Rpc Share Discussion Threads

[broadwood] 30/3/2017 07:32

Plc ("RPC" or the "Group"), a leading plastic products design and engineering company for both packaging and selected non-packaging markets,

RPC Group said revenues for FY 2017 were anticipated to be significantly ahead of last year, reflecting contributions from acquisitions and continued underlying organic growth.

"The Group's overall performance has been encouraging with the adjusted operating profit for the year ahead of management expectations," said the company in a pre-close trading statement.

RPC said its financial position remained robust, with good cash flow development.

Net proceeds of the rights issue announced in February had been received and, following completion of the Letica acquisition, the group retained significant headroom under its debt facilities.

These debt facilities included a new $750m multi-currency term-loan facility.

CEO Pim Vervaat was pleased with RPC's trading performance, and successful integration of acquired businesses.

"The board will continue to implement the Vision 2020 focused growth strategy, in which leading design and engineering capabilities create value in chosen market segments," said Vervaat.

"At the same time the Group is looking to grow selectively in a consolidating industry whilst further enhancing its strategic buying position."

[broadwood] 30/3/2017 07:28

RPC Group sees FY revenues significantly ahead

[tompaul] 29/3/2017 16:16

The comments from Northern are to be considered but tempered against the latest brokers comments (Source Hargreaves Landsdown).

Deutsche Bank - Buy - 1140p - 23rd March.
Jefferies Int. - Buy - 1150p - 9th March.
Peel Hunt - Buy - 1135p - 2nd March.

There are other Buy/Outperform/Overweights in Jan and Feb but the general consensus is Buy to Strong Buy.

I know Brokers can get it wrong but there are no Neutrals or Sells in the last 6 months. Interesting, so does Northern know something they do not.

[sogoesit] 28/3/2017 14:38

Ed 123 : I think that was the caveat in the first line of my comment ;-)
And you're right.

[ed 123] 27/3/2017 18:28

Thanks, Jeffian. :-)

Thursday will be interesting and, I think, helpful to holders.

[jeffian] 27/3/2017 17:56

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!

[ed 123] 27/3/2017 17:52

Hi Sogoesit.

You wrote,

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.

[sogoesit] 27/3/2017 17:07

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.

[ed 123] 27/3/2017 16:43

Hi Jeffian.

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.

[jeffian] 27/3/2017 15:16

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?

[esther1975] 27/3/2017 15:02

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

[ed 123] 27/3/2017 14:16

Barbel3.

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.

Good luck.

[barbel3] 25/3/2017 01:45

been watching since these were tipped the other month still dropping for entry point

[mellorscarthwaite] 24/3/2017 22:08

The new shares will cause a 20% eps dilution due to rights issue timing.
(this should not hold back the share price)

[spooner27] 24/3/2017 17:37

sorry Mornington should read EPS!

[spooner27] 24/3/2017 17:11

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?

[mornington crescent] 24/3/2017 14:26

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

[cheshire pete] 24/3/2017 08:56

EssentialInvestor,
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.

[sogoesit] 23/3/2017 09:53

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.

[jeffian] 23/3/2017 09:38

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!).

[essentialinvestor] 23/3/2017 09:19

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?.

[jeffian] 23/3/2017 09:17

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.

[essentialinvestor] 23/3/2017 08:59

Phil, many thanks for that post yesterday, off my list having read.