Interim Results- 'Excellent Sales & Profit Growth'
DCC PLC
8 November 1999
Interim Results for the Six Months ended 30 September 1999
Euro
Turnover 636.1m Up 36.2%
Profit before goodwill
amortisation and tax 26.0m Up 19.3%
Basic adjusted earnings per share 24.91c Up 21.5%
Dividend per share 6.45c Up 19.5%
Net debt/equity ratio at 30 September 1999 was 29.4% (1998:6.2%)
DCC's Chief Executive & Deputy Chairman, Jim Flavin, said today:
'DCC again generated excellent sales and profit growth in the first
six months, driven by strong organic growth and good results from
acquisitions made last year.
We expect to maintain our record of strong growth for the year as
a whole.'
For further reference, please contact:
Jim Flavin, Chief Executive & Deputy Chairman Tel: +353-1-2831011
Fergal O'Dwyer, Chief Financial Officer
Michael Scholefield, Group Secretary and Investor Relations Manager
DCC plc
Interim Results for the Six Months ended 30 September 1999
DCC plc announces an increase of 19.3% in profit before goodwill
amortisation and tax for the six months ended 30 September 1999 to
EUR26.0 million (1998: EUR21.8 million). Basic adjusted earnings per
share, which excludes the effect of goodwill amortisation, increased by
21.5% to 24.91 cents from 20.51 cents.
Group operating profit increased by 22.5% to EUR29.2 million from EUR23.9
million. The net interest charge for the period increased to EUR3.2
million from EUR2.1 million, primarily reflecting the financing costs of
acquisition activity undertaken in 1998/99. Goodwill amortised in the
first half year amounted to EUR1.7 million (1998: EUR0.5 million).
Profit before tax increased by 13.9% to EUR24.3 million from EUR21.3
million.
The interim tax rate of 15.0% compares with the 1998 interim tax rate
of 16.0% and the Group's actual tax rate for the year ended 31 March 1999
of 15.0%.
FTSE Reclassification
With effect from 20 September 1999 the FTSE Actuaries Industry
Classification Committee reclassified DCC's shares from 'Diversified
Industrials' to 'Distributors - Other'. This reclassification reflects
DCC's focused approach to value added marketing and distribution which
generated 91% of the Group's operating profits in the year to March 1999.
DCC adds value in the marketing and distribution of its own and third
party branded products in the IT, healthcare, energy and food markets.
DCC has built strong positions in growth segments of these markets in
Britain and Ireland.
Value Added Marketing and Distribution
DCC's focused sales teams, market knowledge and distribution reach
continued to drive strong organic growth. The results also reflect a good
contribution from acquisitions made last year. Turnover was up 38.1% to
EUR592.7 million from EUR429.3 million and operating profit was up 33.4%
to EUR28.7 million from EUR21.5 million. Particularly strong results were
achieved in IT, healthcare and food distribution with more modest growth
in energy.
Supply Chain Management Services
On 27 September 1999 DCC announced the launch of SerCom Solutions
(previously known as Printech International) as a provider of supply
chain management services to the IT industry. These services, which are
increasingly being outsourced by international IT companies, include
procurement, project management, localisation, sub-assembly, warehousing,
just-in-time delivery and e-commerce solutions.
Against the background of e-commerce and business globalisation, the IT
industry is showing the way in the adoption of supply chain management
concepts which lead to more cost effective and efficient distribution,
shorter lead times to market and reduced inventory levels. Over time
these concepts will be applied in other industry sectors and are
therefore complementary to DCC's business of value added marketing and
distribution.
The results from these expanding supply chain management services in the
first half reflect the continued investment in skilled personnel and
information technology (incorporating e-commerce initiatives) required to
position the Group for growth in this area. Although turnover was up 12.3%
to EUR30.9 million, these developmental costs contributed to an operating
loss of EUR1.4 million compared to a profit of EUR1.3 million in the
previous year.
Dividend
The Board has decided to pay an interim dividend of 6.45 cents per share
- up 19.5% on the interim dividend of 5.40 cents per share paid in the
previous financial year. The interim dividend will be paid on 26
November 1999 to shareholders on the register at the close of business on
19 November 1999.
Acquisition and Development Activity
Acquisition and capital expenditure in the first half year amounted to
EUR22.1 million.
Acquisition expenditure committed in the period (inclusive of net debt
acquired) amounted to EUR10.8 million cash. This principally comprised
expenditure on bolt-on acquisitions in healthcare and energy distribution
as follows:
the acquisition of a 74.9% shareholding in Casa Garden, a
distributor of mobility and rehabilitation products based in Lohne
in Germany;
the acquisition of Cawoods Oil in Northern Ireland; and
the acquisitions of a number of small LPG distributors in Britain.
Deferred acquisition consideration amounting to EUR9.5 million was also
paid during the period, of which EUR8.3 million was paid in cash and
EUR1.2 million in DCC shares. Including this deferred consideration, the
cash impact of acquisitions in the period amounted to EUR19.1 million.
Capital expenditure in the half year amounted to EUR11.3 million (1998:
EUR7.3 million).
Financial Strength
Shareholders' funds at 30 September 1999 amounted to EUR213.6 million
compared to EUR195.2 million at 31 March 1999.
Net debt at 30 September 1999 increased to EUR62.9 million (1998:
EUR10.8 million), giving a debt ratio of 29.4% (1998: 6.2%). This
reflects acquisition expenditure and the increased working capital
required to finance the very strong sales growth in the first six months
of the financial year.
Year 2000
DCC has been preparing for Year 2000 compliance since 1997 through a
formally structured compliance programme. The focus of the Group's Year
2000 programme over the past six months has been on testing all critical
systems and equipment to ensure compliance and on contingency planning,
covering the Group's own operations as well as those of important
suppliers and customers. The programme is now substantially complete and
no significant impact on the business of the Group is anticipated.
Outlook
DCC again generated excellent sales and profit growth in the first six
months, driven by strong organic growth and good results from acquisitions
made last year.
The Group expects to maintain its record of strong growth for the year as
a whole.
Operating Review - 6 Months ended 30 September 1999
Value Added Marketing and Distribution
IT
1999 1998
Turnover EUR203.4m EUR155.0m + 31.2%
Operating Profit EUR8.6m EUR6.3m + 35.2%
Operating Margin 4.2% 4.1%
DCC's IT distribution business in Britain and Ireland continued to
generate excellent sales volume growth and to improve margins through
operating efficiencies.
Micro P, the British hardware distribution business, maintained its
consistent record of dynamic revenue and profit growth. Micro P's
growth strategy is built on highly motivated and focused telesales
teams which are organised by product group and provide customers with
the specialist product knowledge they require. This approach assures
suppliers that their brands and products are actively promoted on a
daily basis. Efficient management of logistics ensures that customers
receive next day delivery anywhere in Britain. Good growth was achieved
across all product divisions and the Year 2000 issue has had no
discernible negative impact on sales.
In software, Gem Distribution generated good growth in what is a
seasonally quiet trading period. Gem's reputation as the leading
specialist consumer software distributor in Britain has been further
enhanced by Sega's decision to choose Gem as its distributor for the
highly successful launch in October of its new 'Dreamcast' games
console.
Sharptext, the Irish computer distributor, again achieved very
significant growth. Its extensive customer base and track record of
achieving strong volume growth for its key suppliers ensure that
Sharptext is chosen by many of the world's leading computer hardware
and software companies to distribute their products in Ireland.
Healthcare
1999 1998
Turnover EUR77.0m EUR50.4m + 52.8%
Operating Profit EUR7.6m EUR4.4m + 73.0%
Operating Margin 9.9% 8.7%
The strong sales and profit growth in healthcare reflects good organic
growth and contributions from acquisitions made in the previous
financial year.
In hospital supply, sales and profits increased substantially as a
result of the BM Browne acquisition last year. The final stages of the
integration of the Fannin and Browne businesses are expected to be
completed during the first half of 2000.
In mobility and rehab, sales and margins improved in Britain resulting
in profits well ahead of last year. The new businesses in the US and
Germany made modest contributions.
Good sales growth in the health supplements business resulted in strong
profit growth. The acquisitions of EuroCaps (soft gel encapsulation)
and Thompson & Capper (tablet manufacture) last year have greatly
strengthened DCC's health supplements business.
Energy
1999 1998
Turnover EUR139.6m EUR74.4m + 87.8%
Operating Profit EUR4.7m EUR4.4m + 4.9%
Operating Margin 3.3% 6.0%
In energy distribution, DCC achieved growth despite the difficult
background of significant increases in crude oil prices since the start
of the financial year.
The significant increase in turnover reflects organic volume growth,
the acquisition of the Burmah oil business in the Republic of Ireland
and sales price increases due to the increase in the cost of oil and
LPG.
In the energy business, percentage operating margins fluctuate as oil
prices change. This, together with the increased oil volumes which
carry a lower percentage margin, was principally responsible for the
reduction in the overall percentage operating margin.
Oil volumes grew by 65% from strong organic growth and from
a full six months' contribution from the Burmah oil business in the
Republic of Ireland which was acquired in January 1999. The
integration of Burmah within Emo Oil has been completed and is
delivering the anticipated synergies. The acquisition of Cawoods Oil in
August 1999 significantly increased the scale of DCC's oil distribution
business in Northern Ireland.
LPG volumes were broadly in line with the previous year. Although LPG
price increases were implemented in Ireland and Britain it was not
possible to fully recover the increases in the cost of butane and
propane during the period. However, current selling prices now reflect
prevailing LPG product costs.
Food
1999 1998
Turnover EUR172.7m EUR149.5m + 15.5%
Operating Profit EUR7.9m EUR6.4m + 23.9%
Operating Margin 4.6% 4.3%
DCC's focus on higher growth segments of the Irish food trade again
contributed to excellent profit growth in food distribution.
Strong volume and profit growth was achieved in snackfoods and ground
coffee. Sales to the catering and food service sector increased
significantly. The Robinsons drinks range has recently been added to
the cold beverage portfolio in the Republic of Ireland.
In healthfoods, strong volume and profit growth was achieved with DCC's
'Kelkin' healthfood brand continuing to perform well.
DCC's new 50% associate, Kylemore, the bakery and restaurant group,
performed in line with expectations. DCC's other 50% associate, Allied
Foods, the Irish chilled and frozen foods distributor, experienced
tighter margins in its logistics business.
Included in the results for food distribution is DCC's 10.3% share of
Fyffes plc's profit for Fyffes' half year ended 30 April 1999. Fyffes,
the leading fresh produce distribution company in Europe, maintained
its record of good earnings growth.
Operating Review - 6 Months ended 30 September 1999
Supply Chain Management Services
1999 1998
Turnover EUR30.9m EUR27.6m + 12.3%
Operating (Loss)/Profit (EUR1.4m) EUR1.3m - 204.5%
Operating Margin (4.5%) 4.9%
The IT industry outsources certain business critical activities to a
small number of carefully selected partners in order to achieve cost
efficient distribution, shorter lead times to market and reduced
inventory levels. SerCom Solutions and its subsidiary ITP provide their
customers in the IT industry with a range of these supply chain
management services including procurement, project management,
localisation, sub-assembly, warehousing, just-in-time delivery and e-
commerce solutions.
DCC's supply chain management services business has been making significant
investment in skilled personnel and information technology - incorporating
e-commerce initiatives - as it extends its range of services. This
investment, while costly in the short term, is positioning DCC for growth
in the provision of supply chain management services, initially for the IT
industry. Over time DCC expects this capability to be relevant to the
other markets which it serves.
Other Interests
1999 1998
Turnover EUR12.5m EUR10.1m + 23.8%
Operating Profit EUR1.9m EUR1.0m + 93.9%
The Group's principal other interest is its 49% shareholding in Manor
Park Homebuilders which achieved a strong increase in profits. Manor
Park has a substantial land bank, which has been acquired at a very
attractive cost relative to current market values, leaving it well
placed for significant profit growth in the future.
DCC plc
SUMMARISED CONSOLIDATED PROFIT AND LOSS ACCOUNT
Unaudited Unaudited Audited
6 months 6 months year
ended ended ended
30 Sept. 30 Sept. 31 March
1999 1998 1999
Notes EUR'000 EUR'000 EUR'000
Turnover 2 636,088 466,890 1,059,266
Group operating profit 3 29,236 23,867 63,661
Net interest payable (3,251) (2,085) (4,439)
Profit on ordinary activities before
goodwill amortisation and tax 25,985 21,782 59,222
Goodwill amortisation (1,694) (452) (1,557)
Profit before tax 3 24,291 21,330 57,665
Tax (3,898) (3,485) (8,883)
Profit after tax 20,393 17,845 48,782
Minority interests (380) (634) (802)
Profit attributable to
DCC shareholders 20,013 17,211 47,980
Dividends 4 (5,631) (4,916) (12,992)
Profit retained for the period 14,382 12,295 34,988
Earnings per ordinary share -
basic (cents) 5 22.97c 19.98c 55.39c
Adjusted earnings per ordinary
share - basic (cents) 5 24.91c 20.51c 57.19c
Dividend per ordinary
share (cents) 6.45c 5.40c 14.66c
DCC plc
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
Unaudited Unaudited Audited
6 months 6 months year
ended ended ended
30 Sept. 30 Sept. 31 March
1999 1998 1999
EUR'000 EUR'000 EUR'000
Profit attributable to DCC
shareholders 20,013 17,211 47,980
Movement on other reserves of
associated undertakings 1,834 (683) (454)
Exchange adjustments 932 (775) (220)
Total recognised gains and
losses relating to the period 22,779 15,753 47,306
DCC plc
CONSOLIDATED BALANCE SHEET
Unaudited Unaudited Audited
30 Sept. 30 Sept. 31 March
1999 1998 1999
Note EUR'000 EUR'000 EUR'000
Fixed Assets
Goodwill arising on the acquisition of
subsidiaries 50,595 8,180 46,028
Tangible fixed assets 114,237 96,231 106,697
Associated undertakings 61,560 48,773 56,844
226,392 153,184 209,569
Current Assets
Stocks 75,100 50,961 54,133
Debtors 173,678 118,402 150,924
Cash and term deposits 299,020 276,715 311,314
547,798 446,078 516,371
Creditors:Amounts falling due within one year
Trade and other creditors 165,060 113,033 152,914
Deferred acquisition consideration 3,250 3,527 10,167
Bank and other debt 87,549 27,183 41,759
Corporation tax 9,575 8,382 10,762
Proposed dividend 5,631 4,698 8,070
271,065 156,823 223,672
Net Current Assets 276,733 289,255 292,699
Total Assets less Current Liabilities 503,125 442,439 502,268
FINANCED BY:
Creditors:Amounts falling due after
more than one year
Unsecured Notes due 2008/11 100,381 93,820 97,557
Bank debt and other debt 173,967 166,546 192,295
Deferred acquisition consideration 7,541 - 9,868
281,889 260,366 299,720
Provisions for liabilities and charges 2,215 2,165 2,244
284,104 262,531 301,964
Capital and Reserves
Equity share capital and share premium 144,159 142,733 142,924
Reserves 69,445 31,520 52,297
Equity Shareholders' Funds 213,604 174,253 195,221
Minority interests 4,191 3,949 3,902
Capital grants 1,226 1,706 1,181
219,021 179,908 200,304
503,125 442,439 502,268
Net debt 6 (62,877) (10,834) (20,297)
DCC plc
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
Unaudited Unaudited Audited
6 months 6 months year
ended ended ended
30 Sept. 30 Sept. 31 March
1999 1998 1999
EUR'000 EUR'000 EUR'000
Profit attributable to DCC shareholders 20,013 17,211 47,980
Dividends (5,631) (4,916) (12,992)
Profit retained for the period 14,382 12,295 34,988
Issues of equity share capital net
of capital duty 1,235 9,334 9,525
Movement on other reserves of
associated undertakings 1,834 (683) (3,154)
Exchange adjustments 932 (775) (220)
Net movement in shareholders'funds 18,383 20,171 41,139
Opening shareholders' funds 195,221 154,082 154,082
Closing shareholders' funds 213,604 174,253 195,221
DCC plc
CASH FLOW
Unaudited Unaudited Audited
6 months 6 months year
ended ended ended
30 Sept. 30 Sept. 31 March
1999 1998 1999
Note EUR'000 EUR'000 EUR'000
Inflows
Operating cash flow (see below) 5,362 9,114 65,530
Share issues (net) 10 8,465 8,656
5,372 17,579 74,186
Outflows
Capital expenditure (net) 11,669 7,860 16,816
Acquisitions and investments 19,089 15,289 59,124
Interest paid 3,970 1,331 4,080
Tax paid 4,008 2,270 5,768
Dividends paid 8,070 5,824 10,527
Other 40 7,745 7,879
46,846 40,319 104,194
Net cash outflow (41,474) (22,740) (30,008)
Translation adjustment (1,106) 4,872 2,677
Movement in net(debt)/cash for the period (42,580) (17,868) (27,331)
Opening net (debt)/cash (20,297) 7,034 7,034
Closing net (debt) 6 (62,877) (10,834) (20,297)
OPERATING CASH FLOW
Unaudited Unaudited Audited
6 months 6 months year
ended ended ended
30 Sept. 30 Sept. 31 March
1999 1998 1999
EUR'000 EUR'000 EUR'000
Group operating profit 29,236 23,867 63,661
Operating profit of associated
undertaking (6,804) (5,022) (12,129)
Dividends received from
associated undertakings 1,484 1,121 2,268
Depreciation of tangible fixed assets 8,612 7,524 16,176
Amortisation of capital grants (167) (246) (366)
Increase in working capital (26,817) (17,897) (3,352)
Other (182) (233) (728)
Operating cash flow 5,362 9,114 65,530
DCC plc
Notes to the Interim Results for the Six Months ended 30 September 1999
1. Basis of Preparation
The interim financial statements for the six months ended 30 September
1999 have been prepared in accordance with the accounting policies set
out in the financial statements for the year ended 31 March 1999.
The interim financial statements for the six months ended 30 September
1999 and the comparative figures for the six months ended 30 September
1998 are unaudited. The summary financial statements for the year
ended 31 March 1999 represent an abbreviated version of the Group's
full accounts for that year, on which the Auditors issued an
unqualified audit report and which have been filed with the Registrar
of Companies.
Comparative amounts have been regrouped and restated, where necessary,
on the same basis as amounts for the current period.
The Group's financial statements are prepared in Euros denoted by the
symbol EUR. The exchange rates used in translating sterling balance
sheet and profit and loss amounts were as follows:
6 months ended 6 months ended Year ended
30 Sept 1999 30 Sept 1998 31 March 1999
EUR1=Stg£ EUR1=Stg£ EUR1=Stg£
Balance sheet (closing rate) 0.648 0.693 0.666
Profit and loss (average rate) 0.658 0.665 0.681
2. Turnover
Unaudited 6 months Unaudited 6 months Audited
ended 30 Sept. 1999 ended 30 Sept. 1998 year ended
Market Subsidiary Assoc Subsidiary Assoc 31 March 1999
Segment U'takings U'takings Total U'takings U'takings Total Total
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
IT 203,392 - 203,392 155,024 - 155,024 354,613
Healthcare 68,240 8,752 76,992 44,196 6,184 50,380 114,759
Energy 139,627 - 139,627 74,365 - 74,365 193,305
Food 43,656 129,021 172,677 39,228 110,270 149,498 314,179
Value Added
Marketing
and
Distribn. 454,915 137,773 592,688 312,813 116,454 429,267 976,856
Supply Chain
Management
Services 30,856 85 30,941 27,244 311 27,555 61,900
Other
Interests - 12,459 12,459 - 10,068 10,068 20,510
Turnover 485,771 150,317 636,088 340,057 126,833 466,890 1,059,266
Of which acquisitions
contributed 9,414 1,826 42,531
3. Profit before Tax
Unaudited 6 months Unaudited 6 months Audited
ended 30 Sept. 1999 ended 30 Sept. 1998 year ended
Market Subsidiary Assoc Subsidiary Assoc 31 March 1999
Segment U'takings U'takings Total U'takings U'takings Total Total
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
IT 8,557 - 8,557 6,327 - 6,327 14,975
Healthcare 7,109 506 7,615 3,962 441 4,403 9,780
Energy 4,649 - 4,649 4,430 - 4,430 18,213
Food 3,526 4,377 7,903 2,800 3,579 6,379 14,984
Value Added
Marketing
and
Distribn. 23,841 4,883 28,724 17,519 4,020 21,539 57,952
Supply Chain
Management
Services (1,409) 7 (1,402) 1,326 15 1,341 3,336
Other
Interests - 1,914 1,914 - 987 987 2,373
Operating
profit* 22,432 6,804 29,236 18,845 5,022 23,867 63,661
Net interest
payable (3,046) (205) (3,251) (1,933) (152) (2,085) (4,439)
Goodwill
amort. (1,285) (409) (1,694) (103) (349) (452) (1,557)
Profit
before tax 18,101 6,190 24,291 16,809 4,521 21,330 57,665
*Of which acquisitions
contributed (23) 145 3,512
4. Dividends
Unaudited Unaudited Audited
6 months 6 months year
ended ended ended
30 Sept. 30 Sept. 31 March
1999 1998 1999
EUR'000 EUR'000 EUR'000
Interim dividend of 6.45 cents per
share (1998: 5.396 cents) 5,631 4,698 4,698
Second interim dividend of
9.264 cents per share - - 8,070
Additional final dividend - 218 224
5,631 4,916 12,992
The additional final dividend of EUR218,000 paid in the six months
ended 30 September 1998 (Year ended 31 March 1999: EUR224,000) is in
respect of shares issued after the date of approval of the relevant
accounts but qualifying for receipt of the dividend declared.
5. Earnings per Ordinary Share
Unaudited Unaudited Audited
6 months 6 months year
ended ended ended
30 Sept. 30 Sept. 31 March
1999 1998 1999
EUR'000 EUR'000 EUR'000
Profit after tax and minority
interests 20,013 17,211 47,980
Goodwill amortisation 1,694 452 1,557
Adjusted profit after tax and
minority interests 21,707 17,663 49,537
Basic earnings per ordinary share
Basic earnings per ordinary
share (cents) 22.97c 19.98c 55.39c
Adjusted basic earnings per
ordinary share (cents)* 24.91c 20.51c 57.19c
Weighted average number of
ordinary shares in issue
during the period ('000) 87,141 86,128 86,621
Fully diluted earnings per
ordinary share
Fully diluted earnings per
ordinary share (cents) 22.39c 19.72c 54.32c
Adjusted fully diluted earnings
per ordinary share (cents)* 24.29c 20.24c 56.08c
Fully diluted weighted average
number of ordinary shares ('000) 89,678 87,276 88,504
*adjusted to exclude goodwill amortisation.
The fully diluted earnings for the purposes of the fully diluted
earnings per ordinary share calculation was EUR20,087,000 (Six months
ended 30 September 1998: EUR17,211,000 and year ended 31 March 1999:
EUR48,079,000) and EUR21,781,000 (Six months ended 30 September 1998:
EUR17,663,000 and year ended 31 March 1999: EUR49,636,000) for the
purposes of the adjusted fully diluted earnings per ordinary share
calculation.
6. Analysis of Closing Net Debt
Unaudited Unaudited Audited
30 Sept. 30 Sept. 31 March
1999 1998 1999
EUR'000 EUR'000 EUR'000
Cash and term deposits 299,020 276,715 311,314
Bank and other debt repayable
within one year (87,549) (27,183) (41,759)
Bank and other debt repayable
after more than one year (173,967) (166,546) (192,295)
Unsecured Notes due 2008/11 (100,381) (93,820) (97,557)
Net debt (62,877) (10,834) (20,297)
7. Distribution of Interim Report
This announcement and further information on DCC is also available at
http://www.dcc.ie. A printed copy of this report will be posted to
shareholders in the near future and will be available to the public at
the Company's registered office at DCC House, Stillorgan, Blackrock,
Co. Dublin.
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