ANNUAL REPORT AND ACCOU NTS 2 020
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 PACK AGING
TO DIGITAL IMAGING AND AEROSPACE WITH
PRODUCTS THAT ARE AT THE CUTTING
EDGE OF PERFORMANCE .
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Location
Manufacturing
R&D
Sales Office
Partners
1
Burneside, UK (Head Office)
2
Crewe, UK
3
Oslo, Norway
4
Helsinki, Finland
5
Ljungby, Sweden
6
Copenhagen, Denmark
7
Brussels, Belgium
8 Munich, Germany
9
Paris, France
10
Strasbourg, France
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13
14
4
3
5
6
7
8
9 10
11
1
2
12
15
16
17
18
20
19
#
Location
Manufacturing
R&D
Sales Office
Partners
11 Milan, Italy
12
Barcelona, Spain
13
Schnectady, USA
•
•
14
Philadelphia, USA
15 Dubai, UAE
16
Shanghai, China
17 Guangzhou, China
18
Hong Kong, China
19
Sydney, Australia
20
Johannesburg, South Africa
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1
CONTENTS
STRATEGIC REPORT
03
04
05
06
08
11
13
18
21
26
29
32
35
38
40
43
45
47
49
Financial Highlights
Financial Summary
Chairman’s Letter
Chief Executive’s Review
Covid-19 Report
Chief Financial Officer's Review
The Pension Report
Risk Management
Stakeholders Relationship Statement
Technical Fibre Products
ColourformTM
James Cropper Paper
Values and Purpose
Sustainability
Streamlined Energy & Carbon Report
Pride Excellence Awards
People
GOVERNANCE
Board of Directors
Corporate Governance Statement
Report of the Audit Committee
Report of the Remuneration Committee
QCA Principles
Directors’ Report
FINANCIAL STATEMENTS
65
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
2
4
1. Pasaban Operator, Daniel Ford
2. Paper reels in the high bay warehouse
3
3. Maison Ruinart packaging in production with ColourformTM
4. ColourformTM Operatives, Mike Gardner and Matt Lowther
Strategic Report - Financial Highlights
Strategic Report - Financial Summary
FINANCIAL HIGHLIGHTS
FINANCIAL SUMMARY
Geographical % segmentation of region
Summary of results
2020
2019
2018
2017
2016
UK
Europe
Americas
Asia
Other
All figures in £’000
Revenue
Adjusted operating profit (excluding IAS 19 impact)
Adjusted profit before tax (excluding IAS 19 impact)
Impact of IAS 19
Profit before tax
2020
2019
104,667
101,095
7,240
6,674
(1,215 )
5,459
4,262
3,962
(1,386 )
2,576
Earnings per share - diluted
50.6 p
24.3 p
2018
96,312
6,133
5,825
(1,284 )
4,541
43.0 p
2017
92,363
6,849
6,566
(1,025 )
5,541
49.0 p
2016
87,920
6,264
5,173
(1,305 )
3,868
31.8 p
2016
57,470
(17,019 )
40,451
(6,453 )
33,998
(7,305 )
26,693
10%
20%
30%
40%
50%
60%
Profit before tax
£5.5m
2020
2019
2018
2017
2016
Gearing (i)
26%
2020
2019
2018
2017
2016
112%
5.5
5.5
24%
26
2.6
4.5
3.9
12
21
20
22
Summary of Financial Position
All figures in £’000
Non-pension assets – excluding cash
Non-pension liabilities – excluding borrowings
Net IAS 19 pension deficit (after deferred tax)
Net borrowings
Equity shareholders’ funds
Gearing % - before IAS 19 deficit
Gearing % - after IAS 19 deficit
Capital expenditure £’000
2020
72,084
(19,032 )
53,052
(7,600 )
45,452
(11,055 )
34,397
2019
2018
2017
64,871
(16,236 )
48,635
(18,798 )
29,837
(8,561 )
21,276
59,899
(15,585 )
44,314
(16,162 )
28,152
(4,806 )
23,346
64,304
(19,433 )
44,871
(18,421 )
26,450
(7,364 )
19,086
26 %
32 %
21 %
40 %
12 %
21 %
20 %
39 %
22 %
27 %
9,195
5,229
1,935
5,315
4,086
(i)
The IAS 19 pension adjustments are explained in detail in the Financial Review section, pages 18 to 20. The total amount excluded from
the IAS pension Charge is £1,215,000 (2019: £1,386,000). 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.
(excluding IAS 19 Pension adjustments)
(ii) The IAS 19 pension adjustment £1,215,000 (2019: £1,386,000) comprises:
Capital expenditure
£9.2m
2020
2019
2018
2017
2016
1.9
5.2
5.3
4.1
76%
9.2
All figures in £’000
Current service charge
Normal contributions
Interest charge
IAS 19 pension adjustment
Period ended 28 March 2020
Period ended 30 March 2019
1,188
(517 )
544
1,215
1,423
(569 )
532
1,386
Further details can be found on page 19 (The IAS 19 impact on profits).
Total revenue
£104.7m
2020
2019
2018
2017
2016
Adjusted profit before tax (iii)
£6.7m
2020
2019
2018
2017
2016
4.0
4%
104.7
101.1
96.3
92.4
87.9
68%
6.7
5.8
6.6
5.2
(excluding IAS 19 Pension adjustments)
Diluted EPS
50.6p
2020
2019
2018
2017
2016
108%
50.6
43.0
49.0
24.3
31.8
Net borrowings (ii)
£11.1m
2020
2019
2018
2017
2016
Non GAAP Measures:
29%
11.1
4.8
8.6
7.4
7.3
(i) Gearing is calculated as the proportion of net debt to Total Shareholders’ Equity, excluding the IAS19 Pension deficit.
(ii)
Net borrowings, are calculated as total loans and borrowings less cash and cash equivalents.
Included in net borrowings from 2020 are lease liabilities for right of use assets under IFRS 16.
The Group has initially applied IFRS 16 at 31 March 2019 and recognised £4.2m of lease liabilities on the balance sheet.
The Group has applied IFRS 16 using the modified retrospective approach, under which comparative information is not restated
and the cumulative effect of applying IFRS 16 is recognised in retained earnings at the date of initial application.
(iii) Adjusted profit before tax equates to profit before tax excluding the IAS 19 impact.
04
05
Strategic Report - Chairman’s Letter
Strategic Report - Chairman’s Letter
CHAIRMAN’S LETTER
Dear Shareholders,
Against the dramatic background ushered
in by Covid-19 towards the end of our
financial year, I am especially pleased
to report a record year for the Group.
Group revenue once again set a new
record at £105m while profit before tax
more than doubled to £5.5m. These were
excellent results that allow us to enter a
period of great uncertainty with a degree
of fitness, especially compared to the
challenging results of the prior two years.
The result was buoyed up by a £5.4m
rebound in our Paper division operating
profits, moving from a £2m loss to a £3.4m
gain. Whilst operating profits were down
13% for TFP, the business experienced
good growth in fuel cell and green
energy markets which will continue.
ColourformTM saw 800% revenue growth
in the year and cut losses by 45% to £1.4m.
Our closing cash position was significantly
up on last year, moving from £2.3m to
£8.9m, underpinned by a record adjusted
EBITDA result of £11.2m.
The strong financial performance was also
mirrored elsewhere. Our capital investment
programme (which was already significant
as I noted in last year’s report) changed
up a gear again, moving from £5.2m to
£9.2m, a level not seen in 30 years.
More was to come in TFP and Paper,
but the advent of Covid-19 mean these
have now been paused to conserve cash.
Behind the investment figures, innovation
spending was maintained at £4m; research
and development personnel continue to
comprise about 15% of all employees.
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.
Paper’s return to profitability was aided
by lower pulp and energy costs, the former
finally dropping after two years of
extensive (and painful) rises. Paper also
saw an underlying improvement in margin;
itself helped by strong growth of 23% in its
most important market, luxury packaging.
We continue to seek top and bottom-line
improvements in Paper in every way
possible. Importantly, via our Big Listen
(see p.47) and ensuing programmes (p.35),
we are seeking and gaining more ideas than
ever about how to improve performance.
To date over 350 people have given input,
the majority of the Paper team.
ColourformTM has yet to post a profit,
but this year’s 800% revenue growth and
reduced loss have been important steps in
the right direction. The growth has been
significantly helped by brands secured via
a partnership with a packaging company.
This has included a two year programme to
develop a revolutionary ‘second skin’
bottle wrap for champagne house Ruinart,
which replaces traditional boxes (see p.33).
It is nine times lighter with a significantly
lower environmental impact and Ruinart
have made it front and centre of its current
marketing campaigns, with direct credits to
James Cropper included.
Our TFP business registered strong growth
in sales into the fuel cell and wind energy
markets. This growth in sales was enough
to offset a reduction in our sales into
the aerospace sector. Despite the well
documented issues currently impacting
the aerospace sector, we remain optimistic
that there will be a slow but steady
recovery over the next two or three years.
Our success in growing sales into renewable
and clean energy sectors is very well aligned
with our ambitions to deliver green growth.
Another important development this year
was the appointment of Lyndsey Scott to
the Group Board as a non-executive
director. Lyndsey is currently Chief HR
Officer at International Personal Finance
PLC and brings significant multi-national
business experience to the Group gained
across many different sectors.
The appointment followed the retirement
of David Wilks who joined the board in
2004. David also brought a wealth of
experience in organisational development
to the Company and I would like to
personally thank him for everything he
did to help us strengthen the Board and
Company in recent years.
175th Anniversary
Dividend
This year we intended to celebrate history. Our 175th anniversary is 5 July 2020 and
a long weekend of festivities was planned to mark this major milestone. Instead, since
the new world presaged by Covid-19 took hold in early March, we have of course delayed
the celebrations until we can hold them safely, hopefully in 2021 or 2022.
“LOOKING OUT FURTHER, I HAVE NO DOUBT
WE WILL EMERGE STRONGER AND
MORE RESILIENT THAN EVER. ”
In response to the Covid-19 pandemic
and anticipated economic fallout,
the Group Board took the decision
that no final dividend would be paid.
This is part of an all-encompassing
cash preservation programme which is
detailed later in this report. The last time
the company cancelled a dividend payment
was in the loss-making year of 1976
when no interim sum and only a very
modest final payment was made.
Outlook
How do we look forward in times such
as these? At one level it is tempting to
try to learn from other key moments in
our 175 year history: devastating fires in
1886 and 1903, world wars, stock-market
crashes, the rise and fall of the British
Empire, economic swings from free trade
to protectionism and back, and so on.
But in truth each one is different,
requiring different responses.
This time, a global economic crash of
unprecedented speed and depth comes at a
time when mankind is only just waking up
to the devastating impact our actions are
having on the planet. At the same time
there is growing unease about business
and its unequal relationship with society,
whether real or perceived. And what of
Brexit, once front page news and only
months away, but still with unclear
outcomes? None of these issues will be
overturned in the short term. And yet,
throughout our history, we have
demonstrated we can respond and
adapt with speed and agility.
In the days following lockdown two simple
questions were foremost in my mind:
do we truly realise how serious this is,
and will we survive? These are answered:
yes and yes. But this is only owing to the
extraordinary exertions and inputs from
every level of the James Cropper team:
IT setting up dozens of people to work
from home within hours; cleaners adopting
new regimes; the canteen team rapidly
instigating a cashless takeaway; our
maintenance staff adapting the site at
record pace to the new landscape of hand
sanitisers, wash-stations, 2m white lines,
doors that can be opened and closed with
no hands. The list goes on and on: everyone
observing social distancing; finance and
management redrafting plans and models
again and again, delivering unprecedented
cash savings; regular and direct
communication to all from Phil Wild
based around the three strands of
protecting both people and customers
and managing costs; the creation of
virtual coffee breaks, and an online
platform to share news with everyone
especially those offsite on furlough.
Unlike many businesses, we have never
shut although, aided by the government
furlough scheme, we have cycled
production to match demand.
Looking beyond the here and now,
I believe there are now two additional
questions to ask: can we grow our
way out of the current economic
environment and can we do so in
a way that respects our environment,
people and communities like never before?
I would again answer yes and yes.
It is encouraging that the fastest
growing areas of our business are in the
environmental field, whether a recyclable
alternative to plastic (ColourformTM)
or renewable energy materials (TFP).
Paper meanwhile is maintaining a
commitment to transition to 50% waste
fibre by 2025. We are also embarking on a
programme to dramatically cut our carbon
emissions significantly ahead of national
decarbonisation targets. Around our sites,
we are also playing a part in reimagining
and supporting our communities better,
a process we began in Burneside in 2015
and expanded to Kendal in 2019.
How we do all of the above remains to be
finalised, but I have no doubt we will rise
to the challenge just as we have in recent
months. For the year ending March 2021,
we expect a break-even profit at least,
excluding any impact of pension charges
under IAS 19. Looking out further,
I have no doubt we will emerge
stronger and more resilient than ever.
For now, I wish to thank the James Cropper
team like never before. You have shown
your true colours and I am proud to be
associated with each and every one of you.
Mark Cropper, Chairman
22 June 2020
06
07
Strategic Report - Chief Executive’s Review
Strategic Report - Chief Executive’s Review
YEAR IN REVIEW
Revenue
(2019: £101.1m)
£104.7m
+4%
Adjusted operating profit (APM 1)*
(excluding IAS 19 impact) (2019: £4.3m)
£7.2m
+70%
Adjusted profit before tax (APM 2)*
(excluding IAS 19 impact) (2019: £4.0m)
£6.7m
+68%
Profit before tax
(2019: £2.6m)
Net borrowings
(2019: £8.6m)
Dilluted earnings per share
(2019: 24.3p)
£5.5m
+112%
£11.1m
+29%
50.6p
+108%
Global Diversity
To reduce the dependence from a specific
geography, the company has executed on
a strategy to grow exports.
This has been a result of investment in
key regions and targeted growth plans.
Sales exports have grown from 47%
to 60% of sales in the last five years.
As a result of targeted portfolio growth,
export sales now deliver close to 75%
of the company profits.
Sales Exports
2020
2019
2018
2017
2016
60%
55%
54%
51%
47%
Growth in Niche Markets
Each business is focused on niche markets. Each market is chosen to
provide long term growth potential matched with our unique capabilities.
Technical Fibre Products (TFP) operate within the advanced composites market.
TFP’s nonwoven products provide unique solutions for light-weighting,
conductivity, fracture resistance, to name a few.
James Cropper Paper (JCP) produces speciality papers in low volume and
high quality, with the highest growth coming from the luxury packaging sector.
Within this sector, JCP provides ranges of colours, textures and coating using
a range of environmental materials including post-consumer waste.
ColourformTM (3DP) operates within the moulded fibre packing market,
providing environmental alternatives to single-use plastics. Uniquely,
ColourformTM offers high-quality packaging across the spectrum of colours.
Sales Volume
High
Medium
Low
Innovation
Over the past five years, we have invested over £13 million
in research and development activities, with over 15%
of our employees directly involved in these programmes.
Last year over £28 million sales came from products that have
been developed and introduced in the previous five years.
Sustainability is supported through our drive to innovate. Examples include,
recycling sources of waste paper products, introducing renewable energy,
developing products for clean technology such as wind and hydrogen fuel cell.
Full year dividend per share
(2019: 13.5p)
2.5p
-
Interim dividend paid, no final dividend proposed
CHIEF EXECUTIVE’S REVIEW
I was pleased to see continued sales
growth now achieving circa £105m
in sales. The resulting profits before
tax for the group doubled to £5.5m
delivering the most profitable
year so far.
After a period of increased sales
and improved mix along with a
steady decline in pulp prices the
Paper business delivered a strong
performance. Following the successful
commercialisation of the ColourformTM
business sales in this division
delivered strong growth.
Technical Fibre Products delivered
a solid performance, with a dip
in the aerospace market lessened
by an increasing growth experienced
in fuel cell and wind energy sectors.
As a consequence of the increased
profits, earnings per share is 108%
higher than the previous period at
50.6p per share (2019: 24.3p per share).
Revenue and Operating Profit
Capital expenditure
Group revenue for the financial period
was £104.7m, up 4% on the prior period.
Revenue for James Cropper Paper grew by
2% in the period to £75.5m with the division
generating an operating profit of £3.4m,
compared to an operating loss of £2.0m in
the prior period. Revenue for the Technical
Fibre Products division (“TFP”) remained
flat in the period at £26.5m and operating
profit down 13% at £7.8m. Revenue for
ColourformTM grew to £2.5m, compared to
£0.3m in 2019 and operating losses reduced
from a loss of £2.5m to a loss of £1.4m.
Research and development
Research and development is a fundamental
part of our growth strategy, adding to our
capability, maintaining our competitiveness
and bringing new product lines into our
target markets. The Group continues to
invest in research and development with
expenditure in R&D of £3.9m this period,
compared to £4.0m in the prior period.
Capital expenditure during the
period was £9.2m (2019: £5.2m).
Targeted Growth
Each business focuses on its
target market; however, all have
key strategies in common:
• Focusing on niche growth
markets to match our
unique capabilities
• Expand global diversity
to target these niche
markets across the world
• Deliver constant
innovation to these
chosen markets
* For definitions of alternative performance measures please refer to page 13 on the Chief Financial Officer Review report.
08
09
Strategic Report - Chief Executive’s Review
Strategic Report - Covid-19 Report
People
The approach to building skills and
talent can be seen at all levels within
the company. Graduate intake has
traditionally been within technical
and now benefits from a wider range
of functions. Similarly, apprenticeships
traditionally were focused on engineering
disciplines; however, today cover broader
functions within the business.
The annual Pride awards recognise
employees going “above and beyond”
demonstrating creativity, significant
improvements and dedicating personal
time to good causes.
There are a number of cultural programmes
designed to gain input from every
employee within the company to support
building a collaborative approach to
changes we adopt. These include a detailed
employee survey, “The Big Listen” run
within the paper business and structured,
regular communication, to name a few.
Our people programmes together
with a strong emphasis on training
and development, underpin our initiatives
to grow in each business.
Phil Wild, Chief Executive Officer
22 June 2020
Apprenticeships within the group
14 Engineering
2
Papermaking
4
Business
8
Leadership
2
Manufacturing
30
Graduates within the group
8 Technical
14
1
Technology & Innovation
5
Commercial / Business
COVID-19 REPORT
Health and wellbeing of employees
Reducing Costs
• Implementing government guidelines
• Cost of living pay increases
such as sanitation and social distancing
and bonus payments suspended
• Providing personal protective
• Planned production temporary closures
At the start of the new financial
year, we experienced the initial
impact of the Covid-19
global pandemic.
Our guiding principles
on how we responded
to Covid-19 were:-
• Health and wellbeing
of employees
equipment (PPE)
• Directors visible on-site each day
• Up to 30% of employees
working from home
• Utilising the Job Retention Scheme
• Supporting customers
• Regular communication status updates
• Reducing costs
• Providing mental health support
• Community support programmes
Supporting Customers
• Sharing best practices
• Rescheduling orders and production
to best match customers’ needs
and costs
• Logistic and delivery challenges are
overcome. E.g. import restrictions,
reduced air carriers
• Payment plans to support customers
• Employees placed on Job Retention
Schemes reducing the workforce to
minimum requirements
• A hiring freeze, a release of agency
workers and other operational costs
• Significant spending cuts in all areas that
are not directly related to the production
for our customers, and spending cuts
which do not impact our ability to grow
• Capital investment projects for strategic
growth programmes postponed
• Adopting payment suspensions and
plans where government and tax
authority support is in place
• Shareholder dividends stopped
10
11
Strategic Report - Covid-19 Report
Strategic Report - Chief Financial Officer’s Review
The Company selected a severe framework against which build and action immediate plans and assess the impact
of Covid-19 on the business over the next two years. Whilst in the short term costs and cash are managed to
ensure liquidity; our objective is to continue and to accelerate growth plans. Some examples include:-
CHIEF FINANCIAL OFFICER’S REVIEW
Paper
• New product development to extend the range such as PaperGard and Biomaster,
which treats paper against cross-contamination of bacteria. Applications which lend
themselves to medical markets.
• Growth volume, including products such as manilla and filing products.
• Gain market share by working with merchants to win volume projects.
• Accelerate the introduction of new projects such as a new mountboard
range to capitalise on an expected home refurbishment spike.
• Launch new ranges such as the Mill Collection, black & white folding boxboard
for cosmetics packaging which will show rebound benefit from online purchasing.
Technical Fibre Products
Profit Summary
Revenues
Paper Products
Technical Fibre Products (TFP)
Colourform
Other Group expenses
Adjusted operating profit APM1
Net finance costs
(excluding IAS 19 impact)
2020
£’000
2019
£’000
Change Change
%
£’000
104,667
101,095
3,406
7,753
(1,378 )
(2,541 )
7,240
(566 )
(1,992 )
8,883
(2,462 )
(167 )
4,262
(300 )
3,572
5,398
(1,130 )
1,084
(2,374 )
2,978
(266 )
4 %
271 %
(13 %)
44 %
(1422 %)
70 %
(89 %)
Adjusted profit before tax APM2
6,674
3,962
2,712
68 %
Net IAS 19 pension adjustments
Net current service charge required
(671 )
Net interest
(544 )
(854 )
(532 )
Net IAS 19 pension impact
(1,215 )
(1,386 )
183
(12 )
171
21 %
(2 %)
12 %
• Accelerate new products and applications such as high-value fire retardant products.
Profit before tax
5,459
2,576
2,883
112 %
• Drive new markets such as marine defence.
• Growth in the existing market, for example, markets supporting the movement
away from fossil fuels, such as fuel cells.
• Gain volume growth and market share such as the wind energy market selling
high-value materials in Europe and China.
ColourformTM
• Accelerating new projects such as bottle wraps for champagne markets.
• Line extensions in beauty and cosmetics.
• Expanding the range with existing customers.
• Licencing technology. ColourformTM uniquely delivers a full range of
coloured products, however only currently focused on the European market.
Working with partners in other geographies and sharing selective colour technology
allows licencing revenue to be achieved.
Impact from Covid-19
At the start of the pandemic, the Paper
business experienced a sharp downturn
in orders, aligned to the lockdown
imposed around the world and especially
in the UK. Much less impact was
experienced in the TFP business,
with a downturn in aerospace observed,
however, continued growth in other
markets such as green technology.
While the order intake for ColourformTM
has been moderated, year on year growth
continues to be achieved. The impact on
group sales for the start of the current
financial year was approximately
30% less compared to the same period
in the prior year. We expect to fall
further during Q2, with growth being
experienced in the second half of the year.
Impacts on profits have been less severe
due to the quick and significant actions
taken to reduce costs at the start of the
pandemic. While we expect profit to be
significantly affected, as a result, we do
expect to the end the current financial
year at least at break-even profit,
excluding any impact of pension
charges under IAS 19.
Revenue and Trading Profits
Alternative Performance Measures (APMs)
The Group delivered record revenue
of £104,667,000 in the period, a 4%
increase from £101,095,000 in 2019.
Group adjusted profit before tax
(see APM2 Alternative Performance
Measures), grew by 68% on the
prior period to £6,674,000
(2019: £3,962,000).
TFP’s revenues were depressed
slightly by the Boeing 737 Max
production delays and then Covid-19
on the aerospace sector in general,
TFP nonetheless produced a steady
performance with noticeable
growth in its fuel cell and wind
energy sectors. Paper generated
revenue growth largely from luxury
packaging contracts whilst
ColourformTM went from £0.3m
to £2.6m in the year.
Adjusted operating profit (APM 1)
grew successfully (up 70% on prior
year) due to mix improvements in
Paper, favourable forward gas
contracts, the reduction in pulp
prices, and excellent sales growth
in ColourformTM along with a
dependable performance in TFP.
The Group profit before tax
increased in the period by 112%
on the prior period to £5,459,000
(2019: £2,576,000).
APMs make clear to the readers of the accounts what the underlying performance of the
business actually is. These measures are used internally to evaluate business performance.
The following alternative performance measures are used in this report and these accounts:
APM 1
“Adjusted operating profit” - Adjusted operating profit refers to operating
profit prior to the impact of IAS 19.
APM2
“Adjusted profit before tax” - Adjusted profit before tax refers to profit before
tax prior to the impact of IAS 19.
APM3
Adjusted EBITDA - EBITDA is a common term that refers to operating profit
before interest, tax, depreciation and amortisation. Adjusted EBITDA is
EBITDA prior to the impact of IAS 19. The impact of IAS 19 is shown in the
Profit summary table above.
All APMs exclude IAS 19 as IAS 19 varies, up and down, from one reporting period to
another and obscures true business performance. This chart sets out the variable impact
of IAS 19 on profits over the last 12 years.
The surplus in 2012 resulted in an additional £128,000 being added to reported profits.
The largest deficit was experienced in 2019 with a £1,386,000 impact to reported profits.
This year-end to March 2020 reveals an IAS 19 impact on profits of £1,215,000.
Total impact of IAS 19 on profit £’000
400
200
0
(200)
(400)
(600)
(800)
(1,000)
(1,200)
(1,400)
(1,600)
2008 2009 2010
2011
2012
2013
2014
2015
2016
2017
2018
2019 2020
12
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Strategic Report - Chief Financial Officer’s Review
Strategic Report - Chief Financial Officer’s Review
Revenues and Divisional performance
Other Group Expenses
Divisional Revenue Summary
Paper Products
Technical Fibre Products
Colourform
Revenue
Divisional Profit Summary
Paper Products
Technical Fibre Products
Colourform
Other Group Expenses
Adjusted Operating Profit APM1
2020
£’000
75,545
26,536
2,586
2019
£’000
74,318
26,487
290
104,667
101,095
Change
£’000
Change
%
1,227
49
2,296
3,572
2 %
-
792 %
4 %
2020
£’000
2019
£’000
Change
£’000
Change
%
3,406
7,753
(1,378 )
(2,541 )
7,240
(1,992 )
8,883
(2,462 )
(167 )
4,262
5,398
(1,130 )
1,084
(2,374 )
2,978
271 %
(13 %)
44 %
(1,422 %)
70 %
Paper Division
The Paper Division is one of the world’s
foremost makers of premium coloured
paper and a custom specialty converter
of papers. It is renowned globally for
its expertise in the manufacture of high
quality, uncoated, deep coloured papers
that play an important part in sustainable
growth markets within luxury packaging,
display art, photography, printing
and marketing.
Revenues grew 2% year on year as a result
of our strategy to leverage our colour
expertise and to continue to innovate in
recovered and sustainable fibre to generate
value for our customers and their evolving
portfolios. Key opportunities are in
packaging where we have seen 23% year
on year growth, particularly with some
of the highest profile luxury goods brands.
Consumer concern about sustainability
and social issues is on the increase and we
continue to enjoy growing interest from
enlightened brands in our CupCycling™
capability of used coffee cup fibre as
a key source of post-consumer waste
in packaging.
Throughout the year pulp prices softened
easing the burden by £3.9m compared to
the prior year, although prices are still
higher than the historic 2017 levels.
Increasing the use and application
of recovered fibre is key to reducing
dependence on virgin pulp, by the end of the
year usage increased to 24% of recovered
fibres in our portfolio up 4% from the
beginning of the year. The profit in this
period is £3,406,000 (2019: loss £1,992,000).
Technical Fibre Products (TFP)
TFP develops and manufactures
non-wovens and other advanced cutting
edge materials that play an important
part in progressive applications for fuel
cell and green technologies, defence,
fire-protection and transportation.
TFP is a highly diversified business,
with profitable niche positions in a range
of market sectors. TFP has little direct
competition in its chosen applications,
and customarily holds a deep insight into
its customer requirements, it has built
up a strong reputation for innovation
and development in each of its sectors.
In the two years preceding this period
the Division suffered from a sustained
and unprecedented increase in pulp prices
causing a heavy commodity price burden
and an impetus to innovate in recovered
and sustainable fibre solutions.
During the year long term defence
programmes faced delays in production,
the aerospace industry suffered a
contraction which continues into this
year as the Boeing 737 Max stopped
production and Covid-19 took a hold.
Overall sales and profits for the period
were impacted, however the division
enjoyed growth in fuel cell and other
green technologies and continues to
be well positioned in these growing
markets. Profit this period is down
13% on previous year at £7,753,000
(2019: £8,883,000).
ColourformTM
Colourform™ delivers plastic-free
packaging made from 100% renewable
FSC® wood fibre and post-consumer
recycled paper.
Using colour and texture, form,
and functionality, Colourform™
provides a high-quality alternative to
single use plastics. Established in 2017,
Colourform™ has expanded its capacity
as demand has grown. In 2020 the
business delivered over £2.5m sales
(previous year £0.3m) to customers
in key cosmetics, beauty and
perfume sectors.
Further contracts in the champagne
and beauty markets have been secured
by Colourform™ for delivery in 2020/21
and we continue to see a growing interest
in sustainable projects with brands keen
to drive the environmental agenda with
their packaging. Colourform™ made a
loss in the period of £1,378,000
(2019: loss £2,462,000).
Other group expenses have increased in
the period to £2,541,000 (2019: £167,000).
Profit bonus accruals constitute the largest
item, and early recognition of Covid-19
expenditure and provisions another.
Bonus awards are linked to performance
allowing employees to celebrate their
achievements, building trust and
engagement. In the prior year no bonuses
were earned however this year is the
best year in the Company’s history and
we are pleased that bonuses have been
earned. Whilst all awards have been
deferred due to the pandemic it is the
Board’s intention to pay these awards.
The Board believes that we will experience
various emerging phases as the Covid-19
pandemic evolves, with different
countries, different regions and different
business sectors recovering at different
speeds. Whilst expected credit losses are
recognised in each Division the Company
believes these to be much less predictable
in the current environment and yet all the
more important to provide for, additional
provisions in Group have been made to
reflect this uncertainty.
Currency
This table compares the opening and closing exchange rates for the financial period.
Sterling weakened against both major currencies in the period.
60% of the Group’s sales are exports bringing in Dollars and Euros to the Group.
Euros are used to purchase Euro priced 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.
A total of ¤7m forward sell euro contracts are in place throughout the 12 month
period to March 2021 to convert expected excess Euros into Sterling.
Currency movements had a positive impact on operating profit in the divisions
and a negative impact in PLC. Currency movements, with the Dollar and Euro
strengthening had a minor beneficial impact on sales, increasing sales by 0.5%.
Currency
$
¤
Opening rate
March 2019 v. £
Closing rate
March 2020 v. £
Exchange rate
movement
Strengthen v. £
1.3031
1.1605
1.2359
1.1149
5.15 %
3.93 %
EBITDA (Earnings before interest, tax, depreciation and amortisation)
The Group monitors EBITDA as it provides a good indication of cash generated from the Group’s operations.
EBITDA
2020
£’000
2019
£’000
Change Change
%
£’000
Adjusted operating profiting APM1
7,240
Depreciation and amortisation
3,950
Adjusted EBITDA APM3
11,190
4,262
2,952
7,214
2,978
998
3,976
70 %
34 %
55 %
The Group’s adjusted operating profit
increased 70% year on year. The Group’s
depreciation costs were 34% higher than in
the prior period as expected with investment
in ColourformTM now being depreciated.
The group delivered an Adjusted EBITDA
(APM 3) of £11,190,000 (2017: £7,214,000)
up 55% on prior year.
Tax
The Group’s total tax charge for the period is £630,000
(2019: £262,000) an effective tax rate of 11.5% on profit
before tax. The effective rate is lower than the standard
rate of corporation tax in the UK (19%) notably as a result
of rate changes on the opening deferred tax assets and
liabilities from 17% to 19% as a result of the substantive
enactment at the balance sheet date of changes in
corporation tax rates, also due to an off set of losses
arising in overseas jurisdictions.
SFP
2020
£’000
2019
£’000
Non-pension assets - excluding cash
72,084
64,871
Non-pension liabilities - excluding borrowings
(19,032 )
(16,236 )
Net IAS 19 pension deficit (after deferred tax)
(7,600 )
(18,798 )
53,052
48,635
Statement of financial position (SFP)
Net borrowings
Non-pension assets have increased from £64,871,000
to £72,084,000, an increase of £7,213,000 largely due
to the increased levels of capital investment up £3,966,000
on prior year and the inclusion of IFRS 16 Right of Use
assets in 2020. Non-pension liabilities have increased by
£2,796,000 primarily due to balances on trade payables.
Equity shareholders’ funds
34,397
21,276
Gearing % - before IAS 19 deficit
Gearing % - after IAS 19 deficit
Capital expenditure £’000
26 %
32 %
21 %
40 %
9,195
5,229
45,452
29,837
(11,055 )
(8,561 )
14
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Strategic Report - Chief Financial Officer’s Review
Strategic Report - Chief Financial Officer’s Review
SFP IAS 19 Pension
SFP IAS 19 Pension
2020
£’000
2019 Change
£’000
£’000
After deferred tax the Net IAS 19 deficit has decreased
by £11,198,000 to £7,600,000. The decrease is principally
caused by rising corporate bond yields, a fall in expected
future inflation and reductions in life expectancy all decreasing
liabilities which was further aided by strong asset returns.
A greater analysis of IAS 19 on pensions, the on-going valuations
and risk management is provided within the “pensions section”
of this report. Note 19 also provides a full retirement benefit
disclosure to the financial statements.
Retirement benefit liabilities
(9,382 )
(22,648 )
13,266
Deferred tax asset
1,782
3,850
(2,068 )
Net IAS 19 pension deficit
(7,600 )
(18,798 )
11,198
As a result of these movements on the pension scheme deficits,
and the strong performance in the year, shareholders’ funds
show an overall increase of £13,121,000 to £34,397,000.
Cash Flow
In the period the Group’s net cash inflow was £6,612,000
(2019: outflow £3,205,000). A positive cash inflow in the year:
the Group generated cash through its strong operating
performance and good working capital management. Past service
deficit payments of £1,424,000 are made in accordance with the
agreed schedule of contributions covering £1,284,000 to reduce
past service deficits and a further £140,000 to meet protection levy
payments. Strategic investments increased in the year supported
by additional debt drawdowns. Debt drawdowns also provided
the Group with good availability of funds ahead of the evolving
impact of the Covid-19 pandemic.
Capital investment in the period was £9,195,000 (2019: £5,229,000).
Investments are driven by the requirement to enable growth,
largely in the form of generating revenue by increasing
capacity, improving capability or generating cost savings.
Other expenditure supports resilience, safety and workplace
improvements. Capital was invested in all divisions this year.
Last year we announced the strategic decision to provide an
additional nonwoven production line, expanding capacity by a
further 50% in TFP to support future growth. The programme
of work progressed well during the year, and it constitutes the
largest spend in the year. Prior to the year-end with Covid-19
impacting (see CEO report), the completion of this project has
been deferred as one of a number of immediate actions to
safeguard cash and preserve liquidity. Early signs show that the
TFP markets are more resilient to the general market downturn
created from Covid-19 and commercial growth opportunities
will be optimised by the completion of this project.
Capital projects remain under regular review as the Executive
Committee monitors and assesses performance, funding and
market conditions prior to re-starting or approving new or
existing investment projects.
The closing cash position for the Group is £8,964,000
(2019: £2,352,000).
The closing cash position of £8,964,000 along with existing
overdraft facilities of £3,500,000 ensures the Group holds
sufficient funds by way of buffer as the Covid-19 pandemic
takes effect on the world. The Company has selected a prudent
framework against which to action immediate plans and assess
the impact of Covid-19 on the business over the next two years.
Whilst in the short term costs and cash are managed to ensure
liquidity and support working capital requirements our objective
is to continue and accelerate growth plans. Key immediate uses
of cash will therefore be available to back working capital
requirements during the downturn and in readiness to gear up
out of the downturn, however some flexibility is also retained to
re-start our investment programmes if certain conditions are met.
Cash Flow
Net cash inflow from
operating activities
Net cash outflow from
investing activities
Net cash inflow / (outflow)
from financing activities
Net increase / (decrease)
in cash and cash equivalents
Opening cash and
cash equivalents
Closing cash and
cash equivalents
3,870
(1,851 )
5,721
2,742
(1,354 )
4,096
6,612
(3,205 )
9,817
2,352
5,557
(3,205 )
8,964
2,352
6,612
Funding, facilities and net debt
The Group funds its operations and investments from
operating cash flow and from borrowings and leases.
During the period net debt increased by £2,494,000
to £11,055,000, however the Group has adopted IFRS 16
and incorporates £4,328,000 of right-of-use leases in its 2020
borrowings figure. Net debt on an equivalent comparative
basis is reduced to £6,727,000 in the year down by £1,834,000.
Net debt before IFRS 16
2020
£’000
2019 Change
£’000
£’000
Cash and cash equivalents
8,964
2,352
6,612
All borrowings excluding IFRS 16 (15,691 )
(10,913 )
(4,778 )
Net debt on an equivalent
comparison basis
(6,727 )
(8,561 )
(1,834 )
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 £11,000,000, of which £10,934,226 is drawn down
at the period end. Cash and cash equivalents increased from
£2,352,000 up to £8,964,000 in the year whilst long term
borrowings (falling due after more than a year) increased
by £6,895,000 to £16,263,000 after the adoption of IFRS 16.
The expiry profile of existing borrowings is detailed in
note 18.3 to the financial statements.
The group is in compliance with all its banking covenants at the
period end. The group has since arranged new covenant measures,
with its supporting banks, which enable new parameters to be
monitored during the Covid-19 pandemic, and our expected
recovery period.
Undrawn facilities comprise of unused overdraft facilities of
£3,500,000 plus the total unused credit facilities of £1,867,000,
the majority of cash under revolving credit facilities having
been drawn down prior to the year end. This means a total
of £5,367,000 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
£10,575,000 available to the Group beyond 12 months.
Funding
2020
£’000
2019 Change
£’000
£’000
Cash and cash equivalents
8,964
2,352
6,612
Borrowings:
repayable within one year
(3,756 )
(1,545 )
(2,211)
Borrowings: non-current
(16,263 )
(9,368 )
(6,895 )
Net debt
(11,055 )
(8,561 )
(2,494 )
Borrowings:
repayable within one year
3,756
1,545
2,211
Borrowings: non-current
16,263
9,368
6,895
Facilities drawn down
20,019
10,913
9,106
Undrawn facilities
5,367
8,119
(2,752 )
Facilities
25,386
19,032
6,354
Cash and cash equivalents
Undrawn facilities
8,964
5,367
2,352
8,119
6,612
(2,752 )
Funds available at year end
14,331
10,471
3,860
Borrowings:
repayable within one year
Funds available
in excess of one year
(3,756 )
(1,545 )
(2,211 )
10,575
8,926
1,649
The Company has carried out extensive
financial modelling of the most severe
impact of the Covid-19 pandemic.
The Company has used this framework to
inform its strategic response and to engage
with its stakeholders. In particular,
the directors considered the Group's profit
and cash flow forecasts for the coming two
financial years in this context, which
foresees a particularly challenging sales
outlook over the twelve month period
from April 2020 to March 2021.
This framework has formed the basis
of our opinion of the Group’s cash and
debt requirements. We have reviewed
these with our bank lenders and agreed
adjusted financial covenants with them.
The Group's revised financial covenants
are not breached in this severe framework.
The UK government has announced
a number of assistance measures for
businesses. The Company has sought to
utilise these schemes where it is
eligible and beneficial to do so.
For planning purposes, the Company
frequently updates its view on likely
trading patterns, incorporating latest
intelligence on demand, cost reduction
actions, reduced capital expenditure and
the furlough of employees. Importantly
these realistic scenarios provide good
headroom against the Covid-19 severe
framework and our covenants.
At the time of writing this report the
Company is trading very significantly
ahead of the most severe forecasts at both
the sales and profit level. Nevertheless
there still remains a risk that the impact
of Covid-19 could be more significant
than presented in the Company’s severe
case. In the event that there is a more
significant downturn, there are further
mitigating actions that could be enacted,
these could include but are not limited to,
further reductions in capital expenditure,
further reductions in business expenditure
and overheads.
The Company believes that with the
stronger than feared start to the year
and with the on-going government
support measures, the cost savings
enacted and the potential for further
savings, should the impact of Covid-19
be more significant than our most
pessimistic current view, the Company
has sufficient headroom to remain
within covenants and to be able to
continue to operate within available
banking facilities.
The Board is satisfied it has sufficient cash
resources to meet its obligations as they
fall due throughout this duration and the
Board has a reasonable expectation that
the Company and the Group has adequate
resources to continue in operational
existence for the foreseeable future.
2020
£’000
2019 Change
£’000
£’000
13,065
3,366
9,699
(9,195 )
(5,217 )
(3,978 )
Going Concern
16
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Strategic Report - The Pension Report
Strategic Report - The Pension Report
The IAS 19 valuation includes a correction for sex-inequalities inherent in Guaranteed Minimum Pensions (GMPs) which was
accounted for in the year end March 2019 where an estimate of £133,000 for the financial cost to correct the gender inequalities
inherent in Guaranteed Minimum Pensions (GMPs) was 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 fully evaluate,
however the Company would expect any variances compared to the estimate, to flow through the OCI statement.
The April 2016 triennial “on-going” valuations
Discount Rate
Staff
Scheme
£000s
Works
Scheme
£000s
Total
£000s
3.55 %
3.55 %
3.55 %
Assets
Liabilities
44,401
(48,079 )
47,901
92,302
(60,045 )
(108,124 )
Deficit
(3,678 )
(12,144 )
(15,822 )
Funding Level - %
92.4 %
79.8 %
85.4 %
Defined benefit schemes the triennial “on-going” valuation
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 concluded funding
valuations were carried out at April
2016 and these determined the combined
deficit of the schemes to be £15.8m.
Work is progressing on the April 2019
triennial “on-going” valuation.
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.
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 with a low reliance
on support from the Company. With
pension payments not expected to peak
until 2040, and expected to continue into
the 2080s, the funding deficits are
expected to be repaired over this timeline.
The on-going triennial valuations are an
important part of aligning the latest
position on route to the longer term target.
The current deficit recovery plan was
agreed with the Trustee and 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.
Key risks relating to the pension schemes
The Company is exposed to a number
of risks relating to the pension schemes,
including investment risks, demographic
risks and inflation risks for those
benefits linked to inflation. Covid-19 is
likely to cause considerable volatility in
the markets in the short to medium term
affecting all these risks.
Most of the economic risks are hedged by
the schemes’ liability driven investment
strategies, which brings some protection
however 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 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”).
IAS 19 pension valuation 2020
Staff
Scheme
Works
Scheme
Total
2020
Total
2019
Change
%
Discount Rate
2.50 %
2.55 %
2.53 %
2.45 %
Assets
Liabilities
(Deficit) / Surplus
Effect of limit on recoverable surplus
Net (Deficit) / Surplus
Funding Level - %
£000 s
53,512
(51,632 )
1,880
(1,880 )
-
104 %
£000 s
60,456
(69,838 )
(9,382 )
-
(9,382 )
£000 s
113,968
(121,470 )
(7,502 )
(1,880 )
(9,382 )
£’000
109,998
(132,646 )
(22,648 )
-
(22,648 )
87 %
94 %
83 %
4 %
(8 % )
(59 % )
13 %
The Statement of Financial Position IAS 19 deficit
The pension scheme deficit reported in the
accounts has decreased since 2019, from
£22.6m to £9.4m (before deferred tax).
The table shows the overall value of the
schemes’ assets which have increased by
4% and in the same period the schemes
liabilities decreased by 8%.
The combined decrease in the schemes’
overall deficit is principally caused by
rising corporate bond yields, a fall in
expected future inflation and reductions
in life expectancy all decreasing liabilities
which was further aided by strong asset
returns. The Covid-19 pandemic created
an unusual time in the markets at the
March year end and the increased yields
available on corporate bonds at the time
drove down liabilities and, together with
the lower expected future inflation,
has caused the greatest part of the
improvement we see across both schemes.
A full retirement benefit disclosure is
provided in note 19 to the financial
statements and in addition it is worth
noting that;
• The IAS 19 valuation includes
a correction for sex-inequalities
inherent in Guaranteed Minimum
Pensions (GMPs)
• The staff scheme surplus has been
restricted and not recognised in line
with the implications of the guidance
provided by IFRIC 14.
18
19
Strategic Report - The Pension Report
Strategic Report - Risk Management
IAS 19 assumptions
The IAS 19 impact on profits
The bi-annual IAS 19 valuations are
adopted for statutory reporting purposes
and hold no other value to the Company.
The standard requires the Group’s
actuaries to make a number of
assumptions on a very different basis to
the on-going valuations and under IAS 19
the deficit is likely to be volatile and can
be very different from one 6 month
reporting period to the next.
The impact of Covid-19 on markets at the
March year-end illustrates how sensitive
IAS 19 outcomes can be as a result of short
term market volatility. Discount rates for
IAS 19 are based on corporate bond yields
which do not reflect the investment
strategy of the schemes. 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).
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. Actuarial changes in
previous assumptions will pass
through Other Comprehensive
Income (OCI) in this period actuarial
valuations on mortality have passed
through the OCI as a result of more
robust studies carried out to assist
determination of the 2019
on-going valuations.
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 28 March
2020 includes an additional adjustment of £1,215,000 (2019: £1,386,000)
to bring the cost into line with IAS 19.
Operating costs
The cost of providing pension benefits is included within “employee benefits
costs” in the Statement of Comprehensive Income. These costs include; the
costs for the defined contribution schemes, personal pension plans, defined
benefit schemes, life assurance and government pension protection levies.
These costs also include an excess charge of £671,000 (2019: £854,000)
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.
• 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 £544,000 is
charged to the income statement this period (2019: £532,000).
The retirement benefits note to the financial statements can be
found on pages 103 to 106.
RISK MANAGEMENT
Viability
The Board has considered the potential
business impacts of the Covid-19 outbreak.
The Board believes that the four years
to March 2024 is an appropriate period
over which to evaluate the Group’s
viability. This includes revival and
opportunities to thrive in the post
Covid-19 environment.
The Group’s current financial position,
along with its Covid-19 strategies and plans
beyond, marks the end of the Group’s
formal planning horizon. The Board believes
that given the emerging phases in the
Covid-19 pandemic, with different countries,
different regions and different business
sectors recovering at different speeds,
the principal risks described in this report
are in themselves less predictable and
yet important to consider over the
planning horizon.
The Group’s severe downside plan has
been tested for further downside linked to
the Covid-19 pandemic and the Group’s
principal risks. 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 continues to meet its ongoing
obligations. The Board is satisfied that
the Group will have sufficient liquidity to
meet its needs over the planning horizon.
The directors have a reasonable expectation
that the Group remains viable over the
period of assessment.
Risk Management
The Board has overall responsibility for
risk management which is key to ensuring
good governance and to achieving the
Group’s strategy.
The Board coordinates activity across
the Group ensuring risk management
remains relevant to each business and
the Group as a whole, and that it is
responsive to changing business conditions.
During the early phases of the Covid-19
pandemic the Executive team led daily
crisis response meetings and the Executive
team continue to follow an ongoing process
for identifying, evaluating and managing
significant risks faced by the Group:
our covid-secure risk assessment is
available on the Company’s website.
The Group manages risk by a
combination of insurance and
self-insurance. Self-insurance refers
to actions taken internally or in conjunction
with other third parties. High risks in
financial and operational areas are normally
more dependent on insurance, however
selected self-insurance activities can
provide key protection.
Risks in commercial and personnel areas,
because of their nature, are more likely
to be managed by self-insurance.
Principal Risks
The principal risks and uncertainties
that may adversely impact the
performance of the Group are set
out in the table on the following pages,
along with the steps taken to address these.
Each risk should be considered
independently. Other factors could
adversely affect Group performance
and so the risks and uncertainties tabled
should not be considered a complete
set of potential risks, this report
only addresses the Group’s most
significant risks.
20
21
Strategic Report - Risk Management
Strategic Report - Risk Management
THE COVID-19 PANDEMIC RISK
Risk description and Impact
EMPLOYEE HEALTH & SAFETY
Risk description and Impact
New risk this year —
The risk of renewed contagion, and or the risk of global failure to provide effective
therapeutic treatments or vaccines. The risk of these Covid-19 extended pandemic
phases on our employees, our customers and the Group’s financial stability.
Stable —
Mitigation
To date the Company has focused
both on managing the crisis whilst
simultaneously building the Company
and getting fit for the future.
It has a severe downside to instigate
immediate actions.
The severe downside adopts a U shaped
recovery curve and assumes an impact
relevant to the industry we operate
within and the customers we serve.
Further downside linked to the Covid-19
pandemic will result in other measures
being taken which to date have not been
built in and may include:
• Accelerating investment in areas
where commercial growth is
more resilient
• Reducing the workforce
• Outsourcing non-core activities
• Selling IP, know how, licenses
• Defer planned investment where
growth is less resilient to Covid-19
• Invest in other emerging opportunities
Additionally, the company has measures
in place to minimise the risk of infection
including social distancing, sanitisation,
travel and visitor control, working from
home and remote working capabilities.
Any customer demand downside may be
mitigated through a global supply base.
Over 60% of sales are exported and nearly
75% of profit is generated from outside of
the UK.
Employee health, safety and wellbeing is paramount and the Group embraces the ethos
that nothing we do is worth getting hurt for. This includes adherence to new standards
recently introduced by the UK Government to address the risks associated with Covid-19
in the workplace.
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
Ensure employees safety in the workplace
The Group has an extensive Health &
Safety programme built around the
ISO18001 framework which is proactively
managed across every division. We track
leading indicators such as health & safety
training, hazard reporting & improvement
suggestions whilst also monitoring
incidents, and near misses to enhance our
learnings across the Group.
Over recent months our Health & Safety
focus has expanded to incorporate the
newly released Government guidelines for
creating a Covid-19 secure workplace
environment. This includes the
introduction of new risk assessments for
evaluating our effectiveness at addressing
the risks associated with Covid-19
and includes new measures such as
maintaining social distancing whilst
working & moving around, hygiene &
sanitation, site visitor management,
occupancy levels in communal spaces
and working from home where possible.
The Executive and Senior management
teams proactively engage in our
Workplace Observations program to
promote health & safety in the workplace.
This including all new measures recently
introduced to address the risks of
Covid-19 and in doing so support the
creation of a safe working environment
with employees at all levels across the
organisation.
The Group 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. It is through
these forums that best practices are
shared and implemented.
ENERGY PRICE VOLATILITY
Risk description and Impact
Stable —
Gas prices are affected by global supply and demand and price can be subject to
significant fluctuations. Factors that influence these include natural disasters, climate,
political instability, conflicts, economic conditions, shale gas reserves and actions by
major oil and gas exporting countries.
Price fluctuations on key input costs which cannot be passed onto customers in
all cases can affect our business assumptions, margins and investment decisions.
Mitigation
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 2022.
22
23
Strategic Report - Risk Management
Strategic Report - Risk Management
PENSION
Stable —
PULP PRICE VOLATILITY
AND SUSTAINABILITY
Reduced ▼
Risk description and Impact
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 the profitability of the group.
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, and
recovery has improved from 20% to 24%
over the year: the target is 50% by 2025.
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. Volatile exchange
rates could have a significant impact on the Group’s results.
INFORMATION SECURITY
AND CYBER RISK
Increased ▲
BREXIT
Stable —
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.
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.
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.
The additional risk that European bodies are not replaced with a British regulatory regime.
Mitigation
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.
Risk description and Impact
The Group operates 2 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 progressing and expected to complete by the end of June 2020.
Actuarial deficits are sensitive to a number of key factors: the value of the assets,
the discount rate used to calculate the scheme’s 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.
The Pension Subcommittee 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
ongoing valuation.
the Schemes was closed to new members
in 2000 – these have been listed in the
Pension Report.
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.
Investment strategy
A number of risk reduction exercises
have been enacted since membership of
The Group agrees to an investment strategy
with the trustees taking account of risk.
Risk description and Impact
Our divisions are dependent on the availability of IT services and significantly expanded
remote working practices which bring increased challenges in a climate of opportunistic
cyber threat growth.
Mitigation
The organisation is committed to
information security management and
implements a robust IT security and data
protection programme, which tests for
resilience against evolving cyber risks.
This enables the Company’s IT usage
and infrastructure to be continuously
governed, enhanced and protected.
For and on behalf of the Board
Isabelle Maddock, Chief Financial Officer
22 June 2020
24
25
Strategic Report - S172(1) Statement
Strategic Report - S172(1) Statement
PROMOTING THE SUCCESS OF OUR GROUP
S172(1) STATEMENT
OUR APPROACH
OUR EMPLOYEES
Engaging with our stakeholders is
fundamental to the way we do business.
We supply to customers across the globe
to both small businesses and multinational
organisations. Strong partnerships are
key to the success of our business with
customers and suppliers, and have
been through our 175 year history.
Our employees are the lifeblood of our
business and our most valuable resource.
From new starters beginning their work
life to employees who have followed their
family through several generations,
every employee is key to the success
of the business and in these unprecedented
times, their health and wellbeing are a
key factor we strive to protect. Being the
largest business in the local area and the
Cropper family still involved in the
business, the Group supports the
local community and other charities.
Our environment and sustainability
are factors that we are constantly
pursuing to improve.
On these pages you will also find examples
of how we considered our stakeholders
when making key decisions during the
year. As a Board, we have a duty to
promote the success of the Group for
the benefit of our members. In doing so,
however, we must have regard for the
interests of our employees, for the success
of our relationships with suppliers
and customers, for the impact of our
operations on the community, and for
the desirability of maintaining a reputation
for high standards of business conduct.
These stakeholder considerations are
woven throughout all of our discussions
and decisions. Like any business,
sometimes we have to take decisions
that adversely affect one or more of these
groups and, in such cases, we always
look to ensure that those impacted are
treated fairly.
Board considerations
Our employees are our biggest asset and
fundamental to the success of the Group.
During these unprecedented times, the
Board have ensured that the health and
wellbeing of our employees is the highest
of three key priorities for the protection
of the business.
Employee safety is paramount and during
the pandemic, as many employees as
possible who could work from home
have done so and at the same time
significant changes to work practices
have been implemented to ensure all our
employees can work in a safe environment
and ensure social distancing was adhered
to at all times. However, where there were
business activities that meant employees
need to work in more confined areas,
appropriate personal protective equipment
was made available.
Employee updates
Communications with all employees has
been elevated in these times, using social
media to ensure all employees are kept up
to speed with latest advice and any changes
to practices and the work environment.
The Company has maintained its regular
briefings to employees including the
bi-annual financial briefings and
presentations. Regular consultative meetings
are held with union representatives on all
aspects of Group developments and on
actions to be taken during the pandemic.
The 2019 biennial employee survey
resulted in 68% level of engagement.
Diversity and inclusion
Vacancies are advertised both internally
and externally and are filled following
a rigorous evaluation of candidates
who possess the required balance of
skills, knowledge and experience.
The Group operates an equal opportunities
policy that aims to treat individuals fairly
and not to discriminate in any way. 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.
Training and development
Crucial to any successful company is
diversity of thought, experience and
background. At James Cropper we ensure
our recruitment and employment practices
are inclusive providing equal opportunities
for all individuals to allow us to recruit,
develop and retain the best people.
As a company we believe we all deserve the
opportunity to develop our skills and
talents to our full potential, work in a safe,
supportive and inclusive environment, and
be fairly rewarded and recognised for our
work and have a meaningful voice on
matters that affect us.
Crafting our future
This initiative, starting with the
“Big Listen” was attended by 368
employees with over 5,000 ideas and
suggestions collected over four major
topics of Vision; Communications,
Relationships and Working Environment.
This was the first phase of our four phase
cultural change programme to enhance
internal communications and employee
engagement within the paper division to
craft our future.
Further reading:
Pages 29 to 37 divisional reports.
Pages 47 to 48 people pages
OUR CUSTOMERS AND SUPPLIERS
Our business model depends on strong
partnerships with our customers and
suppliers. For generations we have prized
our relationships with stakeholders,
measured with many by decades. In recent
years our growth has been underpinned
by close collaborations with more global
corporations. We have a common goal
for increased sustainability and protection
of the environment. Growth in our
Cupcycling™ product range and our
ColourformTM range are examples of how
our close partnership with customers drives
sustainable environmentally friendlier
solutions to meet our customers’ needs.
Our raw materials are ethically sourced
including all our pulp supplies from
responsibly managed forestry, certified
to FSC® and PEFC® standards.
We continue to increase our work in
the area of preventing modern slavery.
Our latest Modern Slavery Statement
can be found on our website.
Following the introduction of the supplier
payment practice reports, we have amended
our payment procedures to ensure that more
suppliers are paid within agreed terms.
Further reading:
Pages 29 to 37 divisional reports
OUR SHAREHOLDERS
Board considerations
All Board decisions are made with the Group’s success in mind, which is
ultimately for the long-term benefit of our members. This year in particular
though, we made the decision to not propose a final dividend due to the
projected financial impact of the Covid-19 pandemic on the business,
and the need to conserve cash resources.
We considered the impact of this action on our shareholders in detail, and agreed
in line with other stakeholders, there was a need for our shareholders to assist
the long term viability of the Group through these unprecedented times.
Investor briefings
The CEO and CFO meet with key institutional investors as a minimum
twice a year, enabling investors to be well briefed on activities and to better
understand the performance and strategic direction of the Group.
Annual general meeting (AGM)
Our 2019 AGM was well attended and all our proposed resolutions were passed.
Due to the Covid-19 pandemic, the 2020 AGM will have to be held behind closed
doors, with the lowest number of Directors physically attending, in line with our
articles, and the others attending via online conferencing. It is important that more
of our shareholders take the opportunity to express their voting preferences by
using the proxy cards that will be sent out with the notice of the AGM.
The Group’s website is regularly updated and provides additional
information on the Group.
www.jamescropper.com
Further reading:
Pages 04 to 27 strategic report
OUR COMMUNITY
The impact of our operations on the communities in which we work is an
important consideration in our Board discussions. Our Community Support
Committee regularly receives requests from schools, charities and organisations
seeking support for activities that benefit our local communities. In the year,
charitable donations of £21,000 were made to local charities and organisations in
addition to the free paper donated to various schools and organisations.
In these times of lockdown, the Group provided free paper to the residents of
Kendal who visited the three main supermarkets in the town. In addition, further
paper was sent to Lancaster Royal Infirmary for use by children in the hospital
wards. PPE equipment was also shared with local surgeries who were struggling
for supplies.
Beyond the impact of Covid-19, the Board approved the second phase of solar
panels to be installed. These panels are owned by Burneside Community Energy
Ltd who sell all the power generated to the Group with any profits ploughed
back into the local community.
In addition, the Group has supported the installation of a faster broadband
network for the local community under the Broadband for the Rural North
(B4RN) provider.
Our vision for doing business is one that delivers growth whilst also serving society,
and is strongly aligned with the sustainable development goals. By using our
resources as a business to address issues such as biodiversity, reforestation, upcycling
and climate change we are delivering benefits to our stakeholders and society.
26
27
Technical Fibre Products
TECHNICAL FIBRE PRODUCTS LTD
DIVISIONAL REPORT
11%
19%
2020
16%
9%
22%
9%
4%
7%
3%
8%
22%
14%
23%
2019
11%
9%
3%
6%
4%
Aerospace
Fuel Cell
Construction
Medical
Industrial
Renewable Energy
Defence
Others
Insulation
Fuel Cell
Aerospace
Expansion
TFP supplies carbon fibre veils that
are at the heart of every fuel cell.
We have strong positions in this
nascent market in both motive and
static fuel cells. Our material can
be found in fuel cells for cars, buses,
trucks and trains, as well as static power
generation fuel cells. The additional
revenue we sold into this market more
than compensated for the drop in sales
into the aerospace sector.
Our share in this market is significant
and, while current growth rates are
strong, we do expect to benefit much
more in the future as the hydrogen
economy continues to gain momentum.
Last year our sales into this sector grew
by 40%, as we benefitted in particular
from a long-term supply agreement with
one of our key partners. Our material is
sold into Europe, USA and the Far East.
Renewable Energy
The introduction of novel materials
developed in TFP for this market saw
our sales increase by around 60% to a
level that is now material. We expect that
business to grow strongly again this year
and ramp up has already started ahead
of last year’s business.
Sales into the aerospace sector this year
were affected by the pause in production
of the Boeing 737 Max, Covid-19 and
the timing of some large deliveries at
the crossover between financial years.
We noted that as soon as Boeing announced
their production pause, companies across
the entire sector started to reduce stocks
even if they didn’t directly relate to that
particular airframe. Covid-19 prompted
both Airbus and Boeing to shut down
plants quite quickly, though we have seen a
return to work in a number of locations.
This was mirrored by the Tier 1 intermediate
suppliers. It is clear that all airlines are flying
at a fraction of their normal capacity and this
will not change quickly. This is reflected in
an immediate and sharp reduction in forecast
aircraft deliveries this year.
Industry commentators are unusually
consistent in agreeing that 2020 will see
a marked reduction in demand, 2021 may
see some recovery in deliveries but prior
levels of growth will not resume until
2022 at the earliest.
However, it is encouraging to note that
certain market sectors we have focussed
on in recent years took a good step
forward during the year and are set
to grow further this year.
29
Last year, I described our project to
expand our capacity by adding a new
factory and nonwoven line to support
our sales growth. The building is close
to completion and the equipment is almost
fully built but not yet commissioned.
The global pandemic meant that we had
to pause all capital expenditure pro tem,
but we do intend to restart work at the
end of this calendar year. This revised
timing is unlikely to restrain our growth.
People
I would like to take this opportunity
to thank all my colleagues in TFP for
their contribution. Our operations team
were quick to introduce safe Covid-19
working practices and our crews have
done a fantastic job in keeping everything
running. Our support teams continue to
deliver world class outcomes for quality
and service and our culture of innovation
has seen us introduce new products into
new markets year after year, reducing our
exposure to any one particular market
and adding value for shareholders.
Martin Thompson, TFP Managing Director
Technical Fibre Products
TFP MARKETS
FOCUS ON GROWTH
This year our report focus is on markets
which are exhibiting significant growth,
both on a global economic scale as
well as for TFP specifically.
The first is green energy, a market
encompassing a wide range of renewable
energies such as solar, wind, wave and fuel
cells. The growth in this market is driven
by the move towards an increasingly low
carbon economy globally. Recent data
demonstrates this growth; renewable
energy sources are now responsible for
26% of the world’s electricity, in the
UK this is even higher at 40%. In October,
a milestone was reached for renewable
energy in the UK; for the first time in
history the proportion of UK electricity
generated by renewable sources surpassed
that derived from fossil fuels.
Half of all UK electricity generated by
renewable sources is derived from wind
energy, a market seeing steady growth in
its own right. There has been an increase
of 19% in annual installations and 10% in
total capacity reported in 2019, the majority
of which occurred in the biggest onshore
markets – China and the USA. This growth
is forecast to continue with a further
increase of 12% in total capacity forecast
for 2020 and is reinforced by advantages
such as increasing cost effectiveness &
exemption from the price uncertainty
associated with traditional fossil fuels.
TFP’s Optiveil® and Optimat® materials
are well established for use in wind turbines
and fulfil a number of functions, only some
of which we can discuss for confidentiality
reasons. Over the years the size and power
of wind turbines has increased significantly,
from 1.7 MW power and a 56m blade
diameter in 2000 to 3MW and 100m
diameter in 2020; to put it in context an
on-shore turbine can now power up to 1,500
average households and an off-shore turbine
up to 3,300. This increase in size and blade
diameter puts the emphasis on minimising
the weight of the structures whilst
maintaining strength and maximising service
time. This is where TFP’s materials can help,
providing a functional and resin rich surface
finish to the blades with a minimal weight
addition, improving the interlaminar
toughness of the composite blade which
reduces the susceptibility to damage or
providing EMI shielding to nacelles.
Wind energy is not just used for generating
electricity, it is also a promising source
of green hydrogen, a development that
will not only provide a 100% renewable
energy pathway for fuel cells, but may also
help facilitate the deployment of hydrogen
technology sooner than anticipated.
The hydrogen economy is of key
importance to TFP because it encompasses
the fuel cell industry, in which TFP is one
of, if not the, leading manufacturer of gas
diffusion layer (GDL) substrate globally.
Valmont composite utility pole
The hydrogen economy refers to
the growing use of hydrogen as a low
carbon energy source in transport, power
generation and heating. At present 10EJ of
hydrogen is used per year globally, this is
projected to rise to 78EJ a year by 2050,
which would fulfil 18% of the world’s
energy demand. Increase in hydrogen usage
will also be strengthened by decreasing
costs; the Hydrogen Council projects a
cost reduction of up to 50% by 2030,
which would make hydrogen competitive
with other low-carbon alternatives and,
in some cases, even conventional options.
There are barriers to widespread adoption
of hydrogen however, one of which is the
slow development of infrastructure for
applications such as fuel cell electric
vehicles (FCEV’s). This is set to accelerate
though, with plans to significantly increase
infrastructure in countries such as USA,
Germany, Japan and South Korea. By 2030
Germany plans to have 1000 charging
stations to support 1.8 million FCEVs,
Japan 900 fuelling stations for 800,000
FCEVs and China 1000 stations for 1
million vehicles. South Korea predicts over
6.2million vehicles will be operational by
2040 and is one of the pioneers in the fuel
cell market, both for industrial power
and FCEVs; Hyundai’s Nexo is the most
powerful FCEV in the market, taking just
5 minutes to refuel and with a driving
range of up to 413 miles.
TFP’s carbon fibre nonwovens are used
extensively in these portable proton
electrolyte membrane fuel cells (PEMFC)
for automotive applications such as FCEVs,
as well as in static phosphoric acid fuel cells
(PAFC) which provide industrial power.
The nonwoven is used as a GDL substrate,
the basis of the anode and cathode,
which sits at the heart of the fuel cell.
The application is a technically demanding
one in terms of electrical and thermal
conductivity, durability and chemical
resistance, and a consistent even surface
is essential to allow an optimum GDL
to be manufactured.
Both the PEMFC and PAFC markets
are predicted to show strong growth
over the next 5 years, the PAFC market
has a projected CAGR of nearly 20%,
predominantly in the Asia Pacific region.
These large stationary fuel cells are very
efficient (up to 90%) and provide heat
and electricity for high energy demand
applications such as schools, hospitals
and data centres.
The final growth area to be highlighted
is fire protection, a market for which TFP
manufactures Tecnofire®, an intumescent
mat which expands under fire conditions
to prevent fire spread or preserve structural
integrity. The passive fire protection market
was predicted to have a CAGR of 5.1%
over the period 2019-2025, with the forecast
growth largely attributed to the increase in
infrastructure spending coupled with rising
emphasis on fire protection in buildings
by regulatory bodies. Tecnofire® is used
extensively in a wide range of construction
Exploded view of a fuel cell
applications, but is not limited to this
and has also been specified for use in buses,
trains, aircraft, bridges and architectural
fire doors. The latest successful application
is in composite utility poles, manufactured
by Valmont Industries, Inc. The composite
poles are used as transmission and
distribution poles and have to withstand
rigorous fire testing to ensure that they
maintain their integrity in the event of
a fire. This requires them to pass the USA
Utility Company Consortium Fire Tests
and withstand temperatures of 1150°C
without significant structural loss.
Valmont incorporates one of TFP’s infusible
Tecnofire® grades into their composite
structure to ensure the structural integrity
of the pole in extreme fire conditions.
Photos from the wildfire testing are
shown below.
With the help of Tecnofire® Valmont’s
composite utility poles successfully
passed all the fire testing, maintaining
their integrity under load during the
extreme wildfire test at 1150°C, as well
as achieving UL94 V0 and ASTM E84
Class 1 fire standards and passing pre- and
post-burn structural testing. Just one of
many success stories for TFP’s products.
Pre-test (left), mid test (centre) and post test (right) wildfire testing of a Valmont utility pole
30
31
ColourformTM
ColourformTM
Spotlight on innovation
In a year that saw the global environmental movement, Extinction Rebellion,
reach a crescendo, it became increasingly clear that a modern consumer is
emerging. This is a consumer which is paving the way for a future that is
advanced, safe and sustainable.
While ColourformTM is already responding to this and making waves in the
packaging industry by offering brands an alternative to plastic, we recognise
that the need for innovation and change is relentless.
To stimulate our creative thinking, we partnered with futurologist Dr. Ian
Pearson to explore how future influences will overhaul the role of packaging.
He predicts a time in the near future whereby packaging with a ‘second life’,
waste-free materials grown from fungi, integrated computer displays,
and the use of augmented reality will all be commonplace.
To explore our role in the future of packaging, we invited established designers
and design students to participate in a focus group. The session allowed
us to analyse the different ways the groups approach an innovation such
as ColourformTM, and the possibilities it offers their customers.
The findings reaffirmed our innovation-first strategy. It also inspired further
thinking on how we continue to lead; maintaining our position as the destination
for premium alternatives to plastic packaging. Some of the work we are doing
is already in line with this future thinking.
COLOURFORMTM
DIVISIONAL REPORT
I am delighted to report an outstanding
performance from the ColourformTM
team in all departments. Sales increased
by £2.3m, or 800%, making significant
strides towards profitability.
Our position as the destination for
premium alternatives to plastic packaging
grew in strength. We delivered bespoke
moulded fibre packaging to a variety of
brands in the cosmetics, beverages and
smart-tech markets.
One of our best performing projects was
the packaging for L’Oreal’s Christmas
and spring sales campaigns. Millions of
consumers will have seen our moulded-
fibre inserts in gift boxes for brands such
as Lancôme and Diesel.
We were equally pleased with the work
we did on Ruinart Champagne’s new
bottle wrap. As an industry first, the second
skin case was a real step change project
focused on reimagining the packaging
solution as an eco-responsible innovation.
Both projects were delivered in
partnership with the converter Pusterla.
Our performance was also driven by
significant advances in productivity and
efficiency. For example, our six machines
operated at a significantly higher percentage
of capacity compared to the previous year.
The ColourformTM division offers brands
the opportunity to bring innovation and
creativity to their sustainability challenges,
while strengthening their identity.
To deliver on that promise, we rely on
key partnerships with leading brands
and converters. However, we depend
on the ingenuity of our design team.
They continue to push the boundaries
of what is possible using moulded
fibre technology, designing ground-
breaking solutions for both primary
and secondary packaging.
specialists, machine operators and converter
partners. Together, they look after the
colour, form, texture, embossing, logos,
functionality and quality of packaging;
everything that makes the difference
between standard and outstanding.
Approaching the end of the year, we started
to witness increased demand for moulded
fibre packaging from brands in all sectors.
We anticipate growth in opportunities
to engage brands with our solutions,
although we cannot predict the impact
of Covid-19 and reduced consumer
activity resulting from lockdowns around
the world.
I remain as confident as ever in the future
of this division. I am grateful for the hard
work of my colleagues and look forward
to continuing our work with them as
we build on a very successful year.
Bringing those ideas to life requires the
expertise and experience of our colour
Patrick Willink,
ColourformTM Managing Director
The reinvention of packaging
Our latest work with Maison Ruinart
is a shining example of the reinvention
of packaging. In partnership with
converter Pusterla, we had a fantastic
opportunity to work with the
champagne house and create its first
100% eco-responsible packaging.
Like a second skin made of paper,
the case follows the lines of the bottle’s
emblematic curves and allows the integrity
of the Maison Ruinart flavour to be
preserved until tasting. The design is a lesson
in marrying sustainability with a premium,
luxury offer. The raw and sophisticated
texture and form nods to Crayères, the
Maison’s historic chalk-pit cellars in Reims.
The design demonstrates Maison Ruinart’s
commitment to sustainability without
sacrificing exemplary design.
Inspiring change, the new case is nine times
lighter and reduces the brand’s carbon
footprint by 60%, compared to the current
generation of boxes. The ultra-light case was
crafted from natural wood fibres sourced
from sustainably managed European forests
and is set to revolutionise the gift-box
and cases market. The packaging is also
eco-designed, using zero plastic and
ensuring 100% recyclability.
Frédéric Dufour, President of Maison
Ruinart says: “With this second skin case
Maison Ruinart confirms its pioneering role
in champagne, and its ambition in terms
of social and environmental responsibility.
This disruptive project embodies the
Maison’s firm commitment to more
sustainable development for its packaging
across all stages of the development and
marketing of our products, from the tending
of the vine to the consumer experience.”
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33
ColourformTM
Plastic-free collaboration
The health and beauty market remains
key to the current and future success of
our business. Our high-profile work with
L’Oreal where we provided millions of
moulded-fibre inserts for gift boxes,
bolstered a new partnership with a
challenger in the industry.
To bring its plastic-free period products to
the market with real authenticity, Mondays
needed a premium, plastic-free packaging
solution. In an industry first, Mondays is
the only period product subscription service
to be 100% plastic-free; from product
through to packaging.
The partnership was natural; Mondays
also recognise the commercial value in
responding to the consumer demand for
brands to do better. The brief was to create
a pretty, colourful box, made of moulded
fibre, free from plastic, that would look
beautiful on display and fit perfectly in
a bathroom cabinet. Our team delivered
on all fronts, creating a truly unique
packaging solution.
Nancy Saddington, co-founder of Mondays,
says: “By setting a new, higher standard for
circular economy packaging solutions we
are leading by example. Consumers today
don’t want to have to sacrifice luxury or
aesthetics when making a plastic-free choice.
The Mondays box looks fabulous on display
and brings a luxurious touch to a previously
neglected product category.”
“With ColourformTM as our partner, the
packaging we use is completely free of
any form of plastic.”
JAMES CROPPER PAPER PRODUCTS
Our recently refined vision for the Paper
business is to be the best bespoke paper
mill in the world, recognised for our
unrivalled expertise in colour and
leading innovation in sustainable fibre.
This year, we took a step closer to achieving
that vision and delighting our very
discerning customer base.
I am pleased that we continue to deliver
sales growth in an operating environment
defined by intense competition.
However, I am most proud that we
have returned the division to profit.
The turnaround in profitability has been
driven by our relentless focus on higher
value segments, supported somewhat by
lower raw material costs albeit we are still
faced with pulp prices that remain higher
than the long-term average.
Last year I made clear our strategy to grow
our packaging business with luxury brands.
That plan has worked.
We have seen a significant 23% growth in
packaging with some of the world’s biggest
luxury brands. That is thanks to new
customer wins and growth with existing
customers in the fashion, consumer
electronics and beauty sectors.
It is clear that we now have the right
strategy and the right team in place.
In 2017 we launched CupCyclingTM,
the commercial upcycling of used coffee
cups. We have now given 120 million
cups a second life as premium paper and
packaging. Building on the remarkable
DIVISIONAL REPORT
success of our CupCyclingTM facility over
the past 12 months we are determined to
increase the use of this and other recovered
fibre in our products.
The groundswell of interest in sustainability
and social issues is set to continue,
consolidating the importance of
environmental and social governance.
Enlightened brands are continuing to
think of the end-to-end life cycle of their
products and packaging. As it stands,
an average of 24% of the fibre that we
use for papermaking is from recovered
streams. Our ambition is to double
this to 50% by 2025.
This year saw us further establish our
position as an authority on colour.
Taking a macro view, we launched an
extensive report into the biggest influences
on colour choices today. The Progressive
Palettes report was launched to the
packaging industry at Luxe Pack in
Monaco supported by live colour
demonstrations and Q&A sessions with
the colour experts within our technical
team. These experiential sessions caused
quite a stir and were very well attended
by brand managers, innovation teams
and designers at the event.
Our vision to be ‘the best bespoke paper
mill’ is bold and ambitious. We are not
there yet and have some way to go,
but I am passionate in the belief that we
can achieve this aim. It will require the
will and commitment from our many
great craftspeople and team members
who I know share my belief.
With that in mind we embarked upon a
major culture change journey this year;
‘Crafting Our Future’. We asked everyone
across the business to give us their opinions
and ideas about how we can continually
improve the way that we work, so that
we can provide our customers with the
best possible products and service levels.
We had over 5,000 comments and
suggestions with more than 60 respondents
volunteering to be Change Makers,
supporting the business by identifying,
prioritising and progressing improvement
projects. One example is the establishment
of an internal communication hub,
enabling real-time communication across
our business. It gives all employees better
visibility on customer projects, business
updates, community news and health &
safety advice. This has already proved to
be a great asset to the business in keeping
employees updated whether at work
or at home.
As we face an unprecedented crisis,
it is difficult to predict how business
and society at large will be reshaped by
coronavirus. This is not the first storm
that our 175-year-old business has
weathered, and it won’t be the last.
We know where we are headed and
where to focus our efforts. I want
to thank all of the team for a
successful year and I look forward
to continuing that success.
Steve Adams, Paper Managing Director
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35
James Cropper Paper
PAPER - HIGHLIGHTS
Fibre in focus
This year we were delighted to partner
with Hallmark on an artistic and creative
expression of circular economy.
Building on industry-leading examples
of Tailor Made papers for packaging with
Selfridges and Burberry, 2019 saw the paper
division transform disposable coffee cups
and responsibly-sourced paper pulp into
a beautiful card collection designed by
the high-street superbrand.
Creating a beautifully-designed and positive
sentiment from a morning latte really
captures the spirit of CupCycling; a second
life for coffee cups can often be more
compelling and longer lasting than its first.
Comprising 44 beautiful cards, designed
within boutique collections, the cards
and envelopes in the collection are
of course 100% recyclable.
This partnership demonstrates the
value that this precious raw material
has, and how it can produce truly
creative outcomes, setting a high
benchmark for outstanding circular
design. It also illustrates the appetite
amongst consumers for paper and
packaging products made from recovered
fibre, further fuelling our ambition
to achieve 50% recovered fibre content
for papermaking by 2025.
Alison Murnane, at Hallmark Cards,
commented, “We already make Hallmark
cards from responsibly sourced paper,
so we were delighted to work with
James Cropper to help drive forward
another sustainable way to make an
impact by taking some of today’s waste
and turning it into a beautiful card that
creates a lasting moment for tomorrow.”
Colour in focus
While further establishing our position
in the luxury market, Luxe Pack 2019
also gave us an opportunity to throw
a spotlight on our expertise in the art
of colour.
designers from across a range of sectors
and offers unique insight into the modern
context of colour. Unpicking what is
influencing design choices for brands
now and in the future.
To do this we took our acclaimed Colour
Lab experience to Monaco from its home in
Kendal. Our team showcased the incredible
detail involved in our bespoke colour
matching process, underpinned by the 2,500
live shade recipes and an archive of some
200,000 colours we hold on site at the mill.
We also used Luxe Pack 2019 as the moment
to launch our Progressive Palettes report.
It is the result of collaboration with
Our Luxe Pack offering demonstrated
two fundamental areas of our business;
our expert colour capabilities and
our game-changing work in the
sustainability arena.
We continue to be uniquely placed
to give luxury brands the opportunity to
use high quality papers and packaging and
incorporate circular design, all without
compromising on beauty.
Luxury packaging in focus
Our strategy to grow our packaging business with luxury brands has succeeded.
With some of the world’s most well-known fashion, beauty and technology brands
now a part of our customer roster, we’ve achieved 23% growth in the sector.
A demonstration of our success and continuing focus herein, is the appointment
of our first global luxury packaging lead. Tricia Hartmann joined our global team
in January 2020 and with strong technical expertise in printing, paper and packaging
is responsible for the development of the luxury packaging offer across Europe,
Asia and the USA.
Tricia’s extensive knowledge of the international luxury packaging market
and her passion for sustainability make her the perfect fit to drive forward
our expansion on the international stage.
Joining from Arjowiggins Creative Papers, Tricia previously spent 10 years
driving business development in luxury packaging across Europe and Asia.
36
37
Values and Purpose
Values and Purpose
1
“CLEARLY DEFINING AND COMMUNICATING
OUR ‘BUSINESS IMPORTANT GOALS’ IS
KEY TOWARDS REALISING OUR GROUPS
ASPIRATIONS IN THESE TURBULENT TIMES.
PRO-ACTIVELY ENGAGING WITH OUR TEAM
MEMBERS TO IDENTIFY AND FOCUS ON
THOSE LEADING ACTIVITIES NEEDED TO
DELIVER OUR GOALS, WILL ENABLE US
TO CREATE THE MINDSET REQUIRED TO
DELIVER SUSTAINABLE SUCCESS.”
DAVE WATSON,
CHIEF OPERATIONS OFFICER
2
1. TFP Operative, Phil Coward
2. Paper Finishing, Georgia Kennedy
3. Head of Health, Safety, Environment & Paper Quality,
Kate Rowling with Guillotine Operator, Alan Henderson
4. Chief Operations Officer, Dave Watson with (left)
Paper Operative, Gareth Wells and (right) Craftperson,
Dave Askins
5. Blender Operator, Lyndon Montgomery
3
38
4
OUR VALUES
TRUST, DIGNITY
AND RESPECT
SUCCESSFUL CUSTOMERS
PROFITABILITY
CONTINUOUS LEARNING
MOTIVATED WORKFORCE
SAFETY AT WORK
COMMUNITY FOCUS
SUSTAINABILITY
5
39
Sustainability - Development Goals
Sustainability - Development Goals
SUSTAINABILITY WITH PURPOSE, IMPACT AND SCALE
W a s t e Reduction
em ent
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e
t
a
W
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n
n
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v
a
t
i
o
n
Our Sustainability Model
H
e
a
l
t
h
&
W
ellbeing R e s p o n
g
S ourcin
s i b l e
The future growth of James Cropper PLC will continue to
be inextricably linked to sustainability with commitments
made to global initiatives, national programmes and local
activities on our very doorstep all implemented in-line
with the Group’s over-arching values.
In order to achieve sustainable growth, our business must
respond to the challenges and opportunities of an increasingly
resource-constrained world. We believe it is a key responsibility
of business to help secure future economic growth aligned to
societal needs, delivered in a fair, healthy and inclusive way.
With the Sustainable Development Goals (SDGs) as a guide for
our responsibility activities, and in alignment with the wider
paper industry, we have the greatest potential to make a real and
lasting difference, at scale.
For each area of activity, we have highlighted those SDGs that
have the strongest links to our business and where we believe we
can drive the biggest change. The strides we are making on our
journey address challenges of major environmental, ethical and
societal concern and will help to deliver both short-term and
long-term benefits for our customers and shareholders as well
as society.
Water Management
Waste Reduction
Innovation
Water is a fundamental to all James Cropper
business divisions. Our focus is on managing
our impacts on fresh water resources to meet
rising demand for sustainable products while
safeguarding fresh water ecosystems.
• Our source of water, the river Kent,
originates from a spring in the fells of
the English Lake District which feeds
into Kentmere reservoir situated at the
head of the water catchment.
• All fresh water drawn from the river
is conserved by water recovery systems
on the machines, our water saving
investments have been certified as water
efficient technologies by DEFRA.
• The river is classed as a Site of Special
Scientific Interest (SSSI) as it supports a
flourishing population of white-clawed
crayfish and fresh water mussels, both
species being a signifier of water purity.
• Our focus is on efficiency in water usage
and on maximising the return of clean
safe water to the catchment.
• Over 91% of water abstracted is returned
clean to the river downstream of the mill.
• Water is an integral part of the paper
products we produce, they typically
contain 7% moisture.
Our focus on operational excellence,
not only drives efficiency improvements
through low impact manufacturing
techniques, but also unlocks our resource
potential as we design waste out of our
processes and create sustainable product
solutions as part of the circular economy.
• Our commitment is in creating
high quality products that play an
important role in product design,
be that light-weighting for aircraft
or wind turbines, or paper products
that are easily recycled after use.
• Waste from our own paper and
Colourform™ production is recycled
on-site into new paper products.
• Fibrous waste from the mill’s de-watering
We play an important role in creating
business opportunities, investing in local
infrastructure and driving innovation and
collaboration to achieve change and tackle
many of the challenges we face.
• As well as manufacturing and creating
paper products and moulded packaging
from renewable sources, the business
has invested in innovations dedicated
to cutting waste and helping to tackle
the issues we face.
• Our unique CupCycling™ facility
enables us to upcycle disposable
single-use paper cups, in collaboration
with coffee retailers, waste management
companies and brands we are helping to
drive a positive change in recycling.
plant is used as a soil improver on
local farmland, approved by the
Environment Agency.
• The cups are given a second life
as beautiful papers and consumer
packaging such as Colourform™.
• Zero to landfill - what we cannot recycle
ourselves on-site is collected by our local
waste management company, of this
typically 80% is recycled and 20%
goes to Refuse Derived Fuel (RDF).
• 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.
• With CupCycling™ we have upcycled
120 million disposable coffee cups into
paper products and packaging.
• We create paper and packaging solutions
for the circular economy, and are a
signatory to the Ellen MacArthur
global commitment.
• The graduate intake programme now
benefits each business supported by
regular recruitment programmes working
with high performing universities.
• The business created the Technology
and Innovation Directorate in 2014,
taking a strong long-term view on
strategy and investment.
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41
Sustainability - Development Goals
Sustainability - SECR Report
STREAMLINED ENERGY & CARBON REPORT
This is the first year that the Company
has reported on the level of energy
consumed in the UK and will be used
to set targets to reduce the levels of
carbon emissions and increase the use
of renewable energy whilst ensuring we
operate our assets to get the best value
while maintaining security of supply.
Greenhouse gas emissions
Scope 1 Direct emissions
Direct emissions from burning of fossil fuels
Transport: company owned or leased vehicles
Energy use
Total Scope 1 Direct emissions
The underlying energy data used to
calculate carbon emissions includes
electricity, gas and other fuels purchased
for use on-site and for transport.
This year we used 210.9GWh of energy,
which will be used as our baseline year.
Energy efficiency action
During the year, further roof space was
let to Burneside Community Energy Ltd
to place more solar panels on our roof space
with all solar energy generated purchased by
the Company. In the year, 298,000kWh of
solar energy were purchased. In addition,
the Company purchases hydro energy from
Ellergreen Estate, purchasing a total of
229,000kWh of hydro energy in the year.
Scope 2 Indirect emissions
Grid electricity purchased
Scope 2 Indirect emissions
Gross Carbon Emissions
Avoided emissions from renewable electricity purchased
Total avoided emissions
Net Carbon Emissions
Greenhouse gas emissions intensity ratio
52 weeks ended
28 March 2020
tCO2e
Carbon emissions per £100,000 revenue
tCO2e
37.30
52 weeks ended
28 March 2020
tCO2e
36,007
568
36,575
2,611
2,611
39,186
(145 )
(145 )
39,041
Energy Strategy
We are embarking on a programme to
dramatically cut our carbon emissions
significantly ahead of national
decarbonisation targets.
2050
UK ‘net zero’
Long-term energy
strategy to eliminate
dependence on
fossil fuels
Energy compliance,
data acquisition
and analysis
JC Emissions
39,041 Tonnes/year
2030
Reduction in
energy usage through
modest investment
and campaigns
Efficient operation
of the power plant
2020
Responsible Sourcing
Health & Wellbeing
We are taking steps to develop a responsible
and sustainable supply chain, and are
committed to transparency and openness in
our dealings with our supply chain partners.
• The business has a zero tolerance
approach to any form of modern slavery
and we are committed to acting in an
ethical manner and with integrity and
transparency in our business dealings.
• 100% of fresh fibre, our primary raw
material, is sourced from sustainably
managed European forests and certified
to FSC® or PEFC® chain of custody.
• Chain of custody ensures from harvest
site to end product, there is effective fibre
traceability to provide assurance of the
legality of wood, biodiversity and
sustainable land use practices throughout.
• Managed forestry in Europe is bucking
the global forestry trend and continues
to drive forest growth, a key component
of many countries in the fight against
climate change.
• 24% of our fibre input for papermaking
is from recycled sources.
• Within our own business our approach
to packaging is paper where possible,
plastic when useful.
We have a 24-hour mind-set focused
on health, safety and wellbeing at work
and also at home.
• Our organisation provides diverse,
rewarding employment and opportunity
for personal growth, our commitment
to people is core to the Group’s values.
• The business operates a Better Health
at Work scheme, promoting and raising
awareness of health matters.
• We have nearly 50 trained mental
health first aiders and over 20 health
advocates across the business.
• As standard, we provide all of our
employees with healthcare insurance
plans that contribute towards everyday
healthcare bills and offer a wide range
of other well-being benefits.
• The annual Pride Awards celebrate
employees going “above and beyond”
demonstrating significant improvements,
creativity and selflessly giving time to
good causes.
• Support for Community Energy,
not only delivers renewable solar
energy to the mill, but profits benefit
environmental and social projects
in our local parish of Burneside.
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43
PRIDE EXCELLENCE AWARDS
Created as an opportunity for employees to directly show
their appreciation for colleagues across the James Cropper
Group, the Pride Excellence Awards have evolved from
an annual event to a year-round initiative with quarterly
‘winners’ in the categories of innovation, creativity, customer
service and safety. Those who contributed their time and
skills for the benefit of community were also included.
Selecting the overall winners for 2019/2020 will take place
once the Coronavirus pandemic has subsided and business
activities resume to normal levels.
Following are examples of teams and individuals who were
successfully nominated for the 2019/20 quarterly Pride Excellence
Awards. Each recipient demonstrating diligence, initiative and
innovative approaches to making tangible improvement
contributions in one of the four categories identified:
Team Award for Motivated Workforce: March 2019
PM3 Machine Crew - Papermaking
A team-wide commitment to excellence has been an example
to other departments and delivered on the quality ethos of the
James Cropper brand, the crew’s output saw a record low figure
in product defects thereby saving approximately £55,000 in
unnecessary repeat manufacture.
The PM3 Machine Crew comprise 5 people working across
different shifts, yet their excellent approach to communication,
cross-team collaboration, and a willingness to encourage
innovation and adopt new ideas have resulted in a significant
improvement to machine operation and production output.
45
Pride Excellence Awards
People - The Big Listen
Individual Award for Safety at Work: June 2019
Marcus Deacon - TFP Production
Delivering machine wire to TFP in large 90kg crates ensured that the production
component arrived well-protected but presented difficulties for subsequent handling.
The crates would be moved to the basement stores and held on racks. When required on
the production line, this meant a two-man operation that also required a pallet truck.
Marcus took it upon himself to find and implement a solution to this
cumbersome activity, one which also presented potential for personal injury.
On receipt of a new wire we now transfer them from the heavy crates into a 12” centre,
thereby reducing the weight to 25kg with lifting now a more manageable activity.
Marcus sourced centres of the correct diameter and length, along with the end caps.
He also designed new racking to hold them on, created appropriate labelling for the
centres and arranged for disposal of heavy crates. His actions have eliminated a manual
handling risk and improved the TFP production line.
Individual Award for
Profitable Growth: August 2019
Paul Sayner - Paper Reel Transporter
Reducing ‘broke’ in papermaking is a
perennial focus and one which has a
tangible impact on the bottom line of the
Group – quite simply, less waste equates
to money saved. Numerous solutions
have been introduced over the years,
each contributing to varying degrees.
Paul came up with an innovative idea to road
marking paint that raises just high enough
off the ground to prevent the large paper
rolls (‘webs’) from rolling away from their
intended position and potentially becoming
damaged or causing damage themselves.
This solution will decrease the potential
risk of uncontrolled rolling webs and will
also help drivers be more efficient when
collecting the webs.
Individual Award for Community
Focused: February 2020
Stan Wilson - Warehouse and Transport
Stan demonstrated his commitment to
supporting the local community by setting
about raising money to fund the Burneside
village Christmas tree. Liaising with
associates and contacts in our network
of national haulage firms, Stan received
donations of numerous items for raffle
prizes and which realised over £3,000 for
the Christmas tree fund. Furthermore,
Stan dedicated much of his own free time
putting in the footings to support the tree,
and also helped putting the tree up.
THE BIG LISTEN
James Cropper has been successfully
producing beautiful paper for over 175
years and is the last independent mill
of its kind in the UK. During that time,
the business has implemented significant
changes to ensure it continues to be a
profitable, sustainable and responsible
business with the reputation of the
business testament to this.
In October and November 2019,
we invited all of our papermaking
employees to participate in an
engagement and discovery event titled
‘The Big Listen’, the purpose being
to involve everyone and have their say
in the future of the Paper Division as
a single, customer-focused operation
to deliver our three core value
propositions; Streamline, Tailor-Made
and Partnership Private Label.
The response from employees
was quite fantastic, with:
• 368 participants in ‘The Big Listen’ events
• 5,000+ comments and
improvement ideas received
• 85% attendance from across the whole
Paper Making business / Group support
• 36 trained facilitators from across
all parts of the organisation
Topics covered during the sessions included:
• The future vision for the Paper Division
• The different working environments
at the Burneside Mill
• Relationships between teams,
supply chain and customers
• Internal and external communication
From across the various teams in the Paper
Division, a number of ‘Change Makers’ have
stepped forward to help implement some
of the initial improvements. These have been
supported with coaching and training on
how best to further engage their colleagues
and help new practices become embedded
to give them the best chance of success.
46
47
People - Continuous Learning
CONTINUOUS LEARNING
The James Cropper Group place great
emphasis on encouraging personal
development for employees in all roles
and across all divisions. This approach is
aimed at building on existing skills and,
by continued investment in our team
members learning, to maximise
performance at all levels in the company.
James Cropper currently support
30 apprenticeship programmes at,
18 in engineering and 12 in Business
Administration and Leadership.
The golden thread running through
these personal development activities
being that it directly supports succession
planning across the Group.
We have also supported the development
of 49 employees throughout 2019
beyond the apprenticeships and graduate
programme by investing in additional
training and development activities
that enhance both technical qualifications
and personal effectiveness.
Technical Graduates
We are extremely proud to acknowledge that this year has marked the
completion of our inaugural technical graduate programme in the Paper
business. This initiative was created with the aim of developing future
leaders and technical experts to support the growth of papermaking.
We were delighted to congratulate all four of our graduates on
successfully completing their development programme and securing
career advancing roles at James Cropper. Each have demonstrated an
ability to apply their academic learning in a multitude of practical
applications that have delivered sustainable performance improvements.
A further four Graduates, Heidi Jones, Chevonne Irving, Anna Driscoll
and Alex Larkin, have joined us in 2019 and are currently undertaking
their first development module to become a Lean Six Sigma Green Belt.
Three of our graduates, 2018
We wish them every success as they progress through their programme.
48
CONTENTS
STRATEGIC REPORT
03
Financial Highlights
Financial Summary
Chairman’s Letter
Chief Executive’s Review
Covid-19 Report
Chief Financial Officer's Review
The Pension Report
Risk Management
Stakeholders Relationship Statement
Technical Fibre Products
ColourformTM
James Cropper Paper
Values and Purpose
Sustainability
Streamlined Energy & Carbon Report
Pride Excellence Awards
People
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
49
50
52
56
57
62
63
65
Board of Directors
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), Rydal Hydro Ltd (Director), Scandale Hydro Ltd
(Director), Fisherplace Hydro Ltd (Director), Kendal Futures
CIC (Director), Ellergreen (Trustees) Ltd (Director)
Appointed: January 2014
Independent: No
Committee Memberships:
Executive
Qualifications: BEng (Hons)
Experience: Dave previously worked for 3M where he
held roles covering industrial, automotive, pharmaceutical,
and secure documents and systems markets.
External appointments: -
Phil Wild
Chief Executive Officer
Patrick Willink
MD ColourformTM Division
Appointed: October 2012
Independent: No
Committee Memberships:
Executive (Chair)
Qualifications: BEng (Hons)
Experience: Phil previously worked for 3M where he held a
number of directorships and roles covering industrial, healthcare,
automotive and security market sectors.
External appointments: CBI (Counsellor)
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 ColourformTM division. He was
President of the Confederation of Paper Industries Ltd from 2014
to 2019. Patrick has been appointed Managing Director of the
ColourformTM division with effect from 1 June 2020.
External appointments: Confederation of Paper Industries Ltd
(Director)
Isabelle Maddock
Chief Financial Officer
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 experience in finance across a
variety of sectors including manufacturing, software, retail,
facilities management and publishing, before joining the
Company in 2006.
External appointments: CBI Economic Growth Board
(Vice Chair)
Appointed: August 2018
Independent: Yes
Committee Memberships:
Audit, Remuneration,
Nomination
Qualifications: PhD
Experience: Andrew pursued a career in industry culminating
in his appointment as COO 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), RHI Magnesita PLC
(Director), Nexeon Ltd (Director)
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
Committee Memberships:
Audit (Chair), Remuneration,
Nomination, Pension
Qualifications: MA
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 private equity backed businesses.
External appointments: In The Style (Chairman),
Seraphine (Chairman), The Brunner Investment
Trust PLC (Director), Feelunique (Chairman)
Martin Thompson
MD TFP Division
Lyndsey Scott
Non-Executive Director
Appointed: June 2013
Independent: No
Committee Memberships:
Executive
Qualifications: MBA
Experience: Prior to joining the group in 2003, Martin held
directorships covering technical, general management and
multi-site divisional director roles.
External appointments: -
Appointed: August 2019
Independent: No
Committee Memberships:
Remuneration (Chair),
Audit, Nomination
Experience: Lyndsey has spent most of her career in
multi-national organisations and management consultancy across
different sectors, most recently with International Personal Finance
PLC as Chief Human Resources Officer. She brings experience
in strategy creation, planning and delivery of large scale
cultural and performance change management and governance.
Qualifications: BA DPM
Grad IPM
External appointments: International Personal Finance PLC
(Chief HR Officer)
50
51
Corporate Governance Statement
Corporate Governance Statement
CORPORATE GOVERNANCE STATEMENT
As a Board, we remain committed to maintaining high standards of corporate
governance. The Directors place a significant emphasis on ensuring that the
Group has the appropriate governance structures in place.
The Board adopted the QCA Corporate Governance Code in 2018 considering it to
be a pragmatic and practical governance tool committed to high standards of corporate
governance facilitating efficient, effective and entrepreneurial management of the Company.
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 04
to 26 in the Annual Report.
Sub – committees
There are five sub – committees reporting
to the Board:
• Executive Committee
• Remuneration Committee
• Audit Committee
All committees continue to exercise
their duties in compliance with
all relevant legislation, regulation
and guidance. During the year the
Nomination Committee completed their
search for a new Non-executive Director
following the decision by David Wilks to
retire. Lyndsey Scott was appointed on
1 August and has taken on the role of
Chair of the Remuneration Committee.
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. Further reading on
stakeholder engagement can be found in
our Section 172 (1) statement on pages 26
to 27.
• Nomination Committee
Mark Cropper, Chairman
• Pensions Committee
22 June 2020
"I AM PLEASED
TO INTRODUCE
THE CORPORATE
GOVERNANCE REPORT
FOR THE PERIOD
ENDED 28 MARCH 2020.
THIS REPORT INCLUDES
MY STATEMENT AND
THE CORPORATE
GOVERNANCE REPORT."
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
proactively 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
Two 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 2019, Lyndsey
Scott, 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.
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 Lyndsey
Scott on 1 August 2019.
Lyndsey Scott 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.
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.
52
53
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.
Specific strategic topics are reviewed at every
Board meeting, in addition to two strategy
days also held during the year. The Board’s
responsibilities are discharged with reviews
of monthly reports from the Executive
Committee including conference calls with
the Chief Executive and Chief Financial
Officer 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
Andrew Hosty
Jim Sharp
Lyndsey Scott
6
5
6
6
6
6
6
6
6
4
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 20%.
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.
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 Chief Financial Officer 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 Chairs.
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
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.
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.
Due to the impact of the Covid-19
pandemic and the social distancing
guidelines, the AGM this year will be held
behind closed doors with the minimum
number of Directors as stipulated in the
Company’s Articles, attending in person.
The rest of the Board will attend using
social media. In view of this, the Board
encourages all shareholders to use their
proxy cards to vote on the resolutions
proposed at the AGM. In addition, the
Board will be encouraging shareholders
who may have any questions that they
had intended to raise at the AGM to
either write in to the Company Secretary
or send their questions by email.
The Company will be setting up a
designated email address for such
questions details of which will be
provided in the Notice of the AGM.
Jim Aldridge, Company Secretary
22 June 2020
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.
jamescropper.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.
Andrew Hosty is the Senior Independent
Non-Executive Director
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.
Any Non-Executive Directors with service
greater than nine years are subject to
re-election at each Annual General Meeting.
Risk Management
The Group’s corporate objective is to
maximise long-term shareholder value.
In doing so, the Directors recognise that
creating value is a reward for taking and
accepting risk. The Directors consider risk
management to be crucial to the Group’s
success and give a high priority to ensuring
that adequate systems are in place to
evaluate and limit risk exposure.
Internal Control
The Board are responsible for the
Group’s system of internal control and for
reviewing its effectiveness. In the context
of the Group’s business any such system
can only reasonably be expected to manage
rather than eliminate risks arising from its
operations. It can therefore only provide
reasonable and not absolute assurance
against material loss or misstatement.
Going Concern
In carrying out their duties in respect of
going concern, the Directors carry out a
review of the Group’s financial position
and cash flow forecasts for the foreseeable
future. These are based on a comprehensive
review of revenue, expenditure and cash
flows, taking into account specific business
risks and the current economic
environment. For further details on Going
Concern and the possible impact of the
Covid-19 pandemic, please refer to the
CEO Review (pages 08 to 12) and the CFO
Review (pages 13 to 17)
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
54
55
Report of the Audit Committee
Report of the Remuneration Committee
REPORT OF THE AUDIT COMMITTEE
REPORT OF THE REMUNERATION COMMITTEE
The Audit Committee provides independent scrutiny and challenge to ensure that the
Group always presents a true and fair view of its performance, focusing on the accuracy,
integrity and communication of financial reporting.
Composition
External audit
The Committee comprises the four
Non-Executive Directors. Two of the
members have been on the Committee
for over nine years. David Wilks resigned
as a Non-Executive Director and a member
of the Committee on 31 July 2019.
Lyndsey Scott was appointed as a
Non-Executive Director on 1 August 2019
and joined the Committee with effect from
that date. 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,
Chief Financial Officer and Company
Secretary. This composition allows the
Committee to maintain appropriate levels
of objectivity and independence when
providing assurance over the Group’s
systems, operations and financial probity
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.
Auditors
BDO were appointed as auditors by the
Board in December 2018, following a
recommendation by the Audit Committee
after a comprehensive tender process, and
subsequently reappointed by shareholders at
the Annual General Meeting in June 2019.
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
22 June 2020
"I AM PLEASED TO
INTRODUCE THE
AUDIT COMMITTEE
REPORT FOR THE
PERIOD ENDED
28 MARCH 2020.
IN THESE
UNPRECEDENTED
TIMES, THE AUDIT
COMMITTEE HAS
BEEN REVIEWING
THE ADDITIONAL
CHALLENGES ON
THE BUSINESS OF THE
COVID -19 PANDEMIC
AND MONITORING THE
ACTIONS TAKEN BY THE
EXECUTIVE DIRECTORS
TO ENSURE THAT THE
BUSINESS EMERGES
OUT OF THE PANDEMIC
AS A STRONGER GROUP
AND BACK ON TRACK
WITH ITS PLANS FOR
GROWTH."
I am very pleased to present my first Report of the Remuneration Committee following
my appointment as a Non-Executive Director and Chair of this Committee in April.
Following a year of success and recovery from the impact of pulp pricing over the last
two years, we now find ourselves in unprecedented times.
The Remuneration Committee has been very impressed with the dedication and planning
of the Executive team as the global pandemic started to impact the business, with the
primary focus on the health and wellbeing of our employees, followed by plans to
preserve cash and continue the growth of the business.
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.
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 28
March 2020.
• Directors’ Remuneration Policy setting
out the Group’s forward looking
remuneration policy.
Lyndsey Scott, Chair of the
Remuneration Committee
22 June 2020
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 28
MARCH 2020.
THIS REPORT INCLUDES
MY STATEMENT,
THE ANNUAL
REMUNERATION
REPORT AND SETS
OUT OUR FORWARD –
LOOKING DIRECTORS’
REMUNERATION
POLICY."
56
57
Report of the Remuneration Committee
Report of the Remuneration Committee
Annual Remuneration Report for 2020
Details of Directors’ Remuneration
Remuneration Committee
The Remuneration Committee comprises
the following members:
account the objective to attract, retain
and motivate executive management
of the calibre required to run the
Group successfully.
• Lyndsey Scott
• 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
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.
Remuneration policy
The Remuneration Committee will
periodically review the policy to confirm
that our remuneration framework
continues to support the delivery of our
business objectives.
In developing this policy, the Remuneration
Committee takes into account the best
interests of the business and the agreed
terms and conditions of employment for
each Director of the Group.
Our overall remuneration philosophy aims:
•
•
•
•
•
To recognise the importance of ensuring
that employees of the Group are
effectively and appropriately rewarded.
To operate a remuneration policy that is
a mix of fixed and variable pay. Variable
pay is both short term and long term.
To align Directors’ interests with those
of the Group.
To have a pay for performance approach.
To provide a market competitive level
of remuneration to enable the Group
to attract and retain high level
individuals, to support the ongoing
success of the Group.
Service Contracts
Director
Notice Period
M A J Cropper (Chairman)
P I Wild
S A Adams
I M Maddock
M Thompson
K D Watson
P J Willink
12 months
6 months
6 months
6 months
12 months
6 months
12 months
Non-Executive Directors are employed on
contracts of one month’s notice by either side.
James Cropper
FTSE AIM All Share
FTSE All Share
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 28 March 2020 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.
2000
1800
1600
1400
1200
1000
800
600
400
200
0
d
e
s
a
b
e
R
03/10
03/11
03/12
03/13
03/14
03/15
03/16
03/17
03/18
03/19
03/20
£’000
Executive
M A J Cropper
P I Wild
S A Adams
I M Maddock
M Thompson
K D Watson
P J Willink
Non-Executive
Dr A Hosty
J E Sharp
L J Scott
(appointed 1 August 2019)
D R Wilks
(resigned 31 July 2019)
Salary and Fees
2019
2020
Benefits
2020
2019
Annual Bonus
2019
2020
Pension Costs
2019
2020
Total
2020
2019
80
204
161
161
161
161
135
31
36
21
78
198
157
157
157
157
132
17
35
-
13
35
11
40
22
22
22
22
22
-
-
-
-
10
39
21
21
21
21
21
-
-
-
-
-
45
42
35
13
35
30
-
-
-
-
-
-
-
-
21
-
-
-
-
-
-
5
10
10
10
10
10
16
-
-
-
-
5
10
10
9
9
6
16
-
-
-
-
96
299
235
228
206
228
203
31
36
21
13
93
247
188
187
208
184
169
17
35
-
35
1,164
1,123
161
154
200
21
71
65
1,596
1,363
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 28 March 2020 under the Plan to Executive Directors were as follows:
Options at
30 March
2019
Options
granted
in period
Mid-market
price (£)
of options
granted
18,101
13,286
£11.208
9,527
8,475
8,926
8,926
6,993
6,993
6,993
6,993
£11.208
£11.208
£11.208
£11.208
All figures in £’000
P I Wild
S A Adams
I M Maddock
M Thompson
K D Watson
Options Options not
expected
to vest
exercised
in period
Options Options at
lapsed in 28 March
2020
period
-
-
-
-
-
(9,530 )
(8,571 )
13,286
(5,016 )
(5,016 )
(5,016 )
(5,016 )
(4,511 )
(3,459 )
(3,910 )
(3,910 )
6,933
6,933
6,933
6,933
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
30 March
2019
Options
granted
in period
Mid-market
price (£)
of options
granted
Options Options not
expected
to vest
exercised
in period
Options Options at
lapsed in 28 March
2020
period
4,583
7,675
3,364
5,877
£11.208
£11.208
-
-
(2,413 )
(4,216 )
(2,170 )
(3,459 )
3,364
5,877
All figures in £’000
M A J Cropper
P J Willink
58
59
Report of the Remuneration Committee
Report of the Remuneration Committee
PURPOSE AND LINK TO STRATEGY
OPERATION
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.
CONDITIONS FOR LTIP AWARDS
Earnings per share conditions
Under the plan, awards to acquire ordinary shares in the Company, or cash
equivalent, can be made to Executive Directors and other employees within
the Group, as selected by the Remuneration Committee.
The number of options that can be awarded to any participant in a financial
year under the Plan, determined by reference to the Company’s 20 day average
mid-market share price at the time of the award, is limited to a maximum
of 75% of the participant’s base salary.
The LTIP awards are subject to the achievement of certain performance
conditions as set out below.
• 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.
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.
Base Salary
To reflect market value of the role and
individual’s performance and contribution
and enable the Group to recruit and retain
directors of sufficient calibre required to
support achievement of both short and
long-term goals.
Non-Executive Directors’ Salaries
To attract and retain the right individuals
required to support the achievement of
both short and long-term goals.
Benefits
To attract and retain the right individuals
and level of talent required to support
achievement of both short and long term
goals.
Pension
To attract and retain the right individuals
and level of talent required to support
achievement of both short and long term
goals.
Annual Executive Bonus Plan
To reward the delivery of the Group’s
annual financial and strategic goals.
The salary of each Executive Director will be reviewed annually by the
Remuneration Committee without any obligation to increase such salary.
Base salaries are benchmarked against companies of a comparable size with a
targeted approach of median positioning against the market, subject to
satisfactory performance.
There may be reviews and changes to base salary during the year if considered
appropriate by the Remuneration Committee.
The Remuneration Committee will take account of relevant comparator group
data as well as pay increases awarded to other employees within the Company.
Salaries for Non-Executive Directors are based on market practice and are
reviewed by the Board each year.
The maximum aggregate amount of salaries that the Company may pay to all
the Directors who do not hold executive office for their services is £200,000 per
annum, or such larger amount as the Company may by ordinary resolution decide.
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.
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.
Director pension arrangements are in line with the pension arrangements for the
general workforce, depending on what pension scheme they are a member of.
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.
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.
60
61
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
2. Seek to understand and
meet shareholder needs
and expectations
3. Take into account
wider stakeholder and
social responsibilities
and their implications
for long-term success
The Group strategy is set out on pages 4 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.
•
•
•
•
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.
Further reading:- Section 172(1) statement on pages 26 -27 of the Annual Report.
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 (2019) at 68%.
•
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 175 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.
Further reading – Section 172 (1)
statement on pages 26-27 of the
Annual Report.
•
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
• The Group 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 21 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 50 to 64.
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.
•
•
• Biographies on all Directors are shown on pages 50 to 51 of the Annual Report.
Between them, the Executive Directors have many years of broad experience in the nonwoven fibre manufacturing industry.
With the support of our NOMAD and advisors, the Board training and development needs are maintained.
7. Evaluate Board performance
based on clear and relevant
objectives, seeking
continuous improvement
•
•
A comprehensive board evaluation is undertaken annually commencing with a questionnaire, compilation of a summary
of results and feedback at a board meeting. The results are 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 39 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 Group 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 subcommittees is described in the Governance section of the Annual report on pages 50 to 64.
• The website includes historical announcements, copies of the Annual and Interim reports and copies of any presentations made.
DIRECTORS’ REPORT
The Directors present their Annual
Report and the audited financial
statements of James Cropper Group for
the 52 weeks ended 28 March 2020.
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 Statement on pages 06 to 07,
the Strategic Report on pages 04 to 25 and
the Chief Financial Officer’s Review
on pages 13 to 17, report on the performance
of the Group for the period ended 28 March
2020 and its prospects for the future.
The Chairman’s Statement, the Strategic
Report and this report have been prepared
solely to provide additional information to
shareholders to assess the 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
Dr Andrew Hosty • Jim Sharp
David Wilks (Resigned 31 July 2019)
Lyndsey Scott (appointed 1 August 2019)
Details of the Director’s remuneration are
shown in the Report of the Remuneration
Committee on pages 57 to 61. Details of
the Directors’ interests in the share capital
of the Company are set out below.
The biographies of the Directors as at the
date of this report are on pages 50 to 51.
Results and dividends
The results for the period are shown in the
Statement of Comprehensive Income on
page 71.
An interim dividend of 2.5p per ordinary
share was paid on 10 January 2020.
The Directors are not recommending
a final dividend for the year, making the
total dividend for the year 2.5p (2019:
13.5p) per share. Full details of dividends in
respect of the year ended 28 March 2020 are
given in note 7 of the financial statements.
Corporate governance
A report on Corporate Governance is
set out on pages 50 to 64,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 (2019:£21,000)
were made for various local charitable
purposes.
Engagement with key stakeholders
In accordance with the Large and
Medium-sized Companies and Groups
(Accounts and Reports) Regulations
2008 (as amended by the Companies
(Miscellaneous Reporting) Regulations
2018), the Company’s statement on
engagement with, and having due regard
to, the interests of key stakeholders is
contained within the Section 172(1)
statement in the Strategic Report on pages
26 to 27 (also known as the Section 172
statement). The section 172 statement also
summarises how the directors have had
regard to the need to foster the Group’s
business relationships.
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.
Further information can be found in the
section 172 (1) statement on pages 26 to 27.
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. Further details can be found
in the sustainability report on pages 40
to 42 and the streamlined energy
carbon report on page 43.
Share capital
Full details of the authorised and issued share
capital of the Company are set out in note 21
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.
62
62
63
Directors’ Report
Having prepared management forecasts and
made appropriate enquiries, the Directors
are satisfied that the Group has adequate
resources for the foreseeable future.
Accordingly, they have continued to adopt
the going concern basis in preparing the
Group and Company financial statements.
Disclosure of information
to the Auditor
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.
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.
Due to the social distancing measures
imposed during the Covid-19 pandemic,
the meeting will be held behind closed
doors with the minimum level of attendees
physically present at the Burneside site on
Wednesday 29 July 2020 at 11am.
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 Statement and the Chief
Executive’s Statement on pages 06 to 12,
outline the business activities of the Group
along with the factors which may affect its
future development and performance.
The Chief Financial Officer’s Review (pages
13 to 17) discusses the Group’s financial
position, along with details of its cash flow
and liquidity. Note 18 to the financial
statements sets out the Group’s financial
risks and the management of those risks.
Substantial Interests
Shareholdings in excess of 3% of the issued capital at 30 May 2020 were as follows: -
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 Interests
Total
Liontrust Asset Management Ltd
Unicorn Asset Management Ltd
3,068,273
521,583
52,386
3,642,242
1,076,850
320,000
32.1
5.5
0.6
38.1
11.3
3.4
1
1. The Cropper, Willink and Acland families are related and are deemed to be acting in concert with a total holding of 38.1% in the Company.
Details of Directors’ Interests
The interests in the shares of the
Company of those Directors serving
at 28 March 2020 were as follows:
Any material related party
transactions between the Directors
and the Company are set out in note
25 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 57. Non-beneficial interests
include shares held jointly as trustee
with other Directors.
Approved by the Board of Directors
on 22 June 2020 and were signed on
its behalf by
Mark Cropper, Chairman
Ordinary
At 28 March 2020
Options on
Ordinary
Shares
Ordinary
Shares1
At 30 March 2019
Options on
Ordinary
Shares
Shares
Director
Interest
M A J Cropper
Beneficial
Non-beneficial
1,834,802
559,571
-
-
1,787,688
559,571
-
-
P I Wild
S A Adams
Beneficial
Beneficial
I M Maddock
Beneficial
M Thompson
Beneficial
K D Watson
Beneficial
P J Willink
Dr A Hosty
J E Sharp
L J Scott
Beneficial
Non-beneficial
Beneficial
Non-beneficial
Beneficial
Non-beneficial
Beneficial
Non-beneficial
25,572
13,286
17,497
18,101
1,099
12,241
31,127
7,538
58,079
69,434
500
64,951
11,380
64,951
500
64,951
6,993
6,993
6,993
6,993
-
-
-
-
-
-
-
-
1,099
16,261
29,927
7,538
58,079
1,447,558
500
64,951
11,380
75,328
-
-
9,527
8,475
8,926
8,926
-
-
-
-
-
-
-
-
1 Options on Ordinary Shares as at 28 March 2020 exclude the LTIPs
options granted in August 2018 and not expected to be vested.
64
CONTENTS
STRATEGIC REPORT
03
Financial Highlights
Financial Summary
Chairman’s Letter
Chief Executive’s Review
Covid-19 Report
Chief Financial Officer's Review
The Pension Report
Risk Management
Stakeholders Relationship Statement
Technical Fibre Products
ColourformTM
James Cropper Paper
Values and Purpose
Sustainability
Streamlined Energy & Carbon Report
Pride Excellence Awards
People
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
49
65
66
67
71
72
73
74
76
110
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.
Opinion
In our opinion:
We have audited the financial
statements of James Cropper PLC
(the ‘Parent Company’) and its
subsidiaries (the ‘Group’) for the
period ended 28 March 2020 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).
• 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 28 March 2020 and of the Group’s
profit for the period 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.
66
67
Independent Auditor’s Report
Independent Auditor’s Report
Key audit matters
KEY AUDIT MATTER
HOW WE ADDRESSED THE KEY AUDIT MATTER IN THE AUDIT
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.
KEY AUDIT MATTER
HOW WE ADDRESSED THE KEY AUDIT MATTER IN THE AUDIT
Going Concern
The outbreak of Covid-19 has resulted in uncertainty
in the economy and difficulty in accurately forecasting
the performance of the Group going forwards.
Management considered implications for the Group’s
going concern assessment and the disclosure in the
Annual Report and accounts, by developing stress test
scenarios to model potential impacts and consider
compliance with covenants in place. Following this
revised assessment by management, covenants were
reset in line with a Covid-19 set of forecasts.
Management are required to make significant
estimates and judgements when preparing such
forecasts. A small change in the assumptions used may
have a significant impact on the cash flows of the
Group and the ability to meet these covenants.
The disclosures on going concern at page 17 in the
financial statements indicate the view of the directors
on the use of the going concern basis, and key
assumptions used in arriving at this conclusion.
We discussed the potential impact of Covid-19 with management and
the Audit Committee including their assessment of risks and uncertainties
associated with areas such as the Group’s workforce, supply chain and
order levels that are relevant to the Group’s business model and operations.
We formed our own assessment of risks and uncertainties based on our
understanding of the business and the sector.
We challenged management’s stress test scenarios including levers available
to management to mitigate the impacts. Based on the information available
at the time of the directors’ approval of the financial statements and us
signing our audit opinion, we consider the scenarios to be reasonable whilst
noting the impact of Coronavirus on future sales, operational capacity and
covenant compliance is difficult to quantify. We challenged management on
the key assumptions included in the scenarios and confirmed management’s
mitigating actions are within their control.
We evaluated management’s plans for future actions including their
alternative options if the virus continues to impact trade for longer than
anticipated. These measures include potential cost savings to further
improve the level of EBITDA if required to meet key covenants.
We assessed the adequacy of the disclosure within the financial statements
relating to the Directors’ assessment of the going concern basis of preparation.
KEY AUDIT MATTER
HOW WE ADDRESSED THE KEY AUDIT MATTER IN THE AUDIT
Defined Benefit Pension Scheme Valuations
As described in Note 1 (accounting policies) and
19 (retirement benefits), the Group has two
defined benefit pension plans in the UK;
the staff scheme and the works scheme.
At 28 March 2020, the Group recorded a net
retirement obligation of £9.4m (2019: £22.6m),
comprising scheme assets of £113.9m (2019: £110m)
and scheme liabilities of £121.4m (2019: £132.6m).
The staff scheme is in an asset position at the
year-end which has not been recognised.
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.
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.
As such, the valuation of defined benefit pension
scheme is considered a key audit matter.
We assessed the appropriateness of the assumptions underpinning
the valuation of the scheme liabilities.
Specifically we challenged the discount rate, inflation and mortality
assumptions applied in the calculation by using an internal pension
specialists to benchmark the assumptions applied against comparable
third party data and assessed the appropriateness of the assumptions
in the context of the Group’s own position.
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 considered the appropriateness of recognising an asset ceiling
on the staff scheme, by reference to the employer’s rights to surplus
assets of the scheme.
We also assessed the completeness and accuracy of the disclosures within
the financial statements in accordance with the accounting standards.
Key observations
As a result of our testing we were satisfied that assumptions applied in
relation to determining the pension valuation were within an acceptable range.
Revenue recognition
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 15, 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. This is discussed further at Note 1a
to the financial statements.
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 divisions,
and assessing the degree of completion of the 3DP
tooling manufacturing contracts, which occur over a
period of time. Key areas of judgements are discussed
further in Note 1z to the financial statements.
Revenue recognition is regarded as a key audit matter
as it requires a significant level of judgement to be
applied by management.
We utilised data analytics procedures to perform matching between sales
orders, goods despatched and sales invoices on a population-wide basis for
3 of the 5 significant components. A sample of items where exceptions were
identified as a result of the data analytics was tested substantively. For one
component where data analytics could not be performed, a sample of amounts
recognised in the financial statements was agreed to evidence of goods
despatched to ensure control had passed to the customer. A sample of goods
despatched was also agreed to being included as revenue within the financial
statements. The remaining significant component had no significant revenue.
In addition, our substantive audit procedures included a combination
of the following:
We considered whether the group’s accounting policy was in line with
requirements of IFRS 15.
We tested a sample of orders to assess whether the method for recognition
of revenue was appropriate,and consistent with IFRS 15 and the accounting
policy, and had been applied consistently.
We tested whether amounts recognised were accurate and recorded in the
correct period based on the contractual performance obligations by agreeing
a sample of individual transactions to good dispatched notes and sales orders
around the year end.
We considered if tooling revenue in the 3DP division had been recognised
correctly over time with respect to the percentage of units fulfilled for each
customer’s orders. We also considered if the revenue deferred at year end
was appropriate with respect the percentage of units yet to be fulfilled.
Key Observations
As a result of our testing we were satisfied management’s judgements and
estimates with respect to the recognition of revenue were in line with IFRS
15 and the group’s accounting policy.
Our application of materiality
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:
Group materiality
£260,000 (2019: £165,000)
Basis for materiality
5% of Profit before tax (2019: 4.7% of Profit before tax)
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
£169,000 (2019: £107,000), representing 65% (2019: 65%) of materiality. The level reflects 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 £32,000 to £227,000 (2019: £23,000 to £127,000). Parent company materiality was
£97,000 (2019: £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 £7,800 (2019: £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.
68
69
Independent Auditor’s Report
Group Statement of Comprehensive Income
James Cropper PLC
Group Statement of Comprehensive Income
Revenue
Provision for impairment
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 and 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 gains/(losses)
Deferred tax on actuarial (gains)/losses on retirement benefit liabilities
Other comprehensive income/(expense) for the year
Total comprehensive income/(expense) for the period
attributable to equity holders of the Company
Note
2
22
4
2
3
3
4
5
6
19
19
52 week period to
28 March 2020
£’000
52 week period to
30 March 2019
£’000
104,667
(308 )
486
(1,330 )
(38,200 )
(4,539 )
(30,388 )
(3,950 )
(19,869 )
6,569
(1,136 )
26
5,459
(630 )
4,829
50.6 p
4,829
181
(295 )
13,057
(2,481 )
10,462
15,291
101,095
(101 )
614
798
(43,074 )
(5,615 )
(28,183 )
(2,952 )
(19,275 )
3,408
(965 )
133
2,576
(262 )
2,314
24.3 p
2,314
(117 )
(29 )
(3,258 )
554
(2,850 )
(536 )
An overview of the scope of our audit
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 Group 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 16 (2019: 14)
components of the Group, we determined
that 5 (2019: 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 group 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 88% (2019: 85%) of revenue,
92% (2019: 97%) of absolute values of profit
before tax and 89% (2019: 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.
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 period 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.
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
• 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.
Responsibilities of Directors
As explained more fully in the statement of
Directors’ responsibilities 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.
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.
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
BDO LLP is a limited liability partnership
In preparing the financial statements, the
Directors are responsible for assessing the
registered in England and Wales
(with registered number OC305127).
70
71
The accompanying notes form part of the financial statements
Statement of Financial Position
Statement of Cash Flows
Group as at
28 March 2020
£’000
Group as at Company as at
28 March 2020
£’000
30 March 2019
£’000
Company as at
30 March 2019
£’000
Note
James Cropper PLC
Statement of Cash Flows
For the period ended 28 March 2020 (2019: for the period ended 30 March 2019)
James Cropper PLC
Statement of Financial Position
Assets
Intangible assets
Property, plant and equipment
Right-of-use assets
Investments in subsidiary undertakings
Deferred tax assets
Total non - current assets
Inventories
Trade and other receivables
Provision for impairment
Other financial assets
Cash and cash equivalents
Corporation tax
Total current assets
Total assets
Liabilities
Trade and other payables
Other financial liabilities
Loans and borrowings
Total current liabilities
Long-term borrowings
Retirement benefit liabilities
Deferred tax 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
8
9
10
11
20
12
13
13
14
15
16
17
17
19
20
21
495
31,882
4,907
-
1,921
39,205
13,956
19,363
(530 )
-
8,964
1,872
43,625
82,830
16,544
275
3,756
20,575
16,263
9,382
2,213
27,858
48,433
2,389
1,588
584
(1,251 )
31,087
34,397
82,830
365
27,639
-
-
2,234
30,238
16,410
19,234
(222 )
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
366
1,925
301
7,350
1,934
11,876
-
51,455
(350 )
-
6,658
1,509
59,272
71,148
23,421
275
174
23,870
7,983
9,382
114
17,479
41,349
2,389
1,588
-
(1,251 )
27,073
29,799
71,148
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
The Parent Company reported a profit for the period ended 28 March 2020 of £3,416,000 (2019: £4,902,000).
The financial statements on pages 71 to 109 were approved by the Board of Directors on 22 June 2020 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
Loss / (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:
Decrease / (increase) in inventories
Decrease / (increase) in trade and other receivables
Increase in trade and other payables
Tax paid
Net cash generated from 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
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of ordinary shares
Proceeds from issue of new loans
Repayment of borrowings
Repayment of lease liabilities
Interest on lease liabilities
Interest received
Interest paid
Purchase of LTIP investments
Sales of own shares
Dividends paid to shareholders
Net cash generated from/ (used) in financing activities
Net increase / (decrease) in cash and cash equivalents
Effect of exchange rate fluctuations on cash held
Net increase / (decrease) in cash and cash equivalents
Cash and cash equivalents at the start of the period
Cash and cash equivalents at the end of the period
Cash and cash equivalents consists of:
Cash at bank and in hand
Bank overdraft
Group
2020
£’000
Group
2019
£’000
Note
4,829
2,314
630
3,950
1,215
(1,424 )
(74 )
23
566
(252 )
-
2,475
149
1,719
(741 )
13,065
(190 )
(9,005 )
262
2,952
1,386
(1,468 )
(312 )
(12 )
300
(49 )
-
(1,529 )
(2,072 )
1,659
(65 )
3,366
(67 )
(5,162 )
-
12
(9,195 )
(5,217 )
-
135
9,121
(3,301 )
(1,488 )
(200 )
26
(234 )
-
-
7
(1,275 )
2,649
6,519
93
6,612
2,352
8,964
8,964
-
8,964
1,568
(1,311 )
-
-
133
(391 )
(315 )
130
(1,263 )
(1,314 )
(3,165 )
(40 )
(3,205 )
5,557
2,352
2,670
(318 )
2,352
The accompanying notes form part of the financial statements
The accompanying notes form part of the financial statements
72
73
Statement of Changes in Equity
Statement of Changes in Equity
James Cropper PLC
Statement of Changes in Equity - Group
James Cropper PLC
Statement of Changes in Equity - Company
All figures in £’000
At 31 March 2018
Share
capital
2,370
Share
premium
Translation
reserve
Own
Shares
Retained
earnings
Total
1,472
520
(1,445 )
20,305
23,222
All figures in £’000
At 31 March 2018
Share
capital
2,370
Comprehensive income for the period
-
-
-
-
2,314
2,314
Comprehensive income for the period
-
Share
premium
1,472
-
Own
Shares
(1,445 )
-
Retained
earnings
14,270
4,902
Total
16,667
4,902
Total other comprehensive income
-
-
(117 )
-
(2,733 )
(2,850 )
Total other comprehensive income
-
- -
(2,733 )
(2,733 )
Dividends paid
-
-
-
-
(1,263 )
Share based payment charge
-
-
-
-
Tax on share options
-
-
-
-
(49 )
(48 )
Proceeds from issue of ordinary shares
19
116
-
-
-
Sale of own shares
Consideration paid for own shares
-
-
-
-
-
-
509
(315 )
(379 )
-
(1,263 )
(49 )
(48 )
135
130
(315 )
Total contributions by and
distributions to owners of the Group
At 30 March 2019
Adjustment on initial
application of IFRS 161
19 116
-
194
(1,739 )
(1,410 )
2,389
-
1,588
-
403
-
(1,251 )
18,147
21,276
-
(519 )
(519 )
Dividends paid
Share based payment charge
Tax on share options
-
-
-
-
-
-
Proceeds from issue of ordinary shares
19
116
-
-
-
-
-
(1,263 )
(1,263 )
-
(48 )
(48 )
-
(48 )
-
-
509
(315 )
(379 )
-
(48 )
135
130
(315 )
19 116
194
(1,738 )
(1,409 )
2,389
1,588
(1,251 )
14,701
17,427
-
-
-
24
24
Sale of own shares
Consideration paid for own shares
Total contributions by and
distributions to owners of the Group
At 30 March 2019
Adjustment on initial
application of IFRS 161
At 31 March 2019
2,389
1,588
403
(1,251 )
17,628
Comprehensive income for the period
-
-
-
-
4,829
20,757
4,829
At 31 March 2019
2,389
1,588
(1,251 )
14,725
Comprehensive income for the period
-
-
-
3,416
17,451
3,416
Total other comprehensive income
-
-
181
Dividends paid
-
-
-
Share based payment charge
-
-
-
Total contributions by and
distributions to owners of the Group
-
-
-
-
-
-
-
10,281
10,462
Total other comprehensive income
-
-
-
10,583
10,583
(1,275 )
(376 )
(1,275 )
(376 )
(1,651 )
(1,651 )
Dividends paid
-
-
-
(1,275 )
Share based payment charge
-
-
-
(376 )
(1,275 )
(376)
Total contributions by and
distributions to owners of the Group
-
-
-
(1,651 )
(1,651 )
At 28 March 2020
2,389
1,588
584
(1,251 )
31,087
34,397
At 28 March 2020
2,389
1,588
(1,251 )
27,073
29,799
1 The Group has initially applied IFRS 16 at 31 March 2019, using the modified retrospective approach. Under this approach,
comparative information is not restated and the cumulative effect of applying IFRS 16 is recognised in retained earnings at
the date of the initial application.
1 The Company has initially applied IFRS 16 at 31 March 2019, using the modified retrospective approach. Under this approach,
comparative information is not restated and the cumulative effect of applying IFRS 16 is recognised in retained earnings at the
date of the initial application.
The accompanying notes form part of the financial statements
The accompanying notes form part of the financial statements
74
75
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 28
March 2020, (2019: 52 week accounting
period ended 30 March 2019).
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. In
determining the appropriate basis of
preparation, the impact of the Covid-19
pandemic has been the major consideration.
The Board has concluded that it is
appropriate to adopt the going concern
basis, having undertaken a rigorous
assessment of the financial forecasts
with specific consideration to the trading
position of the Group in the context
of the current Covid-19 pandemic.
The Directors, after reviewing the Group’s
operating forecasts, investment plans and
financing arrangements, consider that the
Company and Group have sufficient
financing available at the date of approval
of this report. Accordingly, the Directors
are satisfied that it is appropriate to adopt
the going concern basis in preparing the
Annual Report and Accounts. Further
details of the actions taken can be found in
the Chief Executive’s Review (pages 08 to
12) and the Chief Financial Officer’s
Review (pages 13 to 17).
The financial statements are presented
in Pounds Sterling, being the currency
of the primary economic environment in
which the Group operates. All values are
rounded to the nearest thousand pounds,
except where otherwise indicated.
On publishing the parent company
financial statements here together
with the Group financial statements,
the Company is taking advantage of
the exemption in s408 of the Companies
Act 2006 not to present its individual
Statement of Comprehensive Income
and related notes that form a part of
these approved financial statements.
Basis of consolidation
The financial statements of the Group
consolidate the accounts of the Company
and those of its subsidiary undertakings.
No subsidiaries are excluded from
consolidation. The results and cash
flows of subsidiary undertakings acquired
are included from the effective date of
acquisition. Intragroup balances and
any unrealised income and expenses
arising from intragroup transactions
are eliminated in preparing the
consolidated financial statements.
Subsidiaries are entities controlled
by the Group. Control exists when the
Group has the power, directly or
indirectly, to govern the financial and
operating policies of an entity so as to
obtain benefits from its activities.
The financial statements of subsidiaries
are included in the consolidated
financial statements from the date
that control commences until the
date that control ceases.
(a) Revenue recognition
Revenue 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:
• the Group has transferred
control to the buyer;
• 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 reliably.
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.
(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 10 years
• Computer software
3 - 10 years
• Emission Allowances
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
• Plant and machinery
2 - 20 years
Residual values and useful
lives are reviewed annually.
(g) Impairment of assets
At each reporting date, the Group assesses
whether there is any indication that an
asset may be impaired. Where an indicator
of impairment exists, the Group makes an
estimate of recoverable amount. Where the
carrying value of an asset exceeds its
recoverable amount the asset is written
down to its recoverable amount.
Recoverable amount is the higher of fair
value less costs to sell and value in use and
is deemed for an individual asset. If the
asset does not generate cash flows that are
largely independent of those from other
assets or groups of assets, the recoverable
amount of the cash generating unit to
which the asset belongs is determined.
Discount rates reflecting the asset specific
risks and the time value of money are used
for the value in use calculation.
(h) Research and development
Research expenditure is recognised as an
expense as incurred. Costs incurred on
development projects (relating to the
design and testing of new or improved
products) are recognised as intangible
assets when the IAS 38 conditions are met.
Other development expenditures are
recognised as an expense as incurred.
Development costs with a finite useful life
that have been capitalised are amortised
The accompanying notes form part of the financial statements
The accompanying notes form part of the financial statements
76
77
Notes to the Financial Statements
Notes to the Financial Statements
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.
benefits from use of the identified
asset throughout the period of use,
considering its rights within the
defined scope of the contract;
(i) Research & development tax credit
Research and development expenditure
credit (RDEC) is recognised within
other operating income.
(j) IFRS 16 ‘Leases’
The Group has adopted IFRS 16 from 31
March 2019 using a modified retrospective
transition approach, under which the
cumulative effect of initial application
is recognised in retained earnings at 31
March 2019. The comparative information
presented for the period ended 30 March
2019 has not been restated.
The main impact of IFRS 16 for the
Group is the recognition of all future
lease liabilities on the balance sheet.
Corresponding right-of-use assets
have also been recognised on the balance
sheet representing the economic benefits
of the Group’s right to use the underlying
leased assets.
On transition to IFRS 16, the Group has
elected to apply the following practical
expedients permitted by the standard:
- Excluding any operating leases
with a remaining lease term of
less than 12 months.
- Excluding any low value leases
(less than £5,000).
For the period ended 28 March 2020,
the Group had no low values leases
and two leases with a lease term of
less than 12 months.
On transition to IFRS 16 the weighted
average incremental borrowing rate
applied to lease liabilities where no rate is
included in the lease contract was 3.6%.
For any new contracts entered into on or
after 31 March 2019, the Group considered
whether a contract is or contains a lease.
A lease is defined as a contract that conveys
the right to use of an asset for a period of
time in exchange for consideration. To apply
this definition, the Group assesses whether
the contract meets three key evaluations:
- the contract contains an identified asset,
which is either explicitly identified in
the contract or implicitly specified
by being identified at the time the
asset is made available to the Group;
- the Group has the right to obtain
substantially all of the economic
- the Group has the right to direct
the use of the identified asset
throughout the period of use.
For all periods prior to 31 March 2019,
the Group classified its vehicle and
equipment leases as finance leases.
These leases are on terms that transfer
substantially all the risks and rewards
of ownership. The accounting treatment for
finance leases is similar to the accounting
treatment for leases under IFRS 16. Leased
assets are capitalised at inception and
payments apportioned between finance
charges and reduction of the lease liability.
The interest element is charged to the
income statement and the capitalised leased
assets are depreciated over the shorter of
the estimated useful economic life of the
asset or the lease term. For finance leases,
the carrying amounts of the right-of-use
assets and the lease liabilities on transition
at 31 March 2019 were equal to the carrying
amounts of the finance lease assets and
finance lease liabilities recognised at the
30 March year end.
The Group also previously held leases in
relation to long leasehold property leases
and operating assets. Under IFRS 16, there
is no longer a distinction between operating
and finance leases. As a result, the operating
leases have been remeasured on transition
with future lease payments discounted at
the incremental borrowing rate applicable
on 31 March 2019. The following table
presents the reconciliation of lease liabilities
at 30 March 2019:
£’000
Minimum lease payments under
non-cancellable operating
leases at 30 March 2019
4,346
Minimum lease payments under
non-cancellable finance
leases at 30 March 2019
1,920
Discounted using the
incremental borrowing
rate at 31 March 2019
Assessment of lease
term on transition
(1,228)
1,092
Lease liabilities recognised under
IFRS 16 at 31 March 2019
6,130
Transition
The opening balance sheet position
as at 31 March 2019 has been restated
on transition to IFRS 16.
The Group recognised additional right-of-
use assets, lease liabilities and deferred tax
liabilities, recognising the difference in
retained earnings. Comparative periods
have not been restated.
Increase / (decrease)
£’000
Assets
Property, plant and equipment
(4,274 )
Right of use assets
7,967
Liabilities
Lease liabilities
- current
Lease liabilities
– non current
Finance lease liabilities
– current
Finance lease liabilities
– non current
Deferred tax liabilities
Equity
(980 )
(5,150 )
778
1,142
(2 )
Retained earnings
(519 )
(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) Other income
Other income includes the research and
development expenditure credit (RDEC),
royalties received and grants received for
funded projects.
(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.
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 the period end.
as a going concern, in order to provide
returns to the shareholder and benefits
to other stakeholders. The Group,
and Company, invest in financial assets
that will provide an adequate level of
return to the shareholder commensurate
with the level of risk.
The Group and Company manages the
capital structure and adjusts this in light of
the changes in the economic conditions and
risk associated with the underlying assets.
In order to maintain or adjust the capital
structure, the Group and Company may
adjust the amount of any dividend paid
to the shareholder, return capital to the
shareholder, issues new shares, or sell assets
to reduce debt. Details of borrowings can
be seen in note 16 and shareholdings can
be referred to in note 20. The Group,
and Company, are not subject to any
externally imposed capital requirements.
There have been no material changes in the
management of capital during the period.
(w) Taxation
Tax on the Statement of Comprehensive
Income for the 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.
The fair values are charged to the Income
statement over the relevant vesting period
adjusted to reflect actual and expected
vesting levels.
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.
(r) Cash and cash equivalents
(v) Capital Management
(x) Retirement benefits
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
Group and Company’s capital includes
share capital, reserves and retained
earnings. The Group and Company’s
policies ensure the ability to continue
The Group operates various
pension schemes. The schemes are
generally funded through payments
to trustee-administered funds,
The accompanying notes form part of the financial statements
The accompanying notes form part of the financial statements
78
79
Notes to the Financial Statements
Notes to the Financial Statements
determined by periodic actuarial
valuations. The Group has both defined
benefit and defined contribution plans.
A defined benefit plan is a pension plan
that defines an amount of pension
benefit that an employee will receive
on retirement. A defined contribution
plan is a pension plan under which the
Group pays fixed contributions.
The liability recognised in the
Statement of Financial Position in
respect of defined benefit pension
plans is the present value of the defined
benefit obligation at the Statement
of Financial Position date less the
fair value of plan assets.
The defined benefit obligation is
calculated annually by independent
actuaries using the projected unit
credit method.
The present value of the defined benefit
obligation is determined by discounting
the estimated future cash flows using
interest rates of high-quality corporate
bonds that are denominated in the
currency in which the benefits will
be paid, and that have terms to
maturity approximating to the
terms of the related pension liability.
Actuarial gains and losses arising from
experience adjustments and changes in
actuarial assumptions are recognised in
the period in which they occur outside of
Statement of Comprehensive Income in
the Statement of Changes in Equity.
Past service costs are recognised
immediately in income, unless the
changes to the pension plan are
conditional on the employees remaining
in service for a specified period of time
(the vesting period). In this case, the
past-service costs are amortised on a
straight-line basis over the vesting period.
For defined contribution plans, the Group
pays agreed contributions to the schemes.
The Group has no further payment
obligations once the contributions
have been paid. The contributions
are recognised as an employee benefit
expense when they are due.
(y) Non-GAAP performance measures
In the reporting of financial information,
the Group has adopted certain non-
GAAP measures of historical or future
financial performance, position or cash
flows other than those defined or specified
under International Financial Reporting
Standards (IFRSs).
2 Segmental reporting
IFRS 8 Operating Segments - requires
that entities adopt the ‘management
approach’ to reporting the financial
performance of its operating segments.
Management has determined the segments
that are reported in a manner consistent
with the internal reporting provided to
the chief operating decision maker,
identified as the Executive Committee
that makes strategic decisions.
The committee considers the business
principally via the four main operating
segments, principally based in the UK:
•
James Cropper Paper Products
(Paper): comprising:
- JC Speciality Papers – relates to
James Cropper Speciality Papers,
a manufacturer of specialist paper
and boards.
- JC Converting – relates to
James Cropper Converting,
a converter of paper.
•
James Cropper 3D Products
(ColourformTM) – a manufacturer
of moulded fibre products.
•
Technical Fibre Products (TFP)
– a manufacturer of advanced materials.
•
Group Services – comprises central
functions providing services to the
subsidiary companies.
“Eliminations” refers to the elimination
of inter-segment revenues, profits
and investments.
“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 28 March 2020
All figures in £’000
Paper Colourform
TFP
Group
Services
Continuing
Other Operations
Revenue
External
Segment Profit
75,545
75,545
2,586
2,586
26,536
26,536
Adjusted Operating Profit before IAS 19
3,406
(1,378 )
IAS 19 Pension adjustments to profit
-
-
3,406
(1,378 )
-
-
-
-
-
-
-
-
-
-
7,753
-
7,753
-
-
-
-
-
-
-
(2,775 )
(671 )
(3,446 )
-
-
-
-
-
-
-
104,667
104,667
234
-
234
-
-
-
-
-
7,240
(671 )
6,569
(1,136 )
26
5,459
(630 )
4,829
52,873
(52,097 )
6,443
(13,490 )
58,525
(48,844 )
71,167
(41,349 )
(106,085 )
107,347
82,923
(48,433 )
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.
normal retirement dates for male and
female members of the Staff Scheme.
An estimate of the additional liability
was included in the financial
statements for the year ended 31
March 2019.
Where non-GAAP measures have
been used, it is the belief of the Group
that such measures help provide a
clearer understanding of the
underlying performance.
Non-GAAP measures should be
considered in addition to, and are
not intended to be a substitute for,
or superior to, IFRS measures.
(z) Use of estimates and judgements
The preparation of financial statements
in conformity with generally accepted
accounting principles requires the use of
estimates and judgements that affect the
reported amounts of assets and liabilities
at the date of the financial statements and
the reported amounts of revenues and
expenses during the reporting period.
Although these estimates are based
on management’s best knowledge
of the amount, event or actions,
actual results ultimately may differ
from those estimates.
The Group’s key sources of significant
estimates are as detailed below:
The Group’s significant areas
of judgement would include:
(i) Revenue recognition
Judgement is required in deciding
when and at what rate some volume
rebates awarded to customers are
accrued for. 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.
(i) Retirement benefits
(iii) Right-of use assets
Significant judgement is exercised
in determining the lease term.
IFRS 16 defines the lease term
as the ‘non-cancellable’ period
beyond which any extension is
not reasonably certain.
Significant judgement is exercised in
determining the incremental borrowing
rate. IFRS 16 requires the borrowing rate
should represent what the lessee would
have to pay to borrow over a similar term
and with similar security, the funds
necessary to obtain an asset of similar
value in a similar economic environment.
Operating Profit
Interest Expense
Interest income
Profit before tax
Tax on profit for period
Profit for the period
Total Assets
Total Liabilities
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 19 for additional information.
(ii) Contingencies
The Group have identified that the
historical valuation of the defined
benefit pension obligation did not
capture the potential additional
liabilities arising in relation to the
The accompanying notes form part of the financial statements
The accompanying notes form part of the financial statements
80
81
Notes to the Financial Statements
Notes to the Financial Statements
Operating Segments
Period ended 30 March 2019
All figures in £’000
Paper Colourform
TFP
Group
Services
Continuing
Other Operations
Revenue
External
Segment Profit
74,318
74,318
290
290
26,487
26,487
Adjusted Operating Profit before IAS 19
(1,992 )
(2,462 )
IAS 19 Pension adjustments to profit
-
-
(1,992 )
(2,462 )
-
-
-
-
-
-
-
-
-
-
8,883
-
8,883
-
-
-
-
-
Operating Profit
Interest Expense restated
Interest income
Profit before tax restated
Tax on profit for period
Profit for the period restated
Total Assets
Total Liabilities
-
-
(167 )
(854 )
(1,021 )
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
101,095
101,095
4,262
(854 )
3,408
(965 )
133
2,576
(262 )
2,314
3 Finance Costs
Finance costs include costs in respect of interest payable on borrowings and our defined benefit pension schemes.
Finance income includes interest received from short term deposits and fair value movements.
All figures in £’000
Finance costs
Interest payable on bank borrowings
Interest payable in relation to lease liabilities1
Net finance costs arising on defined benefit schemes
Total finance costs
Finance income
Finance income in respect of cash and short term investments
Other Finance income
Total finance income
Net finance costs
2020
2019
392
200
544
1,136
26
-
26
1,110
366
67
532
965
29
104
133
832
73,189
(66,076 )
5,383
(10,893 )
50,749
(40,883 )
62,995
(45,568 )
(122,859 )
115,239
69,457
(48,181 )
1 The Group has initially applied IFRS 16 on 31 March 2019, using the modified retrospective approach. Under this approach,
comparative information is not restated and the cumulative effect of applying IFRS 16 is recognised in retained earnings at
the date of initial application.
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.
4 Profit before taxation
All figures in £’000
UK
Europe
Asia
The Americas
Australasia
Africa
Total
Revenues from
external customers
Non – current assets
excluding deferred tax
2020
41,785
27,357
9,705
24,517
994
309
2019
44,177
23,299
7,763
24,377
1,171
308
2020
32,137
-
-
2019
25,394
-
-
5,147
2,610
-
-
-
-
104,667
101,095
37,284
28,004
All figures in £’000
Adjustment on initial application of IFRS 161
Additions to non-current assets
Paper Colourform
406
1,595
-
1,320
TFP
2,854
5,802
Group
Services
433
290
Total
3,693
9,008
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
Loss/(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:
1 The Group has initially applied IFRS 16 at 31 March 2019, using the modified retrospective approach. Under this approach,
comparative information is not restated and the cumulative effect of applying IFRS 16 is recognised in retained earnings at
the date of the initial application.
All figures in £’000
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)
2020
£’000
2019
£’000
30,388
28,183
2,706
1,089
155
23
-
4,645
(422 )
(3 )
3,947
(307 )
308
2,273
526
153
(12 )
194
4,572
(555 )
(6 )
3,981
(312 )
101
2020
2019
20
53
73
20
54
74
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
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
2020
2019
Note
£’000
£’000
572
138
710
229
(42 )
(267 )
(80 )
630
259
(149 )
110
107
56
(11 )
152
262
20
6 Earnings per share
Basic earnings per share is calculated on the Group profit for the year attributable to equity shareholders of £4.8m
(2019: £2.3m) divided by 9.6m (2019: 9.5m), 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. The weighted average number of
ordinary shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares. Current share options would be vested
by awarding shares already in existence. At 28 March 2020 there were no potential dilutive share options outstanding (2019: nil).
2020
2019
Weighted
average
number
of share
‘000
Earnings
£’000
Amount
per share
pence
Earnings
£’000
Weighted
average
number
of share
‘000
Amount
per share
pence
4,829
9,555
50.6
2,314
9,516
24.3
Basic EPS
Earnings attributable to
ordinary shareholders
Tax on items charged to other comprehensive income
Deferred tax on actuarial gains on retirement benefit liabilities
2,481
(554 )
Diluted EPS
4,829
9,555
Effect of dilutive securities – options
-
-
-
50.6
-
-
2,314
9,516
-
24.3
Tax on items charged to equity
Deferred tax on share options
The tax for the period is lower (2019: lower) than the standard rate of corporation tax in the UK of 19% (2019: 19%).
The differences are explained below:
Continuing operations
Profit before tax
Profit on ordinary activities multiplied by rate
of corporation tax in the UK of 19% (2019: 19%)
Effects of:
Adjustments to tax in respect of prior period
Changes to tax rates1
Deferred tax on share options
Overseas tax
Expenses not deductible for tax purposes
Income not taxable
Deferred tax not recognised in overseas jurisdictions
Other
Total tax charge for the period
(125 )
(48 )
2020
£’000
5,459
2019
£’000
2,576
1,037
489
96
(267 )
(106 )
-
45
-
(127 )
(48 )
630
(93 )
(11 )
-
-
40
(26 )
(95 )
(42 )
262
1 Following an announcement in the Budget on 11 March 2020, which was substantively enacted on 17 March 2020, the UK
corporation tax rate applicable from 1 April 2020 now remains at 19%, rather than the previously enacted reduction to 17%.
7 Dividends
All figures in £’000
Final paid for the period ended 30 March 2019 / period ended 31 March 2018
Interim paid for the period ended 28 March 2020 / period ended 30 March 2019
Total dividends paid in the year
2020
1,039
236
1,275
Final dividend payment paid pence per share for the period ended 30 March 2019 / period ended 31 March 2018
11.0 p
Interim dividend payment paid pence per share for the period ended 28 March 2020 / period ended 30 March 2019
2.5 p
In addition, the directors are not proposing a final dividend in respect of the financial period ended 28 March 2020
(2019: 11.0p per share) which will absorb an estimated £nil (2019: £1,039,000) of shareholders’ funds.
2019
1,027
236
1,263
11.0 p
2.5 p
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
8 Intangible assets
9 Property plant and equipment
Group
Company
Group
Computer Development
Emission
Costs Secrets Allowances
Trade
Computer
Emission
Total
Software Allowances Total
All figures in £’000
Software
Cost
At 30 March 2019
Additions
Disposals/surrender of allowances
At 28 March 2020
Aggregate amortisation
At 30 March 2019
Charge for Period
At 28 March 2020
4,046
190
-
4,236
3,934
42
3,976
Net book value at 28 March 2020
260
115
Net book value at 30 March 2019
112
228
457
310
25
4,838
3,906
25
3,931
-
-
-
-
619
809
(524 )
(524 )
190
-
619
809
(524 )
(524 )
457
310
120
5,123
4,096
120
4,216
229
113
342
310
-
310
-
-
-
-
-
4,473
155
4,628
3,825
25
3,850
-
-
-
3,825
25
3,850
120
495
246
120
366
25
365
81
25
106
Group
Company
All figures in £’000
Software
Computer Development
Emission
Costs Secrets Allowances
Trade
Computer
Emission
Total
Software Allowances Total
Cost
At 31 March 2018
Additions
Disposals/surrender of allowances
3,979
457
310
70
4,816
3,845
67
-
-
-
-
-
143
210
(188 )
(188 )
61
-
70
3,915
143
204
(188 )
(188 )
All figures in £’000
Cost
At 30 March 2019
Adjustment on initial application of IFRS 161
As at 31 March 2019
Transfers from right-of-use assets3
Additions at cost
Disposals
Effects of movements in foreign exchange
Freehold land
& buildings
Plant & Assets under
construction2
machinery
11,574
-
11,574
-
2,892
-
-
91,034
(6,419 )
84,615
4,582
95
(48 )
138
-
-
-
-
5,502
-
-
Total
102,608
(6,419 )
96,189
4,582
8,489
(48 )
138
At 28 March 2020
14,466
89,382
5,502
109,350
Accumulated Depreciation
At 30 March 2019
Adjustment on initial application of IFRS 161
As at 31 March 2019
Transfers from right-of-use assets3
Charge for period
Disposals
At 28 March 2020
Net book value at 28 March 2020
Net book value on initial application of IFRS 16 on 31 March 2019
Net book value at 30 March 2019
7,214
-
7,214
-
233
-
67,755
(2,145 )
65,610
1,961
2,473
(23 )
7,447
70,021
7,019
4,360
4,360
19,361
19,005
23,279
-
-
-
-
-
-
-
5,502
-
-
74,969
(2,145 )
72,824
1,961
2,706
(23 )
77,468
31,882
23,365
27,639
At 30 March 2019
4,046
457
310
25
4,838
3,906
25
3,931
2 Assets under construction comprise the expenditure to date on the extension of the TFP building and line 4.
Aggregate amortisation
At 31 March 2018
Charge for Period
Disposals/surrender of allowances
3,895
39
-
115
114
-
310
-
-
At 30 March 2019
3,934
229
310
-
-
-
-
4,320
3,803
153
-
22
-
4,473
3,825
-
-
-
-
3,803
22
-
3,825
Net book value at 30 March 2019
Net book value at 31 March 2018
112
84
228
342
-
-
25
70
365
496
81
42
25
70
106
112
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 1 year.
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.
3 Assets held under right-of-use assets where ownership is transferred to the Group/Company at the end of the lease are transferred from
right-of-use assets (note 10) to property, plant and equipment.
All figures in £’000
Cost
Brought forward at 31 March 2018
Additions at cost
Disposals
Effects of movements in foreign exchange
At 30 March 2019
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
Freehold land
& buildings
Plant & Assets under
construction
machinery
11,154
420
-
-
86,251
4,742
(159 )
200
11,574
91,034
6,985
229
-
7,214
4,360
4,169
65,307
2,570
(122 )
67,755
23,279
20,944
-
-
-
-
-
-
-
-
-
-
-
Total
97,405
5,162
(159 )
200
102,608
72,292
2,799
(122 )
74,969
27,639
25,113
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
Company
All figures in £’000
Cost
At 30 March 2019
Adjustment on initial application of IFRS 161
As at 31 March 2019
Transfers
Additions at cost
At 28 March 2020
Accumulated Depreciation
At 30 March 2019
Adjustment on initial application of IFRS 161
At 31 March 2019
Charge for period
At 28 March 2020
Net book value at 28 March 2020
Net book value at 30 March 2019
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
Freehold land
& buildings
Plant &
machinery
1,683
-
1,683
-
11
1,694
486
-
486
22
508
1,186
1,197
2,606
(131 )
2,475
(9 )
202
2,668
1,897
(84 )
1,813
116
1,929
739
709
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
Total
4,289
(131 )
4,158
(9 )
213
4,362
2,383
(84 )
2,299
138
2,437
1,925
1,906
Total
3,984
(303 )
608
4,289
2,252
131
2,383
1,906
1,732
1 The group has initially applied IFRS 16 on 31 March 2019, which requires the recognition of right-of-use assets in place of finance
lease assets. As a result, on 31 March 2019, plant & machinery assets held under finance leases with a net book value of £4.3m have
been reallocated and recognised as right-of-use assets. The Group has applied IFRS 16 using the modified retrospective approach,
under which comparative information is not restated.
Assets held under finance leases, capitalised and included in tangible fixed assets:
All figures in £’000
Net book value at 30 March 2019 / 31 March 2018
Reclassification to right-of-use assets
Additions in the period
Reclassification to assets owned
Depreciation in the period
Net book Value at 28 March 2020 / 30 March 2019
Group
2020
4,274
(4,274 )
-
-
-
-
Group
2019
Company
2020
Company
2019
4,713
-
428
(361 )
(526 )
4,274
47
(47 )
-
-
-
-
394
-
-
(292 )
(55 )
47
10 Right of use assets
Group
All figures in £’000
Cost
Land &
buildings
Plant,
equipment
& vehicles
Total
Recognition of right-of-use assets on initial application of IFRS 16 on 31 March 20191
3,374
6,738
10,112
Additions
Disposals
Transfers to property, plant & equipment2
Effects of movements in foreign exchange
At 28 March 2020
Accumulated Depreciation
Recognition of right-of-use assets on initial application of IFRS 16 on 31 March 2019
Charge for the period
Disposals
Transfers to property, plant and equipment2
At 28 March 2020
Net book value at 30 March 2019
Net book value on initial application of IFRS 16 on 31 March 2019
Net book value at 28 March 2020
Company
All figures in £’000
Cost
Recognition of right-of-use assets on initial application of IFRS 16 on 31 March 20191
Additions
Disposals
At 28 March 2020
Accumulated Depreciation
Recognition of right-of-use assets on initial application of IFRS 16 on 31 March 2019
Charge for the period
Disposals
At 28 March 2020
Net book value at 30 March 2019
Net book value on initial application of IFRS 16 on 31 March 2019
Net book value at 28 March 2020
441
(23 )
-
132
3,924
-
424
(23 )
-
401
-
3,374
3,523
77
(15 )
(4,582 )
-
2,218
2,145
665
(15 )
(1,961 )
834
-
4,593
1,384
518
(38 )
(4,582 )
132
6,142
2,145
1,089
(38 )
(1,961 )
1,235
-
7,967
4,907
Land &
buildings
Plant,
equipment
& vehicles
Total
131
-
-
131
-
71
-
71
-
131
60
433
77
(15 )
495
84
185
(15 )
254
-
349
241
564
77
(15 )
626
84
256
(15 )
325
-
480
301
1 The Group has initially applied IFRS 16 on 31 March 2019, which requires the recognition of right-of-use assets in relation to the
Group’s lease liabilities. As a result, on 31 March 2019, the Group recognised £10.1m of right-of-use assets related to those lease liabilities.
The Group has applied IFRS 16 using the modified retrospective approach, under which comparative information is not restated.
2 Assets where ownership is transferred to the Group/Company upon completion of the lease liability are transferred
into Property, plant and equipment (Note 9)
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
11 Investments
Investments in subsidiary undertakings
All figures in £’000
At 28 March 2020 and 30 March 2019
Group
2020
-
Group
2019
Company
2020
Company
2019
-
7,350
7,350
Investments in subsidiary undertakings are stated at cost. A list of principal subsidiary undertakings is given below:
12 Inventories
All figures in £’000
Materials
Work in progress
Finished goods
Group
2020
6,800
2,431
4,725
Group
2019
8,031
3,152
5,227
13,956
16,410
Company name
Country of
incorporation
Registered % holding
office of ordinary
shares
(see below)
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
James Cropper Overseas Trading Limited
England
England
England
USA
USA
USA
USA
England
England
England
England
England
(i)
(iii)
(i)
(i)
(i)
(ii)
(ii)
(ii)
(ii)
(i)
(i)
(i)
(i)
(i)
James Cropper Germany GmbH
Germany
(iv)
(i) Burneside Mills, Kendal, Cumbria, England. LA9 6PZ
(ii) 679 Mariaville Road, Schenectady, NY 12306 USA
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Nature of business
Manufacturer of specialist paper and board
Sales and marketing organisation
Paper converter
Manufacturer of moulded fibre products
Manufacturer of advanced materials
Holding company
Sales and marketing organisation
Manufacturer of metal coated carbon fibres
Manufacturer of metal coated fibres
Dormant company
Dormant company
Dormant company
Dormant company
Marketing organisation
Dormant company
(iii) Level 54 Guangzhou IFC, 5 Zhujiang Road West, Zhujiang New Town. China
(iv) c/o DWF Germany Rechtsanwaltsgesellschaft mbH, Habsburgerring 2, 50674 Koln, Germany
Inventories are stated after a provision for impairment of £1,262,000 (2019: £864,000).
The cost of inventories recognised as expenses and included in cost of sales for the year ended 28 March 2020
was £89,348,000 (2019: £78,397,000).
The Company does not have inventories.
13 Trade and other receivables
All figures in £’000
Trade receivables
Less: Provision for impairment of receivables
Trade receivables – net
Amounts owed by group undertakings
Provision for amounts owed by group undertakings
Other receivables
Prepayments
Group
2020
17,267
(530 )
16,737
-
-
653
1,443
Group
2019
17,140
(222 )
16,918
-
-
951
1,143
Company
2020
Company
2019
-
-
-
-
-
-
49,956
47,760
(350 )
652
847
-
931
632
18,833
19,012
51,105
49,323
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 (2019: £26m) with a fixed term of one year with an interest
charge of 3.6% pa. Intercompany funding accounts of £23m (2019: £19m) and intercompany current accounts of £0.8m
(2019: £2.9m) are settled within 30 days.
The Company has included a provision for impairment of amounts owed by group undertakings.
Further details of this can be found in note 18.2.
The accompanying notes form part of the financial statements
The accompanying notes form part of the financial statements
90
91
Notes to the Financial Statements
Notes to the Financial Statements
14 Other Financial Assets
Group and Company
All figures in £’000
Interest rate swaps used for hedging
Foreign exchange rate swaps for hedging
2020
2019
-
-
-
24
-
24
The gain arising in the Statement of Comprehensive Income on fair value hedging instruments was £nil (2019: £nil).
15 Trade and other Payables
All figures in £’000
Trade payables
Amounts owed to group undertakings
Other tax and social security payable
Other payables
Accruals
Group
2020
7,232
-
636
717
Group
2019
6,456
-
643
636
7,959
6,885
Company
2020
Company
2019
3,354
17,280
175
421
2,191
2,153
15,097
175
231
899
16,544
14,620
23,421
18,555
The fair values of trade and other payables approximate their carrying values presented.
16 Other Financial Liabilities
Group and Company
All figures in £0’000
Interest rate swaps used for hedging
Foreign exchange rate swaps for hedging
The liabilities are held at fair value.
2020
2019
41
234
275
-
-
-
17 Borrowings
Group
2020
£’000
Group
2019
£’000
Company
2020
£’000
Company
2019
£’000
Note
Current
Bank loans and overdrafts due within one year or on demand:
Bank overdraft
Unsecured bank loans1
Lease liabilities2
Non-current loans
Unsecured bank loans1
Lease liabilities2
-
3,008
748
3,756
11,541
4,722
16,263
-
767
778
1,545
8,226
1,142
9,368
-
-
174
174
7,900
83
7,983
316
-
45
361
4,000
4
4,004
18.3
18.3
1 Bank loans bear interest at rates between 1.25% and 1.95% above 30 day LIBOR rates.
2 The Group has initially applied IFRS 16 at 31 March 2019 and recognised £4.2m of lease liabilities on the balance sheet.
The Group has applied IFRS 16 using the modified retrospective approach, under which comparative information is not
restated and the cumulative effect of applying IFRS 16 is recognised in retained earnings at the date of initial application.
Reconciliation of net cash flow to net debt
Group
30 March
2019
£’000
Application
of IFRS 16 2
£’000
Cash flow
£’000
Exchange
Interest Reclassify movement
£’000
£’000
£’000
28 March
2020
£’000
-
-
-
-
767
(6,068 )
(5,301 )
969
-
-
-
-
(2,966 )
2,966
-
(939 )
(42 )
(213 )
(3,008 )
(11,541 )
(255 )
(14,549 )
-
(748 )
(1,142 )
(4,210 )
-
(158 )
950
(162 )
(4,722 )
Loans repayable within 1 year
(767 )
Loans repayable after 1 year
(8,226 )
Lease liabilities
repayable within 1 year
Lease liabilities
repayable after 1 year
Total borrowings
(8,993 )
(778 )
(1,920 )
(10,913 )
(4,210 )
(4,210 )
-
Cash and cash equivalents
2,352
Net Debt
(8,561 )
(4,210 )
Group
Loans repayable within 1 year
Loans repayable after 1 year
Lease liabilities repayable within 1 year
Lease liabilities repayable after 1 year
Total borrowings
Cash and cash equivalents
Net Debt
969
(4,332 )
6,519
2,187
31 March
2018
£’000
(720 )
(7,203 )
(7,923 )
(880 )
(1,560 )
(2,440 )
(10,363 )
5,557
(4,806 )
(158 )
(158 )
-
(158 )
11
11
-
11
(162 )
(5,470 )
(417 )
(20,019 )
93
8,964
(324 )
(11,055 )
Exchange
Cash flow Reclassify movement
£’000
£’000
£’000
30 March
2019
£’000
(767 )
(8,226 )
(8,993 )
(778 )
(1,142 )
(1,920 )
(15 )
(277 )
(292 )
-
-
-
(292 )
(10,913 )
40
2,352
(332 )
(8,561 )
-
(777 )
(777 )
-
520
520
(257 )
(3,165 )
(3,422 )
(31 )
31
-
102
(102 )
-
-
-
-
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
18 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.
18.1 Financial instruments by category
The fair values of the financial assets and liabilities of the Group are as follows:
Fair value through
profit or loss
2020
£’000
2019
£’000
Amortised cost
loans and receivables
2019
2020
£’000
£’000
Note
Group
Financial assets
Current
Trade receivables
Other receivables
Derivatives
Cash and cash equivalents
Financial liabilities
Current
Trade payables
Other payables
Accruals
Derivatives
Short term borrowings
Non-current
Long term borrowings
13
13
14
15
15
15
16
17
17
-
-
-
-
-
-
-
-
275
-
275
-
-
-
24
-
24
-
-
-
-
-
-
-
Company
Note
Fair value through
profit or loss
2020
£’000
2019
£’000
Financial assets
Current
Amounts owed by group undertakings
Other receivables
Derivatives
Cash and cash equivalents
Financial liabilities
Current
Trade payables
Amounts owed to group undertakings
Other payables
Accruals
Derivatives
Short term borrowings
Non-current
Long term borrowings
13
13
14
15
15
15
15
16
17
17
-
-
-
-
-
-
-
-
-
275
-
275
-
-
-
24
-
24
-
-
-
-
-
-
-
-
16,737
653
-
8,964
26,354
7,232
717
7,959
-
3,756
16,918
951
-
2,352
20,221
6,456
636
6,885
-
1,545
19,664
15,522
16,263
9,368
Amortised cost
loans and receivables
2019
2020
£’000
£’000
49,606
1,499
-
6,658
57,763
3,354
17,280
596
2,191
-
174
23,595
47,760
931
-
-
48,691
2,153
15,097
231
899
-
361
18,741
7,983
4,004
The table below analyses financial instruments carried at fair value, by valuation method.
Level 2: other techniques for which all inputs which have significant effect on the recorded fair value are observable, either directly or indirectly:
All figures in £’000
Financial assets
Derivatives
Financial liabilities
Derivatives
18.2 Credit risk
2020
Level 2
2020
Total
2019
Level 2
2019
Total
-
-
275
275
24
-
24
-
Credit risk is the risk of financial loss to the Group if a customer or counterparty fails to meet its contractual obligations. Credit risk arising
from the Group’s normal commercial activities are controlled by individual business units operating in accordance with Group policies and
procedures. Exposure to credit risk arises from the potential of a customer defaulting on their invoiced sales. Some of the Group’s businesses
have credit insurance in place. For un-insured customers, the financial strength and credit worthiness of the customer is assessed from a
variety of internal and external information, and specific credit risk controls that match the risk profile of those customers are applied.
Trade receivables as at the 28 March 2020 (2019: 30 March 2019) were:
All figures in £’000
JC Speciality Papers
JC Converting
JC 3D Products
Technical Fibre Products
Trade receivables
Provision for impairment on trade receivables
The Company does not have trade receivables.
The majority of trade receivables are covered by credit insurance.
2020
9,323
1,994
648
5,302
17,267
(530 )
16,737
At 28 March 2020 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
3 %
3.75 %
16,242
487
796
30
5.5 %
185
10
6 %
44
3
2019
9,860
1,583
150
5,547
17,140
(222 )
16,918
Total
-
17,267
530
All trade receivables have been reviewed under the expected credit loss impairment model and a provision of £530,000 (2019: £222,000)
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.
Movements in provision for impairment on trade receivables.
Group
Balance at Start of period
Increased during the period
Utilised during the period
Balance at end of period
2020
£’000
222
319
(11 )
530
2019
£’000
121
121
(20 )
222
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
94
95
Notes to the Financial Statements
Notes to the Financial Statements
Provision for impairment on consolidation:
Due to the uncertainty at this time that Covid-19 creates it is possible that market events may materialise that can’t currently be foreseen.
Should events unfold that significantly adversely impact the cash flows of the trading divisions James Cropper PLC will support its trading
divisions. Given the high levels of uncertainty in these unprecedented times James Cropper PLC will therefore recognise an expected credit
loss in respect of intra-group loans should such assistance be required 12 months from now.
The Expected Credit Loss is based on a 1.3% probability that the loan receivables become impaired which is in line with the credit losses
applied to the Group’s trade receivables to derive the lifetime expected loss provision for trade receivables.
Credit risk arises from the potential of subsidiary companies defaulting on intra-group loans.
Intra-group loan receivables at 28 March 2020 are:
All figures in £’000
JC Speciality Papers Limited
JC Converting Limited
JC 3D Products Limited
Technical Fibre Products Limited
Provision for impairment
Net Intra-group loans
Company
Balance at the start of the period
Credited / (released) during the period
(Utilised) during the period
Balance at the end of the period
18.3 Liquidity risk
2020
£’000
-
350
-
350
2020
2019
12,000
12,000
3,000
4,000
7,000
26,000
(350 )
25,650
3,000
4,000
7,000
26,000
-
26,000
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 28 March 2020 (2019: 30 March 2019),
was as follows:
Trade payables
Trade payables at the reporting date was:
All figures in £’000
Trade payables at the reporting date was
Total contractual cash flows
Group
2020
7,232
7,232
Group
2019
Company
2020
Company
2019
6,456
6,456
3,354
3,354
2,153
2,153
Borrowing facilities
The Group has the following undrawn committed borrowing facilities available at 28 March 2020:
All figures in £’000
Expiring within one year (renewed annually)
Expiring after one year
The Group’s expiry profile of the drawn down facilities is as follows:
Group
at 28 March 2020
Floating rate
3,500
1,867
Group
at 30 March 2019
Floating rate
3,500
4,390
All figures in £’000
August 2019
November 2019
May 2020
December 2020
June 2021
December 2021
May 2022
February 2023
Group
Company
28 March 2020 30 March 2019 28 March 2020 30 March 2019
Company
Group
-
-
-
2,199
-
1,416
4,934
6,000
2
2
4,000
-
2,878
2,111
-
-
14,549
8,993
-
-
-
-
-
-
1,900
6,000
7,900
-
-
4,000
-
-
-
-
-
4,000
Group
In less than one year
In more than one year but not more than two years
In more than two years but not more than five years
In more than five years
Company
In less than one year
In more than one year but not more than two years
In more than two years but not more than five years
2020
Lease
Debt liabilities Derivatives
£’000
£’000
£’000
Total
£’000
3,008
607
10,934
-
748
626
1,742
2,354
4,031
275
-
1,233
- 12,676
2,354
-
2019
Debt
£’000
767
4,772
3,454
-
Lease
liabilities Total
£’000
£’000
778
275
673
194
1,545
5,047
4,127
194
14,549
5,470
275 20,294
8,993
1,920 10,913
2020
Lease
Debt liabilities Derivatives
£’000
£’000
£’000
Total
£’000
-
-
7,900
7,900
174
14
69
257
275
-
-
449
14
7,969
2019
Debt
£’000
316
4,000
-
Lease
liabilities Total
£’000
£’000
45
4
-
361
4,004
-
275
8,432
4,316
49
4,365
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
18.4 Currency risk
At the 28 March 2020 the Company’s exposure to foreign currency risk was as follows:
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 28 March 2020.
All figures in £’000
Trade Receivables
Cash and cash equivalents
Trade Payables
Unsecured current loans
Lease liabilities current1
Unsecured non-current loans
Lease liabilities non-current1
Net exposure
USD
5,574
3,584
(1,239 )
(809 )
(103 )
(3,641 )
(3,005 )
361
Euro
3,712
1,315
(1,045 )
-
-
-
-
RMB
18
109
-
-
-
-
-
GBP
7,433
3,956
(4,948 )
(2,199 )
(645 )
(7,900 )
(1,717 )
3,982
127
(6,020 )
1 The Group has initially applied IFRS 16 at 31 March 2019 and recognised £4.2m of lease liabilities on the balance sheet.
The Group has applied IFRS 16 using the modified retrospective approach, under which comparative information is not
restated and the cumulative effect of applying IFRS 16 is recognised in retained earnings at the date of initial application.
At the 30 March 2019 the Group’s exposure to foreign currency risk was as follows:
All figures in £’000
Trade receivables
Cash and cash equivalents
Trade payables
Unsecured current loans
Lease liabilities current
Unsecured non-current loans
Lease liabilities non-current
Net exposure
USD
6,101
642
(1,539 )
(767 )
-
(4,221 )
-
216
Euro
3,261
490
(1,066 )
-
-
-
-
RMB
19
80
-
-
-
-
-
2,685
99
GBP
7,537
1,140
(3,851 )
-
(778 )
(4,005 )
(1,142 )
(1,099 )
This represents the net exposure to foreign currencies, reported in pounds Sterling, and arising from all Group activities.
Total
16,737
8,964
(7,232 )
(3,008 )
(748 )
(11,541 )
(4,722 )
(1,550 )
Total
16,918
2,352
(6,456 )
(767 )
(778 )
(8,226 )
(1,142 )
1,901
All figures in £’000
Cash and cash equivalents
Trade payables
Lease liabilities current
Unsecured non-current loans
Lease liabilities non-current
Net exposure
USD
1,875
(2 )
-
-
-
Euro
1,223
(26 )
-
-
-
1,873
1,197
GBP
3,560
(3,326 )
(174 )
(7,900 )
(83 )
(7,923 )
1 The Group has initially applied IFRS 16 at 31 March 2019 and recognised £4.2m of lease liabilities on the balance sheet.
The Group has applied IFRS 16 using the modified retrospective approach, under which comparative information is not
restated and the cumulative effect of applying IFRS 16 is recognised in retained earnings at the date of initial application.
At the 30 March 2019 the Company’s exposure to foreign currency risk was as follows:
All figures in £’000
Bank overdrafts
Trade payables
Lease liabilities current
Unsecured current loans
Lease liabilities non-current
Net exposure
USD
(232 )
(34 )
-
-
-
Euro
(1,805 )
(29 )
-
-
-
(266 )
(1,834 )
GBP
1,721
(2,090 )
(45 )
(4,000 )
(4 )
(4,418 )
Total
6,658
(3,354 )
(174 )
(7,900 )
(83 )
(4,853 )
Total
(316 )
(2,153 )
(45 )
(4,000 )
(4 )
(6,518 )
A one percent strengthening of the pound against the Euro and the US Dollar at 28 March 2020 would have had the following impact on
equity and profit by the amounts shown below.
Group
28 March 2020
28 March 2020
30 March 2019
30 March 2019
Equity
£’000
Income
£’000
Company
Equity
£’000
Income
£’000
USD
Euro
USD
Euro
(4 )
(39 )
(131 )
(48 )
(43 )
(26 )
(76 )
(43 )
28 March 2020
28 March 2020
30 March 2019
30 March 2019
USD
Euro
USD
Euro
(19 )
(12 )
2
8
-
-
-
-
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.
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
18.5 Interest rate risk
Interest rate risk derives from the Group’s exposure to changes in value of an asset or liability or future cash flow through changes in
interest rates. The Group finances its operations through a mixture of retained profits and bank borrowings. The Group borrows in the
desired currencies at fixed or floating rates of interest. As part of the Group’s interest rate management strategy the Company entered
into two interest rate swaps which mature in May 2020 (GBP) and June 2021 (USD). Under the swaps the maximum base rates the Group
will pay on bank borrowings of up to £3m is 0.66% and $3m is 1.99%. The exposure is measured on variable rate debt and instruments.
The net exposure to interest rates at the Statement of Financial Position date can be summarised as follows:
The net exposure to interest rates at the balance sheet date can be summarised as follows:
All figures in £’000
Interest bearing liabilities - floating
Borrowings
Finance lease
Interest bearing liabilities - fixed
Borrowings
Lease liabilities
Interest bearing liabilities
Group
2020
Group
2019
Company
2020
Company
2019
14,549
-
14,549
-
5,470
5,470
20,019
8,988
450
9,438
5
-
1,475
10,913
7,900
-
7,900
-
257
257
4,316
-
4,316
-
-
49
8,157
4,365
The effective interest rates at the balance sheet date were as follows:
Bank overdraft
Borrowings
2020
%
1.85
2.20
2019
%
2.50
2.30
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 £64,000 for the Group and £38,000 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
28 March 2020
30 March 2019
Income statement
£’000
Company
64
94
28 March 2020
30 March 2019
Income statement
£’000
38
47
18.6 Derivative contracts
Derivative liabilities
All figures in £’000
Derivatives designated as hedging instruments
Interest rate swaps
Forward foreign exchange contracts
Total derivatives designated as hedging instruments
Total derivative financial liabilities
Less non-current portion
Interest rate swaps
Forward foreign exchange contracts
Current portion
2020
2019
41
234
275
275
(7 )
-
268
(24 )
-
(24 )
(24 )
(4 )
-
(20 )
The Group has elected to adopt the hedge accounting requirements of IFRS9 Financial Instruments. The Group enters into hedge
relationships where the critical terms of the hedging instrument and the hedged item match, therefore, for the prospective assessment
of effectiveness a qualitative assessment is performed. Hedge effectiveness is determined at the origination of the hedging relationship.
Quantitative effectiveness tests are performed at each period end to determine the continuing effectiveness of the relationship.
In instance where changes occur to the hedged item which result in the critical terms no longer matching, the hypothetical derivative
method is used to assess effectiveness.
Cash flow interest rate swaps
The Group manages its cash-flow interest rate risk by using floating-to-fixed interest rate swaps. Normally the Group raises long-term
borrowing at floating rates and swaps them into fixed rates.
The hedging ratio is 1:1 with the Group having two interest rate swaps of £3,000,000 and US$3,000,000 hedging the same amount
of underlying debt.
The ineffective portion is recognised in finance expense that arose from cash flow hedges amounts to a loss of £84,000 (2019: £nil).
Gains and losses that relate to designated and effective hedging instruments are recognised in other comprehensive income
and tracked separately.
At 28 March 2020, the main floating rates were LIBOR and US LIBOR. Gains and losses recognised in the cash flow hedging
reserve in equity on interest rate swap contracts as at 28 March 2020 will be released to the consolidated statement of comprehensive
income as the related interest rate expense is recognised.
The effects of the cash flow interest rate swap hedging relationships are as follows as at 28 March:
All figures in £’000
Carrying amount of the derivatives
Change in fair value of the designated hedging instrument
Change in fair value of the designated hedged item
Notional amount
Maturity date
2020
2019
41
64
(64 )
(24 )
20
(20 )
5,427
5,302
17/06/21
17/06/21
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
Cash flow forward foreign exchange contracts
19 Retirement benefits
Foreign exchange risk arises when individual group operations enter into transactions denominated in a currency other than their
functional currency. Where the risk to the Group is considered to be significant, Group treasury will enter into a matching forward
foreign exchange contract with a reputable bank.
The hedging ration is 1:1, with the Group committing to sell forward highly probable forecast euro receipts to an equal value of the
foreign exchange contracts.
The hedged forecast transactions denominated in foreign currency are expected to occur at various dates in the next 12 months.
Gains and losses on the effective element of forward foreign exchange contracts as at 28 March 2020 are recognised in the consolidated
statement of comprehensive income and tracked separately in the period or periods during which the hedged forecast transactions affects
the consolidated statement of comprehensive income. This is expected to be within 12 months of the end of the financial year in respect of
the forward currency contracts taken out as at 28 March 2020.
No ineffective portion of the forward foreign exchange contract was recognised in the consolidated statement of comprehensive
income in the period.
The effects of the cash flow forward foreign exchange contract hedging relationships are as follows as at 28 March:
All figures in £’000
Carrying amount of the derivatives
Change in fair value of the designated hedging instrument
Change in fair value of the designated hedged item
Notional amount
Maturity date
2020
234
234
(234 )
6,279
15/03/21
2019
-
-
-
-
-
Net investment in a foreign operation
The Group manages the risk that changes in exchange rates have on its net investment in foreign operations using loans
payable in the same currency as the functional currency of its foreign operations.
At the inception of the hedge the hedging ratio between the overseas assets and the foreign currency loan is a ratio of 1:1.
For the years ended 28 March 2020 and 30 March 2019 there were no significant amounts recognised in profit or loss
relating to the ineffective portion of hedges or portions excluded from the assessment of hedge effectiveness.
Gains and losses that relate to designated and effective hedging instruments is recognised in other comprehensive income
and tracked separately.
At 28 March 2020, the foreign operations were denominated in USD.
All figures in £’000
Carrying amount of the loan payable
Change in fair value of the designated hedging instrument
Change in fair value of the designated hedged item
Notional amount
Maturity date
2020
607
2,271
(2,110 )
3,237
2019
(2,878 )
(213 )
119
3,070
22/12/21
22/12/21
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:
All figures in £’000
Defined contribution schemes
Personal Pension contributions
2020
832
31
2019
663
36
Other pension costs totalled £962,000 (2019: £976,000) and represent life assurance charges, 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.
The most recent actuarial valuations of the Staff Scheme and the Works Scheme were undertaken in April 2016 by qualified independent actuaries.
The major assumptions used by the actuary for each scheme were as noted below. The expected return on plan assets is calculated by using a
weighted average across each category of asset:
All figures in %
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
2020
2019
2020
1.80
2.55
1.40
2.50
3.45
1.55
2.15
3.15
1.75
2.45
3.65
1.80
1.75
2.50
1.40
2.55
3.15
1.50
2019
2.15
3.15
1.75
2.45
3.25
1.80
The mortality assumptions have been set in line with the best-estimate results of the Medically Underwritten Mortality study carried out
as part of the ongoing 2019 actuarial valuation. In respect of mortality for the Works members the assumptions adopted at 28 March 2020
are 142% of the SAPS “S3” series table, with future improvements in line with the CMI core 2019 projection model with long-term trend
improvements of 1.25% pa. For the Staff members the SAPS “S3” series table with a 142% rating has been used, with future improvements
in line with the CMI core 2019 projection model with long term trend improvements of 1.25% pa.
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 3.7% for the staff scheme and 4.4% for the works scheme.
Pension payments are not expected to peak until 2040, and expected to continue until 2080.
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
The amounts recognised in the Statement of Financial Position (“SFP”) are determined as follows:
Analysis of the movement in the Statement of Financial Position liability
All figures in £’000
2020
2019
2018
2017
2016
All figures in £’000
(121,470 )
113,968
(132,646 )
109,998
(126,079 )
106,607
(128,026 )
105,832
(104,924 )
94,271
(22,648 )
(19,472 )
(22,194 )
(10,653 )
-
-
-
-
At 30 March 2019 / 31 March 2018
Total expense as above
Contributions paid
Actuarial gains / (losses) recognised in Other Comprehensive Income
(22,648 )
(19,472 )
(22,194 )
(10,653 )
At 28 March 2020 / 30 March 2019
Defined benefit obligation (DBO)
Fair value of assets (FVA)
Deficit
Effect of limit on recoverable surplus
Net liability recognised in the SFP
Staff Scheme
Works Scheme
Deficit
Effect of limit on recoverable surplus
Net liability recognised in the SFP
(7,502 )
(1,880 )
(9,382 )
1,880
(9,382 )
(7,502 )
(1,880 )
(9,382 )
(7,664 )
(14,984 )
(6,408 )
(13,064 )
(7,405 )
(14,789 )
(2,813 )
(7,840 )
(22,648 )
(19,472 )
(22,194 )
(10,653 )
-
-
-
-
(22,648 )
(19,472 )
(22,194 )
(10,653 )
2020
2019
(22,648 )
(19,472 )
(1,732 )
1,941
13,057
(1,955 )
2,037
(3,258 )
(9,382 )
(22,648 )
The Covid-19 pandemic created an unusual time in the markets at the March year end and the increased yields available on corporate bonds
at the time drove down liabilities and, together with the lower expected future inflation, has caused the greatest part of the improvement
we see across both schemes. It is highly probable that a surplus on the staff scheme would not have arisen without the impact Covid-19
has had on the year end position. In view of this, the Company has not recognised the surplus on the staff scheme at 28 March 2020.
The key risks relating to the pension schemes can be found in the Pension Report on pages 18 to 20.
The fair value of the plan assets comprises the following categories of asset in the stated proportions:
All figures in %
Managed Growth
Annuities
Cash
Matching Assets
Staff Scheme
Works Scheme
2020
66.4
2.6
1.3
29.7
2019
63.5
3.6
0.4
32.5
2020
71.8
-
1.4
26.8
2019
71.1
-
0.3
28.6
The pension plan assets do not include any investments in the shares of the Company (2019: 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:
All figures in £’000
2020
2019
Total included within employee benefit costs - current service costs, past service costs and administration costs
1,188
1,423
Interest income on plan assets
Interest cost on the defined benefit obligation
Total included within interest
Total
(2,679 )
3,223
544
1,732
(2,959 )
3,491
532
1,955
The actual return on plan assets was £5,372,000 (2019: £5,462,000). The Company expects to pay £416,000 (2019: £617,000) in contributions
to the Staff Scheme and £1,463,000 (2019: £1,324,000) 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 £1.46m 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 actuarial losses recognised in the Statement of Comprehensive Income, since the adoption of IAS 19, are
£8,175,000 (2019: £21,232,000).
All figures in £’000
Works Scheme
2020
Assets
2020
DBO
Staff Scheme
2020
Assets
2020
DBO
Works Scheme
2019
Assets
2019
DBO
Staff Scheme
2019
Assets
2019
DBO
At 30 March 2019 / 31 March 2018
57,009
(71,993 )
52,989
(60,653 )
54,455
(67,519 )
52,152
(58,560 )
Interest Income on plan assets
1,398
-
1,281
-
1,523
-
1,436
-
Current service costs
Benefits paid
(109 )
(753 )
(26 )
(300 )
(152 )
(748 )
(35 )
(355 )
(1,541 )
1,541
(2,108 )
2,108
(1,867 )
1,867
(2,545 )
2,545
Contributions by plan participants
319
(319 )
Employer contributions
Interest cost on the DBO
Past service costs
Return on plan assets
1,324
-
-
(1,758 )
-
-
122
617
(122 )
335
(335 )
-
1,388
-
-
-
(1,465 )
-
-
-
(1,880 )
(72 )
156
649
-
-
(156 )
-
(1,611 )
61
2,056
3,444
637
8,800
1,327
(3,306 )
1,176
(2,455 )
At 28 March 2020 / 30 March 2019
60,456
(69,838 )
53,512
(51,632 )
57,009
(71,993 )
52,989
(60,653 )
Experience adjustments
All figures in £’000
Arising on plan assets
Percentage of scheme assets
Arising on plan liabilities
2020
2,693
2.36 %
12,244
2019
2,503
2.28 %
(5,761 )
2018
(1,161 )
(1.09 %)
3,754
2017
9,505
2016
(624 )
8.98 %
(0.66 %)
(21,383 )
7,178
Percentage of scheme liabilities
10.08 %
(4.34 %)
2.98 %
(16.70 %)
6.84 %
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
Deferred tax liabilities
All figures in £’000
At 31 March 2018
Adjustments in respect of prior years
(Charge)/Credit to income statement
At 30 March 2019
Adjustment on initial application of IFRS 16
Charge to income statement
Group
Accelerated capital
allowances
Company
Accelerated capital
allowances
Total
(1,773 )
(6 )
(33 )
(1,812 )
-
(401 )
(1,773 )
(6 )
(33 )
(1,812 )
-
(401 )
(106 )
-
2
(104 )
(5 )
(5 )
(114 )
Total
(106 )
-
2
(104 )
(5 )
(5 )
(114 )
At 28 March 2020
(2,213 )
(2,213 )
21 Share capital
Group and Company
Issued and fully paid
At 28 March 2020 and 30 March 2019
Potential issue of ordinary shares
Number of ordinary shares
£’000
9,554,803
2,389
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 52,163 ordinary shares of 25p by August 2022 (2019: 62,730 ordinary shares of 25p by August
2021). There were no share options exercised in the period (2019: 38,684). Further information on directors share options can be seen in
the Remuneration Committee Report.
Options at 30 Options granted Options exercised
in the period
in the period
March 2019
Options not Options lapsed
Options at
expected to vest
in the period March 2020
Share options
62,730
52,982
nil
(33,976 )
(29,573 )
52,163
The amount of gains made by Directors on no share options exercised in the year totalled £nil (2019: 38,684 share options with gains
of £638,286). The Statement of Comprehensive Income includes LTIP credits of £255,885 for the year in relation to Directors
(2019: £21,473 charge).
Sensitivity analyses
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.
Current assumption
Sensitivity
£’000
Effect on DBO
Staff Scheme
Discount rate
Price inflation
2.50%pa
2.55%pa (RPI)
1.80%pa (CPI)
0.25% decrease
£1,919
0.25% increase
£540
Mortality
142% of SAPS “S3” series table
Increase in life expectancy of 1 year
£2,505
Works Scheme
Current assumption
Sensitivity
£’000
Effect on DBO
Discount rate
Price inflation
2.55%pa
2.50%pa (RPI)
1.75%pa (CPI)
0.25% decrease
£3,107
0.25% increase
£712
Mortality
142% of SAPS “S3” series table
Increase in life expectancy of 1 year
£3,174
+4.4%
+1.0%
+4.5%
20 Deferred taxation
The movement on the deferred tax account is shown below:
All figures in £’000
At 30 March 2019 / 31 March 2018
(Charge)/credit to other comprehensive income
Charge to equity
Adjustments in respect of prior years
(Charge)/credit to income statement
At 28 March 2020 / 30 March 2019
Group
2020
2,234
(2,481 )
(125 )
-
80
(292 )
Group
2019
2,053
554
(234 )
(43 )
(96 )
2,234
Company
2020
Company
2019
Deferred tax assets have been recognised in respect of all temporary differences giving rise to deferred tax assets because it is
probable that these assets will be recovered. No deferred tax is recognised on the un-remitted earnings of overseas subsidiaries.
Deferred tax assets
Group
Company
All figures in £’000
At 31 March 2018
Adjustments in respect of prior years
(Charge)/Credit to income statement
Charge to equity
Credit to other comprehensive income
At 30 March 2019
Credit/(charge) to income statement
Charge to equity
Charge to other comprehensive income
At 28 March 2020
Share
Pension options Other
Total
Share
Pension options Other
3,310
-
(14 )
-
554
3,850
413
318
34
(81 )
(234 )
-
37
111
-
(125 )
(2,481 )
1,782
-
23
198
(71 )
32
-
-
159
(43 )
-
-
3,826
3,310
(37 )
(63 )
(234 )
554
-
(14 )
-
554
4,046
3,850
481
(125 )
413
-
(125 )
(2,481 )
(2,481 )
127
(72 )
1
-
-
56
73
-
-
116
1,921
1,782
129
1,934
3,840
(2,481 )
(125 )
(5 )
591
1,820
318
34
(81 )
(234 )
-
37
111
-
23
+3.7%
+1.0%
+4.9%
3,649
554
(234 )
(37 )
(92 )
3,840
Total
3,755
(38 )
(94 )
(234 )
554
3,943
597
(125 )
(2,481 )
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
22 Employees and directors
Staff costs during the period
All figures in £’000
Wages and salaries
Social Security costs
Pension costs (note 19)
Group
2020
25,567
2,325
2,496
30,388
Group
2019
23,340
2,314
2,529
28,183
Company
2020
Company
2019
4,284
407
898
5,589
3,086
477
1,065
4,628
The average monthly number of people (including executive directors) employed in the Group during the year, analysed by division was
as follows:
All figures in Number
James Cropper Paper Products
James Cropper 3D Products
Technical Fibre Products
James Cropper PLC
23 Capital commitments
All figures in £’000
Contracts placed for future capital expenditure
not provided in the financial statements
Full Time Equivalent
Headcount
2020
2019
2020
381
26
112
65
584
371
20
104
63
558
391
27
117
91
626
2019
377
21
107
84
589
Group
2020
4,172
Group
2019
1,134
Company
2020
Company
2019
119
319
Capital commitments include contracts placed by TFP totalling £1.7m for the extension of the factory and the new line 4.
Capital commitments include contracts placed by Paper totalling £1.9m for new embosser / varnisher equipment.
24 Contingencies and post balance sheet events
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.
At the date of authorisation of these financial statements, the impact of the Covid-19 pandemic is ongoing.
For further details, please refer to the Chief Executives Review (pages 08 to 12) and the Chief Financial Officer’s Review (pages 13 to 17).
25 Related party transactions
Group
The Group has taken advantage of the exemption not to disclose intra-group transactions that are eliminated on consolidation.
Company
The Company paid £40,000 (2019: £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 £240 (2019: £6,597) 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 £16,416
(2019: £13,651) to Ellergreen Estate (trading name of the J A Cropper (1989) Settlement), a trust of which M A J Cropper is a beneficiary,
for imports of electricity from the hydro-electric plant owned and operated by the Trust. The company has rented the roof space of one of
the buildings to Burneside Community Energy Ltd, who have installed solar panels. The company is importing the electricity generated
by the solar panels and paid £11,962 (2019: £15,834) 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:
2020
All figures in £’000
James Cropper Speciality Papers Limited
James Cropper Converting Limited
James Cropper 3D Products Limited
Technical Fibre Products Limited
James Cropper Overseas Trading Limited
2019
All figures in £’000
James Cropper Speciality Papers Limited
James Cropper Converting Limited
James Cropper 3D Products Limited
Technical Fibre Products Limited
James Cropper Overseas Trading Limited
Management
charges
Receivable /
(Payable )
Loans and net
intercompany
funding
5,647
-
429
1,569
-
7,645
617
62
(11 )
(8 )
29
690
(5,027 )
9,429
9,981
17,838
-
32,220
Management
charges
Receivable /
(Payable )
Loans and net
intercompany
funding
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
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 57).
All figures in £’000
Salaries and fees
Short term employee benefits
Short term bonuses
Pension costs
Shared based payments
Total
2020
1,164
161
200
71
-
2019
1,201
142
56
76
638
1,596
2,113
The accompanying notes form part of the financial statements
The accompanying notes form part of the financial statements
108
109
2019 – 2020 Shareholder Information
Reporting
Interim Results announced and sent to
Ordinary Shareholders
Final results announced
Notification of AGM issued by
19 November 2019
23 June 2020
7 July 2020
Annual General Meeting - at TFP offices, Burneside Mills, Kendal, Wednesday 29 July 2020 at 11.00am.
Dividends on Ordinary Shares
Interim dividend paid on 10 January 2020 to Ordinary Shareholders registered on 29 November 2019.
No final dividend proposed.
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 722 022
Email. info@cropper.com
Burneside Mills
Kendal, Cumbria LA9 6PZ
Great Britain
www.jamescropper.com
Company Registration No: 30226
110
Annual Report Production
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