Interim Results

30 November 2010

RPC GROUP PLC

Half-yearly results for the six months ended 30 September 2010

RPC Group Plc, Europe's leading supplier of rigid plastic packaging, announces today its half year results for the six months ended 30 September 2010.

Highlights:

·; Revenue up 9% at £381.9m (2009: £351.9m) with 3% increase in sales volumes

·; Adjusted operating profit improved to £21.8m (2009: £19.1m)

·; Net profit improved by 64% to a record £13.1m (2009: £8.0m)

·; Adjusted EPS at 14.7p (2009: 12.0p)

·; Net debt further reduced to £74.2m compared with £80.2m at 31 March 2010 (September 2009: £102.8m)

·; Successful RPC 2010 improvement programme nearing completion

·; Interim dividend of 3.4p (2009: 3.1p)

Commenting on the results, Jamie Pike, Chairman said:

"RPC has delivered an encouraging first half profit and cash performance despite polymer prices reaching record levels. Whilst activity levels have generally been subdued, the Group is demonstrating substantial growth in the personal care, pharmaceutical and coffee capsule sectors. With the RPC 2010 programme reaching its conclusion, the focus has firmly turned to achieving profitable growth. The Board is confident that RPC's prospects remain positive and the Group can leverage its strong market positions, technological capabilities and efficient cost base successfully".

For further information:

RPC Group Plc 01933 410064

Ron Marsh, Chief Executive

Pim Vervaat, Finance Director

Kreab Gavin Anderson 020 7074 1800

Robert Speed

James Benjamin

Analysts meeting:

There will be an analysts meeting at 9.30am today. The presentation slides will be available at http://www.rpc-group.com/report_accounts.php. For the details of the meeting please contact Anthony Hughes, Kreab Gavin Anderson on 020 7074 1800 or [email protected]

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

Business operations

RPC is Europe's leading supplier of rigid plastic packaging with manufacturing operations in 11 countries of the European Union and in the USA. The business, which comprises 41 manufacturing sites, converts polymer granules into finished packaging product using a combination of moulding and assembly processes. It is organised around the three main conversion processes used within the Group, each site being managed within one of 6 clusters which are defined along technological and market lines.

The conversion processes, business clusters and the end-markets they serve are as follows:

Each cluster has on average seven manufacturing sites, operating over a wide geographical area for reasons of customer proximity, local market demand and manufacturing resource.

Strategy

The Group strategy over the last two years has focused on restructuring the cost base and optimising cash flows through the RPC 2010 programme. This self-help plan, which on completion is expected to generate circa £21m of structural cost savings, has resulted in the closure of five sites so far. By the end of September circa £18m of these (annualised) savings had been realised. The Goor site (the Netherlands) is expected to close by the end of the financial year. Alongside the plant closure work stream, the Group has engaged in several performance enhancement initiatives, which have now been embedded in an ongoing continuous improvement programme. Furthermore the Group has reduced its risk in relation to the UK defined benefit pension scheme by closing it to new members and future service accrual. Good progress has been made towards achieving the Group's target to increase its return on capital employed (ROCE) to an average of at least 15% across the economic cycle, which now stands at 13.1% (2009: 11.8%) compared with 9.1% recorded in the last financial year preceding the RPC 2010 programme despite presently running at lower activity levels.

With the restructuring almost complete, the Group is ready to resume a growth programme, building on its strong market positions, efficient cost base and technological know-how. Packaging is generally forecast to grow in line with GDP, with rigid plastic packaging expected to grow at a faster rate due to the continued substitution effect of plastic over glass and metal. As the UK and European economies recover, RPC is well positioned to grow through its existing markets and customer base. In addition opportunities for growth continue to be sought, both organically and through acquisition, with a view to increasing market share in its major markets in Europe and through exploiting its technological know-how in higher growth markets outside Europe.

Business review

The business saw some improvement in activity levels, with sales at £381.9m (2009: £351.9m) up 9% on the same period last year. Overall sales volumes rose by 3%, mainly through improved activity levels in the personal care, pharmaceutical and coffee capsule markets as volumes in other sectors remained subdued. Selling prices increased reflecting the pass through of higher polymer prices which reached record levels during the period. Adjusted operating profit (before restructuring and impairment charges) increased by 14% to £21.8m, as the improvement in volumes, together with a more efficient cost base, offset the pressure on gross margins which occurred as a result of the time lag in passing on polymer price increases to customers.

Restructuring costs in the first half year of £3.1m (2009: £5.6m) were lower than the corresponding period last year, as the RPC 2010 programme reaches its final stages. Net financing costs reduced as a consequence of lower debt levels and lower interest rates. The Group reported a record half year net profit of £13.1m, an increase of 64% on last year.

Another satisfactory cash performance was achieved by increased profitability, continued strong working capital management and selective capital expenditure. RPC remains committed to investing in projects that are innovative, provide a competitive advantage and generate attractive returns. Net debt reduced to £74.2m compared with £80.2m at March 2010 and £102.8m at September 2009.

Injection Moulding

The business comprises the UK Injection Moulding business, which is UK based, and Bramlage-Wiko, which operates in Germany, France, Belgium, Slovakia and the USA. Overall the injection moulding business performed well in the period with sales up 14% and operating profit increasing by 29% to £11.6m.

In the UK Injection Moulding business, sales volumes were slightly down on last year with activity in the DIY sector still relatively challenging. Profits were adversely affected by the polymer price squeeze although overall profitability levels for the cluster have been largely sustained. Significant capital investment was made in the period at Oakham in new production lines for the light-weighting of paint containers.

Bramlage-Wiko's volumes increased substantially partly due to the absence of any de-stocking effects experienced in the same period last year, particularly in the personal care and pharmaceutical sectors. There were also volume improvements through organic growth leading to market share gains. Activity levels in the product development departments increased significantly as new packaging designs are being considered by customers. Sales at the USA production facility increased substantially following the transfer of the fruit bowl business from the Netherlands and further growth in the coffee capsules sector.

Thermoforming

The thermoforming operations comprise the Bebo (retail food packaging), Tedeco-Gizeh (food service - vending and disposables) and Cobelplast (sheet production) clusters and are largely based in mainland Europe. Overall the thermoforming business performance was stable in the period. The increase in sales was largely attributable to the pass through of polymer prices to customers, and the lower profitability reflects the resulting pressure on margins due to the time lag effect, mitigated by fixed cost savings.

The margarine and spreads market was characterised by further consolidation and the Bebo cluster was able to strengthen its market leading position in this sector. Investments made in the production of pre-printed lids using the patented Bebo Print process have contributed to this position. New business developments in oxygen barrier packaging (replacing glass and metal) continue to intensify, driven by both environmental and safety considerations. The production of coffee capsules, which is also based on this technology, was significantly increased, with investment in new production machines made at Bouxwiller (France) and Deventer (the Netherlands). The production launch of new innovative products such as the Ecopack, further strengthens Bebo's competitive position in this sector.

PET sheet sales continued to benefit from the development of new applications, but volumes in mono-layer sheet were affected by the recession and in particular the margin impact of higher polymer costs which form a relatively high proportion of the production costs. Sales volumes within the Tedeco-Gizeh cluster fell as the recessionary effects on the demand for vending machine cups continued, and margins remain tight in this competitive market.

The restructuring of the Dutch thermoforming businesses made good progress during the period with the business of Goor currently being transferred to sites in Germany, the Netherlands and the UK. The Goor site is expected to be closed, as scheduled, by the end of the financial year.

Blow Moulding

The blow moulding operations are based both in the UK and in mainland Europe. Overall the blow moulding business performed well in the period; sales volumes were up and operating profit increased by 10% to £4.2m (2009: £3.8m) as the cost savings from restructuring activities and higher volumes helped improve profitability. The restructuring of the UK Stock Containers business and the closure of the Raunds (UK) site was completed ahead of schedule early in the first half.

Sales volumes were characterised by a strong demand in food and a recovery in the personal care sectors, though the demand for industrial products was still affected by recessionary effects. The site at Kutenholz (Germany) in particular benefited from the upturn in personal care products, which it strengthened by increasing its capacity for PET bottles. During the period interest from customers in undertaking conversion projects from other packaging materials increased, including light-weighting and developing 'glass clear' containers. The combination of new polymer grades and improved manufacturing technologies supported significant progress in this area. At the end of the summer a leading food brand launched a new multi-layer retail package manufactured at Corby and Halstead (both UK).

Non-financial key performance indicators

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

Reportable accident rate is defined as the number of accidents resulting in more than 3 days off work, excluding accidents where an employee is travelling to or from work, divided by the average number of employees, multiplied by the constant 100,000.

Progress was made to reduce the water and electricity usage. The effect on the KPIs measured per tonne was however mitigated by efficiency improvements in material utilisation, such as light-weighting. The reportable accident frequency rate improved compared with the same period last year, whilst the severity of accidents is continuing to reduce.

Financial review

Condensed consolidated income statement

Revenue in the first half of 2010/11 was up by 9% compared with the corresponding period last year due to 3% higher sales volumes and increased selling prices reflecting the pass through of higher polymer price levels, partly offset by the translation effect of the strengthening of sterling against the euro.

Adjusted operating profit (before restructuring costs and impairment losses) increased by 14% in the first half of 2009/10 from £19.1m in the same period last year to £21.8m. A more efficient cost base together with the improvement in volumes more than offset the pressure on gross margins which occurred as a consequence of polymer prices increasing to record levels. By the end of the half year most of the polymer price increases have been passed through to our customers.

Restructuring costs of £2.2m (2009: £4.6m) and impairment losses of £0.9m (2009: £1.0m) were incurred in the first half year resulting from the RPC 2010 programme. Good progress has been made in closing the production facility at Goor (the Netherlands) and the redistribution of its business to other sites, and the restructuring activities at Marolles (France) are substantially complete. The overall exceptional costs relating to the total RPC 2010 programme are estimated at circa £44m of which approximately £41m has been recognised to date.

Net financing costs in the first half reduced from £1.7m to £0.7m. This is mainly attributable to a lower net interest charge of £1.6m in the period (2009: £2.4m), reflecting both lower levels of net debt and lower average interest rates. Favourable foreign exchange movements relating to the US dollar bond resulted in a net financial income of £0.9m (2009: £0.7m).

The adjusted profit before tax increased from £16.7m to £20.2m as a result of both the improvement in operating profit and reduction in the net interest charge. The underlying tax rate fell slightly to 28.0% (2009: 28.5%) resulting in an adjusted profit after tax of £14.6m (2009: £11.9m) and adjusted basic earnings per share of 14.7p (2009: 12.0p).

A taxation charge of £4.9m has been made in the half year to 30 September 2010 in respect of the profit before taxation of £18.0m, based on the Group tax charge expected for the full year applied to the pre-tax income of the six month period. The tax charge reflects an effective tax rate of 28.0% on £20.2m profit before tax excluding restructuring and disruption costs and impairment losses and a tax credit at an effective tax rate of 31.7% on the £3.1m restructuring and disruption costs and impairment losses.

The result after tax improved to a profit of £13.1m (2009: £8.0m) mainly due to the higher adjusted operating profit, lower restructuring and impairment costs and a reduction in net financing costs. The basic earnings per share was 13.2p (2009: 8.1p).

Condensed consolidated balance sheet and cash flow statement

Property, plant and equipment decreased by £9.1m to £249.0m compared with the year end; net capital expenditure levels were slightly lower than the depreciation charged in the period, the remaining decrease being attributable to exchange rate movements.

Working capital (the sum of inventories, trade and other receivables and trade and other payables) decreased by a further £3.4m to £23.2m compared with the year end position, in spite of the higher average polymer prices, as the Group continues with its focus on cash management. The working capital as a percentage of revenue for the half year (annualised) improved from 5.7% in September last year to 3.0% this year.

The long-term employee benefit liabilities decreased from £56.7m at the year end to £53.2m, mainly due to the £2.8m reduction in the UK net pension deficit. This was due to an increase in the value of the UK scheme's assets including the investment of the first of the two one-off lump sum deficit contributions of £5.0m, partially offset by a rise in the present value of liabilities caused by reductions in both the discount rate and inflation rate used. The company closed the UK pension scheme on 31 July to new entrants and to existing members for future service accrual.

Capital and reserves reduced in the period by £0.6m, the net profit for the period of £13.1m being offset by pension related actuarial losses of £2.3m, dividends paid of £7.3m, exchange movements on translation of £4.9m and other share and share-based payment transactions. Further details are shown in the 'Condensed consolidated statement of changes in equity' which is included in the financial statements.

Net cash from operating activities (after tax and interest) was £22.0m compared with £27.8m in the same period in 2009 as a lump sum deficit contribution of £5.0m was paid into the UK pension scheme. A working capital inflow of £1.0m was achieved despite higher activity levels and increased polymer prices. The net cash outflow from investing activities of £13.2m was unchanged.

Net debt reduced by a further £6.0m, from £80.2m at 31 March 2010 to £74.2m at 30 September 2010, and was £28.6m lower compared with 30 September 2009. Gearing was 48% compared with 51% at the year end and 64% at the previous half year end. The Group has total finance facilities of approximately £304m leaving an amount of £226m undrawn. The facilities are unsecured and comprise a revolving credit facility of up to £200m, seven year floating notes totalling €35m and $40m, and various overdraft arrangements. The majority of the facilities do not expire until 2012.

Financial key performance indicators (KPIs)

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

(1) Return on capital employed, which is measured over the previous 12 months, is defined as adjusted operating profit divided by the average of opening and closing shareholders' equity, adding back deferred tax assets and liabilities, retirement benefit obligations and liabilities in connection with derivative financial instruments, and after adding back average net borrowings for the year in question.

(2) Added value per tonne is the difference between production sales value per tonne produced and the cost of polymer per tonne produced. The 2009/10 comparative numbers have been re-stated using 2010/11 exchange rates.

(3) Gross margin is the difference between sales price and all directly variable costs such as polymer, packaging, transport and electricity.

(4) Free cash flow is defined as cash generated from operations less net capital expenditure, net interest and tax, adjusted to exclude exceptional cash flows and one-off pension deficit reduction payments.

(5) Cash conversion is defined as the ratio of cash generated from operations less net capital expenditure excluding exceptional cash flows and one-off pension deficit reduction payments, to adjusted operating profit.

The key measure of the Group's financial performance is return on capital employed. This shows a 2.8% improvement versus the comparative period last year and a 1.3% improvement versus the total year 2009/10. The average capital employed (12 months rolling average) reduced to £333m compared with £347m for the full year 2009/10. The Group's target is to achieve an average of at least 15% ROCE across the economic cycle following completion of the RPC 2010 programme. The 13.1% ROCE achieved in the first half year represents 4 percentage points improvement compared with the level achieved prior to the launch of RPC 2010 despite overall activity levels presently being lower.

The decrease in the gross margin as a percentage of sales reflects the impact of higher selling prices combined with a cost price squeeze due to the time lag in passing through the increased polymer prices. Free cash flow and cash conversion performances were strong due to the Group's continued focus on cash generation.

Principal risks and uncertainties

RPC is subject to a number of risks, both external and internal, some of which could have a serious impact on the performance of our business.

The Board regularly considers the principal risks that the Group faces and how to mitigate their potential impact. The key risks to which the Group is exposed have not changed significantly over the past six months of the financial year. Further information concerning the principal risks and uncertainties faced by the Group can be found on pages 10 and 11 of the Group's annual report and accounts for the year ended 31 March 2010.

Dividend

In line with its progressive dividend policy and in support of the improvement in the profitability of the Group, the Board has declared an interim dividend of 3.4p per share, which represents a 0.3p (10%) increase on last year. This will be paid on 28 January 2011 to ordinary shareholders on the register at 31 December 2010.

Prospects

Despite general economic conditions remaining subdued, the Group has improved its market share and achieved substantial organic growth in certain key sectors such as personal care and coffee capsules which is expected to continue going forward. Polymer prices remain volatile as witnessed during the last half year when they rose to record levels. The majority of these increases have however been passed through to the customer base. The Group has enhanced its competitive position significantly over the last two years and the Board believes RPC is well positioned to deliver growth both through its strategy of increasing market share as well as benefitting from any economic recovery across its markets.

Responsibility statement of the directors in respect of the half-yearly financial report

We confirm that to the best of our knowledge:

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

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

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

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

BY ORDER OF THE BOARD

J R P Pike R J E Marsh

Chairman Chief Executive

30 November 2010 30 November 2010

Introduction

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2010 which comprises Condensed consolidated income statement, Condensed consolidated balance sheet, Condensed consolidated cash flow, Condensed consolidated statement of comprehensive income, Condensed consolidated statement of changes in equity and the related explanatory notes. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

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

Directors' responsibilities

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

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

Our responsibility

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

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2010 is not prepared, in all material respects, in accordance with IAS 34 as adopted by the EU and the DTR of the UK FSA.

M Steventon (Senior Statutory Auditor)for and on behalf of KPMG Audit Plc, Statutory AuditorChartered Accountants

1 Waterloo Way

Leicester

LE1 6LP

30 November 2010

Condensed consolidated income statement

Condensed consolidated statement of comprehensive income

 Condensed consolidated balance sheet

The half-yearly financial report was approved by the Board of Directors on 30 November 2010, is unaudited and was signed on its behalf by:

J R P Pike, Chairman P R M Vervaat, Finance Director

Condensed consolidated cash flow statement

Condensed consolidated statement of changes in equity

Six months to 30 September 2010 (unaudited)

Six months to 30 September 2009 (unaudited)

Year to 31 March 2010 (audited)

1. General information

The comparative figures for the financial year ended 31 March 2010 are not the Group's statutory accounts for that financial year. Those accounts have been reported on by the Group'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 Group's statutory accounts for the year ended 31 March 2010 are available from the Company's registered office, at Sapphire House, Crown Way, Rushden, Northants NN10 6FB or from the Group's website, at www.rpc-group.com.

2. Accounting policies

The condensed consolidated half-yearly financial statements have been prepared in accordance with International Financial Reporting Standard (IFRS) IAS 34 'Interim Financial Reporting', as adopted by the EU and in accordance with the Disclosure and Transparency Rules of the UK's Financial Services Authority. They do not include all of the information required for full annual financial statements, and should be read in conjunction with the consolidated financial statements of the Group as at and for the year ended 31 March 2010.

Except as noted below, the same accounting policies, presentation and methods of computation are followed in the condensed set of financial statements as applied in the Group's latest annual audited financial statements for 2010.

Changes in accounting policies

At the beginning of the current period, the Group adopted the following revised and amended standards and interpretations that are relevant to its operations.

·; Amendments to IFRS 3 (Revised), 'Business combinations' effecting all group acquisitions post 1 January 2010 and IAS 27 (Revised), 'Consolidated and Separate Financial Statements' relating to transactions with non-controlling (formerly called 'minority') interests and the loss of control of a subsidiary. These amendments have no impact on the Group's net cash flows, financial position, total comprehensive income or earnings per share.

·; Adoption of Improvements to IFRSs 2009 (issued in April 2009) made several minor amendments to IFRSs. These amendments have no impact on the Group's net cash flows, financial position, total comprehensive income or earnings per share.

Estimates

The preparation of the condensed financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

In preparing these condensed financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the financial statements as at and for the year ended 31 March 2010.

3. Operating segments

Operating segments are identified on the basis of internal reports regularly reviewed by the Board of Directors that are used to monitor performance and make strategic decisions. The Group operates three business segments based on conversion process, details of which can be found in the Business Review on pages 3 to 5.

During the six month period to 30 September 2010, there have been no changes from prior periods in the measurement methods used to determine operating segments and reported segment results.

Segment revenues and results

The accounting policies of the reportable segments are the same as the Group's accounting policies in note 2. Segment profit represents the profit earned by each segment with an allocation of central items. Pricing of inter-segment revenue is on an arms length basis.

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

4. Restructuring and impairment losses

The closure costs incurred in the period relate mainly to the previously communicated closures under the RPC 2010 programme of the operations at Goor (the Netherlands) and Raunds (UK). Closure costs in the half year to 30 September 2009 were attributable to the closure of the operations at Halfweg and Ravenstein (the Netherlands), Aš (Czech Republic) and Raunds (UK).

Restructuring costs incurred in the period are in relation to employment termination costs, the cost optimisation project and other restructuring activities under the RPC 2010 programme.

The charge in the period for impairment losses on property, plant and equipment and goodwill were as a result of the closure of the Goor operation. The charge for impairment losses for the 6 month period to 30 September 2009 relate to the closure of the Halfweg operation.

5. Net financing costs

6. Tax

A taxation charge of £4.9m has been made in the half year to 30 September 2010 in respect of the profit before taxation of £18.0m, based on the Group tax charge expected for the full year applied to the pre-tax income of the six month period. The tax charge reflects an effective tax rate of 28.0% on £20.2m profit before tax excluding restructuring and disruption costs and impairment losses and a tax credit at an effective tax rate of 31.7% on the £3.1m restructuring and disruption costs and impairment losses.

The Group tax rate, excluding restructuring and disruption costs and impairment losses, of 28.0% compares with 28.5% for the year ended 31 March 2010 and 28.5% for the half year to 30 September 2009.

7. Earnings per share

Basic

The earnings per share has been computed on the basis of the weighted average number of shares in issue during the half year ended 30 September 2010 of 98,535,251 (half year ended 30 September 2009: 98,959,365 and year ended 31 March 2010: 98,760,404). The weighted average number of shares excludes shares held by the Employee Benefit Trust to satisfy future awards in respect of incentive arrangements.

Diluted

Diluted earnings per share is the earnings per share after allowing for the dilutive effect of the conversion into ordinary shares of the weighted average number of options outstanding during the period. The number of shares used for the fully diluted calculation as at the half year ended 30 September 2010 was 99,856,487 (half year ended 30 September 2009: 99,785,293 and year ended 31 March 2010: 99,793,473).

Adjusted

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

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

8. Property, plant and equipment

During the period the Group spent £14.0m on capital expenditure (2009: £14.3m) of which £0.7m is related to a movement in capital creditors resulting in additions to property, plant and equipment of £14.7m. The depreciation charge was £15.4m (2009: £18.2m). The impairment of assets is disclosed in note 4. Foreign currency exchange movements in the period reduced the carrying value of property plant and equipment by £6.9m (2009: £5.2m).

9. Employee benefits

The liability recognised in the Condensed consolidated balance sheet for long-term employee benefits and the movement in retirement benefit obligations was:

Retirement benefit obligations

The defined benefit obligations for employee pensions and similar benefits as at 30 September 2010 have been re-measured based on the disclosures as at 31 March 2010, the previous balance sheet date. The results have been adjusted by allowing for updated IAS 19 financial assumptions and rolling forward the liabilities to 30 September 2010 using actual cash flows for the six month period.

The defined benefit plan assets have been updated to reflect their market value as at 30 September 2010. Differences between the actual and expected return on assets, changes in actuarial assumptions and experience gains and losses on liabilities have been recognised in the Condensed consolidated statement of comprehensive income.

The principal source of the reduction in the retirement benefit obligations at 30 September 2010 is a decrease in the UK Pension Scheme deficit from £32.4m at 31 March 2010 to £29.6m. This was due to an increase in the value of the Scheme's assets including the investment of the first of two one-off lump sum deficit contributions of £5.0m, partially offset by a rise in the present value of liabilities caused by reductions in both the discount rate and the inflation rate used.

10. Dividends

The proposed interim dividend for the year ending 31 March 2011 of 3.4p per share will be paid on 28 January 2011 to shareholders on the register at close of business on 31 December 2010. It has not been included as a liability as at 30 September 2010.

 11. Bank overdrafts and loans

During the period net loans of £5.8m were repaid under the Group's existing loan facility. The amount undrawn under the Group's facilities at 30 September 2010 amounted to £226.1m.

 12. Share capital

The Group acquired 100,000 of its own shares through purchase on the London Stock Exchange during the period (30 September 2009: 380,000; 31 March 2010: 680,000). The total amount paid to acquire the shares was £268,642 (30 September 2009: £807,305; 31 March 2010: £1,547,963) and this has been deducted from shareholders equity. The shares are held in trust for the benefit of directors and employees for future payments under share-based payment schemes.

 13. Contingent liabilities

There were no significant changes to the contingent liabilities reported at 31 March 2010 for the Group.

 14. Exchange rates

The average euro exchange rate for the 6 months to 30 September 2010 was €1.19 (6 months to 30 September 2009: €1.14; 12 months to 31 March 2010: €1.13) and the period end rate at 30 September 2010 was €1.16 (30 September 2009 €1.10; 31 March 2010: €1.12).

The average US dollar exchange rate for the 6 months to 30 September 2010 was $1.52 (6 months to September 2009 $1.60; 12 months to 31 March 2010: $1.60) and the period end rate at 30 September 2010 was $1.59 (30 September 2009: $1.61; 31 March 2010: $1.51).

15. Related party transactions

The Group has a related party relationship with its directors. There are no additional significant related party transactions other than those disclosed in note 24 of the annual report and accounts for the year ended 31 March 2010.

Copies of this half-yearly financial report will be mailed to shareholders on 3 December 2010 and are also available from the Company Secretary, RPC Group Plc, Sapphire House, Crown Way, Rushden, Northants NN10 6FB.