftop solar installation
to be delivered by our partners Burneside
Community Energy Ltd. This will double
on-site renewable electricity generation.
8
9
Strategic Report - Chief Executive’s Review
Strategic Report - Chief Executive’s Review
CHIEF EXECUTIVE’S REVIEW
YEAR IN REVIEW
REVENUE
(2018: £96.3m)
£101.1m +5%
ADJUSTED OPERATING PROFIT
APM1* (excluding IAS 19 impact) (2018: £6.1m)
£4.3m
-31%
ADJUSTED PROFIT BEFORE TAX
APM2* (excluding IAS 19 impact) (2018: £5.8m)
£4.0m -32%
PROFIT BEFORE TAX
(2018 restated: £4.5m)
NET BORROWINGS
(2018: £4.8m)
£2.6m -43%
£8.6m +78%
DILUTED EARNINGS PER SHARE
(2018 restated: 43.0p)
24.3p
-43%
FULL YEAR DIVIDEND PER SHARE
(2018: 13.5p)
13.5p FLAT
*For definitions of Alternative Performance Measures (APM) please refer to page 13 on the Finance Director’s Review report.
I was pleased to see continued sales
growth across each division with
the Group now exceeding £100m
sales for the first time.
In the period pulp price has continued to
increase from the highs of the previous
period, raising the overall impact from pulp
price to over £6.5 million over the past two
years. This has impacted the Paper division,
however, the underlying performance
remains healthy with the progression of an
improved value portfolio.
The performance of the Technical Fibre
Products Division (“TFP”) has continued
to strengthen with growth across each
sector and the results demonstrating another
record achievement.
We have continued to invest in James Cropper
3D Products Ltd (“3DP”) adding further
capability and capacity. Whilst this has
added to the operating costs, it positions the
business well as larger commercial contracts
are now becoming a reality.
Group profit before tax was £2.6m, compared
to £4.5m in the prior period.
REVENUE AND
OPERATING PROFIT
Group revenue for the financial period was
£101.1m, up 5% on the prior period.
Revenue for James Cropper Paper grew
by 4.3% in the period to £74.3m with the
division generating an operating loss of
£1.9m, compared to an operating profit of
£1.5m in the prior period.
Revenue for TFP grew by 6.3% in the period
to £26.5m and operating profit up 19% at
£8.9m. The performance of TFP has continued
to strengthen with growth across each
sector and the results demonstrating another
record achievement.
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. Some examples of the research
and development work undertaken are
explained in the following Innovation section.
The Group continues to invest in research and
development with expenditure in R & D of
£4.0m this period, compared to £2.6m in the
prior period.
INNOVATION
INVESTMENT
PEOPLE
GROWTH BUILD FROM
SOLID FOUNDATIONS
Whilst each business has a unique growth
plan, common strategic themes sit at the
heart of each plan.
A combination of product and process
innovation, technological and capital
investment, process and application lead
sustainability and the skills and knowledge
of our employees build the growth plans
for each business.
A LONG-TERM VIEW
ON GROWTH
Over many decades James Cropper has
provided a focus on the long-term growth of
the Company. Today this remains unchanged
with all key strategic decisions aligned to the
medium to long-term growth of the Company.
James Cropper are specialists with each
business providing niche solutions in our
chosen markets, such as materials essential
for a hydrogen fuel cell, a bespoke colour and
texture for a luxury brand’s packaging, or 3D
modelling a sustainable alternative to single
use plastics. Our relentless focus on being the
best in our field and driving innovation is at
the heart of our Company.
Over the past year we have seen growth
across each business. TFP continues to
experience organic growth across each sector
and geography, leading to our next stage
of capacity expansion due in mid 2020.
Paper’s focus on value has delivered growth
within chosen markets such as packaging and
has been awarded new key contracts from
luxury brands.
Colourform has been commercialising the
pipeline and, whilst supporting existing
contracts, they have been awarded more
significant contracts supporting the global
cosmetics market.
INNOVATION
Over 15% of James Cropper’s employees
are involved with research and
development activities and the company
has invested over £8 million in the last
3 years.
Some examples of recent developments
include:
• TFP has developed advanced particulate
and fibre metallised coatings to enhance
shielding and conductivity properties
without compromising weight.
“OVER THE PAST YEAR WE HAVE SEEN
GROW TH ACROSS EACH BUSINESS...
PAPER’S FOCUS ON VALUE HAS
DELIVERED GROW TH WITHIN CHOSEN
MARKETS SUCH AS PACK AGING AND HAS
BEEN AWARDED NEW KE Y CONTR ACTS
FROM LUXURY BR ANDS.”
THREE BUSINESSES: DIFFERENT GROWTH DRIVERS
BUILD & INVEST
COLOURFORM
LARGE
MARKET
GROWTH
SMALL
TFP
DEVELOP & INVEST
PAPER
OPTIMISE & SPECIALISE
LOW
TARGET MARKET SHARE
HIGH
• Colourform has invested in the
latest 3D modelling design capability
allowing seamless product design,
computer aided design and computer
aided manufacture for tool production
in order to create high quality and
complex moulded fibre products.
• Paper has developed an environmentally
friendly whitening process to lighten
consumer waste providing it with a new
lease of life as high-quality fine paper.
RESEARCH & DEVELOPMENT EXPENDITURE (£m)
OVER 15% OF JAMES
CROPPER’S EMPLOYEES
ARE INVOLVED WITH
RESEARCH AND
DEVELOPMENT
ACTIVITIES AND
THE COMPANY HAS
INVESTED OVER
£8 MILLION IN THE
LAST 3 YEARS.
10
11
SUSTAINABILITY Strategic Report - Chief Executive’s Review
Strategic Report - Finance Director’s Review
APPRENTICESHIPS WITHIN THE GROUP
WE ARE CONSTANTLY IMPROVING OUR
MANUFACTURING PROCESSES IN ORDER
TO USE LESS ENERGY AND WATER ...
OUR AMBITION IS TO INCORPOR ATE
NEW AND EMERGING TECHNOLOGIES TO
DRIVE TOWARDS CARBON NEUTR ALIT Y.
INVESTMENT
The Company has a strong history of
targeted strategic investments to implement
technology, supporting both product and
process developments aligned to each
business’s growth plans. Recent investments
include production capacity expansion for
Colourform, specialist cutting technology
for Paper and increased TFP capacity for
particle plating.
Moving forward, further strategic
investments are planned and include increased
independence from commodity pulp prices
with the expansion of Paper’s coffee cup
recycling capability, and additional finishing
capacity to support a high value portfolio.
An additional non-woven production line
in TFP increasing capacity by 50% and in
Colourform the capability to rapid prototype
are also planned.
We are constantly improving our
manufacturing processes in order to use
less energy and water. Our demand is
partially met using hydro and solar energy,
but our ambition is to incorporate new
and emerging technologies to drive towards
carbon neutrality.
James Cropper continues to receive
widespread industrial recognition for its
work on sustainability, from Luxury
Packaging awards to public recognition
from HRH The Prince of Wales.
SUSTAINABILITY
PEOPLE
Sustainability sits at the heart of each
business. Paper and Colourform provide
recyclable, reusable and compostable
solutions in a ‘single-use’ market, whilst
TFP plays a vital role in providing
lightweight solutions for transportation
and materials used in green energy such
as wind and hydrogen fuel cells.
Employees over the generations have built
a strong culture of loyalty and care for the
products we produce and the community we
support. The Company’s approach to building
skills and talent can be seen at all levels.
There are now over 30 employees who
are in the process of, or have completed,
apprenticeships across multiple disciplines
including finance, marketing, HR
and engineering.
The chart above highlights how
apprenticeships have increased over the
past few years at James Cropper.
The graduate intake programme now
benefits each business supported by regular
recruitment programmes working with high
performing universities.
The annual Pride Awards celebrate employees
going “above and beyond” demonstrating
significant improvements, creativity and
selflessly giving time to good causes.
Over the past year the Company has
invested in dedicated trainers to support
mental health. This has resulted in nearly
50 mental health first aiders and over
20 health advocates.
These programmes together with a strong
emphasis on training and development
underpin all of our initiatives to grow
the Company.
PHIL WILD
CHIEF EXECUTIVE OFFICER
24 JUNE 2019
FINANCE DIRECTOR’S REVIEW
PROFIT SUMMARY
2019
£’000
2018
£’000
CHANGE
£’000
CHANGE
%
Revenues
Adjusted operating profit APM1
Net interest (excluding IAS 19 impact)
101,095
96,312
4,262
(300 )
6,133
(308 )
4,783
(1,871 )
8
5 %
25 %
3 %
Adjusted profit before tax APM2
3,962
5,825
(9,787 )
(168 %)
Net IAS 19 pension adjustments
Net current service charge required
Net interest
(854 )
(532 )
(695 )
(589 )
Net IAS 19 pension impact
(1,386 )
(1,284 )
(159 )
57
(102 )
Profit before tax
2,576
4,541
(1,965 )
23 %
(10 %)
8 %
(43 %)
TOTAL IMPACT OF IAS 19 ON PROFIT £’000
PROFIT SUMMARY
The Group delivered record revenue having
reached a milestone of £100,000,000 in
the period. Group revenues are £101,095,000,
a 5% increase from £96,312,000 in 2018.
Group adjusted profit before tax (see
Alternative Performance Measures below),
fell by 31% on the prior period to
£3,962,000 (2018: £5,825,000).
Adjusted operating profit was weakened
somewhat by the continued rise in pulp
prices throughout the period impacting the
Paper division, prices which only stalled and
turned in the last quarter. This challenge was
recognised early in the year, a combination
of higher selling prices, strong operational
performance and an increased focus on
sustainable packaging solutions for our
customers helped to offset these cost
pressures. TFP delivers consistently
strong profit growth which equally
helped to deliver profit expectations.
Colourform experienced delays in displacing
existing contracts and moving businesses over
to this more sustainable alternative, however
the packaging industry is undergoing
meaningful change and the shift towards
sustainable solutions is increasingly evident.
In the face of a further £3m headwind as
the pulp price continued to rise well above
levels experienced in the prior trading period,
the Group profit before tax dropped in the
period. Group profit before tax for the period
fell by 43% on the prior period to £2,576,000
(2018: £4,541,000).
400
200
0
(200)
(400)
(600)
(800)
(1,000)
(1,200)
(1,400)
(1,600)
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
ALTERNATIVE PERFORMANCE MEASURES (APMs)
The following alternative performance measures
are used in this report and these accounts:
This chart sets out the variable impact of
IAS 19 on profits over the last 12 years.
• APM 1 “Adjusted operating profit”
Adjusted operating profit refers to operating
profit prior to the impact of IAS 19.
The positive impact in 2012 resulted in
an additional £128,000 being added to
reported profits.
• APM2 “Adjusted profit before tax”
Adjusted profit before tax refers to profit
before tax prior to the impact of IAS 19.
• APM3 EBITDA EBITDA refers to
operating profit before interest, tax,
depreciation and amortisation.
• APM 4 Adjusted EBITDA This is EBITDA
prior to the impact of IAS 19.
All APMs which exclude IAS 19 are used as
IAS 19 varies significantly, up and down, from
one reporting period to another and obscures
true business performance.
The hardest impact is in 2019 with a £1,386,000
impact to reported profits. This amount takes
into account an estimate of £133,000 for the
financial cost to correct the gender-inequalities
inherent in Guaranteed Minimum Pensions
(GMPs).
EBITDA is used as it provides an indication
of cash generated from Group’s operations.
The APMs make it clear to the readers of the
accounts what the underlying performance
of the business actually is. These same
measures are used internally to evaluate
business performance.
12
13
Strategic Report - Finance Director’s Review
Strategic Report - Finance Director’s Review
REVENUES & DIVISIONAL PERFORMANCE
DIVISIONAL REVENUE SUMMARY
Paper Products
Technical Fibre Products
3D Products
Revenue
DIVISIONAL PROFIT SUMMARY
Paper Products
Technical Fibre Products
3D Products
Other Group Expenses
Adjusted Operating Profit APM1
2019
£’000
2018
£’000
CHANGE
£’000
CHANGE
%
74,318
26,487
290
71,237
24,909
166
101,095
96,312
3,081
1,578
124
4,783
4 %
6 %
75 %
5 %
2019
£’000
2018
£’000
CHANGE
£’000
CHANGE
%
(1,992 )
8,883
(2,462 )
(167 )
4,262
1,468
7,449
(1,639 )
(1,145 )
6,133
(3,460 )
1,434
(823 )
978
(1,871 )
(236%)
19 %
(50 %)
85 %
(30 %)
PAPER
Paper is a bespoke provider of choice in
coloured, textured and coated specialist
papers manufactured exclusively in Great
Britain, renowned globally for our expertise
in creative solutions and for innovating in
sustainable fibre.
Our main sectors include luxury packaging,
art and digital imagery, book and game
covers. Paper as it optimises its portfolio, is
able to seize a number of opportunities in
niche markets where we have a competitive
advantage. In the year we saw rising demand
for our CupCycling™ offering dedicated
to upcycling take away coffee cups, being
the only mill able to do this attracts and
retains brands operating responsibly towards
the environment.
During the year the division won five
sustainability awards in the packaging sector
as a result of the success we have made of this
investment. Paper revenues grew 4.3% year on
year as a result of price increases to mitigate
cost pressures and mix improvement due to
the strong focus on portfolio optimisation, we
experienced 11% growth in luxury packaging.
The division bore a further £3m headwind on
pulp prices this year bringing the commodity
price burden to circa £6.5m against 2017
operating conditions.
Gas costs brought in an additional £1.4m hit
compared to prior year 2018, we have recently
secured a forward arrangement to stabilise
energy costs going forward. The loss this
period is £1,992,000 (2018: profit £1,468,000).
While there are uncertainties on the landscape
we remain confident in our growth drivers, in
our ability to drive margin improvement and in
the sectors in which we operate.
TFP
Technical Fibre Products (“TFP”) develops
and manufactures high performance non-
woven and other advanced cutting edge
materials at manufacturing locations in Great
Britain and in the USA. Working widely in
composites our main sectors include aerospace,
transportation, industrial and clean energy.
TFP experienced top line growth with
revenues up by 6.3%.
With a strong pipeline of research and
development programmes and in close
collaboration with OEMs and tier 1 customers
we play an important part in enabling emerging
technologies. Profit this period is £8,883,000
(2018: £7,449,000).
Progress has been made in all sectors and TFP
is a global business that is highly profitable
and cash generative.
COLOURFORM
Colourform™ is the core product range from
James Cropper 3DP Ltd; it is renewable,
recyclable, moulded fibre packaging that offers
brands an alternative to single use plastics
and we are the only manufacturer capable
of producing moulded fibre products in any
colour. Working strongly in the quality retail
packaging market our key sectors, at this
stage are cosmetics, perfumes, premium wines
and spirits.
The natural fibres used in ColourformTM
are from renewable, well managed forests.
In addition ColourformTM can be made from
our CupCyclingTM fibres. This gives customers,
who are keen to source materials as part of
their transition to a sustainable packaging
solution, Colourform as a trusted partner
of choice.
3D Products made a loss in the period of
£2,462,000 (2018: loss £1,639,000).
Investments were made in the year to increase
capacity and capability ahead of significant
contracts which since the year end are now
in production.
CURRENCY
This table compares the opening and
closing exchange rates for the financial
period. The Euro weakened modestly
against the Pound in the period and the
Dollar strengthened.
56% of the Group’s sales are exports bringing
in Dollars and Euros to the Group. Euros
are used to purchase Euro priced pulp and
raw materials and Dollar receipts are used to
fund the purchase of Dollar priced pulp, this
creates a natural hedge across the Group.
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.
Currency movements had a negative impact
on operating profit in the Paper division
versus a positive impact in TFP.
Currency movements, with the Dollar
strengthening and the Euro weakening
had a minor net beneficial impact on sales,
increasing sales by 0.3%.
$
¤
1.4075
1.1403
1.3031
1.1605
7.42% (1.77%)
Opening rate
March 2018 v. £
Closing rate
March 2019 v. £
Exchange rate
movement
Strengthen/(Weaken)
v. £
EBITDA (EARNINGS BEFORE INTEREST, TAX, DEPRECIATION AND AMORTISATION)
The Group’s adjusted operating profit
decreased 31% year on year and the Group’s
depreciation costs were 10% higher than in the
prior period. The group delivered an Adjusted
EBITDA of £7,214,000 (2017: £8,811,000).
EBITDA is a good measure of core profits and
cash generation, it is also a measure of the cash
flow available to pay debt on equipment and
other long term investments which have life
span of many years.
The ratio of net debt to EBITDA was 1.2
times, importantly giving significant headroom
against our facility covenant of 3.5 times.
TAX
The Group’s total tax charge for the period
is £262,000 (2018: £451,000) an effective tax
rate of 10.2% on profit before tax.
The effective rate is lower than the standard
rate of corporation tax in the UK (19%) as
a result of rate changes on deferred tax, an
off set of losses on which deferred tax wasn’t
recognised in the prior year against taxable
profits arising in overseas jurisdictions, foreign
exchange differences recognised and claims for
Research and Development tax credit (RDEC).
Investing in research, innovation and
development is a key part of the Group’s
growth strategy and is an effective way to
accelerate our manufacturing capabilities.
EBITDA APM3
2019
£’000
2018
£’000
CHANGE
£’000
CHANGE
%
Adjusted operating profiting APM1
Depreciation and amortisation
Adjusted EBITDA APM4
4,262
2,952
7,214
6,133
2,678
8,811
(1,871 )
274
(1,597 )
(31 %)
10%
(18 %)
The Group monitors EBITDA as it provides an indication of cash generated from the
Group’s operations.
STATEMENT OF FINANCIAL
POSITION (SFP)
Non-pension assets have increased from
£59,899,000 to £64,871,000, an increase of
£4,972,000. An increase in the level of capital
investment this year boosts these values along
with higher input prices uplifting inventory
values and a strong trading quarter towards
the end of the year raising the balance of
trade receivables.
Non-pension liabilities have increased by
£650,000 primarily due to balances on
trade payables.
The pension scheme deficit has increased
since 2018, from £19,472,000 to £22,648,000
(before deferred tax). After deferred tax the
Net IAS 19 deficit has increased by £2,636,000
to £18,798,000.
SFP IAS 19 PENSION
The increase is principally caused by falling
corporate bond yields pushing up liabilities,
mitigated to an extent by reductions in life
expectancy and strong asset returns.
The IAS 19 valuations are applied for statutory
reporting purposes only and hold no other
value to the Company as IAS 19 requires
the Group’s actuaries to make a number
of assumptions on a very different basis to
the on-going valuations. A full retirement
benefit disclosure is provided in note 17 to the
financial statements. A greater analysis of IAS
19 on pensions and on the on-going valuations
and risk management is provided within the
pensions section of this report.
As a result of these movements on the pension
scheme deficits, shareholders’ funds show an
overall decrease of £2,070,000 to £21,276,000.
INVESTING IN RESEARCH,
INNOVATION AND
DEVELOPMENT IS A KE Y
PART OF THE GROUP ’S
GROW TH STR ATEGY.
SFP
2019
£’000
2018
£’000
Non-pension assets - excluding cash
Non-pension liabilities - excluding borrowings
64,871
(16,236 )
59,899
(15,585 )
Net IAS 19 pension deficit (after deferred tax)
(18,798 )
(16,162 )
48,635
44,314
SFP IAS 19 PENSION
2019
2018 CHANGE
£’000 £’000 £’000
Net borrowings
Retirement benefit liabilities
(22,648 )
(19,472 )
(3,176 )
Equity shareholders’ funds
Deferred tax asset
3,850
3,310
540
Net IAS 19 pension deficit
(18,798 )
(16,162 )
(2,636 )
Gearing % - before IAS 19 deficit
Gearing % - after IAS 19 deficit
Capital expenditure £’000
29,837
(8,561 )
28,152
(4,806 )
21,276
23,346
21 %
40 %
12 %
21 %
5,229
1,935
14
15
Strategic Report - Finance Director’s Review
Strategic Report - The Pension Report
CASH FLOW
In the period the Group’s net cash outflow was £3,205,000 (2018: inflow
£3,636,000). Outflows on investments and working capital more than off-setting
the inflows from operating activities.
Working capital outflows are a result of; a reduction in trade payables due to
the timing of monthly payments, input prices uplifting inventory values and an
increase in trade receivables following a strong year end trading quarter.
Capital expenditure in the period was £5,229,000 (2018: £1,935,000). Capital was
invested in all divisions this year. Investments are driven by the requirement to
enable growth, typically in the form of generating revenue or increasing capacity,
improving process capability, generating cost savings, resilience to keep a key
asset running, safety and workplace improvements. The largest spend in the year
was driven by a requirement to increase capacity in James Cropper 3D Products
Ltd ahead of planned demand for ColourformTM in 2019 and 2020. Since the year
end orders have now materialised to meet this demand.
Past service deficit payments of £1,468,000 are made in accordance with the
agreed schedule of contributions covering £1,284,000 to reduce past service
deficits and a further £184,000 to meet protection levy payments.
The closing cash position for the Group is £2,352,000 (2018: £5,557,000).
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
Adjusted EBITDA
(excluding IAS 19 impact) APM4
Pension deficit payments
Increase in working capital
Other
Net cash
generated from operations
Capital expenditure
Dividends paid
Increase / (decrease) in loans
Other
2019
2018
£’000 £’000
7,214
8,811
(1,468 )
(1,413 )
(1,942 )
(436 )
(438 )
(1,135 )
3,366
5,827
(5,229 )
(1,935 )
(1,263 )
(1,097 )
257
1,650
(336 )
(809 )
Increase / (decrease) in cash
(3,205 )
3,636
Opening cash
Closing cash
5,557
2,352
1,921
5,557
2019
£’000
2018
£’000
CHANGE
£’000
2,352
(1,545 )
(9,368 )
(8,561 )
1,545
9,368
10,913
8,119
19,032
2,352
8,119
10,471
(1,545 )
8,926
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
(3,205 )
55
(605 )
(3,755 )
(55 )
605
550
(825 )
(275 )
(3,205 )
(825 )
(4,030 )
55
(3,975 )
The Group funds its operations and
investments from operating cash flow
and from borrowings and finance leases.
During the period net debt increased by
£3,755,000 to £8,561,000.
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 £6,110,352 is drawn down at the
period end.
Cash and cash equivalents decreased from
£5,557,000 down to £2,352,000 in the year
whilst long term borrowings (falling due
after more than a year) increased by £605,000
to £9,368,000.
The expiry profile of existing borrowings is
detailed in note 16.3 to the financial statements.
The Group is in compliance with its banking
covenants which specify an EBITDA to net
interest payable ratio of not less than 4 times
and a maximum ratio of net debt to EBITDA
of 3.5 times. The covenant calculations exclude
interest arising from IAS 19 calculations
on the defined benefit pension schemes from
the income statement. At 30 March 2019
the Group had substantial headroom under
its covenants.
Undrawn facilities comprise of unused
overdraft facilities of £3,729,098 plus the total
unused revolving credit facilities of £4,389,648,
meaning a total of £8,118,746 remains
unutilised at the year-end date.
Having taken account of current borrowings to
be paid within 12 months of the balance sheet
date the Group has £8,926,000 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 16.3 in the notes to the
financial statements.
NEW ACCOUNTING STANDARDS
IFRS 15 Revenue from contracts with
customers, was applied from 1 April 2018.
The new standard applies to all revenue
arising from contracts with customers
including sale of goods, volume rebates
and promotional rebates.
Previously the Group would make its best
estimate of any rebates expected to be awarded
based on available information. In accordance
with IFRS 15, the Group now applies the
variable consideration guidance in IFRS 15
and assumes products sold by the balance
sheet date will attract a full rebate except to the
extent that it is highly probable the full rebate
will not be earned.
The adoption of IFRS 15 has had no material
effect on transition and is not expected to
materially alter revenue recognition patterns
going forward.
IFRS 9 Financial Instruments, was applied
from 1 April 2018. The adoption of IFRS 9 has
not had a material impact on the Group.
THE PENSION REPORT
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”).
THE STATEMENT OF FINANCIAL POSITION IAS 19 DEFICIT
The pension scheme deficit reported in the
accounts has increased since 2018, from
£19.5m to £22.6m (before deferred tax).
The table shows the overall value of the
schemes’ assets, which have increased by
3% and, in the same period, the schemes
liabilities increased by 5%.
The combined increase in the schemes’ overall
deficit is principally caused by falling corporate
bond yields pushing up liabilities, mitigated
to an extent by reductions in life expectancy
(which reduces liabilities) and strong asset
returns. The IAS 19 valuation includes a
correction for gender-inequalities inherent in
Guaranteed Minimum Pensions (GMPs).
Full retirement benefit disclosure is provided
in note 17 to the financial statements.
IAS 19 PENSION VALUATION 2019
STAFF
SCHEME
WORKS
SCHEME
TOTAL
2019
TOTAL
2018
CHANGE
%
Discount Rate
2.45 %
2.45 %
2.45 %
2.70 %
BOTH SCHEMES
£000 s
£000 s
£000 s
£’000
Assets
52,989
57,009
109,998
106,607
Liabilities
(60,653 )
(71,993 )
(132,646 )
(126,079 )
(Deficit)/Surplus
(7,664 )
(14,984 )
(22,648 )
(19,472 )
Funding Level - %
87 %
79 %
83 %
85 %
3%
5%
16%
(2 %)
16
17
Strategic Report - The Pension Report
Strategic Report - The Pension Report
DEFINED BENEFIT SCHEMES THE TRIENNIAL “ON-GOING” VALUATION
KEY RISKS RELATING TO THE PENSION SCHEMES
Work has commenced on the next – triennial
“on-going” valuation set for April 2019.
THE APRIL 2016 TRIENNIAL
“ON-GOING” VALUATIONS
STAFF WORKS
TOTAL
SCHEME
£000s
SCHEME
£000s
£000s
Discount Rate
3.55 %
3.55 %
3.55 %
Assets
44,401
47,901
92,302
Liabilities
(48,079 )
(60,045 )
(108,124 )
Deficit
(3,678 )
(12,144 )
(15,822 )
Funding Level - %
92.4 %
79.8 %
85.4 %
UK legislation requires the Scheme Trustee 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. 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 defined benefit schemes are sensitive
to a number of key factors: the value of the
assets, the discount rate used to calculate the
schemes liabilities (based on a premium above
gilt yields), the expected rate of inflation in
the future and the mortality assumptions for
members of the schemes. Changes in these
assumptions will impact the deficit positively
or negatively.
With pension payments not expected to peak
until 2040, and expected to continue into the
2080s, the funding deficits do not need to be
repaired quickly, nevertheless the Company
recognises its responsibility to fund its
defined benefit pension plan deficits.
The long term plan is to ensure that when
pension payments peak the Company has
made sure that these payments can be satisfied
at the peak and into future years.
Monitoring the on-going triennial valuations
is an important part of aligning the latest
position on route to the longer term target.
Following the April 2016 “on-going” valuation
a deficit recovery plan was agreed with the
Trustee which included contributions of £1.3m
per annum to reduce the past service deficits
and a further £0.16m per annum to meet
pension protection levy payments, a total of
£1.46m each year. These have an impact on
both cash and the deficit and are recognised
on the Statement of Financial Position.
The Company is currently in discussions
with the Trustee to agree future pension
contributions, which will form part of a
funding plan designed to meet the pension
scheme deficit over the longer-term.
The Trustee has indicated, in the preliminary
discussions, that they are supportive of the
Board’s decision to invest free cash-flow in
the growth of the business, and so are not
minded to push for a substantial increase in
contributions which may put future growth
prospects in doubt.
THE COMPANY
RECOGNISES ITS
RESPONSIBILITY TO
FUND ITS DEFINED
BENEFIT PENSION PLAN
DEFICITS. THE LONG
TERM PLAN IS TO
ENSURE THAT WHEN
PENSION PAYMENTS
PEAK THE COMPANY
HAS MADE SURE THAT
THESE PAYMENTS CAN
BE SATISFIED AT
THE PEAK AND INTO
FUTURE YEARS.
Future contribution requirements are assessed
against a long-term funding target which
reflects the way in which the schemes’ assets
are invested (rather than the corporate bond
measure used for accounting purposes).
The Trustee and Company have agreed
actions in recent years to reduce this
volatility, including holding liability driven
investments to better match movements in
the schemes’ liabilities.
RETIREMENTS DURING THE YEAR
During the year 16 employees have retired with a total length of service of 466 years.
May we thank you all for your dedicated service to the Group and wish you all a very happy retirement.
Service between 10 and 20 years
Service between 20 and 30 years
Service between 30 and 40 years
Service over 40 years
David O’Callaghan
Peter Dobson
Paul Smith
Jeannie Harper
William Reid
Carol Lawrence
Brian Milburn
Fiona Shepherd
Brian Lock
Geoffrey Sergeant
Steven Roberts
Mark Shepherd
Simon Crossley
Geoffrey Leech
David Watson
Ian Davis
18
The Company is exposed to a number of risks
relating to the pension schemes, including
investment risks, demographic risks (if members
live longer than expected, it will be more
expensive to provide pensions), and inflation
risks for those benefits linked to inflation.
While most of the economic risks are hedged
by the schemes’ liability driven investment
strategies, it is not practical or cost effective to
hedge all pension scheme risks.
Risk management activity in recent years
comprises of the following:
• 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.
• In April 2018 (after the March 2018 year-
end) a new investment strategy was adopted
which aims to significantly reduce risk
whilst maintaining a similar level of overall
return and protecting asset values.
The bi-annual IAS 19 valuations are applied for
statutory reporting purposes only and hold no
other value to the Company as IAS 19 requires
the Group’s actuaries to make a number of
assumptions on a very different basis to the
on-going valuations.
Under IAS 19 the deficit is likely to be volatile
and may, in the future, be very different
from one 6 month reporting period to the
next. IAS 19 requires the Group’s actuaries
to make a number of assumptions based on
values and market conditions at the period end
date. Discount rates for IAS 19 are based on
corporate bond yields which does not reflect
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” period to period.
The chart below provides an indication of the
variability of pension deficit under IAS 19.
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.
In this period an estimate of £133,000 for the
financial cost to correct the gender inequalities
inherent in Guaranteed Minimum Pensions
(GMPs) is taken to the P&L. Actuarial changes
in previous assumptions will pass through
Other Comprehensive Income (OCI).
The “true” cost of GMP equalisation will
take a few years to work out, however
the Company would expect any variances
compared to the estimate, to flow through
the OCI statement.
SCHEME DISCOUNT RATES AND COMBINED
SCHEME PENSION DEFICITS UNDER IAS 19
0.0
(5.0)
(10.0)
(15.0)
(20.0)
(25.0)
8.0%
7.0%
6.0%
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%
2005 ‘06 ‘07 ‘08 ‘09 ‘10 ‘11 ‘12 ‘13 ‘14 ‘15 ‘16 ‘17 ‘18 2019
IAS 19 Pension Deficit (£m)
Discount Rates
The large declines in the combined deficit in 2008 and
2011 were due to a significant reduction in future benefits
for active members introduced in those years.
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 year
end 31 March 2019 includes an additional
adjustment of £1,386,000 (2018: £1,284,000)
to bring the cost into line with IAS 19.
Included within the charge against profits is
an estimate of £133,000 for the financial cost
to correct the gender-inequalities inherent in
Guaranteed Minimum Pensions (GMPs) which
is an issue that has affected many occupational
pension schemes.
OPERATING COSTS
• Curtailment and settlement costs.
• Any government pension protection levies
paid over the period.
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 income from scheme assets and cost on the
accrued liabilities allowed for in the net interest
cost is based on the discount rate at the start of
the period, this impacts the costs shown in the
income statement.
A charge of £532,000 is charged to the income
statement this period (2018: £589,000).
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
£854,000 (2018: £695,000) determined by IAS
19 based on assumptions at the start of the
period and which is over and above the future
service contributions for the defined benefit
schemes. These additional costs are:
• 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. In this period an estimate of
£133,000 for the financial cost to correct the
gender-inequalities inherent in Guaranteed
Minimum Pensions (GMPs) is taken to the
P & L as part of past service costs.
19
Strategic Report - Risk Management
Strategic Report - Risk Management
RISK MANAGEMENT
VIABILITY
The Board believes that the three years to
March 2022 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.
The expiry profile of existing borrowings is
detailed in note 16.3 to the financial statements.
Current availability of finance is good, and
the Group expects to be able to re-finance,
or renew funding on favourable terms.
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.
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.
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.
THE BOARD IS SATISFIED THAT THE GROUP
WILL HAVE SUFFICIENT LIQUIDIT Y TO MEET
ITS NEEDS OVER THE PL ANNING HORIZON.
RISK MANAGEMENT
PRINCIPAL RISKS
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 and the Group as a
whole, and that it is responsive to changing
business conditions. The Executive Team
follow an ongoing process for identifying,
evaluating and managing significant risks faced
by the Group.
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.
20
21
Strategic Report - Risk Management
Strategic Report - Risk Management
EMPLOYEE HEALTH & SAFETY RISK DESCRIPTION AND IMPACT
PULP PRICE VOLATILITY
AND SUSTAINABILITY
RISK DESCRIPTION AND IMPACT
STABLE —
Employee health, safety and wellbeing 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.
MITIGATION
From a safety perspective we have an
overarching goal of zero lost time accidents
and aim to continuously engage with all our
team members through education programmes,
daily activity observations and safety
awareness communications to help achieve
zero harm.
The Group has an extensive Health & Safety
programme built around the ISO18001
framework which is pro-actively driven across
every division. We track leading indicators
such as health and safety training, hazard
reporting and improvement suggestions whilst
also monitoring incidents, and near misses to
enhance our 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.
ENERGY PRICE VOLATILITY
RISK DESCRIPTION AND IMPACT
REDUCED ▼
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.
MITIGATION
Our dedication to continuously improving
health, wellbeing and safety has been
recognised on five consecutive years as
RoSPA (Royal Society For the Prevention
of Accidents) has accredited the James Cropper
Group with a Gold Award resulting in our
site receiving a Gold Medal in recognition of
this achievement in 2019.
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. The Group participates in external
benchmarking and best practice setting across
comparable manufacturing industries 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.
Price fluctuations on key input costs which
cannot be passed onto customers in all cases
can affect our business assumptions, margins
and investment decisions.
A Long-Term Energy Team aims to mitigate
its exposure to energy costs by a combination
of considering strategic diversification away
from gas to alternative fuels and investing in
sustainable energy saving solutions.
A Gas Purchasing Committee seeks to secure
forward the unit cost of wholesale natural gas
in anticipation of future demand. At the time
of this plan the committee has secured prices
for the year to the end of March 2020.
REDUCED ▼
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. 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 cannot
be passed onto customers in all cases and
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.
MITIGATION
The Board regularly receives updates and
market pricing information on pulp and fibre.
The Paper division aims to maximise the
recovery of paper price changes through timely
commercial negotiations and recover costs via
market price increases.
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 division continues to leverage its
reclaimed fibre technology plant and
works collaboratively with the waste
fibre supply chain to secure grades that
are suitable for re-use.
The Paper division also looks to qualify
alternative sources of fibre to reduce its
reliance on virgin fibre from trees
and waste grade material.
Diversification and the success of all
the divisions offers the Group greater
long-term stability.
EXCHANGE RATE VOLATILITY RISK DESCRIPTION AND IMPACT
STABLE —
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 Sterling,
Euro and Dollar. The Group’s financial results
are reported in Sterling.
MITIGATION
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.
Volatile exchange rates could have a significant
impact on the Group’s results.
The Group prepares consolidated financial
statements for reporting purposes, the
consolidation process entails translating the
financial statements of foreign subsidiaries
from foreign to domestic currency.
A Dollar hedge is in place to mitigate
the impact of translation exposure with
the subsidiaries based in the USA.
22
23
Strategic Report - Risk Management
Strategic Report - Risk Management
INFORMATION SECURITY
& CYBER RISK
STABLE —
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.
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 is an ongoing
programme with continuing investment to
ensure our processes and infrastructure evolve
in-line with the threat landscape.
RISK DESCRIPTION AND IMPACT
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 include
regulatory sanctions and fines, financial loss
and a denial of service.
MITIGATION
The organisation is committed to information
security management and implements a robust
IT security programme (inclusive of GDPR).
We organise an extensive training and
awareness programme for all our users
including risk identification and expected
behaviours and conduct.
We utilise external providers and implement
new solutions to conduct threat assessments
and review our security landscape.
For and on behalf of the Board
ISABELLE MADDOCK
GROUP FINANCE DIRECTOR
24 JUNE 2019
PENSION
RISK DESCRIPTION AND IMPACT
INCREASED ▲
BREXIT
STABLE —
The Group operates two defined benefit
pension schemes which are in deficit.
The April 2016 triennial valuation concluded a
combined deficit of the schemes to be £15.8m.
The April 2019 triennial valuation is underway
and expected to complete by April 2020.
Actuarial deficits are sensitive to a number of
key factors: the value of the assets, the discount
rate used to calculate the schemes liabilities
(based on corporate bond yields), the rate of
inflation and the mortality assumptions for
members of the schemes.
Changes in these assumptions, the recognition
of equalisation and market conditions could
mean that the deficit increases further.
MITIGATION
The Group’s strategy is to ensure the profitable
and sustainable growth of the Group which in
turn protects pensions earned.
During 2017 CPI has been adopted as the
inflationary measure for all future service
pension pay-outs.
The Pension Sub-Committee collaborates with
the scheme Trustees to explore opportunities
which may be favourable to reducing risk and
or assist in closing the deficit. These activities
continue as progression is made on the next
on-going valuation.
Deficit reduction contributions
Payments of £1.4m (including PPF levies)
per year across both schemes are presently
committed to. A renewed deficit reduction
contribution plan will be concluded as part of
the next ongoing valuation process.
A number of risk reduction exercises have been
enacted since 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.
The scheme Trustees are supportive of the
Group’s planned investment and capital
expenditure programme to grow the business
which is key to ensuring the Group is capable
of supporting the schemes in the future.
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.
Investment strategy
The Group agrees an investment strategy with
the trustees taking account of risk.
RISK DESCRIPTION AND IMPACT
The risk that 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.
MITIGATION
The additional risk that European bodies are
not replaced with a British regulatory regime.
The Group has planned around a hard Brexit
scenario to ensure we have continuity of trade
with our customers and be ready to handle
all predicted practical matters of cost friction,
barriers and regulation.
The Group works with representative
organisations assisting UK manufacturing
companies such as the Confederation of British
Industry (CBI) and the Confederation of Paper
Industry (CPI) to understand and prepare for
all Brexit outcomes.
24
25
1
“ WE WILL ONLY SECURE
OUR FUTURE AS A BUSINESS
IF WE BAL ANCE OUR
OUTPUTS WITH THE IMPACTS
THAT WE – TOGETHER WITH
THE REST OF MANKIND – ARE
HAVING ON OUR PL ANET.”
2
MAR K CROPPE R , CHAIR MAN
1. Paper model by Helen Musselwhite for T2, London Design Festival
2. Chief Executive, Phil Wild (left) with Director of Hubbub, Gavin Ellis (right)
and Operations Director at Forge Recycling, Sam Goodall (centre)
3. Pasaban Operator, Daniel Ford
4. James Cropper 3DP Ltd Group Leader, Carol Kelly
4
3
27
Technical Fibre Products
Technical Fibre Products
TECHNICAL FIBRE PRODUCTS LTD
CAPACIT Y EXPANSION & GROW TH
Sales growth in the year was
6.3% and this represented our
seventh straight year of annual
revenue growth. Turnover has
roughly doubled since 2014.
Sales have increased globally,
across both established and
emerging markets including
aerospace, defence and fuel cells.
We anticipate that demand for our products
will continue to grow. We roughly doubled
our capacity in 2016 as we commissioned
our new nonwoven line and this additional
capacity has been filling up steadily in the
interim. As a result, we have already
started work on an additional nonwoven
production line.
The latest planned expansion will constitute
a further 50% increase in production
capacity. It involves the addition of a new
manufacturing line, as well as associated
infrastructure, including raw material
and finished goods warehousing, in order
to support both the additional capacity
and future growth.
The new line will be based on the equipment
and hardware of the last expansion and will
be housed in a purpose built extension to the
current TFP site. The project is scheduled
to be completed by mid 2020 and involves
significant capital investment to develop and
install both the new line and infrastructure.
It is an exciting and necessary step to
meet increasing demand and underpins
the successful delivery of TFP’s future
growth strategy.
MARTIN THOMPSON
MD TFP DIVISION
28
29
Technical Fibre Products
Technical Fibre Products
Unfortunately, the development of new
materials often goes hand-in-hand with
confidentiality, something we take very
seriously, which means that there are
few examples that we can discuss.
Some notable ones which we can talk
about include fuel cells, aerospace materials
and resistive heating.
TFP’s work in fuel cells has spanned over
three decades and involved working with
some of the key players in the industry.
The development work has ranged from
working directly with customers, to engaging
on government funded projects, and has
ultimately established our profile globally
as a respected gas diffusion layer (GDL)
substrate manufacturer. In the past financial
year, 11% of our sales were into fuel cell
applications, with this projected to grow as
the larger automotive companies increase
their investment in the commercialisation
of fuel cell electric vehicles (FCEV).
Aerospace developments are a topic that
we touched upon in last year’s report, with
a focus on TFP’s solutions for out of
autoclave (OOA) curing and thermoplastic
veils to improve the interlaminar toughness
of composites. This year our portfolio
has grown further, with a new range of
next generation carrier and support veils.
Launched at the JEC World trade show in
March, these micro-denier polyester and
polyester-polyamide hybrid veils offer
superior flexibility and surface smoothness
compared to our current materials.
Their primary application will be as adhesive
carriers, already a key application for
TFP’s products.
The veils will act as base for a film, ensuring
a uniform layer of adhesive with a consistent
thickness, as well as improving the resilience
and handling of the final product.
The finished adhesive films are used in the
fabrication of aerocomposite structures.
This means that when an electrical current
is passed across the structure, it releases
energy in the form of heat. The heat generated
is utilised effectively in a range of different
applications including heating panels
and de-icing of components.
Another application where product
development has played a key part is resistive
or joule heating. This is not a new application
for TFP’s materials, but one where recent
development work has helped facilitate
growth. The design of TFP’s conductive
nonwovens has been specially adapted to
deliver a specific level of electrical resistance.
These examples give an insight into some of
the developments currently underway at TFP.
They highlight the importance of innovation
and product development and the impact it
has on the long term success of the business.
NONWOVEN DESIGN
INNOVATION, EXPERTISE & CUSTOMER REL ATIONSHIPS
This year we have chosen to
highlight the importance of
material design and development
in the wider business - a
competency which is very
relevant to TFP and central
to the company’s success.
It is responsible for shaping the products
of the future, providing the expertise and
materials which set the company apart
from competitors and ultimately, playing
a key role in building the enduring
customer relationships which are
fundamental to the business.
The prominence of product development
within TFP can be demonstrated in many
ways. Firstly, by the size of our Technology
and Research team, which accounts for
over 15% of the TFP workforce.
The team works with customers and
academic institutions, as well as on
internal R&D projects, to both design new
materials and improve the properties and
performance of our current nonwovens.
This ever expanding portfolio is already
recognised as the broadest range of wet-laid
nonwoven materials in the world, offering
a choice and functionality unmatched by
our competitors.
Simply offering this choice is not
sufficient however, and the focus is still
on creating new nonwovens designed
to meet the specific requirements of our
customers. To achieve this our Technology
team specialise in the customer-led
development of new products via an open
and enabling approach.
“ TFP HAS OVER 100 ACTIVE
NEW PRODUCT DEVELOPMENTS”
This process is a comprehensive one,
perfected over 30 years and encompassing
everything from the initial concept
development in the laboratory, to material
testing, scale up on our purpose built
pilot line before progression to full
scale manufacture.
The pilot line is a further indication of our
investment in R & D, it is a small scale version
of the main production lines and enables new
products to be trialled effectively without
significant investment in raw materials or long
production runs.
The company’s commitment to material
development is not limited to nonwovens.
It is also demonstrated by the complementary
technologies that TFP has invested in over
the years. These range from the electroless
and electrolytic metal plating of fibres at
Electro Fiber Technologies (EFT) in the US,
to the consolidation of multiple materials via
lamination, the application of nanoparticle
coating to rolled goods and, most recently,
the plating of particles.
All these capabilities add value; offering
our customers potential ways to customise
and enhance our nonwovens and, most
importantly, providing the facilities
and expertise to do this in-house.
The result of this product development
ethos is a long list of success stories,
which have shaped the nature of TFP’s
business today and will continue to do so.
30
31
ColourformTM
COLOURFORM TM
ColourformTM is James Cropper’s latest
innovation, the launch of which further
demonstrates the company’s design credentials
while offering brands an alternative to plastic
packaging. ColourformTM gives brands a way to
challenge the global packaging waste problem
and set a new, higher-standard for packaging
solutions and sustainability.
ColourformTM is speciality coloured moulded fibre packaging.
As plastic-free packaging made from 100% renewable FSC
wood fibre and high quality content from James Cropper’s
own recycling plant, ColourformTM is environmentally
ambitious and triumphs from source to end of life.
Perhaps our greatest gift is the gift of colour however and the
brand enhancing capabilities we have which enable brands
to tell their story through their packaging and engage with a
world that is more curious than ever.
ColourformTM’s value lies in its ability to integrate fully into
the narrative of a brand. It is one aspect of how that brand
will communicate and interact with its audience and the vital
relationship and associations that are built hence forth.
We do this through colour, texture, form, functionality
and surface effects - our magic is in the skill of our in-house
designers, our colour specialists, our machine operators
and the partnerships we have developed.
Over the last few years we have evolved significantly and
developed and defined our value proposition. Our ambition is
to inspire brands and work with them predominantly on their
secondary packaging and ultimately become an extension of
the brand, the marketing team and their value proposition.
Key markets which align to this include cosmetics, premium
beverages and smart tech however we have no doubt we will
unearth more as the journey continues.
WE LISTEN, WE DESIGN,
WE OFFER THE UNEXPECTED.
WHAT WILL YOUR STORY BE?
32
33
ColourformTM
ColourformTM
WHAT MAKES
US DIFFERENT?
The key to harnessing our
bespoke service is to forget what
you’ve done before. Think about
the experience you want your
customer to have. Using colour,
texture, creative effects, fibre,
functionality and form, let’s
imagine and create. Together we
can write the next chapter of
your brand story.
ColourformTM is speciality coloured moulded
fibre packaging. As plastic-free packaging
made from 100% renewable FSC wood
fibre and high quality content from James
Cropper’s own recycling plant, ColourformTM
is environmentally ambitious and triumphs
from source to end of life.
Perhaps our greatest gift is the gift of colour,
however, and the brand enhancing capabilities
we have which enable brands to tell their
story through their packaging and engage
with a world that is more curious than ever.
SHAPE AND FORM
• Organic and sculpted shapes.
• Forms that follow the contours
of the product.
• Made to wrap, hug, accentuate
or minimise with elegance and style.
TEXTURE AND COLOUR
• Distinctive textures combined with
smooth embossed logos show how
texture can highlight branding
and add another dimension.
• Colour demonstrates creativity and can
match brand identity and market trends.
MULTIPLE PARTS OR SINGLE PIECE
• To achieve the desired outcome we can
incorporate multiple parts or a single piece.
A multi-part assembly can have a variety of
textures and colours however a single piece
may say it all.
BRINGING LIFE AND PERSPECTIVE
• Mouldable effects, shapes
and sculpted forms.
• Bringing life and perspective.
USING COLOUR,
TEXTURE , CREATIVE
EFFECTS, FIBRE ,
FUNCTIONALIT Y AND
FORM LET’S IMAGINE
AND CREATE .
34
35
James Cropper Paper
James Cropper Paper
JAMES CROPPER
PAPER PRODUCTS
PARTNERSHIPS,
QUALIT Y & VALUE
Despite the significant challenges from
increases in raw material and energy
costs that have affected the whole paper
industry, the Paper division still managed
to grow sales by 4.3%. Achieved primarily
through our knowledge on custom
colour-matching and fibre expertise that
has fuelled significant growth in our
luxury packaging business.
With a strong Tailor Made value proposition we
have been working with leading luxury brands and
converters around the world, helping them to remove
plastic from their packaging supply chain – a double
net positive – as not only is this helping brands to tell
a great environmental story that resonates with their
consumers, but we are also doing good for society in
the process.
We have reaffirmed our commitment to strategic private
label partnerships with leading players in the paper
industry, and as we endeavour to reduce complexity
and focus on high quality, profitable product areas, we
will be further expanding our Tailor Made proposition
to deliver future growth.
PAPER INNOVATION
INSPIRING CIRCUL AR DESIGN
In today’s post-Blue Planet world,
there is a feverish focus on creating
a circular economy when it comes
to plastic. Meanwhile, levels of
paper and pulped product recycling
is now at a record high of 85.8%
across the 28 countries of Europe;
which is why you’d be forgiven for
thinking the paper industry might
take its foot off the gas when it
comes to sustainable innovation.
However, this couldn’t be further from
the truth: In fact, supported by the unique
expertise the paper industry has developed
over hundreds of years, innovation in paper
and pulped products is emerging as a shining
example of best practice for circular design
- and James Cropper is a business that is
leading the charge.
“The vital role of design is gaining wider
traction, reinforced by the work of such
organisations as The Ellen MacArthur
Foundation which describes design as:
‘integral to the shift to the circular economy;
by re-thinking and re-designing, we can
accelerate the transition to a new model that
doesn’t just eke out resources a bit longer, but
is restorative and regenerative by design.’
Only by thinking of design in its most
strategic terms, applying it to develop
solutions to our sustainability challenges,
will we find ways to innovate that are more
than sticking plasters to our woes. At a
product level, design that’s as appealing as it
is functional, recycled and reusable, is a key
step in ensuring uptake on a wider scale.
The paper industry is uniquely placed to
respond to these challenges, with a powerful
design history that dates back hundreds of
years. In fact, it’s by going deeply into
James Cropper’s papermaking heritage
that we’ve developed our most innovative
and successful solutions.
But innovation in isolation cannot facilitate
real change. For these innovations to really
work, collaboration is essential. It’s our
fundamental belief that solutions to our
waste issues lie in brands, designers,
manufacturers, the waste management and
recycling industries, and the government
working together.
CupCyclingTM – a James Cropper innovation
– was the world’s first method of upcycling
used coffee cups; and its success is an
example of why partnership is an essential
part of creating a circular economy. To date
the process has re-purposed in excess of 60
million coffee cups, with scope to achieve
significantly more from the facility with the
capacity to reclaim 500 million units per year.
To put this into context, that figure would
be approximately 20% of disposable cups
thrown away in the UK every year.
Sourcing, collecting, processing and
transporting this raw material is not
something James Cropper could do on its
own. These cups are sourced by working
closely with the coffee retailers, restaurant
chains, shopping centres and airports at the
points the cups are used. James Cropper has
partnerships in place with Costa, Starbucks
and McDonald’s, and ongoing trials with
other key locations.
“I WORK WITH PAPER
BECAUSE I LOVE THE
IDEA THAT A HUMBLE
PIECE OF PAPER
HOLDS SO MUCH
PROMISE , IT CAN
BECOME ANY THING
YOU WANT IT TO BE .”
H E LE N M U SS E LWH ITE ,
PAP E R AR TI ST
36
37
James Cropper Paper
James Cropper Paper
“WE ARE VERY PROUD OF
OUR NEW PACK AGING .
IT IS BEAUTIFUL , LUXURIOUS
AND SUPPORTS OUR
WORK TO BUILD A MORE
SUSTAINABLE FUTURE FOR
THE FASHION INDUSTRY.”
PAM BAT T Y, VI CE P R E S I D E NT
CO R P O R ATE R E S P O N S I B I LIT Y,
B U R B E R RY.
HAND MADE
FOR HANDMADE
Wallpaper* Handmade is an annual
salute to craft and creativity,
bringing together the best designers,
artists, and manufacturers to make
one-off wonders.
In a quest to highlight alternatives to single-use
plastic bottles, designer and marine campaigner
Beatrix Ong was inspired to work with us
in the creation of a natural water vessel to
highlight the problem posed by the many
millions of disposable plastic bottles purchased
daily, finding their way into the world’s oceans.
Showcased at the Wallpaper Handmade
exhibition in Milan, the Water Vessel was
a collaboration with fellow designer and
paper sculpture specialist Lou Blackshaw,
and created using paper with reclaimed
CupCyclingTM fibres.
Of her creative process in creating the beautiful
shell-like form, Beatrix explains “should it find
itself in nature, it wouldn’t find itself out of
place, unlike plastic bottles in the ocean.”
By working with waste management
companies like Veolia, Paper Round, Grundon
and Forge Recycling, we can ensure that these
cups are successfully diverted from landfill to
our CupCyclingTM plant.
Alongside pulp from renewable forests,
paper fibres from some of the 2.5 billion
coffee cups thrown away in the UK each year
are upcycled into beautiful paper for Selfridge’s
iconic yellow shopping bag, Burberry’s
elegant, contemporary new sustainable paper
packaging, new ranges of sustainable stationery
and even packaging for reusable cups!
Burberry is committed to building a more
sustainable future and has achieved 50
disruptions at each stage of its linear value
chain to move towards a more circular
business model. For example, in partnership
with CupCyclingTM, more than 18 million
cups that would have otherwise gone to
landfill have been upcycled to create
Burberry’s rebranded packaging, which is in
turn recyclable and FSC-certified.
Pam Batty, Burberry’s VP of Corporate
Responsibility said: “We believe in driving
positive change for our industry, our
communities and the environment. We are
very proud of our new packaging. It is
beautiful, luxurious and supports our work
to build a more sustainable future for the
fashion industry.”
Serving an estimated 28 million customers
from 2,389 outlets across the UK every
month and voted the Nation’s Favourite
Coffee Shop for 8 years running, Costa
Coffee have also been working with James
Cropper on recovering and recycling its
takeaway coffee cups since the launch of
CupCyclingTM in 2017.
A great example of circular economy
thinking, in 2018 Costa launched the first
reusable coffee cup to enable contactless
payments, with the product packaging
material made from those same recycled
takeaway cups.
Jason Cotta, Managing Director at Costa
Coffee comments: “Whilst we are committed
to ensuring more takeaway coffee cups
are recovered and recycled we hope the
innovative Clever Cup will become an
additional incentive to help facilitate and drive
environmentally friendly behaviour.”
Design-led retailer Paperchase boast over
fifty years on the UK’s high streets with their
offering of inspiring and innovative stationery.
This approach is carried through into their
Conscious Living collection and features the
‘I used to be a coffee cup’, ‘No longer
a latte’ and ‘Kind people are my kinda
people’ notebooks, each containing paper
incorporating fibres from coffee cups
reclaimed through CupCyclingTM.
Scott Corbett, Brand Director at Paperchase
comments: “Conscious Living was born
in response to our customers becoming
increasingly aware and concerned about
the effects we all have on the planet.
It’s not just about recycling, it’s about
sourcing locally and ethically and using
friendlier production processes.
We have always been a brand that takes our
social responsibility seriously, it’s reflected
in our brand values, we just haven’t shouted
about it.”
UK artist Helen Musselwhite is never short
of inspiration, she combines hand cutting,
folding and scoring of paper and card to
create ethereal and whimsical designs by
carefully cutting layers of paper into delicate
scenes. “In my work I try to recreate the
beauty of nature,” she says.
Helen visited the mill recently to see how
the papers she uses in her art are made.
One of her recent commissions was for
specialist tea brand T2, displayed at the
2018 London Design Festival, which draws
a global audience to the capital in an annual
celebration of creativity.
Made entirely from the richly coloured
papers manufactured exclusively for G . F
Smith by James Cropper – Extract, a product
which includes reclaimed fibres from the
CupCyclingTM process and Colorplan, were
transformed in the hands of this acclaimed
paper artist into a paper installation
celebrating teas from around the world.
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“ IT’S NOT J UST ABOUT
RECYCLING, IT’S ABOUT
SOURCING LOCALLY
AND ETHICALLY AND
USING FRIENDLIER
PRODUCTION PROCESSES.”
SCOT T CO R B E T T, B R AN D DI R EC TO R ,
PAP E RCHA S E
Visions & Values
“ CLEARLY DEFINING AND
COMMUNICATING OUR ‘BUSINESS
IMPORTANT GOAL S’ IS KE Y
TOWARDS REALISING OUR
GROUPS ASPIR ATIONS IN THESE
TURBULENT TIMES.
PRO -ACTIVELY ENGAGING WITH
OUR TEAM MEMBERS TO IDENTIF Y
AND FOCUS ON THOSE LEADING
ACTIVITIES NEEDED TO DELIVER
OUR GOAL S, WILL ENABLE US
TO CREATE THE MINDSET
REQUIRED TO DELIVER
SUSTAINABLE SUCCESS.”
DAVE WATSON ,
CH IE F OPE R ATION S OFFICE R
OUR VALUES
TRUST, DIGNIT Y
AND RESPECT
SUCCESSFUL CUSTOMERS
PROFITABILIT Y
CONTINUOUS LEARNING
MOTIVATED WORKFORCE
SAFET Y AT WORK
COMMUNIT Y FOCUS
SUSTAINABILIT Y
41
1
1. Chief Operations Officer, Dave Watson with
(left) Craftperson Dave Askins and (right) Paper Operative, Gareth Wells
2. Head of Information, Systems and Development (ISD), Caroline Noble
3. IT Support Analyst, Mark Foster
4. Blender Operator, Lyndon Montgomery
3
40
2
4
Sustainability
Sustainability
SUSTAINABILIT Y
FROM THE GROUND UP
Sustainability without innovation
is hard, if not impossible, to
achieve. Our volatile and uncertain
world makes increasing demands
on business to be better prepared,
to make smarter decisions,
to understand cause and effect
– how can this be achieved
without innovation?
Conversely, innovation without purpose
and ambition to underpin it and bring it to
life has no foundation, and as such can be
the difference between success and failure.
A product or business process cannot survive
without commerciality, which drives
business, but it thrives when it adds value
to people’s lives.
When we make the statement ‘Redefining
paper since 1845’ we make it with real
purpose: it empowers and liberates, it affords
James Cropper the opportunities to pioneer
and innovate.
Redefinition epitomises our history
and sets a course for the journey ahead,
with sustainability firmly embedded in
the business.
From the raw materials we use and the energy
we consume, the people we employ, the
communities we support and which, in turn,
support our organisation – sustainability will
continue to provide the stable platform for
future growth.
SUSTAINABLE GROWTH
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 activities shown on pages 44 to 45 are
examples from the last 12 months illustrating
how James Cropper is putting a number of
the SDG’s into practice.
“ THE FUTURE GROW TH OF JAMES CROPPE R PLC
WILL CONTINUE TO BE INEX TRICABLY LINKE D
TO SUSTAINABILIT Y WITH COMMITME NTS
MADE TO GLOBAL INITIATIVES, NATIONAL
PROGR AMMES AND LOCAL ACTIVITIES ON OUR
VE RY DOORSTE P ALL IMPLE ME NTE D IN - LINE
WITH THE GROUP ’S OVE R-ARCHING VALUES .”
42
43
Sustainability - Development Goals
Sustainability - Development Goals
ACCELER ATING OUR COMMITMENT
TO SUSTAINABLE DEVELOPMENT
“ WE HAVE BECOME VERY GOOD AT MAKING THINGS – NOW WE HAVE
TO GET MUCH BET TER AT UN - MAKING AND RE- MAKING THEM.”
H R H TH E PRINCE OF WALE S , WASTE TO WE ALTH SU M M IT 2018
VISION TO ACTION
Business must serve society. We believe that
to achieve long-term success and sustainable
growth our business must respond to the
challenges and opportunities of an increasingly
resource-constrained and unequal world which
contains poverty, hunger and climate change.
Our vision for doing business is one that
delivers growth whilst also serving society, and
is strongly aligned with the SDGs. By using
our resources as a business to address issues
such as biodiversity, reforestation, upcycling
and climate change, we are delivering short-
term and long-term benefits for our customers
and shareholders as well as society.
We’re already working with a wide range
of partners, including non-government
organisations, industry groups, academia and
other businesses, and exploring innovative
approaches to drive sustainable development.
WATER
MANAGEMENT
CLIMATE
CHANGE
WASTE
REDUCTION
RESPONSIBLE
FIBRE SOURCING
OVER 91% OF
WATER ABSTRACTED
IS RETURNED TO
THE CATCHMENT
The water drawn from the River Kent
at Burneside is fundamental to all
James Cropper business divisions.
It is a natural resource and designated
Site of Special Scientific Interest (SSSI),
due to the thriving population of
white-clawed crayfish.
Our focus is on efficiency in water
usage and on maximising return of
clean safe water to the catchment.
• Water managed in partnership
with the Environment Agency
• Water is continually recycled during
production processes
• Waste water is sent directly to our
local treatment facility
• Over 91% of water abstracted
is returned to the catchment
James Cropper continues to improve
its energy-related performance and
efficiency, including actively seeking
energy reduction opportunities.
The Group’s commitment to the ISO
50001 energy management standards,
focuses on achieving continual
improvement of energy performance
through a systematic approach to
consumption and efficiency with
immediate objectives of reducing
energy costs and emissions.
• An active investor in low-carbon
energy solutions
• A highly efficient combined heat
and power plant
• Heat exchange and recovery
systems in manufacturing processes
• Hydro and solar energy -
generating 400 MWh renewable
electricity per annum
• Material developments for wind
energy and fuel cell technology
HYDRO AND
SOLAR ENERGY -
GENERATING
400 MWh
RENEWABLE
ELECTRICITY
PER ANNUM
60 MILLION
DISPOSABLE
CUPS UPCYCLED INTO
PAPER PRODUCTS
AND PACKAGING
James Cropper continues to be
recognised as a leading innovator in
the recovery of valuable fibre resource,
thanks to our CupCyclingTM initiative.
Our commitment is not only to using
renewable materials and low impact
manufacturing techniques, but also
designing waste out of our processes
and creating high quality products that
are easier to recycle.
Lightweight materials and design
are becoming increasingly important
in many industries. There are three
industries, however, where lightweight
has played an important role in product
design almost from their inceptions:
aviation, wind energy, and automotive.
TFP materials are often used in the
production of aircraft and wind
turbines where the main drivers for
lightweighting are to achieve better
efficiency, greater stability and reduced
stresses on materials in use.
• CupCyclingTM – 60 million
disposable cups upcycled into paper
products and packaging
• James Cropper paper products
are inherently recyclable and
recycled (record European high
85.8%* recycling rate for paper
and cardboard)
• Dried waste approved by
Environment Agency as a fertiliser
on local farms
• Continued investment in
ColourformTM plastic free packaging
• TFP non-woven materials
improve end-use efficiency
99% FRESH FIBRE
SOURCES CERTIFIED
TO FSC OR PEFC
CHAIN OF CUSTODY
A third key strand of the circular
economy is the regeneration of natural
systems. Wood pulp is our primary
raw material used by the papermaking
and ColourformTM divisions with
recovered material from CupCyclingTM
making a significant contribution.
James Cropper source wood pulp from
responsibly managed forestry, certified*
to FSC® and PEFC® standards.
From harvest site and pulp mill to
end product, we employ effective
fibre traceability procedures which
provide assurance of the legality of
wood, biodiversity and sustainable
land use practices throughout. In fact,
managed forestry in Europe is growing
and, today European forests stand
30% larger in area than they did in
the 1950s!
• 18% recycled fibre input, given
a second life as paper products
and packaging
• 99% fresh fibre sources certified
to FSC or PEFC chain of custody
• Sustainable forest management is
driving Europe’s forest growth
* (Source : European Commission, Eurostat)
https://ec.europa.eu/eurostat/web/products-
datasets/product?code=ten00063
IMPROVING
HEALTH
& WELLBEING
Our organisation provides diverse,
rewarding employment and
opportunity for personal growth,
our commitment to people is core to
the Group’s values.
Launched last year, the Better Health
at Work Award has a dedicated team
of 24 advocates within James Cropper
tasked with promoting and raising
awareness of health matters.
The results of our employee
Health Needs survey clearly showed
Mental Health and Stress to be the
most important topics for all.
Data suggests one in six adults
experience depression, anxiety, stress
and other common mental disorders
yet the ‘invisible illness’ of mental
health is frequently hidden
and widely misunderstood.
Mental Health First Aid (MHFA)
training was implemented during
2018 (see page 51) to equip personnel
across the Group to identify and help
colleagues in need of support.
At the beginning of 2019 we ran our
first campaign to help improve the
health and wellbeing of everyone at
James Cropper. We kicked off with
RED January: a national initiative that
encourages everyone to support their
mental health by doing something
active every single day.
THE BETTER HEALTH
AT WORK AWARD
HAS A DEDICATED
TEAM OF 24
ADVOCATES WITHIN
JAMES CROPPER
44
45
Sustainability
Sustainability
INDUSTRY RECOGNITION
TFP were acclaimed Best Manufacturer at
the in-Cumbria Business Awards 2018
for our unique process and the high standard
to which we operate. The event also saw
TFP taking the Best Innovation award
for our forward-thinking product
development projects.
The James Cropper Annual Report was
itself a winner in 2018 for the category
Recycled or Upcycled Product of the
Year at the Waste2Zero Awards, a showcase
of best practice and recognising excellence
in management and prevention of
waste, specifically in the food service
and hospitality sectors.
Across the Group, 2018 has
been another award-winning
year with honours received
for Paper, Colourform™
and Technical Fibre Products.
The major accolade of Luxury Packaging
Supplier of the Year at the Packaging News
Awards was recognition for teams across
James Cropper, specifically CupCycling™
and Colourform™, with judges commenting
it is “great to see a supplier with a vision.
The start of a journey, looking into recycled
materials for luxury products. They should be
commended for investing.”
Against incredibly high competition, James
Cropper won in the category ‘Driving
the Circular Economy’ for its unique
CupCycling™ process at the Sustainability
Summit Awards.
BURBERRY: DRIVING POSITIVE CHANGE
The luxury brand, which last
year launched new sustainable
packaging incorporating
CupCyclingTM, has committed
to ensuring all of its consumer
packaging is reusable, recyclable
or compostable by 2025.
Using an innovative manufacturing technique,
40% of Burberry’s new packaging material is
made from recycled coffee cups, with more
than 18 million cups diverted from landfill
so far. The result, aligned with Burberry’s
ambition to build a more sustainable future,
is also fully recyclable and certified by the
Forest Stewardship Council (FSC).
Burberry has also made changes to reduce
its plastic footprint in its transit packaging.
Further to its commitment to the Ellen
MacArthur Foundation’s New Plastics
Economy initiative in November 2018,
Burberry will introduce new transit hangers
made from a bio-based compostable
alternative and is switching its garment bags
to a compostable PHA-blended material.
OUR ROLE
IN THE NEW
PL ASTICS
ECONOMY
Led by the Ellen MacArthur
Foundation in collaboration
with UN Environment,
The New Plastics Economy
initiative ‘brings together key
stakeholders to rethink and
redesign the future of plastics,
starting with packaging’.
United behind a common vision and
a set of 2025 targets to address the
problem at its source, James Cropper
joins governments, academia, industry
associations, manufacturers and investors
as a signatory of the New Plastics
Economy Global Commitment.
As a supplier to the global packaging
industry, James Cropper has published its
responsibilities to the packaging sector:
1. James Cropper commits to support our
customers to eliminate problematic or
unnecessary plastic packaging through
the supply of ColourformTM plastic free
packaging and other paper alternatives.
2. James Cropper commits to increasing
our capacity for CupCyclingTM
(upcycling of paper cups) by working
together with retailers, waste
management companies, and other
stakeholders to increase the collection
and supply of used cups to our facility.
We will also continue to work with our
customer base to generate demand for
the resulting recycled fibres.
3. James Cropper commits to send
all plastic recovered during the
CupCyclingTM process for recycling
or re-use by 2025.
“ MANY FORWARD-THINKING BUSINESSES ARE,
I KNOW, ALREADY PUTTING THE PRINCIPLES
OF THE CIRCULAR ECONOMY INTO PRACTICE.
EARLIER THIS YEAR I SAW NOVEL METHODS
OF RECYCLING PAPER CUPS, WHICH INCLUDE
PLASTIC IN THEM, AT JAMES CROPPER IN
KENDAL , ASSISTED BY COLLABORATION
WITH INDUSTRY AND LOCAL AUTHORITIES.”
HRH THE PRINCE OF WALES
WASTE TO WEALTH SUMMIT
Veolia’s integrated waste
management facility in Southwark,
London, provided a fitting
backdrop for the Waste to Wealth
Summit in November 2018.
HRH The Prince of Wales delivered a
keynote address to over 200 leaders from
business, government, academia and civil
society in which the urgent need to tackle
the resource issue in the UK was addressed
and explained why business is best placed
to meet this challenge.
Phil Wild, Chief Executive Officer at James
Cropper said “The summit delivered a clear
message. It’s vital we move from a linear
economy, where waste isn’t utilised to its
full potential, to a circular economy, whereby
it becomes a truly profitable asset.
“It’s everyone’s responsibility to think
about their footprint and make good on
their commitment at pace. As a society
we’ve made some progress, and as a
company we’ve pledged to continue to
work as a key innovator in the packaging
and recycling industries, working
collaboratively with businesses to reduce
avoidable waste and develop sustainable
solutions in product design.
“It was truly inspiring to stand shoulder to
shoulder with like-minded business who are
also pledging to redesign how resources are
used in our products, services and operations.
We need to unlock the potential of a circular
economy. The time to act is now, and so we
look forward to seeing the impact pledges
at the summit have in driving real change
to secure a better future for our planet.”
46
47
Source: A line in the sand: Global Commitment to
eliminate plastic pollution at its source.
www.newplasticseconomy.org
Source: Waste to Wealth: it’s time to stop throwing our future away
https://www.bitc.org.uk/campaigns-programmes/environment-sustainability/wastetowealth
Pride Excellence Awards
Pride Excellence Awards
“ OUR PEOPLE CONTINUALLY STRIVE TO BE AT
THEIR BEST, TO DO BETTER FOR THEIR COLLEAGUES,
DEPARTMENT AND THE WIDER ORGANISATION”
DAVE ‘NIXY’ NICHOLSON
ADAM GAME
PRIDE EXCELLENCE AWARDS
ANTHONY BOWNESS
STEWART KING
RYAN WALLACE
Across the James Cropper Group,
in whatever capacity, our people
continue to excel in the activities
they undertake from one day to
the next.
The roles within the organisation may be
diverse yet a continual thread that runs
throughout is the conscious absence of a
‘business as usual’ mindset – our people
continually strive to be at their best, to do
better for their colleagues, department
and the wider organisation.
Over recent years, the Pride Awards have
been testament to this quest for improvement.
Covering areas of innovation, creativity,
customer service and safety, Pride also
recognised the employees who selflessly
gave their personal time and abilities to help
others, further underlining the James Cropper
commitment to community.
The annual Pride format was re-visited in
July 2018, with quarterly awards introduced.
Nominations were invited for the people
or teams who had gone above and beyond,
who had exceeded in their roles and who,
in the eyes of their peers, were worthy of
recognition for their ongoing commitment
and alignment with the Group’s values.
From these quarterly winners, five individuals
have been selected as recipients of the overall
Pride Excellence Awards.
GOLD AWARD
DAVE ‘NIXY’ NICHOLSON
(PAPERMAKING/YARD)
The sad passing of Steve Tyler was an
incredibly emotional time for many at James
Cropper, especially for Dave who had been
a long-standing workmate and good friend.
A true pillar of strength, Dave visited Steve’s
family at their home and shared their loss
with understanding, dignity and respect.
Dave liaised extensively with the local
authority and community groups to ensure
Bridge Street (adjacent to the Mill and
undergoing major repair works for the
majority of 2018) could be opened for the
funeral cortège to pass and for many of
Steve’s colleagues to pay their last respects.
James Cropper are proud to have had
Dave represent the company and provide
great support to Steve’s friends, family
and work colleagues, for which we are all
greatly appreciative.
SILVER AWARD
ADAM GAME (ENGINEERING)
In an accident in June 2018, James Cropper
Maintenance Craft Engineer Jos Addison
received severe caustic burns to his lower legs.
Carrying out first aid quickly and calmly,
Adam reduced the seriousness of the injury,
actions which helped save Jos’ legs and
which drew commendations from doctors
and hospital staff. Adam was involved in his
colleague’s after-care at hospitals in Kendal
and Preston.
Until recently a member of St John
Ambulance, Adam’s ability to act swiftly
and take appropriate action in a medical
emergency often sees him responding to
999 calls in the local community when not
at work.
BRONZE AWARD
ANTHONY BOWNESS
(HEALTH, SAFETY & ENVIRONMENT)
When a malfunctioning effluent process
one night at the Burneside Mill presented
the potential for a significant environmental
incident, Anthony’s swift action and assured
decision-making brought the situation
under control.
Regardless of the late hour, Anthony headed
to the Mill and assembled a team comprising
engineers and an external contractor to bring
the situation under control, whilst involving
other Senior Team Leaders to mitigate
further issues and informing key stakeholders
of the situation.
His diligence and commitment displayed in
this time epitomises Anthony’s approach to
every day at James Cropper.
BRONZE AWARD
STEWART KING (ISD)
Putting colleagues and company before
himself on countless occasions, Stewart’s
commitment is something which is never
in question. Often seen starting early and
finishing late, Stewart takes great pride in
ensuring the IT systems in his domain are all
operating correctly. Assisting colleagues learn
new skills and software, Stewart is always
flexible with his hours when required.
When a Windows update seriously affected
countless companies causing email networks
to fail, Stewart worked through the night
to remove the faulty software and ensure
systems were fully operational for the
next day.
BRONZE AWARD
RYAN WALLACE (TFP)
In the TFP division, the process of having
to periodically clean and re-coat the couche
roll meant valuable production time was
being lost each day, a figure which amounted
to 364 lost hours per annum across No.1
and No.3 machines.
Ryan has solved a number of issues resulting
in increased uptime on No.1 machine by
approximately 1-2 hours per shift.
Additionally, he has addressed problems with
‘holes and picks’ at the start of a production
run, reduced the amount of broke generated,
helped improve the quality of finished
products and increased capacity on No.1
machine by 2.5%, a potential for additional
£180k revenue.
48
49
49
People - Recruitment to Retirement
People - Trust, Dignity & Respect
RECRUITMENT TO RETIREMENT
“THE GOOD THING
ABOUT THIS
APPROACH IS THAT
IT GIVES YOU TIME
OFF WORK TO TAKE
STOCK OF WHAT
YOU ARE GOING
TO DO WITH YOUR
RETIREMENT - NEW
HOBBIES, HOLIDAYS
... ABOVE ALL , YOUR
PARTNER OR FAMILY
CAN ALSO ADJUST TO
HAVING YOU AROUND
THE HOME MORE.”
This option affords the employee more
control of the way they retire and helps
the company recruit and train their
successors, with knowledge gained
during their employment passed-on to
the next generations.
14 employees have retired using this option
during 2017/18 and we have a further 8
employees due to retire early 2019.
“I remember my first reaction to the Phased
Retirement proposal in 2016 was ‘good idea,
but not for me’, however, I was persuaded by
two of my colleagues to sign up for the scheme.
The good thing about this approach is that it
gives you time off work to take stock of what
you are going to do with your retirement –
new hobbies, holidays and preparing mentally
to get used to not working and socialising with
your work colleagues. Above all, your partner
or family can also adjust to having you around
the home more. So, with all this in mind, I
would thoroughly recommend this scheme for
everyone who is coming up for retirement.”
Ian Davis, March 2019
The 2018 calendar year set a new
milestone for human resources
with 156 new recruits commencing
employment across the James
Cropper Group, a figure which
eclipses the previous highest figure
of 101 in 2017 and brings the head-
count at time of writing to 594.
Continued growth in the business, specifically
ColourformTM (JC3DP) and TFP, combined
with the success of the phased retirement
programme, are key contributors to these
figures. There is also an appreciation of
James Cropper as a provider of well
remunerated, diverse and engaging careers
that has helped support recruitment both in
the UK and international operations.
A company with global reach and ambition
across diverse markets, James Cropper
continues to invest in talent selection, training
and education, an approach which helps
build resilience and guarantee continuity of
knowledge and expertise.
The ability of James Cropper to retain highly
experienced, specialist employees over many
years is well documented and over the last
year 50 members of staff were recognised for
their long service of between 20 and 40 years.
Further evidence lies in the fact that there are
currently 140 employees over the age of 55
spread across all divisions of the Group. It is
understandable that a number of these may
already be looking towards retirement.
The removal of the Default Retirement
Age in the UK has presented a degree
of uncertainty for employees across all
industries. In response to this, James Cropper
have introduced a process which enables
employees to better prepare for retirement
and acclimatise to life outside work.
Within the Phased Retirement Option
full time employees may take off one shift
each week for their final 6 months.
BARNARDO’S
SAY A BIG
‘THANK YOU ’
TO JAMES
CROPPER
EMPLOYEES
In the last year alone, Barnardo’s
work saw them engaging with over
300,000 vulnerable children, young
people, their families and carers
across the UK.
An HMRC scheme, Payroll Giving enables
employees to make tax free donations direct
to a charity through their monthly pay, and
staff at James Cropper have responded to this
initiative in support of Barnardo’s work.
An entirely voluntary scheme, employees can
nominate the charity to be supported and can
donate as little as £1 per month or whatever
figure they wish to contribute. Cumulatively
these donations can add up to significant
amounts and during 2018 the payroll giving
achieved by our employees was £43,728.
TRUST, DIGNITY AND RESPECT
As common as physical first
aid is throughout the modern
workplace, with dedicated
training and provision of medical
equipment, the same cannot be
said for the support of personnel
who may be developing mental
health issues or experiencing
worsening problems.
Recognised internationally, the Mental
Health First Aid (MHFA) training course is
not intended to offer comprehensive diagnosis
or treatment but provides people with the
ability to identify a need and offer primary
support until appropriate qualified assistance
can be arranged.
The indicators of mental ill health can prove
elusive to identify, so MHFA provides the
guidance to recognise the warning signs and
instils the confidence to guide someone to
appropriate support.
James Cropper have made a commitment to
embed MHFA within the Group and, since
October 2018, 48 employees representing all
divisions and levels within the Group have
completed the internationally recognised
training course.
WE ARE ALSO
ENCOUR AGING PEOPLE
TO TALK MORE FREELY
ABOUT MENTAL HEALTH,
REDUCING STIGMA
AND CREATING A MORE
POSITIVE CULTURE BY
IMPROVING OUR WIDER
UNDERSTANDING OF
THEIR EXPERIENCES.
The Better Health at Work Award
(BHAWA) was established in 2009
with the objective of bringing wellbeing
into the workplace. Employees benefit
from a healthier environment and culture,
increased access to health information
and interventions.
During the past year, James Cropper have
facilitated workplace activities to promote
the initiative and have 24 ‘Health Advocates’
who work to motivate employees to actively
participate in the activities. These have
included RED January (doing something
active every day) and T2T Day (Time 2 Talk),
both supporting mental health awareness
and action. Future campaigns include Men’s
Health and Back Pain.
50
51
People - Continuous Learning
People - Thank you to Bob Duvall
CONTINUOUS LEARNING
APPRENTICESHIPS
From its introduction in April 2017, James
Cropper began making contributions to
the Apprenticeship Levy. A tax on UK
employers at a rate of 0.5% of the total
payroll, it is a fund which can be used to
fund apprenticeship training.
In response to the new levy a review
of performance and development was
undertaken, aligning specific training needs
with applicable apprenticeships. In addition,
James Cropper have been instrumental
in creating the new Papermaking
Apprenticeship, a 3-year programme
focused on developing the next generation
of skilled papermakers.
Comprising the single largest cohort from
any UK papermill, 6 employees from James
Cropper embarked on the Papermaking
Apprenticeship programme in 2018, all of
whom have successfully completed modules
in engineering and paper technology.
A total of 43 employees comprising
existing staff and new recruits have
commenced apprenticeship programmes
in the disciplines of engineering, accounting,
business administration and leadership,
from GCSE level through to master’s degree.
PERSONAL DEVELOPMENT
AND TRAINING
In excess of £40,000 has been invested
by James Cropper to support individual
growth, personal development and
succession planning.
Regular performance and development
reviews identify training requirements,
some of which naturally fall outside of
the Apprenticeship Levy.
In such instances external training support
was provided for personnel in subjects
including Lean Six Sigma, NEBOSH
and customer service.
“ IN EXCESS OF £40,000
HAS BEEN INVESTED
BY JAMES CROPPER
TO SUPPORT
INDIVIDUAL GROWTH.”
GRADUATES
Structured to develop future leaders within
the business and support the growth of
papermaking, the graduate programme spans
3-years from foundation to expert level,
with skills developed in leadership, paper
technology, quality and process capability.
To support the growth of the ColourformTM
(JC3DP) division, a further two graduates
joined James Cropper in 2018.
All graduates have embedded quickly into the
business and make significant contributions to
the Group, providing expert technical service
to the business in colour, laboratory and
technical services and mill chemistry projects.
Bob Duvall (centre) receiving a signed photograph from John Haaland (left) and Maria La Torre (right)
THANK YOU TO BOB DUVALL
It was a very significant moment
when we said farewell to an
individual whose time with
James Cropper has had such
an enormous positive impact
on customers, colleagues and in
shaping the road ahead for the
Technical Fibre Products Inc. (TFP)
division of the Group.
Robert ‘Bob’ Duvall was President of Electro
Fiber Technologies (EFT), an in-house
subsidiary of TFP, for over sixteen years until
his well-earned retirement in November 2018.
After serving in the US Marine corps in the
1970s, Bob began his professional career
in creating and manufacturing unique
conductive specialty materials, learning the
craft of plating carbon and other engineered
fibres. Bob became a leading expert in these
technologies and ultimately held positions
as the Chief Technical Officer of Composite
Materials LLC and Director of Manufacturing
for Thermion Systems International.
During his time at Composite Materials LLC,
Bob worked with TFP to develop a dual metal
plated carbon - specifically Copper Nickel
Coated Carbon which is now a standard
product for TFP, and the vertical integration
of this plating technology proved to be a
major catalyst for growth in the business.
Focusing on metal coated nonwovens, EFT
relocated to the current Technical Fibre
Products Inc. site in Schenectady, New York,
in 2011 with Bob appointed President in 2014.
Responsible for developing and implementing
the manufacturing methods for fibre plating
operations, an early achievement made by
Bob enabled TFP to include metallised
carbon fibre into the Optiveil® and Optimat®
product lines, both becoming key additions
to our portfolio.
To put into perspective the scale at which
the Schenectady facility has grown in size
and capacity during Bob’s time with us,
what was once an empty industrial facility
today comprises four advanced plating lines,
a nanocoating line, a particle plating line
and supporting QA laboratories.
Martin Thompson, Chairman of Technical
Fibre Products Inc: “Without Bob’s know
how, work ethic and pragmatism, one would
have to wonder whether any of that would
exist today. TFP is now recognised as a
leader and trusted advisor with regard to
commercialising and developing conductive
wet laid nonwovens.”
Using either electroless plating or an
electroplating method, EFT uniformly coats
either single or dual metals onto the surface
of fibres. The flexibility of the process
enables TFP to offer customised metal coated
fibres with the base fibre, metal type and
metal coating weight all controlled to meet
application requirements.
On behalf of everyone in the James Cropper
Group, we would like to convey our most
heartfelt thanks to Bob for his invaluable
contribution and wish him all the very best
for his retirement.
“ BOB WAS PRESIDENT OF
EFT, FOR OVER 16 YEARS
UNTIL HIS RETIREMENT
IN NOVEMBER 2018.”
52
53
Vehicle Livery
THE PAPER LORRY MADE
FROM 10,000 FOLDS
Precise. Intricate. Delicate.
Words which don’t naturally
come to mind in the realm of
heavy goods vehicles.
Enter British paper artist Kyla McCallum,
the London-based creator of stunning
creations either utilising or inspired by
folding; specifically, paper folding.
Kyla’s work caught the eye of Chairman Mark
Cropper to such a degree that he knew where
to find the biggest canvas and showcase both
her work and James Cropper paper.
“I came across Kyla’s work on Instagram
and it immediately struck a chord” explains
Mark. “Her work transforms a flat sheet into
something dynamic and multi-dimensional that
redefines the material. It is simple, but beautiful
and completely authentic. The fit was perfect.”
The brief was challenging: to create artwork
which will communicate the intrinsic beauty of
James Cropper’s bespoke papers, be delivered
at a huge scale – the full length of an articulated
truck – and to an unprecedented quality.
The paper fleet was one of the very first things
to be branded in the 1960s when we introduced
a pigeon logo that was linked to the family crest.
Following a trip to Kyla’s East End studio,
Mark commissioned her to create four paper
sculptures, each to be made from Kendal Green
paper, James Cropper’s signature colour.
Kyla takes up the story: “The four paper
sculptures include a total of over 10,000 lines,
each one folded individually by hand. I wanted
to create pieces with interesting geometric
patterns that could work at the largest scale
and reflect the precision and craftsmanship
that James Cropper is known for”.
“The project began with lots of paper
prototypes and models to test different shapes.
This ranged from hexagonal and angular designs
to softer shapes that were squeezed together to
create waves of folds.”
To realise the highest quality reproduction on
the trailers, photographs of over 1GB each were
taken and supplied to trailer supplier Schmitz
Cargobull, the highest definition they had ever
worked with.
“Every fold and crease are visible, even
the texture of the paper itself” adds Mark.
“The final result is fabulous. It is a perfect
representation of what James Cropper stands
for – an unmatched dedication to quality, and
every sheet of material tailor-made to exacting
specifications. The three dimensionality is also
very fitting, providing a link with our newest
paper division ColourformTM, a fully recyclable
alternative to moulded plastic”.
At the heart of the project is the company’s
Kendal Green paper, a bespoke colour based on
a woollen cloth the area was famous for in the
middle ages. The original pigments used to dye
the cloth were identified and the colour brought
back to life in James Cropper’s colour lab.
Mark concludes, “I was very keen our
brand colour had an authentic provenance.
James Cropper have been experts in colour
for over 170 years and this attention to detail
is a key reason brands from around the world
choose to work with us. It was important our
own colour was as unique and true to our roots
as those we make for so many others.”
1
2
1. The designs in all their glory
on our trucks
2. Mark Cropper with Kyla McCallum
3. Kyla’s preliminary sketches
4. Drivers Steve Kinley, Andrew
Shepherd, Andrew Armstrong
and Rob Simpson
5. Kyla working with the
paper structures
“ I WANTED TO CREATE PIECES WITH INTERESTING
GEOMETRIC PAT TERNS THAT COULD WORK AT THE
L ARGEST SCALE AND REFLECT THE PRECISION AND
CR AF TSMANSHIP THAT JAMES CROPPER IS KNOWN FOR .”
5
3
4
54
55
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
TECHNICAL FIBRE PRODUCTS
COLOURFORM
JAMES CROPPER PAPER
OUR VALUES
SUSTAINABILITY
PRIDE EXCELLENCE AWARDS
PEOPLE
LIVERY
57
58
60
64
65
70
71
73
GOVERNANCE
BOARD OF DIRECTORS
CORPORATE GOVERNANCE STATEMENT
REPORT OF THE AUDIT COMMITTEE
REPORT OF THE REMUNERATION COMMITTEE
QCA PRINCIPLES
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
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
56
57
Governance - Board of Directors
Governance - Board of Directors
BOARD OF DIRECTORS
MARK CROPPER CHAIRMAN
DAVE WATSON CHIEF OPERATIONS OFFICER
Appointed
October 2006
Independent
No
Committee Memberships
Nominations (Chair) · Audit
Remuneration · Pension
Qualifications
MA
Experience Mark is the sixth generation of the Cropper family
to hold this position. Following university, he pursued a career
in environmental finance.
External appointments Ellergreen Hydro Projects Ltd
(Director) · Director of Community Energy Cumbria Ltd
Director of Burneside Community Energy Ltd
Rydal Hydro Ltd (Director) · Scandale Hydro Ltd (Director)
Fisherplace Hydro Ltd (Director)
Experience Dave previously worked for 3M where he held
roles covering industrial, automotive, pharmaceutical, and secure
documents and systems markets.
External appointments -
Appointed
January 2014
Independent
No
Committee Memberships
Executive
Qualifications
BEng (Hons)
PHIL WILD CHIEF EXECUTIVE OFFICER
PATRICK WILLINK CHIEF TECHNOLOGY OFFICER
Experience Phil previously worked for 3M where he
held directorships and roles covering EMEA, industrial,
healthcare, automotive and security market sectors.
External appointments -
Appointed
October 2012
Independent
No
Committee Memberships
Executive (Chair)
Qualifications
BEng (Hons)
Appointed
March 1998
Independent
No
Committee Memberships
Executive · Pension
Qualifications
BSc MBA
Experience Patrick is a member of the Willink family, joining
the Group in 1990, appointed Chief Technology Officer in 2014
and instrumental in the creation of the 3DP division. He was
President of the Confederation of Paper Industries Ltd from
2014 to 2018.
External appointments Confederation of Paper Industries Ltd
(Director) · Confederation of European Paper Industries Ltd
(Director)
ISABELLE MADDOCK GROUP FINANCE DIRECTOR
DR ANDREW HOSTY SENIOR INDEPENDENT NON-EXECUTIVE DIRECTOR
Appointed
July 2014
Independent
No
Committee Memberships
Executive · Pension (Chair)
Qualifications
BSc, FCMA
Experience 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.
External appointments -
Appointed
August 2018
Independent
Yes
Committee Memberships
Audit · Remuneration
Nomination
Qualifications
PhD · RFEng
Experience Following a PhD in Materials Technology, Andrew
pursued a career in industry culminating in his appointment
as CEO of Morgan Ceramics and COO of Morgan Advanced
Materials PLC. Most recently he was founding CEO of the
Sir Henry Royce Institute for Advanced Materials.
External appointments Rights and issues Investment
Trust PLC (Director) · Mom Incubators Ltd (Director) ·
Consort Medical PLC (Director) · RHI Magnesita NV (NED)
STEVE ADAMS MD PAPER DIVISION
JIM SHARP NON-EXECUTIVE DIRECTOR
Appointed
January 2017
Independent
No
Committee Memberships
Executive
Qualifications
BA (Hons)
Experience Steve previously worked for 3M where he held
directorships and roles both in the UK and Europe covering
display, traffic and vehicle safety, telecommunications,
electronics and energy markets.
External appointments -
Appointed
September 2009
Independent
No
Experience Jim began his career in financial services with
J. Henry Schroder & Co. from 1992 to 2002, where he was
a Director. Since then he has held senior roles with a number
of privately owned businesses.
Committee Memberships
Audit (Chair) · Remuneration
Nomination · Pension
External appointments In The Style Fashion Ltd (Director)
Seraphine (Director) · The Brunner Investment Trust PLC
(Director) · Feelunique.com (Non-Executive Director)
Qualifications
MA
MARTIN THOMPSON MD TFP DIVISION
DAVID WILKS NON-EXECUTIVE DIRECTOR
Experience Prior to joining the group in 2003, Martin held a
variety of roles and directorships covering Business Systems,
Technical and Operational Management.
External appointments -
Appointed
June 2013
Independent
No
Committee Memberships
Executive
Qualifications
MBA
58
Experience David is a Director of a management consultancy
company he founded. Extensive manufacturing operations
experience with H J Heinz and United Biscuits, and was a
Director of ER Consultants.
External appointments Wilks & Partners (Director)
Appointed
April 2004
Independent
No
Committee Memberships
Remuneration (Chair) · Audit
Nomination
Qualifications
LLB (Hons)
5959
Corporate Governance Statement
Corporate Governance Statement
CORPOR ATE GOVERNANCE STATEMENT
“ I AM PLEASED TO
INTRODUCE THE CORPORATE
GOVERNANCE REPORT
FOR THE PERIOD ENDED
30 MARCH 2019. THIS REPORT
INCLUDES MY STATEMENT
AND THE CORPORATE
GOVERNANCE REPORT.”
CORPORATE GOVERNANCE CODE
SUB-COMMITTEES
With the changes to AIM rule 26 on corporate
governance introduced this year, the Board
undertook an exercise to review our corporate
governance polices.
The Board decided to adopt the QCA
Corporate Governance Code (2018 edition)
which was considered to be a pragmatic
and practical corporate governance tool
committed to high standards of corporate
governance facilitating efficient, effective and
entrepreneurial management of the Company.
The Board acknowledges its contribution
to achieving management accountability,
improving risk management and creating
shareholder value over the longer term.
BOARD RESPONSIBILITY
AND STRATEGIC DIRECTION
The Board acknowledges its collective
responsibility for ensuring the long-term
success of the Group by demonstrating
strong leadership, setting strategy and
business models, managing performance and
ensuring the necessary resources are in place
to deliver. It also holds itself accountable for
looking after the needs of all its stakeholders,
including employees, pensioners, shareholders
and the broader community and environment.
Both I and the Non-Executive Directors
are fully supportive of the strategic
direction being taken by the executive team.
The Strategic Report is on pages 6 to 25 in the
Annual Report.
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 completed the review of pay
and rewards for the Executive team.
The Nomination Committee completed
their search for a new Non-executive
Director, with Dr Andrew Hosty appointed
on 1 August 2018. A comprehensive Board
evaluation exercise was completed and
the Audit Committee undertook an Audit
tender exercise. The Pensions Committee
is currently monitoring the next triennial
funding valuation.
All sub-committees continue to be supported
by both internal and, where relevant,
external advisers to ensure their duties are
satisfactorily and professionally fulfilled.
STAKEHOLDER ENGAGEMENT
The Board is keen to ensure ongoing and
effective communication with all stakeholders.
Mark Cropper
Chairman
24 June 2019
GOVERNANCE STATEMENT
THE CHAIRMAN
BOARD COMMITTEES
The Company’s shares are listed on AIM and
are subject to the AIM Rules of the London
Stock Exchange. Under AIM rule 26, the
Company has adopted the QCA Corporate
Governance Code (2018 edition). The choice
of code to adopt was important to us.
We wanted to be sure that we would pro
actively embrace whatever code we opted for
and not end up with a code that would stifle
us and result, on a comply or explain basis,
with us describing why certain requirements
were not appropriate.
We believe that the QCA Code provides us
with the right governance framework:
a flexible but rigorous outcome-orientated
environment in which we can continue to
develop our governance model to support
our business.
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.
The Board continues to have a balance of
Executive and Non-Executive Directors.
Currently, The Board comprises a Non-
Executive Chairman, three Non-Executive
Directors and six Executive Directors.
The members of the Board maintain
the appropriate balance of experience,
independence and knowledge of the
Company to enable them to discharge their
respective duties and responsibilities and to
ensure that the requirements of the business
can be met.
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.
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
Three of the Non-Executive Directors,
including the Chairman, although deemed not
to be independent under the QCA Code, are
considered by the Board to be independent
in both character and judgement and provide
unequivocal counsel and advice to the Board.
All of the Non-Executive Directors
constructively challenge the Executive
Directors and help develop proposals on
strategy, including satisfying themselves on
the integrity of financial information and
ensuring financial controls and systems of risk
management are robust. All Non-Executive
Directors are members of the Remuneration,
Nomination and Audit Committees.
On 1 August 2018, Dr Andrew Hosty, a new
Non-Executive Director, was appointed to
the Board bringing 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.
The Board has delegated specific authority
to the Audit Committee, Nomination
Committee Remuneration Committee
and Pension Committee.
Jim Sharp is the Chair 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. During the year the Audit
Committee requested an Audit tender exercise
to be undertaken resulting in the appointment
of BDO LLP as Auditors in December 2018.
Mark Cropper is the Chair 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. During the year,
The Nomination Committee completed a
search for a new Non-Executive Director
resulting in the appointment of Dr Andrew
Hosty on 1 August 2018.
David Wilks is the Chair 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. During the year the
Remuneration Committee concluded
their review of pay and rewards for the
Executive Committee.
Isabelle Maddock is the Chair 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.
60
61
Corporate Governance Statement
Corporate Governance Statement
BOARD AND COMMITTEE
MEETINGS
The Board holds six Board meetings
throughout the year, scheduled to coincide
with the internal financial reporting timetable
of the Company and key events including
interim and final results, and the AGM.
In addition, two strategy days are also held.
The Board’s responsibilities are discharged
with reviews of monthly reports from the
Executive Committee including conference
calls with the Chief Executive and Group
Finance Director with further ad hoc
meetings held as and when required.
Board Meetings (6)
Meetings attended
Mark Cropper
Phil Wild
Steve Adams
Isabelle Maddock
Martin Thompson
Dave Watson
Patrick Willink
Dr Andrew Hosty
Jim Sharp
David Wilks
6
6
6
6
6
5
6
3
6
6
Board members are supplied with financial
and operational information in good time
for review in advance of meetings both via
an electronic portal and in hard copy.
All Directors have access to the advice and
services of the Company Secretary. The Board
approves the appointment and removal of
the Company Secretary. The Non-Executive
Directors are able to contact the Executive
Directors, Company Secretary or Senior
Managers at any time for further information.
EFFECTIVENESS
BOARD COMPOSITION
A strong feature of the Board’s effectiveness
in delivering the strategy is our inclusive and
open style of management and a free flow of
information between the Executive and Non-
Executive Directors. The size of our Board
encourages individuals to discuss matters
openly and freely and to make a personal
contribution through the exercise of their
personal skills and experience. No individual
or group of individuals dominate the Board’s
decision making process.
All Directors communicate with each
other on a regular basis and contact
with senior executives within the Group
is sought and encouraged.
DIVERSITY
Vacancies on the Board are filled following a
rigorous evaluation of candidates who possess
the required balance of skills, knowledge and
experience, using recruitment consultants
where appropriate. The process for the
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 10%.
APPOINTMENT OF
NON-EXECUTIVE DIRECTORS
Non-Executive Directors are appointed
to the Board following a formal, rigorous
and transparent process, involving external
recruitment agencies, to select individuals
who have a depth and breadth of relevant
experience, thus ensuring that the selected
candidates will be capable of making an
effective and relevant contribution to the
Board. The process for the appointment
of Non-Executive Directors is managed by
the Nomination Committee.
TERMS OF APPOINTMENT
AND TIME COMMITMENT
All Non-Executive Directors are employed
on contracts of one month’s notice by either
side. All Non-Executive Directors are
expected to devote such time as is necessary
for the proper performance of their duties.
Directors are expected to attend all Board
meetings and committee meetings of which
they are members and any additional meetings
as required.
INDUCTION 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.
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.
During the year a comprehensive Board
effectiveness evaluation was undertaken.
The evaluation process commenced with
the completion of a questionnaire for each
separate review, compilation of a summary of
the results and feedback obtained followed
by discussion between the participants.
The Board recognises that evaluation of its
performance is important in enabling it to
realise its maximum potential.
The process gives the Directors the
opportunity to identify areas for
improvement both jointly and individually
through the use of questionnaires
and open discussion.
ELECTION AND RE-ELECTION
OF DIRECTORS
At each Annual General meeting the
shareholders shall vote on resolutions to both
elect any Director who has been appointed
since the last Annual General Meeting and
also re-elect any Director who has not been
appointed, elected or re-elected at one of the
two previous Annual General Meetings.
Any Non-Executive Directors with service
greater than nine years are subject to re-
election at each Annual General Meeting.
RISK MANAGEMENT
The Group’s corporate objective is to
maximise long-term shareholder value.
In doing so, the Directors recognise that
creating value is a reward for taking and
accepting risk. The Directors consider risk
management to be crucial to the Group’s
success and give a high priority to ensuring
that adequate systems are in place to evaluate
and limit risk exposure.
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
24 June 2019
INTERNAL CONTROL
The Board are responsible for the Group’s
system of internal control and for reviewing
its effectiveness. In the context of the Group’s
business any such system can only reasonably
be expected to manage rather than eliminate
risks arising from its operations. It can
therefore only provide reasonable and not
absolute assurance against material loss
or misstatement.
GOING CONCERN
In carrying out their duties in respect of going
concern, the Directors carry out a review of
the Group’s financial position and cash flow
forecasts for the foreseeable future. These are
based on a comprehensive review of revenue,
expenditure and cash flows, taking into
account specific business risks and the current
economic environment.
RELATIONS WITH
SHAREHOLDERS
The Board appreciates that effective
communication with the Company’s
shareholders and the investment community
as a whole is a key objective. The Chairman’s
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 can be found
on the Company’s website. The Company’s
website www.cropper.com is regularly
updated and provides additional information
on the Group.
Notification of the Annual General Meeting
will be circulated to shareholders three
weeks before the date of the meeting.
Feedback from the shareholders attending
the Annual General Meeting and attendees
at presentations to major shareholders and
potential investors are discussed by the Board.
Dr Andrew Hosty has been appointed the
Senior Independent Non-Executive Director.
62
63
Report of the Audit Committee
Report of the Remuneration Committee
REPORT OF THE AUDIT COMMIT TEE
REPORT OF THE REMUNER ATION COMMIT TEE
ROLE OF THE COMMITTEE
The Committee operates under formal
terms of reference. The Committee’s agenda
included the regular matters reserved for its
review during the annual financial reporting
cycle which has ensured it has appropriately
discharged its responsibilities during the year,
having operated in compliance with relevant
legal, regulatory and other responsibilities.
EXTERNAL AUDIT TENDER
KPMG were first appointed as auditors
by shareholders at the Annual General
Meeting in June 2007 and since then have
rotated audit partners every five years. This
year, in line with best practice, the Group
decided to undertake a full tender process for
appointment of Auditor. The audit process
invited four firms, following declarations of
independence, to an introductory presentation
day, touring the site and meeting the senior
finance teams to gain a better insight into
the Group. Each audit firm was invited to
meet any other employees they considered
necessary to gain further insight. The answers
to any questions asked were circulated to each
tender firm for consistency of information.
In addition, the Group Finance Director was
available for one to one meetings with the
proposed partners of each audit firm.
Each firm was then invited to make a
presentation to the senior finance team
after which two firms were selected to
proceed to the next stage. The evaluation
process included consideration of the
following objectives:
• Protection of interest of shareholders
and stakeholders.
“ I AM PLEASED TO INTRODUCE
THE AUDIT COMMITTEE
REPORT FOR THE PERIOD
ENDED 30 MARCH 2019.
DURING THE YEAR OUR
PRINCIPAL RISKS WERE
REVIEWED AND A TENDER
PROCESS WAS UNDERTAKEN
FOR THE APPOINTMENT OF
EXTERNAL AUDITORS.”
Following our adoption of the
QCA Corporate Governance Code
(2018 edition), we are pleased to
include in our Annual Report our
report of the Audit Committee.
COMPOSITION
• Robustness of the audit process.
The Committee comprises the four Non-
Executive Directors. Three of the members
have been on the Committee for over nine
years. Andrew Hosty joined this year on his
appointment as a Non-Executive Director.
All Committee members have relevant
knowledge both of the sectors in which the
group operates and of the Group itself, and
are considered to have appropriate knowledge
and understanding of financial matters.
The committee is regularly supported
by the Chief Executive, Group Finance
Director and Company Secretary.
• Assessment of audit partners and teams,
including skills, range of experience,
industry knowledge and areas of expertise.
• Independence and objectivity.
• Geographical coverage for the Group.
The final stage of the process required
each firm to make a presentation to the
Audit Committee.
Following the presentations, the Audit
Committee made a recommendation to the
Board that BDO LLP should be appointed as
Auditors with the Audit Partner being Stuart
Wood. BDO were appointed as Auditors in
December 2018 and a resolution to re-appoint
them will be proposed at the next Annual
General Meeting.
EXTERNAL AUDIT
The Committee is responsible for overseeing
relations with the external auditor, including
the approval of their terms of engagement
and makes recommendations to the Board
on their remuneration and appointment and,
where appropriate, reappointment based on
reviews of audit effectiveness.
The Committee meets with the Auditor
every year to review and agree the audit
plan. In addition, the Auditor reports back
to the Audit Committee on the outcome
and findings following each audit.
The Committee continues to provide
independent and robust challenge to
management and our auditors to ensure
there are effective and high quality controls
in place and appropriate judgements made.
PRINCIPAL RISKS
The principal risks were reviewed during
the year and are constantly considered by the
Board throughout the year. Our principal
risks can be found on pages 21 to 25 in
the Strategic Report section of the
Annual Report. We continue to develop
our cultural people-driven approach to risk
management, which we believe encourages
focus on prevention rather than reaction to
risks arising.
The committee have the right mix of skills and
experience to provide constructive challenge
and support to management. We consider
relevant corporate governance requirements
and give considerable focus to the Group’s
risk management framework and processes.
Jim Sharp
Chair to the Audit Committee
24 June 2019
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 year, the Remuneration
Committee appointed outside consultants
who undertook an external review of salary
levels for the Directors and advised the Board
on appropriate salary levels in relation to
the level of responsibility and benchmarked
against other similar external Boards.
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 30 March 2019.
• Directors’ Remuneration Policy setting
out the Group’s forward looking
remuneration policy.
David Wilks
Chair of the Remuneration Committee
24 June 2019
During the year, the Board decided
to adopt the QCA Corporate
Governance Code (2018 edition)
(the “QCA Code”). The QCA
Code is a pragmatic and practical
corporate governance tool.
The Group is committed to high standards
of corporate governance in order to facilitate
efficient, effective and entrepreneurial
management of the Company.
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).
“ I AM PLEASED TO
INTRODUCE THE DIRECTORS’
REMUNERATION REPORT
FOR THE PERIOD ENDED
30 MARCH 2019. THIS REPORT
INCLUDES MY STATEMENT,
THE ANNUAL REMUNERATION
REPORT AND SETS
OUT OUR FORWARD-
LOOKING DIRECTORS’
REMUNERATION POLICY.”
64
65
Report of the Remuneration Committee
Report of the Remuneration Committee
ANNUAL REMUNERATION REPORT FOR 2019
DETAILS OF DIRECTORS’ REMUNERATION
The following table brings together the various elements of remuneration of each director for the financial period ended 30 March 2019.
REMUNERATION COMMITTEE
The Remuneration Committee comprises the
following members:
• David Wilks
• Mark Cropper
• Jim Sharp
• Dr Andrew Hosty
The Remuneration Committee has
responsibility for setting the remuneration
policy for all Executive Directors and the
Chairman of the Board, including pension
rights and any compensation payments.
This includes reviewing the performance
of the Executive Directors and determining
their terms and conditions of service,
their remuneration and the grant of any
options, having due regard to the interests
of the shareholders.
The remuneration of senior management
is discussed by the Chairman of the
Remuneration Committee and the Chief
Executive and their recommendations
endorsed by the Remuneration Committee.
No Director can take part in the decision
of their own salary or rewards.
In setting the remuneration policy, the
Remuneration Committee takes into
account the objective to attract, retain and
motivate executive management of the calibre
required to run the 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 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.
SERVICE CONTRACTS
Executive Director
Notice Period
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.
M A J Cropper
M Thompson
P J Willink
P I Wild
I M Maddock
K D Watson
S A Adams
12 months
12 months
12 months
6 months
6 months
6 months
6 months
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.
• To operate a remuneration policy that is a
mix of fixed and variable pay. Variable pay
is both short term and long term.
Non-Executive Directors are employed on
contracts of one month’s notice by either side.
COMPARISON OF FIVE
YEAR CUMULATIVE TOTAL
SHAREHOLDER RETURN
(TSR)
To enable shareholders to assess the
Company’s performance against the London
Stock Exchange, the cumulative TSR for the
period ended 30 March 2019 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.
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
03/09
03/10
03/11
03/12
03/13
03/14
03/15
03/16
03/17
03/18
03/19
£’000
EXECUTIVE
M A J Cropper
P I Wild
I M Maddock
M Thompson
K D Watson
P J Willink
S A Adams
NON-EXECUTIVE
Dr A Hosty (appointed 1 August 2018)
J E Sharp
D R Wilks
SALARY AND FEES
BENEFITS
ANNUAL BONUS
2019
2018
2019
2018
2019
2018
PENSION COST
2019 2018
TOTAL
2019 2018
78
198
157
157
157
132
157
17
35
35
76
194
125
132
132
118
153
-
28
30
10
39
25
27
21
20
21
-
-
-
10
35
23
27
22
18
21
-
-
-
-
-
-
21
-
-
-
-
-
-
1
10
6
16
6
6
7
-
-
-
5
10
9
9
6
16
-
-
-
-
5
10
7
8
6
16
-
-
-
-
93
247
191
214
184
168
178
17
35
35
92
249
161
183
166
158
181
-
28
30
1,123
988
163
156
21
52
55
52
1,362
1,248
LONG-TERM INCENTIVE PLAN
Under the Plan, awards to acquire ordinary shares in the Company can be made to Executive Directors and employees of the Company and its
subsidiaries selected by the Remuneration Committee.
Awards made during the financial period to 30 March 2019 under the Plan to Executive Directors were as follows:
OPTIONS AT
31 MARCH GRANTED IN
PERIOD
2018
MID-MARKET
OPTIONS PRICE (£) OF
OPTIONS
GRANTED
OPTIONS
EXERCISED
IN PERIOD
OPTIONS
LAPSED
IN PERIOD
OPTIONS AT
30 MARCH
2019
M A J Cropper
P I Wild
S A Adams
I M Maddock
M Thompson
K D Watson
P J Willink
4,644
40,655
4,511
15,551
17,369
17,546
6,067
-
9,530
5,016
5,016
5,016
5,016
-
-
£15.626
£15.626
£15.626
£15.626
£15.626
-
2,786
10,291
-
6,067
6,648
6,825
6,067
1,858
21,793
-
6,025
6,811
6,811
-
-
18,101
9,527
8,475
8,926
8,926
-
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
31 MARCH GRANTED IN
PERIOD
2018
MID-MARKET
OPTIONS PRICE (£) OF
OPTIONS
GRANTED
OPTIONS
EXERCISED
IN PERIOD
OPTIONS
LAPSED
IN PERIOD
OPTIONS AT
30 MARCH
2019
M A J Cropper
P J Willink
SAYE OPTIONS
5,951
9,484
2,413
4,216
£15.626
£15.626
-
-
3,781
6,025
4,583
7,675
The details of the SAYE options exercised during the period were:
I M Maddock
4,360
£1.9952
4,360
-
OPTIONS AT
31 MARCH
2018
EXERCISE
PRICE (£) OF
OPTIONS
AWARDED
OPTIONS
EXERCISED
IN PERIOD
OPTIONS AT
30 MARCH
2019
66
67
Report of the Remuneration Committee
Report of the Remuneration Committee
REMUNERATION POLICY SUMMARY
PURPOSE AND LINK TO STRATEGY
OPERATION
BASE SALARY
To reflect market value of the role and
individual’s performance and contribution
and enable the Group to recruit and retain
directors of sufficient calibre required
to support achievement of both short
and long-term goals.
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 opposite.
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.
68
69
Compliance with the QCA Corporate Governance Code
Directors’ Report
COMPLIANCE WITH THE QCA CORPORATE GOVERNANCE CODE
PRINCIPLE
COMPLIANCE
1. Establish a strategy and
business model which promote
long-term value for shareholders
• The Group strategy is set out on pages 6 to 25 in the Strategic Report section of our Annual Report.
• The Executive Committee hold quarterly away days to focus on the Group’s rolling strategic plan.
• The Board holds two strategy days each year.
• The strategy is communicated to all employees at half yearly employee briefings.
2. Seek to understand
and meet shareholder needs
and expectations.
• Investor roadshow meetings are undertaken at least twice per year following the preliminary
and interim announcements.
• Shareholders are invited to the AGM held in Burneside where all Board members interact with our shareholders on a
one to one basis and take questions as they arise.
• Shareholder feedback is received from our Nomads and all shareholder feedback is discussed at Board meetings.
3. Take into account wider
stakeholder and social
responsibilities and their
implications for long-term success.
4. Embed effective risk
management, considering both
opportunities and threats,
throughout the organisation.
5. Maintain the Board as a
well-functioning, balanced team
led by the Chair.
Employees
• Regular meetings take place with employees to share strategy, keep employees updated and seek feedback.
• The Company conducts a biennial employee survey with the latest level of engagement (2017) at 69%.
Customers
• Communications with our customers is fundamental to our success. The Group engages in continuous communications
with our customers to understand their needs, share our plans, and nurture the collaborative partnership.
Suppliers
• Our collaborative attitude allows us to claim a 100 year partnership with a supplier and at the same time build new
partnerships with new suppliers.
Community
• The Company has very close links with the local community built on our 174 year presence at Burneside. The Group
supports local organisations through its community support team with donations this year amounting to £21,000.
Environment
• We are proud to introduce initiatives such as ColourformTM and CupCyclingTM, recycling coffee cups or promoting
the use of pulp based packaging rather than plastic. From efficient water usage to use of solar energy, sustainability and
environmental protection are key to our future.
• The Group’s significant risks are reviewed throughout the year.
• Risk is a fixed item agenda for the Executive Committee meetings.
• The significant risks are disclosed in the Strategic Report within the Annual report on pages 20 to 25
• The Board is led by our Non-executive Chairman, Mark Cropper.
• The Board comprises four Non-Executive Directors and six Executive Directors.
• The members of the Board maintain the appropriate balance of experience, independence and knowledge of the Company.
• Details of the composition, operation and responsibilities, together with details of the Sub-Committees can be found in the
Governance section of the Annual Report on pages 58 to 72.
6. Ensure that between them
the Directors have the necessary
up-to-date experience, skills
and capabilities.
• The current Board has significant sector, financial and PLC experience.
• Between them, the Executive Directors have many years of broad experience in the non-woven fibre manufacturing industry.
• With the support of our NOMAD and advisors, the Board training and development needs are maintained.
• Biographies on all Directors are shown on pages 58 to 59 of the Annual Report.
7. Evaluate Board performance
based on clear and relevant
objectives, seeking continuous
improvement.
• A comprehensive board evaluation was undertaken in September 2018 commencing with a questionnaire, compilation of
a summary of results and feedback at a board meeting. The results were discussed and actions taken to improve in areas
where required.
• The process gives the Directors the opportunity to identify areas for improvement both jointly and individually through
the use of questionnaires and open discussion.
• The Remuneration Committee evaluates Executive Director performance alongside remuneration and reward.
• With regards to financial performance, the Audit Committee meets with the Auditors to plan the year-end audit, followed
up by a meeting to review the results of the audit.
• Training and development needs of Directors are reviewed regularly.
8. Promote a corporate culture
that is based on ethical values
and behaviours.
• Our values and culture are embodied in the Group’s management behaviour, our recruitment and employee
development processes.
• Our values and behaviours help us ensure we provide a safe, rewarding and interesting place to work as well as an
environment that attracts new talent. Our values can be found on page 40 to 41 of the Annual Report.
9. Maintain governance structures
and processes that are fit for
purpose and support good decision
making by the Board.
• The Board meets six times per year plus a further two strategy days.
• The Group has robust internal controls, delegated authorities and authorisation processes.
• The controls are subject to review both internally and externally by our Auditors.
• A culture of continuous improvement is encouraged.
• The PLC website describes the roles and terms of reference for the Committees.
• Continuous improvement can be found on page 52 of the Annual Report.
10. Communicate how the
Company is governed and is
performing by maintaining a
dialogue with shareholders
and other relevant stakeholders.
• Communications with shareholders are explained in Principle 2 above.
• In addition to the interim and full year investor roadshows, meetings with our NOMADS, prospective investors
and other stakeholders arise during the year.
• The work of the Sub-Committees is described in the Governance section of the Annual report on pages 60 to 72.
• The website includes historical announcements, copies of the Annual and Interim reports and copies of any presentations made.
DIRECTOR’S REPORT
The Directors present their Annual Report
and the audited financial statements of
James Cropper Group for the 52 weeks ended
30 March 2019.
PRINCIPAL ACTIVITIES
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 8 to 9, the
Strategic Report on pages 6 to 25 and the
Financial Review on pages 13 to 25, report
on the performance of the Group for the
period ended 30 March 2019 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 · Dr Andrew Hosty
(appointed 1 August 2018)
Details of the Director’s remuneration are
shown in the Report of the Remuneration
Committee on page 67. Details of the
Directors’ interests in the share capital of the
Company are set out below. The biographies
of the Directors as at the date of this report
are on pages 58 to 59.
RESULTS AND DIVIDENDS
The results for the period are shown in
the Statement of Comprehensive Income
on page 79.
An interim dividend of 2.5p per ordinary
share was paid on 11 January 2019.
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 (2018: 13.5p) per share.
Full details of dividends in respect of the year
ended 30 March 2019 are given in note 7 of
the financial statements.
CORPORATE GOVERNANCE
A report on Corporate Governance is set
out on pages 58 to 72, 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 £21,000 (2018:
£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 19
to the consolidated financial statements.
AUTHORITY TO ALLOT SHARES
A resolution will be proposed to renew
an existing authority which expires at the
Annual General Meeting to give the Directors
authority to exercise the powers of the
Company to allot unissued shares.
DIRECTORS POWER TO DISAPPLY
PRE-EMPTION RIGHTS
A resolution will be proposed at the Annual
General Meeting which disapplies statutory
pre-emption rights on the allotment of shares
by empowering the Directors to allot shares
for cash without offering them to existing
shareholders first.
GOING CONCERN
The Chairman’s Letter and the Chief
Executive’s Statement on pages 8 to 9 and
pages 10 to 12 respectively, outline the
business activities of the Group along with
the factors which may affect its future
development and performance. The Financial
Review discusses the Group’s financial
position, along with details of its cash
flow and liquidity. Note 16 to the financial
statements sets out the Group’s financial risks
and the management of those risks.
Having prepared management forecasts and
made appropriate enquiries, the Directors
are satisfied that the Group has adequate
resources for the foreseeable future.
70
71
Directors’ Report
Financial Statements
Accordingly, they have continued to adopt
the going concern basis in preparing the
Group and Company financial statements.
DISCLOSURE OF INFORMATION
TO THE AUDITOR
BDO 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.
SUBSTANTIAL INTERESTS
Shareholdings in excess of 3% of the issued capital at 1 June 2019 are detailed in the table right.
ANNUAL GENERAL MEETING
Notice of Annual General Meeting, which
sets out the resolutions to be proposed at the
forthcoming Annual General Meeting will be
posted to shareholders at least three weeks
before the date of the AGM. The meeting will
be held at The Bryce Institute, Burneside,
Kendal, Cumbria LA9 6PZ on Wednesday
31 July 2019 at 11am.
NAME OF SHAREHOLDING
NUMBER OF SHARES
% HOLDING
NOTE
Cropper Family Beneficial and Non-beneficial Interests
Willink Family Beneficial and Non-beneficial Interests
Acland Family Beneficial and Non-beneficial Interests
Total
Liontrust Asset Management Ltd
Miton Asset Management Limited
2,997,096
523,014
52,386
3,572,496
1,010,985
468,931
31.4
5.5
0.6
37.4
10.6
4.9
1
1. The Cropper, Willink and Acland families are related and are deemed to be acting in concert with a total holding of 37.4% in the Company.
DETAILS OF DIRECTORS’
INTERESTS
The interests in the shares of the Company
of those Directors serving at 30 March 2019.
Any material related party transactions
between the Directors and the Company
are set out in note 24 to the consolidated
financial statements. Further information
relating to the interests of the Directors
regarding options on ordinary shares is
given in the Report of the Remuneration
Committee on page 65. Non-beneficial
interests include shares held jointly as
trustee with other Directors.
Any material related party transactions
between the Directors and the Company
are set out in note 24 to the consolidated
financial statements. Further information
relating to the interests of the Directors
regarding options on ordinary shares is
given in the Report of the Remuneration
Committee on pages 65 to 69.
Non-beneficial interests include shares
held jointly as trustee with other Directors.
On 24 May 2019, following his resignation
as a director of a trust company acting as
trustees for certain Cropper family trusts,
the non-beneficial interest of P J Willink
was reduced from 1,447,558 to 69,434.
There have been no other material changes
between 24 May 2019 and 24 June 2019.
OPTIONS ON
ORDINARY
SHARES AT
30 MARCH
2019
ORDINARY ORDINARY
SHARES AT SHARES AT
31 MARCH
30 MARCH
2018
2019
OPTIONS ON
ORDINARY
SHARES AT
31 MARCH
2018
DIRECTOR
INTEREST
M A J Cropper
Beneficial
Non-beneficial
1,787,688
559,571
-
-
1,747,849
559,571
P I Wild
Beneficial
17,497
18,101
12,273
S A Adams
Beneficial
I M Maddock
Beneficial
M Thompson
Beneficial
K D Watson
Beneficial
1,099
16,261
29,927
7,538
P J Willink
Beneficial
Non-beneficial
58,079
1,447,558
J E Sharp
D R Wilks
Dr A Hosty
Beneficial
Non-beneficial
Beneficial
Non-beneficial
Beneficial
Non-beneficial
11,380
64,951
7,825
64,951
500
64,951
9,527
8,475
8,926
8,926
-
-
-
-
-
-
-
-
1,020
11,032
26,524
4,047
55,046
1,447,558
7,950
75,328
7,825
75,328
-
-
46,446
-
40,655
4,511
19,911
17,369
17,546
6,067
-
-
-
-
-
-
-
Approved by the Board of Directors on 24 June 2019 and were signed on its behalf by
Mark Cropper,
Chairman
72
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
TECHNICAL FIBRE PRODUCTS
COLOURFORM
JAMES CROPPER PAPER
OUR VALUES
SUSTAINABILITY
PRIDE EXCELLENCE AWARDS
PEOPLE
LIVERY
GOVERNANCE
BOARD OF DIRECTORS
CORPORATE GOVERNANCE STATEMENT
REPORT OF THE AUDIT COMMITTEE
REPORT OF THE REMUNERATION COMMITTEE
QCA PRINCIPLES
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
INDEPENDENT AUDITOR’S REPORT
57
73
74
75
GROUP STATEMENT OF COMPREHENSIVE INCOME 79
STATEMENT OF FINANCIAL POSITION
STATEMENT OF CASH FLOWS
STATEMENT OF CHANGES IN EQUITY
NOTES TO THE FINANCIAL STATEMENTS
SHAREHOLDER INFORMATION
80
81
82
84
116
73
Statement of Directors’ Responsibilities
Independent Auditor’s Report
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 financial statements in
accordance with applicable law
and regulations.
Company law requires the Directors to prepare
financial statements for each financial year.
Under that law the Directors have elected to
prepare the Group and Company financial
statements in accordance with International
Financial Reporting Standards as adopted by
the European Union (IFRSs as adopted by
the EU)
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
Company and of their profit or loss of the
Group for that period.
The Directors are also required to prepare
financial statements in accordance with the
rules of the London Stock Exchange for
companies trading securities on AIM.
In preparing these financial statements,
the Directors are required to:
• Select suitable accounting policies
and then apply them consistently;
• Make judgements and accounting estimates
that are reasonable and prudent;
• State whether they have been prepared
in accordance with IFRSs as adopted by
the EU, subject to any material departures
and explained in the financial statements;
• Prepare the financial statements on
the going concern basis unless it is
inappropriate to presume that the
Company will continue in business.
The Directors are responsible for keeping
adequate accounting records that are
sufficient to show and explain the Company’s
transactions and disclose with reasonable
accuracy at any time the financial position
of the Company and enable them to ensure
that the financial statements comply with the
Companies Act 2006.
They are also responsible for safeguarding
the assets of the Company and hence for
taking reasonable steps for the prevention
and detection of fraud and other irregularities.
The Directors are responsible for ensuring the
Annual Report and the financial statements
are made available on a website.
Financial statements are published on the
Company’s website in accordance with
legislation in the United Kingdom governing
the preparation and dissemination of financial
statements, which may vary from legislation
in other jurisdictions. The maintenance and
integrity of the Company’s website is the
responsibility of the Directors.
The Directors’ responsibility also extends
to the ongoing integrity of the financial
statements contained therein.
1. OPINION
We have audited the financial statements of
James Cropper PLC (the ‘Parent Company’)
and its subsidiaries (the ‘Group’) for the year
ended 30 March 2019 which comprise the
Group Statement of Comprehensive Income,
the Group and Company Statement of
Financial position, the Group and Company
Statement of Cash Flows, the Group and
Company Statement of Changes in Equity
and notes to the financial statements,
including a summary of significant accounting
policies.
The financial reporting framework that has
been applied in the preparation of the Group
financial statements is applicable law and
International Financial Reporting Standards
(IFRSs) as adopted by the European Union.
The financial reporting framework that has
been applied in the preparation of the Parent
Company financial statements is applicable
law and United Kingdom Accounting
Standards, including Financial Reporting
Standard 101 Reduced Disclosure Framework
(United Kingdom Generally Accepted
Accounting Practice).
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 30 March
2019 and of the Group’s profit for the year
then ended;
• The Group financial statements have been
properly prepared in accordance with
IFRSs as adopted by the European Union;
• The Parent Company financial statements
have been properly prepared in accordance
with United Kingdom Generally Accepted
Accounting Practice; 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 under those standards
are further described in the Auditor’s
responsibilities for the audit of the financial
statements section of our report.
We are independent of the Group and the
Parent Company in accordance with the
ethical requirements that are relevant to our
audit of the financial statements in the UK,
including the FRC’s Ethical Standard as
applied to listed entities, and we have fulfilled
our other ethical responsibilities in accordance
with these requirements.
We believe that the audit evidence we
have obtained is sufficient and appropriate
to provide a basis for our opinion.
Conclusions relating to going concern
We have nothing to report in respect of the
following matters in relation to which the
ISAs (UK) require us to report to you where:
• The Directors’ use of the going concern
basis of accounting in the preparation of
the financial statements is not appropriate;
or
• The Directors have not disclosed in the
financial statements any identified material
uncertainties that may cast significant
doubt about the Group’s or the Parent
Company’s ability to continue to adopt
the going concern basis of accounting for
a period of at least twelve months from
the date when the financial statements are
authorised for issue.
2. KEY AUDIT MATTERS
Key audit matters are those matters that, in
our professional judgment, were of most
significance in our audit of the financial
statements of the current period and include
the most significant assessed risks of material
misstatement (whether or not due to fraud)
we identified, 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.
74
75
Independent Auditor’s Report
Independent Auditor’s Report
2. KEY AUDIT MATTERS
KEY AUDIT MATTER: DEFINED BENEFIT PENSION SCHEME VALUATIONS
As described in Note 2 (accounting policies)
and Note 17 (retirement benefit obligations),
the Group has two defined benefit pension
plans in the UK. At 30 March 2019, the Group
recorded a net retirement obligation of £22.6m
(2018: £19.4m), comprising scheme assets of
£110m (2018: £106.6m) and scheme liabilities
of £132.6m (2018: £126.1m).
The scheme liabilities in the current year also
had to take into account a High Court ruling
issued in October 2018 whereby benefits
arising from Guaranteed Minimum Pensions
(GMP) should be equalised.
The pension valuation is dependent on market
conditions and key assumptions made with
input from the actuary, in particular relating
to investment markets, discount rate, inflation
expectations and life expectancy assumptions.
HOW WE ADDRESSED THE KEY AUDIT MATTER IN THE AUDIT
We assessed the appropriateness of the
assumptions underpinning the valuation of the
scheme liabilities.
party data and assessed the appropriateness of
the assumptions in the context of the Group’s
own position.
Specifically we challenged the discount rate,
inflation, mortality assumptions and the
impact of the GMP equalisation applied
in the calculation by using our auditor
engaged pension specialists to benchmark the
assumptions applied against comparable third
In addition we tested the membership data
utilised in the valuation of the scheme to
source data, traced cash flow amounts to
bank statements and obtained third party
confirmation of the valuation of the pension
assets from the investment managers.
We are satisfied that the methodology
and assumptions applied in relation to
determining the pension valuation are
within an acceptable range.
KEY AUDIT MATTER: REVENUE RECOGNITION, SPECIFICALLY ADOPTION OF IFRS 15
As shown in Note 1, the Group adopted IFRS
15, Revenue from Contracts with Customers,
in the current year.
Revenue recognition involves significant
judgements and estimates to be made
by management including consideration
of whether contracts contain multiple
performance obligations which should
be accounted for separately, and the most
appropriate method for recognition of revenue
for identified performance obligations.
In accordance with IFRS, revenue should
only be recognised when the performance
obligations associated with it have been met,
for example when the delivery terms have
been satisfied. Cut off is therefore a key
consideration.
It can also include an assessment of multi-
element contracts and consideration of whether
performance obligations are satisfied at a point
in time or over time.
HOW WE ADDRESSED THE KEY AUDIT MATTER IN THE AUDIT
The key judgements therefore include
consideration of the point in time when
transfer of control has occurred for products
sold by Paper, TFP and 3DP prototype
divisions, and assessing the degree of
completion of the 3DP tooling manufacturing
contracts, which occur over a period of time.
- We tested whether amounts recognised
The results of our testing were satisfactory.
were accurate and recorded in the
correct period based on the contractual
performance obligations by agreeing a
sample of individual good dispatched notes
and sales orders.
We obtained a detailed understanding and
evaluated the design and implementation of
controls that the Group adopted in relation
to revenue recognition following the Group’s
implementation of IFRS 15.
In addition, our substantive audit procedures
included a combination of the following:
- Auditing a sample of orders to assess
whether the method for recognition of
revenue was relevant and consistent with
IFRS 15, and had been applied consistently.
3. OUR APPLICATION
OF MATERIALITY
4. AN OVERVIEW OF THE
SCOPE OF OUR AUDIT
The setting of these assumptions is complex
and requires the exercise of significant
management judgement with the support
of third party actuaries. A small change in
the assumptions and estimates used to
calculate the Group’s pension obligation could
have a significant effect on the Group’s net
pension deficit.
We consider materiality to be the magnitude
by which misstatements, individually or in
the aggregate, could reasonably be expected to
influence the economic decisions of the users
of the financial statements. We use materiality
both in planning the scope of our audit work
and in evaluating the results of our work.
Based on our professional judgement, we
determined materiality for the financial
statements as a whole as follows:
As such, there was a subjective valuation risk.
Group materiality £165,000
Our Group audit was scoped by obtaining
an understanding of the Group and its
environment, including Group-wide
controls, and assessing the risks of material
misstatement at the Group level.
The Group manages its operations from
one principal location in the UK as well as
locations in the USA and China and has
common financial systems, processes and
controls covering all significant components.
The audit of all significant components was
performed by the same audit team.
In assessing the risk of material misstatement
to the Group financial statements, and to
ensure we had adequate quantitative coverage
of significant accounts in the financial
statements, of the 14 components of the
Group, we determined that 5 components
represented the principal business units
within the Group.
For these 5 significant components, we
performed a full scope audit of the complete
financial information. For the remaining
components, we performed audit procedures
on specific accounts within that component
that we considered had the potential for the
greatest impact on the significant accounts in
the financial statements, either because of the
size of these accounts or their risk profile.
As a consequence of the audit scope
determined, we achieved coverage of
approximately 85% of revenue, 97% of
absolute values of profit before tax and
95% of total assets. Our audit work on
each component was executed at levels of
materiality applicable to each individual entity
which was lower than Group materiality.
Other information
The Directors are responsible for the other
information. The other information comprises
the information included in the annual report,
other than the financial statements and our
auditor’s report thereon. Our opinion on
the financial statements does not cover the
other information and, except to the extent
otherwise explicitly stated in our report,
we do not express any form of assurance
conclusion thereon.
In connection with our audit of the financial
statements, our responsibility is to read the
other information and, in doing so, consider
whether the other information is materially
inconsistent with the financial statements
or our knowledge obtained in the audit or
otherwise appears to be materially misstated.
If we identify such material inconsistencies
or apparent material misstatements, we
are required to determine whether there
is a material misstatement in the financial
statements or a material misstatement of
the other information. If, based on the
work we have performed, we conclude
that there is a material misstatement of
this other information, we are required to
report that fact.
We have nothing to report in this regard.
5. OPINIONS ON OTHER
MATTERS PRESCRIBED BY
THE COMPANIES ACT 2006
In our opinion, based on the work undertaken
in the course of the audit:
• The information given in the strategic
report and the Directors’ report for the
financial year for which the financial
statements are prepared is consistent with
the financial statements; and
• The strategic report and the Directors’
report have been prepared in accordance
with applicable legal requirements.
6. MATTERS ON WHICH
WE ARE REQUIRED TO
REPORT BY EXCEPTION
In the light of the knowledge and
understanding of the Group and the Parent
Company and its environment obtained in
the course of the audit, we have not identified
material misstatements in the strategic report
or the Directors’ report.
We have nothing to report in respect of the
following matters in relation to which the
Companies Act 2006 requires us to report to
you if, in our opinion:
• Adequate accounting records have not been
kept by the Parent Company, or returns
adequate for our audit have not been
received from branches not visited by us; or
• The Parent Company financial statements
are not in agreement with the accounting
records and returns; or
Basis for materiality 4.7% of Profit before tax
(2 year average)
Rationale for benchmark adopted
Pre-tax profit is determined to be a stable
basis of assessing business performance
and is considered to be the most significant
determinant of performance used
by shareholders.
In considering individual account balances
and classes of transactions we apply a
lower level of materiality in order to reduce
to an appropriately low level the probability
that the aggregate of uncorrected and
undetected misstatements exceeds materiality.
Performance materiality was set at £107,000,
representing 65% of materiality. The level
was dropped to reflect the aggregation risk
of errors in the group.
Our audit work on each significant component
was executed at levels of materiality applicable
to each individual entity which was lower
than group materiality. Component materiality
ranged from £23,000 to £127,000.
Parent company materiality was £71,000.
We agreed with the audit committee that
we would report to the committee all
individual audit differences identified during
the course of our audit in excess of £5,000.
We also agreed to report differences below
these thresholds that, in our view, warranted
reporting on qualitative grounds.
There were no misstatements identified during
the course of our audit that were individually,
or in aggregate, considered to be material in
terms of their absolute monetary value or on
qualitative grounds.
76
77
Independent Auditor’s Report
Group Statement of Comprehensive Income
8. USE OF OUR REPORT
This report is made solely to the Parent
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 Parent 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 Parent Company and the
Parent Company’s members as a body, for our
audit work, for this report, or for the opinions
we have formed.
Stuart Wood (Senior Statutory Auditor)
For and on behalf of BDO LLP,
Statutory Auditor
Manchester
24 June 2019
BDO LLP is a limited liability partnership registered in
England and Wales (with registered number OC305127).
• 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.
7. RESPECTIVE
RESPONSIBILITIES
Responsibilities of Directors
As explained more fully in the Directors’
responsibilities statement set out on page
74, the Directors are responsible for the
preparation of the financial statements and
for being satisfied that they give a true and
fair view, and for such internal control as the
Directors determine is necessary to enable the
preparation of financial statements that are
free from material misstatement, whether due
to fraud or error.
In preparing the financial statements, the
Directors are responsible for assessing the
Group’s and the 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 the Directors 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 for the audit of
the financial statements
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 an auditor’s report that includes
our opinion. Reasonable assurance is a high
level of assurance, but is not a 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 the aggregate, they could reasonably be
expected to influence the economic decisions
of users taken on the basis of these financial
statements.
A further description of our responsibilities
for the audit of the financial statements
is located on the Financial Reporting
Council’s website: www.frc.org.uk/
auditorsresponsibilities
This description forms part of our
auditor’s report.
JAMES CROPPER PLC
GROUP STATEMENT OF COMPREHENSIVE INCOME
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
OTHER COMPREHENSIVE INCOME
Profit for the period
Items that are or may be reclassified to profit or loss
Exchange differences on translation of foreign operations
Cash flow hedges - effective portion of changes in fair value
Items that will never be reclassified to profit or loss
Retirement benefit liabilities – actuarial (losses) / gains
Deferred tax on actuarial losses / (gains) on retirement benefit liabilities
Income tax on other comprehensive income
Other comprehensive (expense) / income for the period
Total comprehensive (expense) / income for the period
attributable to equity holders of the Company
Note
2
20
4
2
3
3
4
5
6
6
17
18
5
52 week period to
30 March 2019
£’000
52 week period to
31 March 2018
£’000
101,095
614
798
(43,074 )
(5,615 )
(28,183 )
(2,952 )
(19,275 )
3,408
(965 )
133
2,576
(262 )
2,314
24.3 p
24.3 p
2,314
(117 )
(29 )
(3,258 )
554
-
(2,850 )
(536 )
96,312
346
767
(40,661 )
(4,021 )
(27,314 )
(2,678 )
(17,313 )
5,438
(908 )
11
4,541
(451 )
4,090
43.30 p
43.0 p
4,090
(82 )
57
2,593
(441 )
91
2,218
6,308
78
78
The accompanying notes form part of the financial statements
79
Statement of Financial Position
Statement of Cash Flows
JAMES CROPPER PLC
STATEMENT OF FINANCIAL POSITION
JAMES CROPPER PLC
STATEMENT OF CASH FLOWS
Group
Company
For the period ended 30 March 2019 (2018: for the period ended 31 March 2018)
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
Loans and borrowings
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
As at
30 March 2019
£’000
As at
31 March 2018
£’000
As at
30 March 2019
£’000
As at
31 March 2018
£’000
Note
8
9
10
18
11
12
13
14
15
15
17
19
365
27,639
-
2,234
30,238
16,410
19,012
24
2,352
1,421
39,219
69,457
14,620
1,545
16,165
9,368
22,648
32,016
48,181
2,389
1,588
403
(1,251 )
18,147
21,276
69,457
496
25,113
-
2,053
27,662
14,854
18,522
47
5,557
867
39,847
67,509
14,328
1,600
15,928
8,763
19,472
28,235
44,163
2,370
1,472
520
(1,445 )
20,429
23,346
67,509
106
1,906
7,350
3,840
13,202
-
49,323
24
-
446
49,793
62,995
18,555
361
18,916
4,004
22,648
26,652
45,568
2,389
1,588
-
(1,251 )
14,701
17,427
62,995
112
1,732
7,350
3,649
12,843
-
45,651
47
3,004
530
49,232
62,075
21,823
43
21,866
4,070
19,472
23,542
45,408
2,370
1,472
-
(1,445 )
14,270
16,667
62,075
The Parent Company reported a profit for the period ended 30 March 2019 of £4,903,000 (2018: £5,422,000).
The financial statements on pages 79 to 115 were approved by the Board of Directors on 24 June 2019 and were signed on its behalf by:
M A J Cropper
Chairman
Company Registration No: 30226
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 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 in inventories
(Increase) / decrease in trade and other receivables
Increase / (decrease) in trade and other payables
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
Net cash (used in) / generated from investing activities
Cash flows from financing activities
Proceeds from issue of ordinary shares
Proceeds from issue of new loans
Repayment of borrowings
Repayment / (issue) of inter-company loans
Interest received
Interest paid
Purchase of LTIP investments
Sale of own shares
Dividends paid to shareholders
Net cash (used in) / generated from financing activities
Net (decrease) / increase in cash and cash equivalents
Effect of exchange rate fluctuations on cash held
Net (decrease) / increase in cash and cash equivalents
Cash and cash equivalents at the start of the period
Cash and cash equivalents at the end of the period
Cash and cash equivalents consists of:
Cash at bank and in hand
Bank overdraft
Group
Note
2019
£’000
2018
£’000
Company
2019
£’000
2018
£’000
2,314
4,090
4,903
5,422
262
2,952
1,386
(1,468 )
(312 )
(12 )
300
(49 )
-
(1,529 )
(2,072 )
1,659
(65 )
3,366
(67 )
(5,162 )
12
-
(5,217 )
135
1,568
(1,311 )
-
133
(391 )
(315 )
130
7
(1,263 )
(1,314 )
(3,165 )
(40 )
(3,205 )
5,557
2,352
2,670
(318 )
2,352
451
2,678
1,284
(1,413 )
(626 )
(11 )
308
341
-
(807 )
4,400
(4,029 )
(839 )
5,827
(41 )
(1,894 )
12
-
(1,923 )
3
4,220
(2,570 )
-
11
(320 )
(441 )
-
(1,097 )
(194 )
3,710
(74 )
3,636
1,921
5,557
5,557
-
5,557
321
153
1,386
(1,468 )
(59 )
-
(774 )
(49 )
200
161
1,284
(1,413 )
142
-
(554 )
341
(6,000 )
(7,500 )
-
(5,767 )
(1,416 )
(65 )
(8,835 )
(61 )
(608 )
303
6,000
5,634
135
768
(848 )
568
946
(137 )
(315 )
130
(1,263 )
(16 )
(3,217 )
(103 )
(3,320 )
3,004
(316 )
2
(318 )
(316 )
-
(1,954 )
2,314
(839 )
(2,396)
(22 )
(73 )
-
7,500
7,405
3
131
(118 )
(1,451 )
631
(79 )
(441 )
-
(1,097 )
(2,421 )
2,588
(110 )
2,478
526
3,004
3,004
-
3,004
The accompanying notes form part of the financial statements
The accompanying notes form part of the financial statements
80
81
Statement of Changes in Equity
Statement of Changes in Equity
Share
Capital
Share Translation
Reserve
Premium
Own
Shares
Retained
Earnings
JAMES CROPPER PLC
STATEMENT OF CHANGES IN EQUITY
GROUP
All figures in £’000
1 April 2017
Prior year adjustment (i)
At 1 April 2017 restated
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
Sale of own shares
Consideration paid for own shares
Total contributions by and distributions to
owners of the Group
2,367
1,472
-
2,367
-
1,472
-
-
-
-
-
-
-
-
-
3
-
-
3
-
-
-
-
-
-
-
-
-
-
-
-
-
At 31 March 2018
Prior year adjustment (i)
2,370
-
1,472
-
At 31 March 2018 restated
2,370
1,472
Profit for the period
Exchange differences
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
Sale of own shares
Consideration paid for own shares
Total contributions by and distributions to
owners of the Group
-
-
-
-
-
-
-
-
19
-
-
19
-
-
-
-
-
-
-
-
116
-
-
116
602
-
602
-
(82 )
-
-
(82 )
-
-
-
-
-
-
-
-
520
-
520
-
(117 )
-
-
(117 )
-
-
-
-
-
-
-
Total
19,086
(219 )
18,867
4,090
(82 )
2,152
57
2,127
(1,097 )
341
(201 )
91
3
-
(1,094 )
JAMES CROPPER PLC
STATEMENT OF CHANGES IN EQUITY
COMPANY
All figures in £’000
At 1 April 2017
Profit for the period
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
Sale of own shares
Consideration paid for own shares
Total contributions by and distributions to owners of the Group
At 31 March 2018
Profit for the period
Loss on cash flow hedges
(853 )
-
(853 )
-
-
-
-
-
-
-
-
-
-
324
(916 )
15,498
(219 )
15,279
4,090
-
2,152
57
2,209
(1,097 )
341
(201 )
91
-
(324 )
(178 )
(592 )
(1,368 )
(1,957 )
Actuarial losses on retirement benefit liabilities
(net of deferred tax)
Total other comprehensive income
Dividends paid
Share based payment charge
Tax on share options
Proceeds from issue of ordinary shares
Sale of own shares
Consideration paid for own shares
Share
Capital
Share
Premium
Own
Shares
Retained
Earnings
2,367
1,472
(853 )
-
-
-
-
-
-
-
-
3
-
-
3
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
324
(916 )
(592 )
7,829
5,422
2,152
57
2,209
(1,097 )
341
(201 )
91
-
(324 )
-
(1,190)
Total
10,815
5,422
2,152
57
2,209
(1,097 )
341
(201 )
91
3
-
(916 )
(1,779 )
2,370
1,472
(1,445 )
14,270
16,667
-
-
-
-
-
-
-
19
-
-
-
-
-
-
-
-
-
116
-
-
116
-
-
-
-
-
-
-
-
509
(315 )
194
4,903
(29 )
(2,704 )
(2,733 )
(1,263 )
(49 )
(48 )
-
(379 )
-
4,903
(29 )
(2,704 )
(2,733 )
(1,263 )
(49 )
(48 )
135
130
(315 )
(1,739 )
(1,410 )
Total contributions by and distributions to owners of the Group
19
At 30 March 2019
2,389
1,588
(1,251 )
14,701
17,427
(1,445 )
20,210
-
95
(1,445 )
-
-
-
-
-
-
-
-
-
509
(315 )
20,305
2,314
-
(2,704 )
(29 )
(2,733 )
(1,263 )
(49 )
(48 )
-
(379 )
-
23,127
95
23,222
2,314
(117 )
(2,704 )
(29 )
(2,850 )
(1,263 )
(49 )
(48 )
135
130
(315 )
194
(1,739 )
(1,410 )
At 30 March 2019
2,389
1,588
403
(1,251 )
18,147
21,276
(i)
The balance on retained earnings as at 1 April 2017 and 31 March 2018 has been adjusted to reflect the change in the Group’s practice
following adoption of IFRS 15 “Revenue from Contracts with Customers” with regards to recognising revenue when control of the
products is passed to the customer.
The accompanying notes form part of the financial statements
The accompanying notes form part of the financial statements
82
83
Notes to the Financial Statements
Notes to the Financial Statements
NOTES TO THE FINANCIAL STATEMENTS
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
30 March 2019, (2018: 52 week accounting
period ended 31 March 2018).
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
With effect from 1 April 2018, the Group
has applied IFRS 15, Revenue from contract
with customers. IFRS 15 replaces all existing
revenue requirements in IFRS and applies
to all revenue arising from contracts with
customers unless the contracts are within the
scope of other standards.
The cumulative effect method of adoption
has been used, with 2018 comparatives not
being restated. The adoption of IFRS 15
has had no material effect on transition and
is not expected to materially alter revenue
recognition patterns going forward.
Revenue represents income derived from
contracts for the provision of goods or
services by the Company and its subsidiary
undertakings to customers in exchange for
consideration in the ordinary course of the
Group’s business.
Upon approval by the parties to a contract,
the contract is assessed to identify each
promise to transfer either a distinct good
or service, or a series of distinct goods or
services that are substantially the same and
have the same pattern of transfer to the
customer. Revenue from the sale of goods
is recognised when control of the goods
have been transferred to the buyer.
Goods are identified as products made
from either natural fibres, (e.g. paper or
moulded paper products, or man-made fibres,
(e.g. highly technical nonwoven products
made by the TFP division).
In addition, revenue for services are also
received (e.g. revenue for design and set up
of moulded fibre ColourformTM products).
Any revenue received for such services are
recognised over the term of the contract.
Revenue is recognised when:
• All significant performance obligations
have been met;
• The Group retains neither continuing
managerial involvement nor effective
control over the goods;
• It is probable that the economic benefits
associated with the transaction will flow
to the Group;
• The amount of revenue can be
measured reliable.
Transfer of control varies depending on
the individual terms of the contract of sale.
For sales in the UK, transfer of control
occurs when the goods are despatched to the
customer. However, for some international
shipments, transfer of control occurs either
upon loading the goods onto the relevant
carrier or when the goods have arrived in the
overseas port. The point of transfer of control
for international shipments is dictated by the
terms of each sale.
Although the majority of the group’s contracts
with customers are not complex, with revenue
being fixed for a specific quantity of goods,
the Group has identified a number of contracts
in which customers are given volume rebates
and/or other promotional rebates based on
quantities purchased over a contractually
agreed period of time. Under IFRS 15, revenue
that varies due to rebates or brand support
costs is only recognised to the extent that it is
highly probable that a significant reversal of
that revenue will not occur at the end of the
rebate assessment period.
Based on the timing of the agreements entered
into with customers, the level of estimation
in year-end accruals is insignificant, and as
such there is not considered to have been a
significant impact on deductions to revenue
under IFRS 15.
(b) Operating segments
IFRS 8 Operating Segments 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 three 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. Allowances not utilised 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.
(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
• Computer software
• Emission Allowances
10 years
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 14 – 40 years
2 – 20 years
• Plant and machinery
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.
The accompanying notes form part of the financial statements
The accompanying notes form part of the financial statements
84
85
Notes to the Financial Statements
Notes to the Financial Statements
(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. A provision for impairment
is calculated using an expected credit loss
impairment model.
Under this impairment model approach, per
IFRS 9, it is not necessary for a credit event
to have occurred before credit losses are
recognized. Instead, an entity always accounts
for expected credit losses and changes in
those expected credit losses. The amount
of expected credit losses is updated at each
reporting date.
To measure expected credit losses the Group
refers to historical credit loss experiences
and adjust for current and forward looking
information on macroeconomic factors
affecting the group’s customers including
the state of the economy and industrial
specific factors in countries where the group
operates. Trade receivables are amortised at
cost using the effective interest method, less
any impairment.
(o) Trade payables
Trade payables are stated at their fair
value. Trade payables are subsequently
stated at amortised cost using the effective
interest method.
(p) Financial instruments
IFRS 9 Financial Instruments, has impacted
the way in which the Group accounts for
certain financial assets and liabilities.
The categories of Financial Instruments
have changed although this has not impacted
the Group. The standard has introduced an
expected credit loss model when assessing
impairment of financial assets. The Group
has applied the simplified model to recognise
expected lifetime losses on its trade
receivables. The Group have applied a
hold to collect business model.
Previously, impairment of trade receivables
was based on the ageing of the debt and
whether or not credit insurance covered the
debt, whilst assessing the likelihood of the
debt not being settled.
Impairment provisions for receivables from
and to Group undertakings are recognised
based on a forward-looking expected credit
loss model. The methodology used to
determine the amount of the provision is
based on whether there has been a significant
increase in credit risk since initial recognition
of the financial asset. For those where the
credit risk has not increased significantly
since initial recognition of the financial asset,
twelve month expected credit losses along
with gross interest income are recognised.
For those for which credit risk has increased
significantly, lifetime expected credit losses
along with the gross interest income are
recognised. For those that are determined to
be credit impaired, lifetime expected credit
losses along with interest income on a net
basis are recognised.
Notwithstanding the high value of trade
receivables, the application of IFRS 9 and the
expected credit loss impairment model has not
had a material effect on the group, due to the
fact the most of the Group’s trade receivables
are covered by Credit insurance and those
that are not covered are tightly managed to
mitigate the likelihood of any credit loss.
(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.
(s) Borrowing costs
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
and Own Shares Held
The Group operates two equity settled share
based payment schemes: A Share Incentive
Plan open to all employees and a Long-Term
Incentive Plan (LTIP) for certain Directors
and senior managers.
The SIP Trust (SIP) holds shares used to
allow employees to salary sacrifice any annual
profit bonus either in full or part to acquire
partnership shares in the Company, which are
held by the SIP Trust for a period of 3-5 years.
The Employee Benefit Trust (EBT) holds shares
for the granting and vesting of shares under
the LTIP scheme. The cost of purchasing and
transferring own shares held by both the
SIP and EBT are shown as movements
against equity.
The Group recognises an expense to the
Income Statement representing the fair value
of outstanding equity settled share-based
payment awards to employees which have not
vested as at 30 March 2019 for the year ending
30 March 2019.
The fair values are charged to the Income
statement over the relevant vesting period
adjusted to reflect actual and expected
vesting levels.
(v) Capital Management
Group and Company’s capital includes
share capital, reserves and retained earnings.
The Group and Company’s policies ensure
the ability to continue as a going concern,
in order to provide returns to the shareholder
and benefits to other stakeholders. The Group,
and Company, invest in financial assets that
will provide an adequate level of return to
the shareholder commensurate with the level
of risk.
The Group and Company manages the capital
structure and adjusts this in light of the changes
in the economic conditions and risk associated
with the underlying assets.
In order to maintain or adjust the capital
structure, the Group and Company may
adjust the amount of any dividend paid to the
shareholder, return capital to the shareholder,
issues new shares, or sell assets to reduce debt.
Details of borrowings can be seen in note 15
and shareholdings can be referred to in note 19.
The Group, and Company, are not subject to
any externally imposed capital requirements.
There have been no material changes in the
management of capital during the period.
(w) Taxation
Tax on the Statement of Comprehensive
Income for the year comprises current and
deferred tax. Tax is recognised in the Statement
of Comprehensive Income, according to the
accounting treatment of the related transaction.
Deferred tax is provided on temporary
differences between the carrying amounts of
assets and liabilities for financial reporting
purposes and the amounts used for taxation
purposes. The following temporary differences
are not provided for: the initial recognition
of goodwill; the initial recognition of assets
or liabilities that affect neither accounting
nor taxable profit other than in a business
combination, and differences relating to
investments in subsidiaries to the extent that
they will probably not reverse in the foreseeable
future.
The amount of deferred tax provided is
based on the expected manner of realisation
or settlement of the carrying amount of
assets and liabilities, using tax rates enacted
or substantively enacted at the Statement of
Financial Position date.
A deferred tax asset is recognised only to the
extent that it is probable that future taxable
profits will be available against which the
asset can be utilised.
(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.
The accompanying notes form part of the financial statements
The accompanying notes form part of the financial statements
86
87
Notes to the Financial Statements
Notes to the Financial Statements
(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.
(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
was included in the financial statements
from the period ended 31 March 2018.
The Group’s significant areas of judgement
would include:
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.
(i) Revenue recognition
Judgement is required in deciding when
and at what rate some volume rebates
awarded to customers are accrued for.
The Group intends to apply the modified
retrospective transition approach when
adopting IFRS 16 from 1 April 2019, whereby
the asset and liability values recognised are
equal to one another.
The estimated impact of adoption will be to:
• Increase the value of property, plant
& equipment by £5m.
• Increase lease liabilities (and net debt)
by £5m
• Increase in depreciation costs by £0.6m
• Increase in finance costs by £0.1m
• Decrease in rental costs by £0.5m
• Increase in EBITDA by £0.6m
• No material impact on Profit before tax
• Increase in gearing of around 39%
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 17 for
additional information.
When variable rates are awarded
depending on the projected total volume
over the contractual period, a judgement
of the probability of achieving the
required volumes is made.
Likewise, when recognising contributions
towards the set up and design costs for
ColourformTM which are recognised
over the length of the contract or levels
of production, judgement is required to
determine over what period the revenue
should be recognised.
(ii) Expected Credit Losses
When determining amounts of expected
credit losses, judgement is required to
ascertain the likelihood of losses, based
on historic information and forward
macroeconomic factors.
New standards and interpretation
not applied
Recently issued accounting standards that are
relevant to the Group but have not yet been
adopted are outlined below:
IFRS 16 Leases is effective from
1 January 2019. Under the new standard all
leases, except short term (under 12 months)
and low value leases, are accounted for on the
Balance Sheet with a “right of use” asset and
lease liabilities reflecting the discounted value
of lease payments.
As at the reporting date, the Group has
non-cancellable operating lease commitments
of £4.3m (see note 21), the vast majority
of which relate to property leases for
operational sites.
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:
“Eliminations” refers to the elimination
of inter-segment revenues, profits
and investments.
• 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
(Colourform) – 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.
“Adjusted Operating Profit before IAS 19”
refers to operating profits prior to the IAS 19
pension adjustment.
The “IAS 19 pension adjustment” refers to
the impact on operating profits of the pension
schemes’ operating costs, as described in the
IAS 19 section of the Financial Review.
“Interest Expense” incorporates the
IAS 19 pension impact of the pension
schemes’ finance costs, as described in the
IAS 19 section of the Financial Review.
Inter segment transactions are performed
in the normal course of business and at
arm’s length.
OPERATING SEGMENTS
PERIOD ENDED 30 MARCH 2019
All figures in £’000
Revenue
External
Segment (loss) / profit
Interest Expense
Interest income
Profit before tax
Tax on profit for period
Profit for the period
Total Assets
Total Liabilities
Paper Colourform
TFP
Group
Services
Eliminations
Continuing
Operations
74,318
74,318
290
290
26,487
26,487
-
-
(167 )
(854 )
-
-
-
-
-
-
-
-
-
-
101,095
101,095
4,262
(854 )
3,408
(965 )
133
2,576
(262 )
2,314
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
73,189
5,383
50,749
(66,076 )
(10,893 )
(40,883 )
62,995
(45,568 )
(122,859 )
115,239
69,457
(48,181 )
Adjusted Operating (loss) / profit before IAS 19
(1,992 )
(2,462 )
8,883
IAS 19 Pension adjustments to profit
-
-
-
Operating (loss) / profit
(1,992 )
(2,462 )
8,883
(1,021 )
The accompanying notes form part of the financial statements
The accompanying notes form part of the financial statements
88
89
Notes to the Financial Statements
Notes to the Financial Statements
Paper Colourform
TFP
Group
Services
Eliminations
Continuing
Operations
OPERATING SEGMENTS
PERIOD ENDED 31 MARCH 2018
All figures in £’000
Revenue
External
Segment profit / (loss)
Adjusted Operating profit / (loss)
before IAS 19
IAS 19 Pension
adjustments to profit
71,237
71,237
166
166
24,909
24,909
-
-
1,468
(1,639 )
7,449
(1,148 )
-
-
-
(695 ) ‐
Operating profit / (loss)
1,468
(1,639 )
7,449
(1,843 )
Interest Expense
Interest income
Profit before tax restated
Tax on profit for period
Profit for the period restated
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3
-
3
-
-
-
-
-
96,312
96,312
6,133
(695 )
5,438
(908 )
11
4,541
(451 )
4,090
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
Other interest receivable
Total interest income
Finance costs – net
4. PROFIT BEFORE TAXATION
Total Assets
Total Liabilities
69,603
(59,908 )
3,557
(6,438 )
42,378
62,075
(34,944 )
(45,408 )
(110,104 )
102,535
67,509
(44,163 )
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.
All figures in £’000
2019
2018
2019
2018
Revenue from External Customers
Non-Current Assets
UK
Europe
Asia
The Americas
Australasia
Africa
Total
44,177
23,299
7,763
24,377
1,171
308
42,963
20,470
7,632
23,153
1,709
385
25,394
23,184
-
-
-
-
2,610
2,425
-
-
-
-
101,095
96,312
28,004
25,609
All figures in £’000
Paper
Colourform
TFP
Group
Services
Total
Additions to non-current assets
339
1,529
359
168
2,395
The following items have been charged / (credited) in arriving at profit before tax:
Staff costs
Depreciation of property, plant and equipment
- owned assets
- leased assets
Amortisation of intangibles
Profit on disposal of fixed assets
Other operating lease rentals payable
- Plant & machinery
Repairs and maintenance expenditure on property, plant and equipment
Research & development tax credits
Government grants received
Research and development expenditure
Foreign exchange differences
Trade receivables impairment
Government grants relate to assistance received for research projects and the development of new technology
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
Other services
Remuneration payable to the company’s auditor for the auditing of subsidiary accounts and associates of the
company pursuant to legislation (including that of countries and territories outside Great Britain
Fees in respect of pension matters
Fees in respect of other assurance services
Fees in respect of other tax advisory services
The accompanying notes form part of the financial statements
The accompanying notes form part of the financial statements
90
91
2019
£’000
2018
£’000
366
67
532
965
29
104
133
832
244
75
589
908
11
-
11
897
2019
£’000
2018
£’000
28,183
27,314
2,273
526
153
(12 )
194
4,572
(555 )
(6 )
3,981
(312 )
22
2,001
523
154
(11 )
149
4,020
(254 )
(19 )
2,604
624
24
2019
£’000
2018
£’000
20
54
-
-
-
74
23
55
-
1
8
87
Notes to the Financial Statements
Notes to the Financial Statements
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 gains on retirement benefit liabilities
Reallocation of credit re deduction of share options to equity
Deferred tax on share options
Net deferred tax on share options
Income tax charged to OCI
The tax for the period is lower (2018: lower) than the standard rate of corporation tax in the UK of 19% (2018: 19%).
The differences are explained below:
Profit before tax
Profit on ordinary activities multiplied by rate of corporation tax in the UK of 19%
(2018: 19%)
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
Note
2019
£’000
2018
£’000
18
259
(149 )
110
107
56
(11 )
152
262
(554 )
173
(221 )
(48 )
-
2019
£’000
2,576
489
(93 )
(11 )
-
40
(26 )
(95 )
(42 )
262
932
(610 )
322
(13 )
143
(1 )
129
451
(441 )
-
(220 )
(220 )
91
2018
£’000
4,541
846
(467 )
(1 )
10
28
-
35
-
451
6. EARNINGS PER SHARE
Basic earnings per share is calculated on the Group profit for the year attributable to equity shareholders of £2.3m (2018: £4.1m) divided by 9.5m
(2018: 9.4m), being the weighted average number of shares in issue during the year.
Diluted earnings per share reflects any commitments made by the Group to issue shares in the future and so it includes the impact of share options.
The weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares. The Group has
one class of dilutive potential ordinary shares - those share options granted to employees where the exercise price is less than the average market price
of the company’s ordinary shares during the year. At 30 March 2019 there were no potential dilutive share options outstanding.
2019
Weighted
average
number of
shares
‘000
Earnings
£’000
2018
Weighted
average
number of
shares
‘000
Amount
per share
pence
Amount
per share
pence
Earnings
£’000
Basic EPS
Earnings attributable to ordinary shareholders
2,314
Effect of dilutive securities – options
Diluted EPS
-
2,314
9,516
-
9,516
24.3
-
24.3
4,090
-
4,090
9,449
67
9,516
43.3
-
43.0
7. DIVIDENDS
Final paid for the period ended 31 March 2018 / period ended 1 April 2017
Interim paid for the period ended 30 March 2019 /period ended 31 March 2018
Total dividends paid in the year
Final dividend payment paid pence per share for the period ended 31 March 2018 / period ended 1 April 2017
Interim dividend payment paid pence per share for the period ended 30 March 2019 / period ended 31 March 2018
2019
£’000
1,027
236
1,263
11.0 p
2.5 p
2018
£’000
864
233
1,097
9.3 p
2.5 p
In addition, the directors are proposing a final dividend in respect of the financial period ended 30 March 2019 of 11.0p per share (2018: 11.0p per share)
which will absorb an estimated £1,039,000 (2018: £1,027,000) of shareholders’ funds. If approved by members at the Annual General Meeting, it will be
paid on 9 August 2019 to shareholders who are on the register of members at 5 July 2019.
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.
The accompanying notes form part of the financial statements
The accompanying notes form part of the financial statements
92
93
Notes to the Financial Statements
Notes to the Financial Statements
8. INTANGIBLE ASSETS
9. PROPERTY, PLANT AND EQUIPMENT
All figures in £’000
Cost
At 31 March 2018
Additions
Disposals / surrender of allowances
Group
Company
Computer Development
Costs
Software
Trade
Emission
Secrets Allowances Total
Computer
Software
Emission
Allowances
Total
3,979
67
-
457
310
70
4,816
3,845
-
-
-
-
143
210
(188 )
(188 )
61
-
70
3,915
143
204
(188 )
(188 )
Group
All figures in £’000
Cost
Brought forward at 31 March 2018
Additions at cost
Disposals
Effects of movements in foreign exchange
Freehold land
& buildings
Plant &
machinery
11,154
420
-
-
86,251
4,742
(159 )
200
Total
97,405
5,162
(159 )
200
At 30 March 2019
4,046
457
310
25
4,838
3,906
25
3,931
At 30 March 2019
11,574
91,034
102,608
Aggregate amortisation
At 31 March 2018
Charge for Period
At 30 March 2019
Net book value at 30 March 2019
Net book value at 31 March 2018
3,895
39
3,934
112
84
115
114
229
228
342
310
-
310
-
-
-
-
-
4,320
153
4,473
25
365
70
496
3,803
22
3,825
81
42
-
-
-
3,803
22
3,825
25
106
70
112
Group
Company
All figures in £’000
Cost
At 1 April 2017
Additions
Disposals / surrender of allowances
Computer Development
Costs
Software
Trade
Emission
Secrets Allowances Total
Computer
Software
Emission
Allowances Total
3,938
41
-
457
310
3,093
7,798
3,823
3,093
6,916
-
-
-
-
133
174
(3,156 )
(3,156 )
22
-
133
155
(3,156 )
(3,156 )
At 31 March 2018
3,979
457
310
70
4,816
3,845
70
3,915
Aggregate amortisation
At 1 April 2017
Charge for Period
Disposals/surrender of allowances
At 31 March 2018
Net book value at 31 March 2018
Net book value at 1 April 2017
3,863
32
-
3,895
84
75
-
115
-
115
342
457
303
7
-
310
-
7
3,063
7,229
3,784
3,063
6,847
93
247
(3,156 )
(3,156 )
19
-
93
112
(3,156 )
(3,156 )
-
4,320
3,803
-
3,803
70
496
30
569
42
39
70
112
30
69
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 2 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.
Accumulated Depreciation
Brought forward at 31 March 2018
Charge for period
Disposals
At 30 March 2019
Net book value at 30 March 2019
Net book value at 31 March 2018
All figures in £’000
Cost
Brought forward at 1 April 2017
Transfers
Additions at cost
Disposals
Effects of movements in foreign exchange
6.985
229
-
7,214
4,360
4,169
65,307
2,570
(122 )
67,755
23,279
20,944
Freehold land
& buildings
Plant &
machinery
Assets under
construction
11,129
1
24
-
-
84,590
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
6,759
226
-
6,985
4,169
4,370
63,170
2,298
(161 )
63,507
20,944
21,420
782
(279 )
-
(503 )
-
-
-
-
-
-
-
782
Assets held under finance leases, capitalised and included in tangible fixed assets:
Group
Company
All figures in £’000
Net book value at 31 March 2018 / 1 April 2017
Additions in period
Reclassification to assets owned
Depreciation in period
Net book value at 30 March 2019 / 31 March 2018
2019
4,733
428
(361 )
(526 )
4,274
2018
4,404
1,229
(377 )
(523 )
4,733
2019
394
-
(292 )
(55 )
47
72,292
2,799
(122 )
74,969
27,639
25,113
Total
96,501
-
1,894
(666 )
(324 )
97,405
69,929
2,524
(161 )
72,292
25,113
26,572
2018
327
131
-
(64 )
394
The accompanying notes form part of the financial statements
The accompanying notes form part of the financial statements
94
95
Notes to the Financial Statements
Notes to the Financial Statements
Company
All figures in £’000
Cost
Brought forward at 31 March 2018
Transfers
Additions at cost
At 30 March 2019
Accumulated Depreciation
Brought forward at 31 March 2018
Charge for period
At 30 March 2019
Net book value at 30 March 2019
Net book value at 31 March 2018
All figures in £’000
Cost
Freehold land
& buildings
Plant &
machinery
1,663
-
20
1,683
465
21
486
1,197
1,198
2,321
(303 )
588
2,606
1,787
110
1,897
709
534
Freehold land
& buildings
Plant &
machinery
Assets under
construction
Brought forward at 1 April 2017
1,663
2,242
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
-
-
-
12
67
-
1,663
2,321
444
21
465
1,198
1,219
1,666
121
1,787
534
576
147
(6 )
-
(141 )
-
-
-
-
-
147
Total
3,984
(303 )
608
4,289
2,252
131
2,383
1,906
1,732
Total
4,052
6
67
(141 )
3,984
2,110
142
2,252
1,732
1,942
10. INVESTMENTS
Investments in subsidiary undertakings
At 30 March 2019 and 31 March 2018
Group
Company
2019
£’000
-
2018
£’000
-
2019
£’000
7,350
2018
£’000
7,350
Investments in subsidiary undertakings are stated at cost. A list of principal subsidiary undertakings is given below:
Company Name
Country of
incorporation
Registered % holding
office (see of ordinary
shares
below)
Nature of Business
James Cropper Speciality Papers Limited
England
James Cropper (Guangzhou) Trading Co Limited
China
James Cropper Converting Limited
James Cropper 3D Products Limited
Technical Fibre Products Limited
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
England
England
England
USA
USA
USA
USA
England
England
England
England
James Cropper Overseas Trading Limited (a)
England
(i)
(iii)
(i)
(i)
(i)
(ii)
(ii)
(ii)
(ii)
(i)
(i)
(i)
(i)
(i)
James Cropper Germany GmbH (b)
Germany
(iv)
100 Manufacturer of specialist paper and board
100
100
100
100
100
100
Sales and marketing organisation
Paper converter
Manufacturer of moulded fibre products
Manufacturer of advanced materials
Holding company
Sales and marketing organisation
100 Manufacturer of metal coated carbon fibres
100
100
100
100
100
100
100
Manufacturer of metal coated fibres
Dormant company
Dormant company
Dormant company
Dormant company
Dormant company
Dormant company
(i) Burneside Mills, Kendal, Cumbria, England. LA9 6PZ
(ii) 679 Mariaville Road, Schenectady, NY 12306 USA
(iii) Level 54 Guangzhou IFC, 5 Zhujiang Road West, Zhujiang New Town. China
(iv) c/o DWF Germany Rechtsanwaltsgesellschaft mbH, Habsburgerring 2, 50674 Köln, Germany.
(a) New company incorporated on 15 February 2019, a wholly owned subsidiary of James Cropper PLC.
(b) New company incorporated on 14 March 2019, a wholly owned subsidiary of James Cropper Overseas Trading Limited.
The accompanying notes form part of the financial statements
The accompanying notes form part of the financial statements
96
97
Notes to the Financial Statements
Notes to the Financial Statements
11. INVENTORIES
Group
Materials
Work in progress
Finished goods
2019
£’000
8,031
3,152
5,227
2018
£’000
7,669
3,221
3,964
16,410
14,854
13. OTHER FINANCIAL ASSETS
Group and Company
Interest rate swaps used for hedging
Foreign exchange rate swaps for hedging
2019
£’000
24
-
24
2018
£’000
44
3
47
Inventories are stated after a provision for impairment of £864,000 (2018: £610,000).
The cost of inventories recognised as expenses and included in cost of sales for the year ended 30 March 2019 was £78,397,000 (2018: £71,647,000).
The Company does not have inventories.
The gain arising in the Statement of Comprehensive Income on fair value hedging instruments was £nil
(2018: £nil).
12. TRADE AND OTHER RECEIVABLES
Group
Company
14. TRADE AND OTHER PAYABLES
Group
Company
Trade receivables
Less: Provision for impairment of receivables
Trade receivables –net
Amounts owed by group undertakings
Other receivables
Prepayments
2019
£’000
17,140
(222 )
16,918
-
951
1,143
19,012
2018
£’000
16,926
(121 )
16,805
-
635
1,082
18,522
2019
£’000
2018
£’000
-
-
-
-
-
-
47,760
44,488
931
632
613
550
49,323
45,651
The carrying value of trade and other receivables classified at amortised cost approximates fair value.
The Group does not hold any collateral as security.
The Group applies the IFRS 9 simplified approach to measuring expected credit losses using a lifetime expected credit loss provision for trade
receivables. To measure expected credit losses on a collective basis, trade receivables are grouped based on similar credit risk and ageing.
The expected loss rates are based on the Group’s historical credit losses experienced. The historical loss rates are then adjusted for current and
forward-looking information on macroeconomic factors affecting the Group’s customers. The Group has identified the current state of the
economy and industry specific factors as the key macroeconomic factors in the countries where the Group operates.
Amounts owed by group undertakings include loans of £26m (2018: £25m) with a fixed term of one year with an interest charge of 3.6% pa.
Intercompany current accounts of £2.9m (2018: £1.9m) are settled within 30 days.
Trade payables
Amounts owed to group undertakings
Other tax and social security payable
Other payables
Accruals
2019
£’000
6,456
-
643
636
6,885
14,620
2018
£’000
5,381
-
612
146
8,189
14,328
2019
£’000
2,153
15,097
175
231
899
18,555
2018
£’000
1,589
18,013
155
229
1,837
21,823
The fair values of trade and other payables approximate their carrying values presented.
The accompanying notes form part of the financial statements
The accompanying notes form part of the financial statements
98
99
Notes to the Financial Statements
Notes to the Financial Statements
15. BORROWINGS
Current
Bank loans and overdrafts due within one year or on demand:
Bank overdraft
Unsecured bank loans
Secured finance lease
Non-current loans
Unsecured bank loans
Secured finance lease
Group
Company
Note
2019
£’000
2018
£’000
2019
£’000
2018
£’000
-
767
778
-
720
880
16.3
1,545
1,600
8,226
1,142
9,368
7,203
1,560
8,763
16.3
316
-
45
361
4,000
4
4,004
-
-
43
43
4,000
70
4,070
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
2019
£’000
819
1,202
-
2,021
Lease
payments
2019
£’000
46
4
50
Interest
2019
£’000
Principal
2019
£’000
41
60
-
101
778
1,142
-
1,920
Interest
2019
£’000
Principal
2019
£’000
1
-
1
45
4
49
Minimum
Lease
payments
2018
£’000
936
1,455
177
2,568
Lease
payments
2018
£’000
45
72
117
Interest
2018
£’000
Principal
2018
£’000
56
71
1
128
880
1,384
176
2,440
Interest
2018
£’000
Principal
2018
£’000
2
2
4
43
70
113
Reconciliation of net borrowings
Net borrowings comprises interest bearing loans and finance leases less cash and cash equivalents.
Group
Cash and cash equivalents
Loans repayable within 1 year
Loans repayable after 1 year
Finance leases repayable within 1 year
Loans repayable after 1 year
Net borrowings
31 March
2018
£’000
Cash flow
£’000
5,557
(3,165 )
(720 )
(7,203 )
(7,923 )
(880 )
(1,560 )
(2,440 )
(4,806 )
-
(777 )
(777 )
-
520
520
(3,422 )
Other
Exchange
non-cash movement
£’000
£’000
-
(31 )
31
-
102
(102 )
-
-
(40 )
(15 )
(277 )
(292 )
-
-
-
(332 )
30 March
2019
£’000
2,352
(767 )
(8,226 )
(8,993 )
(778 )
(1,142 )
(1,920 )
(8,561 )
16. FINANCIAL INSTRUMENTS AND RISK
The Group has exposure to the following risks from its use of financial instruments:
• Credit risk
• Liquidity risk
• Currency risk
• Interest rate risk
This note presents information about the fair value of the Group’s financial instruments, the Group’s exposure to each of the risks noted and
the Group’s objectives, policies and processes for measuring and managing risk. The Board has overall responsibility of the risk management
strategy and coordinates activity across the Group. This responsibility is discussed further in the Directors’ report. Exposure to the financial
risks noted, arise in the normal course of the Group’s business.
16.1 FINANCIAL INSTRUMENTS BY CATEGORY
The fair values of the financial assets and liabilities of the Group are as follows:
Group
Financial assets
Current
Trade receivables
Other receivables
Derivatives
Cash and cash equivalents
Financial liabilities
Current
Trade payables
Other payables
Accruals
Short-term borrowings
Non-current
Long-term borrowings
Note
12
12
13
14
14
14
15
15
Company
Note
Financial assets
Current
Amounts owed to group undertakings
Other receivables
Derivatives
Cash and cash equivalents
Financial liabilities
Current
Trade payables
Amounts owed to group undertakings
Other payables
Accruals
Short-term borrowings
Non-current
Long-term borrowings
12
12
13
14
14
14
14
15
15
Fair value
through profit or loss
2019
£’000
2018
£’000
Amortised cost
2019
£’000
2018
£’000
-
-
24
-
24
-
-
-
-
-
-
-
-
47
-
47
-
-
-
-
-
-
Fair value
through profit or loss
2019
£’000
2018
£’000
-
-
24
-
24
-
-
-
-
-
-
-
-
-
47
-
47
-
-
-
-
-
-
-
16,918
951
-
2,352
20,221
6,456
636
6,885
1,545
15,522
16,805
635
-
5,557
22,997
5,381
146
8,189
1,600
15,316
9,368
8,763
Amortised cost
2019
£’000
2018
£’000
47,760
931
-
-
48,691
2,153
15,097
231
899
361
18,741
44,488
613
-
3,004
48,105
1,589
18,013
229
1,837
43
21,711
4,004
4,070
Financial instruments not measured at fair value includes cash and cash equivalents, trade and other receivables, trade and other payables,
and loans and borrowings. Due to their short term nature, the carrying values of cash and cash equivalents, trade and other receivables,
and trade and other payables approximates their fair value.
The accompanying notes form part of the financial statements
The accompanying notes form part of the financial statements
100
101
Notes to the Financial Statements
Notes to the Financial Statements
The table below analyses financial instruments carried at fair value, by valuation method.
MOVEMENTS IN IMPAIRMENT ALLOWANCE
Level 2: other techniques for which all inputs which have significant effect on the recorded fair value are observable, either directly
or indirectly:
Derivatives
16.2 CREDIT RISK
2019
2018
Level 2
£’000
24
Total
£’000
24
Level 2
£’000
47
Total
£’000
47
Group
Balance at Start of period
Increased/(released) during the period
Utilised during the period
Balance at end of period
16.3 LIQUIDITY RISK
2019
£’000
121
121
(20 )
222
2018
£’000
97
24
-
121
Credit risk is the risk of financial loss to the Group if a customer or counterparty fails to meet its contractual obligations. Credit risk arising from
the Group’s normal commercial activities are controlled by individual business units operating in accordance with Group policies and procedures.
Exposure to credit risk arises from the potential of a customer defaulting on their invoiced sales. Some of the Group’s businesses have credit
insurance in place. For uninsured customers, the financial strength and credit worthiness of the customer is assessed from a variety of internal
and external information, and specific credit risk controls that match the risk profile of those customers are applied.
Trade receivables held at 30 March 2019 (2018: 31 March 2018) were:
Liquidity risk is the risk that the Group will not have sufficient funds to meet liabilities. The Group’s policy is to maintain a mix of short,
medium and long term borrowings with a number of banks. Short term flexibility is achieved through 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 30 March 2019 (2018: 31 March 2018),
was as follows:
JC Speciality Papers
JC Converting
JC 3D Products
Technical Fibre Products
2019
£’000
9,860
1,583
150
5,547
17,140
The Company does not have trade receivables.
The majority of trade receivables are covered by credit insurance.
At 30 March 2019 the lifetime expected loss provision for trade receivables is as follows:
Expected loss rate
Gross carrying amount (£’000)
Loss provision
Not past due
Past due
0-30 days
Past due
31-60 days
Past due
over 60 days
1 %
3 %
14,818
148
2,088
62
4.5 %
215
0
10 %
19
2
2018
£’000
10,628
1,598
29
4,671
16,926
Total
-
17,140
222
All trade receivables have been reviewed under the expected credit loss impairment model and a provision of £222,000 (2018: £121,000) has been
recorded accordingly.
The Group applies the IFRS 9 simplified approach to measuring expected credit losses using a lifetime expected credit loss provision for trade
receivables. The expected loss rates are based on the Group’s historical credit losses experienced. The historic loss rates are then adjusted for
current and forward looking information on macro-economic factors affecting the Group’s customers.
Group
2019
Finance Lease
Debt Obligations
£’000
£’000
In less than one year
767
In more than one year but not more than two years
4,772
In more than two years but not more than five years
3,454
In more than five years
-
8,993
778
275
673
194
Total
£’000
1,545
5,047
4,127
194
2018
Finance Lease
Debt Obligations
£’000
£’000
720
716
6,487
-
7,923
880
686
698
176
Total
£’000
1,600
1,402
1,185
176
1,920
10,913
2,440
10,363
Company
Finance Lease
Debt Obligations
£’000
£’000
In less than one year
316
In more than one year but not more than two years
4,000
In more than two years but not more than five years
-
4,316
45
4
-
49
Total
£’000
361
4,004
-
4,365
Finance Lease
obligations
£’000
Debt
£’000
-
-
4,000
4,000
43
66
4
113
Total
£’000
43
66
4,004
4,113
The accompanying notes form part of the financial statements
The accompanying notes form part of the financial statements
102
103
Notes to the Financial Statements
Notes to the Financial Statements
TRADE PAYABLES
Trade payables at the reporting date was:
Trade payables at the reporting date was
Total contractual cash flows
Group
Company
2019
£’000
6,456
6,456
2018
£’000
5,381
5,381
2019
£’000
2,153
2,153
2018
£’000
1,589
1,589
BORROWING FACILITIES
The Group has the following undrawn committed borrowing facilities available at 30 March 2019:
Group
Expiring after one year
30 March 2019
Floating rate
£’000
31 March 2018
Floating rate
£’000
4,390
3,687
The Group’s expiry profile of the drawn down facilities is as follows:
16.4 CURRENCY RISK
The Group publishes its consolidated financial statements in sterling but also conducts business in foreign currencies. As a result it is subject
to foreign currency exchange risk arising from exchange rate movements which will be reflected in the Group’s transaction costs or in the
underlying foreign currency assets of its foreign operations. The Group has operations in the USA. 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.
Represented below is the net exposure to foreign currencies, reported in pounds sterling, and arising from all Group activities, as at
30 March 2019.
All figures in £’000
Trade Receivables
Cash and cash equivalents
Trade Payables
Unsecured current loans
Finance lease current
Unsecured non-current loans
Finance lease non-current
Net exposure
USD
6,101
642
(1,539 )
(767 )
-
(4,221 )
-
216
Euro
RMB
3,261
490
(1,066 )
-
-
-
-
19
80
-
-
-
-
-
2,685
99
GBP
7,537
1,140
(3,851 )
-
(778 )
(4,005 )
(1,142 )
(1,099 )
Total
16,918
2,352
(6,456 )
(767 )
(778 )
(8,226 )
(1,142 )
1,901
Group
Company
At the 31 March 2018 the Group’s exposure to foreign currency risk was as follows:
August 2019
November 2019
May 2020
June 2021
December 2021
30 March 2019
£’000
31 March 2018
£’000
30 March 2019
£’000
31 March 2018
£’000
2
2
4,000
2,878
2,111
8,993
10
6
4,000
1,243
2,664
7,923
-
-
4,000
-
-
4,000
-
-
4,000
-
-
4,000
All figures in £’000
Trade Receivables
Cash and cash equivalents
Trade Payables
Unsecured current loans
Finance lease current
Unsecured non-current loans
Finance lease non-current
Net exposure
USD
Euro
RMB
GBP
Total
6,169
2,253
(1,417 )
(2,664 )
-
(1,243 )
-
3,098
3,081
(2,518 )
(1,021 )
-
-
-
-
-
55
-
-
-
-
-
(458 )
55
7,555
5,767
(2,943 )
(10 )
(880 )
(4,006 )
(1,560 )
3,923
16,805
5,557
(5,381 )
(2,674 )
(880 )
(5,249 )
(1,560 )
6,618
This represents the net exposure to foreign currencies, reported in pounds Sterling, and arising from all Group activities.
The accompanying notes form part of the financial statements
The accompanying notes form part of the financial statements
104
105
Notes to the Financial Statements
Notes to the Financial Statements
At the 30 March 2019 the Company’s exposure to foreign currency risk was as follows:
16.5 INTEREST RATE RISK
All figures in £’000
Bank Overdrafts
Trade Payables
Finance lease current
Unsecured non-current loans
Finance lease non-current
Net exposure
USD
(232 )
(34 )
-
-
-
Euro
(1,805 )
(29 )
-
-
-
(266 )
(1,834 )
At the 31 March 2018 the Company’s exposure to foreign currency risk was as follows:
All figures in £’000
Cash and cash equivalents
Trade Payables
Finance lease current
Unsecured non-current loans
Finance lease non-current
Net exposure
USD
267
-
-
-
-
Euro
(2,642 )
(37 )
-
-
-
267
(2,679 )
GBP
1,721
(2,090 )
(45 )
(4,000 )
(4 )
(4,418 )
GBP
5,379
(1,552 )
(43 )
(4,000 )
(70 )
(286 )
Total
(316 )
(2,153 )
(45 )
(4,000 )
(4 )
(6,518 )
Total
3,004
(1,589 )
(43 )
(4,000 )
(70 )
(2,698 )
A one percent strengthening of the pound against the Euro and the US Dollar at 30 March 2019 would have had the following impact on equity
and profit by the amounts shown below.
Group
30 March 2019
30 March 2019
31 March 2018
31 March 2018
Equity
£’000
Income
£’000
USD
Euro
USD
Euro
(131 )
(48 )
(31 )
5
(76 )
(43 )
(47 )
(20 )
Company
30 March 2019
30 March 2019
31 March 2018
31 March 2018
Equity
£’000
Income
£’000
2
8
(3 )
27
-
-
-
-
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:
The net exposure to interest rates at the balance sheet date can be summarised as follows:
Group
Company
2019
£’000
8,988
450
9,438
5
1,470
1,475
10,913
2018
£’000
7,908
883
8,791
15
1,557
1,572
10,363
Interest bearing liabilities - floating
Borrowings
Finance lease
Interest bearing liabilities - fixed
Borrowings
Finance lease
Interest bearing liabilities
The effective interest rates at the balance sheet date were as follows:
Bank overdraft
Borrowings
2019
£’000
4,316
-
4,316
-
49
49
4,365
2019
%
2.5
2.3
2018
£’000
4,000
-
4,000
-
113
113
4,113
2018
%
1.5
2.9
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 £94,000 for the Group and £47,000 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
30 March 2019
31 March 2018
Income Statement
£’000
94
88
Company
30 March 2019
31 March 2018
Income Statement
£’000
47
52
The accompanying notes form part of the financial statements
The accompanying notes form part of the financial statements
106
107
Notes to the Financial Statements
Notes to the Financial Statements
17. RETIREMENT BENEFITS
GMP equalisation
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
2019
£’000
2018
£’000
585
41
663
36
Other pension costs totalled £976,000 (2018: £ 892,000) and represent life assurance charges and government pension protection fund levies
and other current service costs.
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.
Following the Lloyd’s case ruling on 26 October 2018, pension schemes are required to equalise GMPs between male and female members.
Method C2 has been adopted to equalise GMPs and has been accounted for as a past service cost item for the financial year ending
30 March 2019. Calculations based on membership data available suggest that equalisation of GMPs has led to an increase in liabilities of
approximately 0.1% in respect of both the Staff and Works Schemes. The ultimate cost of GMP equalisation is sensitive to a number of
factors. The GMP liability for deferred pensioners and pensioners who retired from deferred status equates to approximately 5% of the
overall Staff Scheme liabilities as at 31 March 2016 and approximately 4% of the Works Scheme liabilities as at 5 April 2016. Any change to
the proportion of GMP assumed is unlikely to have a material impact on the overall result. For example, a 5% increase to the proportion of
member benefits that relate to GMP would increase the estimate by around 0.05%.
The amounts recognised in the Statement of Financial Position (“SFP”) are determined as follows:
All figures in £’000
Defined benefit obligation (DBO)
Fair value of assets (FVA)
Net liability recognised in the SFP
Staff Scheme
Works Scheme
2019
(132,646 )
109,998
(22,648 )
(7,664 )
(14,984 )
(22,648 )
2018
(126,079 )
106,607
(19,472 )
(6,408 )
(13,064 )
(19,472 )
2017
2016
(128,026 )
105,832
(104,924 )
94,271
(22,194 )
(10,653 )
(7,405 )
(14,789 )
(2,813 )
(7,840 )
(22,194 )
(10,653 )
2015
(106,788 )
92,346
(14,442 )
(3,074 )
(11,368 )
(14,442 )
The most recent actuarial valuations of the Staff Scheme and the Works Scheme were undertaken in April 2016 by qualified independent actuaries.
The fair value of the plan assets comprises the following categories of asset in the stated proportions:
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:
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
Pension increases for in-payment benefits capped at
2.5%, with a 0% floor
Staff Scheme
Works Scheme
2019
%
2.15
3.15
1.75
2.45
3.65
2.05
2018
%
2.15
3.25
1.90
2.80
3.50
2.15
2019
%
2.15
3.15
1.75
2.45
3.25
1.80
2018
%
2.15
3.25
1.90
2.80
3.15
1.85
In respect of mortality for the Works members the assumptions adopted at 30 March 2019 are 145% of the SAPS “S2” series table, with future
improvements in line with the CMI core 2018 projection model with long-term trend improvements of 1.25% pa. For the Staff members the
SAPS “S2” series table with a 95% rating has been used, with future improvements in line with the CMI core 2018 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 4.6% for the staff scheme and 5.3% for the works scheme.
Pension payments are not expected to peak until 2040, and expected to continue until 2080.
All figures in %
Managed Growth
Annuities
Cash
Matching Assets
Staff Scheme
Works Scheme
2019
63.5
3.6
0.4
32.5
2018
61.4
3.7
0.2
34.7
2019
71.1
-
0.3
28.6
2018
68.7
-
0.4
30.9
The pension plan assets do not include any investments in the shares of the Company (2018: 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 past service costs and administration costs
1,423
2019
£’000
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 31 March 2018 / 1 April 2017
Total expense as above
Contributions paid
Actuarial (losses) / gains recognised in SCI
At 30 March 2019 / 31 March 2018
(2,959 )
3,491
532
1,955
2019
£’000
(19,472 )
(1,955 )
2,037
(3,258 )
(22,648 )
2018
£’000
1,285
(2,846 )
3,435
589
1,874
2018
£’000
(22,194 )
(1,874 )
2,003
2,593
(19,472 )
The accompanying notes form part of the financial statements
The accompanying notes form part of the financial statements
108
109
Notes to the Financial Statements
Notes to the Financial Statements
The actual return on plan assets was £5,462,000 (2018: £1,685,000). The Company expects to pay £621,000 (2018: £649,000) in contributions
to the Staff Scheme and £1,367,000 (2018: £1,669,000) 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.
Following the April 2016 triennial valuation, a deficit recovery plan was agreed with the Trustees which included additional
contributions of £1.4m pa to reduce the past service deficits for nine years from 1 April 2017. The current ongoing valuation may
change this profile once completed.
The cumulative amount of losses recognised in the Statement of Comprehensive Income, since the adoption of IAS 19, are £21,232,000
(2018: £18,735,000).
Works Scheme
Staff Scheme
Works Scheme
Staff Scheme
2019
2019
2019
2019
2018
2018
2018
2018
Assets
£’000
DBO
£’000
Assets
£’000
DBO
£’000
Assets
DBO
Assets DBO
£’000
£’000
£’000
£’000
At 31 March 2018 / 1 April 2017
54,455
(67,519 )
52,152
(58,560 )
53,638
(68,427 )
52,194
(59,599 )
Interest Income on plan assets
1,523
-
1,436
-
1,447
-
1,399
-
Current service costs
Benefits paid
Contributions by plan participants
Employer contributions
Interest cost on the DBO ‐
Past service costs ‐
Return on plan assets
(152 )
(748 )
(35 )
(355 )
(84 )
(789 )
(32 )
(380 )
(1,867 )
1,867
(2,545 )
2,545
(1,722 )
1,722
(1,575 )
1,575
335
1,388
-
-
(335 )
-
(1,880 )
(72)
156
649
-
-
(156 )
-
(1,611 )
(61 )
339
1,315
(339 )
161
(161 )
-
688
-
-
-
(1,840 )
-
-
-
(1,595 )
-
1,327
(3,306 )
1,176
(2,455 )
(478 )
2,154
(683 )
1,600
At 30 March 2019 / 31 March 2018
57,009
(71,993 )
52,989
(60,653 )
54,455
(67,519 )
52,152
(58,560 )
Experience adjustments
All figures in £’000
Arising on plan assets
Percentage of scheme assets
Arising on plan liabilities
Percentage of scheme liabilities
Sensitivity analyses
2019
2,503
2.28 %
(5,761 )
(4.34 %)
2018
(1,161 )
(1.09 %)
3,754
2017
9,505
8.98 %
(21,383 )
2016
2015
(624 )
(0.66 %)
7,178
15,591
16.88 %
(18,836 )
2.98 %
(16.70 % )
6.84 %
(17.64 % )
18. DEFERRED TAXATION
The movement on the deferred tax account is shown below:
Group
Company
All figures in £’000
At 31 March 2018 / 1 April 2017
Deferred tax on actuarial losses / (gains) on retirement liabilities
Deferred tax on share options recognised in equity
Statement of Comprehensive Income (charge) / credit
At 30 March 2019 / 31 March 2018
2019
2,053
554
(221 )
(152 )
2,234
2018
2,843
(441 )
(220 )
(129 )
2,053
2019
3,649
554
(221 )
(142 )
3,840
2018
3,453
(441 )
(220 )
857
3,649
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.
At 31 March 2018
SCI credit
Deferred tax on share options recognised in SOCIE
At 30 March 2019
Deferred tax assets
At 31 March 2018
SCI Charge
Deferred tax on actuarial losses on retirement liabilities
At 30 March 2019
Accelerated
capital
allowances
£’000
(1,773 )
(39 )
-
(1,812 )
Share
Options
£’000
318
(233 )
(48 )
37
Other
£’000
198
134
(173 )
159
Pension
£’000
3,310
(14 )
554
3,850
Total
£’000
(1,257 )
(138 )
(221 )
(1,616 )
Total
£’000
3,310
(14 )
554
3,850
Total
£’000
2,234
The sensitivity analyses below have been determined based on reasonable possible changes to the respective assumptions occurring at the
end of the reporting period, while holding all other assumptions constant. The sensitivity analyses may not be representative of the actual
changes in the net retirement benefits as it is unlikely that the changes in assumptions would occur in isolation of one another and some of the
assumptions may be inter-related.
Net deferred tax asset
Staff Scheme
Discount rate
Price inflation
Works Scheme
Discount rate
Price inflation
Current assumption
Sensitivity
£’000
Effect on DBO
0.25% decrease
£2,788
+4.6%
Mortality
95% of SAPS “S2” series table
Increase in life expectancy of 1 year
0.25% increase
£675
£2,753
+1.1%
+4.5%
Current assumption
Sensitivity
£’000
Effect on DBO
0.25% decrease
£3,817
+5.3%
Mortality
145% of SAPS “S2” series table
Increase in life expectancy of 1 year
0.25% increase
£612
£3,231
+0.9%
+4.5%
2.45%pa
3.15%pa (RPI)
2.15%pa (CPI)
2.45%pa
3.15%pa (RPI)
2.15%pa (CPI)
The accompanying notes form part of the financial statements
The accompanying notes form part of the financial statements
110
111
Notes to the Financial Statements
Notes to the Financial Statements
20. EMPLOYEES AND DIRECTORS
Staff costs during the period
Number of
ordinary shares
9,479,052
75,751
9,554,803
£’000
2,370
19
2,389
Wages and salaries
Social Security costs
Pension costs (note 17)
Group
Company
2019
£’000
23,340
2,314
2,529
28,183
2018
£’000
22,819
2,282
2,213
27,314
2019
£’000
3,086
477
1,065
4,628
2018
£’000
3,602
507
881
4,990
19. SHARE CAPITAL
Group and Company
Issued and fully paid
At 31 March 2018
Issued during the period
At 30 March 2019
Potential issue of ordinary shares
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 62,730 ordinary shares of 25p by August 2021 (2018: 119,780 ordinary shares of 25p by July 2020).
There were 38,684 share options exercised in the period (2018: 55,048). Further information on directors share options can be seen in the
Remuneration Committee Report.
Options at Options granted Options exercised Options lapsed in
the period
in the period
in the period
31 March 2018
Options at
30 March 2019
Share options
119,780
36,078
(38,684 )
(54,444 )
62,730
The amount of gains made by Directors on 38,684 share options exercised in the year totalled £638,286 (2018: 55,048 share options with gains of
£966,092). The Statement of Comprehensive Income includes LTIP charges of £21,473 for the year in relation to Directors (2018: £275,942).
The Save As You Earn (SAYE) scheme was introduced in September 2013 and run 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
September 13
5 year scheme
71 p
01 September 2013
199.52 p
313.5 p
26 %
2 %
5.25 years
1.5 %
During the period 66,898 options were exercised (2018: nil options were exercised) and the Scheme is now closed.
The amount of gains made by Directors on the exercise of 4,360 share options exercised under the SAYE Scheme in the year amounted to
£35,380 (2018: nil share options with gains of £nil).
The average monthly number of people (including executive directors) employed in the Group during the year, analysed by division
was as follows:
Full Time Equivalent
Headcount
James Cropper Paper Products
James Cropper 3D Products
Technical Fibre Products
James Cropper PLC
2019
Number
2018
Number
2019
Number
2018
Number
371
20
104
63
558
365
10
106
60
541
377
21
107
84
589
370
11
108
79
568
21. COMMITMENTS UNDER OPERATING LEASES
Group
2019
Plant &
machinery
£’000
Property
£’000
2018
Plant &
machinery
£’000
Property
£’000
Commitments under non-cancellable operating leases expiring:
Within one year
Later than one year and less than five years
After five years
23
356
3,617
3,996
15
341
-
356
28
833
523
1,384
-
518
-
518
Company
2019
Plant &
machinery
£’000
Property
£’000
2018
Plant &
machinery
£’000
Property
£’000
Commitments under non-cancellable operating leases expiring:
Within one year
Later than one year and less than five years
After five years
-
350
-
350
15
323
-
338
-
115
523
638
-
518
-
518
The accompanying notes form part of the financial statements
The accompanying notes form part of the financial statements
112
113
Notes to the Financial Statements
Notes to the Financial Statements
The principal operating lease agreements in place include the following:
24. RELATED PARTY TRANSACTIONS
Factory and offices USA:
The Group entered into a building lease agreement for a non-cancellable term of 10 years from September 2011,
with an option to extend for a further 5 years. In June 2018, the Group re-negotiated the lease term to extend the
lease until September 2031, with an option to extend for a further 5 years.
Factory and offices in Crewe:
The Group entered into a building lease agreement for a term of 6 years from December 2018. The lease agreement
may be terminated after December 2021 by giving the landlord not less than six months’ previous written notice on 6 June 2021.
Warehouse in Milnthorpe:
The Group entered into a building lease agreement for a term of 10 years from May 2015. The lease agreement may be
terminated from May 2020 subject to not less than six months’ prior written notice.
Warehouse in Milnthorpe:
The Group entered into a building lease agreement for a term of 5 years from February 2019. The lease agreement may
be terminated from February 2021 subject to not less than six months’ prior written notice.
Company cars:
The Group has entered into a number of lease agreements for company cars with terms varying from 3 years to 5 years.
22. CAPITAL COMMITMENTS
Contracts placed for future capital expenditure not
provided in the financial statements
23. CONTINGENCIES
Group
Company
2019
£’000
1,134
2018
£’000
1,302
2019
£’000
319
2018
£’000
5
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.
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 (2018: £40,000) to Sir James Cropper (Honorary President) 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 £6,597 (2018: £5,298) to Ellergreen Hydro, a company in which M A J
Cropper (Chairman and Non-Executive Director) is Managing Director, in the period for maintenance work. The Company paid £13,651
(2018: £18,934) 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 £15,834 (2018: £6,032) to Burneside Community Energy Ltd. M A J Cropper is a director of Burneside Community
Energy Ltd.
The Company also has the following transactions with related entities:
2019
James Cropper Speciality Papers Limited
James Cropper Converting Limited
James Cropper 3D Products Limited
Technical Fibre Products Limited
James Cropper Overseas Trading Limited
2018
James Cropper Speciality Papers Limited
James Cropper Converting Limited
James Cropper 3D Products Limited
Technical Fibre Products Limited
Management
charges
£’000
Receivable /
(Payable)
£’000
Loans and net
intercompany
funding
£’000
6,166
-
343
1,575
-
8,084
2,144
84
497
154
22
2,901
(2,963 )
13,111
6,748
12,866
-
29,762
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
Compensation for key management
In accordance with IAS 24, “Related Party Disclosures”, key management personnel are those persons having authority and responsibility
for planning, directing and controlling the activities of the Group, directly or indirectly, and includes Directors (both Executive and Non-
Executive) of James Cropper PLC. The Board and those members of the Executive committee who are not Directors comprise the key
management personnel of the Group. The remuneration of the Directors is disclosed in the Report of the Remuneration Committee (page 67).
Salaries and fees
Short term employee benefits
Short term bonuses
Pension costs
Shared based payments
Total
2019
£’000
1,201
142
56
76
638
2,113
2018
£’000
1,066
139
175
73
966
2,419
The accompanying notes form part of the financial statements
The accompanying notes form part of the financial statements
114
115
Shareholder Information
2018-2019 SHAREHOLDER INFORMATION
Reporting
Interim Results announced
and sent to Ordinary Shareholders
Final results announced
Notification of AGM issued by
13 November 2018
25 June 2019
9 July 2019
Annual General Meeting at Bryce Institute, Burneside, Kendal, Wednesday 31 July 2019 at 11.00am.
Dividends on Ordinary Shares
Interim dividend paid on 11 January 2019 to Ordinary Shareholders registered on 30 November 2018.
Final dividend to be paid on 9 August 2019 to Ordinary Shareholders registered on 5 July 2019.
Advisers
Independent Auditor
BDO LLP, Manchester
Tax Advisers
PricewaterhouseCoopers LLP, Manchester
NOMAD & Stockbrokers
Shore Capital, 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
3
ANNUAL REPORT PRODUCTION
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