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Shares in RPC jump 6% as company announces £100m share buyback programme

19th July 2017 Print

As RPC updates the market Helal Miah, investment research analyst at The Share Centre, explains what it means for investors.

“Plastic packaging provider RPC’s Q1 trading update indicated that trading conditions continue to be encouraging as revenues came in at approximately £960m, materially ahead of the same period last year driven by organic growth, acquisitions and favourable foreign currency movements.

“Despite the fact there has been a time lag effect on passing through higher polymer prices, the group said this has been offset by translating overseas earnings back to sterling. There was more good news for investors as management highlighted that margins and profitability are ahead of expectations, cash flow generation remains on target while cost synergies from acquisitions are progressing in-line with expectations.

“Given the pace of recent acquisition activity, RPC’s management seemed to suggest today that attention will be turned towards delivering on cost synergies and as a result, the company does not anticipate further acquisitions beyond what it has already announced. At the same time management believe the current share price is undervalued and as part of its capital return programme, RPC have announced a share buyback programme of up to £100m. Investors have taken to this announcement very well, reflected in the share price being driven up by around 6% in early trade. 

“RPC’s share price has had a fairly turbulent 2017 so far, despite the group reporting good full year and interim numbers. This has been caused chiefly by certain analysts taking a dim view of management’s recent acquisitions and accounting practices. However, this morning’s statement that the management’s focus will now turn to integrating current acquisitions over new ones should provide some welcome relief.

“We continue to look upon the shares and the sector favourably. It is being driven forward by long term structural developments such as the ongoing transition towards online shopping and the need for packaging materials. All the while, this is a company that continues to build market share and economies of scale. Combine all of this with the progressive dividend, we continue to recommend RPC as a ‘buy’ for investors looking for capital growth and some income and who are willing to accept a medium to higher level of risk.”