30th Nov 2007 07:01
RPC Group PLC30 November 2007 RPC GROUP PLC Half-yearly results for the 6 months ended 30 September 2007 RPC Group Plc (RPC or the Group), Europe's leading supplier of rigid plasticpackaging, today announces its half-yearly results for the six months ended 30September 2007. Financial highlights: • Group revenue up 6.9% at £329.7m (2006: £308.4m) • Modest improvement in operating profit at £18.7m (2006: £18.4m), before restructuring costs of £10.3m (2006: £2.2m) • Basic EPS fell to 2.4p from 9.2p because of high restructuring costs • Adjusted EPS of 9.5p (2006: 10.1p) • Interim dividend up 7.4% to 2.9p (2006: 2.7p) Corporate highlights: • Excellent performance in specialist businesses • Severe input cost pressure in commodity businesses, particularly polymers • Determined action on costs including extensive restructuring • Positive outlook for second half Commenting on the results, Peter Williams, Chairman said: "The encouraging progress made across the Group this year is unfortunately masked by further sharp rises in input costs; while this may continue to hold us back in the short term our operational and market strengths make me confident that the medium to longer term outlook for the Group is excellent." RPC Group Plc 01933 410 064Ron Marsh, Chief Executive Chris Sworn, Director Merlin Financial 020 7653 6620Tom Randell 0777 587 5847Abbie Thomas 0777 871 10776 RPC Group Plc RPC Group is Europe's leading manufacturer of rigid plastic packaging and isunique in that it is able to offer products made by all three conversionprocesses: blow moulding, injection moulding and thermoforming. It has 50operations in 13 countries and employs over 7,000 people. RPC services acomprehensive range of customers - from the largest European manufacturers ofconsumer products to the smallest national businesses. It has particularlystrong positions in the beauty and personal care sector, the vending anddrinking cup market, the margarine industry, and in multi-layer sheet and packsfor oxygen sensitive food products. Our objectives are to further strengthenRPC's position in these and other sectors of the European market where we canhave a significant presence in the market, be in the forefront in productiondesign and development, and have sufficient size to enable us to optimise ourproduction process. We believe this strategy will produce valued relationshipswith our customers and suppliers, a good future for our employees and a goodreturn for our shareholders. Directors J P Williams MA BCommNon-Executive Chairman R J E Marsh BAChief Executive M J B Green FCASenior Independent Director P Hilton MA PhDP J H Hole BSc Drs H J Kloeze S Rojahn Dipl-Ing MSIEIndependent Non-Executive Director C H Sworn MA PhD FCAFinance Director to 31 October 2007Blow Moulding Cluster Manager from 1 November 2007 Drs P R M Vervaat RCFinance Director - appointed 1 November 2007 D J Wilbraham BSc PhDIndependent Non-Executive Director P S Wood FCAIndependent Non-Executive Director Company Secretary Rebecca K Joyce BA ACA ACIS Registered office Lakeside HouseHigham FerrersNorthants NN10 8RP Websitewww.rpc-group.com INTERIM MANAGEMENT REPORT To the members of RPC Group Plc This interim management report has been prepared solely to provide additionalinformation to shareholders as a body to assess the Group's strategies and thepotential for those strategies to succeed. The interim management report shouldnot be relied on by any other party or for any other purpose. The interim management report 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 their approval of this report; and • should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying such forward-looking information. The interim management report has been prepared for the Group as a whole andtherefore gives greater emphasis to those matters which are significant to RPCGroup Plc and its subsidiary undertakings when viewed as a whole. Business operations The Group is the leading supplier of rigid plastic packaging in Europe withmanufacturing operations in 12 countries of the European Union and the USA. Ourproduct range is extensive, with the Group supplying, inter alia, the followingmarkets: • DIY• Personal care• Cosmetics• Pharmaceutical• Healthcare• Food and drinks• Lubricants• Agrichemicals The Group has wide experience of injection moulding, blow moulding, andthermoforming production techniques; all three production processes are usedextensively within the business and it is along these technological lines thatwe structure our business within what are termed 'clusters', of which there arecurrently seven. Strategy In our most recent annual report, we set out the Group's strategy for generatingattractive long term returns on the capital employed in the business. This maybe summarised as focusing on those sections of the market place where we havestrong positions: here we seek to consolidate the industry and to give ourcustomers good service and high quality innovative packaging. Business review We are pleased to report that, in comparison with the first half of last year,Group turnover for the period increased by 6.9% to £329.7m and that adjustedoperating profit rose modestly from £18.4m to £18.7m. Margins slipped from 6.0%to 5.7%. The improvement in the half year is actually much greater than thefigures indicate as last year's results benefitted from several non-recurringitems. This progress was accomplished in the face of further severe input costpressures particularly in terms of polymer, where the significantly tightermarket strengthened the position of suppliers; this has led to increased priceswhich have proved very difficult to pass on to customers. Undoubtedly the feature of this performance was the excellent contribution ofour specialist, high technology product range made at our German injectionmoulding operations. This is the area where we have concentrated our capitalinvestment over the past several years and where the outlook is now mostencouraging; it is also the least affected by rising polymer costs. By contrastthe more commodity, more polymer intensive products continue to experiencedepressed margins, as we deal with the challenges posed by an unprecedented fiveconsecutive years of substantial polymer cost increases. A charge of £10.3m was taken in the half year for restructuring andrationalisation compared with £2.2m in the equivalent period last year. As thesize of the restructuring charge indicates, we have taken firm action to addressour cost base and prune our portfolio of operating units in response to thechallenge of rapidly escalating input costs and a changing market place. Inparticular: - to address the cost base of our UK injection moulding businesses we have announced the closure of our plants at Thornaby and Hereford; and - in thermoforming, in response to significant pricing pressures, we closed our Bristol operation in March 2007 and are currently restructuring our Bebo business in Poland. Operating profit after restructuring costs fell from £16.2m to £8.4m. As aresult of this, and an increased interest charge, profit before taxation fellfrom £12.9m to £3.7m and basic earnings per share fell from 9.2p to 2.4p. On anadjusted basis, (as defined in note 7) earnings per ordinary share fell from10.1p to 9.5p. The tighter polymer market has also had a significant impact on our workingcapital - we have built up our polymer stocks to avoid any plant downtime in theevent of polymer shortages, while at the same time ever tighter credit termshave become the norm. Between 31 March 2007 and 30 September 2007 the increasein our working capital was £16.0m. This dwarfed all other features of our cashflow with the result that our net debt increased by £22.1m over the same period;consequently our balance sheet gearing rose from 87% at 31 March 2007 to 98% at30 September 2007. Our capital expenditure in the first half of this year amounted to £18.9m. Themajor projects included the continued development of certain operations withinthe Blow Moulding cluster into the higher margin multi-layer bottle sector,efficiency improvements in our UK Injection Moulding business, the Dolce Gustoproject in the Tedeco-Gizeh cluster, and the enhancement of our PET sheet filmcapacity at Montonate. Within the Bebo thermoforming cluster, we have begun aproject to increase our capacity for pre-printed lids - which will confirm ourposition as the market leader in this specialised sector. As a result of the increases in polymer costs over the last five years, theentire rigid plastic packaging industry in Europe is struggling to generateacceptable returns with many of our competitors in disarray. We are not immunefrom these pressures particularly in the 'commodity' sectors of the market wherepolymers typically account for one third or more of the selling price. In thesesectors, where there is long term value through our market or product positionwe are striving to improve the efficiency and cost effectiveness of ouroperations involving, where necessary, restructuring. Overall, we remaincommitted to our strategy of consolidating our position in well-defined nicheswithin the rigid plastic packaging industry convinced that when polymer pricescease to rise, RPC will deliver a very attractive return to its shareholders. Acquisitions In the half year under review, Barplas, acquired on 1 November 2006, made a goodcontribution to the success of our UK Injection Moulding business. Our beautecluster, created last year, made significant progress which will be acceleratedby the current programme to rationalise on to two sites at Marolles and Mozzate. In June we acquired an injection moulding business for £1.6m operatingprincipally in the personal care market strategically located at Velky Medernear to Bratislava, Slovakia; this gives us access to lower labour-cost mouldingfacilities. Annual sales in the full year before acquisition totalled c. £3.0m. On 8 October 2007 we acquired Raytec BV for approximately £3.0m. Raytec, whichenjoyed sales of c. £11.0m in its last full financial year, is based in theNetherlands and will allow further expansion into the DIY, Household andStationery markets; going forward, this business will trade as RPC Bramlage DHSBV. We purchased a business called Mob located at Moirans en Montagne from theAdministrator on 23 November 2007. Mob was a leader in the French blow mouldedstock container industry until July 2007 when it was forced into administrationby its parent Smoby, which was in financial difficulties. In the year ended 31March 2007, Mob's turnover was c. £12.0m but this has fallen subsequentlybecause of polymer supply problems during the early part of the period in whichit was in administration. Review of operations Injection Moulding We have enjoyed a successful half year in injection moulding with improvementsin volumes, profits and operating margins. Of particular note has been thegrowth in Tassimo volumes for Kraft which has given better utilisation ofcapacity already installed: forward prospects for the project look very good,boosted by Kraft's recently announced agreement to launch Starbucks brandedbeverages for Tassimo. Our pharmaceutical business also enjoyed an outstanding period and now looks setto widen its product offering and its customer portfolio to become a much morebroadly-based enterprise. Many exciting product developments are very welladvanced and under-going extensive trials, although it is always difficult tosay when they will be commercialised. The strategic review of the beaute cluster referred to in the 2007 annual reportand accounts has resulted in the planned closure of our plant at Thornaby. Thiswill provide the beaute business with a more cost effective operating base goingforward. Our UK Injection Moulding operations had more mixed fortunes with growth in PETjars and healthcare packaging balancing volume declines in the surface coatingsand DIY sectors. As mentioned above, our Hereford factory is to be closed andthe business there will be transferred to our other operations, mainly in theUK; this will significantly reduce our cost base. Our new plant in the US has attracted considerable attention from our customerbase and we are now proceeding to commercialise a number of interesting projectsoffering European technology to a receptive US market-place. Thermoforming The problems we experienced last year of reduced demand for fruit bowls forexport to the Far East have been resolved and volumes were stronger and moreevenly distributed across an expanding customer base. We have also entered intocontracts up to 2012 securing our position with our principal customer; thiswill secure significant growth in volumes for pre-printed lids for our margarineand spreads business using our unique pre-print technology located at ourBremervorde facility in north Germany. Our sheet business has made strong progress in the period under review; atLokeren there are some exciting developments in the use of our polypropylenebarrier sheet on form fill seal lines for the packaging of baby food andbouillon cubes. Montonate has benefitted from a significant tightening in thePET sheet market as a consequence of continued conversion from PVC andpolystyrene sheet. On the negative side, we have encountered severe competition in some areas ofour thermoforming activities particularly in the cups market and in the Frenchand UK markets. Our policy has been to persist with the recovery of costincreases so that we can maintain our position for the longer term. In someinstances, this has cost us volume. Some of this has been lost at price levelsthat we believe our competition cannot sustain and has already led to the demiseof some substantial competitive capacity which promises a brighter future. Blow Moulding Overall volumes have been maintained. Importantly, the operating performance ofour UK Stock Containers business has improved dramatically opening up theopportunity to start to capitalise on the closure of the Woburn Sands site andthe wholesale relocation of equipment to Rushden. We have secured a newcontract with our major customer in Belgium for a further 3 years, which hasenabled us to continue to grow with it and to recover cost increases. We have also continued to expand our multi-layer bottle business in the personalcare and ambient food sectors. Our expertise in the use of barrier bottles andjars in the sterilisation of foodstuffs is gaining worldwide recognition - wenow enjoy sales in Europe, North Africa, South Africa and the Far East. The poor summer in the UK affected the juice volumes from our Llantrisantfactory. This factory also suffered from the severe financial difficultiesfaced by one of its customers, the main filler for our branded toiletriesbottles. As a result of securing a new contract for PET bottles for thepharmaceutical/healthcare market, the second half year at this location looksmuch more promising. Financial review Overall financial performance Our financial performance was characterised by good revenue growth, marginpressure arising from higher raw material and other input costs, containedexpenditure on salaries and fixed costs, higher interest charges and much higherborrowings as a result of being forced to make prompt payments for our essentialpolymer requirements. Revenue Sales in the first half of 2007/08 increased by £21.3m compared with the sameperiod last year; of this, £11.6m was attributable to acquisitions. Thelike-for-like volume growth was 2.7%. Gross margin Despite the increases in polymer costs gross margin remained stable. Onaverage, the price of the main basket of polymers that we use increased betweenthe first half of 2006/07 and 2007/08 by c.16%. Other costs, in particulartransport, electricity and packaging also increased sharply and proved difficultto pass on to our customers. Adjusted operating profit Overall operating profit before exceptional costs increased from £18.4m in thefirst half of 2006/07 to £18.7m this year. The progress was particularly strongin Germany where a better mix of higher margin business compensated for bothmargin erosion in our commodity based business and the absence of favourablenon-recurring items. Exceptional costs The charge (£10.3m) for restructuring and disruption costs and impairment lossesis attributable to the balance of the costs (as currently estimated or incurred)of closing our plants at Thornaby, Hereford and Bristol and the restructuring ofour Bebo cluster operations in Poland. The amounts reserved for the UK sitestotal £9.5m out of the overall charge. Net financing costs Net financing costs in the first half of the current year were £1.4m ahead ofthose in the equivalent period last year. £0.7m of the increase was due to alower net credit on foreign currency hedging instruments. Further to this, therewas also the impact of the combination of higher rates payable on approximatelyhalf of our borrowings, which are at floating rate, and higher average net debtof £174m compared to £160m last year. Tax The underlying tax charge at 32% is higher than the comparative period last year(29.5%) because under accounting rules we are not able to recognise tax lossesin a number of jurisdictions. The tax charge after exceptional costs was 35.5%- the increase is because some of these are not allowable for tax purposes. Net debt Net debt increased by £22.1m in the period under review. This was primarilycaused by the tight raw material supply position. With polymer shortages, itwas necessary to build stocks of both raw materials and finished goods, andpolymer suppliers were in a position to demand ever prompter payment fordelivered goods. As a result net debt increased from £137.1m at 31 March 2007to £159.2m at 30 September 2007. The average net debt during the first halfyear was £174m. Key performance indicators (KPIs) The status of the Group's KPIs, both financial and non-financial, compared withthe year ended 31 March 2007 are as follows: Half year ended Year ended 30 September 31 March 2007 2007Financial KPIs:Added value per tonne £1,664 £1,710Gross margin 46% 46% The gross margin percentage has remained static despite the increased cost ofpolymers, but these increases have had an adverse impact on the added value pertonne. Non-financial KPIs:Electricity usage per tonne (Kwh/T) 1,936 2,027Water usage per tonne (M(3)/T) 1,008 999Lost time accident frequency rate 1,705 2,176 It is pleasing to report improved electricity usage and a significant reductionin the lost time accident frequency rate. Overall, the key measure of our stewardship is the return on capital employed.This shows the following: Half year ended Year ended 30 September 2007 31 March 2007 10.7% 10.9% Return on capital employed is defined as being adjusted operating profit (forthe period to 30 September 2007 this represents the adjusted operating profitfor the last 12 months) divided by the average of opening and closingshareholders' equity adding back net deferred tax liabilities, retirementbenefit obligations (net of tax) and liabilities in connection with derivativefinancial instruments and after adding back average net borrowings for theperiod in question. Principal risks and uncertainties RPC is subject to a number of risks, both external and internal, some of whichcould have a serious impact on the performance of our business. Each year we conduct a wide-embracing review of these risks. This process helpsboth identify the nature and magnitude of a risk and the manner in which it canbe mitigated. The principal risks and uncertainties affecting the businessremain those detailed on pages 10 and 11 of the annual report and accounts forthe year ended 31 March 2007, a copy of which is available on the Group'swebsite, www.rpc-group.com. Dividend The Board has declared an interim dividend of 2.9p (2006: 2.7p) per share. Theincrease of 7.4% reflects the Board's confidence in the future. This will bepaid on 25 January 2008 to ordinary shareholders on the register at 28 December2007. Board We are pleased to welcome Pim Vervaat to our Board as Finance Director: hejoined us on 1 November and has already made a healthy contribution. ChrisSworn, who has made an invaluable contribution as Finance Director over verymany years, has taken on the key task of managing the Blow Moulding cluster. Prospects The second half has started well and will benefit progressively from our focuson cost reduction, cash generation and the major restructuring programmeunderway. Against this, input costs remain unpredictable and a concern.Overall, the Board expects to make progress for the year as a whole. In thelonger term, when stability returns to our input costs, the Group's operationaland market strengths should mean that our prospects are excellent. BY ORDER OF THE BOARD J P Williams R J E MarshChairman Chief Executive 30 November 2007 RESPONSIBIILTY STATEMENT Responsibility statement of the directors in respect of the half-yearlyfinancial 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 entity 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 J P Williams R J E MarshChairman Chief Executive 30 November 2007 30 November 2007 INDEPENDENT REVIEW REPORT TO RPC GROUP PLC Introduction We have been engaged by the Company to review the condensed set of financialstatements in the half-yearly financial report for the six months ended 30September 2007 which comprises Consolidated Income Statement, ConsolidatedBalance Sheet, Consolidated Cash Flow, Consolidated Statement of RecognisedIncome and Expense and the related explanatory notes. We have read the otherinformation contained in the half-yearly financial report and considered whetherit contains any apparent misstatements or material inconsistencies with theinformation in the condensed set of financial statements. This report is made solely to the Company in accordance with the terms of ourengagement to assist the Company in meeting the requirements of the Disclosureand Transparency Rules (the DTR) of the UK's Financial Services Authority (theUK FSA). Our review has been undertaken so that we might state to the Companythose matters we are required to state to it in this report and for no otherpurpose. To the fullest extent permitted by law, we do not accept or assumeresponsibility to anyone other than the Company for our review work, for thisreport, or for the conclusions we have reached. Directors' responsibilities The half-yearly financial report is the responsibility of, and has been approvedby, the directors. The directors are responsible for preparing the half-yearlyfinancial report in accordance with the DTR of the UK FSA. As disclosed in note 2, the annual financial statements of the Group areprepared in accordance with IFRSs as adopted by the EU. The condensed set offinancial statements included in this half-yearly financial report has beenprepared in accordance with International Accounting Standard 34 'InterimFinancial Reporting' (IAS 34) as adopted by the EU. Our responsibility Our responsibility is to express to the Company a conclusion on the condensedset of financial statements in the half-yearly financial report based on ourreview. Scope of review We conducted our review in accordance with International Standard on ReviewEngagements (UK and Ireland) 2410 'Review of Interim Financial InformationPerformed by the Independent Auditor of the Entity' issued by the AuditingPractices Board for use in the UK. A review of interim financial informationconsists of making enquiries, primarily of persons responsible for financial andaccounting matters, and applying analytical and other review procedures. Areview is substantially less in scope than an audit conducted in accordance withInternational Standards on Auditing (UK and Ireland) and consequently does notenable us to obtain assurance that we would become aware of all significantmatters that might be identified in an audit. Accordingly, we do not express anaudit opinion. Conclusion Based on our review, nothing has come to our attention that causes us to believethat the condensed set of financial statements in the half-yearly financialreport for the six months ended 30 September 2007 is not prepared, in allmaterial respects, in accordance with IAS 34 as adopted by the EU and the DTR ofthe UK FSA. KPMG Audit PlcChartered Accountants1 Waterloo WayLeicesterLE1 6LP 30 November 2007 Condensed consolidated income statement Half year Half year Year ended ended ended 30 September 30 September 31 March 2007 2006 2007 (unaudited) (unaudited) (audited) Note £m £m £m Revenue 3 329.7 308.4 645.7 Operating costs (321.3) (292.2) (619.6) ---------------------------------------- Operating profit 3 8.4 16.2 26.1-------------------------------------------------------------------------------Analysed as:Operating profit beforerestructuring anddisruption costs and 18.7 18.4 38.1impairment lossesRestructuring and 4 (6.8) (2.2) (5.8)disruption costsImpairment losses 4 (3.5) - (6.2) -----------------------------------------Operating profit 8.4 16.2 26.1-------------------------------------------------------------------------------- Financial income 0.7 1.3 2.2Financial expenses (5.4) (4.6) (9.4) ---------------------------------------Net financing costs 5 (4.7) (3.3) (7.2) --------------------------------------- Profit before taxation 3 3.7 12.9 18.9 Taxation 6 (1.3) (3.8) (5.8) Profit for the periodattributable to ---------------------------------------equity shareholders of the 2.4 9.1 13.1parent ======================================= Basic earnings per ordinary 7 2.4 p 9.2p 13.2pshareDiluted earnings per 7 2.4 p 9.1p 13.1pordinary shareAdjusted basic earnings per 7 9.5 p 10.1p 20.6pordinary shareAdjusted diluted earnings 7 9.4 p 10.1p 20.5pper ordinary share Condensed consolidated statement of recognised income and expense Foreign exchange translation differences 3.5 (3.1) (2.2)Effective portion of movement on fair valueof interestrate swaps 0.3 0.3 0.8Deferred tax liability on above (0.1) (0.1) (0.2)Actuarial gains/(losses) on defined benefit 3.3 (1.4) 2.0pension plansDeferred tax on actuarial gains/losses (0.5) 0.4 (0.7) ------------------------------Net income/(expense) recognised directly in 6.5 (3.9) (0.3)equityProfit for the period 2.4 9.1 13.1 ------------------------------Total recognised income and expense for theperiod attributable to equity shareholders of theparent 8.9 5.2 12.8 ============================== Condensed consolidated balance sheet 30 September 30 September 31 March 2007 2006 2007 (unaudited) (unaudited) (audited) Note £m £m £mNon-current assetsGoodwill 18.0 11.9 17.0Other intangible assets 2.0 0.8 1.5Property, plant and 9 238.0 240.9 234.5equipmentDerivative financial 1.3 1.0 1.3instrumentsDeferred tax assets 6.4 8.3 6.9 -------------------------------------- Total non-current assets 265.7 262.9 261.2 -------------------------------------- Current assetsInventories 104.0 93.6 94.2Trade and other receivables 122.3 119.2 128.2Cash and cash equivalents 7.8 3.5 12.3 --------------------------------------Total current assets 234.1 216.3 234.7 -------------------------------------- Current liabilitiesBank loans and overdrafts (6.8) (3.5) (3.9)Trade and other payables (115.7) (114.9) (130.8)Current tax liabilities (4.2) (7.2) (8.6)Employee benefits (2.0) (0.4) (0.4)Provisions (3.8) (0.9) (0.5)Deferred consideration - (1.0) - --------------------------------------Total current liabilities (132.5) (127.9) (144.2) -------------------------------------- Net current assets 101.6 88.4 90.5 -------------------------------------- Total assets less current 367.3 351.3 351.7liabilities --------------------------------------Non-current liabilitiesBank loans and other (160.2) (144.6) (145.5)borrowingsEmployee benefits (29.1) (37.5) (33.0)Deferred tax liabilities (15.0) (16.5) (14.6)Derivative financial (0.3) - (0.1)instruments --------------------------------------Total non-current (204.6) (198.6) (193.2)liabilities -------------------------------------- Net assets 162.7 152.7 158.5 ======================================= EquityCalled up share capital 4.9 4.9 4.9Share premium account 3.1 24.5 2.7Capital redemption reserve 0.9 0.9 0.9Retained earnings 146.4 120.0 146.3Cash flow hedging reserve 0.9 0.3 0.7Cumulative translation 6.5 2.1 3.0differences reserve --------------------------------------Total equity attributable toequityshareholders of the parent 162.7 152.7 158.5 ======================================= The half-yearly financial report was approved by the Board of Directors on 30November 2007, is unaudited and was signed on its behalf by: J P Williams - Chairman C H Sworn - Director Condensed consolidated cash flow statement Half year Half year Year ended ended ended 30 September 30 September 31 March 2007 2006 2007 (unaudited) (unaudited) (audited) Note £m £m £mCash flows from operatingactivitiesProfit before tax 3.7 12.9 18.9Financing costs 4.7 3.3 7.2 -----------------------------------------Profit from operations 8.4 16.2 26.1Adjustments for:Amortisation of intangible 0.1 - 0.1assetsImpairment loss on property, 3.5 - 6.2plant and equipmentDepreciation 15.1 17.9 34.0Share-based payment expense 0.3 0.2 0.5Loss/(gain) on disposal of 0.1 (0.2) 0.2property, plant andequipmentMovement in provisions 3.9 (0.6) (2.0) -----------------------------------------Operating cash flows before 31.4 33.5 65.1movementin working capitalMovement in working capital (16.0) (25.4) (24.2) ----------------------------------------- 15.4 8.1 40.9Taxes paid (5.5) (4.9) (7.5)Interest paid (5.2) (4.2) (8.4) ----------------------------------------- Net cash from operating 4.7 (1.0) 25.0activities ----------------------------------------- Cash flows from investing activitiesInterest received 0.1 0.1 0.2Proceeds on disposal of - 0.5 2.3property, plant andequipmentAcquisition of property, (18.9) (21.2) (35.5)plant and equipmentAcquisition of intangible (0.6) (0.1) (1.0)assetsAcquisition of subsidiaries (1.6) (4.3) (8.1) ----------------------------------------- Net cash flows from investing (21.0) (25.0) (42.1)activities ----------------------------------------- Cash flows from financingactivitiesDividends paid 8 (5.6) (5.2) (7.9)Proceeds from the issue of 0.4 0.5 0.9share capitalMovement in borrowings 10 16.1 10.3 12.3Payment of finance costs (0.1) (0.1) (0.1) ----------------------------------------- Net cash flows from financing 10.8 5.5 5.2activities ----------------------------------------- Net decrease in cash and cash (5.5) (20.5) (11.9)equivalentsCash and cash equivalents at 12.3 24.5 24.5beginning ofperiodEffect of foreign exchange 1.0 (0.5) (0.3)rate changes ----------------------------------------- Cash and cash equivalents at 7.8 3.5 12.3end of period ========================================= Cash and cash equivalentscomprise:Cash at bank 7.8 3.5 12.3 ========================================= NOTES TO THE CONDENSED FINANCIAL STATEMENTS FOR THE 6 MONTHS ENDED #30 SEPTEMBER 2007 1. General information The comparative figures for the financial year ended 31 March 2007 are not theCompany's statutory accounts for that financial year. Those accounts have beenreported on by the Company's auditors and delivered to the Registrar ofCompanies. The report of the auditors was (i) unqualified, (ii) did not includea reference to any matters to which the auditors drew attention by way ofemphasis without qualifying their report, and (iii) did not contain a statementunder section 237(2) or (3) of the Companies Act 1985. The Group accounts forthe year ended 31 March 2007 are available from the Company's registered office,Lakeside House, Higham Ferrers, Northants NN10 8RP or from the Group's website,www.rpc-group.com. 2. Accounting policies These condensed consolidated half-yearly financial statements have been preparedin accordance with International Financial Reporting Standard (IFRS) IAS 34'Interim Financial Reporting'. They do not include all of the informationrequired for full annual financial statements, and should be read in conjunctionwith the consolidated financial statements of the Group as at and for the yearended 31 March 2007. The same accounting policies, presentation and methods of computation arefollowed in the condensed set of financial statements as applied in the Group'slatest annual audited financial statements. Change in accounting policies In the current financial year, the Group will adopt IFRS 7 'Financialinstruments: Disclosures' (IFRS 7) for the first time. As IFRS 7 is a disclosurestandard only, there is no impact of this change in accounting policy on thehalf-yearly financial report. Full details of the change will be disclosed inour annual report for the year ending 31 March 2008. The Group will also adopt the following International Financial ReportingInterpretations Committee (IFRIC) pronouncements: - IFRIC 8 'Scope of IFRS 2 Share-based Payments' - IFRIC 9 'Reassessment of Embedded Derivatives' - IFRIC 10 'Interim Financial Reporting and Impairment' - IFRIC 11 'IFRS 2: Group and Treasury Share Transactions' In all cases the adoption is not expected to have any significant impact on theconsolidated financial statements for the year ending 31 March 2008. Estimates The preparation of the condensed financial statements requires management tomake judgements, estimates and assumptions that affect the application ofaccounting policies and the reported amounts of assets and liabilities, incomeand expense. Actual results may differ from these estimates. In preparing these condensed financial statements, the significant judgementsmade by management in applying the Group's accounting policies and the keysources of estimation uncertainty were the same as those that applied to theconsolidated financial statements as at and for the year ended 31 March 2007. 3. Business segments Primary segments - Geographical The Group operates in two principal geographic regions - United Kingdom andMainland Europe. Mainland Europe also includes one operation in the USA whosesales are predominantly manufactured in Germany. These two regions are the basison which the Group reports its primary segment information. Segment informationabout these regions is presented below. Half year Half year Year ended ended ended 30 September 30 September 31 March 2007 2006 2007 (unaudited) (unaudited) (audited) £m £m £m RevenueUnited Kingdom 108.7 108.0 216.5Mainland Europe 220.0 200.4 429.2Acquisitions 1.0 - - ----------------------------------------------------- 329.7 308.4 645.7 ----------------------------------------------------- Segmental resultsUnited Kingdom (3.6) 3.0 (2.1)Mainland Europe 12.8 13.6 27.0Acquisitions - - -Other (includes Head (0.8) (0.4) 1.2Office) ----------------------------------------------------- Operating profit 8.4 16.2 26.1Net financing costs (4.7) (3.3) (7.2) -----------------------------------------------------Profit before taxation 3.7 12.9 18.9 ----------------------------------------------------- Operating profit before restructuring and disruption costs and impairment losses United Kingdom 5.9 5.2 8.4Mainland Europe 13.6 13.6 28.5Other (includes Head (0.8) (0.4) 1.2Office) ----------------------------------------------------- 18.7 18.4 38.1 ----------------------------------------------------- 4. Restructuring and disruption costs and impairment losses Half year Half year Year ended ended ended 30 September 30 September 31 March 2007 2006 2007 (unaudited) (unaudited) (audited) £m £m £m Closure costs 6.8 2.2 4.2Restructuring of operations - - 1.2Disruption costs caused by fire - - 0.4 ------------------------------------------- 6.8 2.2 5.8 =========================================== Impairment losses 3.5 - 6.2 =========================================== Closure costs in the period relate to the closure of our UK operations atThornaby (£1.7m) and Hereford (£2.6m). An additional £0.8m relates to therestructuring of our Bebo business in Poland. The remainder of the chargesrelates to the on-going closure costs of the Bristol site which ceased operatingin March 2007. The costs of £2.2m incurred in the half year to 30 September 2006 relate to theclosure of Woburn Sands. The charge for impairment losses on property, plant and equipment relates to theclosure of our site at Hereford. The impairment costs relating to Thornaby werecharged in the year to 31 March 2007. 5. Net financing costs Financial expenses of £5.4m include a charge of £0.4m (2006: £0.3m) under IAS 39relating to the mark to market position of foreign currency hedging instruments. The financial income of £0.7m includes a credit of £0.6m (2006: £1.2m) underIAS 39 relating to exchange differences on the $40m bond. 6. Tax Taxation for the six month period ended 30 September 2007 has been charged at35.5%, (half year ended 30 September 2006: 29.5%; year ended 31 March 2007:31%), representing the best estimate of the effective group tax rate expectedfor the full year, applied to the pre-tax income of the six month period.Changes in tax rates in Germany and the UK have been taken into account incalculating the full year group tax charge. The group tax rate for the six month period ended 30 September 2007 excludingrestructuring and disruption costs and impairment losses is 32%. 7. Earnings per share Basic The earnings per share figures have been computed on the basis of the weightedaverage number of shares in issue during the period (half year ended 30September 2007: 98,821,511; half year ended 30 September 2006: 98,144,247 andyear ended 31 March 2007: 98,352,849). Diluted Diluted earnings per share is the earnings per share after allowing for thedilutive effect of the conversion into ordinary shares of the weighted averagenumber of options outstanding during the period. The number of shares used forthe fully diluted calculation for the period was: the half year ended 30September 2007: 99,629,531; the half year ended 30 September 2006: 98,764,568and the year ended 31 March 2007: 98,989,282. Adjusted The directors believe that the presentation of an adjusted basic earnings perordinary share assists with the understanding of the underlying performance ofthe Group. For this purpose we have excluded the restructuring and disruptioncosts and impairment losses identified separately on the face of the CondensedConsolidated Income Statement, together with the exchange differences on the$40m bond and the (credit) or charge for foreign currency hedging instruments.The tax impact on these adjustments has also been reflected. A reconciliation from profit after tax as reported in the Condensed ConsolidatedIncome Statement to the adjusted profit after tax is set out below: Half year Half year Year ended ended ended 30 September 30 September 31 March 2007 2006 2007 (unaudited) (unaudited) (audited) £m £m £mProfit after tax as reported in theCondensed ConsolidatedIncome Statement 2.4 9.1 13.1Restructuring and disruption costs 10.3 2.2 12.0and impairment lossesExchange differences on $40m bond (0.6) (1.2) (2.0)Foreign currency hedging 0.4 0.3 0.5instrumentsTax effect thereon (3.1) (0.5) (3.3) ------------------------------------------ Adjusted profit after tax 9.4 9.9 20.3 ========================================== 8. Dividends Half year Half year Year ended ended ended 30 September 30 September 31 March 2007 2006 2007 (unaudited) (unaudited) (audited)Dividends on ordinary shares: £m £m £m Final for 2006/07 paid of 5.7p per 5.6 - -shareInterim for 2006/07 paid of 2.7p - - 2.7per shareFinal for 2005/06 paid of 5.25p per - 5.2 5.2share ----------------------------------------- 5.6 5.2 7.9 ========================================= The proposed interim dividend for the year ending 31 March 2008 of 2.9p pershare will be paid on 25 January 2008 to shareholders on the register at closeof business on 28 December 2007. It has not been included as a liability as at30 September 2007. 9. Property, plant and equipment During the period the Group spent £18.9m on capital expenditure. There were nosignificant disposals. The depreciation charge was £15.1m (2006: £17.9m). Theimpairment of assets is disclosed in note 4. The impairment in the year to 31March 2007 has reduced the depreciation charge in the current period. 10. Bank overdrafts and loans During the period, additional loans of £16.1m were drawn down under the Group'sexisting loan facility to fund the acquisition in Slovakia and meet short-termexpenditure needs. The amount undrawn under the Group's facilities at 30September 2007 amounted to £113.7m. 11. Acquisition of subsidiary On 1 June 2007, the Group acquired the trade and assets of the plasticmanufacturing operations of DM Plast s.r.o. in Velky Meder near Bratislava inSlovakia for cash. The transaction has been accounted for by the purchase methodof accounting. Book value Fair value £m £m Property, plant and equipment 0.5 1.2Inventories 0.4 0.4Trade and other receivables 0.3 0.3Trade and other payables (0.8) (0.9)Deferred tax liability - (0.1) ---------------------------- 0.4 0.9 ============================ Goodwill 0.7 -----------Total consideration 1.6 =========== Satisfied by:Cash 1.6 =========== Net cash flow arising on acquisition:Cash consideration 1.6 =========== Consideration and acquisition expense:Purchase price 1.5Acquisition costs 0.1 ----------- 1.6 =========== The initial accounting for the acquisition has not been finalised and thereforethe above figures should be considered to be provisional. This is a result ofthe ongoing assessment of property, plant and equipment and working capitalvaluations at the acquisition date. The goodwill arising on the acquisition is attributable to the anticipatedprofitability of the acquired business and the anticipated synergetic benefitsthat will result from being part of the Group's Bramlage-Wiko cluster. The acquired business has generated revenue of £1.0m and a profit of £nil in theperiod between the date of acquisition and 30 September 2007. Prior to acquisition the business was part of DM Plast s.r.o. However, onlypart of that business was acquired. The nature of the accounting function meansthat it is not practicable to provide meaningful details of the results of theacquired business from the beginning of the period under review to the date ofacquisition. 12. Contingent liabilities There were no significant contingent liabilities at either 30 September 2007 or30 September 2006 for the Group. 13. Share based payments On 25 July 2007 the Company granted 1,695,000 options under the RPC Group 2003Approved and Unapproved Executive Share Option Schemes to executive directorsand senior and middle managers as described in the Remuneration Report for theyear ended 31 March 2007. The expense of £0.3m, recognised in the half-yearended 30 September 2007, has been measured on a basis consistent with previousgrants under the Company's equity settled share option schemes and in accordancewith the Group's accounting policy. 14. Defined benefit schemes The defined benefit obligation for employee pensions and similar benefits as at30 September 2007 has been re-measured based on the disclosures as at 31 March2007, the previous balance sheet date. The results have been adjusted byallowing for updated IAS 19 financial assumptions and rolling forward theliabilities to 30 September 2007 using actual cash flows for the six monthperiod. The defined benefit plan assets have been updated to reflect their market valueas at 30 September 2007. Differences between the actual and expected return onassets, changes in actuarial assumptions and experience gains and losses onliabilities have been recognised in the Condensed Consolidated Statement ofRecognised Income and Expense in accordance with the Group's accounting policy. There have been no significant changes to defined benefit obligations during theperiod other than those described in the Group's accounts for the year ended 31March 2007. In the UK, the triennial valuation of the RPC Containers LimitedPension Scheme as at 31 March 2006 was agreed between the trustee and employer.In addition to the benefit and contribution changes previously reported, asalary sacrifice scheme was introduced with effect from 1 July 2007. While thereis no net impact from the salary sacrifice scheme on the liability recognised inthe Group's Condensed Consolidated Balance Sheet, the current service cost isincreased by salary sacrifice contributions made by the employer with acorresponding reduction in wages and salaries costs and a small saving inemployer's National Insurance contributions. 15. Events after the balance sheet date On 8 October 2007, the Group acquired Raytec BV, a Dutch injection mouldingcompany, for approximately £3.0m. Raytec BV, which is based in Ravenstein, willtrade as RPC Bramlage DHS BV. On 23 November 2007, the Group purchased the business of Mob at Moirans enMontagne in France, which was in administration, for £1.0m. 16. Related party transactions The Group has a related party relationship with its directors. There are noadditional significant related party transactions other than those disclosed innote 25 of the RPC Group Plc accounts for the year ended 31 March 2007. Copies of this half-yearly financial report will be mailed to shareholders on 3December 2007 and are also available from the Company Secretary, RPC Group Plc,Lakeside House, Higham Ferrers, Northants NN10 8RP. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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