Rpc Group Regulatory News (RPC)

RPC GROUP PLC

Full year results for the year ended 31 March 2017

§ Further progress in the implementation of the Vision 2020 strategy with solid underlying organic growth and value adding acquisitions, strengthening existing market positions and diversifying into adjacent markets with attractive return and growth profiles whilst enhancing the Group's overall strategic buying position

§ Integration of the GCS and BPI acquisitions completed with the more recent acquisitions bedding in well. Steady state cost synergies estimate for GCS / Promens / BPI increased by €5m to €105m

§ Good trading performance with revenue, profit and cash flow all reaching record levels

§ Revenues increased 67% reflecting a 3% like-for-like growth in sales and the contribution from acquisitions, with the return on sales improving to 11.2% (2016: 10.6%)

§ Adjusted operating profit up 77% at £308.2m (2016: £174.3m) and adjusted EPS improved 54% to 62.2p (2016 restated: 40.4p) with the statutory basic earnings per share more than doubling

§ Strong cash generation with free cash flow improving by 95% at £239m (2016: £123m) and net cash flow from operating activities at £277m (2016: £151m)

§ Final dividend of 17.9p recommended giving a total year dividend of 24.0p (restated and 2016 restated: 16.0p) representing a 50% increase over the previous year and in line with our progressive dividend policy

"The implementation of the Vision 2020 growth strategy is progressing well, reflected in a good trading performance in 2016/17 with continued organic growth and achieving record profitability levels with robust cash generation. Acquisitions made since the launch of the strategy in 2013 continue to add value including the recent GCS and BPI acquisitions, whose performance in the year was better than expected. The recently completed Letica acquisition will provide an enhanced platform for growth in North America and has made a good start under RPC's ownership. Going forward, the Group continues to explore opportunities for growth in line with its strategy. The new financial year has started in line with management's expectations."

1 Adjusted EBITDA, adjusted operating profit and return on sales are before restructuring, impairment charges, other exceptional and non-underlying items and amortisation of acquired intangibles, and adjusted profit before tax is before non-underlying finance costs.

2 Adjusted basic earnings per share is adjusted operating profit after interest and tax, excluding non-underlying finance costs and tax adjustments, divided by the weighted average number of shares in issue during the year.

3 Comparative restated for rights issue.

4 Free cash flow is cash generated from continuing operations less net capital expenditure, net interest and tax, adjusted to exclude exceptional cash flows and non-underlying cash provision movements.

5 Excludes acquisitions made in last quarter of 2016/17 and comparative restated to include acquisitions on pro forma basis.

6 Excludes acquisitions made in last quarter of each year.

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

Overview of the Year

I am pleased to report another year of significant progress for the Group. The implementation of the Vision 2020 strategy is progressing well, with record trading results and good cash flow generation. The integration of the larger GCS and BPI acquisitions has been largely completed with a better than expected business performance. The Letica acquisition is making a good start under RPC's ownership, providing a platform for future organic growth in North America supported by the Group's extensive product range and customer relationships.

The results for the Group reflect good underlying organic growth and the realisation of synergies, supported by the full year effect of acquisitions and the translation effect of the weakening of sterling during the year (73% of the Group's turnover is reported in non-sterling currencies). Sales for continuing businesses grew to £2,747m (2016: £1,642m), adjusted operating profit1 reached £308m (2016: £174m), whilst adjusted earnings per share2 increased to 62.2p (2016 restated: 40.4p). Cash flow was robust, with net cash from operating activities at £277m (2016: £151m). Statutory net profit for the year was £132m (2016: £55m) with the basic earnings per share more than doubling. Return on capital employed (ROCE) at 15.1% (2016: 15.7%) remains at a robust level and is well ahead of the Group's weighted average cost of capital.

1 Adjusted operating profit is defined as operating profit for continuing operations before restructuring, impairment charges, other exceptional and non-underlying items and amortisation of acquired intangibles.

2 Adjusted earnings per share is defined as adjusted operating profit for continuing operations after interest and tax, but excluding non-underlying finance costs and tax adjustments divided by the weighted average number of shares in issue during the year.

Strategy

The Group continues to deliver its Vision 2020 strategy, with its objectives of continuing focused organic growth based on innovation; selective consolidation of the European market through targeted acquisitions; creating a meaningful presence outside Europe where growth rates are considerably higher and pursuing added value opportunities in non-packaging markets. Acquisitions help to strengthen existing market positions and diversify into adjacent markets with attractive return and growth profiles whilst enhancing the Group's overall strategic buying position.

Underlying sales growth remained strong with like-for-like sales3 3% higher than the previous year, ahead of GDP, with continued investment and innovation driving organic growth. Significant capital expenditure has been committed to support future organic growth.

3 Adjusted for constant exchange rates and polymer prices, pro forma for acquisitions completed in 2016/17 and adjusted for businesses divested or exited.

Selective consolidation in Europe continued apace with the organisational integration of GCS completed and four further European based acquisitions made. The acquisition of BPI (August 2016) provides a successful entry into the flexibles packaging market, and the Group's platform in healthcare was enhanced by the acquisition of Plastiape (November 2016). The acquisitions of Sanders Polyfilms and Jagtenberg (both October 2016) strengthened the Group's existing European market positions.

The Group's presence outside of Europe has also been extended through the BPI acquisition (for example its agricultural films business in Canada), two small 'bolt-on' acquisitions in Australia and one in China. The acquisition of Letica Corporation (March 2017) has added a further 13 sites to the 4 existing businesses that RPC operate in the USA. In addition further internal investments have been made by the Ace Division in the Far East at Hefei in developing RPC's packaging sales presence whilst further investment has been made in the start-up business in Brazil in support of a major customer.

The non-packaging businesses have also grown in their respective markets, both through the acquisitions of ESE World, a leading European supplier of temporary waste storage solutions, and through organic growth, particularly in the horticulture and automotive sectors. Further growth is foreseen with the third electroplating line coming on stream in China.

The organisational integration of the GCS and BPI businesses are complete with synergy realisation activities nearing completion, and the more recent acquisitions bedding in well. The steady state cost synergies estimate for the GCS/BPI/Promens acquisitions has been increased by €5m to at least €105m by the end of 2018/19.

Since the Vision 2020 strategy was launched in 2013, the overall performance has improved considerably as evidenced by an increase of £1,765m in revenues whilst enhancing the return on sales from 9.3% to 11.2% and the RONOA from 20.6% to 26.0% when comparing the performance of 2016/17 with 2012/13. Underlying organic growth of 3% has been achieved over this period, ahead of GDP, and the strategic buying position of the Group enhanced by increasing the scale in polymer purchases from 310kt (2013/14) to 1,100kt. The anticipated return on acquisitions made since the launch of Vision 2020, based on expected full realisation of cost synergies, is estimated at 12% whilst the Group's overall market positions have been strengthened and diversified resulting in better cross-selling opportunities.

Board

I am pleased to welcome Dr Ros Rivaz who was appointed an independent non-executive director on 30 March 2017, and is a member of the Remuneration, Audit and Nomination Committees. Heike van de Kerkhof resigned on 24 November 2016. A key strength of the Board lies in its breadth of skills, experience, gender and nationality, and our discussions this year have benefited from this diversity. I have been well supported by the members of the Board and am grateful to them all for their valuable contributions.

Governance

One of the main responsibilities of the Board is to ensure that the Group operates to the highest standards in all aspects of governance and risk management. The Board continues to focus on ensuring that the UK Corporate Governance Code's principles are applied. As corporate governance continues to evolve, emerging practice has remained a regular subject for discussion at the Board.

People

Our employees are undoubtedly our most important asset and the opportunities for long-term growth within the Group, including for those within the newly acquired businesses, will ensure that they find RPC a place where they will continue to enjoy rewarding careers. The Board would like to welcome all of those new colleagues who have joined the Group, thank everyone who has contributed to what has been yet another successful year and look forward to their continued contribution in achieving our strategy going forward.

Dividend

The Board considers the dividend to be an important component of shareholder returns and, as such, has a policy to deliver a progressive dividend year on year targeting a dividend cover of 2.5x adjusted earnings through the cycle. It is recommending a final dividend of 17.9p per share making a total for the year of 24.0p (restated and 2016 restated: 16.0p), which is a 50% increase on the previous year. This will be the 24th successive year of dividend progression since RPC's flotation. The total dividend and 2016 comparator have been adjusted for the bonus element of the rights issue made in the year in connection with the Letica acquisition.

Subject to approval at the forthcoming AGM, the final dividend will be paid on 1 September 2017 to ordinary shareholders on the register at 11 August 2017.

J R P Pike

Chairman

RPC is a leading plastic products design and engineering company for packaging and selected non-packaging markets, with 31 innovation centres and 185 operations in 33 countries, and employs more than 23,800 people. The Group develops and manufactures a diverse range of products for a wide variety of customers, including many household names, and enjoys strong market positions in many of the end-markets it serves and the geographical areas in which it operates. It uses a wide range of polymer conversion technologies in both rigid and flexible plastics manufacture, and is now one of the largest plastic converters in Europe, combining the development of innovative packaging and technical solutions for its customers with good levels of service and support.

The business is organised and managed according to product and market characteristics and is split into two segments, Packaging and Non-packaging. The Packaging business serves the Food, Non-food, Personal Care, Beverage and Healthcare markets. The Non-packaging businesses design and manufacture moulds, plastic products and technical components for specific market segments.

The Group is organised into seven divisions servicing both the Packaging and Non-packaging markets, each focusing on particular markets or product groups. The divisions (Superfos, Bramlage, M&H, Promens, Bebo, Ace and bpi group) are organised into a number of strategic business units (SBUs) reflecting the segmented industry structure. They operate across a wide geographical area for reasons of customer proximity, local market demand and manufacturing resource, with the RPC Ace division's operations based in China.

Strategy

The Group continues to make excellent progress in implementing all elements of the Vision 2020 strategy as the pace of industry consolidation accelerates.

Focused organic growth

The plastic packaging markets are growing ahead of GDP helped by the ongoing substitution from other materials. In that context, the Group has continued to grow profits and sales ahead of GDP in the major geographical areas served by its businesses, with overall like-for-like sales improving by 3% over the year. Activity levels improved in both Packaging and Non-packaging segments with particularly strong performances in Food and Non-food packaging and Technical components. Innovation in both product design and process engineering continues to be a key driver of growth, with over 50% of the £175m capital expenditure made in the period attributable to growth-related projects. Following the most recent acquisitions, the Group now has 31 design centres of excellence. Further investment opportunities for growth in innovative products are being targeted alongside pursuing a margin enhancement strategy in selected more commoditised market segments.

Selective consolidation in the European packaging market through targeted acquisitions

The pace of consolidation within the European packaging industry accelerated during the year. RPC is participating in this trend selectively using a strict set of acquisition criteria. In August 2016, the Group made a further strategic European-based acquisition, British Polythene Industries PLC (BPI). A leading manufacturer and supplier of polythene films for a diverse range of end-markets and with a turnover of c. £470m, BPI provides the Group with an established flexibles platform in line with major international peers. It has strong market positions in Europe and globally in agricultural films. Head quartered near Glasgow, with 19 sites of which 14 are in the UK, it gives entry to another adjacent polymer market, enhancing the Group's overall strategic purchasing position, increasing the range of polymer conversion technologies within the Group and providing excellent opportunities for further consolidation and growth in the flexibles market. 

In addition the Group was able to exploit further consolidation opportunities in Europe with three smaller 'bolt-on' acquisitions completed during the year. All of these acquisitions strengthen existing packaging market positions within Europe. These were:

· Sanders Polyfilms, a specialist manufacturer of high yield collation shrink film, consolidating one of the UK market segments. Total sales are £23m with sites in the UK and Romania. The business has been integrated into the new RPC bpi division;

· Jagtenberg Plastics, a well invested manufacturer of blow moulded products for the packaging and non-packaging markets with sites in the Netherlands and Germany and with total sales of €23m. This business extends the geographical reach of the industrial packaging business within the RPC Promens division;

· Plastiape, with three operations in Italy and Poland and sales of €53m, strengthens the Group's position in the healthcare market, particularly in medical devices. Combined with RPC's existing healthcare businesses, Plastiape provides a platform for future organic and acquisitive growth.

Creating a meaningful presence outside Europe

As the packaging markets are increasingly becoming more global, the Group has continued to increase its global footprint through organic growth and acquisition of businesses outside of Europe. The acquisitions of Ace, Promens and GCS in the previous three years provided operating capability and access to new markets in countries such as China, Canada, the USA, Tunisia, Mexico, Thailand and the Philippines.

The acquisition of BPI during the year added a further two sites in Canada serving North America with agricultural film. In the second half of the financial year, the Group also acquired two small businesses in Australia (Melbourne), both of which provide entry points to support customers within the Australasian market. In November 2016 the Group acquired Synergy Packaging, a manufacturer of PET containers to the beauty, cosmetics, pharmaceutical and food markets. With a turnover of A$13m (£8m) it has been incorporated into the RPC M&H division. In March 2017 the Group also acquired Amber Plastics, a manufacturer of injection moulded pots and containers for the food industry, with IML capability. With a turnover of A$9m (£5m) it has been incorporated into the RPC Superfos division.

In China the RPC Ace division acquired Shenzhen Howyecen Automotive Electronic Company Limited (HYC) in January 2017, a specialist supplier of the printing, forming and cutting of foils for automotive and smart electronics markets which will enhance the Group's product offering in this area. It had sales of £4m in 2016.

In March 2017 the Group made a strategic acquisition in the USA by purchasing the Letica Corporation, enhancing the growth platform for North America. Headquartered in Rochester, Michigan, it is a leading manufacturer of rigid packaging and food service products, and is an important partner to many blue-chip North American customers and brands. With a well invested manufacturing footprint of 13 plants in 11 states, it had sales of $476m and adjusted operating profit of $41m in the 12 months to March 2017, with a robust engineering capability in injection moulding, including a proprietary in-house design centre. Its presence provides critical mass to the existing RPC operations in North America, extending these to 20 sites and more than doubling its sales revenues and polymer purchases in this region.

The Group also agreed during the year to acquire Astrapak Ltd, a leading South African manufacturer of rigid plastic packaging products and components with a broad product offering across injection moulding, blow moulding and thermoforming technology platforms. Listed on the Johannesburg Stock Exchange, the Company serves industrial and consumer markets, supplying customers in Sub Saharan Africa. Its manufacturing footprint comprises nine facilities in South Africa, employing approximately 1,100 people and for the year ended 28 February 2016, the company achieved revenues of ZAR 1.4 billion (£81m), providing RPC with a strategic opportunity to acquire a rigid plastic packaging group of scale (a 'mini RPC'), with well-established market positions, in a new territory with good medium to long term growth prospects. Completion is expected in June 2017.

In addition to the acquisitions, the Group extended capacity to its existing operation at Winchester, Virginia, enhancing growth in sales in the food and personal care markets' in North America. Further progress was also made in developing the Group's own manufacturing capability in Brazil, in supplying a multinational customer with coffee capsules to support a recent launch into South America.

As a consequence sales outside Europe increased by 76% to £384m representing 14% of total sales, and over time will provide the Group with further opportunities to sell its innovative packaging and non-packaging product ranges to these markets. The return on sales outside Europe was 16%, well above the Group's average of 11%.

Pursuing added value opportunities in non-packaging markets

Good progress has been made in developing sales and enhancing profits from the various niche non-packaging businesses from recent acquisitions. The mould-making business in RPC Ace division showed improved profitability during the period, with recent developments in new mould technology enhancing margins, and sales of electroplated products will further increase following investment in a third electroplating line at Zhuhai, China. The materials handling and specialty vehicles businesses acquired through the Promens acquisition continue to perform strongly under RPC's ownership. The Strata Products acquisition has performed particularly well under RPC's ownership, with sales increasing by 10% over the year.

In January 2017 the Group acquired ESE World BV, a leading design and engineering company in temporary waste storage solutions. With a turnover of c. €200m, two major manufacturing facilities in France and Germany, an R&D centre and 12 sales offices throughout Europe, this is a 'plug & play' acquisition with a separate customer base and requiring little integration effort to extract synergies from the business. It enhances the Group's buying position and is a complementary business to the Group's existing materials handling business and operates within the RPC Promens division.

Business Integration

RPC has a proven track record of efficiently assimilating acquisitions with good integration capability across the organisation. Corporate functions are aligned through the head office team, with strengthened and enhanced governance, tax, IT, treasury, legal, management and financial reporting. Group purchasing perform a coordinating role, are active in extracting purchasing synergies and in strengthening internal resources post acquisition. From an operational perspective key management are retained and business strategy enhanced by providing, as a member of the RPC Group, access to a wider product range and customer base. Where the business operates in an adjacent sector, it forms a new SBU in one of the seven divisions; if in an overlapping business it is integrated into one or more of the existing SBUs. Typically organisational integration will be completed within six to twelve months of acquisition completion, with the realisation of related synergies including restructuring activities to integrate both acquired businesses and existing RPC sites taking longer to occur. Recent larger acquisitions have been Letica, BPI and GCS.

Letica

As a well-established and independent business, the integration effort required for Letica will be relatively moderate. Cost savings and productivity initiatives identified by the Letica management are expected at $12m per annum realised over two years. In addition, synergies of $5m per annum have been identified by the Group. Operating as a standalone business within RPC Superfos, the existing Letica management have been retained and are incentivised to deliver growth and additional cost savings through a two year earn-out structure.

BPI

Operating in the flexibles and films markets in different product and market segments and using complementary plastic conversion technologies, BPI operates as a standalone division within the Group. Acquired on 1 August 2016, the PLC cost base and duplicated corporate overheads have been removed and the procurement synergies largely completed. The reorganisation of the business has been implemented reducing the number of business units from 9 to 4, resulting in a market focused organisation facilitating increased cross selling opportunities and better asset utilisation. A review of the manufacturing footprint is well underway, with the site closure in progress prior to the acquisition date at Sevenoaks completed, additional restructuring at the Worcester site to refocus the business and the closure of the site at Portadown, Northern Ireland, announced.

GCS

The integration of GCS, which was acquired on 29 March 2016, was completed in the year, with the business operations integrated within the RPC Bramlage division and duplicated functions in the GCS Paris head office removed. Realisation of the purchasing synergies is complete and work in optimising underperforming businesses and in identifying opportunities to consolidate excess capacity within the combined Group is nearing completion. In this context the USA business at Libertyville has been restructured and reorganised, the site at Torres, Spain closed and business transferred to other Group sites in Spain, Italy and Germany, and the transfer of the existing closures business at Halstead, UK, to other operations is almost complete.

Group Performance

The Group produced a strong set of results, in terms of both profit and cash flow performance. The weakening of sterling following the EU referendum in the UK enhanced profits, producing a translation benefit in the year of £29m to adjusted operating profit, but polymer price movements offset this creating a headwind variance of £14m compared with last year. After taking account of these effects and the contribution of recent acquisitions, the increase in adjusted operating profit resulting from synergy realisation, organic growth and business improvement more than offset inflationary increases to the Group's cost base.

Revenues grew 67% to £2,747m due to the acquired businesses (principally GCS, BPI and eight further acquisitions in the year) as well as growth in both packaging and non-packaging products, which were up 3% overall on a like-for-like basis. Adjusted EBITDA was £441m (2016: £251m) and adjusted operating profit of £308m increased by £134m (77%), with return on sales at 11.2% (2016: 10.6%) and RONOA at 26.0% (2016: 22.4%), both measures showing significant growth and comfortably ahead of the Vision 2020 minimum performance metrics. Statutory operating profit at £192m (2016: £95m) was more than double the previous year. ROCE at 15.1% (2016: 15.7%) remained at a robust level in spite of the recent acquisition activity.

Cash flow generation was strong, reflecting both the impact of the recent acquisitions and good working capital management, with free cash flow of £239m (2016: £123m) and net cash from operating activities of £277m (2016: £151m). The Group continued to invest in growth and efficiency projects, with a cash outflow of £175m (2016: £101m) of capital expenditure in the year. Working capital as a percentage of sales was 6.2% (2016: 6.6%).

The Group retains a strong balance sheet following two acquisition related equity raises during the year, with net debt of £1,049m (2016: £744m) representing a prior 12 month pro forma 1.8x EBITDA multiple, and it had total finance facilities of £2,245m available at 31 March 2017. Packaging

The Packaging business serves diverse end-markets with innovative packaging solutions, both in rigid form and flexibles, through a range of plastic conversion processes including injection moulding, blow moulding, thermoforming and blown film extrusion. After taking account of acquisitions net of disposed business and trade which contributed a net £792m of sales, foreign exchange translation impacts of £210m and polymer price reductions of £23m, like-for-like revenue growth of 3% was achieved during the period. Adjusted operating profit on a like-for-like basis increased by £26m (19%) reflecting the impact of cost reductions through integration activities and mix improvements through a selective margin enhancement strategy to ensure returns are sufficient to support current capacity levels. Return on sales and RONOA all showed further improvement reflecting the above.

The strongest growth rates were in the Food and Non-food packaging end-markets, with new product development and geographical expansion supporting this growth. Beverage, Personal care and Healthcare sales were relatively flat during the year.

In addition there was a further £64m of packaging sales by businesses which are in the Non-packaging segment.

The rigid plastic packaging market is forecast to grow at above GDP over the next 3 years which will continue to present opportunities for the Packaging business to continue to grow organically both inside and outside Europe, through innovation and continuing to launch turnkey projects from its extended platforms in the Americas and the Far East.

The Group also substantially completed the synergy realisation projects of the Promens packaging sites during the year, with a further four sites closed (Blyes, L'Aigle, Kerkrade, Halstead) and a fifth site closure at Bjaeverskov (Denmark) announced as part of a Nordic restructuring. Projects in RPC Promens at Kutenholz, Hockenheim and Ettlingen were completed, with integration activities at Gent and Eke nearing completion and a second phase of changes to the Theessen site commenced. At RPC Bramlage the related synergy realisation programmes in Germany and Slovakia, resulting in the closure of Pulheim, were completed, and restructurings at the French operations at Marolles (transferring business to Monastir, Tunisia) and at Geovreisset (transferring manufacturing capability to La Roche and Bellignat) were well advanced. The RPC Superfos site at Old Dalby was also closed and sold, with its business transferred to sites at Oakham and Blackburn.

Non-packaging

The Non-packaging businesses of the Group comprise the RPC Ace division, RPC Promens Roto, Strata Products and ESE World, and RPC Bramlage Vehicle Engineering. The impact of acquisitions on sales is largely attributable to the full year impact of Strata Products, which was acquired in November 2015, and ESE World, which was acquired in January 2017. Acquisitions contributed £40m to sales and after taking account of foreign exchange translation impacts of £39m like-for-like basis sales increased by 4%.

The RPC Ace division, based in China, operates a world class mould design and manufacturing capability, supplying complex moulds to both internal and external customers and provides the Group with an Asian precision engineering platform for manufacturing high added value co-engineered injection moulded products. It serves, alongside packaging markets, medical, lifestyle, power and automotive end- markets. The business traded ahead of expectations during the period, with profits considerably enhanced, particularly in automotive components, having secured new contracts with several major western vehicle manufactures, and in mould tool sales where a higher proportion of complex and technologically advanced tool designs commanded higher margins. With the slowdown in GDP growth in China abating and the renminbi depreciating against the major currencies, Ace was able to benefit from the improved economic environment. New contracts for Lifestyle products were secured and a third electroplating line was installed at the Zhuhai site during the period, facilitating the growth in sales of electroplating and spray painting for specialist automotive and other products. In January 2017 Ace made its first standalone strategic acquisition, Shenzhen Howyecen Automotive Electronic Company Limited (HYC), an existing supplier with capability for printing, forming and cutting of foils for the automotive and smart electronics markets.

RPC Promens Roto and RPC Bramlage Vehicle Engineering, which manufacture plastic parts for trucks and specialty vehicles from sites in the Netherlands, France, Estonia, Germany and the Czech Republic, performed ahead of expectations with increases in sales volumes and profits over the period, and additional orders for longer term sales secured. The cost base of these operations have been optimised during the integration process with further investment planned.

RPC Promens Roto business, which includes Sæplast, serving the fish and agricultural industries, continued to focus on its markets in Europe and the Americas, with its operation at Ahmedabad (India) sold in the period. In the former Promens vehicles division, significant factory layout changes were made at Zevenaar. Strata Products performed particularly strongly, with sales up 10% with new contracts secured with major UK DIY stores.

The ESE business, acquired in January 2017, contributed £25m to sales and will be a material contributor to this segment in future years.

These non-packaging products are attributed to the Technical components end market, with packaging sales of £64m being reported in the Packaging segment.

Non-Financial KPIs

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

1Reportable accident frequency rate (RAFR) is defined as the number of accidents resulting in more than three days off work, excluding accidents where an employee is travelling to or from work, divided by the average number of employees, multiplied by 100,000.

The Group's health & safety performance realised a step change as the reportable accident frequency rate decreased significantly compared with last year, following continued focus on Health & Safety across the Group, and in particular the concerted efforts made to bring the former Promens and GCS sites up to the RPC standard. A programme of assessment, review and improvement is underway for the BPI and other acquired sites.

The Group continues to make stringent efforts to improve its efficient usage of electricity and water. Electricity usage per tonne reduced, with the replacement of older machinery with more modern energy conserving equivalents and inclusion of more modern machinery from some of the recent acquisitions more than offsetting the higher consumption per polymer tonne converted associated with the manufacture of higher value added products. Water usage and recycling initiatives include closed loop cooling systems introduced to manufacturing sites across the Group. The changes in water usage largely reflect the impact of the GCS sites acquired at the end of last year.

Outlook

The implementation of the Vision 2020 growth strategy is progressing well, reflected in a good trading performance in 2016/17 with continued organic growth and achieving record profitability levels with robust cash generation. Acquisitions made since the launch of the strategy in 2013 continue to add value including the recent GCS and BPI acquisitions, whose performance in the year has been better than expected. The recently completed Letica acquisition will provide an enhanced platform for growth in North America and has made a good start under RPC ownership. Going forward, the Group continues to explore opportunities for growth in line with its strategy. The new financial year has started in line with management's expectations.

P R M Vervaat

Chief Executive

The Group produced a strong set of financial results for 2016/17, with growth in the business achieved both organically and through acquisitions. Group revenues at £2,747m were 67% ahead of last year, adjusted operating profit at £308.2m rose by 77% and free cash flow increased by 95% to £239.0m. Statutory operating profit at £192.0m was 102% ahead of last year and net cash from operating activities at £276.5m increased by 83%.

Acquisitions

The Group completed the following nine acquisitions in the year:

Each acquisition met the Group's acquisition criteria being a good strategic fit, having strong incumbent management, a successful financial track record, quantifiable synergies and being earnings enhancing post acquisition with a ROCE greater than RPC's weighted average cost of capital.

Business Performance

The Group's results and financial position at 31 March 2017 have been significantly affected by the acquisitions noted above together with the full year impact of acquisitions in 2015/16. The trading results of all of the businesses after the acquisition date are included in the Group results, and the 2016/17 acquisitions in total contributed £415m to sales, £36.1m to adjusted operating profit and 1.6p to adjusted EPS. Transaction fees for all acquisitions have been charged to the income statement as exceptional costs.

Consolidated Income Statement

Sales and operating profit

Group revenue from increased by 67% to £2,747m (2016: £1,642m). The net acquisitions indicated above in 2016/17 and the full year impact of the acquisitions made in 2015/16 net of polymer pass through and foreign exchange impacts, contributed £877m of this increase in sales. After taking account of £181m of foreign currency translation effects (mainly the euro which strengthened from €1.37 to €1.19) and the impact of net sales price reductions from falling polymer prices passed on to customers of £24m, sales grew by £71m which was 3% on a like-for-like basis.

Adjusted operating profit (before restructuring costs, impairment and other exceptional and non-underlying items) was £308.2m (2016: £174.3m), with the impact of net current and prior year acquisitions contributing £59m to this increase. The net favourable translation impact of the weakened pound gave a gain of £29m, partially offset by a polymer price headwind variance having an adverse effect of £14m. The Promens/GCS/BPI integration programme contributed an additional £28m of savings. The remaining £56m improvement was generated from the impact of volume, margin and general business improvements and the Group's ability to align contractual terms, offset by inflationary cost increases experienced throughout the Group, estimated at £24m. Return on sales rose from 10.6% to 11.2% as a consequence of these improvements.

Statutory operating profit at £192.0m was 102% higher than the previous year and is stated after the net exceptional costs and non-underlying items described in more detail below.

Foreign Exchange

Following the result of the EU referendum in the UK, sterling weakened against the major currencies. This had a positive impact on the financial results of the Group on translation as 73% of sales revenues are reported in non-sterling currencies. The impact of this was to increase adjusted operating profit by £29m, adjusted EPS by 6.3p and net assets by £106m. The major currency movements which impact the results were:

Impact of Polymer prices

Polymer resin is a major raw material cost for the business, representing about 36% of adjusted costs in the year. As a global commodity its price can vary with supply and demand and as is typical in the industry, RPC has arrangements with its customers to pass on polymer price changes and hedge against price volatility. These changes are passed on through multiple ways, many of which are contractual and can be triggered based on absolute, relative or time based mechanisms. Where no contract exists, prices can often be changed at short notice. As there is a time lag in passing on price adjustments to the customer, typically around 3 months, this can have a negative or positive impact on operating profit depending on whether prices are increasing or reducing. During the year, polymer prices were relatively stable in euros in the first half and started to increase later in the year. In sterling however the devaluation of the pound compounded this and pushed up sterling polymer prices throughout the year. This resulted in a net polymer headwind of £3m, an increase of £14m on the previous year which had enjoyed a tailwind from falling polymer prices in the last few months of the year.

Exceptional costs and non-underlying items

The financial review of the business above focuses on underlying business performance, which excludes exceptional and other non-underlying items. The separate reporting of exceptional and non-underlying items helps facilitate comparison with prior periods and assess trends in financial performance which are not impacted by one-off costs or credits which are exceptional or derive from non-recurring events.

Exceptional items are 'one time' costs or credits which include acquisition costs, costs of business integration and investments to extract synergies, restructuring and closure costs including related asset impairments and losses during the closure period, gains or losses on the disposal of businesses and property, remuneration charged on deferred consideration and one-off tax items arising, and any other gains or losses, which, in the management's judgement, because of their nature, size or infrequency could distort an assessment of underlying business performance.

Other non-underlying items include the amortisation of acquired intangible assets, the fair value changes of unhedged derivatives, the unwinding of the discount on deferred and contingent consideration, including related tax and foreign exchange impacts.

Exceptional and other non-underlying items for the year charged against operating profit amounted to £116.2m (2016: £79.1m) which included costs relating to bringing new businesses into the Group of £84.2m (2016: £68.2m). These costs are the result of acquisitions and can be broken down into four key categories.

Acquisition transaction costs of £19m which are the direct external costs associated with making an acquisition. They are primarily financial, legal, tax, environmental, anti-bribery and corruption due diligence plus representation and warranty insurance and other advisor fees. They comprised Letica £7m, BPI £5m, ESE £3m and Plastiape £1m, with £3m for other acquisitions made or considered during the year. This represents 1.6% of the enterprise value of acquisitions made during the year.

Integration costs are the one-time costs incurred to deliver synergies from the acquired businesses; the Group substantially completed the integration of the Promens sites during the year, and the total cost of the combined GCS, BPI and Promens integration programmes are now estimated at €190m with associated cash costs of €120m. The benefits associated with the overall optimisation of the cost base are projected to be at least €105m which is €5m better than the previous estimate. During the current financial year €77m (£67m) of costs had been incurred. During prior financial periods €83m (£63m) had been expensed leaving approximately €30m (£26m) to follow with completion expected during 2017/18. The £67m is predominately accounted for by integration costs, including severance and redundancy costs of £22m, asset impairments at closed sites of £11m, and other costs relating to the closure and transfer of businesses of £33m.

The realisation of synergies from acquired business by integrating their sites into the Group's existing operations where overlaps occur or opportunities to combine resources exist, including the elimination of duplicate offices and functions, is an important part of the Group's acquisition strategy. Less than 25% of the RPC sites, including those of the newly acquired businesses, were affected by these integration activities during the year, with most of the exceptional costs attributable to only those divisions into which the new businesses were integrated (principally RPC Bramlage into which most of the GCS sites have been integrated and RPC Promens) and RPC bpi. These integration activities are normally carried out as soon as practical from acquiring the business and are normally completed within 12 to 24 months depending on the complexity of the acquired business and the opportunity for synergies with the existing RPC businesses.

Other restructuring, closure costs, impairments and other losses of £6m include other integration costs which are not part of the Promens, GCS and BPI programme, and other restructuring costs including the refocusing of a Bebo division business in the Netherlands. The other impairment losses on property, plant and equipment of £1m relate to assets destroyed in a fire at a site in Belgium, and the other exceptional costs of £2m comprise a number of smaller items, the largest one being the costs associated with the start-up in Brazil.

Remuneration and deferred consideration charges arise when there is an earn-out as part of an acquisition and the selling owner / management are retained within the business or there is a change in the expected level of payment. During this financial year there was a remuneration charge of £12m and a credit of £23m, the latter driven by the assumed payout in relation to the acquisition of Ace being lowered from 75% to 50%. The Ace arrangement is a four year earn-out which requires a four year EBITDA compound annual growth rate of 15.6% to pay out in full. The Ace charge amounted to £8m and the Letica earn-out was £3m. In respect to Letica a 100% payout would mean a charge of £4.4m going forward per month. Other earn-outs were immaterial at £1m.

The other non-underlying items fall into three categories.

Amortisation of acquired intangibles, which arises as a consequence of acquisition accounting, as on acquisition all assets and liabilities, tangible and intangible, are revalued at fair value, with the relevant amount of consideration paid for the business allocated to each asset. Intangibles take the form of intellectual property, brands, know-how and customer contacts. RPC amortises these amounts over 5-10 years. This charge for the year ended March 2017 was £31m (2016: £10m).

Non-underlying finance costs include interest associated with closed defined benefit pension funds of £5m (2016: £3m) and implied interest on deferred and contingent consideration associated with earn- outs, including exchange impacts of £10m (2016: £4m).

The tax effect of the above adjustments are also taken into account. In addition during the year the Group was able to access certain tax losses from prior year acquisitions which could not be previously recognised. The tax credit of £19m has also been reported as non-underlying within the tax charge and a deferred tax asset created for this amount. This will give rise to a cash tax benefit of this amount over an expected 5 to 6 year period. Given the size and nature of this tax credit, this has been excluded from the reported underlying tax figures.

Interest and tax

Net financing costs at £38.0m were higher than the prior year (2016: £20.2m), reflecting both the increase in net interest payable on borrowings of £22.8m (2016: £14.3m), which increased over the period due to the acquisitions made, and the increase in non-underlying finance costs as indicated above.

Adjusted profit before tax increased from £160.6m to £286.1m mainly as a result of the improvement in adjusted operating profit.

The tax rate on underlying activities for the Group varies based on a number of factors. Key drivers are the tax rates of the territories in which the Group operates and the level of profits in each territory. Other factors that can impact the effective tax rate include; assessment and recognition of deferred tax on losses, provisions for uncertain tax positions, local tax incentives (including research and development tax credits) and foreign exchange movements.

The tax rate on the adjusted profit before tax for the Group reduced to 22.8% (2016: 24.0%) for the year due to reductions in tax rates in some of the territories in which we operate (including the UK), changes in the profit mix and the utilisation of previously unrecognised tax losses. This resulted in an adjusted profit after tax of £221.0m (2016: £122.1m) and the adjusted basic earnings per share was 62.2p (2016 restated: 40.4p).

The Group's overall taxation charge was £22.7m (2016: £20.7m) resulting in a reported tax rate of 14.7% (2016: 27.4%). This was mainly as a result of the non-underlying tax credit referred to above and tax relief on certain exceptional and non-underlying costs..

Net profit, earnings per share and dividends

Reported profit after tax was £132.0m (2016: £54.9m), an increase of 140% on the previous year. This led to a basic earnings per share of 37.1p (2016 restated: 18.1p), more than doubling the performance in the prior year.

In line with the Group's progressive dividend policy of targeting a dividend cover of 2.5x adjusted earnings through the cycle, a final dividend of 17.9p has been recommended, making a total for the year of 24.0p (restated and 2016 restated: 16.0p), which is a 50% increase on the previous year.

All prior year earnings and dividend per share figures have been restated to reflect the bonus element of the rights issue in the year.

Consolidated Balance Sheet and Consolidated Cash Flow Statement

The balance sheet of the Group was significantly strengthened by the acquisitions made in the year and the related funding arrangements. Goodwill increased by £750.0m as a consequence of the acquisitions and after taking account of exchange impacts. Other intangible assets increased by net £212.3m comprising mainly customer relationships, technology and brands capitalised on acquisition and new product development expenditure, net of amortisation charges.

Property, plant and equipment increased by £370.4m; capital additions were £183.9m which was £54.1m (42%) ahead of depreciation charged in the period, due to continued investment. The capex spend relating to current year acquisitions was £15.7m.

The £36.7m of derivative financial instruments largely comprise the mark-to-market value of euro currency swaps taken out in 2011 to hedge the US dollar borrowings from the US Private Placement (USPP). The weakening of the euro against the US dollar has served to increase the value of these in the year.

Working capital (the sum of inventories, trade and other receivables and trade and other payables) was £220.3m, which was 6.2% of sales (annualised) compared with £140.2m at the previous year, 6.8% of sales. The decrease includes the impact of working capital reductions (synergies) made in the acquired companies.

The Group had a net deferred tax liability of £117.1m (2016: £45.4m). Deferred tax assets of £116.1m (2016: £71.6m) represent the future tax benefit from settling net pension liabilities and the recognition of tax losses which are expected to offset tax due on future income streams, with part of the increase in the year reflecting the recognition of the exceptional tax credit of £19m referred to above. The deferred tax liabilities of £233.2m (2016: £117.0m) relate in the main to fixed asset and intangible asset temporary differences. The net current tax liability increased by £4.9m to £39.3m (2016: £34.4m) as a result of current year tax charges on profits, tax liabilities from acquisitions which were offset by payments made to tax authorities in the year. Included in the current tax liabilities are uncertain tax provisions, which although individually are not material in amount, represent a number of tax risks across a variety of jurisdictions including liabilities inherited on recent acquisitions. There were no significant movements in these during the year.

The long-term employee benefit liabilities increased from £150.3m at the prior year end to £256.0m, mainly due to the assumption of new pension liabilities from BPI, where £92.2m of long-term employee benefit liabilities mainly relating to its closed UK defined benefit scheme were acquired and was reported at £73.7m at the year end. Excluding this the long-term employee benefit liabilities increased due to the impact of lower discount rates on retired benefit obligations, giving rise to actuarial losses in the period and movements on exchange.

Provisions and other liabilities increased to £111.6m (2016: £102.5m), with the provisions arising on acquisition during the year offset by utilisations. The utilisations mainly relate to out of market contract provisions from acquired businesses committed prior to acquisition, which are generally utilised within 18 months of the acquisition date.

Capital and reserves increased in the period by £928.8m, the net profit for the period of £132.0m, the issue of shares to acquire new businesses of £770.0m, favourable exchange movements on translation, net share issues and share-based payments from employee share schemes being offset by dividends paid of £62.1m, unfavourable net fair value movements on derivatives and pension related net actuarial losses. Further details are shown in the Consolidated statement of changes in equity which is included in the financial statements.

Cash flow

Cash flow performance was strong with free cash flow at £239.0m, 95% ahead of last year (2016: £122.6m). Net cash from operating activities (after tax and interest on a statutory basis) was £276.5m compared with £150.9m in 2016, with higher cash generated from operations (after exceptional cash flows) of £332.9m, mainly due to the higher EBITDA, which benefited by £45.8m from businesses acquired in the year. Working capital inflows of £28.5m benefitted from the realisation of working capital synergies of acquisitions made during the year and at the end of the previous year. This performance also includes further capital investments which were £45.4m ahead of depreciation for the year.

Net debt, which includes the fair value of the cross currency swaps that will be used to repay the USPP funding, increased by £305.1m and at the end of the year stood at £1,049.1m (2016: £744.0m). Net cash from operating activities, which is after interest and tax payments of £54.9m (including £12m attributable to acquisitions in the year), was utilised for, among other things, acquisitions in the year of £941.6m (including debt acquired of £3.5m), purchasing property, plant and equipment of £175.2m (of which £16m related to businesses acquired during the year), and for paying dividends of £62.1m. Additional proceeds were raised to fund the acquisitions from issuing shares, net of share purchases, of £624.1m and increasing borrowings from the banking group. Included in net cash from operating activities (and excluded from free cash flow) were payments of £81.1m relating to exceptional and non-underlying cash outflows, non-underlying cash provision movements of £39.4m, exchange rate movements of £35.9m and other movements in provisions and financial instruments of £8.2m.

Gearing decreased to 57% (2016: 83%) and reported leverage (net debt to EBITDA ratio) was 1.8. The average net debt during the year was £934m (2016: £496m).

Funding

During the year the Group undertook a share placement (c.4% of issued share capital) raising £90m, in addition to raising £141m from issuing 16,505,511 shares to BPI shareholders, to fund the acquisition of BPI and then undertook a full one for four rights issue to raise capital of £552m (gross), in part for the Letica acquisition and to restore and provide additional headroom to continue with the Group's growth strategy. In addition the Group obtained further debt funding from its banking group, which now comprise eight international banks based in the UK, Europe and USA.

As at 31 March 2017 the Group had total finance facilities of approximately £2,245m with an amount of £1,128m undrawn after taking account of bank guarantees and other adjustments. The facilities are mainly unsecured and comprise revolving credit facilities (RCFs) of up to £870m with all eight banks maturing in 2020 and €450m with five banks maturing in 2019, USPP notes of $216m and €60m issued to 17 US life assurance companies maturing in 2018 and 2021, a term loan of $750m with seven banks maturing in 2018 (with the option to extend to 2020), mortgages of £13m, finance leases of £12m and other uncommitted credit and overdraft arrangements.

The Group does not actively use asset based finance or factoring arrangements as a means of raising additional finance.

The USPP notes were a debut issue raised in the USPP market in 2011, providing the Group with seven year and ten year dated borrowings. The Group has a NAIC-2 credit rating by the US National Association of Insurance Commissioners.

Financial Key Performance Indicators (KPIs)

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

1 RONOA is adjusted operating profit for continuing operations divided by the average of opening and closing property, plant and equipment and working capital for continuing operations for the year concerned. Comparatives restated to include all acquisitions on a pro forma basis. Excludes ESE, Letica and Amber (acquired in early 2017).

2 ROS is adjusted operating profit divided by sales revenue.

3 Free cash flow is cash generated from operations less net capital expenditure, net interest and tax, adjusted to exclude exceptional cash flows and non-underlying cash provision movements.

4 ROCE is adjusted operating profit for continuing operations (annualised), divided by the average of opening and closing shareholders' equity, after adjusting for net retirement benefit obligations, assets held for sale, acquisition intangibles and net borrowings for the year concerned. Excludes acquisitions made in last quarter of each year.

5 Cash conversion is the ratio of free cash flow before interest and tax paid, to adjusted operating profit.

The key measures of the Group's financial performance, which are measured on a continuing basis, are its return on net operating assets (RONOA) and return on sales (ROS). The hurdles confirmed by the Board in 2015 are for the Group to exceed 20% RONOA and 8% ROS. The increase in return on sales resulted from improved profitability in the pre-acquisition group, offset by the dilution of lower margin acquisitions. ROCE at 15.1% remains at a robust level, ahead of RPC's weighted average cost of capital. Free cash flow is higher than last year mainly as a result of increased adjusted operating profit. Cash conversion continues to improve.

Technical guidance 2017/18

The Group is providing the following technical guidance for 2017/18:

S J Kesterton

Group Finance Director

Consolidated income statement

for the year ended 31 March 2017

Consolidated statement of comprehensive income

for the year ended 31 March 2017

Consolidated balance sheet 

at 31 March 2017

Consolidated cash flow statement

for the year ended 31 March 2017

Consolidated statement of changes in equity

for the year ended 31 March 2017

1. Basis of preparation and accounting policies

The financial information for the year ended 31 March 2017 contained in this announcement was approved by the Board on 7 June 2017.

This announcement does not constitute statutory accounts of the Company within the meaning of Section 435 of the Companies Act 2006, but is derived from those accounts, which have been prepared in accordance with International Financial Reporting Standards (IFRS) as endorsed and adopted for use by the European Union. This information has been prepared under the historical cost method except where other measurement bases are required to be applied under IFRS, using all standards and interpretations required for financial periods beginning 1 April 2016. No standards or interpretations have been adopted before the required implementation date.

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

- The provisional GCS and JP Plast acquisition accounting has been reviewed and hindsight adjustments made to goodwill, provisions, current and deferred tax, accounts receivable and property, plant and equipment. These have been adjusted in the comparative balance sheet.

- The shares issued in 2014 as consideration for Ace met the criteria for merger relief. As a result, £52.2m has been reclassified from the share premium account to merger reserve in the opening balances.

- Earnings per share in the prior year has been restated to reflect the rights issue on 27 February 2017.

Statutory accounts for the year ended 31 March 2016 have been delivered to the Registrar of Companies. Statutory accounts for the year ended 31 March 2017 will be delivered to the Registrar of Companies following the Company's Annual General Meeting.

The auditors have reported on those accounts. Their reports were not qualified, did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006.

2. Operating Segments

The information reported to the Group's Board of Directors, considered to be the Group's chief operating decision maker for the purpose of resource allocation and assessment of segment performance are reported under 2 segments. A number of operating segments meet the aggregation criteria set out in IFRS 8 and they have been amalgamated into one reporting segment, Packaging. The remaining operating segments have been included as Non-packaging. The business performance of the two segments can be found in the Operating review.

Segment revenues and results

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

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

Segmental revenues and results

Geographical information

The Group's revenue and non-current assets (other than financial instruments and deferred tax assets) are divided into the following geographical areas:

2017