11th Dec 2006 07:01
RPC Group PLC11 December 2006 Monday 11 December, 2006 RPC GROUP PLC Interim results for the 6 months ended 30 September 2006 RPC Group Plc ("RPC" or the "Group"), Europe's leading supplier of rigidplastics packaging, today announces its interim results for the six months ended30 September 2006. Financial highlights: • Group turnover stable at £308.4m (2005: £307.8m) • Unchanged reported operating profit at £18.4m (2005: £18.4m), excluding restructuring costs • Underlying operating profit up £0.7m to £19.1m (2005: £18.4m) • Underlying operating margin up from 6.0% to 6.3% • Reported earnings per share down 0.7p to 9.2p (2005: 9.9p) • Interim dividend up 8% to 2.7p (2005: 2.5p) Corporate highlights • Stable sales despite challenging conditions • Launch of Dolce Gusto product for Nestle • Cost increases were largely recovered • Extension of working week at certain Mainland Europe operations at no extra cost • Major position established in the beauty packaging market • Consolidation of Blow Moulding operations completed Commenting on the results, Peter Williams, Chairman said: "In the face of a number of challenges, it is pleasing to report a respectableperformance for the first half with an underlying improvement in operatingprofit and margins. Recent acquisitions demonstrate our ability to acquirebusinesses at attractive prices which complement and enhance our existingactivities. As a result of a number of Group initiatives and an easing of input costs, theBoard expects the Group to make progress for the year as a whole" - Ends - Note: High resolution images are available for the media to view and download free ofcharge from www.vismedia.co.uk For further information: RPC Group Plc 01933 410 064Ron Marsh, Chief ExecutiveChris Sworn, Finance Director Merlin Financial 020 7653 6620Michael Rummel 07879 890 405Anca Spiridon Attached: Interim Statement Consolidated Income Statement Consolidated Balance Sheet Consolidated Cash Flow Statement Notes to the Accounts Statement by the Chairman and Chief Executive RPC has delivered a respectable performance in the first half of 2006/07 in theface of a number of challenges. Oil prices exceeded $75 per barrel during theperiod, which increased the pressure on our input costs - this was feltparticularly in the prices of polymer, electricity, transport and packagingmaterials. There was a further 18.5% increase in the cost of polymer comparedwith the first half of last year, taking the overall increase to over 50% since2003/04 and more than two-thirds since 2001/02; whilst the cost of electricityin the UK doubled year-on-year. As before we were able to pass on the majorityof the increase in raw material prices to customers and had some success withother cost pressures. Compared with last year we have also experienced somedisappointments on the sales side with lower volumes of fruit bowls, medicaldevices and vending cups. Under these circumstances, we are pleased to be able to report improvingunderlying profit and margins. Sales in the first half were stable on a like forlike basis compared with last year. Operating profit fell from £17.4m to £16.2m,but after allowing for restructuring costs of £2.2m (2005/06: £1m) and theimpact of acquisitions (a loss of £0.7m), it improved by £0.7m to £19.1m.Restructuring costs and the impact of foreign currency hedging instruments havereduced the reported profit before tax to £12.9m (2005/06: £13.3m), which, witha 30% tax charge, leads to a reduction in the earnings per share to 9.2p beforedilution compared to 9.9p in the first half of 2005/06. Going forward, the performance of the Group should benefit from an improvementin a number of these factors. There has been a modest reduction in polymerprices in November. We have also actively sought to increase our selling pricesto recover the non-polymer cost increases that we have incurred in the firsthalf of 2006/07. Sales of pharmaceutical devices and fruit bowls have alsorecovered to some degree, but demand for "Tassimo" discs, although above lastyear, has continued to be below expectations. Operations Injection Moulding Injection Moulding volumes were comparable with last year. The six months saw arecovery of sales to the surface coatings market in the UK from the low levelsof last year, and good sales of tooling and cream dispensers from our Germanoperations. "Tassimo" discs, although disappointing during the period underreview, are now running at a higher level than we have hitherto experienced.Handihaler production and sales from our Mellrichstadt operation were also at alow level as stocks were run down in anticipation of a design change which hasnow happened. A variety of initiatives are underway to address our cost-base in order tomaintain our competitiveness. The biggest of our injection moulding operationsin Germany has agreed to extend its working week by 31/2 hours at no extra costand this is now in place. Headcount reductions have been achieved across theboard in the UK and focused on temporary workers on Mainland Europe in order tominimise the expense. Thermoforming Volumes in thermoforming were affected by a number of factors, reducingyear-on-year by 7%. Our Cobelplast sheet business suffered from the decline in the volume of sheetfor fruit bowls which is subsequently formed into tubs at our Bebo factory inthe Netherlands. This business is also particularly vulnerable to movements inpolymer prices because this represents as much as 70% of the cost of theseproducts. Our PET sheet business in Italy, on the other hand, was strong. Our Bebo business in the Netherlands also suffered from the decline in fruitbowls, but our margarine business in Germany and the Netherlands was buoyant. Inthe UK we found it difficult to pass on polymer price increases. Our Tedeco-Gizeh disposables business suffered from the loss of a major contractin the Netherlands. However, some higher added-value products are growing toreplace this business and a cost-reduction exercise is also underway in theNetherlands which incorporates headcount reductions as well as a 2-hour increasein the working week at no extra cost. The UK business performed better than inrecent years, and in France we commenced the production of coffee pods forNestle's "Dolce Gusto" coffee system for which the customer has highexpectations. This coffee system utilises an intricately-manufacturedmulti-layer pod which we have developed with the customer over a number ofyears, the launch of which went flawlessly. Blow Moulding Blow Moulding volumes were comparable with last year. Our co-extruded operationat Corby as well as our PET business at Llantrisant and our operation atKutenholz in Germany, all performed particularly well. We had a more difficulttime in Benelux where the poor weather during the first half of 2006 adverselyaffected sales of agrichemicals and we suffered the knock-on effects of weakexport markets for the lubricating oil industry during the period. The closureof the Woburn Sands facility acquired from Nampak was completed as planned andthe equipment and turnover has been transferred to Rushden, Raunds andPlenmeller. The transfer and commissioning of the relocated lines proved moredifficult than expected which had an adverse impact on the performance of thesesites; once these lines have bedded down into their new locations the benefitwill progressively accrue. Acquisitions We have made three acquisitions - two during the half year under review, and oneat the end of October. All demonstrate our clear intent to buy businesses whichcomplement and enhance our existing activities, and to do so at sensible prices. At the beginning of July we bought the Risdon beauty packaging businesses of theCrown Group in Europe at Marolles in France and Mozzate in Italy. In 2005 thesehad sales of €45m and EBITDA of €2m: we paid €5.7m. We are integrating thesewith our lipstick and compact case manufacturing facilities on Teeside to formRPC beaute, now trading on the market as the third largest beauty packagingmanufacturer in Europe. This new RPC cluster has been extremely well received bythe customer-base, and the performance of the cluster has already started toimprove from the very low level to which it had dropped in early 2006 before theacquisition. In August we acquired 4 You Sigal in Poznan, Poland. Sales in 2005 were €1.4mand EBITDA was €0.4m: we paid €0.6m. It was therefore only a very smallacquisition, but it nevertheless gave us the leading position in the manufactureof meat trays in Poland and fitted well with our other thermoforming activitiesin Poland. On 31 October we acquired Barplas from the Barghout family in Bradford. Sales ofBarplas in 2005 were £4.3m. EBITDA was £0.9m. We paid £4.2m. Barplasmanufactures pails and paint cans for the surface coatings and similar marketsin the UK, and therefore complements our Oakham and Blackburn facilities. Itincreases our critical mass in these product areas and frees up some machinerywhich could be transferred to one of our facilities in eastern Europe should ourcustomer base so require. Finances The sales revenue of £308.4m includes £6m generated by acquisitions whichcompares with sales of £307.8m last year. Excluding the impact of acquisitions,sales reduced by 2%, but is unchanged when the effect of the shorter workingcalendar in 2006 is taken into account. Operating profit fell from £17.4m to £16.2m, but after allowing forrestructuring costs of £2.2m (2005/06: £1m) and the impact of acquisitions (aloss of £0.7m), operating profit improved by £0.7m to £19.1m reflecting oursuccess in reducing costs and managing the effects of higher polymer andelectricity costs. Allowing for these adjustments the operating profit marginimproved from 6% in the first half of 2005/06 to 6.3% in the current period. The restructuring charge of £2.2m covers the cost of closing the Woburn Sandssite which was vacated on 31 October 2006. This compares to a £1m charge in thesame period last year. The net financing costs this year were £3.3m compared to £4.1m in the first halfof last year. The movement can be mainly attributed to the £1.2m credit arisingon foreign currency hedging instruments in relation to the $40m bond (last yearit gave rise to a charge of £0.5m). The tax rate applied to the profits in the first half is 30% (2005/06: 28%).This increase is due to the increasing proportion of our profits which are beinggenerated in Germany where the tax rate is higher. The Balance Sheet and Cash Flow Statement both reflect a higher level of workingcapital: stocks and, to a lesser extent, debtors increased whilst creditors fellsubstantially. The increase in stocks reflects the impact of the acquisitionsand rising polymer costs whilst the increase in debtors is entirely due to theacquisitions. The reduction in creditors is due to a tightening of credit termsby polymer suppliers and to a lower level of capital creditors at 30 September2006 than at 31 March 2006. Additions to fixed assets in the period amounted to £16.4m compared with £22.1min the first half of 2005/06. The actual cash spend on capital items in theperiod was higher at £21.2m (2005/06: £25.5m); the difference between theadditions and cash spend figures in the first half of 2006/07 reflects the netreduction in capital creditors referred to above. Nearly half of the capitalspend was on expansionary projects like the "Dolce Gusto" production facilitieswhich we are installing at Bouxwiller. The substantial increase in working capital together with the spend onacquisitions of £4.3m have been the primary factors behind our net borrowingsincreasing from £117.7m at 31 March 2006 to £144.6m at 30 September 2006. Atthis level, the debt is still only 2 times our EBITDA whilst our interest coverin the first half is a healthy 4.9 times. Dividend The Board has declared an interim dividend of 2.7p (2005: 2.5p) per share,representing an increase of 8%. This will be paid on 26 January 2007 to ordinaryshareholders on the register at 29 December 2006. Prospects Having achieved a stable performance in the first half under particularlydifficult circumstances, the Group will benefit from some easing of input costsand from a number of initiatives so that the Board expects the Group to makeprogress for the year as a whole. JP Williams RJE MarshChairman Chief Executive 11 December 2006 Consolidated income statement Half year Half year Year ended ended ended 30 September 30 September 31 March 2006 2005 2006 (unaudited) (unaudited) (audited) Note £m £m £m Revenue 2 308.4 307.8 611.5 Operating costs (292.2) (290.4) (577.1) ------------------------------------- Operating profit 2, 3 16.2 17.4 34.4 Analysed as:Operating profit beforerestructuringcosts 18.4 18.4 36.8Restructuring costs (2.2) (1.0) (2.4) ------------------------------------- Operating profit 16.2 17.4 34.4 ------------------------------------- Financial income 1.3 0.1 0.9Financial expenses (4.6) (4.2) (8.9) -------------------------------------Net financing costs 4 (3.3) (4.1) (8.0) ------------------------------------- Profit before taxation 2 12.9 13.3 26.4 Tax on profit on ordinaryactivities (3.8) (3.7) (7.1) Profit for the periodattributable to -------------------------------------equity shareholders of the parent 9.1 9.6 19.3 ===================================== Basic earnings per 5 9.2p 9.9p 19.9pordinary shareDiluted earnings per 5 9.1p 9.8p 19.7pordinary shareAdjusted basic earningsper ordinary share 5 10.1p 10.8p 22.1p Consolidated statement of recognised income and expense Foreign exchange translation differences (3.1) (0.9) 1.4Effective portion of movement onfair value of interestrate swaps 0.3 (0.6) 1.2Deferred tax liability on above (0.1) - -Actuarial (losses)/gains ondefined benefit pension (1.4) (4.1) 3.1plansDeferred tax on actuarial losses/ 0.4 1.3 (0.9)gains ------------------------------------Net (expense)/income recognised (3.9) (4.3) 4.8directly in equityProfit for the period 9.1 9.6 19.3 ------------------------------------Total recognised income andexpense for the periodattributable to equity 5.2 5.3 24.1shareholders of the parent ==================================== Consolidated balance sheet 30 September 30 September 31 March 2006 2005 2006 (unaudited) (unaudited) (audited) Note £m £m £mNon-current assetsGoodwill 11.9 13.0 12.2Other intangible assets 0.8 0.7 0.7Property, plant and equipment 240.9 227.3 243.1Derivative financial instruments 1.0 0.6 1.2Deferred tax assets 8.3 9.0 8.0 ----------------------------------- Total non-current assets 262.9 250.6 265.2 ----------------------------------- Current assetsInventories 93.6 88.8 86.3Trade and other receivables 119.2 113.6 117.3Cash and cash equivalents 7 3.5 7.5 25.5 -----------------------------------Total current assets 216.3 209.9 229.1 ----------------------------------- Current liabilitiesTrade and other payables (114.9) (126.1) (135.8)Bank loans and overdrafts 7 (3.5) (0.9) (2.9)Current tax liabilities (7.2) (10.4) (9.1)Employee benefits (0.4) - (1.5)Provisions (0.9) - (0.2)Deferred consideration (1.0) - (1.0) -----------------------------------Total current liabilities (127.9) (137.4) (150.5) -----------------------------------Net current assets 88.4 72.5 78.6 ----------------------------------- Total assets less currentliabilities 351.3 323.1 343.8 -----------------------------------Non-current liabilitiesBank loans and other borrowings 7 (144.6) (124.7) (140.3)Deferred consideration - (1.0) -Employee benefits (37.5) (43.8) (35.1)Provisions - (0.5) -Deferred tax liabilities (16.5) (17.4) (15.9)Derivative financial - (1.6) (0.3)instruments -----------------------------------Total non-current liabilities (198.6) (189.0) (191.6) -----------------------------------Net assets 152.7 134.1 152.2 =================================== EquityCalled up share capital 4.9 4.9 4.9Share premium account 24.5 22.6 24.0Capital redemption reserve 0.9 0.9 0.9Retained earnings 120.0 104.5 117.1Cash flow hedging reserve 0.3 (1.6) 0.1Cumulative translationdifferences reserve 2.1 2.8 5.2 -----------------------------------Total equity attributableto equityshareholders of the parent 152.7 134.1 152.2 =================================== The interim report was approved by the Board of Directors on 11 December 2006,is unaudited and was signed on its behalf by: JP Williams - Chairman CH Sworn - Finance Director Consolidated cash flow statement Half year Half year Year ended ended ended 30 September 30 September 31 March 2006 2005 2006 (unaudited) (unaudited) (audited) Note £m £m £m Cash flows from operatingactivitiesProfit before tax 12.9 13.3 26.4Financing costs 3.3 4.1 8.0 ---------------------------------Profit from operations 16.2 17.4 34.4Adjustments for:Depreciation 17.9 18.3 33.3Share-based payment expense 0.2 0.1 0.3Gain on disposal of property,plant and equipment (0.2) (0.5) (1.1)Decrease in provisions (0.6) (0.4) (0.3) ---------------------------------Operating cash flows beforemovement in working capital 33.5 34.9 66.6Movement in working capital (25.4) (8.7) (2.1) ---------------------------------Cash generated by operations 8.1 26.2 64.5Taxes paid (4.9) (3.1) (9.7)Interest paid (4.2) (3.5) (7.9) --------------------------------- Net cash from operating (1.0) 19.6 46.9activities --------------------------------- Cash flows from investingactivitiesInterest received 0.1 0.1 0.2Proceeds on disposal of property,plant and 0.5 3.2 4.8equipmentAcquisition of property, plantand equipment (21.2) (25.5) (50.3)Acquisition of intangible assets (0.1) - (0.1)Acquisition of subsidiaries (4.3) (4.2) (5.8) ----------------------------------Net cash flows from investingactivities (25.0) (26.4) (51.2) ---------------------------------- Cash flows from financingactivitiesDividends paid 6 (5.2) (4.7) (7.1)Proceeds from the issue of sharecapital 0.5 0.4 1.9Movement in borrowings 7 10.3 (13.5) 0.7Payment of finance costs (0.1) (0.5) (0.5) ---------------------------------Net cash flows from financingactivities 5.5 (18.3) (5.0) --------------------------------- Net decrease in cash and cashequivalents 7 (20.5) (25.1) (9.3)Cash and cash equivalents atbeginning of period 24.5 32.8 32.8 Effect of foreign exchange ratechanges (0.5) (0.2) 1.0 ---------------------------------Cash and cash equivalents at endof period 3.5 7.5 24.5 ================================= Cash and cash equivalentscomprise:Cash at bank 3.5 7.5 25.5Bank overdraft - - (1.0) --------------------------------- 3.5 7.5 24.5 ================================= Notes to the accounts 1. Principal Accounting Policies Basis of Preparation RPC Group Plc (the Company) is a company incorporated in the United Kingdom. The consolidated interim financial statements (the interim statements) of theCompany incorporate the financial statements of the Company and its subsidiaryundertakings (together the Group). Where subsidiaries are acquired during theperiod, the results are included in the Group accounts from the date of control.Intra-group sales and profits are eliminated fully on consolidation. The interim statements for the half year ended 30 September 2006. The interim statements have been prepared in accordance with the accountingpolicies stated in the audited financial statements for the year ended 31 March2006. The accounting policies have been applied consistently to all periodspresented in these interim statements. Certain comparative figures as at 30September 2005 have been reclassified to conform with the final presentationadopted in the audited financial statements for the year ended 31 March 2006. Inaccordance with EU law, the interim statements have been prepared in accordancewith International Financial Reporting Standards (IFRSs) as adopted by the EU.The interim statements do not include all of the information required for fullannual statements. The interim financial information has been prepared on thebasis of the recognition and measurement requirements of IFRSs in issue that areadopted by the EU and effective as at 30 September 2006. The interim statements are prepared on the historical cost basis except forderivative financial instruments which are stated at their fair value. The preparation of the interim statements requires the directors to makejudgements, estimates and assumptions that affect the application of policiesand reported amounts of assets and liabilities, income and expenses. Theestimates and associated assumptions are based on historical experiences andvarious other factors that are believed to be reasonable under thecircumstances, the results of which form the basis of making the judgementsabout carrying values of assets and liabilities that are not readily apparentfrom other sources. Actual results may differ from these estimates. The figures for the year ended 31 March 2006 have been abridged from the Group'sfinancial statements for that year. Those statutory accounts have been reportedon by the Company's auditors and delivered to the Registrar of Companies. Thereport of the auditors on those accounts was unqualified and did not containstatements under section 237(2) or (3) of the Companies Act 1985. 2. Segmental Analysis Primary segments - Geographical The Group operates in two principal geographic regions - 'United Kingdom' and'Mainland Europe'. The geographical analyses by origin of revenue and operating profit are asfollows: Half year Half year Year ended ended ended 30 September 30 September 31 March 2006 2005 2006 (unaudited) (unaudited) (audited) £m £m £mRevenueUnited Kingdom 108.0 105.5 209.4Mainland Europe 194.4 202.3 402.1Acquisitions 6.0 - - -------------------------------------------- 308.4 307.8 611.5 ============================================ Segmental results United Kingdom 3.0 3.7 4.9Mainland Europe 14.3 14.1 29.8Acquisitions (0.7) - -Other (includes Head (0.4) (0.4) (0.3)Office) --------------------------------------------Operating profit 16.2 17.4 34.4Net financing costs (3.3) (4.1) (8.0) --------------------------------------------Profit before taxation 12.9 13.3 26.4 ============================================ 3. Operating Profit Operating profit is stated after charging depreciation of £17.9m (2005: £18.3m). £2.2m (2005: £1.0m) of trading losses relating to the closure of Woburn Sandshave been incurred in the interim period to 30 September 2006. 4. Net Financing Costs Financial expenses of £4.6m include a charge of £0.3m (2005: £0.5m) under IAS 39relating to the mark to market position of foreign currency hedging instruments.The financial income of £1.3m includes a credit of £1.2m under IAS 39 relatingto exchange differences on the $40m bond. 5. 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 2006: 98,144,247; half year ended 30 September 2005: 96,869,662 andyear ended 31 March 2006: 97,019,926). 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 2006: 98,764,568; the half year ended 30 September 2005: 98,000,198and the year ended 31 March 2006: 97,881,891. 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 costs identifiedseparately on the face of the Consolidated Income Statement, together with the(credit) or charge for foreign currency hedging instruments less the taxthereon. A reconciliation from profit after tax as reported in the Consolidated IncomeStatement to the adjusted profit after tax is set out below: Half year Half year Year ended ended ended 30 September 30 September 31 March 2006 2005 2006 (unaudited) (unaudited) (audited) £m £m £mProfit after tax as reported in theConsolidated IncomeStatement 9.1 9.6 19.3Restructuring costs 2.2 1.0 2.4Foreign currency hedging instruments (0.9) 0.5 0.6Tax effect thereon (0.5) (0.6) (0.9) ---------------------------------Adjusted profit after tax 9.9 10.5 21.4 ================================= 6. Dividends Half year Half year Year ended ended ended 30 September 30 September 31 March 2006 2005 2006 (unaudited) (unaudited) (audited) Dividends on Ordinary Shares: £m £m £m Final for 2005/06 paid of 5.25p pershare 5.2 - -Interim for 2005/06 paid of 2.5p pershare - - 2.4Final for 2004/05 paid of 4.8p pershare - 4.7 4.7 --------------------------------- 5.2 4.7 7.1 ================================= The proposed interim dividend for the year ending 31 March 2007 of 2.7p pershare will be paid on 26 January 2007 to shareholders on the register at closeof business on 29 December 2006. It has not been included as a liability as at30 September 2006. 7. Analysis of Net Debt At Cash Non Exchange At 1 April flow cash movement 30 September 2006 changes 2006 £m £m £m £m £m Cash at bank/ (overdrafts) 24.5 (20.5) - (0.5) 3.5 Bank loans less than 1 year (1.9) (1.8) - 0.2 (3.5) Bank loans greaterthan 1 year (92.9) (8.5) 0.1 1.8 (99.5) Other loans greaterthan 1 year (47.4) - - 2.3 (45.1) ------------------------------------------------------- Total (117.7) (30.8) 0.1 3.8 (144.6) ======================================================= Copies of this interim report will be mailed to shareholders on 12 December 2006and are also available from the Company Secretary, RPC Group Plc, LakesideHouse, 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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