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RPC Group Share Discussion Threads
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|Ed 123 : I think that was the caveat in the first line of my comment ;-)
And you're right.|
|Thanks, Jeffian. :-)
Thursday will be interesting and, I think, helpful to holders.|
|Thanks, Ed123. On reflection, I think the "aggressive accounting" they refer to is probably related to the way acquisition costs and revaluations of acquired assets are written off in the year of acquisition and treated as "exceptional" costs (i.e. one-offs that won't reappear in following years). The difficulty if you make acquisitions year after year is that you never get to see the "underlying" profits. Looking at the 2016 accounts, for example, the divi of 17.1p was barely covered by statutory eps of 19.4p whereas they claim the "adjusted" eps is 43.3p. You have to believe that, had they made no subsequent acquisitions, statutory reported eps would be at least 43.4p. Similar deductions of "exceptional" costs are made before calculating free cash flow and Return on Capital. If that is the issue, that's what the auditors are there for and, in my personal experience, one has to work quite hard to convince the auditors.
My personal opinion is that this is the sort of "shock" report brokers like to produce to raise their profile (as it seems to have done here!). I hadn't heard of NT but I see that they are a US financial services company - an animal not unknown to use "aggressive" tactics themselves, I believe!|
So no institution playing this to the downside for the time being.
They can short up to 2 million shares each without having to declare.
Could be any number of them shorting at <0.5%. We have no way of knowing.|
|No reported short positions (of 0.5% or more) in RPC as far as I can see.
So no institution playing this to the downside for the time being.|
I can't help you on any detail from Northern Trust. I don't have any.
What I do have is ..... RPC's markets are growing, through a trend of switching from glass to plastic and from a global demographic trend of more people buying product in containers. RPC is big and can lead the way in offering competitive pricing. This puts a squeeze on the small producers, who can feel themselves pressured to point of selling out. RPC can and does grow itself, digesting the minnows.
Looking at RPC's takeovers, Northern appear to be saying, this can continue as long as the market supports the rights issues. If RPC's share price falls, if it can't get its next issue away without a good chunk of it ending with the underwriters, it starts to unwind. RPC would then need to offer a greater number of shares to buy each smaller competitor and the economics of this part of the business model could reach an end point - at which, with the debt and a more conservative accounting approach (to do with goodwill amortisation?), RPC's market cap would look stretched at 900p (the price when Northern questioned RPC?).
My instinct is to at least query, if not doubt, institutions such as Northern - after all, they exist to make money, not to be kind to the wider investment community. However, if Northern succeed in undermining confidence in RPC, then Northern's prediction will come to pass.
And my own position? I may not be happy with Northern but I must acknowledge I am only a little person. I must bend with the wind. Hence I sold out. Will recycle into something seemingly safer.
Hope that helps a bit and hope you win here.|
|I haven't yet worked out whether Northern Trust have a case or whether they are scaremongering. It would have been nice to see specific examples and figures (maybe these are included in the full report were not included in the FT edited highlights?).
As I posted previously, I don't buy NT's main premise that RPC are in "a structurally weak position, caught between a weakening relative price position with customers and its labour cost inflation". Pricing, and the ability to pass on rising costs to customers, has always been a usp for RPC which has particularly attracted me. They then go on to talk about "some of the most aggressive accounting we have seen". Examples? "a history of weak free cash flow generation (FCF)". Really? Is this huff and puff or can someone put up the figures to back up this argument?|
|Let's see what the update brings. Northern trust have their view and its spooked a few. But ultimately it's the figures that count going forward. For those feeling brave you can pick up a real bargain|
Take care. Look back on this thread for the Northern Trust comment.
Countering that, I'm expecting a bullish update on Thursday.
Fwiw, the Northern Trust event spooked me enough to exit. No advice intended.
|been watching since these were tipped the other month still dropping for entry point|
|The new shares will cause a 20% eps dilution due to rights issue timing.
(this should not hold back the share price)|
|sorry Mornington should read EPS!|
|Mornington, when you say 2017 is the first year that the EPS will be down, are you referring to the dilution effect of 25% more shares in issues frim rights? Do you have any broker forecast figures for year end march 2017?|
|company seems to be doing well
and the latest acq also looks a good deal
but 2017 is the first year for a long time that the eps will be down
so I wont be surprised if share price settles for a while
that may take the whole of this year|
No harm in questioning, but RPCs record of success with previous acquisitions is, for me anyway, very reassuring. I don't see why the latest purchase should be any different.|
|Let's hope the end is not "in tears"!
I bought this on the basis of the fragmented market and the consolidation play.
I was surprised they "lurched" into the US which can be a graveyard for UK companies (mostly in the retail sector) but held on for the diversification of currency in a weak GBP world.
The upside looks like about £11 to me so, on the risk/reward basis, it still looks good.
I make chart support about 850'ish.|
|Well after the Enterprise Inns debacle, you'd have thought I would learn, wouldn't you?!
The issue with ETI and PUB was what happens when the merry-go-round stops (in those cases they hoovered up most of the market between them and simply ran out of things to buy!). The market RPC operate in is so fragmented we are nowhere near that point but one certainly needs to be looking at the question 'how will this all end?' (a question, incidentally, I posed in the header of my ETI thread but failed to answer!).|
|Ian, does it not remind you of the late 80's a little.
They reference once again further potential acquisitions.
Some in the market starting to question this perhaps?.|
|Well, over the years it has turned into my second largest equity investment and stands significantly 'overweight' in my portfolio, so I suppose I have a rose-tinted view. I haven't yet looked into the claims of 'aggressive accounting' but a quick skim of the article seems to come down to a perceived squeeze between a lack of 'pricing power' and rising costs. I don't know about the rest but one of the things I've always liked about RPC is the strength of its pricing power, so one of us is getting it wrong! Many of RPC's customers are tied to it by design and patent issues (e.g. the Tassimo coffee capsules developed for Kraft/Braun) and its contracts also provide for price adjustment (in both directions) to reflect changes in oil and polymer prices, so whatever else is wrong, I can't believe that "pricing power" is one of them.|
|Phil, many thanks for that post yesterday, off my list having read.|
|A bit of short- trading jiggery here perhaps? And where has Spoole5 come from.|
|Thing is all the top brokers are afraid to criticise the company because of the constant flow of deals they want to earn fees from. This could be a house of cards waiting to fall down.|
|search FT report , Northern Trust accusing co of aggressive accounting practices !?
Some damning statement really and clearly whats done the damage today for sure
i wonder what the company will have to say about that......cause i think they might have to address it|
|Yes, pre-close trading statement on 30th|