Half-year Report

29 November 2017

RPC GROUP PLC

Half year results for the six months ended 30 September 2017

RPC Group Plc, the international plastic products design and engineering company, announces its half year results for the six months ended 30 September 2017.

Financial highlights:

· Revenue growth of 53% to £1,876m reflecting the contribution from acquisitions, organic growth, polymer price tailwinds and translation benefits from foreign exchange movements

· Adjusted operating profit increase of 58% to £214.7m with adjusted EPS up 27% to 36.4p

· Return on sales increase of 30 basis points to 11.4%

· Strong cash generation; statutory net cash from operating activities increase of 62% to £245.4m, and free cash flow up 45% to £171.7m

· RONOA expansion of 320 basis points to 28.0% reflecting acquisition synergy realisation and profitability improvements

· ROCE increase of 30 basis points to 15.1%; remains well ahead of weighted average cost of capital

· Interim dividend of 7.8p up 28% representing the 25th year of consecutive growth

Strategic highlights:

· European synergy programme on track for completion in the current financial year with exceptional costs significantly lower in the half and overall implementation costs lower than expected

· Letica integration well advanced; successful completion of Astrapak acquisition (announced in FY 17)

· More than 20% of revenues now generated outside of Europe

· Healthy innovation pipeline; one additional innovation centre added taking the total to 32 worldwide

· Share buyback scheme implemented to deliver further shareholder value; £12.4m of capital deployed in the period

"Trading was encouraging in the first half with record profitability levels and strong cash generation. The rationalisation of our European manufacturing footprint with 22 locations closing is now nearing completion with the benefits being realised as anticipated. The Letica integration is going well with the expected cost savings on track. Looking forward, the Group continues to target innovation based growth leveraging its global footprint and will participate in the ongoing consolidation of the plastic packaging markets, albeit with no significant acquisitions anticipated in the remainder of this financial year. The second half of the year has started well."

1 Adjusted EBITDA, adjusted operating profit and return on sales are before restructuring, impairment charges, other exceptional and non-underlying items and amortisation of acquired intangibles, and adjusted profit before tax is before non-underlying finance costs.

2 Adjusted basic earnings per share is adjusted operating profit after interest and tax, excluding non-underlying finance costs and tax adjustments, divided by the weighted average number of shares in issue during the period.

3 Comparative restated for rights issue.

4 Free cash flow is cash generated from operations less net capital expenditure, net interest and tax, adjusted to exclude exceptional cash flows and non-underlying cash provision movements.

5 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 the period concerned. Comparatives restated to include all acquisitions on a pro forma basis.

6 ROCE is adjusted operating profit for continuing operations (annualised for half year reporting), divided by the average of opening and closing shareholders' equity, after adjusting for net retirement benefit obligations, assets held for sale, acquisition intangibles and net borrowings for the period concerned.

For further information:

There will be a call for analysts and investors at 9:00am. The dial in details are:

Forward looking statements

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 announcement and such information should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying such forward-looking information. The Group undertakes no obligation to update these forward-looking statements and nothing in this announcement should be construed as a profit forecast. Past performance is no guide to future performance and persons needing advice should consult an independent financial advisor.

Nothing in this announcement shall constitute, in any jurisdiction, an offer or solicitation to sell or purchase any securities or other financial instruments, nor shall it constitute a recommendation or advice in respect of any securities or other financial instruments or any other matter.

About RPC

RPC is a leading plastic products design and engineering company for packaging and selected non-packaging markets, with 32 innovation centres and 194 operations in 34 countries, and employs around 25,000 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. It uses a wide range of polymer conversion technologies in both rigid and flexible plastics manufacture, and is now one of the largest plastic converters in Europe, combining the development of innovative packaging and technical solutions for its customers with good levels of service and support.

The business is organised and managed according to product and market characteristics and is split into two segments, Packaging and Non-packaging. The Packaging business serves the Food, Non-food, Personal Care, Beverage and Healthcare markets. The Non-packaging businesses design and manufacture moulds, plastic products and technical components for specific market segments.

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INTERIM MANAGEMENT REPORT

Results Summary

The Group delivered another strong set of results in the first half of the year, with key financial measures at record levels. The Vision 2020: Focused Growth Strategy continued to deliver substantially improved profits and cash generation, which benefited from BPI, ESE and Letica, the larger acquisitions in 2016/17. The integration activities of Promens, GCS and BPI are largely complete and the synergy realisation continues. The focus during the first half of the year has been on growing the existing businesses and exploiting opportunities provided by the recent acquisitions of Letica in North America and Astrapak in South Africa.

Revenues in the first half of the year grew by 53% to £1,876m, with strong growth in both packaging and non-packaging products. This was driven by the contribution from acquisitions announced or completed in the previous financial year, underlying organic growth of c.2%, polymer price tailwinds and translation benefits from foreign exchange movements. At constant exchange rates reported revenues grew by 45%.

Group margins and profitability levels, both before and after exceptional items, improved significantly compared with last year due to the contribution of acquisitions, the realisation of synergies, organic growth, lower exceptional costs and a foreign exchange benefit from the further weakening of sterling against the major currencies, which more than offset a modest polymer headwind. Adjusted EBITDA grew 49% to £296.1m and adjusted operating profit increased 58% to £214.7m. At constant exchange rates adjusted EBITDA and adjusted operating profit grew by 40% and 47% respectively, while return on sales increased 30 basis points (bps) to 11.4% or 20 bps on a constant currency basis.

Benefiting from synergy realisation and improved profitability, RONOA (return on net operating assets) expanded 320 bps to 28.0% and ROCE, at 15.1%, grew 30 bps compared with the same period last year and remains well ahead of the Group's weighted average cost of capital. Exceptional costs were significantly lower at £6.5m (2016: £32.7m) including the receipt of £11.0m for an insurance claim, reflecting the nearing of completion of the acquisition integration programmes. Statutory profit before tax grew by 129% on the same period last year to £166.2m.

Investment in growth and efficiency projects continued, with capital expenditure of £109.1m (2016: £80.5m) in the period of which c.50% was spent on growth projects. The Group saw excellent cash flow development in the first half reflecting the positive contribution of the recent acquisitions, synergy realisation and lower exceptional costs. Statutory net cash from operating activities was up 62% to £245.4m, and free cash flow up 45% to £171.7m. Adjusted cash conversion remains strong at 99% (2016: 107%). Working capital as a percentage of sales improved to 5.5% (2016: 6.1%). The Group retains a strong balance sheet with net debt of £1,070m (March 2017: £1,049m) representing a pro forma 1.8x EBITDA multiple (March 2017:1.8x). Total finance facilities of £2,227m were available as at 30 September 2017.

The plastic packaging market

The global plastic packaging market is forecast to grow at an annual average rate of 3.7% over the next five years (source: Smithers Pira 2017), outpacing growth in other packaging materials and, at $288bn, accounting for 34.5% of the global packaging market. This superior growth rate is benefiting from numerous structural growth drivers including a rising and ageing population, an increasing number of smaller and single person households in developed economies, busier lifestyles and demand for convenience packaging, increasing income in emerging markets and the growing importance of lightweighting, sustainability and the circular economy. By geography Asia is expected to continue to lead the growth in plastic packaging, with forecast average annual growth of 5% in each of the next five years compared with forecast average annual rates of 2.8% and 2.0% for Europe and North America respectively.

RPC Group is well placed to benefit from these structural growth drivers and, by operating in a large number of product and market niches, is able to benefit from a 'portfolio' effect when macro and market conditions change with growth in certain regions and sectors offsetting any slowdown in others.

Strategy

Against this backdrop, the Group continues to deliver its Vision 2020: Focused Growth Strategy, which comprises:

· Continued organic growth based on innovation

· Selective consolidation of the European market through targeted acquisitions

· Creating a meaningful presence outside Europe, where growth rates are considerably higher

· Pursuing added value opportunities in non-packaging markets.

In the first half of the year the Group focused on delivering the announced synergy realisation programme, demonstrating the contribution of the newly acquired businesses while continuing to drive organic growth, margin improvement, return on capital and cash flow generation.

Focused organic growth

Organic growth was c.2% over the period and benefited from improved activity levels in both Packaging and Non-packaging, although this was tempered by certain adverse natural events and fewer trading days. By end-market Food and Personal Care packaging and Technical Components were notably strong. By geography Europe traded well and organic growth of 23% in China was particularly impressive, while trading in the US was mixed and included a headwind from the hurricanes later in the period. As a result of the latter Letica organic growth was negative in the first half of the year; positive organic growth at Letica has returned to date during Q3.

Investment in innovation and growth for both product design and process engineering continues to drive a healthy pipeline and the Group remains confident of continuing to grow through the cycle ahead of GDP. Over 50% of the £109m capital expenditure made in the period was attributable to growth-related projects, such as new sports cap lines, further capacity at the Zhuhai electroplating operation (China) and a new coffee capsule line at Bebo Plastik (Germany). During the period good progress was made in marketing WaveGrip, a patented multipack beverage solution, supported by collaboration between RPC bpi group and Letica.

Following the completion of the Astrapak acquisition the Group now has 32 design centres of excellence worldwide, and further investment opportunities for growth through the development of innovative products are being targeted.

In more commoditised market segments organic growth is driven by the Group's margin enhancement strategy, which seeks to drive both profitability and cash generation by price discipline while maximising production utilisation and efficiency.

Selective consolidation in the European packaging market through targeted acquisitions

The scale of the opportunity to consolidate the European markets remains significant and participation in this industry consolidation is a core part of the Group's long term growth strategy. However, while the Group continues to be well-placed to capitalise on this opportunity, during the period the Group announced that it did not anticipate making any significant acquisitions or incurring further acquisition-related exceptional costs for the current financial year over and above those it had already announced. Instead it focused on enhancing the performance of the 2016/17 acquired businesses and completing the related restructuring activities of the major previous year acquisitions, including Promens, GCS and BPI. The Sanders Polyfilm (flexibles), Jagtenberg (industrial containers) and Plastiape (pharmaceuticals) businesses had already been fully integrated into the RPC bpi group, RPC Promens and RPC Bramlage divisions respectively by the end of the 2016/17 financial year. These are all performing well and are improving profitability through the benefit of polymer purchasing synergies and by enhancing the trading position of the divisions that have integrated them.

Creating a meaningful presence outside Europe

The Group has continued to increase its global footprint through organic growth and through the completion of the Astrapak acquisition in June 2017. Astrapak is a leading South African manufacturer of rigid plastic packaging products and components with a broad product offering across injection moulding, blow moulding and thermoforming technology platforms. The commitment to acquire the business was announced in December 2016. The company is a 'mini-RPC' serving customers in sub-Saharan Africa with industrial and consumer products. Its manufacturing footprint comprises nine facilities in South Africa, employing approximately 1,500 people and for the year ended 28 February 2016 the company achieved revenues of ZAR 1.4 billion (£80m). The acquisition provided RPC with a strategic opportunity to acquire a rigid plastic packaging group of scale, with well-established market positions in a new territory with attractive medium to long-term growth prospects. The business has already been integrated into the Group by the RPC Superfos division and, although the recent softening of the South African economy has tempered the growth of the business in the short-term, further opportunities to develop and grow the business using technology and market contacts within the RPC Group have already been identified.

Overall, revenue outside of Europe increased by 129% to £398.6m compared with the same period last year with Letica and Ace key contributors, and now represents 21% of total sales. On a constant currency basis revenue outside of Europe increased by 115%.

Pursuing added value opportunities in non-packaging markets

Further progress has been made in expanding the Group's propositions in non-packaging markets, where the focus is on niche products and markets where higher added value products deliver strong returns, and the Group's scale in polymer purchasing creates further competitive advantage. Good growth has been achieved in China, where the Ace business is benefiting from new and existing contracts with vehicle manufacturers and the rebuild and upgrade of the Zhuhai manufacturing plant.

Elsewhere the Strata Products acquisition and the materials handling and specialty vehicles businesses, acquired through the Promens acquisition, continue to perform well under RPC's ownership. ESE World, which was acquired in January 2017 and is a leading design and engineering company in temporary waste storage solutions, was a material contributor to the segment.

Overall, revenue in the Non-packaging segment increased 67% to £284.2m, including organic growth of 3%, and adjusted operating profit grew by 36%. On a constant currency basis revenue grew by 56%.

Business Integration

RPC has a proven track record of successfully and efficiently combining organisations following acquisition, with good integration capability across the organisation and the ability to retain the best of acquired businesses. Corporate functions are aligned through the head office team, with strengthened and enhanced governance, tax, IT, treasury, legal, management and financial reporting. Group purchasing performs a coordinating role and is active in extracting purchasing synergies and in strengthening internal resources post acquisition. From an operational perspective, key management are retained and business strategy enhanced by providing, as a member of the RPC Group, access to a wider product range and customer base. Where the business operates in an adjacent sector, it forms a new strategic business unit (SBU) in one of the seven divisions; if in an overlapping business it is integrated into one or more of the existing SBUs. Typically organisational integration will be completed within six months of acquisition completion, with the realisation of related synergies, including restructuring activities, to integrate both acquired businesses and existing RPC sites taking longer to occur.

Recent larger acquisitions have included Letica in the USA (March 2017), BPI (August 2016) and GCS (March 2016). The BPI and GCS businesses were European based, and together with the Promens acquisition (February 2015), their integration into the Group formed part of a synergy realisation programme which is nearing completion.

Letica

As a well-established and independent business, the integration effort required for Letica has been relatively minimal. Cost savings and synergies are in progress and are still expected at c. $17m per annum realised over two years. Operating as a standalone business within the RPC Superfos division, the existing Letica management have been retained and are incentivised to deliver growth and additional cost savings through a two year earn-out structure.

Promens, GCS and BPI

Promens, GCS and BPI were individually significant acquisitions, providing combined sales of c.€1,725m and 82 manufacturing sites to the Group within a 30 month period. The businesses required varying degrees of integration effort to maximise synergy realisation. This was achieved through a combination of purchasing savings, elimination of cost duplication, business optimisation initiatives and the rationalisation of operations with existing facilities. It also resulted in the creation of two new divisions and 11 SBUs, transforming the operational capacity of the Group.

This European acquisition integration programme is now coming to an end and over this period 22 locations will have been closed, including four head offices and two operations in progress for closure when acquired, and over 300 production lines relocated to other businesses.

The final phase of the Promens integration plan is nearing completion. As planned, during the period the French site restructurings at La Roche, Geovreisset and Marolles were completed and the already announced Nordic restructuring, resulting in the closure of Bjaeverskov (Denmark), commenced. The consolidation of the Manuplastics (UK) operation into the M&H facilities at the former Promens site at Ellough was confirmed in November 2017 and the related costs and sale proceeds of the manufacturing site are expected in the second half of the year, as planned.

The integration of the GCS acquisition into the Bramlage and M&H divisions was completed during 2016/17, with related restructuring activities already announced spilling over into the current financial year. These comprised the closure of the Torres site in Spain, the restructuring of the US business at Libertyville, the closure of the Halstead business in the UK with redistribution of business to other RPC sites and the majority of the outstanding costs relating to the Paris head office closure.

BPI operates as a standalone division. During the period the final post acquisition optimisation of the manufacturing footprint was completed, with site closures at Sevenoaks and Portadown executed and additional restructuring at the Worcester site well advanced.

All remaining elements of these integration programmes will be substantially complete by 31 March 2018.

Acquisition related cost synergies

The cost of the combined Promens, GCS, BPI integration programmes were estimated at €190m at March 2017, however these are now expected to be €185m with cash costs, previously estimated at €120m, now expected to reduce to €110m. The total steady state benefits associated with the overall optimisation of the cost base remain at least €105m per annum. During the period total programme costs, which were charged to exceptional integration and restructuring costs, amounted to £10.3m. As expected, steady state cumulative benefits increased to €84m per annum during the half year.

Operational Review

Packaging

The Packaging business serves diverse end-markets with innovative packaging solutions, both in rigid form and flexibles, through a range of plastic conversion processes including injection moulding, blow moulding, thermoforming and blown film extrusion. Sales grew 51% to £1,591.5m (43% on a constant currency basis) and, after taking account of acquisitions (net of disposed business) which contributed a net £447m of sales (including increases of £24m on foreign exchange and £9m for polymer pricing level impact), foreign exchange translation impacts of £53m and polymer price increases of £17m, grew by c.1% on a like-for-like basis. Adjusted operating profit increased by 63% to £177.5m (52% on a constant currency basis) and on a like-for-like basis increased by 28% reflecting the impact of cost reductions through integration activities and mix improvements through a selective margin enhancement strategy. Return on sales and RONOA all showed further improvement reflecting the above.

The strongest growth rates were in the Food and Personal Care packaging end-markets, with new product development and geographical expansion supporting this growth. Non-food packaging saw modest growth and Beverage and Healthcare sales remained relatively flat during the period.

In addition there was a further £69m of Technical Component sales (mostly moulds) by businesses which are reported in the Packaging segment.

The rigid plastic packaging market is forecast to grow at above GDP over the next five years 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 launch turnkey projects from its extended platforms in the Americas, the Far East and now sub-Saharan Africa.

Non-packaging

The Non-packaging businesses of the Group cover many different product and market combinations which are all linked by innovation, application of technical knowledge and consumption of polymer and comprise the RPC Ace division together with RPC Promens Roto, Strata Products, ESE and RPC Bramlage Vehicles SBUs. Non-packaging sales grew by 67% (56% on a constant currency basis). Acquisitions, largely ESE, which was acquired in January 2017, contributed a net £93m to sales (including a £6m increase on foreign exchange). After taking account of further foreign exchange translation gains of £12m, sales on a like-for-like basis increased by c.3%. Adjusted operating profit increased 36%, or 29% on a constant currency basis, with the return on sales decline reflecting the change in sales mix following the ESE acquisition and start-up costs associated with new contract awards in the Ace division and Bramlage Vehicles. On a like-for-like basis adjusted operating profit grew by 4%.

The RPC Ace division, based in China, operates a world class mould design and manufacturing capability, supplying complex moulds to both internal and external customers. It provides the Group with an Asian precision engineering platform for manufacturing high added value co-engineered injection moulded products and serves, alongside packaging markets, medical, lifestyle, power and automotive end-markets. With Chinese GDP increasing in excess of 6.5%, the business continues to grow at an attractive rate and is benefiting from existing and new contracts with major vehicle manufacturers and mould tool sales, which continue to concentrate on complex and technologically advanced tool designs. Elsewhere, new contracts for Lifestyle products were secured and, following the recent rebuild and upgrade, a fourth electroplating line is being considered for the Zhuhai site, facilitating further growth in sales of electroplating and spray painting for specialist automotive and other products.

RPC Promens Roto and RPC Bramlage Vehicles, which manufacture plastic parts for trucks and specialty vehicles from sites in the Netherlands, France, Estonia, Germany and the Czech Republic, continue to perform well with sales volumes and profits generally increasing over the period, but with some operations suffering higher costs in adapting to the higher activity levels. Optimisation programmes as part of the integration process were finalised during the period.

RPC Promens Roto business, which includes Sæplast serving the fish and agricultural industries, continued to trade well as it refocuses on the European and American markets, but were slightly lower than last year. Strata Products continued to trade well, and ESE, acquired in January 2017, was a material contributor to this segment.

These non-packaging products are attributed to the Technical Components end-market, with sales of £69m from the Packaging segment also being reported in this end-market. The latter comprised mainly mould sales which are typically project based and were lower compared with the previous year, reducing the overall growth of Technical Components to 1%.

Non-financial key performance indicators

RPC has three main non-financial key performance indicators, which provide perspectives on employee welfare and the Group's progress in improving its contribution to the environment.

1 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's health & safety performance continued to improve as the reportable accident frequency rate decreased compared with last year following continued focus on health & safety across the Group.

The Group continues to make stringent efforts to improve its efficient usage of electricity and water. The significant improvement across the Group reflects the impact of including the BPI businesses in the reported figures for the period to 30 September 2017, as the utilisation of both electricity and water in relation to polymer tonnes converted is considerably lower due to the nature of the blown film extrusion process. Excluding the impact of BPI, electricity usage per tonne increased slightly but water usage reduced as recycling initiatives, including closed loop cooling systems introduced to manufacturing sites across the Group, continue.

Outlook

Trading was encouraging in the first half with record profitability levels and strong cash generation. The rationalisation of our European manufacturing footprint with 22 locations closing is now nearing completion with the benefits being realised as anticipated. The Letica integration is going well with the expected cost savings on track. Looking forward, the Group continues to target innovation based growth leveraging its global footprint and will participate in the ongoing consolidation of the plastic packaging markets, albeit with no significant acquisitions anticipated in the remainder of this financial year. The second half of the year has started well.

Financial Review

The Group produced a strong set of financial results for the first half of 2017/18, with growth in the business achieved both organically and through acquisitions. Group revenues at £1,876m were 53% ahead of the same period last year, adjusted operating profit at £214.7m rose by 58% and free cash flow increased by 45% to £171.7m. Statutory operating profit at £182.3m was 98% ahead of last year and statutory net cash from operating activities at £245.4m increased by 62%.

Acquisitions

On 19 June 2017 the Group completed the acquisition of Astrapak for a cash consideration of £65.7m, funded from existing financing facilities. The provisional goodwill on acquisition amounted to £26.6m after fair value adjustments and the trading results of the business after the acquisition date are included in the Group results.

Transaction fees and integration costs of acquisitions are charged to the income statement as Exceptional costs.

Condensed consolidated income statement

Revenue and operating profit

Sales in the first half of 2017/18 increased by 53% (45% on a constant currency basis) to £1,875.7m (2016: £1,226.1m). The acquisition referred to above and the full year impact of the acquisitions made in 2016/17 after taking account of disposed business, net of polymer pass through and foreign exchange impacts, contributed £540m of this increase in sales. After taking account of £65m of foreign currency translation effects (mainly the euro which strengthened from €1.22 to €1.14) and the impact of net sales price increases from rising polymer prices passed on to customers of £17m, sales grew by £28m representing c.2% on an organic basis.

Adjusted operating profit (before restructuring costs, impairment and other exceptional and non-underlying items) increased by 58% (47% on a constant currency basis) to £214.7m (2016: £136.3m), with net acquisitions contributing £49m of prior year profit to this increase. The net favourable translation impact of the weakened pound gave a gain of £10m, partially offset by a polymer price headwind variance having an adverse effect of £1m. The Promens/GCS/BPI integration programme and Letica synergies to date contributed an additional £13m. The remaining £29m improvement was generated from the impact of volume, margin and general business improvements and the Group's ability to align contractual terms, offset by inflationary cost increases experienced throughout the Group, estimated at £21m. Return on sales rose from 11.1% to 11.4% as a consequence of these improvements.

Statutory operating profit at £182.3m was 98% higher than the previous year and is stated after the net exceptional costs and non-underlying items described in more detail below.

Foreign Exchange

Sterling continued to weaken against the major currencies, mainly due to the continued uncertainty of the timing and conditions of Brexit. This had a positive impact on the financial results of the Group on translation as 76% of sales revenues are reported in non-sterling currencies. The impact of this was to increase adjusted operating profit by £13m, adjusted EPS by 2.4p and net assets by £4.5m. The major currency movements which impact the results were:

Impact of Polymer prices

Polymer resin is a major raw material cost for the business, representing around one third of adjusted costs in the year. As a global commodity its price can vary with supply and demand, and as is typical in the industry, RPC has arrangements with its customers to pass on polymer price changes and hedge against price volatility. These changes are passed on through multiple methods, many of which are contractual and can be triggered based on absolute, relative or time based mechanisms. Where no contract exists, prices can often be changed at short notice. As there is a time lag in passing on price adjustments to the customer, typically around 3 months, this can have a negative or positive impact on operating profit depending on whether prices are increasing or reducing. During the first half polymer prices were relatively stable overall, with modest increases in Euro & GBP at the end of the period. Larger increases were encountered in the USA at the end of the period due to the disruptive effect of hurricanes on the supply chain.

Exceptional costs and non-underlying items

The financial review of the business above focuses on underlying business performance, which excludes exceptional and other non-underlying items. The separate reporting of exceptional and non-underlying items helps facilitate comparison with prior periods and assess trends in financial performance which are not impacted by one-off costs or credits which are exceptional or derive from non-recurring events.

Exceptional items are 'one-time' costs or credits which include acquisition costs, costs of business integration and investments to extract synergies, restructuring and closure costs including related asset impairments and losses during the closure period, gains or losses on the disposal of businesses and property, remuneration charged on deferred consideration and one-off tax items arising, and any other gains or losses which, in the management's judgement, because of their nature, size or infrequency, could distort an assessment of underlying business performance.

Other non-underlying items include the amortisation of acquired intangible assets, the fair value changes of unhedged derivatives and the unwinding of the discount on deferred and contingent consideration, including related tax and foreign exchange impacts.

Exceptional and other non-underlying items for the year charged against operating profit amounted to £32.4m (2016: £44.1m). These are mostly the result of acquisitions and can be broken down into a number of categories.

Acquisition, integration and restructuring related costs amounted to £16.3m (2016: £27.7m) which were considerably lower than in the same period last year, and also significantly lower than in the second half of last year.

Acquisition transaction costs of £2.1m are the direct external costs associated with making an acquisition. They are primarily financial, legal, tax, environmental, anti-bribery and corruption due diligence plus representation and warranty insurance and other advisor fees. These are substantially lower than last year due to low acquisition activity levels.

Integration costs of £10.3m (2016: £20.4m) are the one-time costs incurred to deliver synergies from the acquired businesses. The Group substantially completed the integration of the Promens sites during the year, and the total cost of the combined GCS, BPI and Promens integration programmes are now estimated at €185m with associated cash costs also expected to be lower at €110m. The benefits associated with the overall optimisation of the cost base are still projected to be at least €105m. Cumulative project costs were £140.1m at the end of the period, and were £10.3m in the period reflecting the lower level of integration activity as the programme comes to its conclusion. Additional benefits arising in the period amounted to £13m. In addition there were other acquisition, restructuring and closure costs of £3.9m which were not part of the Promens, GCS and BPI programme.

Remuneration and deferred consideration charges amounted to a net £1.1m (2016: £3.8m). These arise where an earn-out is part of an acquisition and the selling owner / management are retained within the business or there is a change in the expected level of payment. During the period, there was a remuneration charge of £12.6m and a credit of £11.5m, the latter primarily driven by the assumed payout in relation to the acquisition of Ace being lowered from 50% to 40%. The Ace arrangement is a four year earn-out which requires a four year EBITDA compound annual growth rate of 15.6% to payout in full. Experience indicates it is unlikely to be paid in full at the current accrual rate. In addition the Letica earn-out percentage was adjusted to 40%, reflecting the expected business performance that will be delivered over the two year earn-out period.

Insurance proceeds relating to the replacement of capital equipment amounted to £11.0m. These were confirmed and received in the period and relate to the fire that occurred at the RPC Promens site at Eke, Belgium, in December 2016. As a consequence of this one-off event, these have been reported as exceptional income.

The other non-underlying items fall into three categories.

Amortisation of acquired intangibles arises as a consequence of acquisition accounting, as on acquisition all assets and liabilities, tangible and intangible, are revalued at fair value, with the relevant amount of consideration paid for the business allocated to each asset. Intangibles take the form of intellectual property, brands, know-how and customer contacts. RPC amortises these amounts over 5-10 years. This charge for the period ended September 2017 was £25.3m (2016: £11.0m).

Non-underlying finance costs include interest associated with closed defined benefit pension funds of £2.8m (2016: £2.1m) and implied interest on deferred and contingent consideration associated with earn-outs, including exchange impacts being a credit of £1.9m (2016: debit £6.8m).

The tax effect of the above adjustments are also taken into account.

Interest and tax

Net financing costs at £16.6m were lower than the prior year (2016: £20.0m), due to the increase in net interest payable on borrowings of £16.0m (2016: £11.1m), which increased over the period due to the acquisitions made, more than offset by a decrease in non-underlying finance costs as indicated above.

Adjusted profit before tax increased from £125.5m to £199.2m mainly as a result of the improvement in adjusted operating profit.

The effective tax rate on underlying activities for the Group is affected by the geographic mix of profits and the tax rates of the territories in which the Group operates. Other factors which can impact the effective tax rate include: assessment and recognition of deferred tax on losses, provisions for uncertain tax positions, local tax incentives (including research and development tax credits), tax reforms as well as foreign exchange movements.

The tax rate on the adjusted profit before tax for the Group increased to 24.5% (2016: 23.5%) for the period due to acquisitions in higher tax rate territories. This resulted in an adjusted profit after tax of £150.4m (2016: £96.0m) and the adjusted basic earnings per share was 36.4p (2016 restated: 28.6p).

The Group's overall taxation charge was £44.1m (2016: £21.5m) resulting in a reported tax rate of 26.5% (2016: 29.7%), reflecting an adjusted effective rate of tax of 24.5% (2016: 23.5%) and a 14.2% tax credit (2016: 15.1%) on exceptional and non-underlying charges, as tax relief is not available on a proportion of these costs.

Net profit, earnings per share and dividends

Reported profit after tax was £122.1m (2016: £51.0m), an increase of 139% on the previous year. This led to a basic earnings per share of 29.5p (2016 restated: 15.2p), nearly doubling the performance in the prior year.

In line with the Group's progressive dividend policy of targeting a dividend cover of 2.5x adjusted earnings through the cycle, an interim dividend of 7.8p (2016 restated: 6.1p) has been recommended, which is a 28% increase on the previous year.

All prior year earnings and dividend per share figures have been restated to reflect the bonus element of the rights issue in the prior year.

 Consolidated Balance Sheet and Consolidated Cash Flow Statement

The balance sheet of the Group was strengthened by the acquisition made in the period. Goodwill increased by £23.3m as a consequence of the acquisition and after taking account of exchange impacts. Other intangible assets decreased by net £28.9m and comprises mainly customer relationships, technology and brands capitalised on acquisition and new product development expenditure, net of amortisation charges.

Property, plant and equipment increased by £62.8m; capital additions were £107.6m, which was £28.2m (26%) ahead of depreciation charged in the period, due to continued investment.

The £30.2m (March 2017: £37.0m) of derivative financial instruments largely comprise the mark-to-market value of euro currency swaps taken out in 2011 to hedge the US dollar borrowings from the US Private Placement (USPP). The weakening of the euro against the US dollar has served to decrease the value of these in the year.

Working capital (the sum of inventories, trade and other receivables and trade and other payables) was £207.7m, which was 5.5% of sales (annualised) compared with £220.3m at the year end, 6.2% of sales.

The Group had a net deferred tax liability of £123.2m (March 2017 restated: £116.7m). Deferred tax assets of £114.0m (March 2017 restated: £116.5m) represent the future tax benefit from settling net pension liabilities, the recognition of tax losses and other temporary differences which are expected to offset tax due on future income streams. The deferred tax liabilities of £237.2m (March 2017 restated: £233.2m) relate in the main to fixed asset and intangible asset temporary differences. The net current tax liability increased from £39.3m to £53.8m as a result of current year tax charges on profits and tax liabilities from acquisitions which were offset by payments made to tax authorities in the period. Included in the current tax liabilities are uncertain tax provisions, which although individually are not material in amount, represent a number of tax risks across a variety of jurisdictions including liabilities inherited on recent acquisitions. There were no significant movements in these during the period.

The long-term employee benefit liabilities reduced from £256.0m at the prior year end to £240.7m, mainly due to actuarial gains of £13.6m primarily due to higher discount rates on retired benefit obligations.

Total provisions and other liabilities decreased to £84.5m (March 2017: £112.9m), with the provisions arising on acquisition in the period offset by utilisations. The utilisations include out of market contract provisions from acquired businesses committed prior to acquisition, which are generally utilised within 18 months of the acquisition date.

Capital and reserves increased in the period by £42.3m, with the net profit for the period of £122.1m, the favourable exchange movements on translation, net share issues, pension related net actuarial gains and share-based payments from employee share schemes being offset by dividends paid of £73.9m and unfavourable net fair value movements on derivatives. Further details are shown in the Consolidated statement of changes in equity which is included in the financial statements.

Cash flow

Cash flow performance was strong with free cash flow at £171.7m, 45% ahead of last year (2016: £118.2m). Net cash from operating activities (after tax and interest on a statutory basis) was £245.4m compared with £151.2m for the same period in 2016, with higher cash generated from operations (after exceptional cash flows) of £285.9m, mainly due to the higher EBITDA. Working capital inflows of £25.4m benefited from seasonality in agricultural businesses and a continued focus on working capital management. This performance also includes further capital investments which were £29.7m ahead of depreciation for the year.

Net debt, which includes the fair value of the cross currency swaps that will be used to repay the USPP funding, increased by £21.3m and at the end of the period stood at £1,070.4m (March 2017: £1,049.1m). Net cash from operating activities, which is after interest and tax payments of £40.5m (2016: £27.8m), was utilised for, among other things, acquisitions in the year of £77.8m (including debt acquired of £12.1m), purchasing property, plant and equipment of £109.1m, and for paying dividends of £73.9m. Included in net cash from operating activities (and excluded from free cash flow) were net payments of £8.5m relating to exceptional and non-underlying cash outflows, non-underlying cash provision movements of £16.7m, exchange rate movements of £17.3m and other movements in provisions and financial instruments of £21.0m. In addition, £12.4m was used to fund share buybacks in the period.

Gearing remained at 57% (March 2017: 57%) and reported pro forma leverage (net debt to EBITDA ratio) was 1.8. The average net debt during the period was £1,189m (year ended March 2017: £934m).

Capital Allocation and funding

To drive shareholder value, RPC has a capital allocation framework that takes account of investment in product innovation, organic growth initiatives, selective strategic and bolt-on acquisitions and returns to shareholders underpinned by a strong balance sheet.

The Group has a progressive dividend policy of targeting a dividend cover of two and half times adjusted earnings through the cycle and is in its 25th year of consecutive dividend growth. In addition RPC continually assesses share buyback opportunities in the context of the Group's overall financial position and leverage guidance, and other available opportunities to deploy capital.

On 19 July 2017 the Group announced an inaugural share buyback programme of up to £100m over a period of up to 12 months, as the then share price undervalued the Group's performance and future prospects. By the end of the half year 1.38m shares had been acquired under the programme for a total consideration of £12.4m, and as at 24 November 2017 this had increased to 2.26m shares for a total consideration of £20.5m.

As at 30 September 2017 the Group had total finance facilities of £2,227m with an amount of £1,077m undrawn after taking account of bank guarantees and other adjustments. The facilities are mainly unsecured and comprise revolving credit facilities (RCFs) of up to £870m with eight banks maturing in 2020 and €450m with five banks maturing in 2019, USPP notes of $216m and €60m issued to 17 US life assurance companies maturing in 2018 and 2021, a term loan of $750m with seven banks maturing in 2018 (with the option to extend to 2020), mortgages of £13m, finance leases of £23m and other uncommitted credit and overdraft arrangements.

The Group does not actively use asset based finance or factoring arrangements as a means of raising additional finance. The USPP notes noted above were a debut issue raised in the USPP market in 2011, providing the Group with seven year and ten year dated borrowings. The Group has a NAIC-2 credit rating by the US National Association of Insurance Commissioners.

Financial key performance indicators (KPIs)

The Group's main financial KPIs focus on return on investment, business profitability and cash generation.

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 the period concerned. Comparatives restated to include all acquisitions on a pro forma basis.

2 ROS is adjusted operating profit divided by sales revenue.

3 Free cash flow is cash generated from operations less net capital expenditure, net interest and tax, adjusted to exclude exceptional cash flows and non-underlying cash provision movements.

4 ROCE is adjusted operating profit for continuing operations (annualised for half year reporting), divided by the average of opening and closing shareholders' equity, after adjusting for net retirement benefit obligations, assets held for sale, acquisition intangibles and net borrowings for the period concerned.

5 Adjusted operating cash flow conversion is the ratio of free cash flow before interest and tax paid, to adjusted operating profit.

The key measures of the Group's financial performance 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 increased by 45% reflecting the impact of recent acquisitions, synergy realisation and lower exceptional costs.

Technical guidance 2017/18

The Group is providing the following update to its technical guidance for 2017/18:

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; dependency on key customers, reduced by joint investment in product and technological development; integration and the achievement of acquisition synergies, managed by the development of integration programmes using divisional resources; and business interruption and the loss of essential supplies, mitigated by ensuring alternative sources of supply are available, the capability of manufacturing from other sites where loss of supply is localised, and maintenance of protocols and procedures to ensure business continuity should a major incident occur.

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 2017.

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 £2,227m at 30 September 2017 with an amount of £1,077m undrawn after taking account of bank guarantees and other adjustments, and comprises mainly committed facilities with tenures ranging from 2018 to 2021. 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.

Board

On 7 September 2017 Kevin Thompson was appointed to the Board of Directors of the Company as a Non‐Executive Director. Kevin is Group Finance Director of Halma plc having qualified as a Chartered Accountant with PricewaterhouseCoopers. Halma is a decentralised, FTSE 250 manufacturing and technology business that has an established track record of delivering strong growth over the long‐term both organically and through acquisitions. The company has significant operations in the UK, Mainland Europe, the USA and Asia.

Having joined the Company as an independent Director in 2009, Martin Towers will resign from the Board in 2018, and Kevin will take over Martin's responsibility as Chairman of the Audit Committee in January next year.

Executive Remuneration

As indicated at the AGM announcement, to further align incentives with the Group's strategy the Remuneration Committee has progressed a review of the performance measures and targets used under both the annual bonus and long-term incentive plan. This will include further emphasis on returns on capital and cash flow generation. The Committee will consult with shareholders as part of this process ahead of the AGM in 2018.

Dividend

The Board has declared an interim dividend of 7.8p per share (2016 restated: 6.1p), an increase of 28% on the previous interim dividend, and is in line with the Group's progressive dividend policy which has been in place since RPC's flotation in 1993. This will be paid on 26 January 2018 to ordinary shareholders on the register at 29 December 2017.

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 IAS 34 'Interim Financial Reporting' 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

INDEPENDENT REVIEW REPORT TO RPC GROUP PLC

Report on the condensed consolidated half year financial statements

Our conclusion

We have reviewed RPC Group Plc's condensed consolidated half year financial statements (the "interim financial statements") in the half year financial report of RPC Group Plc for the 6 month period ended 30 September 2017. 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 Guidance and Transparency Rules sourcebook 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 2017;

· 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 interim financial statements.

The interim financial statements included in the half year financial report have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

As disclosed in note 2 to the interim 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 interim financial statements and the review

Our responsibilities and those of the directors

The half year financial report, 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 in accordance with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

Our responsibility is to express a conclusion on the interim financial statements in the half year financial report 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 Guidance and Transparency Rules sourcebook 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 interim 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, 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 and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim financial statements.

PricewaterhouseCoopers LLP

Chartered Accountants

Birmingham

29 November 2017

a) 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.

b) Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Condensed consolidated income statement

Condensed consolidated statement of comprehensive income

Condensed consolidated balance sheet

The half year financial report was approved by the Board of Directors on 29 November 2017 and was signed on its behalf by:

Condensed consolidated cash flow statement

Condensed consolidated statement of changes in equity

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

1. General information

The comparative figures for the financial year ended 31 March 2017 are not the Group's statutory accounts for that financial year. Those accounts have been reported on by the Group's auditor, PricewaterhouseCoopers LLP, and delivered to the Registrar of Companies. The report of the auditor was (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498(2) or (3) of the Companies Act 2006. The Group's statutory accounts for the year ended 31 March 2017 are available from the Company's registered office, at Sapphire House, Crown Way, Rushden, Northants NN10 6FB or from the Group's website at www.rpc-group.com.

2. Accounting policies

The condensed consolidated half year financial statements have been prepared in accordance with International Accounting Standard (IAS) 34 'Interim Financial Reporting', as adopted by the EU and in accordance with the Disclosure guidance and transparency rules sourcebook of the UK's Financial Conduct Authority. They do not include all of the information required for full annual financial statements, and should be read in conjunction with the consolidated financial statements of the Group for the year ended 31 March 2017.

The accounting policies, presentation and methods of computation used in this condensed set of financial statements are consistent with those applied in the Group's latest annual audited financial statements for the year ended 31 March 2017.

In the preparation of the interim management report, comparative amounts have been restated to reflect the following:

· The provisional GCS and JP Plast acquisition accounting was finalised at 31 March 2017 and hindsight adjustments made to goodwill, provisions, current and deferred tax, accounts receivable and property, plant and equipment. These have been adjusted in the 30 September 2016 balance sheet.

· The provisional BPI acquisition accounting has been finalised and hindsight adjustments made to goodwill, provisions, deferred tax, accounts receivable and intangible assets. These have been adjusted in the 31 March 2017 and 30 September 2016 balance sheets.

· Earnings per share for the period to 30 September 2016 has been restated to reflect the rights issue on 27 February 2017.

· Current tax receivables of £0.9m have been separately disclosed in the 30 September 2016 balance sheet which were previously netted off current tax liabilities.

Estimates

The preparation of the condensed financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

In preparing these condensed financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the financial statements as at and for the year ended 31 March 2017.

New Standards and Interpretations

The IASB has issued a number of new standards which are not yet effective. They do not have an effect on the financial information contained in this report and will be more fully discussed in our annual report for the year ended 31 March 2018.

IFRS 9 - Financial instruments

IFRS 9 is effective for annual periods beginning on or after 1 January 2018. It will therefore be effective in the consolidated financial statements of the Group for the year ended 31 March 2019.

IFRS 9 replaces IAS 39 - Financial Instruments: Recognition and Measurement. In doing so it addresses the classification, measurement and de-recognition of financial assets and liabilities, introduces new rules for hedge accounting and a new impairment model for financial assets.

A detailed assessment of the impact of the new standard is underway, however preliminary assessments indicate that the impact will not be material.

IFRS 15 - Revenue from Contracts with Customers

IFRS 15 is effective for annual periods beginning on or after 1 January 2018. It will therefore be effective in the consolidated financial statements of the Group for the year ended 31 March 2019.

IFRS 15 replaces IAS 18 - Revenue and IAS 11 - Construction Contracts in order to provide a single, comprehensive five-step model to be applied to all sales contracts. The key principle of the standard is that revenue is recognised when control of the goods or services passes to customers at an amount that reflects the consideration to which an entity expects to be entitled in exchange for those goods or services.

A detailed assessment of the impact is currently ongoing, with a review of customer contracts across the Group underway. At this stage in the assessment, based on current findings, the Group does not expect a significant impact on the financial statements.

IFRS 16 - Leases

IFRS 16 is effective for annual periods beginning on or after 1 January 2019. It will therefore be effective in the consolidated financial statements of the Group for the year ended 31 March 2020.

IFRS 16 replaces IAS 17 - Leases and eliminates the classification of leases over 12 months in length as either operating leases or finance leases and introduces a single lessee accounting model whereby all leases are accounted for as finance leases, unless of low-value. The standard will therefore, require that the Group's leased assets are recorded within property, plant and equipment as 'right of use assets' with a corresponding lease liability which is based on the discounted value of the cash payments required under each lease. Meanwhile the operating lease expense will be replaced with a depreciation charge and a financing expense.

The Group's evaluation of the impact IFRS 16 will have on its consolidated financial statements is currently ongoing, but the effect is expected to be material based on the size of the Group's operating lease commitments in the annual report and accounts for the year ended 31 March 2017.

3. Operating segments

The information reported to the Group's Board of Directors, considered to be the Group's chief operating decision maker for the purpose of resource allocation and assessment of segment performance, is based on a divisional structure. These divisions are considered to be operating segments.

Since a number of the operating segments meet the aggregation criteria set out in IFRS 8, they have been amalgamated into one reporting segment, Packaging. The remaining operating segments have been included as Non-packaging. The business performance of the two segments can be found in the Business review.

The accounting policies of the reportable segments are the same as the Group's accounting policies. Segment profit represents the profit earned by each segment with an allocation of central items. Pricing of inter-segment revenue is on an arm's length basis.

Segmental revenues and results