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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
---|---|---|---|---|---|
Dcc Plc | LSE:DCC | London | Ordinary Share | IE0002424939 | ORD EUR0.25 (CDI) |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
-10.00 | -0.18% | 5,515.00 | 5,515.00 | 5,520.00 | 5,560.00 | 5,500.00 | 5,525.00 | 26,661 | 13:29:35 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
Offices-holdng Companies,nec | 22.2B | 334.02M | 3.3818 | 16.31 | 5.45B |
TIDMDCC
RNS Number : 3787W
DCC PLC
14 November 2017
14 November 2017
DCC Reports Strong First Half of Performance and Development
DCC, the leading international sales, marketing and support services group, today announced its results for the six months ended 30 September 2017.
Highlights 2017 2016 % change ------------------------------------ -------------- ----------- --------- DCC LPG volumes (thousand tonnes1) 645.6kT 555.4kT +16.2% ------------------------------------ -------------- ----------- --------- DCC Retail & Oil volumes (billion litres) 6.011bn 5.581bn +7.7% ------------------------------------ -------------- ----------- --------- Revenue - continuing2 (ex DCC LPG and DCC Retail & Oil) GBP1.616bn GBP1.389bn +16.4% ------------------------------------ -------------- ----------- --------- Adjusted operating profit3 - continuing2 GBP122.5m GBP107.1m +14.4% ------------------------------------ -------------- ----------- --------- Adjusted earnings per share3 - continuing2 95.5p 82.2p +16.1% ------------------------------------ -------------- ----------- --------- Interim dividend 40.89p 37.17p +10.0% ------------------------------------ -------------- ----------- --------- Operating cash flow GBP84.0m GBP141.0m ------------------------------------ -------------- ----------- --------- Net debt GBP112.3m GBP112.2m ------------------------------------ -------------- ----------- ---------
-- Strong first half performance with Group adjusted operating profit on continuing activities increasing by 14.4% (up 9.7% on a constant currency basis) to GBP122.5 million, with all divisions recording growth on the prior year.
-- Adjusted earnings per share on continuing activities up 16.1% (11.5% ahead on a constant currency basis) to 95.5 pence.
-- Interim dividend increased by 10.0% to 40.89 pence per share.
-- The Group continues to be very active from a development perspective. Recently, DCC Retail & Oil completed the acquisition of Esso Retail Norway and DCC Technology completed the acquisition of MTR. DCC LPG remains on schedule to complete the acquisition of Shell Hong Kong & Macau before the end of the financial year.
-- In addition, on 7 November 2017, DCC LPG announced its agreement to acquire Retail West from NGL Energy Partners, for an enterprise value of $200 million (GBP152 million). This will be DCC LPG's first step into the very large US LPG market and is DCC's first substantial acquisition in North America.
-- Reflecting the announced acquisition activity to date, the Group's cash spend on acquisitions in the current financial year will be approximately GBP550 million.
-- The Group reiterates its belief that the year ending 31 March 2018 will be another year of profit growth and development.
1 1 tonne of LPG equivalent to 1,969 litres of oil 2 Continuing operations exclude DCC Environmental which was disposed of in May 2017 3 Excluding net exceptionals and amortisation of intangible assets
Commenting on the results, Donal Murphy, Chief Executive, said:
"I am pleased to report that the first half of the year has been another very active and successful period for DCC. The business has performed strongly, with each of our divisions recording good growth, albeit in the seasonally less significant first half of the year.
DCC continues to be very active on the development front. The recent completion of the acquisitions of Esso Retail Norway and MTR demonstrate the continuing opportunity for DCC to redeploy the organic cash flow of the business into attractive acquisition opportunities in each of its chosen sectors. In addition, the recent announcement of the acquisition of Retail West marks another important milestone for the Group and will provide DCC with a substantial, high-quality, LPG footprint in the very large North American LPG market.
The Group continues to have the ambition and capacity for further development and, importantly, as DCC increases in scale and geographic reach, also has the opportunity to build substantial market positions in its chosen sectors.
The Group reiterates its belief that the year ending 31 March 2018 will be another year of profit growth and development."
Presentation of results and dial-in / webcast facility
There will be a presentation of these results to analysts and fund managers at 9.00 am today in the London Stock Exchange. The slides for this presentation can be downloaded from DCC's website, www.dcc.ie.
There will also be audio conference access to, and a live webcast of, the presentation. The access details for the presentation are:
Ireland: 1800 937 656 UK / International: +44 (0) 20 3427 1907 Passcode: 3489165 Webcast Link: https://edge.media-server.com/m6/p/do8jgz5d
This report, the webcast of the presentation and further information on DCC is available at www.dcc.ie.
For reference, please contact:
Donal Murphy, Chief Executive Tel: +353 1 2799 400 Fergal O'Dwyer, Chief Financial Officer Email: investorrelations@dcc.ie Kevin Lucey, Head of Capital Markets Web: www.dcc.ie For media enquiries: Powerscourt (Lisa Tel: +44 207 250 1446 Kavanagh)
Group Results
A summary of the Group's results for the six months ended 30 September 2017 is as follows:
2017 2016 GBP'm GBP'm % change Revenue - continuing operations(1) 6,449 5,507 +17.1% Adjusted operating profit(2) - continuing operations(1) DCC LPG 44.1 37.0 +19.2% DCC Retail & Oil 42.2 39.0 +8.0% DCC Healthcare 22.0 19.8 +11.6% DCC Technology 14.2 11.3 +25.8% Group adjusted operating profit(2) - continuing operations(1) 122.5 107.1 +14.4% Finance costs (net) and other (15.6) (16.3) Profit before net exceptionals, amortisation of intangible assets and tax 106.9 90.8 +17.8% Net exceptional items before tax 16.6 (2.5) Amortisation of intangible assets (20.5) (18.2) Profit before tax 103.0 70.1 +46.9% Taxation (13.2) (11.2) Profit after tax 89.8 58.9 +52.5% Profit after tax - discontinued operations 0.8 8.7 Non-controlling interests (1.9) (2.0) Attributable profit 88.7 65.6 Adjusted earnings per share(2) - continuing(1) 95.5 pence 82.2 pence +16.1% Adjusted earnings per share(2) 96.4 pence 92.1 pence Dividend per share 40.89 pence 37.17 pence +10.0% Operating cash flow 84.0 141.0 Net debt at 30 September 112.3 112.2 (1) Continuing operations excludes DCC Environmental which was disposed of in May 2017 (2) Excluding net exceptionals and amortisation of intangible assets
Revenue - continuing operations
Overall, Group revenue increased by 17.1% (13.2% ahead on a constant currency basis) to GBP6.4 billion.
Volumes in DCC LPG increased by 16.2% to 645,600 tonnes, driven principally by the acquisition of Gaz Européen which completed during the prior year. On a like-for-like basis, volumes were modestly ahead of the prior year, with good growth in Britain and Ireland. Reflecting acquisitions and the increased cost of product, DCC LPG's revenue increased by 36.5% (up 28.7% on a constant currency basis).
DCC Retail & Oil volumes increased by 7.7% to 6.0 billion litres, benefiting from the acquisition of Dansk Fuels which completed in November 2016. Organic volumes were in line with the prior year. Reflecting higher oil prices, DCC Retail & Oil's revenue increased by 15.5% (up 11.5% on a constant currency basis).
Revenue excluding DCC LPG and DCC Retail & Oil increased by 16.4% (up 13.7% on a constant currency basis) to GBP1.6 billion.
Group adjusted operating profit - continuing operations
Group adjusted operating profit from continuing operations increased by 14.4% to GBP122.5 million (9.7% ahead on a constant currency basis), in the seasonally less significant first half. The average sterling/euro translation rate for the six months ended 30 September 2017 of 1.1391 was 7.9% weaker than the average of 1.2364 in the comparative period. Substantially all of the constant currency operating profit growth was organic.
Operating profit in DCC LPG was 19.2% ahead of the prior year (11.5% ahead on a constant currency basis), despite the headwind of an increasing cost of product and colder weather conditions in the early part of the prior year, with strong profit growth in France and good performances in Britain, Ireland and Scandinavia.
Operating profit in DCC Retail & Oil was 8.0% ahead of the prior year (2.9% ahead on a constant currency basis), reflecting good organic profit growth from the oil distribution businesses in Denmark and Austria, and the retail and fuel card businesses also performing in line with expectations.
Operating profit in DCC Healthcare was 11.6% ahead of the prior year (10.9% ahead on a constant currency basis) and approximately one third of the constant currency growth was organic. DCC Vital benefited from a good performance in medical devices and also from the acquisition of Medisource, which completed in January 2017. DCC Health & Beauty Solutions again recorded very strong growth in nutritional products.
Operating profit in DCC Technology increased by 25.8% (24.9% ahead on a constant currency basis) in the seasonally less significant first half. The UK and Ireland business performed in line with expectations and benefited from the acquisition of Hammer, which completed in December 2016, and also benefited modestly from the acquisition of MTR in July 2017.
Finance costs (net)
Net finance costs decreased to GBP15.6 million (2016: GBP16.3 million), benefiting modestly from positive currency translation. The underlying finance costs of the Group are largely driven by the level of the Group's gross private placement debt, which was broadly in line with the prior year during the first half. In September 2017, the Group successfully completed the drawdown of a new GBP450 million private placement debt issuance which will result in an increase in the Group's gross debt for the second half of the year. Average net debt during the first half was GBP313 million compared to GBP262 million during the six months ended 30 September 2016.
Profit before net exceptional items, amortisation of intangible assets and tax
Profit before net exceptional items, amortisation of intangible assets and tax increased by 17.8% (13.0% ahead on a constant currency basis) to GBP106.9 million.
Net exceptional items and amortisation of intangible assets
The Group recorded a net exceptional gain before tax and non-controlling interests of GBP16.6 million in the first six months of the year.
The net gain principally reflects the exceptional gain of approximately GBP30 million recorded on the sale of DCC's environmental division which completed on 31 May 2017, offset by acquisition and restructuring costs.
Acquisition costs include the professional fees and tax costs (such as stamp duty) relating to the evaluation and completion of acquisition opportunities and amounted to GBP3.5 million. Restructuring costs amounted to GBP9.7 million and were principally incurred in the restructuring and integration work following the acquisition of Dansk Fuels and also the commissioning of the new national distribution centre in DCC Technology's UK business.
The charge for the amortisation of acquisition related intangible assets increased to GBP20.5 million from GBP18.2 million in the prior year, with the increase principally reflecting acquisitions completed in the prior year.
Profit before tax
Profit before tax increased by 46.9% to GBP103.0 million.
Taxation
The effective tax rate for the Group in the first half of the year of 18.0% is based on the anticipated mix of profits for the full year. This rate compares to a full year effective tax rate in the prior year of 17.5%. The increase is primarily due to an increase in the proportion of profits generated in Continental Europe.
Discontinued operations
The Group's discontinued operations represent the activities of DCC Environmental which was disposed of in May 2017.
Adjusted earnings per share
Adjusted earnings per share on a continuing basis increased by 16.1% (11.5% ahead on a constant currency basis) to 95.5 pence.
Total adjusted earnings per share increased by 4.6% (0.6% ahead on a constant currency basis) to 96.4 pence.
Dividend
The Board has decided to pay an interim dividend of 40.89 pence per share, which represents a 10% increase on the prior year interim dividend of 37.17 pence per share. This dividend will be paid on 11 December 2017 to shareholders on the register at the close of business on 24 November 2017.
Cash flow
As with its operating profit, the Group's operating cash flow is significantly weighted towards the second half of the year. The cash flow of the Group for the six months ended 30 September 2017 can be summarised as follows:
Six months ended 30 September 2017 2016 GBP'm GBP'm Adjusted operating profit 123.5 117.8 Increase in working capital (79.8) (17.0) Depreciation and other 40.3 40.2 Operating cash flow 84.0 141.0 Capital expenditure (net) (69.1) (59.8) Free cash flow 14.9 81.2 Net interest, tax paid and other (48.0) (42.1) Free cash flow after interest and tax (33.1) 39.1 Acquisitions (56.3) (32.8) Disposals 160.0 - Dividends (66.4) (55.7) Dividends paid to non-controlling interests - (5.1) Exceptional items (net) (15.2) (8.8) Share issues 3.3 2.1 Net outflow (7.7) (61.2) Opening net debt (121.9) (54.5) Translation and other 17.3 3.5 Closing net debt (112.3) (112.2)
Operating cash flow in the six months ended 30 September 2017 of GBP84.0 million compares to GBP141.0 million in the prior year. Working capital increased by GBP79.8 million over the six month period from 31 March 2017, reflecting seasonal requirements, although on a like-for-like basis the value of working capital at 30 September 2017 at negative GBP70 million was broadly similar to that at 30 September 2016. Overall working capital days at 30 September 2017 increased to negative 1.7 days sales from negative 2.9 days sales in the prior year, reflecting the acquisitions completed in the second half of the prior year of Gaz Européen, Dansk Fuels and Hammer, each of which have a positive working capital days profile.
Committed acquisitions, disposal and capital expenditure
Committed acquisition and continuing capital expenditure in the current period amounted to GBP248.0 million as follows:
Acquisitions Capex Total GBP'm GBP'm GBP'm DCC LPG 152.6 27.9 180.5 DCC Retail & Oil 7.7 25.5 33.2 DCC Healthcare - 2.6 2.6 DCC Technology 19.9 11.8 31.7 Total 180.2 67.8 248.0 ------------------ ------------------- ----------- -----------------
Acquisition activity
Committed acquisition expenditure amounted to GBP180.2 million and included:
DCC LPG
Retail West
On 7 November 2017, DCC LPG announced that it had reached agreement with NGL Energy Partners LP ("NGL") to acquire its Retail West LPG division, Hicksgas LLC ("Retail West" or "the business"), based on an enterprise value of US$200 million (c. GBP152 million).
The acquisition represents DCC LPG's entry into the US market and is a further significant step in DCC's strategy to build a global LPG business over time. The US is one of the world's largest LPG markets and is an attractive and growing market. It is also highly fragmented, with over 4,000 LPG distribution businesses operating in the market. The acquisition of Retail West will provide DCC with a substantial, high-quality presence in the US with leading market positions in a number of states. The business has an excellent customer base, a strong and well-invested operational infrastructure and an experienced management team.
The transaction is expected to complete on 31 March 2018, following receipt of customary regulatory consents and separation from NGL.
Headquartered in Illinois, Retail West has been in business for over 70 years and currently employs 390 people. It sells approximately 130,000 tonnes(4) of LPG annually from 43 customer service locations and 58 satellite facilities. The business trades under three prominent regional brands, Hicksgas, Pacer Propane and Propane Central, and a number of smaller, local brands. Retail West has leading market positions in Illinois, Indiana and Kansas and also operates in seven other states across the Mid-West and North-West regions.
The business has a long-established and loyal base of 65,000 customers. Approximately two thirds of annual volume is sold to residential customers, predominantly for heating purposes, with the balance sold to commercial and agricultural customers in both small and large bulk format.
Retail West has a well-invested asset base of approximately 100 bulk storage facilities and a company-owned distribution fleet of over 150 vehicles. Retail West also owns the majority of tanks on customer premises.
The business has an experienced and long-serving management team who have a strong track record of delivering both organic and acquisition growth. It has operated as a standalone division within NGL and will continue to operate and develop under the leadership of its existing management team, post completion of the acquisition.
Retail West is expected to initially deliver an annual EBITDA of approximately $28(5) million (GBP21 million) and EBITA of $20(5) million (GBP15 million). The acquisition will be earnings accretive from completion and the after tax cash payback will be approximately 10 years. The business is very well placed to continue its track record of profitable organic growth and also provides a base for synergistic acquisition activity, both of which would further enhance returns.
4, 5 Assuming normal winter weather conditions
DCC Technology
MTR
In July 2017, DCC Technology acquired MTR Group Ltd ("MTR"), a fast growing UK based provider of second lifecycle solutions for mobile and tablet devices.
Based in Harlow, Essex and employing 60 people, MTR provides a broad range of services to retailers, mobile handset manufacturers and insurance companies to source and refurbish mobile phones and tablets for resale to customers in the UK and abroad. In the year ended 30 November 2016, MTR generated service revenues of GBP11 million. The acquisition of MTR advances the DCC Technology strategy of expanding its service proposition to vendors and customers and provides access to the high growth second lifecycle solutions market.
The following acquisition, announced in the prior year, was completed after the balance sheet date:
DCC Retail & Oil
Esso Retail Norway
On 25 October 2017, DCC Retail & Oil completed the acquisition of Esso Retail Norway. The acquisition is another significant step for DCC in building its retail petrol station business in Europe. The national network sells c. 600 million litres of fuel annually and is the third largest in Norway with approximately 20% of retail volumes. It comprises 142 company-operated sites (127 retail service stations and 15 unmanned stations) and has contracts to supply 108 Esso-branded dealer owned stations. The total consideration was approximately NOK 2.43 billion (c. GBP235 million), plus the value of stock in tank at the date of acquisition, and was paid in cash on completion. The acquired business, which is substantially asset backed, is expected to generate a return on invested capital employed of approximately 15% in the first full year of ownership.
Full details of the acquisition were set out in DCC's Stock Exchange announcement of 7 February 2017.
Total cash spend on acquisitions in the six months ended 30 September 2017
The total cash spend on acquisitions in the six months ended 30 September 2017 was GBP56.3 million. This included the payment of deferred and contingent acquisition consideration previously provided of GBP12.0 million, pre-completion deposits in respect of both Esso Norway and Shell Hong Kong & Macau, the acquisition of MTR and the completion of a number of small acquisitions.
Disposal
DCC Environmental
On 31 May 2017, DCC completed the disposal of its Environmental division for an enterprise value of GBP219 million, on a debt-free, cash-free basis. The Environmental division, which is active in the treatment and recycling of non-hazardous and hazardous waste in Britain and Ireland, comprises the British businesses, William Tracey Group, Oakwood Fuels and Wastecycle, and Enva in Ireland.
Full details of the disposal were set out in DCC's Stock Exchange announcement of 5 April 2017.
Capital expenditure
Net capital expenditure for the six months of GBP69.1 million (2016: GBP59.8 million) compares to a depreciation charge of GBP44.3 million (2016: GBP42.9 million). Net capital expenditure on a continuing basis was GBP67.8 million.
The increase in net capital expenditure over the prior year principally reflects the increased scale of the Group and also increased investment by DCC Retail & Oil in the organic development of its retail site footprint and upgrading of its existing network.
The construction of DCC Technology's new, purpose built, 450,000 sq.ft. UK national distribution centre in the north of England is now complete. The facility has been commissioned and the relocation from the existing warehouses, which is taking place on a staged basis, has begun, with a number of the existing facilities now closed. The relocation will be completed during the next financial year. The related upgrade of the business' technology platform is ongoing and is being completed on a phased basis.
Financial strength
An integral part of the Group's strategy is the maintenance of a strong and liquid balance sheet to enable it to take advantage of development opportunities as they arise. At 30 September 2017, the Group had net debt of GBP112 million, total equity of GBP1.6 billion, cash resources, net of overdrafts, of GBP1.4 billion and a further GBP400 million of undrawn committed debt facilities. The Group's outstanding term debt at 30 September 2017 had an average maturity of 6.8 years. Substantially all of the Group's debt has been raised in the US private placement market with an average credit margin of 1.61% over floating Euribor/Libor.
Management and organisational changes
As set out in DCC's Stock Exchange announcement of 5 April 2017, Donal Murphy was appointed as Chief Executive of the Group on 14 July 2017.
DCC is now reporting its LPG and Retail & Oil businesses as separate divisions, consistent with the revised management and organisational structure of the Group. Henry Cubbon, who previously led DCC's LPG business, continues to lead the business as Divisional Managing Director. Eddie O'Brien, previously Managing Director of DCC's Retail and Fuelcard activities, has assumed responsibility for all Retail & Oil activities. The four divisional Managing Directors, of LPG, Retail & Oil, Healthcare and Technology, report to the Chief Executive.
Outlook
The Group reiterates its belief that the year ending 31 March 2018 will be another year of profit growth and development.
Performance Review - Divisional Analysis
DCC LPG 2017 2016 % change ---------------------------- ----------- ----------- --------- Volumes (tonnes) (6) 645.6kT 555.4kT +16.2% ---------------------------- ----------- ----------- --------- Revenue GBP502.0m GBP367.9m +36.5% ---------------------------- ----------- ----------- --------- Operating profit GBP44.1m GBP37.0m +19.2% ---------------------------- ----------- ----------- --------- Operating profit per tonne GBP68.30 GBP66.61 ---------------------------- ----------- ----------- ---------
DCC LPG delivered strong organic growth in the first half of the year with operating profit increasing by 19.2% to GBP44.1 million (11.5% ahead on a constant currency basis), modestly ahead of expectations.
DCC LPG sold 645,600 tonnes of product, an increase of 16.2% over the prior year, largely driven by the acquisition of Gaz Européen in the second half of the prior year. On a like-for-like basis, volumes were modestly ahead of the prior year. During the first half of the year, DCC LPG grew its operations in the natural gas sector, as evidenced by the recent launch of a consumer natural gas offering in France, and continues to invest in oil to LPG conversions across industrial and commercial customer sectors.
The business in France performed strongly during the first half of the year, delivering modest organic volume growth. Despite the headwind of a rising cost of product and the anticipated seasonal impact of natural gas storage and transmission costs, the business generated strong operating profit growth due to good procurement and operational cost control. Gaz Européen, which provides natural gas to energy management companies, collective housing and public and service sector customers, and was acquired in January 2017, performed in line with expectations. The French business has also recently launched a consumer natural gas and electricity business, utilising Gaz Européen's operating platform and leveraging the strength of Butagaz's leading gas brand position.
Both the British and Irish businesses performed in line with expectations during the first half and delivered good organic volume growth. In Ireland, the business has continued to develop its natural gas and electricity offering. In Britain, the business benefited from its continuing focus on the conversion of industrial and commercial users of oil to LPG. Although more modest, the business in Scandinavia also achieved good operating profit growth.
Since the announcement of the agreement to acquire Shell's LPG business in Hong Kong & Macau in April 2017, the carve-out, integration planning and completion process has been progressing to plan. The acquisition is expected to complete by the end of the current financial year.
On 7 November 2017, DCC LPG announced its agreement to acquire Retail West, a substantial LPG business operating in the Mid-West and North-West states of the US. The business has an excellent customer base and operational infrastructure and will provide DCC LPG with a material footprint in the very large US energy market. The acquisition is expected to complete on 31 March 2018.
Following the completion of the acquisitions of Shell Hong Kong & Macau and Retail West, DCC LPG will operate in nine countries and is well positioned to continue its expansion in both current and new geographies.
6 1 tonne of LPG equivalent to 1,969 litres of oil DCC Retail & Oil 2017 2016 % change ---------------------------- ------------- ------------- --------- Volumes (litres) 6.011bn 5.581bn +7.7% ---------------------------- ------------- ------------- --------- Revenue GBP4,331.6m GBP3,750.9m +15.5% ---------------------------- ------------- ------------- --------- Operating profit GBP42.2m GBP39.0m +8.0% ---------------------------- ------------- ------------- --------- Operating profit per litre 0.70 ppl 0.70 ppl ---------------------------- ------------- ------------- ---------
DCC Retail & Oil recorded a good performance in the first half of the financial year, generating profit growth of 8.0% (2.9% ahead on a constant currency basis), in what was a very active development period for the business. DCC Retail & Oil completed both the acquisition and integration of Esso Retail Norway and also completed the restructuring and full integration of Dansk Fuels into its existing operations.
The volume growth of 7.7% was driven by the acquisition of Dansk Fuels, which completed in November 2016. Organically, volumes were in line with the prior year, notwithstanding the relatively colder weather conditions that prevailed in the prior year.
In Britain, the business performed well, with good growth in commercial volumes offsetting lower heating volume demand. In the oil distribution market, the business continues to make good progress in expanding its activities into adjacent areas, such as lubricants and aviation. The business has ambitions to develop a substantial unmanned retail network and continues this investment, opening eight new sites during the first half of the year, with a pipeline of further sites under consideration. The Fuel Card business continued to perform strongly and grow its market share.
In Continental Europe, the Danish business delivered strong profit growth. Following the acquisition of Dansk Fuels in November 2016, the business has now been fully integrated into DCC Retail & Oil's existing operations in Denmark and Drogheda, Ireland. The Danish business now has leading market positions across the domestic, agricultural, commercial and aviation markets, in addition to operating 148 retail sites under the Shell brand. In France, where DCC operates approximately 320 retail sites under the Esso brand, the business continued to invest in upgrading its sites and customer proposition and performed well in a more competitive market. Although more modest, both the Swedish and Austrian businesses performed strongly during the first half, delivering volume and profit growth.
In February 2017, DCC announced its agreement to acquire Esso's retail petrol station network in Norway. The national network sells c. 600 million litres of fuel annually and is the third largest in Norway with approximately 20% of retail volumes. It comprises 142 company-operated sites (127 retail service stations and 15 unmanned stations) and has contracts to supply 108 Esso-branded dealer owned stations. With the completion of the integration required to carve the network out of Exxon's global retail infrastructure, the transaction completed, ahead of schedule, in October 2017.
Following the acquisition of Esso Retail Norway, DCC Retail & Oil now has substantial market positions across eight countries in Europe. In addition to its oil distribution and fuel card activities, DCC Retail & Oil has grown its retail footprint substantially in recent years and now operates a network of approximately 1,000 retail sites and supplies an additional 2,000 dealer-owned stations.
DCC Healthcare 2017 2016 % change ------------------ ---------- ---------- --------- Revenue GBP245.0m GBP244.3m +0.3% ------------------ ---------- ---------- --------- Operating profit GBP22.0m GBP19.8m +11.6% ------------------ ---------- ---------- --------- Operating margin 9.0% 8.1% ------------------ ---------- ---------- ---------
DCC Healthcare recorded a strong performance in the first half of the year generating operating profit growth of 11.6% (10.9% ahead on a constant currency basis), with approximately one third of the constant currency operating profit growth being organic. The business benefited from the acquisition of Medisource in the prior year and continued its track record of strong organic profit growth in the medical device and nutrition sectors.
DCC Vital, which is focused on the sales and marketing of medical devices and pharmaceuticals to healthcare providers in Britain and Ireland, achieved strong growth in operating profit. In Ireland, the business generated strong growth in the supply of medical devices to the Irish hospital and community care sectors and also benefited from the acquisition of Medisource in January 2017, which has further expanded DCC Vital's product and service offering in Ireland. In Britain, the business generated good growth in the sales of medical consumables to the primary care sector although the trading environment for DCC Vital's pharma activities in Britain remains competitive, exacerbated by the fall in the value of sterling in the prior year.
DCC Health & Beauty Solutions, which provides outsourced solutions to international nutrition and beauty brand owners, again recorded excellent organic growth in the nutrition sector. The business delivered strong growth in sales to nutritional customers, particularly soft gels, as it continued to benefit from its focus on more complex product formulations and from increasing end-user demand in Britain, Continental Europe and Asia. In the beauty sector, the overall performance was held back somewhat by an unfavourable sales mix and some destocking by customers, although the business generated excellent growth in sachet filling, including into the US market.
DCC Health & Beauty Solutions is progressing a number of investment projects across its manufacturing activities which will add new capacity and product capability over the second half of this financial year and into next year, enhancing its ability to meet the growing market demand for its services.
DCC Technology 2017 2016 % change ------------------ ----------- ----------- --------- Revenue GBP1.371bn GBP1.144bn +19.8% ------------------ ----------- ----------- --------- Operating profit GBP14.2m GBP11.3m +25.8% ------------------ ----------- ----------- --------- Operating margin 1.0% 1.0% ------------------ ----------- ----------- ---------
DCC Technology achieved very strong operating profit growth of 25.8% (24.9% ahead on a constant currency basis), in the seasonally less significant first half of the year. The very strong performance was primarily driven by acquisitions completed in both the current and prior years.
The UK and Ireland business performed very strongly and benefited from good growth in key product areas, such as smart home, enterprise and components, and from recent acquisitions. Hammer, acquired in December 2016, has performed well since acquisition and has significantly strengthened DCC Technology's presence in the server, storage and related services markets. The UK business has also enhanced its position in the audio visual market through both the acquisition of Medium, completed in December 2016, and the organic development of its vendor and product portfolio, particularly in the education sector. The business in Ireland achieved strong organic growth, driven by good business development in the mobile and retail sectors and growth in the sales of networking and security products.
DCC Technology continues to expand its service offering to customers and vendors and the acquisition of MTR Group, completed in July 2017, has significantly expanded the UK business' mobile device refurbishment and managed services capability and the business has performed well since acquisition. The new UK national distribution centre in Lancashire, a further enabler of the expansion in service offering, is now operational. The related upgrade of the business' technology platform is ongoing and is being completed on a phased basis.
In Continental Europe, the business in the Nordics generated good organic growth, driven by continued growth in IT, audio visual and entertainment products. In France, the French consumer products business remains challenging, but the business addressing the reseller and electrician markets performed well and is investing in its audio visual proposition.
The Supply Chain Services business continues to invest in its global service offering and achieved good organic profit growth as it benefited from new contract wins and effective cost control.
Forward-looking statements
This announcement contains some forward-looking statements that represent DCC's expectations for its business, based on current expectations about future events, which by their nature involve risk and uncertainty. DCC believes that its expectations and assumptions with respect to these forward-looking statements are reasonable; however, because they involve risk and uncertainty as to future circumstances, which are in many cases beyond DCC's control, actual results or performance may differ materially from those expressed in or implied by such forward-looking statements.
Principal risks and uncertainties
The Board of DCC is responsible for the Group's risk management and internal control systems, which are designed to identify, manage and mitigate potential material risks to the achievement of the Group's strategic and business objectives. The Board has approved a Risk Management Policy which sets out delegated responsibilities and procedures for the management of risk across the Group.
The principal risks and uncertainties facing the Group in the short to medium term, as set out on pages 15 to 17 of the 2017 Annual Report (together with the principal mitigation measures), continue to be the principal risks and uncertainties facing the Group for the remaining six months of the financial year.
This is not an exhaustive statement of all relevant risks and uncertainties. Matters which are not currently known to the Board or events which the Board considers to be of low likelihood could emerge and give rise to material consequences. The mitigation measures that are maintained in relation to these risks are designed to provide a reasonable and not an absolute level of protection against the impact of the events in question
Group Income Statement
Unaudited 6 months ended Unaudited 6 months ended Audited year ended 30 September 2017 30 September 2016 (restated*) 31 March 2017 ------------------------------------------------------------------- ----------------------------------------------------- ------------------------------------------- Pre exceptionals Exceptionals Pre exceptionals Exceptionals Pre Exceptionals (note 6) Total (note 6) Total exceptionals (note 6) Total Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 Revenue 5 6,449,472 - 6,449,472 5,507,286 - 5,507,286 12,269,802 - 12,269,802 Cost of sales (5,836,484) - (5,836,484) (4,963,253) - (4,963,253) (11,006,805) - (11,006,805) -------------------------------------- ------------- ------------ ------------------------ ------------- ------------ ------------- ------------- ------------- Gross profit 612,988 - 612,988 544,033 - 544,033 1,262,997 - 1,262,997 Administration expenses (190,756) - (190,756) (162,375) - (162,375) (323,320) - (323,320) Selling and distribution expenses (297,685) - (297,685) (278,593) - (278,593) (605,182) - (605,182) Other operating income 10,669 308 10,977 7,879 408 8,287 28,297 1,879 30,176 Other operating expenses (12,718) (13,434) (26,152) (3,849) (4,824) (8,673) (17,787) (38,176) (55,963) -------------------------------------- ------------- ------------ ------------------------ ------------- ------------ ------------- ------------- ------------- Operating profit before amortisation of intangible assets 122,498 (13,126) 109,372 107,095 (4,416) 102,679 345,005 (36,297) 308,708 Amortisation of intangible assets (20,527) - (20,527) (18,178) - (18,178) (39,130) - (39,130) -------------------------------------- ------------- ------------ ------------------------ ------------- ------------ ------------- ------------- ------------- Operating profit 5 101,971 (13,126) 88,845 88,917 (4,416) 84,501 305,875 (36,297) 269,578 Finance costs (34,508) (2) (34,510) (35,676) - (35,676) (72,910) - (72,910) Finance income 18,832 - 18,832 19,163 1,901 21,064 40,973 10,101 51,074 Equity accounted investments' profit after tax 92 - 92 182 - 182 712 - 712 -------------------------------------- ------------- ------------ ------------------------ ------------- ------------ ------------- ------------- ------------- Profit before tax 86,387 (13,128) 73,259 72,586 (2,515) 70,071 274,650 (26,196) 248,454 Income tax expense 7 (13,353) 157 (13,196) (10,837) (386) (11,223) (44,113) (1,756) (45,869) -------------------------------------- ------------- ------------ ------------------------ ------------- ------------ ------------- ------------- ------------- Profit for the period (continuing operations) 73,034 (12,971) 60,063 61,749 (2,901) 58,848 230,537 (27,952) 202,585 Profit for the period from discontinued operations 8 790 29,742 30,532 8,719 - 8,719 15,160 - 15,160 -------------------------------------- ------------- ------------ ------------------------ ------------- ------------ ------------- ------------- ------------- Profit after tax for the financial period 73,824 16,771 90,595 70,468 (2,901) 67,567 245,697 (27,952) 217,745 -------------------------------------- ------------- ------------ ------------------------ ------------- ------------ ------------- ------------- ------------- Profit attributable to: Owners of the Parent 88,701 65,588 216,197 Non-controlling interests 1,894 1,979 1,548 ------------ ------------ ------------- 90,595 67,567 217,745 ------------ ------------ ------------- Earnings per ordinary share Basic earnings per share 9 99.66p 73.95p 243.64p Diluted earnings per share 9 99.21p 73.42p 242.00p Basic adjusted earnings per share 9 96.36p 92.14p 303.68p Diluted adjusted earnings per share 9 95.93p 91.48p 301.63p ------------ ------------ ------------- Earnings per ordinary share - continuing operations Basic earnings per share 9 65.36p 64.12p 226.56p Diluted earnings per share 9 65.06p 63.66p 255.04p
Basic adjusted earnings per share 9 95.47p 82.23p 286.59p Diluted adjusted earnings per share 9 95.04p 81.64p 284.66p ------------ ------------ -------------
Group Statement of Comprehensive Income
Unaudited Unaudited Audited 6 months 6 months year ended ended ended 30 Sept. 30 Sept. 31 March 2017 2016 2017 GBP'000 GBP'000 GBP'000 Group profit for the period 90,595 67,567 217,745 Other comprehensive income: Items that may be reclassified subsequently to profit or loss Currency translation: - arising in the period 17,714 38,453 37,084 - recycled to the Income Statement (4,548) - - on disposal Movements relating to cash flow hedges 20,292 9,409 (6,803) Movement in deferred tax liability on cash flow hedges (3,570) (1,504) 1,334 ---------- ---------- --------- 29,888 46,358 31,615 ---------- ---------- --------- Items that will not be reclassified to profit or loss Group defined benefit pension obligations: - remeasurements 1,702 (8,014) (3,056) - movement in deferred tax asset (268) 1,227 413 ---------- ---------- --------- 1,434 (6,787) (2,643) ---------- ---------- --------- Other comprehensive income for the period, net of tax 31,322 39,571 28,972 ---------- ---------- --------- Total comprehensive income for the period 121,917 107,138 246,717 ---------- ---------- --------- Attributable to: Owners of the Parent 119,122 102,678 242,735 Non-controlling interests 2,795 4,460 3,982 ---------- ---------- --------- 121,917 107,138 246,717 ---------- ---------- --------- Attributable to: Continuing operations 95,933 97,165 230,199 Discontinued operations 25,984 9,973 16,518 ---------- ---------- --------- 121,917 107,138 246,717 ---------- ---------- ---------
Group Balance Sheet
Unaudited Unaudited Audited 30 Sept. 30 Sept. 31 March 2017 2016 2017 Notes GBP'000 GBP'000 GBP'000 ASSETS Non-current assets Property, plant and equipment 789,947 778,618 750,020 Intangible assets 1,478,296 1,345,082 1,422,572 Equity accounted investments 24,632 26,019 24,938 Deferred income tax assets 23,128 22,802 22,619 Derivative financial instruments 180,109 271,609 273,767 2,496,112 2,444,130 2,493,916 ------------ ------------ ------------ Current assets Inventories 548,903 435,716 456,395 Trade and other receivables 1,204,122 997,017 1,222,597 Derivative financial instruments 18,479 37,132 18,233 Cash and cash equivalents 1,497,061 1,138,953 1,048,064 ------------ ------------ ------------ 3,268,565 2,608,818 2,745,289 Assets classified as held for sale - - 193,170 ------------ 3,268,565 2,608,818 2,938,459 ------------ Total assets 5,764,677 5,052,948 5,432,375 ------------ ------------ ------------ EQUITY Capital and reserves attributable to owners of the Parent Share capital 15,455 15,455 15,455 Share premium 277,211 277,211 277,211 Share based payment reserve 11 20,077 16,369 18,146 Cash flow hedge reserve 11 3,141 (207) (13,581) Foreign currency translation reserve 11 117,802 106,859 105,537 Other reserves 11 932 932 932 Retained earnings 1,101,502 953,462 1,074,434 ------------ ------------ ------------ Equity attributable to owners of the Parent 1,536,120 1,370,081 1,478,134 Non-controlling interests 32,382 30,238 29,587 ------------ ------------ ------------ Total equity 1,568,502 1,400,319 1,507,721 ------------ ------------ ------------ LIABILITIES Non-current liabilities Borrowings 1,680,507 1,385,011 1,319,967 Derivative financial instruments 5,610 - 506 Deferred income tax liabilities 157,222 140,811 155,297 Post employment benefit obligations 13 (4,862) 7,045 29 Provisions for liabilities 258,909 233,079 255,650 Acquisition related liabilities 71,644 80,548 66,617 Government grants 257 752 261 ------------ ------------ ------------ 2,169,287 1,847,246 1,798,327 ------------ ------------ ------------ Current liabilities Trade and other payables 1,831,926 1,536,255 1,820,517 Current income tax liabilities 11,915 26,187 25,051 Borrowings 118,359 172,274 148,445 Derivative financial instruments 3,511 2,574 5,894 Provisions for liabilities 32,389 33,860 31,022 Acquisition related liabilities 28,788 34,233 28,300 ------------ ------------ ------------ 2,026,888 1,805,383 2,059,229 Liabilities associated with assets classified as held for sale - - 67,098 ------------ ------------ ------------ 2,026,888 1,805,383 2,126,327 ------------ ------------ ------------ Total liabilities 4,196,175 3,652,629 3,924,654 ------------ ------------ ------------ Total equity and liabilities 5,764,677 5,052,948 5,432,375 ------------ ------------ ------------ Net debt included above (including cash attributable to assets held for sale) 12 (112,338) (112,165) (121,949) ------------ ------------ ------------
Group Statement of Changes in Equity
For the six Attributable to owners of the months ended 30 Parent September 2017 ------------------------------------------------------------------------------------------------------------------------ Other Non- Share Share Retained reserves controlling Total capital premium earnings (note Total interests equity 11) GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 At 1 April 2017 15,455 277,211 1,074,434 111,034 1,478,134 29,587 1,507,721 Profit for the period - - 88,701 - 88,701 1,894 90,595 Currency translation: - arising in the period - - - 16,813 16,813 901 17,714 - recycled to the Income Statement on disposal - - - (4,548) (4,548) - (4,548) Group defined benefit pension obligations: - remeasurements - - 1,702 - 1,702 - 1,702 - movement in deferred tax asset - - (268) - (268) - (268) Movements relating to cash flow hedges - - - 20,292 20,292 - 20,292 Movement in deferred tax liability on cash flow hedges - - - (3,570) (3,570) - (3,570) Total comprehensive income - - 90,135 28,987 119,122 2,795 121,917 Re-issue of treasury shares - - 3,309 - 3,309 - 3,309 Share based payment - - - 1,931 1,931 - 1,931 Dividends - - (66,376) - (66,376) - (66,376) ----------------------- ---------------------------- ----------------------- -------------------- ------------------ ------------------------- ------------------ At 30 September 2017 15,455 277,211 1,101,502 141,952 1,536,120 32,382 1,568,502 ----------------------- ---------------------------- ----------------------- -------------------- ------------------ ------------------------- ------------------ For the six Attributable to owners of the months ended 30 Parent September 2016 --------------------------------------------------------------------------------------------------------------------------------- Other Non- Share Share Retained reserves controlling Total capital premium earnings (note Total interests equity 11) GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 At 1 April 2016 15,455 277,211 948,316 78,661 1,319,643 30,833 1,350,476 Profit for the period - - 65,588 - 65,588 1,979 67,567 Currency translation - - - 35,972 35,972 2,481 38,453 Group defined benefit pension obligations: - remeasurements - - (8,014) - (8,014) - (8,014) - movement in deferred tax asset - - 1,227 - 1,227 - 1,227 Movements relating to cash flow hedges - - - 9,409 9,409 - 9,409 Movement in deferred tax liability on cash flow hedges - - - (1,504) (1,504) - (1,504) Total comprehensive income - - 58,801 43,877 102,678 4,460 107,138 Re-issue of treasury shares - - 2,065 - 2,065 - 2,065 Share based payment - - - 1,415 1,415 - 1,415 Dividends - - (55,720) - (55,720) (5,055) (60,775) ------------------------ ----------------------------- ------------------------ -------------------- ------------------------ ------------------------- ------------------ At 30 September 2016 15,455 277,211 953,462 123,953 1,370,081 30,238 1,400,319 ------------------------ ----------------------------- ------------------------ -------------------- ------------------------ ------------------------- ------------------ For the year Attributable to owners of the ended 31 March Parent 2017 --------------------------------------------------------------------------------------------------------------------------------- Other Non- Share Share Retained reserves controlling Total capital premium earnings (note Total interests equity 11) GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 At 1 April 2016 15,455 277,211 948,316 78,661 1,319,643 30,833 1,350,476 Profit for the
financial year - - 216,197 - 216,197 1,548 217,745 Currency translation - - - 34,650 34,650 2,434 37,084 Group defined benefit pension obligations: - remeasurements - - (3,056) - (3,056) - (3,056) - movement in deferred tax asset - - 413 - 413 - 413 Movements relating to cash flow hedges - - - (6,803) (6,803) - (6,803) Movement in deferred tax liability on cash flow hedges - - - 1,334 1,334 - 1,334 Total comprehensive income - - 213,554 29,181 242,735 3,982 246,717 Re-issue of treasury shares - - 2,600 - 2,600 - 2,600 Share based payment - - - 3,192 3,192 - 3,192 Dividends - - (90,036) - (90,036) (5,228) (95,264) ------------------------ ----------------------------- ------------------------ -------------------- ------------------------ ------------------------- -------------------- At 31 March 2017 15,455 277,211 1,074,434 111,034 1,478,134 29,587 1,507,721 ------------------------ ----------------------------- ------------------------ -------------------- ------------------------ ------------------------- --------------------
Group Cash Flow Statement
Unaudited Unaudited Audited 6 months 6 months year ended ended ended 30 Sept. 30 Sept. 31 March 2017 2016 2017 Note GBP'000 GBP'000 GBP'000 Cash flows from operating activities Profit for the period 90,595 67,567 217,745 Add back non-operating expenses/(income) - tax 13,370 13,071 49,054 - share of equity accounted investments' profit (92) (182) (712) - net operating exceptionals (16,616) 4,416 36,297 - net finance costs 15,694 14,685 21,999 ---------- ---------- ---------- Group operating profit before exceptionals 102,951 99,557 324,383 Share-based payments expense 1,931 1,415 3,192 Depreciation 44,263 42,913 92,015 Amortisation of intangible assets 20,527 18,266 39,168 (Profit)/loss on disposal of property, plant and equipment (312) 369 (173) Amortisation of government grants (16) (101) (235) Other (5,552) (4,334) 4,571 (Increase)/decrease in working capital (79,817) (17,046) 83,949 ---------- ---------- ---------- Cash generated from operations before exceptionals 83,975 141,039 546,870 Exceptionals (15,197) (8,752) (31,269) ---------- ---------- ---------- Cash generated from operations 68,778 132,287 515,601 Interest paid (32,457) (33,313) (70,108) Income tax paid (35,905) (28,122) (62,180) ---------- ---------- ---------- Net cash flows from operating activities 416 70,852 383,313 ---------- ---------- ---------- Investing activities Inflows: Proceeds from disposal of property, plant and equipment 2,525 6,076 12,315 Dividends received from equity accounted investments 1,317 121 125 Disposal of subsidiaries and equity accounted investments 8 160,054 - - Interest received 19,001 19,191 40,966 182,897 25,388 53,406 ---------- ---------- ---------- Outflows: Purchase of property, plant and equipment (71,592) (65,878) (143,698) Acquisition of subsidiaries 14 (44,313) (6,609) (203,327) Payment of accrued acquisition related liabilities (12,014) (26,200) (59,069) ---------- ---------- ---------- (127,919) (98,687) (406,094) ---------- ---------- ---------- Net cash flows from investing activities 54,978 (73,299) (352,688) ---------- ---------- ---------- Financing activities Inflows: Proceeds from issue of shares 3,309 2,065 2,600 Net cash inflow on derivative financial instruments 13,914 1,002 14,212 Increase in interest-bearing loans 458,593 - - and borrowings 475,816 3,067 16,812 ---------- ---------- ---------- Outflows: Repayment of interest-bearing loans and borrowings (58,132) (29,895) (108,140) Repayment of finance lease liabilities (6) (79) (177) Dividends paid to owners of the Parent 10 (66,376) (55,720) (90,036) Dividends paid to non-controlling interests - (5,055) (5,228) (124,514) (90,749) (203,581) ---------- ---------- ---------- Net cash flows from financing activities 351,302 (87,682) (186,769) ---------- ---------- ---------- Change in cash and cash equivalents 406,696 (90,129) (156,144) Translation adjustment (650) 43,894 38,929 Cash and cash equivalents at beginning of period 972,822 1,090,037 1,090,037 ---------- ---------- ---------- Cash and cash equivalents at end of period 1,378,868 1,043,802 972,822 ---------- ---------- ---------- Cash and cash equivalents consists of: Cash and short-term bank deposits 1,497,061 1,138,953 1,048,064 Overdrafts (118,193) (95,151) (88,041) Cash and short-term deposits attributable to assets held for sale - - 12,799 1,378,868 1,043,802 972,822 ---------- ---------- ----------
Notes to the Condensed Financial Statements
for the six months ended 30 September 2017
1. Basis of Preparation
The Group condensed interim financial statements which should be read in conjunction with the annual financial statements for the year ended 31 March 2017 have been prepared in accordance with the Transparency (Directive 2004/109/EC) Regulations 2007, the related Transparency rules of the Irish Financial Services Regulatory Authority and in accordance with International Accounting Standard 34, Interim Financial Reporting (IAS 34) as adopted by the European Union.
The preparation of the interim financial statements requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of certain assets, liabilities, revenues and expenses together with disclosure of contingent assets and liabilities. Estimates and underlying assumptions are reviewed on an ongoing basis.
These condensed interim financial statements for the six months ended 30 September 2017 and the comparative figures for the six months ended 30 September 2016 are unaudited and have not been reviewed by the Auditors. The summary financial statements for the year ended 31 March 2017 represent an abbreviated version of the Group's full accounts for that year, on which the Auditors issued an unqualified audit report and which have been filed with the Registrar of Companies.
2. Accounting Policies
The accounting policies and methods of computation adopted in the preparation of the Group condensed interim financial statements are consistent with those applied in the 2017 Annual Report and are described in those financial statements on pages 179 to 187. There were no new standards effective for the Group during the period ended 30 September 2017.
The Group has not applied certain new standards, amendments and interpretations to existing standards that have been issued but are not yet effective, the most significant of which are as follows:
Amendments to IAS 7 Statement of Cash Flows - Disclosure Initiative (not yet EU endorsed):
These amendments are intended to improve the information provided to users of financial statements regarding the entity's financing activities.
Amendments to IAS 12 Income Taxes - Recognition of Deferred Tax Assets for Unrealised Losses (not yet EU endorsed):
These amendments clarify, inter alia, that unrealised losses on debt instruments measured at fair value (and measured at cost for tax purposes) give rise to a deductible temporary difference regardless of whether the instrument is recovered through sale or by holding it to maturity or whether it is probable that the issuer will pay all contractual cash flows. Entities are therefore required to recognise deferred taxes for temporary differences from unrealised losses of debt instruments measured at fair value if all other recognition criteria for deferred taxes are met.
IFRS 9 Financial Instruments (effective date: DCC financial year beginning 1 April 2018):
This standard is designed to replace IAS 39 Financial Instruments: Recognition and Measurement and has been completed in a number of phases with the final version issued by the IASB in July 2014 and endorsed by the EU in November 2016. The Standard includes requirements for recognition and measurement, classification, and de-recognition of financial instruments, a new expected credit loss model for calculating impairment on financial assets and new rules for hedge accounting.
The new impairment model requires the recognition of impairment provisions based on expected credit losses rather than only incurred credit losses as is the case under IAS 39. It applies to financial assets classified at amortised cost, contract assets under IFRS 15 Revenue from Contracts with Customers, lease receivables, loan commitments and certain financial guarantee contracts. While the Group has not yet completed a detailed assessment of how its impairment provisions would be affected by the new model, it may result in an earlier recognition of credit losses.
The new hedge accounting rules will align the accounting for hedging instruments more closely with the Group's risk management practises. As a general rule, more hedge relationships may be eligible for hedge accounting, as the standard introduces a more principles-based approach. The Group has performed an initial assessment on the impact of IFRS 9, and it would appear that the Group's current hedge relationships would continue to qualify as hedges upon the adoption of IFRS 9. Accordingly, the Group does not expect a significant impact on the accounting for its hedging relationships.
The new standard also introduces expanded disclosure requirements and changes in presentation. These are expected to change the nature and extent of the Group's disclosures about its financial instruments particularly in the first year of adoption of the new standard. The Group will apply IFRS 9 from its effective date.
IFRS 15 Revenue from Contracts with Customers (effective date: DCC financial year beginning 1 April 2018):
This standard will replace IAS 18 Revenue, IAS 11 Construction Contracts and related interpretations. IFRS 15 was endorsed by the EU in September 2016. The standard establishes principles for reporting useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. It specifies how and when revenue should be recognised as well as requiring enhanced disclosures. Revenue is recognised when an identified performance obligation has been met and the customer can direct the use of, and obtain substantially all the remaining benefits from, a good or service as a result of obtaining control of that good or service.
The Group is continuing to assess the potential impact resulting from the application of IFRS 15. The Group will apply IFRS 15 from its effective date.
IFRS 16 Leases (effective date: DCC financial year beginning 1 April 2019):
This standard will replace IAS 17 Leases. IFRS 16 is not yet endorsed by the EU. The changes under IFRS 16 are significant and will predominantly affect lessees, the accounting for which is substantially reformed. The lessor accounting requirements contained in IFRS 16's predecessor, IAS 17, will remain largely unchanged. The main impact on lessees is that almost all leases will be recognised on the balance sheet as the distinction between operating and finance leases is removed for lessees. Under IFRS 16, an asset (the right to use the leased item) and a financial liability to pay rentals are recognised. The only exemptions are short-term and low-value leases. The standard introduces new estimates and judgemental thresholds that affect the identification, classification and measurement of lease transactions. More extensive disclosures, both qualitative and quantitative, are also required.
At transition date, the Group will calculate the lease commitments outstanding at that date and apply appropriate discount rates to calculate the present value of the lease commitment which will be recognised as a liability and a right of use asset on the Group's Balance Sheet. In the Income Statement, the Group currently recognises operating lease rentals in operating expenses. Under the new standard, a right of use asset will be capitalised and depreciated over the term of the lease with an associated finance cost applied annually to the lease liability.
As detailed in note 5.4 of the 2017 Annual Report, the Group's future minimum rentals payable under non-cancellable operating leases at 31 March 2017 amounted to GBP236.7 million and the charge recognised in the Income Statement for the year ended 31 March 2017 amounted to GBP51.7 million. These amounts provide an indication of the scale of leases held at 31 March 2017 but should not be used as a proxy for the impact of IFRS 16 on the Consolidated Balance Sheet as a number of factors impact the calculation such as the discount rate, the expected term of leases including renewal options and exemptions for short-term leases and low-value leases.
The Group is continuing to assess its portfolio of leases to calculate the impact of the new standard. The Group will apply IFRS 16 from its effective date, subject to EU endorsement.
3. Going Concern
Having reassessed the principal risks facing the Group (as detailed on pages 15 to 17 of the 2017 Annual Report), the Directors believe that the Group is well placed to manage these risks successfully.
The Directors have a reasonable expectation that DCC plc, and the Group as a whole, has adequate resources to continue in operational existence for the foreseeable future, a period of not less than twelve months from the date of this report. For this reason, the Directors continue to adopt the going concern basis of accounting in preparing the condensed interim financial statements.
4. Reporting Currency
The Group's financial statements are presented in sterling, denoted by the symbol 'GBP'. Results and cash flows of operations based in non-sterling countries have been translated into sterling at average rates for the period, and the related balance sheets have been translated at the rates of exchange ruling at the balance sheet date. The principal exchange rates used for translation of results and balance sheets into sterling were as follows:
Average rate Closing rate ---------------------------------------- ---------------------------------------- 6 months 6 months Year 6 months 6 months Year ended ended ended ended ended ended 30 Sept. 30 Sept. 31 March 30 Sept. 30 Sept. 31 March 2017 2016 2017 2017 2016 2017
StgGBP1= StgGBP1= StgGBP1= StgGBP1= StgGBP1= StgGBP1= Euro 1.1391 1.2364 1.1956 1.1340 1.1614 1.1689 Swedish Krona 10.9425 11.5928 11.3729 10.9424 11.1742 11.1423 Danish Krone 8.4795 9.2173 8.9150 8.4399 8.6542 8.6942 Norwegian Krone 10.6565 11.5655 10.9811 10.6742 10.4373 10.7169 5. Segmental Reporting
DCC is an international sales, marketing and support services group headquartered in Dublin, Ireland. Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker has been identified as Mr. Donal Murphy, Chief Executive and his executive management team.
As announced on 31 May 2017, the Group completed the disposal of its Environmental division. In addition, and as noted in the Group's results for the year ended 31 March 2017, DCC is presenting DCC LPG and DCC Retail & Oil as separate reportable segments from 1 April 2017, in line with the revised management and organisational structures of the businesses. Previously, these two segments comprised the Group's former DCC Energy segment. Following these changes in the composition of operating segments, segmental reporting has been revised and the comparative disclosures have been restated as required under IFRS 8.
The Group is organised into four operating segments: DCC LPG, DCC Retail & Oil, DCC Healthcare and DCC Technology.
DCC LPG is a leading liquefied petroleum gas ('LPG') sales and marketing business in Europe, with a developing business in the retailing of natural gas.
DCC Retail & Oil is a leader in the sales, marketing and retailing of transport fuels and commercial fuels, heating oils and related products and services in Europe.
DCC Healthcare is a leading healthcare business, providing products and services to healthcare providers and health and beauty brand owners.
DCC Technology is a leading route-to-market and supply chain partner for global technology brands.
The chief operating decision maker monitors the operating results of segments separately in order to allocate resources between segments and to assess performance. Segment performance is predominantly evaluated based on operating profit before amortisation of intangible assets and net operating exceptional items. Net finance costs and income tax are managed on a centralised basis and therefore these items are not allocated between operating segments for the purpose of presenting information to the chief operating decision maker and accordingly are not included in the detailed segmental analysis.
The consolidated total assets of the Group as at 30 September 2017 amounted to GBP5.765 billion. This figure was not materially different from the equivalent figure at 31 March 2017 (apart from cash and derivative financial instruments which are managed centrally) and therefore the related segmental disclosure note has been omitted in accordance with IAS 34 Interim Financial Reporting.
Intersegment revenue is not material and thus not subject to separate disclosure.
An analysis of the Group's performance by segment and geographic location is as follows: (a) By operating segment Unaudited six months ended 30 September 2017 -------------------------------------------------------------------------------- DCC Retail DCC LPG & Oil DCC Healthcare DCC Technology Total GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 Segment revenue 501,951 4,331,596 244,995 1,370,930 6,449,472 -------- ----------- ---------------- -------------- -------------- Adjusted operating profit* 44,077 42,159 22,047 14,215 122,498 Amortisation of intangible assets (10,562) (3,944) (3,676) (2,345) (20,527) Net operating exceptionals (note 6) (602) (4,376) (1,324) (6,824) (13,126) -------- ----------- ---------------- -------------- -------------- Operating profit 32,913 33,839 17,047 5,046 88,845 -------- ----------- ---------------- -------------- -------------- Unaudited six months ended 30 September 2016 (restated) ---------------------------------------------------------- DCC Retail DCC LPG & Oil DCC Healthcare DCC Technology Total GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 Segment revenue 367,859 3,750,915 244,283 1,144,229 5,507,286 ------- ----------- ---------------- --------------- --------------- Adjusted operating profit* 36,987 39,046 19,760 11,302 107,095 Amortisation of intangible assets (8,562) (4,828) (3,307) (1,481) (18,178) Net operating exceptionals (note 6) (205) (1,614) (1,361) (1,236) (4,416) ------- ----------- ---------------- --------------- --------------- Operating profit 28,220 32,604 15,092 8,585 84,501 ------- ----------- ---------------- --------------- --------------- Audited year ended 31 March 2017 (restated) ------------------------------------------------------------------------- DCC Retail DCC LPG & Oil DCC Healthcare DCC Technology Total GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 Segment revenue 1,073,212 8,000,923 506,562 2,689,105 12,269,802 --------- ----------- ---------------- --------------- ------------- Adjusted operating profit* 160,462 94,479 48,944 41,120 345,005 Amortisation of intangible assets (18,277) (9,962) (7,258) (3,633) (39,130) Net operating exceptionals (note 6) (6,854) (13,633) (2,695) (13,115) (36,297) --------- ----------- ---------------- --------------- ------------- Operating profit 135,331 70,884 38,991 24,372 269,578 --------- ----------- ---------------- --------------- -------------
* Operating profit before amortisation of intangible assets and net operating exceptionals
(b) By geography
The Group has a presence in 15 countries worldwide. The following represents a geographical revenue analysis about the country of domicile (Republic of Ireland) and countries with material revenue.
Restated Unaudited Unaudited Audited 6 months 6 months year ended ended ended 30 Sept. 30 Sept. 31 March 2017 2016 2017 GBP'000 GBP'000 GBP'000 Republic of Ireland 426,442 322,824 759,439 United Kingdom 3,590,870 3,349,051 7,239,193 France 1,235,359 1,038,271 2,402,290 Other 1,196,801 797,140 1,868,880 ---------- ---------- ------------------- 6,449,472 5,507,286 12,269,802 ---------- ---------- ------------------- 6. Exceptionals Unaudited Unaudited Audited 6 months 6 months year ended ended ended 30 Sept. 30 Sept. 31 March 2017 2016 2017 GBP'000 GBP'000 GBP'000 Restructuring costs (9,742) (2,280) (19,345) Acquisition and related costs (3,512) (1,374) (10,308) Adjustments to contingent acquisition consideration 140 73 (5,114) Impairment of property, plant and equipment - (684) (1,164) Legal and other operating exceptional items (12) (151) (366) Net operating exceptional items (13,126) (4,416) (36,297) Mark to market of swaps and related debt (2) 1,901 10,101 ---------- ---------- ---------
Net exceptional items before taxation (13,128) (2,515) (26,196) Tax attributable to net exceptional items 157 (386) (1,756) ---------- ---------- --------- Net exceptional items after taxation (continuing operations) (12,971) (2,901) (27,952) Net profit on disposal of Environmental 29,742 - - division (note 8) ---------- ---------- --------- 16,771 (2,901) (27,952) Non-controlling interest share of net exceptional items after taxation 816 - 3,138 ---------- ---------- --------- Net exceptional items attributable to owners of the Parent 17,587 (2,901) (24,814) ---------- ---------- ---------
The Group has focused on the efficiency of its operating infrastructures and sales platforms, particularly in areas where it has been acquisitive in recent years. Restructuring costs amounted to GBP9.742 million and were principally incurred in the restructuring and integration work resulting from the acquisition of Dansk Fuels and also the implementation of the new national distribution centre in the Technology division's UK business.
Acquisition related costs amounted to GBP3.512 million and include the professional fees and tax costs (such as stamp duty) relating to the evaluation and completion of acquisition opportunities.
The Group recorded a net profit on disposal of the Environmental division of GBP29.742 million, the sale of which was completed in May 2017.
There was a net tax credit of GBP0.157 million and a non-controlling interest credit of GBP0.816 million in relation to the above net exceptional items.
7. Taxation
The taxation expense for the interim period is based on management's best estimate of the weighted average tax rate that is expected to be applicable for the full year. The Group's effective tax rate for the period was 18% (six months ended 30 September 2016: 17.5% and year ended 31 March 2017: 17.5%).
8. Discontinued Operations
As announced on 31 May 2017, the Group completed the disposal of the Environmental division. The proceeds on disposal will be used to fund the continued development of DCC's continuing operations. The conditions for the segment to be classified as a discontinued operation were satisfied during the year ended 31 March 2017 and the results of the Environmental segment were presented separately in the 2017 Annual Report as discontinued operations in the Group Income Statement and the assets and liabilities of this segment were classified as an asset held for sale at the balance sheet date. Accordingly, the results for the six months ended 30 September 2016 have been restated.
The following table summarises the consideration received, the profit on disposal of discontinued operations and the net cash flow arising on the disposal of this segment:
Unaudited 6 months ended 30 Sept. 2017 Profit on disposal of discontinued GBP'000 operations Net consideration: Net proceeds received 164,517 Costs of disposal (4,463) ---------- Total net consideration 160,054 ---------- Assets and liabilities disposed of: Non-current assets 145,761 Current assets 34,261 Non-current liabilities (4,357) Current liabilities (40,805) ---------- Net identifiable assets and liabilities disposed of 134,860 Recycling of foreign exchange gain previously recognised in foreign currency translation reserve (4,548) ---------- 130,312 ---------- Profit on disposal of discontinued operations 29,742 ---------- Net cash flow on disposal of discontinued operations: Total proceeds received 174,321 Cash and cash equivalents disposed of (9,804) ---------- Net cash inflow from disposal of discontinued operations 164,517 Disposal costs paid (4,463) ---------- Net cash flow on disposal of discontinued operations: 160,054 ----------
The following table details the results of discontinued operations included in the Group Income Statement for the six months ended 30 September 2017, together with comparative figures:
Unaudited Unaudited Audited 6 months 6 months year ended ended ended 30 Sept. 30 Sept. 31 March 2017 2016 2017 GBP'000 GBP'000 GBP'000 Revenue 29,602 89,258 175,232 Cost of sales (20,285) (61,238) (119,654) ---------- ---------- ---------- Gross profit 9,317 28,020 55,578 Operating expenses (8,337) (17,292) (37,032) ---------- ---------- ---------- Operating profit before amortisation of intangible assets 980 10,728 18,546 Amortisation of intangible assets - (88) (38) Operating profit 980 10,640 18,508 Net finance costs (16) (73) (163) ---------- ---------- ---------- 964 10,567 18,345 Profit on disposal of discontinued operations 29,742 - - ---------- ---------- ---------- 30,706 10,567 18,345 Income tax expense (174) (1,848) (3,185) ---------- ---------- ---------- Profit from discontinued operations after tax 30,532 8,719 15,160 ---------- ---------- ----------
The following table details the cash flow from discontinued operations included in the Group Cash Flow Statement for the six months ended 30 September 2017, together with comparative figures:
Unaudited Unaudited Audited 6 months 6 months year ended ended ended 30 Sept. 30 Sept. 31 March 2017 2016 2017 GBP'000 GBP'000 GBP'000 Net cash flow from operating activities (5,599) 12,022 22,461 Net cash flow from investing activities (1,331) (2,916) (6,661) ---------- ---------- --------- Net cash flow from discontinued operations (6,930) 9,106 15,800 ---------- ---------- ---------
9. Earnings per Ordinary Share
6 months ended 30 September 6 months ended 30 September 2017 2016 ------------------------------------------ -------------------------------------------- Continuing Discontinued Continuing Discontinued operations operations Total operations operations Total GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 Profit attributable to owners of the Parent 58,169 30,532 88,701 56,869 8,719 65,588 Amortisation of intangible assets after tax 14,653 - 14,653 13,164 71 13,235 Exceptionals after tax 12,155 (29,742) (17,587) 2,901 - 2,901 ------------- --------------- ---------- ---------------- ----------------- ------- Adjusted profit after taxation and non-controlling interests 84,977 790 85,767 72,934 8,790 81,724 ------------- --------------- ---------- ---------------- ----------------- ------- Basic earnings per ordinary share
Basic earnings per share is calculated by dividing the profit attributable to owners of the Parent by the weighted average number of ordinary shares in issue during the period, excluding ordinary shares purchased by the Company and held as treasury shares. The adjusted figures for basic earnings per ordinary share (a non-GAAP financial measure) are intended to demonstrate the results of the Group after eliminating the impact of amortisation of intangible assets and net exceptionals.
6 months ended 30 September 6 months ended 30 September 2017 2016 ------------------------------------------ ---------------------------------- Continuing Discontinued Continuing Discontinued operations operations Total operations operations Total pence pence pence pence pence pence Basic earnings per ordinary share 65.36p 34.30p 99.66p 64.12p 9.83p 73.95p Amortisation of intangible assets after tax 16.46p - 16.46p 14.84p 0.08p 14.92p Exceptionals after tax 13.65p (33.41p) (19.76p) 3.27p - 3.27p ------------- --------------- ---------- ----------------- -------------- ----------- Adjusted basic earnings per ordinary share 95.47p 0.89p 96.36p 82.23p 9.91p 92.14p ------------- --------------- ---------- ----------------- -------------- ----------- Weighted average number of ordinary shares in issue (thousands) 89,007 88,691 ---------- -----------
Diluted earnings per ordinary share
Diluted earnings per ordinary share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. Share options and awards are the Company's only category of dilutive potential ordinary shares. Employee share options and awards, which are performance-based, are treated as contingently issuable shares because their issue is contingent upon satisfaction of specified performance conditions in addition to the passage of time. These contingently issuable shares are excluded from the computation of diluted earnings per ordinary share where the conditions governing exercisability would not have been satisfied as at the end of the reporting period if that were the end of the vesting period.
The adjusted figures for diluted earnings per ordinary share (a non-GAAP financial measure) are intended to demonstrate the results of the Group after eliminating the impact of amortisation of intangible assets and net exceptionals.
6 months ended 30 September 6 months ended 30 September 2017 2016 ------------------------------------------ --------------------------------------------- Continuing Discontinued Continuing Discontinued operations operations Total operations operations Total pence pence pence pence pence pence Diluted earnings per ordinary share 65.06p 34.15p 99.21p 63.66p 9.76p 73.42p Amortisation of intangible assets after tax 16.39p - 16.39p 14.73p 0.08p 14.81p Exceptionals after tax 13.59p (33.26p) (19.67p) 3.25p - 3.25p ------------- --------------- ---------- ----------------- -------------- ------------ Adjusted diluted earnings per ordinary share 95.04p 0.89p 95.93p 81.64p 9.84p 91.48p ------------- --------------- ---------- ----------------- -------------- ------------ Weighted average number of ordinary shares in issue (dilutive, thousands) 89,410 89,332 ---------- ------------
The earnings used for the purposes of the continuing diluted earnings per ordinary share calculations were GBP58.169 million (six months ended 30 September 2016: GBP56.869 million) and GBP84.977 million (six months ended 30 September 2016: GBP72.934 million) for the purposes of the continuing adjusted diluted earnings per ordinary share calculations.
The earnings used for the purposes of the discontinued diluted earnings per ordinary share calculations were GBP30.532 million (six months ended 30 September 2016: GBP8.719 million) and GBP0.790 million (six months ended 30 September 2016: GBP8.790 million) for the purposes of the discontinued adjusted diluted earnings per ordinary share calculations.
The weighted average number of ordinary shares used in calculating the diluted earnings per ordinary share for the six months ended 30 September 2017 was 89.410 million (six months ended 30 September 2016: 89.332 million). A reconciliation of the weighted average number of ordinary shares used for the purposes of calculating the diluted earnings per ordinary share amounts is as follows:
Unaudited Unaudited 6 months 6 months ended ended 30 Sept. 30 Sept. 2017 2016 '000 '000 Weighted average number of ordinary shares in issue 89,007 88,691 Dilutive effect of options and awards 403 641 --------- --------- Weighted average number of ordinary shares for diluted earnings per share 89,410 89,332 --------- --------- 10. Dividends Unaudited Unaudited Audited 6 months 6 months year ended ended ended 30 Sept. 30 Sept. 31 March 2017 2016 2017 GBP'000 GBP'000 GBP'000 Interim - paid 37.17 pence per share on 12 December 2016 - - 32,415 Final - paid 74.63 pence per share on 20 July 2017 (paid 64.18 pence per share on 21 July 2016) 66,376 55,720 57,621 66,376 55,720 90,036 ---------------------- ------------------------- ---------
On 13 November 2017, the Board approved an interim dividend of 40.89 pence per share (GBP36.473 million). These condensed interim financial statements do not reflect this dividend payable.
11. Other Reserves For the six months ended 30 September 2017 Foreign Share based Cash flow currency payment hedge translation Other reserve reserve reserve reserves Total GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 At 1 April 2017 18,146 (13,581) 105,537 932 111,034 Currency translation: - arising in the period - - 16,813 - 16,813 - recycled to the Income Statement on disposal - - (4,548) - (4,548) Movements relating to cash flow hedges - 20,292 - - 20,292 Movement in deferred tax liability on cash flow hedges - (3,570) - - (3,570) Share based payment 1,931 - - - 1,931 ------------------- --------- ----------- -------- ------- At 30 September 2017 20,077 3,141 117,802 932 141,952 ------------------- --------- ----------- -------- ------- For the six months ended 30 September 2016 Foreign Share based Cash flow currency payment hedge translation Other reserve reserve reserve reserves Total GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 At 1 April 2016 14,954 (8,112) 70,887 932 78,661 Currency translation - - 35,972 - 35,972 Movements relating to cash flow hedges - 9,409 - - 9,409 Movement in deferred tax liability on cash flow hedges - (1,504) - - (1,504) Share based payment 1,415 - - - 1,415 ------------------- --------- ----------- -------- ------- At 30 September 2016 16,369 (207) 106,859 932 123,953 ------------------- --------- ----------- -------- ------- For the year ended 31 March 2017 Foreign Share based Cash flow currency payment hedge translation Other reserve reserve reserve reserves Total GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 At 1 April 2016 14,954 (8,112) 70,887 932 78,661 Currency translation - - 34,650 - 34,650 Movements relating to cash flow hedges - (6,803) - - (6,803) Movement in deferred tax liability on cash flow hedges - 1,334 - - 1,334 Share based payment 3,192 - - - 3,192 ------------------- --------- ----------- -------- ------- At 31 March 2017 18,146 (13,581) 105,537 932 111,034 ------------------- --------- ----------- -------- ------- 12. Analysis of Net Debt Unaudited Unaudited Audited 30 Sept. 30 Sept. 31 March 2017 2016 2017 GBP'000 GBP'000 GBP'000 Non-current assets: Derivative financial instruments 180,109 271,609 273,767 ------------ ------------ ----------------- Current assets: Derivative financial instruments 18,479 37,132 18,233 Cash and cash equivalents 1,497,061 1,138,953 1,048,064 ------------ ------------ ----------------- 1,515,540 1,176,085 1,066,297 ------------ ------------ ----------------- Non-current liabilities: Finance leases (190) (131) (165) Derivative financial instruments (5,610) - (506) Unsecured Notes (1,680,317) (1,384,880) (1,319,802) ------------ ------------ ----------------- (1,686,117) (1,385,011) (1,320,473) ------------ ------------ ----------------- Current liabilities: Bank borrowings (118,193) (95,151) (88,041) Finance leases (166) (322) (190) Derivative financial instruments (3,511) (2,574) (5,894) Unsecured Notes - (76,801) (60,214) ------------ ------------ ----------------- (121,870) (174,848) (154,339) ------------ ------------ ----------------- Net debt excluding cash attributable to assets held for sale (112,338) (112,165) (134,748) Cash and short-term deposits attributable to assets held for sale - - 12,799 ------------ ------------ ----------------- Net debt including cash attributable to assets held for sale (112,338) (112,165) (121,949) ------------ ------------ -----------------
In September 2017, the Group successfully completed the drawdown of a new c.GBP450 million private placement debt issuance.
13. Post Employment Benefit Obligations
The Group's defined benefit pension schemes' assets were measured at fair value at 30 September 2017. The defined benefit pension schemes' liabilities at 30 September 2017 were updated to reflect material movements in underlying assumptions.
The Group's post employment benefit obligations moved from a net deficit of GBP0.029 million at 31 March 2017 to a net asset of GBP4.862 million at 30 September 2017. This movement was primarily driven by an actuarial gain on liabilities arising from an increase in the discount rate used to value these liabilities and by contributions in excess of the current service cost.
The following actuarial assumptions have been made in determining the Group's retirement benefit obligation for the six months ended 30 September 2017:
Unaudited Unaudited Audited 6 months 6 months year ended ended ended 30 Sept. 30 Sept. 31 March 2017 2016 2017 Discount rate - Republic of Ireland 2.10% 1.50% 2.00% - United Kingdom 2.70% 2.45% 2.55% ---------- ---------- --------- 14. Business Combinations
A key strategy of the Group is to create and sustain market leadership positions through acquisitions in markets it currently operates in, together with extending the Group's footprint into new geographic markets. In line with this strategy, there were a number of relatively small acquisitions completed by the Group during the period, the largest of which was the acquisition by DCC Technology of 100% of MTR Group Ltd, a UK based provider of second lifecycle solutions for mobile and tablet devices.
The acquisition data presented below reflects the fair value of the identifiable net assets acquired (excluding net cash/debt acquired) in respect of acquisitions completed during the six months ended 30 September 2017.
6 months 6 months ended ended 30 Sept. 30 Sept. 2017 2016 GBP'000 GBP'000 Assets Non-current assets Property, plant and equipment 6,695 (2,100) Equity accounted investments 157 1,762 ------------------- ---------------------- Total non-current assets 6,852 (338) ------------------- ---------------------- Current assets Inventories 2,880 1,324 Trade and other receivables 2,307 3,724 ------------------- ---------------------- Total current assets 5,187 5,048 ------------------- ---------------------- Liabilities Non-current liabilities Deferred income tax liabilities (45) (13) Total non-current liabilities (45) (13) ------------------- ---------------------- Current liabilities Trade and other payables (2,826) 2,445 Provisions for liabilities and charges - (5,043) Current income tax liability (599) 8,479 Acquisition related liabilities - (9,717) ------------------- Total current liabilities (3,425) (3,836) ------------------- ---------------------- Identifiable net assets acquired 8,569 861 Intangible assets - goodwill 18,918 6,798 ------------------- ---------------------- Total consideration 27,487 7,659 ------------------- ---------------------- Satisfied by: Cash 13,111 8,813 Cash and cash equivalents acquired (108) (2,204) ------------------- ---------------------- Net cash outflow 13,003 6,609 Acquisition related liabilities 14,484 1,050 ------------------- ---------------------- Total consideration 27,487 7,659 ------------------- ---------------------- Reconciliation to Group Cash Flow Statement: Net cash outflow on acquisitions completed during the period 13,003 6,609 Pre-completion deposits paid (Esso Norway and Shell Hong Kong & Macau) 31,310 - ------ ----- Total outflow as reported in the Group Cash Flow Statement 44,313 6,609 ------ -----
None of the business combinations completed during the period were considered sufficiently material to warrant separate disclosure of the fair values attributable to those combinations.
There were no adjustments made to the carrying amounts of assets and liabilities acquired in arriving at their fair values. The initial assignment of fair values to identifiable net assets acquired has been performed on a provisional basis in respect of a number of the business combinations above given the timing of closure of these transactions. Any amendments to these fair values within the twelve month timeframe from the date of acquisition will be disclosable in the Group's condensed interim financial statements for the six months ending 30 September 2018 as stipulated by IFRS 3.
The principal factors contributing to the recognition of goodwill on business combinations entered into by the Group are the expected profitability of the acquired business and the realisation of cost savings and synergies with existing Group entities.
Acquisition related costs included in other operating expenses in the Group Income Statement amounted to GBP3.512 million (six months ended 30 September 2016: GBP1.374 million).
No contingent liabilities were recognised on the acquisitions completed during the financial period or the prior financial years.
The gross contractual value of trade and other receivables as at the respective dates of acquisition amounted to GBP2.315 million. The fair value of these receivables is GBP2.307 million (all of which is expected to be recoverable).
None of the goodwill recognised in respect of acquisitions completed during the period is expected to be deductible for tax purposes.
The fair value of contingent consideration recognised at the date of acquisition is calculated by discounting the expected future payment to present value at the acquisition date. In general, for contingent consideration to become payable, pre-defined profit thresholds must be exceeded. On an undiscounted basis, the future payments for which the Group may be liable for acquisitions completed during the period range from GBP8.0 million to GBP37.5 million.
The post-acquisition impact of sales and profit after tax of acquisitions completed during the period was not material. The revenue and profit of the Group determined in accordance with IFRS for the period ended 30 September 2017 would not have been materially different from that reported in the Income Statement, had the acquisition date for all business combinations been the beginning of the period.
15. Seasonality of Operations
The Group's operations are significantly second-half weighted primarily due to a portion of the demand for DCC's LPG and Retail & Oil products being weather dependent and seasonal buying patterns in DCC Technology.
16. Related Party Transactions
There have been no related party transactions or changes in the nature and scale of the related party transactions described in the 2017 Annual Report that could have had a material impact on the financial position or performance of the Group in the six months ended 30 September 2017.
17. Events after the Balance Sheet Date
Esso Retail Norway
On 25 October 2017, DCC announced it had completed the acquisition of Esso's retail petrol station network in Norway. Details of the acquisition were set out in DCC's Stock Exchange Announcement on 7 February 2017. The total consideration was approximately NOK 2.43 billion (c. GBP235 million), plus the value of stock in tank at the date of acquisition, and was paid in cash on completion. An initial assignment of fair values to identifiable net assets acquired has not been completed given the timing of the closure of the transaction.
Retail West
On 7 November 2017, DCC LPG announced that it had reached agreement with NGL Energy Partners LP ('NGL') to acquire its Retail West LPG division, Hicksgas LLC ('Retail West'), based on an enterprise value of US$200 million (c. GBP152 million). The transaction is expected to complete on 31 March 2018, following receipt of customary regulatory consents and separation from NGL.
18. Board Approval
This report was approved by the Board of Directors of DCC plc on 13 November 2017.
19. Distribution of Interim Report
This report and further information on DCC is available at the Company's website www.dcc.ie. A printed copy is available to the public at the Company's registered office at DCC House, Leopardstown Road, Foxrock, Dublin 18, Ireland.
Statement of Directors' Responsibilities
We confirm that to the best of our knowledge:
-- the condensed set of interim financial statements for the six months ended 30 September 2017 have been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU; and
-- the interim management report includes a fair review of the information required by:
-- Regulation 8(2) of the Transparency (Directive 2004/109/EC) Regulations 2007, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and
-- Regulation 8(3) of the Transparency (Directive 2004/109/EC) Regulations 2007, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.
On behalf of the Board
John Moloney Donal Murphy
Chairman Chief Executive
13 November 2017
Supplementary Financial Information
Alternative Performance Measures
The Group reports certain alternative performance measures ('APMs') that are not required under International Financial Reporting Standards ('IFRS') which represent the generally accepted accounting principles ('GAAP') under which the Group reports. The Group believes that the presentation of these APMs provides useful supplemental information which, when viewed in conjunction with our IFRS financial information, provides investors with a more meaningful understanding of the underlying financial and operating performance of the Group and its divisions.
These APMs are primarily used for the following purposes:
-- to evaluate the historical and planned underlying results of our operations;
-- to set director and management remuneration; and
-- to discuss and explain the Group's performance with the investment analyst community.
None of the APMs should be considered as an alternative to financial measures derived in accordance with GAAP. The APMs can have limitations as analytical tools and should not be considered in isolation or as a substitute for an analysis of our results as reported under GAAP. These performance measures may not be calculated uniformly by all companies and therefore may not be directly comparable with similarly titled measures and disclosures of other companies.
The principal APMs used by the Group, together with reconciliations where the non-GAAP measures are not readily identifiable from the financial statements, are as follows:
Adjusted operating profit ('EBITA')
Definition
This comprises operating profit as reported in the Group Income Statement before net operating exceptional items and amortisation of intangible assets. Net operating exceptional items and amortisation of intangible assets are excluded in order to assess the underlying performance of our operations. In addition, neither metric forms part of Director or management remuneration.
6 months 6 months ended ended Year ended 30 Sept. 30 Sept. 31 March 2017 2016 2017 GBP'000 GBP'000 GBP'000 ---------------------------------------------------- --------- --------- ------------- Operating profit 88,845 84,501 269,578 Net operating exceptional items 13,126 4,416 36,297 Amortisation of intangible assets 20,527 18,178 39,130 ---------------------------------------------------- --------- --------- ------------- Adjusted operating profit ('EBITA') - continuing 122,498 107,095 345,005 Adjusted operating profit ('EBITA') - discontinued 980 10,728 18,546 ---------------------------------------------------- --------- --------- ------------- Adjusted operating profit ('EBITA') 123,478 117,823 363,551 ---------------------------------------------------- --------- --------- -------------
Net interest
Definition
The Group defines net interest as the net total of finance costs and finance income before interest related exceptional items as presented in the Group Income Statement.
6 months 6 months ended ended Year ended 30 Sept. 30 Sept. 31 March 2017 2016 2017 GBP'000 GBP'000 GBP'000 ----------------------------------------- --------- --------- --------- Finance costs before exceptional items (34,508) (35,676) (72,910) Finance income before exceptional items 18,832 19,163 40,973 ----------------------------------------- --------- --------- --------- Net interest - continuing (15,676) (16,513) (31,937) Net interest - discontinued (16) (73) (163) ----------------------------------------- --------- --------- --------- Net interest (15,692) (16,586) (32,100) ----------------------------------------- --------- --------- ---------
Constant currency
Definition
The translation of foreign denominated earnings can be impacted by movements in foreign exchange rates versus sterling, the Group's presentation currency. In order to present a better reflection of underlying performance in the period, the Group retranslates foreign denominated current year earnings at prior year exchange rates.
6 months 6 months ended ended 30 Sept. 30 Sept. 2017 2016 Calculation: Revenue - continuing, constant GBP'000 GBP'000 currency --------------------------------------------- ---------- ---------- Revenue - continuing 6,449,472 5,507,286 Currency impact (215,145) - --------------------------------------------- ---------- ---------- Revenue - continuing, constant currency 6,234,327 5,507,286 ---------------------------------------------- ---------- ---------- 6 months 6 months ended ended 30 Sept. 30 Sept. 2017 2016 Calculation: Adjusted operating profit GBP'000 GBP'000 - continuing, constant currency ----------------------------------------- --------- --------- Adjusted operating profit - continuing 122,498 107,095 Currency impact (5,066) - ----------------------------------------- --------- --------- Adjusted operating profit - continuing, constant currency 117,432 107,095 ------------------------------------------ --------- --------- 6 months 6 months ended ended 30 Sept. 30 Sept. 2017 2016 Calculation: Adjusted earnings per share GBP'000 GBP'000 (pence) - continuing, constant currency --------------------------------------------- --- --------- --------- Adjusted earnings - continuing 84,977 72,934 Currency impact (3,385) - -------------------------------------------- ---- --------- --------- Adjusted earnings - continuing, constant currency 81,592 72,934 Weighted average number of ordinary shares ('000) 89,007 88,691 -------------------------------------------------- --------- --------- Adjusted earnings per share (pence) - continuing, constant currency 91.67p 82.23p -------------------------------------------------- --------- ---------
Effective tax rate
Definition
The Group's effective tax rate expresses the income tax expense before exceptionals and deferred tax attaching to the amortisation of intangible assets as a percentage of adjusted operating profit less net interest.
6 months 6 months ended ended Year ended 30 Sept. 30 Sept. 31 March 2017 2016 2017 GBP'000 GBP'000 GBP'000 ---------------------------------------------- --------- --------- ------------- Adjusted operating profit 123,478 117,823 363,551 Net interest (15,692) (16,586) (32,100) ---------------------------------------------- --------- --------- ------------- Earnings before taxation 107,786 101,237 331,451 ---------------------------------------------- --------- --------- ------------- Income tax expense 13,196 11,223 45,869 Income tax relating to exceptional items 157 (386) (1,756) Deferred tax attaching to amortisation of intangible assets 5,874 5,014 10,674 ---------------------------------------------- --------- --------- ------------- Income tax expense before exceptionals and deferred tax attaching to amortisation of intangible assets - continuing 19,227 15,851 54,787 Income tax expense before exceptionals and deferred tax attaching to amortisation of intangible assets - discontinued 174 1,865 3,217 ---------------------------------------------- --------- --------- ------------- Total income tax expense before exceptionals and deferred tax attaching to amortisation of intangible assets 19,401 17,716 58,004 ---------------------------------------------- --------- --------- ------------- Effective tax rate (%) 18.0% 17.5% 17.5%
---------------------------------------------- --------- --------- -------------
Net capital expenditure
Definition
Net capital expenditure comprises purchases of property, plant and equipment, proceeds from the disposal of property, plant and equipment and government grants received in relation to property, plant and equipment.
6 months 6 months ended ended Year ended 30 Sept. 30 Sept. 31 March 2017 2016 2017 GBP'000 GBP'000 GBP'000 ------------------------------------------- --------- --------- --------- Purchase of property, plant and equipment 71,592 65,878 143,698 Proceeds from disposal of property, plant and equipment (2,525) (6,076) (12,315) Net capital expenditure 69,067 59,802 131,383 ------------------------------------------- --------- --------- ---------
Free cash flow
Definition
Free cash flow is defined by the Group as cash generated from operations before exceptional items as reported in the Group Cash Flow Statement after net capital expenditure.
6 months 6 months ended ended Year ended 30 Sept. 30 Sept. 31 March 2017 2016 2017 GBP'000 GBP'000 GBP'000 --------------------------------------- --------- --------- ---------- Cash generated from operations before exceptionals 83,975 141,039 546,870 Net capital expenditure (69,067) (59,802) (131,383) --------------------------------------- --------- --------- ---------- Free cash flow 14,908 81,237 415,487 --------------------------------------- --------- --------- ----------
Free cash flow (after interest and tax payments)
Definition
Free cash flow (after interest and tax payments) is defined by the Group as free cash flow after interest paid, income tax paid, dividends received from equity accounted investments and interest received.
6 months 6 months ended ended Year ended 30 Sept. 30 Sept. 31 March 2017 2016 2017 GBP'000 GBP'000 GBP'000 ------------------------------------------ --------- --------- --------- Free cash flow 14,908 81,237 415,487 Interest paid (32,457) (33,313) (70,108) Income tax paid (35,905) (28,122) (62,180) Dividends received from equity accounted investments 1,317 121 125 Interest received 19,001 19,191 40,966 ------------------------------------------ --------- --------- --------- Free cash flow (after interest and tax payments) (33,136) 39,114 324,290 ------------------------------------------ --------- --------- ---------
Committed acquisition expenditure
Definition
The Group defines committed acquisition expenditure as the total acquisition cost of subsidiaries as presented in the Group Cash Flow Statement (excluding amounts related to acquisitions which were committed to in previous years) and future acquisition related liabilities for acquisitions committed to during the period.
6 months 6 months ended ended Year ended 30 Sept. 30 Sept. 31 March 2017 2016 2017 GBP'000 GBP'000 GBP'000 ------------------------------------------- --------- --------- --------- Net cash outflow on acquisitions during the period 44,313 6,609 203,327 Net cash outflow on acquisitions which were committed to in the previous period (31,310) (6,609) (34,372) Acquisition related liabilities arising on acquisitions during the period 14,484 1,050 41,041 Acquisition related liabilities which were committed to in the previous period - (1,050) (14,082) Amounts committed in the current period 152,672 180,515 358,000 ------------------------------------------- --------- --------- --------- Committed acquisition expenditure 180,159 180,515 553,914 ------------------------------------------- --------- --------- ---------
Net working capital
Definition
Net working capital represents the net total of inventories, trade and other receivables (excluding interest receivable), and trade and other payables (excluding interest payable, amounts due in respect of property, plant and equipment and current government grants).
As at As at As at 30 Sept. 30 Sept. 31 March 2017 2016 2017 GBP'000 GBP'000 GBP'000 ----------------------------------------------- ------------ ------------ ------------ Inventories 548,903 435,716 456,395 Inventories (asset classified as held for sale) - - 1,922 Trade and other receivables 1,204,122 997,017 1,222,597 Trade and other receivables (asset classified as held for sale) - - 33,264 Interest receivable (included in trade and other receivables) (59) (151) (223) Trade and other payables (1,831,926) (1,536,255) (1,820,517) Trade and other payables (asset classified as held for sale) - - (35,741) Interest payable (included in trade and other payables) 5,268 5,342 4,534 Amounts due in respect of property, plant and equipment (included in trade and other payables) 4,093 228 6,349 Government grants (included in trade and other payables) 9 83 9 ----------------------------------------------- ------------ ------------ ------------ Net working capital (69,590) (98,020) (131,411) ----------------------------------------------- ------------ ------------ ------------
Working capital (days)
Definition
Working capital days measures how long it takes in days for the Group to convert working capital into revenue.
As at As at As at 30 Sept. 30 Sept. 31 March 2017 2016 2017 GBP'000 GBP'000 GBP'000 ------------------------- ---------- ---------- ---------- Net working capital (69,590) (98,020) (131,411) September/March revenue 1,219,059 1,014,498 1,223,575 ------------------------- ---------- ---------- ---------- Working capital (days) (1.7 (2.9 (3.3 days) days) days) ------------------------- ---------- ---------- ----------
This information is provided by RNS
The company news service from the London Stock Exchange
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