rpc full yearpresentation2014

RPC Group Plc 2013/14 Results

Bringing packaging to life

RPC GROUP PLC

2013/14 results 04 June 2014


AGENDA

2

• Vision 2020 PV

• Business Review PV

• Fitter for the Future SK

• Financial Review SK

• Outlook PV


Focused growth

Continuing focus on organic growth

Selective consolidation in Europe

Creating a meaningful presence outside Europe

● Further growth in the selected markets ● 4% organic sales increase

3

VISION 2020: FOCUSED GROWTH PROGRESS

● Acquisition of M&H Plastics ● Acquisition of Helioplast ● Continuing pipeline of opportunities

● Investment in organic growth in the US ● Acquisition of M&H containing US operation ● Acquisition of Ace (China) post year end


M&H Plastics ● Purchasing synergies realised ● Sales integration with Manuplastics completed ● Further growth in the UK ● Roll out of M&H business model in preparation

BUSINESS REVIEW ACQUISITIONS – INTEGRATION UPDATE

4

Helioplast ● Fully integrated into the Superfos cluster ● New machines and product lines allocated ● Increasing RPC presence in Balkans

RPC Group Plc 2013/14 Results 5

BUSINESS REVIEW ACQUISITIONS – ACE Production facilities and headquarters

Sales by destination 2013

Factory location

Production facilities

Production site Headquarters

Shanghai

Hefei Shanghai Employs c.600 people Established in 2003

Hefei Employs c.330 people Established in 2013

Shenzhen (Gonghe) Employs c.1,100 people Established in 1997

Shenzhen (Shatou) Employs c.610 people Established in 1997

Zhuhai Employs c.630 people Established in 2008

Green Arburg machines 5 axis robots

Electroplating plant HPH automation plant HPH automation plant

Clean room moulding

Zhuhai

Hong Kong

Shenzhen (Shatou)

Shenzhen (Gonghe)

13%

19%

30%

38%

Rest of the World

China

Europe Americas

Ace has additional sales offices in the UK and the US

Ace has presence across China through five manufacturing facilities


BUSINESS REVIEW ACQUISITIONS – ACE: STRATEGIC RATIONALE

Platform to create a meaningful presence in Asia

Enhance Ace’s attractive standalone growth strategy

● High quality, modern manufacturing platform − Critical mass and capacity to grow higher added value packaging volumes in Asia

● Leverage RPC’s relationships with global customers calling for RPC to have a manufacturing presence in China

● Platform to accelerate acquisitive growth in the region ● Synergy opportunities:

− Cost savings from increased in-sourcing of existing RPC tooling requirement − Potential for general purchasing savings for enlarged group

● Enhanced export sales for Ace through the RPC sales network ● Increased value offering for European tools through the support of a dedicated service tool centre ● Best practice transfer to Ace – complex moulding, automation, multi-part assembly

Bilateral discussions between Ace and RPC relating to a potential combination were on-going for circa three years


BUSINESS REVIEW MARKET DEVELOPMENTS – GROWTH ON TRACK

7

MARKET SEGMENT

ACTIVITY LEVELS COMMENT

Personal care & cosmetics Acquisition of M&H strengthening position

Spreads & dairy Stable market with trend continuing towards “In-Mould-Label” Injection moulding

Single serve beverage systems Continued strong growth in capsules for

single-serve beverage systems

Surface coatings Signs of the Spanish economy recovering

Pharmaceutical Promising pipeline of new projects

Other food Stable market providing satisfactory returns

Other non-food Healthy growth in chemicals

7%

7%

10%

11%

20% Other food

Long shelf-life

Single serve beverage systems

Spreads

Dairy products Food

55%

4%

9%

15%

17% Other non-food

Pharmaceutical

Personal care and cosmetics

Surface coatings

Non-Food 45%

33% of Group sales in High Added Value products


Polymer price development

BUSINESS REVIEW POLYMER PRICE DEVELOPMENT

PP polymer Supply/Demand

78%

80%

82%

84%

86%

88%

90%

92%

0

15

30

45

60

75

90

08 09 10 11 12 13 14 15 16 17 18

TONNES (M) OPERATING RATE %

Source: Chemical Market Associates, Inc.

8

Operating Rate Actual Demand Free Capacity Forecast Demand

€ PER TONNE

Source: Platts / ICIS

HDPE BM PP HOMO

400

600

800

1,000

1,200

1,400

1,600

Stable polymer prices in financial year 2013/14


FITTER FOR THE FUTURE UPDATE

9

Programme main work streams:

Rationalise manufacturing

footprint

Optimise existing business portfolio

Review of business portfolio

● Intended divestment of Cobelplast cluster

● Sale of disposable trading business

● Nordic region - merger of Tenhult into Mullsjö

● Merge French dairy operations

● Refocus Spanish operations

● Realise value of redundant properties

Programme contents:

● Optimisation programme Blow Moulding cluster

● Optimisation programme Bramlage-Wiko cluster

● Optimisation of cluster overhead

Update:

● Initial offers received, progressing with preferred bidders

● Sold 22nd May 2014 for €3m

● Project on plan

● Production at Troyes ceased in March 2014

● Closure of San Roque in progress

● 3 properties sold in the year

● Update of organisation structure & market approach

● Realigning production concepts in progress

● Completed


FITTER FOR THE FUTURE UPDATE

10

Total project cost

2

9

14 16 17

12/13 13/14 14/15 15/16 16/17

Estimated cumulative EBIT impact of programme (£m):

Incurred to date

Costs remaining

£58m

£12m

Total project cost:

£70m


FINANCIAL REVIEW KEY FIGURES

11

21.1p

30.0p

38.2p 36.9p 41.1p

09/10 10/11 11/12 12/13 13/14

40.9 56.0

95.5 91.6 101.3

09/10 10/11 11/12 12/13 13/14

Adjusted basic EPS*

For continuing operations Adjusted = before restructuring costs, impairment losses, amortisation of acquisition intangibles and pension administration expenses * Restated following Rights Issue in 2011

Adjusted operating profit (£m)

Revenue (£m)

661 752

1,056 982 1,047

09/10 10/11 11/12 12/13 13/14



12

8.4p

11.5p

14.4p 14.9p 15.5p

09/10 10/11 11/12 12/13 13/14

14.1% 16.7%

23.9% 22.6% 24.5%

Mar 10 Mar 11 Mar 12 Mar 13 Mar 14

65 69

100 86

105

09/10 10/11 11/12 12/13 13/14

Net cash from operating activities (£m)

Dividend per share Return on net operating assets

Restated following Rights Issue in 2011 For continuing operations


FINANCIAL REVIEW CASHFLOW BRIDGE (£m)

13

* Includes discontinued operations, exchange rate movements, provision movements, one off pension deficit payments & movement on derivatives

Net Debt Mar 2014 EBITDA

Working Capital

Interest & Tax

Investing Activities Dividends Other*

Net Debt Mar 2013

Exceptional Spend Acquisitions

(171)

(266)

145 (20)

(71)

(24) (25)

(111)

(5)

16


FINANCIAL REVIEW FINANCIAL POSITION

14

KPIs MAR 2014

Net debt (£m) 266

Undrawn facilities (£m) 391*

Net debt to EBITDA ratio 1.7x

0

50

100

150

200

250

300

350

400

2014 2015 2016 2017 2018 2019 2020 2021

Renewal date main facilities

USP

P

USP

P

Term

£m

RC

F –

New

Apr

il 20

14

* Recalculated using new £350m RCF


OUTLOOK

15

Vision 2020 strategy delivered platforms for further growth in Asia, US and South East Europe

Financial year started in line with management expectations

Further acquisition opportunities being explored

Fitter for the Future benefits being delivered


FORWARD LOOKING STATEMENTS

16

This presentation contains forward-looking statements, which: • have been made by the directors in good faith based on the information available to them up to the time of

their approval of this presentation; and

• should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying such forward-looking information.

• The Group undertakes no obligation to update these forward-looking statements and nothing in this presentation should be construed as a profit forecast.


SUPPLEMENTARY MATERIAL

17


FINANCIAL REVIEW CONSOLIDATED INCOME STATEMENT

£ million 2013/14 2012/13 Variance

Revenue 1,046.9 982.3 64.6

Operating profit – adjusted 101.3 91.6 9.7

Interest charge (11.8) (11.7) (0.1)

Profit before tax – adjusted 89.5 79.9 9.6

Tax on adjusted profit before tax (21.5) (19.1) (2.4)

Profit after tax – adjusted 68.0 60.8 7.2

Exceptional items – restructuring and impairments (26.7) (28.4) 1.7

Amortisation of acquired intangibles, pension administration expense and employee benefit net finance expense (3.8) (3.3) (0.5)

Tax relief on above items 6.2 4.9 1.3

Profit after tax – reported 43.7 34.0 9.7

Basic earnings per share (p) – adjusted 41.1p 36.9p 4.2p

Basic earnings per share (p) – reported 26.5p 20.6p 5.9p

18

For continuing operations


FINANCIAL REVIEW SEGMENTAL ANALYSIS - IFRS 8 BASIS


Injection Moulding

Revenue* 692.4 628.3 64.1

Operating profit ** 70.1 63.7 6.4

Return on sales ** 10.1% 10.1% -

Return on net operating assets ** 26.8% 25.5% 1.3%

Thermoforming

Revenue* 182.0 184.1 (2.1)


Return on sales ** 10.5% 9.3% 1.2%


Blow Moulding

Revenue* 172.5 169.9 2.6


Return on sales ** 7.0% 6.4% 0.6%


For continuing operations * External sales only ** Based on adjusted operating profit before restructuring costs and impairment losses, amortisation of acquired intangibles and pension administration expense

19


FINANCIAL REVIEW SEGMENTAL ANALYSIS - GEOGRAPHICAL


UK

Revenue* 269.8 234.4 35.4

Operating profit** 29.9 22.6 7.3

Return on sales** 11.1% 9.6% 1.5%

Mainland Europe (including USA)

Revenue* 777.1 747.9 29.2

Operating profit** 71.4 69.0 2.4

Return on sales** 9.2% 9.2% -

20

For continuing operations * External sales only ** Based on adjusted operating profit before restructuring costs and impairment losses, amortisation of acquired intangibles and pension administration expense


FINANCIAL REVIEW CONSOLIDATED BALANCE SHEET

£ million MAR 2014 MAR 2013

Property, plant and equipment 418.0 395.3

Goodwill 169.8 93.1

Other non-current assets 37.3 33.1

Working capital 32.0 37.8

Employee benefit liabilities (LT) (72.5) (62.7)

Other assets & liabilities (58.9) (58.2)

Assets held for sale (excluding debt) 12.3 4.7

Net debt (including assets held for sale) (266.4) (171.4)

Equity shareholder funds 271.6 271.7

21


FINANCIAL REVIEW PENSIONS UPDATE

£ million MAR 2014 MAR 2013

Retirement benefit liability UK DBs 46.7 33.5

Other retirement benefit obligations 22.5 24.5

Termination benefits 1.2 1.6

Other employee benefit liabilities 2.1 3.1

Total employee benefit liability (LT) 72.5 62.7

22


BUSINESS REVIEW ACQUISITIONS – M&H PLASTICS

23

Leading position in UK plastic packaging to the personal care segment with significant exports to MLE and a growing presence in the US

● Recognised UK leader in plastic personal care packaging (blow moulded bottles, injection moulded jars, flexible tubes, closures, decoration)

● Unique position offering the widest range of personal care containers available

● Leading UK position with substantial MLE exports in short run, low volume, higher added value stock ranges alongside leading bespoke capability supported by in-house tool shop

● Focus on higher added value and niche brands, direct and via filler and distributor channels – business model underpinned by production flexibility and industry leading speed and excellence in design and new product development

● Product reach extended reach to healthcare and food ranges

● Significant exports to MLE (20% sales); rapid growth at US site

M&H Plastics’ primary UK site at Beccles, UK

The M&H site at Winchester, Virginia


BUSINESS REVIEW ACQUISITIONS – HELIOPLAST

24

● Market leading provider of high quality injection moulded packaging

● Highly experienced management team

● Excellent technical capabilities

● Successful and long-standing exporter

● Well invested manufacturing capacity with new state-of-the-art facility

● Strong financial position Helioplast site in Bosnia-Herzegovina


BUSINESS REVIEW ACQUISITIONS – ACE RPC acquisition criteria ● Strategic fit ● Strong incumbent management ● Financial track record ● Financial criteria:

− ROCE > WACC of RPC − Quantifiable synergies − Earnings accretion − Impact on Group KPIs

Vision 2020 financial metrics ● RONOA of at least 20% ● Return on sales of at least 8%

Clear acquisition rationale and strategy Professional management team to be retained Strong profitability and growth achieved

Pro forma ROCE ahead of WACC of c.9% Asian packaging growth EPS accretive in first full year post acquisition See below

Ace RONOA at 31% in 2013 Ace return on sales at 18% in 2013


BUSINESS REVIEW ACQUISITIONS – ACE

Power Group

Share of sales FY2013

£104m

Services offered

Products offered

Lifestyle

£52m

Complete services from design and tooling through manufacturing and assembly

• Consumer electronics • Water proof iPad cases • Bi-injection moulding • Sanitary products

Automotive

£21m

Works with big automotive OEMs and tier 1 suppliers and produces customised structural and decorative parts

• Remote control keys • Engine components • Chrome plated plastic

Packaging

£15m

Complete service including concept design, prototype and tooling

• Food packaging • Cosmetics packaging • Consumer packaging

mould

£10m

Full service engineering expertise in micromachining / metal insert moulding

• Connectors • Power switches • Metal insert moulding

Medical

£6m

Medical device solutions for respected medical OEMs

• Glucose meters • Syringes

Main customers*

Sample products

Source Management information Notes 1. FX rates: GBP/HKD 12.93

14%

50%

6% 10% 20%

*Top 10 customers represent 56% of total 2013 sales **Ace has been supplying Superfos (now part of RPC) since 2008

**

http://www.mitchellgroup.com.au/mp/default.aspx

http://www.hella.com/hella-com/index.html?rdeLocale=en

http://www.meadwestvaco.com/index.htm

http://www.eppendorf.co.uk/int/index.php?l=3

http://en.wikipedia.org/wiki/File:Tyco.svg

http://www.rockwellautomation.com/

http://www.philips.co.uk/index.page

http://www.grohe.com/uk/


VISION 2020 PREDICTED GROWTH IN RIGID PLASTIC PACKAGING

27

13.5 10.8 2.7 13.6 4.715.4 12.1 3.5 21.6 6.5

Europe North America

South & Central

America

Asia Rest of World

2013 Predicted 2018 Forecast

Source: Smithers Pira, 2013

BRIC region (million tonnes)

Rigid plastic packaging set to grow (million tonnes) Rigid plastic packaging grows across all regions: The BRIC countries show strong growth:

1.1 1.7 1.1

6.9

1.42.3 2.3

12.0

Brazil Russia India China

2013 Predicted 2018 Forecast

2.7%

2.3%

5.3%

9.8%

6.9% 5.2% 6.1% 15.2%

12.0%

X% CAGR 2013-2018 X% CAGR 2013-2018



28

2.5 2.6

2.7 2.5

2.7

09/10 10/11 11/12 12/13 13/14

13.5% 15.2%

20.5% 19.4% 20.2%


ROCE – Total Group Dividend Cover ROCE – Pre 2013/14 acquisitions

For continuing operations

13.5% 15.2%

20.5% 19.4% 18.7%


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