Ketchup bottles-to-yoghurt pots maker RPC (RPC) has smashed half year pre-tax profit expectations, sending its share price up 9% to £10.93.
Adjusted pre-tax profit has increased by 66% to £125.5m and free cash flow has more than doubled to £118.2m.
WHY EARNINGS HAVE ROCKETED
Its earnings have been given a boost by two recent acquisitions and cost synergies are being achieved ahead of plan.
Shareholders are also being rewarded by a 35% hike in the half year dividend to 6.5p per share.
The primary boost to revenue has come from the acquisition of dispensing systems specialist GCS which completed in March.
The other acquisition, British Polythene Industries, only completed in August so didn’t have much time to contribute to RPC’s half year period ending 30 September.
RPC now upgrades acquisition synergy forecasts from €92m to a minimum of €100m per year.
Excluding acquisitions, RPC achieved 3% underlying organic sales growth in the period.
EARNINGS UPGRADES LOOK LIKELY
Panmure Gordon analysts says he is going to review his earnings forecasts and indicates current year pre-tax profit estimates may be upgraded by 6%.
Writing ahead of the share price jump this morning, he says: ‘RPC’s forward price to earnings (12 month rolling basis) is 16.1x, up from 11.8x (Oct-15).
'Whilst the discount to its peers is now below 10% (>30% a year ago), the superior organic growth, earnings accretive pan-European M&A opportunities, low level of leverage and earnings upgrades underpin further share price momentum.’
WE ARE BIG FANS OF RPC
Regular readers of Shares should be familiar with RPC as we’ve flagged in many times over the years.
The most recent mention was in the 13 October 2016 issue where we said to buy at 992p. Author Tom Sieber wrote: ‘We believe shares have further to rise despite impressive past few years’.
