James Cropper suffers loss as pandemic impacts

Richard Stuart-Turner
Tuesday, November 10, 2020

Cumbrian papermaker James Cropper suffered a loss and a steep fall in revenue in the first half of the financial year due to the effects of the coronavirus pandemic but said it is now seeing signs of recovery across all divisions.

James Cropper: sales at its paper division were down 45%
James Cropper: sales at its paper division were down 45%

For the half-year period to 26 September 2020, the business reported a pre-tax loss of £1.2m. In the equivalent period a year earlier it had achieved a profit of £2.83m. The decline comes after the business had announced a pre-tax profit of £6.67m for the full-year ended 28 March 2020.

The group's revenue in the six-month period fell by 36% year-on-year to £34m.

The company's net borrowings, however, were reduced from £15.3m to £5.2m.

Prior to the pandemic the group had developed restructuring plans to drive its growth and competitiveness. It accelerated these after the pandemic began in order to reduce costs, optimise cashflow and protect liquidity. Net restructuring costs of £200,000 are projected for the year.

The business currently has liquidity of over £14m, including cash and available overdraft facilities, which it expects to be sufficient “to weather further lockdowns, the return to more normal trading conditions and a re-instatement of investment plans to support future growth”. To protect its liquidity it has not declared an interim dividend.

In recent weeks since the end of the H1 period, the group has also secured a £4m CLBIL (Coronavirus Large Business Interruption Loan), which it said brings additional cash security, if required, as it continues to face uncertainty due to the pandemic.

In a letter to shareholders, chairman Mark Cropper said: “The last six months have been a challenging period for the group, particularly for our employees, customers, suppliers, local communities and shareholders. The impact of the pandemic has been significant, but due to the actions taken at the onset, the group remains in a strong position.

“The group responded quickly to the challenges. Throughout the crisis we have managed our response under three headings: the health and wellbeing of our employees, supporting customers and reducing costs. The overall objective has been to emerge from the pandemic a stronger group.”

He said immediate actions had included working from home where possible while continuing to support its customer needs, cutting non-essential expenditure to reduce costs, and introducing enhanced safety measures to provide a Covid-19 secure environment for employees.

“The group took swift action to reduce costs and protect liquidity. This included the deferral of all discretionary spending, suspension of major capital expenditure, suspension of dividend payments, and seeking support from local authorities, government agencies and the banks.

“During the period, our customers, particularly in the paper division were globally impacted by Covid-19, leading to reduced demand and periods of inefficient or no production. This resulted in many employees being placed on furlough.

“In addition, payment of the bonuses earned from our record results last year have been deferred until the second half of the year. No bonuses or annual incremental pay increases will be implemented in the current year.”

By division, revenue in James Cropper's Paper division was down by 45% year-on-year from £38m to £20.9m, Technical Fibre Products (TFP) recorded revenue of £11.7m, down 13.7% from £13.6m a year earlier, and the group’s Colourform division recorded sales of £1.4m, up 16.5% on the £1.2m reported in the first half of 2019.

“The group has weathered the initial impact of the pandemic. All divisions in the business have been impacted to varying degrees with paper affected the most, TFP more resilient and Colourform continuing to grow,” said Cropper.

He added each division is seeing signs of recovery “with most markets trending back to normality”.

“The restructuring plans are nearing completion with a small net cost anticipated for the year but anticipated savings of £2m p.a. in future years.

“The restructuring has affected less than 10% of the workforce but will result in a leaner, stronger group. Capital investment was suspended during the first half of the year and is planned to resume in the second half.”

Cropper said the business is in an 18-24 month recovery period but plans to come out of the pandemic stronger and fitter, and that it is continuing its plans for growth.

James Cropper's share price was up by 5.05% to 998p at the time of writing, having temporarily dropped to 922p mid-morning.

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