If nothing else, these full-year figures from RPC (RPC) could serve as a belated riposte to criticism levelled at the plastic packager by Northern Trust Capital Markets in the first quarter of 2017 - or do they? In a note to clients, the wealth manager expressed the view that a buying spree by RPC - 10 deals in a little over 12 months – had effectively masked disappointing capital returns and free cash flows, though part of the problem may have stemmed from RPS’s use of ‘alternative performance measures’ as opposed to those specified under the International Financial Reporting Standards (IFRS).
What’s beyond dispute is that group revenues were up a third at constant currencies and cash profits came in at £590m against £441m in FY2017, while the group’s preferred metric to determine the efficacy of asset allocation - return on net operating assets (RONOA) – increased 150 basis points to 27.2 per cent.
RPC had been snapping up assets at a steady clip, with the attendant challenges to management. But the integration of major European acquisitions – GCS, Promens and BPI – is nearly complete, with the group on track to deliver synergy cost savings of €105m (£92m) in FY2019. Conversely, the group now plans to hive-off certain businesses deemed surplus to requirements following a strategic review, which will knock £209m off the top-line and £10.8m from operating profits.
The good folk at Northern Trust Capital Markets certainly wouldn’t object to any considered rationalisation of the business portfolio, but they might well point to the 4 per cent decline in free cash flow as a sign that they weren’t entirely wide of the mark. RPC has been building inventory and its capital investments were ahead of guidance and are expected to rise in the current year. So, despite a marked improvement in reported returns, the shares tanked on release of these figures.
Jefferies has trimmed its forecasts, giving adjusted pre-tax profits of £407m for the March 2019 year-end, leading to EPS of 77.4p (from £389m and 72p in FY2017).
| RPC (RPC) | ||||
| ORD PRICE: | 672p | MARKET VALUE: | £2.73bn | |
| TOUCH: | 671-672p | 12-MONTH HIGH: | 1,032p | LOW: 665p |
| DIVIDEND YIELD: | 4.2% | PE RATIO: | 11 | |
| NET ASSET VALUE: | 472p* | NET DEBT: | 59% | |
| Year to 31 March | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2014 † | 1.05 | 59.0 | 20.5 | 12.0 |
| 2015 † | 1.22 | 67.1 | 18.0 | 13.3 |
| 2016 | 1.64 | 75.6 | 18.1 | 16.0 |
| 2017 | 2.75 | 155 | 37.1 | 24.0 |
| 2018 | 3.75 | 317 | 61.6 | 28.0 |
| % change | +36 | +105 | +66 | +17 |
| Ex-div: | 09 Aug | |||
| Payment: | 31 Aug | |||
| *Includes intangible assets of £1.9bn, or 467p a share †Restated per share figures, adjusted | ||||
