Half year results

28 November 2018

RPC GROUP PLC

Half year results for the six months ended 30 September 2018

RPC Group Plc, a leading global plastic products design and engineering company, announces its half year results for the six months ended 30 September 2018.

Financial highlights1:

· Revenue growth of 7% to £1,892m reflecting continued organic growth of 3.2%, the contribution from acquisitions, pass-through of higher polymer prices partially offset by foreign exchange movements

· Adjusted operating profit increase of 3% to £214.3m demonstrating good organic profit growth despite polymer headwind

· Statutory profit after tax, from continuing operations of £119.1m up 1%, with a 2% improvement in statutory basic EPS to 28.9p

· Robust adjusted operating cash conversion achieving 89% whilst investing in growth projects

· Interim dividend of 8.1p up 4% representing the 26th year of consecutive growth

Strategic highlights:

· Significant organic growth in China and US due to higher added value products

· Investment in the Group's sustainability proposition with the acquisition of UK based recycler PLASgran positioning RPC as one of Europe's leading recyclers

· Selective consolidation of European markets continued with the Nordfolien acquisition

· Finalised the disposal of Letica Foodservice whilst continuing with the disposal of the other non-core businesses

· Returned £99m to shareholders through dividend payments and the completion of the inaugural share buyback scheme

"I am pleased with the trading performance over the last six months. We achieved good profitable organic growth with a robust cash flow performance whilst investing for future higher added value growth. I am excited by the many opportunities to further develop both organically and through acquisitions. With RPC's unique global network of design and engineering centres, the Group is well placed to benefit from the development opportunities driven by globalisation and recent sustainability and e-commerce trends. Looking ahead we continue to target through the cycle organic growth ahead of GDP."

1 For continuing operations only

Notes

1 The directors have adopted various Alternative Performance Measures (APMs), as those not defined or specified under International Financial Reporting Standards (IFRS). The directors believe that these APMs assist in providing additional useful information on the underlying trends, performance and position of the Group. APMs are used by the directors and management for performance analysis, planning, reporting and incentive setting purposes and have remained consistent with the prior year. APMs should be considered in addition to, and are not intended to be a superior to, or a substitute for, IFRS measurements. The APMs that the Group has used this period are contained in this announcement, with further details on pages 40 to 44.

2 The continuing Group is stated, and the prior year restated, before discontinued operations, details of which can be found in note 5 of the condensed financial statements.

3 A glossary of terms used in this announcement can be found on page 44.

For further information:

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

UK +44 3333 000 804 PIN: 18551406#

UK (free) 0800 358 9473 PIN: 18551406#

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 global plastic products design and engineering company that works responsibly across a broad range of carefully selected industries from food to technical components, healthcare and industrial.

A worldwide business, RPC has 188 operating sites in 33 countries that are well placed to support customers on a local, national and international basis, as well as providing multi-site security of supply. Our decentralised structure of specialist operations reflects the industry structure and we have expertise in all five of the major polymer conversion processes allowing us to get close to our customers, understand their needs, and produce innovative, sustainable products that add value. As part of this, we are committed to actively working with our customers, as well as external organisations, to reduce the carbon footprint and environmental impact of our products across the supply chain.

Key to this are our people. An unrelenting focus on Health & Safety, our comprehensive training programmes and an inclusive collaborative and entrepreneurial environment all contribute to ensuring that we attract the next generation of plastics experts to maintain our focus on technical and design innovation.

We continue to grow and deliver returns to our shareholders through the successful application of our strategy.

For further information and to subscribe to our mailing list please visit: www.rpc-group.com

Follow us on Twitter: @rpc_group

INTERIM MANAGEMENT REPORT

Results Summary

The Group's results in the first half of the year showed another successful period. The Vision 2020: Focused Growth Strategy continued to deliver, with the Group being well placed for future growth. The recent acquisitions of PLASgran and Nordfolien have added two sustainability focused businesses to the Group and ensures the Group remains well placed to benefit from the current focus on sustainability.

Revenues in the first half of the year grew by 7% to £1,892m, with strong growth in both packaging and non-packaging segments leading to organic growth of 3.2%. At constant exchange rates, reported revenues also grew by 7%.

Group operating profitability levels, both before and after adjusting items, increased compared with the prior period due to the contribution of acquisitions, the realisation of synergies and organic growth, offset by a foreign exchange translation loss and an adverse polymer price pass-through time lag. Adjusted EBITDA grew 4% to £299.3m and adjusted operating profit increased 3% to £214.3m. At constant exchange rates, adjusted EBITDA and adjusted operating profit grew by 5% and 3% respectively, while return on sales declined 50 basis points (bps) to 11.3% or 50 bps on a constant currency basis primarily due to higher polymer prices. Once these are added back return on sales remains constant at 11.8%.

RONOA (return on net operating assets) was 26.8% and ROCE (return on capital employed) at 14.7%, remains well ahead of the Group's weighted average cost of capital having been impacted by both foreign exchange translation losses and polymer price pass-through lag. Restating for these losses, ROCE would have been 15.2%, in line with the prior period and above the year end. RONOA would have been 27.8%, also an improvement from the year end at 27.2%. Adjusting items were lower than last year at £30.0m (2017: £31.2m), reflecting the completion of the acquisition integration programmes. Statutory profit before tax declined 5% compared with the prior period due to increases in net finance costs resulting from increased net debt, as well as LIBOR and margin increases.

The Group continues to invest in future growth and capital expenditure was £103.5m (2017: £109.1m) in the period of which c.50% was spent on growth projects. The Group's cash flow continues to develop and cash generated from operations was £262.8m. This is slightly down from last year's £285.9m due to the seasonal working capital inflow from some businesses being offset by growth investment in other areas. This working capital outflow, combined with interest and tax payments being higher than last year, has resulted in free cash flow being lower than prior period at £142.9m (2017: £166.8m). Adjusted cash conversion remains strong at 89% (2017: 99%). Working capital as a percentage of sales at 6.5% was in-line with the year end result. The Group retains a strong balance sheet with net debt of £1,181m (March 2018: £1,139m) representing a pro forma 2.0x EBITDA multiple, in line with March 2018. Total finance facilities of £2,137m were available as at 30 September 2018.

Strategy

The Group continues to focus on the delivery of 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 shareholders returns through focusing on increased customer demand for sustainable solutions, divestment of non-core businesses previously identified and integration of newly acquired businesses into the RPC business model.

Innovation, investment and sustainability

Through RPC's 31 design and innovation centres the Group has an attractive customer proposition of innovative, sustainable and proprietary products which continue to drive a healthy pipeline with the Group remaining confident of continuing to grow through the cycle ahead of GDP. Over 50% of the £104m capital expenditure made in the period was attributable to growth-related projects. The Group further cemented its commitment to sustainability by acquiring PLASgran, a leading UK recycler of rigid plastic, securing a supply of PCR for the Group.

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 through price discipline while maximising production utilisation and efficiency.

Active portfolio management

As announced at the 2017/18 year end, the Group's continual review of its business portfolio had identified businesses for disposal with £209m of turnover for reasons including their being sub-scale in the markets in which they operate or they operate outside of RPC's core competencies in plastic packaging and technical components.

During the period, the Letica Foodservice business was disposed of for total consideration of $95m to Graphic Paper International at a profit on disposal of £19.2m. Progress is also being made on the disposal of the other businesses identified, which are held for sale at their expected net realisable value resulting in an impairment of £37.1m within discontinued operations during the period.

Focused organic growth

Organic growth was 3.2% over the period and benefited from improved activity levels in both Packaging and Non-packaging, and remains above the weighted average GDP growth of 2.1%. The Group's revenue in all end markets were either flat or growing despite the hot summer in Northern Europe affecting several of the food end markets served by RPC. Europe, the Group's key market, had a robust trading performance, as well as both China and US achieving high growth rates.

Selective consolidation in Europe

Three small acquisitions were made in the period. Nordfolien, a leading player in the design and manufacture of higher added value polythene films for both industrial and consumer packaging markets, was completed in April. Not only does Nordfolien have spare capacity facilitating the growth of the bpi indupac business without net investment, it also has an in-house recycling facility producing flexible polymer for use across the Group. In August, the Group acquired PLASgran, a leading UK plastic waste recycler, which specialises in the compounding of rigid plastics, securing for RPC an internal source of recycled materials which are being increasingly sought by customers. Also in August the Group acquired Spec Group a small business to sit alongside our existing South African operations.

Creating a meaningful presence outside Europe

Through both organic and inorganic investment, the Group has continued to increase its global footprint and revenues generated outside of Europe grew by 14% in the period to £421m representing 22% of the Group's revenue. Previous years investments in both the Ace Hefei site and a new manufacturing location in Brazil are now fully operational and driving growth. In addition, following the acquisition of Letica in early 2017 the Group's US operations have also increased in scale.

Pursuing added value opportunities in non-packaging markets

Revenue in the non-packaging segment grew by 8% to £272m, by 9% on a constant currency basis and 9% organically. Adjusted operating profit grew by 3%.

Progress has been maintained 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 a further competitive advantage.

This segment has also benefited from the increased focus on sustainability with strong growth from ESE and Strata Products where significant levels of recyclate are used. ESE further benefits from requirements for enhanced waste management and ease of recycling. The increased level of project work has resulted in strong sales for moulds across the Group.

Letica

Following the disposal of the Foodservice business acquired with Letica, agreement was reached with former shareholders to settle the earn-out for $7.5m which was paid after the period end. The Letica rigid plastic business is well invested and operates as a standalone business within the RPC Superfos division but benefits from being part of a larger Group.

Acquisition criteria and pipeline

The opportunity to consolidate the European market remains both significant and highly attractive, and RPC has the scale, innovation capabilities, and ambition to continue to exploit this. RPC maintains disciplined acquisition criteria, which include:

· Strategic fit

· Strength of incumbent management

· Financial track record

· Financial criteria including quantifiable cost and cash synergies; impact on return of capital employed, return on sales, return on net operating assets; and earnings accretion

In line with these, the Group has continued to build and maintain links with potential targets and is supported by a strong balance sheet with significant headroom in its debt facilities.

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. Revenue grew 7% to £1,620m (7% on a constant currency basis) which included acquisitions (net of disposed business) which contributed a net £61m of sales (including decreases of £1m on foreign exchange), adverse foreign exchange translation impacts of £8m and polymer price increases of £12m, and organic growth of 2%. Adjusted operating profit increased by 3% to £175.6m (3% on a constant currency basis). Return on sales and RONOA were impacted in the period by the polymer price increase pass-through lag, sales mix effects and the hot summer in Northern Europe affecting revenue and operating margins.

In addition, there was a further £43m of Technical Component revenue (mostly moulds) by businesses which are reported in the Packaging segment.

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. Like packaging these markets are being driven by recycling, reusing, lightweighting and substitution of heavier substrates. This segment includes RPC Ace and ESE both of which have large project based businesses selling moulds and temporary waste solutions respectively.

Revenue increased by 8% to £272m driven by organic growth of 9% partially offset by foreign exchange translation declines. Adjusted operating profit increased by 3% and was impacted by sales mix. However, these increases were in businesses with low capital deployment resulting in RONOA growing by 180bps to 38.0%

The main drivers of growth have been; new moulds required by customers for new products; increasing focus on sustainability, resulting in increased demand for ESE's temporary waste solutions, and Sæplast, serving the fish and agricultural industries, experiencing a good period resulting from increased European fish quotas. Strata Products continued to trade well as its customer proposition, with many products manufactured from recyclate continuing to resonate with customers.

These non-packaging products are attributed to the Technical Components end-market, with revenue of £43m 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 7%.

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.

There has been a small deterioration in the Group's health & safety performance in the period which was largely in the second quarter due to a higher number of incidents and in part due to new acquisitions. The Group remains fully focused on the health & safety of its employees and in sharing best practice with new members of the Group.

The Group continues to make stringent efforts to improve its efficient usage of electricity and water and this is reflected in continuing reductions in both KPIs. Despite the hot summer experienced across Northern Europe, higher water usage used during the manufacturing process for cooling was mitigated by investment in efficient systems.

Outlook

The Group had an encouraging trading performance over the last six months. We achieved good profitable organic growth with a robust cash flow performance whilst investing for future higher added value growth. There are many opportunities to further develop both organically and through acquisitions. With RPC's unique global network of design and engineering centres, the Group is well placed to benefit from the development opportunities driven by globalisation and recent sustainability and e-commerce trends. Looking ahead we continue to target through the cycle organic growth ahead of GDP.

Financial Review 

The Group performed well during the period ended 30 September 2018 with organic revenue growth of 3.2%, in addition to benefiting from acquisitions in the period and the full contribution from acquisitions completed in the previous year. Group adjusted operating profit increased, however polymer and FX headwinds had a negative impact on that growth. Free cash flow decreased to £142.9m reflecting continued investment in capital, higher borrowing costs, together with a small working capital outflow in the period.

On a statutory basis, operating profit grew by 4% to £184.3m and net cash flows from operating activities decreased by 13% to £214.6m.

During the period the US Letica Foodservice business, European injection moulding automotive business and spirit closures business were classified as discontinued operations. The prior period's income statements and KPIs have been restated to exclude these businesses. The Letica Foodservice business was disposed of in September 2018.

Foreign exchange

Currency had a negative impact on the Group's reported results, the relatively flat euro position offset by the volatility of the USD.

Impact of polymer prices

Polymer resin is the major raw material cost for the business, representing around one third of adjusted costs in the period. As a global commodity, its price can vary with supply and demand and RPC has arrangements with many of its customers to pass on polymer price changes which serves as a hedge against price volatility. As there is a time lag in passing on polymer price adjustments to the customer, typically around three months, this can have a negative or positive impact on revenue and adjusted operating profit depending on whether prices are increasing or reducing. During the period, a steady increase in polymer prices resulted in selling prices lagging input costs.

Overall, there was an adjusted operating profit headwind of £10.2m in the period. This compares to a £2.7m headwind for the first half of the prior year which has resulted in a negative pass-through variance of £7.5m impacting adjusted operating profit. The increasing prices did result in a £12m increase in revenue.

Revenue

The increase in revenue is shown below, impacted by a favourable change in polymer pricing due to the increases noted above as well as the impact of acquisitions, both made in the period and a full year effect of those in the prior year. This growth was offset by the effect of foreign currency translation and at £58.9m organic growth was 3.2% for continuing operations.

Operating profit

The increase in adjusted operating profit benefited from contribution from acquisitions and business improvement, offset by polymer price headwinds, foreign currency translation and general cost inflation.

Return on sales decreased 50bps to 11.3%, due to the impact of polymer pricing and foreign currency movements. Once these are added back return on sales remains constant at 11.8%.

The following table shows a reconciliation of adjusted operating profit to statutory operating profit:

Adjusting items

Adjusting items comprise the following within operating costs:

Acquisition, integration and related restructuring costs:

Acquisition transaction costs of £0.9m (2017: £2.1m) are the direct external costs associated with making an acquisition. During the period, the Group acquired Nordfolien, Spec Group and PLASgran.

Other restructuring costs of £5.1m (2017: £3.3m) include costs related to the restructure of the Belgian footprint following the fire at Eke, Belgium, along with other integration and restructuring costs.

The movement on post-acquisition remuneration and contingent consideration amounted to a net expense of £0.1m (2017: net expense of £1.1m).

Amortisation of acquired intangible assets of £25.5m (2017: £24.8m) arose as a consequence of acquisition accounting. Intangible assets take the form of intellectual property, brands, know-how and customer contacts. RPC amortises these amounts over 5-10 years.

The major integration programme consisting of combining the Promens, GCS and BPI acquisitions was completed as at 31 March 2018.

Other adjusting items: 

These total £1.6m of income (2017: £10.3m income) and consist of the release of a £4.8m out of market contract provision in Hefei, China, which is no longer required following improvements in productivity at this growing site. This is partially offset by non-cash cancellation costs associated with employee share save schemes and other adjusting items totalling £3.2m.

Interest

Net financing costs before adjusting items of £25.8m compared to £15.7m in the previous period, reflecting a full year impact from incremental borrowings drawn to fund acquisitions and a higher interest rate, due in part to an increase on the term loan put in place at the time of the Letica acquisition as well as base rate increases. The intention remains to refinance the $643m term loan which, as is customary with bridge financing, increases in cost over time.

Adjusting finance costs of £4.5m primarily comprise of defined benefit pension interest charges of £1.7m and £2.4m of foreign exchange rate losses on contingent consideration.

Profit before tax

Adjusted profit before tax (being profit before tax and excluding adjusting items included in operating profit and net financing costs) was £188.9m (2017: £193.5m). The growth of 4% in operating profit was offset by an increase in net financing costs. Statutory profit before tax was £154.4m (2017: £161.7m).

Taxation

The Group's tax strategy is to comply with relevant laws and regulations in the countries in which it operates and is aligned with its corporate governance framework. The Group's tax strategy has been approved by the Board and is published on the RPC Group Plc website within the Corporate Responsibility section.

The effective tax rate on underlying activities for the Group varies based on a number of factors. Key drivers are the profit mix and tax rates in the territories in which the Group operates. Other factors that can impact the effective tax rate include the assessment and recognition of deferred tax on losses, provisions for uncertain tax positions, local tax incentives (including research and development tax credits) and foreign exchange movements.

The Group's overall taxation charge for continuing operations was £35.3m (2017: £44.1m). The effective tax rate on adjusted profit before tax for continuing operations decreased to 23.0% (2017: 25.2%), mainly due to changes in the geographic mix of profits and the reduction of the official statutory rate of tax in a number of jurisdictions in which the Group operates.

The tax credit applied to adjusting items (continuing operations) was 23.5% (2017: 14.8%). The low rate of tax relief for adjusting items in the prior year was driven by a number of items for which no tax relief is available, primarily relating to acquisition related costs and remuneration charges on deferred consideration.

Taxation relating to the non-core operations was £7.6m (tax charge) (2017: £nil). This reflects the tax impacts of the discontinued operations, including the tax liability arising on the disposal of the Letica Foodservice business.

Earnings per share

Adjusted basic earnings per share increased by 0.4p to 35.4p, primarily reflecting the increase in adjusted profit after tax. In addition, during the period the share repurchase programme added 0.2p to earnings per share.

The weighted average number of shares for the six month period to 30 September 2018 decreased from 413.5m in 2017 to 411.0m for 2018.

Dividends

The Group has a progressive dividend policy of targeting a dividend cover of two and a half times adjusted earnings through the cycle and this is its 26th consecutive year of dividend growth.

An interim dividend of 8.1p has been recommended, which is a 4% increase over the previous year.

Acquisitions

During the period the Group completed the following acquisitions:

All acquisitions were funded from existing financing facilities.

Non-core assets

Following a strategic review announced in June 2018, a small number of businesses with revenue in the period totalling £104.9m (2017: £105.7m) and an adjusted operating loss of £2.7m (2017: £6.0m profit) were identified as non-core and during the period these have been disclosed as discontinued operations. The operating performance in the period is predominantly due to significant project launch inefficiencies affecting the European automotive injection moulding business.

The US Letica Foodservice business was disposed of in September 2018 for consideration of $95m and generated a profit on disposal of £19.2m.

The spirits closure business and European automotive injection moulding business continue to be actively marketed for sale. At 30 September 2018, these businesses are held for sale at their expected net realisable value, which has led to an impairment of £37.1m within discontinued operations, which is partially offset by the £19.2m profit on sale of the Letica Foodservice business.

Cash flow and net debt

On a statutory basis, net cash flows from operating activities (after tax and interest) were robust with an inflow of £214.6m (2017: £245.4m). The increase in adjusted EBITDA of £1.6m combined with a reduced performance in working capital, where a seasonal inflow from some businesses was offset by growth investment in other areas, together with higher interest costs. Working capital as a percentage of sales remains in line with March 2018 at 6.5%.

Adjusted operating cash conversion, being the ratio of free cash flow before interest and tax to adjusted operating profit on a continuing basis, was 89% (2017: 99%).

Free cash flow declined by £23.9m to £142.9m reflecting a continuing operations working capital outflow of £6.8m (2017: inflow £24.1m) in the period and higher interest costs. Investment in net capital expenditure (for continuing operations) was £100.1m (2017: £103.0m) and additions represented 1.3x depreciation (2017: 1.3x) and 5.7% sales (2017: 5.7%).

Net debt, which includes the fair value of cross currency interest rate swaps that will be used to repay the USPP funding and foreign currency forwards used for managing the exchange rate risk on the term loan, increased by £41.4m since March 2018 and at the half year end stood at £1,180.6m (March 2018: £1,139.2m). This increase was despite returning £98.8m to shareholders, comprising £81.8m in dividends to equity shareholders (2017: £73.9m) and £17.0m shares repurchased under a share buyback programme, and the impact of foreign exchange of £45.2m. In addition, £91.1m related to the acquisition of businesses (including debt acquired), which was partially offset by £70.8m proceeds from the sale of Letica Foodservice.

Gearing was 60% (March 2018: 59%) and covenanted pro forma leverage (net debt to EBITDA) was 2.0x, well within the external banking covenants of 3.5x.

Balance sheet

During the period, property, plant and equipment increased by £25.3m and included fixed asset additions of £113.3m and acquisitions of £39.8m, offset by the transfer of assets to Assets held for sale as part of the discontinued operations disclosure and depreciation.

Goodwill increased by £43.2m mainly due to exchange rate movements, with the additions from acquisitions being offset by an impairment of the assets classed as held for sale.

Also included within non-current assets are:

· Derivative financial instruments of £17.9m (March 2018: £7.2m) which 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).

· Deferred tax of £106.5m (March 2018: £108.9m) as discussed below.

· Other intangible assets of £316.3m (March 2018: £324.2m). These decreased by a net £7.9m and comprise mainly customer relationships, technology and brands capitalised on acquisition and new product development expenditure, net of amortisation charges.

Working capital (the sum of inventories, trade and other receivables and trade and other payables) was £248.7m, which was 6.5% of pro forma revenue compared with £239.7m at March 2018, which represented 6.4% of pro forma revenue.

The long-term employee benefit liabilities improved from £196.9m to £166.6m, mainly due to net actuarial gains of £23.7m as a result of strong asset returns and updated discount rate assumptions.

Total provisions and other liabilities decreased to £40.3m (March 2018: £53.3m) due to utilisation of provisions of £16.3m including out of market contract provisions from acquired businesses (£5.3m), termination and restructuring provisions (£3.2m) and other environmental and legal provisions (£7.8m). In addition, a £4.8m out of contract provision for the Hefei site was released to adjusting items following improvements in production at this growing site. Out of market contract provisions are generally utilised within 12 months of the acquisition date.

Total provision for deferred and contingent consideration relating primarily to Ace and Letica remained at similar levels at £38.4m (March 2018: £37.3m), with the Letica element of $7.5m being paid in October 2018.

Net assets held for sale of £27.0m as at 30 September 2018 primarily relate to the net assets of Group's discontinued businesses that are actively being marketed for sale and hence are treated as current assets. Proceeds from the Manuplastics building sale were received in the period.

The net current tax liability increased to £82.8m (March 2018: £50.9m) as a result of current period tax charges on profits which includes a one off charge arising on the disposal of the Letica Foodservice business. This was 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 has been no material movement in uncertain tax provisions in the period to 30 September 2018.

The Group had a net deferred tax liability of £108.6m (March 2018: £110.2m). Deferred tax assets of £106.5m (March 2018: £108.9m) represent the future tax benefit from settling net pension liabilities and the recognition of tax losses which are expected to offset tax due on future income streams. The deferred tax liabilities of £215.1m (March 2018: £219.1m) relate in the main to fixed asset and intangible asset temporary differences.

Equity shareholder funds increased by £56.8m in the period, with statutory net profit attributable to equity shareholders for the period of £89.8m, favourable foreign currency translation movements, pension related net actuarial gains, share-based payments from employee share schemes and share issues being offset by dividends paid of £81.8m, share repurchase of £17.0m, and unfavourable net fair value movements on derivatives used for hedging. Further details are shown in the Consolidated statement of changes in equity which is included in the financial statements.

Capital allocation and funding

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.

During the period the Group completed its inaugural share buyback programme with £17.0m shares purchased, giving a total of 11.8m shares acquired in the programme for a total consideration of £100.4m.

As at 30 September 2018, the Group had total finance facilities of £2,137m with an amount of £827m undrawn after taking account of bank guarantees and other adjustments. The facilities are mainly unsecured and comprise revolving credit facilities (RCFs) of up to £816m with seven banks maturing in 2022 and €450m with five banks maturing in 2021, USPP notes of $216m and €60m issued to 17 US life assurance companies maturing in Dec 2018 (€35m and $92m) and 2021 (€25m and $124m), a term loan of $643m with six banks with the option to extend to 2020, finance leases of £19m, mortgages of £9m and other uncommitted credit and overdraft arrangements.

During the period, in anticipation of re-financing elements of its capital structure and funding resources, the Group announced that it had obtained an upgrade to an investment grade rating of BBB- (Stable outlook) from S&P Global Ratings, in addition to the investment grade Baa3 (Stable outlook) from Moody's Investors Service received in the prior year. In addition, the Group extended both its euro and GB sterling RCFs, both by two years.

The Group does not have any restricted cash and does not actively promote the use of asset based finance or factoring arrangements as a means of raising additional finance.

Financial key performance indicators (KPIs)

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

Key measures of the Group's financial performance are its RONOA and Return on sales (ROS). Despite polymer headwinds, these metrics remain significantly above the de-minimis hurdles agreed by the Board - to exceed 20% RONOA and 8% adjusted ROS. ROCE is targeted to remain well above the Group's weighted average cost of capital.

Technical guidance 2018/19

The Group is providing the following update to its technical guidance for 2018/19:

Simon Kesterton

Group Finance Director

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, including the impact of the UK leaving the European Union, 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 2018.

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 £2,137m at 30 September 2018 with an amount of £827m undrawn after taking account of bank guarantees and other adjustments, and comprises mainly committed facilities with tenures ranging from 2018 to 2022. The Group's forecasts and projections show that it is able to operate within the level of its current external funding facilities and that it has adequate resources to continue in operational existence for the foreseeable future. For this reason, the going concern basis has been adopted in preparing the financial statements.

Dividend

The Board has declared an interim dividend of 8.1p per share (2017: 7.8p), an increase of 4% 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 25 January 2019 to ordinary shareholders on the register at 28 December 2018.

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 six month period ended 30 September 2018. 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 2018;

· the condensed consolidated income statement and condensed consolidated statement of comprehensive income for the period then ended;

· the condensed consolidated cash flow statement for the period then ended;

· the condensed consolidated statement of changes in equity for the period then ended; and

· the explanatory notes to the condensed financial statements.

The interim financial statements included in the half year financial report 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 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

28 November 2018

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

Prior year comparatives have been restated in relation to the exit from non-core businesses, as described in note 5.

Condensed consolidated statement of comprehensive income

All items included in other comprehensive income relate to continuing operations.

Condensed consolidated balance sheet

The half year financial report was approved by the Board of Directors on 28 November 2018 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 2018 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 2018 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 2018.

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 2018.

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

· The separate presentation of discontinued operations in the condensed consolidated income statement due to the disposal of the Letica Foodservice line of business, disposed of on the 30 September 2018, and the European injection moulding automotive and Bridge of Allan lines of business classified as assets held for sale during the year.

· The provisional Astrapak acquisition accounting has been finalised and hindsight adjustments made to goodwill and fixed assets. These have been adjusted for in the 31 March 2018 and 30 September 2017 balance sheets.

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 2018.

New Standards and Interpretations

The Group has adopted both IFRS 9 - Financial Instruments and IFRS 15 - Revenue from Contracts with Customers from 1 April 2018 and the results contained within the condensed financial statements are reported in line with these standards.

IFRS 9 - Financial instruments

IFRS 9 has been adopted in this set of financial statements. As indicated in the Group's annual report and accounts for the year ended 31 March 2018, the impact of this standard is not material. The additional disclosures required by the standard will be included in the annual report and accounts for the year ended 31 March 2019.

IFRS 15 - Revenue from Contracts with Customers

In line with the disclosure on this subject in the Group's annual report and accounts for the year ended 31 March 2018, the implementation of this standard has not had a material effect on the Group's consolidated financial statements. As a result, the ongoing impact of the standard on the Group's consolidated financial statements will be limited to the enhanced disclosure of revenue, required by the standard, in the notes to the accounts.

2. Accounting policies (continued)

The following standard is effective for annual periods beginning on or after 1 January 2019:

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. In addition, the operating lease expense will be replaced with a depreciation charge and a financing expense.

The Group's operating lease data collection exercise is still ongoing and is due to complete towards the end of the financial year. This data will be used to model the impact across the Group.

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, are reported under two segments.

The Group's operating segments have been derived from the structure which formed the basis of monthly management reporting. There has been aggregation of the Group's divisions or strategic business units, where there are further operational differences, into the Packaging segment due to certain common characteristics. This aggregation has been determined based on market of operation (mostly European), manufacturing or production techniques, the nature of products, profit margins earned and inputs into the production cycle. Typically, as packaging customers are global B2B and served by multiple operating segments, they are considered to be similar for the purposes of segment reporting. The remaining divisions, or where appropriate strategic business units, have been aggregated into the Non-packaging segment.

Segmental revenues and results