Half year results for the six months ended 30 September 2012

Transcription

1 29 November RPC GROUP PLC Half year results for the six months ended RPC Group Plc, Europe s leading supplier of rigid plastic packaging, announces today its half year results for the six months ended. Highlights: Adjusted operating profit up 4% at 47.0m (2011: 45.4m) with the return on sales improving to 9.1% (2011: 7.7%) Sales lower at 518m (2011: 587m) reflecting the impact of a weaker euro with overall volumes 3% down on last year albeit with an improved sales mix Adjusted EPS at 18.4p (2011: 18.3p) Net profit for the period lower at 13.9m (2011: 26.3m) after incurring 18.5m (2011: 4.1m) of restructuring costs, impairment losses and other exceptional items. Good cash flow performance with net cash generated from operations at 42.5m (2011: 30.9m) ROCE for the period improved to 19.3% (2011: 18.2%) Superfos integration and exit from mainland Europe vending cup and automotive businesses successfully completed New business optimisation programme Fitter for the Future launched Manuplastics business acquired enhancing the sale and manufacturing base for personal care in the UK Interim dividend of 4.3p (2011: 4.2p) Commenting on the results, Jamie Pike, Chairman said: This was another creditable performance by the Group in a continually challenging economic environment. The ROCE target set following the Superfos acquisition has been largely achieved but with the prospect of prolonged macro-economic weakness the Group has embarked on the Fitter for the Future optimisation programme to ensure that this level of performance can be sustained. Opportunities to grow the business from a position of financial strength through innovation and acquisitions continue to be explored. For further information: RPC Group Plc Kreab Gavin Anderson Ron Marsh, Chief Executive Robert Speed Pim Vervaat, Finance Director Anthony Hughes Analysts meeting: There will be an analysts meeting at 8.45am today. The presentation slides will be available at For details of the meeting please contact Anthony Hughes, Kreab Gavin Anderson on or ahughes@kreabgavinanderson.com 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.

2 INTERIM MANAGEMENT REPORT Business operations RPC is a leading supplier of rigid plastic packaging with operations in 18 countries. The business, which comprises 48 manufacturing sites and six separate distribution and 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 seven 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 UK Injection Moulding Food, soups & sauces, margarine & spreads, paints, DIY products, promotional products, pharmaceuticals Thermoforming Bebo Margarine & spreads, fresh, frozen and long shelf-life foods, coffee capsules, dairy market Tedeco-Gizeh Vending & drinking cups, coffee Cobelplast capsules, disposable products Phone cards, long shelf-life foods and form-fill-seal lines Blow Moulding Blow Moulding Personal care, lubricants, agrochemicals, food & drinks, long shelf-life foods Each cluster has on average seven manufacturing sites, operating over a wide geographical area for reasons of customer proximity, local market demand and manufacturing resource. Strategy RPC s strategy is to grow and develop leading positions in its chosen product markets and geographical areas in the rigid plastic packaging industry, by establishing strong long-term relationships with its customers and by developing high quality, innovative products that meet customer needs. The Group achieves and maintains its leading market positions by continued innovation and investment, leveraging RPC s leading technological capability and through strategic corporate development. During the first half of the year the Group completed the closure of the Runcorn site and achieved the minimum target of 15m of Superfos related revenues and cost synergies, having realised 10m in the previous financial year. The Group s aim to achieve a return on capital employed (ROCE) of 20% has been achieved as this target assumed a nonrecessionary economic environment. The 19.3% ROCE at the half year would have amounted to at least 20% had it not been for the recessionary Eurozone and UK economies from which circa 87% of the Group s turnover originates. To ensure this level of performance is sustainable in a period of continuing macroeconomic weakness, the Group has embarked on a business optimisation programme, Fitter for the Future. This programme is focused on optimising the Group s mainly European product market combinations and includes a range of further cost efficiency measures such as the proposed closure of the Antwerp (Belgium) and Beuningen (Netherlands) sites, medium term Superfos synergies and the disposal of redundant properties. It is anticipated that it will take two years to complete, with the current scope expected to realise at least 12m of steady state profit benefits in the financial year 2

3 RESPONSIBILITY STATEMENT 2015/16 at an exceptional cost of 30m, of which 3m has been reflected in the first half year of /13. The corresponding cash outflow after taking into account non-cash impairment charges, sales proceeds of properties and release of working capital, is estimated at 15m. Associated capital expenditure requirements will be funded through the ongoing investment budgets. Alongside the Fitter for the Future programme, the Group aims to further grow its higher added value products based on innovation and technology. Opportunities for value adding strategic corporate development, both in Europe and higher growth economies outside Europe, will continue to be explored. On 21 November the Manuplastics business (turnover circa 8m) was acquired for a cash-free, debt-free consideration of 7m, enhancing the Group s UK manufacturing and sale base for personal care. Business review Revenues, which are reported in sterling, were 12% lower than the same period last year mainly reflecting the translation effect of a weaker euro, as circa 64% of the Group s sales originate from the Eurozone, and a 3% reduction in volumes (as measured in polymer tonnes converted). The lower overall activity levels were mainly due to the exit from mainland European vending and automotive businesses and market weakness in the surface coatings (particularly in Spain) and cosmetics areas whilst some de-stocking appears to have occurred in certain food related markets. The sales mix continued to improve with strong growth recorded in areas such as coffee capsules and thin wall/barrier packaging in the Superfos product range. Polymer markets in the first half of /13 showed unprecedented volatility with the record high prices in May reducing by more than 20% towards the end of July before returning to close to record levels by the end of September. These price variations are generally passed through to customers albeit with a time lag of typically three months. With polymer costs representing circa 36% of total revenue the time lag can have a significant impact on the results reported in any period. The negative impact in the first quarter was compensated however by the developments in the second quarter. Adjusted operating profit 1 increased by 4% to 47.0m (2011: 45.4m) in spite of the weakening of the euro. At last year s exchange rates, operating profit would have been reported at 49.8m representing a 10% improvement in the period. This increase in profitability reflects an improvement in gross margins with a better sales mix as the proportion of higher added value products increased, additional Superfos synergies through the closure of Runcorn in the UK and the strategic exit from the mainland European vending and automotive businesses. The Group incurred a total of 18.5m (2011: 4.1m) of restructuring costs, impairment losses and other exceptional items in the first half year. These costs mainly relate to the finalisation of the first phase of the Superfos synergies ( 2.2m), impairment of goodwill within the Cobelplast cluster where market circumstances have deteriorated ( 5.8m), impairment of the asset value of sites held for sale due to the poor state of the property market ( 1.5m), the exit from mainland European vending and automotive businesses ( 5.7m) and the start of the Fitter for the Future programme with cost efficiency measures being implemented at our Lokeren (Belgium) and Bremervörde (Germany) sites ( 3.0m). The Group had a good cash flow performance over the period with 42.5m cash generated from operations (2011: 30.9m). Working capital as a percentage of sales at 4.7% (2011: 4.9%) was at similar levels. Investment in capital projects continues to 1 Adjusted operating profit is defined as operating profit before restructuring, closure and impairment charges and other exceptional items 3

4 RESPONSIBILITY STATEMENT exceed depreciation and included new production facilities for growth in pharmaceutical and the coffee capsule markets. As anticipated these developments, combined with an increase in dividend payments, resulted in a higher net debt of 165.5m (restated to include cross currency swaps relating to the US private placement notes). The Group retains a strong balance sheet with a total of 450m of finance facilities available. Injection Moulding months to 31 March m m m Sales Adjusted operating profit Return on sales 10.7% 9.3% 10.2% Return on net operating assets 27.9% 25.5% 28.2% The business comprises the Superfos, Bramlage-Wiko and UK Injection Moulding clusters. Overall the injection moulding business performed well in the period, with returns on sales improving to 10.7%. The impact of the weakening of the euro was to reduce sales by 21.6m and operating profit by 1.9m. Superfos manufactures and distributes open top filled injection moulded containers and has manufacturing facilities in France, Belgium, Spain, Poland, Denmark and Sweden, with joint ventures in Turkey and North Africa. Although sales volumes for paint and DIY products in Spain and southern Europe fell by a further 10% due to the tough economic market, this was mitigated by volume growth in France and the Nordic regions in the pet food and dairy sectors. Growth opportunities in lightweighting and barrier products are being actively pursued, with sales of these products increasing by 45% in the period. Sales volumes at Bramlage-Wiko, which operates in Germany, France, Belgium, Slovakia and the USA, were at similar levels to last year. The transfer of production to the lower cost Slovakian manufacturing facility continues to contribute to the improvement of returns. There were investments in new product development in pharmaceuticals, with the building of an extension to the existing production facility at the Mellrichstadt site in Germany during the period, and in growing the coffee capsule capacity. Although the continued recession has led to a slow-down in major product launches by customers, particularly in cosmetics and personal care, the cluster remains well positioned to take a significant share of new business opportunities through its strong market positions and leading technological know-how. The site at Antwerp (Belgium), which manufactures injection moulded margarine tubs, is proposed for closure as part of the yellow fats manufacturing optimisation within the Fitter for the Future programme. In the UK Injection Moulding business, which comprises five sites in the UK, overall sales volumes were down on last year with reduced activity in the paint and surface coatings sectors as the housing market in the UK continues to be depressed, with decorative paint sales falling year on year from already low levels. The transfer of machinery and business from Runcorn to other sites in the cluster was completed with customer service to the ongoing business unaffected. The cluster is now focusing on production synergies through the integration of transferred production, and in benchmarking its operations with other Superfos sites in mainland Europe. 4

5 RESPONSIBILITY STATEMENT Thermoforming months to 31 March m m m Sales Adjusted operating profit Return on sales 7.0% 4.7% 4.8% Return on net operating assets 20.0% 22.7% 20.0% The thermoforming operations comprise the Bebo (retail food packaging), Tedeco-Gizeh (food service UK vending and disposables) and Cobelplast (sheet production) clusters and are largely based in mainland Europe. Overall the thermoforming business performed well in the period, in spite of volume reductions across a number of markets, with growth in coffee capsules offsetting lower volumes in spreads and dairy products partly as a consequence of de-stocking. Market share has been retained in most sectors. The impact of the weakening of the euro was to reduce sales by 11.5m and operating profit by 0.6m. The margarine and spreads market is a significant part of the thermoforming business and the Group has strong market positions in this sector. The renewal of major customer contracts during the period has secured this business but to ensure profitability is sustained the efficiency of the yellow fats and margarine businesses within thermoforming have been reviewed under the Fitter for the Future programme. The site at Beuningen (Netherlands), which manufactures thermoformed tubs and lids, is proposed for closure whilst cost efficiency measures are being implemented at the Bremervörde (Germany) site. Most of the growth in the business is from further developments in oxygen barrier packaging (replacing glass and metal) and coffee capsules. Prospects for further growth in these areas remain good. Prospects for further growth in these areas remain good. The mainland European vending cups business was successfully exited during the period, resulting in the closure of its facility at Kajárpéc (Hungary) and restructuring at the Deventer site (Netherlands) which is now focused on coffee capsule production and the consumer food packaging business. Demand for sheet products remained flat compared with last year and margins continue to be under pressure. Following a strategic review of the Cobleplast business, it was decided to restructure the Lokeren (Belgium) site and grow the higher added value multi-layer sheet business. 5

6 RESPONSIBILITY STATEMENT Blow Moulding months to 31 March m m m Sales Adjusted operating profit Return on sales 6.6% 6.8% 7.1% Return on net operating assets 20.2% 21.0% 21.8% The blow moulding business operates from eleven sites based in both the UK and mainland Europe. Overall its performance was mixed with sales volumes marginally up on last year and operating profit slightly lower due to weaker demand and negative currency effects. The impact of the weakening of the euro was to reduce sales by 4.5m and operating profit by 0.2m. There were good volume increases at Llantrisant for PET containers in food and beverages and increased demand from a major customer in health & beauty. The Gent and French sites benefited from a further upturn in agrochemicals and new business was obtained in lubricants. The UK stock containers business suffered from weaker demand from industrial customers and Kutenholz in Germany experienced lower demand from their customers who export to southern and eastern Europe. Sales volumes at the Corby site, which benefits from strong demand for barrier blow moulded plastic jars and bottles, was affected by the weaker euro. The Envases site at Madrid relocated to new, more efficient, premises as part of the Fitter for the Future programme. The cluster continues to invest in multi-layer production facilities to help accelerate the conversion of conventional glass and metal packaging to lighter weight plastic. Non-financial key performance indicators RPC has three main non-financial performance indicators, which provide perspectives on the Group s progress in improving its contribution to the environment and employee welfare months to 31 March Non-financial KPIs: Electricity usage per tonne (kwh/t) 1,821 1,801 1,788 Water usage per tonne (L/T) Reportable accident frequency rate 1,014 1,480 1,389 Reportable accident frequency rate 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 increasing proportion of higher value added production is reflected in the slight increase in electricity usage per tonne of polymer converted. The improvement in water usage reflects the continued focus on water recycling initiatives across the Group. The reportable accident frequency rate has reached a record low, with the continuing health & safety awareness programme leading to further reductions in accidents. 6

7 RESPONSIBILITY STATEMENT Financial review Condensed consolidated income statement Revenue in the first half of /13 at 517.9m (2011: 586.7m) was 12% lower compared with the corresponding period last year. This was mainly due to the translation exchange effect of a weakened euro between the periods ( 1.14 v 1.25) with circa 64% of turnover generated from businesses in the Eurozone. In addition polymer prices fell on average by 7% compared with the same period in the previous year, most of which was passed on to customers in lower sales prices. Overall volumes based on polymer tonnes converted were 3% down on last year. Adjusted operating profit increased in the first half of /13 from 45.4m to 47.0m due to an improvement in gross margins arising from sales mix improvements and a less adverse effect from polymer pass through, the exit from mainland European vending and automotive businesses and lower costs through the closure of Runcorn as part of the phase one Superfos synergies. Restructuring, impairment losses and other exceptional items of 18.5m (2011: 4.1m) were incurred in the first half year. These comprised 5.7m of charges relating to the disposal of the automotive business in Germany and the restructuring and closure costs of exiting from the vending cup business in mainland Europe, and 2.2m related to the realisation of further Superfos synergies. In addition the Group incurred 3.0m of charges relating to restructuring and reorganisation costs as part of the Fitter for the Future programme. Goodwill impairment of 5.8m was incurred with respect to the Cobelplast cluster together with 1.5m of property impairments relating to assets held for sale and 0.3m of other items. Net financing costs in the first half increased by 0.3m to 6.5m due mainly to the higher cost of borrowing at fixed rates on the notes issued in the US private placement (USPP) market. The adjusted profit before tax 2 increased from 39.3m to 40.5m as a result of the improvement in operating profit, partially offset by the higher net interest charge. The adjusted tax rate was retained at 25.0% (2011: 25.0%) due to the further utilisation of unrecognised deferred tax assets, resulting in an adjusted profit after tax of 30.4m (2011: 29.5m) and adjusted basic earnings per share 3 of 18.4p (2011: 18.3p). The Group s overall tax charge was 8.1m (2011: 8.8m) resulting in a reported tax rate of 36.8% reflecting an underlying effective rate of 25.0% and a 10.6% tax credit on exceptional charges. The profit after tax was 13.9m (2011: 26.3m); the decrease being mainly due to the higher restructuring and impairment costs. The basic earnings per share was 8.4p (2011: 16.4p). Condensed consolidated balance sheet and cash flow statement Goodwill was impaired by 5.8m during the period following a review of the market position of the Cobelplast cluster and the restructuring necessary to return the Lokeren business to profitability. The remainder of the 9.5m reduction in goodwill and intangibles was attributable to the weakening of the euro against sterling between March and September. 2 Adjusted profit before tax is defined as operating profit before restructuring, closure and impairment charges and other exceptional items less net interest 3 Adjusted earnings per share is defined as adjusted operating profit after interest and tax adjustments divided by the weighted average number of shares in issue during the period. 7

8 RESPONSIBILITY STATEMENT Property, plant and equipment decreased slightly to 364.8m compared with the year end; net capital expenditure at 30.3m was 7.1m ahead of the depreciation charged in the period, reflecting continued investment in growth sectors such as pharmaceuticals and coffee capsules. Working capital (the sum of inventories, trade and other receivables and trade and other payables) increased by 13.6m to 47.5m compared with the year end position and represents 4.7% as a percentage of revenue for the half year (annualised). Included in current assets are four properties at a carrying value of 5.1m which are no longer used in the business and which have been classified as being held for sale. The long-term employee benefit liabilities of 55.5m at the half year end, were at a similar level to the year end position. The main component of this is the UK net pension deficit on the RPC Containers Ltd defined benefit scheme, which was closed in July 2010, and showed an actuarial gain of 0.8m in the period due to higher asset returns and lower inflation assumptions which more than offset a reduction in the discount rate. This was mitigated by actuarial losses on the unfunded schemes in France and Germany. Capital and reserves decreased in the period by 8.4m, the net profit for the period of 13.9m and net movements from the issue of shares from share-based arrangements of 1.0m being offset by dividends paid of 16.8m, adverse exchange movements on translation of 4.8m, pension related net actuarial losses of 1.1m and net fair value movements on derivatives of 0.6m. 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 31.2m compared with 20.9m in the same period in 2011, mainly due to a lower increase in working capital from the year end position. The net cash outflow from investing activities of 30.1m was 3.9m lower than in the previous year, but in line with investment plans to support growth in the higher added value businesses. Net debt, which includes the fair value of the cross currency swaps used to repay the USPP funding, increased by 5.5m from 160.0m (restated) at March to 165.5m at September, reflecting the 16.8m final dividend payment. The fair value of the swaps increased by 7.5m due to the weakening of the euro against the US dollar. Average net debt for the first half year was 217.8m (2011: 248.2m). Gearing stands at 63% compared with 74% for the same period last year and the covenanted net debt to EBITDA ratio is at

9 RESPONSIBILITY STATEMENT Financial key performance indicators (KPIs) The Group s main financial KPIs focus on return on investment, business profitability and cash generation months to 31 March Financial KPIs: Return on capital employed % 18.2% 19.4% Return on net operating assets % 19.1% 22.5% Added value per tonne 3 1,821 1,781 1,798 Gross margin 4 43% 41% 43% Free cash flow m (4.5)m 41.4m Cash conversion 6 55% 12% 62% 1 Return on capital employed (ROCE), which is measured over the previous 12 months, is defined as adjusted operating profit 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. 2 Return on net operating assets (RONOA), which is measured over the previous 12 months, is defined as adjusted operating profit divided by the average of opening and closing property plant and equipment, working capital and capital expenditure creditors for the year concerned. 3 Added value per tonne is the difference between production sales value per tonne produced and the cost of polymer per tonne produced. The 2011/12 comparative numbers have been restated using /13 exchange rates. 4 Gross margin is the difference between sales price and all directly variable costs such as polymer, packaging, transport and electricity. The 2011/12 comparative numbers have been restated using /13 exchange rates. 5 Free cash flow is defined as cash generated from operations less net capital expenditure, net interest and tax, adjusted to exclude exceptional cash flows and one-off pension deficit reduction payments. 6 Cash conversion is defined as 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. Key measures of the Group s financial performance are its return on capital employed (ROCE) and return on net operating assets (RONOA). ROCE at 19.3% was a percentage point higher than this time last year and at a similar level to that at the year end. The Group s target of 20% ROCE by March 2014, which assumed a nonrecessionary economic environment, has been largely achieved. RONOA at 22.3% showed a similar improvement year on year. The commencement of the Fitter for the Future business optimisation programme is aimed at ensuring that the current ROCE and RONOA levels can be sustained and ultimately improved. The improvement in sales mix is the principal driver of the improvements in added value per tonne and overall gross margin. Free cash flow was much improved compared with this time last year due to the better working capital position and lower capital expenditure, and the cash conversion ratio reflects the year on year improvement. 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 jointinvestment 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 9

10 RESPONSIBILITY STATEMENT significantly over the first half of the financial year. Further information concerning the principal risks and uncertainties faced by the Group can be found on pages 26 and 27 of the Group s annual report and accounts for the year ended 31 March. 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 approximately 450m at the end of September with an amount of 265m undrawn. The facilities are unsecured and comprise a revolving credit facility of up to 200m with nine major UK and European banks maturing in 2015, US private placement notes of $216m and 60m maturing in 2018 and 2021, mortgages of 14m, finance leases of 2m and other credit and overdraft arrangements of 49m. The Group s forecasts and projections show that it is able to operate within the level of its current banking 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 4.3p per share (2011: 4.2p) which is in line with the current policy. This will be paid on 25 January 2013 to ordinary shareholders on the register at 28 December. Outlook Whilst the Group s end markets are relatively defensive with 58% of its exposure to food packaging, the immediate outlook is influenced by the tougher macro-economic conditions in the Eurozone and UK economies affecting overall activity levels and competitive intensity. The newly launched Fitter for the Future programme aims to sustain and ultimately improve the current profitability levels. A further improvement in the sales mix through growth in higher added value products is anticipated whilst value creating corporate development opportunities continue to be explored. It is expected that the weaker euro will continue to impact on the results reported in sterling. 10

11 RESPONSIBILITY STATEMENT 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 Chairman R J E Marsh Chief Executive 29 November 29 November 11

12 INDEPENDENT REVIEW REPORT TO RPC GROUP PLC Introduction We have been engaged by the Company to review the Condensed set of financial statements in the half year financial report for the six months ended which comprises Condensed consolidated balance sheet of RPC Group Plc, the Condensed consolidated income statement and Condensed consolidated statements of comprehensive income, Changes in equity and cash flows for the six month period then ended and the related explanatory notes. We have read the other information contained in the half year 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 Services Authority ( the UK FSA ). 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 year financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half year financial report in accordance with the DTR of the UK FSA. 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 year 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 year 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 year financial report for the six months ended is not prepared, in all material respects, in accordance with IAS 34 as adopted by the EU and the DTR of the UK FSA. G A Watts for and on behalf of KPMG Audit Plc Chartered Accountants 29 November 12

13 Condensed consolidated income statement 12 months to 31 March 2011 Continuing Operations Notes m m m Revenue ,129.9 Operating costs (489.4) (545.4) (1,057.0) Operating profit Analysed as: Operating profit before restructuring and impairment losses Restructuring and closure costs 4 (8.6) (2.3) (8.5) Other exceptional items 4 (2.5) (1.8) (4.9) Impairment losses 4 (7.4) - (7.2) Operating profit Financial income Financial expenses (7.5) (6.2) (12.4) Employee benefit net finance expense (0.8) (0.9) (1.7) Net financing costs 5 (6.5) (6.2) (13.3) Profit before taxation Taxation 6 (8.1) (8.8) (14.9) Profit for the period attributable to equity shareholders Basic earnings per ordinary share 7 8.4p 16.4p 27.7p Diluted earnings per ordinary share 7 8.3p 16.1p 27.6p Adjusted basic earnings per ordinary share p 18.3p 37.3p Adjusted diluted earnings per ordinary share p 18.0p 37.1p Condensed consolidated statement of comprehensive income 12 months to 31 March 2011 m m m Profit for the period Other comprehensive loss Foreign exchange translation differences (4.8) (6.2) (12.1) Effective portion of movement on fair value of interest rate swaps (0.8) (0.4) (0.5) Deferred tax liability on above Actuarial losses on defined benefit pension plans (1.2) (4.0) (13.2) Deferred tax on actuarial losses Other comprehensive loss for the period, net of tax (6.5) (9.7) (22.7) Total comprehensive income for the period, attributable to equity shareholders

14 Condensed consolidated balance sheet 31 March 2011 Notes m m m Non-current assets Goodwill Other intangible assets Property, plant and equipment Derivative financial instruments Deferred tax assets Total non-current assets Current assets Inventories Trade and other receivables Cash and cash equivalents Derivative financial instruments Assets held for sale Total current assets Current liabilities Bank loans and overdrafts (3.2) (169.7) (2.0) Trade and other payables (266.8) (280.4) (296.8) Current tax liabilities (10.5) (8.6) (9.5) Employee benefits (1.6) (2.0) (5.5) Provisions and other liabilities (2.5) (9.6) (6.4) Derivative financial instruments - (0.2) (0.1) Total current liabilities (284.6) (470.5) (320.3) Net current assets/(liabilities) 52.7 (112.4) 44.7 Total assets less current liabilities Non-current liabilities Bank loans and other borrowings (195.6) (51.2) (200.2) Employee benefits 10 (55.5) (48.8) (56.3) Deferred tax liabilities (29.5) (30.4) (29.7) Provisions and other liabilities (1.6) (2.7) (1.8) Derivative financial instruments (3.7) (0.5) (1.2) Total non-current liabilities (285.9) (133.6) (289.2) Net assets Equity Called up share capital Share premium Capital redemption reserve Retained earnings Cash flow hedging reserve (1.2) (0.5) (0.6) Cumulative translation differences reserve Total equity attributable to equity shareholders The half year financial report was approved by the Board of Directors on 29 November, is unaudited and was signed on its behalf by: J R P Pike, Chairman P R M Vervaat, Finance Director 14

15 Condensed consolidated cash flow statement 12 months to 31 March 2011 Notes m m m Cash flows from operating activities Profit before tax Net financing costs Profit from operations Adjustments for: Impairment loss on intangible assets Amortisation of intangible assets Impairment loss on property, plant and equipment Depreciation Share-based payment expense (Gain)/loss on disposal of property, plant and equipment (0.3) 0.1 (0.2) Movement in provisions (8.7) (13.7) (14.3) Other non-cash items 0.6 (1.2) (2.2) Operating cash flows before movement in working capital Movement in working capital (10.4) (20.3) 2.9 Cash generated by operations Taxes paid (5.3) (5.0) (5.3) Interest paid (6.0) (5.0) (9.8) Net cash from operating activities Cash flows from investing activities Interest received Proceeds on disposal of property, plant and equipment Acquisition of property, plant and equipment (30.3) (34.9) (72.2) Acquisition of intangible assets (0.8) - (2.5) Proceeds on disposal of business Net cash flows from investing activities (30.1) (34.0) (72.7) Cash flows from financing activities Dividends paid 11 (16.8) (13.1) (19.8) Purchase of own shares (1.2) (0.6) (0.8) Proceeds from the issue of share capital Repayment of borrowings 12 (4.6) - (189.1) Proceeds of borrowings Net cash flows from financing activities (21.0) 9.4 (16.2) Net (decrease)/increase in cash and cash equivalents (19.9) (3.7) 11.2 Cash and cash equivalents at beginning of period Effect of foreign exchange rate changes Cash and cash equivalents at end of period Cash and cash equivalents comprise: Cash at bank and overdrafts

16 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 Six months to (unaudited) At 1 April (0.6) Profit for the period Actuarial losses (1.2) (1.2) Deferred tax on actuarial losses Exchange differences on foreign currencies (4.8) - - (4.8) Movement in fair value swaps (0.8) - (0.8) Deferred tax on hedging movements Total comprehensive (expense)/income for the period (4.8) (0.6) Issue of shares Equity-settled share-based payments Deferred tax on equity-settled share-based payments (0.3) (0.3) Purchase of own shares (1.2) (1.2) Dividends paid (16.8) (16.8) Total transactions with owners recorded directly in equity (17.4) (15.8) At (1.2) Six months to 2011 (unaudited) At 1 April (0.2) Profit for the period Actuarial losses (4.0) (4.0) Deferred tax on actuarial losses Exchange differences on foreign currencies (6.2) - - (6.2) Movement in fair value swaps (0.4) - (0.4) Deferred tax on hedging movements Total comprehensive (expense)/income for the period (6.2) (0.3) Issue of shares Equity-settled share-based payments Purchase of own shares (0.6) (0.6) Dividends paid (13.1) (13.1) Total transactions with owners recorded directly in equity (13.1) (11.9) At (0.5) Year to 31 March (audited) At 1 April (0.2) Profit for the period Actuarial losses (13.2) (13.2) Deferred tax on actuarial losses Exchange differences on foreign currencies (12.1) - - (12.1) Movement in fair value swaps (0.5) - (0.5) Deferred tax on hedging movements Total comprehensive (expense)/income for the period (12.1) (0.4) Issue of shares Equity-settled share-based payments Current tax on share options exercised Deferred tax on equity-settled (0.3) (0.3) share-based payments Purchase of own shares (0.8) (0.8) Dividends paid (19.8) (19.8) Total transactions with owners recorded directly in equity (18.5) (14.1) At 31 March (0.6)

17 NOTES TO THE CONDENSED FINANCIAL STATEMENTS 1. General information The comparative figures for the financial year ended 31 March are not the Group s statutory accounts for that financial year. Those accounts have been reported on by the Group s auditors and delivered to the Registrar of Companies. The report of the auditors was (i) unqualified, (ii) did not include a reference to any matters to which the auditors 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 The Group s statutory accounts for the year ended 31 March are available from the Company s registered office, at Sapphire House, Crown Way, Rushden, Northants NN10 6FB or from the Group s website, at 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. 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. 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. 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. During the six month period to, there have been no changes from prior periods in the measurement methods used to determine operating segments and reported segment results. Segment revenues and results The accounting policies of the reportable segments are the same as the Group's accounting policies in note 2. 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. 17

18 NOTES TO THE CONDENSED FINANCIAL STATEMENTS Continued The following is an analysis of the Group's revenue and results by reportable segment: months to 31 March 12 months to 31 March (unaudited) (unaudited) (audited) m m m m m m Inter-segment External Inter-segment External Inter-segment External Revenue Injection Moulding Thermoforming Blow Moulding ,129.9 Segmental results Injection Moulding Thermoforming Blow Moulding Segment operating profit Restructuring and other exceptional items (11.1) (4.1) (13.4) Impairments (7.4) - (7.2) Finance costs (6.5) (6.2) (13.3) Profit before tax Taxation (8.1) (8.8) (14.9) Profit after tax March m m m Segment assets Injection Moulding Thermoforming Blow Moulding Unallocated assets Total assets The following is an analysis of the Group's revenue and adjusted operating profit by origin: 30 September months to 31 March m m m Revenue by origin United Kingdom Germany France Other Mainland Europe * ,129.9 Operating profit by origin United Kingdom Mainland Europe * * Mainland Europe also includes an operation in the USA whose sales are predominantly sourced from intra-group supplies manufactured in Germany. 18

19 NOTES TO THE CONDENSED FINANCIAL STATEMENTS Continued 4. Restructuring and impairment losses 12 months to 31 March 2011 m m m Restructuring and closure costs Other exceptional items Impairment loss on intangible assets Impairment loss on property, plant and equipment Impairment losses The closure costs incurred in the period comprise the costs of the planned withdrawal from the vending cup business in mainland Europe announced in the prior year ( 5.7m) with the remaining 2.9m relating to the Fitter for the Future programme affecting a number of sites across the Group. Other exceptional items mainly comprise the remaining costs of the transfer of business from the closed site at Runcorn to other UK sites. The impairment loss on intangible assets relates to the write down of the goodwill held against the Cobelplast cluster, where difficult market conditions are adversely affecting the Group s sheet production businesses. The impairment loss on property, plant and equipment relates to impairment on buildings classified as held for sale. 5. Net financing costs 12 months to 31 March 2011 m m m Net interest payable Mark to market gains on foreign currency hedging instruments (1.7) (0.9) (0.5) Fair value adjustment to borrowings Interest cost on retirement benefit obligations Expected return on pension scheme assets (2.8) (2.9) (6.0)

20 NOTES TO THE CONDENSED FINANCIAL STATEMENTS Continued 6. Tax A taxation charge of 8.1m has been made in the half year to in respect of the profit before taxation of 22.0m, 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 25.0% compares with 25.0% for the year ended 31 March and for the half year to 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 of 164,651,817 (half year ended 2011: 160,750,569 and year ended 31 March : 161,313,391). 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 as at the half year ended was 165,327,126 (half year ended 2011: 163,357,351 and year ended 31 March : 162,118,950). 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 and closure costs and impairment losses identified separately on the face of the Condensed consolidated income statement, together with the debit or credit for the foreign currency hedging instruments and exchange differences on bonds, adjusted for the tax thereon, have been excluded. A reconciliation from profit after tax as reported in the Condensed consolidated income statement to the adjusted profit after tax is set out below: 12 months to 31 March 2011 m m m Profit after tax as reported in the Condensed consolidated income statement Restructuring and closure costs and other exceptional items Foreign currency hedging instruments and exchange differences on bonds Tax effect thereon (2.0) (1.0) (5.2) Adjusted profit after tax