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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 | |
|---|---|---|---|---|---|---|---|---|---|---|
| -60.00 | -1.09% | 5,465.00 | 5,480.00 | 5,485.00 | 5,560.00 | 5,460.00 | 5,525.00 | 142,154 | 16:35:05 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Offices-holdng Companies,nec | 22.2B | 334.02M | 3.3818 | 16.20 | 5.41B |
From Apr 2019 to Apr 2024
TIDMDCC
RNS Number : 1171H
DCC PLC
13 November 2018
13 November 2018
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 2018.
Hot Features
Premium
Highlights 2018 2017 % change
-----------------------------------
DCC LPG volumes (thousand tonnes) 741.6kT 645.6kT +14.9%
----------- -------------- ---------
DCC Retail & Oil volumes (billion
litres) 6.157bn 6.011bn +2.4%
----------- -------------- ---------
Revenue - continuing(1)
(ex DCC LPG and DCC Retail &
Oil) GBP1.864bn GBP1.616bn +15.4%
----------- -------------- ---------
Adjusted operating profit(2)
- continuing(1) GBP141.9m GBP122.5m +15.9%
----------- -------------- ---------
Adjusted earnings per share(2)
- continuing(1) 107.1p 95.5p +12.1%
----------- -------------- ---------
Interim dividend 44.98p 40.89p +10.0%
----------- -------------- ---------
Operating cash flow GBP173.2m GBP84.0m
----------- -------------- ---------
-- Strong first half performance with Group adjusted operating profit on continuing activities increasing by 15.9% (up 16.5% on a constant currency basis) to GBP141.9 million, with all divisions performing in line with expectations.
-- Adjusted earnings per share on continuing activities up 12.1% (13.0% ahead on a constant currency basis) to 107.1 pence.
-- Interim dividend increased by 10.0% to 44.98 pence per share.
-- The Group continues to be active from a development perspective and committed approximately GBP270 million to new acquisitions since the preliminary results in May 2018.
-- Continued expansion of the Group's presence in North America with DCC Technology entering the market for the first time through the acquisitions of Stampede and Jam. These complementary acquisitions provide DCC Technology with a strong platform for further development in the growing and fragmented North American market.
-- On 27 September 2018, DCC raised approximately GBP600 million from an equity placing which completed on 2 October 2018. The proceeds of the placing will enable the continued implementation of DCC's targeted acquisition strategy, by enhancing the balance sheet and liquidity of the Group, ensuring DCC remains a credible and capable acquirer and can efficiently execute acquisition opportunities as they arise.
-- The Group reiterates its belief that the year ending 31 March 2019 will be another year of profit growth and development.
1 Continuing operations exclude DCC Environmental which was disposed of in May 2017 2 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 active and successful period for DCC. The business has performed strongly, with Group operating profit well ahead of the prior year and trading across each division in line with expectations.
DCC continues to be active from a development perspective. The recently completed acquisitions of Stampede and Jam further demonstrate DCC's increased opportunity set for development resulting from the Group's increased geographic presence. The successful completion of the equity placing leaves DCC very well positioned to continue its development and enhances the balance sheet strength and liquidity of the Group, ensuring DCC remains a credible and capable acquirer.
The Group's significant development in recent years has resulted in DCC having the platforms, opportunities and capability to build the Group into a global leader in its chosen sectors.
The Group reiterates its belief that the year ending 31 March 2019 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: +353 (0)1 246 5638 UK / International: +44 (0)330 336 9127 Passcode: 2678240 Webcast Link: https://edge.media-server.com/m6/p/wxvcbshw
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 2018 is as follows:
2018 2017
GBP'm GBP'm % change
Revenue(1) - continuing operations(2) 7,418 5,947 +24.7%
Adjusted operating profit(3) - continuing operations(2)
DCC LPG 40.9 44.1 -7.2 %
DCC Retail & Oil 56.3 42.2 +33.5%
DCC Healthcare 26.9 22.0 +22.2%
DCC Technology 17.8 14.2 +25.0%
Group adjusted operating profit(3) - continuing operations(2) 141.9 122.5 +15.9%
Finance costs (net) and other (22.1) (15.6)
Profit before net exceptionals, amortisation of intangible assets
and tax 119.8 106.9 +12.0%
Net exceptional items before tax and non-controlling interests(4) (6.3) (13.1)
Amortisation of intangible assets (27.6) (20.5)
Profit before tax 85.9 73.3 +17.2%
Taxation (14.0) (13.2)
Profit after tax 71.9 60.1 +19.6%
Profit after tax - discontinued operations(4) - 30.5
Non-controlling interests (3.9) (1.9)
Attributable profit 68.0 88.7
Adjusted earnings per share(3) - continuing(2) 107.1 pence 95.5 pence +12.1%
Adjusted earnings per share(3) - total 107.1 pence 96.4 pence
Dividend per share 44.98 pence 40.89 pence +10.0%
Operating cash flow 173.2 84.0
Net debt at 30 September 832.4 112.3
Net debt at 30 September adjusted for equity placing 237.4 112.3
(1) Prior year revenue restated to reflect the adoption of IFRS 15 Revenue from Contracts
with Customers
(2) Continuing operations excludes DCC Environmental which was disposed of in May 2017
(3) Excluding net exceptionals and amortisation of intangible assets
(4) Gain on disposal of DCC Environmental in the prior year is included under Profit after
tax - discontinued operations
Revenue - continuing operations
Overall, Group revenue increased by 24.7% (25.1% ahead on a constant currency basis) to GBP7.4 billion. Prior year revenue has been restated to reflect the adoption of IFRS 15 Revenue from Contracts with Customers, as set out in note 3 to the financial statements.
Volumes in DCC LPG increased by 14.9% to 741,566 tonnes, driven by DCC LPG's prior year acquisitions of Shell Hong Kong & Macau, Retail West and TEGA. On a like-for-like basis, volumes were modestly behind the prior year, reflecting the warmer than average temperatures across Europe.
DCC Retail & Oil volumes increased by 2.4% to 6.2 billion litres, benefiting from acquisitions completed in the prior year. Organic volumes were modestly behind the prior year, primarily reflecting the warmer weather in Europe.
Revenue excluding DCC LPG and DCC Retail & Oil increased by 15.4% (up 15.9% on a constant currency basis) to GBP1.9 billion.
Group adjusted operating profit - continuing operations
Group adjusted operating profit from continuing operations increased by 15.9% to GBP141.9 million (16.5% ahead on a constant currency basis), in the seasonally less significant first half of the year. The impact of currency translation versus the prior period was negligible with sterling marginally strengthening against the euro and marginally weakening against other relevant currencies.
Operating profit in DCC LPG was in line with expectations and, as anticipated, behind the prior year in the seasonally less significant first half of the year, principally due to the material increase in the cost of product and the investment in its natural gas and power offering in France. Following a significant period of development in the second half of the prior year, each of DCC LPG's recent acquisitions, Shell Hong Kong & Macau, Retail West and TEGA, traded in line with expectations.
DCC Retail & Oil delivered very strong operating profit growth of 33.5% (34.5% ahead on a constant currency basis), in line with expectations, driven by the contribution from acquisitions completed in the prior year and strong organic profit growth from the businesses in Britain, France and Denmark.
DCC Healthcare traded in line with expectations and achieved strong growth in operating profit of 22.2% (22.5% ahead on a constant currency basis). DCC Vital achieved strong organic profit growth, particularly in GP supplies and medical devices. DCC Health & Beauty Solutions generated excellent organic growth and also benefited from the first-time contribution from Elite One Source, which was acquired in February 2018.
Operating profit in DCC Technology was strongly ahead of the prior year and in line with expectations. The business benefited from the first-time contribution from the acquisitions of Stampede and Kondor and also from good organic growth in the UK and Ireland, DCC Technology's largest business.
Finance costs (net)
Net finance and other costs increased to GBP22.1 million (2017: GBP15.6 million). The increase was driven by the drawdown of a GBP450 million private placement debt issuance in September 2017 and also reflects the higher average net debt during the year of GBP914 million, compared to GBP313 million during the prior year. The average net debt increased due to the record level of acquisition spend over the past twelve months of over GBP900 million.
Profit before net exceptional items, amortisation of intangible assets and tax
Profit before net exceptional items, amortisation of intangible assets and tax increased by 12.0% (12.8% ahead on a constant currency basis) to GBP119.8 million.
Net exceptional items before tax and non-controlling interests and amortisation of intangible assets
The Group recorded a net exceptional charge before tax and non-controlling interests of GBP6.3 million in the first six months of the year as follows:
GBP'm
Acquisition and related costs (5.1)
Restructuring and integration costs (5.1)
IAS 39 mark-to-market gain 3.9
Net exceptional charge (6.3)
------------------------------------- ------
Acquisition and related costs include the professional fees and tax costs (such as stamp duty) relating to the evaluation and completion of acquisition opportunities and amounted to GBP5.1 million.
Restructuring and integration costs of GBP5.1 million principally relate to the ongoing dual running costs relating to the optimisation of DCC Technology's logistics and related infrastructure, as well as integration costs arising from recent acquisition activity. The upgraded warehousing and logistics in France, Scandinavia and the UK are all now operational. The related UK SAP implementation is now live in an element of the UK business, with the remaining components of the business scheduled to go-live during the next financial year.
Most of the Group's debt has been raised in the US private placement market and swapped, using long term interest and cross currency interest rate derivatives, to both fixed and floating rate sterling and euro. The level of ineffectiveness calculated under IAS 39 on the fair value and cash flow hedge relationships relating to fixed rate debt is charged or credited as an exceptional item. In the six months ended 30 September 2018, this amounted to an exceptional non-cash gain of GBP3.9 million. Following this credit, the cumulative net exceptional charge taken in respect of the Group's outstanding US private placement debt and related hedging instruments is GBP1.7 million. This, and any subsequent similar non-cash charges or gains, will net to zero over the remaining term of this debt and the related hedging instruments.
The charge for the amortisation of acquisition related intangible assets increased to GBP27.6 million from GBP20.5 million in the prior year, with the increase reflecting acquisitions completed in the prior year.
Profit before tax
Profit before tax increased by 17.2% to GBP85.9 million.
Taxation
The effective tax rate for the Group in the first half of the year of 17.0% is based on the anticipated mix of profits for the full year and compares to a full year effective tax rate in the prior year of 17.0%.
Adjusted earnings per share
Adjusted earnings per share on a continuing basis increased by 12.1% (13.0% ahead on a constant currency basis) to 107.1 pence.
Total adjusted earnings per share increased by 11.1% to 107.1 pence.
Dividend
The Board has decided to pay an interim dividend of 44.98 pence per share, which represents a 10% increase on the prior year interim dividend of 40.89 pence per share. This dividend will be paid on 12 December 2018 to shareholders on the register at the close of business on 23 November 2018.
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 2018 can be summarised as follows:
Six months ended 30 September 2018 2017
GBP'm GBP'm
Adjusted operating profit 141.9 123.5
Increase in working capital (25.7) (79.8)
Depreciation and other 57.0 40.3
Operating cash flow 173.2 84.0
Capital expenditure (net) (82.1) (69.1)
Free cash flow 91.1 14.9
Net interest, tax paid and other (34.2) (48.0)
Free cash flow after interest and tax 56.9 (33.1)
Acquisitions (270.3) (56.3)
Dividends (73.2) (66.4)
Exceptional items (net) and disposals (11.1) 144.8
Share issues 1.1 3.3
Net outflow (296.6) (7.7)
Opening net debt (542.7) (121.9)
Translation and other 6.9 17.3
Closing net debt (832.4) (112.3)
Net debt adjusted for equity placing (237.4) (112.3)
Operating cash flow in the six months ended 30 September 2018 of GBP173.2 million compares to GBP84.0 million in the prior year. Working capital increased by GBP25.7 million over the six-month period from 31 March 2018, reflecting seasonal requirements. The value of working capital at 30 September 2018 was a positive GBP60 million versus a negative GBP70 million at 30 September 2017, as each of the recently completed acquisitions of TEGA, Stampede, Kondor and Jam have a positive working capital profile. Overall working capital days at 30 September 2018 increased to positive 1.3 days sales from negative 1.7 days sales in the prior year, reflecting the aforementioned acquisitions. Working capital days were broadly in line with the prior year on a like for like basis. DCC Technology selectively uses supply chain financing solutions to sell, on a non-recourse basis, a portion of its receivables relating to certain larger supply chain/sales and marketing activities. The level of supply chain financing at 30 September 2018 was broadly in line with the prior year at GBP211.1 million and supply chain financing had a positive impact on Group working capital days of 4.4 days (31 March 2018: 4 days).
Net capital expenditure for the six months amounted to GBP82.1 million (2017: GBP69.1 million), as anticipated. The increase in capital expenditure over the prior year is due to the increased scale of the Group and a number of investments being undertaken to support its continued growth and development. In the current year, these investments include ongoing investment in new retail sites and site upgrades in the Retail & Oil division, investment to support the ongoing conversion of oil customers to LPG being achieved in the LPG division, and DCC Health & Beauty Solutions investment in its manufacturing footprint in Britain, including investment in the soft gel facility in South Wales and at the Elite facility in the US. The net capital expenditure exceeded the depreciation charge in the six months by GBP27.7 million.
Committed acquisitions and capital expenditure
Committed acquisition and capital expenditure in the period amounted to GBP354.0 million as follows:
Acquisitions Capex Total
GBP'm GBP'm GBP'm
DCC LPG 7.3 32.2 39.5
DCC Retail & Oil 10.2 34.1 44.3
DCC Healthcare - 8.2 8.2
DCC Technology 254.4 7.6 262.0
Total 271.9 82.1 354.0
------------------ ------------------- ----------- -----------------
Acquisition activity
Committed acquisition expenditure amounted to GBP271.9 million and included:
DCC Technology
In July 2018, DCC Technology announced the acquisitions of Stampede and Kondor.
Stampede
Stampede Global Holdings Inc. ('Stampede'), is a specialist distributor of professional audio-visual ('Pro AV') products and solutions in North America.
Headquartered in Buffalo, New York, Stampede, one of the leading specialist Pro AV distributors in the US, supplies Pro AV products including large format display, projectors, lamps, drones and accessories to system integrators, value-added resellers, retailers and etailers in the US, Canada and the UK. Stampede also provides Pro AV solutions to the hospitality, government, corporate and education sectors. Stampede partners with, and supplies products from, leading Pro AV brands such as Christie, Epson, LG, NEC, Samsung and Sharp. Stampede recorded revenue of US$280 million in the year ended 31 December 2017 and employs approximately 210 people.
The acquisition of Stampede represented DCC Technology's first acquisition in North America and is consistent with DCC Technology's strategy to extend the geographic footprint and product range of its successful and growing Pro AV business, strengthening its partnership with existing suppliers, while also broadening its base of customers and suppliers.
Kondor
Kondor, based in the South of England, distributes audio and mobile accessory products to etailers, retailers and mobile operators in the UK and Continental Europe. It partners with mobile and accessory brand owners and has an extensive portfolio of own-brand products, complementing its third-party brands. Kondor also provides outsourced category management services, including category/brand management, marketing support, promotional display, brand support and advanced stock solutions, to the retail channel.
Jam
In September 2018, DCC Technology acquired the Jam Group of Companies ('Jam', comprising Jam Industries Ltd. and Jam International Ltd.). Jam is a market-leading North American specialist sales, marketing and services business serving the professional audio, musical instruments and consumer electronics product sectors.
Headquartered in Montreal, Canada, Jam is a world-leader in the professional audio and musical instruments sectors, providing a range of industry-leading, value adding services and solutions to both its vendor and customer partners. This product sector and channel specialisation includes marketing and sales support, in-house technicians providing technical support, after-sales, repair and warranty repair services, in-house graphics and print services and the provision of white-label e-commerce platforms for smaller retailers and resellers. The business recorded revenue of US$323 million in the year ended 30 April 2018 and employs approximately 570 people.
The acquisition of Jam significantly strengthens DCC Technology's position in the North American market following the acquisition of Stampede in July 2018. Importantly, the very strong service capability of Jam is consistent with DCC Technology's increasing focus on positioning itself as a specialist service partner for customers and suppliers, providing extensive brand reach, market access and simplifying the complex supply chain of its chosen sectors.
Total cash spend on acquisitions in the six months ended 30 September 2018
The total cash spend on acquisitions in the six months ended 30 September 2018 was GBP270.3 million. This included the payment of deferred and contingent acquisition consideration previously provided of GBP21.0 million, completion of the acquisitions of Jam, Stampede and Kondor by DCC Technology and the completion of small bolt-on acquisitions in DCC LPG and DCC Retail & Oil.
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 2018, the Group had net debt of GBP832.4 million, total equity of GBP1.7 billion, cash resources, net of overdrafts, of GBP869.1 million and approximately GBP200.0 million of undrawn committed debt facilities. The Group's outstanding term debt at 30 September 2018 had an average maturity of 5.8 years, which has been raised in the US private placement market with an average credit margin of 1.6% over floating Euribor/Libor. In October 2018, DCC successfully refinanced private placement debt maturing in the next 18 months with a private placement issuance equivalent to GBP360 million to be drawn down in April 2019.
On 27 September 2018, DCC raised approximately GBP600 million from an equity placing which completed on 2 October 2018. On a pro-forma basis, net debt at 30 September 2018 adjusted for the proceeds of the equity placing would be approximately GBP237.4 million.
Outlook
The Group reiterates its belief that the year ending 31 March 2019 will be another year of profit growth and development.
Performance Review - Divisional Analysis
DCC LPG 2018 2017 % change
----------------------------
Volumes (thousand tonnes) 741.6kT 645.6kT +14.9%
---------- ---------- ---------
Operating profit GBP40.9m GBP44.1m -7.2%
---------- ---------- ---------
Operating profit per tonne GBP55.16 GBP68.30
---------- ---------- ---------
Operating profit in DCC LPG was in line with expectations and, as anticipated, behind the prior year in the seasonally less significant first half of the year due to the material increase in the cost of product and the investment in its natural gas and power offering in France. DCC LPG made excellent progress in increasing the scale and breadth of its business by successfully integrating the acquisitions completed in the second half of the prior year, each of which performed in line with expectations.
DCC LPG sold 741,600 tonnes of product, an increase of 14.9% over the prior year, principally driven by the prior year acquisitions of Shell Hong Kong & Macau, Retail West and TEGA. On a like-for-like basis, volumes were modestly behind the prior year reflecting the warmer than average temperatures across Europe during the first six months of the financial year.
As anticipated, operating profit per tonne declined versus the prior year due to the significantly higher cost of product in both LPG and natural gas, the investment in natural gas and power in France and the increased seasonality following the acquisition of the US business.
In France, the business performed in line with expectations during the first half of the year benefiting from good procurement and operational cost control. The focus on expanding the service offering and capability of the French business continued, with the rollout out of the 'Click & Collect' cylinder offering and continued organic investment in the development of the consumer natural gas and power business in what is a competitive marketplace. The French business continues to leverage the strength of the 'Butagaz' brand and has achieved good traction in expanding its range of products and services in the French energy market.
In Britain & Ireland, the business delivered good volume growth versus the prior year, despite the warmer than average weather, as it continued its focus on converting industrial and commercial users of oil to LPG. Good progress was made in integrating the Countrywide business acquired in the prior year and this integration will be completed during the second half of the year.
Shell Hong Kong & Macau (acquired in January 2018), Retail West in the US and TEGA in Germany (both acquired on 31 March 2018) have been successfully integrated into DCC LPG's existing operations. Each business performed in line with expectations since acquisition and provide a platform for future growth and development in their respective markets.
DCC Retail & Oil 2018 2017 % change
----------------------------
Volumes (billion litres) 6.157bn 6.011bn +2.4%
---------- ---------- ---------
Operating profit GBP56.3m GBP42.2m +33.5%
---------- ---------- ---------
Operating profit per litre 0.91 ppl 0.70 ppl
---------- ---------- ---------
DCC Retail & Oil recorded a strong performance in the first half of the financial year, with operating profit growth of 33.5%, in line with expectations. This strong performance reflects both organic profit growth and the contribution from acquisitions completed in the prior year.
DCC Retail & Oil volumes increased by 2.4% to 6.2 billion litres, driven by acquisitions in the prior year. Organic volumes were modestly behind the prior year, reflecting the warm weather in Northern Europe which particularly affected agricultural demand in the summer months.
In Britain and Ireland, the business performed very well during the first half of the year delivering strong organic profit growth. Lower agricultural volume demand was offset by good growth in commercial volumes. The business continues to make good progress in expanding its activities into adjacent areas such as lubricants and aviation. During the period, the business successfully acquired and integrated SNAP, an end-to-end transaction processing and payment system for HGV fleets, and continued to invest in expanding its truck stop and retail networks. SNAP facilitates cashless payments through licence plate recognition for services to HGV fleets at truck stops. The Fuel Card business continued to perform strongly during the first half of the year.
In Scandinavia, the Danish business delivered very strong profit growth. A combination of a successful business improvement plan following the acquisition and integration of Dansk Fuels and a strong performance in driving differentiated fuels in the commercial fuels business more than offset lower agricultural volumes. In Norway, Esso's retail network (acquired in October 2017) has been integrated into DCC Retail & Oil's retail operating infrastructure, enabling management to drive improvements in what remains a difficult market environment. The Swedish business performed in line with expectations, delivering strong organic volume growth.
In France, the business delivered strong organic profit growth, primarily driven by the continued focus on business development and customer engagement through the roll-out of the Esso Synergy fuel brand, the Club Certas loyalty program, expansion of its non-fuel offering in carwash and the rollout of both Amazon and Butagaz 'Click and Collect' offerings. The business also recently completed a small bolt-on acquisition of a network of approximately 80 Esso dealers.
DCC Healthcare 2018 2017 % change
------------------
Revenue GBP275.9m GBP245.0m +12.6%
---------- ---------- ---------
Operating profit GBP26.9m GBP22.0m +22.2%
---------- ---------- ---------
Operating margin 9.8% 9.0%
---------- ---------- ---------
DCC Healthcare traded in line with expectations and generated strong profit growth of 22.2% in the first half of the year. Both DCC Vital and DCC Health & Beauty Solutions generated strong organic profit growth, while DCC Health & Beauty Solutions also benefited from the acquisition of Elite One Source in February 2018.
DCC Vital, which is focused on the sales and marketing of medical devices and pharmaceuticals to healthcare providers in Britain and Ireland, performed strongly, driven in particular by very strong organic profit growth in the supply of medical products and services to GP surgeries. DCC Vital strengthened its position as the market leader in the GP channel, successfully integrating two small complementary bolt-on acquisitions completed in the prior year. In medical devices, DCC Vital generated very good growth in the Irish market driven by growth in the scientific and community care segments and performed satisfactorily in Britain against a challenging market backdrop. DCC Vital's pharma activities performed satisfactorily, with strong profit growth in Britain driven by the strength of its supply chain, which offset a slightly weaker performance in the Irish market.
DCC Health & Beauty Solutions, which provides outsourced solutions to international nutrition and beauty brand owners, generated excellent organic profit growth and benefited from the first-time contribution from Elite One Source. In the nutrition sector, DCC generated good organic growth across a number of key customers, as the business continues to support their international sales growth through innovation, manufacturing flexibility and technical support. In the beauty sector, DCC generated excellent organic growth from a range of existing customers and the successful development of new customer relationships.
With the background of continuing global market growth and a strong order book, DCC Health & Beauty Solutions is progressing a number of investment projects across its manufacturing footprint in Britain and in the US, which will add significant new capacity and capability. The most material project is at DCC Health & Beauty Solutions' soft gel facility in South Wales where the business has grown its European market share in soft gels on the back of its market leading capability in complex formulation and vegetarian soft gel products. The expansion project will almost double the business' existing soft gel capacity, as well as providing new manufacturing capability in growth areas such as organic vegetarian soft gels.
DCC Technology 2018 2017 % change
------------------
Revenue GBP1.588bn GBP1.371bn +15.8%
----------- ----------- ---------
Operating profit GBP17.8m GBP14.2m +25.0%
----------- ----------- ---------
Operating margin 1.1% 1.0%
----------- ----------- ---------
DCC Technology achieved strong operating profit growth of 25.0% in the seasonally less significant first half of the year, in what was a very active development period for the business. This performance was driven by a strong organic performance in the UK & Ireland, as well as the contribution from acquisitions completed in the current year.
The UK & Ireland business benefited from good revenue growth in key product areas and from recent acquisitions, including the bolt-on acquisition of Kondor in the current year, which strengthened DCC Technology's position in the mobile and category management services area. Audio-visual, smart-home and repair/refurbishment services generated strong revenue growth, while the Enterprise business continued to achieve very strong growth in the datacentre market. Following completion of the new UK national distribution centre in Lancashire in the prior year, a component of the UK business has now fully upgraded its SAP enterprise management system and is operating effectively. The remainder of the UK business will transition to the new system on a phased basis during the next financial year.
In Europe, the business in the Nordics has consolidated its warehousing infrastructure and invested in automation which will facilitate the further expansion of the business across the region. In France, operational improvements continue in the French consumer products business to reduce costs, drive efficiencies and win new vendors. The French reseller and electrician business continues to perform well and is continuing to invest in its audio-visual proposition.
The business in the Middle East continues to generate organic revenue and operating profit growth, while the Supply Chain Services business performed in line with expectations.
The acquisitions of Stampede in July 2018 and Jam in September 2018 represented DCC Technology's first acquisitions in the large, growing and fragmented North American market. Both businesses have traded in line with expectations since acquisition. The acquisition of Stampede, a specialist distributor of professional audio-visual products and solutions, has extended the geographic footprint and product range of the division's successful and growing Pro AV business, strengthening its partnership with existing suppliers, while also broadening the base of customers and suppliers. Jam is a market-leading North American specialist sales, marketing and services business, serving the professional audio, musical instruments and consumer electronics product sectors. The acquisition of Jam provides DCC Technology with a strong and complementary consumer products capability, whilst also adding a leading-market presence in the growing musical instrument market. Jam's service-led approach is consistent with DCC Technology's increased focus on services and DCC Technology now has a platform of scale in the North American market from which to expand organically and by acquisition.
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 19 to 22 of the 2018 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 2018 30 September 2017 (restated*) 31 March 2018 (restated*)
---------------------------------------------------------------- ------------------------------------------------------------------- -------------------------------------------
Pre exceptionals Exceptionals Pre exceptionals Exceptionals Pre Exceptionals
(note 7) Total (note 7) Total exceptionals (note 7) Total
Continuing Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
operations
Revenue 6 7,418,009 - 7,418,009 5,947,422 - 5,947,422 13,225,467 - 13,225,467
Cost of sales (6,704,752) - (6,704,752) (5,334,434) - (5,334,434) (11,818,642) - (11,818,642)
----------------------------------- ------------- ------------ -------------------------------------- ------------- ------------ ------------- ------------- -------------
Gross profit 713,257 - 713,257 612,988 - 612,988 1,406,825 - 1,406,825
Administration
expenses (217,752) - (217,752) (190,756) - (190,756) (384,701) - (384,701)
Selling and distribution
expenses (354,174) - (354,174) (297,685) - (297,685) (652,636) - (652,636)
Other operating
income 13,985 112 14,097 10,669 308 10,977 28,652 1,156 29,808
Other operating
expenses (13,398) (10,403) (23,801) (12,718) (13,434) (26,152) (14,740) (46,269) (61,009)
----------------------------------- ------------- ------------ -------------------------------------- ------------- ------------ ------------- ------------- -------------
Adjusted operating
profit 141,918 (10,291) 131,627 122,498 (13,126) 109,372 383,400 (45,113) 338,287
Amortisation of
intangible
assets (27,569) - (27,569) (20,527) - (20,527) (43,059) - (43,059)
----------------------------------- ------------- ------------ -------------------------------------- ------------- ------------ ------------- ------------- -------------
Operating profit 6 114,349 (10,291) 104,058 101,971 (13,126) 88,845 340,341 (45,113) 295,228
Finance costs (40,122) - (40,122) (34,508) (2) (34,510) (73,156) - (73,156)
Finance income 17,720 3,974 21,694 18,832 - 18,832 37,421 299 37,720
Equity accounted
investments'
profit after tax 248 - 248 92 - 92 368 - 368
----------------------------------- ------------- ------------ -------------------------------------- ------------- ------------ ------------- ------------- -------------
Profit before
tax 92,195 (6,317) 85,878 86,387 (13,128) 73,259 304,974 (44,814) 260,160
Income tax
expense 8 (13,396) (628) (14,024) (13,353) 157 (13,196) (49,289) 25,407 (23,882)
----------------------------------- ------------- ------------ -------------------------------------- ------------- ------------ ------------- ------------- -------------
Profit for the period
(continuing
operations) 78,799 (6,945) 71,854 73,034 (12,971) 60,063 255,685 (19,407) 236,278
Profit for the period
from
discontinued operations
9 - - - 790 29,742 30,532 801 29,842 30,643
----------------------------------- ------------- ------------ -------------------------------------- ------------- ------------ ------------- ------------- -------------
Profit after tax for the
financial period 78,799 (6,945) 71,854 73,824 16,771 90,595 256,486 10,435 266,921
----------------------------------- ------------- ------------ -------------------------------------- ------------- ------------ ------------- ------------- -------------
Profit
attributable
to:
Owners of the Parent
Company 74,947 (6,945) 68,002 71,114 17,587 88,701 250,420 11,404 261,824
Non-controlling
interests 3,852 - 3,852 2,710 (816) 1,894 6,066 (969) 5,097
----------------------------------- ------------- ------------ -------------------------------------- ------------- ------------ ------------- ------------- -------------
78,799 (6,945) 71,854 73,824 16,771 90,595 256,486 10,435 266,921
----------------------------------- ------------- ------------ -------------------------------------- ------------- ------------ ------------- ------------- -------------
Earnings per ordinary share
Basic earnings
per
share 10 76.15p 99.66p 293.83p
Diluted earnings
per share 10 76.02p 99.21p 292.79p
Basic adjusted
earnings
per share 10 107.05p 96.36p 318.35p
Diluted adjusted
earnings
per share 10 106.87p 95.93p 317.21p
------------ ------------ -------------
Earnings per ordinary share - continuing
operations
Basic earnings
per
share 10 76.15p 65.36p 259.44p
Diluted earnings
per share 10 76.02p 65.06p 258.52p
Basic adjusted
earnings
per share 10 107.05p 95.47p 317.45p
Diluted adjusted
earnings per
share 10 106.87p 95.04p 316.31p
------------ ------------ -------------
Group Statement of Comprehensive Income
Unaudited Unaudited Audited
6 months 6 months year
ended ended ended
30 Sept. 30 Sept. 31 March
2018 2017 2018
GBP'000 GBP'000 GBP'000
Group profit for the period 71,854 90,595 266,921
Other comprehensive income:
Items that may be reclassified subsequently
to profit or loss
Currency translation:
- arising in the period 38,005 17,714 682
- recycled to the Income Statement
on disposal - (4,548) (4,548)
Movements relating to cash flow
hedges 26,532 20,292 (3,030)
Movement in deferred tax liability
on cash flow hedges (4,510) (3,570) 433
---------- ---------- ---------
60,027 29,888 (6,463)
---------- ---------- ---------
Items that will not be reclassified
to profit or loss
Group defined benefit pension obligations:
- remeasurements 2,928 1,702 5,215
- movement in deferred tax asset (489) (268) (665)
---------- ---------- ---------
2,439 1,434 4,550
---------- ---------- ---------
Other comprehensive income for the
period, net of tax 62,466 31,322 (1,913)
---------- ---------- ---------
Total comprehensive income for
the period 134,320 121,917 265,008
---------- ---------- ---------
Attributable to:
Owners of the Parent Company 129,975 119,122 259,336
Non-controlling interests 4,345 2,795 5,672
---------- ---------- ---------
134,320 121,917 265,008
---------- ---------- ---------
Attributable to:
Continuing operations 134,320 95,933 234,365
Discontinued operations - 25,984 30,643
---------- ---------- ---------
134,320 121,917 265,008
---------- ---------- ---------
Group Balance Sheet
Restated*
Unaudited Unaudited Audited
30 Sept. 30 Sept. 31 March
2018 2017 2018
Notes GBP'000 GBP'000 GBP'000
ASSETS
Non-current assets
Property, plant and equipment 980,731 789,947 933,038
Intangible assets 2,136,655 1,478,296 1,972,236
Equity accounted investments 24,933 24,632 24,461
Deferred income tax assets 26,872 23,128 26,154
Derivative financial instruments 119,661 180,109 103,085
3,288,852 2,496,112 3,058,974
---------- ---------- ----------
Current assets
Inventories 728,648 548,903 530,473
Trade and other receivables 1,459,337 1,204,122 1,426,217
Derivative financial instruments 78,232 18,479 8,050
Cash and cash equivalents 977,571 1,497,061 1,038,827
---------- ---------- ----------
3,243,788 3,268,565 3,003,567
----------
Total assets 6,532,640 5,764,677 6,062,541
---------- ---------- ----------
EQUITY
Capital and reserves attributable to owners
of the Parent Company
Share capital 15,455 15,455 15,455
Share premium 281,587 277,211 280,533
Share based payment reserve 12 25,315 20,077 22,883
Cash flow hedge reserve 12 5,844 3,141 (16,178)
Foreign currency translation reserve 12 138,608 117,802 101,096
Other reserves 12 932 932 932
Retained earnings 1,231,736 1,101,502 1,237,937
---------- ---------- ----------
Equity attributable to owners
of the Parent Company 1,699,477 1,536,120 1,642,658
Non-controlling interests 39,604 32,382 35,259
---------- ---------- ----------
Total equity 1,739,081 1,568,502 1,677,917
---------- ---------- ----------
LIABILITIES
Non-current liabilities
Borrowings 1,548,474 1,680,507 1,598,521
Derivative financial instruments 7,489 5,610 10,732
Deferred income tax liabilities 196,434 157,222 187,826
Post employment benefit obligations 14 (4,515) (4,862) (286)
Provisions for liabilities 283,025 258,909 278,890
Acquisition related liabilities 86,118 71,644 71,454
Government grants 348 257 237
---------- ---------- ----------
2,117,373 2,169,287 2,147,374
---------- ---------- ----------
Current liabilities
Trade and other payables 2,134,197 1,831,926 2,063,260
Current income tax liabilities 23,107 11,915 19,769
Borrowings 439,131 118,359 74,897
Derivative financial instruments 12,726 3,511 8,474
Provisions for liabilities 40,809 32,389 44,451
Acquisition related liabilities 26,216 28,788 26,399
---------- ---------- ----------
2,676,186 2,026,888 2,237,250
---------- ---------- ----------
Total liabilities 4,793,559 4,196,175 4,384,624
---------- ---------- ----------
Total equity and liabilities 6,532,640 5,764,677 6,062,541
---------- ---------- ----------
Net debt included above 13 (832,356) (112,338) (542,662)
---------- ---------- ----------
Group Statement of Changes in Equity
For the six Attributable to owners of the
months ended 30 Parent Company
September 2018
-------------------------------------------------------------------------------------------------------------------------
Other Non-
Share Share Retained reserves controlling Total
capital premium earnings (note Total interests equity
12)
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 April 2018 15,455 280,533 1,237,937 108,733 1,642,658 35,259 1,677,917
IFRS 9
transition
adjustment
(note 3) - - (3,450) - (3,450) - (3,450)
----------------------- ---------------------------- ----------------------- --------------------- ------------------ ------------------------- ------------------
At 1 April 2018
(restated) 15,455 280,533 1,234,487 108,733 1,639,208 35,259 1,674,467
Profit for the
period - - 68,002 - 68,002 3,852 71,854
Currency
translation - - - 37,512 37,512 493 38,005
Group defined
benefit pension
obligations:
-
remeasurements - - 2,928 - 2,928 - 2,928
- movement in
deferred tax
asset - - (489) - (489) - (489)
Movements
relating to
cash
flow hedges - - - 26,532 26,532 - 26,532
Movement in
deferred tax
liability
on cash flow
hedges - - - (4,510) (4,510) - (4,510)
Total
comprehensive
income - - 70,441 59,534 129,975 4,345 134,320
Re-issue of
treasury
shares - 1,054 - - 1,054 - 1,054
Share based
payment - - - 2,432 2,432 - 2,432
Dividends - - (73,192) - (73,192) - (73,192)
----------------------- ---------------------------- ----------------------- --------------------- ------------------ ------------------------- ------------------
At 30 September
2018 15,455 281,587 1,231,736 170,699 1,699,477 39,604 1,739,081
----------------------- ---------------------------- ----------------------- --------------------- ------------------ ------------------------- ------------------
For the six Attributable to owners of the
months ended 30 Parent Company
September 2017
------------------------------------------------------------------------------------------------------------------------
Other Non-
Share Share Retained reserves controlling Total
capital premium earnings (note Total interests equity
12)
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 year Attributable to owners of the
ended 31 March Parent Company
2018
------------------------------------------------------------------------------------------------------------------------
Other Non-
Share Share Retained reserves controlling Total
capital premium earnings (note Total interests equity
12)
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 - - 261,824 - 261,824 5,097 266,921
Currency
translation:
- arising in
the period - - - 107 107 575 682
- recycled to
the Income
Statement
on disposal - - - (4,548) (4,548) - (4,548)
Group defined
benefit pension
obligations:
-
remeasurements - - 5,215 - 5,215 - 5,215
- movement in
deferred tax
asset - - (665) - (665) - (665)
Movements
relating to
cash
flow hedges - - - (3,030) (3,030) - (3,030)
Movement in
deferred tax
liability
on cash flow
hedges - - - 433 433 - 433
Total
comprehensive
income - - 266,374 (7,038) 259,336 5,672 265,008
Re-issue of
treasury
shares - 3,322 - - 3,322 - 3,322
Share based
payment - - - 4,737 4,737 - 4,737
Dividends - - (102,871) - (102,871) - (102,871)
----------------------- ---------------------------- ----------------------- -------------------- ------------------ ------------------------- ------------------
At 31 March
2018 15,455 280,533 1,237,937 108,733 1,642,658 35,259 1,677,917
----------------------- ---------------------------- ----------------------- -------------------- ------------------ ------------------------- ------------------
Group Cash Flow Statement
Unaudited Unaudited Audited
6 months 6 months year
ended ended ended
30 Sept. 30 Sept. 31 March
2018 2017 2018
Note GBP'000 GBP'000 GBP'000
Cash flows from operating activities
Profit for the period 71,854 90,595 266,921
Add back non-operating expenses/(income)
- tax 14,024 13,370 24,046
- share of equity accounted investments'
profit (248) (92) (368)
- net operating exceptionals 10,291 (16,616) 15,271
- net finance costs 18,428 15,694 35,452
---------- ---------- ----------
Group operating profit before
exceptionals 114,349 102,951 341,322
Share-based payments expense 2,432 1,931 4,737
Depreciation 54,434 44,263 93,722
Amortisation of intangible assets 27,569 20,527 43,059
Profit on disposal of property,
plant and equipment (863) (312) (167)
Amortisation of government grants (34) (16) (36)
Other 1,049 (5,552) 4,555
Increase in working capital (25,717) (79,817) (13,758)
---------- ---------- ----------
Cash generated from operations
before exceptionals 173,219 83,975 473,434
Exceptionals (19,626) (15,197) (12,602)
---------- ---------- ----------
Cash generated from operations 153,593 68,778 460,832
Interest paid (39,142) (32,457) (69,900)
Income tax paid (12,780) (35,905) (65,437)
---------- ---------- ----------
Net cash flows from operating
activities 101,671 416 325,495
---------- ---------- ----------
Investing activities
Inflows:
Proceeds from disposal of property,
plant and equipment 4,252 2,525 7,617
Dividends received from equity
accounted investments - 1,317 1,980
Disposal of subsidiaries and equity
accounted investments 8,573 160,054 160,063
Interest received 17,715 19,001 37,399
30,540 182,897 207,059
---------- ---------- ----------
Outflows:
Purchase of property, plant and
equipment (86,341) (71,592) (152,997)
Acquisition of subsidiaries 15 (249,259) (44,313) (664,109)
Payment of accrued acquisition
related liabilities (21,048) (12,014) (26,910)
---------- ---------- ----------
(356,648) (127,919) (844,016)
---------- ---------- ----------
Net cash flows from investing
activities (326,108) 54,978 (636,957)
---------- ---------- ----------
Financing activities
Inflows:
Proceeds from issue of shares 1,054 3,309 3,322
Net cash inflow on derivative
financial instruments - 13,914 11,275
Increase in interest-bearing loans
and borrowings 201,357 458,593 458,593
Increase in finance lease liabilities 989 - 766
203,400 475,816 473,956
---------- ---------- ----------
Outflows:
Repayment of interest-bearing
loans and borrowings - (58,132) (58,130)
Repayment of finance lease liabilities (53) (6) (4)
Dividends paid to owners of the
Parent Company 11 (73,192) (66,376) (102,871)
(73,245) (124,514) (161,005)
---------- ---------- ----------
Net cash flows from financing
activities 130,155 351,302 312,951
---------- ---------- ----------
Change in cash and cash equivalents (94,282) 406,696 1,489
Translation adjustment (900) (650) (10,018)
Cash and cash equivalents at beginning
of period 964,293 972,822 972,822
---------- ---------- ----------
Cash and cash equivalents at end
of period 869,111 1,378,868 964,293
---------- ---------- ----------
Cash and cash equivalents consists
of:
Cash and short-term bank deposits 977,571 1,497,061 1,038,827
Overdrafts (108,460) (118,193) (74,534)
869,111 1,378,868 964,293
---------- ---------- ----------
Notes to the Condensed Financial Statements
for the six months ended 30 September 2018
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 2018 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 IAS 34 Interim Financial Reporting 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 2018 and the comparative figures for the six months ended 30 September 2017 are unaudited and have not been reviewed by the Auditors. The summary financial statements for the year ended 31 March 2018 represent a restated, 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 2018 Annual Report and are described in those financial statements on pages 190 to 198, except for those noted below.
The following new standards have been adopted in the current year:
IFRS 9 Financial Instruments:
This standard replaces IAS 39 Financial Instruments: Recognition and Measurement. 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 standard also introduced expanded disclosure requirements and changes in presentation.
Impairment of Financial Assets:
The new impairment model requires the recognition of impairment provisions based on expected credit losses rather than only incurred credit losses as was the case under IAS 39. Trade receivables represent one of the Group's most significant financial assets and are subject to IFRS 9's new expected credit losses model. The Group's impairment methodology has been revised in line with the new requirements of IFRS 9 and the simplified approach to providing for expected credit losses has been applied which uses a lifetime expected loss allowance for all trade receivables. Details of the impact on the Group's financial statements is provided in note 3.
Hedge Accounting:
The Group has made the accounting policy choice allowed under IFRS 9 to continue to apply the hedge accounting requirements of IAS 39 until the amended standard resulting from an IASB project on macro hedge accounting becomes effective. Accordingly, there has been no impact on the accounting for hedging relationships.
IFRS 15 Revenue from Contracts with Customers:
This standard replaced IAS 18 Revenue, IAS 11 Construction Contracts and related interpretations. This 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. Details of the impact on the Group's financial statements is provided in note 3.
There were other changes to IFRS which became effective for the Group during the period but did not result in material changes to the Group's consolidated financial statements.
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:
IFRS 16 Leases (effective date: DCC financial year beginning 1 April 2019):
This standard will replace IAS 17 Leases. 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 2018 Annual Report, the Group's future minimum rentals payable under non-cancellable operating leases at 31 March 2018 amounted to GBP345.0 million and the charge recognised in the Income Statement for the year ended 31 March 2018 amounted to GBP84.8 million. These amounts provide an indication of the scale of leases held at 31 March 2018 but exclude the impact of discounting, assessment of the expected term of leases (including renewal options) and exemptions for short-term leases and low-value leases.
The Group continues to perform a full review of all agreements to assess whether any additional contracts will now become a lease under IFRS 16's new definition in addition to determining which optional accounting simplifications to apply and assessing the additional disclosures that will be required. The new standard offers options on transition; either full retrospective application or modified retrospective application (which means comparatives do not need to be restated). The Group expects to adopt the modified retrospective approach. In order to assist with meeting the requirements of the new standard, the Group has selected a lease accounting software solution which is in the process of being implemented across the Group.
Based on the work performed to date, the Group expects to recognise a lease liability and corresponding right of use asset of approximately GBP300 million on transition. The actual impact on transition could differ to this estimate due to a number of factors such as changes in foreign exchange translation rates, changes in discount rates, changes in the composition of the Group's lease portfolio and other underlying assumptions up until the date of transition. The Group will apply IFRS 16 from its effective date.
IFRIC 23 Uncertainty over Income Tax Treatments (effective date: DCC financial year beginning 1 April 2019):
This IFRIC clarifies the accounting for uncertainties in income taxes and is to be applied to the determination of taxable profit (or tax loss), tax bases, unused tax losses, unused tax credits and tax rates, when there is uncertainty over income tax treatments under IAS 12 Income Taxes. The Group does not expect the adoption of this IFRIC to have a material impact on the consolidated financial statements.
Other changes to IFRS have been issued but are not yet effective for the Group. However, they are either not expected to have a material effect on the consolidated financial statements or they are not currently relevant for the Group.
3. Restatement
Measurement period adjustments:
The Group Balance Sheet for the year ended 31 March 2018 has been restated due to the finalisation of the valuation of the separately identifiable intangible assets acquired on the Retail West and TEGA business combinations. In the year ended 31 March 2018 we reported that the acquisitions of Retail West and TEGA both completed on 31 March 2018 and, as such, it had not been feasible to perform a preliminary assignment of fair values to identifiable net assets. IFRS 3 Business Combinations allows for the recognition of provisional fair values where the initial accounting for the business combination is incomplete. The Group has now completed this assignment of fair values to identifiable net assets and the most significant amendment has been the recognition of customer and supplier related intangible assets. The net impact of the prior year restatement on the previously reported Group Balance Sheet is summarised as follows:
As at 31 March 2018
---------------------------------------------
Previously
reported Adjustment Restated
GBP'000 GBP'000 GBP'000
Intangible assets 500,396 122,936 623,332
Goodwill 1,436,566 (87,662) 1,348,904
------------ ----------- ------------------
Intangible assets and goodwill 1,936,962 35,274 1,972,236
Other non-current assets 1,086,738 - 1,086,738
------------ ----------- ------------------
Non-current assets 3,023,700 35,274 3,058,974
------------ ----------- ------------------
Deferred income tax liabilities (152,552) (35,274) (187,826)
Other non-current liabilities (1,959,548) - (1,959,548)
Non-current liabilities (2,112,100) (35,274) (2,147,374)
------------ ----------- ------------------
The Group Income Statement was not impacted by the adjustments detailed above.
Revenue recognition:
As disclosed in the 31 March 2018 Annual Report, the Group performed a detailed analysis of the impact of IFRS 15 Revenue from Contracts with Customers, which became effective during the current period. This analysis included a focus on whether certain revenue streams might be more appropriately recorded on an agency ('net') basis rather than on a principal ('gross') basis. In particular, the Group deemed that under the new standard, a portion of its fuel card activities constituted acting in the role of an agent rather than that of a principal. Consequently, revenue from these activities is now recorded on a 'net' basis i.e. the Group recognises the gross profit contribution on the revenue line with no overall net impact on gross profit.
In accordance with transition options available under IFRS 15, the Group has restated the Group Income Statement comparatives for the year ended 31 March 2018 and the six months ended 30 September 2017 as follows:
Previously
reported Adjustment Restated
GBP'000 GBP'000 GBP'000
For the six months ended 30 September
2017:
Revenue 6,449,472 (502,050) 5,947,422
Cost of sales (5,836,484) 502,050 (5,334,434)
------------- ------------ ------------------
Gross profit 612,988 - 612,988
------------- ------------ ------------------
For the year ended 31 March 2018:
Revenue 14,264,639 (1,039,172) 13,225,467
Cost of sales (12,857,814) 1,039,172 (11,818,642)
------------- ------------ ------------------
Gross profit 1,406,825 - 1,406,825
------------- ------------ ------------------
Impairment of financial assets:
The Group adopted IFRS 9 Financial Instruments from 1 April 2018. In accordance with the transitional provisions of IFRS 9, comparative figures have not been restated. The impact of adopting IFRS 9 was not material to the Group's consolidated financial statements and the adjustment on application at 1 April 2018 was GBP3.5 million.
4. Going Concern
Having reassessed the principal risks facing the Group (as detailed on pages 19 to 22 of the 2018 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.
5. 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
2018 2017 2018 2018 2017 2018
StgGBP1= StgGBP1= StgGBP1= StgGBP1= StgGBP1= StgGBP1=
Euro 1.1306 1.1391 1.1366 1.1270 1.1340 1.1430
Danish
Krone 8.4245 8.4795 8.4603 8.4035 8.4399 8.5187
Swedish
Krona 11.7550 10.9425 11.0482 11.6184 10.9424 11.7548
Norwegian
Krone 10.8614 10.6565 10.7901 10.6689 10.6742 11.0607
US Dollar 1.3409 1.2872 1.3236 1.3046 1.3389 1.4083
Hong Kong
Dollar 10.5233 10.0355 10.3312 10.2084 10.4575 11.0522
6. 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. 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 with presences in Europe, North America and Asia and a developing business in the retailing of natural gas and electricity in Europe.
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 2018 amounted to GBP6.533 billion. This figure was not materially different from the equivalent figure at 31 March 2018 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 2018
-----------------------------------------------------------------------------
DCC Retail
DCC LPG & Oil DCC Healthcare DCC Technology Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Segment revenue 721,410 4,832,561 275,885 1,588,153 7,418,009
-------- ----------- ---------------- -------------- --------------
Adjusted operating profit 40,915 56,288 26,948 17,767 141,918
Amortisation of intangible
assets (16,176) (5,258) (3,156) (2,979) (27,569)
Net operating exceptionals
(note 7) (2,236) (1,467) (554) (6,034) (10,291)
-------- ----------- ---------------- -------------- --------------
Operating profit 22,503 49,563 23,238 8,754 104,058
-------- ----------- ---------------- -------------- --------------
Unaudited six months ended 30 September 2017
(restated)
-------------------------------------------------------
DCC Retail
DCC LPG & Oil DCC Healthcare DCC Technology Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Segment revenue 491,161 3,840,336 244,995 1,370,930 5,947,422
-------- ----------- ---------------- -------------- --------------
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 7) (602) (4,376) (1,324) (6,824) (13,126)
-------- ----------- ---------------- -------------- --------------
Operating profit 32,913 33,839 17,047 5,046 88,845
-------- ----------- ---------------- -------------- --------------
Audited year ended 31 March 2018 (restated)
-------------------------------------------------------------------------
DCC Retail
DCC LPG & Oil DCC Healthcare DCC Technology Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Segment revenue 1,362,796 8,264,647 514,564 3,083,460 13,225,467
--------- ----------- ---------------- --------------- -------------
Adjusted operating profit 167,485 113,757 54,318 47,840 383,400
Amortisation of intangible
assets (21,312) (8,983) (7,198) (5,566) (43,059)
Net operating exceptionals
(note 7) (8,127) (21,788) (3,034) (12,164) (45,113)
--------- ----------- ---------------- --------------- -------------
Operating profit 138,046 82,986 44,086 30,110 295,228
--------- ----------- ---------------- --------------- -------------
(b) By geography
The Group has a presence in 18 countries worldwide. The following represents a geographical revenue analysis about the country of domicile (Republic of Ireland) and countries with material revenue.
Restated Restated
Unaudited Unaudited Audited
6 months 6 months year
ended ended ended
30 Sept. 30 Sept. 31 March
2018 2017 2018
GBP'000 GBP'000 GBP'000
Republic of Ireland 420,661 423,224 920,232
United Kingdom 3,559,461 3,102,828 6,749,855
France 1,401,882 1,224,569 2,671,257
Other 2,036,005 1,196,801 2,884,123
---------- ---------- -------------------
7,418,009 5,947,422 13,225,467
---------- ---------- -------------------
7. Exceptionals
Unaudited Unaudited Audited
6 months 6 months year
ended ended ended
30 Sept. 30 Sept. 31 March
2018 2017 2018
GBP'000 GBP'000 GBP'000
Restructuring costs (5,124) (9,742) (29,419)
Acquisition and related costs (5,123) (3,512) (12,789)
Adjustments to contingent acquisition
consideration 49 140 477
Impairment of property, plant and equipment - - (3,735)
Other operating exceptional items (93) (12) 353
Net operating exceptional items (10,291) (13,126) (45,113)
Mark to market of swaps and related debt 3,974 (2) 299
---------- ---------- ---------
Net exceptional items before taxation (6,317) (13,128) (44,814)
Deferred tax (628) 157 25,407
---------- ---------- ---------
Net exceptional items after taxation
(continuing operations) (6,945) (12,971) (19,407)
Net profit on disposal of discontinued
operations - 29,742 29,842
---------- ---------- ---------
(6,945) 16,771 10,435
Non-controlling interest share of net
exceptional items after taxation - 816 969
---------- ---------- ---------
Net exceptional items attributable to
owners of the Parent Company (6,945) 17,587 11,404
---------- ---------- ---------
Restructuring costs of GBP5.124 million principally relate to the ongoing dual running costs relating to the optimisation of DCC Technology's logistics and related infrastructure, as well as integration costs arising from recent acquisition activity. The upgraded warehousing and logistics in each of France, Scandinavia and the UK are all operational. The related UK SAP implementation is now live in an element of the UK business, with the remaining components of the business scheduled to go-live over the coming twelve months.
Acquisition and related costs amounted to GBP5.123 million and include the professional fees and tax costs (such as stamp duty) relating to the evaluation and completion of acquisition opportunities.
Most of the Group's debt has been raised in the US Private Placement market and swapped, using long term interest and cross currency interest rate derivatives, to both fixed and floating rate sterling and euro. The level of ineffectiveness calculated under IAS 39 on the fair value and cash flow hedge relationships relating to fixed rate debt is charged or credited as an exceptional item. In the six months ended 30 September 2018, this amounted to an exceptional non-cash gain of GBP3.974 million. Following this credit, the cumulative net exceptional charge taken in respect of the Group's outstanding US Private Placement debt and related hedging instruments is GBP1.7 million. This, or any subsequent similar non-cash charges or gains, will net to zero over the remaining term of this debt and the related hedging instruments.
8. 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 17% (six months ended 30 September 2017: 18% and year ended 31 March 2018: 17%).
9. Discontinued Operations
The Group's discontinued operations for the year ended 31 March 2018 and the six months ended 30 September 2017 comprise the results of the Group's former DCC Environmental segment. There were no discontinued operations in the six months ended 30 September 2018.
The following table summarises the results of discontinued operations included in the prior year comparatives of the Group Income Statement:
Unaudited Audited
6 months year
ended ended
30 Sept. 31 March
2017 2018
GBP'000 GBP'000
Revenue 29,602 29,614
Cost of sales (20,285) (20,292)
---------- ---------
Gross profit 9,317 9,322
Operating expenses (8,337) (8,341)
---------- ---------
Operating profit 980 981
Net finance costs (16) (16)
---------- ---------
964 965
Profit on disposal of discontinued operations 29,742 29,842
---------- ---------
30,706 30,807
Income tax expense (174) (164)
---------- ---------
Profit from discontinued operations after
tax 30,532 30,643
---------- ---------
The following table details the cash flow from discontinued operations included in the prior year comparatives of the Group Cash Flow Statement:
Unaudited Audited
6 months year
ended ended
30 Sept. 31 March
2017 2018
GBP'000 GBP'000
Net cash flow from operating activities (5,599) (5,602)
Net cash flow from investing activities (1,331) (1,332)
---------- ---------
Net cash flow from discontinued operations (6,930) (6,934)
---------- ---------
10. Earnings per Ordinary Share
6 months ended 30 September 6 months ended 30 September
2018 2017
------------------------------------------ --------------------------------------------
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 68,002 - 68,002 58,169 30,532 88,701
Amortisation of
intangible
assets after tax 20,647 - 20,647 14,653 - 14,653
Exceptionals after
tax 6,945 - 6,945 12,155 (29,742) (17,587)
------------- --------------- ---------- ----------------- --------------- --------
Adjusted profit
after
taxation and
non-controlling
interests 95,594 - 95,594 84,977 790 85,767
------------- --------------- ---------- ----------------- --------------- --------
Basic earnings
per ordinary
share
Basic earnings per share is calculated by dividing the profit attributable to owners of the Parent Company 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
2018 2017
------------------------------------------ -----------------------------------
Continuing Discontinued Continuing Discontinued
operations operations Total operations operations Total
pence pence pence pence pence pence
Basic earnings per
ordinary
share 76.15p - 76.15p 65.36p 34.30p 99.66p
Amortisation of
intangible
assets after tax 23.12p - 23.12p 16.46p - 16.46p
Exceptionals after
tax 7.78p - 7.78p 13.65p (33.41p) (19.76p)
------------ ---------------- ---------- ----------------- --------------- ----------
Adjusted basic
earnings
per
ordinary share 107.05p - 107.05p 95.47p 0.89p 96.36p
------------ ---------------- ---------- ----------------- --------------- ----------
Weighted average
number
of ordinary shares
in
issue (thousands) 89,297 89,007
---------- ----------
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
2018 2017
------------------------------------------ ---------------------------------------------
Continuing Discontinued Continuing Discontinued
operations operations Total operations operations Total
pence pence pence pence pence pence
Diluted earnings
per
ordinary share 76.02p - 76.02p 65.06p 34.15p 99.21p
Amortisation of
intangible
assets after tax 23.08p - 23.08p 16.39p - 16.39p
Exceptionals after
tax 7.77p - 7.77p 13.59p (33.26p) (19.67p)
------------ ---------------- ---------- ------------------ ------------ -------------
Adjusted diluted
earnings
per
ordinary share 106.87p - 106.87p 95.04p 0.89p 95.93p
------------ ---------------- ---------- ------------------ ------------ -------------
Weighted average
number
of ordinary shares
in
issue (dilutive,
thousands) 89,451 89,410
---------- -------------
The earnings used for the purposes of the continuing diluted earnings per ordinary share calculations were GBP68.002 million (six months ended 30 September 2017: GBP58.169 million) and GBP95.594 million (six months ended 30 September 2017: GBP84.977 million) for the purposes of the continuing 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 2018 was 89.451 million (six months ended 30 September 2017: 89.410 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.
2018 2017
'000 '000
Weighted average number of ordinary shares in
issue 89,297 89,007
Dilutive effect of options and awards 154 403
---------------- ---------
Weighted average number of ordinary shares for
diluted earnings per share 89,451 89,410
---------------- ---------
11. Dividends
Unaudited Unaudited Audited
6 months 6 months year
ended ended ended
30 Sept. 30 Sept. 31 March
2018 2017 2018
GBP'000 GBP'000 GBP'000
Interim - paid 40.89 pence per share
on 11 December 2017 - - 36,351
Final - paid 82.09 pence per share
on 19 July 2018
(paid 74.63 pence per share on
20 July 2017) 73,192 66,376 66,520
73,192 66,376 102,871
--------------------- ----------------------- ---------
On 12 November 2018, the Board approved an interim dividend of 44.98 pence per share (GBP44.188 million). These condensed interim financial statements do not reflect this dividend payable.
12. Other Reserves
For the six months ended 30
September 2018
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 2018 22,883 (16,178) 101,096 932 108,733
Currency translation - - 37,512 - 37,512
Movements relating to cash
flow hedges - 26,532 - - 26,532
Movement in deferred tax liability
on cash flow hedges - (4,510) - - (4,510)
Share based payment 2,432 - - - 2,432
------------------- --------- ----------- -------- -------
At 30 September 2018 25,315 5,844 138,608 932 170,699
------------------- --------- ----------- -------- -------
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 year ended 31 March
2018
Foreign
Share Cash flow currency
based
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 - - 107 - 107
- recycled to the Income
Statement on disposal - - (4,548) - (4,548)
Movements relating to cash
flow hedges - (3,030) - - (3,030)
Movement in deferred tax liability
on cash flow hedges - 433 - - 433
Share based payment 4,737 - - - 4,737
------------------- --------- ----------- -------- -------
At 31 March 2018 22,883 (16,178) 101,096 932 108,733
------------------- --------- ----------- -------- -------
13. Analysis of Net Debt
Unaudited Unaudited Audited
30 Sept. 30 Sept. 31 March
2018 2017 2018
GBP'000 GBP'000 GBP'000
Non-current assets:
Derivative financial instruments 119,661 180,109 103,085
------------ ------------ -------------------
Current assets:
Derivative financial instruments 78,232 18,479 8,050
Cash and cash equivalents 977,571 1,497,061 1,038,827
------------ ------------ -------------------
1,055,803 1,515,540 1,046,877
------------ ------------ -------------------
Non-current liabilities:
Finance leases (1,462) (190) (692)
Derivative financial instruments (7,489) (5,610) (10,732)
Unsecured Notes (1,547,012) (1,680,317) (1,597,829)
------------ ------------ -------------------
(1,555,963) (1,686,117) (1,609,253)
------------ ------------ -------------------
Current liabilities:
Finance leases (547) (166) (363)
Derivative financial instruments (12,726) (3,511) (8,474)
Bank overdrafts (108,460) (118,193) (74,534)
Bank borrowings (206,960) - -
Unsecured Notes (123,164) - -
------------ ------------ -------------------
(451,857) (121,870) (83,371)
------------ ------------ -------------------
Net debt (832,356) (112,338) (542,662)
------------ ------------ -------------------
14. Post Employment Benefit Obligations
The Group's defined benefit pension schemes' assets were measured at fair value at 30 September 2018. The defined benefit pension schemes' liabilities at 30 September 2018 were updated to reflect material movements in underlying assumptions.
The Group's post employment benefit obligations moved from a net asset of GBP0.286 million at 31 March 2018 to a net asset of GBP4.515 million at 30 September 2018. 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 2018:
Unaudited Unaudited Audited
6 months 6 months year
ended ended ended
30 Sept. 30 Sept. 31 March
2018 2017 2018
Discount rate
- Republic of Ireland 2.20% 2.10% 2.10%
- United Kingdom 2.80% 2.70% 2.65%
- Germany 2.20% n/a* 2.10%
---------- ---------- ---------
* Data for the German schemes relates to TEGA, which was acquired in March 2018.
15. 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, the principal acquisitions completed by the Group during the period, together with percentages acquired, were as follows:
-- The acquisition by DCC Technology in July 2018 of 100% of Stampede Global Holdings Inc. ('Stampede'). Stampede is a specialist distributor of professional audio-visual products and solutions to customers based in the US, Canada and the UK;
-- The acquisition by DCC Technology in July 2018 of 100% of Kondor Limited ('Kondor'). Kondor distributes mobile and accessory products and provides outsourced category management solutions to the retail channel in the UK and Continental Europe; and
-- The acquisition by DCC Technology in September 2018 of 91% of the Jam Group of Companies ('Jam'). Jam is a market-leading North American specialist sales, marketing and services business serving the professional audio, musical instruments and consumer electronics product sectors.
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 2018.
6 months 6 months
ended ended
30 Sept. 30 Sept.
2018 2017
GBP'000 GBP'000
Assets
Non-current assets
Property, plant and equipment 13,894 6,695
Equity accounted investments - 157
---------------------- ----------------------
Total non-current assets 13,894 6,852
---------------------- ----------------------
Current assets
Inventories 105,207 2,880
Trade and other receivables 139,044 2,307
---------------------- ----------------------
Total current assets 244,251 5,187
---------------------- ----------------------
Liabilities
Non-current liabilities
Deferred income tax liabilities (447) (45)
Provisions for liabilities and
charges (2,128) -
Total non-current liabilities (2,575) (45)
---------------------- ----------------------
Current liabilities
Trade and other payables (119,376) (2,826)
Current income tax asset/(liability) 233 (599)
Government grants (147) -
----------------------
Total current liabilities (119,290) (3,425)
---------------------- ----------------------
Identifiable net assets acquired 136,280 8,569
Intangible assets - goodwill 146,318 18,918
---------------------- ----------------------
Total consideration 282,598 27,487
---------------------- ----------------------
Satisfied by:
Cash 256,796 13,111
Cash and cash equivalents acquired (7,537) (108)
---------------------- ----------------------
Net cash outflow 249,259 13,003
Acquisition related liabilities 33,339 14,484
---------------------- ----------------------
Total consideration 282,598 27,487
---------------------- ----------------------
Reconciliation to Group Cash
Flow Statement:
Net cash outflow on acquisitions completed
during the period 249,259 13,003
Pre-completion deposits paid - 31,310
------- ------
Total outflow as reported in the Group
Cash Flow Statement 249,259 44,313
------- ------
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 2019 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 and related costs included in other operating expenses in the Group Income Statement amounted to GBP5.123 million (six months ended 30 September 2017: GBP3.512 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 GBP141.851 million. The fair value of these receivables is GBP139.044 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 nil to GBP145.6 million.
The acquisitions during the period contributed GBP200.0 million to revenues and GBP0.6 million to profit after tax. Had all the business combinations effected during the period occurred at the beginning of the period, total Group revenue for the six months ended 30 September 2018 would have been GBP7,642.8 million and total Group profit after tax would have been GBP72.9 million.
16. 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.
17. 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 2018 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 2018.
18. Events after the Balance Sheet Date
The Group completed an equity placing on 2 October 2018 which raised approximately GBP600 million. The proceeds of the placing will enable the continued implementation of DCC's targeted acquisition strategy, by enhancing the balance sheet and liquidity of the Group, ensuring DCC can efficiently execute acquisition opportunities and remains a credible and capable acquirer.
In October 2018, the Group successfully refinanced private placement debt maturing in the next 18 months with a private placement issuance equivalent to GBP360 million to be drawn down in April 2019.
19. Board Approval
This report was approved by the Board of Directors of DCC plc on 12 November 2018.
20. 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 2018 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
12 November 2018
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 targets.
6 months 6 months
ended ended Year ended
30 Sept. 30 Sept. 31 March
2018 2017 2018
GBP'000 GBP'000 GBP'000
------------------------------------------ --------- --------- -------------
Operating profit 104,058 88,845 295,228
Net operating exceptional items 10,291 13,126 45,113
Amortisation of intangible assets 27,569 20,527 43,059
------------------------------------------ --------- --------- -------------
Adjusted operating profit - continuing 141,918 122,498 383,400
Adjusted operating profit - discontinued - 980 981
------------------------------------------ --------- --------- -------------
Adjusted operating profit ('EBITA') 141,918 123,478 384,381
------------------------------------------ --------- --------- -------------
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
2018 2017 2018
GBP'000 GBP'000 GBP'000
----------------------------------------- --------- --------- ---------
Finance costs before exceptional items (40,122) (34,508) (73,156)
Finance income before exceptional items 17,720 18,832 37,421
----------------------------------------- --------- --------- ---------
Net interest - continuing (22,402) (15,676) (35,735)
Net interest - discontinued - (16) (16)
----------------------------------------- --------- --------- ---------
Net interest (22,402) (15,692) (35,751)
----------------------------------------- --------- --------- ---------
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.
Restated
6 months 6 months
ended ended
30 Sept. 30 Sept.
2018 2017
Calculation: Revenue - continuing, constant GBP'000 GBP'000
currency
--------------------------------------------- ---------- ----------
Revenue - continuing 7,418,009 5,947,422
Currency impact 20,309 -
--------------------------------------------- ---------- ----------
Revenue - continuing, constant currency 7,438,318 5,947,422
---------------------------------------------- ---------- ----------
6 months 6 months
ended ended
30 Sept. 30 Sept.
2018 2017
Calculation: Adjusted operating profit GBP'000 GBP'000
- continuing, constant currency
----------------------------------------- --------- ---------
Adjusted operating profit - continuing 141,918 122,498
Currency impact 733 -
----------------------------------------- --------- ---------
Adjusted operating profit - continuing,
constant currency 142,651 122,498
------------------------------------------ --------- ---------
6 months 6 months
ended ended
30 Sept. 30 Sept.
2018 2017
Calculation: Adjusted earnings per share GBP'000 GBP'000
- continuing, constant currency
--------------------------------------------- --- --------- ---------
Adjusted earnings - continuing 95,594 84,977
Currency impact 708 -
-------------------------------------------- ---- --------- ---------
Adjusted earnings - continuing, constant
currency 96,302 84,977
Weighted average number of ordinary shares
('000) 89,297 89,007
-------------------------------------------------- --------- ---------
Adjusted earnings per share - continuing,
constant currency 107.84p 95.47p
-------------------------------------------------- --------- ---------
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 EBITA less net interest.
6 months 6 months
ended ended Year ended
30 Sept. 30 Sept. 31 March
2018 2017 2018
GBP'000 GBP'000 GBP'000
---------------------------------------------- --------- --------- -------------
Adjusted operating profit 141,918 123,478 384,381
Net interest (22,402) (15,692) (35,751)
---------------------------------------------- --------- --------- -------------
Earnings before taxation 119,516 107,786 348,630
---------------------------------------------- --------- --------- -------------
Income tax expense 14,024 13,196 23,882
Exceptional deferred tax (628) 157 25,407
Deferred tax attaching to amortisation
of intangible assets 6,922 5,874 9,814
---------------------------------------------- --------- --------- -------------
Income tax expense before exceptionals
and deferred tax attaching to amortisation
of intangible assets - continuing 20,318 19,227 59,103
Income tax expense before exceptionals
and deferred tax attaching to amortisation
of intangible assets - discontinued - 174 164
---------------------------------------------- --------- --------- -------------
Total income tax expense before exceptionals
and deferred tax attaching to amortisation
of intangible assets 20,318 19,401 59,267
---------------------------------------------- --------- --------- -------------
Effective tax rate (%) 17.0% 18.0% 17.0%
---------------------------------------------- --------- --------- -------------
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
2018 2017 2018
GBP'000 GBP'000 GBP'000
------------------------------------------- --------- --------- ---------
Purchase of property, plant and equipment 86,341 71,592 152,997
Proceeds from disposal of property, plant
and equipment (4,252) (2,525) (7,617)
Net capital expenditure 82,089 69,067 145,380
------------------------------------------- --------- --------- ---------
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
2018 2017 2018
GBP'000 GBP'000 GBP'000
--------------------------------------- --------- --------- ----------
Cash generated from operations before
exceptionals 173,219 83,975 473,434
Net capital expenditure (82,089) (69,067) (145,380)
--------------------------------------- --------- --------- ----------
Free cash flow 91,130 14,908 328,054
--------------------------------------- --------- --------- ----------
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
2018 2017 2018
GBP'000 GBP'000 GBP'000
------------------------------------------ --------- --------- ---------
Free cash flow 91,130 14,908 328,054
Interest paid (39,142) (32,457) (69,900)
Income tax paid (12,780) (35,905) (65,437)
Dividends received from equity accounted
investments - 1,317 1,980
Interest received 17,715 19,001 37,399
------------------------------------------ --------- --------- ---------
Free cash flow (after interest and tax
payments) 56,923 (33,136) 232,096
------------------------------------------ --------- --------- ---------
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
2018 2017 2018
GBP'000 GBP'000 GBP'000
------------------------------------------- --------- --------- ----------
Net cash outflow on acquisitions during
the period 249,259 44,313 664,109
Net cash outflow on acquisitions which
were committed to in the previous period (10,488) (31,310) (341,253)
Acquisition related liabilities arising
on acquisitions during the period 33,339 14,484 27,840
Acquisition related liabilities which
were committed to in the previous period (7,171) - (13,404)
Amounts committed in the current period 7,000 152,672 18,000
------------------------------------------- --------- --------- ----------
Committed acquisition expenditure 271,939 180,159 355,292
------------------------------------------- --------- --------- ----------
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
2018 2017 2018
GBP'000 GBP'000 GBP'000
------------------------------------------- ------------ ------------ ------------
Inventories 728,648 548,903 530,473
Trade and other receivables 1,459,337 1,204,122 1,426,217
Less: interest receivable (134) (59) (126)
Trade and other payables (2,134,197) (1,831,926) (2,063,260)
Less: interest payable 4,403 5,268 4,775
Less: amounts due in respect of property,
plant and equipment 1,912 4,093 10,671
Less: government grants 11 9 9
------------------------------------------- ------------ ------------ ------------
Net working capital 59,980 (69,590) (91,241)
------------------------------------------- ------------ ------------ ------------
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
2018 2017 2018
GBP'000 GBP'000 GBP'000
------------------------- ----------- ----------- -----------
Net working capital 59,980 (69,590) (91,241)
September/March revenue 1,438,866 1,219,059 1,418,988
------------------------- ----------- ----------- -----------
Working capital (days) 1.3 (1.7 (2.0
days days) days)
------------------------- ----------- ----------- -----------
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
IR FMMMMRZDGRZM
(END) Dow Jones Newswires
November 13, 2018 02:00 ET (07:00 GMT)
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