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DCC PLC (DCC)

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Tuesday 13 November, 2018

DCC PLC

Results for the six months ended 30 September 2018

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.

 

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 - continuing1

(ex DCC LPG and DCC Retail & Oil)

£1.864bn

£1.616bn

+15.4%

Adjusted operating profit2 - continuing1

£141.9m

£122.5m

+15.9%

Adjusted earnings per share2 - continuing1

107.1p

95.5p

+12.1%

Interim dividend

44.98p

40.89p

+10.0%

Operating cash flow

£173.2m

£84.0m

 

                               

·     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 £141.9 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 £270 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 £600 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: [email protected]

Kevin Lucey, Head of Capital Markets

                                  Web: www.dcc.ie

 

For media enquiries: Powerscourt (Lisa Kavanagh) 

 

                      Tel: +44 207 250 1446

 

 

 

Group Results

A summary of the Group's results for the six months ended 30 September 2018 is as follows:

 

 

2018

2017

 

 

£'m

£'m

% change

 

 

 

 

Revenue1 - continuing operations2

7,418

5,947

+24.7%

Adjusted operating profit3 - continuing operations2

 

 

 

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 profit3 - continuing operations2

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 interests4

(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 operations4

-

30.5

 

Non-controlling interests

(3.9)

(1.9)

 

Attributable profit

68.0

88.7

 

Adjusted earnings per share3 - continuing2

107.1 pence

95.5 pence

+12.1%

Adjusted earnings per share3 - 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 £7.4 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 £1.9 billion.  

 

Group adjusted operating profit - continuing operations

Group adjusted operating profit from continuing operations increased by 15.9% to £141.9 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 £22.1 million (2017: £15.6 million). The increase was driven by the drawdown of a £450 million private placement debt issuance in September 2017 and also reflects the higher average net debt during the year of £914 million, compared to £313 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 £900 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 £119.8 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 £6.3 million in the first six months of the year as follows:

 

 

£'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 £5.1 million.

 

Restructuring and integration costs of £5.1 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 £3.9 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 £1.7 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 £27.6 million from £20.5 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 £85.9 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

             £'m

 

2017

             £'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 £173.2 million compares to £84.0 million in the prior year. Working capital increased by £25.7 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 £60 million versus a negative £70 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 £211.1 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 £82.1 million (2017: £69.1 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 £27.7 million.

 

Committed acquisitions and capital expenditure

Committed acquisition and capital expenditure in the period amounted to £354.0 million as follows:

 

 

       Acquisitions

Capex

      Total

 

       £'m

      £'m

            £'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

354.0

 

Acquisition activity

Committed acquisition expenditure amounted to £271.9 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 £270.3 million. This included the payment of deferred and contingent acquisition consideration previously provided of £21.0 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 £832.4 million, total equity of £1.7 billion, cash resources, net of overdrafts, of £869.1 million and approximately £200.0 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 £360 million to be drawn down in April 2019.

 

On 27 September 2018, DCC raised approximately £600 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 £237.4 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

£40.9m

£44.1m

-7.2%

Operating profit per tonne

£55.16

£68.30

 

 

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

£56.3m

£42.2m

+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

£275.9m

£245.0m

+12.6%

Operating profit

£26.9m

£22.0m

+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

£1.588bn

£1.371bn

+15.8%

Operating profit

£17.8m

£14.2m

+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

(note 7)

 

Total

 

Pre exceptionals

Exceptionals

(note 7)

 

Total

 

Pre exceptionals

Exceptionals

(note 7)

 

Total

 

Continuing operations

Notes

£'000

£'000

£'000

 

£'000

£'000

£'000

 

£'000

£'000

£'000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

£'000

 

£'000

 

£'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

£'000

 

£'000

 

£'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 months ended 30 September 2018

Attributable to owners of the Parent Company

 

 

 

 

 

 

Other

 

Non-

 

 

Share

Share

Retained

reserves

 

controlling

Total

 

capital

premium

earnings

(note 12)

Total

interests

equity

 

£'000

£'000

£'000

£'000

£'000

£'000

£'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 months ended 30 September 2017

Attributable to owners of the Parent Company

 

 

 

 

 

 

Other

 

Non-

 

 

Share

Share

Retained

reserves

 

controlling

Total

 

capital

premium

earnings

(note 12)

Total

interests

equity

 

£'000

£'000

£'000

£'000

£'000

£'000

£'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 ended 31 March 2018

Attributable to owners of the Parent Company

 

 

 

 

 

 

Other

 

Non-

 

 

Share

Share

Retained

reserves

 

controlling

Total

 

capital

premium

earnings

(note 12)

Total

interests

equity

 

£'000

£'000

£'000

£'000

£'000

£'000

£'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

£'000

 

£'000

 

£'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 £345.0 million and the charge recognised in the Income Statement for the year ended 31 March 2018 amounted to £84.8 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 £300 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

 

£'000

 

£'000

 

           £'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

 

£'000

 

£'000

 

           £'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 £3.5 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 '£'. 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

 

            Stg£1=

            Stg£1=

            Stg£1=

 

            Stg£1=

            Stg£1=

            Stg£1=

 

 

 

 

 

 

 

 

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 £6.533 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 LPG   DCC Retail & Oil   DCC Healthcare   DCC Technology   Total

 

£'000

 

£'000

 

          £'000

 

£'000

 

£'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 LPG   DCC Retail & Oil   DCC Healthcare   DCC Technology   Total

 

£'000

 

£'000

 

          £'000

 

£'000

 

£'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 LPG   DCC Retail & Oil   DCC Healthcare   DCC Technology   Total

 

£'000

 

£'000

 

          £'000

 

£'000

 

£'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

 

£'000

 

£'000

 

            £'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

 

£'000

 

£'000

 

£'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 £5.124 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 £5.123 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 £3.974 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 £1.7 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

 

 

 

£'000

 

£'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

 

 

 

£'000

 

£'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 2018

 

        6 months ended 30 September 2017

 

Continuing

Discontinued 

 

 

Continuing

Discontinued 

 

 

operations

operations

Total

 

operations

operations

Total

 

£'000

£'000

£'000

 

£'000

         £'000

£'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 2018

 

        6 months ended 30 September 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 2018

 

        6 months ended 30 September 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 £68.002 million (six months ended 30 September 2017: £58.169 million) and £95.594 million (six months ended 30 September 2017: £84.977 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

 

 

£'000

 

£'000

 

£'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 (£44.188 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

 

£'000

£'000

£'000

£'000

£'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

 

£'000

£'000

£'000

£'000

£'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 based

Cash flow

currency

 

 

 

payment

hedge

translation

Other

 

 

reserve

reserve

reserve

reserves

Total

 

£'000

£'000

£'000

£'000

£'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

 

£'000

 

£'000

 

£'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 £0.286 million at 31 March 2018 to a net asset of £4.515 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

 

 

 

 

£'000

£'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 £5.123 million (six months ended 30 September 2017: £3.512 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 £141.851 million. The fair value of these receivables is £139.044 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 £145.6 million.

 

The acquisitions during the period contributed £200.0 million to revenues and £0.6 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 £7,642.8 million and total Group profit after tax would have been £72.9 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 £600 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 £360 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 ended

6 months ended

 

Year ended

 

30 Sept.

30 Sept.

31 March

 

2018

2017

2018

 

£'000

£'000

£'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 ended

6 months ended

 

Year ended

 

30 Sept.

30 Sept.

31 March

 

2018

2017

2018

 

£'000

£'000

£'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 ended

6 months ended

 

 

30 Sept.

30 Sept.

 

 

2018

2017

Calculation: Revenue - continuing, constant currency

 

£'000

£'000

Revenue - continuing

 

7,418,009

5,947,422

Currency impact

 

20,309

-

Revenue - continuing, constant currency

 

7,438,318

5,947,422

 

 

 

 

6 months ended

6 months ended

 

 

30 Sept.

30 Sept.

 

 

2018

2017

Calculation: Adjusted operating profit - continuing, constant currency

 

£'000

£'000

Adjusted operating profit - continuing

 

141,918

122,498

Currency impact

 

733

-

Adjusted operating profit - continuing, constant currency

 

142,651

122,498

 

 

 

 

6 months ended

6 months ended

 

 

30 Sept.

30 Sept.

 

 

2018

2017

Calculation: Adjusted earnings per share - continuing, constant currency

 

£'000

£'000

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 ended

6 months ended

 

Year ended

 

30 Sept.

30 Sept.

31 March

 

2018

2017

2018

 

£'000

£'000

£'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 ended

6 months ended

 

Year ended

 

30 Sept.

30 Sept.

31 March

 

2018

2017

2018

 

£'000

£'000

£'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 ended

6 months ended

 

Year ended

 

30 Sept.

30 Sept.

31 March

 

2018

2017

2018

 

£'000

£'000

£'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 ended

6 months ended

 

Year ended

 

30 Sept.

30 Sept.

31 March

 

2018

2017

2018

 

£'000

£'000

£'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 ended

6 months ended

 

Year ended

 

30 Sept.

30 Sept.

31 March

 

2018

2017

2018

 

£'000

£'000

£'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

 

£'000

£'000

£'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

 

£'000

£'000

£'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 days

     (1.7 days)

     (2.0 days)

 

 

                                                                                                                        

 


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