Earnings Release • May 15, 2018
Earnings Release
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RNS Number : 0389O
DCC PLC
15 May 2018
DCC, the leading international sales, marketing and support services group, today announced its results for the year ended 31 March 2018.
| Highlights | 2018 | 2017 | % change |
| DCC LPG volumes (thousand tonnes)1 | 1,876.2kT | 1,565.6kT | +19.8% |
| DCC Retail & Oil volumes (billion litres) | 12.308bn | 11.572bn | +6.4% |
| Revenue - continuing2 (excl. DCC LPG and DCC Retail & Oil) |
£3.598bn | £3.196bn | +12.6% |
| Adjusted operating profit - continuing2,3 | £383.4m | £345.0m | +11.1% |
| Adjusted earnings per share - continuing2,3 | 317.5p | 286.6p | +10.8% |
| Dividend per share | 122.98p | 111.80p | +10.0% |
| Free cash flow4 | £328.1m | £415.5m | |
| Return on capital employed - continuing2 | 17.5% | 20.3% |
· Strong performance for the year with all divisions recording good profit growth and Group adjusted operating profit on continuing operations increasing by 11.1% (8.6% ahead on a constant currency basis) to £383.4 million.
· Adjusted earnings per share on continuing activities up 10.8% (8.3% ahead on a constant currency basis) to 317.5 pence.
· Proposed 10.0% increase in the final dividend will see the total dividend for the year increase by 10.0%, the 24th consecutive year of dividend growth since DCC listed in 1994.
· Good cash flow performance with free cash flow conversion of approximately 85% and a return on capital employed of 17.5%.
· Record year of corporate development spend with approximately £670 million of acquisition capital deployed.
· Acquisitions completed across all divisions, including the acquisitions of Retail West and Elite One Source, DCC's first entry into the large US markets for LPG and for Health & Beauty Solutions.
· The Group expects that the year ending 31 March 2019 will be another year of profit growth and development.
1 1 tonne of LPG equivalent to 1,969 litres of oil
2 Continuing operations exclude DCC Environmental which was disposed of in May 2017
3 Excluding net exceptionals and amortisation of intangible assets
4 After net capital expenditure and before net exceptionals, interest and tax payments
Commenting on the results, Donal Murphy, Chief Executive, said:
"It is pleasing to report that the year ended 31 March 2018 has been another year of strong growth for DCC, with each division recording good growth in operating profit.
It was also a record year of development for the Group, with approximately £670 million of capital spent on acquisitions, the highest level of spend in DCC's history. The acquisition activity during the year again demonstrates DCC's ability to acquire and integrate businesses in our existing markets to strengthen our market positions, build scale and increase our relevance and service offerings to customers and suppliers. Importantly, it also reflects our strategy to extend our geographic footprint over time, as evidenced by DCC LPG's first acquisitions in the US and Asia and DCC Healthcare's first acquisition in the US. These acquisitions in new markets will provide further opportunities for both organic and acquisitive growth for the Group.
The Group continues to have the opportunity, ambition and capacity for further development across each of our divisions, supported by a strong and liquid balance sheet.
We expect that the year to 31 March 2019 will be another year of profit growth and development for the Group."
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 5621
UK / International: +44 (0)330 336 9411
Passcode: 5200365
Webcast Link: https://edge.media-server.com/m6/p/g6h5bc8u
This report, a 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 20 7250 1446 |
Group Results
A summary of the Group's results for the year ended 31 March 2018 is as follows:
| 2018 £'m |
2017 £'m |
% change | |
| ##### Revenue - continuing1 | 14,265 | 12,270 | +16.3% |
| Operating profit2 | |||
| DCC LPG | 167.5 | 160.4 | +4.4% |
| DCC Retail & Oil | 113.8 | 94.5 | +20.4% |
| DCC Healthcare | 54.3 | 49.0 | +11.0% |
| DCC Technology | 47.8 | 41.1 | +16.3% |
| Group adjusted operating profit2 - continuing1 | 383.4 | 345.0 | +11.1% |
| Finance costs (net) and other | (35.4) | (31.2) | |
| Profit before net exceptionals, amortisation of intangible assets and tax | 348.0 | 313.8 | +10.9% |
| Net exceptional credit/(charge) after tax and non-controlling interests | 11.4 | (24.8) | |
| Amortisation of intangible assets | (43.0) | (39.2) | |
| Profit before tax | 316.4 | 249.8 | +26.6% |
| Taxation | (49.3) | (44.1) | |
| Profit after tax | 267.1 | 205.7 | +29.8% |
| Profit after tax - discontinued operations | 0.8 | 15.2 | |
| Non-controlling interests | (6.1) | (4.7) | |
| Attributable profit | 261.8 | 216.2 | +21.1% |
| Adjusted earnings per share2- continuing1 | 317.5p | 286.6p | +10.8% |
| Adjusted earnings per share2 | 318.4p | 303.7p | +4.8% |
| Dividend per share | 122.98p | 111.80p | +10.0% |
| Operating cash flow | 473.4 | 546.9 | |
| Free cash flow3 | 328.1 | 415.5 | |
| Net debt at 31 March | 542.7 | 121.9 | |
| Total equity at 31 March | 1,677.9 | 1,507.7 | |
| Return on capital employed - continuing1 | 17.5% | 20.3% | |
| 1 Continuing operations exclude DCC Environmental which was disposed of in May 2017 2 Excluding net exceptionals and amortisation of intangible assets 3 After net capital expenditure and before net exceptionals, interest and tax payments |
Revenue - continuing operations
Revenue from continuing operations increased by 16.3% (13.8% ahead on a constant currency basis) to £14.3 billion.
DCC LPG volumes increased by 19.8% to 1.9 million tonnes, driven by the acquisitions of Gaz Européen in the prior year and Shell Hong Kong & Macau in January 2018. On a like-for-like basis, volumes were 4.7% ahead of the prior year. DCC LPG's revenue increased by 30.8% (26.2% ahead on a constant currency basis).
Volumes in DCC Retail & Oil increased by 6.4% to 12.3 billion litres, reflecting the acquisitions of Dansk Fuels in the prior year and Esso Retail Norway in October 2017. Volumes were in line with the prior year on an organic basis. DCC Retail & Oil's revenues increased by 15.8% (13.3% ahead on a constant currency basis).
Revenue excluding DCC LPG and DCC Retail & Oil increased by 12.6% (11.1% ahead on a constant currency basis) to £3.6 billion, approximately half of which was organic.
Group adjusted operating profit - continuing operations
Group adjusted operating profit from continuing operations increased by 11.1% to £383.4 million (8.6% ahead on a constant currency basis); approximately one third of the constant currency operating profit growth was organic. The average sterling/euro translation rate for the year of 1.1366 was 4.9% weaker than the average of 1.1956 in the prior year.
Operating profit in DCC LPG was 4.4% ahead of the prior year (1.0% ahead on a constant currency basis), despite the anticipated headwind of a rising cost of product and continued organic investment in its B2C natural gas and electricity offering in France. DCC LPG benefited from the acquisition of Shell Hong Kong & Macau and strong organic growth from the business in Britain, where further progress was achieved in converting oil customers to LPG in the commercial and industrial sectors.
In DCC Retail & Oil, operating profit was 20.4% ahead of the prior year (18.0% ahead on a constant currency basis). Approximately half of the constant currency growth was organic and broadly based, with good profit growth across the division. The business in Britain benefited from a marginally colder than average winter, which drove a modest increase in heating demand. In Denmark, the business delivered strong organic growth and also benefited from the integration of the Dansk Fuels acquisition, completed in the prior year.
Operating profit in DCC Healthcare was 11.0% ahead of the prior year (10.6% ahead on a constant currency basis) and approximately half of the constant currency growth was organic. DCC Vital performed strongly, driven by the first full year contribution from Medisource, which completed in January 2017, as well as good organic growth in medical devices. DCC Health & Beauty Solutions benefited modestly from the acquisition of Elite One Source in January 2018 and continued to deliver strong organic growth in nutritional products.
In DCC Technology, operating profit was 16.3% ahead of the prior year (15.5% ahead on a constant currency basis), reflecting a very strong organic performance in the UK and Ireland, particularly in audio visual, components and gaming, and the benefit of the acquisitions of Hammer and MTR. In France, the B2B business again delivered good growth. The French consumer products business remained very challenging and a programme to significantly reduce costs while improving its logistics and operational efficiency is being implemented. The Nordics business again delivered strong growth in IT and audio visual products and benefited in particular from continued investment in building out its presence in Norway.
An analysis of the divisional performance in each half of the year, for the Group's continuing operations, is set out below:
| 2017/18 | 2016/17 | % change | ||||||||||
| H1 | H2 | FY | H1 | H2 | FY | H1 | H2 | FY | ||||
| Adjusted operating profit* | £'m | £'m | £'m | £'m | £'m | £'m | ||||||
| DCC LPG | 44.1 | 123.4 | 167.5 | 37.0 | 123.4 | 160.4 | +19.2% | +0.0% | +4.4% | |||
| DCC Retail & Oil | 42.2 | 71.6 | 113.8 | 39.0 | 55.5 | 94.5 | +8.0% | +29.0% | +20.4% | |||
| DCC Healthcare | 22.0 | 32.3 | 54.3 | 19.8 | 29.2 | 49.0 | +11.6% | +10.6% | +11.0% | |||
| DCC Technology | 14.2 | 33.6 | 47.8 | 11.3 | 29.8 | 41.1 | +25.8% | +12.8% | +16.3% | |||
| Group | 122.5 | 260.9 | 383.4 | 107.1 | 237.9 | 345.0 | +14.4% | +9.7% | +11.1% | |||
| Adjusted EPS* (pence) | 95.5 | 222.0 | 317.5 | 82.2 | 204.4 | 286.6 | +16.1% | +8.6% | +10.8% | |||
| *Excluding net exceptionals and amortisation of intangible assets |
Finance costs (net) and other
Net finance costs and other increased to £35.4 million (2017: £31.2 million) and reflects an increase in the Group's gross debt due primarily to the drawdown in September 2017 of a new £450 million US private placement debt issuance. It also reflects the higher average net debt during the year of £467 million compared to £301 million during the prior year. The average net debt increased due to the record level of acquisition spend of approximately £670 million during the year.
Profit before net exceptional items, amortisation of intangible assets and tax
Profit before net exceptional items, amortisation of intangible assets and tax increased by 10.9% to £348.0 million (8.4% ahead on a constant currency basis).
Net exceptional credit and amortisation of intangible assets
The Group incurred a net exceptional credit after tax and non-controlling interests of £11.4 million as follows:
| £'m | |
| Profit on disposal of discontinued operations | 29.8 |
| Acquisition and related costs | (12.8) |
| Restructuring costs | (33.2) |
| IAS 39 mark-to-market gain and other | 1.2 |
| Tax and non-controlling interests | 26.4 |
| Net exceptional credit | 11.4 |
The profit on disposal of discontinued operations relates to the gain recorded on the profitable sale of DCC's environmental division, which completed on 31 May 2017.
Acquisition costs include the professional fees and tax costs (such as stamp duty) relating to the evaluation and completion of acquisition opportunities and amounted to £12.8 million.
Restructuring costs amounted to £33.2 million and principally reflect the costs associated with the Group's focus on increasing the efficiency of its operating infrastructure and sales platforms. The majority of the charge relates to the Retail & Oil division where a large project to bring greater efficiency and reduced capital expenditure over time to the UK business' nationwide depot network infrastructure is underway and the project will result in a material reduction in the number of depot locations. An element of the charge also relates to the integration and restructuring costs associated with the prior year acquisition of Dansk Fuels in Denmark.
The other material element of the restructuring charge relates to the ongoing optimisation of DCC Technology's logistics and related infrastructure. In the UK, the new national distribution centre is now operational and a number of the existing locations have transferred into the new infrastructure. The remaining existing locations will transition during the coming year and the majority of the legacy locations have now been sold successfully. A programme to significantly reduce costs, whilst improving the logistics and operational efficiency of DCC Technology's French consumer business is ongoing. This project will also deliver a consolidation of two existing warehouses into one new facility. Finally, the business in the Nordics has recently commissioned its new national distribution centre and it is now operational.
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 year ended 31 March 2018, this amounted to an exceptional non-cash gain of £0.3 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 £5.3 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.
The tax and non-controlling interests credit of £26.4 million principally reflects the impact of the recent reduction of the statutory corporation tax rate in France and corresponding reduction in the Group's deferred tax liabilities associated with the Group's brand and other intangible assets in France.
The charge for the amortisation of acquisition related intangible assets increased to £43.0 million from £39.2 million in the prior year, with the increase principally reflecting acquisitions completed in the current and prior year.
Profit before tax
Profit before tax increased by 26.6% to £316.4 million.
Taxation
The effective tax rate for the Group decreased to 17.0% from 17.5% in the prior year. The decrease primarily reflects reductions in certain territorial tax rates and the change in the geographical mix of the Group's earnings.
Discontinued operations
The Group's discontinued operations represent the activities of DCC Environmental which was disposed of in May 2017.
Adjusted earnings per share
Adjusted earnings per share on a continuing basis increased by 10.8% (8.3% ahead on a constant currency basis) to 317.5 pence.
Total adjusted earnings per share also increased by 4.8% (2.5% ahead on a constant currency basis) to 318.4 pence.
The Board is recommending an increase of 10.0% in the final dividend to 82.09 pence per share, which, when added to the interim dividend of 40.89 pence per share, gives a total dividend for the year of 122.98 pence per share. This represents a 10.0% increase over the total prior year dividend of 111.80 pence per share. The dividend is covered 2.6 times by adjusted earnings per share on a continuing basis (2.6 times in 2017). It is proposed to pay the final dividend on 19 July 2018 to shareholders on the register at the close of business on 25 May 2018.
Over its 24 years as a listed company, DCC has an unbroken record of dividend growth at a compound annual rate of 14.5%.
The Group generated good operating and free cash flow during the year as set out below:
| Year ended 31 March | 2018 £'m |
2017 £'m |
||
| Group operating profit | ##### 384.4 | ##### 363.6 | ||
| ##### (Increase)/decrease in working capital | ##### (13.8) | ##### 84.0 | ||
| ##### Depreciation and other | ##### 102.8 | ##### 99.3 | ||
| ##### Operating cash flow | ##### 473.4 | ##### 546.9 | ||
| ##### Capital expenditure (net) | ##### (145.3) | ##### (131.4) | ||
| ##### Free cash flow | ##### 328.1 | ##### 415.5 | ||
| ##### Interest and tax paid, net of dividend from equity accounted investments | ##### (96.0) | ##### (91.2) | ||
| ##### Free cash flow after interest and tax | ##### 232.1 | ##### 324.3 | ||
| ##### Acquisitions | ##### (691.0) | ##### (262.4) | ||
| ##### Disposals | ##### 160.1 | ##### - | ||
| ##### Dividends | ##### (102.9) | ##### (90.1) | ||
| ##### Dividends paid to non-controlling interests | ##### - | ##### (5.2) | ||
| ##### Exceptional items | ##### (12.6) | ##### (31.5) | ||
| ##### Share issues | ##### 3.3 | ##### 2.6 | ||
| ##### Net outflow | ##### (411.0) | ##### (62.3) | ||
| ##### Opening net debt | ##### (121.9) | ##### (54.5) | ||
| ##### Translation and other | ##### (9.8) | ##### (5.1) | ||
| ##### Closing net debt | ##### (542.7) | ##### (121.9) |
Operating cash flow in 2018 was £473.4 million compared to £546.9 million in the prior year. Working capital increased by £13.8 million (£7.3m increase on a continuing basis). Overall working capital days were negative 2.0 days sales, compared to negative 3.3 days sales in the prior year, reflecting the acquisition during the year of businesses with positive working capital characteristics. 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 31 March 2018 increased on the prior year and supply chain financing had a positive impact on Group working capital days of 4.0 days (31 March 2017: 4.2 days) or £202.2 million (2017: £165.6 million).
Net capital expenditure amounted to £145.3 million for the year (2017: £131.4 million) and was net of disposal proceeds of £7.6 million. The increased level of gross capital expenditure reflects the increased scale of the Group and a number of investments being undertaken to support its continued growth and development. In the current year, the principal items included ongoing investment in new retail sites and site upgrades in the Retail & Oil division, investment to support the organic volume growth being achieved in the LPG division, and the completion of the new national distribution centres and related infrastructure in the Technology division. The net capital expenditure exceeded the depreciation charge in the year by £51.7 million.
The Group's free cash flow amounted to £328.1 million, representing an 85% conversion of operating profit into free cash flow.
Return on capital employed
The creation of shareholder value through the delivery of consistent, long-term returns well in excess of its cost of capital is one of DCC's core strategic aims. The return on capital employed by division was as follows:
| 2018 | 2017 | |
| DCC LPG | 17.4% | 22.9% |
| DCC Retail & Oil | 18.7% | 19.8% |
| DCC Healthcare | 16.7% | 17.5% |
| DCC Technology | 16.1% | 17.1% |
| Group - continuing | 17.5% | 20.3% |
The decrease in the return on capital employed versus the prior year principally reflects the impact of the substantial acquisition spend during the year as the Group entered new geographies.
Total cash spend on acquisitions for the year ended 31 March 2018
The total cash spend on acquisitions completed in the year was £691.0 million and included the payment of deferred and contingent acquisition consideration previously provided of £26.9 million.
Committed acquisitions
Committed acquisition expenditure in the period amounted to £355.3 million. An analysis by division is shown below:
| £'m | |||
| DCC LPG | 250.8 | ||
| DCC Retail & Oil | 27.9 | ||
| DCC Healthcare | 43.7 | ||
| DCC Technology | 32.9 | ||
| Total | 355.3 |
DCC LPG
Retail West
On 7 November 2017, DCC LPG announced that it had reached agreement with NGL Energy Partners LP ("NGL") to acquire its Retail West LPG division, Hicksgas LLC ("Retail West"). The acquisition completed on 31 March 2018.
Headquartered in Illinois, Retail West has been in business for over 70 years and employs 390 people. It sells approximately 130,000 tonnes (assuming normal winter weather conditions) of LPG annually from 43 customer service locations and 58 satellite facilities. The business trades under three prominent regional brands, Hicksgas, Pacer Propane and Propane Central, and a number of smaller, local brands. Retail West has leading market positions in Illinois, Indiana and Kansas and also operates in seven other states across the Mid-West and North-West regions. The acquisition represents DCC LPG's entry into the US market and is a further significant step in DCC's strategy to build a global LPG business over time. The US is one of the world's largest LPG markets and is an attractive and growing market. It is also highly fragmented, with over 4,000 LPG distribution businesses operating in the market. The acquisition of Retail West will provide DCC with a substantial, high-quality presence in the US with leading market positions in a number of states. The business has an excellent customer base, a strong and well-invested operational infrastructure and an experienced management team.
TEGA
On 4 January 2018, DCC LPG announced it had reached agreement with Linde AG to acquire Tega-Technische Gase und Gasetechnik GmbH, its LPG and refrigerant gas distribution business in Germany ("TEGA"). The transaction completed on 31 March 2018.
TEGA, headquartered in Würzburg, employs approximately 100 people across five operating sites, largely in southern Germany. TEGA has revenue of approximately €75 million evenly split between LPG and refrigerants. The business supplies approximately 35,000 tonnes of LPG annually to approximately 15,000 domestic and commercial customers. It also supplies refrigerant gases to wholesalers and end-users for use in air-conditioning, commercial cooling systems and refrigerators. The business has operated on a standalone basis within The Linde Group and continues to be led by its existing, highly experienced management team.
The acquisition of TEGA provides DCC LPG with a platform in the large, relatively fragmented German LPG market and further strengthens its position in the LPG market in Europe. In addition, it provides an entry into the refrigerant gas market, further enhancing the service capability of the LPG business, following the expansion into medical and aerosol gases in recent years.
Countrywide LPG
On 11 January 2018, DCC LPG announced it had reached agreement with Countrywide Farmers plc to acquire the trade and assets of its LPG distribution business in Britain ("Countrywide LPG"). Countrywide LPG supplies bulk and cylinder LPG to domestic, agricultural and commercial customers in Britain. The business sells approximately 20,000 tonnes of LPG annually. The transaction completed on 28 February 2018 and is currently being held separate, pending merger clearance.
DCC Retail & Oil
SNAP
In May 2018, DCC Retail & Oil acquired SNAP, an end-to-end transaction processing and payment system for HGV fleets. The business facilitates cashless payments through licence plate recognition for services to HGV fleets at truck stops. The business, although modest, is growing strongly and will be complementary to the existing retail and oil businesses.
DCC Healthcare
Elite One Source
On 7 February 2018, DCC Health & Beauty Solutions announced the acquisition of Elite One Source Nutritional Services, Inc ("Elite One Source"), a provider of contract manufacturing and related services to the growing healthcare and dietary supplements market in the US.
Elite One Source focuses on complex-formulation nutritional products in tablet and capsule dosage forms, including organic and probiotic products, across a variety of packaging formats. Its service offering encompasses product development, formulation, manufacturing, packaging and regulatory services. Its customer base includes some of the leading specialist brands in the US consumer healthcare market. Elite One Source's facilities in Missoula, Montana are well-invested with significant scope to expand capacity to meet its organic growth plans. The facilities comply with FDA cGMP (current Good Manufacturing Practices) and Health Canada standards and are certified by leading third party regulatory bodies including NSF and USDA Organic. The business is led by an experienced management team and employs 180 people.
The acquisition of Elite One Source provides an entry into the US market, the world's largest healthcare and dietary supplements market. The US is an innovative, high-growth market, with a fragmented contract manufacturing base, which offers DCC significant opportunities for organic and acquisitive growth.
DCC Technology
MTR
In July 2017, DCC Technology acquired MTR Group Ltd ("MTR"), a fast-growing UK-based provider of second lifecycle solutions for mobile and tablet devices.
Based in Harlow, Essex and employing 60 people, MTR provides a broad range of services to retailers, mobile handset manufacturers and insurance companies to source and refurbish mobile phones and tablets for resale to customers in the UK and abroad. In the year ended 30 November 2016, MTR generated service revenues of £11 million. The acquisition of MTR advances the DCC Technology strategy of expanding its service proposition to vendors and customers and provides access to the high growth second lifecycle solutions market.
Hypertec
In March 2018, DCC Technology acquired Hypertec Ltd, a small UK-based distributor of third party and own-brand memory and accessory products. The business generated revenues of £28.3 million in its most recent financial year and employs approximately 50 people.
Disposals
The cash flow on disposals relates to the disposal of DCC's Environmental division on 31 May 2017. Full details of the disposal were set out in DCC's Stock Exchange announcement of 5 April 2017.
Since the year end, DCC Retail & Oil has completed the disposal of both its fuel storage terminal in Belfast to Valero Logistics UK Ltd, a subsidiary of Valero Energy Corporation, and its distribution business in Northern Ireland to Nicholl Fuel Oils Ltd. The distribution business sold approximately 250 million litres of product in the year to 31 March 2018. The sale excludes the retail business in Northern Ireland.
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. As a result of the continued strong cash flow performance, DCC's financial position remains very strong. At 31 March 2018, the Group had net debt of £542.7 million, total equity of £1.7 billion, cash resources, net of overdrafts, of £964.3 million and a further £400 million of undrawn committed debt facilities. The Group's outstanding term debt at 31 March 2018 had an average maturity of 6.3 years. Substantially all of the Group's debt has been raised in the US Private Placement market with an average credit margin of 1.6% over floating Euribor/Libor.
At 31 March 2018, the Group's Net Debt: EBITDA was 1.1 times, reflecting the large acquisition spend in the second half of the financial year.
Outlook
The Group expects that the year ending 31 March 2019 will be another year of profit growth and development.
DCC's 2018 Annual Report will be published in June 2018. The Company's Annual General Meeting will be held at 11.00 am on Friday 13 July 2018 in The InterContinental Hotel, Simmonscourt Road, Ballsbridge, Dublin 4, Ireland.
Performance Review - Divisional Analysis
| DCC LPG | 2018 | 2017 | % change |
| Volumes (thousand tonnes) | 1,876.2kT | 1,565.6kT | +19.8% |
| Operating profit | £167.5m | £160.4m | +4.4% |
| Operating profit per tonne | £89.27 | £102.49 | |
| Return on capital employed | 17.4% | 22.9% |
DCC LPG recorded a good performance, with operating profit increasing by 4.4% (1.0% ahead on a constant currency basis), despite the anticipated headwind of an increasing cost of product and continued organic investment in its B2C natural gas and electricity offering in France. DCC LPG also made excellent progress in expanding its geographic presence, completing the acquisitions of Shell Hong Kong & Macau in January 2018, as well as TEGA in Germany and Retail West in the US, both on 31 March 2018.
The volume growth of 19.8% was driven by the prior year acquisition of Gaz Européen and the acquisition of Shell Hong Kong & Macau. Volumes grew 4.7% on a like-for-like basis, primarily reflecting strong growth in natural gas volumes and continued growth in sales of LPG to industrial and commercial customers.
As anticipated, the operating profit per tonne declined versus the prior year due to a significantly higher cost of product and the mix impact of lower margin natural gas volumes becoming more material.
The French business performed in line with expectations, benefiting from strong cost control and good margin management and the business continues to progress organic new product development and efficiency opportunities. The 'Click & Collect' concept, allowing 24/7 order and collection of cylinders using a mobile application, is being expanded to an increasing number of locations. The business also continues to invest in its B2C offering in natural gas and electricity, launched in the second half of the year, which leverages the existing B2B natural gas operating platform as well as the Butagaz brand, the most recognised gas brand in France.
In Britain, the business delivered strong organic profit growth, despite the impact of supply constraints across the industry in the peak winter season. The business delivered strong volume growth, reflecting its continued focus on converting industrial and commercial users of oil to LPG. In Ireland, the business also benefited from growth in commercial volumes, reflecting continued strong demand from existing and new customers in the sector.
In Asia, Shell Hong Kong & Macau has been successfully integrated into DCC LPG's operations and has performed in line with expectations since acquisition.
Following the completion of recent acquisitions, DCC LPG has operations across ten countries and is very well placed to continue its development in existing territories, in both LPG and related adjacencies, as well as further developing its geographic footprint.
| DCC Retail & Oil | 2018 | 2017 | % change |
| Volumes (litres) | 12.308bn | 11.572bn | +6.4% |
| Operating profit | £113.8m | £94.5m | +20.4% |
| Operating profit per litre | 0.92ppl | 0.82ppl | |
| Return on capital employed | 18.7% | 19.8% |
DCC Retail & Oil had an excellent year, with operating profit increasing to £113.8 million, 20.4% ahead of the prior year (18.0% ahead on a constant currency basis). The strong performance reflects organic profit growth across all territories and acquisitions completed in the current and prior year.
DCC Retail & Oil sold 12.3 billion litres of product during the year, an increase of 6.4% over the prior year, driven by the prior year acquisition of Dansk Fuels and the acquisition of Esso Retail Norway in October 2017. Organic volumes were in line with the prior year.
In the UK and Ireland, the business delivered strong organic profit growth and benefited modestly from good heating oil demand following a marginally colder than average winter. The business continues to make good progress in developing its business in differentiated premium products, cross-selling value added products and services, such as telemetry, and developing in adjacent product areas such as lubricants and aviation. The business also continued its plans to organically invest in developing an unmanned retail network in the UK and Ireland and now has 39 unmanned sites, with a pipeline of further sites under consideration.
The Fuel Card business performed well, delivering organic profit growth whilst also expanding its operations organically into the German and French markets during the year.
In May 2018, DCC Retail & Oil acquired SNAP, an end-to-end transaction processing and payment system for HGV fleets. The business facilitates cashless payments through licence plate recognition for services to HGV fleets at truck stops. The business, although modest, is growing strongly and will be complementary to the existing retail and oil businesses.
A strong performance in the Danish business reflected organic growth in commercial, agricultural and domestic volumes and a full year's contribution from Dansk Fuels, which has been fully integrated. The Danish business now has leading market positions across the domestic, agricultural, commercial and aviation markets, in addition to operating 144 retail sites under the Shell brand. In France, the business delivered good profit growth while operating in a more competitive environment and continued to invest in both its customer proposition and upgrading its sites. In October 2017, DCC Retail & Oil completed, ahead of schedule, the acquisition of Esso's retail network in Norway. The business has now been integrated into DCC Retail & Oil's retail operating infrastructure, enabling management to commence driving improvements in what is a difficult market environment. The businesses in both Sweden and Austria performed well during the year.
Following a strategic review of the market position and invested capital of the business in Northern Ireland, DCC Retail & Oil completed the sale of its fuel storage terminal and distribution business in Northern Ireland in April 2018. The business sold approximately 250 million litres of volume in the year ended 31 March 2018.
Following completion of the acquisition of Esso Retail Norway, DCC Retail & Oil now has substantial operations in eight countries and has developed a scalable platform to grow the business in existing and new territories across its distribution, retail and fuel card activities.
| DCC Healthcare | 2018 | 2017 | % change |
| Revenue | £514.6m | £506.5m | +1.6% |
| Operating profit | £54.3m | £49.0m | +11.0% |
| Operating margin | 10.6% | 9.7% | |
| Return on capital employed | 16.7% | 17.5% |
DCC Healthcare again delivered strong growth, with operating profit increasing by 11.0% (10.6% ahead on a constant currency basis), with approximately half of the growth being organic. The business continued to improve its operating margin and also completed the acquisition of Elite One Source in January 2018, its first acquisition in the large and growing health supplements market in the US.
DCC Vital, which is focused on the sales and marketing of medical devices and pharmaceuticals to healthcare providers in Britain and Ireland, performed very strongly and benefited from the prior year acquisition of Medisource and good organic growth in medical devices. In the British primary care sector, DCC Vital enhanced its position as the market leader in the supply of medical consumables and equipment to GP surgeries with the completion of two small complementary bolt-on acquisitions. The integration of both acquisitions into DCC Vital's existing infrastructure is progressing to plan. DCC Vital's pharma activities also performed well, benefiting from the strength of its supply chain for certain essential medicines. A strong performance in the Irish business reflected a full year contribution from Medisource, acquired in January 2017, and continued strong growth in the supply of medical devices to the hospital and community care sectors. DCC Vital's operating margin was further enhanced by exiting the supply of certain low value commodity products into hospitals in Britain, continuing the product portfolio streamlining of prior years.
DCC Health & Beauty Solutions, which provides outsourced solutions to international nutrition and beauty brand owners, generated excellent organic growth in the nutrition sector and benefited from the acquisition of Elite One Source in January 2018, which has performed in line with expectations since acquisition. The organic growth was driven by the continued focus on complex product formulations, particularly soft gels, and benefited from increasing end-user demand for nutritional products in DCC Health & Beauty Solutions' key markets of Europe, the US and Asia. In the beauty sector, while the overall performance was held back somewhat due to destocking by certain customers, the business benefited from excellent growth in sachet filling and also generated a number of new business development opportunities during the second half of the year.
DCC Health & Beauty Solutions is continuing to progress a number of investment projects across its manufacturing facilities in Britain and in its recently acquired facilities in the US, which will add new capacity and product capability, enhancing its ability to meet the growing market demand for its services.
| DCC Technology | 2018 | 2017 | % change |
| Revenue | £3.083bn | £2.689bn | +14.7% |
| Operating profit | £47.8m | £41.1m | +16.3% |
| Operating margin | 1.6% | 1.5% | |
| Return on capital employed | 16.1% | 17.1% |
DCC Technology achieved very strong operating profit growth of 16.3% (15.5% ahead on a constant currency basis), reflecting acquisitions completed in the current and prior year and organic profit growth in the UK, Ireland and the Nordics.
In the UK, DCC Technology's largest market, the business achieved very strong revenue and profit growth, driven by market share gains and growth in key product categories including audio visual, components and gaming. The business continued to invest in both its product and service capability to allow it to take advantage of growth opportunities in audio visual, home automation, enterprise software and consumer product solutions.
Hammer, acquired in December 2016, achieved strong growth in sales of server and storage products into key markets, including the datacentre market. The acquisition of MTR, in July 2017, has allowed DCC Technology to enhance its service offering in the mobile market, strengthening its relationships with key vendor and retail partners. The business has performed very strongly since acquisition and provides a platform to extend its service offering outside of the UK. In February 2018, DCC Technology acquired Hypertec, a small specialist distributor of own-brand and third party memory and accessory products to reseller customers in the UK.
The new UK national distribution centre is now operational and the business has successfully disposed of most of its original warehousing. The associated project to upgrade its enterprise management system, which will significantly enhance the capability of the business to service its customers and suppliers, is progressing well and is scheduled to be completed by the end of the year.
The Irish business delivered strong organic profit growth as it benefited from a good performance in the enterprise segment and the continued development of its service proposition, including device life cycle management.
In France, the B2B segment performed strongly as it benefited from expansion of its audio visual offering and strong organic growth in its core cabling business. The French consumer products business remained very challenging and a programme to significantly reduce costs, while improving its logistics and operational efficiency, has been implemented. In the Nordics, the business experienced very strong organic growth and continues to benefit from investments made to broaden the reach of the business in Norway, Denmark and Finland. The business is making a significant investment in warehousing capacity to support future growth, in particular in audio visual and IT products.
The business in the Middle East generated very strong revenue and profit growth reflecting further development of its relationships with key retailers in the region. Supply Chain Services continues to invest in its global service offering and also acts as an essential centre of expertise, supporting the broader DCC Technology business.
The performance in the current year, together with recent investments made in its service offering and infrastructure, leaves DCC Technology well positioned to drive further growth in both its existing and new markets.
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.
Group Income Statement
For the year ended 31 March 2018
| 2018 | 2017 | ||||||||||||||||||
| Pre exceptionals | Exceptionals (note 5) |
Total | Pre exceptionals | Exceptionals (note 5) |
Total | ||||||||||||||
| Continuing operations | Notes | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||||||||||||
| Revenue | 4 | 14,264,639 | - | 14,264,639 | 12,269,802 | - | 12,269,802 | ||||||||||||
| Cost of sales | (12,857,814) | - | (12,857,814) | (11,006,805) | - | (11,006,805) | |||||||||||||
| Gross profit | 1,406,825 | - | 1,406,825 | 1,262,997 | - | 1,262,997 | |||||||||||||
| Administration expenses | (384,701) | - | (384,701) | (323,320) | - | (323,320) | |||||||||||||
| Selling and distribution expenses | (652,636) | - | (652,636) | (605,182) | - | (605,182) | |||||||||||||
| Other operating income | 28,652 | 1,156 | 29,808 | 28,297 | 1,879 | 30,176 | |||||||||||||
| Other operating expenses | (14,740) | (46,269) | (61,009) | (17,787) | (38,176) | (55,963) | |||||||||||||
| Adjusted operating profit | 383,400 | (45,113) | 338,287 | 345,005 | (36,297) | 308,708 | |||||||||||||
| Amortisation of intangible assets | (43,059) | - | (43,059) | (39,130) | - | (39,130) | |||||||||||||
| Operating profit | 4 | 340,341 | (45,113) | 295,228 | 305,875 | (36,297) | 269,578 | ||||||||||||
| Finance costs | (73,156) | - | (73,156) | (72,910) | - | (72,910) | |||||||||||||
| Finance income | 37,421 | 299 | 37,720 | 40,973 | 10,101 | 51,074 | |||||||||||||
| Equity accounted investments' profit after tax | 368 | - | 368 | 712 | - | 712 | |||||||||||||
| Profit before tax | 304,974 | (44,814) | 260,160 | 274,650 | (26,196) | 248,454 | |||||||||||||
| Income tax expense | (49,289) | 25,407 | (23,882) | (44,113) | (1,756) | (45,869) | |||||||||||||
| Profit for the year (continuing operations) | 255,685 | (19,407) | 236,278 | 230,537 | (27,952) | 202,585 | |||||||||||||
| Profit for the year from discontinued operations | 8 | 801 | 29,842 | 30,643 | 15,160 | - | 15,160 | ||||||||||||
| Profit after tax for the financial year | 256,486 | 10,435 | 266,921 | 245,697 | (27,952) | 217,745 | |||||||||||||
| Profit attributable to: | |||||||||||||||||||
| Owners of the Parent | 250,420 | 11,404 | 261,824 | 241,011 | (24,814) | 216,197 | |||||||||||||
| Non-controlling interests | 6,066 | (969) | 5,097 | 4,686 | (3,138) | 1,548 | |||||||||||||
| 256,486 | 10,435 | 266,921 | 245,697 | (27,952) | 217,745 | ||||||||||||||
| Earnings per ordinary share | |||||||||||||||||||
| Basic earnings per share | 6 | 293.83p | 243.64p | ||||||||||||||||
| Diluted earnings per share | 6 | 292.79p | 242.00p | ||||||||||||||||
| Basic adjusted earnings per share | 6 | 318.35p | 303.68p | ||||||||||||||||
| Diluted adjusted earnings per share | 6 | 317.21p | 301.63p | ||||||||||||||||
| Earnings per ordinary share - continuing operations | |||||||||||||||||||
| Basic earnings per share | 6 | 259.44p | 226.56p | ||||||||||||||||
| Diluted earnings per share | 6 | 258.52p | 225.04p | ||||||||||||||||
| Basic adjusted earnings per share | 6 | 317.45p | 286.59p | ||||||||||||||||
| Diluted adjusted earnings per share | 6 | 316.31p | 284.66p | ||||||||||||||||
Group Statement of Comprehensive Income
For the year ended 31 March 2018
| 2018 | 2017 | ||||||||||||
| £'000 | £'000 | ||||||||||||
| Group profit for the financial year | 266,921 | 217,745 | |||||||||||
| Other comprehensive income: | |||||||||||||
| Items that may be reclassified subsequently to profit or loss | |||||||||||||
| Currency translation: | |||||||||||||
| - arising in the year | 682 | 37,084 | |||||||||||
| - recycled to the Income Statement on disposal | (4,548) | - | |||||||||||
| Movements relating to cash flow hedges | (3,030) | (6,803) | |||||||||||
| Movement in deferred tax liability on cash flow hedges | 433 | 1,334 | |||||||||||
| (6,463) | 31,615 | ||||||||||||
| Items that will not be reclassified to profit or loss | |||||||||||||
| Group defined benefit pension obligations: | |||||||||||||
| - remeasurements | 5,215 | (3,056) | |||||||||||
| - movement in deferred tax asset | (665) | 413 | |||||||||||
| 4,550 | (2,643) | ||||||||||||
| Other comprehensive income for the financial year, net of tax | (1,913) | 28,972 | |||||||||||
| Total comprehensive income for the financial year | 265,008 | 246,717 | |||||||||||
| Attributable to: | |||||||||||||
| Owners of the Parent | 259,336 | 242,735 | |||||||||||
| Non-controlling interests | 5,672 | 3,982 | |||||||||||
| 265,008 | 246,717 | ||||||||||||
| Attributable to: | |||||||||||||
| Continuing operations | 234,365 | 230,199 | |||||||||||
| Discontinued operations | 30,643 | 16,518 | |||||||||||
| 265,008 | 246,717 | ||||||||||||
Group Balance Sheet
| As at 31 March 2018 | ||||||
| 2018 | 2017 | |||||
| Notes | £'000 | £'000 | ||||
| ASSETS | ||||||
| Non-current assets | ||||||
| Property, plant and equipment | 933,038 | 750,020 | ||||
| Intangible assets and goodwill | 1,936,962 | 1,422,572 | ||||
| Equity accounted investments | 24,461 | 24,938 | ||||
| Deferred income tax assets | 26,154 | 22,619 | ||||
| Derivative financial instruments | 103,085 | 273,767 | ||||
| 3,023,700 | 2,493,916 | |||||
| Current assets | ||||||
| Inventories | 530,473 | 456,395 | ||||
| Trade and other receivables | 1,426,217 | 1,222,597 | ||||
| Derivative financial instruments | 8,050 | 18,233 | ||||
| Cash and cash equivalents | 1,038,827 | 1,048,064 | ||||
| 3,003,567 | 2,745,289 | |||||
| Assets classified as held for sale | - | 193,170 | ||||
| 3,003,567 | 2,938,459 | |||||
| Total assets | 6,027,267 | 5,432,375 | ||||
| EQUITY | ||||||
| Capital and reserves attributable to owners of the Parent | ||||||
| Share capital | 15,455 | 15,455 | ||||
| Share premium | 280,533 | 277,211 | ||||
| Share based payment reserve | 9 | 22,883 | 18,146 | |||
| Cash flow hedge reserve | 9 | (16,178) | (13,581) | |||
| Foreign currency translation reserve | 9 | 101,096 | 105,537 | |||
| Other reserves | 9 | 932 | 932 | |||
| Retained earnings | 1,237,937 | 1,074,434 | ||||
| Equity attributable to owners of the Parent | 1,642,658 | 1,478,134 | ||||
| Non-controlling interests | 35,259 | 29,587 | ||||
| Total equity | 1,677,917 | 1,507,721 | ||||
| LIABILITIES | ||||||
| Non-current liabilities | ||||||
| Borrowings | 1,598,521 | 1,319,967 | ||||
| Derivative financial instruments | 10,732 | 506 | ||||
| Deferred income tax liabilities | 152,552 | 155,297 | ||||
| Post employment benefit obligations | 11 | (286) | 29 | |||
| Provisions for liabilities | 278,890 | 255,650 | ||||
| Acquisition related liabilities | 71,454 | 66,617 | ||||
| Government grants | 237 | 261 | ||||
| 2,112,100 | 1,798,327 | |||||
| Current liabilities | ||||||
| Trade and other payables | 2,063,260 | 1,820,517 | ||||
| Current income tax liabilities | 19,769 | 25,051 | ||||
| Borrowings | 74,897 | 148,445 | ||||
| Derivative financial instruments | 8,474 | 5,894 | ||||
| Provisions for liabilities | 44,451 | 31,022 | ||||
| Acquisition related liabilities | 26,399 | 28,300 | ||||
| 2,237,250 | 2,059,229 | |||||
| Liabilities associated with assets classified as held for sale | - | 67,098 | ||||
| 2,237,250 | 2,126,327 | |||||
| Total liabilities | 4,349,350 | 3,924,654 | ||||
| Total equity and liabilities | 6,027,267 | 5,432,375 | ||||
| Net debt included above (including cash attributable to assets held for sale) | 10 | (542,662) | (121,949) |
Group Statement of Changes in Equity
| For the year ended 31 March 2018 | Attributable to owners of the Parent | ||||||
| Other | Non- | ||||||
| Share | Share | Retained | reserves | controlling | Total | ||
| capital | premium | earnings | (note 9) | 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 financial year | - | - | 261,824 | - | 261,824 | 5,097 | 266,921 |
| Currency translation: | |||||||
| - arising in the year | - | - | - | 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 |
| For the year ended 31 March 2017 | Attributable to owners of the Parent | ||||||
| Other | Non- | ||||||
| Share | Share | Retained | reserves | controlling | Total | ||
| capital | premium | earnings | (note 9) | Total | interests | equity | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| At 1 April 2016 | 15,455 | 277,211 | 948,316 | 78,661 | 1,319,643 | 30,833 | 1,350,476 |
| Profit for the financial year | - | - | 216,197 | - | 216,197 | 1,548 | 217,745 |
| Currency translation | - | - | - | 34,650 | 34,650 | 2,434 | 37,084 |
| Group defined benefit pension obligations: | |||||||
| - remeasurements | - | - | (3,056) | - | (3,056) | - | (3,056) |
| - movement in deferred tax asset | - | - | 413 | - | 413 | - | 413 |
| Movements relating to cash flow hedges | - | - | - | (6,803) | (6,803) | - | (6,803) |
| Movement in deferred tax liability on cash flow hedges | - | - | - | 1,334 | 1,334 | - | 1,334 |
| Total comprehensive income | - | - | 213,554 | 29,181 | 242,735 | 3,982 | 246,717 |
| Re-issue of treasury shares | - | - | 2,600 | - | 2,600 | - | 2,600 |
| Share based payment | - | - | - | 3,192 | 3,192 | - | 3,192 |
| Dividends | - | - | (90,036) | - | (90,036) | (5,228) | (95,264) |
| At 31 March 2017 | 15,455 | 277,211 | 1,074,434 | 111,034 | 1,478,134 | 29,587 | 1,507,721 |
Group Cash Flow Statement
| For the year ended 31 March 2018 | |||||||
| 2018 | 2017 | ||||||
| Note | £'000 | £'000 | |||||
| Cash flows from operating activities | |||||||
| Profit for the financial year | 266,921 | 217,745 | |||||
| Add back non-operating expenses/(income): | |||||||
| - tax | 24,046 | 49,054 | |||||
| - share of equity accounted investments' profit | (368) | (712) | |||||
| - net operating exceptionals | 15,271 | 36,297 | |||||
| - net finance costs | 35,452 | 21,999 | |||||
| Group operating profit before exceptionals | 341,322 | 324,383 | |||||
| Share-based payments expense | 4,737 | 3,192 | |||||
| Depreciation | 93,722 | 92,015 | |||||
| Amortisation of intangible assets | 43,059 | 39,168 | |||||
| Profit on disposal of property, plant and equipment | (167) | (173) | |||||
| Amortisation of government grants | (36) | (235) | |||||
| Other | 4,555 | 4,571 | |||||
| Decrease in working capital | (13,758) | 83,949 | |||||
| Cash generated from operations before exceptionals | 473,434 | 546,870 | |||||
| Exceptionals | (12,602) | (31,269) | |||||
| Cash generated from operations | 460,832 | 515,601 | |||||
| Interest paid | (69,900) | (70,108) | |||||
| Income tax paid | (65,437) | (62,180) | |||||
| Net cash flows from operating activities | 325,495 | 383,313 | |||||
| Investing activities | |||||||
| Inflows: | |||||||
| Proceeds from disposal of property, plant and equipment | 7,617 | 12,315 | |||||
| Dividends received from equity accounted investments | 1,980 | 125 | |||||
| Disposal of subsidiaries | 8 | 160,063 | - | ||||
| Interest received | 37,399 | 40,966 | |||||
| 207,059 | 53,406 | ||||||
| Outflows: | |||||||
| Purchase of property, plant and equipment | (152,997) | (143,698) | |||||
| Acquisition of subsidiaries | 12 | (664,109) | (203,327) | ||||
| Payment of accrued acquisition related liabilities | (26,910) | (59,069) | |||||
| (844,016) | (406,094) | ||||||
| Net cash flows from investing activities | (636,957) | (352,688) | |||||
| Financing activities | |||||||
| Inflows: | |||||||
| Proceeds from issue of shares | 3,322 | 2,600 | |||||
| Net cash inflow on derivative financial instruments | 11,275 | 14,212 | |||||
| Increase in interest-bearing loans and borrowings | 458,593 | - | |||||
| Increase in finance lease liabilities | 766 | - | |||||
| 473,956 | 16,812 | ||||||
| Outflows: | |||||||
| Repayment of interest-bearing loans and borrowings | (58,130) | (108,140) | |||||
| Repayment of finance lease liabilities | (4) | (177) | |||||
| Dividends paid to owners of the Parent | 7 | (102,871) | (90,036) | ||||
| Dividends paid to non-controlling interests | - | (5,228) | |||||
| (161,005) | (203,581) | ||||||
| Net cash flows from financing activities | 312,951 | (186,769) | |||||
| Change in cash and cash equivalents | 1,489 | (156,144) | |||||
| Translation adjustment | (10,018) | 38,929 | |||||
| Cash and cash equivalents at beginning of year | 972,822 | 1,090,037 | |||||
| Cash and cash equivalents at end of year | 964,293 | 972,822 | |||||
| Cash and cash equivalents consists of: | |||||||
| Cash and short term bank deposits | 1,038,827 | 1,048,064 | |||||
| Overdrafts | (74,534) | (88,041) | |||||
| Cash and short term deposits attributable to assets held for sale | - | 12,799 | |||||
| 964,293 | 972,822 | ||||||
Notes to the Condensed Financial Statements
For the year ended 31 March 2018
1. Basis of Preparation
The financial information, from the Group Income Statement to note 15, contained in this preliminary results statement has been derived from the Group financial statements for the year ended 31 March 2018 and is presented in sterling, rounded to the nearest thousand. The financial information does not include all the information and disclosures required in the annual financial statements. The Annual Report will be distributed to shareholders and made available on the Company's website www.dcc.ie. It will also be filed with the Companies Registration Office. The auditors have reported on the financial statements for the year ended 31 March 2018 and their report was unqualified. The financial information for the year ended 31 March 2017 represents an abbreviated, restated (see note 4) version of the Group's statutory financial statements on which an unqualified audit report was issued and which have been filed with the Companies Registration Office. The financial information presented in this report has been prepared in accordance with the Listing Rules of the Financial Services Authority and the accounting policies that the Group has adopted for 2018 which are consistent with those applied in the prior year.
2. Accounting Policies
The Group has adopted the following standards, interpretations and amendments to existing standards during the financial year:
· Amendments to IAS 7 Statement of Cash Flows - Disclosure Initiative. These amendments are intended to improve the information provided to users of financial statements regarding the entity's financing activities. This amendment, which was EU endorsed in November 2017, did not have a significant impact on the Group's consolidated financial statements; and
· Amendments to IAS 12 Income Taxes - Recognition of Deferred Tax Assets for Unrealised Losses. These amendments clarify, inter alia, that unrealised losses on debt instruments measured at fair value (and measured at cost for tax purposes) give rise to a deductible temporary difference regardless of whether the instrument is recovered through sale or by holding it to maturity or whether it is probable that the issuer will pay all contractual cash flows. Entities are therefore required to recognise deferred taxes for temporary differences from unrealised losses of debt instruments measured at fair value if all other recognition criteria for deferred taxes are met. This amendment, which was EU endorsed in November 2017, did not have a significant impact on the Group's consolidated financial statements.
There are other changes to IFRS which became effective for the Group during the financial year but did not result in material changes to the Group's consolidated financial statements.
3. 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 year, 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 | |||
| 2018 | 2017 | 2018 | 2017 | |
| Stg£1= | Stg£1= | Stg£1= | Stg£1= | |
| Euro | 1.1366 | 1.1956 | 1.1430 | 1.1689 |
| Danish Krone | 8.4603 | 8.9150 | 8.5187 | 8.6942 |
| Swedish Krona | 11.0482 | 11.3729 | 11.7548 | 11.1423 |
| Norwegian Krone | 10.7901 | 10.9811 | 11.0607 | 10.7169 |
| US Dollar | 1.3236 | 1.3181 | 1.4083 | 1.2497 |
| Hong Kong Dollar | 10.3312 | 10.2260 | 11.0522 | 9.7106 |
| 4. Segmental Reporting DCC is a leading international sales, marketing and support services group headquartered in Dublin, Ireland. Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker has been identified as Mr. Donal Murphy, Chief Executive and his executive management team. As noted in the Group's Annual Report for the year ended 31 March 2017, DCC is presenting DCC LPG and DCC Retail & Oil as separate reportable segments from 1 April 2017, in line with the revised management and organisational structures of the businesses. Previously, these two segments comprised the Group's former DCC Energy segment. Following these changes in the composition of operating segments, segmental reporting has been revised and the comparative disclosures have been restated as required under IFRS 8. The Group is organised into four operating segments: DCC LPG, DCC Retail & Oil, DCC Healthcare and DCC Technology. DCC LPG is a leading liquefied petroleum gas ('LPG') sales and marketing business with operations in Europe, Asia and the US with a developing business in the retailing of natural gas and electricity; DCC Retail & Oil is a leader in the sales, marketing and retailing of transport 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; and ## DCC Technology is a leading route-to-market and supply chain partner for global technology brands. 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 below. 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
| Year ended 31 March 2018 |
| DCC LPG | DCC Retail & Oil | DCC Healthcare | DCC Technology | Total | |||||
| £'000 | £'000 | £'000 | £'000 | £'000 | |||||
| Segment revenue | 1,403,779 | 9,262,836 | 514,564 | 3,083,460 | 14,264,639 | ||||
| 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 5) | (8,127) | (21,788) | (3,034) | (12,164) | (45,113) | ||||
| Operating profit | 138,046 | 82,986 | 44,086 | 30,110 | 295,228 |
| Year ended 31 March 2017 |
| DCC LPG | DCC Retail & Oil | DCC Healthcare | DCC Technology | Total | |||||
| £'000 | £'000 | £'000 | £'000 | £'000 | |||||
| Segment revenue | 1,073,212 | 8,000,923 | 506,562 | 2,689,105 | 12,269,802 | ||||
| Adjusted operating profit | 160,462 | 94,479 | 48,944 | 41,120 | 345,005 | ||||
| Amortisation of intangible assets | (18,277) | (9,962) | (7,258) | (3,633) | (39,130) | ||||
| Net operating exceptionals (note 5) | (6,854) | (13,633) | (2,695) | (13,115) | (36,297) | ||||
| Operating profit | 135,331 | 70,884 | 38,991 | 24,372 | 269,578 |
(b) By geography
The Group has a presence in 15 countries worldwide. The following represents a geographical analysis of revenue and non-current assets in accordance with IFRS 8, which requires disclosure of information about the country of domicile (Republic of Ireland) and countries with material revenue and non-current assets.
Revenue from continuing operations is derived almost entirely from the sale of goods and is disclosed based on the location of the entity selling the goods. The analysis of non-current assets is based on the location of the assets. There are no material dependencies or concentrations on individual customers which would warrant disclosure under IFRS 8.
| Revenue | Non-current assets* | |||||
| 2018 | 2017 | 2018 | 2017 | |||
| £'000 | £'000 | £'000 | £'000 | |||
| Republic of Ireland | 927,133 | 759,439 | 129,050 | 123,348 | ||
| United Kingdom | 7,741,143 | 7,239,193 | 1,050,804 | 985,717 | ||
| France | 2,712,240 | 2,402,290 | 882,276 | 869,895 | ||
| Other | 2,884,123 | 1,868,880 | 832,331 | 218,570 | ||
| 14,264,639 | 12,269,802 | 2,894,461 | 2,197,530 | |||
* Non-current assets comprise intangible assets, property, plant and equipment and equity accounted investments
5. Exceptionals
| 2018 | 2017 | ||||
| £'000 | £'000 | ||||
| Restructuring costs | (29,419) | (19,345) | |||
| Acquisition and related costs | (12,789) | (10,308) | |||
| Impairment of property, plant and equipment | (3,735) | (1,164) | |||
| Adjustments to contingent acquisition consideration | 477 | (5,114) | |||
| Other operating exceptional items | 353 | (366) | |||
| Net operating exceptional items | (45,113) | (36,297) | |||
| Mark to market of swaps and related debt | 299 | 10,101 | |||
| Net exceptional items before taxation | (44,814) | (26,196) | |||
| Deferred tax | 25,407 | (1,756) | |||
| Net exceptional items after taxation (continuing operations) | (19,407) | (27,952) | |||
| Profit on disposal of discontinued operations (note 8) | 29,842 | - | |||
| Net exceptional items after taxation | 10,435 | (27,952) | |||
| Non-controlling interest share of net exceptional items after taxation | 969 | 3,138 | |||
| Net exceptional items attributable to owners of the Parent | 11,404 | (24,814) |
The profit on disposal of discontinued operations relates to the gain recorded on the profitable sale of DCC's environmental division, which completed on 31 May 2017.
Acquisition costs include the professional fees and tax costs (such as stamp duty) relating to the evaluation and completion of acquisition opportunities and amounted to £12.789 million.
Restructuring costs amounted to £29.419 million and principally reflect the costs associated with the Group's focus on increasing the efficiency of its operating infrastructure and sales platforms. The majority of the charge relates to the Retail & Oil division where a large project to bring greater efficiency and reduced capital expenditure over time to the UK business' nationwide depot network infrastructure is underway and the project will result in a material reduction in the number of depot locations. The Group incurred a related impairment charge on property, plant and equipment of £3.735 million on this project. An element of the overall charge also relates to the integration and restructuring costs associated with the prior year acquisition of Dansk Fuels in Denmark.
The other material element of the restructuring charge relates to the ongoing optimisation of DCC Technology's logistics and related infrastructure. In the UK, the new national distribution centre is now operational and a number of the existing locations have transferred into the new infrastructure. The remaining existing locations will transition during the coming year and the majority of the existing locations have now been sold successfully. A programme to significantly reduce costs while improving the logistics and operational efficiency of DCC Technology's French consumer business is ongoing. This project will also deliver a consolidation of two existing warehouses into one new facility. Finally, the business in the Nordics has recently commissioned its new national distribution centre and it is now operational.
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 year ended 31 March 2018, this amounted to an exceptional non-cash gain of £0.299 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 £5.3 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.
The deferred tax credit of £25.407 million principally reflects the impact of the recent reduction of the statutory corporation tax rate in France and the corresponding reduction in the Group's deferred tax liabilities associated with the Group's brand and other intangible assets in France.
There was a non controlling interest credit of £0.969 million in relation to certain of the above exceptional charges.
6. Earnings per Ordinary Share
| Discontinued | Discontinued | |||||||||||||
| Continuing | operations | Continuing | operations | |||||||||||
| operations | (note 8) | Total | operations | (note 8) | Total | |||||||||
| 2018 | 2018 | 2018 | 2017 | 2017 | 2017 | |||||||||
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |||||||||
| Profit attributable to owners of the Parent | 231,181 | 30,643 | 261,824 | 201,037 | 15,160 | 216,197 | ||||||||
| Amortisation of intangible assets after tax | 33,245 | - | 33,245 | 28,456 | 6 | 28,462 | ||||||||
| Exceptionals after tax (note 5) | 18,438 | (29,842) | (11,404) | 24,814 | - | 24,814 | ||||||||
| Adjusted profit after taxation and non-controlling interests |
282,864 | 801 | 283,665 | 254,307 | 15,166 | 269,473 | ||||||||
| Continuing | Discontinued | Continuing | Discontinued | |||||||||||
| operations | operations | Total | operations | operations | Total | |||||||||
| 2018 | 2018 | 2018 | 2017 | 2017 | 2017 | |||||||||
| Basic earnings per ordinary share | pence | pence | pence | pence | pence | pence | ||||||||
| Basic earnings per ordinary share | 259.44p | 34.39p | 293.83p | 226.56p | 17.08p | 243.64p | ||||||||
| Amortisation of intangible assets after tax | 37.31p | - | 37.31p | 32.07p | 0.01p | 32.08p | ||||||||
| Exceptionals after tax | 20.70p | (33.49p) | (12.79p) | 27.96p | - | 27.96p | ||||||||
| Adjusted basic earnings per ordinary share |
317.45p | 0.90p | 318.35p | 286.59p | 17.09p | 303.68p | ||||||||
| Weighted average number of ordinary shares in issue (thousands) | 89,106 | 88,735 | ||||||||||||
Basic earnings per share is calculated by dividing the profit attributable to owners of the Parent by the weighted average number of ordinary shares in issue during the year, 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.
| Continuing | Discontinued | Continuing | Discontinued | ||||||||
| operations | operations | Total | operations | operations | Total | ||||||
| 2018 | 2018 | 2018 | 2017 | 2017 | 2017 | ||||||
| Diluted earnings per ordinary share | pence | pence | pence | pence | pence | pence | |||||
| Basic earnings per ordinary share | 258.52p | 34.27p | 292.79p | 225.04p | 16.96p | 242.00p | |||||
| Amortisation of intangible assets after tax | 37.18p | - | 37.18p | 31.84p | 0.01p | 31.85p | |||||
| Exceptionals after tax | 20.61p | (33.37p) | (12.76p) | 27.78p | - | 27.78p | |||||
| Adjusted basic earnings per ordinary share |
316.31p | 0.90p | 317.21p | 284.66p | 16.97p | 301.63p | |||||
| Weighted average number of ordinary shares in issue (thousands) | 89,425 | 89,338 | |||||||||
The earnings used for the purposes of the continuing diluted earnings per ordinary share calculations were £231.181 million (2017: £201.037 million) and £282.864 million (2017: £254.307 million) for the purposes of the continuing adjusted diluted earnings per ordinary share calculations.
The earnings used for the purposes of the discontinued diluted earnings per ordinary share calculations were £30.643 million (2017: £15.160 million) and £0.801 million (2017: £15.166 million) for the purposes of the discontinued adjusted diluted earnings per ordinary share calculations.
The weighted average number of ordinary shares used in calculating the diluted earnings per ordinary share for the year ended 31 March 2018 was 89.425 million (2017: 89.338 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:
| 2018 | 2017 | ||
| '000 | '000 | ||
| Weighted average number of ordinary shares in issue | 89,106 | 88,735 | |
| Dilutive effect of options and awards | 319 | 603 | |
| Weighted average number of ordinary shares for diluted earnings per share | 89,425 | 89,338 |
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.
7. Dividends
| 2018 | 2017 | ||||||
| £'000 | £'000 | ||||||
| Final - paid 74.63 pence per share on 20 July 2017 (2017: paid 64.18 pence per share on 21 July 2016) |
66,520 | 57,621 | |||||
| Interim - paid 40.89 pence per share on 11 December 2017 (2017: paid 37.17 pence per share on 12 December 2016) | 36,351 | 32,415 | |||||
| 102,871 | 90,036 | ||||||
The Directors are proposing a final dividend in respect of the year ended 31 March 2018 of 82.09 pence per ordinary share (£73.242 million). This proposed dividend is subject to approval by the shareholders at the Annual General Meeting.
8. Discontinued Operations
As announced on 31 May 2017, the Group completed the disposal of the Environmental division. The proceeds on disposal will be used to fund the continued development of DCC's continuing operations. The conditions for the segment to be classified as a discontinued operation were satisfied during the year ended 31 March 2017 and the results of the Environmental segment were presented separately in the 2017 Annual Report as discontinued operations in the Group Income Statement and the assets and liabilities of this segment were classified as an asset held for sale at the reporting date.
The following table summarises the consideration received, the profit on disposal of discontinued operations and the net cash flow arising on the disposal of this segment:
| 2018 | |||||
| £'000 | |||||
| Net consideration | |||||
| Net proceeds received | 164,526 | ||||
| Costs of disposal | (4,463) | ||||
| Total net consideration | 160,063 | ||||
| Assets and liabilities disposed of | |||||
| Non-current assets | 145,675 | ||||
| Current assets | 34,198 | ||||
| Non-current liabilities | (4,358) | ||||
| Current liabilities | (40,746) | ||||
| Net identifiable assets and liabilities disposed of | 134,769 | ||||
| Recycling of foreign exchange gain previously recognised in foreign currency translation reserve | (4,548) | ||||
| 130,221 | |||||
| Profit on disposal of discontinued operations | 29,842 | ||||
| Net cash flow on disposal of discontinued operations | |||||
| Total proceeds received | 174,321 | ||||
| Cash and cash equivalents disposed of | (9,795) | ||||
| Net cash inflow on disposal of discontinued operations | 164,526 | ||||
| Disposal costs paid | (4,463) | ||||
| Net cash flow on disposal of discontinued operations | 160,063 | ||||
The following table details the results of discontinued operations included in the Group Income Statement:
| 2018 | 2017 | ||||
| £'000 | £'000 | ||||
| Revenue | 29,614 | 175,232 | |||
| Cost of sales | (20,292) | (119,654) | |||
| Gross profit | 9,322 | 55,578 | |||
| Operating expenses | (8,341) | (37,032) | |||
| Adjusted operating profit | 981 | 18,546 | |||
| Amortisation of intangible assets | - | (38) | |||
| Operating profit | 981 | 18,508 | |||
| Net finance costs | (16) | (163) | |||
| Profit before tax | 965 | 18,345 | |||
| Income tax expense | (164) | (3,185) | |||
| 801 | 15,160 | ||||
| Profit on disposal of discontinued operations | 29,842 | - | |||
| Profit from discontinued operations after tax | 30,643 | 15,160 | |||
The following table details the cash flow from discontinued operations included in the Group Cash Flow Statement:
| 2018 | 2017 | ||||
| £'000 | £'000 | ||||
| Net cash flow from operating activities | (5,602) | 22,461 | |||
| Net cash flow from investing activities | (1,332) | (6,661) | |||
| Net cash flow from discontinued operations | (6,934) | 15,800 | |||
9. Other Reserves
| 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 year | - | - | 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 | ||
| For the year ended 31 March 2017 | |||||||
| Foreign | |||||||
| Share based | Cash flow | currency | |||||
| payment | hedge | translation | Other | ||||
| reserve | reserve | reserve | reserves | Total | |||
| £'000 | £'000 | £'000 | £'000 | £'000 | |||
| At 1 April 2016 | 14,954 | (8,112) | 70,887 | 932 | 78,661 | ||
| Currency translation | - | - | 34,650 | - | 34,650 | ||
| Movements relating to cash flow hedges | - | (6,803) | - | - | (6,803) | ||
| Movement in deferred tax liability on cash flow hedges - | 1,334 | - | - | 1,334 | |||
| Share based payment | 3,192 | - | - | - | 3,192 | ||
| At 31 March 2017 | 18,146 | (13,581) | 105,537 | 932 | 111,034 | ||
10. Analysis of Net Debt
| 2018 | 2017 | ||||
| £'000 | £'000 | ||||
| Non-current assets | |||||
| Derivative financial instruments | 103,085 | 273,767 | |||
| Current assets | |||||
| Derivative financial instruments | 8,050 | 18,233 | |||
| Cash and cash equivalents | 1,038,827 | 1,048,064 | |||
| 1,046,877 | 1,066,297 | ||||
| Non-current liabilities | |||||
| Finance leases | (692) | (165) | |||
| Derivative financial instruments | (10,732) | (506) | |||
| Unsecured Notes | (1,597,829) | (1,319,802) | |||
| (1,609,253) | (1,320,473) | ||||
| Current liabilities | |||||
| Bank borrowings | (74,534) | (88,041) | |||
| Finance leases | (363) | (190) | |||
| Derivative financial instruments | (8,474) | (5,894) | |||
| Unsecured Notes | - | (60,214) | |||
| (83,371) | (154,339) | ||||
| Net debt excluding cash attributable to assets held for sale | (542,662) | (134,748) | |||
| Cash and short-term deposits attributable to assets held for sale | - | 12,799 | |||
| Net debt including cash attributable to assets held for sale | (542,662) | (121,949) | |||
11. Post Employment Benefit Obligations
The Group's defined benefit pension schemes' assets were measured at fair value at 31 March 2018. The defined benefit pension schemes' liabilities at 31 March 2018 were updated to reflect material movements in underlying assumptions.
The Group's post employment benefit obligations moved from a net deficit of £0.029 million at 31 March 2017 to a net asset of £0.286 million at 31 March 2018. The movement in the deficit primarily reflects the inclusion of post employment benefit obligations arising on the TEGA acquisition, offset by actuarial gains on liabilities and contributions in excess of the current service cost.
12. 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 year, together with percentages acquired were as follows:
· the acquisition on 31 March 2018 of 100% of NGL Energy Partners LP's Retail West LPG division, Hicksgas LLC ('Retail West'). Retail West is a US based LPG distributor with leading market positions in Illinois, Indiana and Kansas and also operates in seven other states across the Mid-West and North-West regions;
· the acquisition on 31 March 2018 of 100% of Tega-Technische Gase und Gasetechnik GmbH ('TEGA'). TEGA is an LPG and refrigerant gas distribution business and operates across five sites largely based in southern Germany;
· the acquisition in February 2018 of 100% of the trade and assets of the British LPG distribution business ('Countrywide LPG') of Countrywide Farmers plc. Countrywide LPG supplies bulk and cylinder LPG to domestic, agricultural and commercial customers in Britain;
· the acquisition of 100% of Elite One Source Nutritional Services Inc ('Elite') in February 2018. Elite is a US based provider of contract manufacturing and related services to the growing healthcare and dietary supplements market in the US;
· the completion of the acquisition of Shell Gas (LPG) Holdings BV's LPG business in Hong Kong and Macau ('Shell HK&M'), as announced in January 2018. The business provides LPG in bulk, cylinder and autogas formats to domestic, commercial and industrial customers in the region;
· the completion of the acquisition of Esso's retail petrol station network in Norway, as announced in October 2017, comprising a national network of company-operated sites and contracts to supply Esso-branded dealer owned stations (together referred to as 'Esso Retail Norway'); and
· the acquisition of 100% of MTR Group Ltd ('MTR') in July 2017. MTR is a UK based provider of second lifecycle solutions for mobile and tablet devices.
The acquisition data presented below reflects the fair value of the identifiable net assets acquired (excluding net cash/debt acquired) in respect of acquisitions completed during the year.
| Esso Retail Norway |
Others | Total | Total | ||
| 2018 | 2018 | 2018 | 2017 | ||
| £'000 | £'000 | £'000 | £'000 | ||
| Assets | |||||
| Non-current assets | |||||
| Property, plant and equipment | 63,822 | 78,610 | 142,432 | 8,265 | |
| Intangible assets - other intangible assets | 55,885 | 87,728 | 143,613 | 68,513 | |
| Equity accounted investments | - | 497 | 497 | 404 | |
| Deferred income tax assets | 6,047 | 362 | 6,409 | 60 | |
| Total non-current assets | 125,754 | 167,197 | 292,951 | 77,242 | |
| Current assets | |||||
| Inventories | 6,587 | 28,545 | 35,132 | 32,207 | |
| Trade and other receivables | 6,945 | 45,039 | 51,984 | 206,528 | |
| Total current assets | 13,532 | 73,584 | 87,116 | 238,735 | |
| Liabilities | |||||
| Non-current liabilities | |||||
| Deferred income tax liabilities | (12,853) | (15,355) | (28,208) | (19,902) | |
| Post employment benefit obligations | - | (9,636) | (9,636) | - | |
| Provisions for liabilities | (6,042) | (4,674) | (10,716) | (11,129) | |
| Acquisition related liabilities | - | (102) | (102) | - | |
| Total non-current liabilities | (18,895) | (29,767) | (48,662) | (31,031) | |
| Current liabilities | |||||
| Trade and other payables | (798) | (37,202) | (38,000) | (164,777) | |
| Provisions for liabilities | - | (4,271) | (4,271) | (5,317) | |
| Current income tax (liability)/asset | - | (2,629) | (2,629) | 12,341 | |
| Acquisition related liabilities | - | (57) | (57) | (13,522) | |
| Total current liabilities | (798) | (44,159) | (44,957) | (171,275) | |
| Identifiable net assets acquired | 119,593 | 166,855 | 286,448 | 113,671 | |
| Goodwill | 120,925 | 284,417 | 405,342 | 117,175 | |
| Total consideration | 240,518 | 451,272 | 691,790 | 230,846 | |
| Satisfied by: | |||||
| Cash | 240,518 | 441,943 | 682,461 | 242,018 | |
| Cash and cash equivalents acquired | - | (18,352) | (18,352) | (38,691) | |
| Net cash outflow | 240,518 | 423,591 | 664,109 | 203,327 | |
| Acquisition related liabilities | - | 27,681 | 27,681 | 27,519 | |
| Total consideration | 240,518 | 451,272 | 691,790 | 230,846 |
The acquisition of Esso Retail Norway has been deemed to be a substantial transaction and separate disclosure of the fair values of the identifiable assets and liabilities has therefore been made. None of the remaining business combinations completed during the year were considered sufficiently material to warrant separate disclosure of the fair values attributable to those combinations. The carrying amounts of the assets and liabilities acquired, determined in accordance with IFRS, before completion of the combination together with the adjustments made to those carrying values disclosed above were as follows:
| Book | Fair value | Fair | |
| value | adjustments | value | |
| Esso Retail Norway | £'000 | £'000 | £'000 |
| Non-current assets (excluding goodwill) | 69,869 | 55,885 | 125,754 |
| Current assets | 13,532 | - | 13,532 |
| Non-current liabilities | (6,042) | (12,853) | (18,895) |
| Current liabilities | (520) | (278) | (798) |
| Identifiable net assets acquired | 76,839 | 42,754 | 119,593 |
| Goodwill arising on acquisition | 163,679 | (42,754) | 120,925 |
| Total consideration | 240,518 | - | 240,518 |
| Book | Fair value | Fair | |
| value | adjustments | value | |
| Others | £'000 | £'000 | £'000 |
| Non-current assets (excluding goodwill) | 80,296 | 86,901 | 167,197 |
| Current assets | 73,977 | (393) | 73,584 |
| Non-current liabilities | (14,623) | (15,144) | (29,767) |
| Current liabilities | (43,953) | (206) | (44,159) |
| Identifiable net assets acquired | 95,697 | 71,158 | 166,855 |
| Goodwill arising on acquisition | 355,575 | (71,158) | 284,417 |
| Total consideration | 451,272 | - | 451,272 |
| Book | Fair value | Fair | |
| value | adjustments | value | |
| Total | £'000 | £'000 | £'000 |
| Non-current assets (excluding goodwill) | 150,165 | 142,786 | 292,951 |
| Current assets | 87,509 | (393) | 87,116 |
| Non-current liabilities | (20,665) | (27,997) | (48,662) |
| Current liabilities | (44,473) | (484) | (44,957) |
| Identifiable net assets acquired | 172,536 | 113,912 | 286,448 |
| Goodwill arising on acquisition | 519,254 | (113,912) | 405,342 |
| Total consideration | 691,790 | - | 691,790 |
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. The acquisitions of Retail West and TEGA both completed on 31 March 2018 and, as such, it has not yet been feasible to perform a preliminary assignment of fair values to identifiable net assets. Any amendments to fair values within the twelve month timeframe from the date of acquisition will be disclosable in the 2019 Annual Report 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.
£101.086 million of the goodwill recognised in respect of acquisitions completed during the financial year is expected to be deductible for tax purposes.
Acquisition related costs included in other operating expenses in the Group Income Statement amounted to £12.789 million.
No contingent liabilities were recognised on the acquisitions completed during the year or the prior financial years.
The gross contractual value of trade and other receivables as at the respective dates of acquisition amounted to £53.056 million. The fair value of these receivables is £51.984 million (all of which is expected to be recoverable) and is inclusive of an aggregate allowance for impairment of £1.072 million. In relation to the acquisition of Esso Retail Norway, the gross contractual value of trade and other receivables as at the date of acquisition amounted to £7.223 million. The fair value of these receivables is £6.945 million (all of which is expected to be recoverable) and is inclusive of an aggregate allowance for impairment of £0.278 million.
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 year range from £15.346 million to £51.737 million.
The acquisitions during the year contributed £347.4 million to revenues and £11.5 million to profit after tax. The acquisition of Esso Retail Norway during the year contributed £263.4 million to revenues and £2.6 million to profit after tax. Had all the business combinations effected during the year occurred at the beginning of the year, total Group revenue (continuing) for the year ended 31 March 2018 would have been £14,977.9 million and total Group profit after tax (continuing) would be £274.5 million.
13. 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.
14. Related Party Transactions
There have been no related party transactions or changes in related party transactions that could have a material impact on the financial position or performance of the Group during the 2018 financial year.
15. Board Approval
This report was approved by the Board of Directors of DCC plc on 14 May 2018.
Supplementary Financial Information
For the year ended 31 March 2018
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.
| Calculation | 2018 £'000 |
2017 £'000 |
| Operating profit | 295,228 | 269,578 |
| Net operating exceptional items | 45,113 | 36,297 |
| Amortisation of intangible assets | 43,059 | 39,130 |
| Adjusted operating profit - continuing | 383,400 | 345,005 |
| Adjusted operating profit - discontinued | 981 | 18,546 |
| Adjusted operating profit ('EBITA') | 384,381 | 363,551 |
Adjusted operating profit before depreciation ('EBITDA')
Definition
EBITDA represents earnings before net interest, tax, depreciation, amortisation of intangible assets, share of equity accounted investments' profit after tax and net exceptional items.
| Calculation | 2018 £'000 |
2017 £'000 |
| Adjusted operating profit ('EBITA') | 384,381 | 363,551 |
| Depreciation | 93,722 | 92,015 |
| EBITDA | 478,103 | 455,566 |
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.
| Calculation | 2018 £'000 |
2017 £'000 |
| Finance costs before exceptional items | (73,156) | (72,910) |
| Finance income before exceptional items | 37,421 | 40,973 |
| Net interest - continuing | (35,735) | (31,937) |
| Net interest - discontinued | (16) | (163) |
| Net interest | (35,751) | (32,100) |
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.
| Calculation | 2018 £'000 |
2017 £'000 |
| Adjusted operating profit | 384,381 | 363,551 |
| Net interest | (35,751) | (32,100) |
| Earnings before taxation | 348,630 | 331,451 |
| Income tax expense | 23,882 | 45,869 |
| Exceptional deferred tax | 25,407 | (1,756) |
| Deferred tax attaching to amortisation of intangible assets | 9,814 | 10,674 |
| Income tax expense before exceptionals and deferred tax attaching to amortisation of intangible assets - continuing |
59,103 | 54,787 |
| Income tax expense before exceptionals and deferred tax attaching to amortisation of intangible assets - discontinued |
164 | 3,217 |
| Total income tax expense before exceptionals and deferred tax attaching to amortisation of intangible assets |
59,267 | 58,004 |
| Effective tax rate (%) | 17.0% | 17.5% |
Adjusted earnings per share
Definition
The Group defines adjusted earnings per share as basic earnings per share adjusted for the impact of net exceptional items and amortisation of intangible assets.
| Calculation | 2018 pence |
2017 pence |
| Adjusted earnings per share - continuing | 317.45 | 286.59 |
| Adjusted earnings per share - discontinued | 0.90 | 17.09 |
| Adjusted earnings per share | 318.35 | 303.68 |
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.
| Revenue - continuing, constant currency | 2018 £'000 |
2017 £'000 |
| Revenue - continuing | 14,264,639 | 12,269,802 |
| Currency impact | (296,654) | - |
| Revenue - continuing, constant currency | 13,967,985 | 12,269,802 |
| Adjusted operating profit - continuing, constant currency | ||
| Adjusted operating profit - continuing | 383,400 | 345,005 |
| Currency impact | (8,890) | - |
| Adjusted operating profit - continuing, constant currency | 374,510 | 345,005 |
| Adjusted earnings per share - continuing, constant currency | ||
| Adjusted earnings - continuing | 282,864 | 254,307 |
| Currency impact | (6,280) | - |
| Adjusted earnings - continuing, constant currency | 276,584 | 254,307 |
| Weighted average number of ordinary shares in issue ('000) | 89,106 | 88,735 |
| Adjusted earnings per share - continuing, constant currency | 310.40p | 286.59p |
Dividend cover
Definition
The dividend cover ratio measures the Group's ability to pay dividends from earnings.
| Calculation | 2018 pence |
2017 pence |
| Adjusted earnings per share - continuing | 317.45 | 286.59 |
| Dividend | 122.98 | 111.80 |
| Dividend cover (times) | 2.6x | 2.6x |
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.
| Calculation | 2018 £'000 |
2017 £'000 |
| Purchase of property, plant and equipment | 152,997 | 143,698 |
| Proceeds from disposal of property, plant and equipment | (7,617) | (12,315) |
| Net capital expenditure | 145,380 | 131,383 |
Free cash flow
Definition
Free cash flow is defined by the Group as cash generated from operations before exceptional items as reported in the Group Cash Flow Statement after net capital expenditure.
| Calculation | 2018 £'000 |
2017 £'000 |
| Cash generated from operations before exceptionals | 473,434 | 546,870 |
| Net capital expenditure | (145,380) | (131,383) |
| Free cash flow | 328,054 | 415,487 |
Free cash flow (after interest and tax payments)
Definition
Free cash flow (after interest and tax payments) is defined by the Group as free cash flow after interest paid, income tax paid, dividends received from equity accounted investments and interest received.
| Calculation | 2018 £'000 |
2017 £'000 |
| Free cash flow | 328,054 | 415,487 |
| Interest paid | (69,900) | (70,108) |
| Income tax paid | (65,437) | (62,180) |
| Dividends received from equity accounted investments | 1,980 | 125 |
| Interest received | 37,399 | 40,966 |
| Free cash flow (after interest and tax payments) | 232,096 | 324,290 |
Cash conversion ratio
Definition
The cash conversion ratio expresses free cash flow as a percentage of adjusted operating profit.
| Calculation | 2018 £'000 |
2017 £'000 |
| Free cash flow | 328,054 | 415,487 |
| Adjusted operating profit | 384,381 | 363,551 |
| Cash conversion ratio (%) | 85% | 114% |
Net debt/EBITDA
Definition
The net debt to earnings before net interest, tax, depreciation, amortisation of intangible assets, share of equity accounted investments' profit after tax and net exceptional items ('EBITDA') ratio is a measurement of leverage, and shows how many years it would take for a company to pay back its debt if net debt and EBITDA are held constant.
| Calculation | 2018 £'000 |
2017 £'000 |
| Net debt | 542,662 | 121,949 |
| EBITDA | 478,103 | 455,566 |
| Net debt/EBITDA (times) | 1.1x | 0.3x |
Return on capital employed ('ROCE') - continuing
Definition
ROCE represents adjusted operating profit (continuing) expressed as a percentage of the average total continuing capital employed. Total continuing capital employed represents total equity adjusted for net debt/cash, goodwill and intangibles written off, acquisition related liabilities and equity accounted investments.
| Calculation | 2018 £'000 |
2017 £'000 |
| Total equity | 1,677,917 | 1,507,721 |
| Net debt (continuing) | 542,662 | 134,748 |
| Goodwill and intangibles written off (continuing) | 271,399 | 228,340 |
| Equity accounted investments (continuing) | (24,461) | (24,938) |
| Acquisition related liabilities (continuing, current and non-current) | 97,853 | 94,917 |
| Net assets of the disposal group | - | (126,072) |
| 2,565,370 | 1,814,716 | |
| Average total capital employed - continuing | 2,190,043 | 1,698,240 |
| Adjusted operating profit - continuing | 383,400 | 345,005 |
| Return on capital employed (%) - continuing | 17.5% | 20.3% |
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 year.
| Calculation | 2018 £'000 |
2017 £'000 |
| Net cash outflow on acquisitions during the year | 664,109 | 203,327 |
| Cash outflow on acquisitions which were committed to in the previous year | (341,253) | (34,372) |
| Acquisition related liabilities arising on acquisitions during the year | 27,840 | 41,041 |
| Acquisition related liabilities which were committed to in the previous year | (13,404) | (14,082) |
| Amounts committed in the current year | 18,000 | 358,000 |
| Committed acquisition expenditure | 355,292 | 553,914 |
Net working capital
Definition
Net working capital represents the net total of inventories, trade and other receivables (excluding interest receivable), and trade and other payables (excluding interest payable, amounts due in respect of property, plant and equipment and government grants).
| Calculation | 2018 £'000 |
2017 £'000 |
| Inventories | 530,473 | 456,395 |
| Add: inventories of the disposal group | - | 1,922 |
| Trade and other receivables | 1,426,217 | 1,222,597 |
| Add: trade and other receivables of the disposal group | - | 33,264 |
| Less: interest receivable | (126) | (223) |
| Trade and other payables | (2,063,260) | (1,820,517) |
| Add: trade and other payables of the disposal group | - | (35,741) |
| Less: interest payable | 4,775 | 4,534 |
| Less: amounts due in respect of property, plant and equipment | 10,671 | 6,349 |
| Less: government grants | 9 | 9 |
| Net working capital | (91,241) | (131,411) |
Working capital (days)
Definition
Working capital days measures how long it takes in days for the Group to convert working capital into revenue.
| Calculation | 2018 £'000 |
2017 £'000 |
| Net working capital | (91,241) | (131,411) |
| March revenue | 1,418,988 | 1,223,575 |
| Working capital (days) | (2.0 days) | (3.3 days) |
This information is provided by RNS
The company news service from the London Stock Exchange
END
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