James Cropper flags hit to cash through 2021 financial year
James Cropper updated the market on the expected outturn for the year ended 28 March on Friday, as well as its expectations for trading during the current year., saying that it produced a “strong performance” in the 2020 financial year with positive growth in both revenue and profits.
The AIM-traded firm said market penetration and expansion was achieved across its divisions, adding that adjusted pre-tax profits, excluding the impact of IAS 19, were expected to be “well ahead” of market expectations for that period, and in excess of £6m.
James Cropper said that, during the current Covid-19 coronavirus pandemic, its priorities were the health and wellbeing of its employees, supporting its customers and managing its cash resources.
While the company was on track to continue growing, the impact from the pandemic would have a negative effect on product demand in each of its divisions, the board said.
Technical fibre products were likely to see a downturn as a result of a decline in the aerospace market, the board said, although growth was continuing in clean technology markets such as fuel cell and wind energy.
As a result, the firm said it expected demand would not be “so significantly affected”.
James Cropper Paper was likely to be the most affected of the divisions in the short term, as end markets had been directly impacted by lockdowns.
As a niche speciality provider, the board said it expected demand and growth to return to normal levels after markets settle post-pandemic.
Despite the impact from Covid-19, the directors said they still expected Colourform to grow year-on-year, but not to the levels previously anticipated.
“Given the high levels of uncertainty, we are not reasonably able to forecast the impact on our operations and financial performance for the current fiscal year,” the board said.
“The environment is subject to rapid change.”
At the moment, James Cropper said it was expecting to incur a large, loss-making negative impact the first quarter to June 2020.
“During this period, the company is making use of the government's Coronavirus Job Retention Scheme to furlough more than 50% of staff in the UK operations.”
In the next two quarters to December 2020, it was anticipating still to see a negative effect and to continue to be loss-making, although with some recovery evident.
For the final quarter to March 2021, it was looking at progressive recovery towards a more normalised situation, with the board anticipating being back in profitability.
“We continue to monitor new information as it becomes available and progress our planning accordingly.”
James Cropper said it was now in an 18-to-24 month recovery period.
“The company expects a hit to cash during 2020-2021 over the period of the Covid-19 pandemic and as we return to more normal trading conditions.
“We have acted promptly to conserve cash and to implement immediate savings to shore up reserves, including announcing that the board has decided not to pay a final dividend in respect of the year ending 28 March 2020.”
The company said it had liquidity of more than £12m, including cash and available overdraft facilities, which when taking into account the cash management actions being implemented was expected to be sufficient to weather the crisis, and the return to more normal trading conditions.
“The board, nevertheless, is also considering the funding of its capital expenditure plans post the Covid-19 crisis, which support the future growth of the business.
“Accordingly, it is in the early stages of discussions with its bank debt providers on potential future facilities.”
At 1538 BST, shares in James Cropper were down 6.56% at 855p.