RPC GROUP PLC 2017 / 18 INTERIM RESULTS

Transcription

1 RPC THE ESSENTIAL INGREDIENT RPC GROUP PLC 2017 / 18 INTERIM RESULTS 29 November RPC Group Plc. All Rights Reserved.

2 First half highlights 2017 / 18 Revenue +53% to 1,876m FCF +45% to 171.7m with strong cash conversion Continued organic growth at c.2% Healthy innovation pipeline Operating profit (adj.) +58% to 214.7m Adjusted EPS +27% to 36.4p Interim dividend +28% to 7.8p European synergy programme on track and nearing completion with total implementation costs lower than expected ROS up 30bps to 11.4% RONOA up 320bps to 28% ROCE at 15.1% well above WACC Letica integration well advanced Acquisition of Astrapak completed 2

3 Agenda Vision 2020 Strategy Financial Overview Market Overview Summary and Outlook Pim Vervaat Simon Kesterton Pim Vervaat Pim Vervaat 3

4 Progress of Vision 2020 strategy in the first half year Focus on organic growth Continued organic growth at c.2% with healthy innovation pipeline Global roll-out of patented sports caps continuing FOCUSED GROWTH Selective consolidation in Europe Creating a meaningful presence outside Europe European synergy programme nearing completion Opportunities to further consolidate the European plastic packaging market estimated at > 26bn combined sales Acquisition of mini RPC Astrapak completed Greenfield plant in China on stream with Brazilian plant starting up Further opportunities emerging from leveraging global platform Pursuing added value opportunities in non packaging markets Expansion of Zhuhai operations generating profitable growth in the automotive market Good contribution of ESE in first year of RPC ownership 4 Capital allocation Capital expenditure to support future growth in attractive market segments Utilised 12.4m under 100m share buyback Interim dividend up 28% representing 25 th consecutive year of growth

5 Returns since Vision 2020 strategy launch Capital employed 2,846m 2,371m 19.4% ROCE 475m 14.3% 15.1% 2012 / 13 RPC Group pre Vision years Acquisitions & c. 165m organic investments > depreciation 2017 / 18 RPC Group September 2017 Capital employed Return on capital employed 5 Strategy generates returns consistently above WACC

6 Selective acquisition opportunities in Europe Size of the opportunity in Europe Rigid and flexible plastic packaging Actively monitored targets Europe* c. 63bn RPC c. 3bn (European packaging only) Note: Not representative of total market, only those targets actively monitored Size (by revenue) Number Combined revenues > 500m 12 > 13bn 50m- 500m 60 > 11bn < 50m >100 > 2bn Total > 26bn Numerous opportunities driven by: Short term hold periods of private equity Owner-managed businesses with succession challenges 6 Good quality acquisition opportunities in Europe with sales > 26bn *Smithers Pira, 2017; converted to EUR using an exchange rate of 0.88

7 7 Financial Overview

8 Income statement H / 18 H / 17 FY 2016 / 17 m % m % Δ m % Revenue 1, , % 2,747.2 Raw materials* (945.2) 50.4 (575.5) % (1,359.8) 49.5 Wages and salaries* (391.7) 20.9 (283.2) % (624.9) 22.7 Other expenses* (324.1) 17.3 (231.1) % (454.3) 16.5 Adjusted operating profit % Adjusted interest charge (16.0) (11.1) 44.1% (22.8) Adjusted profit before tax % Non underlying costs (33.0) (53.0) (131.4) Taxation (44.1) (21.5) (22.7) Profit after tax % Adjusted basic earnings per share 36.4p 28.6p 27.3% 62.2p Statutory earnings per share 29.5p 15.2p 94.2% 37.1p 8 Return on capital employed % 15.1% 14.8% 30bps 15.1% * See appendix page 38

9 Revenue bridge ( m) c.2% Revenue H / 17 FX translation Polymer , ,226 1,308 Revenue H / 17 Impact FX translation Polymer price Underlying revenue H / 17 Net acquisitions (prior year revenue) Organic growth Revenue H / 18 9 Organic growth

10 Adjusted operating profit bridge ( m) Includes synergies* of 13m 47 3 (1) 42 (21) Adjusted operating profit H / 17 FX translation Polymer (1) Adjusted operating profit H / 17 FX translation Polymer pass through variance Underlying operating profit H / 17 Net acquisitions (prior year profit) Business improvement Cost inflation Adjusted operating profit H / 18 * From Promens / GCS / BPI / Letica

11 Polymer pass through PER TONNE: average of Platts / ICIS indices 1,750 Mainland Europe 1,650 1,550 1,450 1,350 1,250 1,150 1,050 Mar 14 Sep 14 Mar 15 Sep 15 Mar 16 Sep 16 Mar 17 Sep 17 PER TONNE: average of Platts / ICIS indices 1,400 1,300 1,200 1,100 1, UK impacted by weakened sterling 800 Mar 14 Sep 14 Mar 15 Sep 15 Mar 16 Sep 16 Mar 17 Sep $ PER TONNE: per IHS 2,400 2,200 2,000 1,800 1,600 1,400 US impacted by hurricanes PP HOMO 1,200 Mar 14 Sep 14 Mar 15 Sep 15 Mar 16 Sep 16 Mar 17 Sep 17 HDPE BM Polymer pass through mechanisms in place (based on c. 65 indices) albeit with a time lag Proactive raw material stock and purchase contract management mitigating the pass through time lag effect Flexibility in purchasing various polymer grades for similar applications enhanced Polymer price changes passed through to the customer base

12 Promens, GCS and BPI synergy programme nearing completion European site rationalisation Overview RPC acquired Promens ( 582m sales) in February 2015, GCS ( 590m sales) in March 2016 and BPI ( 553m sales) in August 2016 Combined sales of 1,725m with a total of 82 manufacturing sites 12 Synergy realisation Steady state cost synergies estimated to be at least 105m or c.6% of acquired sales Over the programme 22 locations will close (including 4 head offices and 2 operations in progress for closure when acquired) in total while relocating >300 production lines Currently finalising closures including relocation of UK and Danish facilities Synergy programme anticipated to be substantially completed by March 2018 * Excludes the closure of a Chinese location

13 Promens, GCS and BPI related synergy realisation costs Lower implementation costs than previously anticipated Total P&L charge is 185m, down from 190m previously announced The associated cash out is 110m, down from 120m previously announced with steady state benefits remaining at least 105m per annum Synergy realisation m (cumulative) By year /15 15/16 16/17 17/18 18/19 (185)m (110)m P&L costs m m 14/15 15/16 16/17 17/18 18/19 30m 13 P&L charge Asset write downs Proceeds, working capital & asset sales Cash costs Cash costs m /15 15/16 16/17 17/18 18/19

14 Non-underlying costs (see Appendix page 45 for definitions) Interims Finals million 2017 / / / / 16 Fitter for the Future Acquisition related expenditure Deferred consideration on earn-outs (11.2) (11.5) Promens / GCS / BPI integration costs Other integration and exceptional items (7.0) Total exceptional items Amortisation acquired intangibles Other (pension admin fees) Total non-underlying operating items Non-underlying finance costs Total non-underlying costs

15 Underlying cash generation Interims Finals million 2017 / / / / 16 Adjusted EBITDA Working capital Net capex (108) (82) (176) (101) Other* (1) Operating cash flow Net interest & tax (40) (28) (55) (29) m % 100% 90% 80% H1 15/16 H1 16/17 H1 17/18 Adjusted operating profit Free cash flow Conversion (%) Free cash flow Adj. conversion** 99% 107% 95% 87% Statutory conversion # 97% 105% 82% 85% Continued investment in growth; total capex to sales ratio of 5.8% (Capex / depreciation of 1.4x) Working capital synergies realised as acquisitions adopt RPC s approach; working capital as a % of sales improved to 5.5% (2016: 6.1%) Both statutory cash flow conversion and underlying conversion remain strong 15 * Share based payments, disposal of fixed assets and pension deficit payments **Ratio of operating cash flow shown above to adjusted operating profit # see Appendix page 43

16 Net debt bridge Free cash flow 172m (1,049) 25 (1,070) 296 (108) (40) (1) (77) (12) (9) (74) (21) Net Debt Mar 2017 Adjusted EBITDA Working Capital Investing Activities Interest & Tax Other free cashflow items# Acquisitions (inc. debt) Share buyback Exceptional Items Dividends Other* Net Debt Sep # Share based payments, disposal of fixed assets and pension deficit payments * Includes exchange rate movements: ( 18m), non-underlying cash provision movements: 17m, movement in provisions and financial instruments: 22m

17 Financial position KPIs Sep 2017 Net debt ( m) 1,070 Headroom ( m) 1,077 m 1,500 1,250 1,000 Renewal date main facilities * TERM 750 Net debt to EBITDA ratio (pro forma)** 1.8x Net debt to EBITDA covenant 3.5x USPP RCF RCF USPP Calendar year *The 18 month term facility is extendable up to 2020 if required **Adjusted to include acquisitions on a pro forma basis

18 Capital allocation priorities Capital priorities and structure Profitable organic growth Investing in organic growth and returns ahead of WACC Targeting through the cycle organic growth ahead of GDP Acquisitions that meet strict investment criteria 17 acquisitions since launch of Vision 2020; demonstrating excellent returns well above WACC Progressive dividend policy with dividend cover at 2.5x through the cycle H1 17/18 DPS of 7.8p, up 28% and representing the 25 th consecutive year of growth Announced inaugural share buyback programme of up to 100m* over a 12 month period to July 2018 Programme launched as share price undervalued the Group s performance and future prospects Leverage to remain at a suitable and responsible level H1 17/18 net debt to EBITDA ratio of 1.8x (pro forma) Covenant 3.5x EBITDA 18 * 20.5m shares bought back to date at an average price of 906p

19 Technical guidance For financial year 2017 / 18 Non-underlying costs Capex c. 230m Depreciation c. 175m Non-underlying cash provision utilisation c. 30m Underlying tax rate c. 24.5% Interest c. 34m FX sensitivity: 1c move changes EBIT by c. 1.8m $1c move changes EBIT by c. 0.4m Progressive dividend policy with cover targeted to be 2.5x across the cycle Category Acquisition related expenditure Deferred consideration on earnouts Promens / GCS / BPI integration costs Other integration and exceptional items Guidance External cost on acquisition activity Ace: 40% c. 3m Letica 40% c. 20m P&L c. 21.5m ( 25m) with c. 43m ( 50m) cash Minor Amortisation acquired intangibles c. 50m Other non-underlying items Minor Non-underlying finance costs Pension scheme interest c. 8m Interest on earn-outs: immaterial FX on earn-outs depends on FX rates 19

20 Key figures Sales ( m) Adjusted Operating Profit ( m) Adjusted basic EPS* 1, % % 33.6p +27% ,876 1, /14 14/15 15/16 16/17 H1 17/ /14 14/15 15/16 16/17 H1 17/ p 16.9p 17.9p 36.4p 28.6p 14.7p 17.5p 19.8p 13/14 14/15 15/16 16/17 H1 17/18 Free cash flow ( m) Return on net operating assets # +230bps Dividend per share* % /14 14/15 15/16 16/17 H1 17/ % 22.3% 22.7% 25.7% 28.0% 13/14 14/15 15/16 16/17 H1 17/18 8.4p 9.5p Adjusted = before restructuring costs, impairment charges, amortisation of acquired intangibles and other non-underlying items, net of tax where relevant * Restated following rights issues in 2015, 2016 and 2017 # Includes acquisitions completed in 2016 and comparatives restated on a pro forma basis 11.5p 17.9p +28% 3.5p 3.8p 4.5p 6.1p 7.8p 13/14 14/15 15/16 16/17 H1 17/18 FY H2 H1

21 21 Market Overview

22 Organic growth in the first six months of 2017 / 18 Global plastic packaging markets over the next five years anticipated to grow c.4% with European growth rates at >2%* helped by ongoing material substitution Overall organic growth of c.2% reflecting improved activity levels in both packaging and non-packaging markets partially offset certain adverse natural events and by fewer trading days Good growth in Europe (representing 79% of total sales) with growth outside Europe tempered by hurricane impact in the US Continued investment in innovation capabilities driving a healthy pipeline going forward 22 Group targeting through the cycle growth ahead of GDP * Growth rates to 2022 (Source: Smithers Pira)

23 Sports Caps Current sales 23 Market leading beverage closure, developed in France Now produced in 6 countries across 3 continents; sold worldwide Efficient roll-out facilitated by internally developed standardised approach Patented innovation incorporating functionality for on-the-go consumption Growth through innovation and best practice sharing

24 Sports Caps (continued) 24 Current sales Agreed additional sales 20 production lines installed with 17 still to come

25 Segmental development Food Non-food Technical Components 565m H1 17 / 18 +3% Organic growth 378m H1 17 / 18 +1% Organic growth 353m H1 17 / 18 +1% Organic growth 25 Key developments RPC: good growth in agricultural films and confectionary products in H1 Market: growth driven by shelf-life enhancing solutions, portion control and minimising food waste. Agricultural market continues to grow Outlook: ongoing growth with spreads market recovering as price of substitute (butter) increases Key developments RPC: good overall demand particularly for nicotine delivery systems offsetting decline in UK surface coatings Market: growth driven by innovation in product design in various market segments Outlook: continued growth in tobacco while staying focused on margin enhancement in mature market segments Key developments RPC: growth in H1 driven by higher added value automotive components Market: strong demand growth in complex automotive products, particularly in China Outlook: portfolio of strong platforms for higher added value future growth

26 Segmental development (continued) Personal Care Beverage Healthcare 230m H1 17 / 18 +2% Organic growth 268m H1 17 / 18 Static sales 82m H1 17 / 18 Static sales 26 Key developments RPC: increased sales in China driving growth in H1 Market: globalisation and higher quality products are key growth drivers Outlook: further growth opportunities leveraging global platform and development of the air free DEFI system Key developments RPC: close to zero growth as demand in sport caps and CSD lite closures is offset by continued softness with European coffee capsule customers Market: growing demand for higher added value single serve beverage capsules and closures Outlook: continuing growth in closures combined with Brazilian coffee capsules plant starting up Key developments RPC: close to zero growth with new product launches later than envisaged Market: dry powder inhalant devices set for longer term growth particularly in Western markets Outlook: medium to longer term growth following formation of larger healthcare platform post Plastiape acquisition

27 27 Summary and Outlook

28 * No significant acquisitions anticipated in the remainder of this financial year Summary and Outlook Encouraging trading in the first half with record profitability levels (both statutory and adjusted) and strong cash generation (both statutory and adjusted) Unprecedented rationalisation of the European manufacturing footprint nearing completion, with the benefits being realised as anticipated Letica integration progressing well with the expected cost savings on track Will continue to target innovation based growth, leveraging global footprint, and expect to participate in the ongoing consolidation of the plastic packaging markets* Second half of the year has started well 28

29 Forward looking statements This presentation 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 presentation 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. The Group undertakes no obligation to update these forward-looking statements and nothing in this presentation should be construed as a profit forecast. Past performance is no guide to future performance and persons needing advice should consult an independent financial advisor. 29 Nothing in this presentation shall constitute, in any jurisdiction, an offer or solicitation to sell or purchase any securities or other financial instruments, nor shall it constitute a recommendation or advice in respect of any securities or other financial instruments or any other matter.

30 30 Supplementary Material

31 Appendices Disciplined and selective approach to acquisitions Decentralised organisation enhances integration capability Commitment to our people Commitment to sustainability Polymer capacity expected to increase Income statement extract at FY 2014/15 polymer prices Segmental and geographical analysis Consolidated balance sheet Employee benefits Statutory cash flow Adjusted earning reconciliation Definitions 31

32 Disciplined and selective approach to acquisitions Core acquisition criteria Strategic fit Strength of incumbent management Financial track record Financial criteria: ROCE > WACC of RPC Quantifiable cost and cash synergies Impact on Group KPIs (ROS & RONOA) Earnings accretion Acquisitions generally concluded at below market average EBITDA multiples Overview (EV / EBITDA LTM) Average 7.8x Average 9.3x Transaction multiples Sector trading multiples RPC major transactions = Source: Mergermarket, company information Adding value Improving RPC s overall commercial position Improving RPC s strategic buying position Realising cost synergies (including procurement) Enhancing performance and innovation focus of acquired businesses 32

33 Disciplined and selective approach to acquisitions (continued) Acquisition process >360 40% Rejected without extensive review Opportunities presented to RPC (since launch of Vision 2020) Industry is consolidating numerous opportunities presented Database maintained with attractive assets to be actively approached >215 Desktop review Desktop review of businesses and market segment More attractive opportunities progressed to review involving business management teams Rejected where no strategic fit or value Targets reviewed in-depth In-depth due diligence performed by RPC teams and external advisers Rejected when target does not meet RPC s acquisition criteria Acquired Hand over to divisional management team and corporate purchasing Of those reviewed in-depth, 17 were acquired equating to 18% More than one in three acquisitions have been off-market, one-to-one processes initiated through existing industry relationships 60% 25% 5%

34 Decentralised organisation enhances integration capability Quality businesses acquired with key management retained Multiple growth platforms with strong divisional leadership teams - larger acquisitions spread in time and in different parts of the organisation Central back office and procurement functions strengthened and scalable 34 Proven track record of quickly integrating businesses and realising associated synergies Mini RPC sector management approach matching industry structure RPC divisions Strategic business units

35 Commitment to our people Health & Safety RPC commitment to its employees Reportable accident frequency rate (RAFR)* Full year results Health & Safety culture: Number 1 priority for RPC; further reduction in RAFR Annual Health & Safety week Safety. It s in our Hands H1 15/16 H1 16/17 H1 17/ /17 Sharesave: New annual schemes launched across 23 countries Take up of 4,468 employees (23%) Training & Development: Apprentice training schemes established across many sites International Graduate Development Programme Succession plans in place across the organisation Identification of key talent and potential Range of talent development training programmes 35 * number of accidents resulting in more than three days off work, excluding accidents where an employee is travelling to or from work, divided by average number of employees x 100k

36 Commitment to sustainability The plastic product lifecycle RPC commitment to sustainability Raw Materials: Research and development of new materials such as biodegradable polymers Design & development: Lightweighting Use of recycled material in products Product protection / waste reduction Substitution of heavier materials Manufacturing: Efficient use of water and electricity Reduction of waste Recycling & the responsible disposal of plastic: Closed loop recycling process bpi recycled products & ESE World Involvement in external activities to increase recycling of plastic e.g. New Plastics Economy Initiative We work with organisations including: 36

37 Polymer capacity expected to increase Global PP & PE: Capacity utilisation polymer industry TONNES (M) OPERATING RATE % % 95% 90% 85% 80% 75% 70% Capacity continues to grow and outpace demand Ability to source from outside Europe will become a key competitive advantage RPC s scale, extensive network and flexibility provide a leading position from which to access global markets Key capacity additions are North America and Middle East, both targeting exports as markets globalise. China will look to become self-sufficient in PP, freeing capacity for other geographies Operating rate Actual demand Free capacity Forecast demand Source: IHS Markit 37 RPC s European operations are well placed to take advantage of global markets

38 Income statement extract at FY 2014 / 15 polymer prices H / / / / 15 m % m % m % m % Revenue 1,876 2,747 1,642 1,222 Restated revenue 1,295 2,397 1,677 1,222 Raw materials (583) 45 (1,085) 45 (787) 47 (584) 48 Wages and salaries (288) 22 (558) 23 (384) 23 (280) 23 Other expenses (221) 17 (417) 17 (297) 18 (226) 18 % of restated revenue All costs exclude restructuring costs Revenue and adjusted operating costs have been restated at FY 2014 / 15 polymer pricing and before 2016 / 17 acquisitions 38

39 Segmental and geographical analysis 39 Interims % Finals million 2017 / / 17 Variance Revenue At constant exchange 2016 / 17 Packaging 1,592 1, ,365 Non-packaging Total 1,876 1, ,747 Operating profit Packaging Non-packaging Total Return on sales Packaging 11.2% 10.3% 90bps 70bps 10.4% Non-packaging 13.1% 16.0% (290)bps (280)bps 16.2% Total 11.4% 11.1% 30bps 20bps 11.2% Both packaging and non-packaging continue to grow with sales mix and acquisitions affecting non-packaging return on sales

40 Segmental and geographical analysis (continued) 40 Interims % Finals million 2017 / / 17 Variance Revenue At constant exchange 2016 / 17 Europe 1,477 1, ,363 Rest of the world Total 1,876 1, ,747 Operating profit Europe Rest of the world Total Return on sales Europe 10.9% 10.2% 80bps 60bps 10.4% Rest of the world 13.3% 16.9% (350)bps (370)bps 16.4% Total 11.4% 11.1% 30bps 20bps 11.2% Strong revenue growth by region; Rest of World return on sales affected by sales mix and acquisitions

41 Consolidated balance sheet million SEP 2017 SEP 2016 MAR 2017 Property, plant and equipment 1, , ,265.5 Goodwill 1, , ,577.1 Other non-current assets Working capital Employee benefit liabilities (LT) (240.7) (300.9) (256.0) Provisions, including deferred consideration (135.5) (171.3) (165.1) Other assets & liabilities (317.6) (216.9) (312.0) Assets held for sale Net debt (1,070.4) (833.0) (1,049.1) Equity shareholder funds 1, , ,

42 Employee benefits million SEP 2017 SEP 2016 MAR 2017 Retirement benefit liability UK DBs Other retirement benefit obligations Termination benefits Other employee benefit liabilities Total employee benefit liability Improving discount rates plus deficit reduction payments have reduced the pension liability since the year end H1 Key assumptions: 2017/18 H1 2016/17 FY 2016/17 Discount rate 2.7% 2.4% 2.6% Inflation rate 2.1% 2.0% 2.1% 42

43 Statutory cash flow Interims Finals million 2017 / / / / 16 Adjusted EBITDA Movement in working capital Payment in respect of nonunderlying items Movement in provisions and financial liabilities (8) (28) (81) (50) (27) (21) (56) (19) Cash generated by operations Net capex (108) (82) (176) (101) Cash flow Capex ahead of depreciation (1.4x) Disciplined working capital management Costs and benefits of the Promens / GCS / BPI programme nearing completion with 87% investment in one time costs and 86% of the related benefits have been received Statutory operating profit Statutory conversion* 97% 105% 82% 85% 43 * Ratio of cash flow to statutory operating profit

44 Adjusted earnings reconciliation Earnings ( m) Adjusted earnings & EPS p Acquisition and integration costs (12.4) (3.0)p Deferred consideration on earn-outs (1.1) (0.3)p Amortisation acquired intangibles (25.3) Other non-underlying items 5.8 Total non-underlying tax 4.7 Total adjustments (28.3) (6.1)p 1.4p 1.1p (6.9)p 44 Basic earnings & EPS p

45 Definitions Expense Description Fitter for the Future All expenditure related to a business improvement programme announced before the Vision 2020 Focused Growth Strategy, which was centred on rationalising RPC s European manufacturing footprint, optimising its business portfolio and realised value for the Group by disposing of its noncore businesses and redundant properties. This scheme was largely completed by the end of the 2014/15 financial year. Acquisition related expenditure The advisors fees and other expenses directly relating to the Group s completed acquisitions. 45 Deferred consideration on earnouts Integration costs Other integration & exceptional items Amortisation acquired intangibles Other non-underlying items Non-underlying finance costs The remuneration earned by the shareholders of Ace and other acquisitions who must remain as employees of the Group for the duration of the earn-out period to qualify for the remuneration. It also includes adjustments related to the current expectation of the final payment. Costs relate to the integration of the Promens, GCS and BPI businesses into the RPC organisation, including related restructuring, redundancy, closure costs and impairment charges. Includes other items such as start up costs. It also includes restructuring, redundancy and closure costs of other business optimisation programmes not directly affected by the Promens, GCS and BPI integration and advisors fees directly relating to the group s aborted acquisition processes. Relates to amortisation of intangible assets such as brands and customer relationships related to acquired business (amortised to the income statement on a straight-line basis over their estimated useful life). Other immaterial non underlying costs including the pension admin costs on closed DB schemes. Includes finance charges related to the defined benefit pension schemes and the Ace contingent consideration finance cost and the associated foreign exchange impact on the US dollar liability.

46 Definitions (continued) Category Organic growth ROCE RONOA Description Period-on-period revenue change adjusted for constant exchange rates and polymer prices, pro forma for acquisitions completed in the current period and adjusted for disposals. ROCE is measured over the relevant period (annualised for half year results) and normalised for the effect of acquisitions, is adjusted operating profit for continuing operations, divided by the average of opening and closing shareholders equity, after adjusting for net retirement benefit obligations, assets held for sale, acquisition intangibles and net borrowings for the year concerned. RONOA is measured over the relevant period (annualised for half year results) and normalised for the effect of acquisitions, is adjusted operating profit for continuing operations divided by the average of opening and closing property plant and equipment and working capital for the year concerned. Comparatives are restated to include acquisitions on a pro forma basis. 46