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RPC – THE ESSENTIAL INGREDIENT
© 2018 RPC Group Plc. All Rights Reserved.
06 June 2018
RPC GROUP PLC 2017 / 18 RESULTS
2
AGENDA
Vision 2020
Financial Review
Business Overview
Summary and Outlook
3
Compelling opportunities for continued growth – both organically and via accretive acquisitions
RPC uniquely placed to drive the sustainability agenda
Remaining disciplined in capital deployment
Identified non-core businesses for disposal
Chairman’s overview
RPC has the scale, innovation capabilities and ambition to continue to exploit market opportunities and is committed to contributing to an environmentally sustainable future
for plastic
4
Progress of Vision 2020 strategy in 2017 / 18
FOC
USE
D G
RO
WTH
Focus on organic growth
Selective consolidation in Europe
Creating a meaningful presence outside Europe
• Continued organic revenue growth ahead of GDP at 2.8%• Healthy innovation pipeline creating future opportunities for growth• RPC well positioned vis-à-vis sustainability and e-commerce trends
• Strengthened market position in flexibles with announcement of Nordfolien acquisition• Major European synergy programme substantially completed• Good pipeline for further acquisition opportunities
• Significant growth realised in China with further opportunities going forward• Full year contribution from US business Letica with synergies being realised• Integration of Astrapak and Letica progressing to plan
Pursuing added value opportunities in non packaging markets
• Strong revenue growth in Chinese automotive sector• ESE (temporary waste storage solutions) performed well in first full year of ownership• Circular economy initiative providing good growth opportunities for ESE going forward
5
Continued active portfolio management
• European IM# automotive business
• Letica Foodservice (US)
• Spirits closures
• Sub scale market share
• Primarily paper based business
• Primarily metal based business
# injection moulding*In FY 2017 / 18
Business for sale equating to c.£209m of turnover and £11m EBIT*
Businesses for sale Key rationale for sale
Existing business£519.4m
Non-core businesses
£69.7m
Existing business
£3,019.0m
Non-core businesses
£139.6m
Non-packaging Packaging
6
Core business FY 2017 / 18
ReportedNon-core
businessesCore
businesses
Revenue (£m) 3,748 (209) 3,539
EBIT (£m)* 425 (11) 414
EBIT (%) 11.3% 5.3% 11.7%
RONOA (%) 27.2% 19.3% 27.5%
ROCE (%) 14.8% 7.6% 15.2%
Adjusted basic EPS (p) 72.0 (1.9) 70.1
Targeting at least £50m# EBIT growth for the core businesses by the financial year ending March 2021
Organic revenue growth ahead of GDP Enhancing sales mix Run rate effect from synergies of the major European integration programme Continuous cost improvements (without incurring material adjusting items) Contribution from Nordfolien (including synergies)
# = including Nordfolien and assuming no significant changes in currency rates and polymer price variation* = adjusted items see 49 for definitions
7
Financial Overview
8
Income statementFY 2017 / 18 FY 2016 / 17
£m % £m % Δ
Revenue 3,747.7 2,747.2 36.4%
Raw materials (1,884.6) 50.3 (1,359.8) 49.5 (38.6)%
Wages and salaries (810.6) 21.6 (624.9) 22.7 (29.7)%
Other expenses (627.5) 16.7 (454.3) 16.5 (38.1)%
Adjusted operating profit 425.0 11.3 308.2 11.2 37.9%
Adjusted interest charge (36.3) (22.8) (59.2)%
Adjusted profit before tax 389.4 10.4 286.1 10.4 36.1%
Adjusting items (22.1) (100.4) 78.0%
Amortisation of acquired intangible assets (50.7) (31.0) (63.5)%
Taxation (62.8) (22.7) (176.7)%
Profit after tax 253.8 132.0 92.3%
Adjusted basic earnings per share 72.0p 62.2p 15.8%
Statutory basic earnings per share 61.6p 37.1p 66.0%
Return on capital employed % 14.8% 15.2% (40)bps
9
475
2,398
2,873
19.4%
13.9% 14.8%
Returns driven by capital allocation
Average capital employed (£m)Return on capital employed
RPC GroupMarch 2018
Acquisitions& organic investments
5 years
ROCE
Capitalemployed
2012 / 13
RPC Grouppre Vision 2020
2017 / 18
Disciplined capital allocation driving returns
10
Revenue bridge (£m)
2,852
3,748
70
35
797
99
2,747
Revenue2016 / 17
Impact FXtranslation
Polymer price Underlyingrevenue2016 / 17
Net acquisitions(prior yearrevenue)
Organic growth Revenue2017 / 18
2.8%
Organic growth
16 10
771
Revenue2016 / 17
ImpactFX
translation
Polymerprice
11
Adjusted operating profit bridge (£m)
312
425
(5)
(44)
9
79
78
308
Adjustedoperating
profit2016 / 17
FXtranslation
Polymerpass-through
variance
Underlyingoperating
profit2016 / 17
Netacquisitions(prior year
profit)
Businessimprovement
Cost inflation Adjustedoperating
profit2017 / 18
Includes synergies* of £26m
* From Promens / GCS / BPI / Letica
Note: Business improvement includes a central cost increase of £(6)m
(1)
2
78
Adjustedoperating
profit 2016 / 17
FXtranslation
Polymerpass-through
variance
12
Polymer price changes passed through to the customer base
€ PER TONNE: average of Platts / ICIS indices
HDPE BMPP HOMO
1,050
1,150
1,250
1,350
1,450
1,550
1,650
1,750
Mar 14 Sep 14 Mar 15 Sep 15 Mar 16 Sep 16 Mar 17 Sep 17 Mar 18
• Polymer pass-through mechanisms in place (based on c. 65 indices) albeit with a time lag
• Proactive raw material stock and purchase contract management mitigating the pass through time lag effect
• Flexibility in purchasing various polymer grades for similar applications
• Purchase more than 1,000 different grades of polymer resin
800
900
1,000
1,100
1,200
1,300
1,400
Mar 14 Sep 14 Mar 15 Sep 15 Mar 16 Sep 16 Mar 17 Sep 17 Mar 18
£ PER TONNE: average of Platts / ICIS indices
Mainland Europe UK impacted by weakened sterling
$ PER TONNE: per IHS
1,200
1,400
1,600
1,800
2,000
2,200
2,400
Mar 14 Sep 14 Mar 15 Sep 15 Mar 16 Sep 16 Mar 17 Sep 17 Mar 18
US impacted by hurricanes
£ million FY14 / 15 FY 15 / 16 FY 16 / 17 FY 17 / 18
P&L impact 9 11 (3) (9)
Pass through time lag impact
13
Adjusting items (see Appendix page 49 for definitions)
£ million 2017 / 18 2016 / 17 2015 / 16 2014 / 15
Fitter for the Future - - 3.8 19.6
Acquisition related expenditure 3.9 18.9 11.9 11.5
Contingent consideration on earn-outs (11.5) (11.2) (11.5) 5.8
Promens / GCS / BPI integration costs 23.8 66.8 58.6 4.4
Other integration and adjusting items 1.2 9.7 5.4 1.6
Acquisition and restructuring items 17.4 84.2 68.2 42.9
Amortisation – acquired intangible assets 50.7 31.0 10.3 4.9
Other adjusting items 1.2 1.0 0.6 0.6
Total adjusting operating items 69.3 116.2 79.1 48.4
Adjusting finance costs 3.5 15.2 5.9 3.5
Total adjusting items before tax 72.8 131.4 85.0 51.9
14
0
€35
€68€95 €105
14/15 15/16 16/17 17/18 18/19
€2
€30 €28€40
0
14/15 15/16 16/17 17/18 18/19
Spend completed with cash costs lower than forecast
• Total P&L charge is €187m
• The associated cash is €100m, €10m better than the €110m previously announced – with steady state benefits remaining at least €105m per annum as proceeds from assets sales were higher than expected
• Synergies represent 6% of revenue acquired
Cash costs €m
By year
P&L costs €m
Synergy realisation
€m (cumulative)
Promens, GCS and BPI related synergy realisation costs
€(100)m
€30m€57m
€(187)m
P&L charge Assetwrite downs
Proceeds,working capital & asset sales
Cash costs
€6
€77 €77
€270
14/15 15/16 16/17 17/18 18/19
15
Underlying cash generation
£ million 2017 / 18 2016 / 17 2015 / 16 2014 / 15
Adjusted EBITDA 590 441 251 188
Working capital (22) 29 - (2)
Net capex (242) (176) (101) (95)
Other* (1) - 2 (1)
Cash flow 325 294 152 90
Net interest & tax (96) (55) (29) (29)
Free cash flow 229 239 123 61
Adj. conversion** 77% 95% 87% 68%
Statutory conversion# 68% 82% 85% 33%
0%20%40%60%80%100%
080
160240320400480
2014 / 15 2015 / 16 2016 / 17 2017 / 18
Adjusted operating profit Free cash flow Conversion (%)
£m
* Share based payments, disposal of fixed assets and pension deficit payments**Ratio of cash flow shown above to adjusted operating profit# see supplemental slides
• Continued investment in growth; total capex to sales ratio of 6.4%
• Capex / depreciation of 1.5x (2016 / 17 1.3x)• Statutory cash flow conversion and underlying
conversion remain robust• Convergence between adjusted and statutory measures• Working capital outflow reflects stock building for growth
including within the bpi division ahead of the start to the 2018 agriculture growing season
16
Booster SCapex case study: patented innovative trigger spray
• 13 parts; each requires a separate manufacturing process
• All plastic components; 100% recyclable
• Compatible with many existing containers
• Formerly exclusive to one customer• Average product lifecycle greater
than 10 years• Investment of circa €9m
Investment for growth with cash out in year 1 and expected IRR > 20%
17
Debt bridge
(1,139)
(22)
(242)
(96) (1)
(80)(83)
(36)(106) (14)
590
(1,049)
Net DebtMar 2017
AdjustedEBITDA
WorkingCapital
InvestingActivities
Interest& Tax
Other freecash flow
items#
Acquisitions(inc. debt)
Share buy-back
Adjustingitems
Dividends Other* Net DebtMar 2018
Free cash flow £229m
# Share based payments, disposal of fixed assets and pension deficit payments* Includes exchange rate movements: (£26m), non-underlying cash provision movements (net contract utilisation): £27m, movement in provisions and other liabilities: £20m other share based transactions (£7m)
Maintenance capex
Growth capex
Maintenance capex – £114mGrowth capex - £128m
18
Financial position
KPIs Mar 2018
Net debt (£m) 1,139
Headroom (£m) 1,004
Net debt to EBITDA ratio (pro forma)** 2.0x
Net debt to EBITDA covenant 3.5x
0
250
500
750
1,000
1,250
1,500
2018 2019 2020 2021
Renewal date main facilities
USP
P
USP
P
£m
RC
F
RC
F
TER
M
Calendar year
*The 18 month term facility is extendable up to 2020 if required**Adjusted to include acquisitions on a pro forma basis
*
• Investment grade rating from Moody’s Investor Service of Baa3 (Stable outlook); and,
• S&P Global Ratings rating BB+ (Positive outlook)• Intention remains to extend the $750m term loan• No restricted cash balances
19
Technical guidance FY 2018 / 19
Profit & loss charge Cash charge
Tangible fixed assets Depreciation: c. £175m Capex: c. £250m
IFRS 16 In the process of a formal impact assessment of IFRS 16 which we expect will be material
Net contact provision utilisation c. £10m N/a
Underlying tax rate c. 23% Below P&L charge
Net finance costs c. £42m c. £42m
FX sensitivity: • €1c move changes EBIT by c. £2.0m• $1c move changes EBIT by c. £0.5m
Dividends N/a Progressive dividend policy with cover targeted to be 2.5x across the cycle
Acquisition related expenditure External cost on acquisition activity
Contingent consideration on earn-outs Letica: c. 20% N/a
Net integration and adjusting items Not material Not material
Amortisation – acquired intangibles c. £50m N/a
Other adjusting items Not material Not material
Adjusting net finance costs Pension scheme interest c. £6m N/a
Und
erly
ing
item
sAd
just
ing
item
s
20
Capital allocation priorities
Investment for organic growth
Investing in organic growth and IRRs > 20%Targeting organic revenue growth ahead of GDP through the cycle
Acquisitions that meet strict investment criteria
Progressive dividend policy
Leverage to remain at a suitable and responsible level medium termTargeting medium term range of 2.0x to 2.5x net debt to EBITDA
Share buyback programmes
Capital priorities and structure
*£94.7m shares bought back to date at an average price of 853.2p
Financial acquisition criteria (see appendix slide 39)
Target dividend cover: 2.5x through the cycle
A flexible approach to be considered relative to availability of alternative options typically if net debt to EBITDA persists below 2.0x
21
Capital is allocated to maximise long term shareholder returns
£38m
£45m
£49m
£83m
£114m
£33m
£50m
£52m
£93m
£128m
£107m
£450m
£525m
£1,082m
£80m
£25m
£30m
£41m
£62m
£106m £83m
2013 / 14
2014 / 15
2015 / 16
2016 / 17
2017 / 18
Maintenance capex Growth capex M&A Dividends Share buy-backs
Nearly £190m has been returned to shareholders in the year
22
Business Overview
23
Business performance FY 2017 / 18
Record overall profitability levels with robust cash generation and solid underlying organic revenue growth
Rationalisation of the European manufacturing footprint substantially complete
Significant capital investment in the year underpinning further organic revenue growth going forward
Some impact from significant start-up costs in growing the automotive business, particularly in Europe
Polymer price variations continue to be successfully passed through to the customer base
Achieved synergy targets but cost inefficiencies remain in the current footprint following move of > 300 machines
24
Organic growth in FY 2017 / 18
Global plastic packaging markets over the next five years anticipated to grow by 3.7%*, 2.1% anticipated in Western Europe
Continued to grow patented CSD Lite and Sport caps closures albeit with some customer delays
Achieved overall underlying organic revenue growth for the year of 2.8% with H2 at 4.0% as H1 was impacted by adverse natural events and fewer trading days
Group targeting through the cycle growth ahead of GDP
Substantial revenue growth achieved in China (in total + 26%) in both packaging and automotive sectors with new production facilities started up
* Compound annual growth rates to 2022 (Source: Smithers Pira)
Continued investment in sustainable capabilities driving a healthy pipeline going forward
25
Growth in China
£0m £0m
£99m
£133m£155m
£197m20
12 /
13
2013
/ 14
2014
/ 15
2015
/ 16
2016
/ 17
2017
/ 18
26% CAGR Growth
Group sales manufactured in China• Established a manufacturing footprint in China
since the launch of the Vision 2020 strategy• Growth driven by higher added value products• Pipeline looking very promising but current
manufacturing footprint close to full utilisation• Future investment in footprint with new facility
in Shanghai – phase 1 investment of circa £35m
26
Recent successful product launches
A new sterile airless pump combined with our patented AirFree® bottle, enabling packaging additive free hypoallergenic cosmetics
DEFIPatented development of ultra-light CSD caps. 20% lighter without any reduction in performance
CSD Lite
Multi-packing solution for the global beverage market. Available for both aluminiumcans and PET bottles with advanced, state of the art automation solutions
WaveGripCombines functionality and reusability with product safety. 180 degree hinge that is easy to open with integrated tamper evidence which also reduces plastic waste
Sports caps
27
£732m 2017 / 18+4.2% Organic growth
Key developments
RPC: Strong growth in higher-added value automotive components and moulds.
Market: Driven by demand for complex automotive products and increasing importance of circular waste management solutions.
Outlook: Healthy sales pipeline in the automotive sector while the circular economy initiative will drive growth for ESE.
Technical Components
£790m 2017 / 18+0.1% Organic growth
Key developments
RPC: Strong demand for nicotine delivery systems and trigger pumps while surface coatings remain soft.
Market: Overall growth driven by innovation in product design in various market segments.
Outlook: Resumed growth driven by nicotine delivery systems and introduction of next generation trigger pumps.
Non-Food
£1,082 2017 / 18+4.6% Organic growth
Key developments
RPC: Good growth in agricultural films, confectionary products and dairy products.
Market: Growth drivers to minimisefood waste e.g. shelf-life enhancing solutions. Sustainable designs gaining in importance.
Outlook: Continued growth with plastic having attractive characteristics as a packaging material.
Food
End market revenue development
28
£166m 2017 / 18+0.7% Organic growth
Key developments
RPC: Good growth in standard inhaler products; delays in new product launches.
Market: Dry powder inhalant devices set for longer term growth; increasing demand from developing economies for wider product range.
Outlook: Enhanced medium to longer term growth prospects following the formation of larger healthcare platform post Plastiape acquisition.
Healthcare
£502m 2017 / 18-1.1% Organic growth
Key developments
RPC: Growth in sports caps and CSD Lite offset by softness in coffee capsule customers and in the Letica food service business.
Market: Strong demand for innovative closure systems in Asia; demand for single-serve beverage capsules driven by emerging markets demand and innovation. Sustainable designs gaining in importance.
Outlook: Continued growth in innovative closure systems with single-serve beverage sales set to recover.
Beverage
£476m 2017 / 18+6.8% Organic growth
Key developments
RPC: Strong performance in the US and China following investment for growth.
Market: Globalisation, demand for higher end products and substitution from glass to plastic are key drivers.
Outlook: Further growth opportunities leveraging global platform and patented, innovative solutions e.g. development of the AirFree® DEFI system (production of new system has started).
Personal Care
End market revenue development (continued)
29
Sustainability Trends Plastics in the spotlight update
• May 2018 EU publishes draft directive on single use plastics. Targets a reduction in marine litter through better control of and charges on single use plastics
• April 2018 UK Government announced a consultation on the ban of plastic straws and cotton buds in the UK
• March 2018 UK Treasury launched a call for evidence around single use plastics and potential charges on some items
• March 2018, UK Government announced a consultation on a deposit return scheme for England
RPC works proactively with the relevant policy makers, authorities and industry bodies. Through the British Plastics Federation, RPC is involved with the UK Plastics Pact which has set ambitious targets for increased recycling
RPC does not manufacture any of the items that will be restricted under the proposed directive
Little immediate impact anticipated given RPC’s product range
30
On-site recycling facilities• RPC bpi is a leading recycler of
flexible plastics closing the end of life loop in agricultural, commercial and industrial solutions
• Currently extending our recycling expertise across the Group’s product ranges
• ESE growing through the need to enhance waste management to increase recycling as well as avoid litter and plastic leakage into the environment
Sustainability Trends An opportunity for RPC
Innovative design solutions• Recyclability, recycled content and
reusability are increasingly a sought after design consideration
• RPC uniquely placed to help customers given its design and engineering capabilities
• Anticipate more sustainable designs but not a move back to other materials given plastics unique advantages
Recycled and sustainable input polymers
• Making products incorporating recycled materials and products made from biopolymers
• Working with major material suppliers to incorporate more recycled content in our products
• Continuing to develop ideas such as coffee capsules made from compostable polymer
31
Sustainability Trends The RPC Circular grading tool
BA
BC
DE
F
Rating system based on the “RecyClass” categories. A is the highest rating which indicates perfect for recycling and F means no part of the pack can be recycled.
The blue indicator shows the rating that the concept has achieved as measured against the RecyClass definitions
The feather symbol shows that the pack is light-weighted and has been designed to incorporate the minimum amount of material
The arrow symbol shows the pack contains a % of recycled plastic
The circle symbol shows that the pack has an obvious reuse
The tool is applied to new designs and is used to rate and improve existing products
32
Summary and Outlook
33
Targeting at least £50m operating profit improvement by the financial year ending March 2021*The new year has started in line with management’s expectations
Record profitability levels achieved this year on a significantly enlarged business
Acquisition opportunities continue to be evaluated against strict acquisition criteria
Active portfolio management, non-core businesses identified with revenue of £209m
Continue to drive through the cycle organic growth ahead of GDP
Summary and Outlook
* See slide 6 for details
34
Appendices Strong performance since Vision 2020 strategy launch (in 2013)
Strong customer relationships remain key
Disciplined and selective approach to acquisitions
Decentralised organisation enhances integration capability
Commitment to our people
Remuneration Policy
Commitment to sustainability
Sustainability Trends: Circular Grading Tool in Action
Sustainability Trends
Polymer capacity expected to increase
Polymer passthrough mechanism
Continued deployment of capital for organic growth
Alternative performance measures
Definitions
35
Strong performance since Vision 2020 strategy launch (in 2013)
5 year organic growth> GDP~
290 310
450
610
1,100 1,100
FY 12/13 FY 13/14 FY 14/15 FY 15/16 FY 16/17 FY 17/18
Kt tonnes (annualised)
Organic growth
Scale in polymer buying
1.8%
2.9%
GDP5 year CAGR
(weighted according to RPC’s destination
of sales)
RPC5 year CAGR (like-for-like sales)
Enhanced strategic buying position
~ 2013/14 growth based on volumes only* Revenue by destination
5263
155213
414
868
FY 12/13FY 13/14FY 14/15FY 15/16FY 16/17FY 17/18
Growth outside Europe
Revenue* £m (actual)
Enhanced geographic coverage
36
Strong performance since Vision 2020 strategy launch (in 2013)
An increasingly global Group
Manufacturing countriesCountries we sell to
34 countries 201817 countries 2013
Good cost based returns
Expected returns on
acquisitions
£mEnterprise value of acquisitions# 2,419Associated acquisition costs 41Cash costs of realising cost synergies 88
Invested amount 2,548EBIT year prior to acquisition 222Cost synergies – realised 90Cost synergies – anticipated 11Increase in central costs (15)Post synergy EBIT* 308Return on acquisitions 12.1%Post tax returns 9.3%
* Excludes commercial synergies and subsequent organic growth# Acquisitions generally done at below market average EBITDA multiples – see Appendix page 39
37
Strong performance since Vision 2020 strategy launch (in 2013)
£million 2017 / 18 2012 / 13 CAGR %
Revenue 3,748 982 31
EBITDA* 590 138 34
EBITDA % 15.7% 14.0% 170bps
EBIT* 425 92 36
EBIT % 11.3% 9.3% 200bps
RONOA % 27.2% 20.6% 660bps
ROCE % 14.8% 19.4% (460)bps
Basic EPS Adjusted 72.0p 28.4p 21
Basic EPS Statutory 61.6p 15.8p 31
• Expanding innovation capabilities and leveraging scale benefits
• Value adding acquisitions in a consolidating market:
Strengthening existing market positions and diversifying into attractive adjacent niche markets
Entering new geographies to enhance offering to multinational customers
Adding new products, technologies and recycling facilities
Delivering attractive synergies (re-investment in the business)
• Enhancing the Group’s strategic polymer buying position through building scale & flexibility
• Improvement in operational return profile with EBIT % up 200 bps compared to 2012 / 13
• ROCE maintained at a high level
P&L improvements versus 2012 / 13 Strategic performance to date
Vision 2020 strategy has delivered attractive growth and returns through disciplined allocation of capital
* = adjusted items see 49 for definitions
38
Focus on large customers and smaller accounts
Strong customer relationships remain key
Why customers choose RPC
• Innovative solutions
• Breadth of conversion technologies
• Scale and global footprint
• Providing security of supply
• Ability to manage turn-key projects
• Sector focused management teams
Diversified customer base
with +10,000 customers
Top 20 customers = 21% of revenue
Others
39
4x
6x
8x
10x
12x
14x
Oct-11 May-12 Jan-13 Sep-13 Apr-14 Dec-14 Aug-15 Apr-16 Nov-16 Jul-17 Mar-184x
6x
8x
10x
12x
14x
Core acquisition criteria Strategic fit Strength of incumbent management Financial track record Financial criteria:
• ROCE > WACC of RPC • Quantifiable cost and cash synergies• Impact on Group KPIs (ROS & RONOA)• Earnings accretion
Acquisitions generally concluded at below market average EBITDA multiples
Source:Mergermarket,company information
Overview (EV / EBITDA LTM)
2011-2015 Average 8.0x 2016-2018 Average 9.7x
Sector trading multiples
RPC major transactions =
Transaction multiples
Adding value Improving RPC’s overall commercial position Improving RPC’s strategic buying position Realising cost synergies (including procurement) Enhancing performance and innovation focus of acquired
businesses
Disciplined and selective approach to acquisitions
40
RPC divisions Strategic business units
Decentralised organisation enhances integration capability
“Mini RPC” sector management approach matching industry structure
Quality businesses acquired with key management retained
Central back office and procurement functions strengthened and scalable
Multiple growth platforms with strong divisional leadership teams - larger acquisitions spread in time and in different parts of the organisation
Proven track record of quickly integrating businesses and realising associated synergies
41
Commitment to our people
350
450
550
650
750
850
950
1,050
2015 / 16 2016 / 17 2017 / 18
Reportable accident frequency rate (RAFR)*
Health & Safety
* number of accidents resulting in more than three days off work, excluding accidents where an employee is travelling to or from work, divided by average number of employees x 100k
• Health & safety: • Number 1 priority for RPC; further reduction in RAFR• Firmly believe that we can continue to reduce accidents
• Sharesave:• New annual schemes launched across 23 countries• Take up of 4,468 employees (23%)
• Future skills:• Apprentice training schemes established across many sites • International Graduate Development Programme• Succession plans in place across the organisation• Gold and silver training programmes to develop key talent and
realise full potential• Range of talent development training programmes
RPC commitment to its employees
42
Adjusted Group PBIT
(100%)
(12.5%)
Bonus can be reduced by FCF
and/or ROCE
Adjusted Basic EPS(2/3)
TSR(1/3)
(20%)
PSP can be reduced by
RONOA
2017/18
2017
Adjusted Group PBIT(60%)
2018/19
2018
Free Cash Flow(30%)
RONOA (10%)
ROCE(20%)
TSR(40%)
Adj. Basic EPS(40%)
(12.5%)
Annual Bonus Plan
PSP Awards
• Profits still important, but reduced emphasis –weighting on PBIT reduced from 100% to 60%
• Return measure in the bonus – RONOA used as a key KPI of the business, important to retain it within the incentive structure (following its removal from the PSP, see below)
• Reduced emphasis on profits – weighting on EPS reduced from 67% to 40%
• Increased weighting on TSR – weighting on external measure increased from 33% to 40% (now equal weighting with EPS)
• ROCE introduced as a primary measure – well understood and accepted return based measure for the PSP
Remuneration PolicyChanges for 2018/19
43
Sustainability Trends: Circular Grading Tool in ActionRedesign of Westland lawn spreader
• Redesigned by RPC
• 40% lighter pack
• Easier to recycle – increase in RecyClass grading from D to C
• No change in functionality
• Reduction in parts from nine to three
• Easier to manufacture
44
Sustainability TrendsPlastic will remain an attractive packaging material
Its benefits: Light weight – reducing transport costs of packaged goods
Strength and durability – ideal for effective product protection
Versatility – can be moulded or formed into just about any shape – enhanced marketing opportunities and transport efficiency
Low carbon – less energy used and less carbon emitted during the production process
Recyclability – over 90% of plastic based products currently on the UK market are recyclable – those that are not are where plastics are combined with other materials e.g. foil laminates
Ability to reduce food waste through extended the shelf-life of both fresh and processed food
Expect a move from plastic to plastic as opposed to other materials
45
Polymer pass-through mechanism
Purchase price Sales price
• Contracts with a ‘pass-through’ clause provide for the regular re-set of sales prices according to movements in polymer prices
• Good track record of pass-through to customers
• Sales prices will ‘catch up’ with polymer price movements, but with a time lag
• In times of rising prices, there will be a profit headwind due to the purchase price being current but revenue being based on prices from previous periods
• In times of falling prices, there will be a profit tailwind
• Contractual pass-through clauses in place with re-set taking place typically every 3-4 months
Polymer headwind Polymer tailwind
Illustrative example
Time
46
Polymer capacity expected to increase
• Capacity continues to grow and outpace demand
• Ability to source from outside Europe will become a key competitive advantage
• RPC’s scale, extensive network and flexibility provide a leading position from which to access global markets
• Key capacity additions are North America and Middle East, both targeting exports as markets globalise. China will look to become self-sufficient in PP, freeing capacity for other geographies
RPC’s European operations are well placed to take advantage of global markets
70%
75%
80%
85%
90%
95%
100%
120135150165180195210225240255
2013 2014 2015 2016 2017 2018 2019 2020 2021
Global capacity utilisation polymer industryPP and PETONNES (M) OPERATING RATE %
Operating rate Actual demand Free capacity Forecast demand
Source: IHS Markit
47
Continued deployment of capital for organic growth
36 42 4983
114
250
3350 52
93
128
42 5474
130162 1751.6x
1.5x1.4x
1.3x
1.7x
DepreciationMaintenance related capexGrowth related capex
£m’s
2013 / 14 2014 / 15 2015 / 16 2016 / 17 2017 / 18 2018 / 19
Revenue £1,047 £1,222 £1,642 £2,747 £3,748 Technicalguidance
Capex to revenue 6.5% 7.6% 6.2% 6.4% 6.4%
Capex / depreciation:
circa
circa1.4x
48
In the reporting of financial information, the directors have adopted various Alternative Performance Measures (APMs), previously termed Non-GAAP measures as those not defined or specified under International Financial Reporting Standards (IFRS).These measures are not defined by IFRS and therefore may not be directly comparable with other companies’ APMs, including those in the Group’s industry.The principal alternative performance measures used in this presentation are: • adjusted operating profit; • adjusted earnings before interest, tax, depreciation and amortisation (‘EBITDA’); • return on sales;• adjusted profit before tax; • adjusted basic earnings per share;• organic sales growth;• free cash flow; • adjusted operating cash conversion; • return on net operating assets; • return on capital employed;• working capital as a % of sales; • net debt; and• net debt to EBITDA.These measures exclude the charge for customer relationships amortisation, acquisition related items and any associated tax, where relevant. Acquisition related items comprise deferred consideration payments relating to the retention of former owners of businesses acquired, transaction costs and expenses and adjustments to previously estimated earn outs. Customer relationships amortisation, acquisition related items and any associated tax are items which are not taken into account by management when assessing the results of the business as they are considered by management to form part of the total spend on acquisitions or are non-cash items resulting from acquisitions and therefore do not relate to the underlying operating performance and distort comparability between businesses and reporting periods. Accordingly, these items are removed in calculating the profitability measures by which management assess the performance of the Group. Many of the measures include proforma adjustments for both acquisitions and disposals to allow comparability between accounting periods. Other non-GAAP measures are based on or derived from the non-GAAP measures noted above. All alternative performance measures in this presentation have been calculated consistently with the methods applied and disclosed in the 2016/17 Annual Report.
Alternative performance measures
49
Definitions
Expense Description
Fitter for the Future All expenditure related to a business improvement programme announced before the Vision 2020 Focused Growth Strategy, which was centred on rationalising RPC’s European manufacturing footprint, optimising its business portfolio and realised value for the Group by disposing of its non-core businesses and redundant properties. This scheme was largely completed by the end of the 2014/15 financial year.
Acquisition related expenditure The advisors fees and other expenses directly relating to the Group’s completed acquisitions.
Contingent consideration on earn-outs
The remuneration earned by the shareholders of Ace and other acquisitions who must remain as employees of the Group for the duration of the earn-out period to qualify for the remuneration. It also includes adjustments related to the current expectation of the final payment.
Integration costs Costs relate to the integration of the Promens, GCS and BPI businesses into the RPC organisation, including related restructuring, redundancy, closure costs and impairment charges.
Other integration and adjusting items
Includes other items such as start up costs. It also includes restructuring, redundancy and closure costs of other business optimisation programmes not directly affected by the Promens, GCS and BPI integration and advisors fees directly relating to the Group’s aborted acquisition processes.
Amortisation – acquired intangible assets
Relates to amortisation of intangible assets such as brands and customer relationships related to acquired business (amortised to the income statement on a straight-line basis over their estimated useful life).
Other adjusting items Other immaterial non underlying costs including the pension admin costs on closed DB schemes.
Adjusting finance costs Includes finance charges related to the defined benefit pension schemes and the Ace contingent consideration finance cost and the associated foreign exchange impact on the US dollar liability.
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Definitions (continued)
Category Description
Organic growth Period-on-period revenue change adjusted for constant exchange rates and polymer prices, pro forma for acquisitions completed in the both periods (with the equivalent periods in both years under comparison) and adjusted for disposals.
ROCE ROCE is measured over the relevant period (annualised for half year results) and normalised for the effect of acquisitions, is adjusted operating profit for continuing operations, 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.
RONOA RONOA is measured over the relevant period (annualised for half year results) and normalised for the effect of acquisitions, is adjusted operating profit for continuing operations divided by the average of opening and closing property plant and equipment and working capital for the year concerned. Comparatives are restated to include acquisitions on a pro forma basis.
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Forward looking statementsThis 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 the approval of this presentation 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. The Group undertakes no obligation to update these forward-looking statements and nothing in this presentation should be construed as a profit forecast. Past performance is no guide to future performance and persons needing advice should consult an independent financial advisor.
Nothing in this presentation shall constitute, in any jurisdiction, an offer or solicitation to sell or purchase any securities or other financial instruments, nor shall it constitute a recommendation or advice in respect of any securities or other financial instruments or any other matter.
