13th Jun 2007 07:03
RPC Group PLC13 June 2007 13 June 2007 PRESS RELEASE RPC GROUP PLC Preliminary results for the full year ended 31st March 2007 Reported under International Financial Reporting Standards (IFRS) RPC Group Plc ("RPC" or "the Group"), Europe's leading supplier of rigidplastics packaging, today announces its results for the year ended 31st March2007. Highlights • Solid results in a challenging environment on sales ahead 6%• Unchanged adjusted profit before tax at £29.4m• Basic EPS of 13.2p (19.9p) due to significant restructuring cost and impairment charge (in total amounting to £12.0m)• Cost pressures being met by determined action on operational efficiencies and on underperforming businesses• Improving trend in volumes and margins in the second half• New finance director to be appointed shortly; Chris Sworn to manage the blow moulding business until retirement in 2 years• 8.6% increase in recommended final dividend to 5.7p (2006 5.25p) giving a total dividend of 8.4p(2006 7.75p) Commenting on the results, Peter Williams, Chairman said: "It is pleasing to report a solid result in a year of unprecedented challenges. Sales have continued to grow and adjusted profit before tax remained steadyagainst a back-drop of rising raw material costs. Polymer costs have risen further in the first quarter of this financial year andwe anticipate that they will continue to remain high. Despite this, we have madea satisfactory start to the new financial year and the Board expects to make progress for the year as a whole." - Ends - Note: High resolution images are available for the media to view and download free of charge from www.vismedia.co.uk For further information: RPC Group Plc 01933 410 064Ron Marsh, Chief Executive Merlin Financial 020 7653 6620Angus Urquhart 07787 504 447Tom Randell 0777 587 5847 Statement by the Chairman and Chief Executive It is pleasing to report that in a year of unprecedented adversity the adjusted profit before tax * was unchanged at £29.4m. As a result of a 2% increase in thenumber of shares and a higher tax rate adjusted earnings per share** declined by7%. Significant restructuring costs and an impairment charge, in total amounting to £12.0m, were incurred. Consequently the basic earnings per share was reducedto 13.2p (2006: 19.9p). The principal challenge came from higher polymer costs which, for the 12 month period, were at their highest ever level and 11% ahead of the average for the previous year; this meant that the cost of our basic raw material rose by £20.0m. There were also substantial increases in electricity, outer packaging and carriage costs. Sales of fruit bowls to one of our major customers halved, leaving us with substantial under-utilised capacity. Also the equipment we transferred from Woburn Sands to our Rushden factory did not achieve an acceptable level of efficiency for several months. In the latter stages of the financial year, a number of the difficulties alleviated, some price increases over and above raw material cost movements were achieved and volumes including fruit bowl volumes were recovering. We also benefited from an increased contribution from our Bramlage-Wiko cluster and some one-off payments to compensate for sales shortfalls on starting up major projects. The cost pressures on the Group are being met by a real determination acrossall our operations to effect operational efficiencies and achieve costreduction. In this challenging environment we are looking harder at our underperforming operations and, as can be seen from the size of ourrestructuring costs, we are taking strong action where necessary. Revenue for the year at £645.7m was 6% ahead of last year, which equated to a 2%increase on a like-for-like basis. Adjusted operating profit was up 4% at £38.1m(2006: £36.8m) although margins reduced to 5.9% of sales (2006: 6.0%). AdjustedEBITDA rose to £72.2m from £70.2m in the previous year. The tax rate was up from27% to 31% largely because there was an increase in our taxable profits inGermany where the tax rate is high. Cash generated by operations was £40.9m. This was £23.6m less than last yearbecause of an adverse movement in working capital reflecting the additionalworking capital invested in the acquired businesses, the continuing tighteningof credit terms by polymer suppliers and the higher values of raw materials andfinished goods stocks due to higher polymer prices. Net bank debt at the yearend was £137.1m and gearing was 87%. Capital expenditure at £35.5m was broadly in line with depreciation despite alarge carry over of planned expenditure from the previous year. Significantprojects completed were the Dolce Gusto production facilities at Bouxwiller, thecompletion of the factory expansion at Rushden and the conversion of margarinetub production to an in-line operation in both Holland and Germany. Capitalexpenditure is expected to come down further in 2007/08 in part because of alower level of carry forward expenditure. * - adjusted profit before tax is operating profit before restructuring,disruption and impairment charges less net interest ** - adjusted earnings per share is adjusted profit before tax less corporationtax at 31% Strategy and Acquisitions Despite the harsh conditions your Company has experienced these last few years,caused mainly by the sharp escalation in our principal input costs, we are notdeviating from our strategy which we believe will best create value forshareholders. RPC is already the leader in rigid plastic packaging in Europe andwe believe there are attractive opportunities to build on our position throughorganic growth and acquisitions. We are a consolidator in a market that remainsvery fragmented and, in our view, we will benefit from ongoing industryconsolidation. With a strong track record in acquisitions and integration we areprepared to take on significant challenges, for example the Nampak acquisition,where four plants were consolidated into three, provided, we believe our effortswill produce an attractive return for our shareholders. The Crown Risdon business acquired in July 2006 falls into this category. Theacquisition led to the formation of the RPC beaute cluster. Initial success insecuring new contracts has been encouraging and we have now begun a strategicreview to ensure that we have the optimal cost base and structure to servicethis market On 31 October 2006 we acquired Barplas Limited from the Barghout family asannounced at the time of our Half Year results. This extends our productoffering in the UK paint market. It has performed consistently well since theacquisition and gives us an excellent platform from which to offer theseproducts to the Mainland filling facilities of our existing customers. On 1 June 2007 we acquired the plastic manufacturing operations of DM Plasts.r.o in Vel'ky Meder near Bratislava in Slovakia for a provisionalconsideration of £2.0m. Importantly, it gives us our first injection mouldingfacility in the lower-cost economies of Central Europe, ideally situated tosupply the Central and Eastern European economies and with a track-record ofsupplying western customers, notably Henkel. New Product Development Activities We have become the supplier of choice to a number of our customers when theydevelop novel, innovative products designed to open up new markets. The pipelineat present includes, among others, a significant number of pharmaceuticalprojects. All development projects are invariably customised: the equipment(including tooling) bespoke to these projects has therefore to be paid for bythe relevant customers. The sums of money associated with this equipment can besignificant and our financial performance is impacted by these substantialone-offs. This feature of our business has had an impact during 2006/07 and islikely to continue to do so in the future. Further to this, when these projectsare slow to take off, our customers are normally very supportive and compensateus for some of the shortfall in sales. The benefit is never as great as if theproject is a success and our capacity fully occupied from day one, but there isnonetheless a significant impact on our trading when we receive suchcompensation. In this context we received £3.0m of compensation in 2006/07. Board and Personnel In order to ensure a smooth succession the Board expects to announce theappointment of a new Finance Director shortly; at that time the present FinanceDirector, Chris Sworn, will assume responsibility for all of our Blow Mouldingoperations until his retirement in two years time. Chris will also remain anexecutive member of the Board. The Board would like to thank Chris for hissignificant contribution as Finance Director and it looks forward to his inputand the benefit of his experience in his new role. RPC has, we believe, a special ethos as a result of its decentralised structurewhich in consequence affords many opportunities for individuals to make theirown contribution to the Group. We appreciate the outstanding efforts by all whotogether have enabled the Group to confront the difficult market conditions. Dividend Your Board is recommending an increase in the final dividend to 5.7p per share(2006: 5.25p) making a total for the year of 8.4p (2006: 7.75p), an increase of8.4%. Subject to approval at the forthcoming Annual General Meeting, the finaldividend will be paid on 7 September 2007 to shareholders on the register on 10August 2007. Outlook Polymer costs have risen further in the first quarter of 2007/08 and weanticipate that they will continue to remain high during 2007/08, a view whichis widely shared in the plastic packaging industry. Beyond this time horizonthere is an expectation that polymer prices will begin to fall as additionalcapacity comes on stream in the Middle East. Despite the unhelpful continuing escalation in raw material costs we have made asatisfactory start to the new financial year and the Board expects to makeprogress in the year to come. J P Williams R J E MarshChairman Chief Executive Business Review Review of Operations Injection Moulding We had a successful year in Injection Moulding with both the Bramlage-Wiko andthe UK Injection Moulding clusters improving their performance and the inceptionof the beaute cluster which, despite an initial loss, shows great promise forthe future. Bramlage-Wiko is the partner to a whole range of customers with activities invery diverse markets. Inevitably some of their projects, being innovative bynature, do not achieve the instant success in the market-place that ourcustomers anticipate. This has not hindered our progress - first because ourpartners do not normally walk away from their commitments to us, and secondlybecause our financial investment is largely confined to polymer conversioncapacity which is not bespoke to any specific project and which can therefore,after a reasonable interval, be deployed for other applications. Our traditional product ranges of deo-sticks, cream jars, toothpaste dispensers,air-less cream dispensers, margarine tubs, and inhalant devices have enjoyed agood year. All but two of our seven facilities in this cluster are located inGermany, and are now benefiting noticeably from the improvement in the Germaneconomy. Our UK Injection Moulding business also saw an improved performance partly as aresult of the recovery from the stock over-hang that plagued the surfacecoatings market during the summer of 2005 and also as a result of a costreduction programme conducted in 2005/06. The range of healthcare packaging atMarket Rasen increased its market share, and the recently-acquired Barplasfacility in Bradford made a valuable contribution. The acquisition of Marolles and Mozzate from Crown Risdon led to the formationof the beaute cluster. This was warmly welcomed in the market place and someinteresting new projects have been won. Across all three clusters measures are in place to reduce costs by a reductionin employee numbers in all areas, by extensions to the working week (31/2 hoursat Bramlage for no additional cost), and by reviewing the number of sites wecurrently operate. Thermoforming Our thermoforming operations have a much higher content of raw material and,with the latter once again rising dramatically, experienced mixed fortunes. Our Cobelplast sheet business (with a c. 70% of sales raw material content)suffered for most of the year from a down-turn in the demand from of our majorcustomer for fruit bowls. At the end of the year this picture changed and we nowhave a much-improved demand for this product. The facility in Italy, on theother hand, benefited from our recent investment and the much-improved balanceof supply and demand for PET sheet to record a modestly enhanced performance. Our Bebo thermoformed packaging business also suffered from the lower sales offruit bowls which directly affected our Dutch facilities. On the other hand, wederived benefit from difficulties experienced by our competitors and attractedadditional volume in Germany. Our operations in Poland and the UK bothexperienced aggressive competition which made it very difficult to pass on rawmaterial cost increases - in the UK this issue has been addressed by theconsolidation of our UK business which involved the closure of the Bristolplant. Our operation at As in the Czech Republic made commendable progressduring the year. Our Tedeco-Gizeh plastic cup and disposables business again experienceddifficulties in passing on raw material cost increases. There was also anexpensive strike at Troyes in France and the loss of a major contract topredatory price-competition in Holland. We responded to these issues with anumber of cost-cutting initiatives, in particular reducing the number ofemployees and increasing the working week by 2 hours at Deventer, andre-locating equipment to minimise transport costs. There are now finally signsof an improved supply-demand balance in the cup industry across Europe offeringthe prospect of some recovery in margins. Blow Moulding The major issue for this cluster during the year has been to integrate theequipment taken from the plant we closed at Woburn Sands near Milton Keynes intoour factory at Rushden. Everything was re-positioned on schedule but it hasproved difficult to achieve the same level of efficiency from the transferredmachine bank. Towards the end of the year there were clear signs of improvement,and this trend has continued into the new financial year. Envases in Spain under-performed and we are conducting a strategic review of itstwo small sites to determine an appropriate way forward. In the meantime we havewritten down the value of their plant and machinery incurring an impairmentcharge of £0.9m. In specialised areas such as co-extrusion of polypropylene structures, injectionstretch blow moulding of PET, and extrusion blow moulding of PET we continued tomake progress. Our Halstead caps operation suffered a fire towards the end of the year, butthanks to the herculean efforts of the personnel and management both at the timeand subsequently, the improving performance of the business does not seem tohave been impeded. The one-time disruption costs of the fire amounted to £0.4m. Financial Review The Group's 2006/07 turnover was 6% ahead of that in 2005/06, but excludingacquisitions, the like-for-like increase was 2%; on a volume basis,like-for-like volume sales were flat - thus indicating that we achieved anoverall selling price increase of 2%. The like-for-like operating profit (prerestructuring, disruption and impairment costs) increased by 3% from £36.8m to£37.7. The operating profits in both years include some non-recurring benefitsand costs, including in 2006/07, £3.0m of compensation for sales shortfalls onmajor product launches. The restructuring, disruption and impairment costs taken this year total £12.0m.The charge includes the final costs associated with the closure of Woburn Sands(£2.2m), the estimated cost of closing Bristol (£2.0m), the cost of redundancyof staff at Deventer (£0.7m), the impairment of the assets within the beautecluster and Spain (£6.2m), as well as the cost of disruption at Halsteadfollowing a fire there (£0.4m). The Group's operational KPIs are value added per tonne of goods produced (whichis the difference between production sales value per tonne and the cost ofpolymer per tonne produced and tells us whether selling prices are keeping upwith the cost of polymer), gross margins (which are selling prices less alldirectly variable costs - i.e. polymer, packaging, transport, electricity) aswell as the return on capital employed, though this is a longer-term metric incomparison with the former two indicators. The Group's KPIs are as follows: 2007 2006 Added value per tonne £1,710 £1,637 Gross margin 46% 48% The gross margin percentage has declined despite the improvement in added valuetonne because of the significant increases in non-polymer input costs. EBITDA on an adjusted basis before 'exceptional' items, improved to £72.2m from£70.2m in 2005/06. The net financing costs declined from £8.0m in 2005/06 to £7.2m as a result of a£1.5m credit on foreign currency hedging instruments in 2006/07 compared with acharge of £0.6m in 2005/06. The net interest charge increased from £7.4m to£8.7m as a result of increased borrowings (average 2007: £166m, 2006: £147m) andhigher interest rates. The operating profit interest cover on this 'realistic'basis consequently fell from 5.0 times in 2005/06 to 4.4 times in 2006/07,whilst the EBITDA:interest multiple came down from 9.5 times to 8.6 times. The UK defined benefit pension scheme remains in deficit but the net liabilityincluded in the Balance Sheet has reduced. The net charge to the operatingprofit for the UK and other schemes was made up as follows: UK scheme Other schemes 2007 2006 2007 2006 £m £m £m £mCurrent service cost 1.7 1.7 0.9 0.8Interest cost 3.3 3.1 1.4 1.2Expected return on plan (3.5) (2.7) (0.7) (0.6)assets --------------------------------------------------------------------------------Total (included in staff 1.5 2.1 1.6 1.4cost) --------------------------------------------------------------------------------Net liability (pre 11.1 12.4 17.4 17.3deferred tax) The tax rate increased from 27% in 2005/06 to 31% in 2006/07. The rise wasprincipally because of the high proportion of taxable profit attributable to ouroperations in Germany where the tax rate is 39%. Basic earnings per share have fallen from 19.9p to 13.2p in line with thecontraction in post tax profit whilst the earnings per share adjusted for therestructuring, disruption and impairment costs declined by 7% from 22.1p to20.6p. Despite a net increase in bank borrowings of £19.4m to £137.1m during the year,the Balance Sheet remains sound with a gearing of 87% (77% at 31 March 2006).The reason for the rise in the net bank debt is an increase in the Group'sworking capital - stocks and debtors have risen whilst creditors have fallen.The principal factors behind these adverse movements were the acquisitions (withtheir attendant working capital which was in total £10.7m), the rise in the costof polymer and the restricted terms of credit given by the polymer suppliers. The other significant change to the Balance Sheet is the reduction in the sharepremium account from £24.0m at 31 March 2006 to £2.7m at 31 March 2007;following a successful application to the Court, £22.2m was transferred from theshare premium account to distributable reserves of the parent company (andtherefore of the Group as a whole). The reason for this transfer was tofacilitate the Group's ability to pay dividends. The cash flow statement demonstrates the Group's capacity for generatingsubstantial cash flow from operating activities, although this year it wasmarred by the increase in working capital. The net capital expenditure of £33.2m was marginally below the depreciationcharge. Major projects included the Dolce Gusto production facilities atBouxwiller, France, the completion of the factory expansion at Rushden toaccommodate the business transferred from Woburn Sands, the conversion ofmargarine tub production to an in-line operation in Holland and Germany, as wellas a number of energy saving projects. Overall, the key measure of our stewardship is the return on capital employed.This shows a decline in the year under review: 2007 2006 10.9% 11.5% Return in capital employed is defined as being adjusted operating profit dividedby the average of opening and closing of shareholders' equity, adding back netdeferred tax liabilities, retirement benefit obligations (net of tax) andliabilities in connection with derivative financial instruments and after addingback average net borrowings for the year in question. A major factor behind the reduction in the return is the pressure which thefurther increases in polymer prices has exerted on our margins: even though wehave passed on the bulk of the increases to our customers in line with ourcontracts of supply, we have always been in "arrears" in passing on theincreases. In order to minimise the capital employed, capital expenditure hasbeen reduced. Consolidated income statementfor the year ended 31 March 2007 2007 2006 Note £m £m Revenue 2 645.7 611.5 Operating costs 3 (619.6) (577.1) ----------------------------- Operating profit 2 26.1 34.4--------------------------------------------------------------------------------Analysed as:Operating profit before: 38.1 36.8Restructuring and disruption costs 4 (5.8) (2.4)Impairment losses 4 (6.2) - -----------------------------Operating profit 26.1 34.4-------------------------------------------------------------------------------- Financial income 5 2.2 0.9Financial expenses 5 (9.4) (8.9) -----------------------------Net financing costs (7.2) (8.0) ---------------------------- Profit before taxation 2 18.9 26.4 Taxation 6 (5.8) (7.1) -----------------------------Profit for the period attributable to equity 13.1 19.3shareholders of the parent ============================= Basic earnings per ordinary share 8 13.2p 19.9p Diluted earnings per ordinary share 8 13.1p 19.7p Adjusted basic earnings per ordinary share 8 20.6p 22.1p Adjusted diluted earnings per ordinary share 8 20.5p 21.9p Consolidated statement of recognised income and expensefor the year ended 31 March 2007 Foreign exchange translation differences (2.2) 1.4Effective portion of movement on fair value of interest 0.8 1.2rate swapsDeferred tax liability on above (0.2) -Actuarial gains/(losses) on defined benefit pension 2.0 3.1plansDeferred tax on actuarial (gains)/losses (0.7) (0.9) ----------------------------Net income recognised directly in equity (0.3) 4.8Profit for the period 13.1 19.3 ---------------------------- Total recognised income and expense for the periodattributable 12.8 24.1to equity shareholders of the parent ============================ Consolidated balance sheetat 31 March 2007 2007 2006 £m £mNon-current assetsGoodwill 17.0 12.2Other intangible assets 1.5 0.7Property, plant and equipment 234.5 243.1Derivative financial instruments 1.3 1.2Deferred tax assets 6.9 8.0 --------------------------- Total non-current assets 261.2 265.2 --------------------------- Current assetsInventories 94.2 86.3Trade and other receivables 128.2 117.3Cash and cash equivalents 12.3 25.5 ---------------------------Total current assets 234.7 229.1 --------------------------- Current liabilitiesBank loans and overdrafts (3.9) (2.9)Trade and other payables (130.8) (135.8)Current tax liabilities (8.6) (9.1)Employee benefits (0.4) (1.5)Provisions (0.5) (0.2)Deferred consideration - (1.0) -------------------------- Total current liabilities (144.2) (150.5) -------------------------- Net current assets 90.5 78.6 -------------------------- Total assets less current liabilities 351.7 343.8 -------------------------- Non-current liabilitiesBank loans and other borrowings (145.5) (140.3)Employee benefits (33.0) (35.1)Deferred tax liabilities (14.6) (15.9)Derivative financial instruments (0.1) (0.3) --------------------------Total non-current liabilities (193.2) (191.6) -------------------------- Net assets 158.5 152.2 ========================== EquityCalled up share capital 4.9 4.9Share premium account 2.7 24.0Capital redemption reserve 0.9 0.9Retained earnings 146.3 117.1Cash flow hedging reserve 0.7 0.1Cumulative translation differences reserve 3.0 5.2 --------------------------Total equity attributable to equity shareholders of theparent 158.5 152.2 ========================== Consolidated cash flow statementfor the year ended 31 March 2007 2007 2006 £m £mCash flows from operating activitiesProfit before tax 18.9 26.4Financing costs 7.2 8.0 -------------------------Profit from operations 26.1 34.4Adjustments for:Amortisation of intangible assets 0.1 0.1Impairment loss on property, plant and equipment 6.2 -Depreciation 34.0 33.3Share-based payment expense 0.5 0.3Loss/(gain) on disposal of property, plant and equipment 0.2 (1.1)(Decrease)/increase in provisions (2.0) (0.4) -------------------------Operating cash flows before movements in working capital 65.1 66.6(Increase)/decrease in inventories (4.9) (1.5)(Increase)/decrease in receivables (7.4) 13.3(Decrease)/increase in payables (11.9) (13.9) -------------------------Cash generated by operations 40.9 64.5Taxes paid (7.5) (9.7)Interest paid (8.4) (7.9) ------------------------- Net cash from operating activities 25.0 46.9 ------------------------- Cash flows from investing activitiesInterest received 0.2 0.2Proceeds on disposal of property, plant and equipment 2.3 4.8Acquisition of property, plant and equipment (35.5) (50.3)Acquisition of intangible assets (1.0) (0.1)Acquisition of subsidiaries (8.1) (5.8) ------------------------- Net cash flows from investing activities (42.1) (51.2) ------------------------- Cash flows from financing activitiesDividends paid (7.9) (7.1)Proceeds from the issue of share capital 0.9 1.9Movement in borrowings 12.3 0.7Payment of finance costs (0.1) (0.5) ------------------------ Net cash flows from financing activities 5.2 (5.0) ------------------------ Net decrease in cash and cash equivalents (11.9) (9.3)Cash and cash equivalents at beginning of period 24.5 32.8Effect of foreign exchange rate changes (0.3) 1.0 ------------------------ Cash and cash equivalents at end of period 12.3 24.5 ======================== Cash and cash equivalents comprise:Cash at bank 12.3 25.5Bank overdraft - (1.0) ------------------------ 12.3 24.5 ======================== NOTES For the year ended 31 March 2007 Basis of Preparation The financial information set out in this announcement does not constitute thecompany's statutory accounts for the years ended 31 March 2007 or 2006 but isderived from those accounts. Statutory accounts for 2006 have been delivered tothe registrar of companies. The auditors have reported on the 2006 accounts;their report was (i) unqualified, (ii) did not include a reference to anymatters to which the auditors drew attention by way of emphasis withoutqualifying their report, and (iii) did not contain a statement under section 237(2) or (3) of the Companies Act 1985. The statutory accounts for 2007 will befinalised on the basis of the financial information presented by the directorsin this preliminary announcement and will be delivered to the registrar ofcompanies in due course. 1 Principal Accounting Policies These extracts from the Group financial statements for the year ended 31 March2007 have been prepared in accordance with International Financial ReportingStandards as adopted by the EU ('Adopted IFRSs'). 2 Segmental Analysis Primary segments - Geographical The Group operates in two principal geographic regions - 'UK and mainlandEurope'. Mainland Europe also includes our operation in the USA whose sales arepredominantly manufactured in Germany. These two regions are the basis on whichthe Group reports its primary segment information. Segment information aboutthese regions is presented below. Segmental information by geographic segment UK Mainland Europe Other*/ Consolidated Eliminations 2007 2006 2007 2006 2007 2006 2007 2006 £m £m £m £m £m £m £m £mRevenueExternal 216.5 209.4 429.2 402.1 - - 645.7 611.5salesInter-segmentsales - - 3.2 3.9 (3.2) (3.9) - ---------------------------------------------------------------------------------Total revenue 216.5 209.4 432.4 406.0 (3.2) (3.9) 645.7 611.5-------------------------------------------------------------------------------- Operatingprofit (2.1) 4.9 27.0 29.8 1.2 (0.3) 26.1 34.4 Net financingcosts (7.2) (8.0) ------------------ Profit beforetaxation 18.9 26.4 ================== Segment 144.5 140.0 324.0 318.2 15.1 10.6 483.6 468.8assets Segmentliabilities (52.0) (53.0) (108.2) (110.9)(27.8) (35.0) (188.0) (198.9) ------------------ Net segmentassets 295.6 269.9 Net (137.1) (117.7)borrowings ------------------ Net assetsper 158.5 152.2Balance Sheet -------------------------------------------------------------------------------- Capitalexpenditure 16.1 12.1 17.0 38.7 0.3 0.2 33.4 51.0 Depreciationandamortisation 11.3 12.3 22.6 21.0 0.2 0.1 34.1 33.4 Impairment 5.3 - 0.9 - - - 6.2 -loss Secondary segments - Business Process The Group comprises the following principal secondary segments whose activitiesare all the manufacture, by their specific process, and sale of rigid plasticpackaging and associated equipment. Segment information by business segment Revenue Segment assets Capital expenditure 2007 2006 2007 2006 2007 2006 £m £m £m £m £m £m Blow moulding 147.7 142.8 97.9 106.5 10.7 9.9Injection moulding 281.0 246.5 215.9 195.8 13.6 31.6Thermoforming 217.0 222.2 151.8 152.0 8.7 9.2Other* - - 18.0 14.5 0.4 0.3-------------------------------------------------------------------------------- 645.7 611.5 483.6 468.8 33.4 51.0 Geographical analysis of revenue by destination UK Mainland Europe Consolidated and USA 2007 2006 2007 2006 2007 2006 £m £m £m £m £m £mRevenue 209.8 197.2 435.9 414.3 645.7 611.5 * Other includes Head Office, current and deferred tax balances. 3 Operating Costs Total Total 2007 2006 £m £mRaw material and consumables 307.0 275.5Own work capitalised (2.2) (2.0)Changes in stock of finished goods and work in (1.4) (1.1)progressOther external charges 82.6 81.4Carriage 30.2 29.2Staff costs 165.6 164.0Depreciation of property, plant and 34.0 33.3equipmentAmortisation of intangibles 0.1 0.1Impairment losses (note 4) 6.2 -Other operating income (2.5) (3.3) ------------------------ 619.6 577.1 ======================== The 2006 figures for raw materials and consumables and other operating incomehave been restated to consistently reflect the treatment of sale of scrap withinraw materials and consumables. 4 Restructuring and Disruption Costs 2007 2006 £m £mClosure costs 4.2 2.4Restructuring of operations 1.2 -Disruption costs caused by fire 0.4 - -------------------------- 5.8 2.4 ========================== During the year the decision was taken to close our factory in Bristol, UK afteran appraisal of the ongoing viability of the site. The operation ceased on 31March 2007 and the closure costs amounted to £2.0m. Costs of £2.2m (2006: £2.4m)were incurred at the Woburn Sands site leading up to the planned closure on 31October 2006. Other restructuring costs of £1.2m principally relate to the restructuring of anexisting operation within the Tedeco-Gizeh cluster. The costs relate toredundancy arising from a radical re-assessment of working practices followingthe loss of a major contract. Our Halstead operation in the UK suffered a fire in February 2007. The cost ofwriting off fire damaged stock and the clean up operation amounted to £0.4m. Impairment losses 2007 2006 £m £mImpairment loss recognised in respect of assets 6.2 - ======================== Goodwill is tested at least annually and property, plant and equipment is testedwhere there is an indication of impairment. Cash-generating units have beendetermined as individual sites within the Group. The recoverable amounts of the cash-generating units are determined from valuein use calculations. The cash flow projections used in these calculations covera five year period and are based on the 2008 budget and the outline plans for2009 and 2010 approved by the Board. Cash flows beyond this three year periodhave been extrapolated using a zero growth rate. The key assumptions used in the recoverable amount calculations include: (i) Sales. Forecasts are based on cluster level analysis ofsales, markets, competitors and prices for the budget period. Consideration wasgiven to past experience, knowledge of future contracts and expectations offuture potential changes in the markets. (ii) Polymer and electricity costs. Forecasts for polymercosts were based on prices at the time the budget was prepared. Forecasts forelectricity costs are based on contractual arrangements taking into accountsupply and demand factors. The pre tax discount rates for the cash-generating units used varies dependingupon the risks faced by each individual cash-generating unit. These range from6.6% to 10% using the weighed average cost of capital to the Group, adjusted forrisks specific to the cash-generating units. The charge for impairment losses on property, plant and equipment consists of£5.3m in relation to the beaute cluster and £0.9m in respect of our operation inSpain. The decision to impair certain assets of the beaute cluster follows on from theinitial findings of the exercise to address the cost base of the cluster. The poor performance of our operation in Spain has resulted in an appraisal ofits recoverable amount. The recoverable amount of the cash-generating unit wasmeasured by determining the value in use of the assets. 5 Financial Income and Expenses 2007 2006 £m £mInterest receivable on cash at bank (0.2) (0.2)Mark to market gain on foreign currency hedging - (0.7)instrumentsExchange differences on bonds (2.0) - ---------------------Total financial income (2.2) (0.9) ===================== Interest payable on bank loans and overdrafts 6.5 5.4Interest payable on bonds 2.2 1.8Mark to market loss on foreign currency hedging 0.5 -instrumentsExchange differences on bonds - 1.3Other interest payable and similar charges 0.2 0.4 ---------------------Total financial expenses 9.4 8.9 ===================== 6 Taxation 2007 2006 £m £mUnited Kingdom corporation tax at 31% (2006: 30%):Current year (0.3) 0.1Overseas taxation:Current year 6.8 7.1Adjustments in respect of prior periods 0.2 1.5 --------- ---------Total current tax 6.7 8.7 Deferred tax:United KingdomCurrent year (0.8) (1.0)Adjustments in respect of prior periods (0.3) 0.1OverseasCurrent year 0.1 (0.3)Adjustment in respect of prior years 0.1 (0.4) ----------------------Total tax expense in Income Statement 5.8 7.1 ---------------------- 7 Dividends 2007 2006 £m £mDividends on Ordinary Shares:Interim for 2006/07 paid of 2.7p per share 2.7 -Final for 2005/06 paid of 5.25p per share 5.2 -Interim for 2005/06 paid of 2.5p per share - 2.4Final for 2004/05 paid of 4.8p per share - 4.7 ----------------------- 7.9 7.1 ======================= The proposed final dividend for the year ended 31 March 2007 of 5.7p per sharehas not been included as a liability as at 31 March 2007. The recommended finaldividend of 5.7p per Ordinary Share will be paid on 7 September 2007 subject toapproval at the forthcoming Annual General meeting of the Company toshareholders on the register at the close of business in 10 August 2007, makingthe total dividend for the year 8.4p per share. 8 Earnings per Share Basic The earnings per share have been computed on the basis of earnings of £13.1m(2006: £19.3m), and on the weighted average number of shares in issue during theyear of 98,352,849 (2006: 97,019,926). The number of shares in issue at 31 March2007 was 98,693,711. Diluted Diluted earnings per share is the earnings per share after allowing for thedilutive effect of the conversion into Ordinary Shares of the weighted averagenumber of options outstanding during the year of 636,433 (2006: 861,965). Thenumber of shares used for the diluted calculation for the year was 98,989,282(2006: 97,881,891). Adjusted The directors believe that the presentation of an adjusted basic earnings perordinary share assists with the understanding of the underlying performance ofthe Group. For this purpose we have excluded the restructuring and disruptioncosts and impairment losses, identified separately on the face of theconsolidated Income Statement, together with the credit for the foreign currencyhedging instruments less the tax thereon. A reconciliation from profit after tax as reported in the consolidated IncomeStatement to the adjusted profit after tax is set out below: 2007 2006 £m £m Profit after tax as reported in the consolidatedIncome Statement 13.1 19.3Restructuring and disruption costs and impairmentlosses 12.0 2.4Foreign currency hedging instruments (1.4) 0.6Tax effect thereon (3.4) (0.8) ------------------------- Adjusted profits after tax 20.3 21.5 ========================= Adjusted basic earnings per share The weighted average number of shares used in the adjusted basicearnings per sharecalculations is as follows: 2007 2006 Weighted average number of shares 98,352,849 97,019,926 Adjusted basic earnings per share 20.6p 22.1p Adjusted diluted earnings per share The weighted average number of shares used in the adjusted dilutedearnings per sharecalculation is as follows: Number NumberWeighted average number of shares 98,352,849 97,019,926 Effect of share options in issue 636,433 861,965 --------------------------------- 98,989,282 97,881,891 =================================Adjusted diluted earnings per share 20.5p 21.9p This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Rpc Group