RPC Group’s annual profit doubled, but shares just tumbled

Annual profit more than doubled at plastic packaging firm RPC Group, but sceptical investors caused the company’s share price to tumble.

The figures

Profit before tax increased 105 per cent to £154.7m in the year to the end of March due partly to acquisitions made since the launch of a new strategy in 2013. The group acquired Letica Corporation, British Polythene Industries and Global Closure Systems during the year.

The FTSE 250 firm’s revenue grew 67 per cent to £2.7bn, and the full-year dividend was raised 50 per cent to 24p per share, marking the 24th consecutive year of dividend growth.

Shares were down 7.03 per cent at 790.25p in afternoon trading.

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Why it’s interesting

The figures suggest RPC’s strategy is working well, but Russ Mould, investment director at AJ Bell, said investors are reading between the lines.

“There are many ‘red flags’, or warning signs that seasoned investors watch out for, with multiple acquisitions, frequent restatement of earnings figures and triggers for management bonuses that rely on adjusted earnings numbers,” he said.

“RPC Group’s full-year figures feature all three, which may explain the sceptical response to today’s numbers, even though adjusted operating profit of £308m exceeded even the upgraded guidance provided by chief executive Pim Vervaat back in March.”

Along with acquisitions performing “better than expected”, the strong growth was helped by the depreciation of sterling since the vote to leave the European Union, which boosted RPC’s operating profit by £29m.

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What RPC said

Vervaat said the implementation of the company’s growth strategy is “progressing well”: “Going forward, the group continues to explore opportunities for growth in line with its strategy. The new financial year has started in line with management’s expectations.”