7th Jun 2005 07:00
RPC Group PLC07 June 2005 7 June 2005 RESULTS ANNOUNCEMENT FOR THE YEAR ENDED 31 MARCH 2005 RPC Group Plc ("RPC" or "the Group"), Europe's leader in rigid plastic packaging, today announces its results for the year ended 31 March 2005with record levels of turnover, profit and earnings per share. Group Highlights •Record sales and operating profits •Basic EPS 13.8p (2004: 19.1p) after closure charge (£6.9m) for Woburn Sands •EPS pre exceptional up 12% to 20.9p (2004: 18.6p) •The bulk of the 24% increase in polymer costs recovered •Integration of Rexam and Nampak acquisitions proceeding well •Healthy major project pipeline with Tassimo in the vanguard •Strong financial position with year end gearing of 70% (2004: 95%) •Further progress anticipated during 2005/06 Commenting on the results Chief Executive, Ron Marsh said: "RPC once again achieved a record operating profit with sales exceeding £500mfor the first time. All of this was achieved in an environment where polymercosts increased on average by 24% year on year, clearly demonstrating that whilethere may be short-term time lags we are able to navigate the overall polymercycle successfully. "As a result of our financing activities and our strong cash flow in 2004/05 weenter our new financial year in a strong position. Furthermore, we areencouraged by the good start that has been made and by the influx of newbusiness, and anticipate that further progress will be made this year." Enquiries: RPC Group Plc 01933 410064 Merlin PR 020 7653 6620Ron Marsh, Chief Executive Michael Rummel 0787 989 0405Chris Sworn, Finance Director Peter Otero 07979 537 408 Statement by the Chairman and Chief Executive RPC once again achieved a record operating profit in the year ended 31 March2005. Sales exceeded £500m for the first time. Operating profit was 11% up onthe previous year (12% before currency fluctuations). Profit before tax,excluding a £6.9m provision made for the closure of Woburn Sands, was 8% up onlast year (9% before currency fluctuations). The tax charge, pre exceptionalitems, was 26% compared with 29% last year. Earnings per share beforeexceptional items increased by 12% to 20.9p. Perhaps most importantly, the cash inflow from operating activities was £53.3m,and we spent £32.6m on capital items building our base for further growth insales and profits over the coming years. Gearing at the year-end was 70%,compared with proforma gearing post the Nampak acquisition at 1 November 2004,of 108%. All of this was achieved in an environment where polymer costs increased onaverage by 24% year on year. This supports our statement at the beginning of theyear that "our track record demonstrates that while there may be short-term timelags we are able to navigate the overall polymer cycle successfully". Acquisitions The recent raw material price increases have undoubtedly placed a great strainon our industry. The effect of this is to precipitate a number of factoryclosures, reducing capacity in the market-place. It is also encouraging a numberof owners to seek an exit, albeit with varying degrees of success. Our responseto this environment has been to continue to be open to discuss consolidationopportunities, but only where they are sensibly priced and enable us tostrengthen our position in specific rigid plastic packaging market sectors wherewe feel we can add value for our customers and shareholders. The acquisitions from Rexam and Nampak completed in March 2004 and November 2004respectively fulfilled the above criteria. Both have lived up to ourexpectations. The four Rexam factories have taken us into the Czech Republic,broadened our technology base in in-mould labelling, given us one of the leadingpositions in the French dairy market, and extended our position in the UKinjection moulding industry; they generally performed well in 2004/05. The sevenNampak sites acquired have also made progress. The closure of the Woburn Sandssite, anticipated at the time of acquisition and for which a provision of £6.9mhas been made, is well in-hand and should be complete by the target date of 31October 2006. The Plenmeller site as well as our established sites at Raunds andRushden are benefiting from this programme. The other five sites (one in Wales,one in France, one in Belgium, and two in Holland) have had their managementteams re-structured so that now focused, profit-orientated managers are workingwithin a clear and accountable structure to achieve performance improvement:there are already grounds for optimism as a result of what has been achieved sofar. Organic Growth RPC's reputation as the leader in rigid plastic packaging in Europe is nowwell-established. This, in conjunction with the on-going growth of plasticpackaging at the expense of other materials, has led to a pipeline of projectswhich should assure us of significant organic growth well into the future. TheTassimo project for Kraft Foods is a case in point. Equipment for this projectis now being installed in three of our factories in Germany, and we have veryrecently purchased a factory in the US to manufacture the same product. In fact,in the context of specific requirements for customer partnerships outsideEurope, we are now looking at a variety of arrangements to manufacture under ourcontrol in countries as disparate as Thailand and Russia. Our core strategy,however, continues to be to develop our position in Europe where there is stillvast scope for further consolidation. Our ability to exploit the opportunities for organic growth and theconsolidation of the industry is in large part attributable to our devolvedmanagement structure where each identifiable business unit has its own profitresponsible management team. The current year will be challenging because of thecontinuing competitive trading environment although there is currently somerelief through falling polymer prices. Financing Activities The two fund-raising initiatives undertaken in the year under review, namely thebond issue completed in February 2005 and the share placing in March 2005, havesignificantly enhanced our financial capacity for further growth bothorganically and by acquisition. Operations Injection Moulding: The Bramlage-Wiko-Cresstale cluster made further progress in the year. Inparticular, much management time and a high level of capital investment weredevoted to installing the Tassimo equipment in our German plants. Othersubstantial projects will, moreover, follow this one. Encouragingly, towards theend of the year the underlying business at Bramlage for the German market sawsomething of a revival so that growth in new projects became incremental ratherthan substitutional. We plan to complement our thermoforming activities at ourfour plants in Poland with some injection moulding business from this cluster.Meanwhile, we changed the management at our Cresstale plant in the North-East ofEngland towards the end of 2003/04: this has already resulted in an impressiveturn-round in performance during the year under review. Our UK injection moulding cluster made a good start to the year, butunfortunately faded away in the later stages as it became clear that the wholesupply chain in the paint industry had become seriously over-stocked. We enjoyedfurther growth in the supply of small pots for soups and sauces, but our PET jarbusiness contracted as volumes moved to other materials as a consequence of someone-off decisions by customers: some of this business transferred to otherplastic packs produced within the Group. Thermoforming: Our Cobelplast sheet-manufacturing cluster benefited from the higher demand formulti-layer sheet from our Dutch Bebo plants for the manufacture of fruit bowls.Our Italian operation is now taking full advantage of our new cutting edge PETsheet line to produce greater volumes in a highly cost efficient manner as wellas to move up the value chain into a range of specialised, higher added-valueproducts. Our Bebo cluster of container-manufacturing operations significantly reducedunit costs, strengthened its position in the market for oxygen barrier trays,introduced new management in the UK and Germany, and devolved responsibility forthe further development of our Polish business to our Polish management. InApril 2005 we entered into a contract for the purchase of Bebo Print KG andrelated intellectual property for a consideration of €8.6m. Along with plant andemployees in Germany, this brings with it patented offset print technology forthe decoration of thick plastic sheet, giving us full control of the wholeprocess for the manufacture of pre-printed lids to meet growing demand,particularly in the spreads market. The acquisition will be earnings-enhancingin 2005/06. Our Tedeco-Gizeh disposables business overcame a customer requirement in the UKto tighten specifications, but nonetheless emerged with an unsatisfactory marginposition on which we are now working. The catering supply operation expanded inCentral Europe through the Polish and Romanian units, whilst the dairy packaginggroup successfully exploited the synergies between the ex-Rexam plant at Troyesand our existing Bouxwiller plant to generate profitable sales growth in France.However, returns in this cluster generally are not yet at a satisfactory level,but should be enhanced in the near future, as capacity for both recentlydeveloped insulated vending cups and a novel coffee service system is brought onstream. Blow Moulding:Despite a somewhat disappointing performance by this cluster during 2004/05, theprospects have been improved by the Nampak acquisition. All the signs are thatour emergence as the No.2 player in this industry in Europe is opening upopportunities for us. We are strengthening our position in the agrochemicalmarket through a major enhancement programme at the Gent (Belgium) plant andfurther developments at Montpont in France and Rushden in the UK. We are alsodiversifying our range of multi-layer bottles and jars so that in addition toserving the ketchup and sauces industry, we will have a sizeable involvement inthe fruit processing market. Meanwhile the rationalisation of our blow moulding activities in the UK isproceeding apace. Already one third of the capacity at Woburn Sands has beentransferred to Plenmeller and Rushden, and further moves are imminent. We remainon track to achieve the anticipated synergies once the relocations are completedby October 2006. Financial Review The Group's 2004/05 turnover was 11.8% ahead of that in 2003/04 before theNampak acquisition; excluding currency movements the increase would have been13.3%. The operating margin-on-sale of the underlying businesses declined from6.6% in 2003/04 to 6.3% in 2004/05. In the main the rapidly inflating polymerprices were recovered through corresponding but delayed movements in sellingprices. The margin was also adversely impacted by non-polymer related costincreases (including pensions) which were more difficult to pass on tocustomers. The strengthening of the Euro against Sterling on an average year onyear basis reduced the profit improvement by £0.4m; the underlying increase inoperating profits pre acquisition was therefore 8.5% The acquisitions from Rexam and Nampak made a significant contribution to theGroup's turnover and profitability. The additional turnover and operatingprofits from the Nampak acquisition in the year were £32.3m and £1.1mrespectively. The benefit in a full year will be substantially greater,especially as progress is made towards the closure of the Woburn Sands operationfor which £6.9m has been provided in the accounts, of which £1.0m was spentduring 2004/05. Interest charges increased from £5.3m in 2003/04 to £6.7m in 2004/05 principallybecause of the acquisitions referred to in the previous paragraph. We haveextended the life of a significant proportion of our borrowings by switching£45m into seven year floating rate bonds at a margin of 90 basis points. Thebonds are listed on the London Stock Exchange and have no covenants apart froman undertaking to offer to repay them in the event of a change of control. Thisis a relatively novel financing structure for a British company without a ratingfrom a credit agency. The corporation tax rate on our ongoing profits fell to 26% (2003/04: 29%) againpartly because of the increasing proportion of our profit that emanates from ourcentral European operations. This resulted in a profit after tax of £12.1m. The Balance Sheet has been considerably strengthened by the placing on 17 March2005 of 8,707,074 shares (9.9% of the issued share capital at that date) at 258praising nearly £22.5m before expenses. In addition the impact of the movement inthe Sterling:Euro exchange rate has been favourable - adding a further £3.7m toour reserves. As a consequence, gearing has fallen from 95% at 1 April 2004 to70% at 31 March 2005 despite spending of £21m on the acquisition of the Nampaksites on 1 November 2004. Working capital levels increased by £7.6m almost entirely because of the Nampakdeal. The Cash Flow Statement shows a net cash inflow from operating activities of£53.3m, some £7.4m more than last year and a record for the Group. CapitalExpenditure amounted to £32.6m; whilst higher than anticipated, it does reflectthe accelerating spend on a number of expansionary projects, prime of which isTassimo. The net bank borrowings at 31 March 2005 (being £60.3m) were well within theGroup's facilities which amount to £155m of committed funds and a further £25min overdrafts. We are currently renegotiating our revolving credit agreement inorder to take advantage of the favourable conditions in the UK banking market. RPC Personnel We would like to pay tribute to our management and staff whose motivation withinour decentralised, profit-oriented units, drives our Group. We would also liketo welcome employees arriving with the new acquisitions, as well as managementand staff directly recruited into the Group. As the Group has grown, we havedeveloped our own management resources as well as bringing new blood fromoutside. In this particular year, we have recruited a number of new managers whohave found an environment in which they have been able to make a rapidcontribution to our success. Dividend Your Board is recommending an increase in the final dividend to 4.8p per share(2003/04: 4.45p), making a total for the year of 7.1p (2003/04: 6.6p), anincrease of 7.6%. Subject to approval at the forthcoming Annual General Meeting,the final dividend will be paid on 2 September 2005 to shareholders on theregister on 5 August 2005. Outlook As a result of our financing activities and our strong cash flow in 2004/05 weenter our new financial year in a strong position. Furthermore, we areencouraged by the good start that has been made and by the influx of newbusiness, and anticipate that further progress will be made this year. J P Williams R J E MarshChairman Chief Executive RPC GROUP PLCCONSOLIDATED PROFIT AND LOSS ACCOUNTfor the year ended 31 March 2005 2005 2004 Note £'000 £'000TurnoverContinuing operations 481,026 430,203Acquisitions 32,258 - ------------------------ 2 513,284 430,203 Operating costs 3 (481,816) (401,807) ------------------------ Operating profitContinuing operations 30,362 28,396Acquisitions 1,106 - ------------------------ 2 31,468 28,396 Profit on land sale 4 - 1,912 Loss on terminations - continuing operations - (1,807)- acquisitions 4 (6,922) - Net interest payable and similar charges 5 (6,667) (5,326) ------------------------ Profit on ordinary activities before taxation 17,879 23,175 Tax on profit before exceptional items (6,448) (6,801)Tax on exceptional items 629 324 ------------------------ Tax on profit on ordinary activities 6 (5,819) (6,477) ------------------------ Profit on ordinary activities after taxation 12,060 16,698 Dividends 7 (6,657) (5,772) ------------------------ Retained profit for the year 5,403 10,926 ======================== Basic earnings per ordinary share 8 13.8p 19.1pBasic earnings per ordinary share before 8 20.9p 18.6pexceptional itemsDiluted earnings per ordinary share 8 13.6p 18.9p CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES Profit for the year 12,060 16,698 Currency translation differences onforeign currency net investments 9 3,702 (3,484) ------------------------Total recognised gains and losses for the year 15,762 13,214 ======================== RPC GROUP PLCCONSOLIDATED BALANCE SHEETat 31 March 2005 2005 2004 Note £'000 £'000Fixed assetsIntangible assetsPositive goodwill 8,301 9,258Negative goodwill (10,231) (2,614) --------------------- (1,930) 6,644Tangible assets 226,608 196,400 --------------------- 224,678 203,044 --------------------- Current assetsStocks 84,107 64,127Debtors: amounts falling due within one year 110,004 82,590Debtors: amounts falling due after more than 6,106 5,904one yearCash at bank 32,815 1,212 --------------------- 233,032 153,833 Creditors: amounts falling due within one yearBank loans and overdrafts - (402)Other creditors (144,926) (104,978) --------------------- (144,926) (105,380) --------------------- Net current assets 88,106 48,453 ---------------------Total assets less current liabilities 312,784 251,497 --------------------- Creditors: amounts falling due after more than oneyearLoans (138,495) (113,046)Deferred consideration (1,000) - --------------------- (139,495) (113,046) --------------------- Provisions for liabilities and charges (23,217) (20,133) --------------------- Net assets 150,072 118,318 ===================== Capital and reservesCalled up share capital 4,835 4,370Share premium account 22,184 -Capital redemption reserve 928 928Profit and loss account 122,125 113,020 ---------------------Equity shareholders' funds 9 150,072 118,318 ===================== RPC GROUP PLCCONSOLIDATED CASH FLOW STATEMENTfor the year ended 31 March 2005 2005 2004 Note £'000 £'000Net cash inflow from operating activities 10(i) 53,294 45,872 -------------------- Returns on investments and servicing of financeInterest received 191 119Interest paid (6,494) (4,509)Interest element of finance lease rental payments - (40) -------------------- (6,303) (4,430) -------------------- TaxationUK corporation tax recovered - 150Overseas tax paid (3,487) (3,217) -------------------- (3,487) (3,067) --------------------Capital expenditurePurchase of tangible fixed assets (32,554) (33,164)Sale of tangible fixed assets 588 844 -------------------- (31,966) (32,320) -------------------- Acquisitions and disposalsPayments to acquire businesses (21,071) (14,828)Net cash/(overdraft) on acquisition 1,049 (1,861) ---------- --------- (20,022) (16,689)Reduction in consideration in respect of earlieracquisitions 658 - -------------------- (19,364) (16,689) -------------------- Equity dividends paid (5,904) (5,591) -------------------- Cash outflow before financing (13,730) (16,225) -------------------- FinancingIssue of shares (net of costs) 22,649 203Net loans (repaid)/obtained (22,538) 19,804Bond finance obtained 44,969 -Capital element of finance lease rental payments - (1,131)Cost of arranging loans and bond (350) (20) -------------------- 44,730 18,856 -------------------- Movement in cash in the year 10(ii) 31,000 2,631 ==================== RPC GROUP PLCNOTESFor the year ended 31 March 2005 The financial information set out in this preliminary announcement does notconstitute the Company's statutory accounts for the year ended 31 March 2004 or31 March 2005. The financial information for 2004 is derived from the statutoryaccounts for 2004 which have been delivered to the Registrar of Companies. Theauditors have reported on the 2004 accounts; their report was unqualified anddid not contain a statement under section 237(2) or (3) of the Companies Act1985. The statutory accounts for 2005 are being finalised on the basis of thefinancial information presented by the directors in this preliminaryannouncement and will be delivered to the Registrar of Companies following theCompany's Annual General Meeting. 1 Accounting Policies These extracts from the financial statements for the year ended 31 March 2005 have been prepared in accordance with the accounting policies in the Report and Accounts of the Group for the year ended 31 March 2004. 2 Segmental Analysis Turnover The geographical analysis of turnover by destination and by origin is asfollows: By destination By origin 2005 2004 2005 2004 £'000 £'000 £'000 £'000United Kingdom 173,960 142,274 172,756 140,705Mainland Europe 302,297 257,512 340,528 289,498Rest of World 37,027 30,417 - - -------------------------------------------------- 513,284 430,203 513,284 430,203 ================================================= In the opinion of the directors, the activities of the Group represent a singleclass of business. Segmental results 2005 2004 £'000 £'000United Kingdom 7,766 9,534Mainland Europe 23,702 18,862 ---------------------------Operating profit 31,468 28,396Net exceptional items (6,922) 105 ---------------------------Profit before interest and tax 24,546 28,501 =========================== Net assets 2005 2004 £'000 £'000United Kingdom 86,967 77,605Mainland Europe 164,952 149,830Rest of World 3,833 3,119 --------------------------- 255,752 230,554Net borrowings (105,680) (112,236) ---------------------------Net assets 150,072 118,318 =========================== RPC GROUP PLCNOTESFor the year ended 31 March 2005 - continued 3 Operating Costs Continuing Operations Acquisitions Total Total 2005 2005 2005 2004 £'000 £'000 £'000 £'000 Raw material and consumables 212,849 15,623 228,472 169,638Own work capitalised (2,039) 11 (2,028) (3,954)Changes in stock of finishedgoodsand work in progress (6,104) (691) (6,795) (766)Other external charges 61,217 3,832 65,049 63,283Carriage 22,225 1,925 24,150 20,082Staff costs 135,046 9,842 144,888 127,146Depreciation of tangible fixedassets 30,830 693 31,523 27,976Amortisation of goodwill:Positive 585 - 585 584Negative (105) - (105) (109)Other operating income (3,840) (83) (3,923) (2,073) ---------- --------- -------- --------- 450,664 31,152 481,816 401,807 ========== ========= ======== ========= 4 Exceptional Items 2005 Loss on terminations £'000Direct costs of the termination 3,757Operating loss of the operation up to the date of termination 3,165 --------- 6,922 ========= The costs above relate to the closure of Woburn Sands in the UK; this operationwas acquired in November 2004 from Nampak as part of the acquisition of itsShort Run business. 2004The profit on land sale related to the sale of surplus, undeveloped land at theGroup's Oakham site. The 2004 loss on terminations related to the anticipated residual costs ofdisposing of the site at Oevel together with those of terminating the productionof caps and closures at Celle. 5 Net Interest Payable and Similar Charges 2005 2004 £'000 £'000Interest payable on bank loans and overdrafts 6,580 5,242Interest payable on bonds 109 -Finance leases - 40Other interest payable and similar charges 168 163 ---------------------Total interest payable and similar charges 6,857 5,445Less interest receivable and similar income (190) (119) --------------------- 6,667 5,326 ===================== RPC GROUP PLCNOTESFor the year ended 31 March 2005 - continued 6 Tax on Profit on Ordinary Activities 2005 2004 £'000 £'000United Kingdom corporation tax at 30% (2004: 30%):Current 135 481Adjustments in respect of prior periods (14) (35)Overseas taxation:Current 5,830 6,633Adjustments in respect of prior periods 189 395Terminations (note 4) - (390) --------------------Total current tax 6,140 7,084 Deferred tax:United KingdomCurrent (955) 1,797Adjustments in respect of prior periods (179) (2,317)Terminations (note 4) (629) 66OverseasCurrent 1,442 (153) ====================Tax on profit on ordinary activities 5,819 6,477 ==================== 7 Dividends 2005 2004 £'000 £'000Dividends on Ordinary Shares:Interim paid of 2.3p per share (2004:2.15p) 2,015 1,883Final proposed of 4.8p per share (2004:4.45p) 4,642 3,889 --------------------- 6,657 5,772 ===================== The recommended final dividend of 4.8p per Ordinary Share will be paid on 2September 2005, subject to approval at the forthcoming Annual General Meeting ofthe Company, to shareholders on the register at the close of business on 5August 2005, making the total dividend 7.1p per share. 8 Earnings per Share Basic The earnings per share have been computed on the basis of earnings of £12,060,000 (2004: £16,698,000), and on the weighted average number of shares in issue during the year 87,653,742 (2004: 87,356,211). The number of shares in issue at 31 March 2005 was 96,699,218. The earnings per ordinary share before exceptional items is computed on earnings of £31,468,000 less interest of £6,667,000 and tax on profit before exceptional items of £6,448,000 (2004: earnings of £28,396,000 less interest of £5,326,000 and tax of £6,801,000). 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 year. The number of shares used for the diluted calculation for the year was 88,619,083 (2004: 88,241,654). RPC GROUP PLCNOTESFor the year ended 31 March 2005 - continued 9 Reconciliation of Movements in Shareholders' Funds Group Group 2005 2004 £'000 £'000Profit for the financial year 12,060 16,698Dividends on ordinary shares (6,657) (5,772)Issue of shares 23,300 203Expenses of share issue (651) -Exchange differences on foreign currencies 3,702 (3,484) ------------------------ 31,754 7,645Shareholders' funds at 1 April 118,318 110,673 ------------------------Shareholders' funds at 31 March 150,072 118,318 ======================== 10 Notes to the Cash Flow Statement 2005 2004 £'000 £'000(i) Reconciliation of operating profit to net cash inflow from operating activities: Operating profit 31,468 28,396 Exceptional items (1,001) 847 Depreciation 31,523 27,976 Amortisation: Positive goodwill 585 584 Negative goodwill (105) (109) Profit on sale of tangible fixed assets (423) (187) Movement in working capital - Stocks (10,887) 726 - Debtors (9,867) (2,934) - Creditors 12,668 (8,963) Movement in provisions for liabilities and charges (667) (464) ----------------------- Net cash inflow from operating activities 53,294 45,872 ======================= The exceptional cash flows relate to cash paid on the terminations and proceeds from the land sale (note 4). 2005 2004 £'000 £'000(ii) Reconciliation of net cash flow to movements in net debt: Increase in cash in the period 31,000 2,631 Cash outflow from movement in debt (22,431) (18,673) -------------------- Change in net debt resulting from cash flow 8,569 (16,042) On acquisition - (24) Translation difference (2,195) 1,686 Other non cash changes 182 (143) -------------------- Movement in net debt in the period 6,556 (14,523) Net debt at 1 April (112,236) (97,713) -------------------- Net debt at 31 March (105,680) (112,236) ====================== RPC GROUP PLCNOTESFor the year ended 31 March 2005 - continued (iii) Analysis of net debt: At 1 April Cash Non Cash Exchange At 31 March 2004 Flow Changes Movement 2005 £'000 £'000 £'000 £'000 £'000Cash atbank/(overdrafts) 1,212 31,000 - 603 32,815Bank loans less thanone year (402) 416 - (14) -Bank loans greaterthan one year (113,046) 22,122 182 (2,410) (93,152)Other loans greaterthan one year - (44,969) - (374) (45,343) --------------------------------------------------------- Total (112,236) 8,569 182 (2,195) (105,680) ========================================================== This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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