RPC GROUP PLC. Half year results for the six months ended 30 September 2015

Transcription

1 RPC GROUP PLC 25 November 2015 Half year results for the six months ended 30 September 2015 RPC Group Plc, a leading plastic products design and engineering company, announces its half year results for the six months ended 30 September September 2015 September 2014 Change Key Financial Highlights 1 Revenue ( m) % Adjusted EBITDA ( m) % Adjusted operating profit ( m) % Adjusted operating margin % 10.3% Adjusted profit before tax ( m) % Adjusted basic earnings per share 3,4 22.9p 20.2p 13% RONOA 2,5 22.7% 21.2% Statutory Profit before tax ( m) Net profit ( m) Basic earnings per share 1,4 11.2p 11.8p Dividend per share 4 5.2p 4.4p 18% 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 Comparative restated for rights issue. 5 Comparative restated to include acquisitions on a proforma basis. Key developments: Vision 2020 strategy continues to generate value through both organic and acquisition-led growth; Promens integration progressing well with the expected steady state cost synergies increasing to 50m per annum, up from the 30m announced previously; Revenues grew 36% reflecting a 4% like-for-like growth in packaging and the contribution from recent acquisitions; Adjusted operating profit increased to 82.8m with the adjusted EPS improving by 13% to 22.9p; Strong cash generation with net cash flow from operating activities of 74.4m (2014: 42.4m); Interim dividend of 5.2p up 18% making this the 23rd year of dividend progress.

2 Commenting on the results, Pim Vervaat, Chief Executive, said: The performance in the first half year has been encouraging, certainly when taking into account the polymer time lag and foreign exchange translation headwinds. The second half year has started in line with management expectations, with further trading improvements expected as polymer prices ease and additional Promens-related synergies are realised. The Vision 2020 strategy continues to generate further opportunities for growth. For further information: RPC Group Plc FTI Consulting 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. 2

3 INTERIM MANAGEMENT REPORT Business Operations RPC is a leading plastic products design and engineering company for packaging and nonpackaging markets, with 18 design and engineering development centres and 89 manufacturing sites in 24 countries employing more than 15,000 people. The Group develops and manufactures a diverse range of products for a wide variety of customers, including many household names, and enjoys strong market positions in many of the end markets it serves and the geographical areas in which it operates. Using a wide range of polymer conversion technologies, including injection moulding, blow moulding, thermoforming, reaction injection moulding, rotational moulding and other specialist conversion techniques, it combines the development of innovative packaging and technical solutions for its customers with unparalleled levels of service and support. The business is now organised and managed according to product and market characteristics, and is split into two segments, Packaging and Non-packaging. The Packaging businesses serves the food, non-food, personal care, beverage and healthcare markets; the Non-packaging businesses design and manufacture moulds, moulded products and technical components for other markets. Strategy There are three original core elements to the Group s Vision 2020 Focused Growth Strategy: 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. A fourth element - pursuing added value opportunities in non-packaging markets - was added to the strategy, as announced at the Capital Markets Day in June 2015, to reflect the design and engineering capabilities that the Group has in moulding and capitalising on the new technologies, expertise and market access it has recently acquired. The Group has continued to make good progress in the period in implementing all elements of this strategy. Continuing focused organic growth The Group achieved further growth during the half year, with packaging sales growing 4% on a like-for-like basis. Overall activity levels improved year on year with growth experienced in the USA and eastern Europe, with sales volumes in the UK and western Europe generally flatter. Sales of non-packaging products accounted for a higher proportion of Group sales, which improved the overall profitability of the Group. The Group innovation capabilities were recognised through winning several awards, including the UK Packaging Company of the Year for the second consecutive year. Selective consolidation in the European packaging market through targeted acquisitions In 2014/15, the Group made two significant acquisitions in Europe. Promens, a leading European manufacturer of rigid plastic products for a wide range of end markets, has strengthened our position across the enlarged Group s common packaging end markets and extended our geographic reach, adding new adjacent technologies to RPC s capabilities. The Group also acquired PET Power, a Netherlands based manufacturer of PET products, serving the cosmetics, 3

4 INTERIM MANAGEMENT REPORT food and pharmaceutical markets. With sales of 37m and as a European leader in PET based products, it has provided RPC with a strong platform from which to grow its PET business. During the half year, the Group made two further bolt-on acquisitions. In May 2015, the Group enhanced its position in PET further by acquiring Innocan, a Belgian based start-up company with a range of innovative and stackable PET containers. Located in Antwerp and with annual sales of c. 6m, it sells two-stage PET containers for the food and industrial markets, complementing the Group s position in PET. In June 2015, Depicton, a small manufacturer of cosmetic tubes based in Market Drayton, was acquired. This business and its production capabilities have now been transferred to Beccles and incorporated within M&H Plastics. Creating a meaningful presence outside Europe In 2014/15 the Group acquired Ace, a China based and Hong Kong headquartered awardwinning design and 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 c. 124m, it is a niche manufacturer of specialist injection moulded components. It is now providing RPC with a strong platform to support its international customer base in China, as evidenced by the work undertaken in integrating the Promens operations at Hefei into the Group for a major global customer, and it continues to develop the Group s in-house technical expertise in mould design and manufacture. The acquisition of Promens has also extended the Group s geographical reach outside Europe with operations in Canada, Russia, Tunisia and China. The Group is also benefiting from its recent expansion programmes in the USA, where sales have increased by 58% in the last two years. Additional capacity has provided growth particularly in the food and personal care markets. Furthermore, the Group intends to start up a greenfield plant in Brazil following one of its major coffee capsule customers. Pursuing added value opportunities in non-packaging markets Since Ace s acquisition further synergies have been realised with the newly acquired businesses within the enlarged RPC Group leveraging from Ace s mould making expertise, and providing new opportunities for Ace to apply its mould making capabilities to new mould types (such as blow moulding). In addition, the acquisition of the materials handling and specialty vehicles businesses through Promens have provided opportunities for the Group to make enhanced returns with these businesses trading well under RPC s ownership. In November 2015, the Group acquired Strata Products, a market leading manufacturer of material handling products including branded products for the horticultural market thereby extending and enhancing the Group s position in the UK retail market. Based in Pinxton, Nottinghamshire and with annual sales of c. 29m, the business has seen recent strong growth and provides further opportunities for the Group to leverage purchasing and best practice synergies. Business Integration The Ace business, which was acquired in June 2014, is now fully integrated into the Group and operates as a standalone division, providing a strong platform to manage further growth for the Group within Asia. The Promens acquisition required post-merger integration, necessitating a new organisational structure for the Group given the common products, markets and end sectors in rigid plastic packaging which both Promens and RPC serve. The Group now comprises five divisions, with each operating site being managed within a cluster or region of each division based on geographical, product or technological lines, serving both packaging and non-packaging markets. The Packaging divisions are the former clusters, RPC Superfos (now incorporating the former 4

5 INTERIM MANAGEMENT REPORT UKIM cluster), RPC Bramlage, RPC Bebo, together with a new division, RPC Promens, which includes the blow moulding businesses of the two former organisations. The Non-packaging businesses, which manufacture moulds, moulded products and technical components for other markets, comprise RPC Ace and the materials handling (RPC Sæplast) and vehicles (RPC Promens Vehicles) businesses, together with mould manufacture from the other divisions. The new organisation is scalable for future growth both organically and by acquisition. Excellent progress was made during the period in integrating the Promens businesses and realising the synergies, including: eliminating corporate overhead by closing the Reykjavik, Iceland, head office and the Finance and IT offices in Oslo and Kongsvinger, Norway; realising the polymer purchasing and working capital synergies ahead of schedule; and optimising the combined manufacturing footprint, with the announcement of eight sites, both former RPC and Promens, for either closure or major restructuring. Production optimisation programmes have also commenced in other sites in the Group, affected by the impact of these changes. Purchasing synergies were higher than originally estimated and the identification of further opportunities for eliminating manufacturing overlap and inefficiency have increased the Group s estimate of overall steady state cost savings to 50m ( 36.0m) from 30m ( 21.6m) per annum, the run-rate of which is expected to be achieved by the end of 2016/17. Total restructuring costs are estimated to be 110m ( 79.1m) over two years, with associated cash costs of 65m ( 46.8m) and taking into account non-cash asset write-downs and 10m ( 7.2m) of working capital synergies. At the half year 13m ( 9.4m) of benefits had already been realised, with a further 15m ( 10.8m) expected by the end of 2015/16. The costs of the programme to date, which are charged as exceptional integration and restructuring costs amounted to 27.6m ( 19.8m), including impairments costs of 11.6m ( 8.7m). The PET Power, Innocan and Depicton businesses were fully integrated during the period, with business synergies realised. Business Review The Group s results in the first half were encouraging and in line with expectations, with good profit growth despite the impact of a foreign exchange translation headwind, the time lag in passing through higher polymer prices, and a generally flat European macro-economic environment. Revenues for continuing operations grew 36% to 800m, due to the acquired businesses (the impact of Ace, Promens and PET Power) as well as growth with packaging up 4% partly mitigated by lower non-packaging sales (moulds) on a like-for-like basis. Adjusted EBITDA 1 was 120.2m (2014: 86.9m) and adjusted operating profit 1 of 82.8m increased by 21.9m (36%), with return on sales at 10.3% (2014: 10.3%) and RONOA at 22.7% (2014 reported 24.1%, 2014 pro-forma 21.2%), both measures comfortably ahead of the Vision 2020 minimum performance metrics. The Group incurred 29.7m (2014: 16.1m) of exceptional restructuring costs, impairments and other exceptional items in the first half year, mainly relating to the integration and restructuring costs in respect of the Promens acquisition. The Group continued to invest in growth and efficiency projects, with 49m of capital expenditure incurred in the period. Cash generation improved reflecting the impact of the recent acquisitions with 74.4m (2014: 42.4m) net cash from operating activities and free cash flow 2 of 47.5m (2014: 20.2m). Working capital as a percentage of sales was 6.3% (2014: 4.1%), higher than the previous corresponding period due to the acquired businesses. The Group retains a strong 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. 5

6 INTERIM MANAGEMENT REPORT balance sheet with net debt of 439m, and it had total finance facilities of 843m at 30 September The review of the business performance follows the new organisational structure, of two segments, Packaging and Non-packaging. Packaging 30 September September 2014 Sales ( m) Adjusted operating profit ( m) Return on sales 9.8% 9.8% Return on net operating assets 23.7% 23.0% The Packaging business serves the food, non-food, personal care, beverage and healthcare markets with innovative solutions. While acquisitions contributed 159m to top line growth, after taking account of the polymer price reductions and translation impact, like for like revenue growth of 4% was achieved during the period. This was driven by the continued success of products such as the patented dose counter, further success of the Superlock food containers, continuing single-serve beverage growth with three further lines being commissioned, and further penetration by the Group into the UK, Nordic and US food and personal care markets. Overall there was strong growth in personal care and food, tempered by flatter sales in non-food packaging and healthcare. Operating margins remained steady at 9.8% and return on net operating assets improved slightly to 23.7%. This was achieved despite an increased polymer headwind compared with the same period last year of 8m and was driven by growth, the early implementation of polymer synergies and a contribution from the manufacturing optimisation projects. The technology pipeline continued to deliver with a new cube moulding solution being launched as an alternative to glass in the personal care market, the first successful in-mould labelled thermoforming line for the spreads market introduced, combining the potential of an oxygen barrier with photo quality decoration, lightweighting and high output. Airless dispensing systems coming to market include the Twist Up and Slidissime which provide innovative ease of use while increasing the protection of unused contents. The next generation of single-serve beverage assembly lines are doubling output rates to 1,200 capsules per minute. At the recent UK Packaging Awards, RPC won Packaging Company of the Year for the second year running and was short listed for Design Team of the Year, Rigid Plastic Pack of the Year, Best Packaging of a New Product & Consumer Convenience. This industry recognition is testament to the innovation and development of the packaging business within RPC. In order to realise the synergy potential from the combined RPC and Promens packaging businesses, manufacturing optimisation projects were initiated. These involved sites closures and restructuring activities with the majority of business transferred to more optimum locations. The cost base of one of our major German businesses was optimised through a further headcount reduction. The rigid plastic packaging market is forecasted to grow at above GDP over the next 5 years, according to PIRA, which will continue to present opportunities for the Packaging business to continue to grow organically both inside and outside Europe, through innovation and continuing to 6

7 INTERIM MANAGEMENT REPORT launch turnkey projects from its extended platforms in the USA and China. This, combined with a highly segmented plastic packaging market, should present the inorganic growth opportunities to deliver on our Vision 2020 strategy. Non-packaging 30 September September 2014 Sales ( m) Adjusted operating profit ( m) Return on sales 13.1% 18.0% Return on net operating assets 23.8% 19.4% The Non-packaging businesses of the Group comprise the RPC Ace division, RPC Promens Sæplast and RPC Promens Vehicles, together with mould sales from the other divisions. The increase in sales and profits reflects the impact of the Promens acquisition, with the 2014 comparator period reflecting four months contribution of the Ace business only. The new businesses acquired from Promens operate at lower return on sales levels than Ace. On a likefor-like basis mould sales were lower in the period owing to some large customer contracts for tooling which were not repeated in the first half of the year. The Ace division, comprising six sites in China, operates a world class mould design and manufacturing capability supplying complex moulds to both internal and external customers and provides the Group with an Asian precision engineering platform for manufacturing high added value co-engineered injection moulded products. It serves, alongside packaging markets, medical, lifestyle, power and automotive end markets. Overall the business traded satisfactorily in the period but the slowdown in GDP growth in China, the appreciation of the renminbi versus the euro adversely impacting exports to Europe, and reduced demand from a major life style customer impacted growth rates. Successes in securing automotive contracts were achieved and will boost sales going forward. The first of two plating lines at the Zhuhai site was installed during the period following their destruction by fire in October 2014 and the second line was launched in early November With further growth in electroplated products identified, investment in additional electroplating capacity has been approved and will be made in the second half. The Promens Hefei operation has been successfully integrated into the Ace business. RPC Promens Sæplast, which comprises the materials handling rotational moulding business of Promens, serving the fish and agricultural industries, performed well in the period, with sales activity and profits ahead of the previous year. Following a strategic review of this business, the manufacturing facility at Taicang (China) will be closed. RPC Promens Vehicles, which manufactures plastic parts for trucks and specialty vehicles from sites in the Netherlands, Estonia, Germany and the Czech Republic, also performed well with increases in sales volumes and profits over the period, and additional orders for longer term sales secured. Restructuring activities were undertaken at the Germany and Netherlands sites to deliver the synergies from combining Promens and RPC. 7

8 INTERIM MANAGEMENT REPORT 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 30 September September 2014 Non-financial KPIs: Electricity usage per tonne (kwh/t) 1,904 2,034 Water usage per tonne (L/T) Reportable accident frequency rate 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 show further progress made in the period. The reportable accident frequency rate is affected in the first half of 2014/15 by the impact of the former Promens sites whose health and safety record is currently not as strong as the rest of the Group. However, for the non-promens sites, the number of reportable and major accidents decreased during the period reflecting the continuous focus on this important area. A programme of assessment and improvement for the Promens sites to bring them to standard is in progress. 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 foreign exchange impacts. Acquisitions On 5 May 2015 the Group acquired the entire share capital of Innocan BVBA, for a consideration of 6.5m ( 4.7m), on a cash-free, debt-free basis from existing funds, with 2.2m ( 1.6m) deferred to 2017 subject to subsequent business performance. The provisional goodwill on acquisition amounted to 3.4m after fair value adjustments, and the trading results of the business after the acquisition date are included in the Group results. On 5 June 2015, the Group acquired the trade and assets of Depicton Limited for 0.7m. Condensed consolidated income statement Sales from continuing operations in the first half of 2015/16 increased by 36% to 799.8m (2014: 588.9m), with recent acquisitions (Ace, Promens, PET Power, Innocan) accounting for most of this, together with sales growth in packaging products of 4% underpinning an increase of overall activity levels. This was offset by the translation effect of a weaker euro ( 1.39 v 1.24) which reduced sales by 56.9m compared with the corresponding period last year and the impact of polymer price reductions passed on to customers through sales price reductions. Adjusted EBITDA was 120.2m (2014: 86.9m) and adjusted operating profit was 82.8m (2014: 60.9m), an increase of 21.9m (36%). The effect of the weaker euro was to reduce profit by 6m and there was a polymer headwind of c. 8m compared to last year adversely impacting 8

9 INTERIM MANAGEMENT REPORT margins. In spite of the fall in the price of oil, polymer prices rose steadily from February to June 2015 reaching record levels. The increased costs could only be passed on to customers with a time lag, although reductions in polymer prices in the latter part of the half year mean that the second half has started with a polymer tailwind. Offsetting the above were the impact of acquisitions ( 19m) over the period, synergies realised of 9m (higher and ahead of schedule) from the Promens integration, and general sales growth and other business improvements offsetting inflationary pressures. Exceptional items for the period amounted to 29.7m (2014: 16.1m), comprising Promens integration and restructuring costs of 19.8m, other restructuring and exceptional costs of 2.8m, transaction costs relating to acquisitions of 1.7m, and other exceptional items of 5.4m, including 3.6m of inferred remuneration relating to Ace shareholders who have been retained in the business. The main elements of the Promens integration costs relate to redundancies, restructuring costs and impairments to close the Pulheim site in Germany (RPC Bramlage), and restructuring in respect to reorganisations at Theessen (RPC Promens) and Hockenheim (RPC Promens Vehicles). The remuneration charge of 3.6m 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. Other nonunderlying items include amortisation costs of acquired intangibles of 5.0m (2014: 1.7m) and pension administration costs of 0.3m (2014: 0.3m) Net interest payable increased from 6.1m to 7.3m 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. The adjusted profit before tax 1 increased from 54.9m to 75.8m largely as a result of the improvement in adjusted operating profit. The adjusted tax rate was 24.0% (2014: 24.0%), resulting in an adjusted profit after tax of 57.6m (2014: 41.7m) and adjusted basic earnings per share 2 of 22.9p (2014 restated: 20.2p). The Group s overall tax charge for continuing operations was 12.2m (2014: 10.6m) resulting in a reported tax rate of 30.1% reflecting an adjusted effective rate of 24.0% and a 17.0% tax credit on exceptional and non-underlying charges. The profit after tax for continuing operations was 28.3m (2014: 24.3m); the increase being mainly due to the higher operating profit. Basic earnings per share for continuing operations was 11.2p (2014 restated: 11.8p). Condensed consolidated balance sheet and cash flow statement The balance sheet includes the net assets of the Innocan and Depicton businesses which were acquired during the period. The carrying value of property, plant and equipment was largely unchanged. Although capital additions of 46.1m were ahead of depreciation of 35.8m, 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 to 101.1m (2014: 48.1m) representing 6.3% as a percentage of sales for the half year (annualised) (2014: 4.1%). 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. 9

10 INTERIM MANAGEMENT REPORT The long-term employee benefit liabilities at the half year decreased from 109.3m in March 2015 to 92.1m, most of the decrease reflecting a decrease in the funding deficit position of the two major UK defined benefit schemes, RPC Containers and M&H Plastics. These showed actuarial gains of 16.6m in the period mainly due to an increase in the discount rate. Deferred and contingent consideration relates to previous acquisitions, including the expected contingent consideration earned during the period by shareholders of Ace who are working within the business. Capital and reserves increased in the period by 15.9m, the net profit for the period of 28.3m, pension related net actuarial gains of 16.6m, net fair value movements on hedging derivatives of 4.5m, net movements from the issue and purchase of shares for share-based arrangements of 2.0m offsetting foreign exchange movements on translation of 4.4m and dividends paid of 27.7m. 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 74.4m compared with 42.4m in the same period in 2014, mainly due to the higher EBITDA from acquisitions made in 2014/15. The net cash outflow from investing activities of 48.6m (2014: 160.4m) includes 4.8m to acquire the Innocan and Depiction businesses, 48.7m of capital expenditure and final proceeds from the disposal of Offenburg and Cobelplast which were businesses sold in 2014/15. Net debt, which includes the fair value of the cross currency swaps used to transform the US private placement (USPP) funding, increased slightly from 431m at 31 March 2015 to 439m at 30 September Average net debt for the first half year was 485.4m (2014: 344.1m). Gearing stands at 74% and the covenanted leverage (net debt to EBITDA ratio) is at Financial key performance indicators (KPIs) The Group s main financial KPIs focus on return on investment, business profitability and cash generation. 30 September 30 September Continuing operations Return on net operating assets % 21.2% Return on sales % 10.3% Free cash flow m 20.2m Return on capital employed % 16.9% Cash conversion 5 71% 53% 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. Comparatives restated to include acquisitions on a proforma basis. 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), 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 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. 10

11 INTERIM MANAGEMENT REPORT 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 de-minimis hurdles agreed by the Board are for the Group to exceed 20% RONOA and 8% ROS. ROCE is targeted to remain well above the Group s weighted average cost of capital. Free cash flow improved reflecting the cash generation from the acquisitions and cash conversion increased. 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 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 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 843m at the end of 30 September 2015 with headroom of 371m. The facilities are mainly unsecured and comprised a revolving credit facility (RCF) of up to 490m 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 12m, finance leases and other credit and overdraft arrangements of 94m. 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 5.2p per share (2014 restated: 4.4p) and is in line with the Group s progressive dividend policy which has been in place since RPC s flotation in This will be paid on 26 January 2016 to ordinary shareholders on the register at 29 December Outlook The performance in the first half year has been encouraging, certainly when taking into account the polymer time lag and foreign exchange translation headwinds. The second half year has started in line with management expectations, with further trading improvements expected as polymer prices ease and additional Promens related synergies are realised. The Vision 2020 strategy continues to generate further opportunities for growth. 11

12 INTERIM MANAGEMENT REPORT 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 P R M Vervaat Chief Executive 25 November November

13 INDEPENDENT REVIEW REPORT TO RPC GROUP PLC Report on the condensed set of financial statements Our conclusion We have reviewed RPC Group Plc's condensed financial statements (the "interim financial statements") in the half year financial report 2015 of RPC Group Plc for the 6 month period ended 30 September Based on our review, nothing has come to our attention that causes us to believe that the interim financial statements are not prepared, in all material respects, in accordance with International Accounting Standard 34, Interim Financial Reporting, as adopted by the European Union and the Disclosure Rules and Transparency Rules of the United Kingdom s Financial Conduct Authority. What we have reviewed The interim financial statements comprise: the condensed consolidated balance sheet as at 30 September 2015; the condensed consolidated income statement and condensed consolidated statement of comprehensive income for the period then ended; the condensed consolidated cash flow statement for the period then ended; the condensed consolidated statement of changes in equity for the period then ended; and the explanatory notes to the condensed financial statements. The interim financial statements included in the half year financial report 2015 have been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting, as adopted by the European Union and the Disclosure Rules and Transparency Rules of the United Kingdom s Financial Conduct Authority. As disclosed in note 2 to the condensed financial statements, the financial reporting framework that has been applied in the preparation of the full annual financial statements of the Group is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union. Responsibilities for the condensed financial statements and the review Our responsibilities and those of the directors The half year financial report 2015, including the interim financial statements, is the responsibility of, and has been approved by the directors. The directors are responsible for preparing the half year financial report 2015 in accordance with the Disclosure Rules and Transparency Rules of the United Kingdom s Financial Conduct Authority. The maintenance and integrity of the RPC Group Plc website is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the interim financial statements since they were initially presented on the website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. 13

14 INDEPENDENT REVIEW REPORT TO RPC GROUP PLC Our responsibilities and those of the directors (continued) Our responsibility is to express a conclusion on the interim financial statements in the half year financial report 2015 based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of complying with the Disclosure Rules and Transparency Rules of the United Kingdom s Financial Conduct Authority and for no other purpose. We do not, in giving this conclusion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing. What a review of condensed set of financial statements involves 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 United Kingdom. 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. We have read the other information contained in the half year financial report 2015 and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim financial statements. PricewaterhouseCoopers LLP Chartered Accountants Birmingham 25 November

15 Condensed consolidated income statement 12 months to 30 September September March 2015 (unaudited) (unaudited) (audited) Adjusted Nonunderlying (note 4) Total Adjusted Nonunderlying (note 4) Total Adjusted Nonunderlying (note 4) Total Continuing operations Notes m m m m m m m m m Revenue , ,222.4 Operating costs (717.0) (35.0) (752.0) (528.0) (18.1) (546.1) (1,090.8) (48.4) (1,139.2) Operating profit 82.8 (35.0) (18.1) (48.4) 83.2 Financial income Financial expenses (12.8) - (12.8) (8.2) - (8.2) (23.6) - (23.6) Non-underlying finance costs - (0.3) (0.3) - (1.9) (1.9) - (3.5) (3.5) Net financing costs 5 (7.3) (0.3) (7.6) (6.1) (1.9) (8.0) (12.8) (3.5) (16.3) Share of investment accounted for under the equity method Profit before taxation (35.3) (20.0) (51.9) 67.1 Taxation 6 (18.2) 6.0 (12.2) (13.2) 2.6 (10.6) (28.6) 7.3 (21.3) Profit for period from continuing operations 57.6 (29.3) (17.4) (44.6) 45.8 Discontinued operations Profit/(loss) for the period from discontinued operations (4.4) (4.1) 0.3 (4.9) (4.6) Total profit attributable to equity shareholders 57.6 (29.3) (21.8) (49.5) 41.2 Earnings per share Continuing operations 30 September 2015 (unaudited) 30 September 2014 restated (unaudited) 12 months to 31 March 2015 (audited) Basic p 11.8p 20.8p Diluted p 11.7p 20.8p Adjusted basic p 20.2p 41.0p Adjusted diluted p 20.1p 40.9p Total Group Basic p 9.8p 18.7p Diluted p 9.7p 18.7p 15

16 Condensed consolidated statement of comprehensive income 12 months to 30 September 30 September 31 March (unaudited) (unaudited) (audited) m m m Notes Profit for the period Items that will not be reclassified subsequently to profit and loss Actuarial gains/(losses) on defined benefit schemes (18.7) (31.8) Deferred tax on actuarial (gains)/losses (3.4) (15.1) (25.8) Items that may be reclassified subsequently to profit and loss Recycle of exchange differences on disposal of operations - (2.5) (2.5) Foreign exchange translation differences (4.4) (6.1) 4.1 Effective portion of movement on fair value of interest rate swaps 5.6 (1.5) (6.8) Deferred tax (liability)/asset on above (1.1) Other comprehensive expenses, net of tax 0.1 (9.8) (3.9) Total comprehensive income/(loss) for the period, attributable to equity shareholders 41.6 (4.7)

17 Condensed consolidated balance sheet 30 September 30 September 31 March (unaudited) (unaudited) (audited) Notes m m m Non-current assets Goodwill Other intangible assets Property, plant and equipment Investments accounted for under the equity method Derivative financial instruments Deferred tax assets Total non-current assets 1, ,279.3 Current assets Inventories Trade and other receivables Cash and cash equivalents Assets held for sale Total current assets Current liabilities Bank loans and overdrafts (9.5) (9.5) (13.7) Trade and other payables (404.8) (305.8) (389.9) Current tax liabilities (19.6) (15.1) (13.5) Employee benefits (7.0) (1.5) (9.8) Deferred and contingent consideration 17 (13.7) (9.2) (13.3) Provisions and other financial liabilities 16 (11.7) (12.3) (20.5) Derivative financial instruments (1.6) - (1.4) Total current liabilities (467.9) (353.4) (462.1) Net current assets Total assets less current liabilities 1, ,354.6 Non-current liabilities Bank loans and other borrowings (544.7) (341.1) (499.1) Employee benefits 15 (92.1) (88.9) (109.3) Deferred tax liabilities (64.2) (46.3) (65.4) Deferred and contingent consideration 17 (54.7) (46.3) (51.4) Provisions and other financial liabilities 16 (38.7) (11.4) (38.9) Derivative financial instruments (3.2) (4.9) (9.4) Total non-current liabilities (797.6) (538.9) (773.5) Net assets Equity Called up share capital Share premium Capital redemption reserve Retained earnings Cash flow hedging reserve (1.1) (1.3) (5.6) Cumulative translation differences reserve Total equity attributable to equity shareholders Non-controlling interest Total equity The half year financial report was approved by the Board of Directors on 25 November 2015, is unaudited and was signed on its behalf by: J R P Pike, Chairman S J Kesterton, Group Finance Director 17

18 Condensed consolidated cash flow statement 12 months to 30 September 30 September 31 March (unaudited) (unaudited) (audited) Notes m m m Cash flows from operating activities Profit before tax continuing operations Loss before tax discontinued operations - (4.1) (4.6) Share of investment 13 (0.3) (0.1) (0.2) Net financing costs Profit from operations Adjustments for: Amortisation of intangible assets Impairment loss on property, plant and equipment Depreciation Share-based payment expense Gain on disposal of property, plant and equipment (0.6) (0.1) (0.1) Impairment loss on assets held for sale Loss on disposal of businesses Movement in provisions and financial liabilities (10.3) (6.1) (12.7) Other non-cash items (0.3) (1.9) (2.2) Operating cash flows before movement in working capital Movement in working capital (4.0) (9.2) (11.1) Cash generated by operations Taxes paid (3.9) (5.5) (15.7) Interest paid (7.8) (6.3) (13.7) 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 (48.7) (43.5) (92.3) Acquisition of intangible assets (1.8) (1.8) (5.0) Acquisition of businesses (4.8) (118.9) (450.4) Proceeds on disposal of businesses Net cash flows from investing activities (48.6) (160.4) (540.5) Cash flows from financing activities Dividends paid 9 (27.7) (20.6) (29.9) Purchase of own shares 20 (2.0) (1.7) (2.5) Proceeds from the issue of share capital Proceeds of borrowings Net cash flows from financing activities Net increase in cash and cash equivalents 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

19 Condensed consolidated statement of changes in equity Share Share Capital Translation Cash flow Retained Non- Total capital premium redemption reserve hedging earnings controlling equity account reserve reserve interest m m m m m m m m 30 September 2015 (unaudited) At 1 April (5.6) Profit for the period Actuarial gains Deferred tax on actuarial gains (3.4) - (3.4) Exchange differences (4.4) (4.4) Movement in fair value swaps Deferred tax on hedging movements (1.1) - - (1.1) Total comprehensive (expense)/income for the period (4.4) Issue of shares Equity-settled share-based payments Current tax on equity-settled sharebased payments Deferred tax on equity-settled sharebased payments Purchase of own shares (2.0) - (2.0) Dividends paid (27.7) - (27.7) Total transactions with owners recorded directly in equity (27.6) - (25.7) At 30 September (1.1) September 2014 (unaudited) At 1 April (0.1) Profit for the period Actuarial losses (18.7) - (18.7) Deferred tax on actuarial losses Exchange differences (6.1) (6.1) Movement in fair value swaps (1.5) - - (1.5) Recycle of exchange differences on disposals (2.5) (2.5) Deferred tax on hedging movements Total comprehensive (expense)/income for the period (8.6) (1.2) (4.7) Issue of shares Equity-settled share-based payments Current tax on equity-settled sharebased payments Purchase of own shares (1.7) - (1.7) Dividends paid (20.6) - (20.6) Total transactions with owners recorded directly in equity (20.8) At 30 September (1.3) Year to 31 March 2015 (audited) At 1 April (0.1) Profit for the period Actuarial losses (31.8) - (31.8) Deferred tax on actuarial losses Exchange differences Movement in fair value swaps (6.8) - - (6.8) Recycle of exchange differences on (2.5) (2.5) disposals Deferred tax on hedging movements Total comprehensive income/(expense) for the period (5.5) Issue of shares Equity-settled share-based payments Current tax on equity-settled sharebased payments Deferred tax on equity-settled sharebased payments (0.2) - (0.2) Non-controlling interest on acquisition Purchase of own shares (2.5) - (2.5) Dividends paid (29.9) - (29.9) Total transactions with owners recorded directly in equity (29.3) At 31 March (5.6)