Interim Results

BRITISH POLYTHENE INDUSTRIES PLC

INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2015

Highlights

· Operating profits increased by 6% to £18.0 million (2014: £17.0 million), but increased by 13% on a constant currency basis

· Adjusted profit before tax up by 9% to £17.4 million (2014: £16.0 million), but increased by 17% on a constant currency basis

· Adjusted earnings per share up 11% to 46.82p (2014: 42.10p)

· Interim dividend per share increased to 6.0p (2014: 5.0p). Indicative final dividend of 12.0p making a 12.5% increase for the year 

· Capital investment programme continues with £9.1 million invested in the first half

Commenting on the results Cameron McLatchie, Chairman of BPI, said:

"We are now pleased to report that, despite the headwinds of unexpectedly volatile raw material costs and considerably weaker currency translation of the profits from our European business, the results for the first six months continue to show progress.

Having clearly demonstrated that we can cope well with volatile pricing through the cycle, your Board is confident that our business is well placed to meet our expectations for the year as a whole."

Enquiries

INTERIM MANAGEMENT REPORT

Chairman's Statement

We indicated at the time of our AGM on 12 May that we anticipated a further satisfactory performance in 2015.

We are now pleased to report that, despite the headwinds of unexpectedly volatile raw material costs and considerably weaker currency translation of the profits from our European business, the results for the first six months continue to show progress.

RESULTS

Volumes for the period increased by some 2 %. After currency movement throughout the period, and with prices generally trending lower at the start of the year, this resulted in sales of £265.8 million, a reduction from the comparative period (2014: £281.1 million). Profits from operations were £1.0 million higher at £18.0 million (2014: £17.0 million). On a constant currency basis operating profits were 13% higher.

This was a notable achievement in a period where we saw clear signs of raw material costs falling during the first few months, only to see these costs accelerate to an all-time high during the second quarter. The first six months have been assessed by our senior managers as "the most difficult period of raw material price movements that they have ever encountered in their careers in the polythene film industry".

In the UK, profits were marginally ahead at £7.5 million despite margin pressure in the retail-facing sector.

Profits from our very successful European business rose by 6.5% to €13.1 million but due to the weak euro, on translation into sterling, our European profits fell by 5% to £9.6 million.

We have also had an unusual season for sales of silage stretch-wrap, where overall market demand has been affected by a cool first half in Northern Britain and Ireland, and almost drought conditions in most of Central Europe. Despite the less than ideal conditions for growing grass, we have successfully managed to increase the sales of silage stretch-wrap for the first six months. This is mainly due to increased sales of our premium products that demonstrate excellent performance in the field, and offer significant benefits to our customers over standard silage stretch-wrap.

 It speaks volumes for the quality of our business that we have come through this period with an improvement in our performance, and your Board is confident that there is room for further improvement in more favourable conditions.

Earnings benefitted from the expected turnaround in operating profits from our North American business which was badly affected by the reported delayed plant installation in 2014. We are now starting to see the benefits of that new plant and the business reported a profit of £0.8 million (2014: £ 0.6 million loss).

The adjusted profit before tax (operating profit less interest) increased from £16.0 million to £17.4 million. On a constant currency basis, the increase was 17%.

Adjusted earnings per share increased to 46.82p (2014: 42.10p).

DIVIDEND

To adjust the balance between the interim and final dividend, and encouraged by the profit improvement in these very difficult circumstances, the Board has declared an increase in the interim dividend to 6.0p (2014: 5.0p). This dividend will be paid on 13 November 2015 to shareholders on the register at close of business on 16 October 2015. The Directors intend, in the absence of unforeseen circumstances, to recommend a final dividend of 12.0p per share to make a total for the year of 18.0p (2014: 16.0p).

CASHFLOW & BORROWINGS

Net Borrowings were almost identical to the figure reported for the end of June 2014, at £29.2 million, but, as expected, higher than the number reported for December 2015 at £24.1 million. Given the additional special cash payment of £11.2 million into the Group Pension Scheme in June 2015, the current very high polymer price, and the seasonal nature of our business, this bodes well for a reduction in borrowings when polymer prices do reduce from today's very high levels.

We continue to invest in new plant and equipment, with expenditure in the first six months of £9.1 million. This investment programme continues to deliver good returns and puts the business in a good position to deliver value both to our shareholders and our customers.

GROUP PENSION SCHEME

The IAS 19 deficit in the UK Defined Benefit Pension Scheme reduced to £59.6 million (£51.4 million net of tax) at 30 June 2015. The significant reduction from £99.1 million (£83.1 million net of tax) at the beginning of the year is due primarily to the change in inflation index for pensions in payment from the Retail Prices Index to the Consumer Prices Index. This change had the impact of reducing the reported IAS 19 deficit by £27.6 million and reflects the Government's view that CPI is the most appropriate measure of inflation for pensions in payment due to the adoption of CPI for state, public sector and statutory minimum pension increases. To increase the security of pensions for Scheme members, the Company also made a one off payment of £11.2 million to the Scheme.

RAW MATERIALS

The price of raw materials fell, as expected, at the start of the year, and we felt that this heralded the long awaited decline in price on the back of cheaper feedstock, particularly in North America. To our surprise, and that of the market in general, the price in Western Europe rebounded rapidly from this downward trend, and reached record high levels.

On the face of it, several factors accounted for this rapid rebound. Firstly, import tariff for polyethylene polymers from certain Middle Eastern countries increased from January this year. Secondly, the euro depreciated in value against the dollar, the currency used world-wide, except in Europe, to trade in our raw material. Neither of the first two factors made it attractive to import polymer from the Middle East, currently the largest exporters globally. Thirdly, the Western European producers suffered from an unprecedented number of "force-majeure" incidents, with more plant outages than ever seen before in such a short period of time. These factors created shortages of raw material and producers then acted in a very opportunistic manner to increase prices. 

The raw material market has become less frenetic in the last few weeks, and attention is again focussing on the fundamentals of medium term reductions in feedstock costs, on the back of imported shale gas from North America. We are seeing minor reductions in price for certain grades of raw material, and we currently anticipate further reductions over the coming months.

PROSPECTS

Having clearly demonstrated that we can cope well with volatile pricing through the cycle, your Board is confident that our business is well placed to meet our expectations for the year as a whole.

Cameron McLatchie

Chairman

BUSINESS REVIEW

Summary

The Group operating profit increased from £17.0 million to £18.0 million despite unprecedented polymer price increases in quarter two and adverse currency movements in converting the profits of our European business. This improvement reflected the strong recovery in our North American business which moved from a loss to a profit of £0.8 million. Despite extremely challenging conditions, due to raw material price increases, both the UK and Europe, in local currency, reported small improvements. The contribution from our agricultural sales is normally weighted to the first half and we expect this again to be case in the current year.

Sales Volumes

Total sales volumes at 157,400 tonnes were 2% ahead of 2014 reflecting some growth in Europe due to increased capacity in silage stretch. This increase in tonnage was achieved despite continued downgauging in some of our products. 

Sales and Margins

Sales for the first six months were down by £15 million to £266 million reflecting lower raw material prices in the first quarter and the impact of the strength of sterling on our European sales. We achieved a small improvement in margins as we continued to enrich the sales mix and increase operating efficiencies. The Group operating profit per tonne increased from £110 to £114.

Raw Material Prices

In Europe, raw material prices continued to reduce in January and February but increased every month thereafter to peak at an all-time euro high in June. These price increases were unprecedented and, based on ICIS LDPE, increased by 560 euros a tonne between February and June, an increase of nearly 50% and all against a background of significantly lower oil prices. The reasons for these unexpected increases include increased duties on the import of polymer from the Middle East, exchange rate movements between the US$ and the euro encouraging exports from Europe and restricting imports, and an unusually large number of Forces Majeures declared at European polymer plants.

All of these combined to ensure that demand exceeded supply, prices increased accordingly and obtaining product became very difficult. From April onwards, the industry suppliers appeared to place customers on allocation but, with all our sites cooperating, we were able to maintain all of our lines running and ensure continued supply to our customers. Passing through the price increases was exceedingly challenging and our margins were squeezed. However, we believe that prices have now peaked and we should see some easing in August and September.

In North America, prices reduced in January and February before increasing in May. North American prices remain high despite low feedstock costs and prices are now expected to reduce in August. 

Energy Costs

Wholesale electricity costs are reflecting the lower oil and gas prices but we will see no relief in the UK due to increasing energy taxes and environmental levies.

Borrowing Costs

Borrowing costs reduced to £0.6 million (2014: £1.0 million) reflecting lower average borrowings and better rates.

Capital Expenditure

Capital expenditure was £9.1 million and above depreciation as we remain committed to increased investment to improve efficiency and reduce scrap, labour and energy costs. The most significant expenditure was on the delivery and installation of replacement printing presses at Ardeer in the UK and Hardenberg in Holland. At Bromborough in the UK we continued to replace and upgrade extrusion lines and at Leominster in the UK we ordered a seven layer extrusion line for silage stretch.

Cash Flow and Borrowings

Net borrowings increased to £29.2 million from £24.1 million at the beginning of the period. A single one off payment of £11.2 million was made to the Pension Scheme in recognition of the change of inflation index used for pension increases.

The impact of currency translation of non-sterling borrowings, which are maintained to hedge the net investment in our overseas subsidiaries, accounted for a reduction of £1.2 million. Working capital was unchanged in the period. 

The Employee Share Ownership Trust purchased 450,848 of the Company's shares at a cost of £3.2 million.  

Pension Fund

The deficit, on an IAS19 basis, in the UK Defined Benefit Pension Fund reduced to £59.6 million (net of tax £51.4 million) from £99.1 million (net of tax £83.1 million).

The movement in the deficit is analysed below :

The assumed long term inflation rate increased from 2.9% to 3.15%. The discount rate applied to the liabilities increased from 3.55% to 3.7%. The real yield therefore fell from 0.65% to 0.55%.

As previously advised, in February 2015, the Scheme changed the inflation index for pensions in payment from the Retail Prices Index to the Consumer Prices Index. The change had the impact of reducing the reported IAS19 deficit by £27.6 million. To increase the security of pensions for Scheme members, the Company also made a one off payment of £11.2 million to the Scheme. 

Principal Risks & Uncertainties

The 2014 Annual Report (pages 16 and 17) sets out the principal risks and uncertainties faced by the Group at December 2014, and details the process in place for managing those risks. There have been no significant changes to the risk management process in the interim period.

We do not consider these risk factors to have changed significantly, and therefore the principal risks and uncertainties facing the Group for the remaining six months of the year are consistent with those set out in the 2014 Annual Report. However, there may be additional factors which are not currently known to the Group, or which we currently deem immaterial, which may also have an adverse effect on our business. 

Liquidity Risk  

The economic conditions remain challenging; however, the Directors believe that the Group continues to perform well despite these circumstances and the Group has continued to maintain an appropriate level of borrowings.

There always remains a risk of reductions in market demand. However, more than two thirds of the Group's business is in sectors such as agriculture, retail food chain, healthcare and waste services which, so far, have been shown to be relatively resilient in the face of the economic downturn. The main European markets are UK and Ireland, Benelux, Scandinavia, Germany and France with limited sales to the southern European nations.

In view of these market conditions, the risk of customer insolvency remains increased. However, customers are spread across a wide range of market sectors and geographical regions and the Group's largest customer represents less than 3% of Group turnover. We continue to carry some credit insurance in Europe and in the agricultural sector.

A number of steps were successfully taken to restructure parts of the UK business to reduce capacity in line with demand and reduce costs. Banking facilities are in place, which provide sufficient headroom to support the Group's trading and development plans. The revolving credit elements of these facilities are repayable in 2019. Short-term overdraft facilities are renewable on an annual basis. Where this renewal period falls within 12 months, no matters have been drawn to the attention of the Directors to suggest that renewal may not be forthcoming on acceptable terms.

Going Concern

The Group's projections, taking account of the risks outlined above, show that the Group should be able to operate comfortably within its current banking facilities. As a result, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the financial statements.

Strategy

Our current strategy is set out in our 2014 Annual Report and, during the period, further strategic investments in agricultural films, food packaging films, and printed products have been approved in support of this strategy.

Outlook

Demand remains at reasonable levels and with raw material prices having eased in August, we remain confident of delivering progress in 2015.

OPERATING REVIEW

Mainland Europe

We achieved another strong performance from Europe as profits in euros increased by 6.5% to €13.1 million on the back of sales volumes up by over 7% to 49,500 tonnes. All three sites reported improved volumes. A less favourable exchange rate reduced reported sterling profits by 5% to £9.6 million with an impact of £1.1 million. Margins were squeezed by the exceptional raw material prices in Quarter 2.

Sales volumes of our silage products increased by over 10% with sales of our advanced products SilotitePro® and Baletite® increasing by 31% and now represent 22% of total silage sales. This increase arose against a background of cold weather in Northern Europe and consistent hot and dry weather in Central Europe from April onwards. The significant polymer price increases in Quarter 2 resulted in very difficult pricing and margins suffered and were below 2014.

At Zele in Belgium, volumes of Bontite®, our premium industrial stretchwrap product, continued to grow helped by new legislation for load stability. Sales of printed film for the food industry increased by over 13% with growth mainly from the frozen fries sector but margins suffered from the polymer price increases. A replacement printing press with additional capacity will be installed in the second half of the year.

In Roeselare in Belgium, volumes improved as we increased sales of our strategic products; stretch hoods, feedstock for printing and Formifor®, our thinner product for the insulation market.

Sales volumes from our plant in Holland increased by over 4% with increased sales of FFS and printed film. Margins were however squeezed by the increasing polymer prices. A replacement printing press for FFS was installed and the replacement of a number of extrusion lines authorised.

Our strategy of investment and product development should ensure that the business continues to deliver good returns.

UK & Ireland

We achieved a small increase in operating profits despite the significant polymer price increases implemented in Quarter 2 which squeezed margins. Prompt recovery of polymer prices together with operational improvements helped offset this margin squeeze.

Volumes sold reduced as we shipped less product to our site in Canada and exited some very low margin retail refuse sack business. This was offset by some growth in plain films and silage stretchwrap. 

Volumes in our plain films sector increased but margins suffered from the polymer price increases. Our policy of upgrading the extrusion lines at our Bromborough site has continued with three new lines fully operational. An additional five layer coextrusion line has been ordered for delivery in early 2016.

Silage stretch volumes increased despite a slow start to the season due to the cold weather in Northern Europe. Margins were, however, lower due to the timing of the polymer price increases and the impact of exchange rates on export volumes. Operational improvements continued at Leominster and a seven layer line has been ordered for delivery in 2016.

Sales volumes of industrial stretchwrap increased due to continued growth in our prestretch Wrapsmart® product and good demand for blown hand reels due to customer wins.

Sales volumes from our Wide Lines at Ardeer increased despite reduced supplies of silage sheet to our North American business as we experienced greater demand for silage sheet in the UK and secured new volume in continental Europe. Margin pressure intensified due to exchange rates.

Sales volumes in refuse sacks reduced by over 10% following the loss of some retail business at very low margins. Operational efficiencies have improved and we are starting to see benefits from our co-extrusion investment.

Construction films experienced a slow start to the year with continued patchy demand in Quarter 2 resulting in lower volumes. Sales of our specialist gas and water proofing business continued to grow as we introduced new products and were 9% ahead of 2014.

In Recycling, scrap availability continued to be our major concern, particularly in farm plastics where new start-ups in Ireland and Central Europe contributed to higher demand for farm waste. Our new recycling line at Heanor is performing well and allowing us to access more contaminated waste.

Volumes in our Visqueen packaging business were lower due to reduced demand from the construction sector and a poor season in the animal feed sector due to the mild winter. Sales to the peat/compost and furniture/bedding sectors saw some improvement. At Ardeer, a replacement printing press was installed towards the end of the first half and two replacement extrusion lines will be installed in the second half.

Our UK Consumer operation, which supplies printed packaging for food to the retail supermarkets and major brands, continued to experience challenging conditions with lower volumes and intense margin pressure.

Our plant in China increased volumes in aprons and stretchwrap but has yet to secure any additional printed film food business.

The UK business should benefit from the capital investment programme.

North America

North America returned to normal production levels and produced a profit of £0.8 million compared to a loss of £0.6 million in 2014 which arose due to installation problems on a replacement large extrusion line. The result is more comparable to the profit of £0.7 million achieved in 2013.

Total product sold increased from 10.2 million lbs to 11.6 million lbs with agricultural sales up by 15%. The main increase arose in our agricultural bag market with customers reporting strong approval of products from our new extrusion line.

Our new extrusion line is now performing well with its products being well received and showing improved physical characteristics. Production output was much improved over 2014 although some power outages reduced levels below expectations. Scrap levels have reduced and we are now developing new and improved products for the market.

Performance in the second half will be dependent on market demand and weather and, while there are dry conditions in California, we are experiencing good grain bag bookings in Western Canada. The business will, however, recover from the disappointing 2014 and we should see further benefits from the new extrusion line in 2016.

FORWARD LOOKING STATEMENTS 

The report contains forward looking statements. Although the Group believes that the expectations reflected in these forward looking statements are reasonable, it can give no assurances that the expectations will prove to be correct. Due to the inherent uncertainties, including both economic and business risk factors, underlying such forward looking information, actual results may differ materially from those expressed or implied by these forward looking statements. The Group undertakes no obligation to update any forward looking statements, whether as a result of new information, future events, or otherwise.

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The interim report is the responsibility of, and has been approved by, the directors of British Polythene Industries PLC.

The directors confirm that to the best of their knowledge:

· the condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the European Union;

· 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

John Langlands David Harris

Chief Executive Finance Director

British Polythene Industries PLC

Condensed Consolidated Income Statement

For the six months ended 30 June 2015

British Polythene Industries PLC

Condensed Consolidated Statement of Comprehensive Income

For the six months ended 30 June 2015

British Polythene Industries PLC

Condensed Consolidated Balance Sheet

At 30 June 2015

British Polythene Industries PLC

Condensed Consolidated Cash Flow Statement

For the six months ended 30 June 2015

British Polythene Industries PLC

Condensed Consolidated Statement of Changes in Equity

For the period ended 30 June 2015

1 Refer to note 14 for breakdown of other reserves.

British Polythene Industries PLC

Condensed Consolidated Statement of Changes in Equity (continued)

For the period ended 30 June 2015

British Polythene Industries PLC

Condensed Consolidated Statement of Changes in Equity (continued)

For the period ended 30 June 2015

British Polythene Industries PLC

Notes to the Condensed Consolidated Financial Statements

1. Basis of preparation and accounting policies

British Polythene Industries PLC (the "Company") is a company domiciled and incorporated in the United Kingdom. These interim financial statements ("interim statements") represent the condensed consolidated financial information of the company and its subsidiaries (together referred to as the "Group") for the six months ended 30 June 2015. They have been prepared in accordance with the Disclosure and Transparency rules of the UK's Financial Services Authority and the requirements of IAS 34 'Interim Financial Reporting' as adopted by the EU.

The interim statements were authorised for issue by the Directors on 27 August 2015.

The interim statements do not constitute statutory accounts as defined in section 434 of the Companies Act 2006 and do not include all of the information and disclosures required for full annual financial statements. They should be read in conjunction with the Annual Report 2014 which is available on request from the Company's registered office, or from the Company website; www.bpipoly.com.

The comparative figures for the financial year ended 31 December 2014 are not the Company's statutory accounts for that financial year. The statutory accounts for the year ended 31 December 2014, which were prepared in accordance with International Financial Reporting Standards ('IFRSs') as adopted by the EU, have been reported on by the Company's auditors and delivered to the Registrar of Companies. The report of the auditors was (i) unqualified; (ii) did not include a reference to any matters to which the auditors 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 interim statements for the current and previous period are unaudited. This statement has not been reviewed by the Company's auditor.

The interim statements are prepared on the historical cost basis except for derivative financial instruments and the assets of the defined benefit pension scheme which are stated at their fair value and the liabilities of the defined benefit pension scheme which are measured by the projected unit credit method.

The interim statements have been prepared on a going concern basis. The reasons for this are outlined in the Operating Review.

The accounting policies applied by the Group in these interim statements are the same as those applied in the preparation of the Company's published consolidated financial statements for the year ended 31 December 2014. 

Although the Group has adopted a number of new interpretations and amendments to existing standards in the period, the application of these has not had any impact on the net assets or results of the Group.

The preparation of the interim statements requires the directors to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. There has been no change in the estimates and judgements applied in the 2014 Annual Report.

2. Seasonality of operations

Management do not consider the business to be highly seasonal. However, revenues in some sectors are subject to seasonal fluctuations. Sales to the agricultural sector generally peak in the first half of the year due to seasonal weather conditions.

British Polythene Industries PLC

Notes to the Condensed Consolidated Financial Statements

3. Segment reporting

The Group has three reportable segments; UK and Ireland, Mainland Europe and North America.

UK & Ireland includes all of the UK manufacturing and merchanting activities along with the Irish sales office which distributes predominantly UK manufactured products. It also includes the manufacturing operation in China from which most of the output is exported for sale by the Group in the UK. Mainland Europe comprises the manufacturing and merchanting activities located in Belgium, the Netherlands and France. North America comprises the manufacturing business in Canada with sales throughout North America.

The accounting policies of the reporting segments are the same as those described in Note 1. Inter-segment pricing is determined on an arms length basis.

Segment profit

An analysis of the Group's revenue and results by operating segment for the periods is presented below.

British Polythene Industries PLC

Notes to the Condensed Consolidated Financial Statements

3. Segment reporting (continued)

Segment assets

The Group's assets are analysed by operating segment as follows:

* The measure of non-current assets used for segmental reporting comprises goodwill, other intangible assets, investments and property, plant and equipment. It excludes deferred tax assets and retirement benefit assets.

British Polythene Industries PLC

Notes to the Condensed Consolidated Financial Statements

4. Tax

Corporation tax for the interim period is charged at 27.5% (June 2014: 28.5%), representing the estimated annual effective tax rate for the full financial year.

A reduction in the UK corporation tax rate from 21% to 20% was effective from 1 April 2015. The deferred tax liability at 30 June 2015 has therefore been calculated using the rate of 20%.

The Chancellor announced in his Summer Budget on 8 July 2015 that the main rate of UK corporation tax will be reduced to 19% from 1 April 2017 and 18% from 1 April 2020 and the future current tax charges will reduce accordingly. These changes are contained in the Finance Bill 2015 which is not expected to be substantively enacted until October 2015 and at that point the changes will be reflected in the Company's deferred taxation. This is anticipated to create a one off non cash tax charge of £0.3million in the second half of 2015.

Tax on items taken directly to equity mainly relates to tax on the defined benefit pension schemes.

5. Dividend

The proposed interim dividend of 6.00p (2014: 5.00p) per share will be paid on 13 November 2015 to shareholders on the register at close of business on 16 October 2015.

The interim dividend was approved by the Board on 27 August 2015 and has not been included as a liability as at 30 June 2015.

British Polythene Industries PLC

Notes to the Condensed Consolidated Financial Statements

6. Earnings per ordinary share

Adjusted earnings per share is stated before net retirement benefit financing and prior year tax items. 

7. Goodwill

British Polythene Industries PLC

Notes to the Condensed Consolidated Financial Statements

8. Other intangible assets

9. Property, Plant and Equipment

Capital commitments were as follows:

British Polythene Industries PLC

Notes to the Condensed Consolidated Financial Statements

10. Bank and other borrowings

11. Derivative financial instruments

Fair value of derivative financial instruments relates to Euro interest rate swaps valued based on observable values for underlying interst rates.

12. Retirement and employee benefit obligations

British Polythene Industries PLC

Notes to the Condensed Consolidated Financial Statements

12. Retirement and employee benefit obligations (continued)

The movements in the British Polythene defined benefit pension scheme during the period are as follows:

As a result of changes to the Pension Funding Partnership, the income interest no longer meets the criteria for recognition as an IAS 19 plan asset and consequently the plan asset was removed from the Group's balance sheet with an effective date of 30 June 2014.

During the period scheme changed the index used to determine minimum pension increases from RPI to CPI. This change reflects the Government's view that CPI is the most appropriate measure of inflation for pensions in payment due to the adoption of CPI for state, public sector and statutory minimum pension increases. The group has therefore amended its assumption for increases to pensions in deferment to reflect this. The resulting reduction in the present value of scheme liabilities of £27.6 million is included as a change in assumptions within other comprehensive income. To increase the security of pensions for Scheme members, the Company also made a one off payment of £11.2 million which is reflected in the table above.

13. Share capital

British Polythene Industries PLC

Notes to the Condensed Consolidated Financial Statements

14. Other reserves

15. Related Parties

There are no related party transactions requiring disclosure. Key management compensation will be disclosed in the 2015 annual financial statements.

16. Interim report

The interim report will be available on the Company website, www.bpipoly.com, from 28 August 2015. The Company's Registered Office is One London Wall, London, EC2Y 5AB.