James Cropper (LSE:CRPR) — Results for the year ended 28 March 2026

0:00 Good morning, and welcome to the James Cropper PLC investor presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and could be submitted at any time via the Q and A tab situated on the right hand corner of your screen. Simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company can review all questions submitted today and publish responses where it's appropriate to do so. Before we begin, I'd like to submit the following poll. I'd now like to hand you hand you over to David Sterling, CEO. Good morning, sir. Good morning. Thank you very much. I'm joined here by Andy Goody, our CFO on the other screen to present to you the results for our year end 2026. So quick introduction to James Cropper PLC.

0:56 We have two divisions. The the business started off as a paper maker and paper packaging is still a large business. About two thirds of the turnover comes from the paper packaging business. And we supply very many markets globally, UK, Europe, North America, some markets in Asia, and best known for color papers and the the the quality of our products in a range of markets including craft papers, graphics, specialty packaging, etcetera. The other part of the business is advanced materials. Most of that business, we create paper like materials from other raw materials like carbon fiber, polymer, glass, etcetera.

1:54 And these are used in a very wide variety of mainly industrial applications, but also including things like sports and leisure. The range includes things like galat things like medical, aircraft, defense, construction, etcetera. So and we also have a metal coatings business that primarily supplies into the hydrogen business. So with that brief introduction, let me talk about the results quickly. I joined in early two thousand twenty five, so this is my first full year as chief exec. And it's been a pretty decent year.

2:40 When I joined, we set some key objectives. The first one was to improve performance in paper division, which has been the last four or five years losing money. And second objective was to get growth in advanced materials. And the third one was to improve our financial position and balance sheet. And Annie will talk about that as we go through. The results of the financial year, we saw about 4% increase in turnover. That came predominantly from advanced materials, which grew 11%. We saw a 33% increase in EBITDA.

3:26 That's a preferred metric for profit. It's a core metric here. And that 33% included a profit upgrade at late in the year. We've got some adjusted profit metrics there, but again, showing the same picture, a very strong improvement in the profitability of the business. Our net debt reduced by almost 5,000,000 and is now sitting at a pretty comfortable below 1% at one one times EBITDA. So I I generally have very good performance in the period. If we talk about the group, you know, what what did we do and how did we do it? As I said, transfer materials is about one third of the business, paper and packaging about two thirds.

4:14 And when we look at the performance, really, it's about op be being a good operator. The advanced materials business actually operationally was pretty well run. We just weren't weren't seeing top line growth, but good margins in there and, you know, the the challenge is to make sure that that growth continues. And in the paper and packaging and group functions, it was really about getting the business right sized and becoming operationally efficient. So that's something that has been a big focus for us this year. When we talk about the paper business, the minute use I'll I'll I'll give you some feeling for the progress being made there. Advanced materials first.

5:04 So our turnover increased by 11%. We are selling almost 40,000,000 sales in the year and the growth came predominantly from our hydrogen coatings business. That's one of our largest customers there. Had a very, very good year And the rest of the business, actually, a few pluses and a few minuses, but generally, operationally performed well, but we didn't really move forward as fast as we wanted to on the commercial side. So that's something to address at the moment. The divisional profitability increased from 10,600,000 to 11,400,000.

5:51 So that's a good increase in in EBITDA, and we did invest additional money in the year in sales marketing, r and d to look for areas for for future growth to support those future growth initiatives. So the the drop through on from revenue down to earnings wasn't quite as strong as it could have been, but that was a deliberate action by management to put oomph behind our commercial ambition. If we look at the sectors that we operate in, you can see a fairly wide range of sectors here. I would really categorize the business into two main sectors.

6:42 One are are nascent markets. Those markets are are such as carbon capture, the hydrogen economy, battery fuel cell, etcetera, are really just getting started. Bathroom is obviously a bit more advanced, but the other ones, you know, they're very small compared to people's expectations of what they could be in the future. There's a lot of people jostling proposition. There's a lot of technology development in there. And so, you know, they are they they do offer opportunities for really good growth, but they're also much more risky. I think it's a really interesting part of our portfolio, but very difficult to predict where they're going and obviously the risk of technological change coming.

7:28 So we're we're very active there. We're happily active there, But it's a very different feel from from the rest of the business. And the rest of the business primarily are fairly well established markets. Things like aerospace, medical, etcetera. Got decent growth rates in the markets, but we're actually more about, you know, specific projects, specific customers, etcetera. So trying to improve our our sales in a very targeted way. James Crawford are a very small player in these big markets. So, you know, the what happens in the market is less important than what happens on on the project, if you like. And if we think about our growth opportunities, you know, again, I would probably think about these two different area or two two two different kind of opportunity sets.

8:23 The first things like aviation, defense, medical, etcetera, they tend to be quite highly regulated. Lead times are long. You know, we're working on projects right now in aviation that could be, you know, active in 2035 and beyond. So most aren't as long as that, but it's very difficult to move the needle in the short term. So happily active, happily supporting those those projects and customers, but unlikely to move the dial in the next, you know, few years. There are other markets such as consumer, electronics, sports and leisure, construction, etcetera, where the development cycles are shorter and the life cycles are shorter.

9:12 And so we can probably get more short term benefit for focusing on those markets in terms of turnover. And I think we've gotta get the balance right, you know. It's almost great having lots of long term, you know, potentially big projects, but we need to make sure the pipeline is moving forward and delivering revenue in the short term as well. So that's that's kind of what we're doing in advanced materials. If we look at paper packaging, it's about two thirds of the James Crawford Group. Revenue in the year was about the same as last year. Our profit, again on the EBITDA metric, we lost about 500,000.

10:01 But during the year, we started with a first half loss of of 700,000 and a second half profit of 0.2. So we're improving through the year, and that's a vast improvement on the 2,100,000 we lost last year. And that momentum is continuing into into 2027 year end. So for a very strong start paper and the profitability picture is improving pretty rapidly for the in that business. And the reason it's improving that rapidly is got two two things. One is that we have managed our cost base.

10:47 So, you know, we have fewer people in the business. We have fewer overheads. We are running the factory five days a week rather than seven days a week, which allows us to save energy two days a week. And we have rebalanced the mill in in the sense of if we're making product that creates scrap, we've got other products that can use that scrap. And so we become overall a lot more efficient, and and that properly balanced paper mill concept is a big factor in how we plan to grow and go forward with paper business. If we look at the the markets that we're in, you can see here, you know, a wide range of markets.

11:40 I think we are particularly active in some of them, but they're all important. One of the things that happened in 2026 was that a a very large customer in fact, the largest customer that we have or we had in the business decided to source paper from another mill, and that was after a fifty year cooperation with them. Unfortunately, that meant that our revenue, you know, of that customer it was about 13,000,000 in a normal year. We had one quarter of it last year, so about 3,000,000. And that gave us a kind of 10,000,000 gap in revenue, which is a big number to make up.

12:26 Very pleased to say that's what we did. We we we gained some of that business back through partnering with something called Winfantco with a long standing long standing customer in other other areas that tend to be, you know, paper merchant in in in the kraft paper market. And going direct to some end users there was was successful to an extent, but actually, the rest of the growth was made up by other markets that we were already starting to target. So you can see how how successful we were in getting some of the other business come through the door. And, you know, we have got a bit of a headwind in the first quarter this year from the the 3,000,000 we sold last year.

13:18 But actually, we're already ahead of where we were last year in the first quarter in the paper businesses. As I said, very, strong strong improvement. And getting that commercial engine going, getting the operational efficiencies in place is really transforming a business that struggled in recent years. So with that, I'm gonna trans I will transfer you across to Andy, who talks through the financials in a bit more detail. Thank you, David. Good morning, everybody. So financial highlights on here, and David's touched on the key elements of this already, and we'll look at some of the detail in a moment. But the key, points to highlight on here are the 33% increase in adjusted EBITDA, which as David mentioned is our key profit metric, and also a €5,000,000 nearly €5,000,000 reduction in net debt, both critical objectives for us through the year that ended in March 26.

14:20 I'm pleased to say that we outperformed expectations in both areas. So just looking at in a bit more detail at revenue. Our Advanced Materials business grew its revenue by 10% when we adjust for the effect of changes in currency. We sell fair amount overseas in that business, which is a strong performance. As David mentioned, that level of growth was heavily reliant on the performance of a single customer in the hydrogen coating sector. So we benefited significantly from that. Elsewhere, we saw some ups and some downs, but strong revenue growth across the year as a whole. In terms of paper and packaging business, the story there around revenue is really the one that David just mentioned. We lost a significant customer early in the period, but the team in that business did a fantastic job to grow revenue with everybody else, including some some new customer wins in the year by around 20% that fully made up for the loss of that customer that David mentioned. So across the year as a whole, revenue was broadly in line with the same periods last year.

15:34 In terms of our EBITDA profit, EBITDA was up 2,200,000 or 33% across the year, driven by two big things really. One was the level of revenue growth in the Advanced Materials business and the other was the significant improvement in the profitability of the paper business. Ortho has outlined a significant drop in the EBITDA loss that business made to 500,000 for the year. But by the second half, six months to March 2026, that business made a small EBITDA profit. So major step forward in that business, and that was driven, as David mentioned, by becoming more efficient in the way we use our materials and energy and some savings in people costs as well.

16:22 So a significant step forward in profitability in the paper business. Revenue growth in Advanced Materials resulted in EBITDA comfortably ahead of last year and indeed ahead of our expectations and the market expectations. In terms of net debt, the green bar on here is showing you the gross debt in the business and the black bar the net debt. So that's the debt less the amount of cash we have on our balance sheet. And you can see that that peaked about three years ago and it's been dropping significantly since then. And the red line shows the ratio of our net debt to our EBITDA profit, which is a really important measure of financial health, financial resilience.

17:10 And we've seen a significant drop in that ratio over the last two years to slightly under one times. That was achieved over the last twelve months when we saw a drop in net debt by 5,000,000 that was achieved by the EBITDA performance itself, which generated a significant amount of cash. We were disciplined in terms of capital expenditure and working capital management. That helped as well. We also benefited from collecting out some of the tax amounts that we wrote. We've completed that process now. And we sold some noncore intellectual property assets or one particular asset early in the year for about GBP 1,500,000.

17:57 So a number of activities, some one offs, some disciplined cash management, which really is business as usual for us now as a business, helped us bring net debt down significantly during the year to a point where our debt position is healthy, our balance sheet is resilient. This is the balance sheet here. I've touched on this already. But in terms of the resilience and the strengthening of the balance sheet that we've seen over the last twelve months, our net assets have gone up by 4,000,000, our net debt has gone down by 5,000,000, and our pension deficit in terms of the accounting measurement has dropped by around million. So some really significant improvements in terms of balance sheet health, balance sheet strength.

18:45 This is the cash flow. And again, as I've mentioned, at the heart of this is a strong performance in terms of trading. We manage working capital and capital expenditure well as a business, and so we were comfortably able to meet our obligations to our debt funders and to the pension fund and still see a significant improvement in the overall cash and debt position of the business over the course of the year. In terms of our pension schemes, we have two pension schemes that had a combined deficit at the end of March twenty twenty six of fourteen million pounds. So it's quite a big number for us as a business. The deficit has dropped. As you see on the black bars on the chart, the deficit has dropped over the last two years.

19:38 During the year, we also had our triennial actuarial valuation, which is the critical valuation that looks at the health of the scheme and assesses where we are in terms of the conversations we need to have with the scheme trustee. That improved by about £4,500,000 in the year. So whichever measure we look at, the position is improving and we've agreed a level of repayments into the scheme with the pension trustee to ensure that the scheme is fully funded and as part of our commitment to our pensioners. So this this is improving this position. It probably we're probably seven to eight years away from this being back into balance, but we have a plan to to deal with that. The deficit is going down. It's getting more manageable as our balance sheet position strengthens.

20:30 And so that's where we are in terms of managing this important obligation of the business. A couple of weeks ago, we completed and announced a refinancing of our debt package in the business. Again, a major step forward for us as a business. It was possible to do this now because the significant improvement that we've seen in the debt levels in the business and the strong trading, which meant that our existing banks were very keen to support us in what we did. And in summary, what we did was we have borrowed some money or put in place a facility with the banks that is secured on our receivable or our debtors' ledgers in our UK businesses and that allows us to borrow money as and when we need it and that enabled us to pay off about 7 and a bit million pounds on our largest term debt in the business, and that achieved a number of really important benefits for us as a business.

21:34 It's reduced the scheduled debt repayments that are coming up over the next four years by about £7,000,000. And for us, that is really important. It's the difference between having debt repayments that could have been challenging in terms of all the other things that we want to do as a business and having debt repayments that are eminently manageable in terms of our underlying cash generation and balance sheet position. So that's really important to have got to that point. The other thing that this refinancing does is gives us access to more liquidity, more cash availability as and when we need it. It provides the ability to borrow more money as the business grows if we need to fund additional working capital spend as the business grows. And it also is gonna reduce our interest cost by around £250,000 compared to what it otherwise would have been.

22:25 So so so lots of big benefits to this, and, this, puts in place the right medium term funding structure for us as a business, and in a sense, completes the work we've done over the last two years to to put in place, a resilient balance sheet, that is able to deliver, and support what we wanna do, as a business. So that's the key, financial highlights. I'll hand back to David, who'll give you a quick update on current trading and outlook for the business. Yeah. Thanks, Andy. Very comprehensive presentation. So where are we right now? Well, you know, just to remind you, we have had a good year in '26. We are significantly stronger than we were last year.

23:13 And, you know, we have actually overcome quite a few challenges. The first half of the the start of this financial year, we've actually started really as as with good momentum coming through from the back end of last year, particularly in the paper business. And so, you know, we are expecting further growth in profit this year. And, you know, I I think if we look at the analyst notes, we can see that that's confidence is shared. The outlook is is unchanged. We probably got an advanced materials more of a challenge this year. Particularly, our hydrogen coatings business did really well last year and that's likely to be a bit less this year just with some normal timing variation there.

24:07 And we haven't quite got the pipeline moving in the rest of the business to to to cover that in advanced materials in the short term. Let's see. We, you know, it's early in the year and we're working hard on it. But I would think that the growth in the year will come more from momentum in the paper business and that'll be a strong contributor to overall group group profit profit growth this year. There's a lot to do still, but that's that's good. It gives us a chance to improve and improve. And that focus and discipline is now beginning to show through in the business and I'm confident that we are in a position to create long term value for the shareholder group. So with that, I will stop the the formal presentation.

24:57 If you have any questions, please put them in the in the question bar. We have a few questions come through already, so I'll turn to them and give you a chance to think of your your question or based on what you said this morning. So first question is regarding James Crawford's involvement in the defense industry and specifically references the f 35 programs. This is a question that's come up every time I've presented, to be honest, in every AGM, and we have a very comprehensive statement on our website in relation to that program and defense in general. So we see defense as a core part of James Crawford's future.

25:46 We firmly believe in people's right to defend themselves and that the statement says he gives a very comprehensive view on that, and there has been no change in that position. So I would refer you to that statement, please. The second question is asking about the leadership in advanced materials division. Have recently had a few people leave us on in the leadership and commercial team that will give us an opportunity to, you know, basically, change the approach a little bit and the execution of that business. In the short term, I am sitting in that chair, so I'm managing the advanced materials division and the response from the executive team has been very good.

26:39 So we are currently recruiting for someone in that position. And I've got, I guess, a follow on question which is slightly related talking about the pipeline in the business. It doesn't specify whether it's advanced materials or paper, so let me cover both Paper first, we currently run two paper machines five days a week. We have three machines, and we've run any two from three because we have some bottlenecks earlier in the process in the pulping side. So we are putting in a new pulper and and that should allow us to run three paper machines simultaneously late this year or early next year.

27:31 We have a good, you know, pipeline of growth lined up for that. And I think you just gotta manage the timing of that those projects and those new businesses coming on there in that timing of our execution. And with any if we are working, you know, the the key is not to overload the system on day one, but to create to make sure you've got ability to react and iron out any in difficulties as you scale up. So I think in paper, we feel quite for the the the we're doing there. Advanced materials, we actually have a pipeline which is, you know, less robust than than we would like and a bit more focused on long term project than we would like. So I think there are some quite interesting things in the short term, but they're kind of binary.

28:25 So if if one or two of those come off, we should see, you know, good pretty good performance in the business. If they don't come off or if they're postponed, then it's gonna be more of a struggle over the the the near term. But a medium term, actually, I think we've got enough in that pipeline to to, you know, convince ourselves that we have a confident future in advanced materials. So as I said earlier, it's about focusing on some of the things like construction, sports and leisure, perhaps consumer electronics that would give us more of a boost. And, you know, we have capacity there. Again, we have invested in the past and not grown.

29:13 So the capacity is in advanced materials and right across the business, we could see significant growth without recourse to very much capital spend at all. So that's a that that's an opportunity there to be taken. I will just mention in in advanced materials, we recently launched a product called UniMat, which allows us to deal with very short carbon or or other fibers, which are typically a result of recycling. When you recycle fibers, you you chop, you know, recycle and you put chop it up, fibers get shorter. And this is a way to create a nonwoven product with substantial alignment of the fibers, which is something that allows composite designers to, you know, actually design in particular flex or strength attributes to the product in in a very controlled way. And it's normally associated with very long continuous sort of of unidirectional tapes.

30:24 So not suitable for recycled parts at all. And this is, you know, when I was at a trade show, it was probably one of the only innovations that people are excited about in the recent conference trade show. So it's got, I think, a very bright future what could be trialing those products, but a little bit away from, you know, any commercial movement there. So, you know, positive for the medium term. Let's see how quickly we can get it get it moving. Right. Do we have any other questions? That's great. Thank you for answering all those questions you have from investors. And, of course, the company can review all questions submitted today, and we'll publish those responses on the Investor Meet company platform.

31:14 Just before redirecting investors to provide you with their feedback, which I know is particularly important for company, David, could I please just ask you for a few closing comments? Yeah. So thank you for your attention. If you're a long standing shareholder, thank you for your patience. We are getting to grips with the challenges in the business. I think we're making good progress and, you know, we want to get back to being a dividend paying stock as well. So, you know, we're not quite there yet, but, you know, as Andy explained, we have tidied up our our balance sheet with a much stronger financial position than we were before. So, you know, keep the faith, watch this space, and we'll speak to you soon. Thank you very much. That's great. Thank you for updating investors today. Now please ask investors not to close the session as you'll now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations.

32:09 This may take a few moments to complete, and I'm sure will be greatly valued by the company. On behalf of the management team, we'd like to thank you for attending today's presentation, and good morning to you all.