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RPC Group PLC (RPC)

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Thursday 27 November, 2014

RPC Group PLC

Half Yearly Report

RNS Number : 1265Y
RPC Group PLC
27 November 2014
 



                          

 

27 November 2014

RPC GROUP PLC

 

Half year results for the six months ended 30 September 2014

 

 

RPC Group Plc, Europe's leading supplier of rigid plastic packaging, announces today its half year results for the six months ended 30 September 2014.

 






6 months to September 2014

6 months to September 2013

Change

Key Financial Highlights1




Revenue (£m)

588.9

524.7

12%

Adjusted EBITDA (£m)2,4

86.9

71.4

21.7%

Adjusted operating profit (£m)2,4

60.9

47.1

29.3%

Adjusted operating margin2,4

10.3%

9.0%


Adjusted profit before tax (£m)2,4

54.9

41.4

32.6%

Adjusted basic earnings per share3,4 

22.8p

19.1p

19.4%

RONOA2,4

24.1%

23.3%






Statutory




Profit before tax (£m)1

34.9

30.1


Net profit (£m)

20.2

6.0


Basic earnings per share1

13.3p

13.4p


Dividend per share

5.0p

4.5p

11%

 

1  For continuing operations only.

2 Adjusted EBITDA, operating profit and margin are before restructuring, impairment charges and other exceptional items, amortisation of acquired intangibles and pension administration expenses, and adjusted profit before tax is before non-underlying finance costs.

3 Adjusted basic earnings per share is adjusted operating profit after interest, excluding non-underlying finance costs, and tax adjustments, divided by the weighted average number of shares in issue during the period.

4 September 2013 restated for adjusted items where appropriate.

 

Key developments:

·          Good growth in profits, returns and dividends;

·          Vision 2020 strategy well progressed with the acquisition of Ace Corporation successfully completed in June 2014 and continued with the announcement of the expected acquisition of the Promens Group^;

·          Revenues grew 12% reflecting contribution from recent acquisitions and an increase in like-for-like sales of 4%;

·          Adjusted operating profit reached £60.9m (2013: £47.1m) and Adjusted basic EPS increased by 19% to 22.8p (2013: 19.1p) with a significant contribution from recent acquisitions;

·          Return on Sales improved to 10.3% and Return on Net Operating Assets (RONOA) at 24.1%;

·          Good cash generation with net cash flow from operating activities of £42.4m (2013: £51.1m);

·          'Fitter for the Future' business optimisation nearing completion with three non-core businesses disposed of in the period;

·           Interim dividend of 5.0p (2013: 4.5p).

 

^ Further details can be found in the separate announcement on the proposed acquisition of Promens Group AS issued

27 November 2014.

 

Commenting on the results, Pim Vervaat, Chief Executive, said:

"The performance in the first half year has been encouraging with good growth in selected areas, the progression of the Fitter for the Future programme and the contribution from recent successful acquisitions. The Vision 2020 Focused Growth Strategy is making good progress with the proposed acquisition of Promens providing an attractive opportunity to extend and consolidate the Group's leading market positions, creating shareholder value. The second half of the year has started satisfactorily and the Group remains well placed to benefit from an economic recovery in Europe."

 

For further information:

RPC Group Plc

01933 410064

FTI Consulting

020 3727 1340

Pim Vervaat, Chief Executive


Richard Mountain


Simon Kesterton, Group Finance Director

Nick Hasell


 

This interim announcement contains forward-looking statements, which have been made by the directors in good faith based on the information available to them up to the time of the approval of this report and such information should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying such forward-looking information.


 

Business Operations

 

RPC is a leading supplier of rigid plastic packaging with operations in 19 countries. The business, which comprises 50 manufacturing sites and seven sales centres, converts polymer granules into finished packaging product by a combination of moulding and assembly processes. It is organised around the three main conversion processes used within the Group, each site being managed within one of six clusters which are defined along technological and market lines.

 

Conversion process

Cluster

Markets

 

Injection Moulding

Superfos

Food, soups & sauces, margarine & spreads, paints, DIY products


Bramlage-Wiko

Personal care, pharmaceuticals, cosmetics, food, coffee capsules


UKIM

Food, soups & sauces, margarine & spreads, paints, DIY products, pharmaceuticals, promotional products


Ace

Mould manufacture; food, cosmetic & consumer packaging, and medical, life-style, power and automotive injection moulded technical components

Thermoforming

Bebo

 

Margarine & spreads, fresh, frozen and long shelf-life foods, coffee capsules, dairy market, vending & drinking cups

Blow Moulding

Blow Moulding

Personal care, lubricants, agrochemicals, food & drinks, long shelf-life foods

 

Each cluster operates across a wide geographical area for reasons of customer proximity, local market demand and manufacturing resource, with the Ace cluster based in China.

 

Strategy

 

The Group announced its Vision 2020 Focused Growth Strategy in 2013, of which there are three core elements:

 

·    continuing focused organic growth in selected areas of the packaging markets;

·    selective consolidation in the European packaging market through targeted acquisitions to strengthen and extend market positions; and

·    creating a meaningful presence outside Europe where growth rates in rigid plastic packaging are considerably higher.

 

The Group also identified further opportunities to optimise its existing asset base, resulting in the final phase of the Fitter for the Future business optimisation programme and the decision to sell its Cobelplast and Offenburg businesses.

 

The Group has made good progress in the period in implementing this strategy.

 

Continuing focused organic growth

 

The Group achieved further growth during the half year, with sales growing by 4% on a like-for-like basis supported by higher levels of investment in product and process innovation. Activity levels improved compared with the previous year with most of the growth experienced in the UK and USA, and sales volumes in mainland Europe generally flat. Sales in higher added value products accounted for a higher proportion of overall sales, which improved the overall profitability of the Group.

 

Selective consolidation in the European packaging market through targeted acquisitions

 

In 2013/14 the Group made two acquisitions in Europe. The Maynard & Harris (M&H Plastics) business, whose principal manufacturing site is based in Beccles, UK, and Helioplast, based in Bosnia-Herzegovina. Both have been successfully integrated within the Group and both have made a good contribution to the half year results.  M&H Plastics, with an annual turnover of around £80m and whose acquisition has consolidated the Group's leading personal care offering in the UK, fully realised its anticipated purchasing and working capital synergies during the period. Helioplast, albeit a smaller business, increased its sales by 41% over the same (pre-acquisition) period, benefiting from the opportunities provided by Superfos and supporting the cluster with a manufacturing and sales base to supply into the Balkans and the wider south eastern European region.

 

The Group continues to seek further acquisition opportunities in Europe and on 27 November 2014 RPC announced its proposed acquisition of Promens Group AS, a leading European manufacturer of rigid plastic products for a wide range of end markets, including plastic packaging for chemicals, personal and health care, food and beverage, and rigid plastic components for materials handling and commercial vehicles. With 40 production facilities spanning 20 countries, including sites in North America, Asia and North Africa, this will be a significant acquisition for the Group. It is also an excellent strategic development for RPC, extending the Group's reach and capabilities in Europe, strengthening its position across the enlarged Group's common packaging end markets and acquiring adjacent technologies in rotational moulding, reaction injection moulding and vacuum forming.

 

Creating a meaningful presence outside Europe

 

During the period the Group completed its major expansion programme at Morgantown, PA, USA providing additional capacity for growth in food packaging. In addition, further capital expenditure to support Superfos' growth in North America was made, alongside the expansion of M&H Plastic's facility at Winchester, VA as its successful UK business model is rolled out to the USA. Sales in the USA have grown significantly and now represent 5% of total Group sales, up from less than 3% in the same period last year.

 

On 2 June 2014 the Group completed the acquisition of Ace Corporation Holdings Limited ('Ace'), a China based and Hong Kong headquartered award-winning manufacturer of complex plastic injection moulded components and injection moulding tools for the packaging, lifestyle, medical, power and automotive end markets. Operating from five factories in China and with an annual turnover of circa  £104m, it provides RPC with a strong platform to support its international customer base with high quality packaging of European standards in Asia, as well as the opportunity to benefit from the high and sustained growth of this profitable niche manufacturer of injection moulded components and moulds. Ace operates as a separate cluster within the Group and good progress has been made in integrating the business and developing the growth opportunities. The strategic potential of the acquisition has been confirmed by both packaging and non-packaging customers. 

 

Fitter for the Future

 

The Group is nearing completion of the final phase of Fitter for the Future, its business improvement programme, which is focused on optimising its existing business portfolio and European manufacturing footprint whilst disposing of its non-core businesses.  It is expected to be completed by the end of 2015. Good progress has been made in this final phase as follows:

 

·     Rationalising manufacturing footprint: construction of the new extension to the Superfos facility at Mullsjö in Sweden is on schedule and the merger of the Tenhult factory into these facilities is expected to be completed in the second half year. The closure of the Troyes site in France, as a result of the flooding, is nearing completion. With respect to the rationalisation of the Spanish blow moulding business, the site at San Roque ceased production in August with the retained business being transferred to the Campo Real site in Madrid.  

·     Optimising the existing business portfolio: reorganisation and restructuring undertaken in response to the structural changes within the blow moulding business and to improve production efficiencies in the Bramlage-Wiko cluster as part of the initiative to transfer lower value added business to lower cost facilities.

  • Divesting non-core businesses: the Group sold its trading disposables business at Offenburg (Germany) in May 2014 and the Cobelplast sheet business (comprising sites at Lokeren (Belgium) and Montonate (Italy)) in September 2014.

 

The business incurred programme costs of £12.5m in the period (£8.1m continuing business; £4.4m relating to Cobelplast including a £3.7m loss on sale) with an additional £9m of costs expected to complete. The programme is expected to deliver steady state cost savings of £16m by the end of 2015/16, with cumulative annual savings currently at £13m including £4m incremental savings delivered in the period.

 

Business Review

 

The Group produced a good set of results, in line with expectations and with satisfactory profit growth despite the impact of the foreign exchange translation headwind, the time lag in passing through higher polymer prices, and a generally flat economic growth environment particularly in mainland Europe. Revenues for continuing operations grew by 12% to £589m in part due to the acquired businesses (M&H Plastics, Helioplast and Ace) as well as growth on a like-for-like basis of 4%.  Adjusted EBITDA1 was £86.9m (2013 restated: £71.4m) and adjusted operating profit1 of £60.9m increased by £13.8m (29%), with return on sales improving to 10.3% (2013: 9.0%) and RONOA at 24.1% (2013: 23.3%), both measures comfortably ahead of the Vision 2020 minimum performance metrics.  The Group incurred £16.1m (2013: £9.5m) of exceptional restructuring costs, impairments and other exceptional items in the first half year, mainly relating to the final phase of the Fitter for the Future business optimisation programme and costs attributable to the recent acquisitions.

 

The Group invested heavily in growth and efficiency projects, with over £40m of capital expenditure incurred in the period. Cash generation remained strong with £42.4m net cash from operating activities and free cash flow2 of £20.2m.  Working capital as a percentage of sales for continuing operations remained low at 4.1% (2013 restated: 3.0%). The Group retains a strong balance sheet with net debt of £318m, and having refinanced ahead of the Ace acquisition it had total finance facilities of £663m at 30 September 2014.

 

_________________

1 Adjusted EBITDA and adjusted operating profit is for continuing operations and before restructuring, impairment charges and other exceptional items, amortisation of acquired intangibles and pension administration expenses.
2 Free cash flow is cash generated from continuing operations less net capital expenditure, net interest and tax, adjusted to exclude exceptional cash flows and one off pension deficit reduction payments.

 

 

Injection Moulding

 


6 months to

30 September 2014

6 months to

30 September 2013

restated







Sales (£m)

376.5

341.1

Adjusted operating profit (£m)

36.6

32.7

Return on sales

9.7%

9.6%

Return on net operating assets

23.1%

26.6%

 

The business comprises the Superfos, Bramlage-Wiko, UKIM and Ace clusters. The Ace business was acquired on 2 June 2014 and these results include four months of post-acquisition contribution. The M&H Plastics business which was included in Injection Moulding in the results to 31 March 2014 is now reported in Blow Moulding. The improvement in adjusted operating profit reflects the contribution made by Ace and sales growth within the existing injection moulding businesses, particularly in the higher value added products.

 

Superfos sales volumes were higher, with the recent Helioplast acquisition performing well and growing market share in the south east Europe region. The dairy and ice-cream sectors saw particularly strong growth and the cluster benefited from continued sales growth in thin-walled and barrier packaging. The consolidation of manufacturing facilities in Sweden as part of the Fitter for the Future programme is progressing in line with plan.

 

For Bramlage-Wiko business performance was mixed, with destocking effects in mainland Europe lowering customer demand for personal care products in the first quarter. New investments in Tassimo production lines are in progress, whilst increased food packaging sales from its USA business are forecast following a major expansion of its production facilities at Morgantown, PA. The Manuplastics business, based in the UK, continued to trade well. The cluster is active in developing new product designs and is well positioned to exploit new business opportunities through its strong market positions and leading technological know-how.

 

Overall activity levels for UKIM were similar to last year with the increase in the DIY market offsetting the delay of some projects. Surface coating and paint container sales improved over the period and food packaging sales have grown. Sales of the Superlock product range, with its barrier capabilities, have gained traction and are showing good potential for further growth. 

 

The strategic potential for the acquisition of the Ace business, comprising five manufacturing sites in China, has been confirmed by both packaging and non-packaging customers. The process of integrating Ace in the Group in order to realise these opportunities has been progressing well. On 22 October 2014 a fire incapacitated the electroplating lines at the Zhuhai factory and although insured this may create a pause in the rate of planned growth of the business. Contingency plans are working well and the factory is producing again.

 

Thermoforming

 


6 months to

30 September 2014

6 months to

30 September 2013



restated







Sales (£m)

85.2

90.2

Adjusted operating profit (£m)

10.6

8.2

Return on sales

12.4%

9.1%

Return on net operating assets

37.1%

31.0%

 

The thermoforming operations comprise the retail food packaging and beverage businesses which are managed by the Bebo cluster. The cluster performed well in the period, with profitability and RONOA significantly improved. 

 

Overall activity levels on a like-for-like basis were similar to last year. Increased competiveness in the margarine and spreads market, which is a significant part of the thermoforming business and in which the Group has strong market positions, necessitated a reorganisation programme under Fitter for the Future. This programme is coming to an end and is now yielding savings through reduced capacity costs following the closure of the Beuningen site in 2013, and transfers of business to lower cost operations in the UK and Poland. In addition the development of in-mould labelling to thermoformed products will help retain current market share. Sales into the French dairy market have stabilised but were slightly lower year on year, still affected by the flood and subsequent closure of the Troyes site. Offsetting this and underpinning the growth in return on sales, was further sales growth in beverages. The non-core trading disposables business at Offenburg (Germany) was sold in May 2014, which explains the decrease in turnover for the period.

 

Blow Moulding

 

 

 

6 months to

30 September 2014

6 months to

30 September 2013



restated







Sales (£m)

127.2

93.4

Adjusted operating profit (£m)

13.7

6.2

Return on sales

10.8%

6.6%

Return on net operating assets

27.7%

21.2%

 

The blow moulding business comprises the Blow Moulding cluster which operates from 11 sites in the UK and mainland Europe, and the M&H Plastics business whose processes and markets are predominantly blow moulding.

 

The segment has benefited from the acquisition of M&H Plastics, whose margins are generally higher, and its associated synergies resulting in the significant increase in sales, operating profit and improved returns. Sales volumes at M&H Plastics have grown since joining the Group in December 2013, particularly in the USA where investment in expanding its US facility at Winchester, VA, has resulted in higher sales. Activity levels and sales for the Blow Moulding cluster were at similar levels to the previous year on a like-for-like basis. Growth in agrochemicals and industrial products was offset by some contract losses. The strategic review of the Spanish blow moulding business under the Fitter for the Future programme has resulted in the closure of the San Roque facility, with its remaining viable business transferred to the Madrid facility run by the Bramlage-Wiko cluster.

 

Non-financial key performance indicators

 

RPC has three main non-financial key performance indicators, which provide perspectives on the Group's progress in improving its contribution to the environment and employee welfare.

 

 

 

Continuing operations

6 months to

30 September 2014

6 months to

30 September 2013



restated

 

Non-financial KPIs:



Electricity usage per tonne (kWh/T)

2,034

2,027

Water usage per tonne (L/T)

803

786

Reportable accident frequency rate1

780

1,419

 

1 Reportable accident frequency rate (RAFR) is defined as the number of accidents resulting in more than three days off work, excluding accidents where an employee is travelling to or from work, divided by the average number of employees, multiplied by the constant 100,000.

 

The Group continues to make stringent efforts to improve its efficient usage of electricity and water. Electricity usage per tonne and water usage were both higher reflecting the increase in consumption associated with the manufacture of higher added value products. There has been a significant improvement in reportable accident frequency rate which was impacted in the first half of 2013/14 by an unusually high level of reportable accidents. Following a renewed focus on health and safety in the current year, including a programme of safety tours by the Group Executive, this figure has reduced considerably to its lowest reported level, with the Bramlage-Wiko, Bebo and Superfos cluster reportable accidents reducing by more than 50% compared with the same period last year.

 

Financial Review

 

The financial review of the business is based on underlying business performance, excluding exceptional and non-underlying items which include the amortisation of acquired intangible assets, pension administration costs, the fair value changes of unhedged derivatives and the unwinding of the discount on deferred and contingent consideration including related exchange impacts. All prior period figures have been restated accordingly.

 

Acquisitions

 

On 2 June 2014 the Group acquired effective control of 100% of the share capital of Ace Corporation Holdings Ltd. The business was acquired for an initial consideration of US$301m (£178m) and a total consideration of up to US$430m (£255m) on a cash-free, debt-free basis and subject to customary adjustments. The initial consideration was satisfied through the issue of 8,509,841 ordinary shares in RPC Group Plc (consideration shares) and cash payments of US$207m (£123m) funded from the placement of 12,500,000 ordinary shares (placement shares) and from new debt facilities. Further contingent payments in cash of up to US$129m (£77m) are payable by the Group subject to Ace's financial performance up to the year ending 31 December 2017. The provisional goodwill on acquisition amounted to £154.4m after fair value adjustments, and the trading results of the business after the acquisition date are included in the Group results.

 

Divestments

 

On 22 May 2014 the Group sold its disposables trading business at Offenburg, Germany (RPC Tedeco-Gizeh GmbH) to HOSTI International GmbH. The results of the business up until this date are included in the results of the Bebo cluster (Thermoforming segment).

 

On 30 September 2014 the Group sold its Cobelplast extruded sheet business, comprising its businesses at Lokeren, Belgium (RPC Cobelplast NV) and Montonate, Italy (RPC Cobelplast Montonate S.r.l.). These businesses had been put up for sale in September 2013 and their results reported as Discontinued operations.

 

Condensed consolidated income statement

 

Sales from continuing operations in the first half of 2014/15 increased by 12% to £588.9m (2013: £524.7m), with recent acquisitions (M&H Plastics, Helioplast, Ace) net of disposals (Offenburg) accounting for most of this, together with sales growth of 4% reflecting an underlying increase in activity levels and an improved sales mix. This was offset by the translation effect of a weaker euro (€1.24 v €1.17) which reduced sales by £25.4m compared with the corresponding period last year, with over 60% of turnover generated from businesses in the Eurozone.

 

Adjusted EBITDA was £86.9m (2013 restated: £71.4m) and adjusted operating profit was £60.9m (2013 restated: £47.1m), an increase of £13.8m (29%). The effect of the weaker euro was to reduce profit by £2m and there was a polymer headwind of circa £3m adversely impacting margins. Polymer prices rose steadily through the first and second quarters of the calendar year, giving rise to increased costs which could only be passed on with a time lag, although reductions in polymer prices in the latter part of the half year mean that a margin benefit should arise in the second half. Offsetting these were the impact of the acquisitions (£13.7m) and disposals (£0.5m) over the period, further cost savings from the Fitter for the Future programme and general sales mix and other business improvements offsetting inflationary pressures.

 

Exceptional items for the period amounted to £16.1m (2013: £9.5m), comprising Fitter for the Future restructuring costs of £8.1m, other exceptional costs of £0.6m, acquisition and integration costs mainly relating to Ace of £5.1m, and £2.3m inferred remuneration relating to Ace shareholders who have been retained in the business. The main elements of the Fitter for the Future costs relate to redundancies and restructuring costs on the closure of San Roque, the restructuring of Blow Moulding operations, rationalisation in Bramlage-Wiko (Pulheim & Vel'ky Meder) and ongoing costs relating to the closure of the Troyes site and the thermoformed spreads business. The inferred remuneration charge of £2.3m represents the expected contingent consideration earned in the period under the acquisition purchase agreement by three of the senior Ace executives employed in the business. Accounting standards (IFRS 3) require this amount to be charged to profit rather than be attributed to goodwill on acquisition.

 

Net interest payable increased from £5.9m to £6.1m due to the higher average net debt levels over the period. The remaining increases in net finance charges related to non-underlying finance charges including the unwinding of the discount on the deferred and contingent consideration for the Ace acquisition, fair value adjustments on unhedged foreign exchange derivatives and higher net pension interest charges.

 

The adjusted profit before tax1 increased from £41.4m (restated) to £54.9m largely as a result of the improvement in adjusted operating profit. The adjusted tax rate was 24.0% (2013: 24.0%), resulting in an adjusted profit after tax of £41.7m (2013 restated: £31.5m), and adjusted basic earnings per share2 of 22.8p (2013 restated: 19.1p).

 

The Group's overall tax charge for continuing operations was £10.6m (2013: £8.0m) resulting in a reported tax rate of 30.4% reflecting an adjusted effective rate of 24.0% and a 12.8% tax credit on exceptional and non-underlying charges. The profit after tax was £24.3m (2013: £22.1m), the increase being mainly due to the higher operating profit. Basic earnings per share for continuing operations was 13.3p (2013: 13.4p).

 

________________

1 Adjusted profit before tax is defined as operating profit for continuing operations before restructuring, impairment charges and other exceptional items, amortisation of acquired intangibles and pension administration expenses, and excluding non-underlying finance costs
2 Adjusted basic earnings per share is adjusted operating profit after interest, excluding non-underlying finance costs, and tax adjustments, divided by the weighted average number of shares in issue during the period.

 

 

Condensed consolidated balance sheet and cash flow statement

 

The balance sheet of the Group at 30 September 2014 was significantly affected by the acquisition of Ace and the related funding arrangements, with the net assets of the Group increasing by £126.4m as a consequence of the acquisition. The increase in goodwill of £153.6m is attributable to Ace as is the increase in other intangible assets which largely represent the value of customer contacts identified on acquisition. The carrying value of property, plant and equipment, excluding Ace assets of £63.7m, was largely unchanged. Although capital additions of £40.2m were ahead of depreciation of £25.0m, the movements were adversely affected by the exchange rate impact of the weakened Euro on translation.

 

Working capital (the sum of inventories, trade and other receivables and trade and other payables) increased slightly to £48.1m representing 4.1% as a percentage of sales for the half year (annualised) (2013 restated: 3.0%).

 

The long-term employee benefit liabilities at the half year increased from £72.5m to £88.9m, most of the increase reflecting an increase in the funding deficit position of the two major UK defined benefit schemes, RPC Containers and M&H Plastics. These showed actuarial losses of £15.4m in the period mainly due to a reduction in the discount rate and lower than expected returns on assets.

 

Provisions and other liabilities include deferred consideration relating to the Helioplast (£4.2m) and Ace acquisitions (£51.3m), the latter including £2.3m of expected contingent consideration earned during the period by shareholders who are working within the business.

 

Capital and reserves increased in the period by £101.4m, the proceeds from the equity raise for the acquisition of Ace amounting to £126.4m, net movements from the issue and purchase of shares for share-based arrangements of £0.3m and the net profit for the period of £20.2m offsetting dividends paid of £20.6m, exchange movements on translation of £8.6m, pension related net actuarial losses of £15.1m and net fair value movements on hedging derivatives of £1.2m. Further details are shown in the Condensed consolidated statement of changes in equity which is included in the financial statements.

 

Net cash from operating activities (after tax and interest) was £42.4m compared with £51.1m in the same period in 2013, mainly due to a small working capital outflow in the period. The net cash outflow from investing activities of £160.4m includes the net cash paid for the initial Ace acquisition consideration of £118.9m, together with £43.5m of capital expenditure. Net debt, which includes the fair value of the cross currency swaps used to repay the US private placement (USPP) funding, increased from £265m (restated) at 31 March 2014 to £318m at 30 September 2014. Average net debt for the first half year was £344.1m (2013: £226.3m). Gearing stands at 85% and the covenanted leverage (net debt to EBITDA ratio) is at 1.79.

 

Financial key performance indicators (KPIs)

 

The Group's main financial KPIs focus on return on investment, business profitability and cash generation.

 


6 months to

30 September 2014

6 months to

30 September 2013

restated

12 months to

31 March

2014

restated

Continuing operations




Return on net operating assets (RONOA)1

24.1%

23.3%

24.6%

Return on sales (ROS)2

10.3%

9.0%

9.6%

Free cash flow3

£20.2m

£30.5m

£59.1m

Return on capital employed (ROCE)4

16.9%

20.0%

18.7%

Added value per tonne5

£2,136

£2,072

£2,065

Cash conversion6

53%

84%

82%

 

1      RONOA is adjusted operating profit for continuing operations (annualised for half year reporting) divided by the average of opening and closing property, plant and equipment and working capital for continuing operations for the year concerned.

2      ROS is adjusted operating profit divided by sales revenue for continuing operations.

3      Free cash flow is cash generated from continuing operations less net capital expenditure, net interest and tax, adjusted to exclude exceptional cash flows and one off pension deficit reduction payments.

4      ROCE is adjusted operating profit for continuing operations (annualised for half year reporting), divided by the average of opening and closing shareholders' equity, after adjusting for net retirement benefit obligations, assets held for sale and net borrowings for the year concerned.

5      Added value per tonne is the difference between production sales value per tonne produced and the cost of polymer per tonne produced for continuing operations. The 2013/14 comparative numbers have been restated using 2014/15 exchange rates.

6      Cash conversion is the ratio of cash generated from operations less net capital expenditure excluding exceptional cash flows and one-off pension deficit reduction payments, to adjusted operating profit.

 

 

The key measures of the Group's financial performance, which are measured on a continuing basis, are its return on net operating assets (RONOA) and return on sales (ROS). The new hurdles agreed by the Board are for the Group to exceed 20% RONOA and 8% ROS and for ROCE to be maintained at 20% throughout the cycle for the 2013 pre-acquisition business portfolio. The increase in return on sales resulted from improved gross margins and lower costs. The improvement in added value per tonne reflects the impact of an improved sales mix.  Free cash flow was down on last year reflecting the higher capital expenditure in the period and consequently cash conversion reduced.

 


Principal Risks and Uncertainties

 

RPC is subject to a number of risks, both external and internal, some of which could have a serious impact on the performance of its business. These include, amongst other risks, polymer price volatility and availability, mitigated by the pass through of price changes to customers and reducing dependence on a few suppliers; energy costs, managed by purchasing a proportion of electricity at fixed rates and by improving the efficiency of energy consumption; and dependency on key customers, reduced by joint investment in product and technological development.

 

The Board regularly considers the principal risks that the Group faces and how to reduce their potential impact. The key risks to which the Group is exposed have not changed significantly over the first half of the financial year. Further information concerning the principal risks faced by the Group can be found in the Group's annual report and accounts for the year ended 31 March 2014.

 

Going Concern

 

The Group has considerable financial resources together with long-standing commercial arrangements with a number of customers, suppliers and funding providers across different geographical regions. It had total finance facilities of £663m at the end of 30 September 2014 with an amount of £333m undrawn. The facilities are mainly unsecured and comprised a revolving credit facility (RCF) of up to £350m with seven major UK and European banks maturing in 2019, USPP notes of $216m and €60m maturing in 2018 and 2021, a bilateral term loan of £60m with a major UK bank, mortgages of £14m, finance leases and other credit and overdraft arrangements of £64m. On 26 November the Group increased its RCF by £140m to £490m with its existing banking group on terms substantially the same, in contemplation of the Promens acquisition. The Group's forecasts and projections show that it is able to operate within the level of its current external funding facilities and that it has adequate resources to continue in operational existence for the foreseeable future. For this reason, the going concern basis has been adopted in preparing the financial statements.

 

Dividend

 

The Board has declared an interim dividend of 5.0p per share (2013: 4.5p) and is in line with the Group's progressive dividend policy which has been in place since RPC's flotation in 1993. This will be paid on 16 January 2015 to ordinary shareholders on the register at 5 December 2014.

 

Outlook

 

The performance in the first half year has been encouraging with good growth in selected areas, the progression of the Fitter for the Future programme and the contribution from recent successful acquisitions. The Vision 2020 Focused Growth Strategy is making good progress with the proposed acquisition of Promens providing an attractive opportunity to extend and consolidate the Group's leading market positions, creating shareholder value. The second half of the year has started satisfactorily and the Group remains well placed to benefit from an economic recovery in Europe.

 

Responsibility Statement of the Directors in Respect of the Half Year Financial Report

 

We confirm that to the best of our knowledge:

 

§ the condensed set of financial statements has been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting' (IAS 34) as adopted by the EU; and

 

§ the interim management report includes a fair review of the information required by:

 

(a)  DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

 

(b)  DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the Group during that period; and any changes in the related party transactions described in the last annual report that could do so.

 

 

BY ORDER OF THE BOARD

 

 

J R P Pike

P R M Vervaat

Chairman

Chief Executive

 

27 November 2014

27 November 2014

 

 

Introduction

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2014 which comprises the Condensed consolidated balance sheet of RPC Group Plc, the Condensed consolidated income statement, the Condensed consolidated statement of comprehensive income, the Condensed consolidated cash flow statement, the Condensed consolidated statement of changes in equity and the related explanatory notes for the six month period then ended. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

 

This report is made solely to the Company in accordance with the terms of our engagement to assist the Company in meeting the requirements of the Disclosure and Transparency Rules ('the DTR') of the UK's Financial Conduct Authority ('the UK FCA'). Our review has been undertaken so that we might state to the Company those matters we are required to state to it in this 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 Company for our review work, for this report, or for the conclusions we have reached.

 

Directors' Responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the DTR of the UK FCA.

 

As disclosed in note 2, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the EU. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU.

 

Our Responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

 

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

 

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2014 is not prepared, in all material respects, in accordance with IAS 34 as adopted by the EU and the DTR of the UK FCA.

 

Greg Watts for and on behalf of KPMG LLP

Chartered Accountants

One Snowhill

Snow Hill Queensway

Birmingham

B4 6GH

 

27 November 2014

 

 

Condensed consolidated income statement



6 months to

30 September 2014


6 months to

30 September 2013


12 months to

31 March 2014



 

(unaudited)


restated

(unaudited)


restated

(unaudited)



before

adjusted

items

adjusted

items

(note 4)

after

adjusted

items


before

adjusted

items

adjusted

items

(note 4)

after

adjusted

items


before

adjusted

items

adjusted

items

(note 4)

after

adjusted

items














Continuing operations

Note

£m

£m

£m


£m

£m

£m


£m

£m

£m














Revenue

3

588.9

-

588.9


524.7

-

524.7


1,046.9

-

1,046.9

Operating costs


(528.0)

(16.1)

(544.1)


(477.6)

(9.5)

(487.1)


(945.9)

(26.7)

(972.6)

Adjusted operating profit


60.9

(16.1)

44.8


47.1

(9.5)

37.6


101.0

(26.7)

74.3














Non-underlying:













Amortisation of acquired

intangibles


 

-

 

(1.7)

 

(1.7)


 

-

 

(0.4)

 

(0.4)


 

-

 

(0.8)

 

(0.8)

Pension administration costs


-

(0.3)

(0.3)


-

(0.3)

(0.3)


-

(0.6)

(0.6)














Operating  profit


60.9

(18.1)

42.8


47.1

(10.2)

36.9


101.0

(28.1)

72.9














Financial income


2.1

-

2.1


6.5

-

6.5


8.7

-

8.7

Financial expenses


(8.2)

-

(8.2)


(12.4)

-

(12.4)


(20.5)

-

(20.5)

Non-underlying finance costs


-

(1.9)

(1.9)


-

(1.1)

(1.1)


-

(2.4)

(2.4)














Net finance costs

5

(6.1)

(1.9)

(8.0)


(5.9)

(1.1)

(7.0)


(11.8)

(2.4)

(14.2)














Share of investment

accounted for under the

equity method

 

 

12

 

 

0.1

 

 

-

 

 

0.1


 

 

0.2

 

 

-

 

 

0.2


 

 

0.3

 

 

-

 

 

0.3














Profit before taxation

3

54.9

(20.0)

34.9


41.4

(11.3)

30.1


89.5

(30.5)

59.0














Taxation

6

(13.2)

2.6

(10.6)


(9.9)

1.9

(8.0)


(21.5)

6.2

(15.3)














Profit for period from continuing operations


 

41.7

 

(17.4)

 

24.3


 

31.5

 

(9.4)

 

22.1


 

68.0

 

(24.3)

 

43.7














Discontinued operations


























Profit/(loss) for the period

from discontinued


 

 

 

 

 

 


 

 

 

 

 

 


 

 

 

 

 

 

operations

7

0.3

(4.4)

(4.1)


(0.8)

(15.3)

(16.1)


(0.2)

(15.5)

(15.7)














Total profit attributable to

equity shareholders


 

42.0

 

(21.8)

 

20.2


 

30.7

 

(24.7)

 

6.0


 

67.8

 

(39.8)

 

28.0






































Earnings per share



6 months to

30 September 2014



6 months to

30 September 2013



12 months to

31 March 2014









restated





Continuing operations



(unaudited)




(unaudited)




(audited)














Basic

8



13.3p




13.4p




26.5p

Diluted

8



13.2p




13.3p




26.3p

Adjusted basic

8



22.8p




19.1p




41.1p

Adjusted diluted

8



22.6p




19.0p




40.8p














Total Group













Basic

8



11.0p




3.6p




17.0p

Diluted

8



10.9p




3.6p




16.9p

 

 

Condensed consolidated statement of comprehensive income

 

 


6 months to

6 months to

12 months to


30 September

30 September

31 March


2014

2013

2014



restated



(unaudited)

(unaudited)

(audited)


£m

£m

£m









Profit for the period

20.2

6.0

28.0





Items that will not be reclassified subsequently to profit and loss




Recycle of exchange differences  on disposal of




operations

(2.5)

-

-

Actuarial losses on defined benefit schemes

(18.7)

(4.7)

(3.6)

Deferred tax on actuarial losses

3.6

0.1

(0.3)


(17.6)

(4.6)

(3.9)





Items that may be reclassified subsequently to profit and loss








Foreign exchange translation differences

(6.1)

(5.5)

(6.3)

Effective portion of movement on fair value of interest rate swaps

(1.5)

 

3.7

5.6

Deferred tax asset/(liability) on above

0.3

(0.6)

(1.3)

Other comprehensive expenses, net of tax

(7.3)

(2.4)

(2.0)





Total comprehensive (loss)/income for the period, attributable to equity shareholders

(4.7)

 

(1.0)

22.1

 

 Condensed consolidated balance sheet

 








30 September

30 September

   31 March



             2014

           2013

       2014




restated

restated



  (unaudited)

   (unaudited)

(audited)


Notes

              £m

                £m

                £m

Non-current assets



        


Goodwill

  9

323.4

90.3

169.8

Other intangible assets

10

32.9

8.3

10.4

Property, plant and equipment

11

479.8

370.9

416.1

Investments accounted for under the

equity method

 

12

 

2.6

 

2.6

 

2.7

Derivative financial instruments


12.8

6.8

8.2

Deferred tax assets


34.4

19.6

26.9

Total non-current assets


885.9

498.5

634.1






Current assets





Inventories


149.0

128.9

144.8

Trade and other receivables


204.9

165.9

189.6

Cash and cash equivalents


22.9

25.8

2.5

Derivative financial instruments


-

0.1

-

Assets held for sale

13

2.6

38.0

38.4

Total current assets


379.4

358.7

375.3






Current liabilities





Bank loans and overdrafts


(9.5)

(0.7)

(1.1)

Trade and other payables


(305.8)

(263.5)

(304.5)

Current tax liabilities


(15.1)

(7.8)

(9.3)

Employee benefits


(1.5)

(3.4)

(4.1)

Provisions and other financial liabilities

15

(21.5)

(1.9)

(6.6)

Derivative financial instruments


-

(0.2)

-

Liabilities held for sale

13

-

 (25.2)

 (23.7)



(353.4)

(302.7)

(349.3)




Net current assets


26.0

56.0

26.0

Total assets less current liabilities


911.9

554.5

660.1

 

Non-current liabilities





Bank loans and other borrowings


(341.1)

(196.6)

(268.7)

Employee benefits

14

(88.9)

(64.8)

(72.5)

Deferred tax liabilities


(46.3)

(36.4)

(36.7)

Provisions and other financial liabilities

15

(57.7)

(0.1)

(5.0)

Derivative financial instruments


(4.9)

(2.4)

(5.6)

Total non-current liabilities


(538.9)

(300.3)

(388.5)

Net assets


373.0

254.2

271.6






Equity





Called up share capital


9.4

8.3

8.3

Share premium


219.2

93.1

93.4

Capital redemption reserve


0.9

0.9

0.9

Retained earnings


128.7

127.7

144.4

Cash flow hedging reserve


(1.3)

(1.3)

(0.1)

Cumulative translation differences reserve


16.1

25.5

24.7

Total equity attributable to equity





shareholders


373.0

254.2

271.6

 

The half year financial report was approved by the Board of Directors on 27 November 2014, is unaudited and was signed on its behalf by:

 

 

J R P Pike, Chairman

S J Kesterton, Group Finance Director

 

 

Condensed consolidated cash flow statement

 



 6 months to

6 months to

12 months to



30 September

30 September

  31 March



             2014

2013

       2014




restated

restated



(unaudited)

     (unaudited)

(audited)


Notes

           £m

               £m

           £m

Cash flows from operating activities





Profit before tax - continuing operations


34.9

30.1

59.0

Profit before tax - discontinued operations


(4.1)

(15.9)

(15.4)

Share of investment

12

(0.1)

(0.2)

(0.3)

Net financing costs


8.0

7.0

14.2

Profit from operations


38.7

21.0

57.5






Adjustments for:





Impairment loss on intangible assets


-

1.8

1.8

Amortisation of intangible assets


2.7

1.2

2.8

Impairment loss on property, plant and equipment


0.2

0.7

4.7

Depreciation


25.0

23.5

43.0

Share-based payment expense


1.1

0.8

1.9

(Gain)/loss on disposal of property, plant and equipment


(0.1)

-

0.2

Impairment loss on assets held for sale


-

13.2

13.2

Loss on disposal of businesses


3.8

-

-

Movement in provisions and financial liabilities


(6.1)

(2.0)

(10.0)

Other non-cash items


(1.9)

(1.1)

(2.4)

Operating cash flows before movement in working capital


63.4

59.1

112.7






Movement in working capital


(9.2)

1.3

12.4

Cash generated by operations


54.2

60.4

      125.1






Taxes paid


(5.5)

(3.4)

(12.5)

Interest paid


(6.3)

(5.9)

(12.4)

Net cash from operating activities 


42.4

51.1

100.2






Cash flows from investing activities





Interest received


-

-

0.5

Proceeds on disposal of property, plant and equipment


0.9

4.0

4.7

Acquisition of property, plant and equipment


(43.5)

(29.0)

(69.7)

Acquisition of intangible assets


(1.8)

(1.1)

(3.0)

Acquisition of businesses


(118.9)

-

(106.9)

Proceeds on disposal of businesses


2.9

-

-

Net cash flows from investing activities


(160.4)

(26.1)

(174.4)






Cash flows from financing activities





Dividends paid

16

(20.6)

(17.6)

(25.1)

Purchase of own shares

 18

(1.7)

(0.8)

(0.8)

Proceeds from the issue of share capital


74.3

0.8

1.1

Repayment of borrowings


-

(1.2)

-

Proceeds of borrowings

17

80.0

-

74.8

Net cash flows from financing activities


132.0

(18.8)

50.0






Net increase/(decrease) in cash and cash equivalents 


14.0

6.2

(24.2)


2.5

23.4

23.4 

Classified as held for sale


-

(4.8)

(2.4)

Effect of foreign exchange rate changes


6.4

1.0

5.7

Cash and cash equivalents at end of period


22.9

25.8

2.5






Cash and cash equivalents comprise:





Cash at bank and overdrafts


22.9

25.8

2.5

 

Condensed consolidated statement of changes in equity

 

 


Share

Share

Capital

Translation

Cash

Retained

  Total


capital

Premium

redemption

reserve

flow

earnings

equity



Account

reserve


hedging








reserve




£m

£m

£m

£m

£m

£m

£m

 

6 months to September 2014, unaudited






At 1 April 2014

8.3

93.4

0.9

24.7

(0.1)

144.4

   271.6

 

Profit for the period

-

-

-

-

-

20.2

20.2

 

Actuarial losses

-

-

-

-

-

(18.7)

(18.7)

 

Deferred tax on actuarial losses

-

-

-

-

-

3.6

3.6

 

Exchange differences

-

-

-

(6.1)

-

-

(6.1)

 

Movement in fair value swaps

-

-

-

-

(1.5)

-

(1.5)

 

Deferred tax on hedging movements

-

-

-

-

0.3

-

0.3

 

Total comprehensive (expense)/income for the period

 

-

 

-

 

-

 

(6.1)

 

(1.2)

 

5.1

 

(2.2)

 

Issue of shares

1.1

125.8

-

-

-

-

126.9

 

Equity-settled share-based payments

 

-

 

-

 

-

 

-

 

-

 

1.1

 

1.1

 

Current tax on equity-settled share-based payments

 

-

 

-

 

-

 

-

 

-

 

0.4

 

0.4

 

Recycle of exchange differences on disposals 

 

-

 

-

 

-

 

(2.5)

 

-

 

-

 

(2.5)

 

Purchase of own shares

-

-

-

-

-

(1.7)

(1.7)

 

Dividends paid

-

-

-

-

-

(20.6)

(20.6)

 

Total transactions with owners recorded directly in equity

 

1.1

 

125.8

 

-

 

(2.5)

 

-

 

(20.8)

 

103.6

 

At 30 September 2014

9.4

219.2

0.9

16.1

(1.3)

128.7

373.0

 

 

6 months to 30 September 2013, restated (unaudited)






At 1 April 2013

8.3

92.3

0.9

31.0

(4.4)

143.6

271.7

Profit for the period

-

-

-

-

-

6.0

6.0

Actuarial losses

Exchange differences

-

-

-

-

-

-

-

(5.5)

-

-

(4.7)

-

(4.7)

(5.5)

Deferred tax on actuarial losses

-

-

-

-

-

0.1

0.1

Movement in fair value swaps

-

-

-

-

3.7

-

3.7

Deferred tax on hedging movements

-

-

-

-

(0.6)

-

(0.6)

Total comprehensive (expense)/income for the period

 

-

 

-

 

-

 

(5.5)

 

3.1

 

1.4

 

(1.0)

Issue of shares

-

0.8

-

-

-

-

0.8

Equity-settled share-based payments

 

-

 

-

 

-

 

-

 

-

 

0.8

 

0.8

Current tax on equity-settled share-based payments

 

-

 

-

 

-

 

-

 

-

 

0.3

 

0.3

Purchase of own shares

-

-

-

-

-

(0.8)

(0.8)

Dividends paid

-

-

-

-

-

(17.6)

(17.6)

Total transactions with owners recorded directly in equity

 

-

 

0.8

 

-

 

-

 

-

 

(17.3)

 

(16.5)

At 30 September 2013

8.3

93.1

  0.9

25.5

(1.3)

127.7

254.2

 


Year to 31 March 2014, restated (unaudited)






At 1 April 2013

8.3

92.3

0.9

31.0

(4.4)

143.6

271.7

Profit for the period

-

-

-

-

-

28.0

28.0

Actuarial losses

-

-

-

-

-

(3.6)

(3.6)

Deferred tax on actuarial losses

-

-

-

-

-

(0.3)

(0.3)

Exchange differences

-

-

-

(6.3)

-

-

(6.3)

Movement in fair value swaps

-

-

-

-

5.6

-

5.6

Deferred tax on hedging movements

-

-

-

-

(1.3)

-

(1.3)

Total comprehensive

(expense)/income for the period

 

-

 

-

 

-

 

(6.3)

 

4.3

 

24.1

 

22.1

Issue of shares

-

1.1

-

-

-

-

1.1

Equity-settled share-based payments

 

-

 

-

 

-

 

-

 

-

 

1.9

 

1.9

Current tax on equity-settled share-based payments

 

-

 

-

 

-

 

-

 

0.3

 

0.3

Deferred tax on equity-settled share-








based payments

-

-

-

-

-

0.4

0.4

Purchase of own shares

-

-

-

-

-

(0.8)

(0.8)

Dividends paid

-

-

-

-

-

(25.1)

(25.1)

Total transactions with owners recorded directly in equity

 

-

 

1.1

 

-

 

-

 

-

 

(23.3)

 

(22.2)

At 31 March 2014

8.3

93.4

0.9

24.7

(0.1)

144.4

271.6

 

 

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

 

 

1.             General information

 

The comparative figures for the financial year ended 31 March 2014 are not the Group's statutory accounts for that financial year. Those accounts have been reported on by the Group's auditor and delivered to the Registrar of Companies. The report of the auditor was (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498(2) or (3) of the Companies Act 2006. The Group's statutory accounts for the year ended 31 March 2014 are available from the Company's registered office, at Sapphire House, Crown Way, Rushden, Northants NN10 6FB or from the Group's website at www.rpc-group.com.

 

2.             Accounting policies

 

The condensed consolidated half year financial statements have been prepared in accordance with International Financial Reporting Standard (IFRS) IAS 34 'Interim Financial Reporting', as adopted by the EU and in accordance with the Disclosure and Transparency Rules of the UK's Financial Services Authority. They do not include all of the information required for full annual financial statements, and should be read in conjunction with the consolidated financial statements of the Group as at and for the year ended 31 March 2014.

 

In the preparation of the condensed financial statements, comparative amounts have been restated to reflect the following:

 

-              The restatement of restructuring, impairment losses, other exceptional items and non-underlying costs in a manner consistent with the Annual Report for the year ended 31 March 2014.

-              The adoption of IFRS 11 and IFRS 12 in respect of associates and joint ventures and their disclosure in the accounts, which has resulted in the restatement of a joint venture previously proportionately consolidated and now accounted for under the equity method as an investment. See note 12.

-              The segmental revenues and results by process and geography to reflect the impact of recent acquisitions.

In all other respects, the same accounting policies, presentation and methods of computation are followed in the condensed set of financial statements as applied in the Group's latest annual audited financial statements for the year ended 31 March 2014.

 

Estimates

 

The preparation of the condensed financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

 

In preparing these condensed financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the financial statements as at and for the year ended 31 March 2014.

 

3.             Operating segments

 

The information reported to the Group's Board of Directors, considered to be the Group's chief operating decision maker for the purpose of resource allocation and assessment of segment performance, is based on manufacturing conversion process. The business performance of the three conversion processes used can be found in the Business review.

 

The accounting policies of the reportable segments are the same as the Group's accounting policies. Segment profit represents the profit earned by each segment with an allocation of central items. Pricing of inter-segment revenue is on an arm's length basis.

 

Segmental revenues and results

 

6 months to

30 September 2014

6 months to

30 September 2013

12 months to

31 March 2014


restated

restated

(unaudited)

(unaudited)

(audited)

Continuing operations

Inter-segment

External

Inter-

segment

External

Inter-segment

External

Revenue







Injection Moulding

1.5

376.5

1.6

341.1

3.1

669.7

Thermoforming

-

85.2

0.6

90.2

0.6

182.0

Blow Moulding

0.4

127.2

0.5

93.4

0.9

195.2

Total

1.9

588.9

2.7

524.7

4.6

1,046.9








Segmental adjusted operating profit







Injection Moulding


36.6


32.7


66.0

Thermoforming


10.6


8.2


19.1

Blow Moulding


13.7


6.2


15.9

Adjusted operating profit


60.9


47.1


101.0








Exceptional items


(16.1)


(9.5)


(26.7)

Non-underlying operating items


(2.0)


(0.7)


(1.4)

Finance costs including non-underlying finance costs


(8.0)


(7.0)


(14.2)

Share of investment


0.1


0.2


0.3

Profit before taxation


34.9


30.1


59.0

Taxation


(10.6)


(8.0)


(15.3)

Profit for period-continuing







operations


24.3


22.1


43.7

Discontinued operations, including exceptional items


(4.1)


(16.1)


(15.7)

Total profit attributed to equity shareholders


20.2


6.0


28.0

 

The segmental sales and adjusted operating profit have been restated in prior years to transfer M&H Plastics, which was acquired in December 2013, from Injection Moulding to Blow Moulding, and for adjusted operating profit also to exclude non-underlying items and the share of joint venture results, now shown separately. The Ace results from 2 June 2014 are included within Injection Moulding revenue and operating profit.

 

The following is an analysis of the Group's revenue by origin and adjusted operating profit by origin:

 



6 months to

30 September 2014

6 months to

30 September 2013

12 months to

31 March 2014




restated

restated



(unaudited)

(unaudited)

(audited)



£m

£m

£m

Revenue by origin




United Kingdom


158.3

123.1

254.7






Germany


188.7

180.4

342.5

France


76.7

77.1

152.4

Other Europe


100.7

128.4

246.3

Mainland Europe

366.1

385.9

741.2

Rest of World

64.5

15.7

51.0



588.9

524.7

1,046.9






 

 



6 months to

6 months to

12 months to



30 September 2014

30 September 2013

31 March 2014




restated

restated



(unaudited)

(unaudited)

(audited)



£m

£m

£m

Adjusted operating profit by origin:




Europe

50.5

45.4

93.2

Rest of World

10.4

1.7

7.8


60.9

47.1

101.0






 

The period to September 2014 includes the Group's USA and Asian operations in a new 'Rest of World' category and the prior periods have been restated accordingly.  The 6 months to September 2014 includes turnover and profit from the Ace Group from 2 June 2014. In prior periods the categories Mainland Europe and UK had included operations in the USA whose sales had been predominantly sourced from intra-group supplies manufactured in Germany and the UK.

 

4.             Exceptional and non-underlying items

 


6 months to

6 months to

12 months to


30 September 2014

30 September 2013

31 March 2014



restated


Continuing operations

(unaudited)

(unaudited)

(audited)


                  £m

              £m

          £m

Exceptional items




Restructuring and closure costs

8.1

5.2

17.0

Integration/acquisition costs

5.1

-

1.4

Other exceptional items

2.8

0.9

1.0

Impairment loss on intangible assets

-

1.8

1.8

Impairment loss on property, plant and equipment

0.1

1.6

5.5

Total exceptional operating costs

16.1

9.5

26.7

 

Non-underlying items

 

Amortisation - acquired intangibles

1.7

0.4

0.8

Pension administration costs

0.3

0.3

0.6

Total non-underlying operating items

2.0

0.7

1.4





Non-underlying finance costs

1.9

1.1

2.4





 

The restructuring and closure costs relate to the Fitter for the Future programme affecting a number of sites across the Group. Integration/acquisition costs include the transactional acquisition costs of Ace and integration costs of both M&H Plastics and Ace.  Other exceptional items for the period to 30 September 2014 include £2.3m relating to a provision for remuneration as defined under IFRS 3, earned by shareholders of Ace who must remain as employees of the Group for the duration of the earn-out period to qualify for the remuneration. Exceptional items relating to discontinued operations are disclosed in note 7.

 

Non-underlying operating items include amortisation of acquired intangibles and pension administration costs. The prior period ended 30 September 2013 has been restated in this respect for consistency with the year ended 31 March 2014 and the period ended 30 September 2014. Non-underlying finance items are described in note 5.

 

5.             Net financing costs

 


6 months to

6 months to

12 months to


30 September

30 September

30 March


2014

2013

2014



restated


Continuing operations

(unaudited)

(unaudited)

audited


£m

£m

£m





Net interest payable

6.1

5.9

11.8

Mark to market (gains)/losses on foreign currency hedging instruments

 

(2.0)

 

6.5

 

8.2

Fair value adjustment to borrowings

2.0

(6.5)

(8.2)

Non-underlying finance costs

1.9

1.1

2.4


8.0

7.0

14.2

 

Non-underlying finance costs comprise defined benefit pension interest charges, fair value changes of unhedged derivatives, the unwinding of discount on deferred and contingent consideration including related exchange impacts and other non-recurring finance related costs.

 

6.             Taxation

 

A taxation charge of £10.6m on continuing operations has been made in the half year to 30 September 2014 in respect of the profit before taxation of £34.9m, based on the Group tax rate expected for the full year applied to the pre-tax income for the six month period.

 

The adjusted Group tax rate of 24.0% is unchanged from the periods ended 31 March 2014 and 30 September 2013.

 

7.             Discontinued operations

 

Cobelplast, the RPC business which manufactured extruded sheet, was marketed for sale in the prior periods and was sold on 30 September 2014. In accordance with IFRS 5 'Non-current Assets Held for Sale and Discontinued Operations', it was classified in the Consolidated balance sheet within assets and liabilities held for sale and reported as discontinued operations, prior to its sale.

 

The Consolidated income statement with respect to total discontinued operations is set out below:

 


6 months to

6 months to

12 months to


30 September

30 September

  31 March


             2014

              2013

          2014


   (unaudited)

     (unaudited)

(audited)

Discontinued operations

              £m

               £m

                   £m





Revenue

30.2

35.1

67.6

Operating costs

(34.3)

(51.0)

(83.0)

Loss before tax

(4.1)

(15.9)

(15.4)





Analysed as:




Operating profit/(loss) before restructuring and




impairment losses

0.3

(0.6)

0.1

Restructuring and closure costs

(0.7)

(3.0)

(3.1)

Loss on disposal of operations

(3.7)

-

-

Impairment losses

-

(12.3)

(12.4)


(4.1)

(15.9)

(15.4)





Taxation

-

(0.2)

(0.3)





Loss for the period attributable to equity




shareholders - discontinued operations

(4.1)

(16.1)

(15.7)

 

The loss on disposal of operations related to disposal of Cobelplast businesses. See note 20.

 

 

 





6 months to

6 months to

12 months to


30 September

30 September

31 March


2014

2013

2014


(unaudited)

(unaudited)

 

(audited)

 

Basic loss per ordinary share (note 8)

(2.3)p

(9.8)p

(9.5)p

Diluted loss per ordinary share (note 8)

(2.3)p

(9.7)p

(9.4)p





Cash flow - discontinued operations (£m)

(3.0)

(0.1)

(2.6)

 

Impairment losses in prior periods relate to impairment of the assets of the Cobelplast businesses at the time the business was classified as held for sale. See note 20 for details of the disposal of the Cobelplast businesses.

 

 

8.             Earnings per share

 

Basic

The earnings per share has been computed on the basis of the weighted average number of shares in issue during the half year ended 30 September 2014 of 182,933,451 (half year ended 30 September 2013: 165,598,770 and year ended 31 March 2014: 165,360,202). The weighted average number of shares excludes shares held by the RPC Employee Benefit Trust to satisfy awards in respect of incentive arrangements.

Diluted

Diluted earnings per share is the earnings per share after allowing for the dilutive effect of the conversion into ordinary shares of the weighted average number of options outstanding during the period. The number of shares used for the fully diluted calculation at the half year ended 30 September 2014 was 184,515,735 (half year ended 30 September 2013: 166,366,522 and year ended 31 March 2014: 166,472,143).

 

Adjusted

The directors believe that the presentation of an adjusted basic earnings per ordinary share assists with the understanding of the underlying performance of the Group. For this purpose the restructuring, impairment and other exceptional items, amortisation of acquired intangibles and pension administration expense identified separately on the face of the Condensed consolidated income statement, together with non-underlying finance costs, adjusted for the tax thereon, have been excluded.

 

9.             Goodwill

 

During the period the Group acquired £154.4m of goodwill as part of the acquisition of Ace. Further details of the acquisition are shown in note 19.

 

10.          Intangibles

 

During the period the Group had additions of £3.0m, (2013: £1.0m) including £1.8m acquired in cash and £1.2m included in capital creditors relating to intangible assets. The provisional fair value of intangibles acquired by the Group upon acquisition of Ace was £22.1m. For further details of the acquisition see note 19.

 

11.          Property, plant and equipment

 

During the period the Group had additions of £40.2m to property plant and equipment (2013 restated: £29.0m). The cash outflow for purchase of property, plant and equipment of £43.5m (2013 restated: £29.0m) includes movement in capital creditors. The fair value of property, plant and equipment acquired on the acquisition of Ace was £63.7m. The depreciation charge was £25.0m (2013 restated: £23.5m). Other movements include foreign currency exchange movements of £14.3m (2013: £4.8m), disposals and impairments.

 

12.          Investments accounted for under the equity method

 

The Group has a 46% share in Galion, a joint venture with an injection moulding business based in Tunisia. The carrying value of the investment represents the Group's share in Galion's net assets. Prior periods have been restated in the condensed consolidated income statement, shown in the share of investment line, £0.2m for 6 months to September 2013, £0.3m for year ended 31 March 2014. A result of £0.1m has been reflected in the condensed consolidated income statement for the six months to 30 September 2014. Included within the condensed consolidated balance sheet prior to restatement were £5.0m of assets and £2.4m of liabilities for September 2013 and £4.8m of assets and £2.1m of liabilities for the year ended 31 March 2014, under the previous proportionate consolidation method.

 

13.          Assets and liabilities classified as held for sale

 


30 September

30 September

31 March


2014

2013

2014


(unaudited)

(unaudited)

(audited)


£m

£m

£m





Assets classified as held for sale

2.6

38.0

38.4

Liabilities classified as held for sale

-

(25.2)

(23.7)


2.6

12.8

14.7





Discontinued operations:




Cobelplast business

-

10.3

9.1





Continuing operations:




Buildings classified as held for sale

2.6

0.8

2.7

Other assets classified as held for sale

-

1.7

2.9


2.6

12.8

14.7

 

The assets and liabilities held for sale at the period ended 30 September 2014 include a surplus property in the Netherlands. Assets previously classified as held for sale for 31 March 2014 and 30 September 2013, relating to the Offenburg and Cobelplast businesses, were sold during the 6 month period ended 30 September 2014.

 

14.          Employee benefits

 

The liability recognised in the Condensed consolidated balance sheet for long-term employee benefits and the movement in retirement benefit obligations was:

 


30 September

30 September

31 March


2014

2013

2014


(unaudited)

(unaudited)

(audited)


£m

£m

£m





Retirement benefit obligations at 1 April

69.2

58.0

58.0

Net liabilities on acquisition

-

-

16.1

Total expense charged to the income statement

2.1

1.9

2.4

Actuarial losses recognised in the statement of comprehensive income

 

18.7

 

4.7

 

3.6

Contributions and benefits paid

(2.7)

(2.8)

(10.1)

Exchange differences

(1.4)

(0.3)

(0.4)

Classified as liabilities held for sale

-

(0.6)

(0.4)





Retirement benefit obligations at 30 September/

31 March

85.9

60.9

69.2

Termination benefits

1.1

1.2

1.2

Other long-term employee benefit liabilities

1.9

2.7

2.1

Employee benefits due after more than one year

88.9

64.8

72.5





Restructuring termination cost provision within one year 

 

1.5

 

3.4

 

4.1

Total employee benefits

90.4

68.2

76.6

 


Total employee benefits include amounts falling due within one year as outlined above.

 

The defined benefit obligation for employee pensions and similar benefits as at 30 September 2014 have been remeasured based on the disclosures as at 31 March 2014, the previous balance sheet date. The results have adjusted by allowing for the updated IAS 19 financial assumptions and rolling forward the liabilities to 30 September 2014 using actual cash flows for the six month period.

 

The defined benefit plan assets have been updated to reflect their market value as at 30 September 2014. Differences between the actual and expected return on assets, changes in actuarial assumptions and experience gains and losses on liabilities have been recognised in the Condensed consolidated statement of comprehensive income.

 

The employee benefit obligations at the half year increased from £72.5m to £88.9m, most of the increase reflecting an increase in the funding deficit position of the two major UK defined benefit schemes, RPC Containers and M&H Plastics, mainly due to a reduction in the discount rate and lower than expected returns on assets.

 

15.          Provisions and other financial liabilities

 


30 September

30 September

31 March


2014

2013

2014



restated



(unaudited)

(unaudited)

(audited)


£m

£m

£m





Deferred and contingent consideration

55.5

-

4.4

Termination and restructuring provisions

0.9

0.2

1.5

Contract provisions

10.9

1.8

2.7

Other provisions and liabilities

11.9

-

3.0

Total

79.2

2.0

11.6





Current

21.5

1.9

6.6

Non-current

57.7

0.1

5.0

 

Deferred and contingent consideration payable includes Ace acquisition contingent consideration at fair value, see note 19. Provisions of £20.9m have been included in relation to the Ace acquisition.

 

16.          Dividends

 


6 months to

6 months to

12 months to


30 September

30 September

31 March


2014

2013

2014


(unaudited)

(unaudited)

(audited)

Dividends on ordinary shares:

£m

£m

£m





Final for 2013/14 paid of 11.0p per share

20.6

-

-

Interim for 2013/14 paid of 4.5p per share

-

-

7.5

Final for 2012/13 paid of 10.6p per share

-

17.6

17.6


20.6

17.6

25.1

 

A final dividend of 11.0p per share was proposed in respect of the year ended 31 March 2014 with a cost of £20.6m which was incurred on 4 September 2014. An interim dividend of 5.0p has been proposed in respect of the year ended 31 March 2015. In accordance with accounting standards it has not been included as a liability as at 30 September 2014. This dividend will be paid on 16 January 2015 to ordinary shareholders on the register at 5 December 2014.

 

17.          Bank overdrafts and loans

 

During the period net loans of £80m were drawn under the Group's Revolving Credit Facility, dated 30 April 2014. The amount undrawn under the Group's facilities at 30 September 2014 totalled £332.8m.

 


30 September

30 September

31 March


2014

2013

2014



restated

restated


(unaudited)

(unaudited)

(audited)

Analysis of debt:

£m

£m

£m





Cash and cash equivalents

22.9

25.8

2.5

Bank loans and overdrafts due within 1 year

(9.5)

(0.7)

(1.1)

Bank loans and overdrafts due after 1 year

(341.1)

(196.6)

(268.7)

Derivative financial instruments:




 - assets

11.0

5.7

-

 - liabilities

(1.3)

(2.4)

(0.3)

Net debt included in assets/liabilities held for sale

 

-

 

4.1

 

2.4


(318.0)

(164.1)

(265.2)

 

Net debt balances at 30 September 2013 and 31 March 2014 have been restated to exclude those relating to the Galion joint venture, previously proportionately consolidated. See note 12.

 

Net debt includes derivative financial instruments which relate to cross currency interest swaps used to manage the interest rate and foreign exchange exposure of the Group's borrowings under a US Private Placement.

 

18.          Share capital

 

The Group acquired 300,000 of its own shares during the period (30 September 2013: 183,419; 31 March 2014: 183,419). The total amount paid to acquire the shares was £1.7m (30 September 2013: £0.8m; 31 March 2014: £0.8m) and this has been deducted from shareholders' equity. The shares are held in trust to satisfy awards in respect of share-based incentive arrangements.  In addition the company issued £0.6m of shares for share based payments.

 

On 1 May 2014 the Group issued 12,500,000 shares for net proceeds of £73.7m to fund the acquisition of Ace.  On 2 June 2014 shares totalling 8,509,841 were issued to Ace shareholders as part of the consideration for the acquisition.

 

19.          Acquisitions

 

On 2 June 2014 the group acquired 100% of the share capital of Ace Corporation Holdings Limited, a China based and Hong Kong headquartered manufacturing business.

 

The purchase has been accounted for as a business combination. Due to the proximity of the transaction to the date of the interim financial statements, the acquisition accounting has not been finalised. The provisional fair value amounts recognised in respect of the identifiable assets acquired and liabilities assumed are as set out in the table below:

 



30 September

 



             2014



  (unaudited)





Notes

              £m




Intangible assets


22.1

Property, plant and equipment


63.7

Inventories


21.3

Trade and other receivables


21.4

Trade and other payables


(33.3)

Provisions


(20.9)

Financial liabilities


(4.4)

Taxes


(5.8)

Total identifiable assets


64.1

Consideration


218.5

Goodwill

9

154.4

 

Consideration comprised cash of £118.9m (after taking into account a net cash position of £4.0m), equity of £52.6m and contingent consideration of £47.0m measured at the fair value of expected cash flows. The total gross contingent consideration of up to £77.2m is linked to the performance of Ace measured against an EBITDA growth target over the period to December 2017. A total of £23.9m of the gross contingent consideration will be accounted for as exceptional remuneration expense under IFRS 3 over the earn-out period, of which a charge of £2.3m has been accrued in the period to 30 September 2014 (note 4).

 

20.          Disposals

 

The Group disposed of RPC Tedeco-Gizeh GmbH (Offenburg) on 22 May 2014, for £2.5m to HOSTI International GmbH. The company was included within Thermoforming in the segmental analysis prior to disposal.

 

On 30 September 2014 the Group disposed of two Cobelplast companies with sites at Lokeren, Belgium and Montonate in Italy. The Lokeren site was owned by RPC Cobelplast NV. The Montonate site was held by RPC Cobelplast Montonate S.r.l. The loss on disposal of Offenburg was £0.1m and the loss on disposal of the Cobelplast businesses was £3.7m.

 

21.          Contingent liabilities

 

There were no significant changes to the contingent liabilities reported at 31 March 2014 for the Group.

 

22.          Exchange rates

 

The average euro/sterling exchange rate for the 6 months to 30 September 2014 was €1.24 (6 months to 30 September 2013: €1.17; 12 months to 31 March 2014: €1.19) and the period end rate at 30 September 2014 was €1.26 (30 September 2013: €1.20; 31 March 2014: €1.21).

 

The average US dollar/sterling exchange rate for the 6 months to 30 September 2014 was $1.68 (6 months to September 2013: $1.54; 12 months to 31 March 2013: $1.59) and the period end rate at 30 September 2014 was $1.62 (30 September 2013: $1.62; 31 March 2014: $1.66).

 

23.          Related party transactions

 

The Group has a related party relationship with its directors. There are no additional significant related party transactions other than the employee remuneration earn-out arrangement as part of the acquisition of Ace and those disclosed in note 28 of the annual report and accounts for the year ended 31 March 2014.

 

Copies of this half year financial report will be mailed to shareholders in December 2014 and are also available from the Company Secretary, RPC Group Plc, Sapphire House, Crown Way, Rushden, Northants NN10 6FB or from the Group's website, at www.rpc-group.com.

 

24.          Subsequent events

 

On 22 October 2014 a fire incapacitated the electroplating lines at the Ace factory at Zhuhai and although insured this may slow down the rate of planned growth of this business.

 

On 27 November 2014 RPC announced its proposed acquisition of Promens Group AS, a leading European manufacturer of rigid plastic products for a wide range of end markets including chemicals, personal and health care and food for packaging and rigid plastic components for materials handling and commercial vehicles. With 40 production facilities spanning 20 countries, including sites in North America, Asia, North Africa and the Far East, this will be a major acquisition for the Group.

 


This information is provided by RNS
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