Half Yearly Report

28 November 2013

RPC GROUP PLC

Half year results for the six months ended 30 September 2013

RPC Group Plc, Europe's leading supplier of rigid plastic packaging, announces today its half year results for the six months ended 30 September 2013.

Key highlights:

· Revenues1 grew by 8.5% to £525m (2012: £484m) with sales measured in polymer tonnes converted up by more than 2%;

· Adjusted EBITDA1 at £70.8m (2012: £70.7m);

· Adjusted operating profit1 at £46.6m (2012: £47.0m);

· Adjusted EPS1 at 18.2p (2012: 18.4p);

· Strong cash flow performance with net cash generated from operating activities at £51.2m (2012: £31.2m);

· ROCE1 for the period improved to 20.0% (2012: 19.7%) and RONOA1 at 23.2% (2012: 22.9%);

· Interim dividend of 4.5p (2012: 4.3p).

· The final phase of the Fitter for the Future programme has been initiated, aiming to enhance steady state operating profit by £7m whilst anticipated to be cash neutral;

· Vision 2020: Focused Growth Strategy launched.

1 For continuing operations; comparatives restated to exclude discontinued operations and adjusted for the adoption of IAS19 (Revised).

Commenting on the results, Pim Vervaat, Chief Executive, said:

'The Group delivered a good set of results, in line with our expectations, against a difficult economic backdrop. The Vision 2020: Focused Growth Strategy we announced this month builds on the Group's current strong market positions and innovation capabilities and aims to deliver profitable growth going forward. In this regard, we continue to invest to capture this growth and in the second half of the year this investment will increase due to several major contract wins and the planned expansion in the USA. Looking ahead, the Group is well placed to benefit from an economic recovery in Europe and the second half of the financial year has started well.'

This interim announcement contains forward-looking statements, which have been made by the directors in good faith based on the information available to them up to the time of the approval of this report and such information should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying such forward-looking information.

INTERIM MANAGEMENT REPORT

Business Operations

RPC is a leading supplier of rigid plastic packaging with operations in 17 countries. The business, which comprises 47 manufacturing sites and six separate distribution and sales centres, converts polymer granules into finished packaging product by a combination of moulding and assembly processes. It is organised around the three main conversion processes used within the Group, each site being managed within one of six clusters which are defined along technological and market lines.

Each cluster operates across a wide geographical area for reasons of customer proximity, local market demand and manufacturing resource.

Vision 2020: Focused Growth Strategy

The Group announced its Vision 2020: Focused Growth Strategy at its Capital Markets Day on 5 November 2013, which builds on RPC's strong market positions, leading innovation capabilities and the success of its investments over recent years. There are three core elements to Vision 2020:

· continuing focused organic growth in selected areas of the packaging markets;

· selective consolidation in the still fragmented European packaging market through targeted acquisitions; and

· creating a meaningful presence outside Europe.

Continuing focused organic growth in selected areas of the packaging markets

The Group will continue to grow selectively, enhancing its current leading market positions. With a combination of high relative market share, innovative product ranges and through the geographical reach of its businesses, the Group is operationally geared to benefit from the economic recovery in Europe and well placed to take advantage of high growth products. By continued investment in product and process innovation, the Group has developed strong and long-lasting relationships with its major multinational customers. Innovative products developed within the Group drive growth and have secured niche positions for RPC in the single-serve beverage systems, pharmaceutical and healthcare markets. By leveraging its high technology barrier capabilities, the Group is able to grow by developing new products which accelerate the ongoing conversion of other packaging types to plastic and has been able to reduce manufacturing costs through process improvements including thin-wall technology.

Selective consolidation in the still fragmented European packaging market through targeted acquisitions

The Group is seeking value accretive acquisition opportunities in Europe. The plastic packaging market in Europe remains fragmented with few strategic acquirers of scale; the acquisition of, or partnering with, other plastic packaging businesses will enhance current strong market positions, provide opportunities to enter new markets with complementary products, and benefit the Group from increased scale in polymer purchasing. Acquisitions will meet specific investment criteria and must have a strong strategic fit.

Creating a meaningful presence outside Europe

Opportunities to expand outside Europe will continue to be actively pursued. Currently circa 94% of the Group's sales are within the UK and mainland Europe, but growth rates in rigid plastic packaging are considerably higher outside of Europe. RPC will focus on North America and the BRIC countries, leveraging its North American footprint and current competitive advantages of strong customer relationships, innovation capabilities, extensive product range and operational excellence. Following the Group's multinational customers to their filling and distribution locations outside Europe may provide other possibilities for growth.

Fitter for the Future: Initial Phase

The Group is nearing completion of the first phase of its Fitter for the Future programme. The programme, which was launched in the first half of 2012/13, rationalised the Group's European product market combinations and implemented a range of cost improvement measures such as the closure of the Antwerp (Belgium) and Beuningen (Netherlands) sites, structural improvements at other sites and the realisation of value from redundant properties. The total programme is expected to realise at least £12m of steady state profit benefits (£10m relating to continuing operations) with £3m realised to date, at an exceptional cost of £30m of which £28m has been incurred to date.

Fitter for the Future: Final Phase

During the formulation of Vision 2020, the Group identified a number of final opportunities to optimise its existing asset base. These constitute the final phase of Fitter for the Future and fall under the following workstreams:

· Rationalise manufacturing footprint: this includes the anticipated closure of the Tenhult factory in Sweden, with its operations merged into the nearby Mullsjö plant and the anticipated closure of the Troyes factory in France, following a flood in May.

· Optimise existing business portfolio: this includes a strategic refocus of the Spanish blow moulding operations and various other cost optimisation initiatives, such as overhead savings relating to internal reorganisation programmes.

· Divesting non-core businesses: the Group has taken the decision to seek to sell its Cobelplast group of sheet businesses ('Cobelplast') and Offenburg, a disposables stockist.

The total costs of the final phase of Fitter for the Future, including the asset write down associated with the intended sale of the Cobelplast cluster and Offenburg, are estimated to be £40m of which circa £23m relates to non-cash asset impairments. The associated cash impact is expected to be neutral as the disposal proceeds and working capital releases are anticipated to offset the cash costs of the restructuring.

The steady state benefits of the final phase of Fitter for the Future are estimated to be £7m, to be completed in the financial year ending March 2016, with the full financial benefit realised in 2016/17.

Key Performance Indicators (KPIs)

RPC is targeting the following KPIs which will be used to measure its financial progress going forward:

· a minimum 20% RONOA (Return On Net Operating Assets) through the cycle;

· an adjusted ROS (Return On Sales) of at least 8% through the cycle on its existing business including organic growth; and

· maintaining a progressive dividend policy targeting 2.5x cover through the cycle.

The Group will continue to target ROCE (Return On Capital Employed) of 20% through the cycle for its existing business portfolio.

Business Review

The Group delivered a good set of results against a difficult economic backdrop. The results of the Group have been adjusted to exclude the results of the Cobelplast business which has been made available for sale. Revenues for continuing operations were 8% higher than the same period last year and reflect a more than 2% increase in volumes (as measured in polymer tonnes converted), continued sales mix improvements and a more favourable euro translation rate compared with last year. Polymer prices started the year at high levels, fell during Q1 and rose again during Q2. These price variations are mostly passed through to customers albeit with a time lag which can impact on the results of any particular quarter; for the half year the impact on Group profits was neutral.

Adjusted EBITDA1 was £70.8m (2012: £70.7m) and adjusted operating profit1 was £46.6m (2012: £47.0m). This represented an improvement of more than £3m over the 2013 second half performance for both measures. However when compared with the first half of 2013, continued weakness in continental markets and up-front costs related to future growth have offset benefits in other areas.

The Group incurred a total of £9.5m (2012: £11.1m) of restructuring costs, impairment losses and other exceptional items for continuing operations in the first half year. These costs mainly relate to the Fitter for the Future business optimisation programme, impairments of intangible assets attributable to the Offenburg business and properties which are held for sale.

The Group had a good cash flow performance over the period with a total £51.2m net cash generated from operating activities (2012: £31.2m). Working capital as a percentage of sales for continuing operations was 3.2% (2012: 4.9% restated). Investment in capital projects continued to exceed depreciation which included new production facilities for growth in the USA and new lines for coffee capsules. Net debt at £165.3m was lower than at the year end (£171.4m). The Group retains a strong balance sheet with a total of £517m of finance facilities available.

1 Adjusted EBITDA and adjusted operating profit is for continuing operations and before restructuring and closure costs, other exceptional items and impairment losses.

Injection Moulding

The business comprises the Superfos, Bramlage-Wiko and UKIM clusters.

Operating profit, although flat over the previous half year, improved compared with the second half 2012/13, with RONOA ahead of last year. Growth in coffee capsules and other higher added value products were offset by costs related to future growth.

Superfos manufactures and distributes open top filled injection moulded containers and has manufacturing facilities in France, Belgium, Poland, Denmark, Sweden and Spain, with joint ventures in Turkey and North Africa. Sales volumes grew across all regions, with Iberia ahead of last year benefiting from early signs of a recovery in southern Europe. The dairy and paint sectors saw particularly strong growth and the cluster benefited from improved sales volumes of thin-walled packaging and barrier products, with sales of the successful Superlock barrier pot remaining strong. New investment has been made in the Nordic region for a major customer converting fish and seafood packaging from metal to plastic, and a consolidation of manufacturing facilities in Sweden is expected to commence as part of the final phase of the Fitter for the Future programme.

Bramlage-Wiko, which operates in Germany, France, Belgium, Slovakia, UK and the USA, also experienced strong sales growth, particularly in the personal care, healthcare and coffee capsule sectors. New investments were made in Germany to increase production capacity in response to the continued strong growth in the Tassimo coffee system. In addition the US business, based in Morgantown, Pennsylvania, commenced a $9m expansion of its facilities during the period to accommodate additional capacity for a new single-serve beverage system, personal care products and high added value food packaging. There was also good volume growth in the personal care and healthcare segments at Lohne and Pulheim in Germany, and the cosmetics business in Marolles (France) secured new orders from customer product launches. The Manuplastics business based in the UK, which was acquired in November 2012, traded well with sales volumes significantly ahead of the same period last year (before its acquisition by RPC). The site at Antwerp (Belgium), which was part of the yellow fats manufacturing optimisation programme within the first phase of Fitter for the Future, was closed in the period with all remaining retained business transferred to sites in Germany and the UK. Capital expenditure is expected to increase in the second half due to the expansion of the US facility and the addition of production lines for major new contract wins. The cluster remains well positioned to exploit new business opportunities through its strong market positions and leading technological know-how.

For UKIM, the UK injection moulding business, overall sales were down on last year due to a loss of volume related to two major customers and the transfer of some volumes to the Superfos facility in Poland. The overall surface coatings market appears to have stabilised with good prospects for growth in the event of a UK economic recovery. The Oakham site is progressing well in improving its cost competitiveness through the Fitter for the Future programme whilst additional yellow fats contracts have been won for the Old Dalby site.

Thermoforming

The thermoforming operations comprise the retail food packaging and the UK vending businesses which are managed by the Bebo cluster. Following the decision to dispose of the Cobelplast (sheet production) cluster during the period, its results for the current and prior periods have been excluded and are shown separately as discontinued operations.

Overall activity levels were slightly down for the cluster, with sales affected by the flood at the Troyes site, which lost part of its French dairy business as a consequence. This was mitigated by sales growth in other sectors, such as the Dolce Gusto coffee capsules manufactured for Nestlé at Bouxwiller (France), Deventer (Netherlands) and Port Talbot (UK). Adjusted operating profit was slightly down on last year due to margin pressures from certain customers but was ahead of the second half 2012/13 and RONOA remains above target.

The margarine and spreads market is a significant part of the thermoforming business and the Group has strong market positions in this sector. The reorganisation of the thermoforming businesses as part of the first phase of the Fitter for the Future programme is progressing well and will enhance its cost competitiveness going forward. The Beuningen site in the Netherlands will be closed by the end of the financial year with its business transferred to sites in the UK and Poland. The French dairy business was impacted by a flood which occurred at the cluster's site in Troyes (France). Although continuity of supply was maintained by transferring business to alternative RPC sites and other suppliers, the damage was extensive and it is currently subject to an insurance claim for property damage and business interruption. Following a review, it has been proposed to close the site, and to optimise the French dairy market operations by transferring its business to other sites. However, offsetting this was the performance of the operations at Bouxwiller (France), Deventer (Netherlands) and Port Talbot (UK) which experienced higher activity levels during the period as demand for coffee capsules/single-serve beverage systems continues to grow.

Following a review of the other businesses within the thermoforming segment, it was decided to sell the trading disposables business at Offenburg (Germany), which is a relatively low margin non-core business. In addition the future of the Cobelplast cluster (comprising sites at Lokeren (Belgium) and Montonate (Italy)) was considered best served by selling the business. A process has already commenced and the results of the cluster are excluded from the segment results above and accounted for as a discontinued operation.

Blow Moulding

The blow moulding business operates from eleven sites based in the UK and mainland Europe.

Overall the business performed well with adjusted operating profit and RONOA ahead of last year with sales growth improving returns. There were good volume increases for the UK sites, particularly at Llantrisant for PET containers in food and beverages, Halstead for bottle caps and the UK Stock Containers business which saw a pick-up in demand for industrial products. In mainland Europe volumes were generally flat, the operations at Kerkrade (Netherlands) and Kutenholz (Germany) having to become more cost competitive in response to the challenging economic environment. The cluster continues to invest in multi-layer production facilities which will help accelerate the conversion of conventional glass and metal packaging to lighter weight plastic.

New product developments in the period included the innovative light-weight pack for Westland's Aftercut Even-flo lawn spreader, which recently won the rigid plastic packaging award at the UK Packaging Awards 2013.

A strategic review will be undertaken of the Spanish blow moulding business to ensure that satisfactory returns are sustainable and consequently further work is being undertaken within the final phase of the Fitter for the Future programme to refocus this business.

Non-financial key performance indicators (continuing operations)

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

1 Reportable accident frequency rate 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.

Electricity usage per tonne has improved against the same period last year, as has water usage per tonne as water recycling initiatives such as closed loop cooling systems continue to be introduced across the Group. Focus on health & safety remains strong but a higher number of reportable accidents in the first half of the financial year led to an increase in the reportable accident frequency rate.

Financial Review

Condensed consolidated income statement

Following the decision to put the Cobelplast sheet business up for sale during the period, this business has been classified as a discontinued operation and its results are excluded from the continuing operations of the business. All prior period income statement figures have been restated accordingly. Its assets were impaired to fair value on sale and are classified as assets held for sale in the balance sheet.

Revenue from continuing operations in the first half of 2013/14 at £524.7m (2012: £483.8m) was 8% higher compared with the corresponding period last year. Overall volumes based on polymer tonnes converted were more than 2% up on last year and the impact of new volumes from the Manuplastics acquisition also contributed, but the major driver of the increase was the translation effect of a stronger euro (€1.17 v €1.25) with circa 66% of turnover generated from businesses in the Eurozone.

Adjusted EBITDA was £70.8m (2012: £70.7m) and adjusted operating profit was £46.6m (2012: £47.0m). Continued weakness in continental markets and up-front costs related to future growth have offset benefits in other areas.

Restructuring costs, impairment losses and other exceptional items of £9.5m (2012: £11.1m) were incurred in the first half year. These comprised £4.1m of redundancy and closure costs related to the Beuningen (Netherlands) and Antwerp (Belgium) sites, £0.7m of rationalisation, redundancy and other costs relating to the optimisation of the injection moulding business at Oakham within the UKIM cluster, and £1.3m of other Fitter for the Future phase one costs. In addition impairments of £1.8m of goodwill relating to the disposables business at Offenburg, and £1.6m of property, plant equipment including the property at Runcorn were made, which are carried as assets held for sale.

Net financing costs in the first half increased by £0.3m to £7.0m. In addition to the net interest cost of borrowings, included within finance income and finance expenses are the effect of the translation impact of the strengthening of the euro against the US dollar on the US Private Placement notes and its related cross currency hedge, and the net finance expense from the Group's defined benefit pension schemes.

The Group is responsible for defined benefit pension schemes in the UK and mainland Europe, which it accounts for in accordance with IAS 19, Employee Benefits. Changes to IAS 19 have taken effect for the financial year commencing 1 April 2013. The key changes are the recognition of scheme expenses in operating profit and a reduction in the expected return on assets from the return on the underlying assets to the return on corporate bonds (the basis of the discount rate used to value the schemes' liabilities). As these are changes to accounting policy brought about by a change to IAS 19, comparative figures have been restated accordingly.

The adjusted profit before tax2 fell from £40.3m to £39.6m largely as a result of the decrease in operating profit. The adjusted tax rate was 24.0% (2012 restated: 24.7%), resulting in an adjusted profit after tax of £30.1m (2012: £30.3m), and adjusted basic earnings per share3 of 18.2p (2012: 18.4p).

The Group's overall tax charge for continuing operations was £8.0m (2012: £8.0m) resulting in a reported tax rate of 26.7% reflecting an underlying effective rate of 24.0% and a 15.2% tax credit on exceptional charges. The profit after tax was £22.1m (2012: £21.2m); the increase being mainly due to the lower restructuring and impairment costs. The basic earnings per share was 13.4p (2012: 12.9p).

2 Adjusted profit before tax is defined as operating profit for continuing operations before restructuring and closure costs, other exceptional items and impairment losses, less net interest.

3 Adjusted earnings per share is defined as adjusted operating profit for continuing operations after interest and tax adjustments divided by the weighted average number of shares in issue during the period.

Condensed consolidated balance sheet and cash flow statement

Goodwill was impaired by £1.8m during the period following the decision to sell the disposables trading business at Offenburg (Germany). Property, plant and equipment decreased to £372.7m compared with the year end position, mainly due to impairments. Higher capital expenditure at £26.8m was £3.0m ahead of the depreciation charged in the period, reflecting the continued investment in growth sectors within the business.

The working capital (the sum of inventories, trade and other receivables and trade and other payables) position improved, decreasing slightly after adjusting for discontinued operations to £33.4m compared with the year end position and represents 3.2% as a percentage of sales for the half year (annualised) (2012: restated 4.9%).

Within current assets and current liabilities are the assets and liabilities of the Cobelplast cluster, which have been classified as discontinued operations, the trading disposables business at Offenburg and a remaining property which is no longer used in the business. These have been separately classified as being held for sale.

The long-term employee benefit liabilities of £64.8m at the half year end, which exclude £0.8m relating to discontinued operations, were at a similar level to the year end position. The largest component of this is the UK net pension deficit on the RPC Containers Ltd defined benefit scheme, which showed an actuarial loss of £4.4m in the period mainly due to a reduction in the discount rate and lower than expected returns on assets. Employee benefit liabilities have been adjusted for previously unrecognised past service costs in accordance with the changes to IAS 19.

Capital and reserves decreased in the period by £17.5m, the net profit for the period of £6.0m, net movements from the issue of shares from share-based arrangements of £1.1m and net fair value movements on derivatives of £3.1m being offset by dividends paid of £17.6m, adverse exchange movements on translation of £5.5m and pension related net actuarial losses of £4.6m. Further details are shown in the Condensed consolidated statement of changes in equity which is included in the financial statements.

Net cash from operating activities (after tax and interest) was £51.2m compared with £31.2m in the same period in 2012, mainly due to the improvement in the working capital from the year end. The net cash outflow from investing activities of £26.3m was £3.8m lower than in the previous year, mainly due to the receipt of proceeds from the surplus properties at Goor (Netherlands) and Raunds (UK) which were sold in the period.

Net debt, which includes the fair value of the cross currency swaps used to repay the USPP funding, reduced by £6.1m from £171.4m at March 2013 to £165.3m at September 2013, and was at the same level as at the previous half year. Average net debt for the first half year was £226.3m (2012: £217.8m). Gearing stands at 65% and the covenanted net debt to EBITDA ratio is at 1.2.

Financial key performance indicators (KPIs)

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

1 Return on capital employed (ROCE), which is measured over the previous 12 months, is defined as adjusted operating profit (annualised for half year reporting) for continuing operations, divided by the average of opening and closing shareholders' equity, after adjusting for net retirement benefit obligations, assets held for sale and net borrowings for the year concerned.

2 Return on net operating assets (RONOA), which is measured over the previous 12 months, is defined as adjusted operating profit (annualised for half year reporting) for continuing operations divided by the average of opening and closing property plant and equipment and working capital for the year concerned.

3 Return on sales is adjusted operating profit divided by sales revenue for continuing operations.

4 Added value per tonne is the difference between production sales value per tonne produced and the cost of polymer per tonne produced for continuing operations. The 2012/13 comparative numbers have been restated using 2013/14 exchange rates.

5 Gross margin is the difference between sales price and all directly variable costs such as polymer, packaging, transport and electricity for continuing operations. The 2012/13 comparative numbers have been restated using 2013/14 exchange rates.

6 Free cash flow is defined as cash generated from continuing operations less net capital expenditure, net interest and tax, adjusted to exclude exceptional cash flows.

7 Cash conversion is defined as the ratio of cash generated from continuing operations less net capital expenditure adjusted to exclude exceptional cash flows, to adjusted operating profit from continuing operations.

Key measures of the Group's financial performance are its return on capital employed (ROCE) and return on net operating assets (RONOA). These are now reported on a continuing basis. ROCE was 20% at the half year and RONOA improved to 23.2%, both measures being on target, with the benefits of the Fitter for the Future business optimisation programme impacting the results.

Added value per tonne and overall gross margin have been sustained. Free cash flow was higher than last year due to the improved working capital position, lower capital expenditure and lower restructuring cash costs, and the cash conversion ratio reflects a year on year improvement.

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, amongst other risks, polymer price volatility and availability, mitigated by the pass through of price changes to customers and reducing dependence on a few suppliers; energy costs, managed by purchasing a proportion of electricity at fixed rates and by improving the efficiency of energy consumption; and dependency on key customers, reduced by joint investment in product and technological development.

The Board regularly considers the principal risks that the Group faces and how to reduce their potential impact. The key risks to which the Group is exposed have not changed significantly over the first half of the financial year. Further information concerning the principal risks faced by the Group can be found on pages 28 and 29 of the Group's annual report and accounts for the year ended 31 March 2013.

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 approximately £517m at the end of September 2013 with an amount of £345m undrawn. The facilities are unsecured and comprise a revolving credit facility of up to £200m with nine major UK and European banks maturing in 2015, US private placement notes of $216m and €60m maturing in 2018 and 2021, an undrawn bilateral term loan of £60m with a major UK bank, mortgages of £14m, finance leases of £1m and other credit and overdraft arrangements of £58m. 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 4.5p per share (2012: 4.3p) which is in line with the current policy. This will be paid on 24 January 2014 to ordinary shareholders on the register at 27 December 2013.

Outlook

The Group delivered a good set of results, in line with its expectations, against a difficult economic backdrop. The Vision 2020: Focused Growth Strategy that was announced this month builds on the Group's current strong market positions and innovation capabilities and aims to deliver profitable growth going forward. In this regard, the Group continues to invest to capture this growth and in the second half of the year this investment will increase due to several major contract wins and the planned expansion in the USA. Looking ahead, the Group is well placed to benefit from an economic recovery in Europe and the second half of the financial year has started well.  

Responsibility Statement of the Directors in Respect of the Half Year Financial Report

We confirm that to the best of our knowledge:

§ the condensed set of financial statements has been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting' (IAS 34) as adopted by the EU; and

§ the interim management report includes a fair review of the information required by:

(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the Group during that period; and any changes in the related party transactions described in the last annual report that could do so.

BY ORDER OF THE BOARD

INDEPENDENT REVIEW REPORT TO RPC GROUP PLC

Introduction

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2013 which comprises the Condensed consolidated balance sheet of RPC Group Plc, the Condensed consolidated income statement, the Condensed consolidated statement of comprehensive income, the Condensed consolidated cash flow statement, the Condensed consolidated statement of changes in equity and the related explanatory notes for the six month period then ended. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the Company in accordance with the terms of our engagement to assist the Company in meeting the requirements of the Disclosure and Transparency Rules ('the DTR') of the UK's Financial Conduct Authority ('the UK FCA'). Our review has been undertaken so that we might state to the Company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company for our review work, for this report, or for the conclusions we have reached.

Directors' Responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the DTR of the UK FCA.

As disclosed in note 2, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the EU. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU.

Our Responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of Review

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 UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2013 is not prepared, in all material respects, in accordance with IAS 34 as adopted by the EU and the DTR of the UK FCA.

Greg Watts for and on behalf of KPMG LLP

Chartered Accountants

One Snowhill

Snow Hill Queensway

Birmingham

B4 6GH

27 November 2013

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 27 November 2013, is unaudited and was signed on its behalf by:

Condensed consolidated cash flow statement

Condensed consolidated statement of changes in equity

Six months to 30 September 2013 (unaudited)

Six months to 30 September 2012 restated (unaudited)

Year to 31 March 2013 restated (audited)

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

1. General information

The comparative figures for the financial year ended 31 March 2013 are not the Group's statutory accounts for that financial year. Those accounts have been reported on by the Group's auditor 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 2013 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 Financial Reporting Standard (IFRS) IAS 34 'Interim Financial Reporting', as adopted by the EU and in accordance with the Disclosure and Transparency Rules of the UK's Financial Services 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 as at and for the year ended 31 March 2013.

In the preparation of the condensed financial statements, comparative amounts have been restated to reflect the following:

- the discontinuance of the Cobelplast extruded sheet business. See note 7 for further information; and

- the adoption of IAS19 (Revised) 'Employee Benefits'. See note 11 for further information.

In all other respects, the same accounting policies, presentation and methods of computation are followed in the condensed set of financial statements as applied in the Group's latest annual audited financial statements for 2013.

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 2013.

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 manufacturing conversion process. The business performance of the three conversion processes used can be found in the Business review.

During the six month period to 30 September 2013, there have been no changes from prior periods in the measurement methods used to determine operating segments and reported segment results.

Segment revenues and results

The accounting policies of the reportable segments are the same as the Group's accounting policies in note 2. 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.

The following is an analysis of the Group's revenue and results by reportable segment:

The following is an analysis of the Group's revenue and adjusted operating profit by origin:

4. Restructuring and impairment losses

The closure costs incurred in the period comprise costs relating to the first phase of the Fitter for the Future programme affecting a number of sites across the Group.

The impairment loss on intangible assets relates to the write down of goodwill relating to the Offenburg business (£1.8m) in addition to an impairment of its property, plant and equipment (£0.7m), which was classified as held for sale in the period. The remaining impairments related to assets under the Fitter for the Future programme.

5. Net financing costs

6. Taxation

A taxation charge of £8.0m on continuing operations has been made in the half year to 30 September 2013 in respect of the profit before taxation of £30.1m, based on the Group tax rate expected for the full year applied to the pre-tax income for the six month period.

The adjusted Group tax rate of 24.0% is unchanged from the year ended 31 March 2013 when restated. For the half year to 30 September 2012 it was 24.7% (restated).

7. Discontinued operations

Cobelplast, the RPC business which manufactures extruded sheet, is currently being marketed for sale. In accordance with IFRS 5 'Non-current Assets Held for Sale and Discontinued Operations', it has been classified in the Consolidated balance sheet within assets and liabilities held for sale and reported as discontinued operations (please see note 10).

The Consolidated income statement with respect to total discontinued operations is set out below:

Restructuring costs during the year relate to redundancy and restructuring costs at Lokeren. Impairment losses relate to impairment of the assets of the Cobelplast business at the time the business was classified as held for sale.

8. Earnings per share

Basic

The earnings per share has been computed on the basis of the weighted average number of shares in issue during the half year ended 30 September 2013 of 165,598,770 (half year ended 30 September 2012: 164,651,817 and year ended 31 March 2013: 164,882,119). The weighted average number of shares excludes shares held by the RPC Employee Benefit Trust to satisfy awards in respect of incentive arrangements.

Diluted

Diluted earnings per share is the earnings per share after allowing for the dilutive effect of the conversion into ordinary shares of the weighted average number of options outstanding during the period. The number of shares used for the fully diluted calculation at the half year ended 30 September 2013 was 166,366,522 (half year ended 30 September 2012: 165,327,126 and year ended 31 March 2013: 165,643,171).

Adjusted

The directors believe that the presentation of an adjusted basic earnings per ordinary share assists with the understanding of the underlying performance of the Group. For this purpose the restructuring and closure costs and impairment losses identified separately on the face of the Condensed consolidated income statement, together with the debit or credit for the foreign currency hedging instruments and exchange differences on bonds, adjusted for the tax thereon, have been excluded.

A reconciliation from profit after tax as reported in the Condensed consolidated income statement to the adjusted profit after tax is set out below: