Rpc Share Discussion Threads

[jonwig] 06/6/2018 08:42

Not a holder, but price now looks interesting!
here's the FT Opening Quote e-mail:

A regulatory crackdown on single-use plastics, in the UK and in Europe, has raised many questions. Last Wednesday, with much of the City on its half-term holiday, the main one was: “If straws have to be made out of paper from now on, can you still get bendy ones - or will they just go soggy?” A very good question - and one that stumped this commentator. But, today, with FTSE 250 packaging group RPC reporting full-year results, it’s more a case of: will its profits and revenues hold up… or will they just go soggy?

And, this morning, RPC has not been stumped. It has reported a 36 per cent rise in revenues, driven by acquisitions, which led to a commensurate 36 per cent rise in adjusted pre-tax profit, to £389m. Its most recent deal was the €75m acquisition of Nordfolien, which completed after the year end. On a statutory basis, pre-tax profit actually doubled to £317m - reflecting a “significant reduction in adjusting items” in the past year.

But revenues also grew organically, by 2.8 per cent, continuing RPC’s recent record of increasing its sales by around 3 per cent a year, excluding acquisitions. In China, organic revenue growth was 26 per cent, helping to lift revenues outside Europe to £831m, from £384m previously - now 22 per cent of the group total.

Cash flow generation was “robust”, too, with net cash flows from operating activities up 40 per cent to £386.7m. But free cash flow was lower than the prior year, at £229m, due to the “non-repeatability of working capital related cash synergies”.

Much of this improvement had been expected after a trading update in late March said the positive trading trends outlined in its third quarter update had continued, and revenue for the full year “is expected to have grown significantly versus last year, driven by organic growth and aided by acquisitions, polymer price and foreign exchange tailwinds”.

Back then, RPC had also flagged that profitability and cash generation - before and after exceptional items - were set to meet management expectations.

However, that was not enough to reverse a 20 per cent fall in RPC’s share price since the end of September, after governments and regulators stepped up their fight against plastic waste.

As one of Europe’s largest manufacturers of plastic packaging, the market has expected RPC’s businesses to be directly affected. Recent EU proposals target single-use plastics, such as cutlery and straws, and calls for all plastic bottles to be recycled by 2025.

So, today, it is the outlook that investors will be drinking in, not last year’s performance. RPC chief executive Pim Vervaat insisted the group was well placed to benefit from opportunities driven by the recent sustainability trends, and from e-commerce. He said RPC was still expecting “through the cycle underlying organic growth” to be ahead of GDP growth, and adjusted operating profit in the core businesses to improve - but more slowly. RPC expects it be about about £50m higher, but only by the financial year ending March 2021.

Some analysts agree. Hargreaves Lansdown reckons that, longer term, RPC’s focus on innovative design should mean it is well placed to weather a more difficult plastics environment. Tougher regulation may even improve its position relative to smaller competitors.

[shauney2] 06/6/2018 08:38

I guess the fact that FCF is down is spooking some.Stops getting hit.
Looks good value now.Peel Hunt keep their buy rating and 1250p target.

[prokartace] 06/6/2018 08:32

Need some directors to buy here to make a point

[ali47fish] 06/6/2018 08:28

what am i missing here the share price is down? not a rights issue is it?

[sandeep67] 06/6/2018 08:18

20p Div makes this 5% yield. Awesome

[asturius101] 06/6/2018 08:14

wtf unbelievable - idiots selling at a huge loss no doubt...picked up a few more at 7 odd.

[mister md] 06/6/2018 08:09

Plastics in the naughty corner along with Tobacco etc

[sogoesit] 06/6/2018 08:06

Yep... and there you have it, down 10% at open.
Obviously, carp figures!
Lol!

[asturius101] 06/6/2018 07:55

jeffian no disrespect but your post is somewhat ignorant and skewed. But i like the graph.

[asturius101] 06/6/2018 07:52

yes, very decent

[18bt] 06/6/2018 07:26

Seem to have beaten mkt forecasts on T/O, PBT, EPS and Div. This is now sitting on a prospective PER of under 11 and a yield of getting on for 4%. That looks v good value IMHO unless we beleive that the end of hydrocarbons is happening in the next 10 years.

[dozey3] 06/6/2018 07:24

Results are very reassuring:
Everything going in the right direction and dividend up by 17%, 25th year of increases, what’s not to like?

[sogoesit] 06/6/2018 07:22

Good figures on the face of it; probably beating expectations but the market probably will dislike something about all this... as I'm sure the end of the hydrocarbon era is "approaching" according to most pundits.
Will the era end by falling off a cliff or will we just be driving horses and carriages again or felling forests to wrap all our food and veggies in? And women, what will they be doing having their cosmetics delivered "au naturel" (as avocados in their skin or making trips to mud baths)?

Who knows? But the market thinks it will be "soon", a relatively relative term.
In the mean time the dividend goes up but will the share price drop to keep the yield constant for eternity?

[mauricemonkey] 06/6/2018 01:37

We buy company for £9 per share.
We buy back shares at £8 per share.
For each share, said company actually cost 11% less.
Or am I missing something - all advice appreciated :)

[jeffian] 06/6/2018 01:00

"FWIW I disagree with what you all say abt buybacks - they do work when used properly."

Examples?

The problem is, Boards don't control the share price; the markets do. Reducing the shares in issue raises the eps, nav and dividends which should, theoretically, raise the share price but how often does it? Enterprise Inns spent nearly £1bn(!) buying back their own shares at up to £8/share......before they crashed to 26p. Would shareholders rather have had that £1bn returned to them as special divi or returns of capital? They would now!

Re RPC -
"On 19 July 2017 the Group announced an inaugural share buyback programme of up to £100m. Under the programme to date, 1.38 million shares have been acquired for a total consideration of £12.4 million." Errm..........

[fez77] 05/6/2018 20:44

A bit old news now, but Motley Fool article from 31 May:-

Plastic people
RPC Group (LSE: RPC) has also given investors a bumpy ride lately, its share price down 15% in the last six months. It specialises in rigid plastics packaging which is now threatened by the war on the growing tide of waste clogging up the planet.

The threat overshadowed a strong Q3 for the FTSE 250 group, which posted a 31% rise in year-on-year revenues to £898m, boosted by acquisitions and organic growth. Management also said it was working with governments to reduce plastic waste and noted that many of its products are already recyclable.

Easy as RPC
My Foolish colleague Alan Oscroft is a fan of the £3.23bn group, noting that RPC has increased its dividend for each of the last 25 years. It currently offers a forecast yield of 3.8%, covered 2.5 times, with operating margins of 10.7%.

Its growth outlook seems solid, with earnings per share forecast to increase 8% in the year to 31 March 2019, and 6% the year after. By then, the yield could be 4.1%. It has also gifted shareholders £100m in its buyback programme over the last year. Despite this, it trades at just 10.3 times earnings. RPC appears to have it wrapped.

[asturius101] 05/6/2018 17:47

well fingers crossed for tomorrow - avg is now 773 after adding this afternoon - gla

[asturius101] 05/6/2018 17:44

FWIW I disagree with what you all say abt buybacks - they do work when used properly. Imo RPC are doing a good job with the buybacks.

[redartbmud] 05/6/2018 14:54

Buybacks are a waste of money, and they need to be factored into cash balances when looking at opening and closing numbers for the year, if that is how you measure.

[bouleversee] 05/6/2018 14:51

Great. Many thanks, though I would have preferred fewer buybacks and less debt. I have a similar attachment to FSJ which I have held for a long time. Here's to good news tomorrow, then.

[jeffian] 05/6/2018 13:32

My simple approach is to look at net cash balances at the beginning of the period vs that at the end. If the profits are banked, it should go up accordingly. If it goes down, the cashflow statement will show you where it has been spent. In the case of RPC, because it has been so acquisitive, that is where the money goes and I suppose it is up to you to decide whether that is money well spent or, like Northern Trust, that it obscures the performance of the underlying business because you are never quite comparing like with like. I have been a long-term holder of RPC for ages and take the former view, believing that they are adept at growing market share, cutting overheads, controlling costs through ever-greater buying power and have built up a very significant holding by taking up every Rights Issue in full and more. As for analysts, it may produce a warm glow if they agree with me but, to be honest, I don't set much store by them. My long-term horizons (I have shares in my portfolio I have held for decades) mean that I am not that interested in short-term fluctuations.

[bouleversee] 05/6/2018 12:55

Jeffian -

Thanks yet again. So when you find the cashflow statement, how do you judge it? IIRC RPC has quite a substantial debt but in what context? What criteria should we apply? And what ROCE should we be looking for?


Cole Hathorn's recommendation is very encouraging. Do you know how reliable he is?
I don't claim any expertise but have noticed how supposedly expert opinion varies. The other day, I had a hunch to buy Johnson Matthey and top up my small holding of Burberry but Tempus in The Times advised "avoid" so I didn't buy. Needless to say, they have both gone up and I have seen some "buy" recs. so in the end one is on one's own. Where is that monkey with the pin?

[jeffian] 05/6/2018 11:40

This from Citywire -



"Rerating potential at RPC, says Jefferies

Concerns around plastics manufacturers like RPC (RPC) are ‘overdone’, according to Jefferies, which believes the company is in line for a rerating.

Analyst Cole Hathorn retained his ‘buy’ recommendation and target price of £11.50 on the shares, which fell 2% to 773.8p yesterday.

Hathorn is predicting full-year results later this week will see RPC reiterate that its European integration programme is now substantially complete and confirm cost savings.

‘RPC is the European plastic packaging leader with a c.6% market share in a fragmented industry,’ he said. ‘RPC polymer purchasing scale and production flexibility is a key competitive advantage, allowing RPC to buy polymer around 10% to 20% cheaper than peers. With both organic and further accretive mergers and acquisitions opportunities, we remain confident in RPC delivering medium-term growth.

‘Trading on a discount to EU peers, we think concerns are overdone and we see rerating upside.’ "

[jeffian] 05/6/2018 11:36

#1777,

bouleversee,
Yes, many AR's are impenetrable (and in some cases, one suspects, designed to be that way!) so I find that the trick is to focus on key elements that interest you and not try to absorb the whole thing in detail. Being an old-fashioned cove, I still tend to set store by the P/E ratio so I look at earnings per share and the notes explaining how that is calculated. If they use an 'adjusted' figure, there will be a note at the back explaining what 'exceptional' or other figures they have added or subtracted from the 'basic'. I look at the balance sheet to check debts and assets and, in the latter case, whether those assets are 'tangible' (real!) or 'intangible'. Finally, and increasingly importantly for me, I look at the cashflow statement. Accounts are famously 'adaptable' to show a picture but you can't hide cash - it's either flowing in or it isn't. There is a company called Dialight which makes/sells energy-efficient lighting for extreme locations. Every year it reported ever-increasing profits and paid out dividends but, mysteriously it managed to turn a net cash pile of £15m into a huge debt - it turned out it was capitalising all its R&D expenditure as 'exceptional' when actually it was core business expenditure - so I sold at £13 and the shares subsequently fell below £4. Cash is king for me.

[asturius101] 05/6/2018 08:19

got some in the late 70's - good luck all